Below he concedes the point with grace and style:
"2010 should be an interesting year for property. I will probably have to walk to Kosciouscko at its beginning; Rory may have to consider a fitness regime at its end."
Here's today's house price graph:
Here's Rory's account of the bet he and Steve struck with in November:
If capital-city home prices do indeed fall by 40% within the next five years - starting from Q2 2008, and as measured by the ABS - Rory Robertson will walk from Canberra to the top of Mt Kosciusko (that's maybe 200km followed by a 2228-metre incline).
If Dr Keen turns out to be less than half right, and home prices drop by less than 20%, he will take that long walk.
Moreover, the loser must wear a tee-shirt saying: "I was hopelessly wrong on home prices! Ask me how."
Rory later clarified:
For the record, Steve Keen is keen to clarify that our bet is "peak to trough", as agreed, with no five-year limit. Obviously, I expect this distinction will not make a difference, with the ABS house price index likely to surpass its Q2 2008 level well within 5 years.
Steve begins his concession post with some kind words about a Reserve Bank analysis of housing, presented yesterday by the head of its research department, Tony Richards.
by Steven Keen
"Richard's speech was a welcome acknowledgement of the down-side of rising house prices – something I haven't seen in previous RBA statements. However, there is also a sense of futility about the position the RBA is in, because the paper also acknowledges the down side of falling house prices. One reason why Australia hasn't yet experienced a serious financial crisis is that our house price bubble is the only one that hasn't yet deflated. But if it does, Roberts acknowledges that we could experience the same runaway collapse in credit and the economy we've seen elsewhere.
So the RBA now has to play Goldilocks – it must keep house prices from rising (Mummy Bear) and stop them from falling too (Daddy Bear), thus keeping everyone comfy (Baby Bear). A fine tuning act of exquisite delicacy. After the last four years, I doubt that anyone has any confidence in the ability of economists to fine tune anything.
So the odds are that (a) the government's First Home Vendors Boost (let's call it what it was – not a handout to help first home buyers in but an encouragement to them to borrow up big and give it to vendors to sustain prices) will indeed cause a new bubble to inflate, which the RBA will prick with a rise in interest rates and (b) the tiny rise in rates will cause a huge increase in debt servicing costs for over-leveraged first home buyers, causing a collapse in house prices.
Of course, the removal of the boost at the same time means that the volatility of prices will be amplified by the two wings of government acting against each other, but changing strategies at almost the same time in a way that will drive house prices down.
2010 should be an interesting year for property. I will probably have to walk to Kosciouscko at its beginning; Rory may have to consider a fitness regime at its end."
Wednesday, September 30, 2009
Below he concedes the point with grace and style:
Retail sales were up 0.9% in August.
But that's not the point.
The point is that even in August, nine months after the stimulus packages began, we are still spending way in excess per month of what we ever did before the packages.
The graph from the ABS tells the story.
The dark trend line stops just before the first package.
After the spending packages looks nothing like before them, right?
HT: Gawker, via Boing Boing via Tim Watts
In the words of one commenter: I can imagine Safire writing this, privately pondering the etymological connections of lunar and lunacy. In a genre that requires weight and sober rhythm, it is beyond effective.
In the words of another: Did Bowie get an advance copy?
HIGHLY RECOMMENDED READING: The first man on the moon, Guardian July 2009
. July 20, 1969. Let's remember
. Space travel: The best newspaper correction ever
. I think it's going to be a long, long time... space shuttle edition
Tuesday, September 29, 2009
And they're just the start
FINAL BUDGET OUTCOME 2008-09
The Australian Government general government sector recorded an underlying cash deficit of $27.1 billion (2.3 per cent of GDP) for 2008-09. This outcome was $5.0 billion better than expected at the time of the 2009‑10 Budget, reflecting lower than anticipated spending of $2.2 billion and higher cash receipts of $2.8 billion.
Total tax receipts were $3.3 billion above the estimate at the 2009‑10 Budget, primarily due to stronger than expected company income tax receipts of $3.6 billion, partly offset by lower than expected personal income tax receipts of $0.5 billion.
Lower spending was due to a number of one-off factors, as well as lower income-support payments, including a reduction in payments of $138 million for the Newstart Allowance. This outcome reflects in part the success of our economic stimulus which has meant more Australians in jobs and fewer Australians collecting unemployment benefits than would otherwise be the case.
The stronger budget outcome is also reflected in a significant improvement in the expected Australian Government net debt position. At the end of 2008-09, the level of Australian Government net debt was -$16.1 billion, which is $11.5 billion better than expected at the time of the 2009-10 Budget.
The Government is fully committed to its fiscal strategy to return the budget to surplus as the global economy recovers.
The last bit's the kicker. You wait. From here on, we're about to learn what austerity means. And the Coalition won't be able to complain - they're been asking for it.
The late William Safire spelled it out in his final column.
Enjoy. There are 12 points.
1. Beware the pundit's device of using a quotation from a liberal opposition figure to make a conservative case, and vice versa. Righties love to quote John F. Kennedy on life's unfairness; lefties love to quote Ronald Reagan. Don't fall for gilding by association.
2. Never look for the story in the lede. Reporters are required to put what's happened up top, but the practiced pundit places a nugget of news, even a startling insight, halfway down the column, directed at the politiscenti. When pressed for time, the savvy reader starts there.
3. Do not be taken in by "insiderisms." Fledgling columnists, eager to impress readers with their grasp of journalistic jargon, are drawn to such arcane spellings as "lede." Where they lede, do not follow.
4. When infuriated by an outrageous column, do not be suckered into responding with an abusive e-mail. Pundits so targeted thumb through these red-faced electronic missives with delight, saying "Hah! Got to 'em."
5. Don't fall for the "snapper" device. To give an aimless harangue the illusion of shapeliness, some of us begin (forget "lede") with a historical allusion or revealing anecdote, then wander around for 600 words before concluding by harking back to an event or quotation in the opening graph. This stylistic circularity gives the reader a snappy sense of completion when the pundit has not figured out his argument's conclusion.
6. Be wary of admissions of minor error. One vituperator wrote recently that the Constitution's requirement for a president to be "natural born" would have barred Alexander Hamilton. Nitpickers pointed out that the Founders exempted themselves. And there were 16, not 20, second inaugural speeches. In piously making these corrections before departing, the pundit gets credit for accuracy while getting away with misjudgments too whopping to admit.
(Note: you are now halfway down the column. Start here.)
