Saturday, February 27, 2010

NSW wins more of the GST cake, WA becomes a laughing stock

Winners and losers in 2010-11

NSW + $1070 million
Victoria + 872 million
Queensland + $545 million
South Australia + $357 million
Tasmania + $91 million
Northern Territory + $78 million
ACT - $30 million
Western Australia - $223 million


Grants Commission, 2010 Report on Revenue Sharing relativities

NSW has emerged as the surprise winner of the biggest shakeup in the distribution of funds to the states since the introduction of the GST.

Against expectations that it would cut the share of GST money flowing to Australia's two largest states to fund to the infrastructure needs of Western Australia and Queensland, the Grants Commission instead decided to give NSW an extra $1 billion from next financial year - roughly $150 per head - while Western Australia and the will ACT lose between them $250 million.

The change in approach between last year's draft Grants Commission report and this year's final report has been embraced by the NSW, but caught the biggest loser off guard.

On Thursday one day before the release of the the long--waited report West Australian Treasurer Troy Buswell called on the Commonwealth Government to recognise the independence of the Grants Commission and to implement its recommendations "in full".

After seeing what was in the report Western Australia's Premier Colin Barnett slammed the findings saying they would cost "around $200 for every man, woman and child in this state."

"It's not good for this state but it's not good for Australia. Who in Western Australia is going to vote for Kevin Rudd when he's saying you get just 68 cents in the dollar back."

The Commission has recognised Western Australia as the state most able to fund states in need... followed by Queensland, Victoria and NSW.

NSW Treasurer Eric Roozendaal claimed victory saying "when we work together we can change things for the better. It had looked as if we would lose around $400 million."

The NSW Business Chamber paid tribute to a lobbying campaign that was to include a billboard at Brisbane Airport reading "Welcome to Queensland... Subsidised by the taxpayers of NSW." Although Queensland authorities banned the billboard, chief executive Stephen Cartwright said the resultant publicity and a letter writing campaign to the Commission appeared to pay dividends.

"We will still give away over $1 billion in GST revenue to the other states but this is a victory," he said.

The Grants Commission is charged with dividing up an estimated $45 billion of GST revenue and this time adopted what it said was a "clean slate, top down" approach.

Strongly growing coal and iron ore royalties would mean Western Australia and Queensland needed less of the GST pie than before, essentially allowing them to take over the funding of the special needs of the Northern Territory from NSW and Victoria.

As expected it also recognised the need to fund extra infrastructure in those fast-growing states, but found their revenues were growing so quickly they could do it without extra GST money.

In another decision likely to advantage NSW and Victoria the Commission has decided to conduct future reviews every three years instead of every five because of the rapidly improving positions of the mining states.

Although formally an advisory body, the Commission's findings are always accepted by the Commonwealth and the Council of Australian governments.

Treasurer Wayne Swan had the report tabled "out of session" meaning that it would not be discussed while the parliament is sitting. The Treasurer regards disputed over the carve up of the GST as a matter for the states and so made no comment about the recommendations.

Mr Roozendaal said the extra $1 billion would be "factored into the the NSW Budget process over coming months."


Published in today's SMH

The Sort of Press Release You Wish You Hadn't Sent


Grants Commission 2010 Review



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Friday, February 26, 2010

It's the Canberra Show this weekend, which has meant...

...the parking of the portable primary school for show children in the playground of my children's school:






Note the bags hung under the classroom. At lunch and recess the show kids play with the Canberra kids.

Wonderful, eh?

Australia gets some government programs wrong. Some seem very good.


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What's driving our "investment boom"?

Cars

A dramatic jump in spending by businesses on on "equipment, plant and machinery" is set to push up Australia's economic growth rate and tip the Reserve Bank into pushing up interest rates next week... but it's not all it seems.

The Bureau of Statistics reports private new capital expenditure jumped 5.5 per cent over the three months to December driven by an astonishing 12 per cent jump in spending on equipment, plant and machinery. Treasurer Wayne Swan hailed it as evidence that stimulus is promoting economic activity.

But much of it isn't what is normally thought of equipment or machinery.

The ABS figures show capital spending in the mining industry actually fell in the December quarter. All of the increase was in spending by manufacturers and by businesses in "other selected industries", among them construction, real estate, travel, and the arts.

So unusual did the Bureau find the increase... that it went back to the firms it had surveyed and looked again at what they said they spent the money on and asked asked why.

It published a special note to say the answer was highly likely be motor vehicles and the reason was likely to be a rush to take advantage of the government's end of year business investment tax break.

Industry figures show business purchases of passenger cars jumped 36 per cent between September and December. Business purchases of four wheel drives soared 43 per cent.

The 48,000 extra passenger cars and the 25,000 extra four wheel drives bought by businesses show up in the figures as new investment in equipment, plant and machinery, but are different from what is normally thought of business investment.

