Britain’s decision to leave the European Union has opened a fundamental crack in the western world. Australia’s relationship with the United Kingdom is grounded in the UK’s relationship with the EU.
Given Australia’s strong and enduring ties with the UK and the EU, the shockwaves from this epoch-defining event will be felt in Australia soon enough. Most immediately, the impending Australia-EU Free-Trade Agreement becomes more complicated and at the same time less attractive.
What will happen to trade ties?
The importance of Australia’s relationship with the EU tends to get under-reported in all the excitement about China. We might ascribe such a view to an Australian gold rush mentality. Nevertheless, Australia’s trading ties to the EU are deep and strong.
Such ties looked set to get stronger. In November 2015 an agreement to begin negotiations in 2017 on a free-trade deal was announced at the G20 summit in Turkey. Trade Minister Steven Ciobo said in April 2016 that an Australia-EU free trade agreement:
… would further fuel this important trade and investment relationship.
When considered as a bloc, the EU consistently shows up as one of Australia’s main trading partners. Consider the statistics below:
in 2014 the EU was Australia’s largest source of foreign investment and second-largest trading partner, although the European Commission placed it third after China and Japan in 2015;
in 2014, the EU’s foreign direct investment in Australia was valued at A$169.6 billion and Australian foreign direct investment in the EU was valued at $83.5 billion. Total two-way merchandise and services trade between Australia and the EU was worth $83.9 billion; and
the EU is Australia’s largest services export market, valued at nearly $10 billion in 2014. Services account for 19.7% of Australia’s total trade in goods and services, and will be an important component of any future free trade agreement.
This is all well and good. But when not considered as a bloc, 48% of Australia’s exports in services to the EU were via the UK; of the $169 billion in EU foreign direct investment, 51% came from the UK; and of Australia’s foreign direct investment into the EU, 66% went to the UK.
You get the picture.
The UK was Australia’s eighth-largest export market for 2014; it represented 37.4% of Australia’s total exports to the EU. As Austrade noted:
No other EU country featured in Australia’s top 15 export markets.
In short, the EU is not as attractive to Australia without Britain in it.
Beyond trade numbers
But the Australia-EU-UK relationship cannot be reduced to numbers alone. It also rests on values shared between like-minded powers.
Brexit represents the further fracturing of the West at a moment when that already weakening political identity is in relative decline compared to other regions of the world, notably Asia (or more specifically China).
EU-Australia relations rest on shared concerns such as the fight against terrorism advanced through police collaboration and the sharing of passenger name records. The EU and Australia also collaborated to mitigate climate change at the Paris climate summit. And they work for further trade liberalisation in the World Trade Organisation – but don’t mention agriculture.
Without the UK, these shared political tasks become harder.
Clearly, Australia-UK relations rest on a special historical relationship. However, it has seen efforts at reinvigoration, as British governments buckled under the pressure of the Eurosceptics among the Conservatives.
David Cameron addresses the Australian parliament in 2014.
Beyond everyday trade, historical links have been reinforced through the centenary of the first world war and the UK-Australia commemorative diplomacy that has come with this four-year-long event.
Cultural ties are most regularly and publicly affirmed through sporting rivalries such as netball, rugby and most notably cricket. Expect these ties to be reinforced as the UK seeks trade agreements and political support from its “traditional allies”.
For those with British passports, there will be a two-year period of grace as the UK negotiates its exit. After that, it will be quicker to get into the UK at Heathrow, but this might be small consolation for the loss of a major point of access to the EU.
The vote to leave is a major turning point in Europe’s history. It marks a significant crack in a unified concept of “the West”. It is not in Australia’s interests.
It’s time for Australia to make new friends in Europe.
Author: Ben Wellings, Lecturer in Politics and International Relations, Monash University
British people have woken up to the news that their country has voted to leave the European Union. Along with this, there has been turmoil in financial markets – the pound has hit a 30-year low and the FTSE dropped more than 8%.
Though the Brexit process will probably take two years (and the UK will remain a full member of the EU in the meantime), some aspects of the decision will affect British people straight away.
1. The pound in your pocket
There is inevitably going to be a period of uncertainty and turmoil. As the referendum result emerged, the pound fell 10% against the US dollar on the foreign exchange markets and 7% against the Euro. If this persists, things the UK imports, such as oil (affecting domestic fuel prices and petrol), foreign cars, coffee, bananas and clothing, will cost more. Overall, then, the general price level may rise meaning that your income will not stretch quite so far.
If you’re holidaying abroad over the coming months and haven’t bought your currency yet, the weaker pound means you’ll also now pay more.
2. Your job and income
A weak pound affects industry as well and so may impact on jobs. Company costs will rise if they import their raw materials and most firms will be hit by higher fuel prices. But the fall in sterling makes it easier for exporters to sell their goods and services abroad. So some jobs and wages may be more at risk, while recruitment rises in other areas.
Longer term, economists have been remarkably consistent in predicting that UK growth is likely to be lower outside the EU than it would have been inside. Businesses do not like uncertainty, so they may put off investing in new plant, machinery and jobs, as being outside the EU trading bloc may make trading with other countries more difficult and some firms may decide to quit the UK. This could mean that jobs and wages will be lower than they might otherwise have been, though not necessarily lower than today.
