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Australia’s fertility rate has reached a record low. What might that mean for the economy?

<div class="theconversation-article-body"><a href="https://theconversation.com/profiles/jonathan-boymal-392960">Jonathan Boymal</a>, <a href="https://theconversation.com/institutions/rmit-university-1063">RMIT University</a>; <a href="https://theconversation.com/profiles/ashton-de-silva-3066">Ashton De Silva</a>, <a href="https://theconversation.com/institutions/rmit-university-1063">RMIT University</a>, and <a href="https://theconversation.com/profiles/sarah-sinclair-385470">Sarah Sinclair</a>, <a href="https://theconversation.com/institutions/rmit-university-1063">RMIT University</a> Australia’s fertility rate has fallen to a new <a href="https://www.abs.gov.au/statistics/people/population/births-australia/latest-release">record low</a> of 1.5 babies per woman. That’s well below the “<a href="https://pubmed.ncbi.nlm.nih.gov/7834459/#:%7E:text=PIP%3A%20Replacement%20level%20fertility%20is,of%202.1%20children%20per%20woman.">replacement rate</a>” of 2.1 needed to sustain a country’s population. On face value, it might not seem like a big deal. But we can’t afford to ignore this issue. The health of an economy is deeply intertwined with the size and structure of its population. Australians simply aren’t having as many babies as they used to, raising some serious questions about how we can maintain our country’s workforce, sustain economic growth and fund important services. So what’s going on with fertility rates here and around the world, and what might it mean for the future of our economy? What can we do about it? <h2>Are lower birth rates always a problem?</h2> Falling fertility rates can actually have some <a href="https://www.rand.org/content/dam/rand/pubs/monograph_reports/2007/MR1274.pdf">short-term benefits</a>. Having fewer dependent young people in an economy can increase workforce participation, as well as boost savings and wealth. Smaller populations can also benefit from <a href="https://www.sciencedirect.com/science/article/abs/pii/S0927537112000620.">increased investment</a> per person in education and health. But the picture gets more complex in the long term, and less rosy. An ageing population can strain pensions, health care and social services. This can hinder economic growth, unless it’s <a href="https://pubmed.ncbi.nlm.nih.gov/21302431/">offset by increased productivity</a>. Other scholars have <a href="https://www.gsb.stanford.edu/faculty-research/publications/end-economic-growth-unintended-consequences-declining-population">warned</a> that a falling population could stifle innovation, with fewer young people meaning fewer breakthrough ideas. <h2>A global phenomenon</h2> The trend towards women having fewer children is not unique to Australia. The global fertility rate has dropped over the past couple of decades, from 2.7 babies per woman in 2000 to <a href="https://www.macrotrends.net/global-metrics/countries/WLD/world/fertility-rate">2.4 in 2023</a>. However, the distribution is not evenly spread. In 2021, 29% of the world’s babies were born in sub-Saharan Africa. This is projected to <a href="https://www.healthdata.org/news-events/newsroom/news-releases/lancet-dramatic-declines-global-fertility-rates-set-transform">rise to 54% by 2100</a>. There’s also a <a href="https://onlinelibrary.wiley.com/doi/full/10.1002/psp.2720">regional-urban divide</a>. Childbearing is often delayed in urban areas and late fertility is more common in cities. In Australia, we see <a href="https://www.abs.gov.au/statistics/people/population/births-australia/latest-release#data-downloads">higher fertility rates</a> in inner and outer regional areas than in metro areas. This could be because of more affordable housing and a better work-life balance. But it raises questions about whether people are moving out of cities to start families, or if something intrinsic about living in the regions promotes higher birth rates. <iframe id="U1wEx" class="tc-infographic-datawrapper" style="border: 0;" src="https://datawrapper.dwcdn.net/U1wEx/1/" width="100%" height="400px" frameborder="0" scrolling="no"></iframe> <h2>Fewer workers, more pressure on services</h2> Changes to the makeup of a population can be just as important as changes to its size. With fewer babies being born and increased life expectancy, the proportion of older Australians who have left the workforce will keep rising. One way of tracking this is with a metric called the old-age dependency ratio – the number of people aged 65 and over per 100 working-age individuals. In Australia, this ratio is currently about 27%. But according to the latest <a href="https://treasury.gov.au/publication/2023-intergenerational-report">Intergenerational Report</a>, it’s expected to rise to 38% by 2063. An ageing population means greater demand for medical services and aged care. As the working-age population shrinks, the tax base that funds these services will also decline. Unless this is offset by technological advances or policy innovations, it can mean higher taxes, longer working lives, or the government providing fewer public services in general. <h2>What about housing?</h2> It’s tempting to think a falling birth rate might be good news for Australia’s stubborn housing crisis. The issues are linked – rising real estate prices have made it difficult for many young people to afford homes, with a significant number of people in their 20s <a href="https://pursuit.unimelb.edu.au/articles/more-australian-adult-children-are-living-with-their-parents-longer">still living with their parents</a>. This can mean delaying starting a family and reducing the number of children they have. At the same time, if fertility rates stay low, demand for large family homes may decrease, impacting one of Australia’s most significant economic sectors and sources of household wealth. <h2>Can governments turn the tide?</h2> Governments worldwide, including Australia, have long experimented with policies that encourage families to have more children. Examples include paid parental leave, childcare subsidies and financial incentives, such as Australia’s “<a href="https://theconversation.com/what-the-baby-bonus-boost-looks-like-across-ten-years-81563">baby bonus</a>”. Many of these efforts have had only limited success. One reason is the rising average age at which women have their first child. In many developed countries, including Australia, the average age for first-time mothers has surpassed <a href="https://www.aihw.gov.au/reports/mothers-babies/australias-mothers-babies/contents/overview-and-demographics/maternal-age">30</a>. As women delay childbirth, they become less likely to have multiple children, further contributing to declining birth rates. Encouraging women to start a family earlier could be one policy lever, but it must be balanced with women’s growing workforce participation and career goals. Research has previously highlighted the factors influencing fertility decisions, including levels of paternal involvement and workplace flexibility. Countries that offer part-time work or maternity leave without career penalties have seen a <a href="https://faculty.wcas.northwestern.edu/mdo738/research/Doepke_Hannusch_Kindermann_Tertilt_Handbook_23.pdf">stabilisation or slight increases</a> in fertility rates. <h2>The way forward</h2> Historically, one of the ways Australia has countered its low birth rate is through immigration. Bringing in a lot of people – especially skilled people of working age – can help offset the effects of a low fertility rate. However, relying on immigration alone is not a long-term solution. The global fertility slump means that the pool of young, <a href="https://www.imf.org/en/Publications/fandd/issues/2020/03/can-immigration-solve-the-demographic-dilemma-peri">educated workers from other countries</a> is shrinking, too. This makes it harder for Australia to attract the talent it needs to sustain economic growth. Australia’s record-low fertility rate presents both challenges and opportunities. On one hand, the shrinking number of young people will place a strain on public services, innovation and the labour market. On the other hand, advances in technology, particularly in artificial intelligence and robotics, may help ease the <a href="https://www.sciencedirect.com/science/article/abs/pii/S0164070420302020">challenges of an ageing population</a>. That’s the optimistic scenario. AI and other tech-driven productivity gains could reduce the need for large workforces. And robotics could assist in aged care, lessening the impact of this demographic shift.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/241577/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/jonathan-boymal-392960">Jonathan Boymal</a>, Associate Professor of Economics, <a href="https://theconversation.com/institutions/rmit-university-1063">RMIT University</a>; <a href="https://theconversation.com/profiles/ashton-de-silva-3066">Ashton De Silva</a>, Professor of Economics, <a href="https://theconversation.com/institutions/rmit-university-1063">RMIT University</a>, and <a href="https://theconversation.com/profiles/sarah-sinclair-385470">Sarah Sinclair</a>, Senior Lecturer in Economics, <a href="https://theconversation.com/institutions/rmit-university-1063">RMIT University</a> Image credits: Shutterstock This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/australias-fertility-rate-has-reached-a-record-low-what-might-that-mean-for-the-economy-241577">original article</a>. </div>

Money & Banking

Huge drop in international economy airfares revealed

Airfares to some of the most popular tourist destinations have dropped over the past year according to new data released by Flight Centre. The Australian agency revealed that average price of an international economy airfare sold in Australia has dropped by 12.8 per cent. The top three destinations with the most significant drop in prices include Indonesia at 21.01 per cent, New Zealand with 13.03 per cent and the US at 12.45 per cent. The UK has seen a decrease of 8.05 per cent and popular European destinations like France, Germany and Spain down 7.91 per cent, 6.9 per cent and 6.03 per cent, respectively. The cost of flights to Thailand has also gone down by 3.84 per cent. The figures are based on a comparison of the cost of flights between January and March last year and the same period this year. “In fantastic news for travellers the latest data shows the average cost of an international airfare is down almost 13 per cent when compared to this time last year,” Flight Centre global managing director Andrew Stark told news.com.au. “What that means in real figures is that an economy return airfare between Sydney and Bali would’ve cost on average $1010 this time last year, now it will now set you back under $800.” He attributed these changes to the increased competition and capacity. “It’s vital that there is active competition between the airlines and the more we see of it, the more likely we are to see cheaper airfares, more destination options and a better experience for consumers.” Qantas has also recently announced that they will be increasing the number of flights to Singapore and India, with flights from Sydney to Singapore set to increase from 14 to 17 return flights a week, and Sydney to Bengaluru from five a week to seven. Image: Shutterstock

Money & Banking

Rise in insurance premiums set to devastate Aussies

Australians struggling with the cost of living are set to be hit with another blow to their wallets as health insurance premiums rise. Coming into effect on April 1st, private health insurance premiums are set to rise by more than 3 per cent, in the biggest increase in five years. The federal government has approved an average industry premium rise of 3.03 per cent, which will impact 14 million Australians paying for private health cover. The 2024 increase is slightly higher than a rise of 2.9 per cent in 2023, and 2.7 per cent in 2022 and 2021. In 2019, premiums rose by 3.3 per cent, making the 2024 rise the biggest in five years. Health Minister Mark Butler said the rise was smaller than the increase in wages, the age pension and inflation. “I wasn’t prepared to just tick and flick the claims of health insurers, as the opposition asked me to do,” Butler said. “I asked insurers to go back and sharpen their pencils and put forward a more reasonable offer for the 15 million Australians with private health insurance.” “Private health insurers must ensure their members are getting value for money,” Butler said. “When costs rise, Australians want to know that higher premiums are contributing to system-wide improvements like higher wages for nurses and other health workers and ensuring that affordable services are available.” Image credits: Getty Images