Underlying the unusual nature of the boom the industry-lite ACT recorded the biggest increase in "business investment", up 25 per cent followed by the Northern Territory, up 22 per cent and NSW and Victoria, up 16 and 13 per cent. Recorded investment fell in the mining powerhouses of Queensland and Western Australia.

But the future looks good. The Bureau says planned investment is up 15 per cent over the coming financial year led by mining, up 38 per cent, without an investment tax break in sight.

Photo: An actual sports car bought with the investment allowance - Thanks Geoff, happy driving



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Thursday, February 25, 2010

So you think you know about economics

Try the latest VCE and HSC exam papers:

2009 VCE Economics

2009 HSC Economics


Of course you know the joke about the questions in economics exam papers being the same every year - only the answers change



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Without the stimulus what would we have?

Not much of a building industry

The scale of the Rudd government's stimulus-funded building spree has become apparent in new figures showing a record $4 billion of public money was spent on non-residential construction in the three months to December - a remarkable 62 per cent jump on the three months before.

The $4 billion of public sending on non-residential building is more than double the $1.9 billion spent in the same period the year before. Without it the building industry would have gone backwards in the quarter and backwards over the year.

Private non-residential building was flat in the quarter and down 27 per cent over the year. Residential construction slipped 3 per cent.

Treasurer Wayne Swan claimed the government-funded building spree as "evidence of the important role economic stimulus has played in supporting jobs and small businesses through the global recession".

"If it weren't for our investments in shovel-ready infrastructure... then literally thousands of tradies working in the construction game would have been forced to join the unemployment lines," he said.

But there are concerns the building stimulus is so big it is dragging workers away from non-government projects.

"We have heard anecdotes that workers were siphoned out of the housing sector to work on the Government’s school program," said RBS Australia economist Kieran Davies.

"This might explain some of the weakness in residential construction, although presumably there would have been a pool of workers in the private non-residential construction sector to draw on given that that sector has been very weak."

Housing Industry Association economist Harley Dale agreed saying builders seemed to be taking longer to finish residential projects, presumably because their workers had been lured away to work on stimulus-funded school and public housing projects.

"We can't obviously prove that. Maybe I am wrong, but it seems to me there is a reasonably large pool of labour that can easily transfer between housing and the kind of non-residentail work that is part of the stimulus. It could beocme quite a hefty constriant by 2010," he told The Herald/Age.

The government has set aside $14 billion for spending on school building over the next two years, $6 billion for spending on public housing, and $1 billion for extra roadwork.

Shadow Treasurer Joe Hockey again attacked the spending on schools saying it was stupid to keep spending until 2012 a potential recession in 2008 but refused to commit to stopping the program if the Coalition won office.

The construction figures show a record $46 billion of work underway but not yet completed; $13 billion of it in Victoria.

Victoria topped the nation in construction work done in the December quarter, eclipsing NSW for the third consecutive quarter.

It accounted for one-third of all of the extra construction work undertaken in the quarter, more than any other state.

Published in today's SMH and Age


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Wednesday, February 24, 2010

Could our mining boom last another 10 years, another 20?

The IMF has issued a plea to countries considering unwinding their economic stimulus measures - don't do it quickly and most probably don't do it now.

In a staff paper entitled "Exiting from Crisis Intervention Policies" released early this morning Australian time the Fund says the key lesson from earlier crises is that premature withdrawal of stimulus measures can be "very costly, particularly if the financial system is weak".

It says only Australia among the advanced G-20 countries has lifted official interest rates and that for most, "current conditions do not justify a significant rolling back of macroeconomic stimulus or financial policies in 2010".

While acknowledging that too long a period of low interest rates and fiscal stimulus could feed inflation and further damage government balance sheets it says "in the current context, the potential risks associated with an early withdrawal of policy stimulus seem to outweigh the risks of maintaining it for longer than possibly needed".

While most IMF members should "draw up plans" improving fiscal balances they should keep them on ice until recovery is "entrenched".

Earlier in a speech to the Sydney Institute Reserve Bank Deputy Governor Ric Battellino stressed that Australia was in a special position... saying it was in the midst of a mining boom set to last at least another 10 years.

"Judged by the pattern in mining investment and commodity prices, the start of this boom can be dated from around 2005," he told the Institute.

"By 2007 and early 2008, it was severely testing the productive capacity and flexibility of the economy. That all changed in the second half of 2008, as the effects of the mining boon were offset by the impact of the global financial crisis. However, now that this has passed, the underlying dynamics of the resource boom are starting to re-appear."

Mr Battellino said past booms did "not seem to have lasted more than about 15 years" but, "on this occasion, the growth potential of countries such as China and India suggests that the expansion in resource demand could continue for an extended period."

Although previous mining booms had brought with them double digit inflation the current boom was the first to take place with a floating exchange rate and with more soundly-based fiscal and monetary policies.