7. Watch for repayment of favors. Stewart Alsop jocularly advised a novice columnist: "Never compromise your journalistic integrity - except for a revealing anecdote." Example: a Nixon speechwriter told columnists that the president, at Camp David, boasted "I just shot 120," to which Henry Kissinger said brightly "Your golf game is improving, Mr. President," causing Nixon to growl "I was bowling, Henry." After columnists gobbled that up, the manipulative writer collected in the coin of friendlier treatment.
8. Cast aside any column about two subjects. It means the pundit chickened out on the hard decision about what to write about that day. When the two-topic writer strains to tie together chalk and cheese, turn instead to a pudding with a theme. (Three subjects, however, can give an essay the stability of an oaken barstool. Two's a crowd, but three's a gestalt.)
9. Cherchez la source. Ingest no column (or opinionated reporting labeled "analysis") without asking: Cui bono? And whenever you see the word "respected" in front of a name, narrow your eyes. You have never read "According to the disrespected (whomever)."
10. Resist swaydo-intellectual writing. Only the hifalutin trap themselves into "whomever" and only the tort bar uses the Latin for "who benefits?" Columnists who show off should surely shove off. (And avoid all asinine alliteration.)
11. Do not be suckered by the unexpected. Pundits sometimes slip a knuckleball into their series of curveballs: for variety's sake, they turn on comrades in ideological arms, inducing apostasy-admirers to gush "Ooh, that's so unpredictable." Such pushmi-pullyu advocacy is permissible for Clintonian liberals or libertarian conservatives but is too often the mark of the too-cute contrarian.
12. Scorn personal exchanges between columnists. Observers presuming to be participants in debate remove the reader from the reality of controversy; theirs is merely a photo of a painting of a statue, or a towel-throwing contest between fight managers. Insist on columns taking on only the truly powerful, and then only kicking 'em when they're up.
In bidding Catullus's ave atque vale to readers of this progenitor of all op-ed pages (see rule 10), is it fair for one who has enjoyed its freedom for three decades to spill its secrets? Of course it's unfair to reveal the Code. But punditry is as vibrant as political life itself, and as J.F.K. said, "life is unfair." (Rules 1 and 5.)
(HT: Mark Colvin)
Monday, September 28, 2009
We expect and need to hear the truth from the Opposition.
Shortly after Joe Hockey took over as the Coalition's Treasury spokesman the Comonwealth Bank inched up its standard variable mortgage rate from 5.64 per cent to 5.74 per cent, bringing it into line with NAB's.
Hockey dived in:
"The increase in interest rates by the Commonwealth Bank today is directly linked to Kevin Rudd’s debt."
I labelled what Hockey had said "bizarre garbage".
I was disappointed - indeed shaken - when his leader (who must have known better) actually backed him up:
"Doesn’t the Prime Minister accept that it is his reckless spending and debt binge which is pushing up interest rates?"
We expect and need to hear the truth from the Opposition.
We weren't getting it then.
Today at the Senate hearing the Reserve Bank Governor dealt with Hockey's contention in a way Hockey and Co. can't have enjoyed.
SENATOR JOYCE: Thank you. First of all I would like to know does the amount of Australian borrowing, Government borrowing, force up the amount of interest rates and, if so, by how much?
STEVENS: Well I take it we’re talking about the rates the Government actually pays to borrow it and…
JOYCE: And also, borrowing of the Government’s involvement in the market (inaudible) State Government and the Federal Government for hundreds of billions of dollars. How much effect is that having on interest rates in Australia or is it having any effect at all?
STEVENS: Well I don’t think it’s having a significantly large effect on the rates that they’re actually paying at their tenders. As I said earlier, the 10 year yield in Australia, I think it’s in the bottom half of the five at present. You know these rates go up and down but that’s not materially different to the sorts of rates we’ve seen on average for a decade or so.
JOYCE: So is it less than 1 per cent or more than 1 per cent.
STEVEN: I don’t think you could, I think the effects, if any, is quite small. Certainly not more than a percent, no. Much less, if anything.
JOYCE: So is there any extent of borrowings where it does have an effect? Or are just Government borrowings are irrelevant?
STEVENS: They’re not irrelevant, but this is an area where over the years in my memory at least, the studies which try to pin this down empirically find a pretty wide range of estimates and often they struggle to find much effect. You know, I think if we had very large, much larger debt burdens like 50 per cent of GDP or something, we would see a noticeable premium on Australian debt reflecting that. But I don’t really think that one can claim that there is a significant measurable impact in these yields at present. These yields presumably embody the market’s expectation of all of the things that are ahead.
JOYCE: Okay you say 50 per cent of GDP. Now Australia’s GDP is what – $1.2 trillion so we are looking at about $600 billion. Would that be a fair analysis of what you’re saying is it?
STEVENS: What I am saying Senator is that, I think, that with debt positions of 10 or 15 or 20 per cent of GDP, the likely impact of that on the premium that our Government pays over and above what other Governments would pay is likely to be pretty small. And the most likely cause of a big rise in government borrowing costs is the borrowing by other governments around the world. After all it’s a global capital market.
"The reason why I wanted the head of the Reserve Bank at the Senate inquiry was because the Reserve Bank governor is the only person who can answer the billion dollar question that all Australians want answered, whether ongoing stimulus spending will drive up interest rates."
- Steve Fielding
Well, here's Stevens answer- in his Opening Statement, just out:
"In due course, both fiscal and monetary support will need to be unwound as private
demand increases. In the case of the fiscal measures, this was built into their design. The peak effect of these measures on the rate of growth of demand has probably already passed."
9:15am – 10:55am
Reserve Bank of Australia
Mr Glenn Stevens, Governor
11:00am – 11:45am
Australian Office of Financial Management
Mr Neil Hyden, Chief Executive Officer
Mr Andrew Johnson, Head of Compliance and Reporting
11:45am – 12:30pm
Mr Rory Robertson
1:00pm – 1:45pm
Australian Chamber of Commerce and Industry
Mr Greg Evans, Director of Economics and Industry Policy
1:45pm – 2:30pm
Australian Industry Group
Dr Peter Burn, Associate Director (Public Policy)
Mr Anthony Melville, Director Public Affairs and Government Relations
IT WAS designed to stimulate the economy but more than $82 million of the first round of the Federal Government’s stimulus payments went to people living abroad. Centrelink has confirmed 68,812 people living overseas received as much as $1400 each – a total of $82.2 million. The figure is 1.7 per cent of the $4.8 billion the Government handed out to pensioners, self-funded retirees and some single parents in December last year.
