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Mortgage and inflation pain to ease, but only slowly: how 31 top economists see 2024

<a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, <a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a> A panel of 31 leading economists assembled by The Conversation sees no cut in interest rates before the middle of this year, and only a slight cut by December, enough to trim just $55 per month off the cost of servicing a $600,000 variable-rate mortgage. The <a href="https://theconversation.com/au/topics/conversation-economic-survey-81354">panel</a> draws on the expertise of leading forecasters at 28 Australian universities, think tanks and financial institutions – among them economic modellers, former Treasury, International Monetary Fund and Reserve Bank officials, and a former member of the Reserve Bank board. Its forecasts paint a picture of weak economic growth, stagnant consumer spending, and a continuing per-capita recession. The average forecast is for the Reserve Bank to delay cutting its cash rate, keeping it near its present 4.35% until at least the middle of the year, and then cutting it to <a href="https://cdn.theconversation.com/static_files/files/3028/The_Conversation_AU_February_2024_Economic_Survey.pdf">4.2%</a> by December 2024, 3.6% by December 2025 and 3.4% by December 2026. <hr /> <iframe id="xV821" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/xV821/4/" width="100%" height="400px" frameborder="0"></iframe> <hr /> The gentle descent would deliver only three interest rate cuts by the end of next year, cutting $274 from the monthly cost of servicing a $600,000 mortgage and leaving the cost around $1,100 higher than it was before rates began climbing. Six of the experts surveyed expect the Reserve Bank to increase rates further in the first half of the year, while 20 expect no change and three expect a cut. Former head of the NSW treasury Percy Allan said while the Reserve Bank would push up rates in the first half of the year to make sure inflation comes down, it would be forced to relent in the second half of the year as unemployment grows and the economy heads towards recession. Warwick McKibbin, a former member of the Reserve Bank board, said the board would push up rates once more in the first half of the year as insurance against inflation before leaving them on hold. Former Reserve Bank of Australia chief economist Luci Ellis, who is now chief economist at Westpac, expects the first cut no sooner than September, believing the board will wait to see clear evidence of further falls in inflation and economic weakening before it moves. <hr /> <iframe id="ZQgno" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/ZQgno/7/" width="100%" height="400px" frameborder="0"></iframe> <hr /> <h2>Inflation to keep falling, but more gradually</h2> Today’s <a href="https://www.rba.gov.au/">Reserve Bank board meeting</a> will consider an inflation rate that has come down <a href="https://theconversation.com/the-7-new-graphs-that-show-inflation-falling-back-to-earth-220670">faster than it expected</a>, diving from 7.8% to 4.1% in the space of a year. The newer more experimental monthly measure of inflation was just <a href="https://theconversation.com/the-7-new-graphs-that-show-inflation-falling-back-to-earth-220670">3.4%</a> in the year to December, only points away from the Reserve Bank’s target of 2–3%. But the panel expects the descent to slow from here on, with the standard measure taking the rest of the year to fall from 4.1% to 3.5% and not getting below 3% until <a href="https://cdn.theconversation.com/static_files/files/3027/The_Conversation_AU_2024_economic_survey.pdf">late 2025</a>. Economists Chris Richardson and Saul Eslake say while inflation will keep heading down, the decline might be slowed by supply chain pressures from the conflict in the Middle East and the boost to incomes from the <a href="https://theconversation.com/albanese-tax-plan-will-give-average-earner-1500-tax-cut-more-than-double-morrisons-stage-3-221875">tax cuts</a> due in July. <hr /> <iframe id="buC9f" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/buC9f/6/" width="100%" height="400px" frameborder="0"></iframe> <hr /> <h2>Slower wage growth, higher unemployment</h2> While the panel expects wages to grow faster than the consumer price index, it expects wages growth to slip from around <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release">4%</a> in 2023 to 3.8% in 2004 and 3.4% in 2025 as higher unemployment blunts workers’ bargaining power. But the panel doesn’t expect much of an increase in unemployment. It expects the unemployment rate to climb from its present <a href="https://www.datawrapper.de/_/w9h9f/">3.9%</a> (which is almost a long-term low) to 4.3% throughout 2024, and then to stay at about that level through 2025. All but two of the panel expect the unemployment rate to remain below the range of 5–6% that was typical in the decade before COVID. Economic modeller Janine Dixon said the “new normal” between 4% and 5% was likely to become permanent as workers embraced flexible arrangements that allow them to stay in jobs in a way they couldn’t before. Cassandra Winzar, chief economist at the Committee for the Economic Development of Australia, said the government’s commitment to full employment was one of the things likely to keep unemployment low, along with Australia’s demographic transition as older workers leave the workforce. <hr /> <iframe id="pAioo" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/pAioo/2/" width="100%" height="400px" frameborder="0"></iframe> <hr /> <h2>Slower economic growth, per-capita recession</h2> The panel expects very low economic growth of just 1.7% in 2024, climbing to 2.3% in 2025. Both are well below the 2.75% the treasury believes the economy is <a href="https://treasury.gov.au/speech/the-economic-and-fiscal-context-and-the-role-of-longitudinal-data-in-policy-advice">capable of</a>. All but one of the forecasts are for economic growth below the present population growth rate of 2.4%, suggesting that the panel expects population growth to exceed economic growth for the second year running, extending Australia’s so-called <a href="https://theconversation.com/were-in-a-per-capita-recession-as-chalmers-says-gdp-steady-in-the-face-of-pressure-212642">per capita recession</a>. <hr /> <iframe id="TO8bP" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/TO8bP/4/" width="100%" height="400px" frameborder="0"></iframe> <hr /> The lacklustre forecasts raise the possibility of what is commonly defined as a “technical recession”, which is two consecutive quarters of negative economic somewhere within a year of mediocre growth. Taken together, the forecasters assign a 20% probability to such a recession in the next two years, which is lower than in <a href="https://theconversation.com/two-more-rba-rate-hikes-tumbling-inflation-and-a-high-chance-of-recession-how-our-forecasting-panel-sees-2023-24-208477">previous surveys</a>. But some of the individual estimates are high. Percy Allen and Stephen Anthony assign a 75% and 70% chance to such a recession, and Warren Hogan a 50% chance. Hogan said when the economic growth figures for the present quarter get released, they are likely to show Australia is in such a recession at the moment. The economy barely grew at all in the September quarter, expanding just <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">0.2%</a> and was likely to have shrunk in the December quarter and to shrink further in this quarter. The panel expects the US economy to grow by 2.1% in the year ahead in line with the <a href="https://www.imf.org/en/Publications/WEO/Issues/2024/01/30/world-economic-outlook-update-january-2024">International Monetary Fund</a> forecast, and China’s economy to grow 5.4%, which is lower than the International Monetary Fund’s forecast. <h2>Weaker spending, weak investment</h2> The panel expects weak real household spending growth of just 1.2% in 2014, supported by an ultra-low household saving ratio of close to zero, down from a recent peak of 19% in September 2021. Mala Raghavan of The University of Tasmania said previous gains in income, rising asset prices and accumulated savings were being overwhelmed by high inflation and rising interest rates. Luci Ellis expected the squeeze to continue until tax and interest rate cuts in the second half of the year, accompanied by declining inflation. The panel expects non-mining investment to grow by only 5.1% in the year ahead, down from 15%, and mining investment to grow by 10.2%, down from 22%. Johnathan McMenamin from Barrenjoey said private and public investment had been responsible for the lion’s share of economic growth over the past year and was set to plateau and fade as a driver of growth. <h2>Home prices to climb, but more slowly</h2> The panel expects home price growth of 4.6% in Sydney during 2024 (down from 11.4% in 2024) and 3.1% in Melbourne, down from 3.9% in 2024. ANZ economist Adam Boyton said decade-low building approvals and very strong population growth should keep demand for housing high, outweighing a drag on prices from high interest rates. While high interest rates have been restraining demand, they are likely to ease later in the year. <hr /> <iframe id="syk8x" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/syk8x/6/" width="100%" height="400px" frameborder="0"></iframe> <hr /> In other forecasts, the panel expects the Australian dollar to stay below US$0.70, closing the year at US$0.69, it expects the ASX 200 share market index to climb just 3% in 2024 after climbing 7.8% in 2023, and it expects a small budget surplus of A$3.8 billion in 2023-24, followed by a deficit of A$13 billion in 2024-25. The budget surplus should be supported by a forecast iron ore price of US$114 per tonne in December 2024, down from the present US$130, but well up on the <a href="https://budget.gov.au/content/myefo/index.htm">US$105</a> assumed in the government’s December budget update. <a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a> Image credits: Getty Images This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/mortgage-and-inflation-pain-to-ease-but-only-slowly-how-31-top-economists-see-2024-218927">original article</a>.

