But more ludicrous are suggestions that this will be somehow good for the economy. Shane Oliver thinks it will ease pressure on rents. Come on, we are in a recession. Rents will go down with the economy regardless of whether a few extra migrants come in or not. It has been a while since I looked at this but there is no correlation between rents/house prices and migration rates save for the fact that a strong economy encourages both.

What is more, an employed skilled immigrant is likely to be a spender rather than a saver as you need to buy durable goods. That will stimulate the economy. Once again, we see too many people blindly nodding their heads that protectionism is in the interests of the macroeconomy when it hardly seems obvious at all and likely falls more on the pandering to voters front.

In my paper with Phil Bodman published in the 2005 RBA Conference volume we looked at linkages between Australia and G7 economies prior to and post WWII. Linkages between Australia and other countries were surprisingly low pre-WWII - between 1870 and 1913 for example the correlation between Australian GDP and US GDP was -0.16. Some facts about pre-war business cycles are similar to today – the US spent a remarkably 49 percent of months in recession between 1870 and 1900, according to the NBER. This is a far greater percentage time wise than the US has spent in recession post WWII, but it is still true today that the US has more recessions than Australia and spends a greater fraction of time in recession. In Australia we do not have an equivalent to the NBER to date recessions, but an examination of annual GDP growth suggests that only the first half of the 1890s were spent in recession prior to WWI. The 1930s was obviously a global contraction, but even then most economies recovered from recession more quickly than the US, where banks started to fail in late 1930 and continued to fail en masse until 1933.

Since WWII Australia has had eight recessions, if a recession is defined as consecutive quarters of negative growth. The number of quarters spent in recession has been 19 – three of those quarters have also been quarters when the US was in recession. Using the NBER definition of recession (or the ECRI definition for Australia) we have spent 68 months in recession since 1948, of which 22 months have been jointly in recession with the US. Essentially this is too few phases in sync to be consistent with coupling. So I guess the question for those who argue that the decoupling argument is debunked is what has caused us today to become recoupled, when the evidence for coupling is so weak since WWII, and so weak prior to WWII when recessions were arguably more similar to today? This is not to say that the global economy doesn’t matter, but coupling would imply coincident timing of a global recovery. I’m confident that we don’t have to wait for the US and Europe to recover in order for this hemisphere to enjoy recovery, which would be consistent with past linkages between Australia and other economies. [/DDET]

And here is a local version of the same basic argument – from more than 10 years ago!

Update – and another article from last week’s Economist magazine.

Australian writer Alison Goodman has written an absolutely stunning fantasy novel that deserves a wide readership, among both adults and children.

Ironically, he criticises the title, which in the US is, Eon: Dragoneye Reborn. Suffice it to say that made it difficult for me to locate here even though after reading the book the US title seemed more apt than the Australian one and certainly conveys the idea that there are more books to come in the trilogy. Regardless of the title, if you like speculative fiction, it is worth a look (click here for Amazon link).

For a long time, longer than anyone in the newspaper business has been alive in fact, print journalism has been intertwined with these economics. The expense of printing created an environment where Wal-Mart was willing to subsidize the Baghdad bureau. This wasn’t because of any deep link between advertising and reporting, nor was it about any real desire on the part of Wal-Mart to have their marketing budget go to international correspondents. It was just an accident. Advertisers had little choice other than to have their money used that way, since they didn’t really have any other vehicle for display ads.

The old difficulties and costs of printing forced everyone doing it into a similar set of organizational models; it was this similarity that made us regard Daily Racing Form and L’Osservatore Romano as being in the same business. That the relationship between advertisers, publishers, and journalists has been ratified by a century of cultural practice doesn’t make it any less accidental.

The competition-deflecting effects of printing cost got destroyed by the internet, where everyone pays for the infrastructure, and then everyone gets to use it. And when Wal-Mart, and the local Maytag dealer, and the law firm hiring a secretary, and that kid down the block selling his bike, were all able to use that infrastructure to get out of their old relationship with the publisher, they did. They’d never really signed up to fund the Baghdad bureau anyway.

It is worth reading the whole thing.

Treasurer Wayne Swan says Mr Turnbull has changed his mind about the ETS because he is worried about former treasurer Peter Costello challenging him for the party’s leadership.

“Malcolm Turnbull campaigned for an emissions trading scheme when he was running for the leadership and now it’s under threat he’s thrown it overboard,” he said.

[DDET Read more]

Think about what the means: the Government’s policy is suffering because the Opposition is in turmoil. Of course, if the Government was serious about that they should do things that will reduce that turmoil but instead we see them digging in at every opportunity — which is of course, what we usually expect.

