Tag: Business and Economics

The Budget 2019-20: Why does it matter?
May 16, 2019 3:15 pm Comments Off on The Budget 2019-20: Why does it matter?
Out of all events in the Australian political calendar, the Federal budget is rarely the pivotal moment in an average person’s voting habits. This is understandable. To fully comprehend any sort of nation-wide and long-term piece of economic policy – let alone a Federal budget – requires a considerable investment of time and research that many outside of academia or economics-related professions do not have. Furthermore, reporting and coverage in the mainstream media often gives us a shallow understanding the complexities at hand. However, budgets are a critical part of a government’s blueprint for the short to long term, outlining a national direction and plans for the machinery of government. Budgets have the power to make or break a nation’s economy –particularly on the eve of an economic downturn.
To analyse the 2019-20 Federal budget, one should look into the economic conditions and probable future of the Australian economy. On the surface, Australia has had a fortunate run of economic prosperity for nearly 30 years. Continual economic growth has seen unprecedented development relative to the OECD – that would lure one to believe that Australia’s economic future is no serious cause for concern. The economy’s uncanny ability to miss financial earthquakes like the GFC has restrained many from considering less pleasant alternatives. Unfortunately, the actual predicted outcome is not so bright. More economists are expecting a major downturn in the economy to occur as soon as 2019. Many of these forecasts are steeped in an understanding of the dangerous levels of household and corporate debt in Australia that have long been incubating.
Without getting too technical, it is worth outlining the exact mechanisms by which debt can hinder an economical performance. Economic activity to grow an economy comes from several sources, such as consumer spending, investment by individuals and businesses, and, in some cases, government policy. The former two are common ways economies grow on the private side of the economy – through consumers spending more on goods and services, and businesses driving development and expanding operations through investment. Often, these groups need to take out loans from financial intermediaries (banks) to properly and safely finance their activities, in the process creating a debt – in this case, private debt if the borrower is not government affiliated. Thus, debt is often a natural by-product of a growing or booming economy. As history professor, Yuval Noah Harari has pointed out, the idea and process of debt have been a fundamental part of allowing economic growth and development in areas from science to technology. By representing imaginary goods or gains on future investment as credits (or debt), institutions and individuals can more confidently lend to the borrower to undertake entrepreneurial and economic activity essential to an economy’s growth, paying the borrower as stipulated in the terms of this debt.
Problems arise, however, when this level of debt is left unchecked and grows out of control. Numerous models show that when individuals or firms have a strong tendency to invest, the level of private debt in an economy begins to rapidly increase relative to GDP (i.e. the debt to GDP ratio increases). This can easily be passed off as economic growth, since debt is often used to power economic activity and, as debt to GDP increases, the percentage of GDP debt also increases. Just before a crisis, volatility in unemployment ceases, giving the impression of economic tranquillity. Critical mass –when the economy’s GDP and employment crash to zero – occurs when this debt growth begins to slow down, resulting in a potentially cataclysmic economic crash.
In Australia, we are close to hitting this critical mass of debt. Since 1995, debt to GDP has skyrocketed from 120 per cent to 210 per cent in 2015. Most worryingly, this ratio has begun its decline since then, dropping to 205 per cent in 2017, signalling the approach of critical mass. If no policy action is taken, the only way out of this situation for the near future would be an impossible increase in household borrowing. This would make total private debt nearly 250 per cent of GDP, which would be the highest level ever recorded in the OECD. Given this, it is likely an unavoidable economic slowdown is on the cards.
Returning to the original question at hand: does this budget have what it takes to mitigate the worst of a hypothetical but probable crisis? As a short-term measure, the budget has sound and robust policies at its disposal. During any kind of economic calamity or financial crash, it is imperative that the government ensures that the economic activity continues. The tax cuts proposed in the budget are one such stimulating measure: $158 million worth of tax relief has a high chance of increasing the spending of consumers, particularly those in lower socio-economic levels who stand to gain up to an extra $1080 annually in income. Furthermore, plans for extensive investment into essential infrastructure is a sure-fire way to keep the economy ticking over in a recession, as demonstrated by Roosevelt’s Works Progress Administration in the 1930s. The promised $2.6 billion will largely contribute to regional and urban road upgrades and construction. This on top of further funding for upgrading telecommunications in regional and rural areas will likely help to create jobs in a hypothetical contracting economy, and may help to stabilise and stimulate economic demand, particularly in these centres.
But aside from these measures, the budget fundamentally does not seem equipped to deal with the possibility of a recession. Many of the underlying assumptions that are used to justify budgetary spending or restraint are highly unrealistic. For example, an assumption of a 0.4 per cent growth in health spending in real terms is improbable given the retirement of the boomer generation and increased strain on health systems this brings. The defence has received a similar projection for its expected unlikely growth, since such departments often need huge amounts of funding to achieve their policy goals. The budget is constructed in a way to discourage further spending; effectively limiting the scope of government policy for the near future. Overall this budget is one of restraint and prudence, taking the title for the lowest projected spending in the past 50 years. While in normal economic times this stance is welcomed, in the lead-up or during a recession it is not the right mindset to have. Such assumptions will have to be violated for the government to help restart the economy through spending, such as once-off lump sum payments to consumers or businesses, or increased spending on public works, and further tax cuts. Otherwise, non-intervention for the sake of sticking to budgetary goals will likely make the situation worse. It is clear from the nature of the budget that some policymakers do not anticipate a recession despite the growing evidence and support for this viewpoint. Even if a recession does not originate in Australia, growing economic woes in the US or elsewhere could easily create a chain reaction effect, much like in the GFC, that could severely damage the unprepared Australian economy.
