Catallaxy Files

The interim report of the Greiner review into the distribution of the GST has been released.  (Evidently, Swan wanted to delay it until after the Budget – stealing the limelight or something like that, although Slippery Pete is surely hogging all the attention now.  Note also the likelihood of the Senate forcing the release of the FWA report on the HSU in Budget week … should be fun.)  Anyway, it is a great disappointment.

Now some HFE is one thing, but the extent of subsidies now flowing to Tasmania and to a lesser extent South Australia is another thing altogether.  (NT is a special case – removing idigeneity from the formula, which surely is crying out to be done, would fix this up to a degree.  Or perhaps give NT to SA again … only joking.)

The report effectively rejects a shift to equal per capita distribution (EPC), although the panel’s stance is not well argued.

But as for Lara (Giddings, Premier of Tasmania) to come out with this line that THE LARGER STATES ARE ACTING OUT OF SELF-INTEREST AND HYPOCRISY  – breathtaking.

This is from the leader of a state that receives $700 million more a year than it deserves and has the largest public service of all the states.  In fact, pretty much anything that has a pulse in Tasmania is a public servant, directly or indirectly.  (Recall Sinc’s important work on the Tasmanian economy after which he was treated like someone with ebola virus — have you been back, Sinc?)

I had this comment piece in The Aus yesterday.

The GST Distribution Review Interim Report is a measured and thorough piece of work.  It is also a missed opportunity.  In setting the scene for only marginal changes to the way in which GST receipts are distributed between the states and territories, an important chance has been lost.

There is absolutely no doubt that the system is broke.  It is simply not possible to have an arrangement that allocates only one-third of the tax revenue raised in a state to that state – this is the direction in which Western Australiais heading.

To have some states, which year after year receive much more GST revenue than they raise, and, at the same time, have vastly bloated public sectors is neither fair nor efficient.  And, at the margin, the arrangement encourages people to stay put inTasmaniaandSouth Australia- both recipient states – when the more rational action would be to move.

The current arrangements penalise the states that innovate and provide services efficiently while rewarding the incompetent laggards.

The answer is relatively straightforward.  Abolish the Commonwealth Grants Commission and redistribute the GST revenues on an equal per capita (EPC) basis.  This would include an element of redistribution, both because people in the more prosperous states spend more on a per capita basis and there is a lag in the system.  Growing states receive their equal share only after a period.

Sadly, the Greiner panel is not attracted to this option, arguing that to do so would require a further funding source

Certainly, the recipient – some would call them mendicant – states would need some time to transition to  EPC funding, but clearly the Greiner panel’s view is that these recipients states can never be expected to stand on their own two feet. Read the rest of this entry »

As we approach the implementation of our suicide tax, there is a very good piece over the misinformation perpetrated about the ‘progress’ made at Durban.  I have highlighted the important final par.

In a classic end-of-conference rabbit-from-hat exercise, negotiators managed to agree on language for the roadmap that allowed all sides to save face and herald progress in the talks. The text of the roadmap commits the parties to a new process for the negotiation by 2015 of “a protocol, another legal instrument or an agreed outcome with legal force”, with the associated emissions reduction obligations to come into effect from 2020. The Europeans had wanted the text to refer to “a legally binding” treaty, but this formulation was deemed unacceptably strong to developing countries because of the reference to the word “binding”. The disagreement threatened to derail the talks, which by that stage had already gone into overtime. A last-minute “huddle” on the floor of the conference hall between the Europeans,India and other key countries resulted in the compromise language.

World leaders were quick to pronounce the success of the negotiations on the back of this compromise. The head of the UN’s climate secretariat heralded the outcome as “a historic agreement that has met all major issues”. The EU’s Climate Commissioner, Connie Hedegaard, claimed that the outcome vindicated the Europeans’ negotiating strategy. Australia’s climate change minister Greg Combet said the outcome was a “massively historic step” that “means we are negotiating a legally binding agreement that would bind all developing and developed countries”.

But the text of theDurban outcome does not commit developing countries to binding targets and anyone who genuinely thinks it does understands neither the meaning of the words agreed to nor the circumstances in which they were agreed. One could drive a truck through the compromise language.

Tony brought to my attention three related advertisements in The Australian today for senior positions in The Environment and Sustainable Development Directorate in the ACT Government.  Is the Chief Minister trying to jump the shark or something?

AND DON’T FORGET, THE ACT IS EFFECTIVELY A LOCAL GOVERNMENT!

The three positions are:

• Deputy Director-General, Policy, Corporate and Regulation, salary range: $278,633 to $294,793;
• Deputy Director-General, Planning Policy, salary range: $278,633 to $294,793;
• Executive Director, Policy, salary range: $219,150 to $231,587.