Money & Banking

You don’t have to be an economist to know Australia is in a cost of living crisis. What are the signs and what needs to change

<a href="https://theconversation.com/profiles/john-hawkins-746285">John Hawkins</a>, <a href="https://theconversation.com/institutions/university-of-canberra-865">University of Canberra</a> This article is part of The Conversation’s series examining Australia’s cost of living crisis. <hr /> Every day the higher price of seemingly everything is mentioned in the news or in conversations with friends and acquaintances. The impact is clear as we are required to pay more for most things from our weekly shop and power bills, to filling the car and swimming lessons. So what is the cost of living and how is it measured? The “cost of living” refers to the prices people need to pay to meet their needs in their everyday lives. The most commonly cited measure is the <a href="https://www.abs.gov.au/websitedbs/d3310114.nsf/home/Consumer+Price+Index+FAQs">Consumer Price Index</a> compiled by the Australian Bureau of Statistics. This represents the price of a fixed basket of goods and services. The items in the basket reflect the spending of metropolitan households. Each item is given a weight corresponding to its share in the spending of these households. The CPI does not include the price of land or financial assets such as shares. The rate of change of prices is known as <a href="https://www.rba.gov.au/education/resources/explainers/inflation-and-its-measurement.html">inflation</a>. <hr /> <iframe id="WV21a" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/WV21a/1/" width="100%" height="400px" frameborder="0"></iframe> <hr /> Inflation rose sharply in the 1970s, especially after the oil price shocks. It took a long while to get it down. The Reserve Bank adopted an <a href="https://www.rba.gov.au/education/resources/explainers/australias-inflation-target.html">inflation target of 2-3%</a> in the <a href="https://www.tandfonline.com/doi/full/10.1080/10370196.2019.1615401">early 1990s</a> to keep inflation low over the medium term. After a long period of low inflation, it rose sharply again during 2022. It is now declining. A similar pattern is seen in comparable economies such as the United States and New Zealand. The supply bottlenecks caused by COVID have eased and economic activity is slowing in response to the increases in interest rates in most economies. <hr /> <iframe id="XtUKa" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/XtUKa/3/" width="100%" height="400px" frameborder="0"></iframe> <hr /> <h2>Not all prices rise at the same rate</h2> Some prices rise fairly smoothly in line with the overall CPI. Others, such as petrol and fresh food, are much more volatile. <hr /> <iframe id="XKmuL" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/XKmuL/2/" width="100%" height="400px" frameborder="0"></iframe> <hr /> Since 1972 the price of the CPI basket has increased almost 12-fold. But some prices have increased much more. Cigarettes cost almost 60 times as much (reflecting increased taxes). Labour-intensive hairdressing costs 20 times as much. Prices of other goods have gone up much less, especially after Australia cut tariffs and started importing more from low-cost producers. Over the past decade the prices of clothing and computers have fallen. People often believe inflation is higher than the CPI reports. Big price rises are more noticeable. You seldom see headlines about prices that have not changed. And when was the last time you heard a discussion about how clothing has been getting cheaper? House prices are now more than 50 times as high as in 1972, a much larger increase than the CPI. Some of this, however, represents quality changes rather than pure price changes. The average Australian house has roughly doubled in size and may now be the <a href="https://theconversation.com/size-does-matter-australias-addiction-to-big-houses-is-blowing-the-energy-budget-70271">largest in the world</a>. <h2>My inflation is not the same as yours</h2> The CPI reflects the prices faced by an average household. About half of households will have experienced a higher increase in the prices they pay, and half will have seen a lower increase. Different households consume different goods and services. Retirees tend to spend more on health care and less on childminding. A higher proportion of the spending of lower income households goes on necessities rather than luxuries. For the “average” household, almost 4% of spending is on tobacco. But of course non-smokers spend nothing while heavy smokers spend much more. So that large rise in cigarette prices affects some people significantly and others not at all. The ABS publishes some separate <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/selected-living-cost-indexes-australia/jun-2023">living cost indices</a>. The data get much less attention, partly because they are released after the CPI. These differ from the CPI in that they <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/6467.0Feature+Article1Mar+2017">include interest charges</a>. They are also prepared relating to different classes of people. Over the year to June 2023, the living costs of employees rose by 9.6% but those of self-funded retirees by 6.3% and age pensioners by 6.7%. The main reason for the difference was that interest rates increased and employees are more likely to have a mortgage than are retirees. <hr /> <iframe id="1OagU" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/1OagU/3/" width="100%" height="400px" frameborder="0"></iframe> <hr /> These compare to the <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">6% increase in the CPI</a> over the same period. <h2>Cost of living problem</h2> The cost of living becomes an increasing problem when incomes, notably wages, fail to keep up with it. Over long periods of time, wages tend to grow faster than prices. The economy becomes more productive over time and the gains flow to both workers and companies. But over shorter periods, this may not be the case. Last week’s <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/jun-2023">data</a> show wages grew by only 3.6% over the year to the June quarter. This is well below the current inflation rate of 6%. But it is around the growth in prices <a href="https://www.rba.gov.au/publications/smp/2023/aug/pdf/05-economic-outlook.pdf">forecast</a> by the Reserve Bank for the coming year. As well as an income for workers, wages are a major cost for businesses. So if wages grow too fast, and particularly were they to accelerate, there is a risk of a wage-price spiral. The 3.6% annual wage increase for the June quarter is slightly less than the 3.7% recorded in the March quarter. The quarterly growth rate has been steady at 0.8% for the past three quarters. If labour productivity grows close to its medium-term average, this size of wage increase should not be a concern. If business starts to expect raw material and input prices, and prices charged by their competitors, to keep growing strongly, they will be likely to keep increasing their own prices a lot. This risks a <a href="https://www.axios.com/2023/05/18/once-a-fringe-theory-greedflation-gets-its-due">price-price spiral</a>. <hr /> <iframe id="dfh40" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/dfh40/2/" width="100%" height="400px" frameborder="0"></iframe> <hr /> The Reserve Bank is trying to steer the economy along what it calls a narrow path. It hopes it has raised interest rates enough to slow the economy and return inflation to its 2-3% target within a reasonable time frame. But it hopes it has not raised them too far, which would push the economy into a recession and lead to a large rise in unemployment. The bank’s goal is to have the cost of living rising by around 2-3% per year and incomes a bit more than this, so living standards steadily improve for all Australians over time.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/210373/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/john-hawkins-746285">John Hawkins</a>, Senior Lecturer, Canberra School of Politics, Economics and Society, <a href="https://theconversation.com/institutions/university-of-canberra-865">University of Canberra</a> Image credits: Getty Images This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/you-dont-have-to-be-an-economist-to-know-australia-is-in-a-cost-of-living-crisis-what-are-the-signs-and-what-needs-to-change-210373">original article</a>.

