A new economic theory may yet cut the ground from under Australian Prime Minister Scott Morrison's feet

ABC News, 17 July 2020:

We may be on the cusp of a revolution. What if everything we thought we knew about public finance over the past 40 years has been wrong? 

A new economic theory has emerged that could rewrite our understanding of how governments create and spend money and what type of society we can afford to build. 

And if it is correct, people may be furious. 

Because it could show that Australia's political elite can afford to spend far more than they are on public health and education, social housing, scientific research and green energy schemes, while eliminating unemployment. 

And yet they're not — either from a misunderstanding of government finances or because they don't want to. 

However, to embrace this radical economic theory you will have to forget what you've learned about budget deficits (that they're bad) and government debt (that it burdens future generations). 

Why? Because proponents of the theory say that far from being a problem, budget deficits are often a good thing — they can be the source of healthy economic growth. 

They argue a country like Australia that controls its own currency doesn't need to tax or borrow before its national government can spend money — the government can create all the money it needs to fund itself … within limits. 

It all sounds too good to be true, which is why critics warn the theory is naive, simplistic and potentially dangerous. 

But supporters of the theory — who are growing in number — say many of the world's problems today (extreme wealth inequality, poorly funded public hospitals and schools, chronic underemployment, stagnant wages) are a consequence of misunderstanding government financing. 

They say macroeconomic theory — which looks at the bigger picture of how the national economy works — has got too many major questions wrong. 

So what are we talking about? Let's take a closer look.... 

The theory is called Modern Monetary Theory (MMT). It is challenging the neoliberal economic orthodoxy that has dominated policymaking in Australia, the United States, the United Kingdom and many other countries since the mid-1970s. 

The reigning orthodoxy assumes a couple of things. 

Firstly, it assumes every country has a "natural rate" of unemployment and it's unwise to try to force the jobless rate below the natural level because inflation (and wages) will rise too quickly. Therefore, it assumes it's better to accept a certain amount of unemployment to keep prices stable (and to keep wage demands weak).

At the moment, Australia's natural rate of unemployment is assumed to be somewhere between 4 and 5 per cent. 

Secondly, the economic orthodoxy holds that the national government needs to collect taxes, or borrow from savers, before it can spend money. 

Politicians repeat this point incessantly. 

When you hear a politician saying the government must "live within its means," what they're really saying is the government mustn't spend more than it collects in taxes or borrowings.

However, MMT economists want to turn these orthodoxies on their head, among others...... 

The people who developed it have been working on the body of theory for decades, quietly, in countries such as Australia and the United States, but their ideas have recently burst out into the open as global leaders search for fresh ideas to deal with the unprecedented economic crisis of 2020, and the lingering effects of the global financial crisis in 2008-09.

 MMT economists make several claims: 

Firstly, they say we've been thinking about budget deficits incorrectly. 

They say budget deficits are not always bad. In fact, deficits are often necessary and beneficial. A budget deficit is merely evidence of extra government spending, and government spending boosts the wealth of private sector businesses and households.  

They say it depends what deficit spending is used for. Increasing the deficit to finance a war is not the same thing as increasing the deficit to build more hospitals and schools. 

They argue investments that will enhance productivity through better health, greater knowledge and skills, improved transport and the like are worth funding, even if it results in a budget deficit. 

Secondly, MMT economists say we've been thinking about government spending incorrectly. 

They say the argument (promoted famously by British prime minister Margaret Thatcher) that national governments must tax or borrow before they can spend is wrong. 

MMT argues it's the other way around — national governments have to spend money into the economy before they can tax or borrow. Government spending actually precedes taxation. Accepting this proposition is key to embracing MMT. 

Thirdly, they say taxes are necessary, but not for the reasons you may think. 

They say government taxes can be used to keep inflation under control, to control our behaviour (via fees and levies and rates), and to get us to produce things the government needs. 

MMT economists draw on the ideas of chartalism to make this last point. They say governments use taxes to create demand for their own currency — that is, if a citizen has to pay tax then they're going to have to work to earn the currency to pay the tax in that currency. 

Essentially, governments use taxes to put everyone to work. 

"At the end of the day, a currency-issuing government wants something real, not something monetary," writes Professor Stephanie Kelton, one of the highest-profile MMT economists and a senior adviser to Bernie Sanders in both his 2016 and 2020 Democratic presidential primary campaigns. 

