Big economic issues for the 2020s

In my latest Economics Explained episode Big economic issues for the 2020s, I discuss the major economic issues I’ve been thinking about lately: the secular stagnation hypothesis, digital disruption and surveillance capitalism, and climate change.

Use these timestamps to jump right into the episode:

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My top ten posts of the 2010s

Since I started Queensland Economy Watch in June 2010, I’ve attempted to cover the changing fortunes of the Queensland economy and state budget as accurately and objectively as possible. It’s been a great experience. I’ve learned a lot and met a lot of interesting people I never would have if I hadn’t started blogging. Without further ado, these are my top ten posts by views since 2010, from first to tenth:

Top twenty largest cities and towns in Qld

Heat map of Brisbane property prices – big opportunities in the Western corridor?

Qld’s economic outlook in 2018

Is Townsville or Cairns the capital of North Qld?

Pros and cons of a $300M royalties holiday for the Adani mega mine

Qld construction industry outlook for 2019 discouraging despite #BNE2025 projects

Where do Qld’s super rich live?

Michael Porter on Cairns’s tourism cluster

Did the financial crisis lead to an increase in Qld’s crime rate?

Which suburbs of Brisbane had the largest increases in unemployment?

My post on the twenty largest cities and towns in Queensland is number one, no doubt due to people googling for the largest cities and towns in Queensland and finding my site. The Queensland Government Statistician’s Office should set up a dedicated page on this topic given the general interest in it. Other top ten posts covered topics of wide interest or controversy, such as those on the property market, the economic outlook, whether Cairns or Townsville is the capital of North Queensland, and the Adani mega mine. Regrettably, link rot has set in on some of the posts.

Finally, a hat tip to Darren Nelson for the idea for this post.

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Higher long-term unemployment a marker of Qld’s under-performance relative to rest of Australia

In its 2019-20 Mid-Year Fiscal and Economic Review released in mid-December, the Queensland Government revised down the state economic outlook, with economic growth revised to 2.5%, down from 3%, and the unemployment rate revised upwards to 6.25% from 6% for 2019-20. These revisions were sensible, in my view. Regular readers will know I’ve been concerned about the strength of the Queensland economy for a while now.

One of the consequences of our under-performing economy is that long-term unemployment in Queensland has not fallen as it has in the rest of Australia over the last few years. Using the latest ABS estimates up to November 2019, see how the long-term unemployment rate increased over 2013 to 2015 and has remained much higher than in the rest of Australia since then (see chart below).

ltu_plot_Nov19_upscaled_image_custom

I am defining long-term unemployment as the situation where a job-seeker has been unemployed for six months or longer. In November 2019, Queensland’s long-term unemployment rate was 2.6% compared with 1.8% in the rest of Australia. I should note these rates are much lower than the historical highs following the early-nineties recession of 4.7% for Queensland and 5.8% for the rest of Australia.*

The persistence of a long-term unemployment rate of around 2½% in Queensland, in contrast to the fall in the rate in the rest of Australia, is consistent with my view that Queensland has been under-performing the rest of Australia for a while now. The Queensland Government urgently needs to review the full range of policy and regulatory settings which could be constraining business investment and job creation.

One of the policy areas which should be investigated is vocational education and training. Despite Queensland being a fair way away from full employment overall, we are seeing an increasing reliance on temporary skilled migration to fill those positions for which shortages of skilled labour are emerging. The Courier-Mail today reports:

FOREIGN tradies are flooding into Queensland as the number of skilled worker visas skyrockets and the nation faces an apprenticeship crisis.

Mechanics, chefs, welders, carpenters and electricians were all trades which saw a noticeable increase for temporary skilled worker visas granted from 2017-18 to 2018-19.

It has been reported that apprenticeship numbers have been falling and the federal government is being criticised by the federal opposition over its cuts to TAFE funding. But isn’t TAFE a state government responsibility?

This is a good example of our dysfunctional federation, brought about by the so-called Vertical Fiscal Imbalance, which I discuss in my book Beautiful One Day, Broke the Next. Each level of government blames the other for policy and program failures. The federal government blames the states for poor administration and the states blame the federal government for not providing enough funding. We’ve known about this problem for many decades. Regrettably, we’re about to enter another decade with no resolution in sight.

