1,720,983 research outputs found
Economic returns to education
No full textThree leading economists discussed the evidence for how education quality drives economic growth. They also reviewed the evidence that the most important policy interventions are to improve teacher quality rather than school building improvements or class size reductions.
The panel consisted of Colm Harmon, Director of the Geary Institute; Saul Eslake, Program Director Productivity Growth, Grattan Institute and Ben Jensen, Program Director School Education, Grattan Institute provided in in depth look at the above issues
Reflections on climate change, and the quality of Australian economists
No full textSaul Eslake ponders Tony Abbott\u27s distrust of economists in Online Opinion.
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I attended a conference of economists from around the world in Amsterdam last month at which, during one of many discussions about the handling of the Greek sovereign debt crisis, one of the European economists remarked that the world had become a funny place when the Head of the Catholic Church was a German and the Head of the European Central Bank was an Italian.
Australia has become a funny place, too, when the ostensibly left-of-centre major political party advocates reducing Australia’s greenhouse gas emissions by using ‘price signals’ − in the hope that the combination of lower returns from processes which are intensive in their use of fossil fuels and higher prices for goods and services which are similarly intensive will spur the search for less fossil fuel intensive means of producing and distributing goods and services – while the ostensibly right-of-centre party advocates ‘direct action’, based on the premise that governments actually know the best means of reducing carbon emissions, and will pay people to undertake them.
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Image: Alex E. Proimos / flick
The global financial crisis of 2007-09 - an Australian perspective
No full textThe objective of avoiding another substantial crisis will not be well served by attempts to use the current one in order to supplant one ideology with another argues Saul Eslake. The global financial crisis has some parallels with the financial meltdown that preceded the Great Depression. However it wasn’t the scale of the financial meltdown that made the Great Depression ‘great’, but rather the series of policy miscalculations and mistakes made in the early 1930s and later in that decade. Contemporary governments and central banks appear to have learned from those mistakes and, for the most part, have avoided repeating them in their responses to the current financial crisis.
Fears that the fiscal and monetary policy responses to the current crisis will sow the seeds of the next one appear exaggerated. Australia’s experience of the financial crisis has been remarkably benign compared with what was initially expected and with the subsequent experience of most other advanced economies. That partly reflects Australia’s unusual orientation towards China, and Australia’s ability to avoid some of the policy and regulatory mistakes made in the US, Britain and elsewhere; but it also results from timely and well-targeted responses from Australia’s economic policy-makers, who have also absorbed important lessons from more recent economic downturns. Some seek to attribute the most recent financial crisis largely, or even wholly, to ‘greed’, ‘neo-liberalism’ and ‘free market fundamentalism’.
While there is no doubting that greed and regulatory failures, some of which were based in part on ideology, contributed to the crisis, there were other, more significant factors (including incompetence). The objective of avoiding another substantial crisis will not be well served by attempts to use the current one in order to supplant one ideology with another.
This speech was given for the Shann Memorial Lecture, University of Western Australia on 19 August 2009
Image: Anders V / Flick
Message to the G20: Defeating protectionism begins at home
No full textOn 16 November last year, G20 leaders made a commitment to resist protectionism. According to the World Bank, by the end of February 2009, seventeen of the twenty had already ‘implemented 47 measures whose effect is to restrict trade.’ When the leaders meet in Pittsburgh on 24 September 2009, they will have an opportunity to review their commitment and decide how best to strengthen it. In a new Lowy Institute Policy Brief, Bill Carmichael, Saul Eslake and Mark Thirlwell argue that the advice that G20 leaders have received to date fails to deal with the underlying causes of protectionism. Protectionism results from decisions taken by governments at home, for domestic reasons. As a consequence, any effective response to protectionism needs to begin at home. The authors therefore propose that G20 leaders should sponsor domestic transparency arrangements in individual countries, in order to provide public advice about the economy-wide costs of domestic protection
Affordability and taxation
No full textLower interest rates and a reduced capital gains tax combined to create the present affordability crisis, writes SAUL ESLAKE, and the solutions aren’t straightforward
THERE’S no doubt that housing affordability has deteriorated substantially over the past decade or so. Indeed as conventionally measured - in terms of the income required to service the mortgage needed to purchase a median-priced house in any of Australia’s major cities - purchasing a home is currently less affordable than at any time since the late 1980s, when the standard variable mortgage rate peaked at 17.5 per cent. It was those high interest rates which were the main cause of the “housing affordability problem” back then; and the solution was, at least in principle, obvious and simple - lower interest rates. It took a severe recession to deliver the lower inflation required to make lower interest rates a feasible proposition, along with other reforms such as removing the potential for political interference in the setting of monetary policy; but once interest rates began to trend sustainably lower during the 1990s, the housing affordability “problem” was effectively “solved,” at least for a while.
