Business people know meetings can crowd out action and, hence, meetings should be minimised to only those absolutely necessary and they should be action-focussed (e.g. short and sharp Scrum meetings of the team members directly involved in a project, meaning those actually doing the work). Unless the PM and state Premiers are the ones on the phones with the vaccine suppliers, it’s difficult to understand how twice-weekly National Cabinet meetings (see this Brisbane Times report), with all their associated paperwork and bloviating, will help speed up the vaccine rollout.
It’s possible a twice-weekly National Cabinet meeting could distract the people actually trying to secure vaccine supplies and make them less effective. As an example of meetings not guaranteeing outcomes, consider that the Rudd Government was characterised by a high rate of Cabinet or, more precisely, Cabinet committee meetings, but ultimately it failed to get the major elements of its policy agenda implemented.
Meetings are no substitute for doing the work. Twice-weekly National Cabinet meetings should not be required and may be counter-productive. Rather effective delegation to the officials securing the vaccine supplies and arranging vaccine distribution is what is required.
It’s pretty obvious this vaccine rollout delay is bad news for our economy, which to date has been recovering strongly based on jobs, vacancies, and the latest NAB business conditions survey data (see chart below), although it remains to be seen how it will fare with JobKeeper and the Coronavirus Supplement being removed. With the vaccine delay, it’s more likely we’ll experience future lockdowns, as it will take longer to reach herd immunity, and those tourism, hospitality, and other businesses reliant on international travel will experience more financial stress and many more of them may go under. Sure, a sizable portion of the money Australians would have spent overseas on holidays, which would have been more than foreigners spent here, has been re-directed to domestic spending, but it’s not all going into domestic tourism. Many of our tourism businesses on the Gold Coast and in Cairns and the Whitsundays, for example, will struggle over the rest of the year.
To keep the economic recovery on track, we need to prioritise the securing of new vaccines and their distribution. I hope twice-weekly National Cabinet meetings will help, but I’m sceptical.
UNSW Economics Professor Gigi Foster, who you may know from her appearances on ABC’s Q&A and The Economists podcast, has done some fascinating research on the phenomenon of female breadwinning, whereby, in around one-in-four partnerships, the female earns more than the male (e.g. see Does Female Breadwinning Make Partnerships Less Healthy or Less Stable?). In Australia and the US, female breadwinning increases the risk of an unhappy relationship, possibly because it is a blow to the male ego. Furthermore, in the US, female breadwinning increases the likelihood of relationship dissolution among young co-habiting couples. This appears to be because some young women think that, if their partner earns less than they do, they could do much better. Ultimately, people try to find partners that are at (or above) their level, so to speak, and income is one characteristic among others (e.g. physical attractiveness, sense of humour, conversational ability, etc.) that are relevant.
I spoke with Gigi about her research earlier this week and our conversation is now available as the latest episode of my Economics Explored podcast. Please check it out for some great insights into female breadwinning and also into the gender pay gap.
As Queensland Premier Palaszczuk pointed out yesterday on social media following the announcement of the travel bubble with New Zealand, Queensland has the largest number of NZ-born people in Australia. Indeed, according to the 2016 Census, Queensland had 201,200 NZ-born people living here in 2016 (see chart below), with Kiwis therefore accounting for one in every 25 people living in Queensland.
International visitors from NZ may help some of our struggling tourism regions such as Cairns and the Whitsundays, but overall I don’t expect much of a macroeconomic impact from the travel bubble, particularly given more money may end up being spent in NZ by people currently living in Australia than the other way around. Many Kiwis who’ve been cut off from relatives back home during the pandemic would be longing for reunions, as SBS has reported: ‘So excited’: After the travel bubble announcement, Kiwis in Australia are planning long-awaited homecomings. Whatever the macroeconomic impact, it’s undoubtedly a great thing to be re-opening to the world, even if just to NZ at this stage. As John McCarthy aptly titled his InQueensland piece yesterday, Thumbs up, bro!
