Q&A Forum: August 29, 2016

Posted in Open Forum | 124 Comments

Don’t believe the PBO either

One minute the Parliamentary Budget Office thinks that a lifetime non-concessional contributions cap of $500,000 will raise $2.5 billion over ten years; the next minute, the figure is nearly $6 billion.

Both figures are just completely made up because the PBO has no idea what people will do with their money otherwise.  They certainly won’t be keeping it in ways which attract the top marginal tax rate. And then there are assumptions you can make about the timing of the contributions – if you believe in the firmness of the policy, you might wait until just before retirement to make your non-concessional contribution and thereby avoid the earnings tax.

Mind you, the government’s package is seriously over-engineered: if you have final cap on the tax free balance, all this other stuff is irrelevant, apart from as a short term revenue grab that will undermine the incentives to save and induce higher age pension dependence.

There is no explanation that one minute the PBO’s estimate of the  lifetime NCC of $500,000 is $2.5 billion and the next minute it is $6 billion (although there is always a chance that Phil Coorey of the Fin has got the story arse-about.)

It is interesting that the Greens toyed with the idea of having a lifetime non-concessional cap but, having seen the PBO’s analysis, decided to drop it.

Today

The federal government risks losing almost $6 billion in revenue unless it can find a way through on its proposal to impose a $500,000 lifetime cap on non-concessional superannuation contributions.

A day after Prime Minister Malcolm Turnbull sparked speculation the measure could be dumped on the basis of opposition by both the Senate and Coalition MPs, costings prepared by the Parliamentary budget office show the impact over a decade would be $5.7 billion.

The cost over the first four years, the standard budget forward estimates period, is $550 million, the same estimate as provided by Treasury.

The backbench opposes backdating the $500,000 cap to 2007, claiming that makes it retrospective. Treasurer Scott Morrison has offered to increase it to $750,000 and keep it backdated which appears to have calmed concerns.

This stand-off between what the backbench wants and what the Senate will accept underscores Mr Turnbull’s suggestion the cap may be dumped.

Treasurer Scott Morrison and Mr Turnbull have been adamant that any revenue lost through compromise would have to be recouped elsewhere.

A year ago

The Greens asked the Parliamentary Budget Office to assess the budget impact of putting a lifetime cap on non-concessional contributions.

The PBO found that only a small number of individuals putting regular non-concessional contributions to their super funds would be limited by a lifetime cap.

Most people only start making non-concessional contributions to top up their superannuation balances late in their working lives, to maximise the amount of their savings that will be covered by the favourable superannuation tax rules.

The PBO found that only 6 per cent of total lifetime contributions were in excess of $800,000 while 12 per cent were over $500,000.

The agency found that over a 10-year period, imposing a lifetime cap of $500,000 would reap the budget $2.5 billion, but if the total were lifted to $600,000 it would start costing the budget with the 10-year cost reaching $800 million. If the lifetime cap were lifted to $800,000, it would cost the budget $3.3bn.

The cost to the budget would be incurred because people would be able to make larger contributions in the final years of their working life than at present.

Greens Treasury spokesman Adam Bandt said it was good that the government was considering superannuation reform and “a lifetime cap on voluntary super contributions is unlikely to generate the kind of savings we need to address the growing cost of unfair super tax breaks”.

“We need to do much more to end the unfairness in our super system to make sure it properly looks after people in their retirement,” he said.

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25 priorities, sensible centre: help us

370e256316a5a1d6ee3e1e94867b24e4Malcolm Turnbull doesn’t seem to see the inconsistency of telling us that he now has 25 immediate priorities, but that changing 18C isn’t one of them.

Last week, he and his erstwhile Treasurer, Sco-Mo, were telling us that they had better things to do than change 18C and besides they couldn’t be expected to walk and chew gum at the same time.

But a 25 point plan?  Is he joking?  A government cannot possible run with 25 priorities, even though I understand that Our Dear Leader was hurt by the suggestion that he would be a do-nothing PM without an agenda. (Possibly better than one with a 25 point plan.)

Let me remind you of the appalling statist and delusional excuse that Sco-Mo put forward for refusing to amend 18C; it had clearly been workshopped through the PMO, because Mal said the same thing.

“It doesn’t help me reverse the deficit, it doesn’t help me repay the debt, it doesn’t help me get one more person in a job and it doesn’t lead to one extra company investing more in Australia so you can appreciate that it is not at the top of my list.”

And now Mal has devised some new concept of the SENSIBLE CENTRE, whatever that means.  It just sounds just like a big sell-out, whatever it takes idea, without principle. Obviously imposing higher taxes on superannuation savers is part of the ‘sensible centre’, according to our Mal. (see cartoon)

Where are the principles that should govern the Liberal Party’s policy making?  The central role of individual responsibility, of the family, of limited government, of low taxation,  of minimal regulation, of the rule of law and equality before the law, of freedom of speech and religion.

