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BASIC ECONOMICS
It’s not a proper market when producers have the whip hand
Your correspondent (“Victoria’s energy minister should look in the mirror”, Letters, 4/11) is correct. Economics 101 did explain that prices are set where demand and supply curves intersect.
However if the product in the market has inelastic demand, that is consumers have to buy it irrespective of the price because it is essential – as is the case with gas, for example – then producers have the whip hand at setting prices at a much higher level than would otherwise be the case.
In this scenario the cost of gas to consumers has little to do with the volume of supply.
Phil Alexander, Eltham
A failure to explain the real world
There has been much talk of “economics 101” and the basic theory of supply and demand.
Many years ago, in my first economics 101 class, the tutor listed six assumptions about the market on the board. They looked debatable to me, but when I asked when we would discuss them, I was told that they were not up for discussion, they were given. They were fundamental to the whole course.
This might explain why economics (101 and the rest) consistently fails to explain the real world.
Gill Riley, Doncaster East
Monopoly-like behaviour distorts the market
We have a number of contributors to the letters pages talking about economics 101 and demand and supply curves, but they fail to mention that this mantra assumes a perfect market.
We do not have a perfect market simply because there are too few suppliers controlling input and consumers are unable to negotiate prices because of the monopoly or duopoly behaviours of suppliers.
Economics 101 is built on assumptions, and it’s within those assumptions that the perfect market falls apart. I often quote the simple adage “to assume makes an ass-of-u-&-me” – the only answer to the gas and coal price issues is for market intervention to protect local consumers because the suppliers do not see it as their responsibility. The resource is theirs and the holy dollar their goal. Monopoly-like behaviour distorts the market.
Keith Hawkins, Point Lonsdale
There is no competition between suppliers
The argument put forward by your correspondent (“Basic economics says the treasurer’s plan will fail”, Letters, 4/11) is based on what he claims to be economics 101.
Economics 101 is based on a perfect market, where there is competition between suppliers of a commodity, not the current market we have in regard to gas. Sure we have multiple retailers, but not producers, so there is no perfect market. Ross Gittins has been pointing this out for years. Australia has sufficient gas for domestic supply but the producers are controlling the price and supply to us.
Increasing the amount of gas produced will not reduce the cost to consumers because that is controlled by the producers, not the retailers.
Jenny Callaghan, Hawthorn
THE FORUM
A failure of policy
The current mess with our gas exports versus our local demand is symptomatic of the long-term failure of public policy.
All Australian resources should be recognised as being owned by us – i.e. the people of Australia. Therefore, we should do now what we should have done 100 years ago and bring into law a provision that every commercial use of our collective resources (think gold, nickel, gas, iron ore, lithium, old-growth forest for woodchips, etc.) should automatically have a minimum percentage allotted to the government – say 15 per cent or 20 per cent – which the government could put into a common fund, or some such.
As it stands, the international investment community is freeloading on our common wealth – what is more, they are using our outdated taxation rules to make us pay them to do it.
Rod Cripps, Parkdale,
It’s a finite resource
Exploration of new gas fields will not produce jobs and tax royalties that endure (“Basic economics says the treasurer’s plan will fail”, Letters, 4/11).
Gas is a finite commodity. It is not renewable. It will run out. We need to start ramping up renewables now.
Margaret Callinan, Hawthorn
An unappealing prospect
It is not surprising that the Victorian ALP has not been able to secure candidates for seven rural and regional electorates (“Labor in need of bodies fast”, CBD, The Age, 3/11).
The abandonment of membership ballots by the party bureaucracy for the preselection of parliamentary candidates, the core of democratic participation in any political party, would inevitably reduce enthusiasm
for continued involvement in the ALP.
To be left with the task of flag waving outside polling booths on election day may no longer seem worth the effort for the members who do remain.
Ian Hundley, Balwyn North
A flawed analysis
The Victorian Forest Alliance report providing the basis for your recent article “Logging emissions double aviation’s” (The Age, 4/11) is a flawed analysis of carbon emissions from native timber harvesting.
Estimates of recent emissions include those from wood left in the forest from 1970 onwards, but ignore carbon sequestered in regenerated forests on these same areas. Elsewhere the report indicates harvesting related emissions account for only 60 per cent of of the “equivalent to 700,000 cars” number, which is likely to be more than offset by carbon sequestered in regenerated forests.
This type of partial analysis is a poor basis for policy. A complete picture of native forest carbon dynamics and emission reduction opportunities needs to include all sources and sinks of all greenhouse gases across land tenures, including emissions from large-scale wildfires, long-term carbon storage in wood products and emissions associated with increased timber imports if harvesting in Victoria ceases.
Priorities for climate action on land use are ending permanent forest clearing for agriculture, mining and urban development and growing more trees in rural landscapes for carbon, timber, conservation and on-farm benefits.
Professor Rod Keenan, University of Melbourne, chair, Victorian Branch, Forestry Australia
Stop the logging
At the recent candidates’ forum in Hawthorn, representatives of both major parties argued that there was insufficient plantation timber to fill the space should the logging of native forests cease.