Small across-the-board cuts or increases to legislated tax rates would be a fiscal policy instrument analogous to the official bank rate in monetary policy. Just as the Bank of England’s Monetary Policy Committee sets the official bank rate, so the power to make such across-the-board adjustments could be given to an independent fiscal board, or even to the BoE, reconstituted as a consolidated Macroeconomic Stability Board.
In the podcast episode, Nicholas elaborates on why he thinks such an independent fiscal board would be desirable and why the concept shouldn’t be dismissed simply because it appears politically infeasible. I wrote a brief guest post on Club Troppo about the podcast discussion, so please check that out as well as the conversation itself.
This guest post by my good friend and fellow Queensland economist Dr Brendan Markey-Towler makes some excellent points regarding Queensland’s economic recovery from the COVID-recession – e.g. consumption spending has been goosed up by government benefits and, apart from in housing, private sector capital investment levels aren’t encouraging. It goes without saying that views expressed are Brendan’s and should not necessarily be attributed to me. GT
Six houses, alike in dignity… not much else
by Dr Brendan Markey-Towler
A global pandemic has helped us rediscover the Australian constitution. We look at the economic impacts of a 21st-century Premier’s Plan.
We look at key economic indicators across the Federation to evaluate the effects of Covid-19 and associated policy on economic recovery.
Queensland has the strongest overall recovery, but probably thanks to the effect of government stimulus in a comparatively open economy.
New South Wales probably displays the most robust recovery, with modest but consistent indicators and leading the nation in private business investment recovery.
Australia was envisioned as six states that delegate certain powers upward for defence, foreign relations and to regulate a trading bloc. The states were intended to be the primary policymakers. For instance, the “Premier’s Plan” to combat the Great Depression was led by the states, each implementing their own response within a coordinated national plan.
Mr Xi Jinping has helped us rediscover our constitution. The response to Covid-19 has been a 21st-century Premier’s Plan; the states each implementing their own policy within a coordinated national response. This provides us with a great case study of economic Federalism in 21st century Australia.
There is no such thing, really, as an “Australian economy”. Rather there are six roughly correlated city-state economies, each with a vast interior. The ABS collects data on each, and though the sampling error is higher than national data, we can still roughly evaluate each state’s success in facilitating post-crisis recovery by indexing indicators to the first quarter of 2020.
In terms of State Final Demand (a metric of overall aggregate expenditure), we clearly see that Victoria is paying the price for its extended lockdowns and restrictions. It is the only state not to have fully recovered. Queensland leads the Federation, just under 3% above pre-crisis state final demand.
Breaking this down, household consumption provides the “bedrock” for State Final Demand across the Federation simply because it is so large. We clearly see that the five States which avoided extended lockdowns and restrictions have been able to take advantage of the massive JobKeeper and JobSeeker supplement programs and fully recover pre-crisis household consumption and then some.
We see a similar, even stronger effect in the housing market of the mid-tier states (Queensland and Western Australia) and Tasmania. We believe the dizzying strength of their housing investment reflects significant state and Federal subsidies in comparatively unrestricted housing markets.
Turning our attention to private business investment, we begin to see a different story. This is important because private business investment is the key driver of prosperity, allocating resources to expand future economic capacity.
Here Queensland and Western Australia are over 5% below pre-crisis levels and show no signs of recovery. This is particularly concerning for Queensland, as it was displaying stagnant and declining private investment pre-crisis. We believe this is due to the uncertain business environment created by public health policies that focus exclusively on caseload mitigation using hard interstate border closures as a first resort and widescale lockdowns as a second.
New South Wales leads on this key indicator, with private business investment just over 2% below pre-crisis levels and recovering. This is likely due to public health policies that seek to balance virus mitigation and economic sustainability. New South Wales invested massively in world-class contact tracing and targeted quarantines to make good on a commitment to no further wide-scale lockdowns. The only other states where we see recovery are special cases: Tasmania attracts a tiny proportion of national business investment, and Victoria is recovering from a catastrophic decline.
