Wednesday, December 26, 2012

My twelve most read in 2012


Happy reading


1 Mining boom? Not compared to what's to come

2 Labor is wrong. It is the Greens who are mainstream

3 Why we need a carbon tax, by the Coalition's environment spokesman

4 How bad are Australia's unemployment benefits? Bad and getting worse.

5 Truth time. How much has the great big new tax pushed up the cost of living?

6 Why is Gina importing workers direct? Because we won't go there

7 Wrong, wrong, wrong: Gillard, Hockey, Robb

8 Labor's Education Tax Rebate, a bad program buried

9 Remember the census? It's about to change, big-time

10 Earth to Australia - the party's over, you've had time to prepare

11 Joe Hockey defends the culture of entitlement, which he opposes

12 NDIS. Labor is poised for greatness.


And happy 2013!


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Friday, December 21, 2012

What? No surplus? The morning after


Mitchell: Yes, you can argue, as Joe Hockey does, that the budget should have been in a surplus long before now. But, given the situation in which the government now finds itself, the Prime Minister had no option but to drop her plan to push the budget into surplus this financial year.

Beacher: This announcement should not surprise any rational-thinking analyst, merely confirming that this increasingly political commitment was not prudent during these uncertain economic times. We welcome the announcement, and should be market and ratings neutral.

Maiden: Wayne Swan's decision to jettison Labor's commitment to get the budget into surplus next year is only a big deal for the economy and perceptions of its management if Labor does what Swan says it won't, and attempts to buy itself another term in office.

AFR: The basic problem is that the unusual set of circumstances that Mr Swan used to explain his broken promise are more like the new normal. Australia’s looming budget crisis is not a short-term problem.

Uren: Canberra now has no strategy for returning the budget to surplus beyond the hope that the revenue shortfall proves to be temporary.

Koukoulas: In my assessment of economic risks, it is not a long shot to envisage a slightly stronger economic outlook in the first quarter of 2013 and for the government to get a pleasant budget surprise in in the lead into the budget in May. That would be interesting.







And some memories...


Julia Gillard In the Black April 19 2012.doc



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Wednesday, December 19, 2012

So you think the "plain packaging" isn't getting to you... (video)






Recommended reading

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Tuesday, December 18, 2012

Ultralow. Could next year's cash rate be 2 per cent?

Sharply weaker mining conditions, a “tepid” recovery in the non-mining economy and a collapse in job advertising have prompted the ANZ to forecast four more interest rate cuts next year - enough to the take the Reserve Bank cash rate from 3 to 2 per cent.

The new rate - almost certainly the lowest in a century - would mean ultra low rates for depositors who are already earning just 1.7 per cent on cash management accounts, 3.05 per cent on online accounts and 0.5 per cent on building society and credit union accounts.

For mortgage holders now paying the discounted variable rate of 6.65 per cent it would mean a further saving of $182 per month on payments on a $300,000 loan. If the banks passed on only 80 per cent of the cuts as has been their recent practice the saving would be $145 per month.

The ANZ had previously been forecasting one or at most two more rate cuts in the year ahead. The bank’s head of Australian research Ivan Colhoun said he now expected four cuts because the non mining economy was failing to pick up fast enough to fill the “hole” that would be left by mining.

“The economy has grown below trend in each of the past two quarters,” he said. “Real net disposable income fell in the September quarter. The key issue is whether the weakest sectors of the economy - retail, housing, manufacturing and non-mining investment - will strengthen sufficiently to offset the anticipated slowing in mining investment. The Reserve Bank’s two most recent interest rate cuts suggest it wants further insurance.”

Mr Colhoun said business conditions were their weakest since the global financial crisis. Forward orders weakened sharply in November and capacity utilisation fell to its lowest since mid 2009.

“Each of these trends, if maintained, warns of slower economic growth ahead and of the need for further policy stimulus to avoid a further rise in unemployment. This will likely require a further 0.50 to 1.00 of rate cuts in 2013 - with the bigger figure likely if the Australian dollar remains high or rises further"...

Reserve Bank deputy governor Philip Lowe said in a speech last week the average level of interest rates would most likely be lower for longer than in the past due to changed global conditions and the decision of Australian households to save an unusually large 10 per cent of their income.

Further cuts would make saving less attractive and borrowing still easier.

The Bank cut its cash rate from 4.25 per cent to 3 per cent during 2012. Standard variable mortgage rates slid from 7.30 to 6.45 per cent. The Bank board is not due to meet again until February.

Treasurer Wayne Swan adopted a hard line with state treasurers at a summit Monday, failing to agree to any requests for extra money. But he supported in principle their request to impose the goods and services tax to imported parcels worth $500, instead of the present $1000 as at present. Officials will develop a business case for the change.

In today's Sydney Morning Herald and Age


ANZ December Chartbook



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Monday, December 17, 2012

State treasurers to Swan: Collect more GST



State Treasurers are to push for the first significant extension of the GST as a new international survey finds its earning power embarrassingly low.

The OECD survey, Consumption Tax Trends 2012 finds Australia’s GST accounts for just 14 per cent of nationwide tax collections, compared to a average among developed nations of 19 per cent. The United Kingdom’s Value Added Tax brings in a more typical 17 per cent. The New Zealand GST brings in 27 per cent.

Among developed nations only Canada, Japan and Switzerland charge less GST than Australia. The typical rate is 18 per cent, almost double Australia’s 10 per cent.

Ahead of Monday’s meeting in Canberra Treasurer Wayne Swan has attempted to head off a push by state Treasurers to extend the tax releasing figures showing it hits low-income Australians much harder than others.

“We don’t support hitting those who can least afford it to bankroll somebody else’s tax cut,” he said. “It is wrong to pretend that jacking up the GST is the holy grail of tax reform. While it has become an accepted part of the tax mix and its integrity should be protected, it is a regressive tax – those on lower incomes pay a larger proportion of their incomes on it than those on higher incomes.”

