Published by the John Curtin Research Centre
Issue 2, October 2017
The twentieth century saw an explosion in technologies, from aircraft to radio, antibiotics to smartphones. Living standards rose massively. Yet the middle of that century – the 1920s to the 1970s – saw the largest reduction in inequality in Australian history.
Australia today faces two intertwined challenges. First, how do we continue the pace of innovation in the twenty-first century that we saw in the twentieth? Second, how do we ensure that prosperity is broadly shared? As it happens, I will argue that a single policy recommendation offers the greatest promise to make us more entrepreneurial and more equal.Read more
Australia can prevent the Global Gag Rule’s catastrophic statistics, Huffington Post, Friday 31 March 2017
Do you remember when Donald Trump described himself as “very pro-choice”.
I also vividly remember the photo of President Trump in the White House – surrounded by men – signing the Global Gag Rule he supercharged this year.
While some Madagascan women and girls may have missed that photo, many of them will suffer mightily from this Global Gag Rule’s implementation.
This is because President Trump signed into existence a much more extreme and destructive Global Gag Rule. Previous versions of the rule prohibited any non-governmental organization from having any involvement with abortion in order for it to receive any funding from the U.S. for family planning activities.
The rule meant that an organization couldn’t even use its own money to provide abortions, or to assist a doctor to provide or counsel a patient as to her best care, or refer that patient to another place for necessary medical care. It meant that patients couldn’t be given condoms to reduce HIV transmission.
The President aggravated this directive by extending it to all global health funding for any aid program that was linked in any way to abortion funding, not just family planning. The rule now applies to 15 times more funding, which will result in over US$9 billion in global health funding being affected.Read more
Why Corporate Australia Should Care About Inequality, Business Insider, Friday, 30 March 2017
When we talk about tax policy, we often say that good tax reform needs to be efficient, equitable and simple. But too often, equity becomes the ugly duckling of that troika – forgotten as soon as it has been uttered. Unless we put equity at the heart of tax policy, our economic debates will fail to address one of the central challenges of our age. Just as no business today can afford to ignore climate change, human capital or social responsibility, so too no business can afford to ignore inequality.
Over the past generation, wages have risen three times as fast for the top tenth (people such as financial dealers and anaesthetists) as for the bottom tenth (people such as apprentices and hairdressers). According to research that I did with the late Tony Atkinson, inequality in Australia is now at a 75-year high. Compared with other countries in the advanced world, Australia isn’t the most unequal. But we are among the upper third for inequality in the OECD.
There are three reasons that business should care about inequality.
First, because more inequality means lower levels of wellbeing. Like the slow shifts of Arctic Glaciers, this can be hard to notice at first – but it’s obvious when you think about the extremes. If we took all the income in Australia and gave it to one person, the average would be unchanged.
But do we really think that we would all be equally happy? In a similar way, the past few decades in Australia have been good times for professionals with harbour views, but hard times for a school cleaner with limited formal education. In economic terms, we’ve seen a rise in both top incomes and relative poverty.
As economists intuitively know, our discipline isn’t about maximising the total amount of money in a society; it’s about maximising the amount of happiness, or utility. If you think that a dollar brings more pleasure to a battler than a billionaire, then you intuitively recognise the prime reason why policymakers should care about inequality. If you’re a utilitarian, you should probably also be an egalitarian.Read more
State Agreement Will Stamp Out Charity Scammers, The Daily Telegraph, 3 March 2017
Camp Gallipoli claimed it was a charity established to raise funds for veterans and their families. On that basis, it received $2.5 million dollars in taxpayers’ money from the federal government, plus permission to use the word ‘Anzac’ on its promotional merchandise.Read more
Tanking in business is known as "Phoenix Activity", Sydney Morning Herald, 21 February 2017
Perhaps my most famous constituent is Nick Kyrgios, Australia's top-ranked male tennis player. But despite his extraordinary serve and blasting forehand, there is one aspect of Kyrgios's game that I, along with other Australian sports fans, cannot condone.
Not trying. Failing on purpose. Tanking.
Australians hate it when their stars don't play to win. So when Nick tanked a tennis match at the Shanghai Masters last year, he copped it from all corners (when John McEnroe is criticising your attitude, you know there's a problem).
It's not just in tennis. We've seen allegations of tanking in the AFL, as well as major league baseball, Olympic badminton, Asian soccer and the National Hockey League.
Tanking in sport lets down the fans. But when it happens in business, people can lose their jobs and companies. Tanking in business is known as "phoenix activity".Read more
Dr LEIGH (Fenner) (11:14): In 1975, Gough Whitlam announced the Order of Australia 'for the purpose of according recognition to Australian citizens and other persons for achievement or meritorious service.' In replacing the British honours system, the Orders of Australia did two things. They ensured that honours would be based on decisions of Australians, not those of the British, and they ensured that they would be made by Government House, not by parliamentarians. And, with an exception or two, that system has endured in the decades since.Read more
Competition is the best way to fuel growth and end tacit collusion, Herald Sun, 5 February 2017
Do you know which day of the week is cheapest to buy groceries? Or which day of the week is cheapest to buy whitegoods, cars and home appliances? Spoiler alert: there isn’t one! So why is there a cheap day to buy petrol? If hundreds of petrol stations really are engaged in dog-eat-dog competition, why do they all raise prices on the same day of the week?
