Heartless government sools computer onto needy citizens

Of the loads of films I saw last year, the most memorable was Ken Loach's I, Daniel Blake. I go to the movies for escapist entertainment, not to give my emotions a good workout but, even so, it left a lasting impression.

It was the story of a 59-year-old carpenter in Newcastle, England, whose cardiologist told him not to go back to work for a few months after he'd had a heart attack on the job.

What we saw was Blake's mistreatment at the job centre he went to for social security payments at the height of the Cameron government's austerity spending cuts.

It was run like an assembly line, with "clients" processed as fast as possible, with a complete lack of flexibility or consideration.

Nothing Blake said was listened to, but at his first sign of frustration he was rebuked for his utterly unacceptable behaviour and threatened with removal by security guards. He was repeatedly threatened with the "sanction" of having his dole suspended for such crimes as being late for his appointment.

He got nowhere when he visited the centre, had to hang on for ages when he phoned, and was always being told to fill out forms online. Small problem: he didn't have a computer and didn't know how to use one.

Sorry, online forms are "mandatory".

Why would a government treat its citizens so badly? Well, reading between the lines you saw the centre had been handed over to a private business. It probably underquoted to get the contract and had turned the centre into a sausage machine in the hope of saving enough on staff to make a profit.

I thought of Daniel Blake when I read of the way the Turnbull government is using an "automated debt recovery program" to harass former users of Centrelink.

It's using a computer program to go back several years, checking Centrelink benefit payments against records from the Tax Office, to look for apparent overpayments and demand the money be repaid.

Trouble is, the exercise is hugely prone to error. Eligibility for social security benefits is assessed on a fortnightly basis, whereas tax information is annual. The machine merely divides the annual figures by 26 and often gets the wrong answer.

Where the same employer's name has been recorded differently, the machine treats them as separate businesses, sometimes calculating "debts" that are thousands of dollars out.

The machine may send its demand to an old address, even though failure to respond within 21 days is taken as acceptance that the figure named is correct, and the trigger for debt collectors to be called in, with the addition of a 10 per cent "recovery fee".

The many leaks from appalled Centrelink staff suggest they've been discouraged from correcting obvious errors before the machine-generated demands are sent out, and discouraged from helping people in person, rather than just telling them to use the website.

It's clear this is a fishing expedition. You make what you know may often be erroneous claims for repayment, shift the onus of proof onto people with few records or resources, give them a scare, then sit back and see how much you rake in.

I confess to feeling much empathy for people struggling with the many digital tentacles of the ironically named MyGov website. I'm an accountant but I still struggle with its online tax return.

Its requirement for you to supply your spouse's income sets up a Catch 22 where neither you nor your spouse can submit a return without saying something you know isn't true.

This year I'm stuck on a section of the return which, when I try to save it and move on, just says ERROR. OK, what's the error? Doesn't say. But I know what it's thinking: that's for us to know and you to find out.

So far I've spent ages searching the site for the answer, to no avail. I'm waiting for the time and courage to do battle with the Tax Office's phone system - assuming that's still permitted.

Back on the Centrelink debacle, I've been amazed by the way the Centrelink boss, the junior minister, Alan Tudge, and the senior minister, Christian Porter, have each denied there's any problem.

Really? This is the way bureaucrats and politicians get their names into the history books for contributing to their government's demise.

So far they've mainly been picking on young people on the dole, but now they're moving on to invalids and age pensioners. Really? Courageous decision, minister.

What on earth is motivating them? Partly it's that, having made so much fuss about debt and deficit while in opposition, the government is having enormous trouble getting the budget deficit down.

It lacks the courage to tackle the big sources of rent-seeking by business interests, but is confident it can get away with cracking down on the tiddlers in social security.

It's worse than that, however. Porter and Tudge are from the Liberals' hard Right. You can see from their speeches and remarks they have little sympathy for people poor enough to need social welfare, and every sympathy for their own class, groaning under the weight of a tax rate of supposedly "almost 50 per cent".

Their sacred mission is to prevent the need for higher taxes by ensuring none of their department's "clients" get away with a dollar more than they're supposed to get.

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Have a touchy-feely holiday break from the economic grind

I hope your "face time" with family and friends over the holiday break wasn't done using a mobile phone.

A phone call may be better than nothing, but it turns out that regular, in-the-flesh, face-to-face communication reduces the risk of depression in older adults.

That's according to research by Alan Teo, a psychiatrist at the Oregon Health and Sciences University, and others.

"Meeting friends and family face-to-face is strong preventive medicine for depression. Think of it like taking your vitamins, and make sure you get a regular dose of it," Teo advised.

Thanks to my own painstaking research (I googled it), I can tell you we know from previous studies that having social support and staying connected with people is good for your physical and mental health. It even helps you live longer.

Teo and his mates examined the results of a survey of about 11,000 people aged 50 or more between 2004 and 2010.

They found a correlation between the types of interactions people had with others and their likelihood of showing symptoms of depression two years later.

