Dale Boccabella

The newly installed Government has declared that the former Government’s $2,000 deduction cap announcement for self education expenses will be abandoned.

This decision has been widely welcomed, no doubt .

Part of the explanation given was that “there was no credible evidence of substantial abuse of this deduction.” 

The former Government observed that some taxpayers are deriving a significant private benefit from their self-education expenditure, and that the general body of taxpayers should not have to carry this. Travel on first class air fares and taxpayers staying in five star accommodation were expressly mentioned.

Further, the former Government did have some basis for arguing that capping can be justified on the “private benefit” aspect. There has been a steady stream of tax cases involving claims for overseas and interstate travel where the taxpayer attaches leisure to his or her attendance at a relevant conference, study tour, etc.The tax tribunals have been generous when it comes to apportioning expenditure on air travel between the deductible conference attendance and the non-deductible leisure pursuit.

The Government has not stated the basis for the advice it has received that there is no “substantial abuse” of the current rules. In any event, “substantial” seems too high a threshold of tolerance when it comes to assertions of deductions being claimed for private benefits.

Dale Boccabella is an Associate Professor of Taxation Law at the Australian School of Business.

 

Nigel Stapledon

I have been asked to comment on the Prime Minister’s proposed pact between government and business which was aimed at boosting Australia’s productivity to 2% per annum.

The point I have made is that it is for the Government to set the parameters or economic environment in which business operates. Those parameters (e.g. industry assistance or exposure to market forces, taxation, product and labour market regulations, etc.) provide the incentives for business to maximise (or not) productivity. It is then for business to get on with it.

After the economic malaise of the 1970s, there was something of a political consensus that things had to change. The Hawke-Keating and then Howard governments, in pursuing micro-economic reform, shifted the parameters to ones which created increased incentives for businesses and the workforce to lift productivity.

Those reforms included reducing industry protection which made the environment more competitive, and making the labour market more flexible. The lagged result of this was a period of significantly better productivity performance, leading to increased living standards for all Australians.

The Accord with the ACTU in the 1980s was the political process by which the labour force bought into or accepted these changes but the Accord was more about delivering wage outcomes consistent with a return to low inflation.

Industry was consulted but industry-government pacts played no substantive part in the reform process. Industry plans, e.g. the car and textile plans, by delaying change, if anything, hindered the process of boosting productivity.

A key source of advice was the Productivity Commission which represented the broad national as distinct from sectional interests,and provided the economic argument for change. Those past Governments listened to that advice, even if political considerations meant they did not heed it all the time.

A major disappointment in recent years has been the active running down and sidelining of the Productivity Commission. It is today a shadow of its former self. The sidelining of the Productivity Commission has coincided with policies which have if anything acted as a break on Australia’s productivity.

Deals or pacts between business and government are not a substitute for governments listening to, and acting on, sound advice.

An additional point is that 2% per annum target is not in any way realistic. Even with the best parameters for business to operate in, which courtesy of earlier reforms was the case in the period 1993-2003, productivity growth only managed 1.9%. Since 1978, the long term average is 1.5%. In the current environment, i.e. without substantive changes in the policy parameters in the right direction, a result below that long term average and closer to 1% would be a more likely outcome.

Dr Nigel Stapledon, Australian School of Business

Justin O’Brien

Australia cannot ignore the Singaporean investigation into attempts to manipulate key financial benchmarks. 

The investigation by the Monetary Authority of Singapore into the attempted manipulation of key financial benchmarks has profound implications. Notwithstanding the fact that no evidence of actual success has been proffered, Singapore has moved quickly and decisively to change the domestic and international regulatory battleground.

The regulatory change is based on very loose principles articulated by the International Organization of Securities Commissions earlier this year. The decision is a considerable victory for IOSCO, which is chaired by Greg Medcraft of the Australian Securities and Investments Commission. Its articulation of global principles, although purposively vague, was designed to demonstrate both the timeliness and efficacy of international coordination. In fleshing out these principles in a radical redesign, Singapore is providing a much needed route map to navigate two pressing hazards.

