Why Australian cities need post-COVID vision, not free parking



Brent Toderian/Twitter

Rebecca Clements, University of Sydney; Elizabeth Taylor, Monash University, and Thami Croeser, RMIT University

Many Australian cities have fallen back on offering free car parking to attract visitors back to the CBD after the pandemic. In contrast, cities around the world are basing their recovery strategies on bold and evidence-based urban transformations.




Read more:
How COVID all but killed the Australian CBD


In August, Adelaide City councillors voted for incentives for people to drive and park within the CBD, including a controversial “driver’s month” promotion. In Perth, free parking in the CBD during the holidays is expected to cost A$700,000.

In Victoria, the state hit hardest by the pandemic, the City of Geelong has announced a range of free CBD parking policies estimated to cost several million dollars. Melbourne City Council has endorsed free on-street parking via a voucher system estimated to cost $1.6 million in lost revenue. It’s also seeking to reduce the state-based congestion levy on off-street parking by 25%.

The move to increase car traffic into the central city is perhaps most surprising in the case of Melbourne. Planners have called it a “1960s solution” and a “lost opportunity”. Free parking and other incentives for car travel are at odds with the city’s recent Transport Strategy 2030, which seeks to prioritise walking, cycling and public transport.

Parking incentives don’t work

These car-led approaches to a hoped-for economic recovery were rushed out ahead of new evidence and modelling. This approach also goes against decades of available evidence on the detrimental impacts of conventional urban parking policies in Australia and internationally.

Free parking – pursued and mandated in many cities since the mid-20th century – has a nasty habit of building in unnecessary car use through narrowly targeted subsidies to car users, which directly undermine other transport modes. Parking researcher Liz Taylor recently explained the historical myths and troubled relationships between retail and parking we risk perpetuating.




Read more:
The elephant in the planning scheme: how cities still work around the dominance of parking space


COVID has changed cities, and we must adjust

Cheap parking has poor prospects for attracting enough visitors to offset the changes the pandemic has brought to Australian CBDs. CBDs rely heavily on daily office workers – who are now largely working from home – and on large residential populations, including international students and tourists to whom borders are now closed.

In Melbourne, daily journeys into the city are down 90%. Only 8% of office towers are occupied.

Even so, car traffic is now at roughly 90% of its pre-COVID levels. Cars are already back, but that does not translate to people in CBDs – and road capacity means the city can’t manage many more cars.

Chart showing use of cars, public transport and walking in Melbourne from January to the end of November
Apple mobility data for Melbourne show car travel is back to almost pre-pandemic levels.
Apple Mobility Trends, CC BY

Similarly, Australian CBD retail landscapes have been drastically altered. Experts predict many lasting changes, including retail “localism” in the suburbs.




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The suburbs are the future of post-COVID retail


Parking hasn’t played any role in these changes. Instead, major economic shifts and political decisions have forced and enabled changes in work and lifestyle.

Many CBD workers simply won’t have to come back. CBDs previously didn’t need to be pleasant to be full of people – many were forced to be there. That has changed, and so the city must change too – from a destination of default to a destination of choice.

The adjustment can create better cities

Encouraging cars back into the hearts of cities isn’t just a bad recovery strategy. It could be a huge missed opportunity to create more attractive, high-amenity cities.

Around the world, many cities are welcoming the chance to use parking and streets differently, farewelling the daily car commute to embrace something better.

In Paris, Mayor Anne Hidalgo’s visionary “15-minute city” plan aims to replace 60,000 surface parking spaces with green pedestrianised streets, safe dedicated cycling networks and “children streets” near schools. The plan actively turns away from car dominance.

Barcelona’s mayor has announced a massive green revamp of the central city. Its already successful Superblock model, based on large-scale pedestrianisation, will be super-sized. Intersections and parking are being turned into parks and plazas.




Read more:
Superblocks are transforming Barcelona. They might work in Australian cities too


London is creating hundreds of low-traffic neighbourhoods (LTNs), as is car-dependent Brussels. LTNs are based on transforming streets with quality cycling and pedestrian infrastructure, closing some streets to car traffic and otherwise instituting low speeds. Oslo’s “Vision Zero” strategy demonstrates the power of these measures to transform cities.

