Archive for the 'Economics' Category

LPG and money on the footpath

Published
by
Robert Merkel
3 days, 3 hours ago
in Budget 2008, Economics, Energy and Transport
. 45 Comments

Flicking through the Fin Review at lunch today, there was all manner of interesting tidbits about the budget. For instance, the means testing of the baby bonus will scrape back a lot less revenue than the scrapping of an obscure tax exemption on the byproducts from natural gas production - a form of light crude oil called condensate. And disappointingly, the FBT concession for company cars stayed, so we’ll continue to have the spectacle of people driving around in circles, burning fuel and releasing CO2, just to collect a tax rebate.

But there’s one little program that was rumoured to get the axe, but didn’t - the LPG vehicle scheme. This scheme provides a rebate of $2000 to get your car converted to run on LPG, and $1000 if you buy a pre-converted vehicle from a manufacturer. Even without the rebate, if you drive a reasonable-sized car around the average distance, it pays for itself in a couple of years. With the rebate, it seems to be a complete no-brainer - it pays for the remaining cost of the conversion within a year, and saves around $1000 per year, every year after that.

Which brings me to a simple question, which relates to adapting to higher energy prices. If LPG is such a no-brainer - particularly after the government bribe - why isn’t everybody installing it?
In my case, the answer’s simple - I commute on a motor scooter, which not only saves me fuel but even more on parking, and Rex is a high-powered indulgence which gets driven relatively little. But, LP readers, why aren’t you? Do you all drive very little? Worried about the effect on the reliability and resale value of the car? Think that the lower fuel economy will take away all the advantage of the cheaper fuel (from all reports, it does use substantially more fuel, but the costs aren’t that bad). Don’t want to lose any engine power? Or is it simply not worth the hassle of doing the conversion for you?

A balanced budget

Published
by
Mark
3 days, 7 hours ago
in Budget 2008, Economics, Howardia, International and Markets
. 2 Comments

Since I was concentrating on the politics of the budget in my post last night, it’s worth pointing out that there’s an interesting take on Wayne Swan’s first budget from market economist (and former Keating adviser) Barry Hughes at New Matilda this morning. It’s confirmation of some of the early reaction from other economists on Lateline Business that the policy settings in the budget are basically neutral, giving the government (and the Reserve Bank) wriggle room to respond if things take a quick downward turn in an environment of almost unprecedented international instability. But it’s worth remembering one thing. Unlike the previous government, this one actually does have a macro-economic policy:

Financial markets will be thankful for small mercies. Who knows what Howard and Costello might have done? Perhaps they might have finally learnt some economics. But on their past form they would have continued to party. Keeping a budget surplus around one per cent of GDP would have left high single digits of more billions of new spending and tax cuts. And financial markets will also be impressed that the ALP has been able to slot in its new spending without blowing any valves.

Think about that as you assess the economic value (if any) of anything Malcolm Turnbull and Brendan Nelson have to say about the “Labor budget for a nation”.

Update: Also in New Matilda, Ben Eltham on the rhetoric and the reality of budget cutting, an assessment of the “Education Revolution” and the infrastructure fund… And somehow an AFL metaphor slipped into the title of my contribution to the budget discussion the morning after.

So how about that credit crunch?

Published
by
Kim
3 days, 9 hours ago
in Economics, Markets, Media and Sociology
. 81 Comments

Terms like “securitisation”, “derivatives”, “longitudinal diversification” and “dynamic hedging” would make most of our eyes glaze over, I suspect. Yet all this arcana is now having an impact on us - vie the subprime mortgage crisis and the shock waves it’s set off in the world economy. There are at least two factors which mitigate against discussion and examination of causes and solutions - the arcane nature of the math and language used by the finance wonks, and the reactive press coverage - attuned more to reporting on what pollies and regulators are saying or doing than assessing causes and debating the way forward. So I’d thoroughly recommend taking the time to read author and sociologist Robin Blackburn’s article The Subprime Crisis. It took me about half an hour to read, but I think it was time well spent, as Blackburn takes great care to demystify the nature and history of the crisis, and thus provides a basis for thinking about its implications which is far better than skimming spin laden or impenetrably written articles.

Continue reading ‘So how about that credit crunch?’

Liveblogging Budget 2008

Published
by
Mark
4 days, 3 hours ago
in Blogging, Budget 2008, Economics, Media and Polls
. 31 Comments

I’m going to have a go at it. I’ll leave comments closed on this post until 7pm-ish. Until then, comments can be left on Rob’s speculation thread. Once the liveblogging starts, remember to refresh periodically to see the updates, and please leave your own updates in comments.

