Sunday, 27 May 2018

Why the robot revolution risks an economic 'death spiral' for Australia

In promoting his 10-year tax plan, Malcolm Turnbull suggested people want governments to undertake “long term planning”. However, a new research paper out this week from the IMF highlights how economies could be set for a major shake-up in the future and how sticking with the belief that better wages for workers comes from reducing company tax in order to spur capital investment is a rather wishful proposition.
Economics research papers generally are not known for their optimism, but the IMF paper titled “Should We Fear the Robot Revolution? (The Correct Answer is Yes)” fairly hits you between the eyes with its pessimism.
This research goes very much to the heart of primary political debate in this country about jobs, equality and the role of government.
When Malcolm Turnbull took over the prime ministership he loved to talk about how it was the most exciting time to be alive – innovation was on the rise, agility was all the go! But for many workers it is a rather worrying time. In the past decade since the global financial crisis real wages have stalled, underemployment has risen, wage growth has plummeted, businesses have sought to move away from enterprise bargaining, and the growth areas have been mostly in lower-paid services sectors such as social care.
And underneath all that is the feeling – perhaps overstated – that we are soon in danger of being replaced by robots.
The IMF paper on the topic notes that there are essentially two camps on this issue – the first is optimistic and believes that, as in the past, greater automation will see some jobs lost, but the demand for many jobs – especially those “that place a premium on creativity, flexibility, and abstract reasoning” – will grow and overall the economy is better off.
The other side of the coin are those who note these are not your grandparents’ robots we’re talking about. These are robots that make use of AI in order to do work previously believed to be non-automatable precisely because it was seen as creative, flexible, or needing abstract reasoning.
The paper considered a range of scenarios – from the more traditional one where robots replace only low skilled work to where robots are able to replicate a range of work and then a final one where robots “can do anything”.
And the results are not good for workers.
Essentially the shift sees national income move from labour to capital – as the returns from investing in robots to do work previously done by people increase.
They note that “the most common arguments for technology optimism do not stand up to scrutiny”.
Even in scenarios that fit with the more optimistic view of automation, the paper concludes that “automation is very good for growth and very bad for equality”.
The authors suggest that “in scenarios where the traditional technology disappears and robots take over the automatable sector, the economy either ascends to a virtuous circle of ongoing endogenous growth or descends into a death spiral of perpetual contraction. Unfortunately, the odds strongly favor the death spiral”.
It’s never good to read a report with “economic growth” and “death spiral” being used together.
And one reason to fear the future is the past.
Another report from the IMF this week looked at why some places in the US have had improved labour participation while elsewhere it has plummeted. It found that once you accounted for age, the overwhelming reason was automation:

"Automation and offshoring may have permanently displaced some workers, even if their effects on the economy as a whole were beneficial, through the creation of job opportunities in other sectors or productivity gains”.

The authors looking at the benefits of increased robots concluded that the rise in automation causes real wages to fall in the short run but that they “eventually rise” due to increased demand for labour in work robots cannot do. But, they note bitterly, the “short run” can “consume an entire working life” and “eventually” could “easily take generations”.
It’s why basing your economic policy on “long-term” gains can easily fool you into pursuing something of little worth. And why in a period where we have seen strong employment growth, but flat household income, talk of cutting company taxes to increase capital investment is not a formula that is going to bring much joy.
Even the treasury’s own research suggests the company tax cuts will cause real wages only to rise in the “long term,” at least 10 years after they have been introduced – at which point we may well wonder what jobs will be around to garner that growth.

