Catallaxy Files

Graham Richardson has a must-read op-ed in the Australian today. He reveals the depths of hatred towards the PM.

While it is clear Julia Gillard just doesn’t understand how bad things really are, she is at the very core of the disenchantment. These two MPs, who both voted for her in Kevin Rudd’s February challenge, were staggered at the hatred — and that is the right word — the electorate expresses about the Prime Minister. The breach of trust, exemplified by the broken carbon tax promise, totally destroyed her standing. The long litany of political stuff-ups has only magnified the outrage. Australia desperately wants to get rid of her, and it seems the electorate won’t change its collective mind because Wayne Swan brings down a benign budget.

I suspect they are all in denial and it’s ugly – see the headline in The Age online today (the hard copy doesn’t have that headline – I know because it now gets delivered (at zero-price) along with my AFR subscription; very annoying, it just takes up space in my recycle bin).

The government is calling the Chairman of ‘The Big Australian’ a liar – really?

Richo also warns of the other goings on

Labor should be more cautious about its pursuit of Christopher Pyne over his meetings with Slipper’s accuser. The electorate doesn’t care whether Pyne continued to talk to him or not. Its interest is in what Slipper did, or didn’t do, not in who accused him. Slipper is threatening retribution against Pyne in a big way. As they say in the classics, I am reliably informed the personal duel could get interesting.

I suspect the government are beyond taking good advice and we’ll all just have to watch with morbid fascination. Make sure you recall the gory details because when ‘Gillard: the mini-series’ goes to air in a few years time, some will still be in denial, while others will simply refuse to believe.

Martin Parkinson gave the traditional Australian Business Economists Conference speech on the budget this week. So what did he say about the revenue forecast errors that have caused some recent controversy? Well first and foremost it was the mining boom that caused the trouble.

The first is the implications for company tax of the mining sector growing more rapidly than anticipated and mining investment exceeding expectations.
As set out in Budget Statement 5, these factors will tend to dampen tax receipts as a share of the economy, as mining companies claim tax deductions associated with the depreciation of their capital stock. Of particular importance is the accelerated write-offs provided for many mining assets. Some assets receive immediate deductions while others are depreciated at concessional rates over a longer period. Accelerated write-offs effectively result in the deferral of tax payments into future years. While we had anticipated this factor in our forecasts, we underestimated its magnitude.

So what does Budget Statement 5 say?

Importantly, the expected massive increase in mining investment over the next three years, to nearly 9 per cent of GDP in 2013-14, will generate very large tax deductions. This high investment is in contrast to the characteristics of the mining boom during the mid-2000s, which was largely driven by increasing commodity prices and the expansion of existing projects. While existing projects are still expanding, there is an increase in new projects. In addition, the mining sector can deduct some forms of investment immediately rather than over the life of the asset. This will reduce the tax-to-GOS ratio during high investment periods.

As I keep arguing, if Treasury made the effort to model the actual tax base and not the tax to GOS ratio they might have more success in getting things right.

But back to the actual claim “Of particular importance is the accelerated write-offs provided for many mining assets.” So what are we talking about – how much money is at stake? To blow a hole in Australian government tax revenue – forecast to be $343 billion this coming financial year (up from $309 billion in the current year) – we must be talking about some serious money. If so, it would be documented in the Tax Expenditure Statement and also in the Productivity Commission’s Trade and Assistance Review.

So I had a look through those documents (again) to drag out the figures – remember we’re looking for big numbers.

The biggest numbers that I can find relates to transport – but this overstates any benefit to mining.

To be blunt I can’t find the kind of numbers that Parkinson must be referring to in the Tax Expenditure Statement. There may be good reason for that. Similarly, I can’t find the kind of numbers we’re looking for in the PC TAR either.

Should we accept that Treasury got caught off-guard by the extent of the mining investment boom? That is clearly what has happened – but how and why did it happen? Mining investment doesn’t occur at the drop of a hat; so I’m happy to expect large variations in medium-terms forecasts, but not large variations in year-to-year forecasts. Treasury should have a fairly good idea of the investment coming on-line and a fairly good idea of the depreciation expenses that will follow.

In the early 1950s, when I was a young college graduate and a new employee of the Frost Bank, my great-Uncle Joe Frost, then CEO, told me that the very first goal we had was to return the deposits we received from customers. Our obligation was to take care of the community’s liquid assets and manage them safely so others could use them (via loans) to grow.

Frost Bank was not big enough to be saved by the government, Uncle Joe told me at the time, so we would always need to maintain strong liquidity, safe assets and adequate capital. I was impressed that making money was not high on his list of priorities, but he implied that profits would come if we observed sound banking principles.
…
Uncle Joe was not a fan of the [Federal Deposit Insurance Corporation] — he said it took his money to subsidize his inefficient competitors.