A thought to start off with - the lack of a “budget bounce” for the Coalition in recent years led to (accurate, I think) commentary that the importance of the budget as a political event had been massively overplayed. This year, everyone knows the tax cuts are coming, and it’s a much more complex messaging/communications event - as Bernard Keane captures in this piece at Crikey, noting that the leaks have been finely targeted to particular publications covering particular demographics (for instance, “soak the rich” going to the tabloids, climate change for the Sunday Fairfax papers):

Crikey and others have been lamenting the Government’s mixed Budget messages, but we were missing the point. The messages were only mixed for the commentariat itself, which analyses everything the Government says. The media diet of most people is far more limited, and they would’ve only heard what the Government targeted at them.

Similarly, speculation that the budget will establish or damage the Rudd government’s “economic management” credentials is another elite preoccupation. As demonstrated by Kim in this post, that famous phrase is a piece of bad polling anyway - literally asking the wrong question, with endless narratives built on something that has nothing to do with how people vote. It’s much more likely that people are awaiting evidence that Kevin Rudd and Wayne Swan will do their utmost to protect them from economic uncertainty, than that there’ll be some sort of collective scoring exercise on what is increasingly a very niche piece of political theatre. The Opposition probably know this as well - though they’re caught in the headlights having set Brendan Nelson up as a bunny who’ll need to perform or face the consequences. They should be much more worried about the polling that demonstrates that “welfare for all, not just the poor” is going down like a lead balloon even among their own voters.

Elsewhere: Riffing off Kim riffing off Zoe’s crystal ball liveblogging, tigtog proposes a budget drinking game. Demonstrating the odd time sense that surrounds budget night, Zoe reports on reports of struggling working families with babies earning more than $150000 already bemoaning how they’ll find it hard to make do without the nanny state. And Trevor Cook deconstructs some of the spin about the budget that’s been going on for quite some time already.

Update: GreensBlog will also be liveblogging from 7.30pm.

Further update: Comments now open. Liveblogging will start below the fold at 7.30pm.

Continue reading ‘Liveblogging Budget 2008′

The budget rituals

Published
by
Robert Merkel
4 days, 8 hours ago
in Budget 2008, Climate change and Economics
. 25 Comments

I’m clearly getting old and cynical. But it seems that the pre-Budget media leaks have followed the conventional pattern even more than normal. We’ve had a couple of weeks of tax rises, such as the T**t Fuel Tax (my SO’s name for the stuff, not mine…), the Toorak Tractor Tax, and the means testing of the baby bonus.

Now, as we get closer to the budget, we get softer pieces on new expenditure, like money for climate change - though it’s just the implementation of election commitment at this stage, with no new policy AFAICT. Not to mention the adjustment of the Medicare surcharge threshold.

Anybody want to place a bet on there being a couple of “surprise” spending initiatives in the Budget speech? Perhaps a major education announcement?

Continue reading ‘The budget rituals’

Oil marches on…

Published
by
Robert Merkel
5 days, 3 hours ago
in Energy and Markets
. 34 Comments

The price of oil continues to set records - it’s now reached nearly $126 US Dollars. While some of that can be attributed to the Pacific Peso-ization of the greenback, by most measures the oil price has reached a record. Against the Euro, it’s still a record. Inflation-adjusted, it’s still a record.

But there’s still one measure by which the oil price isn’t a record - against the purchasing power of the average Western consumer, apparently. According to today’s Fin, it would have to reach somewhere around $135 per barrel to match the peak price of oil by that measure. But it seems like there’s every possibility it might continue to go up in the short term. Indeed, some guy from Goldman Sachs is predicting that oil will reach $200 per barrel in a few months’ time. Continue reading ‘Oil marches on…’

Guest post by Terry Flew: Is America going backwards economically?

Published
by
Administrator
1 week ago
in American election 2008, Economics and USA
. 13 Comments

Another dispatch from LP’s Indiana correspondent:

Aside from the Democrat primaries, the major talking point in the U.S. this week is whether the United States is losing ground in the global economy. This is different to the question of whether or not the U.S. economy is in recession (or ’slowdown’ as GWB prefers to put it), but is rather about whether the U.S. is losing the competitive race against the emergent economies of East Asia and the Middle East, and indeed to Europe.

Two triggers to this have been Thomas Friedman’s ‘Who will tell the people’ article in the New York Times, and the launch of Zareed Fakaria’s book, The Post-American World and the various articles and TV appearances he has made around that. Both are arguing that as much of the world has adopted a free trade, pro-globalization agenda - as the U.S. campaigned for them to do throughout the 1980s and 1990s - the ability to compete successfully in the global market is understood mostly in terms of its threat to the U.S. economy.