Money & Banking

6 reasons Australians don’t trust economists, and how we could do better

<a href="https://theconversation.com/profiles/peter-siminski-250958">Peter Siminski</a>, <a href="https://theconversation.com/institutions/university-of-technology-sydney-936">University of Technology Sydney</a> Economics is about organising markets in ways that contribute to social welfare, which means anyone interested in anything from inequality to housing affordability, to health and education systems, or climate change to gender gaps ought to be interested in it. But economists are far from the most trusted professionals. We are apparently among the <a href="https://kingcenter.stanford.edu/news/abhijit-banerjee-good-economics-hard-times">least-trusted</a> in the US and <a href="https://www.ipsos.com/en-uk/ipsos-veracity-index-2020-trust-in-professions">midway</a> down the ranking in the United Kingdom. In Australia, such surveys on our most trusted professions <a href="https://www.governanceinstitute.com.au/advocacy/ethics-index/">don’t include</a> <a href="https://www.roymorgan.com/findings/roy-morgan-image-of-professions-survey-2021-in-a-year-dominated-by-covid-19-health-professionals-including-nurses-doctors-and-pharmacists-are-the-most-highly-regarded-but-almost-all-professions-d">economists</a>, which itself is noteworthy. Nevertheless, it’s worth reflecting on why Australians may distrust economists, and the ways in which economics can better serve Australia. <h2>1: Weak diversity and reflexivity</h2> Diversity is imperative for a field that helps make decisions about the allocation of resources. At <a href="https://www.rba.gov.au/publications/bulletin/2020/jun/why-study-or-not-study-economics-a-survey-of-high-school-students.html">high school</a>, economics students are increasingly male, and concentrated in metropolitan and high socio-economic status locations. <hr /> <iframe id="Pdz6D" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/Pdz6D/2/" width="100%" height="400px" frameborder="0"></iframe> <hr /> Only 0.5% of Indigenous graduates identified economics or econometrics as their main discipline in the 2021 census. Two-thirds of the Australians employed as economists are <a href="https://labourmarketinsights.gov.au/occupation-profile/economists?occupationCode=2243">male</a>, and although university economics departments have improved recently, they are still notoriously <a href="https://genderinstitute.anu.edu.au/gess/academic-appointments-in-economics-in-Australia">male-dominated</a>. Compounding this is that – unlike other social sciences – mainstream economics is not a tradition where <a href="https://medicine.unimelb.edu.au/school-structure/medical-education/research/qualitative-journey/themes/reflexivity">reflexivity</a> is encouraged. Reflexivity involves reflecting on one’s background and environment. Nor are economists often encouraged to reflect on the role of power in the promotion of the ideas they and others espouse, including in the media. <h2>2: The media and conflicts of interest</h2> Economists span academia, government, private and not-for-profit sectors. <figure class="align-right zoomable"><figcaption></figcaption></figure> But those appearing in the media appear to come disproportionately from banks, other financial institutions, management consultancies and think tanks. Particularly worrying is that some think tanks do not disclose the identity of their donors. The media seems uninterested in holding them to account for this. In contrast, all reputable academic journals (and <a href="https://images.theconversation.com/files/541221/original/file-20230804-21-4t1zo2.png">The Conversation</a>) require authors to declare any potential conflicts of interest as a condition of publication. Also worrying is that some think tanks seem particularly ideologically driven. In my view, the media should be much more critical and discerning in its engagement with economists and potential conflicts of interest. And more space should be made for academic and public-sector economists. Choices as to who is quoted should be guided by informed attempts to identify genuine expertise, as well as by diversity considerations. The opposite approach, sensationalism, is irresponsible and detrimental to the public good. And it contributes to distrust in economists. Equally, academic economists should strive to contribute more to national economic debates. A realignment of incentives within universities would help. <h2>3: Efficiency preferred to equity</h2> Decisions made by governments usually affect both the “size of the pie” (loosely, what economists call efficiency) and how it is shared (equity). How to balance this trade-off is a question of values, about which economists have no special insight. But we are well placed to summarise the likely distributional implications of policies. It is true that many economists are at the forefront of research on <a href="https://wid.world/">inequality</a>, but it is also true that economists often focus too much on efficiency. It is rare for economists to explicitly discuss the implications of government decisions for both. Recent examples are debates about increases to the minimum wage and to JobKeeper payments in the context of containing inflation. <h2>4: A heavy international focus</h2> Most of our best and most prominent economists were trained overseas, which is a double-edged sword. We should continue to help top students to study at the world’s best institutions, and continue to recruit top economists globally. But we should accept that this can come with the price of reduced interest and engagement in Australian issues. In my view we should balance this by also creating a truly world-class Australian postgraduate training system, perhaps through cross-institutional collaboration, drawing on strengths and creating economies of scale. Such programs <a href="https://tinbergen.nl/graduate-program">run</a> <a href="https://www.parisschoolofeconomics.eu/en/teaching/phd-program-pse/">successfully</a> in Europe. This has been discussed many times by academics in Australia, but it requires government resolve to happen. <h2>5: Declining economics training</h2> It’s also hard to trust economics if you don’t understand it. Year 12 enrolments in economics have fallen by about <a href="https://www.rba.gov.au/publications/bulletin/2020/jun/pdf/why-study-or-not-study-economics-a-survey-of-high-school-students.pdf">70%</a> since the 1990s. In New South Wales at least, economics has been mostly replaced by “business studies”. <hr /> <iframe id="ANlgw" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/ANlgw/1/" width="100%" height="400px" frameborder="0"></iframe> <hr /> The study of economics has also declined strikingly compared to other fields at universities. Census data shows that only 1% of university graduates under 40 specialised in economics, compared to 2.5% of those now in their 70s. <hr /> <iframe id="tE4bE" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/tE4bE/2/" width="100%" height="400px" frameborder="0"></iframe> <hr /> Management and commerce degrees are much more popular, producing 23% of graduates across all ages. While these degrees do include some economics, it is usually in only one or two compulsory units. <h2>6: Overconfidence</h2> While it was once said that every two economists had at least <a href="https://quotefancy.com/quote/939837/Winston-Churchill-If-you-put-two-economists-xin-a-room-you-get-two-opinions-unless-one-of">three opinions</a>, reflecting the inherent uncertainties in the discipline, economists seem very sure of themselves in the media. A large dose of humility would help, and it would help build trust. The media and consumers of the media should seek out the voices that acknowledge the necessary uncertainties.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/208833/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/peter-siminski-250958">Peter Siminski</a>, Professor of Economics, <a href="https://theconversation.com/institutions/university-of-technology-sydney-936">University of Technology Sydney</a> Image credits: Shutterstock This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/6-reasons-australians-dont-trust-economists-and-how-we-could-do-better-208833">original article</a>.