"This gives grounds for confidence that we can do better this time," said the Deputy Governor. "But the task will not be without challenges."


Published in today's Age

Mining Booms and the Australian Economy - 23 Feb



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Monday, February 22, 2010

Maybe we don't have enough government debt

Or at least not enough to satisfy the demand from our banks.

The Governor said it Friday, now Deutsche Bank warns that under forthcoming regulations..

"...the stock of commonwealth and semi government debt will almost certainly be insufficient for bank liquidity purposes. It is inevitable, in our view, that Supra and agency debt will be included in the pool of high quality liquid assets as a consequence. But even this will not provide a large enough pool of liquid assets for the banks, in our view, unless the liquidity buffer is kept relatively small."

Bond Supply Implications for Bank Liquid Asset Portfolios



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Godwin Gretch's house is for sale - check out the inside!


It's well-appointed.

As Jessica Wright notes in the Canberra Times, according to the listing ''the love and attention to detail will become evident once you have inspected this home ... our instructions are to sell''.


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Saturday, February 20, 2010

Did Stevens say Barnaby's not fit for the job?

Nearly. I've a softer spot for Barnaby

The Reserve Bank Governor has declared himself at odds with Coalition finance spokesman Barnaby Joyce and questioned his fitness for the job, telling a parliamentary committee he had "yet to meet a finance minister who has ever mused any possibility about debt default of his own country."

The Shadow Finance Minister claimed this month Australia was "going to hock to our eyeballs to people overseas" and was "getting to a point where we can’t repay it".

Governor Glenn Stevens told the committee yesterday there were "few things less likely than Australia defaulting on its sovereign debt".

"There has never been an event of sovereign default by Australia as far as I know, with one exception for one day – which the Commonwealth stepped in and fixed – in 1931. But there has never been such an event, and I very much doubt there ever will be."

Australia had so little government debt that... on one reading of the proposed new international banking standards there wasn't enough of it to sell Australia's banks the securities they would need.

Mr Stevens told the committee he expected to increase rates two to four more times in the months ahead.

Declaring the financial crisis over, and labeling it only ever a truly global crisis for six to eight weeks Governor Stevens said the cash rate had to move away from its present "emergency settings" and increase by a further 0.50 to 1.00 percentage points so that retail rates returned to about their long term average, "which I think is the appropriate place to be".

Another two to four hikes of 0.25 points would add a further $95 to $190 to the monthly cost of servicing a $300,000 mortgage, but would importantly leave repayments several hundred dollars below where they were before the crisis began.

The future of rates beyond that would depend on inflation and wage pressures. Mr Stevens said the jury was still out on the government's new workplace laws.

"The test is going to be how the new powers are administered and implemented by all the parties involved," he told the committee. "It is important this be done sensibly, extremely important. Flexibility is as key now as ever for us to get the most value out of the opportunities that the growth of Asia presents."

Asked about reports of big wage claims he said it was hard for him "to judge how serious the problems are" but that he could "only record that a lot of business people are expresing concern at the moment".

The immediate future of interest rates would depend in part on the name of the institution with which borrowers had their accounts.

"We have really had three-and-half rate moves so far, or if you are a customer of Westpac four," Mr Stevens told the committeee. "I am not criticising Westpac, I am just saying that if you are a customer of that bank you have had the equivalent of four Reserve Bank tightenings, not three."

Banks would face less competition from no-bank lenders than before "but some of that competition was really doing lending that shouldn't have been done".

Mr Stevens wanted the government guarantee of bank deposits wound back when it came up for review in late 2011. At the moment it extends to deposits worth up to $1 million. No other country had a limit anything like as high, he said.


Published in today's SMH and Age


COLEBATCH:

The global financial crisis is over, leaving just a ''North Atlantic crisis''. For Asia and Australia, as Glenn Stevens sees it, the challenge now is to manage the expansion - and there'll be a lot of it to manage.

Yesterday's grilling by federal MPs found the Reserve Bank governor wary but contented. He's confident that he has called the shots right and Australia is heading back into a resources boom.

It will take time to develop. Much of the economy will not share in it. But the bank sees a future like the recent past, before the brief crisis erupted.

It forecasts a 15 per cent rise in the terms of trade by mid-2011, implying a 3 per cent rise in national income. It sees GDP growing at 3.5 per cent in 2010-11 and 2011-12 alike. But that's just the start.

Stevens and assistant governor Philip Lowe see the future as a resources boom. Lowe, head of the bank's economic team, told MPs that in the next five years we will see ''very significant increases in resource exports … very, very high rates of investment which are going to deliver quite high (growth in) coal exports'' - and ''very high rates of return'' on investments.

That has all kinds of implications, and under some acute questioning, particularly from Liberal MPs Bruce Billson and Jamie Briggs, the RBA team set out some of them:

. Monetary stimulus must be withdrawn. The recession, Stevens said, was the smallest since World War II, leaving ''less scope for robust demand growth without inflation starting to rise again … Monetary policy must therefore be careful not to overstay an expansionary setting.''