As these cities are finding, street reclamation projects can succeed quickly, and local businesses and neighbourhoods of all income levels benefit. However, leaders need to “hold their nerve” through the complex period of change.

New ways of seeing cities

Australian cities are changing with COVID too. Melbourne in particular has been forced to radically rethink streets as public space at a metropolitan scale. Through innovative co-operation between retailers and local councils, hundreds of parklets have emerged across the city.

These spaces offer sensible, creative and exciting ways for people to re-embrace dining out after lockdown. The enthusiastic reception is already causing many retailers to forget about parking and call for permanent changes.

The City of Melbourne has issued 1,300 outdoor dining permits and transformed 200 on-street parking spaces. This raises the the question of whether free parking is the best use of its precious public space and funds.

Diners sit within a green parklet on Lygon Street in Melbourne, having fun on reclaimed street space.
A parklet on reclaimed street space on Lygon Street, Melbourne.
Liz Taylor (own photo)

While systematic study of parking is often scarce, far stronger evidence supports the economic value of space for active transport, green space and outdoor dining. Our future cities can be places where people “will see the street belongs to them”.

Street space can feel like the exclusive (and hostile) realm of cars, but it is simply public land that is currently (mis)allocated to cars. Perceptions are beginning to change, allowing city residents to reimagine what streets might offer beyond moving and storing cars.

The race is on to invite people back to our cities. But a return to streets full of cars, narrow sidewalks crowded with pedestrians, and parking problems that never go away simply isn’t much of an invitation.

When urbanist Brent Toderian asked people to post photos showing #TheBeautyofCities, the hundreds of submissions featured green streets full of people walking, cycling and having fun, not car parking and traffic.The Conversation

Rebecca Clements, Postdoctoral Research Associate, Faculty of Architecture, Building and Planning, University of Sydney; Elizabeth Taylor, Senior Lecturer in Urban Planning & Design, Monash University, and Thami Croeser, Research Officer, Centre for Urban Research, RMIT University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

6 things to watch for as Australia crawls out of recession



Sergey Tinyakov/Shutterstock

Janine Dixon, Victoria University

Our economy has grown in the September quarter (the three months to September) after two quarters of going backwards.

Using the literal meaning of recession, we are no longer in one – economic output (the things we produce and consume) is no longer be going backwards.

But things won’t be like they were. Even a rebound in gross domestic product of 3.3% (the biggest in 40 years) doesn’t make up for the 7% we lost in the previous quarter, meaning we’ll remain worse off than we were at the start of the year and much worse off than we would have been had the pandemic not happened.

Here are six things to expect as the economy recovers:

1. Consumer spending will recover first, but might need help

Consumer spending will to return to normal first, as forecast in the budget.

(Don’t be fooled by the forecast decline of 1.5% for 2020-21 compared to 2019-20. From where we stood in the June quarter 2020 – an enormous decline of 12% on the March quarter – this is a massive recovery.)

So far the signs are promising, but in part this might be because the stimulus payments are still flowing, keeping household disposable income above pre-COVID levels.




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It isn’t right to say we are out of recession, as these six graphs demonstrate


The coronavirus supplement that tops up JobKeeper and other benefits (originally A$225 per week) winds down to $75 per week after Christmas and expires on March 31.

JobKeeper, originally $1,500 per fortnight, became harder to get in October and will wind down to $1,000 per fortnight in January and $650 for part-time workers, before expiring on March 31.

Victoria has funded tutors to assist students left behind.
fizkes/Shutterstock

Treasury expects wage growth to be slower than price growth for the next two years, so a household-led recovery is by no means guaranteed.

If the recovery stalls in the household sector, activities such as hospitality, retail and arts and entertainment will suffer a second blow and unemployment will remain high.

After the year we’ve had, the household sector could be forgiven for losing confidence.

The government should consider extending the coronavirus supplement payments, and be ready for further one-off stimulus payments if required.

Unlike the imminent income tax cuts, these measures are temporary and can be discontinued as soon as they are no longer required.

Governments can also stimulate demand directly. Victoria has announced an additional 4000 tutors to assist school students left behind after an interrupted year. Other areas in which governments could usefully create meaningful jobs include the care sector and the arts.

2. Overseas demand won’t assist in the recovery

Exports face headwinds and are unlikely to recover over the next 18 months.

