I HAVE been reading with great interest the views and experiences of noted British Economist Charles Goodhart, who turns 90 years old later this year. He is an emeritus professor at the London School of Economics and was once a senior official at the Bank of England.
His major view is that the next 30 to 40 years are going to be very difficult economically for most of us in western society when compared to those wonderful years between 1950 and 2020, producing 70 years of prosperity.
He now conducts podcasts spending an hour discussing macro-economic trends which are making life increasingly hard for the average worker.
He states that the early decades of these inflation-targeting times began in the 1990s, which included Australia and coincided with manufacturing industries being pushed offshore and then shifted domestic production to services.
This saw nominal and real interest rates falling simultaneously in all western countries, which made things very easy for central banks. However, these contributed to the housing anguish for young people who experienced asset values increasing quickly during those decades.
As interest rates decline, asset values rise, he said. This means that younger people trying to enter the workforce today are finding it increasingly tough. With our unemployment rate edging up to 4.7 per cent this is not seen locally to be a huge issue as 5 per cent unemployment rate has been historically seen as full employment in Australia with the view that 5 per cent are not seeking employment.
He went on to say that in coming decades, ageing populations will also put younger workers under an increasing tax burden as the government would need to increase taxes so they can look after our older residents.
This problem will get worse as the political divide increases due to political polarization and the fact that the economy is dividing into those that have and those who do not have the financial resources to live how they might like to.
He saw the immediate issues being caused by falling birth rates, aging populations, rising dependency ratios plus increasing debt levels that the politicians so far are unable to deal with.
By John BLACKBOURN
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