While it is easy to criticise a budget for its lack of preparation, one must remember these are highly politicised documents, and they often shirk economic truth for the purposes of political warfare. Economic predictions can be lost in the desire to one-up a political opponent; most if not all political parties are guilty of this, both in Australia and across the globe. Nonetheless, it is important to realise such faults and make alternate suggestions from an economic perspective. Investment in infrastructure and tax cuts are solid short-term measures, but these alone will not be enough. Longer-term investments that pay for themselves, such as investments into increasing economic productivity and technology, are all incredibly powerful ways to stimulate short-term and long-term growth well after a crisis has subsided. Even better, ways that tackle the heart of the problem, like gargantuan levels of private debt, are a promising way to delay or avert the crisis before it begins. History has shown us time and again that poor governmental policy in the face of recession – be it in the Great Depression, the EU crisis (specifically Greece, Ireland and Cyprus) and the GFC – only makes the situation far worse. Australia has weathered crises before, and with sensible and diligent policy-makers in government, business and banking, we can weather it again.

Unfortunately, the actual predicted outcome is not so bright. More economists are expecting a major downturn in the economy to occur as soon as 2019. Many of these forecasts are steeped in an understanding of the dangerous levels of household and corporate debt in Australia that

Felix Ryan
The Chinese Economy: Still Going Strong
April 22, 2019 2:12 am Comments Off on The Chinese Economy: Still Going Strong
There has been media noise in recent times about the possibility of a Chinese economic slowdown or crash. This is nothing new; swathes of spectators have persistently claimed over the past decade that China’s miraculous growth will come to a halt, due to an ever-changing myriad of variables resulting in this ‘inevitable’ economic calamity. But criticisms often fail to capture a wider understanding of the heterogeneous and complicated systems of China’s economy. Upon examining a few criticisms, while they have validity, they also reveal that these perceived threats only pose an ostensible danger. In fact, an efficient government with a unique balance of ideas has allowed China to consistently meet its
growth targets, and will be the key to overtake the US in economic power. We have so much to learn from China’s approach to economics; if we choose to not be dismissive and examine issues closely, we may gain insight into our own economic woes.
Possibly the most common issue commentators have with China is its high levels of debt. China’s economy has primarily grown through the proliferation of government-funded investment projects (investment alone made up for 60 per cent of GDP in 2017), which have been utilised in domestic spending, such as high-speed rail construction and housing. Over the years, this has brought on ever- mounting levels of debt that have persistently increased as more spending has taken place. Efforts to avoid the financial crisis in 2008, which saw the government pour billions of renminbi into a stimulus package, only added to this debt – manifesting in the debtto-GDP ratio soaring to 300 per cent. As this debt is now rising considerably faster than GDP (which has recently slowed relative to previous years), China’s economy will begin to slump – much in the same way that western economies did when their debt began to grow faster than their GDP, in the prelude to the GFC.
The distribution and origin of this debt, as well as the health of relevant institutions, are far more indicative variables than the debt figure alone. In China’s case, debt is largely public (meaning that it essentially owns its own debt), while only 10 per cent of it is external (debts owed to foreign bodies). This means it is highly unlikely, as some commentators claim, that China will be unable to pay external debtors as per conditions and endure a sudden economic recession. Further, most of this debt was created through smart investment and spending operations that tangibly improved the real economy. In the case of the fiscal stimulus package during the GFC, most resources went to local governments and state businesses to keep employing workers and thus keep economic activity going. Meanwhile, credit growth in the US was largely due to financial engineering and an increase in private debt from the proliferation of loans and mortgages with high credit risk, which had no direct benefit to the real economy.
However, critics are quick to point out potential credit risks, brewing within the banking sector, as the most serious concern stemming from China’s debt. Due to strict regulations surrounding loans from public banks (which make up nearly half of Chinese banks), private institutions have turned to less regulated financial entities for funding and financial products. This less regulated industry is called the ‘shadow banking’ industry – an area characterised by less government regulation. Even local governments have relied on shadow banking for additional funds, since issuing bonds and stock was previously illegal. Steady privatisation coupled with the maintenance of tough loaning policies by public banks has seen the shadow banking sector reach just over 75 per cent of GDP from 30 per cent in five years, stipulating that shadow banks are helping to create substantial amounts of credit. Even if this credit is going towards real economic activity, there is concern that much of this debt is short term but funding long term projects – creating a liquidity mismatch that adds to the overall credit risk. Further, as the sector is largely unregulated, defaults do not carry government guarantees of assistance and there is great uncertainty regarding the interconnectedness of these institutions. A possible marked rise in defaults by shadow banking customers has the potential to send seismic ripples throughout the economy, if left unchecked.