The International Monetary Fund expects the global economy to shrink by 4.4% in 2020 after growing 2.8% in 2019, a turnaround of more than 7%.

This will be apparent in all of Australia’s major customers including China and will depress demand for exports.




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More importantly, travel bans have come close to eliminating “exports” of tourism and education, which together account for almost one fifth of Australian export income.

This income will remain weak until international travel properly restarts.

3. We will lose four years population growth

Before the crisis, the 2019 mid-year budget update predicted Australia’s population would grow from 25.6 million to 28.4 million by June 2026.

Births and immigration will remain low for years.
KieferPix/Shutterstock

This year’s budget says we won’t get there until June 2030, a full four years later.

Even after travel resumes, net overseas migration is expected to remain lower than before due to economic uncertainty and weak labour market conditions.

Businesses will find it more difficult to get the staff they need through skilled migration, crating a greater role for higher education and vocational education.

By 2024 migration is assumed to return to normal, yet population growth will continue to be slow. This is because the birth rate is projected to be lower than usual for the remainder of the decade.

4. Business investment will be weaker, and different

2020 has been a difficult year, but it’s also been the year we’ve learnt to do things differently.

We have learnt about on-line shopping, working from home, telehealth and on-line entertainment, and we will continue to make use of what we have learnt after the pandemic is over.

These changes could drive the next genuine wave of productivity growth.




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Bricks-and-mortar retail, commercial office space, roads, bridges and railways are all investments that facilitate the meeting and movement of people.

With new technologies and a smaller population that is learning to keep things local, these old-world investments won’t be as generate the same returns as they once might have.

Where we might see the investment dollars being spent is on home improvements, while government investment dollars could be spent on improving local amenities such as parks and community centres.

5. We’ll need to get more people into paid work

A year ago, 66% of Australia’s adult population was participating in the labour market, either by being employed or looking for work.

During the crisis the participation rate dipped below 63%.

Australia’s economy could place more emphasis on caring.
Toa55/Shutterstock

It has since returned to 65.8%, a touch above where the budget expects it will stay.
Other countries including Canada, Britain, New Zealand and Germany do better than us.

There’s room to get more unpaid carers (many of them women) into the paid workforce.

More than 900,000 people who perform significant unpaid caring work say they would like more paid employment.

In my work for the National Foundation for Australian Women, I found the net budgetary cost of increasing caring services was modest, mainly because it brought about a strong increase in the tax-paying workforce.

6. One last dark cloud: the terms of trade

The terms of trade measure what we can buy for each unit of what we sell; how many imports we can buy for each unit we export.

The budget forecasts a fall of almost 11% in 2021-22 as a result of lower prices for iron ore.

Taking a long view, this may be nothing more than a correction, but it is as big a fall in a single year as we experienced in the dog days after the end of mining boom when the terms of trade declined for four consecutive years, and we experienced four years without real growth in income growth per capita.




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Population, participation and productivity are the “three P’s” that drive economic growth in the long run, but in the short run a big decline in the terms of trade poses a real risk to a household-led economic recovery.

Where to from here

In an effort to avoid more economic pain, the government has rightly abandoned fiscal restraint in the most recent budget.

Much of its recovery strategy (perhaps too much) is built around income tax cuts and investment incentives.

I see a need for a greater emphasis on temporary measures aimed at supporting household spending, given the role it will have to play in unwinding the recession.




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In the longer term, there is a case for paring back some of the larger income tax cuts to expand child care, aged care and disability care; measures that would support low-paid workers, boost labour force participation, and improve the standard of living for many Australians.The Conversation

Janine Dixon, Economist at Centre of Policy Studies, Victoria University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

It isn’t right to say we are out of recession, as these six graphs demonstrate



Lukas Coch/AAP

Peter Martin, Crawford School of Public Policy, Australian National University

It’d be wrong to say that we are out of recession, although that’s how the graph of Wednesday’s GDP numbers makes it look.

Gross domestic product (the measure of everything produced and earned and spent) fell 7% between the March and June quarters after slipping 0.3% between the December and March quarters, and then rebounded 3.3% between the June and September quarters.

It was the biggest bounce since 1976, after the biggest fall on record.


Quarterly percentage change in gross domestic product


ABS National Accounts

But it hasn’t anything like got us back to where we were.