Money & Banking

When’s the best time to use frequent flyer miles to book flights? Two economists crunched the numbers on maximizing their dollar value

Traveling during major holidays like Thanksgiving can be expensive, since so many people want to see their friends and families, wherever they might be. It’s especially hard this year with <a href="https://fred.stlouisfed.org/series/CPIAUCSL">inflation soaring</a> at the fastest pace since the early 1980s. Airline fares <a href="https://fred.stlouisfed.org/series/CUSR0000SETG01#0">were up 43% in October</a> from a year earlier – only a <a href="https://www.bls.gov/news.release/cpi.t02.htm">handful of categories increased by more</a>. One way to ease the blow to your wallet or purse is by using frequent flyer miles. While there’s <a href="https://doi.org/10.1145/2733384">quite a bit</a> of research on when is the <a href="https://conservancy.umn.edu/handle/11299/215872">best time to use cash</a> to buy flights, <a href="https://www.bu.edu/questrom/profile/huseyin-karaca/">we wondered</a> – as travel lovers – if there’s an optimal time to use miles. So with the help of <a href="https://drive.google.com/file/d/1HikpvLqt_M8OfXrCXta4rm76Z_JreLJt/view">our research assistant</a>, we investigated this question, with a focus on flights over the Thanksgiving holiday. <h2>Americans return to the skies</h2> The day before Thanksgiving is one of the busiest days to travel in the U.S. Before the COVID-19 pandemic upended travel, the Transportation Security Administration <a href="https://www.tsa.gov/coronavirus/passenger-throughput">screened 2.6 million people</a> on Thanksgiving eve of 2019, just shy of the 2.9 million record. While the number plunged in 2020 as demand dropped, it picked up to 2.3 million last year and <a href="https://www.wsj.com/articles/this-thanksgiving-is-expected-to-be-one-of-the-busiest-for-travel-in-decades-11668532148">is expected to return</a> to pre-COVID-19 levels this year. The surge in demand, along with significantly higher jet fuel costs, are key factors in leading to more expensive air fares. To offset these higher costs, <a href="https://newsroom.wf.com/English/news-releases/news-release-details/2022/New-Study-Americans-Lean-Into-Credit-Card-Rewards-to-Offset-Rising-Costs--Including-Travel/default.aspx">many consumers</a> may turn to frequent flyer miles – whether accumulated from other travel or from credit cards – to avoid forking over so much cash. <h2>Frequent flying 101</h2> <a href="https://doi.org/10.1080/10253866.2015.1096095">Frequent flyer mile programs started</a> in the late 1970s after the <a href="https://www.faa.gov/about/history/brief_history">federal government stopped regulating</a> airfares. Before the change, fares, routes and schedules for all domestic flights were set by the federal Civil Aeronautics Board. Besides slashing fares, <a href="https://abcnews.go.com/Travel/airline-frequent-flyer-miles-30-years/story?id=13616082">airlines reacted by creating frequent flyer programs</a>. Texas International Airlines, which ultimately merged with United, and Western Airlines, which later joined Delta, were among the first to institute frequent flyer programs. In a particular airline’s frequent flyer program, you earn miles when you fly with that airline. Many people get miles by using their credit cards as well. These accumulated miles can then be redeemed for free air travel. Frequent flyer programs were designed to <a href="https://doi.org/10.1108/02634509810199535">build customer loyalty</a>, as they provide a rebate to regular passengers. They are also <a href="https://hbr.org/1995/05/do-rewards-really-create-loyalty">meant to lock travelers</a> into a particular airline – since they have a strong incentive to only fly with that carrier. One downside is that many business flyers go out of their way to use their preferred airline, <a href="https://www.informs.org/About-INFORMS/News-Room/Press-Releases/Study-Finds-that-Frequent-Flyer-Programs-Increase-Cost-of-Business-Travel">which boosts their company’s travel costs</a>. And although airlines use frequent flyer programs to increase customer goodwill, they frequently <a href="https://www.thrillist.com/news/nation/united-airlines-loyalty-program-status-update">change the rules and rewards</a>, which often <a href="https://www.inc.com/jason-aten/delta-just-announced-a-change-that-will-make-people-very-mad-its-actually-a-brilliant-move.html">frustrates customers</a>. <a href="https://doi.org/10.1145/2733384">Researchers have looked</a> at the <a href="https://conservancy.umn.edu/handle/11299/215872">optimal time to buy</a> airplane <a href="https://doi.org/10.1057/s41272-019-00193-7">tickets</a> with cash. In general, <a href="https://www.forbes.com/sites/suzannerowankelleher/2022/08/31/best-time-to-book-a-cheap-flight/?sh=23fdd1e72ebc">they have found prices</a> tend to dip anywhere from two months to three weeks before the travel dates. Prices are highest for those who want to book their flights very early, to lock it in, and last-minute travelers booking just before their departure dates. <h2>How frequent flyer miles compare</h2> To see when’s the best time to book with miles, we looked at <a href="https://www.oag.com/busiest-routes-right-now">one of the busiest routes in the U.S.</a> – New York (JFK) to Los Angeles (LAX). Each month, airlines have over a quarter of a million seats flying direct on that route. There are about 30 nonstop flights a day, run by <a href="https://www.aa.com/en-us/flights-from-new-york-to-los-angeles">three</a> <a href="https://www.delta.com/us/en/flight-deals/united-states-flights/flights-to-los-angeles">different</a> <a href="https://www.jetblue.com/destinations/los-angeles-california-flights">airlines</a>. Starting about three months before Thanksgiving, we collected weekly data from the online booking sites of these three airlines. We tracked the frequent flyer miles needed as well as the price for every coach flight scheduled to take place within one week of Thanksgiving. As miles are not interchangeable between airlines in general, we needed an alternative measure for more direct comparison between different airlines. So we calculated how much a frequent flyer mile is worth by dividing the number of frequent flyer miles needed by the ticket price. We then compared the dollar worth of 1,000 miles, depending on the airline, when the booking was made and the flight date. <a href="http://businessmacroeconomics.com/">Economic theory</a> tells us that when there is lots of competition and the product is almost identical, competition should result in all businesses charging roughly the same price. That wasn’t what we found. In mid-October, Delta was asking 69,000 miles to fly the Tuesday before Thanksgiving. American Airlines was only asking 33,000 miles for roughly the same flight. This means if you have a <a href="https://www.cnbc.com/select/best-travel-credit-cards/">general travel rewards credit card</a> that lets you use miles on different airlines, it pays to shop around. Just because an airline has a high price in miles doesn’t mean the price will not come down. At the start of November, Delta wanted 69,000 miles to fly at dinnertime on the Tuesday before Thanksgiving. A week later the airline cut the price to 53,000 miles. A week after that, it was down to 36,500 miles, a price drop of almost 50% in two weeks. While in general the earlier you book, the better, booking too early can cost you. We found the best time to spend your frequent flyer miles for Thanksgiving travel was to book during the first week of October, which was about eight weeks out. In early October, 1,000 frequent flyer miles were worth over $14 in airfare. The last week of October, about four weeks before Thanksgiving, those same miles were only worth shy of $12. <h2>The best day to fly</h2> As for what is the best day on which to travel to get the most from your miles, there are two answers. On the Monday before Thanksgiving, your miles are typically worth the most, on average $15 per 1,000 miles. This is in sharp contrast to $11 for the day before Thanksgiving. However, flying Thanksgiving Day itself had required the lowest average number of miles, about 27,000 miles. If you haven’t booked flights yet, you may be too late to find the best value in frequent flyer miles. However, while we are still gathering and analyzing data, these tips look like they will hold up for future holidays. Image credits: Getty Images This article originally appeared on <a href="https://theconversation.com/whens-the-best-time-to-use-frequent-flyer-miles-to-book-flights-two-economists-crunched-the-numbers-on-maximizing-their-dollar-value-194893" target="_blank" rel="noopener">The Conversation</a>.