"It's not our tax money the government wants. It's our time. 

"To get us to produce things for the state, the government invents taxes or other kinds of payment obligations." 

Fourthly, MMT economists say countries that issue their own fiat currency can afford to buy anything that's available for sale in their own currency, and they can never go bankrupt in their own currency. 

"Fiat" money is government-issued currency that isn't backed by any commodity, such as gold. It's paper or digital money that has no intrinsic value. We'll return to this point later too. 

Fifthly, MMT economists say "full employment" is not only possible, it's a moral imperative. Anyone who wants a job should have one. 

They say we must prioritise genuine full employment and governments should spend whatever is necessary to achieve it — no matter the debt or deficit. 

Sixthly, MMT economists say the national government should run a permanent "Job Guarantee" (JG) program to provide a job to everyone who wants one. 

They say it could be linked to other economic and social programs, such as a "Green New Deal" — a policy advocated by MMT proponents linked to the US Democratic senator Bernie Sanders, to create jobs by shifting to zero-emissions technologies.......

Read the full article here.

Unemployment in Australia is at a 22 year high, however NSW is faring a little better

Australian Bureau of Statistics, Labour Force June 2020, 16 July 2020:

NATIONAL SEASONALLY ADJUSTED ESTIMATES 

• Employment increased 210,800 to 12,328,500 people. 
• Full-time employment decreased 38,100 to 8,489,100 people and part-time employment increased 249,000 to 3,839,400 people. 
• Unemployment increased 69,300 to 992,300 people. 
• Unemployment rate increased 0.4 pts to 7.4%. 
• Underemployment rate decreased 1.4 pts to 11.7%. 
• Underutilisation rate decreased 1.0 pts to 19.1%. 
• Participation rate increased by 1.3 pts to 64.0%. 
• Monthly hours worked in all jobs increased 64.3 million hours to 1,664.7 million hours.

NATIONAL YOUTH UNEMPLOYMENT

• Employment for 15-24 year olds increased by 101,500 people (6.3%). 
• Unemployment rate for this group increased 0.4 pts to 16.4%.
• Participation Rate for 15-24 year olds increased 3.9 pts to 63.5%. 
• Around 30% of the people moving into employment in June were aged 15 to 24 years.

New South Wales in June 2020 :

• Number of Employed Persons rose by est. 81,000 to total 3,949,500 individuals. This still leaves a gap of est.124,200 persons who lost the job they held in January 2020 and have not yet found other employment (original data);
• Full-time Employment rose by est. 8,200 positions (original data);
• Part-time Employment rose by est. 72,800 positions (original data);
• the Employment to Population Ratio was Persons 59.5, Males 64.4, Females 54.8 (original data);
• the Unemployment Rate was Persons 6.7%, Males 6.7%, Females 6.8% (original data);
• Underemployed Persons totalled est. 473,900 individuals (original data); and
• the Workforce Participation Rate was Persons 63.8% - up 1.6 percentage points, Males 69.0% - up 2 percentage points, Females 58.7% - up 1.6 percentage points (original data).

Menzies Research Centre evidence before parliamentary joint inquiry appears to be built on shifting sands

Liberal-National Party drone, the Menzies Research Centre, was the 66^th individual or organisation to make a submission to the Parliamentary Joint Committee on Corporations and Financial Services’ Inquiry into the Litigation funding and the regulation of the class action industry.

 This submission was written by twenty-five year-old James Mathias (shown left), Chief of Staff at the Menzies Institute and unsuccessful Liberal candidate for the seat of Holt at the 2016 feferal election.

It would appear from the evidence Mathias gave to the Inquiry that he shares an office with the Liberal Party in Canberra.

Young James is definitely not a scholar and, typical of that peculiar breed of young Liberals, he made a a mess of the submission right from the opening lines.

On 13 July 2020 The Guardian report his appearance at the first public hearing of the Inquiry:

Mathias appeared on Monday before a parliamentary committee investigating whether Australia’s class action industry needs tighter regulation…

The first line of the submission from the MRC – the Liberal party thinktank – quoted the federal court justice Michael Lee as saying in a judgment on 5 June: “The phrase ‘access to justice’ is often misused by litigation funders to justify what at bottom is a commercial endeavour to make money out of the conduct of litigation.”

