John Freebairn

• University of Melbourne

The design and effects of different schemes to reduce greenhouse gas emissions associated with the production and consumption of electricity are modelled. The tax scheme achieves the lowest cost per unit emission reduction because it encourages both businesses and consumers to reduce emissions, and the recycled windfall revenue can meet equity obje...

The form and potential contributions of cooperative federalism and the additional skills and tasks required of the public service to turn well‐known and developed tax reforms into actual reforms are evaluated. Cooperative federalism seems necessary for reforms involving state taxes and changes in the mix of taxes. Additional public sector skills an...

Potential effects of alleged monopsony pricing of farm food products by supermarkets on farm product prices, quantities, incomes and land values are assessed relative to competitive behaviour. A long‐run comparative static equilibrium model is used. For export‐competing and import‐competing products, the farm food input supply curve facing the supe...

Environmental water management is a relatively new discipline, with concepts, management practice and institutional mechanisms that are still emerging. The efficient and effective use of environmental water to maximize environmental benefits, or environmental water use efficiency , is one such emerging concept. Currently, much of the focus is on al...

Taxation analysis seeks to describe the effects of current taxes, make forecasts and assess proposed reform options. In each case, the effects on market outcomes, distribution of the tax burden and distortions to decisions and economic efficiency are estimated. When second-round effects are important, including for most taxes on business and where...

A framework for sharing a limited quantity, but also a variable quantity, of water between irrigation and the environment to maximize social wellbeing is developed and illustrated. The optimal water allocation equates the marginal social value of water across different uses. A simplified illustration allocates water from the Goulburn River in north...

The effects of taxation on housing market outcomes, and implications for efficiency and distribution, are assessed. Current consumption, income and asset taxes are evaluated. Effects of the taxes on decisions to purchase own home versus rent for housing services and for investment of household savings in own home, other property or other options, s...

Tax, emission trading schemes, regulations and subsidy policy instruments to reduce Australian greenhouse gas emissions are assessed. Australian recent and proposed examples are used as illustrations. Comparative pollution reduction cost, tax interaction distortion costs, redistribution effects and operating cost properties are evaluated. A tax ins...

Contributions of Australian economists to understand the effects of a boom export industry are reviewed. Effects are considered on: the real exchange rate; output, prices and factor incomes of the boom industry, other trade-exposed industries and nontraded industries; and national income and its distribution. Theoretical models and empirical models...

The incidence of a lower Australian corporate income tax on resident shareholders, non-resident shareholders, other investors, labour and government revenue is assessed. In the short run, non-resident investors are large winners at the expense of government revenue. In the long run, some of the short-term benefits to shareholders are eroded, one-ha...

It is argued that a comparative assessment of a royalty and a resource rent tax as a special tax on the Australian mining industry should recognise the following: the importance of quasi-rents earned on investments which shift out the mining supply curve over time, the dominance of nonresidents as buyers and as shareholders, and available data on r...

This paper describes the operation of a price and a subsidy to reduce greenhouse gas emissions (GHG), and it compares and contrasts efficiency, redistribution and transactions costs of the two options. An initial comparison assumes comprehensive bases and negligible transaction costs. Then, actual examples for Australia are assessed, namely the car...

The balance of payments identity linking the current account to net domestic investment and foreign capital inflows is used as a framework to assess the effects of a mining boom on the exchange rate. The exchange rate response is found to vary with whether the boom is generated by an increase in global demand or an increase in domestic supply, and...

This article explores the arguments for and against the use of government debt to finance large-scale public investments. Relative to the options of higher taxation or lower other expenditures, debt finance means that both the costs and the benefits of the investment fall on future generations. Debt funded public investments can be an important com...

The different time paths of effects of a mining boom driven by an increase in demand or by an outward shift of supply on the revenues and expenditures of the Australian Commonwealth and State Governments are described using a partial equilibrium model. Theoretical arguments to replace the present system of royalties with one of the different forms...

The efficiency, equity and simplicity effects of reform proposals for lower taxation of capital income relative to labour income, for a comprehensive labour income tax base, for a more neutral system of taxation of different forms of capital income, and for a simpler and more transparent personal income tax rate schedule are explained and evaluated...

