In last week’s budget the government has retrospectively changed the rules around superannuation taxation. Now there is a lot of kerfuffle relating to whether those changes are retrospective or not.
Bottom line – they are.
Our political elites are a tad confused because they do this sort of thing all the time. Anyway, I thought I’d share a discussion I had with a Labor Senator on this point (in the context of water markets).
Senator McALLISTER: You made some remarks earlier about structural problems in the water market associated with uncertainty in relation to property rights. What is the source of that uncertainty?
Prof. Davidson : Basically I would have thought that because it is a rollout plan people do not know what the rules will be going forward or if they will change unexpectedly. This is a new market, and all new markets have the disadvantages that we learn as we go, and we change the rules as we go, from our learning. People feel that they may be disadvantaged by those changes. This would lead to less liquidity in the market than might otherwise have been the case, which will lead to price fluctuations, which would lead to disruptions to supply and demand. This is what people are worried about. This is a common characteristic of almost any new market.
Senator McALLISTER: You would acknowledge that there is not uncertainty in access to the property right, though—that that has been dealt with in the legislation in establishing the arrangements under the National Water Initiative?
Prof. Davidson : To the extent that legislation is changed, yes. I would not be as confident perhaps as other people might be. The fact that it is enshrined in legislation does not mean that much, to be quite honest. Legislation can be changed.
Senator McALLISTER: You do not think that conventions and constitutional protections around property rights are adequate? I can see that there is some space for discussion around the operation of systems.
Prof. Davidson : There is a great quote by the American philosopher—comedian, perhaps, some people might say—Mencken, who said that nobody’s property is secure while Congress in in session. Maybe it is a bit harsh, but I am inclined to that view that our property is not secure while the parliament is in session. While people’s livelihoods are on the line, they are going to be cautious, and I would never say to them, ‘Don’t be cautious.’
What I found most interesting was that Senator McAllister genuinely thought that property rights are secure because of “conventions and constitutional protections”. Canberra is Lala land. Her super will, no doubt, be secure and that of her politician friends, judges, and senior public servants. The rest of us? Not so much.