"We found that all forms of socialisation aren't equal. Phone calls and digital communication with friends or family members do not have the same power as face-to-face social interactions in helping to stave off depression," Teo said.

But what, pray tell, has this to do with the economics I'm paid to write about?

Well, in the silly season it doesn't have to. But as it happens, it does. One of the most important discoveries of economists in the past decade or so is the almost magical economic properties of face-to-face contact.

For this new knowledge we're indebted mainly to the guru of urban economics, professor Edward Glaeser, of Harvard, as set out in his important 2011 book, Triumph of the City.

Economic geographers have long understood the significance of "economies of agglomeration". We crowd into ever-bigger cities because close proximity between a business, its workers, its customers, its suppliers and even its competitors does wonders to improve productivity.

Unfortunately, what's good for our material standard of living isn't necessarily good for the soul.

Glaeser's contribution was to realise that, in the era of the knowledge economy, firms want to crowd together in the very centre of the biggest cities – regardless of sky-high rents – because knowledge spreads most effectively though face-to-face contact between the smartest people.

Here in Oz, pioneering empirical work by Jane-Frances Kelly of the Grattan Institute, has shown how more and more of our gross domestic product is being generated in the CBDs of our four biggest cities.

While she was at it, she publicised Reserve Bank research showing convincingly that, in every capital city, house prices are rising fastest in those suburbs closest to centre and slowest in those suburbs furthest out.

So if you think the golden rule of real estate is position, position, position, you're behind the curve. In big cities these days its proximity, proximity proximity. And that gets back to the economic value of face-to-face contact.

Unfortunately, however, what's good for our material standard of living isn't necessarily good for the soul.

When we're crammed in together in trains, lifts or waiting rooms, we know almost instinctively to avoid invading people's "personal space", avoid conversation and even eye contact.

But research by Nicholas Epley, of the University of Chicago's Booth School of Business, and Juliana Schroeder, of the University of California, Berkeley's Haas School of Business, shows our instincts are wrong.

In a series of experiments, those commuters who were instructed to strike up conversation with a stranger reported having the most positive experience, compared with those instructed to sit in silence or behave as they usually would.

When it comes to the advent of the knowledge economy, the information revolution and digital disruption, there are two errors we can make: underestimating the extent to which it's already changing the way the economy works (see above), and overestimating the extent to which it's changing the way humans work – and are happiest working.

You can be sure the world's model-bound economists will make – are making – the first error. And since their model copes with human nature only by assumption, they won't even be conscious of the second.

For the rest of us, however, the thing is to remember new technology raises three distinct questions: first, what new tricks is it actually capable of doing for us, second, do we really want it to do that trick for us and, finally, assuming we do, what will we eventually feel about the wisdom of that choice? See intro.

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To what do we owe the Industrial Revolution?

One of the small pleasures of my year was watching the deft political manoeuvrings of Thomas Cromwell in the TV miniseries of Hilary Mantel's Wolf Hall.

Of course, this has nothing to do with the economy – or does it?

I've just been reading a paper by three economic historians, Monks, Gents and Industrialists, arguing that an important reason why the Industrial Revolution of the late 18th century began in England, and in particular parts of England, was the long-run consequence of Henry VIII's dissolution of the monasteries between 1532 and 1540.

Henry's right-hand man in orchestrating the dissolution was Thomas Cromwell.

The economists are Leander Heldring, of Oxford University, James Robinson, of the University of Chicago, and Sebastian Vollmer, of the University of Gottingen in Germany. Their paper is published by America's National Bureau of Economic Research.

We owe today's economy to the two centuries of economic development precipitated by the Industrial Revolution, a period of radical technological innovation beginning in the 1760s.

It involved the replacement of hand tools with power-driven machines, and the shift of production from artisans' homes to factories.

The initial changes were in textile manufacture and metals, using new forms of inanimate power such as the steam engine and new methods of transportation, such as the railway.

The newly ubiquitous form of energy was coal – the start of our ill-fated love affair with fossil fuels.

There's less agreement among historians on why the Industrial Revolution started in England. Some give the credit to Britain's superior economic and political institutions. Others see it as a consequence of various "economic shocks", such as the Black Death of the mid-14th century or the expansion of Atlantic trade.

These led to changes in England's social structure, to political conflict in the 17th century, particularly the English civil war of the 1640s, to the Glorious Revolution of 1688, in which William of Orange seized the English throne from James II and, ultimately, to favourable changes in economic institutions.

The famous English historian Richard Tawney argued that the dissolution of the monasteries caused a change in the rural social structure, which led to the civil war.

Later scholars have discounted this, but our authors argue the dissolution helped bring about something much bigger, the Industrial Revolution.

As part of Henry's break with the Pope – which happened at the time of the Protestant Reformation in other parts of Europe – parliament first decreed that the Catholic monasteries' tithes be paid to the king rather than Rome, then that the monasteries be dissolved, with their lands expropriated by the crown. The king was declared head of the Church of England.

In 1530 there were about 825 monasteries in England and Wales, housing about 10,000 people. The term "monasteries" includes nunneries, friaries, abbeys and priories.