Arguments for using a tax or an emission-trading scheme on a comprehensive base of greenhouse gas emissions as a lower-cost way of reducing pollution than regulations or subsidies are explained. While the Australian Government's 'Clean Energy Future' scheme, with its proposal for a price on carbon, moves in the low-cost direction, the base is less...

A pollution tax or emissions trading scheme places a price on greenhouse gas emissions. This price also is an additional indirect tax and a government revenue windfall. To restore distributional equity, to avoid compounding the efficiency costs of existing distorting taxes and to maintain macroeconomic stability, it is argued that most of the reven...

Application of the product characteristics model and the finance portfolio choice model are used to illustrate the important effects of risk aversion held by decision makers in making decisions in the urban water markets. Decision makers face uncertainty about water demand, water inflows and supply costs, and about government policy. Relative to ri...

This article argues the case for changes to the Goods and Services Tax (GST) as a key part of fundamental tax reform in Australia. A more comprehensive base would bring gains in efficiency and simplicity, with equity goals better met by the income transfer system. Revenue gains of a broader GST base and/or a higher rate could fund tax mix change pa...

The past twenty years have seen major taxation reforms, but also the present system is easily criticised because of its inefficiency, inequity, complexity and revenue risk. In the mid 1980s extensive income base broadening measures were used to fund lower and flatter personal income tax rates, and the imputation system

Except in the most recent recession, net flows were from unemployment to employment (even in previous recessions), from employment to not in the labor force (even in booms), and from not in the labor force to unemployment; changes in the unemployment rate across subperiods varied chiefly with the size of the net flow between employment and unemploy...

Policy to protect river ecosystems has changed rapidly in Australia, and the mechanisms to both establish and manage environmental water are still evolving. Policy has moved from providing a fixed environmental target (albeit varying between years) to one in which the environment can actively participate in the market, with the possibility of bette...

Policy to protect river ecosystems has changed rapidly in Australia and the mechanisms to both establish and manage environmental water are still evolving. Policy has moved from providing a fixed environmental target (albeit varying between years) to one in which the environment can actively participate in the market, with the possibility of better...

The efficiency and equity arguments for changing the structure of, and the aggregate level of, special taxation of the mining industry are reviewed. An economic rent base tax would cause smaller taxation distortions than the current quantity base royalties. A higher level of taxation of immobile factors, including mining resources, as part of a tax...

It is important to understand how labour markets in different regions are affected by 'common’ or 'national' shocks including national macroeconomic, monetary and fiscal policies. This paper applies a new econometric approach - involving an unobserved components model - to identify the direction and timing of the shifts in regional Beveridge Curves...

This paper assesses the effects on mature age workforce participation of three types of changes. These are, first, policy changes already implemented in 2005-07, notably complex changes to superannuation eligibility and the taxation of mature age people which took effect in July 2005 and July 2007. Secondly, we project the likely future effects of...

In most countries, including Australia, special excise and other taxes are imposed on beer, wine and spirits. This study reviews the market failure arguments for special taxation of alcoholic beverages, evaluates the pros and cons of different externality correction taxes in terms of the tax base and tax rate, and uses the results to suggest reform...

In the future, the marginal cost curve for urban water will be an increasing function. This fact favours a single volumetric water price to meet both equity and revenue adequacy criteria, and in some cities an explicit resource rent tax should be imposed. Although desalination and recycled water are likely to be more expensive than rain-fed water,...

In most countries special excise and other taxes are imposed on beer, wine and spirits. Both the tax base and tax rates usually vary across products and across countries. This paper reviews the market failure arguments for special taxation of alcoholic beverages, evaluates the pros and cons of different externality correction taxes in terms of the...

Up to 2005, most Australian public servants and the military received as a part of their remuneration a defined benefit superannuation payment in retirement1. At the time of employment, no funds were set aside for these future outlays. Rather, the payments were to bemet when required on a pay-as-you-go form from recurrent government expenditure. In...

"This paper examines the manner in which labour services are modelled in the aggregate production function, concentrating on the specification of the relationship between the number of persons employed and average hours worked. We argue that, given the presence of quasi-fixed costs of employment, hours of work and the number of employees cannot be...

There is much in the scientific literature dealing with methods to determine environmental water requirements in streams. However, most of these methods are suited to long-term water resource planning and setting regulatory targets. In Australia, the environment is now recognized as a legitimate user of water with its own water entitlement. With th...