Here’s a tip: the sensible centre is just complete guff and should be ditched immediately as a guiding principle.  Follow the correct principles and you might make some correct decisions.

Here is Caroline Overington’s piece in The Aus, with which I large agree:

The problem with a 25-point plan is that it’s about twenty points too many.

In general terms, five is about the number of items you want to have on your to-do list at any given time.

Five things – especially when they’re big things – are manageable.

Already I can see Leigh Sales asking the Prime Minister to please list the 25 priority reforms in his policy onslaught.

Worse, I can see Mr Turnbull gamely trying to answer.

But, hey, it’s easy to criticise, when we can all see what Turnbull’s doing.

His government has been tagged as a do-nothing regime.

What has the Turnbull government done?

What does it stand for?

Why is it here?

We’ve been without it since the election. Did anyone notice it was gone?

Mr Turnbull is trying to counter that by giving the impression that he’s roaring back to work. He’s determined to get stuff done. According to reports in today’sAustralian, he wants every bill introduced to parliament this week.

Good for him, but if I was drawing up Turnbull’s personal to-do list, there would be only one point on it:

1) Win back the confidence of the Australian people.

How? Okay, here’s five ways:

a) Make decisions with your role as the leader of a centre-right party firmly in mind.

b) Hire people who know how to make and give speeches; and stay deliberately and determinedly on message (stick to the script; no waffling.)

c) Show courage on matters of principle. One of the easiest ways to immediately do this would be to denounce the anti-free speech clause, 18C, with every breath in your body. Deploy your most persuasive disciplines to win the support of those who might help expunge it from our lives.

d) Remember: you are not the President of Australia. You are merely the leader of the Coalition party that won the election. Therefore, this is not all about you. Reject with all the energy you possess the overwhelming desire to mention your new grandchild during your return to the dispatch box this week.

e) Like it or not, the public sees you as a tremendous silver tail. Give up fighting that perception, and work with every ounce of your being to stamp out the real barriers to success for small businesspeople in Australia: endless red tape, and taxes. Become their champion: Saviour of the Taxed and Strangled.

This is a high-stakes moment. Turnbull’s control is weak, at best. He’s going for crash, or crash through, and good for him. Just please, no more stall.

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Does Penny Wong have no shame?

Here is Penny Wong politicking on gay marriage in 2016:

He has lacked the courage to do what he knows is right and he has lacked the courage as Prime Minister and leader of the Liberal Party to deliver marriage equality in the quickest form possible, which is to enable a free vote in the Parliament.

Here is a summary of an exchange between Malcolm Turnbull, Penny Wong and Tim Wilson in 2008:

In light of the fact that Malcolm has a large gay representation in his electorate and Penny is Australia’s first declared gay Cabinet Minister, the panel was asked about their position on same-sex marriage. Catherine argued that as a Catholic, she saw marriage as a sacrament and wondered whether those seeking same-sex marriage were as enthusiastic about other church sacraments, such as baptism. Tim Wilson claimed that marriage should not be something endorsed by the government, that churches should take charge of marriage and the government could arrange civil unions. While Tim Flannery said that we should stay out of people’s relationship choices, Malcolm and Penny both argued their party’s positions, that marriage is a permanent union between a man and a woman. Tim Wilson said that as a gay person himself, he wanted to see Penny speak her mind in public, even if it contradicted the Labor Party’s views. Penny said that her personal perspective was not relevant.

Alas – in those early days the ABC didn’t publish a transcript of the show. From memory Tim Wilson whacked her hard for hypocrisy.

Posted in Hypocrisy of progressives | 29 Comments

APS Integrated Leadership System

I am not going to comment on this.  Will leave to the Cats to make their own.

This is APS (Australian Public Service) Integrated Leadership System.

Consider it when you consider the Census, Pink Batts, School Halls and Australian Research Council.  Pick your own.

Note the first competency being “Achieves results”.

It’s also always nice to know that APS workers are happy with their supervisors.

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Policy by Polling II

And speaking of Policy by Polling, at the complete other end of the spectrum, we have the European Commission.

See their latest contribution to the ERQ (European Regulatory Quagmire) in seeking to regulate and tax hyperlinks.  That’s right, if your online publication provides a hyperlink to someone else’s website, you need to pay a fee to the hyperlinked site.  Yes – this would affect the economics and feasibility of this very site.

PS – Hat tip to Yoda for sending me this link.  Does this mean we both need to pay the tax?

Who needs to design policy by reference to the people, even as assessed by polling.  You can design policy by reference to a self-interested cabal of Big (and old) media.  And because you are unelected and unaccountable, then, off you go.

