Inflation rises in Australia – but transitory factors and natural disasters are the reason

Today, my on-going inflation watch turns to Australia, given the release today (July 28, 2021) of the latest – Consumer Price Index, Australia – for the June-quarter 2021. The data is consistent with what we are seeing across many nations as supply chains are disrupted by the pandemic. Energy prices are adjusting back upwards and because the base from which we are judging these quarterly rises was lower as a result of price suppression during the downturn, the recovery in the pre-pandemic price levels deliver larger than usual price increases (when the base is higher). In Australia’s case, a major recent flood and a long drought before that have also complicated matters by driving up food prices. All these impacts are transitory. The CPI rose by 0.8 per cent in the June-quarter 2021 and over the 12-months to June 2021 it rose 3.8 per cent. But the key to understanding the trends in the data is to appreciate that the less volatile series were still rising at rates below the RBAs inflation targetting range – the Trimmed Mean rose just 0.5 per cent and the Weighted Median rose 0.5 per cent. So nothing to see here. The most reliable measure of inflationary expectations are flat and below the RBA’s target policy range.

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And the winner is Brisbane … well kind of … or maybe not

Just when we were meant to be waving our national flags, standing to attention at the medal ceremonies and enjoying the Olympic Games from our various states of lockdown or in my case (day 12) quarantine, Professor Scott Baum sends me his latest guest blog telling us how bad the Games are. What a spoilsport (sorry). So, today, Scott from Griffith University, who has been one of my regular research colleagues over a long period of time, brings the wet blanket to wreck our fun, and just as Victoria (where I am holed up in quarantine at present) comes out of lockdown. Over to Scott …

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Calling the British PAC, IFS – it is time we all moved on from the debt and deficit hysteria

The BBC in Britain carried a story yesterday (July 25, 2021) – UK will be paying for Covid for decades, say MPs – that began with the assertion that “Taxpayers will bear the costs of Covid ‘for decades'”. I guess there is some truth in that statement – families will remember their loved ones that died from the virus and those who are stricken with Long COVID will probably endure the negative effects for the rest of their lives. In that sense, if they are also ‘taxpayers’ they will be ‘paying’ the ‘costs’ of the pandemic. But, of course, that is not what the BBC article was wanting its readers to absorb. The intent was to lie to British citizens that somehow their tax burdens would have to rise to offset the deficits that the British government has run dealing with the collapsing economy. I know the BBC was just reporting on a document released by the House of Commons Committee of Public Accounts – COVID 19: Cost Tracker Update (released July 25, 2021). But the role of the public broadcaster is not to act as a press releasing agency for such politicised organisations, which, given the absence of any alternative voice in the article, is exactly what it did. The demise of critical scrutiny in economics commentary by national broadcasters everywhere is a major problem and makes them indistinguishable from scandalous media organisations run by private sector owners.

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The Weekend Quiz – July 24-25, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’s 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.

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Debate about the National Disability Insurance Scheme driven by the usual ‘taxpayer’s money’ arguments

Today, we have a guest blogger in the guise of Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time. Today, he is writing about the way the Federal Australian government is starving the National Disability Insurance Scheme of funding. The usual arguments are being used – ‘taxpayer’s funds’ are in short supply – which seriously undermine the future for thousands of people with disabilities. The NDIS is the national structure that supports people with disabilities to increase their capacity to participate in employment and provide opportunities for them to so. So, once again, to Scott …

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Mobility data tells an interesting story about cultural differences between Australian states

It’s Wednesday and I am catching up on other writing commitments. But I have been examining the latest – Google Mobility Reports – to assess the differences between NSW and Victoria during this latest COVID crisis that has befallen Australia. The results are not particularly robust in terms of statistical benchmarks, rather, being eyeballing exercises, but they do tell and interest story about life in Australia and the cultural differences that lie on either side of the border between our two largest states. And, as usual on a Wednesday, I get out of writing by offering music.

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British House of Lords having conniptions about QE – a sedative and a lie down is indicated

When I studied British politics (as one unit in a politics minor) at university, I was bemused by the role of the House of Lords. I know it is a curiously British institution that would be hardly tolerated anywhere else. But the fact that it serves as a part of the British democratic system continues to amaze me. Recently, the Economic Affairs Committee has been investigating (if that is what they get up to) Quantitative Easing because, apparently, some of the peers were worried about the “operational independence” of the Bank of England and the “economic effects” (read: inflation fears) among other concerns. They published their first report last week (July 16, 2021) – 1st Report – Quantitative easing: a dangerous addiction? – and it is littered with errors. The government has until September 16, 2021. The reply does not have to be long – they could just submit this blog post and get on doing things that matter, although the Tories are currently finding it hard to get their head around that essential task at the moment.

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Reading Beardsley Ruml carefully

Many social media commentators that have become interested in Modern Monetary Theory (MMT) regularly cite sections of the article written by businessman and former Chairman of the Federal Reserve Bank of New York Beardsley Ruml – Taxes for Revenue Are Obsolete – which appeared in the January 1946 edition of the American Affairs journal. The article was actually a speech that he made “before the American Bar Association during the last year of the war”. Some claim that the content provides an early underpinning for Chartalism, upon with MMT is, in part, derived. I disagree. If you read his work carefully, rather than selectively quoting convenient sentences, and, that work includes his more substantial book that was published in 1945 and from which the article cited above was derived, you would get no MMT succour. He was basically lobbying for zero corporate taxation and he expressed rather orthodox views about fiscal policy at the time, which are very non-MMT in substance.

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The Weekend Quiz – July 17-18, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’s 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.

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