Which politician, holding a senior frontbench economic position, made the following sensible observation
I remind you that Lehman Brothers, the collapse of Lehman Brothers, which started this global financial crisis, on that very day, they still had a AAA credit rating. What does a AAA credit rating really amount to? What I’m saying is you can’t place enormous store in the rating agencies. They do get things very badly wrong, and they totally missed those major firms and economies that were driving and the reason for the GFC.
Unfortunately, the same one who said only a few months ago that our
commitment to returning the Budget to a real surplus in a timely fashion and retaining Australia’s AAA rating is paramount.
Answer over the fold
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My previous posts put up various bits and pieces about the sharp economic divergence between NZ and Australia, but I didn’t say much about why this topic is of interest right now. The issue has come up in several different contexts, where the contrast between the two countries, starting from fairly similar positions, seems to me to provide some pretty strong evidence. The questions include
* Do recessions have sustained effects on income levels, or does the economy rapidly return to its previous growth path? The evidence from NZ (six recessions since 1975) and Australia (two) suggests that effects are sustained
* Is market-oriented microeconomic reform a major determinant of economic growth? NZ reformed more, and more vigorously than did Australia and did drastically worse in economic terms.
* Do more flexible labour markets yield better macroeconomic performance? Again, the evidence from NZ and Australia suggests the answer is No.
Obviously, given the points above, I take the view that bad macroeconomic policy in NZ, particularly during the reform era of the 1980s and 1990s, is an important reason for poor economic performance. Important examples include the adoption of a contract-based 0-2 per cent inflation target in the early 1990s, and the misconceived idea of the Monetary Conditions Index at the time of the Asian crisis. I don’t think bad macro policy is a sufficient explanation, but the gap is so large and persistent, it’s hard to explain in terms of standard microeconomic analysis.
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Those are the terms chosen by young American voters to describe climate change deniers in a poll conducted for the League of Conservation Voters. LCV is obviously pro-environment, but historically nonpartisan, and they used both a Democratic and a Republican pollster.
The fact that, to be accepted in Republican circles, its necessary to be ignorant, out of touch or crazy or, at the very least, deferential to the crazies who dominate that side of politics, is being recognised as a problem for the Republicans and an opportunity for the Democrats, going well beyond the specific issue of climate change.
The climate denial issue came up again in Andrew Bolt’s interview with Kevin Rudd, and I’ve been reminded of his repeated claim that I got estimates of the climate impact of the government’s emission target wrong. In fact, it was Bolt who was wrong, as on almost every topic he touches, in this case, out by a factor of 100.
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Readers have sent in a couple more instances of claims that the NZ economy has done, or was about to do, better than competitors, most notably Australia. Here’s Tony Abbott on the alleged success of NZ macro policy
there are other countries which have chosen a different path and there’s no evidence that their response has been any less effective than ours. For instance, in New Zealand they have tried to reform their way through the global financial crisis under the new government’s leadership and they seem to be doing pretty well
and here’s a picture from 1989 of then Finance Minister, David Caygill, showing what he thought the reforms could achieve.
It’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.
A new sandpit for long side discussions, idees fixes and so on.
For a variety of reasons, I’ve been looking at the relative economic performance of Australia and New Zealand over the postwar period. For most of the 20th century, income per person in New Zealand grew in parallel with Australia. According to the Penn World Tables, income per person in New Zealand was within 10 per cent of the Australian level for most of the period from 1950 to 1970. Since the 1970s, NZ has declined greatly relative to Australia. On the latest Penn World Table figures, income per person is about 70 per cent of the Australian level. Over most of this period, NZ has been governed by radical advocates of the free market[1]. As part of my research, I’m collecting some of their claims about NZ economic performance, relative to Australia and the OECD. I’ve listed some over the fold (links a bit scrappy, as some predate the rise of the interwebs). Further contributions welcome, as would any interesting examples of more accurate assessments (I have some already).
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I missed this when it came out a few weeks ago, but the Australian Energy Market Operation (AEMO) has released new forecasts of electricity demand to 2020. The forecasts represent a further reduction on the big cuts in estimated demand made between 2011 and 2012. In 2011, the medium forecast was for nearly 250 000 GWH by 2020, up from 200 000 in 2010. The latest medium forecast is 211 000 GWh for 2020, and the low forecast stays below 200 000 out to 2022-23. These forecasts would be even lower if it were not for three large export LNG projects in Queensland.
