Monday, January 31, 2011

Quiggin, the Musical

Why not?

As he enjoys the success of Zombie Economics - How Dead Ideas Walk among Us, he is already considering the movie rights.

It is being translated into French and Portuguese and Japanese, Korean and Chinese.

It began its life as a series of blog posts as we were recovering from the financial crisis, several of which I reposted here.

It's a great read, the best cover of any economics book, and potentially as important in Freakonomics in popularising economic concepts.

And now it's easy listening.

Here's John Quiggin at the London School of Economics in November.

And here he is in surprisingly agreement with Hayek fan Russ Roberts on EconTalk:

(The Econtalk link has a virtual transcript, so hardworking is Roberts)


Want to check out Zombie Economics? Here's the Introduction, to get you started:

Zombie Econoics Introduction

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Saturday, January 29, 2011

Egypt is attacking its citizens and shutting down the internet



Here's the latest. Updates.

Mubarak has been in power for 30 years, with the complete backing of the US.

A little long, perhaps.

Click to Read More...

Friday, January 28, 2011

Swan: GDP to take a $7 billion hit, mostly in one quarter


Taken literally it'd mean negative growth that quarter


THE HON WAYNE SWAN MP

ADDRESS TO CEO INSTITUTE (QUEENSLAND)

THE IMPACT OF THE FLOODS ON OUR PATCHWORK ECONOMY

Thanks very much for having me and for that kind introduction.

I’d like to thank everyone for being here today, at such a challenging time for our state in particular, for other flood-affected communities in Victoria and elsewhere, and for the national economy more broadly. I’m sure all of you have many competing demands on your time, whether you’ve been personally affected by the floods or involved in the huge rescue and cleanup operation, or whether you’re looking after staff, or whether you’re just trying to get your business back on its feet.

Like me, you would have been inspired by the sheer depth of the community spirit we’ve seen in Queensland in recent weeks. Given the scale of the floods, we’re going to need every ounce of that community and corporate spirit, as we turn our attention to the economic costs and the economic recovery.

As you’ll expect, I’ll talk quite a bit today about those economic impacts. In particular, I’m going to talk a bit about how and why the Government decided to fund the $5.6 billion reconstruction program – including the $2 billion initial payment to Queensland - through a combination of the one-off levy, delaying some infrastructure projects and spending cuts, rather than by simply putting the entire cost on the existing Budget...
I’m also going to talk about the longer-term challenge facing our economy: dealing with the pressures of a patchwork economy. The issues of flood reconstruction and dealing with the mining boom present very different challenges but they’re united by a critical factor – the capacity constraints we face, particularly in the labour market.

Of course, as Treasurer, you’d expect me to focus on the economic magnitude of the floods, and I will. But first let’s put them into their proper perspective.

The economic questions pale into insignificance next to the human cost of what we’ve seen in recent weeks. Like all Australians I’ve been deeply saddened by the loss of life – some heart-wrenching stories of self-sacrifice, of lives and families torn apart. With so much pain and loss still being experienced, our focus remains on human, not monetary values. There are still people to mourn and remember.

It’s been inspiring to see how people have come together in recent weeks – people, communities, businesses – everyone has done what needed to be done, no questions asked. But now, as the waters gradually recede, and the full extent of the damage is revealed, we turn to an assessment of the costs to our economy and our budget, and the repair and rebuilding task.

ECONOMIC MAGNITUDE

It’s pretty hard to make comparisons between different disasters – they’re all awful when it comes to living through them, whether you’re talking about the Newcastle Earthquake or the Black Saturday Bushfires. But what the Prime Minister said yesterday gives you a sense of just how big and damaging these floods have been.

I was around during the ’74 floods – I was a student back then and working part-time as a sewerage maintenance man for Brisbane City Council – so I got a pretty good view of it all in ’74. That flood was bad – but the impact this time is going to be much worse, because the state’s grown so much since then. There are 3.1 million people living in affected areas, this time around, compared with 2 million for the whole state back then. Queensland accounts for 19 per cent of Australia’s national output, compared with 14 per cent a generation or so ago.

The truth is this is likely to end up being the most costly disaster in Australian history. The fact that Queensland makes a bigger contribution now to national prosperity means that these floods will hit us that much harder.

Our assessment of the effect on Gross Domestic Product is only preliminary at this stage, but Treasury estimates that in 2010-11, the loss is likely to be around ½ of a percentage point of GDP.

Of course the rebuild effort will add to GDP again in time, but this is unlikely to fully offset the immediate output loss.

The main negative impact from the floods will be concentrated in the March quarter. A large part of the GDP impact will be from lost coal production and the effect this will have on our export volumes. Treasury estimates that several billion dollars will be lost in coal production – somewhere around 15 million tonnes of coal.

A lot of that production is concentrated in the Bowen Basin, where supply chains have been seriously hampered by the floodwaters. While the effects vary from mine to mine, the industry estimates that the worst affected mines could be disrupted for months. Queensland alone produces about 80 per cent of Australia’s exports of coking coal. And when you consider that coking coal represents about 10 per cent of our exports, and 2 per cent of our GDP, you can see that the impact here is going to be significant. Of course, some of this negative impact will be offset by higher commodity prices – but the production losses will still be immense.

Agricultural production has been hard hit, too. In many ways, some of the cruellest impacts have been and will be on our farmers. Treasury estimates the sector’s losses could be around $1 billion– a huge hit when the country relies on Queensland for so much of its food produce.

While these are only preliminary estimates and they will of course be updated as more information is received, ABARE is estimating loss of Queensland fruit and vegetable crops at around $225 million.

For cotton, ABARE estimates around $150 million worth of damage to crops, representing around 7 per cent of Australia’s total plantings. It also estimates that the floods have damaged 15 – 20 percent of the state’s planted grain sorghum crop, representing around $30 million.

The unfortunate reality is that all Australians are going to see the impact of this on the economy, particularly in the March quarter, at the supermarket checkout:

• 32 per cent of our vegetables are produced in Queensland

• 33 per cent of our fruit

• 68 per cent of our mangoes are from Queensland

• 55 per cent of our tomatoes are from Queensland

So the floods have wiped out a significant part of our country’s food bowl, and this is going to feed into prices. Based on Treasury’s numbers, the floods are expected to increase CPI inflation by about ¼ of a percentage point in the March quarter. This spike should only be temporary, but it’s inevitable that it’s going to cost more for fruit and veg for a while. We saw this happen after Cyclone Larry in 2006 – when banana prices went up to $15 a kilo but then fell, some months later, back down to $2 a kilo.

Another industry that will take a battering is tourism. Queensland has such a great tourism industry – it makes up around 4 per cent of Gross State Product – but it’s being hit hard by the floods. Treasury estimates the damage to tourism could be in the region of $300 million.

That’s why Andrew Fraser and I have announced a new $10 million Tourism Industry Support Package, to provide a vital boost for the many families and small businesses who depend on Queensland’s reputation as one of the world’s most attractive tourism destinations. The package will include a domestic marketing campaign to assure all Australians that many of Queensland’s most iconic destinations are largely unaffected by the floods.

Other industries have also been directly affected – especially with the huge disruption to urban centres like Brisbane. Outside mining, agriculture and tourism, Treasury estimates put the damage bill across a range of other industries at around $½ billion.

You get the picture: there’s no getting away from the fact that this disaster, not just in Queensland but Victoria and elsewhere as well, is going to cost Australia dearly.

I’m sure no-one here is under any illusions about just how long a reconstruction effort we’ve got in front of us. It is going to take years to recover from the 2011 floods, not months. And in the end, Queensland will recover strongly – strongly, but slowly.

FEDERAL RESPONSE

So that’s an early view on the economic impact. Of course, the floods are also going to have a significant impact on our budget bottom line. As the Prime Minister said yesterday, our initial estimates suggest the Commonwealth contribution will be something like $5.6 billion.

That’s why we announced a one-year levy, the deferral of $1 billion worth of scheduled infrastructure spending to make room for the rebuild task, and $2.8 billion in difficult spending cuts.

Let me make some points about our response. Firstly, we were very conscious, in designing it, that the last thing we wanted to do was take precious resources away from flood victims, or stretch the capacity of Australians to help us rebuild Queensland.

That’s why the one-year levy won’t be paid by those who have been affected by the flood, and why we will only raise it from people earning more than $50,000. This means that half of Australian taxpayers won’t pay anything at all and over 60 per cent of them will pay less than one dollar a week.

We recognise that many, many people have already donated generously to help the victims of the floods – and this levy doesn’t ignore that generosity. It’s a way of paying for the reconstruction of essential infrastructure that needs to take place – roads, bridges, ports – so Queensland can get back on its feet, after the initial disaster phase.

Secondly, we know the economy and parts of the labour market are already under extreme pressure from the mining boom. That’s why we have some labour market programs in the policy mix, and why we deferred $1 billion worth of other infrastructure spending, to ensure we have the capacity to rebuild priority projects first.

