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INFRASTRUCTURE

GDP smashed by preoccupation with inflation target

Wed, 15/10/2008 - 09:02 — Chris Lamont

Chris LamontThe effect of a restrictive monetary policy on investment in the private rental market provides a useful lesson. Rate rises have starved investment while demand has increased; add to that record low vacancy rates - is it any wonder that rents across the country have increases in the order of 10%+. 

The release of the Australian National Accounts on Wednesday [Sept 3, 2008] confirms what most Australians already knew, a rapid slow down in domestic economic activity.  In seasonally adjusted terms GDP increased by just 0.3 per cent in the June quarter. Excise investment in machinery and equipment in Western Australia from the result, and you get zero growth for the quarter.

Notwithstanding a rapid slowing in the economy, a pre-occupation with an ageing inflation target has been maintained.  A pre-occupation with this 15 year-old inflation target has muzzled the adoption of a monetary policy that maintains a ‘realistic' inflation target.  Such a target should be mindful of external price shocks and capacity constraints within the Australian economy. 

To suggest that inflation woes experienced over the last 18 months were a consequence of consumer exuberance ignores the fact that investment in capacity building infrastructure has been sadly lacking for quite some time.  Furthermore, it ignores the effect of external price pressures most notably the price of oil.

Competition regulation in telecommunications

Mon, 20/10/2008 - 11:26 — David Quilty

David QuiltyOn 26 September David Quilty presented these ideas at the GAP Congress on Regulatory Affairs: "Opportunities for Business",  held in Parliament House of Victoria.

It is a pleasure to be here today and my congratulations to the GAP and to Peter Fritz for his leadership in putting this Congress together and for all the hard work in developing the ideas and the proposals that are being discussed.

The fact there are so many public policy leaders participating at the Congress is testament to the interest in and support from all levels of government for the GAP and for Peter's "second track" approach to taking forward what are often contentious, complex and hard to resolve issues.

The matter I wish to focus on today could certainly be defined in this way. Competition regulation in telecommunications in Australia is characterised by high levels of disputation; the spending of vast amounts of money usually for little discernible benefit for anyone involved; and a total lack of communications between those who play the game and the wider community.

Last year, Peter came to Phil Burgess and me and said he thought this issue was too important not to resolve and that, while he did not pretend to understand the complexities of it, there must be a solution if the right people are involved and they bring with them open minds and a spirit of goodwill.

Regulating for Better Infrastructure

Tue, 16/09/2008 - 10:12 — David Quilty

David QuiltyIf Australia is to derive maximum benefit from the global digital economy, the need to encourage and reward investment in high-speed broadband infrastructure simply must be the number one objective of a modern telecoms regulatory regime.

Clearly there is an urgent and unquestionable need for major infrastructure investment in this country.  Be it roads, ports, clean energy, water or telecommunications, the cries for multi-billion dollar infrastructure projects get louder by the day, along with the push for governments to fund or subsidise more and more of this investment.

The fact that Australia has experienced over a decade of sustained economic growth, yet is suffering from outdated and sub-standard infrastructure in so many sectors, begs the question - why have businesses (and governments) not made these investments during the good times?

With the implementation of the Hilmer competition reforms and a range of sector-specific regimes at the Federal and State levels, it has long been presumed that Australia has world-leading structures for regulating market power and encouraging competition.