NSW Coalition Treasurer Mike Baird and South Australian Labor Treasurer Jack Snelling will present a united front acknowledging the Commonwealth is unwilling to boost the GST, but asking it instead to extend it to privately imported parcels worth $500.

If adopted the proposal would not only apply the 10 per cent GST to those parcels for the first time but would lumber the senders with the administrative costs of opening and taxing the parcels...

“Ernst & Young say before costs the measure would raise $2.5 billion for the states over the next three years,” Mr Baird said. “If we can pass those costs on to the suppliers it could well be $2.5 billion in net terms.

“It’s an essential reform. It’s not popular, but it’s the right thing for my state and the country. When the GST was first envisaged on-line retailing wasn’t growing at 25 per cent per annum as it currently is,and physical retailing wasn’t flat as it currently is. It’s about bringing the GST into the modern age. “

“All of us have put this to our cabinets except for Western Australia, which is about to have an election.”

The Australian National Retailers Association released calculations showing overseas retailers were set to capture $2.7 billion or 8 per cent of Christmas spending. Much of it would escape the GST, which at present is only applied when an incoming parcel is valued at $1000 or more.

“This has very real implications for the states which will be hundreds of millions of dollars poorer with no GST collected on these goods. This means schools hospitals, roads to families across the country,” chief executive Margy Osmond said.

The Treasurers will attempt to pin the Commonwealth to a timetable to cut the threshold to $500. The Productivity Commission, the low Value Parcel Processing Taskforce and the Greiner Review of GST Distribution  have all found in favour of cutting the threshold if a way could be found to shift the processing costs to the senders.

Mr Swan will get little joy from the states on his demand they wind back stamp duties and so-called nuisance taxes. They will suggest he first hands them several billion dollars of Commonwealth income tax as a replacement.

In today's Age


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Sunday, December 16, 2012

Remembering Ian Wolfe, the man who dragged ABC News into the 21st century



September 12, 1941 - December 16, 2011




When the team from Australian Associated Press walked into their usual contract renegotiation with the ABC at the start of the 1990s they had every reason to think they would get what they wanted.

The ABC had used the AAP’s foreign wire service for half a century, initially for an annual fee of 3000 pounds. Now the fee was reportedly $250,000. AAP wanted more and treated the ABC like a captive client.

Sitting on the other side of the table was the deceptively polite Dr Ian Wolfe, the ABC radio news and current affairs supremo with degrees in politics and psychology. After being told the fee increase was non negotiable he terminated the negotiation, sacked AAP and did a deal with Agence France Presse for a fraction of the price.

For the first time in its history the ABC no longer relied on a service owned by its competitors. Wolfe had already looked on with approval as the man he had appointed executive producer of AM axed its 20-year old recitation of newspaper editorials entitled “What the Papers Say”. Wolfe believed the ABC owed Murdoch and Fairfax nothing.

Then he went in for the kill.

You were glad he was on your side. Protege Robert Bolton put it this way in a bit that was edited out of the excellent obituary he wrote for the Sydney Morning Herald:

“Had some of his staff realised how well he had studied human behaviour and weakness they might not have gone into battle with him. They usually lost.”

No longer having a commercial relationship with AAP Wolfe was free to launch an assault on its revenue stream. He set up an ABC wire service to sell news stories specifically written for radio to the commercial stations who had previously been captives of AAP. The stories on Broadcast News Australia were more timely and better-written (for radio). AAP pulled out all stops to maintain its monopoly and succeeded, although things looked dicey for a while. It had learnt what anyone eventually learned who came up against Ian Wolfe - don’t mess with him, don’t mess with the ABC and don’t imagine convention will hold him back.

I was with him as he sat down for a meeting with the Sydney Stock Exchange and explained that their employees would no longer be reading a ten-minute list of share prices on radio national each lunch time. He told me afterwards it felt like axing the daily reading of the river heights on rural radio which he also had done.

He hired me direct from the Commonwealth Treasury and defended me against all manner of people who thought I wasn’t right for radio. Whenever he offered an opinion about how the broadcasting landscape would develop or news would turn out I found him to be right. I sought his advice long after I had left the ABC.

Broadcast News Australia quietly evolved into NewsRadio, quietly because ABC Managing Director David Hill was trying to sack him at the time. Hill later praised Wolfe for one of the most impressive developments in three decades of broadcasting, and also one of the cheapest.

Intensely loyal to the ABC, incredibly smart and disarmingly shy, Ian Wolfe has left us far too soon.



In the November Walkely Magazine



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Friday, December 14, 2012

Big Man, Big Data. Kim Carr's incredibly audacious plan

He wants to know what you need before you know it yourself

Kim Carr is impatient. Fiona Stanley is angry. Between them Australia’s new minister for Human Services and the former Australian of the Year want to solve some of Australia’s most intractable problems by mining what could be Australia’s greatest resource – its data.

Unexpectedly, the Victorian senator has found himself sitting on top of more data than any minister before him. In March, Julia Gillard withdrew his beloved manufacturing portfolio a few months after taking away innovation, industry, science and research. Human Services looked like a consolation prize, or a punishment for backing Kevin Rudd in the leadership struggle.

But the former research minister quickly came to see the department (and the data) as a research gold mine. Created just eighteen months ago it not only processes Centrelink payments as its predecessor used to, but also Medicare payments, pharmaceutical benefits payments, rehabilitation support and child support. It knows an amazing amount about each of us and it is amassing that information from cradle to grave.

Its information technology network - built from a number of previously separate networks - is the biggest in the southern hemisphere: five times the size of the Commonwealth Bank’s. It costs $1 billion a year to run. It processes 200 million payments each year, recording each one on a computer system that already holds three million gigabytes. It has twice as much again stored on magnetic tape.

The department has always linked its data to the maximum extent permitted by the law, gaining what some might see as a disturbingly complete picture of our activities. But until now it has done it mainly in order to fight fraud. What it has hardly ever done is to interrogate the data to make its services more effective, or as the minister puts it, to “make Australia work better”.