These issues have not gone unnoticed by the government. The introduction of municipal bonds in 2016 for local governments took away the reliance on shadow banking and encouraged funding from more transparent sources. Many non-performing or ‘bad’ loans have long since been taken out and sold off, while the central government reinvigorated banks with additional capital. Today, the number of non-performing loans is minuscule, making it unlikely for Chinese banks to suddenly find themselves lacking the ability to pay. Regardless, the dangers of shadow banking in China have been exaggerated. Unlike the rest of the world, China’s shadow banking assets lie entirely within its own borders and well below the OECD average (which is 128 per cent of GDP compared to China’s 78 per cent). This gives government authorities total freedom over monetary and fiscal policy to deal with any defaults. Hence, critical credit channels can be kept open to maintain activity and prevent economic downturn, restricting loans to overheated industries with liquidity mismatch and the tightening of interest rates in these sectors.
An article touching on the many varied critiques of China’s economy would likely be enormous in size, covering multiple policy areas in greater depth. A final criticism worth concluding on is that of China’s slowing growth. It is true that China’s GDP has not grown as rapidly in previous years – decreasing from the record high 15.4 per cent in 1993 to that of 6.6 per cent in 2018. The engines of investment that drove the last 30 years of record-breaking growth have indeed begun to taper off, as China now searches for more fuel for the economic fire. But the commentators are wrong to suggest that this signifies the beginning of the end, nor will it mean a transition to a consumption-based economy when still much of the population is yet to enter the middle class (especially in the rural western regions). In any likelihood, the government’s current plan, focusing on the development of western China coupled with an investment in renewables, will create a new but slower burst of economic growth that will lead to the transition to an innovative and stronger economy on par, if not superior to, the US.
The underlying notion in these criticisms, whether about debt, credit risk or slowing growth, is that China has been able to overcome these common economic problems. To do so, China has directed its spending to improve the real economy, be its key infrastructure, creating jobs or combatting pollution – improvements that have a real return and long-lasting economic utility. Furthermore, China is not afraid to act to protect all aspects of its economy; it recognises that a healthy banking sector is essential alongside an efficient, committed government. China demonstrates the power of competent economic management coupled with an increasing balance of privatisation. The lesson for us is simple: there is little downside to investing in ourselves economically, particularly in infrastructure. Rather than relying on credit growth from any and all sources (such as high-risk lending), we must be conscious of what kind of growth our economy is generating – especially whether it is sustainable and impactful in the real economy. We can learn much from China’s economic achievements, which shows that foresight and efficiency in government, along with harmony between economic agents, are critical for success.

Felix Ryan
CBE Venture LAB: The beginning of an exciting Entrepreneurship journey at ANU
November 16, 2018 10:30 pm Comments Off on CBE Venture LAB: The beginning of an exciting Entrepreneurship journey at ANU
Last week, I had the pleasure of interviewing the man behind the creation of the CBE Venture Lab, Camilo Potocnjak-Oxman; an exciting new space for all the ANU students.
How did the concept of creating the Venture Lab come about?
“Two years ago, there was an initiative from the CBE mainly at the Research School of Management to set up an innovation hub, part of which would be an Entrepreneur’s room. When I heard about the initiative, I was excited and eager to help. It was quite an ambitious project, and unfortunately, it did not entirely go ahead. However, between the time it was announced, and now, I was given the opportunity to run several activities in the space that was going to be the innovation hub. Activities such as team-building events for the ACT Innovation competition, tutorials for Entrepreneurship course and seminars for the Postgrads New Venture course. I was using the room to see how people would react to this space.
“At the beginning of this year, two students from the previous entrepreneurship course contacted me as they were interested to continue to use the space for their project. That was where the concept of the Venture Lab came from in late February of this year. This generated a discussion with the people who oversaw the space. Then I had a conversation with the Associate Dean (Research) Emma Schultz who was supportive of the idea of creating an Innovation Hub. So, the creation of this Venture Lab is an amalgamation of my experience in teaching and developing entrepreneurship course, Emma’s support of championing the concept of the creation of an entrepreneur’s room and the students wanting a space to work on their projects.”
How long did it take to transform this idea into reality?
“Given the size of the institution, I would say it was fast. The project was proposed was on 13th March 2018. But, it wasn’t until late June it got approved. It went into renovation at the beginning of week four of this semester. And now in early October, we are just about to start running some activities. It is always important to undertake some low-cost tests to increase the probability that the solution will be adequate to the people which it is intended to serve. Before this space went into renovation, I engaged with a community of former students who participated in the Entrepreneurship course or the ACT entrepreneurship competition. I asked them several questions regarding; what kind of support you would have hoped to receive before graduation, what kind of equipment or resources the entrepreneurship space needs to provide and what kind of activities would you want to see running in the space. It was those conversations that began to shape this space. So, it was very much a collaborative and co-creation activity with the former students.”
Were there any challenges that you faced when setting up the CBE Venture Lab?
“No challenges as such from the CBE side, but rather from the learning to adjust to the dynamics of a larger institution. I was incredibly supported by all the executives, my colleagues, the academics and the RSM director in making this Venture Lab become a reality.”
What can ANU students and staff expect from the CBE Venture Lab?
“That is a good question. So, firstly: what is a Venture Lab and how is it different from any incubator or escalator? I like this name, although it seems very generic, but it was chosen very strategically. When we talk about entrepreneurs, a lot of people think about it as ‘start-up founders’, but I think of it as people who can act upon opportunities to solve problems and serve needs or create benefits to the society. So, based on this concept a venture is a daring journey and ANU being a research university, the lab will be a space to explore and experiment while undertaking daring journeys. The Venture Lab has mainly three objectives; to better support entrepreneurial activities among ANU students, to provide a context where one can study entrepreneurship and help people to build a set of tools which can be used in entrepreneurial projects.