This means two-thirds of the funding for the rebuilding of flood affected communities comes from spending cuts and one-third from the levy. Commentators have asked why we haven’t taken the whole cost in to the budget, rather than putting on a levy. Well, as the Prime Minister said yesterday – in a growing economy, we shouldn’t put off until tomorrow what we can deal with today.

Paying for the reconstruction is not a commitment we step away from – but it’s a factor that has big ramifications for the budget. The Australian Government Disaster Recovery Payments have given short term financial assistance to Australians affected by the floods, and this is expected to cost over $600 million. And claims under the Disaster Income Recovery Subsidy are expected to cost a further $120 million.

The slowdown in economic activity across a range of industries will also reduce the tax revenues coming to government.

Clearly – and there has been a lot of public commentary on this point – this will put increased pressure on our fiscal strategy, on our plan to bring the budget back to surplus by 2012-13. I want to make two points about why it’s important that we bring the budget back to surplus – because I think they are crucial.

Fiscal responsibility is about keeping our budget in a position where it can deal with surprises like the floods in the future. Getting back to surplus gives us more firepower for future battles. During the global financial crisis, our strong balance sheet – built in part on difficult saves in our first budget – meant we were immediately able to respond to the crisis with a stimulus program that helped our economy weather the storm. But reloading the fiscal cannon to deal with future surprises is not the only reason why returning the Budget to surplus by 2012-13 is the right thing to do.

The main reason it is the right thing to do is because it is the right response to dealing with the longer term challenges facing the Australian economy. As awful as these floods have been, they haven’t knocked the Australian economy off its longer term course, and they haven’t altered the longer term challenges we face, particularly the mining boom mark II. The mining boom is contributing to strong private economic activity, and strong employment growth. Capacity constraints are building, and unemployment is low.

In these circumstances, the right thing to do is for government spending to make room for the strengthening private economic activity. It is text book fiscal policy. And the right way to do that is through a combination of cuts to other public programs, delaying some infrastructure programs and a temporary levy.

As the Prime Minister has said, borrowing to fund the public reconstruction effort would be the soft option. With capacity constraints building, unemployment low, and an impressive pipeline of new mining-related investment, the right thing to do is to pay-as-we-go for the public reconstruction efforts. Applying some fiscal restraint to other parts of the economy frees up resources to help rebuild after the floods, and reduces pressure on our growing national economy.

PATCHWORK ECONOMY

I raise these points about our broader economy because it is crucial that when we’re rebuilding Queensland we’re doing it in a way that recognises we have broader responsibilities to the broader economy too. We cannot, and will not, lose sight of the broader challenges of our economy as boom conditions return to other parts of the country.

Like me, you’d be struck by just how much Australia’s story right now is the story of a patchwork economy. As one part of the country rides high, another struggles. The mining boom caused by the rise of China and India has led to much faster growth in some places than others. So I want to spend some of my remaining time today talking about the longer term challenges facing Australia, beyond the reconstruction.

While the floods are very much front of mind at the moment, I’m confident that we’ll overcome them, and rebuild Queensland. And as we do, the longer-term questions we’ll face are the challenges of the return of boom conditions.

Globally, we’re witnessing a changing of the guard. China and India are giants of the past with extraordinary futures. In recent years, we have seen an inexorable shift of power from West to East, as they – and other Asian countries – have industrialised. The global financial crisis has only reinforced their relative importance within the world economy. And coming decades are only going to continue this economic convergence.

The United States will still be a global superpower, but this will be the Asian Century. Over the past three decades, the Chinese economy has grown 10 per cent a year, on average – equivalent to doubling in size every 8 years. A similar story can be told for India. Together, they were 7 per cent of the global economy in 1990. Today, they’re 19 per cent.

By 2050, China and India alone are expected to make up over a third of the global economy. A continuation of current trends will see India become the world’s third largest economy around 2015, and China overtake the United States as the world’s largest economy around 2020.

Not just by chance but by choice, Australia has been making the most of this – which has seen us become a standout performer in an uncertain world economy. A combination of good policy during the global financial crisis, hanging on to the enduring benefits of the reforms put in place by previous governments and our natural advantages in Asia give us cause for confidence. Since coming to office we have created 700,000 jobs while other advanced economies shed millions of jobs, and our public finances are among the strongest in the developed world.

Resources are a source of strength, but the higher dollar and other factors make life difficult for people working in sectors like tourism and manufacturing. Even before the Queensland floods and the massive reconstruction effort they will bring, we were already expecting to see the re‑emergence of labour shortages and bottlenecks in some industries. The impact of mining boom mark II on our economy cannot be understated – it will be profound, as big as the structural change associated with the floating of the dollar, of tearing down Australia’s tariff walls in the '80s.

The truth is – the speed with which we can rebuild Queensland will be limited by the tightness of labour, as will the extent to which we can take advantage of the mining boom. This is one of our core challenges – there are only so many skilled tradespeople and workers to go around. In that context, as we work to rebuild Queensland and beyond, our core task is to permanently rebalance the economy to better leverage the opportunities of the Asian Century.

Our challenge is to create a flexible high-productivity, low-pollution economy – and it’s a challenge equivalent in scale to Hawke’s and Keating’s successful reforms that opened up our economy to the world. On top of that, we need to ensure we’re harnessing the talents and efforts of more Australians – giving more people a stake in the next generation of growth and prosperity.

Our policy settings are already addressing these challenges, and are routinely commended by global institutions, but we know there’s more that can be done with community support. As the PM said yesterday, Australians rightly expect their Government to be able to do more than one thing at a time. Our record investments in training and infrastructure, a carbon price to encourage investment in renewable energy, and an NBN to boost the digital economy are absolutely crucial to building productivity. We can’t lose sight of these broader policy objectives while we deal with the challenges imposed on Queensland and other parts of the country by mother nature.

The coming Budget was always going to be about the challenges of our patchwork economy – it’s just that the floods have added additional complexity to the policy response we need. It’s too early to go into detail, but what I can tell you is that the budget will focus on making sure our economy – already stretched by the boom and now the reconstruction effort – can get the people it needs.

It will recognise education is the principle driver of prosperity in an economy that demands we draw more heavily on the talents and efforts of even more of our people. It will build on the PM’s conviction that our nation can create opportunities for all, and that if we all work together to grasp these opportunities we will prosper together. And above all it will maintain the economic discipline that has been a hallmark of this government.

CONCLUSION

So ladies and gentlemen, thank you again for coming today. Sometimes in the public arena we don’t talk enough about the good work that our corporate sector does, as if those in business don’t take a broad enough view of what’s important for the communities in which they operate, or for their staff. What we’ve seen in spades, through this flood emergency, is how wrong that view is.

We’ve seen corporate Australia open its hearts to the victims of the flood, in all sorts of ways – donations, direct assistance, dropping off needed supplies out of stock without any thought of recompense. The business taskforce I chair is off to a great start as well. It’s this community spirit, from CEOs like yourselves, from all sectors of our economy, and from all corners of our country, that convinces me we can still face the future with confidence.


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Knock me down with a feather - the levy that'll tickle, not hurt

Julia Gillard's much-hyped levy won't do much harm and won't raise much money. Boosting the nations coffers by a mere fraction of one per cent, it'll set back an Australian on $80,000 one cup of coffee a week. A sandwich isn't at risk until your income hits $100,000. You would need $200,000 to lose a taxi fare.

More than half of Australia's workers (60 per cent according the ACTU) will pay nothing because their earnings won't reach the $50,000 threshold. Even someone on $55,000 will pay next to nothing because the levy will be only be applied to the $5000 of their income above the threshold.

The effect is a sliding scale of commitments quite different to the brutal and at times deeply regressive levies imposed by the Howard government. Its 11 cents per litre levy on milk, in force for almost a decade, hurt battlers but not their bosses, as did the sugar levy. Even the guns buyback levy was tacked on to the Medicare levy ensuring that Australians earning less than $50,000 paid up as well as those earning far more.

In an ideal world you wouldn't impose a levy at a time when the economy's reeling in the wake of a natural disaster. But this one is little and late...
The economy will be hammered in the first few months of the year. Westpac is talking about negative economic growth in the March quarter. But the levy won't come into force until July, months after a massive construction effort is underway lifting economic growth well into positive territory (or that's the plan).

And we will scarcely feel it because it will be taken out of our pay packets fortnight by fortnight rather than in a lump sum. Around $1.6 billion of the $1.8 billion will be collected through the PAYE system rather than at tax time.

It's almost as the Treasury implored the Treasurer and Prime Minister to go ahead with the levy if they must, but to make sure it wouldn't damage a damaged economy.

The downside is it'll won't raise enough to make much difference to whether or not Swan and Gillard hit their target of 2012-13 budget surplus. It would need to be awfully thin surplus for $1.8 billion to matter.

That's why they are finding most of the money elsewhere. Some of the schemes they are cutting are so embarrassing they must be glad of the excuse. As a greenhouse gas reduction measure, Cash for Clunkers would have made us a global joke. The Green Start program was a hasty fix for a very poorly implemented Green Loans program. There's always value in spring cleaning.

Published in today's SMH and Age


Prime Minister Gillard has taken an axe to billions of spending championed by her predecessor Kevin Rudd, cutting funding to sensitive areas such as housing, solar power, better cities and green cars in order to part fund a multi-billion dollar budget shortfall that will be left even after the flood tax levy.