Source: Wall Street Journal.

Greg Craven has an excellent op-ed in the Australian ($) today on how the Parliament is going. Not well it seems.

Just now, parliament, which has been consigned to the knackers more often than Ricky Ponting, is looking dead sick. You have to be careful here. The end of meaningful parliamentary government has been predicted since Billy Hughes did the numbers with an abacus and a cattle prod.

But grim reality is grim reality. The present parliament in Canberra represents a bipartisan new low in public ethics, behaviour and standards.

I hope this is an aberration and not simply greater public awareness of business as usual. The ALP are escalating the grubbiness.

Now, gratifyingly, we hear Labor is threatening revenge killings. Long-disproved allegations against Tony Abbott are being dusted off, while Sophie Mirabella, who certainly could be convicted on any charge of felonious rudeness, is to be Thomson-ised over civil allegations yet to even grace a court. Doubtless, the Coalition will produce further hostages of its own. Huzzah.

These exchanges do tend to end in tears. Yesterday we heard that Tony Abbott is being sued by a unionist for defamation – no doubt next week the ALP will call for him to stand down while the case proceeds. As if calling attention to alleged union thuggery is equivalent to stealing other people’s money and using it to frequent brothels or defrauding the taxpayer by fiddling with entitlements. Actually I’m looking forward to the case being argued in open court – names being named and so on. If it drags on past the next election an Abbott government could organise for the proceedings to be televised. But I digress.

The best part of Craven’s op-ed is this.

In the good old days, starry-eyed constitutional lawyers wondered how it would be if the stalags of the major parties were replaced with free-range independents, treating issues on their merits and exercising their own quirky judgment.

Now we know. Pork is always on the menu in the members’ dining room; parliament closely resembles a dysfunctional airliner hijacked by confused rural freedom fighters; and even if the besieged Prime Minister formed a delusion that she was a teapot, a no confidence vote could not be allowed to cut short the party.

I think we’ll be seeing fewer independents in the parliament in future years. For all their faults political parties do try to screen the candidates for public office – although people like Slipper and Thomson make you wonder. Graham Young (hi Graham) makes excuses for Slipper here.

There is a reason that, despite 22 years in Parliament, Slipper has never risen further than parliamentary secretary, a position he last held in 2004, not long after rumours began of the existence of the “incriminating” tape. And that is, while he might be secure in his seat, for whatever reason he was not suitable for further promotion.

He only rose to the deputy speakership as a Liberal because, like the independents, Adam Bandt, and Kevin Rudd, he knew how to play the blackmail games available in a hung Parliament.

And now he is Gillard’s problem, and not the Liberals’ because the public understands that you’re not to blame if you get lumbered with a dud, but you are if you embrace him.

While I wasn’t overwhelmed by Graham’s argument I have yet to see an explanation of how and why Thomson managed to get preselected again in 2010 when allegations against him had already surfaced. I have heard that he assured people it was all behind him, but did anybody think to actually check? Clearly not.

Ken Henry got interviewed on the 730 Report on a wide range of topics. This is what he had to say about the wasteful stimulus package.

CHRIS UHLMANN: Was there a problem not with the first stimulus package, but perhaps with the shape and delivery of the second one?

DR KEN HENRY: Well, a lot of people say that in hindsight. But you know when you’re, when you’re putting money out the door so to speak, and I know this is difficult for people to understand, it sounds counterintuitive, but actually if it’s fiscal stimulus the most important thing is to get the money out the door. But how the money is, whether the money is in some sense wasted because there’s overcharging or whatever, of course it’s an important point but from a macroeconomic perspective it’s very much second order, maybe even third order.

Second or even third order. Fantastic – completely ignoring all the proposals from critics to spend differently, or to wait, or to not spend at all. Notice also that any criticism of the stimulus is all in hindsight.

Judith Sloan was on Q and A last night tenderising lefties. It seems the transcript isn’t a fair reflection of the discussion.

PENNY WONG: … But I’d make this point. If you want to look at the – the best way to judge how much a government is intervening in the economy is look at tax as a proportion of GDP and spending as a proportion of GDP. We are taxing less than Peter Costello did when he was in Government…

JUDITH SLOAN: You’d like to do more.

PENNY WONG: Well, Judith…

JUDITH SLOAN: It’s androgynous, Penny. It’s not what you want.