“The most important thing that the Venture Lab needs is ‘participation’. So, we are running a series to events during this semester and even during the summer where students can come and not only work on their venture project, but also contribute in developing how the Lab would look like in next semester. The idea is not just to build a space but build a community.”
Recently, I have seen a Facebook post about the first Venture Lab event on 10th October with only 15 students? Why only 15 and not have an open event?
“The lab is quite small, and the idea is to choose people who are committed enough to participate in undertaking the entrepreneurial activity. We are having multiple iterations of 15 people event rather than having a big 300 people event. So, this Venture Lab will be helpful for students irrespective of their study discipline to come together and co-create an entrepreneurial project”
What is the future direction of the CBE Venture Lab?
Many exciting innovation-related activities are happening at ANU currently. The Venture Lab has “Immediate access to Business and Economic disciplines, Marketing, Business models, Corporate Strategy and Finance. So, the vision of the CBE Venture Lab is to provide a space for ANU students and staff to explore, experiment and undertake daring entrepreneurial journeys. It will offer the opportunity to engage the CBE community and support your entrepreneurial projects.”
On a scale on 1 to 10, how excited are you to begin the CBE Venture Lab?
“Probably, I would say, a 135 out of 10 (laughs). So, people who want to participate in entrepreneurial activities or want to learn about entrepreneurship, network with former entrepreneurs and anyone who has entrepreneur projects is welcome to join.”

Soumyadeep Sengupta
The European Union – In Need of Review
10:22 pm Comments Off on The European Union – In Need of Review
The idealistic dream of the union of the European states has had a difficult decade. The shock of the global economic downturn in 2008 has lingered well into recent years; causing severe financial disruption that has irreparably damaged and destabilised European economies. High unemployment, ballooning debt and sluggish growth have fuelled the flames of populist schemes across the continent. Policymakers have tried to combat these issues to the best of their ability, but have found themselves restricted by the incoherent structure of the EU economic apparatus. Specifically, the presence of a monetary union has prevented smaller member states from moving out of recession, leaving them conjoined at the hip and deprived of their monetary, and arguably economic sovereignty. The EU economy must undergo significant structural change to promote economic prosperity across Europe in near future.
The original design of the EU as a zone of economic cooperation worked effectively in the aftermath of World War II. Determined to rebuild relations, France and West Germany began economic cooperation through the creation of a common market for coal and steel. Decreased tariffs and other trade restrictive practices allowed both the countries to regenerate their war-ravaged industries. By 1951, other European nations, including the Netherlands and Belgium, had joined in this agreement, creating the European Coal and Steel Committee to oversee the trade liberalisation of coal and steel trade between signatory nations. The benefits were twofold: not only did the cheap flow of steel and coal allow for the rapid rebuilding of European industry but also for healing the wounds between nations which less than a decade ago, were locked in brutal conflict. Through free and unrestricted trade, Europeans began to develop a sense of community as economic prosperity bloomed.
From this agreement came the European Economic Community (EEC) in the 1957 Treaty of Rome. It brought further reductions in tariffs and trade barriers to a plethora of different goods and services, extending the newfound diplomatic and economic harmony to these new member states. However, it was clear larger economies would dominate the proceedings. Agriculture that commanded France and Germany was exempted from trade liberalisation practices. German and French farmers had long operated in restrictive markets and made it clear that they would continue to do so to French and German policymakers. Consequently, EEC suffered from high and uncompetitive market prices for agricultural products that were ultimately reflected in tax burdens for EEC citizens. By the late 1980s, this had resulted in a huge unsold surplus of several goods; most notably over a million tonnes of excess butter.
But the real problems of the European economic cooperation were found in the undertaking of monetary union. With the collapse of the Bretton Woods agreement and the Keynesian system of fixed exchange rates, European policymakers began to look at ways to fix exchange rates between European countries to continue the prosperity. Once the 1973 OPEC Crisis had subsided, these discussions quickly turned into ideas for the monetary union. Theoretically, the monetary union does have an appeal. If every European country had the same currency, it would be easy to determine across the continent the most competitive prices and thus allow European consumers to reward efficient suppliers. Furthermore, it would eliminate fluctuations of exchange rates that would otherwise make it risky to invest in European countries, thus encouraging a free flow of capital within the EEC.
However, the loss of monetary sovereignty would entail poor policy outcomes for member states. A European Central Bank (ECB) would be focused not on domestic interests but continent-wide economic issues and wouldset interest rates accordingly. The danger is obvious: an economy that requires low-interest rates to engineer economic activity will have the same central bank as another that needs higher interest rates to curb inflation.The ECB must choose which state it favours by raising or lowering interest rates. The results would be uniform wages, prices and market activity, with a high likelihood of labour and brain drain from one economy to another. The significant disparity in the legal, linguistic and economic heritage of Europe makes this scenario likely and should have made it clear to policymakers that a monetary union was not appropriate for European economic success. Nonetheless, the Maastricht Treaty was signed by EEC members in 1992, establishing the ECB and monetary union.