Even more striking is the forecast for residential and commercial consumption per persom. In much of the debate around energy issues, it is assumed that increases in living standards must go hand in hand with higher consumption of all forms of energy. But AEMO, assuming moderate rates of economic growth, is predicting that consumption per person will drop to 6000 KwH per year by 2020. In 2005, it was around 7200 KwH, so that’s a drop of more than 15 per cent. Over that time, income per person is likely to rise by around 30 per cent.
The AEMO measures don’t include rooftop solar, but they do include large-scale renewable energy (wind and grid-connected PV). Current policy calls for an additional 20 000 GWh of large-scale renewables by 2020, which would imply a significant reduction in energy-related CO2 emissions over the next decade.
Of course, a lot of this is the fortuitous result of high electricity prices, driven mainly by distribution costs. But it’s certainly an impressive demonstration that lower energy consumption does not mean lower living standards.
That’s the headline for my latest piece in Guardian. Of all of the anti-science nonsense peddled by the political right, here and in Britain, none is more stunningly hypocritical than their campaign against the (non-existent) health risks of wind turbines. The self-image promoted by these guys (and, with a handful of exceptions, they are guys) is one of hardnosed scepticism about unproven risks, disdain for emotive appeals to feelings about the environment. But because wind turbines are supported by their tribal enemies, they swallow and propagate utterly absurd alarmist claims.
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The announcement by Kevin Rudd and PNG PM O’Neill that asylum seekers arriving by boat would, from now on, be settled in PNG came as a shock to most of us. I’ve waited a while to respond, because I’m neither happy with the policy nor satisfied with the critical responses from the Left. It also remains unclear whether the policy will actually work as planned, but that will take some time to determine.
The benefit of waiting is that I’ve had time to see this piece by Tad Tietze, who I think sums up the issues pretty well, making the point that, while Rudd has outflanked Abbott regarding a hard line on boat arrivals, he has also outflanked critics on the left by increasing the total refugee intake, which is already claimed by the government to be the highest in the developed world on a per capita basis. [1]
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The Rudd government’s proposal to tighten up documentation requirements for the very generous tax concessions provided for people who receive motor cars as a fringe benefit has produced some striking examples of rent-seeking from the Australian right, notably including Catallaxy and the Australian Financial Review. Catallaxy has a string of posts defending this rort.
The Fin gives lots of space to bleating rent-seekers, while imputing to “academics” the opinion that this is a subsidy. I guess that’s fair enough, given that the Fin regards basic science as a matter of academic opinion, while treating the failed dogmas of the 1980s as proven facts. And, of course, the Opposition has promised to oppose the measure, while weaselling out on the question of whether it would reverse the changes if elected.
This really is a test for Rudd. If he wants to refute the oft-repeated claim that he is all spin and no substance, this is his first chance, and one of the best he is going to get.
As a member of the Climate Change Authority, I’m constrained to some extent in what I can say about the plan to bring forward the date at which emission permits will become tradeable, so I’m going to make a few points, and leave discussion to others
* The really big change, which went largely un-noticed, was the link to the EU scheme, announced by Greg Combet shortly after the carbon price came into effect. Bringing this forward by a year is a minor adjustment by comparison
* The offsetting savings announced today are mostly good, the most obvious exception being the biodiversity fund. I supported assistance to Carbon Capture and Storage in the past, on the general principle of backing every horse, but it’s time to admit that this horse won’t run
* The tightening of Fringe Benefit exemptions for cars is, I hope, a recognition that subsidising motor vehicle use in general isn’t going to save the domestic car industry, which has a small and shrinking share of the market. The impending demise of the Falcon should kill the presumption that fleet cars are likely to be Australian-made I hope this view is taken more generally. Preservation of the domestic industry is probably a lost cause, but if governments are going to try, they should do so with direct subsidies to domestic production not subsidies to car use in general.
* I hope Parliament sits again, and that the government puts the necessary legislation forward. The amusement of watching Tony Abbott voting *for* the carbon tax would be well worth the price of admission.
I’ve written a piece for the Conversation about a side issue in the Rudd-Gillard contest, namely the view that, under the Westminster system, voters elect the politicians who then choose the PM. Rudd’s proposed reforms obviously contradict that. I argue that Rudd is effectively codifying the existing system, as established by the bulk of historical precedent and understood by voters, and rejecting the view of insiders (especially the kind who appear on Insiders, or so I’m told – I’ve never watched the show and plan never to do so).