Travel Tips

Tragic loss for Nobel Prize winners

Economists David Card, Joshua Angrist, and Guido Imbens were awarded the 2021 Nobel Prize in Economics for their development of “natural experiments” that have since been used to answer some of society’s biggest questions. The pioneering of this style of experiment has been significant for economists, who can’t use the randomised experiments or clinical trials that those in medicine and other sciences can. Natural experiments work by using real-life situations to study the world, and have since <a rel="noopener" href="https://www.abc.net.au/news/2021-10-12/nobel-prize-economics-2021-winners/100531188" target="_blank">been adopted</a> by other social sciences. <blockquote class="twitter-tweet"> Good morning to 2021 economic sciences laureate David Card! Card’s wife Cynthia Gessele snapped this photo of him speaking to <a href="https://twitter.com/hashtag/NobelPrize?src=hash&ref_src=twsrc%5Etfw">#NobelPrize</a>’s Adam Smith (which he suspected might be a made-up name) right after he had heard the news. Listen to our interview, coming soon. <a href="https://t.co/I93bJwikGl">pic.twitter.com/I93bJwikGl</a> — The Nobel Prize (@NobelPrize) <a href="https://twitter.com/NobelPrize/status/1447517204430434308?ref_src=twsrc%5Etfw">October 11, 2021</a></blockquote> Card was recognised for findings he made in the 1990s, alongside economist Alan Krueger. The research duo used natural experiments to reverse misconceptions surrounding minimum wage, immigration and education. Their most significant experiment debunked the commonly held belief that wage increases resulted in job losses by studying what happened after the US state of New Jersey increased wages from $4.25 to $5.05 in comparison to neighbouring Pennsylvania, where wages stayed the same. But Krueger, who served as a chair of President Obama’s Council of Economic Advisors, took his own life in 2019 and <a rel="noopener" href="https://theconversation.com/introducing-david-card-the-2021-nobel-prize-in-economics-winner-who-made-the-minimum-wage-respectable-169715" target="_blank">could not receive the award</a> as Nobels aren’t awarded posthumously. Instead, Angrist and Imbens - who also worked with Krueger - shared the prize for their contribution to “the analysis of causal relationships”. <blockquote class="twitter-tweet"> MIT economist Joshua Angrist shares Nobel Prize: Cited for work building the foundations of “natural experiments” in economic research, Angrist is honored along with two others in California. <a href="https://t.co/vj0F47jO6m">https://t.co/vj0F47jO6m</a> <a href="https://t.co/sXTUBwBv6v">pic.twitter.com/sXTUBwBv6v</a> — Massachusetts Institute of Technology (MIT) (@MIT) <a href="https://twitter.com/MIT/status/1447519773332496385?ref_src=twsrc%5Etfw">October 11, 2021</a></blockquote> Angrist and Krueger studied the relationship between education and lifetime earnings, finding that one additional year of education was worth an increase of about 7.5 percent in earnings. Imbens and Angrist then used natural experiments to study the relationship between cause and effect. <blockquote class="twitter-tweet"> It's been a busy morning for <a href="https://twitter.com/hashtag/NobelPrize?src=hash&ref_src=twsrc%5Etfw">#NobelPrize</a> winner Guido Imbens and his family! After waking everyone up when they heard the news shortly before 3 a.m., <a href="https://twitter.com/Susan_Athey?ref_src=twsrc%5Etfw">@Susan_Athey</a> told their kids Andrew, Sylvia, and Carleton that they could decide if they wanted to go to school or not today. <a href="https://t.co/rJjZZAbKVO">pic.twitter.com/rJjZZAbKVO</a> — Stanford University (@Stanford) <a href="https://twitter.com/Stanford/status/1447549033539637248?ref_src=twsrc%5Etfw">October 11, 2021</a></blockquote> Many took to Twitter to congratulate the three winners, as well as Krueger’s contributions. “The Nobel today is a good time to remember and celebrate the economist Alan Krueger,” researcher Max Roser wrote on Twitter. “Krueger died two years ago. He dedicated his energy and skills to the same research that was awarded with the Nobel today.” <blockquote class="twitter-tweet"> And they STILL do it, with language that everyone gets! "kungfu represents life as a journey where people have choices to make – everybody has a destiny and yet, they also have a free will. That works well for econometrics – it’s like you already have a destiny, which is y0, ..." — Dr. Tammy McGavock (@tmcgav) <a href="https://twitter.com/tmcgav/status/1447569546295054342?ref_src=twsrc%5Etfw">October 11, 2021</a></blockquote> The conversation also turned to the importance of mental health and checking in with those around us. “Alan Krueger also taught us something even more important: Deep dark, life-ending depression can and does attack beloved, creative, prolific, widely respected people,” economist Dr Tammy McGavock tweeted. “No one is immune. “We must check on each other. We must normalize seeking help.” The three winners split the 10 million Swedish kroner prize, with Card receiving half and Angrist and Imbens splitting the remainder. Image: Niklas Elmehed / Nobel Prize Outreach

Money & Banking

Australians should be given $100,000 to avoid full-blown financial crisis, economist says

Every Australian should be handed $100,000 to wipe out household debts and prevent a full-blown financial crisis from the coronavirus pandemic, an economist has said. Professor Steve Keen of the University College of London said the economy cannot recover from the COVID-19 shock unless a large chunk of private debt is written off. “Give $100,000 per person as a flat rate to everyone to eliminate the private debt,” he told <a href="https://www.dailymail.co.uk/news/article-8330913/Every-Australian-handed-100-000-stop-country-sliding-financial-disaster.html">Daily Mail Australia</a>. Australians have the world’s second-largest household debts, sitting at around 120 per cent of GDP. A <a href="https://oversixty.com.au/finance/retirement-income/most-australians-struggle-managing-their-debts-amid-covid-19-survey-finds">recent survey</a> also found that about three in five Aussies could not manage their debt amid the COVID-19 outbreak. “We let ourselves get into the biggest debt bubble in human history,” Professor Keen said. He said bank lending had “financed” the private debt bubble, which pushed up house prices and in turn led to even higher levels of debt. The solution was to reduce individual debt to the rates Australia had before the recession of the early 1990s. Treasurer Josh Frydenberg said $200 billion worth of loans had been deferred, most of which were residential mortgages. Nearly 600,000 people left the workforce in April, the Australian Bureau of Statistics said, wiping away two years of jobs growth.