Bill Mitchell at the Centre for Full Employment makes some sobering points:
$82 million noted above is about 0.14 of a percentage point of the total package. Headline news material for sure. Not.
Of interest to me was where this international leakage occurred. Apparently:Italy received the lion’s share of the money with 16,846 people receiving $19.3 million. Greece was the second largest destination for Australian money with 6078 people receiving $7.2 million. New Zealand came third with 5684 people receiving a total of $6.9 million. A further 21 countries had just one person who received a payment, including Cuba, North Korea and Zimbabwe.
Italy and Greece were the first-large Post World War II sources of non-English speaking migrants who were brought here to “build the country”. These early arrivals in the 1950s and 1960s, laboured and constructed a significant amount of the valuable infrastructure that is still providing benefits to our nation. Without these workers the job shortages would have been significant.
The reality is that a lot of those early migrants who took out citizenship went back to their homelands in later life as the gap between the improving standard of living there and the declining standard of living here narrowed. They had done their service to this country however.
I'll make another point.
It was the world that was in trouble not just us. If our stimulus money slopped over the border to stimulate other economies, it wasn't wasted. Just as when other countries stimulus dollars slopped over the border to us, it wasn't wasted.
If every country had adopted a begger-my-neighbour policy and tried to stop any of its stimulus dollars going overseas - as the article implies every country should have - we never would have have got out of this as well as we have.
Saturday, September 26, 2009
Australians are getting richer again, for the first time in almost two years.
Bureau of Statistics figures released Friday show household wealth rebounded in the June quarter after sliding for six consecutive quarters.
From peak to trough wealth per person slipped from $58,900 to $35,000 - an extraordinary drop of 40 per cent. In the June quarter it bounced back 9 per cent, to $38,000.
The measure includes household wealth held in the form of cash, bank deposits, bonds and shares, net of borrowing but significantly excludes wealth held in the form of superannuation and real estate.
"It's the share market that's doing it and it will continue," said Commonwealth Securities economist Savanth Sebastian who calculated the per-capita figures...
"Equity markets have rallied by over 50 per cent so far this year so there will be more in coming quarters. The pickup in business and consumer confidence will help as well."
Companies are also better off as a result of paying down debt while raising a record amount of new equity.
Non-financial companies raised a record $29.7 billion in June quarter by issuing new shares. Net company assets have jumped to their highest level on record.
The Financial Accounts lend weight to an assessment by the Reserve Bank in its Financial Stability Review this week that Australia's recovery is under way.
Governor Glenn Stevens will be quizzed about about it at a Sydney hearing of the Senate's economics committee on Monday.
Treasury Secretary Ken Henry was to front the committee Monday but yesterday asked for a delay of a fortnight to give the Treasury further time to prepare briefing materials.
He told a business audience in Brisbane Wednesday that a sustained recovery depended "on the continued implementation of existing stimulus commitments".
"The fiscal stimulus has been designed so that it withdraws gradually," he said. "Withdrawing the stimulus more quickly would risk stalling the economy and causing a steeper rise in the unemployment rate."
Updated Westpac forecasts suggest Australia's net foreign debt will now top out at $108 billion rather than the $188 billion forecast in the May budget.
Published in today's SMH and Age
Oh my. That's the word from the G-20
Speaking ahead of today's release of the 19-point plan prepared by a Group of 20's Financial Stability Board with input from Australia Mr Swan said it displayed a "steely determination" to stamp out pay packages that rewarded excessive risk taking and did not reward long-term value creation.
Specific Australian proposals will be released on Wednesday when Productivity Commissioners Allan Fels, Robert Fitzgerald and Gary Banks unveil the preliminary findings of their six-month review of executive salaries.
The Financial Stability Board's proposals which would apply only to the finance sector would require at least 40 per cent of each executive's bonus to be deferred over a number of years, rising to 60 per cent for the bonuses of the most senior executives...
The deferral period should be at least three years with at least half paid in the form of shares or share-like instruments rather than cash.
Where cash is paid it should be handed over gradually, with unpaid portions "clawed back" when performance turns down.
No part of any bonus should be automatic except for new employees for whom an exception could be made in the first year.
Each firm would be required to review its entire system of executive payments each year and submit the results to authorities or disclose them publicly.
Existing contracts would be reopened and the termination provisions only kept if they did not "reward failure".
The draft principles are stronger than expected and may defuse an expected showdown between French President Nicolas Sarkozy who wanted harsh caps on executive salaries and other leaders who wanted a more hands-off approach.
Importantly the Board has told the G-20 leaders the draft principles are just the first step ,and that it will propose others in March next year.
Mr Swan said the rules would form an international framework for laws that each G-20 member would have to draw up locally.
"This goes to the very core of some of the issues in the financial system that we've lived with the consequences of over the past six to nine months," he told a Pittsburgh news conference.
Published in today's SMH and Age
Graphic: New Mexico Independent
Friday, September 25, 2009
The Coalition's campaign against government debt has been unfortunate on many levels. Now its figures are wrong:
Australia's government debt is set to top out at just $108 billion rather than $200 billion and more used the Coalition to justify its claim that the Rudd government plans to "lump every Australian with $9500 in debt".
The updated estimate from Westpac - a near halving - reflects a much stronger than expected economy and comes as an official Reserve Bank survey finds that Australian banks ramped up their interest earnings 22 per cent during the global crisis and that Australian businesses succeeded in raising more money from the share market than at any time since the 1980s.
The Reserve Bank's Financial Stability Review finds conditions have "improved significantly" and that its time for banks to wean themselves off $142 billion in government borrowing guarantees.
Westpac finds that this year's underlying cash budget deficit is likely to be $49 billion rather than the $58 billion forecast at budget time and that next year's should be $35 billion, far less than the budget forecast of $57 billion...
As well the government is likely to have banked an extra $5 billion at the end of the last financial year as a result of higher than expected tax receipts and also lower than expected grant payments. Grant payments alone have been running $6.5 billion below forecasts, causing Westpac to caution that its estimates may prove pessimistic.
"The effect on government debt will be cumulative," said Westpac senior economist Andrew Hanlan. "We're forecasting a peak of $108 billion in 2012/13 rather than the $188 billion forecast in the budget. The $80 billion improvement is simply the sum of the improved budget positions over those years."