In the labour market, New South Wales is a little behind on employment and full employment levels. However, it comes in meaningfully behind only Queensland and Tasmania on hours worked and has displayed the more consistent recovery across all metrics.
Queensland displays the strongest recovery in household consumption, housing investment, and hence (albeit only recently) the labour market. But it displays little recovery in private business investment, suggesting its recovery can be attributed to the effect of massive government stimulus in a relatively unrestricted economy behind its big, beautiful border wall. It probably outperforms Western Australia due to the latter’s wall being so strong as to nearly constitute secession.
New South Wales on the other hand displays the more robust recovery with moderate but consistent recovery across all indicators and leading the national recovery of private business investment. New South Wales may be slightly behind overall, but slow and steady will probably win the race.
It’s obvious now we were lulled into a false sense of security several weeks ago by Queensland CHO Jeannette Young when she said future lockdowns were unlikely. Our CHO has panicked once again, caused the Premier a sleepless night, and Brisbane is once again in a costly and unnecessary lockdown.
Obviously, it’s bad for tourism. It’s disruptive. It ignores fundamental civil liberties. It smashes business confidence. All of these costs for only a small number of COVID cases, and with the vaccine being rolled out, and on the day after JobKeeper has ended. It defies common sense.
The argument goes that the lockdown means we can get on top of the cluster and hopefully all is good for Easter. But how can this be so when the case numbers we’ll see over the next few days will have been determined by events one week or two weeks ago? The lockdown we’ve entered into makes it more likely, not less likely, that we’ll be in lockdown over Easter. We’re already in lockdown, so, unless we see only one or two new cases, I expect the government will keep us in lockdown. This is complete madness.
I argued against the extension of the CHO’s emergency powers and against further lockdowns – unless our public health system was at risk of overwhelm – back in January at the Parliamentary Inquiry into the relevant bill, but, alas, fear prevailed among our elected representatives. Only the One Nation member Stephen Andrew had the wisdom and courage to oppose the extension of the CHO’s powers. Check out my post:
We can’t go on with these disruptive lockdowns whenever we get a handful of cases. I was supportive of the first lockdown last year because everything was so uncertain, and we had so many more cases each day. But we’ve had time to get a decent contact tracing system in place – we hope – and we should not have to resort to these costly and totalitarian lockdown measures if we’re only seeing a small number of cases.
A rare closed doors meeting of Brisbane City Council last night voted to support the city’s bid for the 2032 Olympic and Paralympic Games after spending eight hours poring over details of how to satisfy the financial and infrastructure demands from staging the events.
A secret meeting keeping crucial information from the public doesn’t inspire confidence that the Brisbane Olympics stacks up. I have an open mind about the 2032 Brisbane Olympics and acknowledge there would be a lot of non-economic benefits flowing from it, but we should be realistic and frank about the likely economic cost of it (see my post More work needed to show SEQ Olympics would stack up).
Last Saturday, I chatted about the economics of the Olympics with my old friend and fellow economist Dr Alistair Robson, and I’ve published our conversation as my latest Economics Explored episode: EP80 Olympics: Economic boon or burden? Al and I discussed the historical cost over-runs associated with the Olympics, the problem with the lack of transparency around the bid, and how the community might get a better return on investment by investing in community sporting facilities instead.
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When the global pandemic hit, Queenslanders turned their focus to their homes and gardens with a boom in DIY projects.
Homewares stores and nurseries experienced the busiest influx they’ve seen in decades selling out of ‘must-haves’ including vegetable seedlings and potting mix.
Basically any products that are complements with leisure, broadly defined, experienced a surge in demand, so we spent big on products from Ikea, Bunnings, bike stores, and AV stores, among others. We also loaded up on booze from bottle shops and food and other groceries from supermarkets, while cutting back on meals, drinks, and coffees from restaurants, bars, and cafes, unsurprisingly due to the lockdowns (see chart below).
