NEWSFLASH! In September I will join The Conversation as its Business and Economy Editor. I have been honoured to work at The Age for the past ten years, originally alongside the legendry Tim Colebatch, and for the past four years as economics editor in my own right.

At The Conversation, my job will be to make the best thinking from Australia's 40 univerisites accessible to the widest possible audience. That means you. From the new year I will also write a weekly column.

On this site are most of the important things I have written for Fairfax and the ABC over the past few decades. I recommend the Search function. The site is a record for you, as well as me.

I'll continue to post great things from The Conversation and other places here, and also on Twitter and Facebook. Enjoy.

Monday, May 21, 2012

"percentage point" - discuss.

Here is a reader's letter:

Here is my reply:

Thanks very much for writing.

The Reserve Bank’s “0.50 percentage point rate cut” is the cut in its cash rate from 4.25% to 3.75%.

Here’s how it looks expressed in numbers: 4.25 – 0.50 = 3.75

You can see that a cut from 4.25 per cent to 3.75 per cent is a cut of 0.50 percentage points.

But, perhaps surprisingly, it is NOT a cut of 0.50 per cent.

Expressed as a per cent, a move from 4.25 to 3.75 would be much bigger: a cut of 11.1%.

If I wrote the Reserve Bank cut its cash rate 0.50 per cent I would be (hugely) wrong.

That’s why I use percentage points, a factually correct term that I until now had thought people understood.

Can you think of a better way to do it? I am open to suggestions.

Please discuss.