Money & Banking

Heated argument between economy passengers reignites plane etiquette debate

A 12-second clip of two passengers arguing on a plane has reignited the age-old debate of whether it is acceptable to recline your seat on a plane. The viral video which was originally posted on TikTok and then re-shared on X, has racked up over 8 million views since Thursday. In the video, a frustrated woman was calling out another female passenger for pushing her seat the entire flight, right after they landed. “The whole trip she pushed my seat,” the woman said to a male passenger seated next to the female passenger accused of kicking her seat. “You seen it. You know she did.” “I’m allowed to put my seat back," she yelled repeatedly. Ian Miles Cheong, the user who posted the video on X, defended the woman saying: “She’s allowed to put her seat back. You don’t get to kick it repeatedly just because you want more space.” A few were on the woman's side and praised her for standing up for herself. “You are allowed! Period! You want space in front of you instead of pushing the seat, buy a seat with extra space or get your a** to business class. Reclining was put there for a reason,” one person wrote. “She was patient enough to wait till flight landed," they added. “If the seat is reclinable, recline it,” another commented. "What she’s saying is right. The woman has a right to put her seat back without someone kicking it," a third agreed. <blockquote class="twitter-tweet"> She’s allowed to put her seat back. You don’t get to kick it repeatedly just because you want more space. <a href="https://t.co/WELD7Qh4Re">pic.twitter.com/WELD7Qh4Re</a> — Ian Miles Cheong (@stillgray) <a href="https://twitter.com/stillgray/status/1719881310351863952?ref_src=twsrc%5Etfw">November 2, 2023</a></blockquote> However, others claimed that there was an unwritten rule that you shouldn't recline your seat, especially on a short-haul flight, adding that the recline feature should be scrapped from airplanes. “Putting your seat back in coach is an unspoken thing most people don’t do. It’s really the airline’s fault because they’ve made coach so cramped and tight that putting the seat back shouldn’t even be an option,” one commented. “Airline seats simply shouldn’t be able to recline. It intrudes on the already very little space a person has on the plane for the person behind them,” another added. “Really it’s the airline’s fault for cramming so many people in such a small space. They don’t call it cattle class for nothing,” a third wrote. One user understood both sides of the argument, and blamed the airlines for making the seats so cramped. "It can be annoying sometimes to be behind someone with their seat all the way, but if the airlines didn't want to allow that, it wouldn't happen," they wrote. "You don't kick the seat like a baby. Blame the airline, not the person doing what the airline says is fine." Images: Twitter

Travel Trouble

How a secret plan 50 years ago changed Australia’s economy forever, in just one night

<a href="https://theconversation.com/profiles/alex-millmow-4462">Alex Millmow</a>, <a href="https://theconversation.com/institutions/federation-university-australia-780">Federation University Australia</a> At a time when governments are timid, keener to announce <a href="https://www.pc.gov.au/inquiries/completed/productivity/report">reviews</a> than decisions, it’s refreshing to remember what happened 50 years ago today – on July 18 1973. Inflation had surged to <a href="https://www.datawrapper.de/_/vu9by/">14%</a>. Australia’s biggest customer, the United Kingdom, had joined the <a href="http://news.bbc.co.uk/onthisday/hi/dates/stories/january/1/newsid_2459000/2459167.stm">European Economic Community</a>, agreeing to buy products from it rather than Australia. And the newly formed Organisation of Arab Petroleum Exporting Countries had <a href="https://advisor.visualcapitalist.com/historical-oil-prices/">doubled</a> the price of oil. The tariffs imposed on imported goods to protect Australian manufacturers from competition were extraordinarily high. For clothing, they reached <a href="https://www.pc.gov.au/inquiries/completed/textile-clothing-footwear-1997/59tcf2.pdf">55%</a>; for motor vehicles, <a href="https://ro.uow.edu.au/cgi/viewcontent.cgi?article=1077&context=commwkpapers">45%</a>. Then, with absolutely <a href="http://andrewleigh.org/pdf/Trade%20liberalisation%20and%20the%20ALP.pdf">no</a> public indication he had been considering anything as drastic, at 7pm on Wednesday July 18, the recently elected prime minister Gough Whitlam made an <a href="https://pmtranscripts.pmc.gov.au/sites/default/files/original/00002971_0.pdf">announcement</a>. <h2>Every tariff cut by one quarter overnight</h2> From midnight, all tariffs would be cut by 25%. As Whitlam put it: “each tariff will be reduced by one quarter of what it is now”. <figure class="align-right "><figcaption></figcaption></figure> If Australian businesses (and the Australian public) were caught by surprise, it was because Whitlam had planned the whole thing in secret. He had given a six-person committee just three weeks to work out the details. Although the committee was chaired by the head of the Tariff Board, Alf Rattigan, and included an official from Whitlam’s own department, the department of industry and the department of trade, it met in an obscure location in Canberra’s civic centre rather than in public service offices, where the project might be discovered. Not included in the committee was a representative of the treasury, which its then deputy head John Stone said “<a href="https://cdn.theconversation.com/static_files/files/2744/Stone__The_Inside_Story_of_Gough%E2%80%99s_Tariff_Cut__in_The_Australian__18_July_2003..pdf">knew nothing</a>” about what was unfolding. But driving the work of the committee were two academic outsiders – Fred Gruen, an economics professor at the Australian National University and adviser to Whitlam, and Brian Brogan, an economics lecturer at Monash University who was advising the trade minister, Jim Cairns. <h2>Outsiders, not treasury insiders</h2> As economists rather than bureaucrats, Gruen and Brogan were able to see benefits where others saw entrenched interests. Going to the tariff board and asking for extra tariffs, whenever it looked as if your prices might be undercut by imports, had become a reflex action for Australian businesses. In the words of <a href="https://esavic.org.au/385/images/2013_GaryBanks.pdf">Gary Banks</a> – later to become head of the successor to the tariff board, the Productivity Commission: “it was not a shameful thing for a conga line of industrialists to be seen wending its way to Canberra”. Tariffs were good for business owners, although bad for their customers, who had to pay much higher prices and often got <a href="https://www.afr.com/opinion/bill-scales-the-rise-and-fall-of-the-australian-car-manufacturing-industry-20171018-gz3ky4">worse goods</a>. They were also good for government – bringing in tax revenue. Whitlam was more interested in bringing down inflation. His announcement said increased competition would "have a salutary effect upon those who have taken advantage of shortages by unjustified price increases which have exploited the public". Any firm seriously hurt by the extra imports could apply to a newly established tribunal for assistance, but the tribunal "should not provide relief as a matter of course – that is, simply because the question of relief had been referred to it". So Whitlam offered “rationalisation assistance” to encourage firms to refocus their operations, and “compensation for closure” where that couldn’t be done and production had to cease. For displaced workers, the 7pm announcement offered anyone who lost their job retraining, as well as "a weekly amount equal to his [sic] average wage in the previous six months until he obtains or is found suitable alternative employment." Over the next seven years, manufacturing employment fell by <a href="https://www.bitre.gov.au/sites/default/files/report_136_CHAPTER_6_WEB_FA.pdf">80,000</a>, but few of those job losses were immediate. Fifteen months after the 25% tariff cut, fewer than <a href="https://www.jstor.org/stable/20634782?seq=10">6,000</a> people had claimed the wage replacement offered on the night of the announcement. When Whitlam went to the polls a year after the cut in the double dissolution election of May 1974, 122 university economists signed an <a href="https://pmtranscripts.pmc.gov.au/release/transcript-3267">open letter</a> of support. The letter said the general thrust of the government’s policy responses had been in the best interests of the nation as a whole, and added, "more importantly, we seriously doubt that the previous government would have had the wisdom or the courage to undertake it. It had certainly given no indication of moving in that direction while it was in power, even though the need for such policies had become obvious". In its later days in office, the Whitlam government was roundly criticised for its irresponsible public spending. Ironically, in its approach to tariffs in the 1970s, it had taken the first steps in a neoliberal direction that characterised western governments of the 1980s. By acting boldly after decades of inaction, Whitlam showed what a government could do. It was a lesson his Labor successor Bob Hawke took to heart a decade later, when he floated the dollar, revamped Australia’s tax system and put in place a series of further cuts that reduced tariffs to near zero. It’s something we see less of today.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/209378/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/alex-millmow-4462">Alex Millmow</a>, Senior Fellow, <a href="https://theconversation.com/institutions/federation-university-australia-780">Federation University Australia</a> Image credits: Getty Images This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/how-a-secret-plan-50-years-ago-changed-australias-economy-forever-in-just-one-night-209378">original article</a>.

Money & Banking

Cheques to be phased out by 2030

Cheques will be phased out in Australia by 2030 as the federal government aims to improve the nation’s payments system. Treasurer Jim Chalmers revealed his plan for major reforms in the way payments are made which will focus on cashless and mobile financial transactions. In a speech to the Australian Banking Association (ABA) in Sydney, he said Australia’s ageing payments infrastructure was restricting the country’s productivity levels. Chalmer’s said phasing out cheques and introducing a more efficient New Payment Platform would steer Australia into the path of a digital economy. The reforms will provide direction for the banks and payments industry’s investment in future technology, ABA chief executive Anna Bligh said. "With cheques now in steady decline and accounting for only 0.2 per cent of all payments, it's time to have a smooth and well-planned process to phase out this form of payment. "Australian banks will work with the government to ensure that customers and businesses are ready for a gradual and orderly phase out.” One of the more significant reasons behind the decline in cheques can be attributed to the costs to individuals and financial institutions. After consulting with states, territories and industry and community groups, cheques will cease by 2023. The reform will see Australia in line with several major economies that have already eradicated cheques. Image credit: Getty / Shutterstock

Money & Banking

“No justification for this ever”: Outrage over one husband’s selfish inflight arrangement

A couple in the United States have landed themselves at the centre of the internet’s attention after the wife made the shocking admission that her husband flies first class when they travel, leaving her behind in economy with their two children. Writing to The New York Times’ ethics column, she wanted to know if she was selfish for thinking their ‘arrangement’ was unfair, noting that while he had offered a compromise of sorts, it did “not really address or solve the problem of the inherent selfishness in his thinking.” As she explained in her message, she and her husband are avid travellers, and he “either pays for, or gets an upgrade into, the first-class cabin”. Even when they travel with their two children - who are 12 and 16 years old - he takes himself off to first class, while they remain in economy. According to her, he justifies it to himself by explaining that it’s “because of the cost”, and that their children “might feel alone” if she were to travel up front with him. “I feel that this is unfair,” she said. “ I don’t think our kids would mind if they were in economy plus and my husband and I sat together in first class. Is that unfair of me to want? “My husband has suggested travelling alone on a different flight ahead of us so that we don’t feel badly about the disparity, but this does not really address or solve the problem of the inherent selfishness in his thinking. Am I wrong?” Kwame Anthony Appiah, the ethicist who responded to her for The New York Times, was of the opinion that “a modern marriage is meant to be a pairing of equals”, with partners treating each other with respect and having equal say in the decision making process. “Your husband has another view,” he said. “He evidently thinks that because he’s the ticket-buyer in the family, his own preferences get priority.” And when the article was shared to social media, people from all over were quick to get in on the discussion, with most leaping to the defence of the wife. “I’d divorce him so fast he’d never get to fly first class again until our kids were grown and through college,” one said. “There is no justification for this ever.” “I'd be calling a divorce lawyer rather than a travel agent,” one agreed. “Wow. And you’re still married to him?! I’d recommend booking your own flights,” came a similar response. Meanwhile, another noted that she “just might be married to a narcissist.” “Oooph BIG YIKES. It’s not about the flight, I’m sure this imbalance trickles into other parts of the relationship,” someone wrote. And as another shared, “recently, my husband was offered the upgrade to first class but declined it because I couldn’t go too. We’ve been married 30 years.” Some, however, took issue with the idea of both parents lounging in first while their children were still left behind, with one noting “she wants to upgrade but still leave the kids in economy? The pair of them sound like terrible parents.” “Frankly, I’m blown away that this mother sees the disparity for herself,” another said, “but is perfectly comfortable experiencing privilege while treating her own children disparately.” Images: Getty

Travel Trouble

What does your health fund know about living costs? Because health cover premiums are on the rise this year too!

