Monthly Archives: October 2013

Secretive govts costing lives

The Productivity Commission is not really known for engaging in hyperbole, so when it says that the refusal of successive governments to share information could be costing lives, it is worth listening.

In its latest annual report, the Commission has a chapter in which it argues persuasively of the need for governments, State and Federal, to make the information they collect on us, as a matter of routine, every day, publicly available.

This is not a call for some Edward Snowden-type data dump.

The Commission says any data released should be appropriately de-identified to protect privacy.

But what the Government can offer researchers are unique datasets covering large segments of the population over significant periods of time which can help provide a window into important (dare we say, lifesaving) questions about everything from what we take and when we die to how we work and play.

To take one example. The Commission cited researcher Professor Fiona Stanley,  who said access to real-time prescription and birth data could have detected the connection between the morning sickness drug thalidomide and thousands of birth defects much earlier.

“Greater linking of health and non-health data sets could save lives and deliver more efficient and better targeted services,” the Commission says.

Another suggestion from the PC is to use linked data to analyse the interaction between welfare and work.

So, if there is so much useful information sitting on government hard drives, why isn’t it being shared already?

Privacy concerns and resource issues are regularly cited in objections to government data sharing but, as the PC points out, these are hardly insurmountable issues.

The real reason probably lies in the reluctance of governments to give the public the means to measure the effectiveness of their work.

As the PC says, “Administrative datasets could be instrumental in gaining insights into whether government programs meet their stated objectives, operate as intended, are delivered effectively, and deliver services in the right places”.

It notes that blockages to the release of data “occur within policy departments, reflecting sensitivities that providing data for independent research could yield unfavourable public findings about policy effectiveness”.

Maybe there’s a chance for a new approach to data sharing before the Abbott Ministry gets too much skin in the game –  but I wouldn’t want to bet on it.



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Forget fuel spike – tame underlying inflation means no price fears for RBA

A surge in the cost of fuel (up 7.6 per cent) helped drive  a 1.2 per cent spike in headline inflation in the September quarter.

But if you want a clue to what the Reserve Bank of Australia will make of the Consumer Price Index, focus on the measures of underlying inflation, when the quarterly rise was a more moderate 0.65 per cent.

As a result, underlying inflation is sitting around 2.3 per cent – virtually bang on the RBA’s forecast.

There are a few things for the central bank to keep an eye on.

One is the growth in house prices as the long-awaited recovery in the housing market gathers pace. While slow wages growth may help constrain inflation in real estate, the RBA will be increasingly alert as time goes on to the risk (remote for now) that if interest rates are kept low for too long they could fuel risky borrowing. But this is a problem that is a long way off. Economics conditions are still too soft for there to be talk of a rate rise just yet.

The other main factor is the lower exchange rate, and the effect that has had on push up the cost of imports.

If, as expected,  the US recovery gradually reasserts itself after the debt ceiling madness of recent days, the dollar is likely to slide further.

Overall, there is little in the Consumer Price Index numbers that is unexpected, making a November interest rate move no more or less likely.

The behaviour of inflation has caused little concern for the central bank for some time now.

In its most recent forecasts, released in August, the RBA stuck by the outlook it outlined earlier in the year – underlying inflation to hover around 2.25 per cent (in the lower half of its 2 to 3 per cent target band) through to the middle of next year, and gradually rise to around 2.5 per cent thereafter.

It bases its benign outlook on its belief that all the forces acting on prices – some to force them up, some to force them down – collectively cancel each other out.

One of the big positives for households in recent years has been the strength of the currency, which has made imports (particularly clothes, electronics, cars etc) extraordinarily cheap and affordable.

But the dollar’s fall against the US currency in recent months (notwithstanding burst in dollar strength in the last couple of weeks), has seen this boost to household spending power fade.

So, if this was happening in isolation, the effect would be to force prices up.

But softness in the domestic economy, which has seen both economic activity and wages growth slow, means retailers risk quickly losing customers if they push up their prices too fast.

In the RBA’s judgement, the net effect of these opposing forces (a weaker dollar forcing the cost of imports up while a softening labour market and slower wages growth holds back consumer spending) on inflation will be negligible.


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More oldies mean work is less and less a young person’s game

Interesting analysis from Matt Cowgill at the ACTU, which adds to the argument that, when it comes to explaining what is happening in the jobs market, IR laws are at best only a part of the story.

In its latest Economic Bulletin, the peak union body argues that the ageing of the population has accounted for much of the decline in the participation rate in recent years.

The reason? The preponderance of people aged 65 years or older in the general population has increased sharply as the Baby Boomer generation ages, and workforce participation among this age group is typically low.

Although their participation rate has picked up of late, it is not enough to outweigh the general decline in the proportion of workers that is going on because of population ageing.

Add in soft employment growth among the young (aged 15 to 24 years) and an increased preference for undertaking tertiary study.

A chart on p2 of the ACTU report that breaks down changes in the participation rate by age group highlights the fact that almost all the action is occurring among those at the very beginning and at the very end of their working lives. Between late 2010 and mid 2013, the participation rate among 15 to 19 year-olds fell 2.1 per cent, and among 20 to 24 year-olds it dropped 0.9 per cent. By contrast, among those 60 to 64 years it rose 1.3 per cent, and by 1.4 per cent among those 65 years and older. For the age groups in the middle, the variation in change was between minus 0.6 per cent and plus 0.2 per cent.

An interesting counter-point to the argument that blames changes to IR laws by the Gillard Government for the participation rate decline.

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Record-breaking run on inflation in sight

As it contemplates what has been an extraordinarily white knuckle few weeks for the global economy (courtesy of the insanity of sections of the Republican Party), at least one thing the Reserve Bank of Australia Board is  unlikely to worry about when it meets in a couple of weeks is domestic inflation.

The September quarter Consumer Price Index figures due out on Wednesday are expected to confirm that, whatever else might be going on the economy, it’s not happening in prices.

If they show, as tipped, that underlying inflation increased by around 0.5 per cent for the quarter, it will mean the nation is heading into the fourth consecutive year in which price pressures have been contained within the 2 to 3 per cent target band set by the central bank.

Since mid-2010, annual growth in underlying inflation has not reached any higher than 2.85 per cent, and has remained stuck around 2.4 per cent for more than a year.

Laudable as this result may be, it is not really remarkable.

In the sweep of time since the recession of the late 80s/early 90s and the establishment of an independent central bank, inflation has been largely well behaved – apart from a few quarters following the introduction of the GST in 2001 and the growing pains caused by the resources boom during 2007 and 2008 (see RBA chart below).

Underlying inflation 1993-2013 - RBA

If the RBA is correct in its view that inflation will remain within its target band for at least the next two years, it will mean more than five years of moderate price growth – a record-breaking achievement, exceeding the previous high of four consecutive years from mid-2002 when annual underlying inflation stayed between 2 to 3 per cent.

For a central bank which has as part of its mandate the containment of price pressures, this will be a signal achievement.

It also means that politicians may have to update their rhetoric and ditch the trusty old trope of “household cost of living pressures”.

For all the talk about cost of living pressures, there is little sign of them in the figures.*

* There is an argument to be had about whether the Australian Bureau of Statistics, with its CPI methodology, accurately encapsulates what households spend their money on, but this is a subject for a future post.


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