Before the referendum, Chancellor George Osborne threatened a post-Brexit emergency Budget that would cut public spending and raise taxes. This seems an unlikely immediate response since it would further depress the UK economy just when it is reeling with uncertainty and MPs across all parties were quick to say they would not support such measures. A new prime minister, due from October, may well appoint a new chancellor with his or her own ideas.
3. Your savings and pensions
Uncertainty while markets adjust and firms decide how to respond means the UK stock market is likely to be volatile for some time. Anyone who has recently retired and opted to take an income using drawdown (periodic cashing in of a pension fund still invested in the stock market) may have to take tough decisions about drawing less income now or risk running out of retirement savings later on.
Pensioners may face some complications.shutterstock.com
Savers have suffered since the global financial crisis of 2008 with rock-bottom interest rates. It’s unclear what might happen to these. On the one hand, rising consumer prices may push interest rates up; and credit rating agencies have said they may downgrade UK government debt which means the government would have to raise interest rates to persuade savers to buy its debt. But, if the economy struggles to grow, the Bank of England – which has said it stands ready to deploy any measures to maintain financial stability – might embark on new rounds of quantitative easing to keep interest rates low to encourage economic growth.
4. Your home and mortgage
While savers would welcome a rise in interest rates, this would increase mortgage repayments for borrowers and could even trigger repossessions. The International Money Fund has predicted that UK house prices could drop sharply post-Brexit. You might be concerned about that if you are in one of the six out of ten UK households that own their own home. But this could be good news for younger generations who have been struggling to afford a home.
Author: Jonquil Lowe, Lecturer in Personal Finance, The Open University
Bank of England Governor Mark Carney was admirably quick to read the unfolding economic dangers of a Brexit when the referendum result was declared. While stock markets and sterling plummeted amid developing financial stress, the governor’s statement immediately brought to mind the famous “whatever it takes [to save the euro]” intervention by European Central Bank chief Mario Draghi at the height of the eurozone crisis in July 2012.
Carney started by making clear that the British banks are safe since their capital requirements are now ten times higher than before the 2008-2009 financial crisis. The purpose of these high requirements is to ensure banks will be able to pay off their depositors, which aims to reduce the risk of a banking panic.
Indeed, the UK banks have been stress-tested against more adverse scenarios than what the Treasury thought that Brexit might trigger. The scenarios included residential property prices falling by over 30% and the level of GDP falling by 4% at the same time as a 5% rise in unemployment.
The governor was obviously seeking to reassure the public that whatever the economic/financial headwinds after the Brexit vote, British banks are rock solid and won’t see a repeat of the queues outside Northern Rock branches nine years ago.
Carney was absolutely right to do this. Lack of confidence in domestic banks often triggers recessions as depositors withdraw money, which restrict the banks’ ability to lend and keep the economy growing. This can be particularly lethal when combined with capital flight, which is where nervous investors offload a country’s currency and assets priced in the currency for fear that it is falling in value.
In Britain’s case, there were reasons on the ground to justify the intervention. British customers have queued outside banks to ditch sterling in an attempt to “hedge” against Brexit. And the news of sterling dropping like a stone on the night of the count was a strong signal that investor confidence was deserting the UK.
The worries of these investors are well summed up by the IMF’s warnings over Brexit:
[It] could entail sharp drops in equity and house prices, increased borrowing costs for households and businesses, and even a sudden stop of investment inflows into key sectors such as commercial real estate and finance.
The UK’s record-high current account deficit and attendant reliance on external financing exacerbates these risks. Such market reactions could sharply contract economic activity, further depressing asset prices in a self-reinforcing cycle.
The liquidity weapon
As well as the reassurances about strong banks, Mark Carney also said the Bank of England is prepared to inject up to £250bn of liquidity for financial institutions to keep the economy going in these difficult times ahead. Without doubt, this is substantial financial help amounting to some two-thirds of the £375bn that the central bank has already pumped into the system in the form of quantitative easing in recent years.
Carney also referred to “extensive contingency planning” with Chancellor George Osborne throughout the night, as well as mentioning potential “additional measures” such as providing substantial liquidity in foreign currency if it was needed. That might desperately be needed by British companies trading internationally which might be exposed to large fluctuations in exchange rates because of turbulence with sterling.
Yet the governor deliberately didn’t spell out what any other measures might be. One option might be to cut the base rate down to zero or even charge banks for “parking” their cash with the Bank of England. The European Central Bank is already doing this to encourage European banks to continue lending to the private sector.
Carney was right not to reveal his full defensive armour yet. Suffice for the time being to let both the public and the markets know he has other policy weapons in place and is ready to be tested if the economic conditions make it necessary.
Cameron steps down
The governor’s speech came shortly after David Cameron resigned. The British prime minister was trying to show a very brave face by delaying his departure to October. This makes absolute economic and political sense because the captain of a sinking (UK) ship has a moral obligation to be the last one to abandon it.
Yet in truth, the eurosceptic Tories would hardly trust him to start the Brexit negotiations with the EU when he has fought passionately to stay in. He therefore might lose his job much earlier than he thinks. Not that this would have made any difference to the markets – his defeat made his departure unavoidable. The only thing that might have further traumatised the markets would have been if he had not resigned.