Have you noticed more scary headlines about ballooning inflation and climbing interest rates out there lately? While the media love their dramatic headlines, there’s more truth than usual in their scary stats. It’s no secret that a lot of us are feeling squeezed financially at the moment. The cost of living has shot up in recent months - from interest rates, to groceries, and new energy and fuel price hikes, it’s getting harder to make ends meet. Health cover is no exception. In fact, in 2023, health insurance premiums are set to rise by an average of 2.9%... …but did you know that your fund can put your premium up by a lot more than that? It’s true. Don't be fooled by any ‘average’ messaging. An ‘average increase’ is just that - an average. Your premium may be going up by a lot more. OverSixty has partnered with Compare Club, Australia’s most trusted team of health insurance experts,* who spend every day talking to Aussie families – and they’ve recently shared with us two examples: 1. Kevin's policy has gone up by 20% in 2 years - that’s a LOT more than the current rate of inflation it’s being blamed on. 2. Cassie's family combined cover policy is going up by 13.67% or $33.60 a month - that’s over $400 a year on top of her current premium. We know how much households are hurting right now, so Compare Club talked to us about three smart ways to keep your health insurance premiums in check - without compromising your cover: 1. Downsize your policy - only pay for what you need: Are you on a top tier policy you’re not fully using? You might find you can get a Silver Plus or Bronze Plus tier policy with a lower premium, and stay covered for what you need. 2. Split policies - health funds’ best kept secret: If you and your partner have different health needs, splitting your cover across two different policies - or even two different funds - could save your family several hundred dollars in annual premiums. 3. Pay in advance - before your premium rises: You may have noticed that a lot of health funds have delayed their premium increase this year. If yours is one of these, and you can afford to pay your full annual premium before the date of increase, you’ll lock in a full year’s worth of savings for yourself. Know your options: “Health funds are a competitive bunch, so you don’t have to take what your fund dishes out. If you've not reviewed your health cover recently, you could be paying an average of $785^ more than you need.” – Compare Club CEO, Andrew Davis. OverSixty has partnered with Compare Club’s experts who have saved over 136,500 customers an average of $300 on health cover premiums over the last five years^. We’re quite sure you have better things to do with your money than overpaying for health cover. Compare Club have been helping Aussies switch and save on health cover since 2010#, so get in touch and see how much their experts could save you. <h4 style="box-sizing: border-box; margin-top: 0px; margin-bottom: 1rem; font-family: -apple-system, 'system-ui', 'Segoe UI', Roboto, 'Helvetica Neue', Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji', 'Segoe UI Symbol', 'Noto Color Emoji'; line-height: 1.2; color: #212529; font-size: 1.5rem; background-color: #ffffff;">Call 1300 863 204 now, or visit <a style="box-sizing: border-box; color: #258440; text-decoration-line: none; background-color: transparent; transition: all 0.2s ease-in-out 0s;" href="https://lp.compareclub.com.au/over60/?utm_medium=partner&utm_source=over60&utm_campaign=raterise&utm_content=nativearticle&category=health" target="_blank" rel="noopener">compare.oversixty.com.au</a> to save today!</h4> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 1rem; color: #212529; font-family: -apple-system, 'system-ui', 'Segoe UI', Roboto, 'Helvetica Neue', Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji', 'Segoe UI Symbol', 'Noto Color Emoji'; font-size: 16px; background-color: #ffffff;"> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 1rem; color: #212529; font-family: -apple-system, 'system-ui', 'Segoe UI', Roboto, 'Helvetica Neue', Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji', 'Segoe UI Symbol', 'Noto Color Emoji'; font-size: 16px; background-color: #ffffff;"> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 1rem; color: #212529; font-family: -apple-system, 'system-ui', 'Segoe UI', Roboto, 'Helvetica Neue', Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji', 'Segoe UI Symbol', 'Noto Color Emoji'; font-size: 16px; background-color: #ffffff;"> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 1rem; color: #212529; font-family: -apple-system, 'system-ui', 'Segoe UI', Roboto, 'Helvetica Neue', Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji', 'Segoe UI Symbol', 'Noto Color Emoji'; font-size: 16px; background-color: #ffffff;">*Based on Trustpilot reviews, correct as of 04/01/23 ^Savings based on 136,746 customers between 1 Jan 2018 - 23 December 2022. #Compare Club compares selected products from a panel of trusted insurers. We do not compare all products in the market.

Caring

How zinc batteries could power the sustainable economy

What might it take to get zinc batteries offsetting some of the demand on lithium-ion? According to a <a href="https://dx.doi.org/10.26599/NRE.2022.9120039" target="_blank" rel="noreferrer noopener">review</a> in Nano Research Energy, a few avenues of research look set to make rechargeable zinc batteries efficient and long-lasting enough to be competitive. If you want to store electricity, lithium-ion batteries are <a href="https://cosmosmagazine.com/science/physics/long-live-the-power-of-lithium/" target="_blank" rel="noreferrer noopener">generally the most powerful</a> and <a href="https://cosmosmagazine.com/technology/precious-metal/" target="_blank" rel="noreferrer noopener">energy dense option</a>. But lithium isn’t a <a href="https://cosmosmagazine.com/technology/materials/lithium-ion-battery-supply-chain-australia/" target="_blank" rel="noreferrer noopener">super-abundant metal</a>, and it’s very reactive: lithium-ion batteries need <a href="https://cosmosmagazine.com/technology/battery-fire-lithium-ion/" target="_blank" rel="noreferrer noopener">elaborate safety systems</a> to lower the risk of fires. As battery demand soars, to shore up the <a href="https://cosmosmagazine.com/technology/energy-crisis-escape-transition/" target="_blank" rel="noreferrer noopener">transition to renewable energy</a>, researchers are looking for alternatives to lithium. “Zinc has a strong battery track record, having been used as anode material as early as 1799!” says co-author Dapeng Liu, a battery researcher with the Key Laboratory of Bio-inspired Smart Interfacial Science and Technology at Beihang University, China. “Zinc-based battery technology already accounts for one-third of the world battery market.” Zinc can be used in a range of different types of battery – including <a href="https://cosmosmagazine.com/technology/new-charge-for-old-battery/" target="_blank" rel="noreferrer noopener">zinc-air batteries</a>, which are currently available as small disposables, rechargeable <a href="https://cosmosmagazine.com/technology/flow-battery-china/" target="_blank" rel="noreferrer noopener">flow batteries</a>, or rechargeable non-flow zinc-bromide batteries. Zinc-based batteries are typically cheaper than lithium-ion, and carry a much lower fire risk. But while their performance has much improved over the past decade, they’re still not good for commercial rechargeable batteries yet. They’re not very energy-dense, and they have shorter life cycles. According to the researchers, there are a few areas of chemistry that should be focused on to improve this. First, say the reviewers, the anodes and cathodes of zinc batteries need to be developed so that they don’t deplete as much over time. They think that changing the surface of the anodes (interface modification), and alloying the zinc with other materials and additives, will yield the best results. Next, better <a href="https://cosmosmagazine.com/science/next-big-thing-catalysts-can-change-the-world/" target="_blank" rel="noreferrer noopener">catalysts</a> are needed to speed up zinc-air batteries’ reactions, making them more efficient. Finally, the researchers suggest that new electrolyte mixtures can improve battery performance. “Rechargeable zinc-based batteries have a long way to go before large-scale application in the mobile, power, and other electronic equipment markets,” conclude the researchers in their paper. A zinc-bromide battery factory opened in Australia in late September. Operated by <a href="https://gelion.com/gelion-launches-australian-battery-manufacturing-facility/" target="_blank" rel="noreferrer noopener">Gelion</a>, a renewable energy company that spun out from research at the University of Sydney, the facility is currently capable of making two megawatt hours of batteries per year.  <img id="cosmos-post-tracker" style="opacity: 0; height: 1px!important; width: 1px!important; border: 0!important; position: absolute!important; z-index: -1!important;" src="https://syndication.cosmosmagazine.com/?id=227531&title=How+zinc+batteries+could+power+the+sustainable+economy" width="1" height="1" data-spai-target="src" data-spai-orig="" data-spai-exclude="nocdn" />  <div id="contributors"> <a href="https://cosmosmagazine.com/technology/zinc-batteries-improvements-needed/" target="_blank" rel="noopener">This article</a> was originally published on Cosmos Magazine and was written by Ellen Phiddian. Image: Getty Images </div>

Technology

Fighting inflation doesn’t directly cause unemployment – but that’s still the most likely outcome