The Coalition used a bigger figure of $200 billion in its advertising in May and in July boosted it to $315 billion on its so-called debt truck, a figure Opposition Leader Malcolm Turnbull said was "over 13,000 of debt for every man, every woman and every child in Australia".
The government will officially update the budget forecasts in December. Mr Hanlan said Westpac's projections were prepared on the basis of "no policy changes" over the next three years, meaning that any new spending promised during the next election would add to the debt estimate.
The revised Westpac forecast takes some of the heat out of Monday's Senate hearing set up to quiz Reserve Bank Governor Glenn Stevens and Treasury Secretary Ken Henry on the "efficacy and anticipated costs and benefits" of their stimulus measures.
Other figures released yesterday point to an avalanche of new home sales in August ahead of the phasing out of the $21,000 First Home Owners Boost for new buyers buying newly built homes. National new home sales jumped 11 per cent in August as did NSW sales - the biggest jump in three years - with Victorian sales up a staggering 22 per cent, believed to be the biggest jump on record.
In an indication of the potency of the boost the Reserve Bank report found that first home buyers have been paying more for their homes than other buyers; "an unusual outcome by historical standards".
The Bank found that private banks managed to widen their interest margins during the financial crisis, driving up their net interest income 22 per cnet over the year. Businesses raised double the usual amount of equity in the first half of this year and households enjoyed a 4 per cent lift in disposable income despite working fewer hours, as a result of tax cuts and stimulus payments.
Published in today's Age
UPDATE: The Coalition has told me where its $200 billion, later replaced with $315 billion debt figure came from.
They were both mentioned by Swan in Hansard on 25 May, the first for net debt, the second for Gross debt. The Coalition used the $200 billion net figure in its advertising at first, and then switched to using the $315 billion gross figure. Mmmm...
Westpac Budget Update
Thursday, September 24, 2009
From today's Financial Stability Review:
Treasury boss Ken Henry has weighed into the debate over the future of the economic stimulus programs, declaring that cutting them - as proposed by the Coalition leader Malcolm Turnbull - risked stalling the economic recovery and pushing workers out of jobs.
Speaking in Brisbane ahead of his appearance before the Senate inquiry into the programs Monday Dr Henry said a sustained recovery was "reliant on the continued implementation of existing stimulus commitments".
Coalition and Green Senators forced the inquiry because of concern that much of the $16 billion to be spent on school buildings will be wasted. Mr Turnbull told a forum in London Wednesday that in Australia the buildings had become known as Julia Gillard Memorial Assembly Halls.
Dr Henry acknowledged "significant public discussion around the recent strength of the economy and the need for the next phase of fiscal stimulus measures", but said he would "caution against the conclusion that the success of the stimulus to date is an argument for winding back that which is still in the pipeline"...
"The fiscal stimulus has been designed so that it withdraws gradually," he said.
"Considerable thought was given to its structure, based on the well-accepted tenets that it be timely, temporary and targeted.
"The first phase was designed to provide immediate support to growth – largely through transfer payments. As the impact of the transfers wanes, the investment-related phases will continue to support growth, giving a recovery in the private sector time to take hold."
Dr Henry said that the outlook for business investment remained weaker than commonly realised.
"In aggregate it is expected to remain very weak in the near term, with investment-related stimulus measures providing some degree of offset."
"Withdrawing the stimulus more quickly would risk stalling the economy and causing a steeper rise in the unemployment rate."
Shown a copy of Dr Henry's remarks Coalition Treasury Spokesman Joe Hockey said he continued to "disagree with the government in regard to their level of spending".
"There has been waste and mismanagement which will lead to higher taxes and higher interests rates, which will ultimately cost Australians and cost jobs."
He declined to comment on the Treasury head's decision to intervene in what has become a political debate.
Dr Henry confirmed that the Treasury has abandoned its earlier forecast of an unemployment rate of 8.5 per cent, but said it still expected jobs to be lost through until early 2010 and did not expect the unemployment rate to peak until late 2010.
Although many employers had responded to the downturn by cutting hours worked rather than jobs, the combined effect of the reduced hours was equivalent to the loss of 230,000 jobs.
Without the stimulus measures Australia would been in recession in the December, March and June quarters with the economy sliding backwards 1.3 per cent.
New Zealand learnt that it had emerged from recession yesterday after hearing that its economy grew in the June quarter for the first time since late 2007. But the paper-thin growth of 0.1 per cent is understood not to have changed authorities' views that the economy remains very weak.
Published in today's SMH and Age
Wednesday, September 23, 2009
Darn! We've been doing it so well
The graph below shows annual CPI inflation measured against the Reserve Bank's target of "keeping consumer price inflation between 2 and 3 per cent, on average, over the cycle."
The International Monetary Fund has challenged Australia's Reserve Bank and other monetary authorities to do more than simply target inflation the next time around.
In an early release of some chapters from its forthcoming World Economic Outlook timed to coincide with this week's G20 leaders meeting in Pittsburgh the Fund has called on central banks to also target asset prices, tightening monetary conditions "earlier and more vigorously, even if inflation appears to be under control".
Such a move would require a rewriting of the Reserve Bank's compact with the government renewed in 2006 which requires it to aim to keep "consumer price inflation between 2 and 3 per cent on average over the cycle"...
Governor Glenn Stevens has himself raised the possibility of broadening the Bank's goals saying there could be room for taking into account wider objectives "at the margin."
It is an idea that would be on the agenda of the new financial system inquiry proposed by six leading Australian economists and under consideration by the Treasurer Wayne Swan.
IMF senior economist Alasdair Scott told a Washington news conference overnight that the Fund's examination stopped short of blaming the central banks for the global economic crisis.
"We don't see evidence that monetary policy was the smoking gun - it was not the main systematic cause. But that's not to say that monetary policy was entirely without blame."
"We would recommend that monetary policymakers consider taking a broader approach and to say that even when inflation is under control they should think of what is happening in asset price markets to see whether vulnerabilities building up."
"If they are building up they should strongly consider taking preemptive action and not think that we can just pick up the pieces after the crisis has happened," he told the press conference.
The IMF report examines 40 years of asset price busts and finds a recurring pattern of deteriorating current account balances in the run-up to house price bursts.
"A number of central banks have explicit mandates to to target CPI inflation and they have been strikingly successful in keeping inflation in check," the report says.
"But this approach has not been sufficient to prevent asset price busts; the current crisis is no exemption."
"We do not suggest that policy makers should react automatically to changes in asset prices, still less that they should try to determine an appropriate level for asset prices."