When the levels rather than the changes in GDP are graphed, it is clear that, as Treasurer Josh Frydenberg put it, we have “a lot of ground to make up”.


Quarterly real gross domestic product


ABS National Accounts

At first sight the graph of quarterly gross domestic product looks odd. Surely if GDP fell 7% and then rebounded by half that much it should have got back half its losses.

But 3.3% of a small number is much less than 7% of a bigger number. We’ve regained only two fifths of what we lost.




Read more:
6 things to watch for as Australia crawls out of recession


And we’ve lost more than that. Had the economy grown as the Reserve Bank forecast before the coronavirus crisis, we would have spent and earned A$509 billion in the September quarter instead of $476 billion.

It’s consumer spending that’s bounced

What drove the bounce was a rebound in consumer spending after months in which we were confined to quarters, and here the news is better than it seems.


Quarterly change in household final consumption expenditure


ABS Australian National Accounts

Nationwide, household spending jumped 7.9% after falling 12.5%, but excluding locked-down Victoria (which will have its own delayed bounceback) household spending in the rest of the country rebounded 11% after falling 12%.

And it bounced back in exactly the places it collapsed while we were locked down; in services such as tourism and hospitality.


Household spending by category

National, percentage change between June quarter and September quarter.
Australian Treasury

Victoria’s economy literally went backwards.

Spending in Victoria continued to fall while spending everywhere else bounced back.

In only one category, home alcohol consumption, did spending in Victoria advance while spending in other places retreated.


State and territory final demand, September quarter


ABS Australian National Accounts

Consumers financed the extra spending by saving less, but even so, Australia’s household saving ratio remained alarmingly high.

In the June quarter Australian households saved a record (upwardly revised) 22.1% of what they earned. In the September quarter that fell to 18.9%, which is still far too high.

In good times, less-worried Australians save less than half that.


Household saving ratio


ABS Australian National Accounts

Frydenberg put the best spin he could on the extraordinarily high amount of saving by saying it would provide “ongoing support for the economic recovery in the new year as confidence continues to build”.

Australia was as well positioned to recover as “any nation on earth”. Over the past year its economy has contracted less than Britain, France, Germany and Japan.

Exports, business investment continue to fall

Much of that success is due to Australia’s achievement in getting on top of the virus and the success of JobKeeper in keeping Australians in work until conditions improved. The Reserve Bank believes it saved 700,000 jobs.

Working against that has been the forth consecutive quarterly fall in export income (something set to worsen unless relations with China improve) and the sixth consecutive fall in business investment.

In a quarter when consumer spending recovered, non-mining business investment fell a further 3% on top of a fall of 8.6% in the previous quarter.

The US National Bureau of Economic Research defines a recession as

a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales

On that basis Australia is still in one. Employment, income and production remain well down on where they were a year ago. GDP is down 3.8% on where it was a year ago.

Reserve Bank Governor Philip Lowe.
MICK TSIKAS/AAP

Speaking as the national accounts were being released, Reserve Bank Governor Philip Lowe said he expected Australia’s unemployment rate to remain above 6% for the next two years.

Annual wage growth would remain less than 2%

It was possible the economy could do better.

His forecasts assume no widespread vaccination against coronavirus until late next year. They also assume international travel restrictions until 2022.

But it was also possible things could be worse.

Just three months ago that many were hailing a robust bounce-back in Europe.

Now, Europe’s economy is expected to sink again in the December quarter as member states struggle to contain the virus.

Australia was on a different path, but there was “no guarantee we will remain so”.The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Top economists want JobSeeker boosted by $100+ per week and tied to wages



Wes Mountain/The Conversation, CC BY-ND

Peter Martin, Crawford School of Public Policy, Australian National University

Once about as high as the pension, the JobSeeker (Newstart) unemployment payment has fallen shockingly low compared to living standards.

It’s now only two thirds of the pension, just 40% of the full-time minimum wage and half way below the poverty line.

JobSeeker has fallen relative to other payments because while the pension and wages have climbed faster than prices, JobSeeker (previously called Newstart) has increased only in line with prices since 1991.

In an apparent acknowledgement that JobSeeker had fallen too low, the government roughly doubled it during the coronavirus crisis, introducing a supplement to enable people to “meet the costs of their groceries and other bills”.