You may have seen the news: in its attempts to tackle inflation, the Reserve Bank is going to increase unemployment. The idea can even seem to come right from the mouths of experts, including the bank’s governor, Adrian Orr. <a href="https://www.nzherald.co.nz/business/adrian-orr-beating-inflation-will-mean-higher-unemployment/WO3WLQQUGWEC5NVK3AQTR2BN5A/">Speaking recently</a> to an industry conference, he said: <blockquote> Returning to low inflation will, in the near term, constrain employment growth and lead to a rise in unemployment. </blockquote> Similar sentiments have been expressed by <a href="https://businessdesk.co.nz/article/opinion/inflation-taming-the-costs-are-becoming-more-visible">independent economists</a> and <a href="https://thespinoff.co.nz/business/31-10-2022/the-big-banks-just-cant-stop-winning">commentators</a>. But is it as simple as it might appear? What is the relationship between inflation and unemployment, and is it inevitable that reducing one will lead to an increase in the other? <blockquote class="twitter-tweet"> Unemployment rate holds steady at 3.3%, wages rise strongly - Stats NZ <a href="https://t.co/IQOPBaNYTn">https://t.co/IQOPBaNYTn</a> — RNZ News (@rnz_news) <a href="https://twitter.com/rnz_news/status/1587568087808999424?ref_src=twsrc%5Etfw">November 1, 2022</a></blockquote> Historic highs and lows Like other developed countries, New Zealand has been going through a period of historically high inflation. The latest figures, for the September quarter of 2022, show an annual <a href="https://www.stats.govt.nz/news/annual-inflation-at-7-2-percent/">rise of 7.2%</a>, only slightly lower than the 7.3% recorded for the June quarter. Inflation is the highest it has been since 1990. The story is similar across the OECD, where inflation averages <a href="https://www.oecd.org/economy/consumer-prices-oecd-updated-4-october-2022.htm">10.3%</a>, including <a href="https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/september2022">8.8%</a> in the UK and <a href="https://www.bls.gov/news.release/cpi.nr0.htm">8.2%</a> in the US. At the same time, New Zealand is experiencing a period of very low unemployment, with a <a href="https://www.stats.govt.nz/news/unemployment-rate-at-3-3-percent">rate of just 3.3%</a> for September 2022, following 3.2% in the June quarter. These are near-record lows, and the rate has not been below 4% since mid-2008. So, right now New Zealand is in a period of historically low unemployment and historically high inflation. At first glance, that might suggest that in order to return to low inflation, we may inevitably experience higher unemployment. The Phillips Curve The idea that inflation and unemployment have a negative relationship (when one increases, the other decreases, and vice versa) dates back to work by New Zealand’s most celebrated economist, <a href="https://en.wikipedia.org/wiki/William_Phillips_(economist)">A.W. (Bill) Phillips</a>. While working at the London School of Economics in the 1950s, Phillips wrote a <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/j.1468-0335.1958.tb00003.x">famous paper</a> that used UK data from 1861 to 1957 and showed a negative relationship between unemployment and wage increases. Subsequent work by economics Nobel Prize winners <a href="https://www.econlib.org/library/Enc/bios/Samuelson.html">Paul Samuelson</a> and <a href="https://www.nobelprize.org/prizes/economic-sciences/1987/solow/facts/">Robert Solow</a> extended Phillips’ work to show a negative relationship between price inflation and unemployment. We now refer to this relationship as the “Phillips Curve”. However, even though this relationship between inflation and unemployment has been demonstrated with various data sources, and for various time periods for different countries, it is not a causal relationship. Lower inflation doesn’t by itself cause higher unemployment, even though they are related. To see why, it’s worth thinking about the mechanism that leads to the observed relationship. <blockquote class="twitter-tweet"> <a href="https://twitter.com/hashtag/LISTEN?src=hash&ref_src=twsrc%5Etfw">#LISTEN</a> 🔊 The Finance Minister says addressing inflation without increasing unemployment is a difficult balancing act. 📎 <a href="https://t.co/CfaopcqjGv">https://t.co/CfaopcqjGv</a> <a href="https://t.co/1gMNat2G99">pic.twitter.com/1gMNat2G99</a> — Morning Report (@NZMorningReport) <a href="https://twitter.com/NZMorningReport/status/1587893034351411200?ref_src=twsrc%5Etfw">November 2, 2022</a></blockquote> Collateral damage If the Reserve Bank raises the official cash rate, commercial banks follow by raising their interest rates. That makes borrowing more expensive. Higher interest rates mean banks will lend less money. With less money chasing goods and services in the economy, inflation will start to fall. Of course, this is what the Reserve Bank wants when it raises the cash rate. Its <a href="https://www.parliament.nz/en/pb/library-research-papers/research-papers/monetary-policy-and-the-policy-targets-agreement/">Policy Targets Agreement</a> with the government states that inflation must be kept between 1% and 3%. So when inflation is predicted to be higher, the bank acts to lower it. At the same time, higher interest rates increase mortgage payments, leaving households and consumers with less discretionary income, and so consumer spending falls. Along with reduced business spending, this reduces the amount of economic activity. Businesses therefore need fewer workers, and so employment falls. So, while the Reserve Bank raises interest rates to combat inflation, those higher interest rates also slow down the economy and increase unemployment. Higher unemployment is essentially collateral damage arising from reducing inflation. Great expectations That’s not the end of the story, though. After its 1960s heyday, the Phillips Curve was criticised by economists on theoretical grounds, and for its inability to explain the “stagflation” (high unemployment and high inflation) experienced in the 1970s. For example, <a href="https://www.econlib.org/library/Enc/bios/Friedman.html">Milton Friedman</a> argued there is actually no trade-off between inflation and unemployment, because workers and businesses take inflation into account when negotiating employment contracts. Workers’ and employers’ expectations about future inflation is key. Friedman argued that, because inflation is expected, workers will have already built it into their wage demands, and businesses won’t change the amount of workers they employ. Friedman’s argument would suggest that, aside from some short-term deviations, the economy will typically snap back to a “natural” rate of unemployment, with an inflation rate that only reflects workers’ and businesses’ expectations. Symptom or cause? Can we rely on this mechanism to avoid higher unemployment as the Reserve Bank increases interest rates to combat inflation? It seems unlikely. Workers would first have to expect the Reserve Bank’s actions will lower inflation, and respond by asking for smaller wage increases. Right now, however, consumer inflation expectations <a href="https://www.rbnz.govt.nz/statistics/series/households/household-inflation-expectations">remain high</a> and wage growth is at <a href="https://www.nzherald.co.nz/business/latest-job-numbers-out-unemployment-flatlining-near-record-lows/O4NDE3Y4W5GMHGDRDDS733LX7A/">record levels</a>. So, we can probably expect unemployment to move upwards as the Reserve Bank’s inflation battle continues. Not because lower inflation causes higher unemployment, but because worker and consumer expectations take time to reflect the likelihood of lower future inflation due to the Reserve Bank’s actions. And since workers negotiate only infrequently with employers, there is an inevitable lag between inflation expectations changing and this being reflected in wages. Alas, for ordinary households, there is no quick and easy way out of this situation. Writen by Michael P. Cameron. Republished with permission from <a href="https://theconversation.com/fighting-inflation-doesnt-directly-cause-unemployment-but-thats-still-the-most-likely-outcome-193617" target="_blank" rel="noopener">The Conversation</a>. Image: Getty Images<img src="https://counter.theconversation.com/content/193617/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" />

Money & Banking

Be prepared: There’s a premium increase coming

Health insurance premiums are going up every year and in 2022, are rising at an average of 2.70%*. Although 2.70%* might not seem a lot, <a href="https://compareclub.com.au/health-insurance/quote/cover-type-location/?utm_source=over60&utm_medium=affiliate&utm_campaign=raterise&utm_content=article&utm_term=getaquote&utm_category=health" target="_blank" rel="noopener">Compare Club</a>'s data suggests that Australian couples aged 65 could see an average increase in premiums ranging from at least $155^, depending on your policy. So how do you keep your health insurance affordable while still making sure you’re covered for everything you need? It’s simple: compare with <a href="https://compareclub.com.au/health-insurance/quote/cover-type-location/?utm_source=over60&utm_medium=affiliate&utm_campaign=raterise&utm_content=article&utm_term=getaquote&utm_category=health" target="_blank" rel="noopener">Compare Club</a> today and if you get a better deal, switch to a better value policy in minutes. How much does loyalty to your health insurer cost you? Staying loyal to the same health fund could really cost you, especially if you’ve put switching policies at the bottom of your to-do list. Compare Club's experts have crunched the numbers for you, and if you haven’t changed your cover in the last five years, premiums on average have gone up by 15.56%^. If that number isn’t shocking enough, Compare Club's internal data shows that if you’ve got a couples policy, you’ve paid, on average, around $794^^^ more for the same cover. It’s easy to get a better deal with the help of Compare Club's experts It’s easier than you think to miss the letter from your health insurer and end up paying hundreds of dollars more. Compare Club’s CEO Andrew Davis says that there’s some demographics who are sometimes hit harder than others: “We’ve found that older Australians are especially vulnerable to falling victim to the common health insurance traps like staying on an outdated policy, being talked into a higher level of cover, and fund loyalty incentives.” Fortunately, thousands of Australians have seen significant savings in their pocket once they’ve spoken to Compare Club's experts#. Over the last 5 years, Compare Club has saved their customers an average of $320** on their annual health insurance cost when they switched policies through them. So what are you waiting for? Make sure you’re saving on your health cover today and speak to <a href="https://compareclub.com.au/health-insurance/quote/cover-type-location/?utm_source=over60&utm_medium=affiliate&utm_campaign=raterise&utm_content=article&utm_term=getaquote&utm_category=health" target="_blank" rel="noopener">Compare Club</a>'s experts now. This article is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions. *<a href="https://www.health.gov.au/" target="_blank" rel="noopener">Health.gov.au</a>, <a href="https://www.health.gov.au/sites/default/files/documents/2021/12/average-annual-price-changes-in-private-health-insurance-premiums-list-of-historical-premium-price-changes-by-insurer-for-2022_0.pdf" target="_blank" rel="noopener">List of historical premium price changes by insurer - 1997 to 2022</a>, accessed 30th August, 2021. **Based on 111,658 policies sold Jan 2017 - Nov 2021 ^2.70% premium increase applied to the average premium of policies purchased through Health Insurance Comparison by singles and couples aged 65+ years in 2021 ^^^5 years of average premium increases applied to the average premium of policies purchased through Health Insurance Comparison by couples in 2018. #Compare Club compares selected products from a panel of trusted insurers. We do not compare all products in the market. This is a sponsored article produced in partnership with <a href="https://compareclub.com.au/health-insurance/quote/cover-type-location/?utm_source=over60&utm_medium=affiliate&utm_campaign=raterise&utm_content=article&utm_term=getaquote&utm_category=health" target="_blank" rel="noopener">Compare Club</a>.

Money & Banking

Why the nose-diving British pound matters for Australia

As the British pound hit its lowest value since 1971, experts are warning it could serve as a dire warning for those of us beyond UK shores. On Monday, it was reported that the pound was worth as little as $US 1.037 ($AU 1.60 or $NZ 1.82), its lowest since the currency was decimalised in 1971. It comes amid concerns about the state of the global economy, with central banks working to slow the rate of inflation, and economic changes the UK government has introduced. After Liz Truss became the UK’s new Prime Minister on September 6, Treasury chief Kwasi Krawteng released a controversial mini-budget including hefty tax cuts for the wealthy and an increase in borrowing to spur economic growth. But, many economists warn it’s more likely to increase inflation even further, with the British central bank expected to increase official interest rates in response. Since the announcement of the tax cuts on Friday, which come as the biggest cuts in 50 years, the pound lost more than five percent of its value against the US dollar. Along with the cuts that are set to total £45 billion ($AU 75 billion or $NZ 85 billion), the government also plans to cap prices for electricity and natural gas for homes and businesses to cushion the impact of price rises caused by the Russian invasion of Ukraine. With the caps to the tune of £60 billion ($AU 100 billion or $NZ 114 billion), Kwarteng said the government would be borrowing the funds needed to finance it. How does it affect us? Though that could mean your next UK holiday is cheaper, economist Jason Murphy points to it as a warning for what could be in store for the Australian economy. Australia’s new Treasurer, Jim Chalmers, is expected to release his first budget in October, which is expected to include his proposed tax cuts that will mostly benefit high-income earners, known as “stage three tax cuts”. These cuts are a hand-me-down from the Turnbull government’s 2018-19 budget, coming from then-Treasurer Scott Morrison, but they could pose some issues as Aussies face inflation everywhere from the supermarket to keeping the lights on. Tax cuts encourage spending and that spending encourages businesses to increase prices, resulting in inflation. With debts from the payouts delivered during the COVID-19 pandemic, <a href="https://www.news.com.au/finance/markets/world-markets/british-pound-hits-a-record-low-in-big-warning-for-australia/news-story/36c1a1c7b5c3431147948a9dcea5395a" target="_blank" rel="noopener">Murphy argues</a> that steering clear of tax cuts will also help reduce the country’s debt, which is significantly higher than when Morrison’s budget was first announced. As we continue to watch what happens in the UK, senior investment and markets analyst Susannah Streeter said it’s difficult to know just how far it will fall. "It depends, I think, now on what the Bank of England does in response to sterling's most recent fall," she said. "There's been this dramatic loss of confidence in the government's economic management. But now the ball is in the Bank of England's court." Image: Getty Images

Money & Banking

“Kia Ora NZ!”: First cruise ship returns to New Zealand

After more than two years, the first cruise ship has returned to New Zealand’s shores, sailing into Auckland’s Waitemata Harbour on Friday. The P&O Cruises flagship Pacific Explorer, decked out with a banner reading, “Kia ora NZ”, was carrying passengers on a 12-night round-trip cruise from Sydney to New Zealand and Fiji, who were greeted with a traditional Māori welcome before heading ashore for locally-run tours. Multiple Kiwi businesses welcomed the return of cruising to New Zealand and hope it will bring a boost to the local economy and their business. David Lee, who owns five eateries in the shopping and hospitality precinct in Auckland City, said the return of cruising has brought him hope after the lockdowns during the COVID-19 pandemic wreaked havoc when he opened in March 2020. “Without tourists, it was really hard to keep our restaurants afloat,” he said in a statement. “Our projected revenue amounted to less than half of what it should have been - we hung on by the skin of our teeth. “The return of cruise ships and the tourists they bring has given me hope for our business. I can’t wait to see the city abuzz with tourists and energy again.” Clinton Farley, the general manager of The Hotel Britomart, a boutique hotel in downtown Auckland, said the return of tourists through cruising isn’t just welcome financially, but also from a community aspect. “Along with our industry peers, we are extremely excited to see the maritime border reopening and tourists returning – they are such an important part of the fabric within our community,” Mr Farley said. “Tourists are crucial not just to the hotel but also to the wider Britomart precinct and the New Zealand economy. The return of cruise is a big part of our reopening to the world, and we are thrilled to see downtown Auckland coming back to life.” P&O Cruises Australia and Carnival Australia president Marguerite Fitzgerald thanked the Ardern government for enabling the cruising industry to return following the pandemic, “Pacific Explorer’s arrival in Tāmaki Makaurau, Auckland today is a signal that cruise tourism is poised to make a significant contribution to the restoration of the tourism economy,” Ms Fitzgerald said. “We are looking forward to our ships also being able to return to beautiful destinations in New Caledonia and Vanuatu and to the progressive return to New Zealand ports of ships from our other cruise lines as the tourism sector continues to rebuild.” Ms Fitzgerald added that they were already planning for the Pacific Explorer to return to Tāmaki Makaurau, Auckland, in 2023 for the ship’s first home-ported cruise in three years. “This is an exciting day for P&O and an exciting day for cruising and we thank New Zealand for today’s warm welcome,” she said. Image: P&O Cruises (Supplied)