Surprisingly, Stevens suggested rates now were only about 50-100 basis points below average, implying that - if bank margins remain static - the near-term target is a cash rate of 4.25 per cent to 4.75 per cent.

But that would only get rates back to average. If the Reserve's vision of our future is right, you can bet it will lift rates well above average to keep inflation under control.

. It is ''important'' the government keeps its pledge to limit annual growth in spending to 2 per cent once activity is back to normal. The Reserve forecasts that will be in 2010-11, which means the May budget. Kevin Rudd and Wayne Swan have yet to confirm that it will.

. Pressure for big wage rises in the resources sector could prevent Australia reaping the full benefit of the resources boom, especially if it leads other workers to seek the same. While conceding that union leaders were doing their job, Stevens quietly laid down the law: ''A rise in unit labour costs is going to push up prices. (If so), we will respond to that. The long-run implication of excessive wage pressure is unemployment.''

. Australia will be ''a two-speed economy'', with states like Victoria taking the pain as the coal states boom. High mineral prices will mean a high exchange rate, putting pressure on manufacturers. Workers must move to where there is demand.

Uh-huh. Perhaps next time the governor can explain to MPs why workers stayed put in the 2005-08 boom instead of moving to Queensland and WA, as the textbooks predicted.

. This boom must be financed, and Australia is resisting moves in the Basel Committee to require its banks to hold far more of their assets in government bonds. We don't even have enough government bonds to meet the rules, Stevens said. But he thinks Australia will win an exemption from these North Atlantic rules - just as it was exempted from the North Atlantic crisis.



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Friday, February 19, 2010

Governor Stevens and crew - 9.30 am AEDT


Expect intense grilling.

You can watch and listen live here.


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Thursday, February 18, 2010

This outrage over what Conroy did... it took surprisingly long to build


I was working Sunday February 7 when Conroy made the strange announcement, and frankly felt a bit of outrage might be in order.

The ABC's Mark Scott, whose tweets I follow, actually seemed pleased with the announcement:

Government to rebate commercial free-to-air TV licence fees to promote Australian content.......very significant step. 3:30 PM Feb 7th  from TweetDeck


The Coalition's Communications Spokesman Tony Smith through his spokesman Andrew Cox dictated these supportive words to me over the phone:
"Preserving quality Australian content is important and there is little doubt the cost of delivering that content is higher at present. While we acknowledge support is warranted during transition to digital television, we look forward to considering further details and the government's costings."
No suggestion at the time that it could be inappropriate...

One week later on Sunday February 14, I was working again when news came through about Conroy's skiing meeting with Stokes.

Smith emailed Cox who emailed me:

From: Smith, Tony (MP)
To: Cox, Andrew (T. Smith, MP)
Sent: Sun Feb 14 17:00:02 2010

Senator Conroy has simply not been upfront and open in the last week.

He should release the full costings and all of the detail to justify both the size and the duration of the rebates.

And given his public linkage of the rebates with quality Australian content – he must detail what commitments he has sought and received to achieve this objective.

Again, no outrage at the idea of handing money to the commercial television networks.

Like I said, that took time to build.



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"I've had a Westpac of a day"

Up on Westpac's tweet site late this afternoon:



A concerned Simon Thomsen tweeted in response: Gail, step away from the window...

HT: Julie Posetti


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"The Current Economic Landscape" - in pictures

Philip Lowe is the Reserve Bank's Assistant Governor (Economic).  Here's his slideshow:












You can hear his talk here.



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Thursday column: The networks war on TV

There are five free-to-air television networks in Australia. All are now government funded.

How it came to this when any one of a number of private entrepreneurs would have been keen to enter the market on any terms and take their chances providing viewers with what they want says as much about the malleability of our leaders as it does about the essentially anti-television attitudes of the networks who claim to be its protectors.

What I about to describe is a three-card trick. Watch closely for the switch, admire the skill and cynicism with which it was executed, and if you can keep an eye out for the interests of viewers as taxpayers; just about no-one else has.

Let's start in the lead up to March 1998 when an entire new world of viewing became possible.

Digital channels, which took up far less spectrum than analogue channels, would enable far more chanels to be broadcast... The UK and much of Europe were planning to give one of the new channels to each of the existing broadcasters and then auction the others to new entrants. It would be a great deal for taxpayers and a great deal for viewers.

The networks pulled out all stops to prevent it happening here. Spreading what now looks like dodgy research they told us we didn't really want more channels, we wanted better quality pictures.

To popularise the idea they produced a series of ads fronted by Mr Fizzy, Mr Squirt and Mr Butt. Each of the existing networks was to get given enough spectrum to simulcast its existing channel in near cinema-quality High Definition leaving no spectrum free for upstarts such as Mr Singleton or Mr Murdoch to broadcast new channels.