The GFC in Europe brought monetary union problems to a head. Member states were impacted differently by the crisis: Greece, Cyprus and Ireland suffered terribly while Germany and the Netherlands were quicker to recover. This proved extremely difficult for the ECB, whose policymakers are largely French and German, to assist all EU countries. Commentators pointed out ECB policy generally favoured the larger economies at the expense of the small. Greece is the best example. Under its own currency (the drachma) and central bank, it would have been able to devalue the drachma temporarily. This would have served interest on debt at a lower cost while increasing demand for exports and Greek tourism. Instead, Greece was forced to rely upon the ECB’s higher interest rate and later stringent measures attached to bailout packages that made the downturn much worse. Cyprus faced a similar experience; with ECB and EU policy makers enforcing inappropriate ‘one size fits all’ solutions that only exacerbated the crisis. Even today, Greece and other such EU countries bear scars of the ECB’s inconsiderate policy making – contributing to the steady rise in extreme political and civil unrest across Europe.
Many have suggested that the solution to the EU’s economic problems could be to bring the EU to fiscal federalism as well as monetary unity to sync policy decisions. But this again ignores the distinct economic, legal and cultural heritage of Europe. Unlike the individual German, Italian or US states, each European country has substantially different economic requirements that simply cannot be met at the continental level. Depriving member states of fiscal powers will leave them completely defenceless against future crises, vulnerable to economic stagnation and entailing the potential collapse of support for European cooperation. The EU needs to re-examine its origins as an economic community – it must seek to maintain the prosperous trade liberalisation and economic cooperation of the EEC while acknowledging the economic and cultural personalities of its members. European unity is still an outcome to be strived for, but so long as the monetary, economic and political sovereignty of member states is restored, upheld and respected.

Felix Ryan
The TPP: a bad deal for workers
October 24, 2018 10:53 am Comments Off on The TPP: a bad deal for workers
DISCLAIMER: the author is a member of the Labor party, convenor of ANU Labor Left and an employee of the Construction, Forestry, Mining and Energy Union.

The announcement of the renewed Trans-Pacific Partnership (TPP-11) purports to usher in a brand-new era of globalisation and free trade, aiming to promote Australia’s status in the region and strengthen our geopolitical influence – or so we are led to believe.
In fact, the truth of the TPP-11 for the average Australian is far bleaker. The reality is, this deal will provide trade protection for large multinationals and safeguard the interests of billionaires, whilst leaving Australian workers in the lurch. This deal carves a new precedent for free trade, whilst leaving healthcare, the environment and labour laws in tatters.
The TPP-11 – which recently passed through the Lower House – is set to create a slew of anti-worker laws, deregulating the labour market by removing the need for labour-market testing for various countries. This means that employers will no longer be required to test the Australian labour market for available employees before hiring migrant workers, who are often employed at lower pay rates and with less entitlements. This will result in many Australians who are willing and able to work being excluded from employment, whilst vulnerable migrant workers will be open to continuous exploitation in the temporary labour market.
The deal also creates ‘Investor-State Dispute Settlement’ clauses, which essentially allow a foreign investor to sue the Australian government for creating laws which the investor claims to have an impact on their profit margins. Not only does this decision have huge impacts on Australian sovereignty, it also puts laws pertaining to the environment, health, and labour standards (that are in the public interest) under threat. This is a deal that puts the interests of working Australians far below the profit margins of big businesses and multinationals.
From the deal’s inception, the Australian trade union movement has stood in staunch opposition to the TPP. Whilst unions around Australia are calling the proposed agreement a “disaster for workers”, the federal Labor party – the political wing of the Union movement – has failed to show any solidarity to working Australians. Instead, the federal ALP caucus has moved to support the trade deal, betraying workers around Australia and undermining decades of tireless work and activism by trade unionists. This disloyalty not only damages the ALP’s relationship with affiliate unions, but inherently contravenes their own national platform – a platform intending to put working people at the core of their political agenda.
As both a trade unionist and a member of the Labor party, this move towards neoliberalism and away from the party’s primary socialist agenda is extremely disheartening. To see a political party built by unionists who wanted a better deal for working people utterly betray and repudiate the core principles of that party is unacceptable. The hard work of unions to eliminate wealth inequality, stop wage theft and the exploitation of workers, prevent multinational tax evasion, secure renewable energy schemes and provide a strong welfare system could all be seriously undermined with the ratification of this deal.
Whilst several members of Labor’s Left faction remain strongly opposed to the TPP, this has not been enough to prevent the deal moving forward. The right faction – spearheaded by Labor’s trades spokesperson, Jason Clare – has remained steadfast in its commitment to bipartisan support for the TPP. This decision sees federal Labor turn its back on all it once stood for, including the millions of hard-working Australians who put their faith in the ALP.
The TPP represents everything the Labor party was built to oppose, and the ratification of this deal fundamentally undermines the core principles of the ALP. If the Labor Party ever wants to secure government, it must do so on the values it was founded on. Labor cannot be a party that bends to the whims of capitalist demand, and it cannot be a party that abandons its values for the sake of votes. As Jim Cairns once said, “The purpose of Labor is not to make governments, but to make better social conditions… Labor will long be prepared to remain in opposition rather than give up its policy by identifying with the parties of big business and other conservative organisations.”
For Labor to truly become a party that represents the many rather than the few, it must remain true to its core values of standing up for working people. A good place to start is tearing up the TPP and blocking its passage through the Senate.