"But they should examine what is driving asset price movements and be prepared to act in response."
Published in today's SMH and Age
Treasury Executive Director David Gruen in June:
Expansionary US monetary policy undoubtedly contributed to rising US asset prices, including house prices, at the time. Indeed, that is the point of the policy – rising asset prices constitute one of the ways that expansionary monetary policy works.And Reserve Bank Assistant Governor Guy Debelle in May:
But I have less sympathy with the argument that monetary policy should explicitly 'lean against the wind' of a suspected inflating asset price bubble, which is implicit in the criticism of US monetary policy at that time.
In my view, to lean against the wind and do more good than harm requires a level of understanding about the likely future path of a suspected asset bubble that is simply unrealistic. Without that understanding, attempting to use monetary policy to lean against the wind is as likely to be destabilising for the wider economy as it is to be stabilising.
In my view, the current episode vindicates the position that monetary policy, narrowly defined as the setting of the policy interest rate, should be confined to targeting inflation. Set interest rates primarily to achieve the inflation goal as that, in itself, contributes to sizeable social gains. A departure from that runs the risk of losing the nominal anchor that the inflation target provides.
But other tools, most notably the much-touted (although not clearly defined) macro-prudential instruments, should be used to address asset price and credit imbalances. I do not think that a slightly tighter setting of interest rates would have prevented the development of the imbalances that have led to the current financial crisis. When human psychology is such that optimism about asset price rises is at the fore, then an excessively stringent setting of interest rates would be required to suppress the optimism. The Australian and Scandinavian experience in the late 1980s shows the sort of interest rate settings required to achieve such an outcome. In that example, a credit boom and bubble-like asset price dynamics took hold and only a very high setting of real interest rates ultimately curtailed that, but at the cost of a historically high level of unemployment.
I do not think it would be socially acceptable or desirable to endure the level of unemployment that would come with the high interest rates necessary to pop the bubble. It is asking too much of the single monetary policy instrument, namely, the targeted short-term interest rate to target both financial excesses and inflation.
Nor do I believe there is much to be achieved by ‘leaning against the wind’. The wind that is blowing in most episodes of credit booms is generally at least gale force. Setting interest rates a bit higher in such circumstances is likely to be close to futile when such credit dynamics take hold. Again, what would be the point of undershooting the CPI inflation target and enduring a higher than desirable level of unemployment with little to be gained. How would such actions be explained to the public?
Tuesday, September 22, 2009
It was an EARLY CITY SPECIAL alright.
The NBC explains:
"WE'RE SCREWED" screamed the front page of the alleged "New York Post," we picked up on the corner of 49th and 6th Avenue, from a guy who actually didn't look like the kind of person who would be selling the Post. The fact that it was free was nothing alarming, they're always trying to move copies one way or another, maybe the newspaper audit numbers were coming out soon.
But it was a phony, a fake newspaper, completely based on Gotham's favorite tabloid. They got it right down to the last detail: the American flag billowing on the front page, the wood (that's newspaper-speak for "front page" font) and a Page Six bug to boot.
The cover's story, however, is decidedly non-Post-like. "What you're not being told: Official City report predicts massive climate catastrophes, public health disasters"..
Sure, the real Post loves gloom-and-doom, so you might be fooled, but members of the News Corp. empire tend to be squarely in the "global-warming doesn't exist" camp (Although Uncle Rupe himself did have a famous change of heart a few years ago). And this paper is all about the impending dangers of global warming.
Yes, it was all just a ruse by the Yes Men, the infamous group that did a similar send up of the New York Times last November, and proclaimed "Iraq War Ends."
In the fake Post, there are stories about carbon emissions, urban farming, ads for sex (it's free entertainment and doesn't add to global warming), and even Page Six and the comics are given the treatment. The message is tied to the U.N. conferences this week.
"It's funny stuff," said one businessman reading the paper on a midtown corner. "I'm reading the ads in here, they're hilarious."
The Yes Men got the Post fonts down perfectly, and their website, nypost-se.com, is spot on as well:
The Post responded through their reps at Rubenstein PR, which released a statement that was headlined: "Witless Spoof in Flawless Format."
"It’s no surprise that they tried to spoof the New York Post; they figured this time they’d choose a paper people actually love to read," said the statement, taking a obvious shot at the New York Times. "But this is a limp effort. It has none of the wit and insight New Yorkers expect from their favorite paper. The Post will not be hiring any of their headline writers."
But perhaps the powers that be at the Post didn't have as much humor about the prank as their statement would suggest. Some of the volunteers who were distributing the fake papers outside of the Post's real offices were detained by police and had their papers taken away, according to Daily Finance.com.
One insider at the Post, noted that the faux-paper was pretty funny, and was in fact being passed out in front of their offices at Sixth Avenue and 48th Street.
The Yes Men were proud of their work, and say they handed out nearly a million copies across the city today.
"This could be, and should be, a real New York Post," said Andy Bichlbaum of the Yes Men. "Climate change is the biggest threat civilization has ever faced, and it should be in the headlines of every paper, every day until we solve the problem."
"Although the 32-page New York Post is a fake, everything in it is 100% true, with all facts carefully checked by a team of editors and climate change experts," the group said in a statement.
Carefully checked facts? Wait, that doesn't sound like the Post at all!
Check out the Yes Men's video.
Monday, September 21, 2009
Gittins and I love what Conroy's done. As Gittins says: "For Telstra to have been given immunity - an eternal licence to rip off Australian phone users - would have been intolerable"
But Ken Davidson argues today that part of Conroy's vision appears to be to force us to pay more by cutting off what we have now.
"It is a blackmail attempt by the Government designed to force Telstra (owned by 1.4 million voters) to divest itself of a copper network, which generates cash flow of around $6 billion a year, and make it worthless within eight years. It is doing this in order to replace it with a system that nobody wants or needs at a cost to households and businesses for access to the telecommunications network 30 to 40 per cent higher than now."
The full thing is below.
Be careful what you wish for. Telstra's competitors - such as Optus, AAPT and Primus, who have led the charge for breaking up Telstra into two companies in order to protect their own arbitrage businesses - may have shot themselves in the foot.
Forget about competition, level playing fields, cheaper, faster telephone and internet services. What is unfolding in the policy announced by Communications Minister Stephen Conroy is a $43 billion protection racket designed to keep Telstra's competitors in business.