Prime Minister John Howard and Communications Minister Richard Alston bought the network's line against the express wishes of just about every one of their official advisors.

The Office of Asset Sales labelled the move "a de facto further grant of a valuable public asset to existing commercial interests".

Prime Minister and Cabinet said there were "better ways of introducing digital television than by granting 7 megahertz of spectrum to each of the five free-to-air broadcasters at no cost when a standard definition service of a higher quality than the current service could be provided with around 2megahertz of spectrum each."

Announcing the gift of so much spectrum, announcing a ban on its use for anything other than HD broadcasting, and announcing a ban on new entrants the minister said he "would normally welcome additional competition, in any industry, as healthy" but that the existing operators needed special treatment because of the cost of installing new equipment.

Franco Papandrea of the Institute of Public Affairs wrote that "if the cost of introducing new technology were to be a legitimate reason for limiting competition, every industry in Australia would be seeking and would be entitled to protection".

I said it was a three-card trick. It had to be, because the truth was we weren't too fussed about near-cinema quality pictures. We wouldn't stump up the money for set-top boxes if all they would offer was smoother-looking versions of the programs we had before. The broadcasters weren't too keen on offering higher quality pictures anyway. Most of what they simulcast on their HD channels was made in standard definition.

The ABC begged for approval to somewhat degrade the quality of its HD signal to allow it to broadcast extra channels that might actually drive demand for the new technology. The government granted the approval but on one very odd condition - the extra channels were not allowed to be very interesting. The could show children's and educational programs but could not show drama, comedy, entertainment or national news, current affairs or sport.

The ABC began broadcasting children's channels and later ABC 2 which was indeed boring until the genre restriction was lifted.

By this time each of the networks had degraded the quality of its HD channel to enable it to broadcast more channels. After all real HD had never been the point. The point had been soaking up free spectrum to prevent anyone else from using it.

The cards having been switched, in the past year the incumbents have been dancing on HD's grave.

Network Ten is using its HD channel to broadcast continuous sports programing under the name ONE HD. It's abandoned the pretense of offering ordinary programs in HD. The ABC, having used up the two extra channels it created by degrading its HD channel is now going to use what remains of the HD channel to broadcast 24 hour news.

And now the networks want compensation. Why they want more compensation given what they've pulled off at public expense is a bit of mystery, and perhaps even a mystery to the minister who handed it out.

In granting them rebates on their license fees of 33 per cent this year and 50 per net next year - government funding - Minister Conroy has variously said it it will protect Australian content, assist with the cost of new equipment, and help the networks as they face increased competition from new media.

On Tuesday he offered an extra explanation - the Free Trade Agreement with the United States. He said the decision was about protecting Australian content but "we are not in a position that we can afford to breach trade obligations". The industry itself had yet another take - it was compensation for the analog spectrum they would lose when the analog signals were finally turned off. Never mind that they have already been compensated and that analog won't be turned off for years.

As with the best conjurer's tricks, its hard to work out how it happened.


Published in today's Age


Fiddling With the Digital TV Tuner Agenda 2009


Digital Three-Card Trick, IPA Reveiw


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Wednesday, February 17, 2010

The worst of the rate rises are behind us?

We'll hear more from Governor Stevens Friday

The Reserve Bank has reached a pivotal point in its program of rate rises, declaring the bulk of the work behind it.

After three successive rate rises at the end of last year the board's February minutes say rates are "no longer exceptionally accommodative," merely remaining "somewhat below average".

The minutes say future rate rises will be decided on a case-by-case basis depending on economic indicators each month.

Board members no longer "regard the outlook as requiring an increase at every meeting"; they believe rate rises to date have given them "a degree of flexibility" in future decisions.

While good news for mortgage holders the declaration means future rate rises will become politically charged, being painted by the Bank as responses to current conditions rather than the withdrawal of emergency settings.

Asked at a Women in Finance lunch in Sydney whether future rate adjustements would be linked to attempts to wind back government spending Reserve Bank Assistant Governor Guy Debelle ducked the question...

"I can guarantee that there will be at least three hours of questioning on this topic on Friday when the Governor appears before the parliamentary committee, where they will spend three hours trying to get him to answer this question in some way or the other," he said.

"In the interests of not pre-empting Glenn, I think I'd prefer to leave that question to him."

At a closed Reserve Bank anniversary function last week Governor Glenn Stevens painted a picture of "a lengthly period of rather low short-term interest rates" if governments committed themselves to repairing their budgets.

But he prefaced his remarks by saying they were "not intended to provide any particular message about current issues for monetary policy in Australia".

It is understood he will tell the parliament's economics committee Friday that he had in mind other countries with much bigger needs to cut spending than Australia when he linked rates to government spending, and that any linkage in Australia would be small.