Lachlan McGregor
Artificial Intelligence: the future face of businesses
October 4, 2018 11:10 am Comments Off on Artificial Intelligence: the future face of businesses
Today’s world is dominated by technology. Whether it be at work or home, or even when you are walking on the streets – technology is everywhere, and we can’t live without it. Every day there are discoveries and new products created to make human life easier and more comfortable – as if we are employing ‘human robots’ – intelligent machines – to complete human tasks. There is a huge technological disruption in today’s modern society. While some inventions seem to be revolutionary in a positive sense, others force us to recalculate what is primarily meant to be human.
As the wind of technical disruption blows through human society, companies are inventing new ways of creating automation in business processes. One of such discovery is ‘Artificial Intelligence’: intelligent machines that perform complex tasks like a human. Although not a new concept, AI is yet to show its true power in the form of accessible products services. Companies are trying to create new products that use AI to transform our lives into a bed of ease and comfort. AI is currently the critical element to have in mind when creating new digital inventions. It incorporates several new innovative and problematic technologies, such as machine learning, cognitive and computer vision, conversational capabilities, human-to-machine user interfaces, predictive data analytics, cyber security, Internet of things (IoT) and intelligent monitoring.
Businesses that have successfully integrated AI into their enterprise systems have increased their operational efficiency, allowing them to make faster, better informed decisions about innovating products and services for the general public. For effective and successful integration of AI into marketable products, organisations need clear AI strategy, support from existing business processes and a specific set of metrics. In the future, AI will transform the business environment to create more jobs than today. AI will help us to develop new products that could be used in our everyday life, achieve cost-efficiency due to streamlining business processes, accelerate decision-making and expand the scope of business and machine automation.
With the proliferation of data in today’s world, AI is mainly used to analyse these massive data to predict a specific outcome. It is integrated primarily with the production of new software, which is widely used in the healthcare, mobility and financial industries. Over the next decade, it is predicted AI enterprise software revenue will grow from $644 million to nearly $39 billion. AI will transform the nature of the business processes in the distant future and will help in the creation of a technology-dominated society with business automation.

Soumyadeep Sengupta
The Lucky Country: A brief economic outlook for Australia
10:58 am Comments Off on The Lucky Country: A brief economic outlook for Australia
The Global Financial Crisis (GFC) was undoubtedly one of the most destructive economic events since the Great Depression. Titanic financial institutions previously thought beyond collapse fell apart almost overnight. Economies that had experienced phenomenal growth were hit with sudden bouts of bank collapse and unemployment. They were in desperate need of financial bailouts. Worldwide there was rampant unemployment and disruption to pensions, savings and investments. Further, the damage was lasting. Many European countries, due to poor implementation of policy, lingered in economic slump well into the 2010s. We were fortunate that Australia had not slipped into a similar recession. Indeed, careful policymaking and increased private sector activity relating to China’s demand for our resources steered us clear of the worst aspects of the GFC. Australia was one of two the OECD countries to experience growth during the GFC, while the US economy shrank by $2.5 trillion. Unemployment peaked at 5.1%, one of the lowest levels for OECD countries during the GFC years. Continuous growth since the crisis has convinced many that Australia has escaped unscathed; claiming that the “the North Atlantic Economic Crisis” had been avoided.
However, this does not mean that Australia has ongoing immunity. For this, we need to examine the causes of financial crises throughout the decades. Only recently has mainstream economics taken a closer look at the role of lending and debt in economic cycles. Previously, the activities of the financial sector were only considered in tangent; perhaps at best as a source of ‘financial frictions’ that can hinder investment activity and growth. Ironically, in the period of stability just before the crisis, mainstream economist bodily declared that economic depressions were a curio of the past; never to be repeated under the current economic paradigm. Thus, the GFC was a rude anachronism that these models failed to predict and solve (as shown by European economic stagnation), with former World Bank Chief Economist Paul Romer deriding their unrealistic assumptions.
Economic models, including the core tenants of economic analysis, found that focusing upon lending and private debt were far more accurate at predicting crises. In these models, when individuals/firms have a strong tendency to invest (which usually involves taking loans and creating private debt), the level of private debt in an economy begins to rapidly increase relative to GDP (i.e. the debt to GDP ratio, an important metric in this discussion, increases). It can be passed off as economic growth; since debt is often used to power economic activity and as the value of debt to GDP increases, logically the percentage of credit (i.e. debt) of GDP rises. Critical mass – when the model economy’s GDP and employment crash to zero – occurs when this debt growth begins to slow down (an inevitable outcome, whereby businesses and individuals reduce their level of borrowing), resulting in a cataclysmic systems failure of the model economy.
To further explain this, it is best to look at how this has played out during recent years. Japan’s ‘lost decade’, whereby it experienced a severe economic downturn that continues to haunt it, is one of the prime examples of this kind of ‘debt’ crisis. During the 1980s Japan’s economy proliferated; much of which fuelled by debt and speculation. The Japanese system was heavily reliant on using debt to finance operations, with agreements connecting businesses more closely together. By 1982, corporate debt to GDP averaged at 100% of GDP while household debt (both components of the overall level of debt in an economy) reached 25% of GDP. In this period, Japanese banks continued to provide finance for not just industry but for share and property speculation, fuming the flames of a rapidly rising Nikkei index. However, just as the models predicted, this boom period is only sustainable so long as the debt to GDP ratio continues to grow, which cannot go on indefinitely. By the early 1990s, the ratio peaked at 27% before quickly slumping to -1%, causing a sudden economic contraction spilling over into a collapse in the Japanese financial system and economy. Similar patterns were present in the US and other GFC stricken countries, with high levels of private debt fuelling GDP growth as a percentage for years and upon slowdown sending these economies into a nosedive.
