Former Labor government minister Barry Cohen has some good sense to offer on the problem of indigenous Australians living in remote settlements in today’s Oz:
Sir Humphrey would have called it a “courageous decision”. And he would have been right. John Howard and Mal Brough, supported by Kevin Rudd, decided enough of inquiries, surveys, reports and commissions. Action was what was needed.
Henry’s only criticism is that the meaning of Cohen’s ultimate conclusion is far from clear:
The Aboriginal people should be offered the best Australia can provide. Then it is they who must choose. Let us hope they make the right choice.
Should anyone who chooses to live beyond the natural limits of civilisation be provided with all the benefits of civilisation? An economist’s natural propensity is to say “Let them sort it out themselves” but in the case of indigenous people caught in a cycle of poverty and ignorance this is not good enough.
Despite his economist bias, Henry concludes that we need to provide civilised services for these remote communities and let the children and grand children decide for themselves.
Against this intractable issue, the RBA board meeting tomorrow may seem like a genteel, refined and relatively unimportant affair. Yet inflation is creeping up, and it is timely to consider the horrific costs of inflation allowed to get out of control. Our usual advice for the Board will appear tomorrow.
On the closely related topic of currency movements, today’s Raff Report provides some interesting analysis of the market for the Aussie dollar:
Figure 4 shows that on a visual inspection there appears to be a close correlation between the AUD/USD exchange rate and commodity prices. Statistics does show that over shorter time frames that there is a plus 80% correlation between commodity prices and currency. However, since December 1984, when Hawke and Keating floated the AUD, the correlation is only 40%. This is poor correlation with an “r” squared of only 16-17%. Clearly there are other factors impacting the AUD and its trend is subject to the whims of currency traders. This means that the market should not expect the AUD to follow commodity prices. The hot flow of money tracking interest rate differentials is likely a far more important factor. It is improper to refer to the AUD as a commodity currency — over the long term that is simply not true.
Where is AUD heading now? On the basis of changes over 9 months or 270 days, the indications are it is more likely heading higher rather than falling precipitously – see Figure 5. This is interesting partly because if analysts forecast lower commodity prices they tend to offset falls with a lower exchange rate. Situation is normal – long-term forecasts are pretty well meaningless and represent a best guess.
Read more at Henry Thornton.