Aside from maintaining property and collecting rents, the monks engaged in prayer and singing for the local community, were active in education and were expected to provide food and lodging to travellers and distribute alms to the poor.

The church is thought to have held between a quarter and a third of all the land in England and Wales.

Henry gave away some of the expropriated land – including to Thomas Cromwell – but sold most of it. Two-thirds had been sold by 1547 and most of the rest by 1554, during the reign of Edward VI.

A key part of the authors' thesis is that most of the land was sold to the "gentry" – all non-noble landowners with sufficient land or wealth to put them above the yeomen farmers.

It's estimated that the gentry's share of English land rose from a quarter in 1436 to about half in 1688. What Tawney called "the rise if the gentry" mattered because they tended to be more commercially minded rural entrepreneurs.

The authors hypothesise that, in parishes or counties where the gentry rose more, and where commercial farming was more advanced, the gentry would be involved in other activities which would ultimately coalesce into the Industrial Revolution.

Three mechanisms could have connected the gentry to industrialisation. First, they had the vote, were able to sit in parliament and to lobby for legislation favourable to their economic interests.

Second, it's plausible the gentry were part of "proto-industrialisation", where the necessary conditions for industrialisation were established. There are many case studies of such things as gentry establishing coal mines on their properties.

Third, to the extent that the gentry were entrepreneurial commercial farmers they would have been more innovative and productive, and this "agricultural revolution" could have directly stimulated the Industrial Revolution.

But the endangered species of economic historians isn't allowed just to think up plausible theories about the past. Academic economists' obsession with mathematics means they have to seek empirical evidence for their theses by using fancy statistical techniques to find correlations between whatever "data series" they can find.

The authors digitised the 1535 Valor Ecclesiasticus – a census of the monasteries' incomes, ordered by Henry – and compared it with the 1838 survey of textile mills, as well as figures from the British census of 1831 showing the proportions of the labour force engaged in manufacturing, retail and agriculture.

They showed that the monastic income in a parish in 1535 was positively and significantly correlated with the presence of a textile mill in the parish 300 years later. Monastic income was also correlated with the proportion of the labour force in manufacturing and retail 300 years later.

They then used a census from 1700 showing the number of gentry in each of 24,000 towns and villages. Again, a good correlation with the distribution of monastery incomes 165 years' earlier.

And they used other figures to show monastic income is correlated with the number of agricultural patents registered in a parish between 1700 and 1850, implying the dissolution may indeed have led to greater innovation.

So, thanks for your help, Thomas.

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How to get more enjoyment from the time available

I don't know about you, but it's at this time of year, when the Christmas rush is over and things slow down – even for those who are "working through" – that I get a bit more philosophical, a bit more reflective.

What exactly did I achieve last year? Is next year going to be all that different? What's the point of working so hard? How can I find a better balance between work and play?

To tell you the truth, I'm divided between all my old professional ambitions and a desire to slow down, smell the roses and have more fun.

Of course, one of the key lessons of economics is that we're often faced by conflicting but desirable objectives, and the answer is to find the best trade-off between them. The particular combination that yields most "utility" (aka happiness).

Unfortunately, that's about as far as economists' advice goes. Fortunately, psychologists' advice is a lot more practical.

Economists are big on working to make money, then using the money to buy the things that make us happy. Which things, exactly? Who knows? Economists cop out at this point by assuming you know what things make you happy.

Psychologists assume nothing, but conduct studies and experiments to see which things make us happiest and whether we always know to pick them.

Often we don't. Some years back I wrote up the recommendations of three North American psychologists in their paper, If money doesn't make you happy then you probably aren't spending it right.

Their advice included spending on experiences rather than objects, spending on others rather than yourself (eg Christmas) and on small pleasures rather than big luxuries.

Research shows that small pleasures – such as a cold beer on a hot day or, for my family, a hot cup of tea on a cold day – are some of life's most "salient" (noticeable) instances of happiness.

But soon after, three marketing academics, Jennifer Aaker, Melanie Rudd and Cassie Mogilner, published a complementary paper, If money does not make you happy, consider time.

Ah yes, time. One of the most valuable commodities we possess, but often spend unwisely. We work less efficiently than we could (guilty) and waste too much of our leisure time sprawled in front of the box watching reruns of Midsomer Murders (ditto).

Time tends to be laden with personal meaning – we live through it, after all – compared with money which, at best, contains potential. And time fosters interpersonal connection.

Since both personal meaning and social connection have been found to be critical to happiness, for individuals to consider how they spend their time ought to be important in their efforts to "solve the happiness puzzle".

The authors' first suggestion is to spend time with the right people. That doesn't mean cosying up to Malcolm and Lucy, it means that social leisure activities contribute more to happiness than solitary ones.

People who engage in social activities more frequently, experience higher levels of happiness than those who engage less often.

Whatever the activity, you usually enjoy it more if you do it with other people.