By contrast, today’s housing affordability problem is largely due to high housing prices. And they, in turn, are largely the result of the sharp decline in interest rates during the 1990s and early 2000s effectively being capitalised into the price of housing. Lower interest rates, combined with sustained steady growth in incomes, enhanced competition and innovations on the supply side of the mortgage market, substantially increased the borrowing power of buyers; at the same time, rising levels of immigration and the on-going decline in the average number of people living in each dwelling boosted the “underlying” demand for housing. Over the past fifteen years the increase in effective housing demand more than outstripped the increase in the supply of housing by a wide margin, so that a substantial increase in housing prices was more or less inevitable. And it was exacerbated by the halving of the capital gains tax rate in 1999, which effectively converted “negative gearing” from something which historically allowed those availing themselves of it to defer tax into a strategy for permanently reducing as well as deferring tax, thus bringing another cohort of would-be landlords into competition for the limited supply of housing with would-be owner-occupiers.
Absent a sharp decline in interest rates - which looks unlikely any time soon given the Reserve Bank’s publicly stated judgements regarding the risks to the outlook for inflation - the only “solution” to the contemporary housing problem is lower housing prices. But given that almost 70 per cent of Australian households own (or are in the process of buying) their own dwelling, and that for most of them their own dwelling accounts for the bulk of their net worth, lower housing prices are hardly likely to attract much support.
Most of the proposed “solutions” to the housing affordability “problem” entail putting more cash into the hands of home buyers, for example through increases in the First Home Owners’ Grant, or further reductions in (or exemptions from) State stamp duties. By allowing would-be home-buyers to pay more for the dwellings which they wish to acquire, such proposals would effectively make the housing affordability “problem” even worse. The governments who would be expected to fund these “solutions” might as well give the cash to vendors, because that’s where the cash given in the first instance to home buyers will eventually end up. The same is true of “shared equity” schemes, unless they are subject to tight eligibility criteria (as Western Australia’s scheme is). A would-be home buyer who is willing to spend 300,000 house, confronted with the possibility of buying a 200,000 under a shared equity scheme, would probably see that as offering the potential to buy a 300,000 he or she was orginally willing to spend. The inevitable result, if such schemes were sufficiently widely available, would be that 400,000.
“Supply-side” solutions - based on increasing the supply of land which can be used for housing, or reducing the cost of bringing new housing on to the market - potentially offer greater chances of improving housing affordability. But they do suffer from the problems that the majority of would-be home buyers don’t want to live in the areas where new land supply could be most readily brought on to the market, on the far fringes of our major cities; and changes to town planning laws which might permit greater urban density tend to be highly unpopular with existing residents of established suburbs.
One possible approach which in my view merits serious investigation is to extend to home-buyers the same tax treatment as is available to investors - that is, to allow home-buyers a tax deduction for interest payments on their mortgage provided they agree to pay capital gains tax on the increase in the value of their principal residence if and when it is sold. It can be thought of as a shared-equity scheme funded by the Australian Tax Office. It would certainly cost the federal government money up-front - through lower income tax collections as home-buyers claimed tax deductions for interest on their mortgages. But a proportion of these revenue losses would be recouped as capital gains tax became payable when these buyers subsequently “traded up”. The net cost could be reduced by restricting eligibility to homes of less than a stipulated purchase price (which might have to be set at different levels for different regions) or to home-buyers with less than a stipulated income. And those who wanted to preserve the tax-free status of their principal residences would be under no obligation to participate. But even this proposal is arguably open to the suggestion that, by enabling home-buyers to take out bigger mortgages (since the interest would be effectively subsidised through the tax system), it could put additional upward pressure on house prices.
It’s also important to remember that for all the public attention devoted to those encountering difficulties with their mortgage repayments, they will at least own something of considerable value when the struggle is over. Those who are devoting high proportions of their income to paying rent don’t end up with anything to show for their commitment. And most renters have lower incomes than home-buyers. There are probably more things that governments can do to make rental housing more affordable - directly or indirectly increasing the supply of rental accommodation - than there are things which would genuinely improve affordability for home buyers. •
Saul Eslake is Chief Economist at ANZ
Photo: Keith Binns/iStockphoto.co
The economic divide
No full textThe agricultural sector is booming but are the benefits flowing to regional Australia?
