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The Magic of Public-Private Partnerships: Really?

Last week I was visited by election campaigners who wanted to sell me on the merits of their party for the upcoming Victorian election. I may be strange, but I actually was happy to be visited by door-knockers so I could ask them some questions. The Victorian election has been fought on competing infrastructure projects but there didn’t seem to be clear details on how the projects would be funded. Being fiscally responsible, I wanted to know how these projects would be funded. So I asked the door-knockers the question. And the answer I got was: “through the magic of PPPs [public-private partnerships].”

I was quite frankly stunned that someone in our digital world still believes in magic! And in such a brutal arena as politics, it was great to see that innocence wasn’t dead. Then the implications hit me: what kind of magic are we talking about here? White or black magic? Then you get into finer categories such as illusionism, sorcery and necromancy. If it was necromancy, this would have major implications for workplace relations. Would the government use zombies to build the infrastructure? There will be huge cost savings from using the undead. But you need to feed zombies brains which may pose a public safety issue to live humans. Furthermore, the building unions probably wouldn’t be happy that their members’ jobs will be stolen by zombies. I can see why the issue of infrastructure financing is hard to explain to voters.

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Climate Change-Induced Financial Disaster

One of the extraordinary things to witness at the G20 meeting in Brisbane during the weekend of 15-16 November, was Australia’s rearguard action to keep climate change of the agenda. The G20 host’s justification was that climate change would distract from the economic policy focus. Besides, according to Australia’s Treasurer (i.e. Finance Minister), climate change is no impediment to economic growth. This is despite the wealth of economic research that has been produced that has modelled the economic impacts of climate change. A potential economic impact that has been gaining some traction is the ‘carbon bubble‘. The carbon bubble is where assets that derive most of their value from carbon reserves (i.e. coal, oil and gas) become ‘stranded assets’ as their value falls in response to international climate change action. For a country like Australia that is heavily dependent on fossil fuels for its prosperity, you would think a carbon bubble would have a serious economic impact. I went along to listen to a talk about what a carbon bubble meant for Australia. The panel was made up of Prof. Ross Garnaut, Jemma Green, Dr John Hewson and Tony Wood. Each of them an expert in economics, finance and energy in their own right. This is what I took from the discussion.

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Housing Bubbles as Economic Policy

 

I’m curious why governments around the world are fond of pursuing higher house prices as economic policy. Not that I have anything in principle against higher house prices. I understand why governments want to do it, housing is an important concern for many people and a significant contributor to an economy. But all of that is wasted if the policies stimulate a housing bubble that eventually bursts leaving people poorer because their main asset drastically falls in value. But I’m concerned that governments introduce significant economic risk to the whole economy by promoting housing bubbles. We saw this with the recent Great Recession that consumed the US and much of the world in 2008-09. Yet governments continue to inflate housing bubbles. In the end, we are worse off when a housing bubble pops. I’m no ‘economic girly man‘ when it comes to risk, but surely as stakeholders in the global economy (and voters, depending on where you are) shouldn’t we be cognisant of the risks that our governments introduce? That way if we know about it, we can demand our governments to manage or even prevent these risks. This post will attempt to identify the key ways that governments have introduced risks into our economies in order to stimulate housing bubble.

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Government as Risk Manager: Should We be More Worried?

The Productivity Commission (PC) recently released a draft inquiry report into ‘Natural Disaster Funding Arrangements’ in Australia. For those that don’t know, the Productivity Commission is an Australian Government independent agency that provides advice on economic reform. To my knowledge, I’m not sure if other national governments have a similar agency. The only one that comes close is the OECD, but that is a multilateral agency. The PC has a strong reputation of furnishing ‘frank and fearless’ advice to successive Australian Governments. So it is with some interest that I read this report. I have worked on the role of government in managing risk, so I was interested to learn the PC’s perspective on natural disaster risk management. (more…)