Shadow Treasurer Joe Hockey told the Press Club Tuesday the bottom line was "the Government can reduce the upward pressure on interest rates by cutting its spending, but it chooses not to".

However when asked whether he would tighten spending further than the government which has promised to cap real spending growth at 2 per cent per annum once economic growth recovers, he replied he would not.

"I accept the framework the government has put in place where it says it will put the cap in place when we get to trend growth," he said.

"I accept that framework. What I have a problem is the other end of it. My concern is as soon as we go into surplus under the Labor Party’s framework, that 2 per cent cap comes off. That’s my concern."

Treasurer Wayne Swan said Mr Hockey had "endorsed the government’s strict spending cap, demolishing his own year-long scare campaign".

"Mr Hockey’s endorsement of the government’s spending parameters leaves the Liberals’ scare campaign on government spending in tatters," he said.

A National Australia Bank business survey released yesterday found business confidence up 7 points in January but actual business conditions down 7 points in the month on weaker trading and profits.


Published in today's SMH and Age


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Tuesday, February 16, 2010

Steve Keen to walk to Kosciuszko April 15 - 23

Sponsor him at keenwalk.com.au

CBD has the story:

"Never one to shy away from the glare of the media, the University of Western Sydney's Steve Keen has launched a website to promote his forthcoming ascent of Australia's tallest peak, Mount Kosciuszko.

Keen is required to scale the hill as a result of losing his bet with the Macquarie economist Rory Robertson on the direction of house prices.

But rather than accept the victory of his more bullish opponent, it appears the professor is trying to muster the biggest gathering of market bears in Australian economic history. He has already coined the event ''Walking Against Australia's Property Mania.''

Keen will start his 224-kilometre walk from Parliament House in Canberra on April 15, and aside from a documentary crew, his girlfriend and a masseuse, he hopes to be accompanied by some of the 3000-odd members of his Debtwatch blog.

''I know I'm not the only person in Australia who regards our house prices as crazy - not to mention economic policy which has become beholden to maintaining the property bubble,'' says Keen on his website keenwalk.com.

Keen hopes to cover about 30 kilometres a day. At least some good will come of the walk. While he plans to use the event to highlight his views, the walk will raise money for the charity Swags for Homeless."


Here's the ABC's story.


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If you thought the consumer price index measured the cost of living...

You were wrong

Consumer Price Index +0.5%

Employee living cost +0.7%
Age pension living cost +0.6%
Self-funded retiree +0.6%
Beneficiary living cost +0.6

December quarter 2009
CPI , Analytical living cost indexes.


Do you reckon your own personal rate of inflation is higher than the official rate of 2.1 per cent?

During the December quarter you were almost certainly right.

The Bureau of Statistics says the official inflation rate in that quarter was just 0.5 per cent. But more detailed so-called analytical living cost indexes released yesterday show that if you were working your living costs were climbing 0.7 per cent, if you were retired and on the pension they were increasing 0.6 per cent, if you were retired and self-funded by 0.6 per cent and on benefits by 0.6 per cent.

That's right. Almost whoever you were, your living costs were climbing faster than the rate of inflation.

It's good news for pensioners, even if it appears to make no sense. Pensions and other benefits get lifted every six months by the larger of the official inflation rate and the pensioner and beneficiary living cost index.

How can each of the published living cost indexes increase by more than the rate of inflation...

The anwer, according to ABS Assistant Director Lee Taylor is that the long-established consumer price index doesn't measure the cost of living.

Instead it measures price movements.

Confused? The big difference is that when it comes to calculating the CPI increases in mortgage rates aren't regarded as price increases. The "price" that is included in the CPI is the margin between what banks pay us for money and what they charge, which may or may not change when mortgage rates increase.

But when it comes to calculating a "cost of living" mortgage rates are very relevant. The Bureau has decided that even if interest charges are not prices they are a cost. The three mortgage rate hikes at the end of last year increased living costs substantially for mortgage holders, and for employed Australians more than other Australians because employed Australians are more likely hold mortgages.

The Bureau's measure of the price of financial and insurance services jumped 2.9 per cent for households with employees in the December quarter and 1.3 per cent for households with age pensioners. The differently-calculated financial and insurance index used in the CPI climbed just 0.7 per cent.

The Bureau has launched an inquiry into the way it calculates the CPI and is seeking submissions on its "relevance" and the way it handles deposits and loans.

Published in today's SMH  and Age


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Expect a visit, with a locksmith, if you're hiding something from the Tax Office

The Tax Office has been given a "tick of approval" for continuing to break into homes, cars and workplaces where it believes documents are at risk of being destroyed.

The visits, which involve locksmiths and do not need court-issued warrants have received the all-clear from the Ombudsman after an investigation which his staff accompanied 100 tax officers on a coordinated raid on homes, cars and workplaces in four states.

Ombudsman John McMillan said at each site the officers flashed "wallet authorities" and provided provided the people they met with signed approvals and a brochure about tax law.