This paper argues it will be welfare-improving at a national level to auction tradable greenhouse gas permits, and , at an international level, forrst-world countries to bribe third-world countries to join a cooperative solution.

The paper argues from first principles and with supporting related empirical evidence that most of the final incidence of emissions taxes or tradable permits will fall on consumers of greenhouse gas intensive products. This distributional outcome supports an emissions reduction strategy of an emissions tax or auctioning the tradable permits, rather...

Shifts in the ‘national’ equilibrium rate of unemployment relevant for determining national economic policy settings, we contend, are those shifts which are ‘common across states & territories’. One way to identify these is to identify the common shifts in state and territory Beveridge curves in Australia over time. When we do this we recover a nat...

This paper provides pictures of low pay adult employees in Australia in 2004 drawing on data from the HILDA survey. The low waged are disaggregated into full-time and part-time employees. It is conservatively estimated that approximately 13 per cent of employees can be classified as low waged with just under 5 per cent assessed to have earned below...

The paper compares and contrasts the pay-as-you-go system of government provided age pensions funded from recurrent tax revenue with the pre-paid system based on a compulsory superannuation levy funding an actuarially fair retirement income. Under special assumptions, including constant levels of GDP, the two systems are similar. However, given spe...

In Australia, and in other countries, we observe at any one time a wide distribution of hours worked per week. We develop a cost-minimising model to explain employer choices over the number of employees and their hours of work. An important finding is that hours of work and the number of employees are not perfect substitutes. We show that this has...

A tax mix change, including a component of the Australian tax reforms, involves a net increase in taxation of consumption and a net decrease in income taxation. If the tax mix change is approximately aggregate revenue neutral and retains current vertical equity, the new income tax rate schedule must be more progressive than the current schedule. Th...

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This paper provides pictures of low pay adult employees in Australia in 2004 drawing on data from the HILDA survey. The low paid are disaggregated into full-time and part-time employees. Estimates from multivariate probit models reveal that low wage employees are more likely to have casual status, single marital status, a low educational attainment...

The chapter evaluates decisions of households, businesses, and governments to locate in flood-prone areas, to invest in flood mitigation projects, and to choose risk management strategies. In general, it will be sensible for some to locate in flood-prone areas, and even after investment in flood mitigation it will be sensible for some costs of floo...

Different options for funding the provision of meteorological services and for charging for the information provided are described and evaluated. The basic infrastructure and general forecasts and warnings have public good properties of non rival consumption and high costs of exclusion. For these, direct government funding and free provision to all...

The relative merits of different systems of property rights to allocate water among different extractive uses are evaluated for the case where variability of supply is important. Three systems of property rights are considered. In the first, variable supply is dealt with through the use of water entitlements defined as shares of the total quantity...

This article compares five alternative policy options with the January 2006 tax and social security system. Each option is designed to cost a similar amount of approximately $5 billion per year to the government at the observed level of labour supply. The five options include reducing the lowest income tax rate, increasing the tax-free threshold, i...

We explore a new approach to understanding the evolution of the unemployment rate in Australia. Specifically, we use gross worker flows data to study the consequences of assuming that there is no unique equilibrium rate of unemployment but rather a continuum of stochastic equilibrium rates which reflect the movement of the unemployment entry and ex...

This article evaluates the effects of budget consolidation on the Australian economy in the 1990s. As the economy recovered from the 1991-92 recession, the need to improve the fiscal balance to lift national saving became the dominant influence on fiscal policy. The article argues that spending cuts by the Australian federal government announced in...

Developing the institutional details for markets which will improve the allocation of scarce water as proposed in recent government initiatives is still a work in progress, and the designers face many challenges. Differences in the relevant market time interval, the important effects of geography on costs, and differences in the forms and extent of...

The revenue, efficiency, equity and operating costs properties of alternative tax bases or taxable sums are compared and contrasted. Initially the assessment is made for generic, comprehensive tax bases on income and consumption flows, wealth stocks, and on transactions. On the criteria of efficiency and equity, there are unresolved conceptual and...

Changes in standard hours of work, as occurred in the 1970s and 1980s, alter the budget constraint facing employers and their employment decisions. Using quarterly data for the period 1969:1-2004:1, an employment equation for Australia that includes standard hours as well as the usual output, real wage and trend explanatory variables is estimated....