But how does this relate to Australia? As mentioned, we, fortunately experienced an increased demand from China for Australian resources, meaning industry needed to rely on further borrowing to finance its activities. Policy makers at the RBA acted cautiously to maintain a stable and robust economy. These actions meant that credit continued to grow at a faster rate than GDP, allowing us to escape recession. But this is unsustainable. Chinese demand has been tapering off significantly, and the only way to maintain credit growth into the future would be an impossible increase in household borrowing (of 170%). The total private debt would need to exceed 250% of GDP, which would be the highest level ever recorded in the OECD. Given this, it is likely a debt growth slowdown will hit in the next few years, potentially even as soon as 2020.
There is no easy solution to this. Interest rates could be dropped to enable further room for private debt and incentive to borrow; but as mentioned this is only a short-term solution and won’t solve the heart of the issue. Even solutions that tackle the growing amount of private debt are dubious: Milton Friedman’s idea of ‘helicopter money’ has been re-suggested, but commitment methods of ensuring it would be used by consumers to reduce debt must be included. This issue, while complex, is highly relevant to all university students: those that graduate during recessions earn far less than those who graduate during economic booms over a lifetime. Economies are highly chaotic and complex systems, owing to human agency (as rightly pointed out by Hayek), and a recession, whether in several months or years, is nonetheless a possible reality that we all should be prepared.

Felix Ryan
Australia’s Withering Media Landscape
September 19, 2018 10:56 am Comments Off on Australia’s Withering Media Landscape
The announcement of Fairfax’s takeover by Nine in July of this year sent shockwaves through Australia’s media landscape. The move, spurred by the government’s weakening of media ownership laws, marks the end of Fairfax’s tenure as one of Australia’s most formidable independent media giants. Yet more than that, it sheds light on the failures embedded within our market-driven media sphere, wherein profits dominate over purpose, and quality journalism is lost amidst the battle for higher shareholder returns.
In the era of the internet, the demise of quality print journalism is a tragic, yet unavoidable reality. Journalism in Australia is dominated by five major outlets – the government-funded ABC, the Sydney Morning Herald, the Age, the Australian Financial Review, and The Australian. Collectively, these outlets provide coverage on a broad spectrum of issues to the Australian populace – indeed, they have been described by Australian journalist Eric Beecher as “pillars of the Australian democratic infrastructure” for their role in holding governments to account. Fairfax media’s role within this context cannot be understated, and thus the merger represents more than just an inevitable consequence of a company’s failure to adapt to the digital age, but a fundamental shift in Australia’s media sphere.
On an economic front, the takeover makes sense. In years past, Fairfax failed to adapt to a challenging media landscape, missing opportunities to buy into online giants such as ‘Seek’ and ‘CarSales.com.au’. Yet ultimately, media should never be dictated by purely economic considerations. Independent, well-funded media is critical to holding governments to account and providing citizens with a well-rounded understanding of current events and issues. A diversity of voices in the media helps to avoid the danger inherent in the predominance of powerful, vested commercial interests dominating media platforms. Indeed, it is critical to democracy that voices are not magnified by privilege or power. An independent free press not only acts as a bulwark against government tyranny, but also against the dangers inherent in powerful commercial interests.
The reality is that journalism itself is a loss-making enterprise. While Nine’s takeover may be a commercial saviour to Fairfax, they are fundamentally different companies, dominated by different values and understandings of their role within Australia’s media sphere. Let’s face it – there’s nothing common between the Sydney Morning Herald’s investigative reporting and Nine’s line-up of reality cooking shows. It is exactly this tension between the market reality – to increase returns for shareholders – and the fundamental purpose of the media – to provide quality journalism – that has the media searching for its soul.
Of course, it’s not all bad news. Online media has provided a wealth of opportunities for journalism. It has amplified marginalised voices, provided a free platform for quality journalists to publish their work and increased the rate at which news is consumed.
Yet the media today is faced with formidable challenges. The proliferation of ‘fake news’ and clickbait journalism are two fundamental market failures of this model. In this Trumpian era of dystopian proportions, where Australia’s banks are fraught with corruption, big money reigns supreme in our politics and powerful corners of the media continue to deny the reality of human-induced climate change, an independent and well-funded press is critical. Sadly, the future looks bleak: over 2500 Australian journalism jobs have been cut since 2011, with over 200 jobs cut at the ABC in 2017 alone. The gutting of our national broadcaster – to the tune of $83.7 million over the next four years – is yet another consequence of the trend towards a corporatised media sphere.
Today we need a strong, independent media more than ever. And that’s exactly what we’re losing.

Woroni Editor
Energy economic policy: The rise in energy prices
September 18, 2018 11:18 pm Comments Off on Energy economic policy: The rise in energy prices
Energy policy and the economics behind power prices has been the most contested political issue over the last decade in Australia. As Canberrans and ANU students receive their astronomical winter power bills, we see the same issue become instrumental in yet another Prime Minister being deposed. Why is it so hard for policymakers and economists to find a resolution to Australia’s ever-increasing power costs?
