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.
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
Yesterday, the Australian Bureau of Statistics released the latest – Wage Price Index, Australia – for the March-quarter 2021, which showed that wages growth remains low in Australia. I will analyse that next week separately because there are some interesting policy principles involved. Today, the ABS put out the latest – Labour Force, Australia – for April 2021 and while unemployment fell by 0.3 points, this was all down to the decline in participation as employment plunged by 30,600. Unemployment rate would have been 70.3 thousand higher had not the participation rate fallen (that is the rise in hidden unemployment) and the unemployment rate would have been 6 per cent rather than the official 5.5 per cent. Monthly hours of work declined by 13 million hours (0.7 per cent). The design of fiscal stimulus packages requires a careful assessment of when it is right to taper them and/or withdraw them altogether. In this neoliberal era, governments who reluctantly provide stimulus during bad times, tend to withdraw the support too early. The current evidence suggests that is once again the case here. Further, uncertainty has now reached new heights as a result of the vaccination bungling by the federal government. Overall, the recovery is still too slow and more government support by way of large-scale job creation is needed.
It is Wednesday and I am catching up on other things. But In a rather extraordinary article (May 16, 2021) – Nobel prize-winning economist Paul Krugman explains why he’s more left-wing than the Modern Monetary Theory crowd – we learn about hubris. I provide some brief commentary on that claim before chilling out to some great post minimalist music.
I am tied up most of today in Sydney and so am handing over the blog responsibilities to our regular guest blogger, 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 impact the Australian Government’s COVID income supplement has had on financial stress and the need for continued support for our mot vulnerable households. Over to Scott who shows clearly that the persistence of poverty is a government choice …
The other day I gave a talk to the ‘investment’ community in Melbourne and they wanted to talk a lot about inflation, which seems to be their foremost concern at the moment. Tomorrow, I am giving a similar presentation in Sydney and I expect a similar line of questioning. Think about it. Wages growth is projected to be so low over the next several years that real wages will decline for at least 3 to 4 years. The Output gaps are still significant and were significant even before the pandemic. Households were already cutting back consumption spending growth, given record levels of indebtedness and no prospect of wages growth. Where pray tell are the inflationary pressures going to come from? I also keep reading of similar fears from economists and central bankers. The latest I saw came from Britain, where the outgoing chief economist from the Bank of England started beating on the inflation drum. There are some areas of our economies that will experience price pressures in the coming period given the disruptions in supply and various administrative pricing decisions by governments (reversing pandemic assistance in areas like rents, energy, child care etc). But these pressures in some segments of the economy are unlikely to instigate a major shift to high generalised inflation rates because the capacity of workers to defend their real wages is diminished now. Fiscal policy has a long way to go yet in reducing unemployment and underemployment from their elevated levels before that capacity becomes functional again.
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.
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
Today, I am treating as Wednesday, given I wrote an extended treatment of the Australian government’s fiscal statement yesterday and I reserve Wednesday’s for other writing commitments. So just a few things today but including a really interesting piece of news. Some music to follow for those who seem to like what I come up with on Wednesdays. But the interesting snippet is from a tiny island in the middle of the Indian Ocean that might just be showing the world how central banks and treasuries should interact.
Last night, the Federal Treasurer released the annual ‘fiscal statement’ (aka ‘The Budget’) and everyone is jumping up and down at the size of the spending proposed. Yes, the deficit and debt hysteria has been abandoned for the time being – but only because this is an election year (presumably). This is an announcement government (with little action) and the actual bigger spending initiatives are not next year but in the hazy forward years which means we can largely disregard them. Further, what most commentators are ignoring is that the Government is proposing a record fiscal contraction next year (2021-22) and is relying on (unrealistic) growth in household consumption expenditure over a period they project real wages will fall. If their projections are to be believed then household debt will rise significantly beyond its already record levels. But I don’t believe the projections anyway. In terms of my wish list, the fiscal strategy fails – no funding for carbon retrenchment, little for social housing, nothing for higher education and lots of handouts for their business mates who will pocket the funds and pay themselves very well in the process.