As a side issue, my piece was extensively edited for publication. With the natural pride of authorship, I thought my original (over the fold) was better. But I’d be interested in a reality check on this from readers here.
As I’ve said before, I don’t want to rehash the substantive merits of Rudd and Gillard at further length here. If you want to have your say on this, go to the Crooked Timber post I’ve linked.
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It’s time for another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.
A new sandpit for long side discussions, idees fixes and so on.
I’ve posted a piece about Rudd and Gillard on Crooked Timber, aimed at an international audience. Readers here might want to present alternative, or concurring, views in comments there.
Since we’ve been discussing Andrew Bolt, I thought I’d dig up another of his columns from ten years ago, in which he denounces all those who criticised the lies he help to propagate. It was published in the Herald-Sun on 9 June 2003, but can now only be found via republications in Internet forums – the link they give is broken. Comment is, I think, superfluous.
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The Conversation has now launched its election fact-checking site. The opening set includes a factcheck I’ve done, on a claim by Tony Abbott that it now takes three years to get a mine approved compared to less than twelve months six years ago. This is wrong on about as many levels as it can possibly be, the most important being
* The claim rests on a single coal mine in NSW, which was initially rejected, then approved on appeal
* The implied blame is directed to the Commonwealth government, which changed in 2007. But mine approval is mostly a state function, and most states have switched from Labor to LNP governments in the last six years
Meanwhile, there was a Twitterstorm over the weekend, about a story run by independent journalist Margo Kingston, who used FOI to determine that Abbott had been made to repay $9400, claimed as expenses while he was promoting his book Battlelines in 2009. MSM weren’t much interested, but the barrage of tweets has elicited at least one story, here in the Age.
It’s time for another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.
That’s the headline on my latest piece for The National Interest. It looks at the case of (retired) General James Cartwright, former vice chair of the Joint Chiefs of Staff, under investigation for a leak relating to the Stuxnet worm, a US-Israeli cyberwarfare exercise directed against Iran. The key points
* Like most leaks, the one for which Cartwright is being investigated revealed nothing that wasn’t known to the Iranian targets of the exercise or easily inferred by anyone who had followed the story in public media
* Unlike the leaks for which whistleblowers like Manning and Snowden have been prosecuted/persecuted, this was an absolutely standard Washington leak, done for personal gain. Assuming the facts are as alleged, Cartwright, an insider, gave information (classified as secret, but actually well known) to a journalist, in return for favorable coverage. This is such standard practice that it would be hard to find anyone in government (in DC or elsewhere) who hasn’t done it
But, Cartwright had made lots of enemies and so appears excluded from the general immunity that covers such leaks. Moreover, thanks to Obama, the stakes are high. Based on the Manning precedent, he could be charged with aiding the enemy, a crime that carries the death penalty. The only comparable case of an insider prosecution is that of Lewis ‘Scooter’ Libby, who leaked the identity of an active CIA agent for political gain. He got a three-month slap on the wrist, which was immediately commuted. Even then he was prosecuted for perjury, not for the actual leak.
Having reached the point where the weapons of the security state are being turned against insiders, it will be interesting to see how things play out. Hopefully, those involved will look over the precipice and pull back.
I’ve had two calls in the last 24 hours asking me to fact-check claims by Tony Abbott. I accepted one, and found that his claims were nonsense (links soon, I hope). The other didn’t sound much better, but I thought I’d let someone else deal with it.
The emergence of systematic fact-checking is a huge vulnerability for Abbott, coming at just the wrong time for him. Until recently, the perception that the government was untrustworthy and deceitful[1] allowed Abbott to get away with just about anything he said, and he took full advantage of this. Now his record is littered with obvious lies and he’s finding it hard to break the habit. Worse still, the post-truth state of the political right, in Australia and the US, makes it hard for anyone on that side of politics to discern the truth even if they want to. Once you assume (correctly) that anything said by Bolt, the IPA, the Oz, Fox and so on is probably false, where can a conservative go for information. Essentially, it’s necessary to do the work from scratch, and I don’t get the impression that Abbott or his team enjoy hitting the books[2]. So, switching from his previous line of fact-free negativity and putting forward a positive alternative to Rudd is going to be very difficult for Abbott, I think
fn1. As previously, I don’t want to debate the accuracy of this perception. I don’t suppose anyone will dispute its existence
fn2. To be fair, he obviously trains much harder than I do, as our relative performance in endurance events illustrates. But I haven’t found a lot of transference of training between ironman length triathlon and policy analysis.
It’s time for another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.
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