From little things big things grow

When Rachel ViforJ first approached me about the RBA being involved in a special issue of Australian Economic Papers featuring the best economic honours theses of the past couple of years, I jumped at the opportunity. The honours programs at Australian universities provide a world-class education in economics to some of our smartest students. A key part of that training is writing a thesis and applying everything they have learnt over the past 3 years to an important economic question. The skills honours students gain through this process is one of the reasons the RBA recruits so many economics honours students. As a result of their experience in honours programs they can very quickly make a contribution to the important public policy issues that we grapple with at the RBA. Consequently, if I missed the opportunity to highlight the quality of economic analysis being done by some of our brightest students, it would be (to borrow an analogy from the great Paul Kelly) like melting wax to fix my wings, losing my shirt or pawning my ring.

This initiative has caused me to reflect on my own experiences as an economics student. When I was doing honours back in the early '90s it was a time of remarkable change in the Australian economy. Significant reforms were sweeping through the economy and we were just emerging from the recession ‘we had to have’. There were major reforms to labour markets, retirement savings, financial markets, foreign trade and the beginnings of a wave of privatisation of government businesses—the economy was opening up and moving into deeper water. My own honours thesis analysed the newly introduced enterprise bargaining system, but there was no shortage of interesting topics to choose from. It was, in short, an exciting time to be an economist.

The benefits of those, and subsequent, reforms were seen over the following decades. There was unprecedented productivity growth through the 1990s and the start of the Great Moderation. While there has been much debate about the causes of the Great Moderation, my own view is that it reflects improvements in economic policymaking—particularly monetary policy. This might have been seen as a triumph for economics, but there was a sting in the tail. Economics came to be seen as boring. All the big reforms had already been done, the economy was travelling nicely and all that was left was some tinkering around the edges. One reflection of this can be seen in the number of students studying economics. As the Public Access and Education team at the RBA, led by Jacqui Dwyer, has documented—enrolments in high school economics courses in Australia have fallen by around 70% since the early 1990s.

Which brings us to today. From my perspective, the early 2020s feels a lot like the early 1990s. We are emerging from one of the biggest disruptions to our lives since the recession of 1991 and the economy is being reshaped by massive structural changes. Geopolitical tension and the experience of the pandemic are leading to a re-evaluation of global supply chains. Climate change and the transition to a low carbon economy is reshaping industry. And the economic whiplash from the pandemic and recovery is raising questions about whether our economic institutions are fit for the future. The need for new thinking and for economic policy to rise to the challenge is obvious; and, just like before a southerly buster sweeps into Sydney, it smells like rain and I do believe we are heading for a change. It is, in short, an exciting time to be an economist.

So, just as I and my classmates experienced 30 years ago, there is no shortage of topics for aspiring economists to study. This can be seen in the range of topics covered by the theses in this volume. There are papers on housing, monetary policy, the COVID-19 pandemic, job mobility, parenting, resources, tax policy and (I am particularly excited to see) the enterprise bargaining system. But, even with the breadth of topics included in this volume, there are many more important questions still unanswered. Reflecting this, it is my hope that, by showcasing the wide range of interesting questions that economists are addressing and the quality of both our budding economists and our economics education in Australia, this volume can contribute to a reinvigoration of the study of economics.

So, in conclusion, I think this is a great initiative and I would like to thank Rachel ViforJ, Pauline Grosjean, Evelyn Parsonage, Amanda Martz, Lilly O'Scanaill, all the authors, their supervisors, honours coordinators and heads of economics for helping make this initiative a success.