SCRAPPED, HACKED, RAIDED AND REPROFILED

$2.8 billion in savings

"Cash for Clunkers' grants of $2000 per car from mid 2011 SCRAPPED Saving: $429 million

Priority Regional Infrastructure Program RAIDED Saving: $350 million

Higher Education Capital Development Pool WOUND UP Saving: $299 million

Green Car Innovation Fund WOUND UP Saving: $234 million

National Rental Affordability Scheme cut from 50,000 to 35,000 houses HACKED Saving: $264 million

Carbon Capture and Storage Flagship grants 'REPROFILED' Saving: $250 million

Solar Flagships program 'REPROFILED' Saving: $250 million

Solar Hot Water Rebate spending CAPPED Saving: $160 million

Green Start home assessment program WOUND UP Saving: $129 million

Building Better Cities grants to local government RAIDED Saving: $100 million

LPG Conversion grants scheme CAPPED Saving: $96 million

Australian Teaching and Learning Fund AXED Saving: $88 million

Solar Homes and Communities grants CAPPED Saving: $85 million

Global Capture and Storage Institute Funding 'REPROFILED' Saving: $55 million

O-Bahn Adeladie busway extension AXED Saving: $56 million


The temporary income tax levy is set to raise $1.8 billion during its one year lifetime. The budget shortfall left by the floods will exceed $5 billion in direct costs plus an unknown amount in lost revenue as lower export earnings cut the company tax take.

The Prime Minister will meet $2.8 billion of the shortfall by scrapping, raiding or "re-profiling" a dozen of the former Prime Minister's pet programs, as well as her own poorly-received "Cash for Clunkers" election promise.

Promised as part of the affordable housing push that helped bring Kevin Rudd to power in 2007, the National Rental Affordability Scheme gives developers of low cost housing a ten year tax break and their tenants a 25 per cent rent rebate. Well behind schedule it has delivered very few of the 50,000 new homes promised, a total that will now be cut to 35,000 slicing one quarter off its billion dollar budget.

The Green Start home energy assessment program that replaced Labor's Green Loans program will itself be axed and payments of the solar hot water rebate, solar homes and communities rebate and LPG car conversion grants will be capped.

Funding to the Carbon Capture and Storage and Solar Flagships programs and the Global Capture and Storage Institute will be "reprofiled" meaning some will be deferred and some will be trimmed cutting spending during the government's four year forward estimates period.

"There is complete consensus that the most efficient way to reduce carbon is to price carbon," said Ms Gillard. "Some of these policies are less efficient than a carbon price and will no longer be necessary - others will be better delayed until a carbon price's full effects are felt," she said.

The "Cash for Clunkers" 2010 election promise - one of Ms Gillard's own - put a price on cutting carbon emissions of around $400 per tonne, so ineffective would it have been in reducing pollution. Now scrapped, from the middle of this year it was to pay $2000 to each motorist who traded in a pre-1995 car for a more fuel efficient one.

The Green Car Innovation Fund, also scrapped, was an industry support scheme that directed grants to manufacturers such as Holden and Toyota that tooled up to produce lower emission models.

The Prime Minister hinted at further spending cutbacks after promising not in any circumstances to increase the planned tax levy and saying the full budgetary impact of the floods was not yet known.

Later today Treasurer Wayne Swan will update Queensland company directors on the Treasury's best estimate of the hit to revenues. Late yesterday Treasury was still working on the numbers.

Published in today's SMH and Age

Complete Flood Package Documents


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Thursday, January 27, 2011

The package as summarised by Gillard:



REBUILDING AFTER THE FLOODS

The Prime Minister today announced the Gillard Labor Government’s response to the immense national challenge of rebuilding flood-affected regions across Australia.

Preliminary estimates, following consultation with the Queensland Government, indicate that the Government will need to invest $5.6 billion in rebuilding flood-affected regions, with the vast majority going on rebuilding essential infrastructure.

Two-thirds of that funding will be delivered through spending cuts.

The other third will be provided by a modest one-year progressive levy that won’t be paid by people directly affected by the floods or by low-income earners.

The Government will deliver the funding through the following measures:

· $2.8 billion in spending cuts, including removing industry assistance and cutting back other green programs by abolishing the Green Car Innovation Fund and the Cleaner Car Rebate Scheme and making other cuts.
· $1 billion in delaying some infrastructure projects – which will free up funds and skilled workers at a time of skilled labour shortages around the country.
· $1.8 billion through a progressive levy on people earning over $50,000. This will only apply to income above the $50,000 threshold. For example, someone earning $60,000 a year will pay less than a dollar a week, while someone on average annual adult full-time total earnings of $68,125 will pay $1.74 a week. Anyone directly affected by the floods will not have to pay the levy at all.

Every cent raised through these measures will go directly to flood-affected regions across Australia.

The Government recognises many Australians have already donated to people affected by the floods to help them with personal costs. That is a great contribution, but entirely separate from the job of rebuilding essential infrastructure in flood-affected regions – which is what today’s announcement, including the progressive levy, is focused on.

To ensure recovery and rebuilding can start as soon as possible, and to provide certainty to the Queensland Government and Queensland local authorities, the Australian Government has agreed to make an advance payment of $2 billion to Queensland.
The decisions the Government has taken have been necessary to meet the scale of this disaster while keeping the economy strong.

The Government will rebuild Queensland while delivering the budget surplus as promised in 2012-13.

It is important to note that estimates of the impact of the floods are preliminary, and do not take into account what is expected to be a hit to government revenues as tax receipts fall in the aftermath of the floods.

Where the funding is going

The vast majority of the $5.6 billion will be invested in rebuilding infrastructure damaged by the floods.

After discussions with the Queensland Government, preliminary estimates of the infrastructure repair costs under existing arrangements for the Natural Disaster Relief and Recovery Arrangements (NDRRA) are around $5 billion, of which the Australian Government will provide close to three quarters (around $3.9 billion).

There are also anticipated to be significant but smaller costs arising from flooding in other states.

The Government has also committed significant funding to provide for urgent assistance for those affected by flooding, in line with standard arrangements for natural disasters. This is estimated to include around $600 million for the Australian Government Disaster Recovery Payment and $120 million for the Disaster Income Recovery Subsidy.

Levy

The Government will introduce a modest one-year levy to help pay for the rebuilding effort.
The levy will not be paid by those affected by the floods, will not be paid by lower income earners, and will apply only in the 2011-12 financial year.

The levy is based on an individual’s ability to pay:

· Anyone earning under $50,000 will not pay the levy.
· People earning between $50,000 and $100,000 will pay 0.5 per cent of taxable income in excess of $50,000.
· People earning over $100,000 will pay 0.5 per cent of taxable income in excess of $50,000 and 1 per cent of taxable income in excess of $100,000.


As examples:

· Someone earning $60,000 a year will pay 96 cents per week.
· Someone on average annual adult full-time total earnings of $68,125 will pay $1.74 a week.
· Someone earning $100,000 a year will pay $4.81 per week.

The levy will be paid through tax taken out of regular pay, in the same way the Medicare levy is paid.

To make sure those affected by the floods do not have to pay the levy, anyone who received an Australian Government Disaster Recovery Payment for a flood event in 2010‑11 will be exempt from the levy.

Spending cuts

The Government will make $2.8 billion in spending cuts, with the funding to go towards the recovery and reconstruction effort, including:

· Not proceeding with the Cleaner Car Rebate Scheme
· Abolishing the Green Car Innovation Fund
· Reducing and deferring spending on the Carbon Capture and Storage Flagships and Solar Flagships programs and the Global Carbon Capture and Storage Institute
· Abolishing the Capital Development Pool from 1 January 2012
· Discontinuing funding for the Australian Learning and Teaching Council
· Reducing the National Rent Affordability Scheme dwelling target
· Redirecting funds from the Priority Regional Infrastructure Program and Building Better Regional Cities Program
· Capping annual claims under the Liquefied Petroleum Gas (LPG) Vehicle Scheme
· Capping funding for the Renewable Energy Bonus Scheme – Solar Hot Water Rebate
· Not proceeding with Round 2 of the Green Start Program
· Capping funding for the Solar Homes and Communities Plan
· Withdraw funding to the O-Bahn City Access project.

Infrastructure

The strong Australian economy means that Australia faces very real skills shortages. This pressure on skilled labour will increase in the face of the major rebuilding effort in Queensland.

To make room for this demand the Government will defer $1 billion worth of infrastructure projects, freeing up builders, carpenters, electricians and other skilled workers to rebuild essential infrastructure in flood-affected regions.

Around $325 million of deferred projects have already been agreed with the Queensland Government, with the remainder to be discussed with the relevant state and territory governments (see Attachment 4).
Skills and the rebuilding task

As Australia rebuilds, this will create additional demand for skills and workers.
To assist employers in flood-affected areas fill positions and get on with the job of rebuilding, the Government will:

• Establish a special team within the Department of Immigration to deliver employer-sponsored temporary visas (457 visas) within five days (where applications are ‘decision ready’) for employers genuinely involved in Queensland flood reconstruction work; and
• Double the number of places in the job seeker relocation pilot program to help job-seekers move to take up employment opportunities.

