Glenn Stevens casts doubt on trend growth

Glenn Stevens who is the Governor of the Reserve Bank of Australia made a speech yesterday.

In it he talked about whether the trend rate of growth has declined lately. It may have declined for the 3.25% most people (and the budget assumed) thought.

This does have implications for fiscal policy. It does mean that when the economy gets back to its trend level the budget will not gain the revenue you would normally expect and thus the budget would not automatically balance..

This means there must be either cuts to expenditure and/or a rise in taxes to enable the budget to balance ONCE the economy is back at trend growth.

To do that now when the economy is weak is to repeat the mistake Wayne Swan did when he cut 0.7 percentage points from GDP. Easily the most austere budget since budget figures were collected.

Thus any Government ( or Opposition needs both a short-term fiscal policy together with a medium term policy.
In the immediate term we need to get back to trend growth. In the  medium term we need fiscal consolidation.

What did the price on Carbon do in Australia

Hugh Saddler examines putting a price on carbon affected carbon emissions in Australia.
He finds that emissions fell when we had a price on carbon and started to rise when the price was removed.
 Who'd thunked it!
What is particularly interesting is the different reactions between the wholesale and retail markets.
What should not be forgotten is the rise in prices to pay for a gold paved poles and wires.

Very interesting article.

Changing taxes

Perhaps the silliest argument about whether to increase the GST is that it is a regressive tax. Does this mean you only increase or have progressive taxes?  The best indirect tax is a GST. A country must have an indirect tax. Overall the GST should be broadened with compensation for low income earners or those on welfare.

It isn't whether an individual tax is progressive or regressive but whether the TAX SYSTEM is progressive.

I doubt many people would argue the more money you make the more taxes you should pay. As it is overall the Australian taxation is progressive however equity is only one concept you take into account. Efficiency is another one.
The Henry taxation review was pretty good and one only need adopt most of its reconsiderations.

In essence you get rid of most state taxes and have broad based taxes in their stead.

Go do it!

The Ashes Second Test

Wow, The second test was a mirror image of the first test except Australia were far more dominant.

The Australian batsmen were rarely troubled and easily scored runs. The bowlers were disciplined and swung the ball better than their pommy counterparts. They also got more out of this dead pitch.
They fielded well.After winning the toss Clarke captained well. The two changes worked quite well.

The Poms were awful. Lords was a dead batting pitch yet they managed only 103 in the second innings. They need an attacking partner for Cook opening, A first drop with a decent technique and a replacement for Bell. Pieterson is the obvious replacement for Bell. Bairstow for Ballance.
Against the Windies, The Kiwis and now us the poms are usually 4-3- or 40 or 50. given this has occurred too often something must be done.
Only Broad was impressive bowling. Anderson had the worst test I have ever seen him play.
I doubt if the bowlers will bowl as badly again.

I think we are favourites to win the Ashes however Anderson can still win a test on his day. if he bowls badly the Poms are shot ducks.

We shall see

Bronwyn Bishop and politicians' entitlements

The trouble Bronwyn Bishop is in over her use of a helicopter shows no signs of abating.
I am with Andrew Elder on what it is really about. Laurie Oakes reinforces Andrew's opinion of Bishop.
Bishop's behaviour has allowed this to go on when it should have run its course ages ago.Her political judgement has always been poor so no surprises there.

I have no sympathy for Bishop. She is clearly a pathetic speaker and the only one to suspend a member for laughing!

However it does raise politicians' entitlements and whether they should be changed.

In private enterprise if you stay anywhere you pay the bill and are reimbursed for the amount. The politicians are paid an allowance. This is ludicrous.

Take where they live in Canberra. .If she share living with other politicians and thus the rent and it is well below the allowance they are given they make money.

Politicians should not be able to access superannuation before anyone can.

The entitlements have come about because we do not pay politicians as much as they should be so they try and make up for it by other means.

It should be reformed.

Postscript:
Banaby Joyce thought he had a gotcha on Shorten. He didn't and now has egg over his face.
Even though Shorten's trip was justified like Abbott's down in Melbourne it should not have been.

More evidence of the need for reform.

Around the Traps 17/7/15

It is time for Around the Traps again.
More Grexit etal articles in Europe and Pluto articles are in General.