PENNY WONG: Well, if we can just get away from the personal for a minute. We are taxing less…

JUDITH SLOAN: (Indistinct)

At great risk to my sanity I have listened carefully to the actual recording (at 47:48) you can hear Judith saying

It’s endogenous, Penny.

and then she doesn’t say “(Indistinct)” she says “Endogenous” it is an economic term.

Memo to ABC: Do try harder to accurately reflect what people actually say – if you’re not sure, ask.

(HT: rebase)

Regular threadster “.” sent though this guest post.

While browsing the library I found a book by John Leard – Australia, the Worst is Yet to Come. At pg. 74-75 ‘The ACTU’s Real Motives’

There is grave doubt whether the whole thrust of the ACTU’s Superannuation deal is really in the interests of the members whose funds they will be administering.

It is interesting to quote from a paper delivered to the 1981 ALP Special National Conference. The following was a statement made in regard to Superannuation:

There are a number of issues raised by the extension of Superannuation Schemes. Ultimately these questions include the examination of the investment strategies of
those funds and their implications for industrial relations, employment and structural changes in the economy.

Conflicts may arise from those investment decisions. For example, investment in highly profitable areas will maximise the member’s retirement benefits, but the social
consequences of that investment may create a conflict.

Obvious examples are investment in Uranium mining (pre three mines policy, methinks!) or firms which operate in South Africa.

What we must recognise at this early stage of union involvement in the Superannuation issues is that control over the funds will provide unions and
governments with considerable financial leverage. That leverage can be used to advance the cause of Socialism in Australia.

There you have it.

The real objective of these funds is not the welfare of the Australian people, nor the maximisation of returns for those who have entrusted their funds (albeit compulsorily) to union-controlled schemes, but to further the cause of Socialism in Australia and to give the unions and the Government increased political leverage.

If the average Australian will buy this, he has rocks in his head!

We all know that in a collective bargaining agreement, negotiations will be dominated by the employer and the union. The union will not give up their position in terms of bargaining power, nor will they allow individual agreements – or choice varying from their objectives. Unions nearly explicitly exist to disadvantage non members – let alone pricing marginal workers out of jobs and robbing their own rank and file blind.

Essentially what we have observed is that the unions helped to create superannuation – whether we are union members or not or want to invest in superannuation- but to advance socialism in Australia and not to “run funds only for the benefit of their members”.

This was predicted by John Leard over 26 years ago and stated as a goal of the ALP over 31 years ago.

The Victorian government has been a disappointment. What are they doing in office – did they have any plans or ideas for when they came to office? Apparently not. Rather than simply shut down the Victorian Equal Opportunity and Human Rights Commission as being some sick joke foisted on Victorians by the previous government, Baillieu chose instead to retain it and appoint someone to the Board.

It seems Kuruvilla George doesn’t support gay marriage.

Professor Kuruvilla George, who is Victoria’s deputy chief psychiatrist, has signed a submission to a senate inquiry calling for a ban on same-sex marriage.

He is among a group of doctors, who in a letter to the marriage equality inquiry, say limiting marriage between a man and woman “is important for the future health of our nation”.

I’m not sure what a ‘ban on same-sex marriage’ means, I suspect what the article intended to say was that the current law of the land remain unchanged. Pesky details. Anyway, lets have a look at Professor George’s background.

Kuruvilla George, a former Christian missionary who is the state’s Deputy Chief Psychiatrist, was appointed to the Victorian Equal Opportunity and Human Rights Commission by Attorney-General Robert Clark last year.
…
Before he joined the board, Professor George had been linked to the anti-euthanasia and pro-life group Medicine with Morality.

Can’t have that – people with non-progressive opinions like that on the Victorian Equal Opportunity and Human Rights Commission.

The Age reports that Professor George will be resigning from the Commission later today. It will be an outrage if the Baillieu government accepts his resignation – rather they should show some backbone – not much, just some – and advise the Victorian Equal Opportunity and Human Rights Commission board to be more tolerate of alternative views to their own or get another job.

Update: Baillieu government got crunched.

A Victorian equal opportunity board member who sparked a furore over his public position opposing same-sex marriage has quit his post.
Kuruvilla George, a former Christian missionary who is the state’s Deputy Chief Psychiatrist, was appointed to the Victorian Equal Opportunity and Human Rights Commission by Attorney-General Robert Clark last year.
His resignation offer, flagged in The Age today, has been received by Mr Clark. “The Government thanks Professor George for his dedicated service to the Victorian Equal Opportunity and Human Rights Commission during his time as a member of the Board,” Mr Clark said this morning.

Mike Smith, formerly of 2UE, was interviewed today on Sydney Radio station 2GB. Simply fantastic. Listen to the whole thing.

(HT: Gab)