But it's not only whether you spend your time with others, but who the others are. More satisfaction comes from spending it with friends, family and significant others (or "the wife", as we probably should revert to saying during the Trumpocene) than with bosses and co-workers.

That's no doubt true but, since most of us have little choice but to spend much time with workmates, it makes a lot of sense to turn workmates into friends whose company we enjoy.

The authors say two of the best predictors of people's general happiness are whether they have a best friend at work, and whether they like their boss.

As the quality of workplace friendships increases, so do happiness and productivity, studies suggest.

The authors' second suggestion is to spend your time on the right activities. Regular checking by testers shows that hanging out with family and friends comprise the happiest parts of the day, whereas working and commuting make for particularly unhappy portions of the day.

But, again, if you can possibly wriggle your way into a position where you enjoy your work, you'll do much better in the happiness stakes.

Third suggestion is to enjoy the experience without spending the time. Neurological studies show people get much pleasure merely from thinking about activities they find pleasurable.

You can get a lot of pleasure from reading up on and planning a holiday even if, for whatever reason, you end up putting it off.

You can derive pleasure from window shopping, and the pleasure gained from shopping for a dress may exceed the pleasure from actually acquiring the dress, they say.

But the authors' next suggestion is roughly opposite to the previous one: expand your time. Rather than spending a lot of time salivating over future purchases or adventures, focus on "the now".

One possible benefit from being present-focused is that it slows down the perceived passage of time, allowing people to feel less rushed.

In one study, people instructed to take long, slow breaths for five minutes not only felt there was more time available to get things done, but also perceived their day to be longer.

Let me wish that 2017 is a year in which you perceive yourself to be less rushed.

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We're on the way to peak everything

Some economists worry the world economy isn't growing fast enough. It's slowing down and reaching the point of "secular stagnation".

On a very different wavelength, however, environmentalists worry that if the world economy keeps growing the way it is, it won't be long before we run out of the natural resources on which that growth depends. Whoops.

But if all that's a bit heavy for the holiday season, here's something lighter. Remember all that crazy talk a few years back about the paperless office? What a joke.

Then there was peak oil. Whatever happened to that looming disaster?

If any of those possibilities piques your interest, I have news - courtesy of an essay by Professor John Quiggin, of the University of Queensland.

Quiggin thinks the paperless office is on the way, especially because the world has already reached "peak paper".

Despite continuing economic growth, peak paper was reached in 2013. "Global paper production and consumption reached its maximum, flattened out, and is now falling," he says.

Until relatively recently, the growth and spread of information was directly linked to the growth in paper, books and newspapers.

The closely related information revolution and digital revolution have broken that link. Businesses and governments don't print reports, they just put them on their website. We read e-books and online newspapers.

Banks and businesses want to stop sending us statements and bills through the post. If we hold out too long, they impose a fee for continued paper statements.

As for peak oil, Quiggin says that, in terms of oil consumption per person, the world reached it in 1979.

"In the developed countries, the decline in oil consumption per person has outpaced population growth, with the result that total consumption is declining. The average person in a developed country now uses less oil than her parents did 40 years ago," he says.

Why has this remarkable change attracted so little notice? Partly because much of the reduction in energy use has taken the virtually invisible form of improvements in energy efficiency. Both industrial processes and household appliances use far less energy than they used to.

But also because, until fairly recently, the main substitutes for oil have been other fossil fuels, such as coal and gas. Only in the past 10 years have renewable energy sources, especially wind and solar, begun to play a significant role, he says.

Peak coal has already arrived in the developed world. Coal consumption has fallen substantially in the US and Europe, and is set to fall further.

Until recently, the decline in fossil-fuel use in the developed world has been more than offset by rapid growth in the developing countries.

But even China - the planet's largest coal consumer by far - has changed course. Beginning with Beijing, it has begun closing down all the coal-fired power stations near major cities.

"In fact, China reached peak coal in 2013, at the same time as it reached peak paper," Quiggin says.

As for peak steel, it's different. Steel lasts a long time and can be recycled almost endlessly, but demand for it is finite.

In developed countries, the stock of steel reached about eight tonnes a person decades ago, he says, and has remained stable or slowly declining since then.

"With the stock of steel on a gently sloping plateau, the need for more can be met almost entirely by recycling scrap, rather than by burning coal to smelt iron ore in blast furnaces.

"The result has been described as a 'circular economy'. When this arrives, peak steel will have been reached."

All this has happened while economic growth has continued and living standards have risen.

Economists have been saying for years, particularly in the developed world, that growth is becoming "weightless". The part of the economy that's growing isn't goods - things you can drop on your toe - but services: people doing things for people, whether fixing their health, teaching them nuclear physics or waiting on their table.

With an ever greater proportion of gross domestic product - the quantity of goods and services produced in a period - accounted for by services, economic growth becomes ever less dependent on the increased use of natural resources.

Over the long term, growth in real GDP comes less from the use of more raw materials, human labour and man-made machines and structures and more from improved "productivity" - greater efficiency with which those inputs are transformed into outputs of goods and services.

