Warwick Smith @warwicksmith.bsky.social

I've got a new article in @ConversationEDU on the possible changes to the capital gains #tax discount. Is reducing the discount going to solve our housing problems? No, not by itself, but it will make a difference and is still worth doing #auspol #ausecon theconversation.com/is-the-capital…

"I believe that economists put decimal points in their forecasts to show they have a sense of humor."  William Gilmore Simms.

"Teach a parrot the terms 'supply and demand' and you've got an economist." -Thomas Carlyle

@Smithdanj @haugejostein Have you read The Affluent Society? I think it's a good antidote to Mises.

@haugejostein Mises (1922):

The idea that capitalism = freedom is a myth. Capitalism restricts freedom in countless ways. Under highly capitalist systems, basic needs are commodified. Freedom becomes paywalled. Rich people have freedom, poor people don't.

@peter_tulip @CameronRenilson The Age Pension does a great job at dealing with retirement poverty (as long as you own a home). Super does a great job of reducing taxes for the wealthy and high income earners. Could address retirement poverty for non-home owners with a fraction of what we spend on super.

@RecoEco @CameronRenilson Relative to what? It is progressive relative to the pre-1986 regime. It's regressive relative to the retirement systems of some other countries. But egalitarianism is not its purpose. There are other market failures, like myopia, that policies need to address.

So at 4% drawdown you get 8k a year. Grim.

@peter_tulip @CameronRenilson Do you deny that the superannuation system is fundamentally regressive? The more support you need, the less you get, right down to nothing at all for those who need the most. The very wealthy get the most benefit from the system - i.e. those who would have retired rich anyway.

@RecoEco @CameronRenilson You are measuring "government support" as deviations from taxation at full marginal income tax rates. That is inefficient. Few governments around the world tax saving for retirement that way. I don't want to defend the current system, but the criticisms need to be on point.

@peter_tulip @CameronRenilson Then why does the overwhelming majority of government support go to those who would have had secure retirements without super?

@RecoEco @CameronRenilson Experts disagree. The Callaghan review did not recommend stopping the legislated increase. I can't speak for others but for me, the primary purpose of compulsory super is security in retirement.

@peter_tulip @CameronRenilson They supported an increase against the most considered advice (e.g. The Henry Tax Review). If you follow the money (majority of government support) you can see that the primary purpose of super is subsidising tax minimisation and estate planning for the wealthy

@CameronRenilson The more relevant comparison is with a lifetime indexed annuity of $11k, which Challenger is offering for $200k. Still grim. Which why both parties supported an increase in the Super Guarantee. challenger.com.au/individual/wha…

''There is an unearthly, mystical element in Friedman's thought. The mere existence of a stock of money somehow promotes expenditure. But insofar as he offers an intelligible theory, it is made up of elements borrowed from Keynes.'' -Joan Robinson

@JamesYo43532848 Thanks. Hoping to read the whole thing. Given you didn't provide a link I'm assuming it's not published yet but will be sometime? Looks super interesting. Been thinking about this a lot lately, particularly the shift from a full employment to a price stability focus in Australia

@RecoEco My focus is to present an improved inflation model (KYSID : Claim Dilution theory) which by it's effectiveness replaces previous models.

Explaining the Failure of NAIRU "In each case, inflation can rise or fall without a corresponding change in labour-market tightness, breaking the NAIRU relationship."

@VincentGeloso Another element re autocrats is surely distribution. Many of the papers you cite look at growth as if it’s the only important metric. Who benefits from the growth is a central question. Many liberalizing policies deliver greater wealth and power to those who already have it.

Why do autocrats fail to generate growth when they liberalize? Because autocrats that liberalize can also be autocrats that de-liberalize. On a whim, they can change their minds. Business owners, workers, investors understand that and so they do not act as much as one would expect. However, with democratization, its different. Democracy acts as a constraint on rulers by allowing the shoe to be on the other foot eventually. It also forces liberalization to be pedagogical and convince people. Kevin Grier and Robin Grier, in a new article, checked cases of economic liberalization joined with democratic liberalization. In instances of liberalization without democratization, benefits are minimal. With both together, you get the benefits. So, the disappointing cases of "reforms" have nothing much to do with whether economic liberalization is itself beneficial. It has to do with other factors in political economy -- democracy or if liberalization is well executed.

Okay, I have read this paper and it is horrible. The obvious reply, that many economists have made, is that there is no causality in there. The problem is that I have not seen many replies that cite actual empirical research, so let me plug this in. On five grounds.

@GbellOz @ak_pennington We’re going through an inflationary period right now that, once again, proves Friedman’s ridiculously simple characterization of inflation wrong. How do you twist an oil supply shock into a monetary phenomenon?

@ak_pennington Inflation is a monetary phenomenon. The only way to make input/energy/supply problems worse is by the govmint "helping" by providing "relief" by printing money. Then you have inflation AND price increases.

Watch closely as the next inflation tidal wave is sanitised as a technical 'shared' mission to get the economy back into 'balance.' Inflation is everywhere a distributional phenomenon, between workers & business, big business & small, & wealthiest & ordinary working people.

@GeneSohoForum @RelearningEcon It’s really unclear what you mean here. Are you denying the existence of imperfectly competitive markets?

@RelearningEcon Economist Joan Robinson's own magnum opus, "The Economics of Imperfect Competition," limped along w/both feet mired in ignorance of the intense competition from the creative disruption of an entrepreneurial economy, causing both profit & loss to capitalist firms.

"Economics limps along with one foot in untested hypotheses and the other in untestable slogans." -Joan Robinson

@BenPhillips_ANU @PeteWargent What’s that old line? “economics is the art of confusing stocks with flows” :)

The household balance sheet in Australia is in rude health. $22T in assets against about $3T in debts for ~$19T net wealth ($1.7m on average). I reckon the average household can weather elevated petrol prices for a while!

Proud of my council asking fossil fuel companies to foot the bill of #climatechange fueled disasters. These companies profit from their pollution while communities and governments pay the price. abc.net.au/news/2026-03-2…

🎓️ SCHOLARSHIP OPPORTUNITY 🎓️ The Ken Clements PhD Scholarship, generously donated by Diane Smith-Gander AO, aims to support more women to undertake PhD studies in economics at the University of Western Australia. Find out more: esacentral.org.au/jobs-item/6396… #ESA #AusEcon

@worstall Interesting to post this without mentioning that, from the beginning of the revolution, Cuba has had the most powerful nation on earth on its doorstep trying to make the Cuban government fail. How does that impact the analysis? BTW, the paper you cite makes Cuba look pretty good

Where would Cuba be now without the revolution and 60 years of socialism? Well, reality suggests that if they'd just stuck with the capitalist and colonial hegemony of the US like Puerto Rico then they'd be 4 times richer - like Puerto Rico. Ho Hum.

@peter_tulip Wow, I hadn't seen that. I can see arguments for taking it back to inflation indexed but completely removing it seems like an overreaction. I'd personally like to see a more nuanced approach. Ideally you'd tax away 100% (inflation adjusted) land price growth.

@RecoEco The chair of the parliamentary committee inquiring into the CGT wants to "abolish the discount". greens.org.au/news/media-rel…

The capital gains discount raises issues of income averaging, retrospectivity, incentives to save, etc. However, the crux is whether changes in asset prices that simply reflect inflation should be taxed. Why don't opponents of the discount argue that?