*Based on the Labour Force Survey data which are available since February 1978. We don’t have comparable data for the 1930s or 1890s depressions.

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Podcast highlights – Quiggin on climate change, Gruen on digital public goods, and others

My latest Economics Explained episode presents highlights from the podcast in 2019, including UQ’s John Quiggin on climate change, Lateral Economics’s Nicholas Gruen on digital public goods, and RMIT’s Leonora Risse (currently a fellow at the Harvard Kennedy School) on the gender pay gap, among other highlights.

Use these timestamps to jump right to the highlights:

  • 3:55 – John Quiggin on the relevance of his two lessons in economics for responding to climate change (i.e. introduce a carbon price, a more cost-effective way to reduce greenhouse gas emissions than so-called direct action measures);
  • 8:55 – Craig Lawrence on cost-benefit analysis;
  • 12:20 – Di Johnson on personal finance, particularly buying a house or unit;
  • 15:05 – Brendan Markey-Towler on behavioural economics;
  • 17:50 – Nicholas Gruen on digital public goods illustrated with 23andMe example;
  • 21:45 – Andreas Chai on Randomised Controlled Trials in poverty alleviation;
  • 25:23 – Rebecca Archer on the media in this age of digital disruption;
  • 26:54 – Darren Brady Nelson on the gig economy;
  • 28:44 – Pascalis Raimondos on multinational tax avoidance; and
  • 31:02 – Leonora Risse on the gender pay gap.

You can find all the episodes at Economics Explained.

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Economic development with Griffith’s Dr Andreas Chai – latest Economics Explained episode

One of the traditions of the Queensland branch of the Economic Society of Australia (ESA) is an end-of-year seminar on each year’s Nobel Prize in Economics winners. Given our location, it’s a bit hard to get the actual prize winners themselves to speak, so ESA (Qld) asks a local academic to speak about the winners and their contributions to economics. Earlier this month, Associate Professor Andreas Chai of Griffith University briefed the Economic Society on the 2019 Nobel prize winners, Abhijit Banerjee, Esther Duflo, and Michael Kremer, and the contributions they made to the field of economic development or, more specifically, poverty alleviation. Andreas joined me in my latest Economics Explained episode to share his thoughts on this year’s prize winners:

Randomised controlled trials & economic development

Andreas is Discipline Head of Economics and Business Statistics in the Griffith University Business School. He has previously worked at the Australian Productivity Commission and the Australian Treasury, where we were colleagues in the late 2000s. Andreas is well-placed to speak about economic development, as he has consulted to international organisations such as the United Nations Industrial Development Organization on economic development issues (see link below to his work).

Use these timestamps to jump right into my conversation with Andreas:

  • 1:40 – is the Nobel Prize in Economics a real Nobel Prize? (NB at the current exchange rate, the 9 million Swedish Krona prize is work around 960,000 USD, which is shared equally among the winners)
  • 5:40 – why did Esther Duflo, Abhijit Banerjee and Michael Kremer win the 2019 Nobel Prize?
  • 9:00 – Limitations of traditional approach to economic development, with Andreas mentioning Jeffrey Sachs and Bono and critics such as William Easterly
  • 16:00 – Bill and Melinda Gates Foundation and Abdul Latif Jameel Poverty Action Lab
  • 17:50 – what is a randomised controlled trial? How one helped find the cure for scurvy.
  • 22:40 – RCTs in poverty alleviation
  • 31:25 – Dr Andrew Leigh MP as proponent of RCTs in policy analysis and development in Australia (e.g. see Andrew’s 2018 interview on RN Breakfast)
  • 31:50 – ethical issues with RCTs?
  • 33:20 – future Nobel Prize winners? Neuroeconomics as an emerging field
  • 36:35 – Andreas’s own work on economic development issues; e.g. this UNIDO report on Household Consumption Patterns and the Sectoral Composition of Growing Economies

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My Weekend Australian comments on Qld Future Fund

The mid-year Queensland budget update Deputy Premier-Treasurer Jackie Trad released on Thursday was one of the most interesting in a long time, and I was called on a few times for media commentary. For instance, I’m quoted in the Weekend Australian by Sarah Elks and Michael McKenna (Queensland Treasurer’s $5bn super grab a budget gimmick):

A former federal Treasury economist has labelled Queensland Treasurer Jackie Trad’s debt reduction plan a “gimmick” as latest figures show borrowings now equate to more than $15,000 for each resident of the state.