So let’s step back for a second and highlight a few clear facts. First, Peter Costello is not staying in Parliament for the fun of it. He is there waiting to become leader; seemingly, in a Howard style, “please come and save us” consensus which might never arise. The impact of that is simple: it is useless for anyone, Malcolm Turnbull and his colleagues included, to pretend otherwise. They shouldn’t. Barack Obama didn’t run through the Democratic primary process pretending that Hillary Clinton didn’t want the job and he is just fine now. Why can’t the Liberals do the same?

Second, political leadership succession in Australia has been a disaster for decades. Party leaders who win elections hang on way too long so much so that there is a vacuum thereafter. Think about Labor after Keating — a complete disaster that took over a decade to recover from.

Third, correct me if I’m wrong, but the rhetoric of the Liberal party is that “competition is good” except that when it comes to internal competition, that is apparently bad. Now I can see how that would be bad when actually fighting an election. But there is no election now so what is the problem.

Here is my two cents worth: the Liberals should embrace internal leadership competition and turn it from vice into virtue. Why can’t they say “look at us, we have a great leader and several others who could easily take over, want to work to take over, and may well take over if the current leader falters in the future”? Use the notion that you have several potential leaders as a strength; it is something that you can afford to do in Opposition.

Put simply, Australia’s current government is not good enough to govern without an effective Opposition. The Greens are doing their part for some aspects of policy but the Liberals need to do far far better for the mainstream.

[/DDET]

I have been derelict in my duty to also point out the ‘What the font’ iPhone application for easy font identification and the KERN iPhone typesetting game.

You might think that the terminology comes from the sex education literature, but in fact it has been borrowed from physics. An example of a coupled oscillator is two pendulums swinging in a perfectly synchronised fashion – bang one of the pendulums and you have decoupling. So strictly speaking for two countries GDP series to be coupled they’d need to have perfectly synchronised business cycles. Heather Anderson at ANU has a nice paper with Jim Ramsey on US and Canadian Industrial Production series as coupled oscillators.  Of course perfect coupling between economic series never happens, so coupling, or decoupling, is a matter of degree. I have long thought that in Australia we overstate the idea that our economy is linked to the US. The past high correlation between the two countries GDP series has largely been driven by the coincident timing of disinflations in the early 80s and early 90s. With low inflation and inflation targetting the monetary policy correlation should in future be lower.

Of course economies aren’t entirely decoupled from global events either. If the 60+% of the global economy that is the US, Europe and Japan go into recession that will have some impact on other countries. And with some major emerging markets being affected by their own property bubbles and exchange rate falls it is hard at the moment for any country to avoid some fallout. But I am still of the view that a recovery in Australia, and in China can lead recovery in Europe and North America. In 2001 the US was in recession, and western europe and Japan were doing poorly then as through most of the past two decades. Despite that Australian GDP growth was 4 percent. So I think Stephen Wyatt is right. We can hope for decoupling of China, and Australia from events in the US, though this may still be some time away yet. (Heather’s website is at http://cbe.anu.edu.au/schools/eco/info.asp?Surname=Anderson&Firstname=Heather - I’m having trouble with our links today. For more on the links between Australian and US business cycles see the paper by Phil Bodman and I in the 2005 RBA Conference Volume availalbe at www.rba.gov.au ).[/DDET]

But the types of people who have been threatening to go Galt rather puts me in mind of another literary descrption of a mass withdrawal of an entire class of the working population – the Golgafrincham Ark Fleet, Ship B of Douglas Adams’s ‘Restaurant at the End of the Universe’.

[DDET read more]

For those of you unfamiliar with this literary masterpeice, the planet Golgafrincham was doomed due to, depending on who you listened to, a gigantic swarm of twelve foot piranha bees, or an enormous mutant star goat, but it was definitely doomed. Three Ark Ships were ‘launched’ into space to found a new planet. Ship A was to contain all the great scientists, leaders and artists, and ship C was to contain “all the people who do the actual work”. Ship B – launched first! – contained the middlemen, including telephone sanitizers, hairdressers, advertising account executives and, one presumes, hedge fund managers. (Likely most academics, too, I’d reckon.) Curiously, though, Ships A and B didn’t ever actually leave the ‘doomed’ planet.

Eventually, Ship B found its way to the Earth. We know that it must have contained at least some financial sector workers, because within a few months of the Ship’s arrival on Earth, leaves had been established as the currency, causing rather serious inflation, and requiring, in order to restore price stability, that all forests be burned down. (Adams pins the blame for this on a bunch of management consultants, but I think we know better.)

So to the Ayn Rand afficionados out there: Guys! Get out of the US while you can! A moderate increase in tax rates on people who are in the top 1% of income earners presages the Coming of the Great White Hankie! You can only survive with your dignity, nay your very souls intact, by taking the radical action of establishing a new civilisation, an Eden, your own Galt’s Gulch! You go on first. Your lead will totally make the rest of us see that you were right, and we’ll surely end up following on right behind you!

(Note to self: make sure the telephone santisers don’t leave, though! Remember the fate of the other two thirds of the Golgafrincham population.)

[/DDET]