Is coal still cheaper than renewables as an energy source?

Coal-fired power is only cheaper than renewable energy where the capital cost of the plant is sunk. For new power facilities, renewables is already cheaper. A factcheck by Ken Baldwin (ANU) Dylan McConnell (Uni Melbelbourne) and Tony Wood (Grattan Institute)in The Conversation runs through the numbers.

Is Australia's economy really a world-beater?

The claim that Australia has  gone twenty-six years without a recession is true, but only if you accept three assumptions. Unfortunately, none of them has any official or intellectual basis. Tim Colebatch explains in Inside Story that that economics has no accepted definition of a recession. In public debate, the gap has been filled by the silly measure journalists love to use: a recession occurs when seasonally adjusted GDP goes backwards for two quarters.

Tax on ‘unearned gains’ is the missing piece of the affordable housing puzzle

Extending capital gains taxation to cover annual improvements in land value would improve discourage housing speculation and improve housing affordability. Brian Feeney (University of Queensland) explains.

The government is swimming against the tide on Westpac’s Adani decision

No one is going to make even short-term profits out of the Adani coal mine, with its huge upfront capital investment, unless they get a substantial subsidy from the taxpayer. And the long-term prospects look grim. David Peetz and Georgina Murray (Griffith University) explain that those who argue that Westpac’s decision was “illogical” are swimming against both the financial and technological tides.

WA’s economic mismanagement is not a reason to review how the GST is carved up

The questions in the terms of reference, that the Treasurer has given to the Productivity Commission, were answered almost five years ago by a similar inquiry, which found many of the concerns about the current system were overstated. And, contrary to the Treasurer’s insinuation that “the current approach of horizontal fiscal equalisation creates disincentives for reform”, the previous inquiry concluded there was not enough evidence of efficiency losses in the economy. Saul Easlake (University of Tasmania) explains.

Houses aren’t more unaffordable for first home buyers, but they are riskier

Comparisons of housing affordability typically compare the ratio of house prices to incomes - ignoring interest rates, which have a greater impact on changes in affordability. Jamie Alcock (University of Sydney) explains.

Business investment is weak, but an unfunded company tax cut won’t fix it

The overwhelming reason why companies undertake investment is to exploit market opportunities for the goods and services that the investment supports. Cutting the rate of company tax can lead to a marginal increase in the after-tax rate of return of an investment - but only if the project is profitable in the first place, and that depends on demand and broader economic growth. 

Because of dividend imputation in Australia, the role of company tax in influencing investment decision is even more marginal than in other countries - it is mostly only foreign shareholders that would benefit from a cut in Australia's company tax rate.

Jim Minifie (Grattan Institute) explains the importance of economic growth for investment decisions.

What economists and tax experts think of the company tax cut

In a perfectly stylised model of the economy, a company tax rate reduction to 25% could be expected to deliver modest economic gains. But the evidence overwhelmingly rejects such a notion. Jenni Henderson (The Conversation) explains why Australia's leading economists disagree with the Government's economic justifications for a company tax rate cut.

More equal societies perform better

Australia is not the egalitarian nation that many people think it is. Rather, in terms of wealth inequalities, we’re mid-ranking on the international league table and we’re becoming more unequal. Frank Stilwell (University of Sydney) explains why that matters and the role that reintroduction of an inheritance tax might play.

Government needs to consider policies that boost private demand for goods and services

Reuben Finighan (University of Melbourne) argues that the Treasurer’s comments show some understanding of the challenges presented by the new low-rate era, but the policies he promotes do not. Taking money from welfare and sending it to corporations risks increasing corporate saving while reducing consumer demand – the exact opposite of what is needed. 

The evidence is against ‘bigger is better’ for local government

Brian Dollery (University of New England) explains that the financial performance of local authorities does not improve as advocates of amalgamation contend. On the contrary, amalgamated municipalities often perform worse than their unmerged counterparts.

A comparison of monetary and fiscal expansion

Phil Lewis (University of Canberra) compares the options available to stimulate a sluggish economy.

For the English, Brexit will mean economic and political pain

Stephen King (Monash University) explains that the EU leaders have a strong incentive to make the UK's ‘exit conditions’ as onerous and costly as possible – so as to deter other nations from also exiting the EU. Incentives for Scotland and Northern Ireland to stay with the EU will figure prominently and the remaining England and Wales are likely to face the highest level of default restrictions on trade with the EU (including with Scotland and Northern Ireland). Great Britain is likely to disintegrate rapidly over the next two years and the standard of living will decline, particularly in the midlands and northern parts of England.

Childcare policies compared

Ben Phillips (Australian National University), writing in The Conversation, compares Labor's childcare policy with that of the Coalition. Each party seems locked into a vicious cycle of increasing subsidies only to see prices increase more and parents worse off except in the short term.

Company tax cut only advantages foreign investors!

Janine Dixon (Centre of Policy Studies, Victoria University) writes in The Conversation that it’s easy to see why a company tax cut polarises opinion, as it generates clear winners and losers. Foreign investors will receive a windfall gain at the expense of Australian residents.

Editor's note: Finally, an economic modeller who understands how Australia's company tax system works! My only quibble is the analysis seems to ignore the effect of company tax on retained earnings and also double taxation agreements. Retained earnings complicate the imputation credit story. DTAs work a little bit like the imputation system, so foreign investors from most countries who pay their taxes will likely be worse off, similar to Australian investors. Foreign investors who avoid paying taxes through sophisticated offshore arrangements are the big winners from a company tax cut.

Budget explainer: the problem with measuring productivity

Gerard de Valence (University of Technology Sydney) explains in The Conversation that Government policies can support improved productivity, if they are well designed and implemented. However, many current policy settings were put in place when we had an industrial economy and are not really suited to the emerging post-industrial economy of the 21st century.

Removing negative gearing on property would hurt low income renters

Ross Guest (Griffith University) explains in The Conversation that if we restricted the tax advantages of negative gearing we would dampen investor demand for housing which would slow house price growth in Sydney and everywhere else. But at what cost? It would be tougher to rent a property, hurting low income households. We need to be clear about what problem we are trying to fix and consider whether there are better ways of doing it.

China’s 6.9% GDP growth rate is not the hard landing feared

James Laurenceson (University of Technology Sydney) writes in The Conversation that economic data point to a Chinese economy that is following the same path towards high income status travelled earlier by neighbours such as Korea. And, while the resources price boom may be over, the rise of China’s middle class (expected to grow by 850 million by 2030) is still the best news that the Australian economy has.

Was the housing boom in Sydney and Melbourne driven by foreign buyers?

Ross Guest and Nicholas Rohde (Griffith University) explain in The Conversation that foreign investment was only a minor factor in the decade long boom in Sydney and Melbourne and housing affordability.

Interest rates could stay low for decades

Rodney Maddock (Monash University) writes in The Conversation that saving has tended to increase and investment to fall; more money is available but fewer people want to borrow, thus driving down rates. The trends will not likely change abruptly so we can expect low rates for a long time.