But despite Carney and Cameron’s efforts to steady the markets, they could do nothing to disguise the UK’s lack of preparation or plans for handling the Brexit negotiations. There are many possible options for trade deals with the EU but no clear direction.
The Brexit camp, particularly Justice Secretary Michael Gove, has attacked the economic “experts” who overwhelmingly warned of the huge economic and financial risks of such a move. They warned that four UK companies would lose out for every one that benefits from leaving the EU.
The odd argument of the Brexit camp is that these experts have to be wrong because they did not predict the 2008-09 financial crisis. “Once wrong, always wrong,” in other words. Now that Mark Carney has had to step in while the politicians try and work out what happens next, we will know pretty soon whether we economists are going to be wrong this time around. Don’t be surprised if we haven’t seen the last intervention from the Bank of England.
Authors:Costas Milas,Professor of Finance, University of Liverpool; Gabriella Legrenz,Senior lecturer in economics, Keele University
The UK has voted to leave the European Union but even before all the votes were counted volatility made its way across Asian markets and to Australia.
The S&P ASX200 has finished 3.3% down at the close, wiping off approximately $50 billion in value, while the Australian dollar has dropped 3.4% to 73.4 US cents.
Richard Holden, Professor of Economics at UNSW says the volatility is likely to continue at least for another 24 hours.
“We could see volatility, perhaps not as extreme as the current levels, for a really extended period of time,” Professor Holden says.
One of the major factors in this will be how affected UK banks and therefore Australian banks will be by this decision, as they rely on short term funding for their operations.
“If those markets start to dry up and there’s uncertainty about their funding getting rolled over, one day to the next, then that’s when things can go pear shaped within an incredibly short period of time,” he adds.
The position of hedge funds, banks and other financial institutions in betting on currencies in over-the-counter markets (not regular currency markets) in times like this, also adds to the uncertainty.
“Basically we don’t know, what we don’t know and suddenly there’s a liquidity crunch and someone gets into trouble and that has flow-on effects like we saw in 2008,” Professor Holden says.
The S&P ASX200 index closed -3.3% following the Brexit vote.S&P ASX 200
He also warns that a drop in the Australian dollar shows that money could flow out of Australia and back to the UK as financial institutions there change their positions.
In the longer term, Brexit could affect the way Australian companies trade with the European Union through the UK.
“All of a sudden that’s going to be more complicated, it’s going to have to go through under some new trade agreement and we know that a series of bilateral trade agreements are always more complicated and have more nuance than large multilateral trade agreements,” Professor Holden says.
All this comes as Australia goes into the last week of an election campaign and this volatility will keep economic management top of mind for Australian voters.
“I don’t think either side of politics in Australia has an exclusive right to say they are going to be the best economic managers, I guess we’ll have to wait and see about that as well.”
Jenni Henderson, Assistant Editor, Business and Economy, The Conversation Interviewed Richard Holden,Professor of Economics, UNSW Australia
A National Broadband Network (NBN) based on Fibre to the Premises (FTTP) was, and still is, the right answer for Australia’s broadband needs.
Compared to the original FTTP-based NBN, we are currently on the way to a much poorer performing broadband network with a mix of FTTP, fibre to the node (FTTN) and other technologies. It will entail increased long-term costs and be completed at about the same time as the original project would have been completed.
Around the world, the direction in which new builds of fixed broadband networks are headed has become clear. The world is increasingly moving towards FTTP. As a consequence, advances are being made in FTTP technology that make it cheaper and easier to deploy.
These developments, which have taken place in the last few years, have only reinforced the rationale for basing Australia’s NBN on FTTP.
Not too late to change
It is not too late to change the current direction of the NBN, but that change would need to be made in a controlled and managed way to ensure the project is not subject to another major disruption.
Why has it been so hard to get at the facts regarding the costs and timing of the FTTP-based NBN? The answer, as we all know, is that the NBN project has been from its inception a contentious political issue.
Initiated by the Labor party back in 2009, it was a good example of a government being courageous enough to initiate a large and complex project for the public good.
The original NBN was a visionary project and would have created a valuable asset for the Australian public. It didn’t take long, though, for the attacks on the project to start.
But the fact – confirmed this week – remains that over the past three years, Australia’s world ranking for average peak connection speeds dropped from 30th to 60th. We shouldn’t have been happy with being ranked 30th in the first place.
Yet the drivers of faster speeds and capacities for fixed broadband have not abated. Quite the contrary.
The latest Australian Bureau of Statistics data shows internet usage has been increasing over the years, from 191,839 terabytes downloaded in the month of December 2010 to 1,714,922 terabytes in December 2015. That’s nearly a ninefold increase in five years.
That’s why the debate in the United States and Asia is about gigabit per second speeds, not about whether 25MBps or 50Mbps is sufficient.
It is a bit surprising that we continue to hear the argument that nobody is buying a 1Gbps service today, so why build a network that can deliver that much speed? 25Mbps to 50Mbps is more than enough.
It seems especially curious that a government that styles itself as the innovation and infrastructure government should argue this. Because this argument betrays a complete lack of understanding of what the original FTTP NBN was all about.
It was about providing the vital infrastructure that Australia needs in order to remain competitive internationally in the 21st century.