The first of these is how to handle the investigation and enforcement process. The MAS action has foreclosed individual investigation and the piecemeal erosion of trust associated with periodic disclosure of individual institution misconduct. Instead it opted for a comprehensive settlement. The second and potentially more significant navigational aid is how the settlement forcibly enlists the industry in protecting the integrity of the rate-setting process.

The benchmarks are conceived as a public good that industry has an obligation rather than an interest in protecting. Cleverly, the MAS has forced ‘skin in the game’ by demanding individual banks increase the level of reserves deposited with the central bank.  Under the terms of the settlement, released on Friday, the banks implicated have to deposit additional reserves in Singapore for a period of one year, during which they will not receive any interest.

The exact amount depends on the degree of complicity in the scandal, with the highest imposed on ING, RBS and UBS (S$1-1.2 billion each). What is also clear, however, is that the MAS does not trust the capacity of any of the banks to clean this mess up without external supervision. The banks are required ‘to report their progress to MAS on a quarterly basis, and conduct independent reviews to ensure the robustness of their remedial measures.’ Self-certification, therefore, is deemed in itself inadequate.

The Association of Banks in Singapore is to be stripped of its capacity to self-regulate the benchmarks. Manipulation or attempted manipulation is to be made specific civil and criminal offence. At the same time, the authorities have made it clear that ongoing integrity can only be vouchsafed by a significant change in practice. The MAS has managed to force the industry to institute an effective early-warning system linked to blacklisting those directly implicated (if not charged with wrongdoing). It notes that ‘the industry will put in place measures to facilitate reference checks, so that an institution would be made aware if a potential hire had been implicated in attempts to inappropriately influence benchmarks.’ 

In taking such robust enforcement action, Singapore is guarding itself against the possibility that any future civil or criminal proceedings in the United States will seek to quarantine guilt to subsidiaries operating in Asian markets. Its integrated approach also has the capacity to break the impasse within the IOSCO taskforce set up to evaluate how benchmarks can be refined. The United Kingdom continues to insist Libor and its facsimiles can be reformed; the United States by contrast wants it replaced by observed rates. These too, however, run the risk of being manipulated.

It goes without saying that the primary focus of the MAS investigation will be the main British Banks implicated, including RBS and Barclays. It is, however, also significant that US banks have been censured formally. The involvement of two major Australian banks – ANZ and Macquarie – in the scandal also raises serious questions about the efficacy of oversight here in Australia.

Because ANZ and Macquarie were in the bottom range (S$110-300m) they failed to make initial international media reports. Although Macquarie itself does not itself submit to the Association of Banks in Singapore benchmark rate, it too is found to have ‘deficiencies in governance, risk management, internal control and surveillance systems.’ Along with the other banks censured it must adopt measures to address deficiencies and appoint an independent party to ensure the robustness of remedial measures.

With the MAS action, the manipulation of financial benchmark scandal has gone global. Australia, the lucky country, has for once not been saved by the tyranny of distance. In today’s globalized marketplace, it is too obviously implicated for regulatory agencies here in Australia to ignore.

Professor Justin O’Brien is director of the Centre for Law, Markets and Regulation at UNSW  Law.

His most recent research paper on Libor has just ben published by Edmond J Safra Center for Ethics at Harvard university. It is available for download at http://ssrn.com/abstract=2277172

A shorter version of this article was previously published in The Australian Financial Review.

Dale Boccabella

As currently couched, the self-education deduction capping measure is not targeted at the claimed mischief and it therefore overwhelmingly looks like a revenue raising measure. To dispel this, the government needs to target the measure.

As part of the government’s National Plan for School Improvement (NPSI), a $2,000 per year cap will be placed on deductions for self-education expenditure related to production of a taxpayer’s income. It is planned to start in 2014-15 and is expected to save the government around $520 million over the forward estimates (3-4 years).

Two justifications were given. First, this measure will generate savings towards the cost of the NPSI. Secondly, some taxpayers are spending too much on their self-education and/or their expenses involve “luxury” self-education. The Treasurer suggested that without a cap, some taxpayers are able to enjoy a significant “private benefit” at the expense of taxpayers.

