My trip to Australia started off at a Centre for Independent Studies conference outside of Brisbane. It’s a classical liberal think tank where business people, pundits and policymakers meet to discuss ideas. I presented the MM message and lots of people seemed interested. Francis Fukuyama also spoke there. It was the first time I’ve met him, although I’m a fan of The End of History and Trust.
As of today, it looks like the center-right coalition in Australia is likely to win the election in 10 days, joining similar parties in New Zealand, Canada and Britain. Because America does not current have a center-right party, I don’t expect to see a center-right victory here in the near future.
I was particularly impressed with the talk given by the representative from the New Zealand government (Bill English) but will admit to knowing little about that place, other than that that their people live in Hobbit-style dwellings.
On a more serious note, the people at CIS were excellent, and seemed somehow more “reasonable” than similar groups in the US. I was really impressed with the talk given by Stephen Kirchner. Stephen is sympathetic to many of the ideas espoused by market monetarists, but has a slightly different take on the success of the RBA:
The new market monetarists argue Australia was a poster child for NGDP stabilisation during the financial crisis, but I interpret things differently. Prior to the onset of the financial crisis, inflation was out of control (CPI inflation running at 5%) and nominal GDP growth was running in the double-digits. The financial crisis saved the RBA from having to induce a domestic recession to bring inflation under control. The RBA was most successful when international conditions were doing the work for them.
No wonder they call it the lucky country. I’ve added Stephen’s blog to my blogroll, and recommend that you take a look at it.
Then it was on to Sydney where I almost gave a talk at the RBA. At least I was in the same building, and some RBA people attended. But the talk was actually sponsored by the Economic Society of Australia. (I’d like to thank Zac Gross for inviting me.) I had a very productive conversation afterwards with some of the RBA people, including one who had worked at the Fed and knew a lot about it. I was vigorously challenged by some really smart people, but I came away more convinced then ever that I am on the right track. I’m pretty sure that there are no hidden flaws in my argument, rather that even Ben Bernanke himself would likely defend current policy against my criticism on the basis of arguments that I’ve considered and found non-persuasive. BTW, the RBA’s (dual) mandate is literally carved in stone on the marble wall of their lobby.
I was told that Australia had 20 good years for policymaking, under both parties (in my view it was mostly Labour), but that the current government squandered some of the successes over the past 6 years. Their fiscal stimulus was completely unnecessary, even using Paul Krugman’s criterion (don’t use fiscal stimulus until rates hit zero.) Fortunately for Australia, the current Labour government took office with almost no public debt, and thus the gross debt is still only 30% of GDP. The likely new center-right government has promised a maternity leave benefit that is so absurdly extravagant (up to $75,000) that even the Labour Party is opposed. A bit of “compassionate conservatism” is on the way.
Overall I was very impressed by Australia. The airports seem very convenient (no horrible TSA system, just a few friendly blokes that wave you through.) Returning to American airports I felt I was in a third world country. At Dallas I almost missed my connection despite the fact that there was a 2 hour layover. Australia surely has the highest living standards among all countries with more than 20 million people, perhaps 10 million. It’s third on the Heritage free market list, trailing only Singapore and HK.
It’s nice to see countries with relatively low tax levels do well (Australia, Singapore, Switzerland, etc.) even using the standard criteria of liberalism. It makes me think that many of the problems liberals attribute to America’s low tax ideology (failed areas like Detroit, etc), are actually caused by unrelated public policy mistakes. I saw one blogger recently imply that Singapore was some sort of conservative dystopia because it has “inequality.” This is a country with essentially no slums, excellent public education, great environmental policies, universal health care, etc, etc. But because 17% are millionaires there is more “inequality” than some place where everyone is dirt poor. Liberals used to care about poverty back in the 1960s, the change in emphasis to “inequality” (between the middle class and rich) is really a disgrace.
PS. My first taxi driver said he was from the South Island of New Zealand. So did my second taxi driver. Then I took a bus and started chatting with the driver—yup, the South Island. American taxi drivers usually come from some sort of hellhole in central Asia or Africa, where there is a civil war going on. God help the people of the South Island. (Yes, I know about the earthquake.)
PPS. Back in 2010 I pointed out that the Australian housing “bubble” still hasn’t burst. That’s still true today. Also true in New Zealand, Britain and Canada. America is the outlier; bubbles usually don’t burst over a time frame where bubble predictions would be useful. Yes, prices will eventually fall, as free markets always move up and down. Even markets with no bubbles.