It is arguable that, today, most homes and businesses can get by with speeds of up to 50Mbps. But already there are many home-based businesses that can’t and are demanding 100Mbps or more.
Gigabit services are just starting to emerge elsewhere in the world, so the applications that can take advantage of this type of speed are in their infancy. But we all know they are coming.
To spend billions of dollars on building a major piece of national infrastructure that just about meets demand today, but doesn’t allow for any significant growth over the next ten or 20 years is incredibly short-sighted.
It is such a pity that so much time and effort has been spent on trying to discredit and destroy the original FTTP-based NBN plan. Equally, it’s a pity the Coalition has put its faith in what has turned out to be a short-sighted, expensive and backward looking multi-technology mix (MTM) plan based on copper.
The nation is going to be bearing the consequences of those decisions for years to come – in higher costs and poorer performance in an area that is critical to its long-term future. Betting tens of billions of taxpayers dollars at this time on copper access technologies, as the Coalition has done, is a huge miscalculation.
The number of telcos still focussed on squeezing out the last bit of value from their old copper networks continues to decrease every year. Even the UK’s BT, which has been the poster child for FTTN, is now planning to increase its FTTP deployment, in part as a response to pressure from the UK regulator, Ofcom.
Come the election
No matter what the outcome of the upcoming election, the original vision of a broadband network built largely on a future-proof FTTP solution is now going to happen over a longer period and at a greater cost to taxpayers.
The Coalition is likely to continue with the FTTN and Hybrid fiber-coaxial (HFC) deployments and the peak funding is likely to be in the range of A$49 billion to A$56 billion. It will take a “heroic” effort, as NBN Co’s chairman Ziggy Switkowski has said, to have the network completed by the end of 2020.
Just when the FTTN equipment will need to be upgraded to provide higher speeds is an unknown but given what is happening overseas, it is unlikely to be very long. No one has yet made public the estimated costs of this upgrade.
Should the Labor party win the election, we can expect a managed transition from FTTN to FTTP, increasing the number of premises served by FTTP by about two million.
Given what we now know about the deployment costs of FTTP versus FTTN, I would not expect this transition to FTTP to make a big difference to deployment costs or timing of completing the NBN. It will result, however, in a network that is a step closer to the desired end state.
While it is impossible to turn back the clock on the MTM, it is still possible to make changes to the current direction, without introducing another major disruption. Changes that will get us closer to building the right network for the long term.
It is becoming increasingly obvious, especially to customers, that an NBN based on FTTP is a much better network than an MTM-based NBN from every angle – speed and capacity delivery, maintenance costs, reliability, longevity and upgrade costs.
An FTTP network would be a much more valuable public asset and could generate greater cash flows for the government due to lower maintenance, higher revenues and almost no upgrade costs. And it would be vastly superior in driving growth through the wider economy.
So it is a great pity that before making the shift to the MTM, the Coalition did not heed the words re-quoted by the then independent MP for New England, Tony Windsor: “Do it right, do it once, do it with fibre.”
Author: Mike Quigle, Adjunct Professor in the School of Computing and Communications, University of Technology Sydney (Mike Quigley was affiliated with NBN Co for the period from July 2009 to September 2013. He was NBN Co’s CEO during this time.)
Over the last 25 years, home ownership rates have fallen sharply for young Australians. Between 1982 and 2011, the home ownership rate for young adults aged 25 to 34 years dropped from 56% to 34%. Growing concerns about their home ownership prospects have prompted those in Generation Y (defined as 18-35 years for the purposes of this article) to become increasingly vocal about the difficulties of achieving home ownership.
The vast majority (86%) of Gen Y households living in the private rental sector or with their parents aspire to own a home, although not necessarily in the short term. Of these households, 30% believed they would be able to buy a home in the next two to five years. One-quarter believed home ownership was five to ten years away. Only 6% did not believe they would ever be able to buy a home.
Although many are choosing to delay home ownership as a lifestyle choice, others are forced to delay because of a lack of affordable housing options. Across all age groups, home owners were more likely to perceive their housing as affordable.
The survey reported that those living in unaffordable housing were making significant sacrifices to meet their housing costs. And 55% said sustaining high housing costs was leading to mental health issues, with those most affected in the private rental sector. This highlights the importance of affordable housing.
The ‘bank of mum and dad’
The deposit gap is the biggest barrier to home ownership. The survey calculated the average gap between the deposit currently available to an individual and the amount the individual expected to need for home purchase. This gap was around A$50,000.
Among Gen Ys already in home ownership, 38% reported they had received financial assistance from their parents or grandparents. For those yet to enter home ownership, only 17% expected to receive some assistance to buy. A further 24% indicated help might be offered.
Therefore, almost 60% of Gen Ys surveyed are unlikely to receive the benefit of intergenerational assistance. This may prevent them from ever entering home ownership.
Parental assistance to purchase
Housing opportunities for ‘Generation Rent’
Assistance for home purchase is becoming more and more important for Gen Ys. They are being dubbed “Generation Rent” as the Great Australian Dream of home ownership moves further out of their reach.
Among Gen Y survey respondents, three-quarters rated the First Home Owner Grant and stamp duty relief as being important in helping them into home ownership. Even the scrapped first home saver accounts scheme was viewed as important. The generation is becoming increasingly reliant on these volatile demand-side incentives.