I note that “It’s a political solution, not an economic solution.” The Government appears to believe its so-called Future Fund, which is just a relabelling of funds it already has, will help convince ratings agencies the Government has a plan to eventually pay down its debt. It’s possible but not very likely this will be the case, in my view. Check out the paper for more commentary.

As anticipated (e.g. in my post from Monday last week), big falls in coal prices since 1 July (e.g. see chart below) have led to a write-down in expected revenue of hundreds of millions of dollars, a reduction of $643 million in coal royalties in 2019-20 alone. If it weren’t for the extraordinary $715 million in budget savings identified by the $10 million PwC razor gang, the operating budget would have gone into deficit. (Incidentally, that would be a 70X ROI from the razor gang, so we should ask why the Government didn’t have a thorough efficiency review earlier?)

I’m keen to see more details of the razor-gang-identified savings to see how solid they really are, and I’d also like to see what the final budget outcome is next year before getting too excited about this. The state government hasn’t had a great record of sticking to its expenses forecasts and keeping its expenses under control in recent years, as I discuss in chapter 7 of my book Beautiful One Day, Broke the Next.

Have a great weekend and I’ll be back next week with some more analysis of the budget and economic update.

Coking coal price

The big fall in coal prices since 1 July has slashed $643 million from Qld government revenue this financial year.

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The Gender Pay Gap with Dr Leonora Risse – latest Economics Explained episode

My latest Economics Explained episode on the Gender Pay Gap is now available. My guest this episode is Dr Leonora Risse, who is currently a fellow in the Women and Public Policy program at the Harvard Kennedy School. Prior to taking up her Kennedy School fellowship this year, Leonora was a Vice-Chancellor’s Postdoctoral Research Fellow at RMIT University in Melbourne, Australia.

Use these timestamps to jump right into my conversation with Leonora:

  • 1:53 – size of the gender pay gap
  • 4:41 – gender pay gap partly due to women and men being concentrated in different industries, but partly to do with women not progressing up the career ladder as quickly as men do
  • 8:47 – how some policy settings (e.g. means-testing of child care benefits) can create high effective marginal tax rates for women and discourage them from returning to the workforce or working more hours
  • 12:16 – men get rewarded for being confident and ambitious, but women don’t – what does this mean regarding all those self-help books by Sheryl Sandberg, Marie Forleo, etc.?
  • 17:57 – women won’t go for a new job unless they feel they meet 100% of the criteria while men will if they think they meet 60%
  • 26:58 – impact of big 5 personality traits (e.g. agreeableness, conscientiousness, etc.) on gender pay gap
  • 40:59 – whether there are barriers to women moving into male-dominated industries (e.g. mining, economics & finance)
  • 43:07 – I ask Leonora whether gender pay gap will naturally close over time due to higher tertiary enrolments among women than men and Leonora responds “…even though a higher share of women compared to men to achieve these educational qualifications, they still tend to be concentrated in fields of study that are associated with lower pay.”
  • 48:36 – what the Australian Women in Economics Network (WEN) has been up to, and why we should try to avoid “manels”, all male panels of speakers

Leonora has kindly provided the following supplementary information on her gender pay gap research to help listeners understand her findings:

Supplementary analysis of gender pay gap

Earlier this year, Leonora recorded a podcast interview on the gender pay gap for the Economic Society of Australia (Victoria):

Does confidence advance women’s careers?

Also, you may be interested in Leonora’s Mandarin article:

Rewarding competence not confidence offers a step toward equality

And if you’re interested in what the Australian Women in Economics Network has been doing to promote a career in economics to women, check out this video:

https://www.youtube.com/watch?v=AtOU-DAVch0

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