According to the Clean Energy Council, power prices have increased by 109% in the NSW/ACT area over the past decade. In 2016, the ACCC stated that only 22% of a person’s electricity bill is made up of the actual power generation costs. However, the wholesale power increase in the past two years has been the predominant cause of more recent power price hikes.
Since 1998, power has been supplied to 80% of households in Australia through the National Electricity Market. It is a wholesale market which connects electricity generators to energy retailers, who then in turn distribute to businesses and households. The market determines a ‘spot’ or ‘equilibrium price’ that reflects the physical demand and supply in the marketplace. This is a critical price signal for the financial market, made up of generators and retailers. It’s where contracts are exchanged on a minute-by-minute basis, which ends up determining the end price that is passed onto the consumer.
Demand and supply factors in the energy market can explain why prices have increased over the last decade and shown no signs of abating. Australia’s ever-rising population, coupled with the increased rate of homes with power-intensive air conditioning and heating systems, have placed a demand strain on the market. Think of the 40-degree summer nights, or the -5 Canberra winter evenings: these see a nightly peak in energy demand, causing the spot in the wholesale market to spike, and this is eventually passed onto households via the quarterly power bill.
However, where energy prices and economics collide with politics, is on the supply side of the market. Simply said, over the past decade Australia has not been able to provide affordable enough ‘dispatchable’ energy to keep up with the rising demand. This is primarily due to three factors. Firstly, the price of gas in Australia has risen by over 100% in the past decade, mostly due to increased exporting overseas of natural gas by domestic producers, which in turn has reduced the overall supply of gas within the Australian marketplace. Secondly, the closure of major ageing and old coal plants in South Australia and Victoria has caused an overall reduction in the total productive capacity of energy available in Australia. And thirdly, the contested political environment and multiple government schemes that have come and gone over the decade have resulted in a terrible commercial environment for business. Fossil fuel and renewable projects have a 30 to 50-year project time frame, and without the medium term certainty business was unable to make up for the supply shortfall that has been occurring.
The latest attempt to provide policy certainty was in the form of the National Energy Guarantee (NEG). The policy aimed to both legislate the Paris emissions reduction target of 26-28% while providing the framework and certainty required for new supply to be generated into the energy marketplace in a technologically agnostic way by investors. According to ACCC statistics, 7% of a household power bill is made up of the costs from environment schemes such as the renewable energy subsidies and the Renewable Energy Target. A significant portion of government members saw the legislation of Paris emission targets and the likely renewable energy investment it would generate as being unlikely to bring average household prices down and to restoring supply side certainty to the energy generation market. This was the prime instigator of the political turmoil that occurred last month.
Unfortunately for households and businesses, Australia is back in no man’s land when it comes to this fundamental issue. Expect an ever-continuing rhetorical battle leading into next year’s election. Until either party can deliver legislatively the long-term framework required, it is hard to foresee anything other than greater financial strain amongst many within our community as prices rise further and reliability during critical times diminishes.

Sam Walker
The rise of religious and spiritual market
September 15, 2018 12:29 am Comments Off on The rise of religious and spiritual market
When any conflict emerges in a nation, multiple stakeholders gather their physical and mental armour to fight for their interests. Each stratum of the society seeks comfort in what they know. Now a person can get information from sources including but not limited to national news, individual communities and their immediate family. But what if these sources of information reflect the cultural or religious bias of certain people? Such sections of our society vulnerable to the prejudiced opinion are the first ones to fall trap to the fault lines of religious fanaticism.
In our first lesson in economics, we are taught that humans are rational. That humans are expected to choose amongst scarce resources available to them rationally and prudently. But if recent trends are to be believed, not all humans behave rationally. During conflicts, very few people are cognizant of their immediate reality. Even fewer can grasp the tangible facts of ongoing strife.
While a few people take immediate steps to know more about the situation and formulate an educated opinion, there is an immensely growing section of society which is impressionable and naive. This level of naivety inherently makes such people susceptible to some mischievous elements rooted in our society. Instances range from the exploitation of a person’s faith for someone else’s financial gain and establishing a person’s religious beliefs as grounds for a battle call.
There have been numerous cases in recent history where a community as a whole has taken rash decisions based on blind faith and dogma. There is an increasingly unstated and subtle competition implying that “my idol is better than yours,” and what was once a society that hoped to be guided by reason became a society driven by the fear of God and on the wheels of ill-advised decisions.
It has been believed that “once gods and religious figures are installed in place, they cannot be dislodged.” Such shrines attract millions of devotees each year. A report by the National Sample Survey Office (NSSO) showed that “average expenditure on religious trips has more than doubled,” between 2007 and 2015 so much so that “religious tourism” has become one of the biggest highlights in recent government policy.
This debate on whether religion is a money-making business has revealed surprising facts. As is evidenced by some studies, it seems that such religion and faith-related institutions do generate a socio-economic impact. A study conducted by the Religious Freedom and Business Foundation stated that “religion annually contributes almost 1.2 trillion dollars” worth of socio-economic value to the United States economy, which is more than the global revenues of the world’s top ten tech companies, including Apple, Amazon and Google.
Naturally faith is not a bad thing – but capitalizing on a community’s belief for politics and other financial gains has become an efficient money-minting scheme. People are increasingly relying on their sage’s prophecies, blissfully unaware that their priests are reaping the profits of God.

Surbhi Arora