Wednesday, March 12, 2008

Macroeconomics from Down Under

Five Questions for: two economists

* Has the Reserve got its policy settings about right? In other words, have they overplayed the interest rate card, or do you think we are in for more rises in the next six months or so?
* The Rudd Government is making much play of its so-called five-point plan to tackle inflation long-term. Do you share their diagnosis about what needs to be done? They say the keys are (1) fiscal constraint—cutting back government spending (2) measures to encourage savings (3) measures to increase the skilled workforce (training investment etc) (4) identify and fund (probably via public-private programs) major infrastructure projects (ports, for eg) (5) lift workforce participation. Is this more or less how you would approach the matter?
* Can the government really achieve the sort of spending cuts they claim to want without getting rid of so-called “middle-class welfare” policies such as family allowances and negative gearing?
* What is different about the US economy—where they are lowering interest rates—and the Australian economy, where we are raising ours?
* The proposed tax cuts I suggest are a political necessity - a promise the new government can’t afford to break. That aside, what do you think of them from a economic viewpoint? Stay or go? Good or bad?

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