Importance of government assistance
So what can be done to help those who wish to enter home ownership but lack financial support? Government-backed low-deposit loans such as Keystart in Western Australia and Homestart in South Australia, which are designed for those on low to moderate incomes, have made a real difference to thousands of households. Although not without risk to government, these type of loans could be introduced in other states.
Shared ownership products enable the purchaser and a third party to share ownership of the dwelling, which reduces deposit requirements and monthly payments. These are successful in the UK, accounting for 18% of total housing stock, and are growing in popularity in Australia under the schemes noted above. There may be scope for community housing providers to step into this sector in partnership with private developers.
Discounted home ownership is another option. This option could be tied to developer contributions as part of inclusionary zoning requirements. However, it must be structured in a way that ensures any discount on the market price is retained in perpetuity.
The National Rental Affordability Scheme had its critics but at least provided a supply of affordable housing that reduced the rental burden for many households. That, in turn, increased their chances of saving for a deposit.
The rental sector is in dire need of a replacement scheme, which could possibly be enhanced using a model whereby investors offering new rental dwellings below market rents for a defined period are eligible for stamp duty relief. The argument will be raised that this will encourage demand from investors, raising prices.
It is more critical than ever for government to implement meaningful structural reforms that improve home purchase affordability for Generation Y. Otherwise, growing numbers of Gen Ys all over Australia face a lifetime of renting without the financial and emotional security of home ownership.
Authors: Steven Rowle, Director, Australian Housing and Urban Research Institute, Curtin Research Centre, Curtin University;Amity Jame, Senior Research Officer, Curtin Business School, Curtin University;Rachel On,Deputy Director, Bankwest Curtin Economics Centre, Curtin University
“Big data” is a catchall term for any data set of exceedingly large volume. It could be transaction information at a credit card company, invoice data at an online retailer, meteorological measurements from a weather station. All these data sets have unique characteristics that make it extremely difficult to use conventional computing technologies and techniques to store and process them for analysis. Their variety is daunting, and high velocity is required to handle them in a timely manner.
So who is going to store, manage and process all this information? Well, why not you? Companies are starved for people with this kind of expertise. Big data is a growth industry and people from a variety of academic backgrounds can find successful careers in this area.
But you didn’t major in “big data”? Don’t worry. Your academic background shouldn’t be an inhibiting factor when you start to contemplate becoming a big data professional.
People working in fields such as physics, bioinformatics, statistics, political science and psychology are already heavy users and analyzers of a large amount of data. Transition from these types of disciplines to big data analytics could be relatively smooth.
If your original education and training didn’t focus on data, that’s not necessarily a problem. Your own discipline-specific knowledge, insights and perspectives can be valuable when figuring out how to leverage big data in the most sensible way. The only catch is you need to be willing and able to acquire the technical skills necessary to either analyze or work with big data.
The most fundamental of these focus on data infrastructure – how the data is actually housed and accessed. These infrastructure jobs involve developing and maintaining the necessary hardware and software. A cloud computing environment is especially well equipped to handle big data due to its scalable nature.
Big data management professionals rely on the data infrastructure to actually populate it with data and manipulate them. Conventional database management workers are natural candidates who could be trained quickly to work as big data management experts. They already have general database management knowledge. But they need to get up to speed on dealing with big data. These can be much more unstructured than what you find in a traditional database, where each record conforms to a certain structure in the form of data fields and types. Imagine a student record, with discrete first name and last name fields. Big data often doesn’t have this kind of nice organization: It can be as unstructured as a bunch of Twitter feeds or Facebook postings by millions of users.
Statisticians are essential in the big data industry. They’re the number crunchers who specialize in analyzing and interpreting the data. There are many advanced techniques used by statisticians, which require years of training. They depend on the data infrastructure providers and data management workers to store and retrieve their source data for further processing.
Visualization specialists are also key in the big data industry. One of the most critical aspects of big data analytics is communicating the results of an analysis to decision-makers – and they often lack expertise in data interpretation or statistics. Visualization empowers a layperson to understand the significance and implication of the numbers produced by a big data analytics effort. Think about being presented with a large set of numbers that you’re told indicate a changing climate. It’s a lot easier to understand the data’s significance when shown a graph with a sharp turn upwards, implying exponential growth.
Finally, machine learning experts focus on automating the statistical and visual interpretations of big data. Automation is critical, especially when the amount of data to be analyzed is beyond human capabilities – as is the case in most big data scenarios. Machine learning is based on self-learning algorithms. These computer programs autonomously enhance their own performance and accuracy through trial and error.
Many curricula available today through universities provide foundational knowledge in all the technical areas of big data. Students can eventually pick their specialty, which can be further honed in a graduate program.
And the most successful big data worker isn’t just a numbers geek. People in this area also need to have a business mindset. Companies are always eager to leverage the information stemming from their big data analyses. They’re looking for people who naturally make connections between actionable information and what the companies are striving to accomplish in both the short and long term. If you aren’t interested in linking these two interests, your job security may eventually be at risk.
You could focus on any one of these areas of big data – data infrastructure, data management, statistics, visualization, machine learning – and become an expert. Another option is to become a generalist; you have exposure to all these technical requirements and as a project manager work with the specialist to solve any given problem.