A modified Treasury Macroeconomic model is used to assess the relative effects of policy options to reduce unemployment. Simulation results are reported for the Australian economy starting at either a high or a low rate of unemployment. Over the next 10 years or so, all policies are projected to generate cyclical gains and losses in macroeconomic o...

Generic advertising has been a widely-used marketing tool of many agricultural industries. The strategy has come under increasing scrutiny lately, especially by levy-paying producers who fund the advertising. Also, for many food products, supermarket chains have developed and advertised their own “store†or “private label†brands in competiti...

In this paper we investigate the behaviour of net flows of persons between employment, unemployment and not in the labour force in Australia between 1979-2003 and the relationship of these flows to changes in the unemployment rate over that period. We find that: flows from unemployment to employment exceed flows from employment to unemployment and...

Books reviewed: Peter Bernholz, Monetary Regimes and Inflation: History, Economic and Political Relationships William Oliver Coleman, Economics and Its Enemies: Two Centuries of Anti-Economics Michael Pusey, The Experience of Middle Australia. The Dark Side of Economic Reform Bent Flyvbjerg, Nils Bruzelius and Werner Rothengatter, Megaprojects and...

Commodity levies are used increasingly to fund producer collective goods such as research and promotion. In the present paper we examine theoretical relationships between producer and national benefits from levy‐funded research, and consider the implications for the appropriate rates of matching government grants, applied with a view to achieving a...

Commodity levies are used increasingly to fund producer collective goods such as research and promotion. In the present paper we examine theoretical relationships between producer and national benefits from levy-funded research, and consider the implications for the appropriate rates of matching government grants, applied with a view to achieving a...

We model the relationship between hours of work and employment and argue that unless actual hours are varying with a change in ‘standard hours’, actual hours should not appear in the long-run component of an equation for employment. If however standard hours are changing then it is desirable that this variable be incorporated into the employment eq...

In this paper we develop a framework which is appropriate for the systematic investigation of the relationship between net (and gross) flows between different labour market states and movements in the unemployment rate. We use that framework to investigate the behaviour of net flows of persons between employment, unemployment and not in the labour...

In this paper we experiment with the idea of a conditional minimum income (CMI) support system to replace the current raft of allowance and pensions payments for families of working age. In doing so, our main motivation is to establish whether such a system can fulfil the objectives of simplification and rationalisation relative to the current syst...

Australian sugar-producing regions have differed in terms of the extent and rate of incorporation of new technology into harvesting systems. The Mackay sugar industry has lagged behind most other sugar-producing regions in this regard. The reasons for this are addressed by invoking an evolutionary economics perspective. The development of harvestin...

The efficiency and equity effects of economic policies affecting the quarter of Australians who live in rural and regional Australia (RARA) are reviewed. For the most part it is argued that economy-wide policies, rather than region or industry specific policies, are appropriate. Progressive income taxation, means-tested social security payments and...

This paper summarises a large project involving many studies to evaluate the effects on employment and unemployment in Australia of macroeconomic, wage restraint, taxation and social security systems, and of education and training policies. One set of studies finds that the NAIRU is an uncertain estimated number, others suggest a number or a range...

Agricultural commodity taxes, called check-offs, are used to finance promotion, research, and other activities that can be regarded as industry collective goods. The collection of the check-offs and the programs they are used to fund have implications for the welfare of consumers, other producers, and taxpayers in addition to their effects on those...

Most parts of Australia are now in the mature water economy stage. Demand for water - for irrigation, for direct use by households, for industry and for the provision of environmental goods and services desired by individuals-exceeds supply, and the marginal cost of additional supplies is rising sharply (Watson and Rose 1980; Randall 1981). The nec...

The existence of linkages between the agricultural sector and the rest of the economy points to the specificity of that sector and justifies why we can conceive of a macroeconomics of agriculture. The primary sector is characterized by product homogeneity, a pre-condition for the absence of imperfect competition. Also, agricultural prices are subje...

There is an increasing need for more rigorous and more broadly based determination of the economic value of meteorological services as an aid to decision-making on the appropriate level of funding to be committed to their provision at the national level. This paper develops an overall framework for assessment of the economic value of meteorological...