At a time when the “evidence-based policy” has become a setup line for jokes, Senator Carr uses the phrase proudly even though he knows it exposes him to ridicule. “Every politician loves evidence-based policy,” he says. “Actually for some it's as useful as lamp-posts for drunkards - good for support, not illumination. I am told we have called for it, or claimed to have had it, on more than eighteen hundred occasions in the parliament this year.”

“But if you start from the premise that you are serious about evidence-based policies you realise you can actually develop them by using the data you’ve already got.”

“We know where people live, we know when they’ve worked and how they’ve responded to major shocks. We know what illnesses they have suffered, and how they were treated. We can follow a family’s journey right down the generations. I want to open up that information to researchers who can find patterns. For example I would like to know what type of medical admissions take place ahead of applications for child support. If we knew that we would know where to best direct resources before they were needed”.

Predicting what’s needed before it is needed is one of the mainstays of science fiction. In The Hitchhiker's Guide to the Galaxy elevators can see far enough into the future to arrive at floors before potential passengers realise they need them, saving them from the embarrassment of waiting around.

But Carr has something grander in mind for what he calls “big data” - it’s more like Minority Report where the authorities can use glimpses of the future stop crimes from being committed at all...

“Let's not pretend that there isn't entrenched poverty in this country. Let's not pretend that some people's postcodes don’t predetermine their life chances,” he says in his parliament house office. “I want to find the mechanisms to even up those chances. It’s what the social security system is supposed to be all about.”

On the other of the country in Perth former Australian of the Year Fiona Stanley has been working with an unusually cooperative state government for 35 years to gain glimpses into the future. She has been given access to birth records, health records and educational records - all linked in a way that enables her to build a complete picture of someone’s life that isn’t allowed in other states.

She reckons she’s just discovered a disturbing answer to one of the senator’s questions, although she wishes she had been able to do it with national data and with data sitting on Senator Carr’s pharmaceutical benefits computers.

“Disabled children are much more likely than other children to be subsequently (physically) abused. It’s an important finding.”

“Knowing that, or knowing anything like that, means we can direct resources where they are likely to be needed rather than directing them at random,” she says.

Kim Carr employs one quarter of the Commonwealth public service. He runs a Centrelink office, a Medicare office or an agent in every Australian town. He concedes that until now his department and its predecessor have been seen as a payments organisations - it now shifts two-fifths of the Commonwealth’s budget. But a lot of the payments work is being automated (he calls web-based delivery “home delivery”). Technology is both freeing up staff and making data even easier to collect.

“I want the department to deliver more personalised services, “ he says.

“We deal with people who are homeless, people who are sick, people who are students, people who are thinking about retiring. We are the first boots on the ground with the army after a natural disaster. We help people clean up their circumstances. We offer financial counselling, although I’m not allowed to call it that.”

“It’s a wrap-around service, but I want it targeted where it is needed. To find that out I am going to open our data to researchers.”

Until now they’ve been locked out. Fiona Stanley and her colleagues at the paediatrics and child health unit at the University of Western Australia used to get occasional access to pharmaceutical benefits records until the Commonwealth cut it off with what she says was no explanation. Kim Carr has swiftly approved data requests from RMIT University, the Australian National University and the University of Queensland. He has also inherited an earlier program (set up by himself as research minister) in which the CSIRO mines data in Centrelink records.

Last month he invited researchers from five universities to Canberra to meet officials from his department and the CSIRO to toss around ideas. Professor Stanley’s paper was entitled “Lessons from Western Australia: You can do it and the sky won’t fall”.

“In 35 years of doing this in Western Australia we have never once had a privacy breach,” she says. “We are given anonymised data - it is linked so we can join together health records, birth records, postcodes and the like but it can’t be used to identify individuals. We’re not interested in that anyway.”

Richard Denniss, executive director of the Australia Institute says he understands privacy concerns but says they are outweighed by the good that is likely to come from “joining up” data.

“Sure, privacy is a concern, but the data can be anonymised and you can have sanctions for researchers who try to unpack it. At the moment your bank probably knows an awful lot about you - how much you earn, how you spend your money, when you get fired, when you get divorced, when your loved one dies, whether you pay child support. That data is in no way anonymised. Your bank is free to mine it for any commercial purpose it can dream of.”

“Anyone concerned about privacy would be better off directing those concerns at what profit-seeking corporations can do rather than ways in which researchers can use government data to improve public policy.”

Half a century ago (and far too late) the mourning sickness drug thalidomide was removed from shelves after thousands of mothers gave birth to disabled children. Professor Stanley says if researchers back then had had access to real-time prescription and birth data they would have spotted the link sooner. What really disturbs her is that they don’t have access to that data today.

“The whole reason we set up birth defects registries across Australia was to pick up the next thalidomide,” she says. But until now we haven’t been able to link those registries to the Pharmaceutical Benefits Scheme. It’s insane,” she says.

The anti-arthritis drug Vioxx was withdrawn in 2007 after years in which its users died of heart attacks. Professor Stanley is certain access to Carr’s Pharmaceutical Benefits prescription data and Medicare data would have allowed researchers to spot the link sooner.

“Heart attacks are quite common, so it was hard to see the link. You need data from 100 per cent of the population. Surveys aren’t very good. They are always biased by the people who who choose not to participate. And you never know the extent to which they are biased.”

Professor Stanley and colleagues in Western Australia have drawn unnerving conclusions about the relative effectiveness of schooling in educating children, conclusions they could not have been able to draw without linking the state’s birth, health and education records.

“Parental factors are far more powerful than anything in the school system,” she says.

“Children who are born underweight because their mothers smoke or drink in pregnancy or fail to eat well or have sexually transmitted disease when pregrant, they are likely to have poor education outcomes regardless of the quality of their schooling. Birthweight matters. Resources directed there can make a bigger difference than extra resources directed at schools.”