Denying these deductions to raise revenues for an expenditure program is using the tax system for a “foreign purpose”. And, this point holds even if the topic of tax deductions bears some relationship with the expenditure program. In this case, this is debatable.

The Treasurer has some basis for arguing that the capping can be justified by the “private benefit” aspect. There are many tax cases involving claims for overseas and interstate travel where the taxpayer attaches leisure to attendance at a relevant conference. The tax tribunals have been rather generous when it comes to apportioning expenditure on air travel between the deductible conference attendance and the non-deductible leisure pursuit. This capping measure may put a ceiling on “suspect claims” but it will not address the private element of expenditure where it is below the $2,000 cap because it is not targeted at “private items” of self-education expenditure.

The cap more broadly can be seen as an equity measure as it puts a ceiling on a category of otherwise deductible expenses and therefore can reduce the detrimental “upside down” effect (i.e. taxpayers on higher tax rates get bigger tax break from a given deduction amount) that comes with all deductions. But, many people incurring non-private benefit and expensive self-education are in the earlier stages of their careers and are on lower tax rates. For them, the capping appears inequitable.

Although bluntly targeted, this measure will in part deny deductions for taxpayers with high “luxury” income-related expenditure. The short and legitimate question is, why is the capping only relevant to self-education expenses? Why isn’t it considered where other “luxury” deductible spending occurs? After all, isn’t there a large private benefit to a taxpayer undertaking business or first class air travel or five star accommodation for their work, outside the self-education context?

The extra problem is that the measure also operates to deny deductions for taxpayers with high “non-luxury” income related expenditures of self-education; again, the targeting of the private benefit appears to be missing. This tends to undermine the denial of the private benefit rationale and brings the government admitted revenue-raising rationale to the fore.

The deductibility of self-education expenses is one of the most troublesome areas under the general deduction provision and an area where the error rate is very high amongst taxpayers and their advisers. At times, this uncertainty encourages unscrupulous taxpayers and tax agents to make iffy claims knowing full well they may not be called to account. This announcement doesn’t address complexity because the focus is on capping. However, the government could use the opportunity to set out some bright lines on the circumstances where self-education is deductible. After all, it will have to do this to identify expenditure subject to the cap.

Perversely, the introduction of the cap may actually convince some taxpayers to claim an amount of self-education deductions just under the cap as deduction caps can send the “wrong message” (i.e. it is viewed as giving a deduction). Such practices need robust compliance follow up from the ATO.

Finally, many will argue that denying/capping deductions for income related self-education expenses is sending the wrong message and that some may be discouraged from engaging in education. Time will tell, but the argument puts considerable faith in the power of a tax deduction.

Dale Boccabella is an Associate Professor of Taxation Law at the Australian School of Business.

Geoff Weir

There is no doubt China wants the renminbi (RMB) to become a major global currency. While there is no public timeframe, one thing is clear: the ongoing move towards internationalisation of the RMB will have a huge influence on global volumes, currency denomination and location of financial flows and financial market activity over the coming decades.

China will within the next decade be both the world’s largest economy and the single most important driver of global trade.  The move towards internationalisation of the RMB will require ongoing relaxation of capital controls on China’s inward and outward investments, and full currency convertibility.

These factors will see a massive increase in investment and trade-related flows into and out of China, and in the associated provision of RMB denominated financial products and services in trade financing and investment.

There will be winners and losers. For instance, local and offshore investors have used Australian dollar and Australian dollar denominated assets as proxies for exposure to the Asian growth story. As the RMB becomes fully convertible and capital controls are gradually eased, these “proxy” trades will decline.

So how is Australia positioned to ensure it benefits from these enormous changes?

To date the process of building up RMB liquidity offshore has focused on encouraging RMB trade invoicing. While only a small proportion of Australia’s trade with China is currently invoiced in RMB, a recent Bank Customer Survey of Australian companies trading with China showed that it is likely to increase, potentially resulting in a build-up of RMB liquidity and RMB-denominated financial products and services in Australia.