The most worrying part of the IMF paper is the authors have little sense that much can be done to ameliorate the problems. Yes, education can help, but even then the authors doubt a higher skilled labour force can offset the “huge real wage cuts unskilled labour suffers and the decrease in labour’s overall income”.
Similarly they note the proposal for a universal basic income has some merit but the problem is paying for it in a world where income is shifting from labour to capital. They note that “capital taxation is becoming more and more difficult with globalization and the increasing capital mobility”.
And it is also made more difficult when our government is following the lead of others to reduce the level of taxation that would be paid by those companies in the first place in order to encourage the investment that are causing so much worry for workers.
It has long been assumed such policies would work out better for everyone in the end; the research this week shows that that has not be true in the past and is not likely to be so in the future.
Greg Jericho is a Guardian Australia columnist

Saturday, 26 May 2018

'Not on the same planet': Julia Banks is wrong about Newstart, say unemployed

Extract from The Guardian

Liberal’s claim she could live on $40 a day prompts small but vocal protest outside her office

  Newstart recipients protest outside MP Julia Banks's office – video

Annie McLoughlin had one thought when she heard Liberal MP Julia Banks’s claim she could live on Newstart’s $40 a day.
“I just thought, she’s not really on the same planet as people who are under the pump,” McLoughlin said. “If you’ve got children to look after, how are you actually expected to get out from under?”
“I thought she was a fool, basically.”
McLoughlin was so outraged by the comments that she joined a small protest outside Banks’s electorate office in Melbourne’s eastern suburbs on Friday. The protesters, organised by the Australian Unemployed Workers’ Union, wanted to give Banks the weekly budgets of Newstart recipients, to show her the kind of hardship they faced.
Banks wasn’t in the electorate office, and the protesters said the doors were locked, leaving them unable to deliver the documents. Earlier this month, Banks courted controversy when she said she could “live on 40 bucks a day knowing that the government is supporting me with Newstart looking for employment”.
The position conflicts with the views of former prime minister John Howard, Deloitte’s Chris Richardson and the Business Council of Australia, who have all said the current rate is too low.
McLoughlin, who is 59, said living on Newstart was a constant struggle. She gets by on canned food, pasta, oranges and peanut butter (for the protein).
“Put it this way, if I was going to get a takeaway coffee, it would be a special experience for me,” she said. “Because they cost almost $5 in some places. That’s too extravagant.”
She has just enrolled in a technician course to boost her employment prospects, after struggling to secure employment due to her age.
The Australian Council of Social Service (Acoss) led a pre-budget campaign for an increase in the Newstart rate, which has remained frozen for 18 years.
Research released earlier this week showed Newstart recipients who were also supported by the Salvation Army were left with just $17 a day, after housing costs.
Banks’s office was contacted for a response. 

Friday, 25 May 2018

Rich List: Billionaires multiply as profits surge, wages stall

Posted yesterday at 4:43pm

Australia has 16 extra billionaires this year, taking the total to a record 76, with carboard and recycling magnate Anthony Pratt again topping the list of the nation's wealthiest.
The nation's richest 200 people, as calculated by the Financial Review, held a record $283 billion in wealth, up 21 per cent on last year.
It took a personal fortune of $387 million to make the list this year, up significantly from $341 million last year.
But the average wealth of Australia's 200 richest people was $1.41 billion.
Apartment developer Harry Triguboff ($12.8 billion) and Gina Rinehart ($12.7 billion) were just behind Mr Pratt, with Hong Kong-based property magnate Hui Wing Mau ($9.1 billion) and Westfield shopping centre billionaire Frank Lowy ($8.4 billion) rounding out the top five richest Australians.
The chief economist at left-leaning think tank The Australia Institute, Richard Denniss, said it is no surprise that the number and wealth of billionaires has surged.
"It's a good time to be a billionaire in Australia," he said.
"On the back of strong profit growth and frozen real wages, the share of GDP going to wages is at historically low levels, while profit share is at historically high rates."
"It is little wonder that inequality is on the rise and the biggest winner from all of this are billionaires, whose numbers are rapidly growing."