Fakaria likes to use examples of ‘big things’ to make his point (Where’s the world’s biggest mall? - Beijing). Friedman compares the slow death experience of time spent at a major U.S. airport to the resort/business club experience of spending time at Hong Kong International Airport or Changi airport in Singapore. But both are saying that, having mostly won the arguments about globalization and freeing up international trade, the U.S. polity has largely failed to consider the implications for the U.S. itself of a more competitive global trading regime.

I am struck by how this debate differs in the U.S. to how it plays out in Australia. Continue reading ‘Guest post by Terry Flew: Is America going backwards economically?’

Landline on the Murray-Darling plan

Published
by
Robert Merkel
1 week, 4 days ago
in Climate change, Economics, Environment and Water
. 15 Comments

There hasn’t been much commentary about the government’s announcements on the Murray-Darling plan - notably, the beginnings of large-scale buybacks of water rights - in the blogosphere so far; Quiggin thinks it’s good because they’ve announced they’re going to start buying back water; the only problem is that they’re not buying back enough. However, the ABC comes to the rescue with a a lengthy report from the Landline program.

There’s lots to chew on in this report - for one thing, it makes the excellent point that while rice may be a water hog, it’s one of the only things grown in the basin that can be planted after it’s clear how much water is available. And the stupidity of holding water in Queensland and northern NSW, much of it to just evaporate, while the Coorong dies is fairly dramatically illustrated.
Continue reading ‘Landline on the Murray-Darling plan’

Energy roundup - cars vs trucks, better biofuel

Published
by
Robert Merkel
1 week, 5 days ago
in Climate change, Economics, Energy, Markets, Transport and USA
. 17 Comments

While everyone’s heard the jokes about the USA being the land of the monster truck, it’s not until you actually go there and wander round a shopping mall carpark that you appreciate just how gargantuan the average American family vehicle is. The typical American car isn’t a car at all, it’s a Ford F-150 SuperCrew, a 2500 kg behemoth. They’re terrible to drive, by all reports, and get about 13mpg - or, if you like, use 18 litres for every 100 kilometres driven. But, since 2001, sales of “light-duty trucks” of this ilk have exceeded total sales of passenger cars in the United States, helped not only by cheap fuel but a collection of tax write-offs that encouraged their purchase.
Continue reading ‘Energy roundup - cars vs trucks, better biofuel’

Efficiency over the decades

Published
by
Robert Merkel
2 weeks, 2 days ago
in Climate change, Economics, Energy, Environment and Transport
. 36 Comments

Planning academic Paul Mees has been a tireless advocate for Melbourne’s public transport system for a long time. And, while his views on various topics are often disputed by other experts, they’re always worth a read. Ditto his latest research, which makes the observation that the average fuel economy of the Australian vehicle fleet has essentially stayed the same for 45 years:

In research for the Garnaut Climate Change Review, Melbourne University’s Dr Paul Mees has used Australian Bureau of Statistics figures to show that fuel efficiency has remained practically unchanged since 1963.

In that year — the first date efficiency was recorded by the Federal Government — the average Australian car used 11.4 litres of petrol to travel 100 kilometres.

In 2006, according to the ABS’s Survey of Motor Vehicle Use, it remained identical.

Continue reading ‘Efficiency over the decades’

To those who have, even more will be given

Published
by
Mark
2 weeks, 3 days ago
in Budget 2008, Economics, Howardia and Poverty
. 34 Comments

Perhaps our Christian Prime Minister has been reading Luke 8:18. I suppose we’re lucky that those who have little won’t find even the little they have taken away from them, but Andrew Leigh and Peter Martin are surely justified in asking why a fairly dodgy election promise to start with is being implemented in such a way as to disproportionately reward those who are already well off.

The redesigned scheme, due to come into effect on July 1, works like this: Every dollar that first home savers put into an account - up to a maximum of $5,000 - will be matched by a government contribution of 15 cents.

Except for Australians earning more than $80,000 per annum. They will get a government co-contribution of 25 cents for every dollar they invest. Really. …

Unless they earn more than $180,000 per annum in which case they will be blessed with a government contribution of 30 cents per dollar they invest.

That’s right.

Wayne Swan’s made much of creating incentives to save. I can’t for the life of me see why high income earners need public incentives. I thought we’d had enough middle class welfare under Howard. Now it seems we’re to get upper class welfare under Rudd.

Continue reading ‘To those who have, even more will be given’

Greens Coalition propose national solar feed-in tariff

Published
by
Robert Merkel
2 weeks, 4 days ago
in Economics, Energy, Environment and Politics
. 107 Comments

It may just be that Greg Hunt knows he’s never actually going to have to justify his policy ideas to Treasury or the Productivity Commission. But, at the moment, you’d swear he was the Greens environment spokesperson, not the Liberal Party’s. He’s proposing a whole raft of measures to promote the development of solar energy in Australia.