The 457 visa program is demand-driven. These measures simply make it faster for employers to get the workers they need to rebuild. All workers seeking a 457 visa will still be subject to strict skills tests.
The recent floods across Australia pose a unique challenge.

This is likely to be the biggest natural disaster in Australia’s history in economic terms – an extraordinary event requiring an extraordinary response.

In times of crisis Australians see what needs to be done and we do it.

Australians have pulled together in the face of crisis in the last few weeks, and will continue to pull together in the difficult months of rebuilding that lie ahead.



Complete Flood Package Documents

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Complete package of flood response documents


Complete Flood Package Documents


Full text of Gillard's speech:


Yesterday was Australia Day, and in some ways, it was an Australia Day like any other.

Picnics and barbecues, tennis and cricket, a new Australian of the Year and new Australian citizens - in so many ways it felt just like last year did and just like next year will.

But yesterday in Toowoomba, Australia Day felt different to any I have known.

I went to Toowoomba yesterday to be with some of the people I have met in these last weeks. I went to Toowoomba, where shock has been followed by horror and horror has been followed by grief and where grief's long season has only now begun, because I wanted the people I have met to know that their Prime Minister won't let them go.

I also went to Toowoomba to express my admiration for the way Australians have started rebuilding already. Whether with a mop or a shovel or a bulldozer, Australians see what needs to be done and are doing it.

It is no different for the Government. I see what needs to be done and I will do it...

We will rebuild.

The great floods of this summer have been a national tragedy, not just a natural disaster, because of the awful loss of human life.

The great floods of this summer have destroyed billions of dollars of wealth and robbed us of billions of dollars of income. In time they may prove to be the most expensive disaster in Australian history.

We are grieving.

We are burying the dead.

We are thanking many thousands for their courage and selflessness.

We are moving from crisis to recovery.

Now is the time to count the cost and to start to rebuild.

THE TASK BEFORE US

So today, I want to explain what we already know about the task before us and what we plan to do.

Queensland is of course the worst affected, but there are flood affected areas in almost every state, and the effects are being felt in the whole country today.

In order to think clearly about the best way to rebuild we need to understand not only the costs to the economy and the Federal Budget, but the growing capacity constraints on the economy, as well as the importance of the Government's long-term reform agenda.

The economic costs begin with the immediate cost of damage and destruction of property.

Private homes and cars have been wrecked, business equipment ruined, public ferry terminals and highways have been damaged, even the ocean floor of Moreton Bay itself needs cleaning up.

That is a huge, one-off cost – simply replacing the things the floods have destroyed. These costs will be shared by people and families, by firms and insurers, by all levels of Government.

The Australian Government's greatest part is through direct payments to affected individuals and businesses and through the cost of rebuilding. And in rebuilding, the Australian Government pays the greatest share. Under our longstanding natural disaster arrangements with the States, we meet 75 per cent of this cost for major disasters.

Today's estimates of the Federal Budget costs of these floods over the next four years are of course preliminary, but they are the best figures we have before us.

The Australian Government Disaster Recovery Payments – which have given short-term financial assistance to half a million Australians affected by the floods – are estimated to cost over $600 million. The Disaster Income Recovery Subsidy – helping workers, small businesspeople and farmers who have lost income – will cost another $120 million.

At this stage – and I stress the estimates are preliminary and costs may well rise – the cost to the Australian Government of rebuilding flood affected areas outside Queensland is estimated at $1 billion.

Rebuilding flood affected areas in Queensland itself is estimated to cost us $3.9 billion.

Bringing all of those elements together the best preliminary estimate of the direct cost to the Federal Budget of this summer's flood disaster is just over $5.6 billion.

So that is the immediate Budget challenge, to find over $5 billion.

Although our economy remains strong, there is also the one-off effect on economic activity because of the immediate disruption from the floods.

When a city of millions is closed for business for days, the cost to the economy is huge. When roads are closed all over a State that represents a fifth of GDP, the cost to the economy is enormous.

And the cost of this disruption continues into the future. Some coal mines won't return to full production for months and farming will be affected for seasons.

Treasury's preliminary estimates are that GDP growth in this financial year will be around half a percentage point lower due to the floods. The Treasurer will be saying more about the future impact on the economy in coming days.

But we still have the advantage that our overall economy is strong and that means we have the capacity to pay as we go”.

With our growing economy and rising national income, we can pay for rebuilding now. And if we can, we should. We should not leave the task of finding the money until future years.

My experience in Government since 2007 tells me that while we must plan to sustain growth we must never take future growth for granted, so we should not put off to tomorrow what we are able to do today.

Solely borrowing to rebuild Queensland is a soft option I am not prepared to consider.

My Cabinet's job is still to make the decisions which will bring the Budget back to surplus in 2012-13.

In a growing economy, we pay as we go.

In addition to the Budget challenge there is a wider economic challenge as well: building and managing economic capacity.

This is because we don't only need to be able to pay for the new things we now need – we quite literally need to be able to make the new things we now need as well.

The floods have not washed away piles of hundred dollar notes. They've put holes in roads, buckled rail, broken up sections of ports, wrecked factory equipment, washed away fencing on farms.

So we're not just going to need money, we're going to need concrete and rubber and steel – and more importantly, we're going to need carpenters and bricklayers and road gangs.

And while the advantage of a strong economy is felt when we come to fund the rebuilding, the challenge of a strong economy is felt when we look for the capacity: delivering the actual rebuilding itself.

There is unprecedented demand in many parts of Australia for skilled labour.

Unemployment is already low and participation is already rising.

And that's before we add one extra tradie or truck driver to rebuild after the floods.

There is unprecedented pressure on Australia's infrastructure as well.

More infrastructure is already needed to nurture the mining boom and support economic growth, so the Government is investing in long lived economic assets and infrastructure like high speed broadband, ports, roads and rail.

Now we have thousands of kilometres of roads and rail to rebuild as well.

Simply spending to rebuild without addressing the balance between supply and demand in the economy as a whole is not an option.

That would only drive up the cost of skilled labour and the cost of building materials and other economic inputs, reduce value for money in the rebuilding itself, rob our mining industry and other economic sectors of the skills and material they need, and ultimately spill over into higher inflation and interest rates.

To make up for the demand we are putting into the economy with our rebuilding efforts the Government must take some demand out of the economy at the same time.

So sound Budget principles say we should pay as we go – and sound economic principles say we should not add to capacity pressures.

And we must drive reforms for the future as well.

I know Australians expect that while we rebuild after the floods, the Government will not lose sight of our long-term reform agenda.

Australians expect their governments to do more than one thing a time.

So 2011 remains a year when I will be delivering the national broadband network, creating more opportunity through education reforms and improving health care as well as a year when I will make long-term decisions on workforce participation and a carbon price.

That is my job and that is what I will do.

DELIVERING REBUILDING

Here's how I'll begin.

I will make an immediate upfront payment to Queensland of $2 billion.

With this money rebuilding can start in more than 60 flood-affected communities across Queensland.

The payment will be made in the current financial year, as soon as financial controls and arrangements are finalised.

I'm acutely conscious of the desire of the Queensland Government to use their powers to cut through red tape and deliver rebuilding as fast as they can. I want to ensure that nothing in the funding arrangements holds them back.

I want this money to be available immediately. In my meetings with Premier Bligh and with Major General Mick Slater they've stressed that no town should be closed for a day longer than is necessary because of a lack of funds ready to be spent. And from my discussions with local community leaders and small and medium business owners, they want funds to flow as soon as possible so economic life can return to the main streets of regional towns.

A National Partnership Agreement with Queensland will establish the conditions of the funding. I expect this to be a simple, transparent and generous set of guidelines which ensure public money is spent in the right ways and at the right time.

Queensland will get what it needs.

The money will be managed by the Queensland Reconstruction Authority, which will scope and coordinate the total statewide rebuilding program and develop a statewide reconstruction plan. This will take into account unique local problems and opportunities in each flood affected community.

Payments to other states will be made through the Natural Disaster Relief and Recovery Arrangements in the usual way. We are working closely with the responsible State Governments to ensure all this assistance is delivered when and where it is needed.

The Australian Government's total commitment – which our best estimates suggest will reach $5.6 billion – is absolutely vital to the rebuilding of our country and our recovery from the floods.

FUNDING AND SKILLING REBUILDING

We will meet the cost.

Rebuilding after the floods in an economy with growing capacity constraints for the present while delivering reforms and making decisions is a big job and there'll inevitably be setbacks.

But as a nation we are up to the challenge and we are up to managing the economic strains.

So we can do just that, I have made a set of decisions on funding and managing economic demand.

I announce today a $5.6 billion funding and skilling package for flood rebuilding.

A balanced package which cuts some spending programs, defers some new infrastructure and applies a one-off levy to most Australian income earners from 1 July this year.

Two dollars are saved in spending cuts for every dollar raised by the levy.