I wonder what the Director-General gets?

And here’s the blurb:

The Environment and Sustainable Development Directorate is responsible for developing and implementing sustainability policies and programs, including those related to climate change (note to the person responsible for this ad (laugh here), we have the carbon tax now, so no need), energy, nature conservation, environmental protection, construction services, transport planning, heritage (in Canberra!) and water.  The Directorate is also responsible for spatial planning (que?), planning approvals, sustantainable urban design and administers the Territory Plan (sounds very Stalinist).

Of course, people management skills are required, as well as superior skills in stakeholder engagement, collaborative partnerships and issue management (whatever all that codswollop means – but, oh, so today-speak).

That’s a close to a cool million that the ratepayers of the ACT would surely not want to cough up -  or is the taxpayers of Australia who are paying for this sort of useless lark?

I guess the truth about the unjustified increase in the superannuation guarantee charge would eventually dawn on people.  No, the government does not fund directly the phased increase from 9 to 12 per cent, with the exception of public servants who currently only get the SGC (many get more).

But no doubt, the government thought that there was some sort of political advantage to inferring that the government was the source of this new beneficence.  We taxpayers are up for the concessional tax arrangements, but that is it.

Leaving aside the argument that 9 to 12 per cent is required to provide for adequate incomes (What?  Make workers retire on more than pre-retirement earnings or is it really giving yet another leg up to your mates in the industry super funds – take your pick.  After all, those addicted funds are finding the going a bit tough on just 9 per cent guaranteed.)

And now we have Bill Shorten MBA – he obviously attended the lecture on tax incidence – telling us this:

WORKPLACE Relations Minister Bill Shorten has rejected union calls for employers to fund an increase in the superannuation guarantee, insisting workers will have to defer part of their annual pay rises for the next seven years to meet the cost.

Rejecting complaints that lifting the superannuation guarantee from 9 per cent to 12 per cent would cost employers $20 billion a year, Mr Shorten has confirmed the money will come from “deferred wage increases” worked out between employers and employees during wage negotiations.

The minister has swept aside union demands that employers must meet the full cost, describing the increase, to be phased in over seven years, as an important Labor reform to prevent Australians retiring in poverty on a diet of “baked beans and toast”.

“For millions, it puts the golden goal of lifetime income security within reach,” he writes in The Australian today.

“The truth is that superannuation is part of an employee’s total remuneration.

“So an increase in super means an increase in remuneration – or wages by another name.”

Although more than $2bn of the MRRT revenue will be used to boost superannuation for low-income earners, business leaders complained that they would shoulder most of the burden for the rest of the workforce.

Yesterday, union leaders vowed they would not moderate future wage claims to make room for the super increase.

Transport Workers Union national secretary Tony Sheldon said the long phase-in period meant “any business worth its salt” should be able to manage its affairs to pay increased wages and superannuation.

Mr Sheldon’s comments echoed incoming ACTU national secretary Dave Oliver’s warning on Tuesday night that the union movement saw the increase in the super guarantee as an entitlement, not a salary sacrifice.

Mr Shorten moved quickly to make clear that the increase would have to be factored into future wage negotiations.

“I can’t see that business will be paying any more in the future than they otherwise would have been if the superannuation changes hadn’t gone through,” Mr Shorten toldMelbourneradio station 3AW.

“But what I do recognise is that a portion of what would have been employees’ increases will go into compulsory savings, which is concessionally taxed.”

Later he said that he expected union leaders would attempt to obtain the best possible outcomes for their members. But he said Labor was committed to improving superannuation savings.

“We don’t want Australians to retire in poverty,” Mr Shorten said.

All well and good?  But one of the real problem is that some one-fifth of workers is covered by regulated wages (awards), with small businesses overrepresented in the award-covered category.

Unless there is a deliberate strategy by FWA to discount award increases, including the National Minimum Wage, to account for the SGC increase (mandated), employers will be paying the increase in superannuation.

It will be interesting to look at the government’s submission next year to the minimum wage case to see its argument for EXPLICIT discounting of 0.25 points for the increase in the SGC.  I am not holding my breath.

And the other point is that the FWA is so slanted towards the unions, that the normal market mechanism of shifting of the tax incidence to wages is impeded – just read Sheldon and Oliver’s threats; they are not idle.

Anna, Anna, Anna – can you not dream up some more smears to throw at Campbell Newman (don’t mention all the Labor politicians who have been jailed and/or found guilty of corruption, by the way)?  Time is running out.

This campaign seems to have created a new low in politics.  (Let’s all have a bit of chuckle over Pete’s (Beattie) opinion that Anna has campaigned very well.  Hee, hee.)

