Rudd's Reply

Just watched Rudd reply to the budget. The message he is trying to get out is pretty clear: "it's the economy stupid".

Again a modest approach to climate change, hardly better than the lip service given by the Government.

More soon.

Budget Part 2 - Education

I feel that this budget could be pivotal in the election campaign and I am therefore taking the liberty to scrutinise its essential features. Yesterday I argued that from my personal macroeconomic view, the budget was inappropriate given the stage in the economic life cycle.

Today I want to focus on the education "reforms" because Costello proclaimed it himself that this was an "education budget". Money has been thrown about all over the place.

For tertiary education, the thrust is to increase enrollments with:

- removing full fee caps
- a $5bn endowment fund that will generate $304m for investment in university infrastructure
- extending Youth allowance and Austudy for students enrolling in masters courses
- an increase in the Commonwealth scholarships.

For primary and secondary education:

- a $700 voucher system for private tuition for those students who do not meet numeracy and literacy standards
- a bonus for teachers who complete a numeracy and literacy refresher course in the summer
- private schools will get an extra $1.7bn while public school will receive only an extra $300m.

Where do I begin? I'll start with those things that will likely affect me and my work. The Government is continuing to kick teachers in the gut with the implied blame for poor results of students. The tuition reform is also just another step to towards the privatisation of the secondary education system.

Most teacher's do not need refresher courses, and it will do very little to improve the results of students. Why? The problem in schools has nothing to do with teacher skills nor with the students. The problem lies with a system of education that provides an environment of diminished capacity. The neglect of the public system by successive state and federal governments has meant that the public system is now a safety net with major rips in the cords.

The solution is to halve class sizes. Halve class sizes and everyone wins. The student wins because there is more time to have one-to-one classroom learning relationships with their teacher. The teacher wins because they would no longer have to spend half their time on classroom behaviour management and can therefore get back to proper teaching. The parents will win because social, physical and intellectual development of their children will improve. The economy will win because there will be a larger base of skilled workers thereby increasing its capacity.

The tertiary education system deserves a boost in spending. Universities have been stagnant as it has had to deal with the commercialisation of the tertiary education sector forced on to them by the Howard government.

Perhaps even more appalling is that the federal government has dramatically increased their funding of private schools. It is completely abhorrent to me that private schools receive this much money while public schools are suffering.

The motive for this education spending has become quite clear with the resumption of parliament: it enabled Costello and Howard to say, "the education revolution has happened and we delivered it not Rudd." It is purely a political move to nullify one of labor's policy strengths. Lets not forget that it was Costello and Howard that slashed and burned education as part of its zeal to destroy public debt in 1997.

The highlight of Latham's leadership was when he was able to force the Howard Government into reducing parliamentary pensions. Latham said, "if we can do this while in opposition, imagine what we could do in Government." Latham looked in control, Howard looked weak. Rudd and Swan should be doing the exact same thing here. Howard has stolen labor's thrust and labor should take ownership of it. They have failed to do so. I look forward to Rudd's reply.

Budget Analysis Part 1

Another election budget comes around and another cunning political move is made at the expense of much needed reform. More portfolio specific information is to come but here are my macroeconomic policy views on this disaster:

Macroeconomic policy

Coming from an economics background, and someone who strongly believes that the most effective mechanism Government has to manage the economy is fiscal policy, the budget has to be seen first from its strategic macroeconomic value. At this stage in the economic cycle (ie peak boom), Keynesians would argue that fiscal policy would need to be very tight. In other words, the budget would need to be deflationary with large surpluses. At first glance Costello has delivered a deflationary budget with a budget surplus of $10bn, about 1% of GDP.*

However, the beauty of fiscal policy is that it is very flexible in that it allows targeted spending and even targeted taxation (rather than the sledgehammer of interest rates). This means that particular aspects of the spending pattern of Governments can have differing impacts.

The government is raking in a huge amount of tax, more than was ever expected. For example, in the last 6 months the treasury had to upwardly adjust revenue by more than $60bn. Why? The minerals boom has meant that corporate tax has exploded the Governments coffers.

So the extra money is being raked in but where does the money go? This budget is throwing money away to anyone who breathes; a purely political tactic. So here's the economic mismanagement: the budget is putting more money in the pockets of those people who are more likely to spend it and not save it. Moreover, the tax changes are also putting more money into those pockets of people who are more likely to spend it and not save it. The extra cash to spend will lead to inflationary pressures, further putting pressure on an interest rate hike to contain inflation.

So when we take into account the inflationary pressures I just described together with the deflationary pressures of a budget surplus, I would argue that the budget is either balenced or moderately inflationary. Either way it is an inappropriate fiscal stance given the stage of the economic cycle we are in.