Aussie,Aussie,Aussie,Oy,Oy.Oy

• Croaking Cassandra on just-how-large-a-contribution-has-net-migration-made-to-population-growth , a-useful-snz-innovation-but-a-question, a-severe-commentary, how-not-to-have-a-reasoned-and-deliberate-discussion-of-housing-and-immigration
• Ross Gittins on lower-dollar-boosts-services-exports
• Mathew Ricketson on six-reasons-abbotts-peace-deal-on-qanda-isnt-quite-what-it-seems
• Brian McNair on managing-the-mallah-fallout-qanda-under-scrutiny 
• Kevin Bonham on reachtel-liberals-narrowly-holding-in.Tassie
• Greg Jericho on the-housing-booms-not-over-but-theres-good-news-for-hopeful-buyers, inequality-has-fallen-yet-the-poor-remain-in-danger-of-being-left-behind
• Max Chalmers on unfair-welfare-daily-telegraph-pinged-press-council , why-will-abbott-let-mp-speak-reclaim-australia-rally-not-qa
• The Kouk on and-that-s-the-century-up-for-the-abbott-government
• Andrew Elder on the-smell-of-kerosene
• Simon Chapman on the-australians-campaign-against-wind-farms-continues-but-the-research-doesnt-stack-up
• Irfan Ahmad on reclaiming-australia-liberalisms-role-in-islamophobia
• Tony Wood on the-latest-turn-in-the-twisty-history-of-labors-climate-policies

The ASHES

• Tony and the boys on second-test-lords

Northern America

• Lorenzo on the-poisonous-legacy-of-slavery-and-the-us-race-tangle , when-the-three-languages-of-us-politics-get-in-the-way
• Calculated Risk on the-shrinking-deficit, key-measures-show-low-inflation-in-june, comments-on-june-housing-starts
• David Beckworth on did-monetary-policy-really-offset-fiscal-austerity-in Canada
• Timothy Taylor on the-declining-number-of-illegal , some-economics-of-freedom-of-information-act
• Mark Thoma gives us Tim Duy on fed-watch-more-mediocrity, fed-watch-the-case-for-september
• David Frum on domestic-political-consequences-iran-nuclear-deal , iran-deal-2016-presidential-election
• Garret Epps on clarence-thomas-unusual-evolution
• John Robertson and Elwyn Terry on have-changing-job-and-worker-characteristics-restrained-wage-growth
• Paul Waldman on the-next-gop-president-wont-walk-away-from-the-iran-deal-heres-why  Thanks Brad
• Brent Meyer ondifferent-strokes-for-different-folks, getting-to-the-core-of-goods-and-services-prices
• Livio De Matteo on the-great-convergence-federal-transfer-revenue-shares-198081-to-201314
• ProGrowth liberal on heritage-economist-on-greece-and-us
• John Holbo on where-is-this-going-someone-tell-me
• Peter Beinhart on iran-nuclear-deal
• Noah Smith on growth-fantasy-of-tax-cuts-and-small-government

