The Limits of Fiscal Policy: Insights from Tony Makin, Alex Robson & others - EP222

Economics Explored

This episode on the limits of fiscal policy features highlights from host Gene Tunny's past conversations with the late Australian economist Professor Tony Makin and former OECD Ambassador Alex Robson. In the discussions, Tony Makin provides a balanced and insightful analysis of Australia's fiscal response to the COVID-19 pandemic, critiquing programs like JobKeeper while recognizing some justification. He and Alex Robson discuss the importance of considering the open economy impacts of fiscal stimulus and the long-term burdens of debt. The episode looks to validate Makin's warnings about the limits of discretionary fiscal policy through subsequent evidence and events. Gene summarizes the JobKeeper evaluation results and what happened in the Australian housing market following the pandemic fiscal stimulus.

Please get in touch with us with any questions, comments and suggestions by emailing us at [e-mail] or sending a voice message via https://www.speakpipe.com/economicsexplored.

What’s covered in EP222

• Fiscal policy limits and its impacts: introduction (0:03)
• Economic stimulus measures during the COVID-19 pandemic. (9:36)
• JobKeeper program design and targeting. (15:44)
• JobKeeper program's effectiveness and infrastructure spending challenges. (21:31)
• Keynesian economics and infrastructure spending. (27:50)
• Fiscal policy and its impact on the economy. (33:13)
• Fiscal policy and its unintended consequences. (40:12)
• The economic impact of public debt with Tony Makin and Alex Robson. (48:31)
• Fiscal policy and its impact on the economy: wrap up. (53:39)

Takeaways

1. Fiscal stimulus packages must be carefully designed and limited in size to avoid unintended consequences.
2. The nature of the workforce is important to consider when implementing fiscal policy, as not all workers can easily transfer to different industries.
3. The burden of public debt, including interest payments, can have long-term impacts on national income and economic growth.
4. The effectiveness of fiscal policy in an open economy is influenced by factors such as capital mobility and exchange rates.
5. Tony Makin was a leading advocate for sensible fiscal policy in Australia, and his contributions to the field are greatly missed.

Episodes the highlights are clipped from

EP119: What Tony Makin taught us about macroeconomics – Economics Explored

A Fiscal Vaccine for COVID-19 with Tony Makin – new podcast episode | Queensland Economy Watch

Links relevant to the conversation

Fiscal policy papers by Tony Makin:

The Effectiveness of Federal Fiscal Policy: A Review

(PDF) Australia's Competitiveness: Reversing the Slide

A Fiscal Vaccine for COVID-19

Treasury analysis of JobKeeper:

Independent Evaluation of the JobKeeper Payment Final Report | Treasury.gov.au

The employment effects of JobKeeper receipt | Treasury.gov.au

News regarding unintended consequences of fiscal stimulus:

Building company collapses into liquidation days before Christmas, impacting four Guzman Y Gomez sites

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au.

Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.