This is untrue and similar to the gas argument. Instead of exporting almost all our plantation timber, a proportion could be redirected to satisfy local timber needs. By stopping the logging of native forests in Victoria, we can also reduce emissions equivalent to taking hundreds of thousands of cars off the road (“Logging emissions double aviation’s”, 4/11).
We can also save the $21 million of government money paid to VicForests, which still managed to make a $4.7 million loss in 2021 according to its annual report, and we can save millions in legal fees each time VicForests loses a court case for breaching environmental laws. But more importantly, by stopping the logging we can save the remaining habitat of many of our nearly 2000 endangered species.
The Victorian government must bring forward the $200 million in the Victorian Forestry Plan to support workers, businesses and communities through the transition. It’s as obvious as the nose on a greater glider’s face.
Ray Peck, Hawthorn
Heartening to read
Well done, Australia. How heartening to read that 62 per cent of us support a ban on gambling sponsorship of sport (“Major sports play straight bat to anti-gambling sentiment”, The Age, 4/11).
To date little has caused our politicians to act decisively, but maybe a realisation that there are plenty of votes to be won in strong action against the gambling giants might move them to action. Over to you, premier and prime minister.
Andrew Laird, Malvern
Better off without it
Gambling regulators have been unsuccessful in their attempts to stop money laundering in online gambling and casinos (“Regulator to probe online bookies”, The Age, 4/11).
When you add the other serious social harms of legalised gambling, it’s obvious society would be better off without it. The ubiquitous advertising creates a whole new dimension.
Meanwhile, governments continue in their addiction to revenue from gambling taxes.
Lawrie Bradly, Surrey Hills
Not a good look
In watching Labor Party election ads I recall Michelle Obama’s words, “When they go low we go high”, and wonder why an incumbent government needs to denigrate the political process in this manner. Surely a focus on past achievements and plans for the future would be more appropriate.
Regrettably it probably says something about their assessment of the electorate but, nevertheless, it may be an assessment that comes back to bite them.
Rod Evans, Parkville
Time for a turnover tax
Different solutions are being suggested in the energy costs debate, including a super profits tax on energy companies.
Given the sad fate of the Rudd leadership after it tried to introduce such a tax 12 years ago, it appears the likelihood of an effective super profits or resource rent tax is nil. A different approach is needed, but it must target not just energy companies, but tap the wealth of other big movers that pay very little or no tax.
We need a small (say, 2 per cent) total turnover tax on large companies. This is not a new idea, but it is understandably hotly opposed by those who would be liable, as is generally the case when anybody is expected to take a financial hit.
But if, in some modest way, we are ever to get the better of the commercial cost shifters and creative accountants, this sort of tax is probably the only way.
William Puls, Mentone
A parallel universe
Reading Dr David Berger’s article (“We’re kidding ourselves on COVID”, Comment, 3/11) I began to think of major issues confronting us, in addition to COVID.
Climate change came immediately to mind and it occurred on me – not for the first time – that we people really want to try to live in some parallel universe by suspending reality.
I am not sure where the reality of COVID will lead to but I can hazard a guess as to the reality of climate change.
Phil Labrum, Flemington
It cuts both ways
Your correspondent asks why should employees expect wage rises without productivity improvements to earn them (“Why penalise employers?”, Letters, 3/11).
Yet the same question can be asked of employers. If indeed, as he says, these are windfall profits employers have done nothing to deserve them. Yet over recent decades we have consistently seen a greater share of economic growth go to providers of capital, not labour.
Too much of this is unproductive rents. And it’s not good for the economy.
Andrew Cornell, Parkville
AND ANOTHER THING
Gambling ads
“Gamble responsibly” is almost as silly – and irresponsible – as “smoke responsibly”.
Bernd Rieve, Brighton
Credit:
I’m glad the “gamble responsibly” tagline is ending. I never knew what it meant.
Susan Munday, Bentleigh East
Politics
To vote intelligently, voters need to know the policies of all parties. Advertisements that are personal attacks on leaders do not outline policies and any party that does this is not winning my vote.
Deborah Rogers, Seaton
So many promises, so much grandstanding. Both Daniel Andrews and Matthew Guy need to take deep breaths, focus on present economic realities and keep the fantastic “specials” for later.
Mary Cole, Richmond
My trusty calculator just seized up as I added in the latest round of election promises. Now I will have to resort to googling “bottomless pit”.
Jim McLeod, Sale
If the state Liberal and Labor parties are still trying to run on integrity, it is a case of Dud and Dudder.
Peter Thomas, Pascoe Vale
A question for the Bureau
The forecast is for 28 on Tuesday. Degrees or millimetres?
David Price, Camberwell
Furthermore
Am I the only one who suspects that rising interest rates actually fuel inflation rather than stifle it?
Neale Woods, Wattle Glen
Since when have prayers ever protected vulnerable children from abuse, regardless of which religious institutions are involved (“Parents told to pray after abuse claims”, The Age, 3/11).
Marie Nash, Balwyn
I think it’s time for everyone to watch the 2005 film Enron : The Smartest Guys in the Room.
Arnold Grodski, Heidelberg
Finally
It’s a darn shame Matthew Guy couldn’t convince the B-52s to come to Melbourne, instead of Darwin. We both love “rock lobster”.
Barry Miller, Kyneton
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