The top six richest Australians had a combined personal fortune of $64 billion in 2018, roughly equivalent to The Australia Institute's 2017 estimate of the combined $65.4 billion wealth held by the 1.8 million households in the bottom 20 per cent.
Three of Australia's richest people were neither born in the country nor spend most of their time living here: Hong Kong-based property tycoon Hui Wing Mau, who owns several large Australian agricultural interests; South African-born, Swiss-based mining executive Ivan Glasenberg; and Indian-born, Dehli-based auto parts manufacturer Vivek Sehgal.

Property developers dominate rich list

The top five industries in which the nation's wealthiest 200 primarily made their fortunes are property (51), retail (22), investment (20), resources (18) and financial services (16).
With property the main source of wealth creation for more than a quarter of the richest 200, Dr Denniss said the wealthy should be concerned about the growing number of Australians feeling left behind by the economic system.
"Whether it is precarious work, sluggish wages growth or rapidly rising house prices, there are a growing number of Australians who are becoming increasingly angry at the fact that they're missing out," he told the ABC.
"It is a brave politician who ignores the public's growing concern."

The nation's richest are evenly split between Sydney and Melbourne (with 57 residing in each of those cities), with Perth (20), Brisbane (15) and the Gold Coast (5) housing many of the rest.
Men continue to dominate the nation's wealth, with only 19 women in the top 200 and just 8 female billionaires out of 76.

Stargazing Live breaks world record for most people looking at the night sky at once

Updated about 8 hours ago

It's official: the world record for most people stargazing across multiple venues at the same time has been broken.
The ABC's Stargazing Live broadcast, in partnership with the Australian National University (ANU) and Australians across the country, clinched the Guinness World Records title for an event that saw thousands of telescopes pointed at once at the night sky.
With more than 285 stargazing parties registered and thousands of telescopes delivered across the country, organisers were confident a world record would be eclipsed.
Due to the overwhelming number of participants involved, the exact number of people that helped to win this record is still being counted.
But the ABC can confirm more than 40,000 people simultaneously observed the moon through telescopes for 10 minutes on Wednesday night, eclipsing the previous record set by the ANU in 2015 of 7,960 people.

"It's great to break the world record for the number of people stargazing simultaneously, but I think this is only half the story," Stargazing Live host Professor Brian Cox said in a statement.
"The real value is that many thousands of Australians have been introduced to the wonders of the night sky, and many of those will be children.
"They will develop a lifelong interest in astronomy and science, and the impact of that will be felt in decades to come.
"Perhaps the first Australian to walk on Mars will have been inspired by this spectacular night."
Stargazing Live has seen the audience help identify two new exploding stars, and in the process gather enough data to estimate the age of the universe.

Wednesday night saw the discovery of a type Ia supernova 1.1 billion light-years away, and further observations on Thursday night suggested a second type Ia blast slightly closer, some 945 million light years away.
The "Star Parties" across the country were hosted by community groups and organisations in every state and territory, from remote outback locations to metropolitan centres.

They included large public events in Brisbane, Sydney and Canberra, in 14 universities, over 100 schools and eight observatories.
All registered participants will receive a certificate from Guinness World Records.