[Anna Bligh] said the poll made it clear Labor was facing a “David and Goliath” battle and her role was to ensure her party still had enough seats to form a healthy opposition.

“If the poll is replicated, we’re not only set to see a change in government, but potentially one in which that government has almost unfettered power,” she said.

LNP leader Campbell Newman says a Labor smear campaign against him is a threat to democracy, as the Queensland election enters its final week.

QUEENSLAND’S Labor government is headed for a devastating defeat at Saturday’s state election, if the latest opinion poll proves accurate.

“I don’t think that’s good for Queensland and I don’t think it’s healthy for a democracy.

“So that tells me it’s my duty is to get out there and hang on to as many seats as we possibly can.”

Ms Bligh also defended a Labor campaign attacking LNP leader Campbell Newman’s personal integrity.

The Crime and Misconduct Commission on Friday cleared Mr Newman of any impropriety over three separate issues that have plagued his campaign.

Labor has repeatedly referenced the allegations in the lead up to polling day.

“I think calling into question the suitability of your opponent is a very legitimate activity during the campaign,” she said.

“If Queenslanders are contemplating a change then I do think we need to know more about who they’re contemplating changing to.

“There are a lot of questions about Mr Newman’s financial dealings and his time as lord mayor.”

I can’t remember another era when a government spent virtually all of its time talking about the opposition and its policies.   You certainly don’t see this in state politics.

Now what ever you may think of Ted or BOF, are they spending all their time mentioning their Leaders of the Opposition (bonus point for all those who can even name the Victorian Leader of the Opposition)?  And I am pretty sure that Colin Barnett is not wasting his time or boring the electorate talking about the WA Leader of the Opposition, whom I cannot name and cannot be blowed to look up (it could always change).

But watching Penny Wong on The Insiders today [the program gets more dreary by the week], waving around a glossy brochure (it would appear to have been written by the Labor party – it would have been unconscionable to use public service resources) entitled: Pre-Budget Deficit: Tony Abbott and the Coalition, the government just cannot talk about anything else.

(I would love to have an opinion from a marketing expert: is it really a good idea always to be mentioning the competition – day in, day out?  If I am trying to market Palmolive soap, should I be spending all my time slagging off about Lux?)

So the point of this pamphet seems to that, assuming the Opposition were the Government (hey, that’s an idea that Abbott could warm to – no negativity there), there would be a $9 billion deficit next financial year rather than the chimera of a surplus- as thin as a cigarette paper – that will doubtless be revealed on May 8.  But hang on, the Oppostion is not the Government – you are the Government.

Oh and hang on further, an election is not due for some 18 months.

This is really weird.

Additional note about Peter Costello:  The press gallery line (and Labor Party line) on last week’s fiasco over the appointment of the Chairman of the Future Fund was that the process could have been better handled, but the best man got the job in the end.  Oh and by the way, a former senior politician should never have been considered for the position.  (This rather begs the question why the Minister asked Gonski to ask the views of the Guardians – a bit of ex post rationalisation there, I think.)

The reality is that there is no best person for these things – there are many people who could fill that role perfectly satisfactorily.  (Gonski is a lawyer just like Costello.) In the UK and the US, for instance, it is very common to have ex-politicians in all sorts of senior jobs, both government and private sector.  If anything, we waste the talents and experience of these people in Australia.  (Oh and note to Nick Minchin – you have left politics, it would be better to butt out.)

And for all those fans of SWFs (and I am not one of them), go and check out their governance overseas and see how many ex-politicians sit on these boards.  Crony-capitalism more generally.

UPDATE: No one has claimed the bonus points for knowing the Victorian Leader of the Opposition.  Actually, I’m not sure I know.

UPDATE ON UPDATE: I have had a look at Penny’s pamphlet -  it is truly pathetic and must have taken some hack in the party about 5 minutes to put together.  Why would you bother having that sort of tosh printed up, with its bright red covers?

Oh and it takes the MYEFO estimate for the 2012-13 budget cash balance as Gospel.

And why or why mention the $2million that the Coaltion has pledged to the Surf Lifesaving Association?  Should we take it from that the Labor party hates surf lifesavers? Puerile stuff.

Now even the dumb blonde realises that shifting a budget from a deficit close to $40 billion in one year to a surplus of $1.5 billion in the next year is nigh on impossible … unless an awful lot of creative accounting is involved (creative accounting that would land company directors in a lot of hot water with ASIC).  (So many of the entitlement programs are locked in.)