It was purportedly from a judgment on class actions stemming from allegations that the Australian defence department negligently allowed toxic chemicals known as Pfas to escape from defence bases and contaminate local environments.

But Mathias, who was just 21 when he ran as a federal candidate for the Victorian seat of Holt in 2016, confirmed under questioning he had “not read the full judgment” cited in the submission as “judgments are very long – some hundreds of pages”.

O’Neill said the judgment was actually 37 pages long and “the words you quote in the very first line of your submission are nowhere, nowhere to be found in his honour’s judgment”.

The NSW senator said the only place that quote could be found was in an article in the legal journal Lawyerly on 9 June, titled “‘A significant inequality of arms’: Funding led to better outcomes in PFAS class action, judge says”…..

In Lee’s judgment of 5 June, the judge made a more qualified statement that “the term ‘access to justice’ is commonly misused, most often by some funders who fasten upon it as an inapt rhetorical device”.

He then cautioned against generalisations. While noting “litigation funding is about putting in place a joint commercial enterprise aimed at making money”, Lee went on to say that recognising that reality “does not diminish the importance of litigation funding in allowing these class members to vindicate their claims against the commonwealth”.

Referring to the alleged victims in the Pfas class actions, Lee continued: “Without litigation funding, the claims of these group members would not have been litigated in an adversarial way but, rather, they would likely have been placed in the position of being supplicants requesting compensation, in circumstances where they would have been the subject of a significant inequality of arms….

When contacted for a response to the criticism of his submission, Mathias said it was “astonishing that the Guardian would be siding with foreign backed, super-profitable litigation funders just because it does not like the politics of the MRC”.

The 5 June 2020 judgement in question GAVIN SMITH et al v COMMONWEALTH OF AUSTRALIA (DEPARTMENT OF DEFENCE) can be found at https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2020/2020fca0837

*James Mathias Snapshot found on Twitter

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COVID-19 has returned to the NSW Northern Rivers after 48 days free of active infection

Northern NSW Local Health District, media release, 16 July 2020:

One case of COVID-19 has been confirmed in the last 24 hours in the Northern NSW Local Health District (NNSWLHD). 

This brings the total cases to 56, as at 8pm Wednesday, 15 July. 

The new case is a person who travelled to Northern NSW from Melbourne, arriving at Ballina airport on Sunday, 12 July on Jetstar flight JQ466. This person was screened on arrival at Ballina airport. 

Since arriving in Northern NSW, this person has been in mandatory 14-day self-isolation. 

Any potential close contacts are being followed up. 

Of the 56 cases in Northern NSW Local Health District, 53 have recovered. There are no cases being treated in hospital. 

NNSWLHD cases by likely source of infection: 

Overseas or interstate acquired – 52 
Locally acquired –contact of a confirmed case or in a known cluster – 2 Locally acquired – source not identified – 1 
Under investigation – 1 
Total 56 

NNSWLHD is encouraging anyone with symptoms, however mild, to self-isolate and get tested. Anyone with symptoms is also advised to refrain from visiting aged care facilities and hospitals. Everyone is also reminded to maintain physical distancing and hand hygiene. 

Anyone who is unable to practise physical distancing should wear a mask. 

More than 4,900 people have been tested during the last fortnight in NNSWLHD. 

Testing is free and available to everyone in the region, including visitors. The site locations are/can be found at: https://nnswlhd.health.nsw.gov.au/about/covid-19-clinic-information/

Will U.K. based multinational mining corporation Rio Tinto Ltd be stripped of its status as a human rights leader following its destruction of an Aboriginal sacred site showing evidence of 46,000 years of human habitation?

"The fact that nearly half of the companies assessed (49%) score 0 across all indicators related to the process of human rights due diligence is particularly alarming. These indicators focus on the specific systems the company has in place to ensure that due diligence processes are implemented to assess the real-time risks to human rights that the company poses, to act on these findings so as to prevent and mitigate the impacts, and to track and communicate those actions. Human rights due diligence is a fundamental expectation of the UN Guiding Principles on Business and Human Rights (UNGPs). The three companies that top the 2019 ranking (Adidas, Rio Tinto and Unilever) all score full points on the human rights due diligence indicators...Eleven [of the 56 extractive] companies score above 50%, with Rio Tinto, BHP Billiton, Freeport McMoRan and Repsol in the highest scoring band of 70-80%" [Corporate Human Rights Benchmark 2019 Key Findings]

The New York Times, 8 July 2020:

MELBOURNE — Aboriginal and human rights groups on Thursday called for miner Rio Tinto Ltd to be stripped of its status as a human rights leader following its destruction of an Aboriginal sacred site showing evidence of 46,000 years of human habitation. 