Stargazing Live with Brian Cox and Julia Zemiro, on ABC iView

Coalition comes out firing in super Saturday byelection gunfight

Extract from The Guardian

It should be clear to anyone watching politics right now that no one is bringing a knife to a gun fight, but it became abundantly clear when the Speaker, Tony Smith, updated the House of Representatives just after question time on Thursday.
All week, the denizens of the parliament had been sweating on the date for the byelections triggered by the last vestige of the dual-citizenship crisis. The days of the sitting week passed. Tick tock. Still, no date.
On Thursday we had a date, and hey presto, it was the same weekend as Labor’s national conference. What a coincidence. Of all the gin joints in all the towns in all the world, she walks into mine.
Given the obvious political provocation, a bit of trolling-by-scheduling, a boilover on the opposition benches was predictable, and the boilover happened.
Tony Burke tried to be gracious, given he rates Smith’s professionalism, but testiness bubbled to the surface. July 28 just happened to be the weekend of the national conference, the manager of opposition business noted, lips pursed.
Labor’s Senate leader, Penny Wong, felt little obligation to feign graciousness and just bored straight into the electoral commissioner, Tom Rogers. This was all a bit convenient, Wong thought, the electoral commission telling the government July 28 was “optimal” for the byelections.
Wong pointed out that byelections and elections had been scheduled previously during school holidays (one of Rogers’ reasons for suggesting delaying the contests almost two months) and democracy had not crumbled.
Rogers was having none of it. He said he provided advice to the Speaker of the House, and it was the Speaker of the House who made the decision.
He also thought he might take a moment to give Wong, and possibly the political class watching on all around the parliament, a short homily about precisely who had created the botch up in the first place.
The electoral commissioner noted that we were having byelections because several MPs had resigned “as a result of failing to follow procedures”. He thought it was a bit rich for the AEC to be “fingered” as somehow responsible for the debacle, and didn’t fancy being anyone’s passing cat to kick.
Rogers is right of course. That is why we are in this mess; that and our complete joke of an accountability and enforcement regime which permits politicians to think complying with constitutional requirements is entirely optional. But Wong wasn’t in the mood for a homily. She was in the mood for a mauling.
So what are the practical consequences of super Saturday on 28 July?
It looks almost certain that Labor will postpone the national conference given the impossibility of having key operatives in the party’s campaign machine locked away jawboning and arm-twisting in an Adelaide conference room when they need to be out in marginal seats getting candidates elected.
Labor will blow cash on a cancellation. Lots of things – flights, venue, accommodation – are pre-booked. No political party in Australia can afford to blow cash. Obviously no one will be celebrating.

Dinosaur-killing asteroid impact warmed Earth by 5 degrees for 100,000 years, fossil study finds

The asteroid smash that finished off the dinosaurs also cranked up Earth's thermostat by 5 degrees for 100,000 years, according to shards of fish fossils found in Tunisia.

Key points:

  • An asteroid or comet smashed into Earth 66 million years ago, coinciding with a mass extinction event
  • Whether the Earth cooled or warmed afterwards has been debated
  • Ancient fish fossils suggest the world's temperature shot up by 5 degrees and stayed that high for 100,000 years before dropping back to pre-impact levels
And even though the asteroid collided with Earth around 66 million years ago, the sudden global warming that followed is relevant to what's happening today, according to Ken MacLeod, the lead author of a study outlining the findings, published in Science today.
"The rate at which the planet system was perturbed by the impact is quite comparable to human perturbations over the past 200 years," said Professor MacLeod, who is a palaeoclimatologist at the University of Missouri.
"If we turn off our fossil fuel lifestyle tomorrow, it'll still take 100,000 years for the changes we've already imposed upon the Earth to come back down to something like the pre-industrial revolution state."
To find out what the climate was like when the dinosaurs died, Professor MacLeod and his colleagues looked to a region in northern Tunisia called El Kef.
Even though it's a good 9,000 kilometres from the Chicxulub crater in Mexico — all that's left of the asteroid impact — El Kef is renowned in palaeontology circles for its record of the Cretaceous-Palaeogene, or K-Pg, boundary.
The K-Pg boundary is a thin layer of rust-coloured sediment that's dated to around 66 million years ago. It's associated with the mass extinction event that famously destroyed all dinosaurs, apart from some birds.
The sedimentary layers are particularly clear at El Kef because the area, which was seabed at the time, was shielded from waves and on stable ground, away from the warping effects of earthquakes.
Professor MacLeod's team analysed the chemical composition of sand-grain-sized fragments of fish fossils embedded in the sedimentary layers below and above the Cretaceous-Paleogene boundary, signifying the 50,000 years preceding and 300,000 years after the collision.
When fish build minerals in their teeth, bones and scales, the temperate of the surrounding water dictates how much of a specific type or isotope of oxygen, called oxygen-18, is laid down.
In the El Kef fish fossils, he and his team found the signature of a rapid, intense rise in temperature from around 20 to 25 degrees Celsius, which was sustained for 100,000 years before dropping back to pre-collision levels.
And because of polar amplification, which tends to produce bigger climate swings near the poles than the equator, it's likely the polar regions warmed even more than the 5 degrees calculated at El Kef, Professor MacLeod said.