Of most direct short-term interest is the proposal for a national “feed-in tariff” scheme. To explain this, first some background. If you’ve got access to grid electricity, solar panels are currently financial lunacy. The solar system I’m currently being quoted on (thanks to commenter wilful for the tip) costs about $12,000, and generates about $225 worth of electricity every year. By contrast, if I left that $12,000 in the bank, I’d get at least double that after tax. If I put the money into a share fund, over the course of a decade I’d probably do much better again. I’d be able to pay for GreenPower from my electricity supplier, and have a considerable pile of money left over.

So why am I looking at solar cells? Because of the massive government rort known as the Photovoltaic Rebate Programme. Essentially, the government will pay $8000 towards the cost of my 1 kilowatt installation. I only have to pay somewhere around $4000, and it works out pretty close to cost effective.

Continue reading ‘Greens Coalition propose national solar feed-in tariff’

Intertubes and catalogues, liberatory and otherwise

Published
by
Mark
2 weeks, 4 days ago
in Books, Writers & Writing, China, Economics, History, International, Life, Media, Philosophy, Politics, Sociology, The Web and USA
. 12 Comments

There’s a thought provoking review of Richard Barbrook’s new book Imaginary Futures: From Thinking Machines to the Global Village at Mute magazine. I came across it via bookforum.com, and my curiosity was piqued because I received a flyer for Imaginary Futures enclosed with another book I recently ordered from Pluto Books in the UK (whom I wholeheartedly endorse for customer service btw - not only did they deliver a book I needed from Britain within a week, but I got an email telling me about it from an actual person as opposed to an Amazonbot).

Ian A. Boal asks some interesting questions - how did we get from seeing the computer as an instrument of dehumanisation (think HAL in 2001 and other such fictional and filmic representations of the 60s and 70s) to seeing it as a utopian saviour of humanity? How can we understand the history of “digital utopianism” and what of the interests and social positions of those who spruiked it?

Continue reading ‘Intertubes and catalogues, liberatory and otherwise’

Targets

Published
by
Mark
2 weeks, 5 days ago
in Budget 2008, Economics, International and Media
. 14 Comments

At The Road to Surfdom, Ken Lovell deconstructs Tony Abbott’s latest contribution to the economic debate:

“If anyone has created the current inflation, it’s Wayne Swan, with his wild and irresponsible talk,” he said.

You can make of that what you like. The opposition were previously running the line that there was no inflation problem (in order to “defend the Howard record”), and this absurd nonsense is apparently how that message morphs when the inflation figure hits a 17 year high.

The chatter among economists and on the business pages for a while has been about whether the Reserve Bank should dump its 2-3% orthodoxy - because a lot of the push factors are in effect exogenous to the domestic economy - so as to avoid tipping the show into recession. I was writing about this almost two months ago, and copped a bit for my pains.

What really surprised me was the fact that the defenders of economic orthodoxy - the same mob who always bang on about a globally integrated economy - were apparently so sanguine about the degree to which any nation state can exert sovereign control over inflation within its territory. As I suggested back then, economic orthodoxy is a moveable feast, and Henry Thornton documents just how far it has moved by today - to a position where the “suspension” of inflation targeting is being mooted.

At the same time, the stock in trade of political journalism Glenn Milne style is still debating whether Wayne Swan will come up with a credible message to target voters with in the light of changed economic conditions. That’s about as useful as debating how many angels can dance on the head of a pin. Continue reading ‘Targets’

Molitor@UNSW

Published
by
dk.au
3 weeks, 2 days ago
in Climate change, Energy, Environment, Government, Markets and Technology
. 11 Comments

Michael Molitor gave a public lecture last night at UNSW, where he now holds an adjunct professorship with the Climate Change Research Centre between appointments as a ‘Carbon Manager’ for PriceWaterhouseCooper. The talk was entitled Climate Change: ‘Show Me The Money’, which is the famous line from Tom Cruise’s character in Jerry Maguire - so when Molitor spoke passionately of the ‘Governor of NSW’, I was thankful that there were no couches onstage. Though, to be fair, the event showcased a fascinating, eclectic and sometimes contradictory mix of bravado-filled insights on the problem of climate change from someone on the inner circle of business elites. The message was familiar enough - that we aren’t moving quickly enough for the scale of the problem - his analysis, however, was somewhat less conventional.

The ‘good news’ began with the observation that our ‘carbon productivity’, that is, our economic outputs from machines relative to their spewing waste into the global carbon dump has actually been increasing over time. Continue reading ‘Molitor@UNSW’