With other changes to ensure we have enough skilled workers to get the new work done.

First, we will deliver a one-off levy. It will not include lower-income earners.

A levy of 0.5 per cent will be applied on taxable income between $50,001 and $100,000 and a levy of 1 per cent will be applied on taxable income above $100,000. Anyone earning under $50,000 will not pay the levy.

In other words it is not like the Medicare Levy, which for most taxpayers applies to all their income – it is like income tax rates which apply only above certain income levels.

Under this levy, someone who has an income of $60,000 will pay just under $1 extra per week. A person earning $100,000 per year will pay just under an extra $5 per week.

The levy will apply only in the 2011-12 financial year and it will raise $1.8 billion.

People who were affected by the floods will not pay this levy.

Anyone who receives the Australian Government Disaster Recovery Payment for a flood this financial year will be exempt.

And importantly, this levy is completely separate from donations.

People who have generously donated are helping out individuals in their time of need. People who pay this levy will be helping to rebuild the infrastructure – roads, bridges, ports – which has been torn apart by these floods.

The great majority of Australians are ready to contribute, I have no doubt about that.

The legislation will be introduced into the Parliament in the first sitting week.

Second, we will defer some infrastructure projects to help manage capacity constraints and to redirect funding to immediate rebuilding.

Six Queensland roads projects will be delayed by periods of one to three years. This will save $325 million in the Budget period. And these changes have been agreed to by the Queensland Government.

I have also identified a number of projects in other states where delays and reductions in Australian Government funding will save approximately $675 million. Over coming days I will be discussing these projects directly with the affected State Governments before the Minister for Infrastructure publicly announces the details of our changes.

The savings from these infrastructure decisions make a major contribution to funding the rebuilding. Perhaps even more important, these decisions will free up skilled labour for rebuilding. This is part of ensuring we not only pay as we go, but manage capacity as well.

These decisions will also ensure value for money when these projects are delivered.

That's an important part of my thinking in deferring these infrastructure works: for these long-term projects, I am determined to ensure value for money. Pressing ahead now would inflate the cost to taxpayers considerably.

Third, we will cut some spending programs and cap some others.

I am abolishing, deferring and capping access to a number of carbon abatement programs.

These include the Green Car Innovation Fund, Cleaner Car Rebate Scheme, the Carbon Capture and Storage Flagships and Solar Flagships, the Solar Hot Water Rebate, Green Start Program, Solar Homes and Communities Plan and the Global Carbon Capture and Storage Institute.

The key to these carbon abatement program savings is my determination to deliver a carbon price.

There is complete consensus that the most efficient way to reduce carbon is to price carbon. Some of these policies are less efficient than a carbon price and will no longer be necessary – others will be better delayed until a carbon price's full effects are felt.

And these decisions also mean cuts to industry programs. Business will be doing its part.

With the major call on the Budget for rebuilding, it is now appropriate to reduce this spending, in the knowledge that the objectives will be delivered better through the Government's more economically efficient policy of a carbon price.

I am also capping some programs to limit their cost: the National Rental Affordability Scheme and the LPG Vehicle Scheme. And some lower priority education spending, where the desired outcome can be achieved through other programs, will be discontinued. This includes the Capital Development Pool and the Australian Learning and Teaching Council.

And Building Better Regional Cities funding and Priority Regional Infrastructure Program funding will be redirected to the highest priority infrastructure demand on Government – flood rebuilding.

There are no easy savings, but this package is balanced and appropriate.

I am confident Australians will understand the need for these decisions.

Skilled labour will be as important as funding for rebuilding.

The 457 visa program for temporary skilled migrants has proven to be very responsive to prevailing economic conditions. The program is entirely demand driven by employers.

So I am announcing quicker approval for temporary skilled migrants who work on flood rebuilding. There will be extra resources, assistance to employers and simpler processes to ensure a five day turnaround for ‘decision-ready' applications for workers in a host of nominated occupations to work on rebuilding Queensland.

I am also doubling the pilot of relocation assistance for people on income support and directing it to Queensland. Up to 4 000 eligible jobseekers who want to get a job helping out will now receive support to move to Queensland and make a difference on the ground.

The offer to these jobseekers is simple: we can get you help to get there if you can stick at the job.

The funding and skilling package is the right one.

Two dollars saved in spending cuts for every dollar raised through the temporary levy.

Cutting less efficient carbon abatement programs because the carbon price will deliver a market based solution. Business doing its part through cuts to industry programs.

Capping demand-driven programs to limit costs. Redirecting infrastructure spending to the highest priority, flood rebuilding. Delivering the skilled workers we need as quickly as we can.

Paying as we go and managing demand.

THE INVALUABLE WORK OF THE COMMUNITY AND BUSINESS

As important as the role of government is in responding to this disaster, others will also play a vital role.

Australians have given generously to the Premier's Relief Fund in Queensland and similar funds in other states. I am very proud of that helping hand of mateship.

This will help meet the hardship and distress of individual flood victims.

The Australian Government has pledged contributions to these funds as well as encouraging business to give generously.

And I do want to take a moment to pay particular tribute to corporate Australia's contribution in the crisis. Hundreds of Australian big, medium and small businesses have already pledged money and donations in kind.

My meeting with business leaders in Brisbane on Monday confirmed that more money was on its way to rebuild and repair – as well as trucks to remove the rubbish, bottled water for drinking, clothes and toys for people whose houses were lost or damaged.

These are just examples of the substantial corporate assistance coming through.

I'm proud of the way corporate Australia has given something back this month.

I believe all insurers should show as much compassion and flexibility in dealing with individuals affected by the floods.

Australia's insurance industry has a very positive record of assisting communities after natural disasters, but I know a number of questions have arisen as a result of the floods about definitions, coverage and consumer protection.

Already the Treasurer and Assistant Treasurer have engaged in a frank and constructive dialogue with the Insurance Council of Australia and the major flood affected insurers and we have seen RACQ lead the way by announcing a $20 million package to assist flood victims.

This is an example the industry should follow.

But the rebuilding cost for government is something quite different from corporate assistance and the relief funds or the costs met by insurance.

Donations will provide invaluable extra help.

Government funding will provide the core assistance all Australians rely on and rightly expect from their Government. This will largely fund the restoration and replacement of essential public assets and long-term economic infrastructure.

Roads and rail to get farm produce to market and coal to port - Integral parts of the public infrastructure, which urgently need to be brought back into service, and for which the costs run into the billions.

A CHALLENGE FOR OUR NATION

I've spent a lot of time in flood-affected parts of our country in the past two weeks.

I wanted to be on the ground to make sure that the Queensland Government could get whatever it needed from the Government straight away.

I also wanted to be able to see my Government's efforts with my own eyes and ensure it was all working at its best, across the country.

What I have learnt has certainly been instrumental in my own thinking as we've put together this package to rebuild after the floods.

And while what I learnt was important, what I was reminded of was so much more.

I was reminded about our people.

Flood affected people in Queensland who feel the sorrow, even the grief, but who know the sun will come up and are determined to endure.

Flood affected people outside Queensland who keep telling me there's worse off than them, and they are glad there hasn't been greater loss of life in their parts. But flood damage is flood damage and in a quiet way, they also say to me ... don't forget us.

Australians not affected by floods who just want to help. Not just Brisbane's amazing clean up volunteers, not just friends filling sandbags for friends, but all Australians, especially those far from the waters, are looking for a way to make a difference.

As I reflect on these floods and what has happened, I can't escape the sadness. None of us can. But I won't forget the pride in what we have done together.

But then I look forward and I know what needs to be done: Investing in rebuilding; investing in future growth; managing demand; reforming for the future. That's what we will do.

My plan for rebuilding after the floods is the right economic solution, but it is more than that.

It is what Australians have a right to expect.

Putting the national interest first.

Working to build consensus.

Tackling the big challenges.

Focussing on delivery.

Doing it the Australian way.

Sharing and sticking together.

Everyone doing their part.

We put out a hand to help the flood victims on the first day when they needed us. They still need us.

We won't let go.


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Flood package documents

FLOOD COSTS BREAKDOWN


LEVY DEETS


JG Levy deets


SKILLS DEETS


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Oh, and we're slowing down the flow of migrants - Access

As hard as the floods will hit the economy, Access Economics expects new migration rules to do worse.

In its quarterly business outlook released this morning the firm excoriates the government for twice cutting Australia's migrant intake, and then changing the rules governing foreign students in a way that accelerated the decline.


"It was a much needed change, but it came just as the international education sector sailed into a perfect storm. Publicity over the treatment of Indian students, the closure of colleges leaving some students high and dry, an increase in visa costs, the change in the ease of getting permanent residency, and the rapid rise of the dollar have all conspired to cut very sharply into foreign student numbers," the report says.

The net migration of 280,000 Australia enjoyed in the previous boom will be closer to 180,000 in the present one.

"Australia had the people to help satisfy the last jobs boom. The boom has returned but the working age population numbers are set to crawl when they should be sprinting."

"Victoria will be hard hit. Its high foreign student numbers had seen it grow fast," said Access director Chris Richardson. "Of course Western Australia will be the biggest victim because it needs workers in the boom and is just not going to get them"...