What drives productivity improvement? Advances in technology and accretion of human capital. That is, the growth and spread of knowledge and information.

But an information-driven economy is very different from the one we've become used to since the industrial revolution, one driven by the use of natural resources to produce goods plus a few conventional services.

Natural resources are finite. If you want to use my coal or paper you must pay me (they're "excludable"). Any coal or paper you use can't be used by someone else (they're "rivalrous").

This makes economic growth relatively easy to measure. But knowledge and information are opposite to natural resources: they're often freely available (non-excludable) and my knowing something doesn't stop you knowing it, too (non-rivalrous).

What's the difference between a taxi and Uber? Information. What's the difference between renting a hotel room or self-catering accommodation and Airbnb? Information.

A knowledge and information-driven economy is one whose continuing growth makes less demands on the natural environment than many scientists and environmentalists imagine. That's particularly true as we move to renewable energy.

But a knowledge and information-driven economy is harder to measure, especially using the metrics (GDP) we developed to measure a raw materials and goods-based economy.

We're now in a world where GDP is going one way and raw-materials use is starting to go the other way.

That's why Quiggin doubts that world economic growth is grinding to a halt.

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Why I wish we'd had our credit rating downgrade this week

You can tell by when a government releases its midyear budget update how well it's going with the budget. If it's doing well, it publishes as early in December as possible.

If it's doing badly, it publishes as close to Christmas as it thinks it can get away with, when normal people are busy with parties and preparations and not paying much attention.

This year we got the update just six sleeps before Santa's arrival. Draw your own conclusions.

And this year the government was worried, we're told, that the continued slippage in its efforts to repair the budget would prompt the credit rating agencies to downgrade our AAA status.

Labor was already salivating at the prospect, with finance spokesman Jim Chalmers confidently predicting a downgrade would "smash confidence in our economy" and "push up borrowing costs for households and small businesses".

You beauty! If that doesn't improve Labor's chances of beating the Coalition at the next election, what will? A little damage to the economy in the meantime? A price Labor would be happy for us to pay.

In the event, however, all three ratings agencies announced the update had done nothing to change their views.

But the government isn't off the hook. The most aggressive publicity seeker of the three, Standard & Poor's, didn't confirm our AAA rating, it said the update gave it no reason to change its "negative outlook" for that rating.

So the agency's supposed fiscal sword of Damocles remains hanging over Scott Morrison's head at least until the budget in May.

To tell you the truth, I'm sorry it didn't fall this week. That's not because I bear the government any ill will, but because the sooner we're downgraded, the sooner the public will realise there's little to fear from a downgrade. The ratings agencies are toothless tigers.

In any case, there is no good reason any sovereign Australian government – federal or state – should allow a few American for-profit businesses to dictate how much it should or shouldn't borrow (nor engage in hugely expensive ways of disguising the true extent of its liabilities).

The ratings agencies' credibility has been destroyed by their part in the global financial crisis. Not only did these all-wise experts fail to see it coming, they contributed to the conflagration by awarding AAA ratings to the promoters of "collateralised debt obligations" – for the small fee – that soon turned into "toxic debt".

It's long been questionable whether the agencies were leaders or followers in identifying the risks attached to the bonds issued by businesses and governments, but since the GFC there's little doubt the financial markets don't need their advice.

When Standard & Poor's downgraded US government bonds in 2011, the financial markets took no notice and the two other agencies left it hanging out to dry.

S&P downgraded Greece's government bonds only months after its budget cover-up became public in 2009.

All three agencies downgraded Britain's bonds immediately after Brexit, but market yields (interest rates) on those securities actually fell.

So it's not at all clear that a downgrading of our credit rating would do anything much to increase the interest rate at which our government can borrow.

And while it's technically true a downgrading of Australia's "sovereign" credit rating would flow on to the ratings of our banks, it's not clear this would increase their borrowing costs abroad, nor that there would be any flow-on to home buyers and small businesses.

While Labor's Chalmers was telling anyone who'd listen of the disaster about to befall everyone with a mortgage, the chief executive of ANZ Bank, Shayne Elliott, was telling his shareholders that a downgrade had already been priced into the funding costs for Australian banks.

Should the banks actually pass on that increase on to their customers, it would tell us less about the Turnbull government's budget failings than about the failure of successive governments – Labor included – to do enough to encourage greater competition between the big four banks, generous party donors that they are.

It suits neither the government nor the opposition to admit that the rating agencies' pressure on us to cut government spending is diametrically opposed to the advice we're getting from the two genuine international economic authorities, the International Monetary Fund and the Organisation for Economic Co-operation and Development.

Their advice is that, with our economy weaker than it should be, we still have plenty of "fiscal space" to strengthen the economy by borrowing to finance increased spending on worthwhile infrastructure.

All this is why I say that, these days, the economic significance of our credit rating is long gone.

It retains much political significance, however.

Governments – federal and state – still live in fear of a downgrade simply because they know their political opponents would parade this as a disaster for the government, the economy and public and private borrowers, as well as objective, authoritative proof that they are utterly hopeless economic managers.

