Money on the Screen – film industry episode of Economics Explained podcast

The latest episode of my Economics Explained podcast, Money on the Screen, explores the economics of the film industry. What affects the return on investment in films? Should governments subsidise film productions as they do in Australia?

In the episode, I discuss the economics of the film industry with my good friend Tim Hughes, who spent ten years working in the film industry in the UK and Australia. Tim worked as a crew member on TV shows such as Peak PracticeThe Bill, and Coronation Street and on film productions including Tomb RaiderScooby-Doo, and Swimming Upstream.

Currently, Tim’s a Brisbane-based businessman who’s had a range of ventures over the years. His latest business is Urban Ergo, a distributor of Humanscale ergonomic products which improve health and comfort at work. Despite his change of career, which he talks about in the interview, Tim has never lost his passion for the film industry.

In our discussion, Tim explains that to maximise the profitability of a film you need to see the money on the screen. You don’t want to waste money on expensive catering or fancy hotels. You want to see the money that’s spent end up on the silver screen, so:

…if you get together a $1 million budget, it looks like a $1 million film or, ideally, it looks like a $10 million film that cost $1 million.

As noted in the conversation, I’m a long-time critic of government subsidies for the film industry. For instance, see my Policy magazine article:

Special rates for special mates: The case against film industry subsidies

Regarding the issue of local Australian content on streaming services such as Netflix, an issue Tim and I discuss in the episode, the latest news is:

Change is coming: Netflix, Amazon, Apple get the jump on regulation

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Qld-Commonwealth argy bargy over dam funding & vertical fiscal imbalance

The argy bargy over dam funding between the federal and state government reported by the Courier-Mail (State accuses feds of holding out on dam money) earlier this week is yet another illustration of a big problem in our federation: vertical fiscal imbalance, which blurs accountabilities. In chapter 8 of my book Beautiful One Day, Broke the Next I wrote:

The mismatch between expenses of state and territory governments and their expenditure responsibilities is referred to as vertical fiscal imbalance (VFI). For decades, VFI has been blamed for blurring accountabilities and creating a situation of learned helplessness and an unedifying blame game. The states and territories blame the Commonwealth for not providing sufficient funding to deliver quality services, while the Commonwealth blames the states and territories for poor service delivery. The VFI sets up a patron-supplicant relationship between the Commonwealth and the states and territories. Premier Wayne Goss once compared the relationship to “a dialogue between a begging bowl and a baseball bat”, with the Commonwealth obviously the one holding the baseball bat.

On the issue of dam funding, Federal Water Resources Minister David Littleproud told the Courier-Mail:

“The Queensland Government is going down the path of becoming a dependent state.

“We are reaching the point where the state cannot and will not provide for its own people.

“Queensland can’t just depend on siphoning New South Wales dry.”

Yes, Queensland is highly dependent on Commonwealth transfers (see the grants share of total revenue in the chart below), as are other state governments, and we are not that much more dependent on Commonwealth transfers than other states. For instance, regarding the $70 billion GST revenue pool, Queensland has received 3% more on average than what we’d get under an equal per capita distribution since the GST was introduced in 2000-01, and arguably we deserve it due to NSW and Victoria having wealthier populations and Queensland having high-cost remote communities to service (see my posts Upcoming AiP event on the golden handcuffs of federation and Qld has gained $7bn from GST revenue redistribution since 2000-01).

Qld_govt_revenue_pie_chart

The dependency of all states and territories, not just Queensland, on the federal government should be lessened. Unfortunately, in 2016, state and territory governments rejected what I thought was a very good proposal from our former PM Malcolm Turnbull, that states and territories could piggyback on the national income tax (with a cut to the rates before the states piled on).

We’ve known about the vertical fiscal imbalance problem for decades, but alas we haven’t fixed it and the blame game continues.

cover

You can read all about vertical fiscal imbalance in my book Beautiful One Day, Broke the Next, published by Connor Court.

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The Gig Economy – Economics Explained episode with Darren Brady Nelson

The topic of my latest Economics Explained episode is the so-called gig economy. Across the world, we’ve seen a surge in freelancing and contract work, facilitated by the proliferation of laptops and smartphones, and by web platforms such as Uber and Upwork.

The gig economy benefits consumers through lower prices and greater choice. Check out how many local restaurants are participating in Uber Eats for example. And obviously the gig economy benefits the platform businesses which have multi-billion-dollar valuations. But does the gig economy benefit the workers, the people working gig-by-gig?

This question and others were considered in the conversation I had on 12 October with my good friend Darren Brady Nelson, a professional economist who has worked for many years as a freelancer and contractor. Darren’s professional career began in the NSW Treasury in the 1990s. In addition to his economic consulting work, Darren has contributed regularly to a variety of publications, including the Cayman Financial Review. He has also served as an adviser to politicians. For instance, in 2017, Darren was economic adviser to Queensland Senator Malcolm Roberts.