But that supplement is being wound down, from A$225 per week to $125 on September 25, and again to $75 on January 1, before expiring on March 31.

After March, the single rate of JobSeeker (including the $4.40 per week energy allowance) will drop back to about $287.25 per week.


JobSeeker vs age pension


Source: Ben Phillips ANU, Services Australia

Ahead of a decision about any permanent increase expected early next year, The Conversation and the Economic Society of Australia asked 45 of Australia’s leading economists where they thought JobSeeker should settle.

Only four think it should revert to $287.25 per week.

All but eight want a substantial increase. More than half (24 out of 45) want an increase of at least $100 per week.



Economic Society of Australia/The Conversation, CC BY-ND

The results suggest the economists would be dissatisfied with a decision to merely increase JobSeeker by $75 per week in line with the supplement that is due to expire at the end of March.

The 45 members of the society’s 57-member panel who responded include Australia’s preeminent experts in the fields of microeconomics, macroeconomics economic modelling, labour markets and public policy.

Among them are former and current government advisers, a former member of the Reserve Bank board and a former member of the Fair Work Commission’s minimum wage panel.




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Many want an increase of about $150 a week to bring JobSeeker close to the age pension and 50% of median income.

Curtin University’s Harry Bloch asked (rhetorically) whether unemployed people had “lower needs than those on the aged pension”.

Labour market specialist Sue Richardson said keeping payments so low that people lost dignity and hope and suffered material deprivation hurt not only the people who were unemployed, but also the thousands of children who grew up in their households.

A scant incentive to shirk

She knew of no evidence that suggested a low rate of JobSeeker increased the likelihood of an unemployed person getting a job.

Jeff Borland said even if JobSeeker was increased by $125 per week, those on it would still earn less than all but 1% of full-time adult workers and would face plenty of remaining financial incentives to get paid work.

In research to be published in The Conversation on Monday he examines a real-life experiment: the temporary near-doubling on JobSeeker between March and September, and finds it played no role in creating unfilled vacancies.




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New finding: boosting JobSeeker wouldn’t keep Australians away from paid work


Emeritus Professor Margaret Nowak said JobSeeker had been driven to the point where it denied unemployed Australians the shelter, food and transport they needed to find work.

Former Liberal party leader John Hewson described the failure to adjust JobSeeker for three decades as “immoral”, and a national disgrace driven by “little more than prejudice”.

Going forward, there was overwhelming agreement among those surveyed that once JobSeeker was restored to an acceptable level, it should be linked to wages (in line with the pension) rather than increase with prices as before.



Economic Society of Australia/The Conversation, CC BY-ND

Two thirds of those surveyed want JobSeeker increase in line with wages, and of those who do not, several want the pension to increase more slowly in order to ensure the two move in sync.

Gigi Foster and Geoffrey Kingston propose a half-way house – increases in both the pension and JobSeeker halfway between increases in the consumer price index and wages.

Wages determine living standards

Others suggest practical measures to make JobSeeker better at getting Australians into jobs. Beth Webster suggests reducing the rate at which JobSeeker cuts out with hours worked to encourage part-time workers to take on more hours.

Tony Makin suggests a relocation allowance to help people take on jobs distant from their current place of residence.




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None of the economists surveyed expressed concern about the budgetary cost of restoring the relative position of JobSeeker, estimated by the Parliamentary Budget Office to be $4.8 billion per year for an increase of $95 per week.

Several expressed a desire to put the issue behind them, increasing JobSeeker to a reasonable proportion of the pension or median wage and leaving it there so that, in the words of Saul Eslake, “this issue never arises again”.


Individual responses

The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

From here on our recovery will need more than fiscal policy, it’ll need redistribution


Michael Keating, Australian National University

From the 1980s right through to the global financial crisis, the standard response in Australia and elsewhere to too weak or too strong an economy has been monetary policy — the manipulation of interest rates by a central bank, in our case the Reserve Bank.

Rates can be moved quickly, and central banks are seen to be independent and to behave responsibly, while governments are seen as making decisions for political rather than economic reasons.

But since the global financial crisis (in much of the world) and since COVID (in Australia) managing the economy has come to be seen once again as the role of the government through spending and tax decisions — so-called fiscal policy.