With state government approval, the world's biggest iron ore miner in May destroyed two sacred caves in the Juukan Gorge in the Pilbara region of Western Australia as part of a mine expansion. 

 Rio's response to blowing up the caves was "far from adequate", 35 Aboriginal and Torres Strait Islander and human rights groups said in a letter requesting the miner be suspended from the Corporate Human Rights Benchmark (CHRB). 

Netherlands-based CHRB is a public benchmark of corporate human rights performance. 

It lists Rio as the highest ranked extractives company globally on human rights issues, with a score in the second highest possible band.  

"We are calling on the Benchmark to ensure that the company's human rights ranking reflects the reality for people here on the ground," said Wayne Bergmann, a Kimberley Aboriginal leader and chief executive of Aboriginal charitable trust KRED. 

Rio apologised for the distress it caused to the Puutu Kunti Kurrama and Pinikura people and launched an independent investigation into how the destruction occurred.

Thursday's letter disputed Rio's explanation of the incident as a "misunderstanding", saying that the indigenous land owners had brought to Rio's attention on several occasions the archaeological and ethnographic significance of the site. 

Rio declined to comment on the letter......

Prior to the November release of its Corporate Human Rights Benchmark 2020 CHRB issued this:

Corporate Human Rights Benchmark (CHRB), media release, 9 July 2020: 

Due to the destruction of a 46,000-year-old Aboriginal heritage site by Rio Tinto at Juukan Gorge in Western Australia on 24 May 2020, the Corporate Human Rights Benchmark (CHRB) and the World Benchmarking Alliance (WBA) have decided to append this statement to Rio Tinto’s latest CHRB results. 

It would be inappropriate for CHRB to continue to assess and rank Rio Tinto in one of the highest-scoring bands and as the top mining company without reference to this incident. 

The CHRB seeks to provide robust and credible information on companies’ actions to respect human rights across their business, and it would be misleading not to reference this severe impact as a complement to the latest results. 

The statement appears in the homepage banding table, in the company's latest scorecard and in the latest overall dataset.

~~~~~~~~~~~~~~

"It would be inappropriate for CHRB to continue to assess and rank Rio Tinto in one of the highest-scoring bands and as the top mining company without reference to this incident....The severity of the impact and the context in which it took place, including the process that led to it and allegations of other similar impacts involving the company, raise concerns that go beyond this specific incident and point to possibly more systemic weaknesses in the company’s approach to human rights." [CHRB response to the destruction of a 46,000-year-old Aboriginal heritage site by RioTinto at Juukan Gorge in Western Australia on 24 May 2020]

~~~~~~~~~~~~~~

Hopefully this statement means that Rio Tinto Ltd will get more than a small red flag next to its ranking with a brief one line explanation for ongoing human rights issues, such as was afforded to another extractive industry high flyer, BHP Billiton.

BACKGROUND

ABC News, 5 June 2020:

Mining giant Rio Tinto was alerted six years ago that at least one of the caves it blasted in Western Australia's Pilbara region last month was of "the highest archaeological significance in Australia".  

Advice delivered to Rio Tinto and the Puutu Kunti Kurrama and Pinikura (PKKP) Indigenous people of the region six years ago was never publicly released. The ABC has been given a summary of the contents of the report, as well as earlier archaeological survey work and excavations at the sites dating back to 2004. 

The documentation of the 2014 report by archaeologist Dr Michael Slack confirmed one of the sites that was blasted, the Juukan-2 (Brock-21) cave, was rare in Australia and unique in the Pilbara. 

"The site was found to contain a cultural sequence spanning over 40,000 years, with a high frequency of flaked stone artefacts, rare abundance of faunal remains, unique stone tools, preserved human hair and with sediment containing a pollen record charting thousands of years of environmental changes," 

Dr Slack wrote. "In many of these respects, the site is the only one in the Pilbara to contain such aspects of material culture and provide a likely strong connection through DNA analysis to the contemporary traditional owners of such old Pleistocene antiquity."....

Before and After

Juukan Gorge caves, BBC News, 31 May 2020