Europe

• James Hamilton on possible-scenarios-for-greece
• Simon Wren-Lewis on the-great-recession-and-eurozone-crisis , greece-and-trust , labour-and-deficit, labour-and-deficit-tristram-hunt-follow
• Tim Harford on george-osbornes-gamble-with-jobs
• Tony Yates on greek-bank-bread-and-buiter, mark-carney-and-the-yield-curve
• David Glasner on le-boche-payera-tout
• Antonio Fatas on micromanagement-of-european-reforms
• Justin Links on religion-class-and-turkeys-new-left
• Cas Mudde on its-time-to-end-eurosceptic-illusions
• Emily Tamkin on russias-senseless-investigation-into-baltic-independence
• George Kyros on greece-a-europe-forged-in-one-crisis-may-have-laid-the-foundations-for-the-next
• Costas Mylos on tsipras-may-have-just-done-the-best-deal-possible-for-greece
• Kruggers on roach-motel-economics, the-pause-of-2014 , history-lessons-for-euro-debtors
• John Quiggin on bluffed
• Cecchetti and Schoenholtz on after-greece-saving-emu Thanks Mark
• Barry Eichengreen on greece-debt-agreement-risks Thanks Brad
• Menzie Chinn on greece-is-internal-devaluation-enough
• Charles Wyplosz on new-european-union
• Philip Lane on considering-the-greek-crisis
• Sandwichman on slush-fund-schauble
• Kenneth Thomas on impending-disaster-in-greece
• Anton Muscatelli on greece-a-bad-deal-for-everyone
• Sony Kapur on thisisnotacoup-dispelling-some-myths-about-greek-agreement Thanks Mark
• Jacques Delpla and Pierre-Oliver Gourinchas on Greek_Banks Thanks Brad
• Thorsten Beck on greece-and-can-keeps-rolling
• Peter Dorman on the-greek-transportation-giveaway
• Barbora Cernusakova on we-are-not-antigreeks-need-for-return-of-solidarity-to-east
• Andreas Chatzidakis on what-now-for-greece-what-now-for-left
• Fil Lekkas on some-harsh-truths-for-germans-greeks-and-europeans
• Lorenzo on the-rotten-heart-of-europe
• Brad De Long on when-greece-her-knee-in-suppliance-bent
• Menzie Chinn on guest-contribution-what-europeans-think-about-europe-in-the-aftermath-of-the-crisis
• Bill Mitchell on Euro exit will not be enough for Greece
• Mikhail  Molchanov on unsolving-ukraine-conflict 
• Matt O'Brien on the-euro-is-a-disaster-even-for-the-countries-that-do-everything-right Thanks Brad
• Karl Whelan on alice-in-schauble-land-where-rules-mean-what-wolfgang-says-they-mean Thanks Brad
• Paul De Grauwe on why-ecb-should-not-insist-repayment-its-greek-bonds
• Nauro Campos and FAbrizio Coricelli on reforming-greece
• Jeff Gordan and Jeff Ringe on greece-and-missing-banking-union
• Barkely Rosser on the-papandreouization-of-alexis-tsipras 
• Coppolla Comment on the-great-greek-bank-drama-act-i
• Chris Dillow on the-cushnie-principle
• mean squared errors on greece-growth-or-recovery  Thanks Mark
• Ben Bernanke on greece-and-europe Thanks Mark

Asia

• Matt Schiavenza on thailand-china-uighur-refugees
• Croaking Cassandra on considering-the-veracity-of-chinese-gdp-christopher-balding
• Saleem Ali on energy-and-economic-diplomacy-can-trump-the-nuclear-threat-of-the-iran-deal
• Shadi Armad on iran-nuclear-deal-consequences-obama
• Barkely Rosser on is-iran-really-like-north-korea
• Shujiro Yazawa on crisis-of-democracy-in-japan

Wonk

• Noah Smith on woodford-vs-neo-fisherians , a-finance-industry-insider-on-equilibrium-asset -pricing-models, capitalism-that-helps-cronies-or-the-public-good-
• Nick Rowe on alpha-beta-ecb-independence-and-omega-lender-of-last-resort, privately-issued-preloaded-drachma-cards, understanding-schmidt-and-woodford-on-neo-fisherianism , wtf-and-neo-fisherianism-as-one-social-construction-of-reality
• Chris Dillow on minimum-wages-and-jobs, in-defence-of-welfare, three-paradigms-of-maximization
• John Quiggin on tisataafl
• David Warsh on The rivals  Thanks Mark
• Growth Economics on understanding-diffusion-models-of-growth  Thanks Mark
• Tim Harford on why-wishful-thinking-doesnt-work
• Timothy Taylor on productivity-growth-and-diffusion
• Simon Wren-Lewis on evidence-for-monetary-offset
• David Glasner on exposed-milton-friedmans-cluelessness-about-the-insane-bank-of-france, the-pot-calls-the-kettle-black

General

• Greg Laden on why-is-pluto-not-a-planet
• Chris Arridge on new-horizons-is-an-old-spacecraft-but-it-will-transform-our-knowledge-of-pluto
• Alan Taylor on the-voyage-of-new-horizons-jupiter-pluto-and-beyond
• Gerraint Jones on new-horizons-brings-plutos-mysterious-moons-into-sharper-focus
• David Rothery on historic-close-ups-of-pluto-and-its-moon-charon-present-puzzle-for-scientists
• Mike Summers on a-team-members-view-of-all-the-work-on-earth-it-took-to-get-new-horizons-to-pluto
• Kevin Orrman-Rosstter and Alice Gorman on fnding-pluto-the-hunt-for-planet-x
• Norman Naimark on genocide-isnt-history-its-part-of-the-long-term-human-experience
• Asma Afsaruddin on a-new-weapon-of-islamist-extremists-is-poetry
• Simon Chadwick on warning-for-fifa-in-barcelona-as-fans-bid-to-end-qatar-sponsorship