After decades of researchers trying to understand bowsernomics, a new study may have cracked the nut. Economists David Byrne from the University of Melbourne and Nicolas de Roos from the University of Sydney analyse nearly 2 million daily petrol prices. Alarmingly, they find that petrol retailers have been engaged in ‘tacit collusion’, resulting in coordinated prices, less competition and higher margins for retailers.
To be clear, these experts are not alleging the type of collusion that involves secret meetings, fake moustaches and disposable mobile phones. Rather, it is ‘tacit’ collusion where, through a gradual and unspoken process, firms slowly converge on the same pricing strategy so as to maximise revenues.
Sifting through the data, the researchers produce the economic equivalent of an Agatha Christie novel. They find that the dominant firm, BP, performed the role of the price leader. BP’s prices acted as a focal point for the broader market to converge on. Through a long process of trial and error, by 2010 all petrol stations had adopted the same pricing strategy.
Here’s how the game ended up being played. Every Thursday prices went up by 15-20 cents per litre. Then, for the next six days, the price fell by 2 cents each day. Like clockwork, the cycle repeats itself week after week. The only change was in 2015, when all petrol stations switched from Thursday price jumps to Tuesday price jumps.Read more
Why the battle over hiring rival employees could be the next big challenge for Australian workplaces, Business Insider, 19 January 2019
In 2006, Michael Devine worked as a computer scientist for the tech-giant Adobe in Seattle, Washington. Like most, he was always on the lookout for new and exciting job opportunities. But strangely, for a reputable computer scientist in the heart of Silicon Valley, the offers weren’t flooding in.
Four years later, Michael found out why. It turned out that his company had entered into a secret agreement with five other tech-giants – Apple, Google, Intel, Intuit and Pixar – not to hire each other’s workers. In an angry phone call, Apple’s Steve Jobs had warned Google’s Sergey Brin: ‘If you hire a single one of these people, that means war’.
When he realised how the firms had colluded, Michael Devine wasn’t happy. He and 64,000 other employees filed a class action and ultimately received a settlement. Unfortunately, it was only the tip of the iceberg. Soon after, the online retailers Ebay and Ituit were caught doing the same thing. So were the film producers Lucasfilm and Pixar. It wasn’t just the tech-giants, either. Hospitals had agreements to fix the pay and conditions for temporary nurses. Fashion designers were caught trying to reduce the pay and conditions for models. The list goes on.
What’s most alarming was just how widespread this conduct was once US regulators started looking. It made me worry: is this happening in Australia?Read more
Baby Steps Lead to Big Achievements, The Chronicle, 10 January 2017
Fifty days into his walk across Africa, Canberran Matt Napier had braved the lion-filled ‘danger zone’ in Botswana, experienced the pain of blisters-on-blisters, and lost 15 kilograms. Not only was he distributing soccer balls to needy community groups, but he was doing so while living below the poverty line. He spent less than US$1.50 a day of food, which meant ‘the hunger pains are so bad I feel like I am going to faint’.
Yet when I interviewed Matt on my podcast last month, he was full of enthusiasm for his next challenge, and constantly thinking about innovative ways of raising money to reduce global poverty. In fact, I’d challenge anyone who meets him not to come away feeling more energised about Australians’ ability to do good in the world.
New Year’s resolutions are a great way to shake us out of our habits, and encourage us to try something new. The problem comes when we pick challenges that don’t have a path to get there. The major goal of ‘Walk the Kokoda Track’ is a whole lot more achievable if it comes with a minor goal of regularly walking up Mt Ainslie. The big aim of mental calmness may be easier to reach if it goes with using the Headspace meditation app for ten minutes a day.
So whether your goal is walking across Africa or being a better friend, I hope 2017 is a good year for taking baby steps to make big changes.
Andrew Leigh is the Federal Member for Fenner and this resolution was first published in The Chronicle, Tuesday 10 January, 2017. His ‘Good Life’ podcast is available via iTunes and other podcast apps.
Banking on a Fairer System for All, Daily Telegraph, 16 January 2017
Seventy-one years ago, economist John Maynard Keynes quipped ‘if you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy’.
It’s a cracker line – but it isn’t true anymore. In today’s money, Keynes’s million pound debt would be about 1/2000th of the loan book for one of the Australian big four banks. In the ‘too big to fail’ era, banks are rarely at their customers’ mercy.
Banking is one of Australia’s most concentrated industries. A new analysis from the Australian Securities and Investments Commission looks at the market share of our largest four banks: the Commonwealth Bank, Westpac, ANZ and NAB. It finds that they control 77 per cent of all banking assets, 80 per cent of mortgages, 75 per cent of credit card transactions and 80 per cent of household deposits.
Australia’s banks are big by international standards. Our banking sector is more than twice as concentrated as that of the United States, and more concentrated than banking in the major advanced economies.
Australian banking is becoming more concentrated. In 2007 the big four controlled 65 per cent of Australia’s banking assets. Today they control 77 per cent. They are also expanding into other markets such as funds management, financial advice, wealth management and mortgage broking.Read more