"Last time we got lots of extra workers from the rest of the world and we had skills shortages, wage growth picked up, inflation went up and the Reserve Bank was jamming on the brakes. The key difference this time is we won't have the people power."

"It is almost too late for the government to reverse things, the dollars have begun flowing in and if you can't get the workers you blow smoke - you put up wages and get high turnover."

Mr Richardson expects the Reserve Bank to being pushing up interest rates again as soon as April, although the floods may make it hold off for a few more months.

It expects near-record crops in 2010-11, with the winter crop perhaps the second or third biggest of all time because of the impact of the rain before the floods.

"Inflows into the Murray Darling Basin is giving the river system a much needed flushing," Mr Richardson's report says. "Many irrigation storages are now full and soil moisture has lifted in a way which should help the 2011-12 crop as well."

The Access forecasts are weaker than those in the Treasury's mid-year review because they were finalised after the December release of the disappointing September quarter national accounts. Prepared before the floods hit Brisbane and Swan Hill the forecasts put economic growth at a below-trend 2.7 per cent this financial year, climbing to 3.5 per cent in 2012-13.

Mr Richardson now expects very weak but still positive growth in the first quarter of this year, a better outlook than Westpac which has growth turning negative in the March quarter.

Before the floods the budget was on track to return to a slight surplus in 2012-13, although "off the back of revenue luck rather than the dint of hard fought spending cuts".

Published in today's SMH and Age


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Ah memories. Today Gillard will ditch Cash for Clunkers





Let's see. What's left of the other ideas she came up with on the run during the campaign?

The Peoples' Assembly?

The Timor Solution?


Michelle has the story.

Gillard will announce details at the National Press Club, 12.30 pm AEDT


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Wednesday, January 26, 2011

Might this be the wrong time for a levy?

Hands up everyone who knows the difference between a good levy and a bad levy. Hands down Wayne.

The Treasurer is softening us up for a levy to fund the cost of rebuilding after the floods. He thinks its a great idea because it has been tried before and worked. Prime Minister Gillard is expected to announce it tomorrow.

Over the weekend Swan outlined its impressive lineage.

"We've seen levies used in the past to fund programs such as the gun buyback scheme, worker entitlements after the collapse of Ansett Airlines, and assistance packages for the dairy and sugar industries," he said. "It is just common sense to keep all the options on the table as we consider how the Commonwealth Government will help to rebuild Queensland, and how we will fund that."

But what was common sense in paying for the buyback of firearms, assisting with the collapse of Ansett, funding the commitment to East Timor and compensating farmers is far from common sense when it comes to rebuilding after the floods. It could actually be dangerous.

Don't get me wrong - I like the idea of levies. When voters such as myself were metaphorically screaming at the Howard government in 1999 to do something to help the people of East Timor it was only right that we were presented with a bill... What we wanted cost one billion. Howard was to get it by saddling those of us on middle to high incomes with an extra Medicare levy for a year. (He later decided not to, but it was still a good idea.)

The guns buyback levy was a corker of an idea. The nation asked for it, the nation needed it and the nation was prepared to pay.

The 11 cents per litre milk levy, now ended, was so successful it bought us lower milk prices while it was in place (and much lower since) such was the fierce deregulation it ushered in.

So how is a levy to fund the costs imposed by the floods different?

Wayne Swan can't see a difference. He told a press conference yesterday the costs imposed by the floods would be enormous, and "the fact is, the money has to come from somewhere".

"I don't think the Australian people would want us to respond by hacking into health and education, sacking teachers or nurses," he said, setting up a straw man.

The alternative of pushing out the budget's projected return to surplus in 2012 was unthinkable.

"The Commonwealth made it very clear when we acted to protect our economy from global recession that when growth returned above trend we would move our budget quickly back to surplus, not because it is some vauge objective, but because it is the responsible thing to do."

Responsible no matter what?

Apparently so.

On the Sunrise program during the August election Swan promised the Seven network's David Koch, "we’re getting back into surplus in three years, Kochie."

Koch probed, "Come hell or high water?"

Swan replied, "Come hell or high water, but we’ve got the judgement to handle these situations."

Judgement is needed because hell and high water are quite different to decisions to buy back guns or pay off farmers for deregulation.

They knock the stuffing out of the economy. When the economy is winded it is wise not to whack it further.

The Treasurer knows about the impact. He said yesterday it would be "unprecedented in economic terms". The resulting price increases alone would be "pretty tough on the family budget"

Sunday he told us the economic toll of the floods would surpass that of tragedies such as the Victorian bushfires and Cyclone Tracy.

Queensland makes up 19 per cent of the nation's production, 80 per cent of our coking coal which is itself responsible for 2 per cent of GDP.

Westpac expects economic growth to turn negative - yes, negative - in the March quarter. It has slashed its forecast from growth of plus 1.1 per cent to minus 0.1 per cent.

Consumers are withdrawing into their shells. This month the proportion feeling good about conditions over the next 12 months dropped 16 per cent.

Woolworths is bemoaning a "new frugalism" and says spending on discretionary goods will be hit as people struggle to afford flood-hit basics.

It's the wrong time to hit consumers further.

Coles knows this. From today it is cutting the price of its milk one cent per litre in an effort to entice customers into its stores.

Wayne Swan should know it too. The whole point of economic management is to soak businesses and consumers when times are good and to tighten up or hand money out when times turn down.

Professor Warwick McKibbin has been doing it for ten years on the Reserve Bank board.

Last week he likened the economic impact of the floods to that of an earthquake, one he has run the numbers on.

"When Japan's Kobe earthquake struck the wrong response was to tighten government spending," he said. "What was needed was more spending to support demand and confidence."

"Sure it's important not to have too much debt," he told The Age. "But the idea that you have to have a particular surplus at a particular point in time no matter what, is dangerous."

Swan and Gillard are about to lead us down a dangerous path.

There will be plenty of time to impose a levy or to slash spending when the economy is on the mend.

To do it now, as the economic shockwave of the flood is about to hit, betrays enormous insecurity. They must know it matters scarcely at all to government finances whether the budget hits surplus in 2012, 2015 or 2011.

But it could matter enormously to economic management. We hired Swan and Gillard to manage the economy. They did it well (with Rudd and Tanner) during the crisis. It would be nice if they did it well after the flood.

Published in today's SMH and Age


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Here's the bad news. Food was soaring before the flood


Going up:        Fruit prices +15%
                       Vegetables +11%
                       Petrol + 2%
                       Rent +1%

Going down:   Chidren's clothes - 1%
                       Major appliances - 2%
                       Women's clothes -3%
                       Computers, HiFi - 5%
                       Men's sox, briefs -7%


                              ABS 6401.0 December quarter 2010


Food prices were soaring before the full force of the floods that wrecked Australia's Queensland, northern NSW and Victorian foodbowls. New figures show retail fruit prices jumped an extraordinary 15 per cent between the September and December quarters of last year, and vegetable prices 11 cent.

Along the east coast the rises were even steeper with fruit prices up 17 per cent in Sydney and Brisbane and 16 per cent in Melbourne. Vegetable prices climbed 15 and 10 per cent.

Mostly unrelated to the floods, the supply shortages were just a taste of what's in store with Treasurer Wayne Swan yesterday outlining official figures showing 80 per net of Australia's beetroot is produced in flood-affected areas as well as 60 per cent of sweet potatoes and zucchini, mandarins and spring onions.

"Many families will be doing it tough at the checkout when the price hikes flow through in the weeks and months ahead," he said responding to an otherwise benign inflation result of just 0.4 per cent for the quarter and 2.7 per cent for the year to December.

TD Securities economist Annette Beacher said she had penciled in a further jump of 50 per cent in fruit prices in the March quarter... a "guesstimate" based on the spike in banana prices after Cyclone Larry wiped out 80 per cent of Australia's banana crop in 2006.

"There's a wider variety of produce affected, but on the other hand there's scope for importing which there wasn't for bananas," she said.

Commonwealth Bank economist Michael Blythe said the days of relatively cheap food were ending. Prices would continue to climb even after impact of the floods had passed.

"Rapid income growth in emerging economies is lifting the demand for food," he said. "Economic history shows that the largest increase in food consumption typically occurs as incomes rise from low levels. Most of any rise in income goes on food, either more of it or better quality."

"The other driver is the expansion of biofuels which will absorb more agricultural production over time. The Food & Agriculture Organisation believes global food prices have climbed 46 per cent over the past four years. Australia is not immune."

The Reserve Bank's preferred so-called underlying measures of inflation were tame at 0.4 per cent for the quarter and 2.3 per cent for the year. These measures underweight large price movements such as those for food and for petrol which jumped 2 per cent.

Weighing inflation down was heavy discounting in the face of weak consumer demand and rapidly falling prices of imported electronic goods such as computers and audio visual equipment which slipped 5 per cent in the quarter and 18 per cent over the year.

"The Reserve Bank over-estimated the strength of the economy when it lifted rates in November," said Commonwealth Securities economist Craig James.