Andrew Robb, Shadow Finance Minister, is on to this smoke and mirrors – or is it more like a London pea soup fog? – show.  Here are some of the examples:

• Spending on the energy security fund – $1 billion this year, $1 million dollars next year, $1 billion in 2013-14 and $1.06 billion in 2014-15.  Does this mean there are no energy security issues in 2012-13?
• Coal sector jobs package – $222 million in 2011-12, $247 million in 2013-14 and $257 million in 2014-15.  But only $10 million in 2012-13.  Anyone smelling a fiscal rat?
• Clean Energy Advance (compensation for the carbon tax) - being shovelled out the door this financial year (in May and June), thereby shifting spending that should be in the 2012-13 year into 2011-12.
• Underspending next year on land management and biodiversity measures.
• Bringing forward $1.4 billion in spending on natural disaster relief.
• $1.4 billion of infrastructure spending brought forward into this year and $1.22 billion shifted out to 2013-14.
• There is no allowance for the purchase of new submarines (which is perhaps a blessing – just lease them from overseas).

The irony is that this sort of financial footwork does not meet any auditing standards known to humankind and an auditing firm would have to issue a qualified report.  Is this anyway to run the government?

No.

So here’s the deal.

• The government faffed around for 12 months before deciding on the new Chairman of the Future Fund.
• It asked Gonski to advise them on who that should be and to consult with the current Guardians (trustees) of the Future Fund.
• The Guardians told him Peter Costello.
• It is corporate governance best practice for the the board to nominate the Chairman and, only in exceptional circumstances, would a Chairman be selected from outside the existing board members.
• Costello should have been made Chairman.  All that stuff about him not being a Chairman of a listed company and having no standing in the business community.  Complete bollocks – he was the Australian Treasurer for 12 years for heaven’s sake. And all boards need diversity – there are other business types on the board.
• Gonski only advised the government; he did not make recommendations (according to Wong).  Again, complete bollocks – there is no difference between advise and recommend.
•  It is a complete disgrace that Conroy and Cameron are now criticising (defaming?) Costello.  And, would be that the person that the government appointed to the board of the Future Fund and in whom they have no faith in his money management skills? Quite amazing.

I simply shake my head.  This has been an unbelievably disgraceful episode.

I have been pondering this question after reading  the quite misleading part of Treasury Secretary Martin Parkinson’s most recent speech about the amount of company tax paid by resources companies (and highlighted in the Fin).  He really should know better.

Mining companies account for about a fifth of gross operating surplus, yet only around a tenth of company tax receipts, primarily because tax receipts from the industry are affected by the high levels of investment occurring in the sector and the consequent level of depreciation deductions.

This is outrageous on a number of levels.  After all, Parkinson knows full well that company tax is payable on the basis of taxable income and not GOS.  After all, GOS is just that, it is gross, and does not take into account the depreciation allowed under the tax laws. (And, he failed to include royalties in the tax take.)

When an industry is going through such a strong investment and expansion phase, the growth of taxable income will significantly lag the growth of GOS.  And there is nothing normative that comes out of this – notwithstanding Parkinson’s golly gosh statement.  What only one tenth of company tax compared with one fifth of GOS – something fishy there, something should change – seems to be the implication.

Of course, Parkinson could have gone on to advocate that we move to a cash flow tax regime, which is really Ken Henry’s ultimate dream, but if this were to apply, then the mining companies would pay even less tax in aggregate.

What Parkinson seems to be doing is trying to reinforce the government’s position that the mining industry remains undertaxed, even with the MRRT, and to provide some weird rationalisation after the fact that the RSPT was not really that bad.  Note to anyone connected with economic policy making, it was that BAD and more.  And it is truly embarassing for all those connected with its launch and failed implementation to be bringing it up again.  Why would you?

Of course, it is largely politics when Wayne writes “for every Andrew Forrest who wails about high company taxes and then admits to not paying any, …” – but he clearly does not understand the company tax code either.  It turns out the Fortescue will be paying over one billion dollars this year in royalties, company tax and other government charges and over 2 billion dollars next year.  Spoke too soon, me thinks. Read the rest of this entry »

Yes, I had thought that Jamie Oliver had chunked up but we are all too polite to point this out if it were not for the fact that he has been carrying on like a sanctimonious git.

One female reporter learned that the hard away, according to Australia’s Herald Sun. When asked to comment on his expanding waistline, Oliver, 36, snapped: “Are you from a tabloid? Thank you for noticing, bitch!” It wasn’t initially clear if Oliver, who is known as the Naked Chef, was kidding around.

“I do my best,” Oliver later explained. “Working in the food business is quite hard when someone is constantly asking you to try things. I eat fresh. I train twice a week. I could definitely do better, but I am trying to do my best like most people when they hit 30.”

Oliver later apologized to the reporter, saying: “I went out last night and had a few drinks after a very long day. My brain did not quite understand that question.”

The restaurateur’s weight gain is ironic, given that he tried to end childhood obesity for two seasons on ABC’s Jamie Oliver’s Food Revolution.