Didn't the Earth cool after the collision?

You might have been taught that when the asteroid that killed the dinosaurs smashed into the Earth, fine particles were blasted into the atmosphere, blocking the sun and causing global cooling.
Even though this may have been the case in some parts, particularly close to the impact site, any local effects would have soon been swamped by overall global warming, said Andrew Glickon, a palaeoclimatologist at the Australian National University, who was not involved with the study.
"The impact could cause a rise of dust, fragments, aerosols, sulfur dioxide and so on. This is the normal process," he said.
Where particles might hang in the atmosphere for tens or hundreds of years, he added, carbon dioxide has real staying power, sticking around for millennia.
A major source of carbon dioxide likely came from burning forests, said Chris Turney, a palaeoclimatologist at the University of New South Wales, who was also not involved in the study.
"There would have been global fires, arboreal forests bursting into flames. That amount of carbon locked in vegetation and dumped into the atmosphere almost instantaneously would have a massive effect," Professor Turney said.
Greenhouse gases belching from the rattled ground, too, probably played a big role during the post-asteroid global warming.
Vast stores of subterranean methane could have been shaken loose by the impact's shockwave.
Methane has more than 20 times the greenhouse effect of carbon dioxide. And even though methane doesn't last as long in the atmosphere, it breaks down into carbon dioxide, Professor Turney said.
Some palaeoclimatologists suggest the asteroid shouldn't shoulder all responsibility for the mass extinction that followed. Rather, vast volcanic eruptions were already underway when the asteroid hit, and these got the extinction ball rolling.
The Deccan Traps in India, for instance, comprise 500,000 square kilometres of ancient volcanic flows more than 2 kilometres thick in parts.
They pre-date the asteroid impact by a couple of hundred thousand years.
Next, Professor MacLeod will analyse more fish fossils from deeper underground at El Kef to investigate the warming effects of volcanic activity.
"We'd like to extend to 2 million years before the K-Pg boundary to cover the interval where volcanism occurred to see if there's a warming pulse [before the collision]," he said.
This, Professor MacLeod added, "would really help us calibrate our fish-based palaeo-thermometer".

Why is land clearing bad news for the Great Barrier Reef?

Extract from ABC News

When the Federal Government approved the bulldozing of nearly 2,000 hectares of forest on Cape York's Kingvale Station this month, critics warned that the clearing would add to the sediment load running onto the Great Barrier Reef.
Many said the approval undermined the Government's $500 million budget commitment to protect the reef, and was at odds with Great Barrier Reef Marine Park Authority (GBRMPA) advice, which lists land-based run-off as a significant threat.
So how does land clearing affect sediment runoff, and what implications can this have for downstream marine environments like the Great Barrier Reef?

Sediment flowing onto reef has increased four-fold

Large-scale clearing is usually done by dragging 100 metres or more of ship-anchor chain between two bulldozers.
The desired effect is that everything between the dozers is mown flat.
Typically this type of clearing is done to make way for cropping, or to enhance grass cover for cattle grazing.
Denuding the landscape in this way has a double-barrel effect on erosion, according to Professor Jon Olley from the Australian Rivers Institute at Griffith University.
Removing the tree canopy exposes the soil to erosion from direct rainfall impact, and destroying the tree roots removes the "reinforcing" that holds the soil together.
"Studies have shown that runoff in subtropical regions increases by a factor of about four when trees are removed and replaced with paddocks," Dr Olley said.
In total, the Great Barrier Reef receives run-off from 35 basins, and river discharge is the biggest source of nutrients to inshore waters.
GBRMPA estimates that sediment inflow into the Great Barrier Reef has increased more than four-fold in the last 150 years, and by as much as 10 times in more disturbed catchments.