Across Australia, in 2020, retail turnover was up 7% on average, and up 11% in Queensland (see chart below), but how was that possible in a year with a pandemic-induced recession? It was possible because the Government over-compensated households with the Coronavirus Supplement and with JobKeeper, boosting aggregate household disposable income by $85 billion or 6.6% in 2020, and because Australians couldn’t travel overseas, so billions were redirected to the domestic economy. Consider that, in 2018-19, Australian tourists spent $58 billion overseas, compared with the $39 billion foreign tourists spent in Australia, according to Tourism Research Australia’s Tourism Satellite Account 2018-19 (p. 1). But, as noted in my post from yesterday, as Commonwealth assistance is reduced (and as international travel hopefully starts up again later this year), retail trade should regress back towards the long-term trend and this will detract from economic growth to some extent. The economy was very challenging to forecast last year, and I suspect that will also be the case in 2021 as well.
The latest retail trade figures from the ABS illustrate the challenge the Australian economy faces over the next few months with JobKeeper and the JobSeeker Coronavirus Supplement ending soon. Household disposable incomes have been boosted by all the generous assistance and this has pushed retail turnover to an elevated level. But retail trade fell 1.1% in February, as it starts to return to more normal levels (see chart below). The withdrawal of JobKeeper and the Coronavirus Supplement will detract from economic growth over the next few months, and we may see some disappointing numbers.
What happens over the next few months will help us understand whether the harsh measures our authorities have imposed to control COVID-19 since March last year have been beneficial in net terms. I expect many Australians will reassess whether all the harsh measures were really necessary. Did we succumb to mass panic back in March last year? I know that I was very worried and agreed with the lockdown in the early days, but I’ve been critical of interstate border restrictions and subsequent lockdowns since then.
Our governments and Chief Health Officers tried their hardest to frighten us about COVID. Reading a Quadrant article from last May by UNSW Finance Professor Peter Swan AO recently, I learned of one more questionable decision made by Queensland’s Chief Health Officer. It turns out our CHO recommended measures based not just on the science, but on the messages they would send. Here’s what the Brisbane Times reported last April:
Dr Young told Ms Palaszczuk to shut down schools on March 26.
She says while evidence showed schools were not a high-risk environment for the spread of the virus, closing them down would help people understand the gravity of the situation.
“If you go out to the community and say, ‘this is so bad, we can’t even have schools, all schools have got to be closed’, you are really getting to people,” Dr Young says.
“So sometimes it’s more than just the science and the health, it’s about the messaging.
That’s one of several eyebrow-raising statements from our CHO that would have led anyone concerned about good public policy and civil liberties to oppose the extension of the CHO’s emergency powers, as I did earlier this year (see Industry wants changes to Qld CHO emergency powers extension bill). I wish I’d read Peter Swan’s piece prior to the Parliamentary inquiry into the bill, because it would have helped me with my arguments before the committee.
Fellow Queensland economist Nick Behrens and I sat down with 612 ABC Brisbane’s Steve Austin to chat about the latest report from the Auditor-General on Queensland’s state finances. Of course, COVID is the big story since March last year, but, as we cover in the discussion, Queensland’s public financial management problems pre-dated COVID. I mentioned the big debt build up which began during the Beattie-Bligh years and the raid on the funds set aside to meet the defined-benefit superannuation liability by the current government. One consequence of the latter is that now, based on one calculation methodology, the defined-benefit super liability exceeds the value of assets set aside to meet it, as highlighted by the Auditor-General in his latest report. Retired public servants will still get paid their superannuation, but the smaller asset pool means lower investment earnings for the Government to help pay the defined benefit payments, meaning, e.g., lower spending on frontline services or higher taxes and charges for a given budget balance.
Of course, we knew all this already from the state budget and state actuary’s review of QSuper. I told Steve the only thing that was really new and noteworthy in the Auditor-General’s report was the recommendation that the state Treasury should publish an update on state finances prior to each election – i.e. similar to the Commonwealth’s Pre-Election Fiscal Outlook (the PEFO) – which is something I recommended many times in the lead up to the 2020 state election. As the Auditor-General writes: “The Queensland Government’s financial statements are reliable but not always timely”. Yes, particularly when timeliness would be politically inconvenient.