As a university professor specializing in information sciences and technology, I encounter many students who figure out their true passion for big data only during their senior year while doing their job search; by then, they’ve missed a golden opportunity to prepare themselves academically for this thriving emerging profession. The earlier this epiphany comes before graduation, the better. But there’s nothing holding back grad students or adult learners from investing their time wisely and acquiring the necessary skills. This is especially true in the field of big data analytics due to the abundance of learning resources in the form of both self-learning and traditional education.
What are you waiting for? Start your journey today.
Author: Jungwoo Ryoo, Associate Professor of Information Sciences and Technology at Altoona campus, Pennsylvania State University
Glenn Stevens’ ten year stewardship of the Reserve Bank of Australia has been characterised by remarkable challenges. Yet, if the Australian economy has shown considerable resilience over this troubled decade, particularly during the global financial crisis, part of the credit certainly goes to the RBA.
When Stevens’ deputy, Philip Lowe succeeds him in September, he will need to continue to shepherd Australian prosperity through the challenges of global deflation and faltering global economic growth.
What direction will he take with the country’s monetary policy?
Glenn Stevens’ Legacy
Under Stevens, inflation has remained relatively stable and predictable, which is the main target for a central bank like the RBA. The repercussions of the financial crisis in North America and Europe have been mostly avoided thanks to the solidity of the Australian financial system, which is also a key responsibility of the RBA.
Sure enough, the exchange rate has experienced some wide fluctuations. But in an economy where the central bank targets inflation and there is no external anchor, these fluctuations are inevitable. In fact, the flexibility of the exchange regime has been another important factor driving Australia’s resilience.
Finally, the RBA has maintained its strong reputation and credibility both domestically and internationally; and in the current context where central banks in many industrial countries are blamed for poor macroeconomic management (well beyond their actual faults), this is no little achievement.
A solid background
A graduate from the University of New South Wales, Lowe holds a PhD from the Massachusetts Institute of Technology. He began his career with the RBA in 1980 and, until 1997, occupying a various positions in the International Department and Economic Group, before becoming Head of the Economic Research Department in 1997-98 and then the Financial Stability Department in 1999-2000.
In 2000-02 he was Head of Financial Institutions and Infrastructure Division at the Bank for International Settlements. After returning to the RBA, he headed the Domestic Markets and Economic Analysis Departments.
In 2004 he was appointed Assistant Governor (Financial System), then Assistant Governor (Economic) from 2009 until 2012, when he assumed his current position as Deputy Governor. This already impressive curriculum is enriched by several academic publications.
Lowe’s on monetary policy and financial stability
The RBA operates with an inflation target; that is, its objective is to use monetary policy to stabilise inflation at around 2%-3% on average over the business cycle. The pursuit of the inflation target requires the RBA to respond to demand pressures that can eventually lead to undesirable fluctuations in inflation and consumer prices.
In a low inflation environment such as Australia, these demand pressures can manifest themselves in rapid credit and asset prices growth, which in turn trigger episodes of financial instability.
In some of his academic work, Lowe has documented these links, showing that inflationary pressures are likely to become evident in asset prices before they show up in goods and services prices.
Taken to the operational level, this means that the emergence of an asset-price bubble calls for a deflationary intervention of the RBA before the further enlargement of the bubble threatens financial and monetary stability.
We can therefore expect Lowe’s RBA to be watching credit and asset markets closely and be prepared to respond to fluctuations on such markets as a way to prevent a more general increase in consumer prices. To use an economist’s jargon, credit and asset markets become part of the monetary policy reaction function of the RBA.
But even under an inflation target regime, monetary policy should concern itself with the cycles of the “real” economy (that is, cycles of gross domestic product and employment). Provided that the inflation target is not compromised, monetary policy should be adjusted to stabilise cyclical changes in production and labour market conditions.
In fact, the RBA has never been the type of excessively hard-nosed central bank that exclusively pays attention to monetary stability. Even recently, monetary policy has been significantly accommodating, meaning that interest rates have been kept low as a way to support the cyclical recovery of the Australian economy.
This approach to monetary policy is very likely to continue under Lowe. For instance, in a recent address to Urban Development Institute of Australia (UDIA), he indicated that “[this] low inflation outlook provides scope for easier monetary policy should that be appropriate in supporting demand growth in the economy.”
In this regard, the challenge for him will be twofold. For one thing, as interest rates continue to decline, the effectiveness of further interest rate cuts in stimulating the real economy is likely to weaken. For another, a debt-obsessed government might end up relying too much on monetary policy and too little on fiscal policy to stimulate the economy.
This would then place the RBA in a difficult position, with Lowe having to protect the independence and autonomy of his institution.
Lowe’s on the long term prosperity of Australia
What else can monetary policy do for Australians? Someone might be tempted to argue that monetary policy should deliver long-term growth and prosperity.
In a sense, any public policy should aim at the greater good of the community. Monetary policy does that by delivering stable financial and monetary environment and by helping the economy to recover from short-term cyclical fluctuations.
But beyond that, prosperity becomes a matter of long term productivity growth and innovation, which in turn call for actions that fall largely outside the realm of monetary policy.
