Business and EconomicsSubscribe to Business and Economics

Sir Howard Davies, the Director of the London School of Economics will ask whether central banks around the world could have helped head off the GFC in this years David Finch Lecture on Thursday August 13.

The rise of China in the new global economic order has made for a more prosperous and stable world, according to Associate Professor Mark Crosby from the Melbourne Business School.

While the Australian economy recorded positive growth over the last economic quarter, Associate Professor Mark Crosby from the Melbourne Business School says Australia is still in recession.

"Most economists would not use the journalistic interpretation of recession i.e. two quarters of negative growth.  Most economists would have a pretty rubbery definition of it, but generally the settle on something 'significantly below trend'.  The Australian economy IS significantly below trend, with regards to GDP growth, so I would say we are in recession."

"In the US there is a committee that decides whether the country is in recession, and they dont just look at the GDP numbers they take in all sorts of factors.  That committee put the US economy in recession in November 2007."

"I think if we had a similar sort of structural committee in Australia, they would put the economy in recession around about September last year, if you took into account all the data.  Even now if you look at the structure of GDP, the farm sector- and its recovery from the drought - has been what's kept us in positive growth, where most other sectors experienced negative or zero growth."

However Associate Professor Crosby says that Australia still has recorded some positive numbers in the last quarter.  "Our 0.4% growth is better than most OECD countries - we're number one for GDP growth and bottom in terms of unemployment rate - and certainly the best in the G7, and signifcantly better than most of the other countries in our region. 

"But our economy is still very soft, our growth is still very poor, just not as bad as other countries.  To do better we do need our trading partners to be in better shape."

You can read more of Associate Professor Crosby's thoughts on the current GDP data in today's edition of The Age: http://business.theage.com.au/business/is-the-data-telling-us-big-fat-gdp-lies-20090604-bx7u.html. 

The Carbon Pollution Reduction Scheme (CPRS) is not the most efficient way to reduce carbon emissions, says Senior Lecturer in Finance Dr Les Coleman.

Dr Coleman says that while there have been extensive discussions about the pros and cons of the CPRS, alternatives to the scheme have not been adequately considered and people with specialist knowledge in the area of carbon reduction have not been adequately consulted.

“The reduction of carbon emissions is a very scientific objective, yet the process of deciding how to do this is being run by politicians and diplomats. If you really want to achieve reductions in carbon emissions, you need a technical solution. This could be achieved by consulting people with specialist knowledge like scientists, chemists and people with expertise in markets and taxation and not just diplomats.”

“The Government is setting up a false market with the CPRS and we know from the recent global financial crisis that markets don’t solve all of our problems. I would much rather see a technique used that has worked successfully in the past - a simple and direct tax system.”

“The main disadvantage of a tax system however is the name, as nobody likes to be accused of introducing another tax. Otherwise it’s a fairly direct process and could be introduced as a fairly simple extension of the current petrol excise or GST.”

Professor Joshua Gans says delays on the Federal Government’s emissions trading scheme shouldn’t effect consumer decisions on ‘buying green’.

With the Federal Government's hotly debated emissions trading scheme set to be introduced into the lower house today, Professor Gans says that the proposed one year delay in its official introduction should not be considered as "reneging on a previous timetable."

"When it comes down to it all, of the targets are to be achieved by 2020 or 2050”.

“Its going to matter to consumers to get energy efficient appliances, even if they know emissions trading is another 12 months away,” he said.

“The idea of emissions trading is to set a carbon price, and influence the investment decisions of businesses, households and government; unless those investments involve appliances that will only last two years, another delay won’t change things.”

Professor Gans said the real delay is in not passing the legislation, and the Government has already changed its policy and compromised its plan enough to accommodate various groups.

 “One of the problems we face in wanting to do more (such as the greens are asking) and having lower emission than the government is targeting, is that if the international community don’t come along for the ride, Australia’s impact on the actual problem - in the absence of an international agreement - is that we will be economising on carbon and suffering economic harm for no reason,” he said.

Professor Howard Dick argues that there is worrying neglect in important dimensions of the Australia-Indonesia relationship despite its increasing maturity.

Professor Mark Wooden says governments should focus on job creation instead of job protection to halt rising unemployment.

Professor Wooden says state and federal government policies focused on saving jobs are “misplaced” and should be redirected toward job creation.

He says a number of declining industries are going to die out no matter how much funding is provided, and that the recession is “just the mechanism that accelerates the process”.

“Government policy has to think not only about saving jobs but also creating jobs and creating conditions under which employers feel a little less cautious about hiring people,” he says.

“I think this idea gets a little lost when we are too focused on job preservation”.

Professor Wooden agreed that the inclusion of an $8 billion investment toward major projects in the new Victorian State Government budget - with the intention of creating 35,000 jobs - was a good one.

Professor Mark Wooden is Deputy Director of the Melbourne Institute of Applied Economic and Social Research.

Professor Lyn Yates says funding for school buildings and facilities will help improve student morale and retention rates.

In today’s state budget, the Victorian Government has allocated $402 million toward the rebuilding and renovation of 113 state government schools across the state. These funds will be combined with the Federal government’s allocation of $686 million for Victorian schools’ infrastructure projects.

Professor Yates said receiving such a large amount of funding from the Federal government in such dire financial times was an encouraging sign that the Government was taking investment in education seriously and that the funding will do a lot more than simply make things look “shiny and new.”

“Teachers, students and parents really get a sense of whether or not they are valued in an institution if it is shiny and new, we should never underestimate the morale and valuing aspect of improvements of infrastructure,” she says. 

Professor Yates predicted these improvements could increase retention rates, with students actually enjoying their surroundings and deciding to stay on till year 12. Professor Yates also said she hoped this funding will begin to close the disparity between rich and poor schools by “at least making the base level something people will feel happy about.”

Professor Lyn Yates is Professor of Curriculum in the Graduate School of Education.

Dr Sam Wylie says that IMF predictions of a growth phase in the world economy in 2010 are off the mark, and says Australia should expect a long but shallow recession. 

"The financial crisis is going to take between $40-$60 billion out of Government revenues.  We should expect to see big defecits in Australia, with total government debt around $200 billion at the end of 2012, where at the moment its about $50 billion."

Personal insolvency rates in Australia, including bankruptcy, have increased 261% over the past 18 years and, increasingly, it is the middle class that is most affected, according to an Australian first study completed at the Melbourne Law School.

Pages