Cruising

A heated steering wheel for $20 a month? What’s driving the subscriptions economy

From gym memberships to music and movies, to razors, toilet paper, meal kits and clothes, there’s seemingly no place the subscription economy can’t go. Having conquered the software market – where it gets its own acronym, SaaS (Software as a Service) – the subscription model is now moving into hardware. Car makers are among the first cabs off the rank, using software to turn on and off optional extras. German auto maker BMW is offering “<a href="https://www.theverge.com/2022/7/12/23204950/bmw-subscriptions-microtransactions-heated-seats-feature" target="_blank" rel="noopener">in-car microtransactions</a>” to access options for car buyers in Britain, Korea, Germany, New Zealand and South Africa. A heated steering wheel, for example, has a monthly cost of NZ$20 in New Zealand, and £10 in the UK. Other markets <a href="https://www.drive.com.au/news/bmw-australia-monthly-subscriptions-detailed/" target="_blank" rel="noopener">including Australia</a> will soon follow. In the UK, seven of 13 “digital services” – from heated seats to automatic high beam and driving assistance – are now available in subscription form. “Welcome to microtransaction hell” is how <a href="https://www.pcgamer.com/welcome-to-microtransaction-hell-buy-a-bmw-pay-monthly-for-the-cars-features/" target="_blank" rel="noopener">one headline</a> put it. But that’s probably overselling the onset of a corporate dystopia where “you will own nothing”. BMW’s motives are pretty straightforward – as is most of what’s driving the subscription economy. What is the subscription model? The subscription model means paying a fee for periodical access to a service or product. Until a decade or so ago, it was largely confined to a few select industries, such as the delivery of milk, newspapers and magazines. <figure class="align-center "><img src="https://images.theconversation.com/files/474494/original/file-20220718-68552-hvzp5p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" srcset="https://images.theconversation.com/files/474494/original/file-20220718-68552-hvzp5p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/474494/original/file-20220718-68552-hvzp5p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/474494/original/file-20220718-68552-hvzp5p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/474494/original/file-20220718-68552-hvzp5p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/474494/original/file-20220718-68552-hvzp5p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/474494/original/file-20220718-68552-hvzp5p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" alt="From milk and magazines, subscription services have proliferated with digital technology." /><figcaption>From milk and magazines, subscription services have proliferated with digital technology. Shutterstock</figcaption></figure> Other business models had similarities – such as rental businesses – but the point of the subscription model was different. It was not about meeting a demand for a service someone only wanted to use temporarily or could not afford to own outright. It was about locking in a continuing relationship, to maximise “customer lifetime value”. As <a href="https://www.investopedia.com/ask/answers/042715/how-do-subscription-business-models-work.asp" target="_blank" rel="noopener">Investopedia puts it</a>, the subscription model’s focus is on customer retention over customer acquisition: <blockquote> In essence, subscription business models focus on the way revenue is made so that a single customer pays multiple payments for prolonged access to a good or service instead of a large upfront one-time price. </blockquote> This in large part explains why subscription services are now being adopted in markets outside their more obvious fit for things such as streaming news and entertainment. In a broad sense, consumers can now be divided into two groups. One group comprises the “transactional shopper”, who interacts with the vendor once or twice, then disappears. The other group comprises customers whose connection and “investment” in the brand is maintained through their subscriptions. <figure class="align-center "><img src="https://images.theconversation.com/files/474211/original/file-20220715-24-eopgdo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" srcset="https://images.theconversation.com/files/474211/original/file-20220715-24-eopgdo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/474211/original/file-20220715-24-eopgdo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/474211/original/file-20220715-24-eopgdo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/474211/original/file-20220715-24-eopgdo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/474211/original/file-20220715-24-eopgdo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/474211/original/file-20220715-24-eopgdo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" alt="The subscriptions model emphasises customer retention over customer acquisition." /><figcaption>The subscriptions model emphasises customer retention over customer acquisition. Shutterstock</figcaption></figure> E-commerce and access Part of the growth in the subscription economy has come from companies riding the e-commerce wave, delivering goods such as meal kits, wine, coffee, baby supplies, pet food, cleaning products, razors and toilet paper. Consultant firm McKinsey has estimated the subscription e-commerce market is <a href="https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/thinking-inside-the-subscription-box-new-research-on-ecommerce-consumers" target="_blank" rel="noopener">doubling in value</a> every year – though that was before the pandemic. It could be well be more now. The other part of the market is represented by BMW’s approach, offering extra features to customers that can only be accessed for a fee. In some cases this may involve standard “upsell” techniques. For example, when you buy a new Peloton exercise bike you’ll be enticed with <a href="https://www.onepeloton.com.au/membership" target="_blank" rel="noopener">subscription offers</a>, such as virtual classes and “customised” training programs, to “reach your goals”. Or increasingly, as with BMW’s heated seats and steering wheels, it can be done with software turning actual bits of hardware on or off. What is BMW’s game? Is BMW’s purpose to gouge its customers for more money through getting them to pay an ongoing fee for something instead of owning it outright? This is not what its subscription structure indicates. The opposite, in fact. Customers can still buy these options outright. A heated steering wheel in the UK, for example, costs <a href="https://www.bmw.co.uk/en/shop/ls/dp/Steering_Wheel_Heating_SFA_gb" target="_blank" rel="noopener">£200</a>, and in New Zealand <a href="https://www.bmw.co.nz/en/shop/ls/dp/Steering_Wheel_Heating_SFA_nz" target="_blank" rel="noopener">NZ$350</a>. But now they can also pay a subscription – for three years (£150, NZ$250), annually (£100, NZ$250) or monthly (£10, NZ$20). These prices represent a strong signal – that the cost of outright ownership is the most economical. It’s unlikely BMW expects anyone to sign up for the annual or three-yearly options. These are probably just to make the outright cost look more attractive. The monthly offering, on the other hand, may lure owners to try out a feature they would otherwise have rejected buying outright at the time of purchase. Indeed, car makers argue the reason they offer so many options as extras is because most owners don’t want them. So this mostly looks like BMW offering a “try before you buy” option. The pitfalls of over-subscribing That said, companies don’t need to have sinister motives for us to have concerns about the spread of the subscription model. The more things we pay for with “micro-payments”, the harder it becomes to keep track of payments. Many of us continue to pay for products and services we don’t use. A survey of 1,000 Australian adults in 2021, for example, found about a third wasted money on unused subscriptions or memberships – losing an average of about <a href="https://www.savings.com.au/savings-accounts/unused-lockdown-subscriptions-are-costing-aussies-200-a-year" target="_blank" rel="noopener">A$200 a year</a>. Deep psychological associations can influence these decisions. Experiments by US marketing professors Jennifer Savary and Ravi Dhar suggests people with lower “<a href="https://academic.oup.com/jcr/article-abstract/46/5/887/5498871" target="_blank" rel="noopener">self-concept</a>” are less likely to sign up for subscriptions – but also less likely to cancel subscriptions they are not using. We may see the subscription model increasingly used in other sectors – including the health and justice systems. For example, a subscription payment may provide a better level of nutritious food for a resident in an aged care facility, or a hospital or even a prison. This is not dissimilar to the way private health insurance premiums are managed, but still presents important justice and equity concerns. So while there’s no reason to exaggerate the dangers of the subscription economy, it’s also prudent for consumers, advocacy groups and governments to ask “What next?”.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/186913/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/louise-grimmer-212082" target="_blank" rel="noopener">Louise Grimmer</a>, Senior Lecturer in Retail Marketing and Associate Head Research Performance, <a href="https://theconversation.com/institutions/university-of-tasmania-888" target="_blank" rel="noopener">University of Tasmania</a> This article is republished from <a href="https://theconversation.com" target="_blank" rel="noopener">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/a-heated-steering-wheel-for-20-a-month-whats-driving-the-subscriptions-economy-186913" target="_blank" rel="noopener">original article</a>. Image: Getty Images