Sustaining productivity requires reforms to enhance competition, investment in transport infrastructure and in high quality education. Similarly, innovation stems from interventions that specifically support new entrepreneurial activities while preventing the distortions of old-school import substitution policies.
Active labour market policies are required to support the process of structural transformation of the economy and to guarantee that workers can relocate from declining to emerging sectors.
The RBA, or any central bank for that matter, is not meant to provide all that. In fact, expecting the RBA to do all (or even only some) of the above would tantamount to compromising its fundamental functions, throwing the Australian economy towards an era of financial and monetary instability and low economic growth.
In his October address to the CFA’s Australia Investment Conference, Lowe explicitly acknowledged that, ultimately, the rate at which living standards improve is unlikely to be driven by the actions of the central bank.
The hope is that the government will listen to him and take responsibility for bringing the Australian economy into a new era of prosperity.
Author: Fabrizio Carmignani, Professor, Griffith Business School, Griffith University
Housing affordability and tax reform have shaped up to be two of the defining issues this election. The Property Council of Australia – which describes itself as “the Voice of Leadership” – has helped frame the debate on behalf of its 2200 company members.
The council began as the Building Owners and Managers’ Association of Australia (BOMA) in 1969, and was renamed the Property Council of Australia in 1996, with advocacy a core focus. The Residential Development Council and International and Capital Markets division were formed in 2001 and the Retirement Living Council in 2015.
With a board of directors drawn from Australia’s largest residential and commercial developers, the Property Council’s considerable annual revenue (A$27.3 million in 2015) is drawn primarily from membership fees and services.
The financial stakes are high when it comes to lobbying for regulatory settings which favour property development and investment. The Property Council’s healthy budget for advocacy and communication ($6.4 million and $1 million in 2015 alone) has generated a voluminous amount of reports, advertising campaigns and government submissions on taxation and planning reform. Another $7.2 million for “networking” ensures that this information is disseminated where it counts.
These deep coffers have funded the Council’s high profile television campaign to preserve negative gearing and capital gains tax discounts in response to mooted changes early this year. Likening the housing market to a fragile house of cards on the brink of collapse, the ad (released on 22 February) carried a menacing warning, “don’t play with property.”
The government has got the message. The Treasurer, Scott Morrison, who served as National Policy and Research Manager for the Council between 1989-1995 ruled out changes to negative gearing in the lead up to the 2016 Budget. Despite speaking out against negative gearing prior to becoming Prime Minister, Malcom Turnbull also changed his tune recently, rejecting “reckless” changes to existing arrangements and suggesting that aspiring home buyers hit up their parents for help.
While the campaign to retain negative gearing is the Property Council’s most visible, behind the scenes the council has been busy meeting with government and writing submissions. In 2015 alone, the NSW division wrote 55 submissions and attended an extraordinary 230 government meetings. Its 2016 election brochure presents a number of “solutions” to “grow the economy through property”. Here are some highlights.
Negative gearing and the CGT
The council wants to retain negative gearing (which allow interest rates and other expenses associated with housing investment to be offset against total income) and capital gains tax discounts on investment properties. This is despite substantial evidence that these bonuses stimulate demand for housing, pushing up prices and leaving first home buyers unable to compete. But by framing housing affordability problems as a symptom of supply side pressures rather than demand side incentives, the council shifts the affordability debate to planning reform.
Housing and planning reform
Current incentives for property investment (such as negative gearing) don’t target new housing supply – only a small proportion of investor loans finance new dwellings. So the Council argues that Commonwealth payments to the states for “micro economic reform” should incentivise planning system changes needed to “turbocharge housing supply pipelines and deliver innovative affordable housing solutions.”
This is a tired argument which ignores the years of planning reform already undertaken by the states and territories, while levels of new housing production are currently at their highest in decades. This supply has done little to dampen price inflation in a market awash with domestic and foreign investors.
While the Property Council always bangs on about bottlenecks in housing supply (which it argues are caused by planning system constraints), such arguments miss the obvious issue that prices are a result of an interaction of supply and demand. What the combination of negative gearing and capital gains tax do is to drive demand so hard in boom times that even with sharp increases in supply, prices keep on rising, especially in today’s low interest environment.
The chart below shows this problem with respect to Sydney. It shows dwelling completions falling slowly when prices flatlined after the 1996-2004 boom, but rising in line with price inflation from mid 2011 on.
Prices: Department of Family and Community Services, Rent and Sales Report.Source: Completions. NSW Department of Planning, CC BY-SA
The Council’s election platform does call for institutional investment in affordable and social housing, and this is one idea worth taking up.
Cities and Infrastructure
The Property Council support long term infrastructure planning and delivery, coordinated by Infrastructure Australia. Who doesn’t?
But the problem is how to assign the costs and benefits. Land value rises due to investments in public infrastructure – such as a new rail line or road – are typically pocketed by landowners and developers.
Commonwealth and state governments are now canvassing value capture arrangements which would use some of this uplift to offset costs of provision. The council oppose this model, instead suggesting Tax Increment Financing (TIF), which leverages increases to commercial rates in defined districts.
While popular in some parts of the US, it has not been proven effective for larger schemes. It would be difficult to implement in Australia because our recurrent property charges are much lower than the US.
The Property Council also wants existing development contributions towards basic facilities like open space, local roads, and footpaths to be wound back, along with stamp duties on property transactions.