One reason is interest rates have fallen so low there’s been little left to cut.

After the 1990s recession, the Reserve Bank cut its cash rate from 17% to 7.5%. After the financial crisis it cut it from 6% to 3.25%. By the time COVID came around the rate was already at a record low of 0.75%

The bank did cut, as much as it could — first to a new record low of 0.5%, then to 0.25% and now to 0.1%, but there’s little more it can do, at least with the cash rate.

Rate cuts have been used up

And there’s little that whatever cuts it could make could do to boost the economy. Their immediate impact would be to push up the prices of houses and other assets and worsen inequality.

So the government has turned to fiscal policy. Since the onset of the pandemic the Commonwealth has provided A$257 billion in direct economic support; about 13% of GDP.

By comparison, in response to the global financial crisis it spent $72 billion; about 6% of GDP.

It will help, but it will do little about the underlying reason why rate cuts have become ineffective, which is an excess of savings over opportunities to invest them.

We’re in a savings glut

As far back as the mid-2000s the then chairman of the US Federal Reserve, Ben Bernanke, was talking about a savings glut: too many savings chasing too few opportunities to invest.

Too many savings chasing too few opportunities.
Ashwin/Shutterstock

For a while the US and other economies remained strong as the downward pressure of excess savings on demand was held at bay by households borrowing ever increasing amounts in order to spend.

That escape valve closed after the global financial crisis, and numerous (mostly American) economists began talking about ongoing slow economic growth, which they described as “secular stagnation”.

There are two suggested explanations. One involves supply. It might be that the ability of the economy to supply more of what we want is slowing.

The other involves demand. It might be that we not demanding enough of the things the economy can produce.

Potential supply might be slowing because modern-day technological progress, principally in the form of information and communications technology, is having less of an impact than previous new technologies such as electricity, the internal combustion engine or the automated production line.




Read more:
Why zero interest rates are here to stay


Australia’s treasury has also suggested the Australian economy might be less dynamic, with lower levels of firm entry and job switching, slower adoption of frontier technologies and processes, and less labour reallocation of resources from low to high productivity firms.

It is these supply-side constraints that have captured the attention of the Australian authorities.

On the other hand, in the US, former Treasury Secretary Lawrence Summers has pointed out that if supply-side constraints were the principal problem, inflation would have been expected to accelerate as capacity to supply fell short of demand, whereas in fact it has decelerated.

Low spending means low investment

What’s more likely is there’s insufficient demand for the goods and services the economy is able to supply.

This would explain why firms are reluctant to invest (and invest in new technology) to make more goods and services, a reluctance that might itself be slowing technological progress and the rate of increase in potential supply so that it better matches the slow increase in demand.

Treasury Secretary Steven Kennedy.
AAP

It would also explain why interest rates have been falling. Businesses don’t need funds to invest on the scale they once would have, however widely available those funds are.

According to Australia’s treasury secretary Steven Kennedy, this savings glut is the reason the neutral interest rate (the real cash rate that is neither expansionary or contractionary) has been falling over the last 40 years.

He attributes these lower rates to “some combination of population ageing, the productivity slowdown and lower preferences for risk among investors”.

Given the international literature, it is surprising he hasn’t also identified changes in the distribution of incomes.

As is well known, higher income families tend to have a higher propensity to save than low income families.

Our incomes are becoming more skewed

This means changes in the distribution of incomes can drive changes in demand.

In Australia’s case — and Australia is far from the worst among the advanced economies — over each of the decades in the 1990s and 2000s male real earnings grew by about 30% at the top of the distribution, while at the bottom of the distribution they grew not at all in the 1990s only by 10% in the 2000s.

For females, real earnings grew by about 15% for women on below median earnings in each of the decades, while at the top of the distribution, female real earnings grew by 25% in the 1990s and 35% in the 2000s.




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Although the available data doesn’t show any further increase in income inequality during the 2010s, it shows the previous increases haven’t been reversed.

In addition, the unequal distribution of wealth has worsened dramatically.

For fiscal policy to be effective from here on it will need to be directed toward Australians with high propensity to spend and away from Australians with a high propensity to save. This means it will have to adopt as a goal a more egalitarian distribution of incomes, and perhaps wealth.