Another important and previously-unacknowledged finding is that Perth psychiatric patients are much more much likely than others to later suffer from heart disease and diabetes. Targeting resources for preventing those diseases to them would be akin to pre-programing the lifts in the Hitchhiker's Guide to the Galaxy or stopping a crime before it took place along the lines of Minority Report.

Stopping health problems and poverty before they get started is Kim Carr’s holy grail. It makes him part health minister, part minister for social inclusion. He sees his role as improving people’s lives.

Human services may not have been a portfolio he sought, but he gives every indication he is relishing it and is keen not to waste time.

In today's Age


Why not obtaining consent may be best practice


Child Health, Fiona_Stanley



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The OECD to tell the truth about our surplus, later today

11.30 am AEDT, Here

The Paris-based Organisation for Economic Co-operation and Development will press the government to loosen its commitment to a budget surplus Friday, delivering a 160 page report that will set out the case for allowing the budget wear the consequences of any further significant economic deterioration.

The revenue forecasts in this year’s budget were built around nominal GDP growth of 5 per cent, knocked down to 4 per cent in the mid year review. But new growth figures not available at the time show nominal GDP inching ahead at an annual pace of 2 per cent -- a rate which if sustained would wipe at least $5 billion from projected revenue, more than obliterating the wafer-thin $1.1 billion promised surplus.

The OECD will say in the event of a further big turndown the authorities should “let the automatic stabilisers work and should slow budget consolidation”.

“Automatic stablisers” are the changes that automaticly weaken the budget as the economy turns down, cutting tax collections and in some cases boosting welfare payments.

Attempting to stand in their way by boosting tax collections or cutting payments runs the risk of slowing the economy further.

The OECD made the point in a three-page summary of its views about Australia released as part of a global survey last month. It said while the current policy settings were appropriate, the government had room to delay the surplus to respond to risks. The International Monetary Fund concurred, noting in its own report that authorities had “scope to delay their planned return to surplus” should the outlook deteriorate sharply.

Both organisations consult closely with the Treasury while visiting Australia and their findings are often thought to reflect the views of the Treasury. Treasury has a full-time officer stationed at the OECD headquarters in Paris.

The government has been hoping the next set of economic growth figures due on March 6 will show an improvement. Minerals prices rebounded strongly in September, but the Reserve Bank index shows they slid again in October and November... It has reactivated its its expenditure review committee and asked public servants to search for fresh spending cuts in the leadup to Christmas.

But at the same time Treasurer Wayne Swan has been careful to avoid repeating earlier cast iron commitments to a surplus instead saying that the budget must also be “appropriate for the economy and jobs”.

Speaking to Fairfax Media in India Thursday where he was concluding a trade mission Mr Swan refused to be drawn on the question.

Former Reserve Bank board member Bob Gregory told Sky News Thursday the budget would not and should not get back into surplus this year.

“The surplus target was never really appropriate. If it was appropriate a year or so ago it’s certainly not appropriate now,” he said. “Looking forward, things are moving downwards, and when things are moving downwards you don’t want the government to help that process along - if anything you want them to slow the process.”

“Moving towards a surplus is not what virtually anyone would advise at this time.”

He said if things did deteriorate their would not be a surplus in the following year either, whichever government was in power. He expected at least two more interest cuts next year.

In today's Age


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Monday, December 10, 2012

Let's impose a special tax, on Apple, Google, and Starbucks

Starbucks, Google, Apple, eBay and other ‘shape shifting’ corporations that route their business through intermediaries located in tax havens may soon face an Australian tax from which other corporations will be exempt.

The idea will be discussed at a special reference group set up to advise Treasury on a scoping paper that will set out the extent of multinational tax minimisation and ways the Australian government respond.

The 14-member reference group is laden with critics of multinational tax practices including ACTU assistant secretary Tim Lyons, Serena Lillywhite of OxFam Australia, Jason Sharman of the Centre for governance and public policy at Griffith University, Mark Zirnsak of the Uniting Church and Tax Justice Network and Frank Drenth of the Corporate Tax Association.

Others appointed by assistant treasurer David Bradbury include the executive director of Treasury's revenue group Rob Heferen who will chair the group, foreign investment review board chair Brian Wilson, former Tax Commissioner Michael D’Ascenzo and public policy specialist Greg Smith who served on the Henry Tax Review.

The only corporate representative is Ross Lyons, a tax executive at Rio Tinto. The consulting firms PwC, Deloitte, Ernst & Young and Clayton Utz are also represented.

Mr Bradbury has asked Treasury to report by the middle of the year, using the specialist group as a sounding board.

“This isn’t just a reporting exercise,” Mr Bradbury said. “That’s pointless without recommendations for ways of collect tax from corporations that make money from the Australian without paying proportionate tax"...

“Some significant multinationals are deriving considerable revenues from Australian economic activity but paying tax out of proportion to that gain.”

In the United Kingdom Starbucks has taken the "unprecedented" step of pledging to pay £20 million ($30.6 million) corporate tax it says it does not owe offering as a gesture not to claim deductions for royalties it pays to its Amsterdam office.

The move has enraged rather than calmed critics such as Liberal Democrats tax spokesman Stephen Williams who said it confirmed corporations such as
Starbucks seemed to think paying tax was voluntary.

Niv Tadmore, a Clayton Utz partner who be on the Australian specialist group said the tax rules were relics of the when doing business in a country like Australia meant “setting up a shop or a factory here or coming here every six months”.

One idea would be a withholding tax notionally applying to all corporate income but from which companies headquartered in nations with tax treaties would be exempt.

“You point it at everyone and have exceptions for countries bound by treaty obligations, that’s the polite way of doing it,” he said.

In today's Sydney Morning Herald and Age


John Kay, in the Financial Times last week:

“The repeated revelations that many major companies pay little or
no tax, even if they do so by legal means, fuels a public sense that tax is mainly
for little people. We need only look at Greece to see how socially, politically and
economically corrosive that perception can be... Well conceived apportionment
is the best – perhaps only – answer to the problem presented by multiple company
tax jurisdictions.”