Now this is the European Commission.  Facts should not get in the way of lobbying or social dogma.  That the British voted to get out of this arrangement because of such behavior is not relevant.  That similar policies have failed wherever they have been tried is not relevant.  These things should not sully the work of the Commission.

After all, these are the same people who brought you the European Union Regulation on Bananas.

Kevin Rudd did not get nominated for the UN SecGen gig.  Is it possible that KRudd become the European Commission Commissar?  He can bring back the Euro-sausage and the emulsified high fat offal tube.

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The triumph of Chairman Mao

Celebrations are planned to honour the achievements of Mao in China after the capture of the mainland by his communist forces in 1949.

Concerts are to be held in Sydney and Melbourne town halls to honour Chinese communist leader Mao Zedong, described in promotional material as “a hero in the eyes of people all over the world”… The events have been widely promoted in Chinese-language print media and radio to take place in Sydney on September 6 and Melbourne on September 9…

Major events were the Great Leap Forward which started in 57/58 and the Cultural Revolution from 1966 to 1976.

Some comments from Frank Dickotter’s The Great Famine, describing the fruits of the Great Leap Forward.

The term famine or even Great Famine is often used to describe these four to five years of the Maoist era but the term fails to capture the many ways in which people died under radical collectivisation. The blithe use of the term famine also lends support to the widespread view that their deaths were the unintended consequence of half-baked and poorly executed economic programs. Mass killings are not usually associated with Mao and the Great Leap Forward and China continues to benefit from a more favourable comparison with the devastation associated with Cambodia and the Soviet Union. But the fresh evidence presented in this book demonstrates that coercion, terror and systematic violence were the foundations of the Great Leap Forward…
Between 1958 and 1962 approximately 6 to 8 per cent of the victims were tortured to death or summarily killed – amounting to at least 2.5 million people.
Other victims were deliberately deprived of food and starved to death. Many more vanished because they were too old, weak or sick to work, and hence unable to earn their keep. People were killed selectively because they were rich, because they dragged their feet, because they spoke out or simply because they were not liked…
A vision of promised abundance not only motivated one of the most deadly mass killings of human history but also inflicted unprecedented damage on agriculture, trade, industry and transportation. Pots, pans and tools were thrown into backyard furnaces to increase the steel output which was one of the magic markers of progress…
The book also documents how the attempt to leap into communism resulted in the greatest demolition of property in human history – by far outstripping any of the WW2 bombing campaigns. Up to 40% of all housing was turned into rubble as homes were pulled down to create fertilizers, to build canteens, to straighten roads or simply to punish the inhabitants.
The natural environment did not escape. Up to half the trees were eliminated in some provinces [to feed the backyard furnaces producing unusable iron ingots]. Dams and canals build by hundreds of millions of farmers at great human and economic cost were for the most part rendered useless or even dangerous resulting in landslides, river silting, and soil salinization.

See also the video in the Andrew Bolt post above.

Comments are not working again, I suggest putting them into the open thread for the time being.

[Sinc – Update: Comments working]

Posted in Economics on the left, History, Rafe, Terrorism | 6 Comments

Policy By Polling

One has to question the abilities of those who work at the SMH/Fairfax.  Today, in their august publication, SMH writers declared that “Majority of voters back broader lockout laws across NSW, poll shows”.  That’s right based on a poll of 1,600 conducted by ReachTEL, SMH writers claim to accurately know the mind of the 7.5 odd million residents of NSW.  (For those at Fairfax who can’t count, that 0.021% of the population).

This is not a comment on the poll by ReachTEL but rather of the interpretation of the poll by SMH staff.  And if this is the quality of their analytical skills, one need not wonder why their business is going down the drain.

Note to SMH editors, a poll is an attempt to assess views of many by sampling few.  The results are indicative and, believe it or not, have been known to get it wrong.  If you want to know what the voters think, you have one of those funny election things.  Or dare one say, a plebiscite.

It seems not just a rhetorical stuff up, but rather a mindset.  A view that Government is not of the people, by the people and for the people.  But rather Government is of the experts, by the experts for the experts.

But let us accept for this moment that this poll of 1,600 voters accurately represents the wishes of all NSW citizen.  The questions should be asked, why should the views of, for example, the residents of Wagga, have any bearing on the governance of drinking hours in a very small part of Inner Sydney?  Should the citizens of NSW also be polled to determine the business trading hours of Wagga?

There seems, however, something more sinister in this mindset.  The view of Governance by the mob and that government policy should be determined by polls.

Government is not about the 50% plus 1.  If this was the case, we would not have laws for the protection of minority groups.  The protection of property rights and of minorities should not be subject to polling.  The role of government is to act not just for those who vote for them, but for all voters, and that includes those that currently don’t vote such as children and the unborn.  Note to those ratcheting up the debt.

If this is the quality coming out of Fairfax, they may as well pack it up now.