Looking beyond trade invoicing, there are good reasons why Australia has the potential to become an important part of the offshore RMB network. For starters, Australia is ideally positioned, being the first major financial market to open after the US closes, before Singapore, Tokyo and Shanghai, and remaining open for much of the Chinese trading day.

Australia has a world class payments settlement system and a predictable, efficient and well-regarded legal framework and regulatory regime, with strong prudential oversight.

Australia already has critical mass and liquidity in funds management, and equities, derivatives and foreign exchange markets.  This is allied with a robust banking system and efficient distribution platforms, providing both liquidity and confidence.

While the extent to which in practice Australia develops as an offshore RMB hub is very much in the hands of the Chinese authorities, Australia has reasons for optimism. Firstly, in 2012 China and Australia entered into a bilateral currency swap agreement. The swap facility is the fourth largest after Hong Kong, Singapore and South Korea.  Last week it was announced the AUD has just become the third major currency outside of USD and JPY to have direct trading against CNY. And perhaps most importantly, the recently announced strategic partnership between China and Australia will provide an annual forum at which policy issues can be discussed.

So there are encouraging reasons for thinking that China may be willing to encourage and support Australia’s development as a location for the expansion of the network of offshore RMB hubs.

Nonetheless, more work needs to be done on understanding the key issues, drivers and impediments for developing RMB business in Australia. They will be the subject of a joint research project to be conducted by the Centre for International Finance and Regulation (CIFR) and the Shanghai University of Finance and Economics. This important project was announced last Friday by the Treasurer at the RMB Trade and Investment Dialogue in Sydney. It will incorporate a survey of both Chinese and Australian companies regarding constraints to RMB invoicing; the implications of RMB internationalisation for regional and global financial markets; and the market conditions and policy framework that may need to be in place to encourage development of an offshore RMB market in Australia.

Australia benefits enormously through its trade links with China. We now need to ensure that we have both the market conditions and the policy framework in place to also benefit from the massive changes that are just beginning in global financial markets as China eases its capital controls and moves towards a more market determined exchange rate.

Geoff Weir is a consultant for the Centre for International Finance and Regulation. A version of this article was previously published in The Australian Financial Review.

Rosemary Howard

Not the big end of town, but not small either, Australia’s  mid-market (defined by companies with revenue of $10-$250mil)  makes up just 1.4 percent of Australian businesses yet contributes more than a third (37 per cent) of Australian business revenue, contributes 21 per cent of deposit and borrowings and employs one in five Australians (23 per cent).

These businesses contribute around $425 billion in added value, compared to large and small businesses – which contribute $393 billion and $373 billion respectively.

The mid-market is the fastest growing sector in our economy, yet it often flies under the radar. By focusing on this sector, we can support its growth — not only here but into Asia, which is where the growth lies.

Recently, the Australian Government released the “Asian Century” whitepaper which addresses how to ride the wave of Asia’s continual growth. This is about government investment in education, infrastructure, workplace change and assisting companies find bigger markets for 2020+.

For mid-market businesses in Australia, the Asian Century whitepaper signifies the need to network and be open to the world, particularly to Asia. Geographically, Australia is intrinsically linked to Asia and we are in an enviable position given the tremendous growth of China and the Asian tigers.

Australia is now at a very important point in its history.  The world is changing dramatically and a strong Asia focus is required.  This applies at the general economic and society level as well as at the company level.

Let’s have confidence and stay positive.

Leadership. Innovation. Collaboration. Openness. Investment.

These areas are critical to the future of Australia’s mid-market sector.

Rosemary Howard is the Executive Director and Conjoint Professor of Executive Education at the Australian Graduate School of Management.

Rosemary has over 30 years experience in senior management with executive leadership positions in public and private sectors. Prior to joining AGSM, Rosemary was CEO at TelstraClear and inaugural Managing Director, Telstra Wholesale. Previously, Rosemary was Executive Director, NSW Department of State Government.

