The year Australian progressives abandoned the national commitment to full employment

At present, the unemployment rate in Australia is 4.2 per cent and falling. If the rate of new immigrants remains low for a while as our external borders open, then it is likely the unemployment rate will fall into the 3 per cent range soon. What people are learning is that the claims made by mainstream economists that full employment was anything between 5 and 8 per cent (at various times to suit their arguments) was a lie. It just suited their ideological agenda and flawed theoretical framework to maintain that narrative. Of course, underemployment is still very high, which means that even if the unemployment rate falls further, we are still a way from being at full employment. But with prices accelerating at present, we are seeing calls for government to pursue an austerity fiscal approach, which would prevent the unemployment rate falling further. We have been here before. Today, I document a major turning point in Australian politics, when the Labor government became the first to abandon the national government’s commitment to full employment, a policy approach that had defined the post Second World War period of prosperity. So … back to 1974 we go.

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The last thing we need is a return to fiscal surpluses and rising household debt

There are some Op Eds that are bad, and then others that transcend that standard to become terrible. Such was the case last week when I read this article in the Australian press (Sydney Morning Herald) (February 18, 2022) – It’s time to return to Costello economics, whoever wins the federal election – which was written by a former advisor to the last Labor Prime Minister in Australia. The article is dishonest in that it completely ignores the most significant aspects of the period he seeks to eulogise. It is also scary if it reflects current Labor Party thinking, given the author’s previous associations.

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The Weekend Quiz – February 19-20, 2022 – 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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Australian labour market – as Covid spreads, workers get sick and hours or work falls dramatically

The Australian Bureau of Statistics released the latest labour force data today (February 17, 2022) – Labour Force, Australia – for January 2022. The situation is this: most states have now abandoned Covid restrictions and the virus has spread quickly and is now impacting significantly on the availability of workers. One standout in today’s data is the dramatic fall in monthly hours worked (-8.8 per cent). This puts paid to the notion spread by economists that there is a trade-off between the economy and the health of workers. Employment growth was modest to say the least and full-time jobs growth was negative. The unemployment rate was unchanged. The flat population growth as external borders remain largely closed (or there is a slow take-up of international travel opportunities from foreign tourists) has helped keep the unemployment rate low as employment growth slows dramatically. The falling fiscal support is not helping however.

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Repeat after me: Central banks can make large losses and who would care

It’s Wednesday and I have a lot on today. I was scanning some transcripts from the European Parliament today as part of a project I am embarking on to update my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015). I have had lots of requests (including from publishers) to provide a revised version to take into account events since 2015, include Brexit and the pandemic. So my head is back in transcripts, hansard reports, and other official documents to create the trail of evidence I need to make the continued case against the monetary union and the EU, in general. I report today on a particularly interesting exchange that appeared in November 2020 in the European Parliament. And then we have some great harmonica playing.

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Key economic policy organisations still claim that public spending undermines private spending

It is hard to imagine that so little progress has been made in dismantling the mainstream macroeconomics paradigm over the last decade within the institutions of government. We have had the GFC, and now, the pandemic to disclose what does and does not happen when governments engage in relatively large fiscal shifts, yet the fictional world that is taught in mainstream university programs and echoed in policy making circles keeps being rehearsed. While researching the literature on rates of return on public infrastructure spending for a project (book chapter) I am working on at present, I came across the starkness of the mainstream deception. They are still claiming that public spending damages private spending.

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The last thing policy makers should be thinking about right now is creating a recession

There was an informative article in the UK Guardian over the week (January 13, 2022) – Australia’s supply chain issues likely to continue despite drop in Covid cases – which documented the many ways in which the pandemic has led to difficulties in getting goods supplied to retail outlets or their destination (in the case of overseas mail deliveries). The majority of recent articles about the economy and policy options have erred on the side of the need for interest rate hikes and fiscal policy cutbacks, which assume the rising inflation rates around the world are the demand-side events. But it is obvious to anyone other than private bank economists who are lobbying for interest rate rises to increase the profits for their banks, or, mainstream economists, who oppose central bank bond-buying and fiscal deficits, that the cause of the problems at present is not being driven by an explosion of nominal spending – neither from the non-government sector or through fiscal policy. Here is some more evidence to support that conclusion.

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The Weekend Quiz – February 12-13, 2022 – 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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