Money & Banking

How Australia’s gig workers may remain contractors under Labor’s reforms

Uber Australia’s historic <a href="https://www.twu.com.au/wp-content/uploads/2022/06/Statement-of-Principles-28-June-2022.pdf" target="_blank" rel="noopener">agreement</a> with the Transport Workers’ Union, on the need to regulate the gig economy, is the first step in fundamental reform of gig work. It suggests the direction the Albanese government will to take to deliver better conditions for gig workers. The “statement of principles” agreed to between Uber and the union supports “regulatory certainty for platforms” and “minimum benefits and standards for platform workers who aren’t engaged as employees”. It does not agree that gig workers should be classified as employees instead of independent contractors. The response of federal workplace relations minister Tony Burke to <a href="https://ministers.dese.gov.au/burke/important-step-rights-gig-workers" target="_blank" rel="noopener">the agreement</a> suggests the government will take the same route – not changing the classification of gig workers but giving the federal industrial relations umpire, the Fair Work Commission, the power to set minimum standards for any workers in designated sectors. A precedent for this approach comes from <a href="https://www.ntc.gov.au/sites/default/files/assets/files/Safe-payments-report-October-2008.pdf" target="_blank" rel="noopener">New South Wales provisions</a> enabling regulation of payments to owner-drivers of trucks. Those provisions have been in place for more than 40 years, and have inspired the proposal <a href="https://statements.qld.gov.au/statements/95479" target="_blank" rel="noopener">before the Queensland parliament</a> to regulate the work of independent courier drivers. <h2>Leaving gig workers as contractors</h2> There are good reasons to aim to regulate gig economy workers as contractors, rather than attempting to bring them under the umbrella of being employees. Yes, their relationship with platforms can look an awful lot like an employment relationship – hence the reason for <a href="https://theconversation.com/an-employee-not-a-contractor-unfair-dismissal-ruling-against-deliveroo-is-a-big-deal-for-australias-gig-workers-161173" target="_blank" rel="noopener">court cases</a> supported by the Transport Workers’ Union seeking to have gig workers deemed employees. As the <a href="https://en.wikipedia.org/wiki/Duck_test" target="_blank" rel="noopener">saying goes</a>, if it looks, swims and quacks like a duck, it probably is a duck. But the outcome of trying to define gig workers as employees has been mixed. Around the world these attempts have sometimes <a href="https://www.theguardian.com/business/2017/feb/10/pimlico-loses-appeal-against-plumbers-worker-status-in-gig-economy-case" target="_blank" rel="noopener">succeeded</a>, <a href="https://btlaw.com/insights/blogs/currents/2018/philadelphia-u-s-district-court-determines-uber-drivers-are-independent-contractors" target="_blank" rel="noopener">sometimes not</a>. <h2>Roadblocks to becoming employees</h2> Platform companies have worked against these attempts, leveraging the fact quite a number of gig workers like to imagine themselves as <a href="https://www.cipd.co.uk/Images/to-gig-or-not-to-gig_2017-stories-from-the-modern-economy_tcm18-18955.pdf" target="_blank" rel="noopener">independent</a>, self-employed people, as well as customers’ preference for cheap services. The best (but not only) example is their success against California’s <a href="https://www.acslaw.org/expertforum/ab5-regulating-the-gig-economy-is-good-for-workers-and-democracy/" target="_blank" rel="noopener">AB5</a> law, passed in 2019, that tightened the rules for companies to hire workers as independent contractors. Uber and rival Lyft first <a href="https://calmatters.org/economy/2020/08/california-gig-work-ab5-prop-22/" target="_blank" rel="noopener">threatened to suspend operations</a> in California rather than comply with the law. They then teamed up with other platform companies such as DoorDash and spent a reported <a href="https://www.theguardian.com/commentisfree/2020/nov/12/uber-prop-22-law-drivers-ab5-gig-workers" target="_blank" rel="noopener">US$200 million</a> in 2020 to secure and a win a “ballot proposal” (known as Proposition 22) <a href="https://www.nytimes.com/2020/11/04/technology/california-uber-lyft-prop-22.html" target="_blank" rel="noopener">exempting</a> app-based transportation and delivery companies from the new law. A Californian court has since found <a href="https://www.nelp.org/blog/prop-22-unconstitutional/" target="_blank" rel="noopener">Proposition 22 unconstitutional</a>, but it remains in place pending an appeal. Even when a rule is devised to interpret the contracts that gig workers sign as employment contracts, gig companies could <a href="https://www.hcamag.com/au/specialisation/industrial-relations/uber-eats-announces-new-business-model-and-contracts-for-riders/245068" target="_blank" rel="noopener">amend their contracts</a> to get around that. But in the end, a company such as Uber will adhere, grudgingly, to most standards that are imposed on it — other than defining its workers as employees. Thus it has accepted <a href="https://www.uber.com/ca/en/drive/montreal/get-started/training-requirement/" target="_blank" rel="noopener">training requirements in Quebec</a> (after first <a href="https://www.thedrive.com/article/14652/uber-threatens-to-leave-quebec-over-new-driver-training-requirements" target="_blank" rel="noopener">threatening to quit</a> the Canadian province), <a href="https://www.masslive.com/politics/2016/08/gov_charlie_baker_signs_law_regulating_uber_and_lyft_in_massachusetts.html" target="_blank" rel="noopener">fare regulation in Massachusetts</a> and driver accreditation requirements in <a href="https://www.transport.nsw.gov.au/newsroom-and-events/media-releases/transport-for-nsw-statement-regarding-ride-sharing-apps" target="_blank" rel="noopener">several</a> <a href="https://www.intellinews.com/uber-reaches-agreement-with-the-czech-government-138071/" target="_blank" rel="noopener">jurisdictions</a>. <h2>Regulating contractors as contractors</h2> Regulating gig work without redefining gig workers as employees is not just politically easier, and hence more sustainable. It is also more effective policy. It enables regulation to be <a href="https://research-repository.griffith.edu.au/bitstream/handle/10072/405187/Peetz498000-Accepted.pdf?sequence=2&isAllowed=y" target="_blank" rel="noopener">tailored to circumstances</a>. For example it may mean applying an hourly wage rate in one sector, and a piece rate of some sort in another. For example, a New York state inquiry into how to regulate passenger transport came up with an amount expressed like taxi charges – that is, dollars per kilometre travelled – drivers needed to be paid to earn the <a href="https://news.yahoo.com/judge-rules-lyft-must-york-rules-driver-minimum-010416081.html" target="_blank" rel="noopener">equivalent of the state’s minimum wage</a> (taking into account waiting times, average speeds and so on). Different panels of the Fair Work Commission could determine different forms of gig economy regulation for different industries. Legislation does not need to specify how regulation should be expressed. It just needs to make sure that the Commission has all the power it needs, to regulate in whatever way it sees fit. <h2>Levelling the playing field</h2> The Transport Workers’ Union – which has a number of former officials in the Albanese government – has a long history of successfully promoting regulation of safety conditions for independent contractors (such as truck owner-drivers) without rebadging workers as employees. In the 1970s, for example, it persuaded the Wran government in NSW to introduce amendments to the NSW Industrial Relations Act that have made roads safer. The Albanese government does not need to legislate specific regulation. It just needs give the Fair Work Commission the power it needs to regulate in whatever way it sees fit, setting a minimum hourly rate or something else. The law must also direct the commission to set minimum standards in a way that ensures gig workers are paid as much as comparable award-covered employees, taking account of expenses. (Contractors often pay for costs that, if they were employees, would be covered by their employer.) This sort of direction is important to ensure neutrality between the costs of using employees or contractors. This article originally appeared on <a href="https://theconversation.com/how-australias-gig-workers-may-remain-contractors-under-labors-reforms-186197" target="_blank" rel="noopener">The Conversation</a>. Image: Shutterstock

Money & Banking

New Treasurer claims ScoMo left economy in "a mess"

New Labor Treasurer Jim Chalmers has claimed Scott Morrison left Australia's economy in "a mess", and warned Aussies of a "serious economic challenges" ahead. At a press conference on Wednesday, Chalmers told the media that inflation and interest rates were higher since the end of March, petrol prices were up 12 per cent since the end of April, and wholesale electricity and gas prices were also significantly higher under the Morrison government. “We do have labour shortages and we do still have Covid absenteeism, and the international environment has become more challenging as well,” he told reporters. “There is no point tiptoeing around these serious economic challenges. There is no point mincing words about the sorts of conditions that we have inherited." “We have inherited high and rising inflation and rising interest rates, we’ve inherited falling real wages and we’ve inherited $1 trillion in debt.” He went on to say that the economy forecast was weaker in March than the Morrison government claimed at election time, while saying, “Consumption, dwelling investment, new business investment, exports and nominal GDP were all weaker in the March quarter than was anticipated by our predecessors.” “These national accounts are a glimpse of the mess that the former government left behind for us to clean up." “Obviously, we want the economy to recover strongly. Obviously, we want household consumption and other key elements of the national accounts to be as strong as possible. “But even when, on the surface, they might look stronger than they have been during the worst of Covid, they are still short of what the government was hoping for.” In relation to growing energy costs, Chalmers said there was a "perfect storm" of challenges facing the energy market. “These are the costs and consequences of almost a decade now of a government with 22 different energy policies failing to land the necessary certainty to improve the resilience of our energy markets,” he said. “This is the chickens coming home to roost when it comes to almost a decade now on climate change and energy policy failure from our predecessors." The Albanese government has been passionate about their climate change policy, with a strong goal of reaching net zero by 2050. Despite the government's passion for energy reform, financial experts have warned that growing oil and gas prices could plunge Australia into a recession before Christmas if radical change isn't made sooner rather than later. Chalmers also said that workers on a minimum wage should not be further disadvantaged through the ongoing cost of living crisis. “Minimum wage workers were in many cases the heroes of the pandemic. They shouldn’t be going backwards in this cost of living crisis,” he said. Although Labor are dedicated to reducing the cost of living, The Australian Bureau of Statistics (ABS) said global events – including the rolling conflict in Ukraine – would continue to impact the Australian economy in the months ahead. Image credits: Getty Images

News

An air-craft toilet with a view

Everyone knows that going to the bathroom on a plane isn’t an enjoyable experience to begin with. Cramped, dingy lighting and the most horrendous flush in the world make relieving yourself not exactly the most pleasant task. However, a Reddit user revealed they caught a flight with the best economy plane bathroom in the world. The person, who goes by username <a href="https://www.reddit.com/user/drewsoulman/">u/drewsoulman </a>on the platform, shared a photo of the plane toilet that had a window inside – a feature that is unheard of in most aeroplane bathrooms. <img src="https://oversixtydev.blob.core.windows.net/media/2022/04/New-Project.jpg" alt="" width="601" height="583" /> On top of that, there was even a shelf behind the toilet – perfect for holding a phone or wallet. The post has received more than 116,000 votes and 2600 comments, and most viewers were amazed at the bathroom. “I wouldn’t leave. Better than an economy seat,” one person wrote. “Plane toilets are always so cramped and gloomy – this is nice,” added another. Someone else said they thought a window would help them get over one of their fears. “I wish this was more common. I have an irrational fear of aeroplane bathrooms. I like being able to see out the window on planes as I feel more grounded. I feel like this would help my fear,” they wrote. Meanwhile, a former flight attendant has revealed the best time to use the facilities on a plane. Mark Benders explained that flyers should go to the toilet about half an hour before landing as it’s just before the seatbelt sign goes on before the descent. “When you are on a flight and you start getting the feeling that you’re getting close to your destination, the first time you feel the aeroplane slow down from cruising speed, you will have about half an hour before landing,” he said. “That would be a good time to use the lavatory because the fasten seatbelt light will go on soon and you won’t be allowed out of your seat until the plane reaches the gate. Image: Getty