Darren joined us via Skype from co-working space Work Lofts in Milwaukee, Wisconsin, which has a range of features designed to make freelancers and entrepreneurs comfortable, including beer and sparkling water on tap and coffee (see image below).

Beer on tap at Work Lofts

The following articles were mentioned in the interview:

OECD Working Paper – Gig Economy Platforms: Boon or Bane?

Mises Institute article – Is the Sharing Economy Exploitative?

In the episode, I alluded to the regulators taking a dim view of Uber in London. The latest news is that Uber is effectively on probation in London:

Uber gets two-month operating license in London. It wanted five years

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Government Budget Analysis Training Day on 22 November at the Johnson, Spring Hill, Brisbane

I’m excited to announce my old friend and colleague Joe Branigan and I will be holding a training day on government budget analysis on Friday 22 November at the Johnson Hotel, Spring Hill, Brisbane. Tickets are available via Eventbrite:

Government Budget Analysis Training

We think there is a real need for a training day like this, given all the debate we see in the media on budget/fiscal policy and the large number of different budget metrics, such as the net operating balance and fiscal balance, which are mentioned.

Topics to be covered at the training day include:

  • Public finance 101 – what governments do; how they tax, spend, manage cash, and borrow money
  • Operating and cash flow statements
  • Balance sheets
  • Pros and cons of different metrics (e.g. gross vs net measures, cash vs accrual, general government vs government-owned corporations)
  • Optimal budget policy
    • – golden rule / debt dynamics
    • – debt brake, etc.
    • – privatisation and so-called asset recycling
  • Debt dynamics modelling in Excel
  • Role models and cautionary tales – i.e. good and bad budget policies through history

Morning tea, lunch, and afternoon tea will be provided. Please join us if you’re interested, and please alert anyone who may be interested in our upcoming training day.

Qld_govt_capital_purchases_19_20_v2

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Economics of Infrastructure with Craig Lawrence podcast discussion – Part 2

I’ve just published part 2 of my Economics Explained podcast discussion on the economics of infrastructure with Craig Lawrence, Managing Director of Brisbane-based Lytton Advisory:

Economics of Infrastructure – Part 2

Craig Lawrence has three decades of experience as a professional economist and has advised on a wide range of infrastructure projects in Australia, the Pacific, and the Middle East. Part 2 of our conversation covers, among other things:

  • public private partnerships or PPPs, their pros and their cons;
  • challenges in infrastructure provision in emerging economies;
  • the merits of quasi-independent infrastructure advisory bodies such as Infrastructure Australia and Building Queensland; and
  • the geopolitics of infrastructure (e.g. Chinese takeover of a Sri Lankan port, Australia blocking Huawei’s involvement in 5G infrastructure, and the 99-year leasing out of Darwin port to a Chinese company).

My new Economics Explained podcast is also available via iTunes/Apple Podcasts and Spotify.

On PPPs, you might be interested in an article written by Adept Economics Research Assistant Ben Scott and me:

Demystifying Brisbane’s Cross-River Rail: a PPP, an alliance, and a traditional procurement

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Rookwood Weir business case should be re-worked – first one suggested it’s a poor project, though

Building a downsized 54,000 ML Rookwood Weir in Central Queensland, as the state government is now proposing following an estimated cost blowout, doesn’t appear sensible to me, as agricultural use of the water is critical to the project’s viability, and the project will now offer little water for agriculture (see the ABC News article Weir reduction plan condemned by central Qld farmers worried about water loss). This is not to say that the full-sized 76,000 ML dam should be built instead. Building Queensland’s Rookwood Weir Business Case suggested the full-sized project probably wouldn’t stack up anyway.

In Building Queensland’s central case ‘best estimate’ scenario, Rookwood Weir’s benefit-cost ratio was estimated at 0.6-0.8 (see Figure 1-2 on p. 16 of the Business Case). That is, the benefits from the weir were estimated to be only 60-80% of its costs. It doesn’t stack up. The project does stack up in the most optimistic “full demand” scenario, but it wouldn’t be wise to spend $352 million on a project you expect will only be worthwhile in the most optimistic scenario.

The business case for the Rookwood Weir should be re-worked, using the latest cost estimates, and the state government should give itself the option of not going ahead with the project, which doesn’t stack up in the central scenario of Building Queensland’s business case anyway. According to the Courier-Mail, the state government has already spent $66 million on the project, but the preliminary construction works start next month. These should be deferred until the government re-works the business case and is confident the project actually stacks up.

Rookwood Weir business case

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Economics of apartment living podcast discussion with Dr Stephen Thornton

I’ve just published a new Economics Explained episode in which I interview regular QEW contributor Dr Stephen Thornton on the economics of apartment living:

Economics Explained episode 2 – Economics of apartment living

Issues discussed include:

You can subscribe to the Economics Explained podcast via iTunes:

Economics Explained via iTunes

Apartment tower under construction at Milton

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