The idea of removing stamp duty has some merit (at least for domestic purchasers), since taxes on property transactions can discourage mobility, deterring retirees from moving to a smaller home, for example. But experts think stamp duty should be replaced by land taxes, to encourage more efficient use of land.
This would also provide a mechanism for capturing back values arising from public infrastructure investment. Not surprisingly, the Property Council thinks otherwise, calling instead for a higher GST.
While the Property Council complains about unfair tax burdens on its members, they seem content to spend a lot of money on their advocacy and networking activities. Described by economists as “premium seeking expenditure”, lobbying for more generous regulatory and financial settings clearly promises a high return for the property sector.
But it’s important to remember that despite their size, the Property Council only represents a portion of the development, construction, and real estate industry – they don’t really cover many smaller suburban developers or house builders. The question is whether the “Voice of Leadership” will dominate the agenda or whether wider perspectives on housing and cities will be heard.
Authors: Nicole Gurra, Professor – Urban and Regional Planning, University of Sydney; Peter Phibb, Chair of Urban Planning and Policy, University of Sydney
We see their spokespeople quoted in the papers and their ads on TV, but beyond that we know very little about how Australia’s lobby groups get what they want. This The Conversation series shines a light on the strategies, political alignment and policy platforms of eight lobby groups that can influence this election.
A complacent government could easily adopt a wait-and-see approach when it comes to the effects of technology on our economy, but a report from the Productivity Commission advocates what governments need to do to confront digital disruption – get out of its way.
Nobody would mistake the Productivity Commission program for that of a central planner – and just as well. If today’s technologies do lead to a fourth industrial revolution as transformative as the steam, electric and information technology revolutions before it, much of the work will be done outside government.
The report reviews how technology changes are affecting firms and markets, work and incomes. It contradicts some of the solutions already touted by politicians, such as the emphasis on STEM (science, technology, engineering and mathematics education) graduates and throwing lifelines to struggling firms or industries.
It argues that government should remove regulatory barriers to the spread of innovation. Its recommendations are generally sound, but it fails to provide solutions for privacy and ownership of data in the digital economy.
Technology disrupts but productivity growth isn’t following
Devices connected to industrial-strength “cloud” computing underpin today’s digital disruptions. But the revolution goes much deeper than just phones, sensors and robots.
The report finds that technology is blurring the lines between industries that make things and those that provide services. It is also shifting market power towards those who control data and host online transactions, and creating new business models such as the ‘sharing economy’.
Yet for all that, digital disruption has failed to reignite productivity growth from its decade-long slowdown. That might be because current innovations, impressive as they are, are not as transformative as those of previous revolutions. Perhaps their benefits are yet to be fully realised, or are not picked up in official measures.
The report turns to concerns of income distribution and unemployment produced by technology. As new technologies such as machine learning automate many tasks that white collar workers do today, some workers will struggle to adapt.
Technology changes in recent decades may also have helped to propel top earners forward faster than others. Yet the report points out that the last two centuries of technical change led not to mass unemployment but to huge and broad-based improvements in living standards.
What should governments do?
The report urges governments to remove barriers to the spread of innovation, deploy digital technologies to deliver services, and introduce new regulations only where there is strong evidence they are needed. The recommendations, though high-level, are sensible.
The Productivity Commission hews close to its standard line that governments often get in the way of innovation. It recommends that governments only regulate to reduce risks where the evidence supports it, and that they experiment with temporary regulations for innovative business models. The Australian Securities and Investment Commission is already doing this for financial firms.
It acknowledges competition regulators may ultimately need to impose access conditions for digital platforms with strong market power – as the ACCC did recently for a new taxi-booking app backed by incumbents.
On industry support, the report argues that governments should help displaced workers rather than propping up firms or industries. This is the right call: industry support too often throws good money after bad, and can lure new workers to industries that rely on subsidies to survive. One example is what has happened with the auto industry over many years.
The report notes that as the amount of data held on all of us has exploded, protecting privacy and preventing unlawful use has become critical. But there is disappointingly little discussion of control and ownership of data – the single biggest asset underpinning the digital revolution. The Commission must fully address what control consumers should have over their data in its current inquiry on data availability and use.
The report argues that with the gig economy, one reliant on workers taking short-term contracts rather than secure jobs, in its infancy and that it is too early to change labour regulations and the welfare system, which is also what other research has concluded.. It concedes changes may be needed as this form of work grows.
It argues correctly that there is no time to waste in the race between education and technology. Pointing out that STEM does not provide everything workers need to thrive (a finding others have made) in a changing labour market, the report urges instead that broader deficiencies in the quality of secondary and tertiary education be addressed. Governments should tackle these with a sense of urgency: Australia is already busy under-preparing the students who will be the mainstay of the mid-century workforce.
Finally, the report recommends that governments use new technologies to improve service delivery, provide more choices, better target services and cut costs. Governments can also use technology to help the community get the most out of infrastructure – with congestion pricing of roads, or in adapting roads for use by autonomous vehicles, for example. But to get there, governments will need to run trials, share data among agencies and with the public, and in other ways overcome their risk-averse culture.
Author: Jim Minifie, Productivity Growth Program Director, Grattan Institute