SPECIALIST REFERENCE GROUP ON WAYS TO ADDRESS TAX MINIMISATIONOF MULTINATIONAL ENTERPRISES

Assistant Treasurer David Bradbury has today announced the members of the specialist reference group on multinational corporate taxation.

The formation of this group, made up of business representatives, tax professionals, academics and the community sector, is the first step in Treasury’s examination of multinational tax minimisation strategies and its risks to the sustainability of Australia’s corporate tax base.

“The way companies do business is changing and we need to ensure that international tax systems keep pace,” said Mr Bradbury.

“I have asked Treasury, led by Revenue Group head Rob Heferen, to begin work on a scoping paper that will set out the risks to the sustainability of Australia's corporate tax base from multinational tax minimisation strategies and identify potential responses.

“The specialist reference group will feed into that process, with Treasury drawing on members’ knowledge and expertise.

“We don’t want to see a future where hard-working Australian families and businesses have to pay disproportionately high taxes because multinational corporations are not pulling their weight.

“We need to make sure that we are doing everything possible through our domestic laws to keep up with the changing nature of global commerce in the information age.

“More importantly, Governments all around the world need to re-examine many of the key rules of international taxation, which are not keeping up with the changing business models and tax planning arrangements of many multinational companies.”

Members have been appointed to the group in their personal capacity, based on their high level of expertise in this area, rather than as representatives of particular organisations.

A key role of the specialist reference group — and the key focus of the Treasury paper — will be to build community understanding of the nature of the challenges we face.

In addition to the meetings of the specialist reference group, Treasury will also consult directly with interested stakeholders.

The first of several meetings of the reference group will be in February. The Government will release the Treasury scoping paper for public consultation in mid‑2013.


Specialist Reference Group membership:

Rob Heferen (Chair)
Executive Director, Revenue Group
The Treasury

Michael Bersten
Partner
PwC

Michael D’Ascenzo AO
Expert in tax policy and administration
Commissioner of Taxation (2006 – 2012)

Frank Drenth
Executive Director
Corporate Tax Association of Australia

Serena Lillywhite
Mining Advocacy Coordinator
OxFam Australia

Ross Lyons
General Manager – Tax, Asia Pacific
Rio Tinto

Tim Lyons
Assistant Secretary
ACTU

Peter Madden
Partner
Deloitte

Jason Sharman
Director, Centre for Governance and Public Policy
Griffith University

Greg Smith
Adjunct Professor, Australian Catholic University
Senior Fellow, The Melbourne Law Masters

Tony Stolarek
Partner
Ernst & Young

Niv Tadmore
Partner
Clayton Utz

Brian Wilson
Chair
Foreign Investment Review Board

Mark Zirnsak
Director, Justice and International Mission Unit
Uniting Church




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. Google: Don’t Be Evil, Don’t Pay Tax - Mike Seccombe, Global Mail

. How savvy multinationals curb their tax bills, Ben Butler and Georgia Wilkins



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Free advice for the ANZ: Eviscerate your competition

This Friday



Here’s some free advice for the ANZ. Eviscerate your competition when you meet to set mortgage rates Friday. Make their Christmas hell.

The National Australia Bank is extraordinarily vulnerable.

Positioning itself as the consumer’s friend, it has guaranteed to offer the lowest standard variable mortgage rate of the big four all year.

But it went out on a limb on Wednesday passing on only 0.20 points of the Reserve Bank’s 0.25 point cut, doubtless expecting the other banks to follow. Westpac and the Commonwealth did.

But the ANZ sets rates on a different cycle, considering such questions only on the second Friday of each month, giving it time to think.

It has the opportunity to break from the pack (a bit) by cutting 0.22 points.

NAB would be blindsided. The cut would take the ANZ rate to 6.38 per cent, exactly the same as NAB’s.

In order to fulfil the terms of its pledge to offer the lowest rate NAB would have to cut again, embarrassing itself by implicitly admitting it sold its customers short last week.

The ANZ would steal the mantle of innovator from the NAB, gain much needed mortgage customers and put beyond doubt that at least one of the banks was prepared to compete on price.

Importantly the opportunity is a once-off. The NAB’s pledge expires at the end of this year. It’s made itself a soft target for one month only. If I was running the ANZ I would take aim.

In today's Sydney Morning Herald and Age


Memo item

Westpac from 6.71% to 6.51%
Commonwealth from 6.60% to 6.40%
NAB from 6.58% to 6.38%
ANZ from 6.60% to...




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Friday, December 07, 2012

The truth about jobs


They weren't flat during 2011 at all.

That's what the grey line shows - flat jobs growth during 2011, until now the official picture:




The black line is revision published Thursday.

Instead of staying fairly flat during 2011 (slipping 1200), during that year employment climbed 48,700.

It is an important difference.

Did the Bureau of Statistics suspect that it had been reporting misleading jobs growth figures at the time? Yes it did.

As Tim Colebatch reported:

"The official jobs figures published by the Bureau of Statistics have significantly underestimated recent job growth, due to forecasting errors that first overstated, then understated, the growth in the adult population.

The errors, which have serious implications for economic policy, began when the number of foreign students living in Australia fell rapidly after immigration laws were tightened in late 2009.

The unforeseen fall at first led Bureau forecasters to greatly overstate population growth — and When it realised the error, rather than correct it by revising the previous jobs figures the Bureau decided to understate population growth in future forecasts, depressing the labour force figures. These then reported a net loss of 900 jobs in 2011.

On one estimate, once the figures are adjusted for the erroneous forecasts, at least 100,000 of the jobs supposedly created in 2010 in fact arrived in 2011."


To repeat: rather than revise previous jobs figures when it found they were wrong, the Bureau understated future population growth estimates in order to depress future reported jobs growth.

It will do so no longer.