Saul Eslake and Fiona Simson discuss the regional economy and what is needed to drive growth.
Saul Eslake is an economist, company director and Vice Chancellor\u27s Fellow at the University of Tasmania.
Fiona Simson is a farmer and grazier, company director and President of the National Farmers\u27 Federation
Tasmania report 2016
No full textIt is with great pleasure and pride that I introduce this second TCCI Tasmania Report to you. It is remarkable both in the quality of the data and the themes identified as well as the unique partnership that makes the funding of the report possible. The idea that the TCCI and TasCOSS together with B&E Personal Banking, Chartered Accountants Australia and New Zealand, the Federal Group and Southern Cross Television could combine in a partnership that provides all of us with key data, disrupts conventional attitudes around likely partnerships formed for the benefit of all Tasmanians.
As engaged Tasmanian leaders you all know the significance of accurate data in measuring and managing key objectives and the benefits of positive relationships with stakeholders who join with us in striving to achieve a better Tasmania for all and who recognise that prosperity and wellbeing are intrinsically linked at an individual and community level. The significance of economic indicators alone can cloud vision and judgment. The juxtaposition of social and economic indicators informs a fuller appreciation and prompts debate about the priorities that Tasmania must set. Of course, the state government plays a huge part in the achievement of community priorities, but local government, health and education institutions, industry, businesses, households and individuals have a responsibility to look beyond self-interest and professional empires, and understand and act for the needs of Tasmania as a whole.
Tasmanians are the unhealthiest, oldest, worst educated, most under-employed and most dependent on government benefits in Australia. This is not sustainable and if it continues will condemn a large number of Tasmanians to unproductive lives with compromised opportunities for employment, personal fulfilment and community engagement. The flow-on effects mean increasing health costs, more people who feel alienated from society, and who in turn, have no stake in developing communities.
Consider, what could be achieved if we saw these ‘deficits’ as challenges and opportunities.
Because we have the oldest population in Australia, there is an opportunity to bring the needs and wishes of older people into new business and service models that could lead the whole country. Developing sustainable models of services for older Tasmanians in all parts of the state presents opportunities for training and employment, redirection of funds from an increasingly expensive sickness model to more proportionate and seamless wellbeing model of health. Not only is our aging demographic a spur to the development of new services, it is also a largely untapped consumer group. Businesses and communities that create age-friendly experiences, services and consumables will meet this burgeoning market opportunity. Let’s not forget that this cohort still has many productive years which can be mobilised by a fresh look at training opportunities for those who are over 50.
Traditionally, business has not examined the qualitative indicators of Tasmania’s success such as housing, education and health. The TCCI believes that the true measure of a successful Tasmania must include improved achievements in these areas as well as the quantitative indicators of employment, infrastructure development, levels of taxation and the costs of doing business in an island state with a static population and limited transport options.
It is pleasing to see that following the publication of last year’s Tasmania Report we have seen a state wide debate about education. Whatever the stakeholder sentiment, it is gratifying to see the engagement and the passion that has fanned the debate. We congratulate the state government on its education reform program and local media for keeping the debate vigorous and Education Ambassadors for continuing to provide additional data. The TCCI envisages Tasmania as the most successful state in the Commonwealth. The measures of that success include prosperity but depend on education standards and good health. With the publication of the second Tasmania Report, the TCCI will continue to track Tasmania’s progress towards the attainment of improved results in jobs, construction, exports, new businesses, housing, health status and educational achievement
The resources boom, structural change and 'closing the gap'
No full textAustralia\u27s mining boom heralds an unprecedented opportunity to establish a sovereign wealth fund that can be used to help eliminate indigenous disadvantage.
Australia is experiencing what may be the largest and longest commodities boom in its history. Through a sovereign wealth fund built on budget surpluses generated by the boom, we could tackle some of our most intractable problems, including the cost of an ageing population, the transition to a low-carbon economy and the stubborn reality of Indigenous disadvantage. We have an unprecedented opportunity. But do we have the foresight to take it
Catch me if you can
No full textAustralia is one of the few countries whose principal exports wont be priced out of global markets by China and India. Meanwhile, our program of unilateral trade liberalisation leaves us safe from their growing dominance in other markets, writes Saul Eslake
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