The competitors are basically marketing and billing organisations. With the assistance of the Australian Competition and Consumer Commission, they are allowed to tap into the telecommunications network at the telephone exchanges at a price that doesn't reflect the cost of building the network, and then resell the capacity at a price that allows them to undercut Telstra in the profitable major city markets. Telstra, of course, is expected to build and maintain a network that covers the whole country.
This cosy arrangement in the name of competition was threatened by Telstra's announcement in 2005 that it would begin upgrading the network by rolling out fibre to the node at the end of the street as part of the evolutionary upgrading of the network - as has occurred over the past 100 years.
The point was that it would bypass the exchanges and put the arbitragers out of business.
So what? The introduction of automatic exchanges and the change from analog to digital network destroyed more than 40,000 Telstra jobs during the '80s and '90s, which was managed by the former public monopoly without major union disruption.
By comparison, the job destruction as a result of technological change bypassing exchanges and putting the arbitragers out of business would be a flea bite by comparison.
Most of the jobs are in call centres, which are being moved offshore to India and the Philippines in any case.
Fibre to the node is a sensible intermediate step to eventual fibre to the home if it is ever needed.
Big institutions such as hospitals, universities, utilities, big corporations, government departments and even schools already have access to direct fibre connections.
Copper wires, properly maintained, can give speeds up to 50 megabits, which is more than adequate for any need a household might conceivably imagine.
In Devonport and Hobart, where the Tasmanian Government has been experimenting with building fibre to the home at Commonwealth expense, shows nobody wants it while the cheaper copper alternative is available.
The mind boggles. What could a sensible government do with $43 billion to invest over eight years? Think global warming. Think of the infrastructure such as electrification of rail lines, urban public transport, base load renewable energy, conservation and recycling water, which will be needed to reduce our carbon footprint in order to ensure that the world will be a fit place to live for our children and grandchildren.
Meanwhile, Telstra could use its internal cash flows to upgrade the network, supplemented by a multibillion- dollar sell-off of more than a thousand large exchanges, most occupying valuable real estate in the major cities.
Now that would be a win-win situation leading to lower real prices.
What Telstra's competitors hoped was that, by splitting Telstra in two, they would keep their privileged access to the copper network. Not so. As the experience in Tasmania makes blindingly obvious, the only way customers can be induced to take up the fibre-to-the-home option is if the copper network is closed down.
Under the plan, the copper network will become progressively redundant as the NBN network is rolled out. Even with the febrile imaginings of the ACCC as to what constitutes competition, it cannot set a wholesale price for access to the new network that is lower for Telstra's competitors than for Telstra retail.
Without scope for arbitrage, the competitive advantage to Telstra's competitors disappears. Even with the arbitrage handicap, Telstra still holds 70 per cent of the fixed-line market and would be able to drive its competitors out of business, based on a level playing field.
It is bad public policy. Even worse, it is politically disastrous.
It is a blackmail attempt by the Government designed to force Telstra (owned by 1.4 million voters) to divest itself of a copper network, which generates cash flow of around $6 billion a year, and make it worthless within eight years. It is doing this in order to replace it with a system that nobody wants or needs at a cost to households and businesses for access to the telecommunications network 30 to 40 per cent higher than now.
The way this policy was arrived at cannot bear the most superficial examination. When the Opposition stops staring at its navel, it will realise this is Rudd Labor's equivalent of WorkChoices with the same capacity to destroy the Government.
Published in today's SMH and Age
Graphic: From here
What do you get for a study of emissions trading that won you a first-class honours degree and the University Prize?
Bugger all if you are in the Coalition.
Greg Hunt is the Coalition's emissions trading expert.
Its environment spokesman, he was snubbed and silenced on his area of expertise when Turnbull handed the emissions trading job to climate change skeptic Andrew Robb.
When Robb asked for leave because of illness this weekend, Hunt might have expected the gig himself.
But it went to another frontbencher likely to know less about the topic than Hunt... the coal industry's friend Ian MacFarlane.
Now I know the Coalition has bigger things to deal with than putting its best people forward, but.... why should we take it seriously if it doesn't take the problems we face seriously?
While understandable, its treatment of the only emissions trading expert it has is a disgrace.
My colleague Tony Wright spells this out more eloquently at www.nationaltimes.com.au and below:
Gravel mouth brought in to deal with Liberal's hot air
So how did a bloke brought up as a Kingaroy peanut farmer - no, not that one, we're talking here about Ian Macfarlane - get the plumb Liberal Party job dealing with the vexed business of emissions trading?
Macfarlane, you will be aware, was chosen by Malcolm Turnbull to replace Andrew Robb as Shadow Minister Assisting the Leader on Emissions Trading Design when Robb took the gutsy decision at the weekend to reveal he was suffering a depressive illness and decided to step aside to seek treatment.
A little background may be required here.
Nineteen years ago, a young Melbourne University student named Greg Hunt, searching for a thesis for his Honours degree in Law, decided that control of carbon pollution would be the big issue over the following decades.
Thus, Hunt's thesis studied the relative merits of pollution pricing, examining various forms of carbon taxes and comparing them with emissions trading.
He was awarded first-class honours and a university prize for his work.
In 1990, it was an esoteric subject and Greg Hunt's thesis was one of the pioneering studies of the subject.
He went on to become a Liberal MP in the Federal Parliament and, considering his interests, it seemed unsurprising when he was appointed Shadow Minister for Climate Change, Environment and Water.
The climate change part, of course, was a bit overshadowed by Robb's senior role assisting Turnbull on emissions trading design.
Thus, when Andrew Robb stepped aside, we might have imagined Hunt, an ambitious fellow, would finally get his chance to step up to the role.
Well, you might have imagined that if you thought politics was about academic expertise and long-term interests and the sort of things that human resources departments take into account.
Thing is, Malcolm Turnbull has been having a spot of bother persuading the tougher elements of his Opposition that the Coalition's approach to the Rudd Government's push for a Carbon Pollution Reduction Scheme was hard-edged enough.
Only last week Turnbull faced a coalition party-room revolt when he and Robb told MPs that the business community was insisting the Liberals must negotiate with the Rudd Government to reach a workable agreement on an emissions trading scheme.
The fracas is unlikely to have assisted Robb's state of mind.
Enter Ian Macfarlane.
The gravel-voiced Queenslander has been Shadow Minister for Energy and Resources under Turnbull for the very good reason that he's a tough and pragmatic operator who has been dealing with industrialists and miners for years (he was Minister for Industry, Tourism and Resources in the Howard Government from 2001 to the bitter end in 2007).