Instead it will revise employment figures when it learns they are wrong, rather than downwardly or upwardly biasing future figures. The adjustments will take place every six months, and from 2014 every three months.

Earlier this year the Australian Statistician Brian Pink signed a letter to the editor of the Sydney Morning Herald defending the old practice.

The letter said:

"Your articles have suggested that we will not revise history more frequently than five-yearly, as is our current practice. There is presently no compelling case for doing this, as there is unlikely to be any change of statistical significance, and it will make little difference to decisions that have already been taken based on the high quality statistics the ABS has already published."

He has now found the case compelling and that's to be applauded. Big time.

In Markets Live


Recommended reading

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Thursday, December 06, 2012

Lower growth, lower rates, no surplus. The GDP washup


Me on Sky News December 5, 2012

11minutes, play or CLICK THEN CLICK AGAIN to download mp3




Deputy Governor Lowe's excellent speech - recommended

The Reserve Bank has spoken of an extended period of low interest rates as official figures showed collapsing export prices have knocked the stuffing out of economic growth, cutting growth per person to zero and casting fresh doubt on the promise of a budget surplus.

The Australian economy grew at an annual rate of 3.1 per cent in the year to September, down from 4.3 per cent in the year to March. The quarterly growth rate was 0.5 per cent, no higher than population growth, meaning economic growth per per person fell to zero.

“What we’ve seen in this quarter has been a pretty savage reduction in our terms of trade,” said Treasurer Wayne Swan. “Revenue will be weaker. Profits are down and that will have a flow-through effect, but we can’t just look at just quarter: it’s a bit early to jump to a definitive conclusion.”

Australia’s top business economists are now forecasting a budget deficit of $8billion this financial year rather than the promised $1.1 billion surplus. “We think of this as a political downside rather than an economic downside,” said Stephen Halmarick, who chairs the executive committee of the Australian Business Economists.

“It will not be a significant issue to financial markets if a surplus is not delivered by June 2013, so long as there’s a medium term plan in place.”

The committee encompasses 16 leading economists who work for firms including the Macquarie Group, Deutsche Bank, JP Morgan and the Westpac, Commonwealth, National Australia and ANZ banks. Its forecasts have economic growth sliding to 2.8 per cent next year and growth in business investment sliding from 16 per cent this year to 9.3 per cent next year and then close to zero in 2014.

“The committee believes the peak in the prices phase of the mining boom is over,” Mr Halmarick said. “The peak in the investment phase will follow soon. The export phase of the boom has much longer to run.”

Addressing the ABE’s forecasting conference Reserve Bank deputy governor Philip Lowe said low inflation and low interest rates were the new normal.

“Most consumers and businesses now view it as usual, typical or expected that inflation will average two-point-something over time,” he said.

“For most of the past 20 years we were benefiting from either the credit boom or the terms of trade boom. Under the influence of these two factors one might expect, all else constant, higher average lending rates than otherwise.”

The unwinding of the credit and trade booms would mean low interest rates for a longer period of time than Australians had been used to...

“It is possible that normal lending rates will be somewhat lower for a period owing to the combination of global factors and the legacy of the credit boom,” Dr Lowe said.

“Whether or not this turns out to be the case depends upon a whole range of factors, including how cost and price pressures in the economy evolve.”

The prices measure used in the national accounts climbed a tame 2.3 per cent despite the introduction of the carbon tax in July. Household purchases of electricity and gas dived an extraordinary 3.2 per cent in the quarter, suggesting the carbon tax is having the desired effect.

Cutbacks in state and Commonwealth spending weighed heavily on economic growth, taking 0.5 percentage points off what would have been quarterly economic growth of 1 per cent.

In today's Sydney Morning Herald and Age


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Wednesday, December 05, 2012

Less than brilliant. How the ABE sees the year ahead



Economic growth is set for a fall, business investment will hit wall, and the government is heading for a deficit this financial year rather than a surplus. Those are chief findings of a dismal set of forecasts assembled by Australia’s leading business economists for their annual forecasting conference.

Australia’s annual economic growth rate has already slipped from 4.3 per cent in March to 3.1 per cent in the September quarter figures released Wednesday. The forecasters expect 2.8 per cent next year with one pumping for an annual rate as low as 0.7 per cent.

Elected by their peers to the Australian Business Economists executive committee, the 16 forecasters work for big firms including the Macquarie Group, Deutsche Bank, JP Morgan and the Westpac, Commonwealth, National Australia and ANZ banks.

Growth in business investment - until now a driver of economic growth - is expected to slip from 16 per cent this year to 9.3 per cent next year and then close to zero (0.7 per cent) in 2014.

“The committee believes the peak in the prices phase of the mining boom is over,” said ABE chairman Stephen Halmarick of Colonial First State... “The peak in the investment phase will follow soon. The export phase of the mining boom is viewed as having much longer to run.”

The committee expects a further a sharp fall in the terms of trade of 5.5 per cent in 2013, following this year’s slide of 9 per cent. “These falls will mean the economy is likely to lose some of its insulation,” the report says.

Household consumption is more slowly in 2013 notwithstanding the run of interest rate cuts before recovering somewhat in 2014.

Dwelling investment is expected to improve, climbing 3 per cent and 5.7 per cent in 2013 and 2014 after sliding 5.4 per cent in 2012.

Government income will be particularly hard hit by sliding company tax revenue, resulting in a budget deficit of $8 billion this financial year rather than the forecast surplus of $1.1 billion. The range of budget forecasts is particularly wide, from a low of a $20 billion deficit to a high of a $0.1 billion surplus. The 2013-14 forecasts range from a deficit of $7.9 billion to a surplus of $1 billion.

Unemployment will peak at 5.8 per cent (up from 5.5 per cent) but the range of forecasts is particularly wide with the highest forecast a peak of 6.8 per cent and the lowest a peak of 5.7 per cent.