We’ll need to boost low incomes

So far, the government response to the COVID crisis has been good in this respect.

JobKeeper and the Coronavirus supplement for job seekers have both been of most benefit to lower income Australians.

Looking to the future, a sustained recovery in demand is unlikely to come from extra spending on infrastructure. These projects typically employ few people and have either no business cases or business cases of dubious value.

Nor will it come from general fiscal support, including income tax cuts for high earners with high propensities to save.

Long-term, it will have to involve boosting the earning potential of low earners.

Education and services are the places to start

This will mean, as a first priority, boosting spending on education and training in order to improve skills and earning power and better suit skills to needs.

The second priority has to be improving the quality of and access to government services.

Services such as aged care have suffered from under-funding, denying employment opportunities to low earners and denying others support.




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In addition, cutting the cost of childcare and a revamping its means tests would encourage many women to increase their hours of work and thus their family income, as well as creating more jobs for carers.

One of the great benefits of fiscal policy is that it can be targeted in this way, refashioned to improve income distribution and consumer demand.

It is another reason for preferring it over monetary policy for some time to come.The Conversation

Michael Keating, Visiting Fellow, College of Business & Economics, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Data from 45 countries show containing COVID vs saving the economy is a false dichotomy



Shutterstock

Michael Smithson, Australian National University

There is no doubt the COVID-19 crisis has incurred widespread economic costs. There is understandable concern that stronger measures against the virus, from social distancing to full lockdowns, worsen its impact on economies.

As a result, there has been a tendency to consider the problem as a trade-off between health and economic costs.

This view, for example, has largely defined the approach of the US federal government. “I think we’ve learned that if you shut down the economy, you’re going to create more damage,” said US Treasury Secretary Steve Mnuchin in June, as the Trump administration resisted calls to decisively combat the nation’s second COVID wave.

But the notion of a trade-off is not supported by data from countries around the world. If anything, the opposite may be true.

Data from 45 nations

Let’s examine available data for 45 nations from the Organisation for Economic Co-operation and Development, using COVID-19 data and economic indicators.

The COVID-19 statistics we’ll focus on are deaths per million of population. No single indicator is perfect, and these rates don’t always reflect contextual factors that apply to specific countries, but this indicator allows us to draw a reasonably accurate global picture.

The economic indicators we’ll examine are among those most widely used for overall evaluations of national economic performance. Gross domestic product (GDP) per capita is an index of national wealth. Exports and imports measure a country’s international economic activity. Private consumption expenditure is an indicator of how an economy is travelling.

Effects on GDP per capita

Our first chart plots nations’ deaths per million from COVID-19 against the percentage change in per capita GDP during the second quarter of 2020.

The size of each data point shows the scale of deaths per million as of June 30, using a logarithmic, or “log”, scale – a way to display a very wide range of values in compact graphical form.


Log(deaths per million) by percentage change in Q2 2020 GDP per capita.


If suppressing the virus, thereby leading to fewer deaths per million, resulted in worse national economic downturns, then the “slope” in figure 1 would be positive. But the opposite is true, with the overall correlation being -0.412.

The two outliers are China, in the upper-left corner, with a positive change in GDP per capita, and India at the bottom. China imposed successful hard lockdowns and containment procedures that meant economic effects were limited. India imposed an early hard lockdown but its measures since have been far less effective. Removing both from our data leaves a correlation of -0.464.

Exports and imports

Our second chart shows the relationship between deaths per million and percentage change in exports.

If there was a clear trade-off between containing the virus and enabling international trade, we would see a positive relationship between the changes in exports and death-rates. Instead, there appears to be no relationship.


Log(deaths per million) by percentage change in Q2 2020 exports.


Our third chart shows the relationship between deaths per million and percentage change in imports. As with exports, a trade-off would show in a positive relationship. But there is no evidence of such a relationship here either.


Log(deaths per million) by percentage change in Q2 2020 imports.


Consumer spending

Our fourth chart shows the relationship between deaths per million and percentage change in private consumption expenditure. This complements the picture we get from imports and exports, by tracking consumer spending as an indicator of internal economic activity.


Log(deaths per million) by percentage change in Q2 2020 private consumption.