He has the added benefit of knowing a bit about how Queensland rural folk think and behave - a handy attribute in a Coalition where the Queensland Nationals are the most fractious rump of the show.
As young Greg Hunt was waltzing off with his First-Class Honours degree and celebrating his prize for a thesis on carbon pricing, Macfarlane was being voted in as President of the Queensland Graingrowers Association and as a councillor of the Queensland Farmers Federation.
His electorate of Groom, a rich farming area covering the Darling Downs and the very conservative city of Toowoomba, is now a jewel in the Liberal crown, sticking in the craw of Nationals who think that rural Queensland is their manor.
Indeed, when Macfarlane was thinking of a political career, a herd of Nationals charged so hard to his door that their vehicle actually knocked down his letterbox. The peanut farmer wasn't impressed. He went to the Liberals.
And how did Greg Hunt take it when Turnbull decided to hand over Andrew Robb's pivotal role to the Queenslander who was once the lust object of those cantankerous Nationals?
Bravely would be one description.
"I am extremely supportive of Macka's appointment," he told The Goanna yesterday.
"Macka (Ian Macfarlane) brings the best understanding and history of engagement with industry on either side of politics."
But not, of course, a first-class honours degree relating to emissions trading completed in 1990, when most of us had never heard of the subject.
The environment can be a heartbreaker in politics. Hunt could probably have a therapeutic chat to Peter Garrett about the matter.
Crikey's Bernard Keane adds:
The Liberals will miss Robb, badly. He has been the ballast of the Opposition. With Nelson and Costello leaving, Tony Abbott flapping his mouth off on most anything that takes his fancy, Julie Bishop utterly out of her depth, Joe Hockey speaking first and engaging his brain second, Barnaby Joyce becoming de facto leader of the Nationals and Malcolm Turnbull himself going off the deep end over the faked email affair, Robb has remained rock solid throughout.
Time has shown that he should have been made shadow Treasurer rather than Hockey. Instead, for months he has been trying to navigate the near impossible course of securing enough Coalition support for an ETS to get this killer issue off the political agenda as soon as possible. Unlike Greg Hunt, regarded as a bomb-throwing greenie amongst some his more conservative colleagues, Robb hails from the more sceptical end of the spectrum on climate change, meaning his endorsement of the Turnbull position on the CPRS carries weight with the flatearthers and those otherwise inclined to knock it back outright.
In his stead comes Ian Macfarlane, an outright climate sceptic, card-carrying member of the Greenhouse Mafia and former Industries and Resources Minister. Maybe, like Robb, Macfarlane understands the political need for the Opposition to simply get emissions trading off the agenda; maybe, like Robb, Macfarlane’s endorsement of a negotiating position with Labor will carry some of the more hostile backbenchers over into supporting, or at least not opposing, a deal.
One way or another, Macfarlane’s status as a former member of the “dirty dozen” will alter the dynamics of the Senate negotiations significantly.
The Liberals, and anyone who wants to see the CPRS make it into legislation this year, will fervently pray that Robb makes a speedy and complete recovery. For that matter, so will anyone who has dealt with him and knows the contribution he has made to keeping this Opposition together.
From this weekend's Age and Sydney Morning Herald:
Katharine Murphy was given rare access to the real power station of government in Australia - the Prime Minister's office.
The young men in Kevin Rudd's press office could get old and not even notice. The nerve centre of the 24/7 enterprise hums in a Neverland-like present. This illusion is reinforced by clocks along the wall. There are four, but three have stopped working.
It's 6am. Spring fog hangs heavy outside and the hair of Sean Kelly, a prime ministerial press secretary, is still wet. Suite MG65 smells stale on first contact, like discarded running socks or the signature left by the alpha males who have inhabited the PM's press office for the past 20 years.
A forlorn pot plant on the window ledge swoons; another leans into the frame, its will to stand upright lost.
The press office has an almost ostentatious lack of adornment, like a bunch of Swedish modernist freaks have moved in and swept the joint clean. This is not the environment of a particular aesthetic but the reflection of its inhabitants who live almost entirely at the whim of the man running the country, who have little more certainty than the next bullet point on the Prime Minister's ''tick tock''. Dried rations are stashed under the desk. There are no family photographs because there are no families, dogs, lawns or detritus of any kind, apart from some long-suffering girlfriends. A half-eaten punnet of cherry tomatoes sits on a desk...
Sunday, September 20, 2009
"Like the grain of mustard seed in the parable Rudd would have read about in his studies of Christianity - when planted, the Henry Review became impossible to control"
Gathered around butchers' paper stuck to one of seven pinup boards in the Great Hall of Parliament House 17 months ago the taxation group at the 2020 Summit decided the only thing it could sensibly recommend was a complete tax inquiry.
On that day the topics participants including former Reserve Bank Governor Bernie Fraser and businessmen Lachlan Murdoch and Fred Hilmer had in mind did not seem particularly grand. They spoke about about how to better mesh the tax and welfare systems and how to ensure that foreign companies could easily invest in Australia .
They might have been surprised by pay-as-you-drive road taxes policed by geosynchronous satellites, death duties, wealth taxes, higher capital gains and resource rent taxes, the withholding of superannuation until the age of 67 as well as the shaving of corporate tax rates and the slashing of taxes on insurance.
Wayne Swan might have been surprised as well. In announcing the review on the eve of his first budget he was clear about what it could not do. It could not recommend broadening or boosting the Goods and Services Tax, it had to preserve tax-free super payments for over 60s and it couldn't tamper with the government's announced "aspirational" tax cuts for high income earners.
Since then the government itself has ditched the aspirational tax cuts, the Henry Review has found other ways to restrict superannuation payouts and its report is set to at least give a nod to the long-term case for a higher consumption taxes...
Anyone who expected Treasury boss Ken Henry to do any different overlooked both his history and the way in which he spoke about his task.
In 2006 Prime Minister John Howard appointed Henry to a task group on emissions trading with terms of reference that required it to advise on a "workable global trading system". Instead it suggested a standalone Australian system.
In 2008 Communications Minister Stephen Conroy appointed Henry to a panel to examine proposals to build a fibre-to-the-node broadband network. Instead it suggested a fibre-to-the-home network.
Henry speaks about the review as a once-in-a-generation game changer. This is partly good news for Rudd and Swan because it releases them from the obligation to act on the recommendations quickly in what will be the lead-up to an election. Henry points out that the 1975 Asprey Tax Review had to wait 10 years for the capital gains tax it recommended and 25 for the goods and services tax . He told a conference in August some of his recommendations might only become possible "sometime in the future when technology is available".