The carbon tax should headline inflation should brush the top of the Reserve Bank’s target 2 to 3 per cent target band next year, but the committee expects the more important measure of so-called underlying inflation to remain contained at 2.6 per cent during both 2013 and 2014.

On balance the committee expects the Reserve Bank’s cash rate to stay steady at 3 per cent for the next two years, but forecasts for next year range from a low of 2.5 per cent to a high of 5.3 per cent.

In today's BusinessDay


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Reserve: The big four can pass it on, and if we have to we'll cut again

Me on ABC 891, December 5, 2012

11 minutes, play or CLICK THEN CLICK AGAIN to download mp3



Australia’s big four banks are in a excellent position to pass on all of its latest 0.25 point rate cut, Reserve Bank calculations show.

Each of the big four sat on its hands Tuesday rather than immediately respond as they once used to, leaving it the smaller Bank of Queensland, which passed on 0.20 points and ING Direct, which passed on all 0.25 points.

The prime minister, treasurer and shadow treasurer Joe Hockey all implored the banks to pass on the cut in full, Mr Hockey qualifying his appeal by saying that if they did not cut in full they should give their customers a complete explanation of the reasons why.

The Reserve Bank calculations show the banks in a better cost position than they were in October when the Commonwealth, ANZ and National Australia banks passed on only 0.20 points of its 0.25 point cut and Westpac only 0.18 points.

Reserve Bank governor Glenn Stevens said in a statement released with the rates decision that Australian banks had “no difficulty accessing funding, including on an unsecured basis”.

Treasurer Wayne Swan said while ING Direct had done the right thing by its customers, the other banks had not.

Prime Minister Gillard said with Christmas approaching the big four “should take into account that Australian families will be looking to them to pass the interest rate reduction on in full”.

If fully passed on the cut would slice a further $47 from the monthly cost of servicing a $300,000 mortgage, bringing the total saving since the cuts began last November to $270 per month.

The Bank board cut rates because of signs the business investment outlook is weakening, not only in mining but also in the non mining economy... It pays close attention to the National Australia Bank survey of business confidence which shows business conditions their weakest in three years. It wants to strengthen other parts of the economy in order to take up the slack as the mining investment boom passes.

If necessary it will cut rates again in order to sustain economic growth, restrained only by its inflation target. Late Tuesday the futures market assigned a 67 per cent probability to a further cut of 0.25 points at the board’s next meeting in February.

The board does not believe it has cut rates to “emergency levels”.

Mr Hockey said Tuesday the Bank was “trying to catch a falling Australian economy. It had “dropped rates to emergency levels, not because the economy is doing well but because it is facing huge challenges”.

The cut from 3.25 per cent to 3.00 per cent brings the Bank’s cash rate to the low point reached at the trough of the 2009 global financial crisis.




But unlike during the financial crisis it has not been brought there by a series of dramatic, unprecedentedly large cuts. Unlike during the global financial crisis it has not be accompanied by a dramatic boost in government spending. Unlike during the financial crisis it has not been accompanied by an unusally low Australian dollar but by a near-record high dollar.

“Anybody who would go out there and describe rates now in the same context that they were at the height of the global financial crisis is simply unqualified for high office,” Mr Swan said.

“We are having an attempt to sensationalise this rate cut, not just by the Liberal opposition, but elements of the media. Anyone who can't welcome a cut as such good news for families and business is somebody who is just being negative about everything.”

In today's Canberra Times, Sydney Morning Herald and Age


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Tuesday, December 04, 2012

Why the Bank should cut today, why the market thinks it will

The Reserve Bank is considered certain to cut interest rates after a last-minute deluge of data showed spending had stalled, profits had collapsed, the job market had shrunk and inflation had turned negative.

“Interest rate cuts come in groups,” said Bank of America Merrill Lynch chief economist Saul Eslake. “Like cockroaches, there’s hardly ever just one.”

“The Reserve Bank cut in October, it held off in November, and now it knows it needs to do more. If it doesn’t move Tuesday it will have wait two months until its next scheduled meeting in February.”

Retail spending stopped growing in October. The Bureau of Statistics says minimal growth in NSW and a dive of 0.5 per cent in Victoria were offset by continuing strong growth in Western Australia. The national growth rate of zero is significant because it came after a rate cut intended to spur spending. Spending on items other than food slid 0.7 per cent.

“It is clear the economy is in effect treading water,”said CommSec economist Savanth Sebastian. “Consumers are holding back on significant purchases. Lower pricing will have to play a part in enticing nonplussed consumers.”

The monthly TD Securities inflation gauge shows prices slid 0.1 per cent in November, suggesting the December quarter consumer price index will rise a mere 0.2 per cent, allowing ample scope for the Bank to cut again.

The ANZ job advertisements index slid a further 2.9 per cent in November, its eighth consecutive fall. Job advertisements are down 17 per cent since February.

Total wages and salaries paid by businesses actually fell in the September quarter for the first time since the global financial crisis.

Company profits slid 2.9 per cent... Mining profits slumped 12.2 per cent, offset by a rebound in manufacturing profits of 10.8 per cent. Small business profits slipped 2 per cent.

Inventories Inventories grew for the fourth straight quarter, climbing a further 1.1 per cent as businesses found themselves unable to move as much stock as they had expected.

“The Reserve Bank’s underlying objective is to ensure a smooth batton change from growth led by mining to growth led by something else," said Mr Eslake. "It looks as if mining investment will peak lower and sooner than had been thought. The Bank is running out of time to foster faster growth elsewhere.”

The budget cuts announced in October have added to pressure on the bank to boost economic growth.

The Australian Industry Group’s performance of manufacturing index slipped a further 1.6 points to 43.6 in November on a scale where anything less than 50 means the sector is shrinking.

The RP Data measure of national housing prices held firm in November after slipping 1 per cent in October, suggesting the October rate cut did little to spur the market.

Late Monday the interest rate futures market assigned a 92 per cent probability to a rate cut Tuesday, up from 83 per cent earlier in the day.