The officers were armed with lists of names, phone numbers and phrases to help identify documents and electronic records on computers and mobile phones...

"The ATO officers advised the building occupiers that they were under no obligation to answer any questions other than those regarding the location of the documents. The building occupiers elected to answer all questions freely," the report says.

Professor McMillan said the Tax Office took the use of its powers seriously and had established sound guidelines and manuals to assist its staff to apply the powers.

"This is the second Ombudsman investigation into the ATO’s access without notice powers in the past 10 years and it confirms that taxpayers can feel confident that the ATO is exercising these powers in the manner in which it should."

The Tax Office was unable to tell Professor McMillan how many raids it conducted each year saying it had kept "no central register of records in relation to the use of access powers".

It has undertaken to start collecting the information and publish it in its annual report.

An earlier Senate report found the ATO conducted as many as 280,000 raids without warrants yearly.

"This volume of monitoring activity could not be conducted under a warrant based system without a very large increase in resources or a substantial reduction in monitoring," it said. "This in turn would lead to losses in revenue."

Published in today's SMH and Age


UPDATE: 280,000 sounds far too high, but that's what the reports say.


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Monday, February 15, 2010

Of all the dodgy explanations... (Stephen Conroy edition)

Communications Minister Stephen Conroy has described as "entirely appropriate" his decision to meet with Channel Seven chief Kerry Stokes at a Colorado ski resort shortly before handing to the networks fee rebates worth one quarter of a billion dollars.

The Minister yesterday confirmed reports that he had met Mr Stokes in Veil, Colorado while on a personal holiday in January "fully paid for by me including all airfares from Australia to Colorado".

While not directly addressing a claim by a spokesman for Mr Stokes that the two had "enjoyed a couple of ski runs" together the Communications Minister said he "met regularly with all senior communication stakeholders".

"All of my conduct with Mr Stokes and his associates, and all other stakeholders in my portfolio, has been entirely appropriate," he added.

Within weeks the Minister announced what amounted to a gift to the commercial networks of $250 million... in the form of a 33 per cent rebate on their licence fees in 2009 and a 50 per cent rebate in 2010.

Although headed "Government to protect Australian content on commercial television" the announcement detailed no requirement for the networks to protect or extend Australian content and merely restated existing rules.
Opposition frontbencher Christopher Pyne called for an explanation.

"The actual visit and the skiing with Kerry Stokes is not nearly as important as exactly what is going on with the communications portfolio," Mr Pyne told the ABC's Insiders.

"He has given the networks $250 million. He hasn't yet said how he arrived at the figure, what exactly the money is to be used for, and what guaranntees he's received from the networks that it will be used for something that will benefit the public."

"Was there a rationale, or did he pull the figures out of his ear?"

A spokesman for the Minister said the rebate was "an interim measure to support current Australian content at a time of structural change".

"Treasury were involved in developing the costings," she said.

Published in today's SMH 

Graphic: Vail Hotel, Colorado



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Still waiting for your tax return?

It could be because the Tax Office computer has been off

Things will start to look up for as many as half a million taxpayers from today.

They're caught in a backlog that began on the Australia Day long weekend when the Tax Office took the unusual step of turning off the aging computer system that processes tax returns and transferring all 27 million taxpayer records and 280 million forms to a new one.

Until days ago scarcely a return had been processed since.

Some test runs have made a dent the backlog of 705,000 unprocessed returns and 111,000 were to have been processed over the weekend.

If all works well when the new system is run at full speed from this morning most of the backlog will be cleared by the end of the month.

But some taxpayers will wait longer... Second Commissioner David Butler told a Senate committee Wednesday it would take some time to properly link the Tax Office and CentreLink databases. Taxpayers dealing with the Child Support Agency and students claiming youth allowance will also experience problems.

Asked why the Tax Office couldn't continue to run the old system while it set up the new one Mr Butler said the two would get out of sync. "We had to essentially turn the old system off, move all the data to the new one and then start processing on the new system going forward," he told the Committee. The Tax Office would consider paying interest on late returns.

The $434 million project is 50 per cent over budget and behind time. Originally due for completion in late 2009, then on January 27, then on February 8, it needs to be operating reliably before March when the next wave of company tax returns arrive.

The Auditor General found the original timetable "ambitious and, in hindsight, optimistic."

Governments had repeatedly loaded more work onto new the system, including the administration of Labor's First Home Saver Accounts and the Coalition's changes to superannuation.

The new system will replace more than 180 old computer systems, some more than 3 decades old.

It will form the backbone of the new pre-filled internet tax return service and the optional government calculated automatic tax returns recommended in the Henry Tax Review.

Published in today's SMH  and Age 


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Sunday, February 14, 2010

Oh, and here are some evidence-based tips for Valentines


From the British Psychological Society's Research Digest Blog


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Chomsky (and others) on love, this special day



It's here, at Big Think.