Tropical rains compound erosion

Rain events in the tropics can be severe.
Tully, in the wet tropics south of Cairns, averages more than 4 metres of rain annually, with most of this falling between November and April.
These intense downpours increase the potential sediment load that can be washed away, and also mean the sediment can be carried further downstream to the reef, according to Dr Olley.
"Removing vegetation increases the landscape's vulnerability to those couple of large storm events that provide most of the runoff in the year," he said.
That material can often include nutrients like nitrogen and phosphorus from fertiliser, and also pesticides, if the runoff is coming from agricultural land.
Some pesticides can have direct toxic effects to marine organisms, while the nutrients can be taken up by phytoplankton to form large algal blooms.
Although the sediment is eventually washed into the ocean, increased runoff into river systems can also be problematic.
Channels are filled in, and tidal flow can be affected.
"You end up with less complexity in the channel system, and so less diverse habitat, and so the whole ecology of the system is affected," Dr Olley said.
Toward the river mouths, mangroves require a balanced sediment load, though they are more resilient than reefs and seagrass according to Dr Frederieke Kroon, a coastal ecologist at the Australian Institute of Marine Science (AIMS).
"Mangroves actually need sediments, to a certain extent, to trap and increase the area where they can grow into," Dr Kroon said.
"But you don't want too much sediment … if the mud layer around mangroves gets too high, then you don't get that tidal movement anymore, which mangroves need to survive."

Too much sediment can kill coral, seagrass

Declining water quality from land-based runoff is listed as "one of the most significant threats" to the reef by the GBRMPA.
Similarly, fragile seagrass ecosystems can suffer due to declining water quality, according to Dr Kroon.
Seagrass, like all plants, requires sunlight to produce food through photosynthesis, as do corals containing symbiotic algae in their tissues that provide them with food.
The light is reduced even more if there are algal blooms from increased nutrients, and after too long without sunlight, corals and seagrass will die.
In turn, animals like dugong which rely on these habitats for food also die or are forced to relocate.
As well as blocking sunlight, sediments also smother corals — young and old — stunting or completely stopping their growth, Dr Kroon said.
"Corals can deal with being covered in sediments to a certain extent by removing particles on them with their tentacles. But if you get too much sediment they can get overwhelmed, and eventually die," she said.
Sediments can cover all the surfaces on a reef, including bare rock, which is the preferred landing spot for coral larvae to settle and grow.
"When hard surfaces in coastal waters are covered by sediment, it makes it difficult for these larval corals to recruit to, which means there's no reef recovery," Dr Kroon said.

'Brushing and scraping' fish unable to keep up

On a healthy coral reef, one group of fish plays an important role in removing and cycling sediments.
These fish unwittingly ingest sediment that is attached to the algae they feed on, according to reef-fish ecologist Sterling Tebbett from James Cook University (JCU).
"Some fish have specialised teeth that act like brushes, and they brush the sediment and their food from the algae, and they've got little toilet sites off the reef where they deposit this," he said.
"Others, like parrotfish, scrape the entire reef surface of algae.
Without the brushing and scraping fish, the algae lawns they normally feed on go from being neatly mown to longer and laden with sediments.
"When more algae grows it limits the reef's ability to recover," Mr Tebbett said.
"Corals can't recruit to surfaces dominated by these longer algae turfs, and it is harder for the reef to regenerate following a disturbance like bleaching."
The sediment-removing fish help keep reef processes working, but too much sediment and they can no longer do their jobs.
While the worst impacts of sediments are felt on inshore reefs, storms, cyclones and flooding can cause the footprint to spread much further out from the coast, Dr Kroon said.
"During really big floods the plumes can make it out to the mid-shelf reefs, and sometimes to the outer reef depending where you are," she said.
"Around the wet tropics where the outer reef is only 50km away from the coast, it can definitely happen, and it has happened before."