*I would bet that Keating, a true Keynesian, would say that we need higher surpluses for this stage of the economic cycle.

Recent polling data

Ozpolitics once again provides an excellent summary of the latest polling data. Of most interest to me is the trend for the Greens. This can be seen in the diagram below.



What you will find is that since Rudd's coronation in December as the ALP leader the Greens have taken a hit. Morgan polling has been quite indicative with a high of 12% back before Rudd came to power and is now showing the Greens hitting 7%.

Prior to Rudd's ascent the Greens were hitting its highest polling data for each of the polling agencies (Morgan, AC Nielson and Newspoll). This is on the back of a month of climate change debate in the public sphere and Beazley's (and Albanese's) seemingly lack of conviction on the issue. On the other hand, Rudd has able to garner the media's attention and has taken the opportunity to steal the Greens agenda.

With labor on the ascendancy it was always going to be difficult for the Greens. However, one can sense that Rudd's honeymoon is coming to an end. Rudd's gloss is disappearing. The Greens will withstand this shock as Rudd lurches to the centre.

Post-election carve-up

Hi all,

Well the results of the State election are in (a while ago now). A summary:

The ALP won convincingly overall. The Liberals regained a seat or two they lost to independents in past bi-elections. The Nationals picked up a seat or two.

The upper house result for the Greens was great. We scored almost 9% with a positive swing to us. the upper house campaign should be delighted with the re-election of lee Rhiannon and the introduction of a new Greens MLC Dr. John Kaye. Well done John!!!! I can think of no one more qualified to represent the people of NSW and the Greens. I look forward to his style of politics.

The seats in the Hawkesbury were a mixed bag. The seat of hawkesbury scored less than 6% and Londonderry scored less than 7%. i would like to thank all of the committed Hawkesbury greens members who helped on election day and on the lead up to the election.

The election was a fantastic experience. I hope to participate in future elections for the Greens in some capacity. The upcoming the federal Election poses many challenges for the Greens with the resurgence of the ALP. I hope to participate in the campaigning, particularly on the Senate campaign.

Election Eve

Hi all,

It is election eve. The last couple of weeks have been so amazingly hectic. The best highlight has been the meet the candidate forum at the Richmond Club. It was an intense experience and a rowdy affair; democracy in action.

Typically, and predictably, the drugs spin by the rotten murdoch press has come out. I really don't think it hurts us that much.

Well a tough day tomorrow. I am looking forward to it, particularly the party afterwards. Who knows I may have a new job come Monday!

Campaign update

Wow its been a busy week for the campaign. I have:

• Officially nominated (which although it doesn't sound hard, it is a scary thought to get it wrong).
• Numerous media responsibilities.
• Organise our leaflets/postcard distribution.
• Organise advertisements for the papers.
• Consider preference decisions for our how-to-votes.
• Organise media for the forthcoming week in the hawkesbury and Nepean papers.

It's been hectic but fun, even more hectic when I am trying to hold on to a new job!! I feel this campaigning is what I am born for, to get a message across that I believe in. I love it. The next few weeks are going to be great with lot's of media and, what I am really looking forward to, meet the candidates.

Development West of the River

On Sunday I was invited to a concerned residents meeting regarding a proposal to subdivide some blocks of land near Kurrajong. You can read about it here in the Hawkesbury Gazette.

With me at this meeting was two Labor representatives and Greens Councillor Leigh WIlliams. What occured was that those people who were in favour of the development proposal turned up and took control of the meeting. Although I did not agree with their points of view, I was glad to have heard them; in a democracy it is important to at least here tho oppositions' point of view.

However, it is clear to me that the Hawkesbury community must draw a line in the sand regarding development in the area. John Aquilina mentioned at this meeting that this "line in the sand" is quite clearly the Hawkesbury river. Although I agree that inappropriate development west of the river must be curbed, we must also think very carefully about development in the Hawkesbury as a whole.

Indeed, as our population grows we must find ways to expand our residential stock. However, this does not mean we can allow inappropriate development to run a muck with little regard for the future of the Hawkesbury, it's people and it's environment. I will not stand idle as this wonderful community gets annexed by urban sprawl.

This is therefore a local and state issue. Planning is key, and planning needs vision. Hawkesbury City Council is set to draw up a new LEP. This is our time to decide what that vision for our community will be. In thinking about that vision ask yourself these questions:

• do you want the Hawkesbury to be subsumed into Sydney's urban sprawl?
• do you want the Hawkesbury to lose it's enormous social capital by losing that inherent community feeling?
• Should the Hawkesbury give in to economic development at the expense of the environment, or do we want remain as "Sydney's backyard"?

These are not difficult questions that as a community we must come to grips with.