Rosemary holds a Bachelor of Science from Sydney University, Masters of Science and Society from UNSW and Graduate Diploma of Management from AGSM.  In 2003, she was awarded an Australian Government Centenary Medal for ‘Service to Australian Society in Business Leadership’.

Tim Harcourt | The Airport Economist

When you are punting on this year’s Melbourne Cup, have a bit of sympathy for Australian export businesses who have to make their big bets on international markets in the Asian region. Like a good punter Australian exporters have to look at the horse, the jockey, the state of the track, and of course, the odds. And it is not just a flutter for them but a major business decision that will affect their livelihood as well as the well being of those whom are dependent on their business as well.

To help the average race goer understand the nuances of exporting, the following export ‘form guide’ has been produced. 

Horse number one is Great Samurai, representing the Japanese market. It’s a long standing champion, has been written off by some, but still very capable and strong and has helped others develop in the East Asian stable yards through outward investment.

Secondly, there’s New Dynasty, representing China. This dynamic new colt has surprised seasoned punters with his ability to maintain a fast pace, year after year.

Thirdly, Passionate Tradition, representing Korea. This little known but powerful galloper with an industrious approach has revealed new appeal to punters in recent years.

Fourthly, there’s Fragrant Harbour, representing Hong Kong. Known for slipstreaming the colt from China but also an attractive performer in her own right.

Fifthly, there’s Little Dragon, representing Taiwan. She is occasionally overshadowed by her new high profile cousin, New Dynasty, but she’s a tidy performer who has rewarded loyal supporters well over many seasons.

Next is The ASEAN Emissary, representing Vietnam. This is the dark horse of the East Asian field that has put together a string of good seasons in recent years and seems set for even better days ahead.

Next is Taj Mahal, representing India. An up and comer who is twinned sometime unfairly with New Dynasty, but is coming into his own thanks to ongoing reform of stable practices.

Finally there’s Archipelago, representing Indonesia. Had question marks a while ago but had now start challenging the field and becomes am up and coming favourite amongst Aussie punters.

Racegoers should also consider a few newcomers amongst the emerging markets including Arabian Nights from Abu Dhabi in the United Arab Emirates, Samba Fever from Brazil and even a roughy like Genghis Khan from Mongolia, Burmese Days from Myanmar or Boratnomics from Kazakhstan might be good for a place.

So there you have it, your own export form guide for Asia. Fortunately, back in the real world, exporting is clearly not all about luck as much as skill and strategy. It requires good research, innovation, flexibility and good knowledge of your prospective market. And most importantly, the evidence shows that it does pay off. According to economic research, exporters are, on average, faster growing, more profitable and more productive than non-exporters. Exporters also pay better wages; provide better employment conditions and higher quality jobs than non-exporters. In short, exporting is a good bet for both large and small players in the international trade game but you’ve got to be a stayer in the Asian Century.

Tim Harcourt is the JW Nevile Fellow in Economics and an adjunct professor in International Business Strategy, at the Australian School of Business, the University of New South Wales (UNSW) & author of The Airport Economist:  www.theairporteconomist.com.

Tim Harcourt | The Airport Economist

The Asian white paper is a great chance for Australia to explore the opportunities our closest neighbours offer us, and education is the key: as it offers great points of engagement with Asia and longer lasting and deeper relationships.

The long-awaited Asian Century white paper was released on Sunday. Ken Henry’s paper covered a broad range of issues including education, language skills, technology and security in the fastest growing region on the planet.

Australia has been earning big dollars through rocks and crops – now we’ve got to do a bit more learning through education and service exports. But I argue that now it is vital for Australia’s trade that the white paper lifts our engagement with Asia, and identifies opportunities for government and business.

Just speaking an Asian language whilst helpful is not sufficient – we need to be Asian business literate, and understand the economies of our Asian partners to succeed in our engagement.

As younger Australians engage with Asia through education and exchange, technological advances and social media, the nature of their relationship with Asia will be different from that of previous generations. Demographic change in Asia will mean more opportunities for Australian services providers in the traditional areas of education and tourism but also in areas focused on wellbeing.