Again, no positive relationship. Instead, the overall negative relationship suggests those countries that succeeded (at least temporarily) in suppressing the virus were better off economically than those countries adopting a more laissez-faire approach.

National wealth

As a postscript to this brief investigation, let’s take a quick look at whether greater national wealth seems to have helped countries deal with the virus.

Our fifth and final chart plots cases per million (not deaths per million) against national GDP per capita.


Log(GDP per capita) by log(cases per million).


If wealthier countries were doing better at suppressing transmission, the relationship should be negative. Instead, the clusters by region suggest it’s a combination of culture and politics driving the effectiveness of nations’ responses (or lack thereof).

In fact, if we examine the largest cluster, of European countries (the green dots), the relationship between GDP per capita and case rates is positive (0.379) – the opposite of what we would expect.




Read more:
Vital Signs: the cost of lockdowns is nowhere near as big as we have been told


It’s not a zero-sum game

The standard economic indicators reviewed here show, overall, countries that have contained the virus also tend to have had less severe economic impacts than those that haven’t.

No one should be misled into believing there is zero-sum choice between saving lives and saving the economy. That is a false dichotomy.

If there is anything to be learned regarding how to deal with future pandemics, it is that rapidly containing the pandemic may well lessen its economic impact.The Conversation

Michael Smithson, Professor, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Daniel Andrews plans pilot for casual workers’ sick pay but Morrison government critical



Lukas Coch/AAP

Michelle Grattan, University of Canberra

The Victorian government plans a pilot scheme for up to five days sick and carer’s pay, at the national minimum wage, for casuals or insecure workers in priority industries.

Even though the initiative is at a very early stage, with $5 million in Tuesday’s state budget for consultation on the pilot’s design, the federal government immediately attacked the move.

Industrial Relations Minister Christian Porter said it “raises a number of major issues”.

Once underway, the pilot would run two years in selected sectors with high casualisation. It could include cleaners, hospitality staff, security guards, supermarket workers and aged care workers.

“The pilot will roll out in two phases over two years with the occupations eligible for each phase to be finalised after a consultation process that will include workers, industry and unions,” a statement from Premier Daniel Andrews’ office said.

Casual and insecure workers in eligible sectors would be invited to pre-register for the scheme.

While the pilot would be government-funded, any future full scheme would involve a levy on business.

Andrews said: “When people have nothing to fall back on, they make a choice between the safety of their workmates and feeding their family.

“This isn’t going to solve the problem of insecure work overnight but someone has to put their hand up and say we’re going to take this out of the too hard basket and do something about it.”

But Porter said a fully-running scheme would put “a massive tax on Victorian businesses”, which would be paying both the extra loading casuals receive and the levy.

“After Victorian businesses have been through their hardest year in the last century, why on earth would you be starting a policy that promises to finish with another big tax on business at precisely the time they can least afford any more economic hits?”

Porter said it would be better to strengthen the ability of workers to choose to move from casual to permanent full or part-time employment if they wished.

He said this was what had been discussed in the recent federally-run industrial relations working group process involving government and employee and employer representatives.

“It must surely be a better approach to let people have greater choice between casual and permanent employment than forcing businesses to pay a tax so that someone can be both a casual employee and get more wages as compensation for not getting sick leave – but then also tax the business to pay for getting sick leave as well.”

Porter claimed the Victorian approach would be “a business and employment-killing” one.

In the pandemic the federal government has made available a special payment for workers who test COVID-positive or are forced to isolate and don’t have access to paid leave. The Victorian government has provided a payment for those waiting for the result of a COVID test.

The Morrison government will introduce an omnibus industrial relations reform bill before the end of the parliamentary ar, following its consultation process.

A central objective will be to streamline enterprise bargaining. Scott Morrison told the Business Council of Australia last week: “Agreement making is becoming bogged down in detailed, overly prescriptive procedural requirements that make the process just too difficult to undertake”.

He said various issues needed addressing. “The test for approval of agreements should focus on substance rather than technicalities. Agreements should be assessed on actual foreseeable circumstances, not far fetched hypotheticals.” Assessments by the Fair Work Commission should happen within set time frames where there was agreement from the parties.

Morrison said key protections such as the better off overall test would continue but “our goal is to ensure it will be applied in a practical and sensible way so that the approval process does not discourage bargaining, which is what is happening now”.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.