Credit ratings are now little more than something the politicians use to slag each other off.

This is why I'm sorry we weren't downgraded this week. Only when the public experiences the ratings agencies' inability to have much effect on the interest rates we pay will they lose their power over our governments, and the pollies lose credit ratings as a political football.

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Party blame-laying conceals budget truths

Don't believe anything any politician on either side says about the mid-year budget update and the expected further deterioration in the budget deficit it reveals.

And don't let speculation about whether the government will or won't lose its AAA credit rating worry you.

These days, our credit rating is little more than something for the politicians to use to slag each other off. Its economic significance is long gone.

According to Treasurer Scott Morrison, the government's long and unsuccessful struggle to get the budget back to surplus is all Labor's fault, first because of the terrible mess it left when it lost office and second because of its refusal to support many government savings measures in the Senate.

According to Labor, the Coalition's been in office for more than three years, during which time things have got worse rather than better, and it has no one to blame but itself.

In truth, neither side is as bad as the other side claims, but each is more at fault than it is prepared to admit.

It's true Labor left office with the budget in bad repair. It had two big new policies - the national disability insurance scheme and the Gonski schools funding scheme - for whose rapidly growing cost it had made quite inadequate provision.

But it is equally true that the Abbott government's first act was to make the budget worse by abandoning various taxes and tax savings measures it didn't agree with.

Morrison speaks at length about the government's efforts to "repair" the budget, but the truth is that, since the rejection of the government's first budget by the public and the Senate, it has made no further effort to improve the budget balance, either by net cuts in government spending or net tax increases.

When Morrison speaks about all the spending cuts he has succeeded in putting through, and all those Labor has helped to block, he hopes you won't realise that their purpose was merely to stop the government's new spending decisions from adding to total spending.

That is, he has limited himself to trying to stop government spending getting ever greater. He hasn't been trying to make it smaller.

It is true, of course, that Labor has blocked many of the government's proposed spending cuts.

But to imply, as Morrison and others argue, that Labor has a moral obligation to pass all the spending cuts the government proposes, is to absolve the government of any obligation to propose savings the Senate might regard as sharing the burden of budget repair fairly between the haves and have-nots.

In fairness, the further deterioration in the budget outlook revealed in the up-date arises almost wholly from slower than expected growth in tax collections, particularly the pathetically slow growth in wages, which is not of the government's making.

Labor refuses to accept this "excuse" as payback for the Coalition's refusal to accept Labor's "excuses" when similar revenue setbacks occurred while it was in office.

This is the point being missed in all the blame laying: the main reason successive governments have had so little success in reducing the deficit is the economy's weak rate of growth since the resources boom started busting in 2011.

Some may think the economy's continuing weakness should not inhibit the government's willingness to slash and burn. Not me.

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Mining makes pollies confused about demand and supply

Since almost all of us have lived in a market economy all our lives, you'd expect the effects of supply and demand on price would be well understood, particularly by anyone who managed to get themselves into Parliament.

In fact, however, our politicians on both sides have terrible trouble working out how supply works. Sometimes they tell us increasing supply will put downward pressure on price and sometimes they tell us it won't.

Turns out they're wrong on both counts.

When it comes to natural gas, Industry Minister Greg Hunt – like his predecessors Ian Macfarlane and Martin Ferguson who, purely by chance, have since gone on to jobs lobbying for the mining and gas industries – tells us the solution to the high price and looming "shortages" is for the Victorian and NSW governments to give gas companies free rein to do their fracking wherever they choose on the states' farmland.

Adding to the eastern states' production of coal seam gas would increase supply and thus put downward pressure on gas prices and avert the risk of shortages, they tell us.

This would be true if Australia – strictly, our eastern seaboard – had a closed market. If there was no international trade in gas.

But that's the trick the pollies and the business interests they want to help don't want to draw attention to.

There's been little change to the eastern states' demand for gas, nor decline in the supply of gas from Australian gasfields.

What's changed is the decision of our governments to allow foreign investors to set up several gas liquefaction plants near Gladstone in Queensland.

By doing so they opened a link between our closed gas market and the world market, where the world price of gas just happens to be a lot higher.

The inevitable result is our wholesale gas price has doubled to reflect the world price, our manufacturers are claiming to be "uncompetitive" at such a price and people are claiming to see shortages looming.

(As is typical in a resources boom, when our politicians see their job as complying with every demand coming from the miners in their greed-driven frenzy, we allowed too many liquefaction plants to be built and now none of them is making money. But that's a separate stuff-up.)

The point is, for as long as our governments allow local gas producers to charge us the world price (which I think they should), no amount of additional coal seam gas production would be sufficient to lower that world price.

Federal pollies of both colours bang on about reducing the restrictions on fracking because they're doing the bidding of their mates/generous party donors/future employers in the gas industry and because they want to draw attention away from the truth that they allowed domestic gas prices to rise and don't want to do anything to cut them.

There'll be no gas shortage as long as we pay the world price.