Money & Banking

Open letter from 174 Australian economists: don’t sacrifice health for ‘the economy’

In recent weeks a growing chorus of Australian commentators has called for social distancing measures to be eased or radically curtailed. Some have <a href="https://www.theaustralian.com.au/business/economics/coronavirus-lockdown-hysteria-is-ruining-10-million-lives/news-story/fd5307f58302cf1ab928decb07b2619c">claimed </a>the lives saved by the lockdowns are not worth the damage they are causing to the economy. Others have <a href="https://www.smh.com.au/national/baby-boomers-won-t-like-it-but-next-step-after-lockdown-is-herd-immunity-20200415-p54k0t.html">claimed</a> the case for easing is strengthened by the fact many of the hardest hit by COVID-19 are elderly or suffering from other conditions. Some might expect economists, of all people, to endorse this calculus. But as economists we categorically reject these views, and we believe they do not represent the majority of our profession. We believe a callous indifference to life is morally objectionable, and that it would be a mistake to expect a premature loosening of restrictions to be beneficial to the economy and jobs, given the rapid rate of contagion. It is wishful thinking to believe we face a choice between a buoyant economy without social distancing and a deep recession with social distancing. In a world with COVID-19, there are no good choices. The best we can do is limit the spread of COVID-19 as much as practicable and rely on the strength of the government’s balance sheet to cushion the impact on the workers and businesses hardest hit. Our success to date is a direct result of the measures taken, but we cannot afford to be complacent. We recognise there are trade-offs on some margins, but we urge the government to work closely with public health experts to carefully determine at what time, in what ways, and in which sectors, to begin lifting restrictions. There should be no doubt the cost of getting this wrong is very high. Open Letter from Australian Economists 19 April, 2020 Dear Prime Minister and Members of the National Cabinet, The undersigned economists have witnessed and participated in the public debate about when to relax social-distancing measures in Australia. Some commentators have expressed the view there is a trade-off between the public health and economic aspects of the crisis. We, as economists, believe this is a false distinction. We cannot have a functioning economy unless we first comprehensively address the public health crisis. The measures put in place in Australia, at the border and within the states and territories, have reduced the number of new infections. This has put Australia in an enviable position compared to other countries, and we must not squander that success. We recognise the measures taken to date have come at a cost to economic activity and jobs, but believe these are far outweighed by the lives saved and the avoided economic damage due to an unmitigated contagion. We believe strong fiscal measures are a much better way to offset these economic costs than prematurely loosening restrictions. As has been foreshadowed in your public remarks, our borders will need to remain under tight control for an extended period. It is vital to keep social-distancing measures in place until the number of infections is very low, our testing capacity is expanded well beyond its already comparatively high level, and widespread contact tracing is available. A second-wave outbreak would be extremely damaging to the economy, in addition to involving tragic and unnecessary loss of life. Sincerely, <a href="https://theconversation.com/profiles/alison-booth-153308">Professor Alison Booth</a>, Australian National University <a href="https://theconversation.com/profiles/jeff-borland-1079">Professor Jeff Borland</a>, University of Melbourne <a href="https://theconversation.com/profiles/lisa-cameron-986169">Professorial Research Fellow Lisa Cameron</a>, Melbourne Institute, University of Melbourne <a href="https://theconversation.com/profiles/efrem-castelnuovo-145615">Professor Efrem Castelnuovo</a>, University of Melbourne <a href="https://theconversation.com/profiles/deborah-ann-cobb-clark-729631">Professor Deborah Cobb-Clark</a>, University of Sydney <a href="https://scholar.harvard.edu/ashley-craig/home">Assistant Professor Ashley Craig</a>, University of Michigan <a href="https://theconversation.com/profiles/chris-edmond-673265">Professor Chris Edmond</a>, University of Melbourne <a href="https://nisvanerkal.net/">Professor Nisvan Erkal</a>, University of Melbourne <a href="https://theconversation.com/profiles/john-freebairn-90">Professor John Freebairn</a>, University of Melbourne <a href="https://theconversation.com/profiles/renee-fry-mckibbin-673270">Professor Renée Fry-McKibbin</a>, Australian National University <a href="https://theconversation.com/profiles/joshua-gans-399">Professor Joshua Gans</a>, University of Toronto <a href="https://theconversation.com/profiles/jacob-k-goeree-562903">Professor Jacob Goeree</a>, UNSW Business School <a href="https://theconversation.com/profiles/quentin-grafton-1941">Professor Quentin Grafton</a>, Australian National University <a href="https://www.rse.anu.edu.au/about-us/our-people/people/?profile=Simon-Grant">Professor Simon Grant</a>, Australian National University <a href="https://theconversation.com/profiles/pauline-grosjean-343133">Professor Pauline Grosjean</a>, UNSW Business School <a href="https://theconversation.com/profiles/jane-hall-1280">Distinguished Professor Jane Hall</a>, University of Technology Sydney <a href="https://theconversation.com/profiles/steven-hamilton-155869">Assistant Professor Steven Hamilton</a>, George Washington University <a href="https://theconversation.com/profiles/ian-harper-8628">Professor Ian Harper</a>, Melbourne Business School <a href="https://theconversation.com/profiles/richard-holden-118107">Professor Richard Holden</a>, UNSW Business School <a href="https://research.monash.edu/en/persons/david-johnston">Professor David Johnston</a>, Monash University <a href="https://theconversation.com/profiles/flavio-menezes-4124">Professor Flavio Menezes</a>, University of Queensland <a href="https://theconversation.com/profiles/warwick-mckibbin-9129">Professor Warwick McKibbin</a>, Australian National University <a href="https://economics.uchicago.edu/directory/simon-mongey">Assistant Professor Simon Mongey</a>, University of Chicago <a href="https://theconversation.com/profiles/james-morley-9918">Professor James Morley</a>, University of Sydney <a href="http://www.josephlyonmullins.com/">Professor Joseph Mullins</a>, University of Minnesota <a href="https://findanexpert.unimelb.edu.au/profile/140028-abigail-payne">Professor Abigail Payne</a>, Melbourne Institute, University of Melbourne <a href="https://theconversation.com/profiles/bruce-preston-452859">Professor Bruce Preston</a>, University of Melbourne <a href="https://theconversation.com/profiles/sue-richardson-552530">Emeritus Professor Sue Richardson</a>, Flinders University <a href="https://theconversation.com/profiles/stefanie-schurer-333154">Professor Stefanie Schurer</a>, University of Sydney <a href="https://fbe.unimelb.edu.au/our-people/staff/economics/kalvinder-shields">Professor Kalvinder Shields</a>, University of Melbourne <a href="https://theconversation.com/profiles/john-quiggin-2084">Professor John Quiggin</a>, University of Queensland <a href="http://www.simonrquinn.com/">Associate Professor Simon Quinn</a>, Oxford University <a href="https://www.philadelphiafed.org/research-and-data/economists/vickery">Economic Advisor James Vickery</a>, Federal Reserve Bank of Philadelphia <a href="http://tomwilkening.com/">Professor Tom Wilkening</a>, University of Melbourne <a href="https://theconversation.com/profiles/justin-wolfers-429743">Professor Justin Wolfers</a>, University of Michigan <a href="https://lens.monash.edu/@yves-zenou">Professor Yves Zenou</a>, Monash University Written by Steve Hamilton, Bruce Preston, Chris Edmond and Richard Holden. Republished with permission of <a href="https://theconversation.com/open-letter-from-174-australian-economists-dont-sacrifice-health-for-the-economy-136686">The Conversation.</a>