Climate

• Artic Sea Ice Blog on nares-strait-ice-on-the-move, junction-june-2015
• Greg Laden on suddenly-the-atlantic-and-delores
• Bob Henson and Jeff Masters on Chan-Hom
• Tamino on i-was-wrong , extreme, so-hot , breaking-climate dont-do-the-wilcoxon , most-extremely-hotter-than-usual-month
• Lawrence Hamilton on polar-facts-age-of-polarization
• Andy Skuce on Carbon cycle feedbacks and the worst case greenhouse gas pathway
• Skeptical science on economic-growth-can-close-emissions-gap
• And then there's physics on mini-ice-age , understanding-versus-accepting, rude-and-touchy
• Hotwhopper on watching-global-thermometer-year-to-date
• The conversation on factcheck-has-australia-met-its-climate-goals-while-other-nations-make-airy-fairy-promises
• Nick Stokes on giss-new-version-up-by-003-in-june
• Dana1981 0n no-sun-isnt-going-to-save-us-from-global-warming
• John Abraham on global-warming-rain-melting-greenland-ice-sheet
• Timothy Taylor on global-carbon-intensity-rises-kaya
• Ross gittins on all-we-should-be-doing-to-protect-land-and-water

Andrew Gelman ( Mainly Stats)

• dont-do-the-wilcoxon
• survey-weighting-and-regression-modeling
• prior-information-not-prior-belief
• new-papers-on-loowaic-and-stan
• stan-is-turing-complete
• measurement-is-part-of-design
• Tamino on extreme
• Kaiser Fung on what-is-an-interaction-effect , flawed-thinking-about-causes

Genial Dave Giles ( Econometrics)

• questions-about-size-and-power-of-test
• No Hestitations on what-seasonally-adjusted-us-economic-data-needs-most  Thanks Mark
• Kids Prefer Cheese on who-cares-about-getting-asymptotically-correct-standard-error-for-a-possibly-massively-inefficient-coefficient-estimate thanks Mark

Dianne Coyle ( Quirky + Book Reviews)

• imagined-communities , global-value-chains
• Brad De Long on notes-on-trekonomics

Vox Wonk

• quantitative-macro-models-wealth-inequality-survey
• innovative-firms-and-resilience-chinese-import-competition
• earning-about-governments-fiscal-plans
• service-labour-market-engine-growth-and-inequality
• debt-sustainability-puzzles-implications-greece
• birth-of-european-macroeconomics
• economic-rationale-african-scramble
• leniency-damages-and-eu-competition-policy
• why-it-necessary-regulate-doping-sports
• fuel-economy-requirements-and-household-driving
• early-childhood-education-mooc-lessons-sesame-street
• quality-distance-quality-sorting-alchian-allen-effect-and-geography
• kids-and-stress
• india-s-confidently-green-road-paris
• stock-and-currency-returns
• us-intergenerational-mobility-wwii
• the-changing-tasks-of-the-ecb
• suicide-and-happiness
• how-fiscal-policy-can-support-medium-long-term-growth

Would an ETS be a vote killer for the ALP?

There was a leak yesterday on a discussion paper from the ALP. This undoubtedly came from a business group to whom it was given for comment. Holy gullibility Batman!

however if the ALP do adopt an ETS as policy would it be a negative for the ALP? I have heard Tony Abbott is a great negative campaigner and would be all over this.

One BIG problem with this argument however. A scare campaign only works before a policy is implemented not after.
The GST was a vote loser for Howard BUT after it was implemented it was a bit of a yawn. The paperwork associated with it like the BAS certainly cheesed a lot of people off but not the GST.
Similarly the ETS which the previous Government imposed was a vote loser but again a BIG yawn once it came in.

People have memories. you cannot make a scare campaign on a policy which occurred and nothing happened like you said it would particularly if you went into hyperbole overdrive on it like Tony Abbott did.

Imagine a leader's debate and Abbott starts to hyperventilate about the ETS. Shorten merely has to look into the camera and ask the people of Whyalla was Tony Abbott correct? In other word It is very east for Abbott to get fed on this issue. Moreover Abbott has little credibility these days.

Of course this all assumes the ALP are capable politicians and we recently saw in the Killing season many are not.