When it comes to the politicians' enthusiasm for constructing Adani's Carmichael coal mine in the Galilee Basin of central Queensland, however, they leave us with the impression its addition to world coal supply would have no effect on the world coal price (or global carbon emissions, for that matter).

But we're one of the world's biggest exporters of coal. And Carmichael would be one of the world's biggest mines.

So it couldn't help but push down the world price, relative to what it would otherwise be, to the detriment of all our existing coal producers and their employees, and government royalty and company tax collections.

The Queensland government is so keen to see the mine proceed ASAP it's willing to subsidise a rail line to a coastal port by $1 billion. Can you imagine what that would do to its net royalty revenues?

It claims the rail line isn't a subsidy because it's a loan (believe that if you like) and because the line will open up the Galilee Basin to other mines.

Should they emerge, however, the downward pressure on coal prices and tax receipts would be even greater.

All this says Australia has not much to gain and a lot to lose by pressing on with the development of one more coal mine.

At a time when the whole world needs to make the transition from fossil fuel to renewable energy as soon as we reasonably can, pushing down coal prices slows the process down by increasing the relative price disadvantage of renewables.

There seems to be something about political office in Australia that interferes with our pollies' economic reasoning powers. I can't think what it might be.

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What's happening in the labour market

Oh, no! They say the Bureau of Statistics' jobs figures for November are good because they show employment growing by 39,000, with all those jobs full-time. But then they say the unemployment rate increased a click to 5.7 per cent. Huh?

It is possible to make sense of what's happening in the labour market, but only if you follow a few rules.

For a start, it's never possible to make sense of the monthly figures if you focus on the change from last month because they're subject to sampling and other errors and keep bouncing around.

You make it doubly hard if you defy the bureau's advice and focus on its "seasonally adjusted" estimates rather than its "trend" (smoothed) estimates.

Also, employment and unemployment aren't opposite sides of the same coin. There's a third possibility: neither employed nor unemployed, because you don't have a job and aren't looking for one. The statisticians call this "not [participating] in the labour force".

So it's perfectly possible for both employment and unemployment to increase at the same time - if, say, some people are leaving the unemployed because they've found a job, while others are adding to the unemployed by joining the labour force to look for work.

But let's stick to the trend figures and step back for a longer view, looking at the 12 months to November.

The figures show total employment grew by 87,000 and the rate of unemployment fell 0.3 percentage points to 5.6 per cent.

If you think that sounds good, sorry. Over the same period, the proportion of working-age people participating in the labour force, either by having a job or looking for one, fell by 0.6 percentage points to 64.5 per cent.

About 0.25 percentage points of that fall would have been caused by the ageing of the population, but the rest was probably caused by "discouraged jobseekers" ceasing to be classed as unemployed because they gave up looking for work.

The bureau points out that growth in total employment of 87,000 is an annual increase of only 0.7 per cent, which is less than half the average growth rate over the past 20 years of 1.8 per cent.

Then, when you delve into the employment story you find that while part-time employment grew by 138,000, full-time employment actually fell by 51,000.

It's not so surprising that the jobs market isn't doing as well as our reasonable rate of growth in gross domestic product would lead us to expect, because a lot of the output growth is coming from increased production of minerals and energy, which involves employing very few extra miners.

But why are those jobs we are creating more likely to be part-time? The Reserve Bank investigated this question in last month's quarterly statement on monetary policy.

It says much of the recent swing from the creation of full-time jobs to the creation of part-time jobs is explained by the economy's return to non-mining led growth since the end of the mining construction boom.

The Reserve divides the economy into three broad sectors. First, the goods-related sector: agriculture, mining, manufacturing, construction, utilities and distribution (transport, postal and warehousing, and wholesale and retail trade).

Second, the business services sector: finance and insurance, administration and support, media and telecommunications, professional scientific and technical, and rental, hiring and real estate.

Third, the household services sector: health and aged care, education, accommodation and food, and arts and recreation.

"Since 2013," the Reserve says, "employment growth has been strongest in the household services sector, where the share of part-time employment is relatively high at about 45 per cent."

Over this period, the share of part-time employment in the business services sector and the goods-related sector has also increased but, at about 25 per cent, it remains much lower than for the household services sector.

Employment growth has been weakest in the goods-related sector, partly reflecting the loss of jobs as mining construction projects come to an end and the ongoing decline in manufacturing employment.

So far we've said that, since 2013, some sectors of the economy have growth faster than others, with the sector that's grown fastest also being the one that's always had the biggest proportion of part-time jobs.

But there's also been a shift to part-time employment within each of the sectors. The Reserve says this fits with what businesses are telling it in its "liaison" interviews, that they've been hesitant to employ full-time workers until they see evidence that increased demand for their output is likely to be sustained.

Of course, the share of part-time employment in total employment has been increasing steadily since the mid-1960s. Then, it was 10 per cent; today it's about a third.

Being able to employ people for those times in the week when you need them - rather than having full-timers with little to do for much of the week - has allowed firms to increase the efficiency with which they use labour.