"The economy is now struggling for momentum, keeping downward pressure on prices. Certainly interest rates won’t be rising any time soon."

The December figure was also artifically depressed by the operation of the Pharmaceutical Benefits Scheme which cuts the price of prescription drugs to zero toward the end of the year for heavy users.

The March quarter figures will be boosted by higher recorded pharmaceutical prices and by increases in education prices at the start of the school year.

Published in today's SMH and Age


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6401.0

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What an impressive Australian. Meet Ron McCallum.


Senior Australian of the Year

A few years back Julia Baird and I conducted a remarkable interview with him.

Enjoy to the audio here, or read it below the fold.


Ron McCallum is a passionate and extraordinary Australian. The Dean of the Sydney University Law School, it is a position he has reached against near-overwhelming odds.

That’s the sound of him reading, Or rather the sound of Professor Ron McCallum being read to by an electronic voice.

It’s a rate of audio information input most of us can’t begin to comprehend.

And yet it’s how one of Australia’s foremost experts in industrial relations law reads everything.

Professor Ron McCallum is the first totally blind person to have been appointed to a full professorship at any Australian university.

He has been driven to succeed, but also driven by a sense of justice - one that’s been deeply offended by the new industrial conditions introduced as a result of the government’s WorkChoices legislation.

Just this week there have been reports of one employer using the legislation in order to remove its workers rights to penalty payments, bonuses and public holidays in return for a pay increase of just two cents an hour.

Ron McCallum says more like that is around the corner. And he’s worried too about the way in which WorkChoices has been introduced.

The Commonwealth government has purported to grab control of industrial relations from the states using the power to make rules governing corporations given to it in the Australian constitution.

Professor McCallum says there’s something wrong about using a power over corporations in order to control the working conditions of human beings.


Ron McCallum:

I think it’s the most significant case on federal state powers since the high court disallowed the nationalisation of the banks in the Chifley government in 1949. The High Court and the Privy government said the federal government didn’t have power to nationalise the banks, it’s of that level, because if the federal government wins in this case then it seems to me they can establish a whole lot of other laws governing all the things that corporations do and corporations do most of the things that happen in private sector economy.

Julia Baird:

What is it about the things that happen in a private sector economy that particularly disturbs you?

Ron McCallum:

I’m a fairly simply fellow Julia. Corporations power should be for corporations, the labour power, that’s the consolation power should be for settling and preventing labour disputes. By using the corporation’s power to enact our labour laws we’re corporatising labour law. We’re making it a subset of corporations law.

Julia Baird:

And therefore making workers a commodity.

Ron McCallum:

Exactly, I have put this view up by using examples which may seem frivolous but it’s to make a serious point. Supposing we had a power in the constitution called the women’s power and it allowed parliament to make laws about women. Could we use that power to make laws allowing women and men to marry each other and divorce each other and the answer is, yes. But wouldn’t we say that these laws are a bit lopsided and that we gentlemen are but mere appendages? The point I’m trying to make is that if you put labour law as an appendage to corporations law, it’s corporation law that always wins.

Julia Baird:

Look those that have followed your public speaking and commentary and your work on Industrial relations would know that you’re very passionate about it and this might be a stereotype, but we can usually expect expertise from a Dean of Law but not always passion. Can you explain what it is about these laws particularly which invoke such passion in you?

Ron McCallum:

I’ve worked all my life around the world and in Australia to find balances between the rights of employers to operate their businesses and the rights and obligations of employees. These laws are unbalanced. I find it unjust for example that if the majority of workers at an enterprise want to be dealt with collectively, they can’t insist upon that right. I find it unjust that if your employer which is incorporated and has a hundred or less people and you are terminated because arbitrary capricious or unfair behaviour, you have no remedy other than the common law. I live and breathe these laws. I have friends and acquaintances and family working, I’m a worker myself and it’s only really through our passion and commitment that we can really get things done.

Julia Baird:

Let’s talk about some of your life now. You’ve said that this has been something which has preoccupied you ever since you were young and one of the extraordinary things about you is that the area of your expertise, the law requires many long hours of reading and you’ve reached the top of your field despite the fact that you were blind. I understand that when you were born in 1948 you had perfect site but your eyes were damaged while you were being looked after at the hospital as a premature baby. What happened?

Ron McCallum:

I’m what’s called a retrolental fibroplasia child. When I was born ten weeks premature, they put me in a humidicrib and the only way they could keep me alive was by using pure oxygen. It caused blood vessels to grow, which pulled the retinas off the back of my eyes, so I guess I lost my sight a few hours after birth.

Julia Baird:

That must have been a terrible accident for your parents to come to terms with, how did they react to that?

Ron McCallum:

My mother was a very strong woman, she reacted very well, my father, it was his second marriage, it was after World War 11, he had post traumatic stress, the way we would describe it now. I don’t think he handled disability, the fact that I was disabled you know, he just found me as I perceive it now, hard to accept.

Julia Baird:

That must have been very hurtful for you as a child?

Ron McCallum:

I’m not sure that I found it hurtful. He was a strange very ill man when I look back on it now. He used to push my mother around a little and I, you know I’ve got teenaged children who are going to be listening to this, he was a sick man I think it would be fair to say. I don’t know that it was after any event, it was the coming to realization that, I decided at the age of thirteen that I was going to be my own person and that I would not be put down by anybody and that I would say what I think and always be me and maybe that had something to do with the fact that now I speak out on things and I try and be me all the time.

Julia Baird:

You said to a journalist once that your great passion in life was to read…

Ron McCallum:

Absolutely.

Julia Baird:

At what age did you become aware of this and why were you so keen?

Ron McCallum:

About two and a half or something. My Mum was reading to my older brothers and to me, they were looking at pictures on the page and I went up like to try and feel the page and my Mum explained to me I couldn’t see the pictures and that what she was doing was reading print that I couldn’t see and would never be able to read and from that time onwards I would have loved to read. I had to spend all my time when I was a high school student getting people to put things on tape. When I was at university, I could always get students to read criminal law but as to reading conveyancing, no way.

Julia Baird:

Did any of your readers ever kind of fall asleep or nod off while they were going through it?

Ron McCallum:

No, but I did.

Julia Baird:

Did all these huge number of hours, you talked about kind of living on your own, did this affect your social life, the number of hours you would have had to put in to all your study and listening to these tapes?

Ron McCallum:

I think so; I just had much less social life because I was busy working.

Julia Baird:

Were you expecting to marry or have children, did you want to have kids?

Ron McCallum:

Yes, when I was a young teacher at Monash I would spend every Friday morning every couple of weeks at the creche where they asked me to help run the four-year-old program. That was a great outlet to me, I didn’t expect to have children and when I met Mary and we were getting engaged I said, “Well look, this is great getting married but you’d better get the thumbs up from my creche class because…”

Julia Baird:

I gather she got it!

Ron McCallum:

She got it and one of the students came up to me after Mary visited, Jennifer I think it was, who would now be 25 or 26 and she said, “Mr McCallum we’ve been talking and we think you ought to marry her.” I said, “Okay, I’ll do it.”

Julia Baird:

And how did, were there things that she had to come to terms with about the fact that you were blind?

Ron McCallum:

Her father is a world famous ophthalmologist, he was first professor of Ophthalmology in Australia, Gerard Crock. You know he has given sight back around the world to thousands of people and he has a blind son-in-law and a blind father of his grandchildren so it’s quite extraordinary. Which you know I think, there are frustrations. I think most ladies would say there are frustrations living with any man and perhaps vice versa but you know, I can’t drive a car, when I get very tired, I get very confused. I don’t always look this organised. She’s never complained in the sense of my disability which I think is extraordinary, I think if the boot were on the other foot, I’d say, “Oh for God’s sake”, so I think that’s truly amazing.

Julia Baird:

What did falling in love and getting married change for you?

Ron McCallum:

People didn’t perceive me, when I became a husband and a Dad, people seemed to perceive me more in the mainstream. Now I could be misconstruing that but that’s my perceptions, suddenly people looked at me and thought, “Yes, he’s doing all the things we do.”

Julia Baird:

And had you expected to do all the things that everyone else does?

Ron McCallum:

No, at that time technology came along and technology altered my life because they were now inventing synthetic speech which could be used with computers and also scanners where you could scan books and by 1989 I could scan a book, I didn’t have to get someone to read it. I could put a book on a scanner and it would be read out synthetically. It’s liberated me, I can be not only hopefully a good husband and Dad but I can be a government advisor and Dean of a law school.

Julia Baird:

I think you said once, “It was like saying to a paraplegic, ‘you can walk now’.”

Ron McCallum:

Yes. You know people say to me and you can cut this out of the interview if you like, people say to me, “Wouldn’t you like to see your wife and see your children?” And I think in an abstract way, I suppose if you could see it would be good, but I’ve never seen and I know that Mary and I bathed the children when they were born, I know them, I don’t need to see them, doesn’t mean anything to me, but if you’d said to me at the age of ten, “Would you like a machine that would read to you automatically?” I would have said, “Yes.” Look it got so complicated that I had a little bit of counseling, I married Mary in 1986 and we had a child a year later and then technology, the first talking computer, I had sexuality and being a Dad and technology and they all hit at once and suddenly I was liberated and I could read whatever I wanted to read. I could actually put on the scanner pornography in theory!