Travel Tips

How incomes, taxes and benefits work out for Australians

The Australian Bureau of Statistics has just released its latest analysis of the effects of government benefits and taxes on household income. Overall, it shows government spending and taxes reduce income inequality by more than 40% in Australia. Disparities between the richest and poorest states are also greatly reduced. The ABS analysis provides the most up-to-date (to 2015-16) and comprehensive figures on the impacts of government spending and taxes on income distribution. As well as direct taxes and social security benefits, it estimates the impact of “social transfers in kind” – goods and services that the government provides free or subsidises. These include government spending on education, health, housing, welfare services, and electricity concessions and rebates. The figures also include a wide range of indirect taxes. Among these are GST, stamp duties and excises on alcohol, tobacco, fuel and gambling. The 2015-16 results are the seventh in a series published every five to six years since 1984. The methodology is based on similar studies by the UK Office of National Statistics since the 1960s. The latest UK analysis coincidentally also came out on Wednesday. <h2>How do the calculations work?</h2> The ABS analyses income distribution in a number of stages. First, it calculates the distribution of “private income”. This includes wages and salaries, self-employment, superannuation, interest, dividends and income from rental properties, among other items. It also includes net imputed rent from owner-occupied dwellings and subsidised private rentals. Next the ABS adds social security benefits, such as the Age Pension, unemployment and family payments, to give “gross income”. Then it deducts direct taxes – primarily income tax – to give “disposable income”. The next stage is to add the estimated value households derive from government services. This is mainly the value of public health care and education spending. The final stage is to deduct the estimated value of indirect taxes. <h2>So what are the impacts on income inequality?</h2> It is possible to calculate measures of economic inequality at different stages in this process. By implication, the difference between inequality measures is the result of the different government policies taken into account. Figure 1 shows the Gini coefficient, which ranges between zero – where all households have exactly the same income – and 100% – where one household has all of the income. The Gini coefficient for private income in 2015-16 was 44.2. The addition of social security benefits, which mainly increase the incomes of low-income groups, reduces the coefficient by 8.1 percentage points. Deducting income taxes – which are progressive – further reduces inequality by 4.5 points. Government non-cash benefits reduce the Gini coefficient by nearly as much as the social security system. However, indirect taxes slightly increase income inequality. The Gini coefficient for final income is 24.9. So, compared to a coefficient of 44.2 for private income, government spending and taxes reduce overall income inequality by more than 40%. While most of the reduction in inequality is due to government spending, taxes are obviously important to pay for this spending. The social security system reduces income inequality (and poverty) because Australia <a href="http://insidestory.org.au/how-fair-is-australias-welfare-state/">targets benefits to the poor more than in any other high-income country</a>. Figure 2 shows the distribution of social security benefits and government services across income groups, from the poorest 20% to the richest 20% of households. The poorest 20% receive about seven times as much in benefits as the richest 20%. The average for OECD countries is close to one, with rich and poor receiving about the same amount. Government spending on social services is also progressively distributed. This spending is considerably greater than social security spending and includes both Commonwealth and state spending on education and health. The poorest 20% receive about 70% more in non-cash benefits than do the richest. This is not due to income-testing. Instead, it’s largely a result of the greater value of public health spending on hospitals and Medicare for older people, who tend to be in the bottom half of the income distribution. Taxes, of course, work to reduce income inequality, as high-income groups pay a higher share than low-income groups. Figure 3 shows that the poorest 20% pay about 5% of their disposable income in direct taxes, while the richest 20% pay about 30% of their disposable income. In contrast, indirect taxes – particularly those on tobacco and gambling – are regressive. Low-income groups pay more than high-income groups as a share of their disposable income. However, the undesirable effects of smoking and gambling on the wellbeing of low-income households need to be borne in mind. When direct and indirect taxes are added together the overall tax system is less progressive, but the richest 20% still pay nearly twice as much of their disposable income as do the poorest 20%. <h2>Redistribution also happens between age groups and states</h2> In addition to reducing inequalities between income groups, government spending and taxes redistribute across age groups. Government spending is much higher for households of Age Pension age than for younger households. This is because of both the Age Pension and older households’ use of the healthcare system. For example, households where the reference person is 75 or older receive on average just over $1,000 a week in government spending but pay about $180 a week in direct and indirect taxes. Households with a person aged 45 to 54 pay the highest taxes on average – about $800 per week – and on average receive about $620 a week in social spending. There is also redistribution across states and territories. For example, average private income is about 65% higher in Western Australia than in Tasmania. However, on average, Western Australian households receive about two-thirds of the social security benefits that Tasmanian households get. This reduces the disparity in gross income to about 45%. Western Australian households pay about twice as much in income taxes as Tasmanians, reducing the disparity to 35%. Households in the West receive only about 3% more in spending on social services than in Tasmania, which reduces the disparity in average incomes to 28%. West Australian households also pay about 20% more in indirect taxes than Tasmanian households (although as a percentage of disposable income, this is a higher share in Tasmania). These figures suggest that while the financing of fairly equal social services across most parts of Australia reduces inequality between states, the income tax and social security systems also significantly reduce disparities. This is because income tax and social security are national systems and because Tasmania is the poorest state largely due to the higher share of age pensioners in its population. Overall, this publication provides an invaluable picture of how government spending and taxes affect household economic well-being. Its results are relevant not only to the political debate about tax cuts, but also to long-term policy development to prepare Australia for an ageing population. This article originally featured on <a href="https://theconversation.com/who-gets-what-who-pays-for-it-how-incomes-taxes-and-benefits-work-out-for-australians-98627">The Conversation</a>. Image: Getty

Retirement Income

Healthy humans drive the economy: we’re now witnessing one of the worst public policy failures in Australia’s history

Australians are getting a stark reminder about how value is actually created in an economy, and how supply chains truly work. Ask chief executives where value comes from and they will credit their own smart decisions that inflate shareholder wealth. Ask logistics experts how supply chains work and they will wax eloquent about ports, terminals and trucks. Politicians, meanwhile, highlight nebulous intangibles like “investor confidence” – enhanced, presumably, by their own steady hands on the tiller. The reality of value-added production and supply is much more human than all of this. It is people who are the driving force behind production, distribution and supply. Labour – human beings getting out of bed and going to work, using their brains and brawn to produce actual goods and services – is the only thing that adds value to the “free gifts” we harvest from nature. It’s the only thing that puts food on supermarket shelves, cares for sick people and teaches our children. Even the technology used to enhance workers’ productivity – or sometimes even replace them – is ultimately the culmination of other human beings doing their jobs. The glorious complexity of the whole economy boils down to human beings, using raw materials extracted and tools built by other human beings, working to produce goods and services. <h2>A narrow, distorted economic lens</h2> The economy doesn’t work if people can’t work. So the first economic priority during a pandemic must be to keep people healthy enough to keep working, producing, delivering and buying. That some political and business leaders have, from the outset of COVID-19, consistently downplayed the economic costs of mass illness, reflects a narrow, distorted economic lens. We’re now seeing the result – one of the worst public policy failures in Australia’s history. The Omicron variant is tearing through Australia’s workforce, from <a href="https://www.smh.com.au/national/nsw/nurses-are-in-despair-as-staffing-shortages-bite-in-nsw-hospitals-20220103-p59ljc.html?fbclid=IwAR3obDpqk7Muu2xpOA1H7MH2D2TuxPIzMQrL_NKk2QoKHA2LriWoRcmRO8o">health care</a> and <a href="https://www.smh.com.au/national/nsw/hundreds-of-nsw-childcare-centres-shut-due-to-covid-20220104-p59ls4.html">child care</a>, to <a href="https://www.edenmagnet.com.au/story/7575635/knock-on-effects-through-supply-chain-despite-eased-covid-rules-for-workers/">agriculture</a> and <a href="https://www.freshplaza.com/article/9388733/omicron-has-now-put-us-in-a-desperate-situation-in-regards-to-workers-shortage-and-shipping-issues/">manufacturing</a>, to <a href="https://www.abc.net.au/news/2022-01-06/supermarket-shortage-supply-chain-truck-driver-covid/100741392">transportation and logistics</a>, to <a href="https://www.smh.com.au/national/surf-lifesavers-and-students-fill-paramedic-shifts-as-omicron-spreads-20220108-p59mrq.html">emergency services</a>. The result is an unprecedented, and preventable, economic catastrophe. This catastrophe was visited upon us by leaders – NSW Premier Dom Perrotet and Prime Minister Scott Morrison in particular – on the grounds they were protecting the economy. Like a Mafia kingpin extorting money, this is the kind of “protection” that can kill you. <h2>Effect as bad as lockdowns</h2> On a typical day in normal times, between <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/nov-2021/EM2b.xlsx">3% and 4% of employed Australians</a> miss work due to their own illness. Multiple reports from NSW indicate up to half of workers are now absent due to COVID: because they contracted it, were exposed to it, or must care for someone (like children barred from child care) because of it. With infections still spreading, this will get worse in the days ahead. Staffing shortages have left hospitals in chaos, supermarket shelves empty, supply chains paralysed. ANZ Bank data, for example, shows <a href="https://twitter.com/ANZ_Research/status/1479284711151345666?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet">economic activity in Sydney</a> has fallen to a level lower than the worst lockdowns. <hr /> Spending in Sydney and Melbourne now near lockdown conditions <a href="https://images.theconversation.com/files/440169/original/file-20220111-17-1jp9jpu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img src="https://images.theconversation.com/files/440169/original/file-20220111-17-1jp9jpu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" alt="ANZ Bank data shows spending in Sydney and Melbourne has fallen to levels typical of lockdown conditions." /></a> ANZ Research <hr /> If relaxing health restrictions in December (as Omicron was already spreading) was motivated by a desire to boost the economy, this is an own-goal for the history books. <h2>Relaxing isolation rules</h2> Now the response to Omicron ravaging labour supply is to relax isolation requirements for workers who have contracted, or been exposed to, COVID-19. The first step was to shift the goalposts on “test, trace, isolate and quarantine” arrangements by redefining “close contact”. On December 29 <a href="https://www.pm.gov.au/media/press-conference-kirribilli-nsw-10">the Prime Minister said</a> it was important to move to a new definition “that enables Australia to keep moving, for people to get on with their lives”. The next day National Cabinet <a href="https://www.pm.gov.au/media/national-cabinet-statement-12">approved a definition</a> such that only individuals having spent at least four hours indoors with a COVID-infected person needed to isolate. Australians certainly want supply chains to keep moving. That won’t happen by simply pretending someone with three hours and 59 minutes of face-to-face indoor contact with Omicron is safe. Putting asymptomatic but exposed and potentially infected people back to work will only accelerate the spread. The second step has been to reduce the isolation period for those who do pass this tougher “close contact” test. At its December 30 meeting National Cabinet agreed to a standard isolation period of seven days (ten days in South Australia), <a href="https://www1.racgp.org.au/newsgp/gp-opinion/so-you-have-been-asked-to-self-isolate-or-quaranti">down from 14 days</a>. For “critical workers” in essential services including food logistics, the NSW and Queensland governments <a href="https://www.news.com.au/finance/work/at-work/isolation-rules-relaxed-for-critical-workers-as-nsw-battles-supply-chain-issues/news-story/2b97ef133f6c3caff9dcd5bc548cc58b">have gone even further</a>, allowing employers to call them back to work so long as they are asymptomatic. <h2>Snatching defeat from the jaws of victory</h2> This follows a <a href="https://www.cdc.gov/media/releases/2021/s1227-isolation-quarantine-guidance.html">US precedent</a>, despite <a href="https://www.nejm.org/doi/pdf/10.1056/NEJMc2102507?articleTools=true">scientific evidence</a> indicating contagion commonly lasts longer than 5 days. Employers will use this change to pressure exposed and even sick workers to return to work, risking their own health, colleagues, customers, and inevitably spreading the virus further. Copying US COVID protocols only guarantees US-style infection rates. In fact, since 5 January, Australia’s seven-day rolling average infections per million <a href="https://ourworldindata.org/explorers/coronavirus-data-explorer?zoomToSelection=true&time=2021-03-30..latest&facet=none&pickerSort=desc&pickerMetric=total_cases_per_million&hideControls=true&Metric=Confirmed+cases&Interval=7-day+rolling+average&Relative+to+Population=true&Color+by+test+positivity=false&country=USA%7EAUS">now exceed that of the US</a>. <hr /> <a href="https://images.theconversation.com/files/440179/original/file-20220111-21-zzh3bj.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img src="https://images.theconversation.com/files/440179/original/file-20220111-21-zzh3bj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" alt="Daily new confirmed COVID-19 cases per million people, Australia compared to United States." /></a> <a href="https://ourworldindata.org/explorers/coronavirus-data-explorer?zoomToSelection=true&time=2021-03-30..latest&facet=none&pickerSort=desc&pickerMetric=total_cases_per_million&hideControls=true&Metric=Confirmed+cases&Interval=7-day+rolling+average&Relative+to+Population=true&Color+by+test+positivity=false&country=USA~AUS" class="source">Our Wold in Data</a>, <a href="http://creativecommons.org/licenses/by/4.0/" class="license">CC BY</a> <hr /> From one of the best COVID responses in the world to one of the worst, Australia has snatched defeat from the jaws of victory. <h2>It’s not too late to limit the carnage</h2> The idea that health considerations <a href="https://www.theguardian.com/australia-news/2021/oct/07/its-an-economic-crisis-too-in-nsw-what-a-difference-a-new-premier-makes">had to be balanced with economic interests</a> was always a false dichotomy. A healthy economy requires healthy workers and healthy consumers. The Omicron surge has created an economic emergency that will be difficult to endure. But it’s not too late to limit further avoidable contagion. Infection prevention practices (including masks, capacity limits, prohibitions on group indoor activities, PPE and distancing in workplaces, and free and accessible rapid tests) must be restored and enforced. Income supports for workers who stay home must be restored. Staffing strategies need to emphasise steady, secure jobs, rather than outsourcing and gig arrangements which have facilitated contagion. Above all, our policy makers need to remember the economy is composed of human beings, and refocus their attention on keeping people healthy. Protecting people is the only thing that can protect the economy.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/174606/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/jim-stanford-521684">Jim Stanford</a>, Economist and Director, Centre for Future Work, Australia Institute; Honorary Professor of Political Economy, <a href="https://theconversation.com/institutions/university-of-sydney-841">University of Sydney</a> This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/healthy-humans-drive-the-economy-were-now-witnessing-one-of-the-worst-public-policy-failures-in-australias-history-174606">original article</a>. Image: Shutterstock

