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Saturday, 20 February

18:39

Another fearless prediction John Quiggin

As longterm readers know, my record on political and other predictions is mixed, not as bad as some have made out, but by no means uniformly accurate. Still, I’m going to venture my most fearless prediction in some time.

Bill Shorten will be Prime Minister after the next election.

Like most Australian voters, I have no great enthusiasm for Shorten. But, I’ve come to the view that Turnbull is, as the Fin remarked recently, “all hat and no cattle”, and the same can be said of most of his ministry. In particular, Scott Morrison is the most striking instance of the Peter Principle I’ve seen in some time. Brutally effective as Immigration Minister, he handled the Social Services portfolio quite deftly, but has floundered as Treasurer.

Turning from personality to policy, Labor certainly deserves a win. They have stuck to their guns on issues like carbon pricing, and advanced serious and credible policies on tax and public expenditure, something that hasn’t been attempted since John Hewson’s Fightback! disaster in 1993.

By contrast, the Turnbull government is an enigma. Will it go to the election with the policies Turnbull inherited from Abbott? Or will be asked to “let Malcolm be Malcolm”? Or will we see a continuation of the studied ambiguity of the last five months? No one seems to know.

For the moment, Turnbull’s popularity looks like the trump card. The experience of his last stint as leader suggests that this is a fairly weak reed.

The best hope for the government is that the post-Turnbull surge was not so much driven by support for Turnbull as by an underlying LNP majority, submerged by Abbott’s absurdities.

05:00

The Weekend Quiz – February 20-21, 2016 – answers and discussion Bill Mitchell – billy blog

Here are the answers with discussion for the Weekend Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Question 1:

If the private domestic sector spends less than it earns and the nation runs a small external deficit, then the government fiscal position will always be in deficit at all levels of national income.

The answer is True.

This question requires an understanding of the sectoral balances that can be derived from the National Accounts. But it also requires some understanding of the behavioural relationships within and between these sectors which generate the outcomes that are captured in the National Accounts and summarised by the sectoral balances.

Refreshing the balances (again) – we know that from an accounting sense, if the external sector overall is in deficit, then it is impossible for both the private domestic sector and government sector to run surpluses. One of those two has to also be in deficit to satisfy the accounting rules.

The important point is to understand what behaviour and economic adjustments drive these outcomes.

To refresh your memory the balances are derived as follows. The basic income-expenditure model in macroeconomics can be viewed in (at least) two ways: (a) from the perspective of the sources of spending; and (b) from the perspective of the uses of the income produced. Bringing these two perspectives (of the same thing) together generates the sectoral balances.

From the sources...

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Friday, 19 February

22:06

A Threat to China’s Debt Ratings? The Diplomat » Pacific Money

How big a deal is China’s growing leverage?

17:00

The Weekend Quiz – February 20-21, 2016 Bill Mitchell – billy blog

Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.

1. If the private domestic sector spends less than it earns and the nation runs a small external deficit, then the government fiscal position will always be in deficit at all levels of national income.



2. Under current institutional arrangements, a central bank can easily purchase treasury debt directly to satisfy accounting arrangements relating to the national government’s fiscal deficit (that is, “monetise the deficit”) while still targeting a positive short-term policy rate.

...

14:42

Wind and solar replace coal in South Australia. But will the lights go out? Renew Economy

New report from market and grid operators says South Australia's push to 50% wind and solar, and the exit of the last coal generator, will not affect system security or reliability. But that is not what the fossil fuel and nuclear lobbies, or many in mainstream media, want to hear.

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Thursday, 18 February

18:26

Slouching Tiger, Roaring Dragon: How China Still Outpaces India The Diplomat » Pacific Money

In one critical area, China still has an overwhelming lead.

12:49

Australian labour market – looking pretty wan indeed Bill Mitchell – billy blog

Last month, employment growth was basically flat (slightly negative). Participation decreased. The signs were ominous. Today’s release of the – Labour Force data – for January 2016 by the Australian Bureau of Statistics show that those ominous signs have worsened. Total employment growth fell again with massive drops in full-time jobs, unemployment increased sharply and the unemployment rose by 0.2 per cent on the back of the declining employment and steady participation. The teenage labour market continued to deteriorate with the adjusted unemployment rate (taking into account the sharp fall in participation since the downturn) of 28.2 per cent rather than the official estimate for January 2016 of 18.3 per cent. Overall, with private investment forecast to decline further over the next 12 months, the Australian labour market is looking pretty wan indeed.

The summary ABS Labour Force (seasonally adjusted) estimates for January 2016 are:

  • Employment decreased 7,900 (-0.1 per cent) with full-time employment decreasing by 40,600 and part-time employment rising by 32,700.
  • Unemployment increased by 30,200 to 761,400.
  • The official unemployment rate increased by 0.2 percentage points to 6.0 per cent.
  • The participation rate was steady at 65.2 per cent. It is still well below its November 2010 peak (recent) of 65.9 per cent.
  • Aggregate monthly hours worked increased 10.9 million hours (0.66 per cent).
  • The quarterly ABS broad labour underutilisation estimates (the sum of unemployment and underemployment) were updated in the December release month. Underemployment was at 8.4 per cent and total labour underutilisation rate was at 14.3 per cent. There were 1,051.2 thousand persons underemployed and a total of 1.839.3 thousand workers either unemployed or und...

Friday, 12 February

16:00

The Weekend Quiz – February 13-14, 2016 Bill Mitchell – billy blog

Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.

Please go to The Weekend Quiz – February 13-14, 2016 to view the quiz

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