My favourite quorte, from David Schnarch - instead of an aphrodisiac, being nice to your partner works better.




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Saturday, February 13, 2010

A brief history of pretty much everything

Maggie Koerth-Baker has made a flipbook:





HT: Boing Boing


It reminds me of the following observation...

(Warning: Hitch Hikers Guide to the Galaxy quote)


The Universe, as has been observed before, is an unsettlingly big place, a fact which for the sake of a quiet life most people tend to ignore.

Many would happily move to somewhere rather smaller of their own devising, and this is what most beings in fact do.

For instance, in one corner of the Eastern Galactic Arm lies the large forest planet Oglaroon, the entire “intelligent” population of which lives permanently in one fairly small and crowded nut tree. In which tree they are born, live, fall in love, carve tiny speculative articles in the bark on the meaning of life, the futility of death and the importance of birth control, fight a few extremely minor wars, and eventually die strapped to the underside of some of the less accessible outer branches.

In fact the only Oglaroonians who ever leave their tree are those who are hurled out of it for the heinous crime of wondering whether any of the other trees might be capable of supporting life at all, or indeed whether the other trees are anything other than illusions brought on by eating too many Oglanuts.

Exotic though this behaviour may seem, there is no life form in the Galaxy which is not in some way guilty of the same thing, which is why the Total Perspective Vortex is as horrific as it is.

For when you are put into the Vortex you are given just one momentary glimpse of the entire unimaginable infinity of creation, and somewhere in it a tiny little marker, a microscopic dot on a microscopic dot, which says “You are here.”



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Friday, February 12, 2010

It's the stimulus, stupid. You can't spend $14 billion upgrading schools without employing people

Employing blokes

The stimulus has been credited with a surge in male employment that has pushed Australia's unemployment rate down to 5.3 per cent as the head of the Treasury has declared the financial crisis "behind us".

An extra 52,700 Australians found work in January, two-thirds of them male .

Since October an extra 123,000 Australians have found work, three quarters of them male .

"When men outnumber women so much it has to be an industry story," said Deutsche Bank economist Phil O'Donohue. "The building industry is the obvious candidate. Since mid last year almost 8000 primary schools have been building halls and computer labs and libraries with $14 billion from the Primary Schools for the 21st Century program."

"It looks as if in January with school about to return the tradies put on more blokes."

"It has to be the stimulus... Private non-residential construction is flat, private industry isn't investing outside the mining sector."
Victoria provided the lion's share of the new jobs creating 41,900 new jobs since October, half of them full-time. NSW by contrast created just 10,100; only 2,000 full-time.

The further plunge in unemployment from 5.5 per cent in December to 5.3 per cent in January pushed up the Australian dollar more than a cent to $US0.8874 as the money market doubled its bets on a March rate hike.

Coalition Treasury spokesman Joe Hockey called for an end to stimulus spending saying the big issue was no longer unemployment but interest rates.

"It’s time for the government to explain how spending money on school halls in 2012 is going to create jobs and help address the economic downturn in 2008," he said.

Treasurer Wayne Swan said were it not for the stimulus Australia would be in recession. "We celebrate that 52,700 Australians told their families in January they got a job. Nothing is more important to somebody’s security than the knowledge that they have a pay packet."

In a grilling before a Senate committee Treasury chief Ken Henry said the stimulus had been responsible for keeping or creating 210,000 jobs. Without them Australia's unemployment rate would be nearer 7.3 per cent.

He said what people called the global financial crisis had "passed".

"I think that's safe to say. There may be further adverse shocks, some significant for individual countries, but I don’t imagine shocks of the sort that would be globally significant and I certianly won’t be speculating about those sorts of possibilities," he told the committee.

Unemployment was worse than it looked because the hours worked had dropped. "If you wanted to translate our rate into what it would be if hours worked were higher you could probably add a couple of percentage points to it. That is instead of talking about 5.3 per cent, you might be talking about 7.3 per cent," he said.

Employment Minister Julia Gillard said despite the jobs growth there were 124,500 more Australians unemployed than were at the start of the global financial crisis.

"They are the Australians we want to support through the economic stimulus and through the economy so they get the benefits of work."

Published in today's SMH  and Age 

COLEBATCH: Garden state in blooming good shape



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Thursday, February 11, 2010

Enjoy this clip, but...

...it'll only make sense if you're familiar with Beyoncé




..'cos we're goin' to learn
what it really feels like with a degree...

If you learned it, should have got an 'A' on it...

Oh Oh oh...




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So who’s getting the jobs?

Extra jobs since October, trend

Unemployment rate, seasonally adjusted

Victoria +41,900 5.3%
Western Australia +12,000 5.0%
Queensland +10,500 5.5%
NSW +10,100 5.6%
South Australia +7,500 4.4%
Tasmania +400 5.2%

ABS Labour Force, Australia January 2010


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