The bookmaker sportingbet.com.au would pay out only $1.22 on a $1 bet for on rate cut, compared to $3.25 for $1 bet on no change.

“It’s around what we would pay on Black Caviar winning its next race,” said spokesman Haydn Lane. “It’s about as close as you get to a certainty.”

The Australian dollar fell almost a third of a cent to 104.06 US cents Monday on the expectation of a rate cut Tuesday. Treasurer Wayne Swan welcomed the prospect of a rate cut saying it if happened a family with a $300,000 mortgage will be saving around $5,000 per year compared to when the Coalition was last in office.

In today's Canberra Times, Sydney Morning Herald and Age


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Monday, December 03, 2012

Simpler super. Letter of the day


It's in today's Financial Review:

"Amid Treasury's concerns about the lost revenue from superannuation tax concessions, it would be useful to consider an alternative approach. About 80 per cent of pensionable-age Australians receive at least some age pension. The budget would probably be in a better and more predictable position if means testing of the pension was abolished, along with all superannuation tax concessions. All employees would get a 9 per cent pay rise and would be responsible for providing for the lifestyle they want beyond the basic aged pension."

Marc and Maria Sarossy Essendon, Vic
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Sleepless over surplus. The search for yet another round of budget cuts


The Gillard government has asked public servants to search for fresh spending cuts in the leadup to Christmas in a new attempt to achieve a 2012-13 budget surplus.

The package of measures which could form a minibudget or a number of separate announcements would be unveiled early in the new year in time to improve the position of the 2012-13 budget in the remaining few months of the financial year.

Immediately after the May budget the prime minister politically tied herself to delivering a surplus saying her government had “saved jobs, stayed out of recession and got back to surplus.”

The government has restarted its expenditure review committee, something a spokesman for Finance Minister Penny Wong said was “not unusual” at this time of year. The committee includes the treasurer, prime minister and finance minister.

Departmental officers who would normally be winding down after the November mid-year budget update have instead been asked to identify extra savings in the wake of news that the minerals resource rent tax collected almost nothing revenue in the September quarter and fears of weaker than expected company tax growth.

“Normally after the mid-year outlook Finance and Treasury officials kick back so to speak,” said former Treasury budget official Chris Richardson of Deloitte Access Economics.

“Things are quiet until the Treasury updates its forecasts in the wake of the September quarter national accounts which are due this Wednesday. That takes until Christmas. The budget process doesn’t really start until early in the new year.”

The finance minister’s spokesman insisted said the expenditure review committee met “throughout the year”, especially to look at “urgent proposals”... Departments “naturally assist in the process to find considered savings.”

Another former Treasury officer Stephen Anthony said “aggressive” hunts for further savings in December were rare.

“It’s one thing where to take three or four months to agree on a list of savings, that’s normal. It’s another thing to have people working aggressively before Christmas to come up with a list,” he said.

“It’s my understanding that last occurred in the late Keating years and the early Howard years.”

Mr Anthony runs the Canberra consultancy macroeconomics which is forecasting a deficit of $8 billion to $10 billion deficit this financial year rather than the $1.1 billion surplus predicted by the government in November.

“The economy is weaker than the government expected, the terms of trade are weaker than the government expected, and we know mining tax revenue is weaker than it expected,” he said.

“This government is good at keeping up appearances. The measures it is working on will improve the outcome it can credibly forecast on budget night, but they run the risk of further weakening the economy making the task even harder.”

Asked on Channel Ten’s Meet the Press to guarantee she would deliver the forecast surplus Prime Minister Gillard merely said the November statement showed the budget “on track” to achieve a surplus. She stood by its forecasts.

Shadow treasurer Joe Hockey said it had become “abundantly clear the government plans to break another solemn commitment”.

Mr Richardson said with luck the new round of spending cuts could just save the paper-thin forecast surplus. He expected them to be announced early in the year on a piecemeal basis rather than in a set-piece economic statement.

In today's Sydney Morning Herald and Age


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TPP. What's being built under our noses in Auckland

Negotiations over what’s set to be the world’s biggest free trade agreement resume in Auckland this week, with the Australian government insisting the contentious proposal for foreign companies to sue governments will stay off the table.

But non-government observers say aspects of the proposed powers are likely to be incorporated in the words of the agreement to be refined by officials.

The Trans Pacific Partnership will encompass eleven states from all edges of the pacific including Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Japan is considering joining at a later stage.

The Australian government has said it will not be party to the agreement if it includes a so-called investor state disputes settlement clause, something insisted on by the United States and obtained in each one of its free trade agreements apart from the one with Australia.

Such a clause would allow companies who believed an Australian law had harmed their ability to invest in Australia to take their dispute to an extranational body with the power to overrule local laws. Philip Morris International is attempting to use such a clause in the Australia Hong Kong investment treaty to declare invalid the plain cigarette packaging law that came into force on December 1.

“Many aspects of the wording to be nutted out this week touch on investor-state relations,” said Sydney university trade specialist Patricia Ranald who is in Auckland for the negotiations.

“Officials will discuss the meaning of the term expropriation, the meaning of fair and equitable treatment and what kinds of local laws could be considered legitimate rather than expropriation. The wording agreed on could be used in side deals between some of the members if Australia sticks to its guns and refuses to agree to a deal with investor state disputes settlement clauses"...

Trade minister Craig Emerson said Australia’s position remained unchanged and said he understood the proposed clauses were not to be discussed in Auckland.

“This is about officials deciding on wording, so that ministers can consider bigger issues in future meetings,” he said.

Also up for discussion will be United States proposals with the potential to restrict the scope of Australia’s pharmaceutical benefits scheme and to further extend the term of copyright. Australia agreed to extend the term from 50 years past an author’s death to 70 years when it signed the US-Australia free trade agreement in 2004. The US is also proposing tougher intellectual property restrictions on use of material from the internet.

In today's Sydney Morning Herald


Trans Pacific Partnerhsip an American Perspective



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