We should be at the forefront of offering financial services to Asia, and Australia could become the dominant financial centre in the region. Australian capability in financial services will be critical in the fourth wave of our economic engagement with Asia, as finance is the fuel that lubricates international trade. Financial services trade volumes picked up substantially in 2011 after four years of stagnation, rising by 22 per cent.

Tim Harcourt is the JW Nevile Fellow in Economics and an adjunct professor in International Business Strategy, at the Australian School of Business, the University of New South Wales (UNSW) & author of The Airport Economist:  www.theairporteconomist.com.

Tim Harcourt | The Airport Economist

Once upon a time when I went to my publisher, he told me adamantly “Economics doesn’t sell.”

I was gobsmacked! “Economics, that tells us all about supply and demand and how to run a business or a household doesn’t make a quid?  How could that be?” I asked the great man of Australian publishing.

“Well, you see, my friend, “it’s the dismal science” explained my publisher.

Not to be deterred I had a look at the origins of this term ‘the dismal science’ and whether it was an albatross around the neck of economics and its popularity. In my historical voyage of intellectual discovery I found out a few interesting things along the way, and some myths and realities about the history of economics and how it has been perceived in past times and in the modern day.

First things first about economics, it’s not dismal it’s gay. When I looked up the term “dismal science” I found a fascinating history of how the label became associated with economics. It was found that the British historian Thomas Carlyle used the term in his debates with the Quakers and Baptists over the emancipation of slavery in the West Indies and his fears about what had occurred in the Irish famine.

Carlyle was debating the ‘Exeter-Hall Philanthropists who called for emancipation of black slaves in the West Indies whom he feared be worse off under the laws of supply and demand as free man, as had happened to free agricultural labourers in Ireland who perished by famine.  Carlye is reported to have said in 1888:

“Truly, my philanthropic friends, Exeter-Hall Philanthropy is wonderful. And the Social Science – not a ‘gay science’, but a rueful – which finds the secret of this Universe in ‘supply and demand’ and reduces the human governors to that of letting men alone is also wonderful. Not a ‘gay science’ I should say, like some we have heard of: no, a dreary, desolate, and indeed quite abject and distressing one, what we might call, by way of eminence, the dismal science.”

In an absorbing analysis of the debate by the historian of economic thought, Peter Groenewegan, Caryle’s main contention is that slavery was better than the forces of supply and demand that had impoverished the Irish farm worker. Carlye further thought that slave owner had a mutual obligation to look after black slaves in the West Indies and thought that any move to emancipate them into a free labour market would make the West Indies a ‘Black Ireland’ in terms of economic misery. In fact, the whole debate about the West Indies and Ireland reminds me of Roddy Doyle’s film ‘The Commitments’ when the fledgling band manager Jimmy wants his (lily white) band to say: “We’re from Dublin, we’re black and we’re proud!”

Who would have thought a popular movie about a fledging rock band would have had its historical roots in the history of economic thought?

In any case, as a result of this chequered history, several myths about economics developed. Some are still hanging around today, like a dead cat in the middle of Anzac Parade, stinking to high heaven. Its troublesome origins have made a bit of mud stick.

Myth one: ‘economics is not ethical’. It’s all about profit and welfare maximising, that is how to be selfish and what it means as a result. Hence the term ‘homo economicus’ about rational decision makers individually pursuing their own ends. Or as my grandpa who was a professional punter at the Randwick racecourse used to say: “Always back the horse called ‘self-interest’, it doesn’t always win but you can guarantee that it will be a trier.”

However, the real story is more complicated than that. It needs to be recalled that early political economists were moral philosophers like Adam Smith. Smith’s ‘The Theory of Moral Sentiments’ was in some ways a much more important treatise in the early development of economic thought than the ‘The Wealth of Nations’. Smith was a theologian, and he was interested in ethical behaviour and what was better for society as a whole as well as the individual.

In fact, in Australian economics today, many of our leading thinkers such as UNSW’s own distinguished emeritus professor, John Nevile (whom my fellowship is named after) and the likes of Ross Gittins (the son of a Salvation Army chaplain in Newcastle), Ian Harper and Nevile Norman have a strong ethical and religious roots in how they think about economic issues.