Posted in Uncategorized | 17 Comments

Monday Forum: August 29, 2016

Posted in Open Forum | 1,521 Comments

Debby supports Malcolm: industry super funds on board

If Malcolm Turnbull had any sense, he should realise that the fact that the union-dominated (actually, union owned) industry super funds are fully supportive of the government’s super changes indicates that he should be running at high speed in the other direction.

After all, these were the same funds which managed to scuttle the government’s plans to reform their governance to include mandatory independent directors.  These industry super funds are also winning the game of retaining their monopoly positions in enterprise agreements and in the list of default funds in modern awards.

In other words, these industry super funds have made the Turnbull government look completely weak and pathetic when it comes to the issues that are important to them.  Kelly O’Dwyer must take most of the blame.  (Where is the progress of this stuff, Kelly?)

But of course the LISTO, the low income superannaution tax offset, is just what the industry super funds want and Malcolm has delivered.  More funds to be chewed up in the fees and charges – it doesn’t get much better than that.

And what was all that stuff about the taxeds and taxed-nots Morrison was banging on about last week.  Here is any instance where the taxed-nots are forced to pay a small amount of tax via the compulsory superannuation system and Morrison is planning to relieve them of this requirement.  In other words, it skews the balance the wrong way.  Good one, Morro.

As for that distraction about women having less super, here is the thing: women with interrupted career patterns by and large have partners.  Their partners have super too.  It is a combined game.  But here’s the real rub: if the partners split, then the super assets are split and so the female gets her share that way.  The female argument is really a red herring designed to sting the taxpayer into contributing even more into another government program.

And by the way, it was not clear that Glenn Stevens was referring to super in the speech he gave.  After all, the Reserve Bank operates the mother of all defined benefit scheme the generosity of which is one the best around – up there with the old pollies’ scheme.  I don’t think he would fall for that trap.

Here is the piece from Debby, chief of HESTA, the board of which is stuffed with union officials and Labor-aligned persons – just the source of advice Mal loves:

Systemic changes in Australia’s superannuation system will be needed to deal with disrupted work patterns, an ageing and longer-living population, and if we don’t want our daughters consigned to retiring with almost half the super balance of men.

These reforms will demand far more political compromise and astuteness from policy makers than is currently being demonstrated in the super tax concessions debate.

Putting off dealing with these challenges risks undermining the fair society that generations of Australians have worked hard to create.

Departing Reserve Bank Governor Glenn Stevens gave a blunt assessment of the budget savings debate: “the conversation quickly shifts to rather narrow notions of ‘fairness’, people look to their own positions, the interest groups all come out and specific proposals often run into the sand”.

The relatively modest measures to better target super tax concessions are playing out much as Mr Stevens has characterised.

The vested interests have come out strongly to protect their own positions. Where we disagree with Mr Stevens is that we think fairness should feature prominently in the discussion. The very principle of fairness actually underpins public confidence in the sustainability of the super system and in any long-term plan for budget repair. To be more than hand-wringing, a realistic conversation about budget repair must involve hard discussions about who has to give up something.

Treasury forecasts total super tax concessions will grow by almost a third to almost $41 billion in 2019-20. (This is just wrong but who cares?) While experts may disagree on this quantum, there is considerably less dispute about the long-term trajectory. Given that we need a more frugal footing for public finances, it’s understandable for younger generations of Australians to ask if the generous access to these tax benefits should or can be maintained.

HESTA has long argued for a fairer super system, particularly for women and the lower paid. But the foundation for defining “fairness” should be whether policy settings are in line with the objectives of super – not the objectives of every vested interest. To this end, we are encouraged the government confirmed the objective of super is to provide income in retirement to substitute or supplement the age pension and retained a key equity measure for low-income earners. We welcomed the government’s decision to repackage the low-income super contribution, with its continuation beyond 2017 ensuring more than 3 million low-income earners receive similar tax benefits from super as other working Australians.

But there is a line to be drawn between providing for retirement and using super for wealth creation. Most Australians will never reach the proposed $1.6 million cap on the amount that can be put into a tax-free retirement account let alone the limit for non-concessional contributions of $500,000. However, what all Australians need is for that line to be clear and bipartisan so they can confidently contribute to their own retirement without worrying about the goal posts being shifted.

In his budget observations Mr Stevens went on to say that these types of “other worldly” discussions must eventually give way to more hard-nosed conversations best had before a moment of crisis.

Our super system needs to give a fair go to all Australians. Today’s discourse, dominated by short-term political expediency, is doing a disservice to working Australians and future generations who must have confidence that policy makers are up to the challenge of ensuring the sustainability of our three-pillar retirement system.

Debby Blakey is CEO of HESTA, the $34 billion fund managing the super of more than 800,000 members working in health and community services.

 

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