This paper addresses five related questions. What are the ‘stylised facts’ about the behaviour of flows into and out of unemployment and the Unemployment Rate in Australia, especially in recessions? Why does the number of persons flowing out of Unemployment rise in recessions? How does outflow behaviour affect the severity of recessions? What has b...

Design deficiencies of State taxes on payrolls, land, stamp duties and motor vehicles fail tax criteria of efficiency and simplicity. Replacing conveyance duties with a higher land tax and stamp duties on motor vehicles with a higher registration fee would improve efficiency, horizontal equity and simplicity. Important efficiency gains would come f...

This paper evaluates different policy options to reduce unemployment by using a version of the TRYM model. For the purpose of this paper, the TRYM model has been modified in several respects, particularly by combining the private business and government trading enterprise sectors. For the long run, the neoclassical model closure means that the unem...

Profits from generic advertising by a producer group often come partly at the expense of producers of closely related commodities. The resulting tendency toward excessive advertising is exacerbated by check-off funding. To analyze this beggar-thy-neighbor behavior we compare a scenario where different producer groups cooperate and choose their adve...

Producer profit‐maximising rules for generic commodity advertising programs and associated funding levies are derived. Lump‐sum, per unit and ad valorem levies, and government subsidy funding arrangements are compared and contrasted. The initial single‐product competitive market model is extended to incorporate international trade, government price...

It is argued that the magnitude of effect of more doctors on medical care demand, and in particular estimates in the Richardson article, is biased upwards.

An important characteristic of E-commerce is that it is a form of technological change. The effects of E-commerce induced reductions in business production costs and on seller to buyer transaction costs are assessed. Comparative static models for different market structures are used to assess the effects of E-commerce on prices, quantities, aggrega...

Profits from generic advertising by a producer group often come partly at the expense of producers of closely related commodities. The resulting tendency toward excessive advertising is exacerbated by check-off funding. To analyze this beggar-thy-neighbor behavior we compare a scenario where different producer groups cooperate and choose their adve...

Tax reforms passed by Federal Parliament in June 1999 include rationalising indirect taxes, a tax mix change, and a smaller fiscal surplus. The impact or first‐round effects on the natural resource industries indicate large gains. Important second‐round reactions, particularly a real currency appreciation, erode most of, and in some cases more than...

Compulsory contributions to superannuation have significant second round effects on labour market outcomes. The effects of employer, employee and government contributions are compared and contrasted for markets with different degrees of wage flexibility. With a flexible wage, the market wage adjusts to offset most of the initial effects of the supe...

Separation of railway infrastructure, a natural monopoly, from a contestable train operator industry raises policy options for setting the infrastructure access fee and for regulation of the infrastructure supplier. Marginal cost, average cost, Ramsey prices, and multipart tariff rules for access fees are assessed. Recognizing the importance of tra...

The Australian system of Commonwealth and State taxes is in need of comprehensive reform. It fails the criteria of neutrality, horizontal equity and simplicity, it is not as progressive as often thought, and the future revenue base is declining. Many of the problems stem from the absence of comprehensive tax bases as applied to income, expenditure...

Faster economic growth and wage restraint, especially for the low skilled, are necessary to increase employment. The tax and social security systems are more appropriate ways to compensate those with low incomes.

Australian taxation faces growing revenue, efficiency, equity, and complexity problems. Replacing the present hybrid mix of taxes on income with either a comprehensive income or expenditure base is a worthy radical reform option. Alternatively, several income base broadening measures to fund rate reductions are explored. Reform of indirect taxes le...

The Hilmer Report focuses primarily on the very important issues of legislative and regulatory measures to directly reduce monopolistic structures and conduct. This article argues that competition policy also should embrace measures to reduce transaction costs. Lower transaction costs increase the substitutability of different options and help to e...

A model with sticky wage rates and involuntary unemployment is used to compute the marginal cost of taxation, and these estimates are compared with those obtained from the conventional price-clearing equilibrium model. Important determinants of the marginal cost estimates are the response of sticky wages to a tax increase, the elasticity of demand...

Taxation of agriculture has to be assessed in the context of the wider total economy system. A progressive income tax rate schedule is required to meet social goals of vertical equity. Efficiency properties of taxation of agriculture are difficult to assess because some capital income is taxed according to an expenditure base, some to a real income...