Of planning and racism

Camden Council has rejected the development application for an Islamic school “on planning grounds alone,” as if the sentiments of local residents are somehow independent of the planning process. The decision may make some locals feel better, but the whole matter does little to foster social cohesion more widely.

It is a great disappointment that such narrow-minded racism still exists in Australia. This hostility, reflected in the vociferous opposition to the development application, has obviously influenced the council’s decision: Would they really have approved the school in spite of such local attitudes, had the traffic and other technical “planning” conditions been adequate?

The planning process needs to simultaneously balance economic, environmental and social sustainability alongside both local attitudes towards development and the broader public interest. This is easier said than done. The council’s decision was, given local attitudes, the correct one. Approving an Islamic school would only have lead to greater hostility, violence and racism in the area. It would not change attitudes; nor would it encourage the acceptance of difference. Indeed, it would probably prove counterproductive in these respects.

Public transport in Sydney

Rising petrol prices and increasing demand for trains and buses suggest that the inevitable transition towards a less carbon-intensive world is beginning to occur in Sydney. Sydney needs a decent public transport system now more than ever, with growing populations and fuel costs threatening the way our city functions.

However, effective, large-scale public transport systems can't be built overnight. They need to be planned and invested in well in advance. The state government must borrow the required funds to do so immediately. The borrowing can be paid off over time through higher taxes on fuels and cars, and on slightly higher ticket prices for public transport. We can't wait any longer.

Inflation targeting

Joseph Stiglitz's criticisms of inflation targeting are cause for concern. It's widely acknowledged that when an economy is faced with inflation caused by rising input prices, automatically raising interest rates in response risks pushing down economic growth even further. It's also widely acknowledged that food and energy prices cannot keep rising indefinitely forever. Once they stabilise, price levels stop growing and the inflation that they cause tapers away.

The Reserve Bank of Australia is aware of this and has already set monetary policy accordingly. Inflation is high but the RBA hasn't been raising rates month after month as it expects that the temporary supply-side inflation will eventually subside. Rather than force inflation into a rigid 2 to 3 per cent band, it is focusing on moderating the extent to which supply-induced price rises flow on to other prices and affect wage determination. We must remember that inflation is high at present mostly due to strong demand growth.

The other flaw with Stiglitz's claim concerns what a more appropriate nominal target for monetary policy would be. The experiences of the late 1960s and 1970s showed that exchange rate targeting was not optimal policy. The mid-1980s showed that money growth targeting was difficult and didn't work. The late 1980s, during which there was no specific target, eventually culminated in the early 90s recession.

Inflation targeting has worked well since its inception in the early 1990s, and if implemented flexibly--like it is now in Australia--there is no reason to dump it for an unknown alternative.

Labour market outcomes

"Australia may be lucky and sail through the boisterous economic seas without any significant impact on unemployment. However, while we may have seen the worst of the credit crisis, I would rate this outcome as only a ⅓ probability.

"Allowing for the delayed impact of earlier interest rate increases, a more likely outcome over the next couple of years is that official unemployment will rise above 5 per cent for a sustained period of time and that the overall under-utilisation rate (which allows for under-employment and discouraged workers) will grow to 8 to 8.5 per cent."

... writes Fred Argy in On Line Opinion. With inflation looking like it's reached its peak, and looming uncertainty about Australia's economic future, it's a very real possibility that unemployment will have to rise soon.

Argy argues that the Howard-Costello government ran a 'neutral' fiscal policy at the expense of a contractionary one when the economy probably needed slowing down (that is, there was a big cyclical surplus but policy opted for a moderate structural deficit). As a result, inflation kept rising and unemployment fell lower than it should have.

To bring inflation down, the RBA raised rates at the start of the year. But did they raise them by too much, and will we now see an upwards surge in unemployment?

Besides, what is the 'natural' or long-term rate of unemployment these days anyway? With the evolving labour market policy landscape, this is an important question to think about. The new government may not have things as rosy as their predecessor did.

A geographic revolution?

Geography is all around us. Where you live and work, why you go where you do to shop or have fun, how you move about, and what public and private spaces mean to you can be thought about geographically. So can globalisation, climate change, landforms, macroeconomics and events happening on the other side of the Earth. As can the view out the window. Being able to think geographically is an important skill; it helps us to make sense of our world.

The world is far from perfect, and these imperfections matter. Why places are different, the way people interact with their environment and with each other, and what places mean to different groups all constitute geography. Geography is the world, and knowing the world is important.

Read more...

The politics of envy

There was a time when welfare dependency was looked down upon and Australian society was based upon hard work. A time when everybody had the chance to climb the social ladder if they put in the effort, and those who were poor and struggled more than most to put food on the table got help from the government. But the Australia of today doesn’t seem to look like this anymore.

The poorly devised federal budget has opened up debates about whether we should redistribute income from the rich to benefit the poor, on one side, or whether we should move beyond the “politics of envy,” on the other. Despite the terms used, the argument is really about whether government handouts should be given to wealthy, high income-earning households, who live quite comfortably but are only “struggling” because they’ve overcommitted themselves to excessive mortgages.

An efficient tax-welfare system would recognise that government handouts distort and reduce incentives to work, and that they are a privilege, not a right. Those who are really struggling and living close to the poverty line deserve government help; those earning over $80,000 a year most certainly don’t. If the government wants to use mining boom revenues to benefit more people it should direct these towards reducing inequality in our society, or, alternatively, simply give everyone a lump sum cheque rather than using the revenues to distort the economy through all manner of complicated welfare payments.

In any case, the “politics of envy” haven’t disappeared, they’ve simply flipped. The rich now expect not just high incomes to compensate for their hard work, but government handouts too. This is not the Australia I know.

(Published in The Australian letters, 19 May 2008)

A new blog...

Well, I've had this blog sitting here unused for quite a while, so I'd thought it would be a good idea to resuscitate it. So I’ve deleted all the old posts and I’m starting afresh.

I’m not sure what to post here, but I guess it will just be a collection of snippets, travel stories and comments on the state of the world.

Seemingly everyone has a blog these days, so I thought I’d join in the fun!

Brad