Caring

"Deeply dangerous": Backlash to stern views of economist Gigi Foster

An economist has been labelled “heartless” for her controversial opinion on Australia’s coronavirus lockdown efforts, saying the economy is also “about lives”. Appearing on Q&A, Professor Gigi Foster was immediately slammed by viewers on social media for her comments about the economic impacts of being in lockdown. “I reject the idea it’s lives versus the economy,” she said. “It’s lives versus lives. The economy is about lives. It’s about protection of lives and human welfare and livelihood. You can make an apples to apples comparison although people find it difficult to do so.” <blockquote class="twitter-tweet"> Do we need to start taking a more pragmatic attitude towards death? <a href="https://twitter.com/hashtag/QandA?src=hash&ref_src=twsrc%5Etfw">#QandA</a> <a href="https://t.co/5bOvAOq7jL">pic.twitter.com/5bOvAOq7jL</a> — QandA (@QandA) <a href="https://twitter.com/QandA/status/1252204224194048002?ref_src=twsrc%5Etfw">April 20, 2020</a></blockquote> The UNSW academic raised her eyebrows when epidemiologist Jodie McVernon spoke about whether the question of lives versus lives had been considered in modelling provided to the government. Professor McVernon said Australia had been spared the worst of the coronavirus impacts other countries had seen because of its efforts. But Professor Foster did not agree. “What frustrates me is when people talk about the economic costs of the lockdown they often don’t think in details in terms of counting lives, as we do with the epidemiological models,” she said. “Has anyone thought about how would you get a measure of the traded lives when we lock an economy down? What are we sacrificing in terms of lives? “Economists have tried to do that and we try to do that in currencies like the value of a statistical life … and those quantities enable you to think about lives on one side versus lives on the other. “If you do that kind of calculus you realise very quickly that even with a very, very extreme epidemic, in Australia, we are still potentially better off not having an economic lockdown in the first place because of the incredible effects that you see not just in a short-run way but in many years to come.” To which ACTU secretary Sally McManus immediately fired back, asking “How can you say that?” Ms McManus went on to explain that Australia was avoiding what is currently occurring in the UK and US and the idea of having intensive care units overrun and healthcare workers dying was horrible. “It's horrible either way,” Professor Foster responded. “The coronavirus has made the world awful. There's absolutely no doubt about that. In order to have a proper discussion about trade-offs, you need to think in terms of lives you’re giving up. “I know it's invisible lives and difficult to imagine when we aggregate, for example, all of the health effects and the mental health effects and the effects of people right now who have illnesses other than COVID-19.” Those watching at home took to social media to air their frustrations. <blockquote class="twitter-tweet"> There is nothing “safe” about herd immunity in the absence of a vaccine <a href="https://twitter.com/hashtag/qanda?src=hash&ref_src=twsrc%5Etfw">#qanda</a> — Prof Kerryn Phelps AM (@drkerrynphelps) <a href="https://twitter.com/drkerrynphelps/status/1252215288948420608?ref_src=twsrc%5Etfw">April 20, 2020</a></blockquote> <blockquote class="twitter-tweet"> Gigi Foster, economist, on <a href="https://twitter.com/QandA?ref_src=twsrc%5Etfw">@qanda</a>. What a disgraceful and cold thought process this woman has. She’d go well in the US spruiking Trumpism. Has no respect for humanity, is all about the economy and the $$ — ShiannonCorcoran (@ShiannonC) <a href="https://twitter.com/ShiannonC/status/1252205512487104512?ref_src=twsrc%5Etfw">April 20, 2020</a></blockquote> <blockquote class="twitter-tweet"> Gigi is a deeply dangerous fool who should never be commenting on public health issues - or the economy <a href="https://twitter.com/hashtag/qanda?src=hash&ref_src=twsrc%5Etfw">#qanda</a> — Stephen.359 (@stephen_359) <a href="https://twitter.com/stephen_359/status/1252215129858400263?ref_src=twsrc%5Etfw">April 20, 2020</a></blockquote> More than 6600 cases of coronavirus have been recorded in Australia with 71 lives lost to the disease. Globally, more than 2.4 million people have been infected with at least 165,000 killed.

News

Why would anyone want to sit on a plane for over 18 hours? An economist takes the world’s longest flight

