Is it just me? I step outside in Melbourne in July and it feels colder than it used to. Is that a function of my age? Or a function of the temperature?
Month: July 2019
Western Civilisation
It’s over 30 years since the beneficial partnership of Thatcher and Reagan. 40 years earlier, Churchill and Roosevelt formed a partnership in the face of a potentially catastrophic enemy, with a little spice added by Stalin clinging on. These great Atlanticist partnerships are few and far between. They seem to emerge only when times are truly difficult. They are rooted in the fundamentals of western civilisation, freedom and responsibility of the individual, they hold the family as the unit of society and deem constraints on the size of Government as essential. Well, times are difficult now. I wonder if there is a new partnership ready to form between Boris Johnson and Donald Trump. I’m hopeful.
Rainbow Lorikeets
Noisy little birds. They chew through the apples on my apple trees. But their pairing and concerns for each other are endearing. They witter away to each other as if discussing today’s letters to the editor. This chap was photographed in the Melbourne autumn on Kodak Ektachrome 100 film, 100mm lens.
How to get monetary policy completely wrong
There is a difference between the prevailing rates of interest in the money and credit markets and what can be loosely called the natural rate of interest. When the rates diverge, problems emerge.
The central bank in Australia (the RBA) conducts the management of monetary policy, independently of the Government of the day but to a stated aim of constraining inflation between 2% – 3%pa. It has just manipulated down market interest rates twice in two months. Prior to that, the official cash rate (the benchmark the RBA uses to influence all other rates) was held ‘at emergency low levels’ for 3 years. If the old rates were at emergency levels, then what are they now being lower still? The official cash rate is now 1%pa.
Continue readingIncome tax cuts in Australia
There has been a lot of chatter in Australia this week about the cuts to income tax rates passed by Parliament. The cuts are phased in with immediate effect for lower income levels and deferred a number of years for the higher income levels.
While I’m in favour of income tax cuts, like anyone else who pays income tax, we ought to remember that the true tax burden is not represented by the rate of income tax, or any other tax, for that matter. The true tax burden is determined by the level of Government expenditure. The tax regime, the rates, the thresholds, the mix between consumption tax, income tax, royalties, stamp duties, corporate tax etc is the outcome of a political process that determines who will pay for the expenditure and in what time period they will pay. Cutting tax without cutting expenditure simply means someone else can pay for it, at some other time.
We are collectively better off when Government expenditure is cut first, and tax reductions can then follow. None of this is to deny the truism of the Laffer Curve.
Gender quotas and corporate performance
I think quotas of any sort are inherently wrong and likely to be bad for corporate performance. In recent times, many of those in favour of quotas have shifted their claims from “quotas are necessary to treat under-represented groups fairly”, to “quotas are good for business performance.” It is not easy to prove or disprove such claims.
Conceptually, the skills needed to perform well in business are not held in exclusively in the domain of any particular group of people. Those skills are held by all different sorts of people. And plenty of people do not have the necessary skills. Consequently, the best corporate performance will emerge from the companies with the best collection of people with those skills, regardless of who they are or where they came from.
Adding a degree of empirical research to the debate, the authors of a study conducted in Norway and published last month (accessible here), considered corporate performance controlling for gender composition of the board. Among the conclusions was this:
“Analyzing the causal effects of the Norwegian gender-balancing quota, we find the quota significantly increases the share of women directors on the boards of treated firms. Further, we find the quota significantly adversely affects the performance of treated firms and firm risk is significantly reduced.”
That is, if the law imposes quotas on gender balance, gender balance will improve. (No surprises there.) Also, firm risk reduces. Finally, corporate performance is significantly adversely affected.
Corporate performance changes as a result of gender quotas. Lower performance and lower risk is not the same as improved performance with no increase in risk.
Australian Actuary 