But the sweeping nature of the once-in-a-generation rethink also means Rudd and Swan genuinely could have had no idea of what was to become of what they started. Like the grain of mustard seed in the parable Rudd would have read about in his studies of Christianity, when planted it became impossible to control.
A better analogy is that of a review conducted from the deck of an alien spaceship just arrived on earth. Some things we do are so obviously strange - such as imposing special taxes on insurance that we impose on no other socially useful spending - that the alien couldn't help but notice.
Insurance stamp duties and fire and emergency service levies add as much as 50 per cent to the cost of a premium on which the 10 per cent GST has already been paid. Every other product-specific supertax is imposed on a good or service thought to be bad such as alcohol or gambling or tobacco. Insurance is not a vice and should be taxed at no higher rate than everything else under the GST according to a recommendation to be included in the December report.
The fact that these are state taxes and the Henry Review is a Commonwealth committee won't worry it. Like an alien on the deck of a spaceship it will feel free to recommend the unthinkable - that our existing ideas about which part of government does what can be reworked.
Australia's system of alcohol taxation can kindly be described as uneven. It too will get attention.
No relief for homebuyers
But the Henry Review has come to the conclusion that other state taxes - much complained about - aren't actually that bad. Stamp duties on conveyancing and land transactions are charged at a time when people are already borrowing and can afford to pay. They don't much seem to be slowing our relentless desire to trade up and they help claw back the untaxed profits we pocket from the capital gains tax exemption on our family home. The Review won't recommend an end to real estate stamp duties for as long as the capital gains tax exemption remains, and even it is unlikely to have the courage to recommend that the exemption goes.
Payroll tax to stay
Payroll tax is also widely abhorred, but from the review's standpoint is pretty harmless. Not only will it stay in defiance of the bulk of submissions on the topic but the review will recommend it be extended by withdrawing a range of exemptions.
There are taxes that do genuinely hurt employment, and the review believes they are those that discourage foreign firms from setting up here and staying here.
Company tax to slide
A nation's rate of company tax turns out to be pivotal to its ability to attract and retain foreign capital. The Henry Review is convinced of that beyond doubt. While earlier tax reviews suspected it they lacked hard evidence in the form of cross-country studies that have only recently become available. They suggest that the gains from even small cuts to a nation's corporate tax rate are so big that Australia would be doing itself a disservice by leaving its rate at an uncompetitive looking 30 per cent.
But they also suggest there's no need to cut the company tax rate to anywhere near zero. Beyond a certain point a low rate attracts the wrong sort of capital; extremely footloose money that bids up asset prices rather than builds employment.
The review believes that the ideal rate for Australia at the moment lies between 25 and 30 per cent, and so will recommend a cut - but not to below 25 per cent.
Higher resource and capital gains taxes
The review believes mining companies have been treated too generously. In an earlier discussion paper it noted that while mining profits raced ahead during the commodities boom the revenue to the nation whose resources were being mined failed to keep pace. It will recommend either a higher resource rent tax or a switch to a resource profit tax.
It also expressed bemusement at the 50 per cent discount applied to income taken in the form of capital gains introduced by John Howard at the start of this decade, noting that income earned from work attracts no such concession. The review has been told the cut fed the subsequent explosion in property prices and sallows high income earners to avoid tax.
Taxing income from capital gains in the same way as other income would have an economic rationale as well as recovering some of the revenue to be lost from a lower company tax rate.
Many of the report's recommendations are far from firm at the moment. And that's why the review's staff are drafting chapters. Panel members want the recommendations to firm up in the drafting process and want to use each draft chapter to see how its ideas mesh with those in other chapters to build an integrated vision.
In designing a system for the next 25 years the review has had to become a futurologist, effectively producing its own early version of the government's Intergenerational Report due for release next year.
Longer work and longer care
The review has seen that Australians are living longer and so will recommend not only that the pension age be lifted to 67 as the government has already announced, but that the age at which we can get superannuation payouts climbs to 67 as well. It has also discovered that we are living longer in unpredictable ways, meaning that private insurers have stopped offering lifetime annuities - a role it wants the government to perform so that retirees can be certain of getting a monthly cheque for the rest of their lives no matter how long they live.
Paying for using roads
The review can see that cars will soon no longer be powered by petrol. When that happens excise collections will collapse, and with it Australia's half-hearted attempt to use the pump to charge for road use. The obvious replacement revenue stream is from actual road use and the review is excited by the possibilities.
Its report will point out that other utility is charged for. Electricity, gas, water, telephones - we pay for each of them according to how much we use. When the committee asked "why not do it roads," it found no valid reason. It commissioned one study and the Treasury commissioned another and found benefits from road user charges extending way beyond the revenue stream. In the same way as charging for electricity use removes the need to build endless new power stations, and charging more for power at peak times makes better use of the power stations we have, charging for road use and charging more when roads are clogged should drastically cut the need to spend billions building more and more expensive roads.
Along with lower corporate tax rates, user charges for roads have long been an article of faith among economists, but they are now actually being trialled in Seattle and Singapore with in-car GPS devices that deduct money from accounts or pre-paid cards in real time. The review is convinced that privacy concerns can be properly addressed and will point out that the information collected by the in-car devices would remain in the cars with only bills being sent outside of them.
If it sounds futuristic, it's the type of thing the Treasury Secretary meant when he said that some of his ideas would have to wait until the technology became available.
It's probably light years away from the ideas that were going through the minds of the enthusiasts gathered around the butchers' paper in the Great Hall in April last year.
Death duties and wealth taxes
But other ideas won't surprise them. Estate duties and wealth taxes are both on the agenda, as they need to be to bring Australia into line with the rest of the world, but the review has put them there for completeness, not because it thinks they'll be big earners. Most estates and most piles of wealth would have to be exempted to make the system popular and easy to administer.
And a modest land tax
Land tax, another favourite of economists will get some sort of endorsement, but the committee has found that its benefits aren't as straightforward as claimed. It's often hard to distinguish the value of land from the value of the purposes for which it is used.
The top rate of income tax certainly isn't set for another cut regardless of the "aspirational" goals the review was told to keep in mind and its likely to spell out the obvious case for pushing up Australia's reliance on consumption tax.
But there'll be surprises as well. It'll be that sort of report.
Published in today's SMH and Age
Graphic: The Mustard Seed Bookstore