Matt Nolan

Poll tax on kids

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Sticking to the recent theme of externality taxes, some researchers from Perth suggested that Australians should ‘fine’ parents for each kid they have above two. Now we know I’m a big fan of externality taxes, but I’m not too sure about this one.

As we have already established a carbon trading scheme, this externality tax is not being used to cover carbon creation from the consumption or production of certain goods – the kids will pay for all of this when they grow up. This leaves us with the carbon emissions that the child makes from living, by doing things such as breathing.
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Matt Nolan

The desirability of rent controls

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Over at Marginal Revolution, Tyler Cowen posts on what some people have to say about rent control. Several points are put forward as to why rent controls are a good thing, namely:

  1. People do not become happier from a larger, or better quality house and so a lower quality – lower price equilibrium would be preferable.
  2. Given this, lower prices will increase the supply of property over time by getting owners to put more small apartments in a given building.
  3. As it is harder to find an apartment temporarily people are forced to commit to a region for a longer period of time, which may provide a positive externality, or help to solve prisoners dilemma issues through the use of a repeated game.

If you cannot be bothered reading my long, boring post on the issue, then you can just say whatever you think about the above points in the comments 🙂
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Matt Nolan

Will a fiscal stimulus in the US not be inflationary?

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According to Martin Feldstein (hat tip Greg Mankiw):

“Even if the Fed decides that it should not cut rates further at the present time, it would not raise rates to offset the stimulus effect of the fiscal change. From the Fed’s point of view, the tax cuts can provide a desirable short-run stimulus without the inflationary impact that would result from a lower interest rate and an increase in the stock of money.”

Just because Martin Feldstein is a far, far, better economist then I will ever be does not mean that I have to agree with him, and here’s why.

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Matt Nolan

December 07 MPS – OCR unchanged at 8.25%

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The December quarter monetary policy statement was released today. Alongside this they announced that the OCR would remain unchanged, as they believe “current level of the OCR remains consistent with future inflation outcomes of 1 to 3 percent on average over the medium term”. This times they give the feeling that tax cuts are incorporated in their view of inflation outcomes, however they still view the emissions trading scheme and financial market uncertainty as risks to their forecasts.

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Matt Nolan

Australian cash rate on hold – December 2007

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The Reserve Bank of Australia kept their target cash rate on hold yesterday. In a push to increase transparency, they now release a statement with every decisions, which is awesome. Yesterday’s statement was relatively neutral, however as my esteemed colleague CPW says, there is nothing to compare it too so its hard to tell exactly what the statement means. My guess is that the Bank is happy to stay on hold, until the risks associated with subprime worries in the US calm down.

At the same time the September GDP result came out, with a 1.0% seasonally adjusted increase in the September quarter, taking average annual growth to 3.4%. Although 1.0% for a quarter seems high, CPW informed me that this is what the market expected, and furthermore the growth in previous months had been revised down.

Will Taylor

Thoughts on the Warehouse Decision

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I found this point particularly interesting

“it is not possible to conclude that the relevant markets would be more competitive if the Warehouse Extra concept is pursued by the acquirer than if the Warehouse is not acquired”

I have always been of the opinion that the Extra concept would be much more effective in the hands of Woolworths or Foodstuffs due to the massive scale they have in the wholesale market. One of the supermarkets could then use the “halo” effect to the benefit of their grocery operations. I think this would lead to more competition than the status quo.

Another really interesting point is that the high court ditched the 5% price effect threshold in favor of 2% and still found that the acquisition wouldn’t substantially lessen competition. While this is interesting in it self, it also has profound implications for future mergers as the commission will have leeway to use different thresholds depending on the situation now that there is high court precedence for doing so