An excess supply of economic illiteracy

Economic illiteracy is a common fault among our political classes. Two stories off the front page of The Australian this morning. First this: NBN chief Bill Morrow asks who will by [sic] the $49bn debt. As if you have to ask:

Australians face a stark choice in how to pay for the $49 billion National Broadband Network — it will either be funded by consumers who use the network or ultimately by the taxpayer via subsidies and writedowns.

NBN chief executive Bill Morrow, writing today in The Australian, raises fundamental questions about how to pay for the federal government-owned network.

He says a “land grab’’ by retailers as they try to gain market share while the NBN is rolled out has driven down internet plan prices to a level that may not reflect the costs consumers are willing to pay in a rational market. “We need to ask whether this is a faulty commercial model where cost recovery isn’t possible or is it an over-heated retail market with a price-centric marketing strategy that needs to change?’’

It’s all Labor except that our economically challenged PM also didn’t get it when he might have done something useful when he was Minister of Communications. And to go with that we now have this: Regulation needed to keep lid on power bills: Victorian report.

A damning review of Victoria’s privatised energy market has called for the reintroduction of price regulation to drive down household power bills and put a ceiling on spiralling electricity costs.

The eight-month independent review found that, after 15 years, market deregulation had failed Victorians and led to significantly higher household power bills.

Left out is the small matter of the Hazelwood power station closure. It shouldn’t be that hard to understand the supply half of supply and demand, but apparently it is.

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