On the other hand, some economists, of the neo-classical variety, take a different tack.  For instance, Milton Friedman, the father of the Chicago School once famously said about ethics and economics that: “The only ethical obligation of a business is to make a profit.” So the debate rages on.

Myth two: ‘economics is not accurate’. Many engineers and members have the natural scientific community have sneered at economics for ‘not getting its forecasts right’ and make the famous jokes about ‘when you get 4 economists in a room you get 5 answers.’ This seems to forget that economics is one of the social sciences, predicting human behaviour, so it’s like psychology, history or sociology rather than a ‘hard’ science. Of course, economists themselves have acted like ‘social science imperialists’ and have tried to make their discipline closer to the hard sciences and more mathematical. The risk they have run here is that distancing economics from the social science and closer to the hard science rather than becoming a rich man’s sociology they will make economics a poor man’s mathematics.

Myth three, ‘economics is dry’. You hear this all the time, that it is a dry subject and/its proponents are dry. Well it’s a difficult subject but dry? Whether it be the economics of being a child, growing up, getting a job, getting married, working out super, economics is about everything that touches our lives. As the Cambridge economist Alfred Marshall says “Economics was the study of mankind in the ordinary business of life.” And its ‘big picture’ too, whether we are talking war and peace, free trade and protection, or global warming all these issues have an economic dimension.

Myth four, ‘economics won’t get you a job’. When I was at University nearly everybody was advised to do accounting as you can always “fall back” on an accounting qualification. Economics was warned to be ‘too risky’. Two decades of full employment on I have found economics to not only be in great demand in the labour market, but also a means to a number of very stimulating and interesting jobs. Furthermore, I have found that many of my colleagues at Austrade, DFAT, the ACTU and in the private sector had ‘secretly’ got economics degrees but didn’t tell people they were economics graduates (at Austrade I was the only one ‘out of the closet’, so to speak, with economist officially in my title). I think this shows that in many profession with a business dimension, whether it be accounting, politics, journalism, marketing, engineering, or general management, economics is a useful discipline to have as a way of thinking. Just as Dr Karl Kruszelnicki, the Julius Sumner Miller at Sydney University (or ‘Dr Karl’ fame on the ABC) says all scientists should have a background in physics as a way of thinking and solving problems, all business professionals need to have economics in the tool kit as they embark into the big wide world.

Myth five, ‘economics books don’t sell’. Well we are no Stephen King or JK Rowling but we economics authors have actually done ok. In fact, my own publisher had a change of mind, after he saw the success of Freakonomics and told me to “Hurry up and get that manuscript finished,” and hence The Airport Economist took off thanks to the success of Freakonomics and The Undercover Economist by Tim Harford.  (In fact the British based Tim and I often get confused for each other, which is great for business on both sides of the world!). In addition, there’s Ross Gittins’s The Happy Economist, Zombienomics by John Quiggin, Parentnomics by Joshua Gans, Disconnected by economist turned Labor MP Andrew Leigh and the new contribution by Jessica Irvine titled Zombies, Bananas and Why There are no Economists in Heaven: the Economics of Real Life. In fact, my publisher (Allen & Unwin) has been a publisher of most of these titles in Australia and have now become the ‘true believers’ of the new economics literature.

In conclusion, maybe economics is the gay science rather than the dismal one after all. So in that vein I should conduct some research into the economics of gay marriage and its impact on the economy. If the Tasmanian gay marriage act gets up maybe it will provide some lucrative stimulus to the local economy. And then we can start research on something even more potentially economically lucrative – gay divorce…

Tim Harcourt is the JW Nevile Fellow in Economics and an adjunct professor in International Business Strategy, at the Australian School of Business, the University of New South Wales (UNSW) & author of The Airport Economist:  www.theairporteconomist.com.

The  Reserve Bank of Australia (RBA) has cut its cash rate by 25 basis points to 3.25 per cent in response to a weakening outlook for global economic growth. I feel the decision by the RBA to cut interest rates may boost underperforming sectors of the economy.