Julia Baird:

And did you?

Ron McCallum:

No but I wrote my first book from memory on a typewriter and if you’d come into my office I would have said, “Look would you read me the last sentence I wrote, because I can’t remember and I’d keep on typing.”

Julia Baird:

Right.

Ron McCallum:

Someone recently wrote that Ron McCallum’s writing had become crisper and I thought, “Yes, I can now read it back.” But yes, if you’re an academic and you want to read and you want, information is power and now I can do it, it’s extraordinary; I never imagined it could happen. You know I didn’t imagine marrying or having children but I knew people did marry and have children but at that stage I never knew that we would invent this technology. Sometimes in the middle of the night, Mary will reach over and feel my ears, this is nothing to do with amorousness, we’ve been married twenty years, this is, “Are you still plugged in and would you try and get a balanced life!”

Julia Baird:

You described it as when you first made this discovery and I think it was in December 1989, it was orgasmic…

Ron McCallum:

Yes.

Julia Baird:

Can you tell us about that actual moment when you were able to scan material into your computer?

Ron McCallum:

Yes, the scanner had arrived and each week on my desk comes a loose part of the law reports from around the world and you can read cases and the first part that came to me as soon as I got the computer was from England, it was the House of Laws decision on Occupational Health and Safety. Now I teach that law. Normally I would have had to go and find someone to read it, I said, “No, no, no. I’m going to read this myself now.” I walked into the room, I put it on the thing and I read it and I came out and I thought I can do this. The days of asking someone to read me something are over. It’s a bit like you know if I hadn’t learnt to do up my shoes or my buttons, would I have to say to someone everyday, could you please do up my buttons? I can read what I want to read, when I want to read, I can read whatever I like to read whether it’s permissible or impermissible.

Julia Baird:

I think you’ve got your, we might call it a talking machine but its actually called something else.

Ron McCallum:

This is a computer with a synthetic voice.

Julia Baird:

It reads to you from things which are scanned into it right?

Ron McCallum:

Yes will this one, some things are scanned in and other things are taken off the net. What I took off the net was the work choices bill scanned it into that and I can now read it by pressing these buttons here.

Julia Baird:

Can you play it for us?

Ron McCallum:

I will, I’ve put it on the very slow speed.

Julia Baird:

Okay....

It’s like Star Trek.

Ron McCallum:

I can slow it down more…Now if I were going to read it myself, I would read it like this…

Julia Baird:

Oh my goodness.

Ron McCallum:

But I’m trained to do that.

Julia Baird:

But it’s like another language.

Ron McCallum:

Yes but it’s like when you are using your eyes reading, you read far quicker than you could speak, that’s only about 500 words a minute.

Julia Baird:

So you can understand that easily?

Ron McCallum:

Yes. I do get some headaches but my friends get headaches after reading for a long time and I think when I became blind shortly after birth the brain hadn’t developed, in fact quite a lot of my cohort had brain damage, you know I went to school with brain damaged kids at first because they put us all together but often I think there are big spaces in my head, there are big blanks, but I think some of those blanks are used to help me use my hearing and touch and smell senses better. I’m quite amazed about how clever people with vision are, grown ups. When the children were smaller my wife could drive the car, talk to me and where necessary yell at children in their car seats in the back. I just can’ t do all that at once and my nearly 19 year old who can drive me somewhere I think this child whom I held in two hands and he can do those things that I can never even conceive of doing, it’s quite extraordinary.

Julia Baird:

You’re listening to Sunday Profile, my guest is Professor Ron McCallum, the Dean of Law at Sydney University.
Well with all those sounds and that kind of noise going into your earphones and all these words swimming around your mind, what do you do to relax or to still your mind?

Ron McCallum:

I meditate morning and evening. I’ve done that ever since I got stressed in the early 1990’s. I am a Christian meditator, but you can be whatever meditator you like and I say my mantra morning and evening.

Julia Baird:

What’s your mantra?

Ron McCallum:

MA-RA-NA-THA. It means come lord. It’s in the old Aramaic which was the language Jesus spoke. So I mediate morning and evening, get up at quarter to five to meditate. I find relaxing very hard but I find meditation is cheaper than the shrink, you know, it’s not chasing other ladies, it’s not drinking too heavily but seriously I find I need times of absolute quiet and meditation to centre myself. I find my job difficult. Not only am I Chief Executive but I still teach and research, I’m responsible for significant educational institution, a significant part of Sydney University. I need that meditation and calm time to still all the stuff going around.

Julia Baird:

Do you think that meditation means something different to you than it would for a sighted person?

Ron McCallum:

I don’t know, I don’t see things in my dreams, I don’t dream that much. I know that my mind is different and that it has these gaps but I’m still trying to do what you’re doing.

Julia Baird:

You’ve said it was a form of Christian meditation, what does it mean to you in your work to be a Christian?

Ron McCallum:

I’m a believer in Jesus Christ and I believe in the Ten Commandments and his good neighbour philosophy. I try and live that life as best I can. I know I don’t always live up to the Christian ideals and to me there’s a lot of elements of Christianity in labour law. We were a Christian country particularly in 1900. When we developed our system of conciliation and arbitration it was backed by the Catholic church, to a lesser extent by the Protestant churches, it was backed by people concerned with fairness, there are a whole lot of stories in the Bible of Jesus speaking about how masters should treat servants and vice versa. Our law is based upon Judaic Christian principles.

Julia Baird:

So you feel probably that part of your work in IR would be about protecting the vulnerable or seeking a fair deal for workers.

Ron McCallum:

Absolutely.

Julia Baird:

I mean there must be some different views out there on that as well, I mean given that Ian Harper who’s the head of the new fair pay commission is an Anglican as well?

Ron McCallum:

Absolutely, I mean there’s another view that we should reward merit, that we should employ people at all costs, even if that means lowering wages, that there is an ordained order of things, that we will get better productivity for all if we pay the higher skilled workers more. They look at labour law I think in a collective or overall national sense. I came from the other side of the tracks, from the poor side of the tracks. I look at it from the plight of the individual. I think once you move law away from the individual you lose its humanity. We might want to say, “Okay, it’s nice for businesses who have a hundred or less employees not to worry about their unfair behaviour if they dismiss someone unfairly,” what about the individual who’s felt injustice? You know, we can all remember from childhood something that went wrong in our lives when we were unjustly dealt with. We may have been unjustly punished at school or our parents may have misconstrued something. Dickens wrote that every child has an innate sense of justice and I think we have it and we can all remember injustice. If the law means anything, if it’s not going to clang like an empty symbol it has to have justice at the core and justice and must be centred in the individual worth of individual human beings.

Julia Baird:

So there’s also a battle of ideas amongst people of faith in the industrial relations tradition perhaps?

Ron McCallum:

Oh absolutely, you know one person said in the early days of the church, “You could tell Christians from the way they looked at you with their eyes.” I’m not sure that we Christians stand out like that anymore.

Julia Baird:

Recently we have seen the High Court decided in a case about wrongful life. In a situation where parents claimed they would have aborted rather than give birth to severely disabled children had they been told about the rubella which the woman had contracted during her pregnancy. This case is ultimately involved comparing a disabled life with no life, and as you would know, the High Court threw it out, saying, “It would be odious and repugnant to suggest a disabled person would be better off not being born.” As a Christian, a lawyer and a blind person, what were your thoughts on this case?

Ron McCallum:

I would never question someone who wanted to abort because there was evidence of disability, if that was their choice I wouldn’t jump up and down about it. I think we disabled people do have a valuable life. Now it might be easier to say it of me, even those with brain damage have right to live unless someone’s in extreme pain, people have a right to live. On the other hand, I can see why people who are bringing up a disabled child should be allowed to get damages; it’s a bit emotive to call it ‘wrong for life’. The real issue is over damages to help bring up a disabled child which costs a lot of money. So I’m torn, I’d probably in the end side with Justice Michael Kirby that I would have probably allowed the case to go to trial and assess for damages but that would mean my view is that disabled people have a worthless life. I think all of us have a place in the procession, young and old and disabled.

Julia Baird:

Well in this instance the parents were angry with the doctor who was involved, what would you say to parents who are angry with God when their children are born disabled?

Ron McCallum:

I had a father who was angry; I don’t know what God’s plan is. When people say, ‘It’s God’s will’, I don’t know that I want to subscribe to that theory. I think you’re very lucky if you have a child with ten fingers and ten toes. We’re not in a world of designer babies, I wasn’t a designer baby, who would have thought of me in a humidicrib with a post traumatic stressed father that I would have ended up being Dean of a Law school and leading what I hope is a useful life? We don’t know where we’re all going to end up so you know we all have value.

Julia Baird:

Professor Ron McCallum, thanks for joining us on Sunday Profile.

Ron McCallum:

Thank you very much Julia.

Julia Baird:

And that’s Ron McCallum – by any standard an extraordinary and a committed human being.

I’m Julia Baird – thanks for listening.



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