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World economy in 2022: the big factors to watch closely

Will 2022 be the year where the world economy recovers from the pandemic? That’s the big question on everyone’s lips as the festive break comes to an end. One complicating factor is that most of the latest major forecasts were published in the weeks before the <a rel="noopener" href="https://www.who.int/news/item/26-11-2021-classification-of-omicron-(b.1.1.529)-sars-cov-2-variant-of-concern" target="_blank">omicron variant</a> swept the world. At that time, the mood was that recovery was indeed around the corner, with the IMF projecting <a rel="noopener" href="https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021" target="_blank">4.9% growth</a> in 2022 and the OECD <a rel="noopener" href="https://www.oecd.org/newsroom/oecd-economic-outlook-sees-recovery-continuing-but-warns-of-growing-imbalances-and-risks.htm" target="_blank">projecting 4.5%</a>. These numbers are lower than the circa 5% to 6% global growth expected to have been achieved in 2021, but that represents the inevitable rebound from reopening after the pandemic lows of 2020. So what difference will omicron make to the state of the economy? We already know that it had an effect in the run-up to Christmas, with for example <a rel="noopener" href="https://www.theguardian.com/business/live/2021/dec/23/omicron-hits-uk-economy-growth-car-production-market-optimism-energy-crisis-business-live?filterKeyEvents=false&page=with:block-61c46e4c8f08efd5f0de270a#block-61c46e4c8f08efd5f0de270a" target="_blank">UK hospitality</a> taking a hit as people stayed away from restaurants. For the coming months, the combination of raised restrictions, cautious consumers and people taking time off sick is likely to take its toll. Yet the fact that the new variant seems milder than originally feared is likely to mean that restrictions are lifted more quickly and that the economic effect is more moderate than it might have been. <a rel="noopener" href="https://www.reuters.com/world/middle-east/israel-admit-some-foreigners-with-presumed-covid-immunity-jan-9-2022-01-03/" target="_blank">Israel</a> and <a rel="noopener" href="https://www.aljazeera.com/economy/2022/1/3/australia-pushes-on-with-reopening-amid-milder-impact-of-omicron" target="_blank">Australia</a>, for example, are already loosening restrictions despite high case numbers. At the same time, however, until the west tackles very low <a rel="noopener" href="https://ourworldindata.org/covid-vaccinations?country=OWID_WRL" target="_blank">vaccination rates</a> in some parts of the world, don’t be surprised if another new variant brings further damage to both public health and the world economy. As things stand, the UK thinktank the Centre for Economics and Business Research (CEBR) published a more recent <a rel="noopener" href="https://www.bloomberg.com/news/articles/2021-12-26/world-economy-now-set-to-surpass-100-trillion-in-2022" target="_blank">2022 forecast</a> just before Christmas. It predicted that global growth would reach 4% this year, and that the total world economy would hit a new all-time high of US$100 trillion (£74 trillion). The inflation question One other big unknown is inflation. In 2021 we saw a sudden and sharp surge in inflation resulting from the restoration of global economic activity and bottlenecks in the <a rel="noopener" href="https://obr.uk/box/the-economic-effects-of-supply-bottlenecks/" target="_blank">global supply chain</a>. There has been <a rel="noopener" href="https://theconversation.com/inflation-why-its-temporary-and-raising-interest-rates-will-do-more-harm-than-good-172329" target="_blank">much debate</a> about whether this inflation will prove temporary, and central banks have been coming under pressure to ensure it doesn’t spiral. So far, the European Central Bank, Federal Reserve and Bank of Japan have all abstained from raising interest rates from their very low levels. The Bank of England, on the other hand, followed the <a rel="noopener" href="https://www.ft.com/content/ca15ce59-ca72-497c-bf7a-c1482d972f01" target="_blank">IMF’s advice</a> and <a rel="noopener" href="https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2021/december-2021" target="_blank">raised rates</a> from 0.1% to 0.25% in December. This is too little to curb inflation or do any good besides increase the cost of borrowing for firms and to raise <a rel="noopener" href="https://www.bbc.com/news/business-59140059" target="_blank">mortgage payments</a> for households. That said, the <a rel="noopener" href="https://www.reuters.com/markets/europe/sterling-nears-2-year-high-vs-euro-rate-rise-bets-2022-01-04/" target="_blank">markets are betting</a> that more UK rate rises will follow, and that <a rel="noopener" href="https://www.cnbc.com/2022/01/03/markets-and-the-economy-brace-as-the-feds-first-hike-could-come-in-two-months.html" target="_blank">the Fed</a> will also start raising rates in the spring. Yet the more important question regarding inflation is what happens to quantitative easing (QE). This is the policy of increasing the money supply that has seen the major central banks <a rel="noopener" href="https://www.atlanticcouncil.org/global-qe-tracker/" target="_blank">buying some</a> US$25 trillion in government bonds and other financial assets in recent years, including about US$9 trillion on the back of COVID. Both the Fed and ECB are still operating QE and adding assets to their balance sheets every month. The Fed is <a rel="noopener" href="https://www.businessinsider.com/personal-finance/fed-tapering?r=US&IR=T" target="_blank">currently tapering</a> the rate of these purchases with a view to stopping them in March, having recently announced that it would bring forward the end date from June. <a rel="noopener" href="https://www.ft.com/content/03a30484-b265-4a88-a861-de1784305d40" target="_blank">The ECB</a> has also said it will scale back QE, but is committed to continuing for the time being. Of course, the real question is what these central banks do in practice. Ending QE and raising interest rates will undoubtedly hamper the recovery – the <a rel="noopener" href="https://cebr.com/reports/city-am-uk-to-remain-one-of-the-top-six-global-economies-post-covid-says-cebr-report/" target="_blank">CEBR forecast</a>, for example, assumes that it will see bond, stock and property markets falling by 10% to 25% in 2022. It will be interesting to see whether the prospect of such upheaval forces the Fed and Bank of England to get more dovish again – particularly when you factor in the continued uncertainty around COVID. Politics and global trade The trade war between the US and China looks likely to continue in 2022. The “<a rel="noopener" href="https://www.piie.com/research/piie-charts/us-china-phase-one-tracker-chinas-purchases-us-goods" target="_blank">phase 1</a>” deal between the two nations, in which China had agreed to increase its purchases of certain US goods and services by a combined US$200 billion over 2020 and 2021 has missed its target <a rel="noopener" href="https://www.piie.com/research/piie-charts/us-china-phase-one-tracker-chinas-purchases-us-goods" target="_blank">by about 40%</a> (as at the end of November). The deal has now expired, and the <a rel="noopener" href="https://www.globaltimes.cn/page/202201/1243977.shtml" target="_blank">big question</a> for international trade in 2022 is whether there will be a <a rel="noopener" href="https://www.ced.org/solutions-briefs/the-china-trade-challenge-phase-ii" target="_blank">new “phase 2” deal</a>. It is hard to feel particularly optimistic here: Donald Trump may have long since left office, but US strategy on China remains <a rel="noopener" href="https://www.project-syndicate.org/commentary/biden-losing-china-strategy-protectionism-industrial-policy-by-anne-o-krueger-2021-09?utm_source=Project%20Syndicate%20Newsletter&utm_campaign=bf7c015f95-sunday_newsletter_12_26_2021&utm_medium=email&utm_term=0_73bad5b7d8-bf7c015f95-105568073&mc_cid=bf7c015f95&mc_eid=14a09c8529&barrier=accesspaylog" target="_blank">distinctly Trumpian</a>, with no notable concessions having been offered to the Chinese under Joe Biden. Elsewhere, western tensions with Russia over Ukraine and further escalation of economic sanctions against Putin may have economic consequences for the global economy – not least because of Europe’s dependency on Russian gas. The more engagement that we see on both fronts in the coming months, the better it will be for growth. Whatever happens politically, it is clear that Asia will be very important for growth prospects in 2022. Major economies such as <a rel="noopener" href="https://www.bloomberg.com/news/articles/2021-12-22/u-k-economy-closer-to-pre-pandemic-levels-despite-3q-downgrade?sref=Hjm5biAW" target="_blank">the UK</a>, <a rel="noopener" href="https://tradingeconomics.com/japan/gdp" target="_blank">Japan</a> and the <a rel="noopener" href="https://tradingeconomics.com/euro-area/gdp" target="_blank">eurozone</a> were all still smaller than before the pandemic as recently as the third quarter of 2021, the latest data available. The only major developed economy that has already recovered its losses and regained its pre-COVID size is <a rel="noopener" href="https://www.brookings.edu/blog/up-front/2021/12/08/a-most-unusual-recovery-how-the-us-rebound-from-covid-differs-from-rest-of-g7/" target="_blank">the United States</a>. Economic growth by country since 2015 <a href="https://images.theconversation.com/files/439333/original/file-20220104-18500-zchaq3.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img src="https://images.theconversation.com/files/439333/original/file-20220104-18500-zchaq3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" alt="" /></a> OECD data On the other hand, China has <a rel="noopener" href="https://www.worldometers.info/coronavirus/country/china/" target="_blank">managed the pandemic</a> well – albeit with strict control measures – and its economy has achieved strong growth since the second quarter of 2020. It has been <a rel="noopener" href="https://theconversation.com/chinas-problem-with-property-the-domino-effect-of-evergrandes-huge-debts-168601" target="_blank">struggling with</a> a heavily over-indebted property market, but appears to have handled these problems <a rel="noopener" href="https://www.wsj.com/articles/china-evergrande-says-construction-has-resumed-at-vast-majority-of-its-projects-11640602229" target="_blank">relatively smoothly</a>. Though the jury is out on the extent to which <a rel="noopener" href="https://edition.cnn.com/2021/12/15/economy/china-omicron-economy-intl-hnk/index.html" target="_blank">China’s debt problems</a> will be a drag in 2022, some such as Morgan Stanley <a rel="noopener" href="https://www.cnbc.com/2022/01/03/morgan-stanley-on-chinas-gdp-economy-in-2022.html" target="_blank">argue that</a> strong exports, accommodative monetary and fiscal policies, relief for real estate sector and a slightly more relaxed approach to carbon reduction point to a decent performance. As for India, whose economy has seen double dips during the pandemic, it is showing a strong positive trend with <a rel="noopener" href="https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021" target="_blank">8.5% expected growth</a> in the year ahead. I therefore suspect that emerging Asia will shoulder global growth in 2022, and the world’s <a rel="noopener" href="https://onlinelibrary.wiley.com/doi/10.1111/j.1758-5899.2010.00066.x" target="_blank">economic centre of gravity</a> will continue to shift eastwards at an accelerated pace.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/174350/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a rel="noopener" href="https://theconversation.com/profiles/muhammad-ali-nasir-1244347" target="_blank">Muhammad Ali Nasir</a>, Associate Professor in Economics and Finance, <a rel="noopener" href="https://theconversation.com/institutions/university-of-huddersfield-1226" target="_blank">University of Huddersfield</a> This article is republished from <a rel="noopener" href="https://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a rel="noopener" href="https://theconversation.com/world-economy-in-2022-the-big-factors-to-watch-closely-174350" target="_blank">original article</a>. Image: Getty Images

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