Recently <a href="https://www.qantasnewsroom.com.au/media-releases/qantas-to-operate-project-sunrise-research-flights-direct-new-york-london-to-australia/">Qantas announced</a> plans to conduct test flights from New York and London to Sydney and two other Australian cities. If commercialized, these routes would become the longest in the world at about 19 hours. Qantas said it will conduct test flights <a href="https://www.wsj.com/articles/qantas-wires-up-people-for-19-hour-endurance-flight-11566471393">with only employees</a> on board to ensure the flights are safe and comfortable enough for paying customers. I heard this news after finishing a round-trip on what is currently the world’s <a href="https://www.travelandleisure.com/airlines-airports/longest-flights-in-the-world">longest flight</a>, the 18 hours and 45 minutes Singapore Airlines schedules to get from <a href="https://www.forbes.com/sites/ericrosen/2018/10/11/worlds-new-longest-flight-from-singapore-to-newark-launches-today/#6a42a6a12aca">Newark, New Jersey, to Singapore</a>, a route that began last October. The return trip is slightly quicker. Fortunately for me, there were favorable winds so each way took about 30 minutes less than scheduled. Being aloft twice for the better part of a day gave me plenty of time to ponder the origins and <a href="http://businessmacroeconomics.com/">economics</a> of long-distance flights – with plenty of time to spare for binge watching. Talk about a long flight Pilots and airlines have been pushing the boundaries of flight times since the earliest days of air travel. In fact, 19 hours is rather quick for the industry’s trailblazers. The <a href="https://www.wired.com/2009/06/dayintech-0609/">first plane to make it across the Pacific</a> took off from Oakland, California, in 1928. It took the aircraft, dubbed the “Southern Cross,” <a href="https://www.thisdayinaviation.com/tag/southern-cross/">three long flights</a> to get to its final destination in Australia: 27 and a half hours to Hawaii, 34 and a half hours to Fiji and a final 21 and a half miles to Brisbane. In all, the pilot and his crew covered about 7,000 miles in 10 days – all without losing any luggage. A few years later, in 1931, two daredevils in search of a US$25,000 prize <a href="https://www.wired.com/2010/10/1005first-nonstop-transpacific-flight">flew from Tokyo to the state of Washington</a> in the first nonstop flight over the Pacific Ocean. To save weight and fuel, the pilots even threw out their landing gear after takeoff. When they reached the U.S., they crash landed – but survived to claim the prize. The flight took 41 hours and covered more than 5,500 miles. These super-long flights, of course, were taken by daredevil pilots with no passengers. And they were very dangerous. One of the most famous aviation failures involved <a href="https://www.usatoday.com/story/news/nation/2019/07/19/amelia-earhart-found-disappearance-theories/1475518001/">Amelia Earhart</a>, who disappeared in 1937 while attempting to cross part of the Pacific on a world circling flight. Six days and 60 hours The <a href="https://www.clipperflyingboats.com/transpacific-airline-service">first service</a> to ferry paying customers across the Pacific was created by Pan Am in October 1936. The trip started from San Francisco and ended in Manila, capital of the Philippines. It took six days and about 60 hours of flying time. The plane flew during the day and made stops in Hawaii, Midway, Wake and Guam at night. The longest leg, from San Francisco to Hawaii, <a href="https://airandspace.si.edu/exhibitions/hawaii-by-air/online/pan-am-clippers/pan-am-spans-the-pacific.cfm">took 18 and a half hours</a>. Pam Am’s planes, called the “Clippers,” <a href="https://www.clipperflyingboats.com/">didn’t need airports</a>. They were specially designed to <a href="https://airandspace.si.edu/exhibitions/hawaii-by-air/online/pan-am-clippers/pan-am-spans-the-pacific.cfm">take off and land in the water</a>. The planes <a href="https://airandspace.si.edu/exhibitions/hawaii-by-air/online/pan-am-clippers/what-was-it-like-to-fly.cfm">were also quite luxurious</a> and even had separate areas for eating and sleeping. But all that luxury while spanning the globe was quite expensive. The one-way fare from San Francisco to Manila <a href="https://www.sfgate.com/bayarea/article/China-Clipper-s-flight-made-history-75-years-ago-3165474.php">was $950</a>, or $17,400 in <a href="https://www.bls.gov/data/inflation_calculator.htm">today’s dollars</a>. Fortunately, the cost of flying these long routes – in terms of both money and time – has come down dramatically. These days you can fly direct from San Francisco to Manila in business class for around $3,000, including the return flight. The trip to Manila takes just 14 hours. Today’s flights are also a lot safer. The concern for many passengers is not crashing but instead <a href="https://www.popsci.com/are-long-airplane-flights-bad-for-your-health/">health risks like deep vein thrombosis</a>, a type of blood clot. Saving time, money and bags Still, even if things have improved, I think most of us agree that <a href="https://www.cleveland.com/pdworld/2008/02/flying_isnt_fun_anymore.html">flying is not fun</a>. Airlines <a href="https://www.forbes.com/sites/danielreed/2018/04/26/airline-customer-satisfaction-scores-fell-in-2018-even-as-more-people-flew-on-them-than-ever-before/#3e9ae4ca2ddc">regularly rank near the bottom</a> among industries in customer satisfaction surveys. So why would we want to increase the amount of time spent 30,000 feet above the ground in a metal tube with wings? For one thing, it means less total travel time. For example, my flight to Singapore would have taken three and a half hours longer with a layover in Hong Kong. But if you’re someone who might prefer a break during a long flight halfway around the world, a more practical benefit is that removing the connection also reduces the chance <a href="https://pp.bme.hu/tr/article/view/1870">your luggage is lost</a>, since bags are handled fewer times. Almost half of all bags delayed in 2017 <a href="https://www.sita.aero/resources/type/surveys-reports/baggage-report-2018">were a result</a> of baggage handlers missing connections. Flying a full plane load of passengers directly also saves airlines money – which often translates into lower prices for consumers too. An extra layover at a major airport <a href="https://www.fraport.com/en/misc/binaer/business-and-partner/airlines-cargo/airport-charges/infographic--airport-charges-at-frankfurt-airport/_jcr_content.file/fraport_entgelte_eng.pdf">can be expensive</a>, with fees for landing, takeoff, parking, noise abatement and security. Airports also charge extra for <a href="https://www.fraport.com/en/misc/binaer/business-and-partner/airlines-cargo/airport-charges/list-of-service-charges/_jcr_content.file/list-of-service-charges---july-2019.pdf">optional services</a> like cleaning, towing and providing electricity to a plane while it is parked at the gate. Expect more ultra-long flights One thing that was interesting about the Qantas announcement is all the research it plans to do during its test flights – scheduled for October through December – on the passengers themselves. Scientists and medical experts will monitor sleep patterns, food and beverage consumption, lighting, physical movement and in-flight entertainment to assess their impact on health and well-being – and prevent any blood clots in the legs. Using this data, Qantas hopes to make ultra-long flying a more pleasant experience. After all, the main reason to take a single 19-hour flight is to arrive faster and feeling better than taking multiple flights to the same destination. Whether you love or hate flying, expect longer flights in the future as more efficient planes allow airlines to go ever farther. Given we seem to be <a href="https://theconversation.com/despite-hectic-multitasking-lives-were-wired-to-binge-on-tv-24158">wired for binge watching</a>, I don’t think this trend is so bad. I could have actually used a longer flight. My effort to binge the second season of “Star Trek: Discovery” was abruptly interrupted as we descended back into Newark, with just 10 minutes left in the final episode. Written by Jay L. Zagorsky. Republished with permission of <a href="https://theconversation.com/why-would-anyone-want-to-sit-on-a-plane-for-over-18-hours-an-economist-takes-the-worlds-longest-flight-122433">The Conversation</a>.

Travel Tips

Great Barrier Reef valued at $56 billion

A new Deloitte Access Economics report has found the total asset value of the Great Barrier Reef to be $56 billion. The economists calculated the World Heritage site’s economic, social and iconic brand value to reach the staggering figure. Many Australians believe the reef is priceless but Deloitte arrived at the figure after a six-month analysis that drew on economic and scientific sources as well as international surveys. At $29 billion, tourism was found to be the greatest contributor to the overall value. $23.8 billion of the reef’s value came from “indirect or non-use value” which means people who haven’t yet visited the reef but value knowing it exists. $3.2 billion of its value was attributed to recreational users such as weekend divers. Commissioned by the Great Barrier Reef Foundation, the report found the reef added $6.4 billion of economic value to the Australian economy in 2015-16. The reef employs 39,000 people directly but there are also 64,000 jobs linked to it nationally. In comparison, National Australia Bank creates 34,000 direct jobs, Telstra 33,000 and Qantas 26,000. Great Barrier Reef Foundation director Steve Sargent said no other Australian asset contributed as much value to “Brand Australia”. "At $56 billion, the reef is valued at more than 12 Sydney Opera Houses," he said. "This report sends a clear message that the Great Barrier Reef – as an ecosystem, as an economic driver, as a global treasure – is too big to fail." Former US vice-president Al Gore deemed the report as a necessary look at the reef’s value. "Any failure to protect this indispensable natural resource would have profound impacts not only to Australia but around the world," he said. Deloitte Access Economics partner and report author John O’Mahony labelled the reef as irreplaceable. "With the reef under threat, our report is a major step in looking to value nature's significance in monetary terms and using this information to help inform what we do to protect and save important natural assets." The study used various economic techniques including input-output tables, econometrics, willingness to pay analysis, sensitivity and the Brand Asset Valuator. In the past two years, two-thirds of the reef have been impacted by unprecedented coral bleaching.

International Travel

The Economist’s list of the most dangerous cities in the world is in

The Economist recently published its “Safe Cities Index”, in which it ranked 50 of the world’s cities from most to least safe. The cities, selected for a number of factors including their size, were ranked according to four main categories: digital security, health security, personal safety, and infrastructure safety.While Australia scored two of the places for the top 10 safest cities (Sydney came in at number six, while Melbourne was ninth), some of our not-so-distant neighbours were down the very bottom of the list.46. Riyadh, Saudi Arabia47. Johannesburg, South Africa48. Ho Chi Minh City, Vietnam49. Tehran, Iran50. Jakarta, IndonesiaEach of these cities ranked low four of the categories. Ho Chi Minh City came last in infrastructure safety because of the quality of its roads, and the number of disaster-related deaths, among others.It should be pointed out that while there is a close link between city safety and its wealth and economic development, it is not a guarantee.

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