So there's been growing employer demand for part-time workers. At the same time, however, there's been growing willingness among employees to supply their labour on a part-time basis.

The obvious examples are full-time students, parents of very young children and, these days, older workers seeking semi-retirement.

This makes it wrong to think that part-time jobs are inferior to full-time jobs, that everyone with a part-time job really wants a full-time job (there aren't many for whom that's true) or that all part-time jobs are casual rather than permanent.

What is true, however, is that with the rise in part-time employment has gone a rise in under-employment - essentially, people with part-time jobs who'd prefer to be working more hours.

Since February 1990, under-employment's risen from 4 per cent to 8.5 per cent today, though it's been steady for the past two years.

On the downside of the resources boom, employment growth isn't as strong as we'd like it to be.

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Experts agree emissions intensity scheme the way to go

If ever there was proof that modern-day politicians are more followers than leaders, Malcolm Turnbull must be it. Last week, under pressure from the Coalition's climate change-denying rump, he dropped the ball on global warming.

He inherited from Tony Abbott a commitment under the Paris agreement to reduce our carbon emissions by 28 per cent below 2005 levels by 2030, plus a plan for a review in 2017 to determine what policies were needed to achieve that target.

Everyone's agreed that the government's existing direct action approach, taking money from the budget to pay farmers and others to cut their carbon emissions, is quite inadequate to achieve the new target.

The authorities responsible for advising the government on energy and climate change – the Climate Change Authority, the Chief Scientist, the Australian Energy Market Commission – have each decided the best approach would be to introduce an "emissions intensity scheme" on the electricity generation industry.

But last week, when Energy Minister Josh Frydenberg mentioned that the review would include examining an intensity scheme, the Coalition's deniers went ape and Turnbull summarily excluded such schemes from the review, claiming they would add too much to electricity costs.

We're not all climate change deniers, however – and far from all Coalition voters – so if we think something decisive should be done, the way forward is to convince Turnbull this is what most of his potential followers want.

In other words, it's our community and our economy and prime ministers don't get to dismiss options without us even being allowed to think about them and decide what we prefer.

Since electricity generation accounts for about a third of our total carbon emissions, it's pretty clear it will be the main focus of our efforts to reduce emissions, especially because of the emergence of renewable energy from wind and solar.

The final report of the energy market commission, released at the Council of Australian Governments meeting on Friday, evaluated three different policies for achieving the pledged reduction in emissions.

The first was one that would appeal to many environmentalists: extending the existing large-scale renewable energy target.

At present, the target is to achieve 33,000 gigawatt hours of renewable energy a year by 2020. To achieve our commitment under the Paris agreement, we'd have to more than double the target to 86,000 gigawatt hours a year by 2030.

The second approach was for a government regulator to work out which coal-fired power stations should be required to close down at which times, as renewable energy expanded.

You'd start with the oldest generators, including the particularly polluting brown coal generators.

The third approach was the one Turnbull rejected sight unseen: imposing an emissions intensity scheme on electricity generators.

You start by measuring the industry's present emissions intensity by dividing its total emissions of carbon dioxide in a year by its total production of electricity in the year.

This average becomes the industry's emissions intensity standard. Those generators operating above the standard have to get down to it by buying "credits" from those that are below it.

The standard is lowered – made more demanding – each year by the set amount needed to achieve the desired reduction in emissions.

See how it would work? The "dirtiest" generators – the coal-fired generators – also happen to be the ones whose electricity is cheapest to produce, whereas the cleanest producers – wind and solar – are the ones whose electricity is dearest.

So the cheap dirty generators are required to subsidise the expensive clean producers, thus creating a price incentive for the clean producers to expand and the dirty producers to contract.

It also means the overall price doesn't change much.

So how do the three approaches compare, according to the modelling done for the report – remembering that all modelling is built on a host of assumptions?

The extended renewable energy target turns out to be the worst approach. It leads to almost the biggest increase in the cost of electricity to consumers over the years to 2030.

It also has the highest cost per tonne of emissions reduced – $42 a throw.

This is because it doesn't allow businesses to pick the type of technology most appropriate to their needs. Dirtier brown coal would remain in the market for longer, while black coal and gas-fired generation were forced out.

Regulated closure of generators would cause the highest increase in prices to consumers, though its cost of emissions reduction is the second lowest - $19.50 a tonne.

The bureaucrats and politicians making decisions about which generators to close would have to get it right, avoiding the temptation to take account of political pressures and the interests of generous donors to party funds.

This leaves the emissions intensity scheme. It has the lowest effect on consumer prices relative to what the model assumes would happen to prices even if no attempt were made to reduce emissions.

It assumes consumer prices would still go up under "business as usual", but would rise by less under the intensity scheme.

It also has the lowest cost of reducing emissions – $17.50 a tonne.

So the option the formerly studious Turnbull rejected without considering is the best, and the one least likely to put prices up.

Well done, Malcolm. Especially as it's a safe bet Labor will be offering such a scheme at the next election.

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