Friday, February 27, 2015

The Bureau of Statistics on the census. It's not that useful after all

The Australian Bureau of Statistics has claimed the census is less useful than widely believed, as a leading trade union launches an online petition to save it.

Defending a push to move the census from once every five years to once every 10, the bureau's chief executive David Kalisch said the census did less than was generally thought.

There is a sense in the community that a lot of information is derived from the census, which isn't true 

While the census was useful for setting electoral boundaries,  infrastructure planning and business decisions, it was "an increasingly modest input".

"We believe there is a different way of configuring our statistical approach that makes use of a census and also makes better use of more regular population surveys," he said.

The bureau has asked the government to relieve it of the legislated requirement to run a census every five years. The next one is due in 2016.

The United States and the United Kingdom each run censuses only every 10 years.

Asked whether there would be a census in 2016 as scheduled, Mr Kalisch said he could not "announce what the government might decide".

Asked whether he wanted to be freed of that obligation to conduct the 2016 census, Mr Kalisch said he shouldn't disclose what he had put to the government.

The bureau wanted to reallocate funding away from the census towards upgrading its technology in order to continue to produce high quality statistics.

"You talk about the people having trust and faith in the bureau," Labor senator Sam Dastyari told him. "How do you build trust and faith when the one interaction that all Australian people have with the bureau is the one thing you've put on the table to get chopped?"

The hearing took place as the trade union United Voice launched an online petition at SaveOurCensus.com.au...

National secretary David O'Byrne said cancelling the census would marginalise his members and vulnerable Australians.

Among the workers United Voice represents are cleaners, childcare workers, restaurant and hotel employees and ambulance officers.

"Our members in childcare rely on the census to prepare for the 308,065 births each year," he said. "Our aged care members need accurate data to provide services for the 3,012,300 older Australians. As the union representing 21,626 baristas and hospitality workers, we need this data to ensure workforce training is adequate."

A bureau spokesman responded that the births figure didn't come from the census, and the each of the other examples could have come from somewhere else.

"This is a good example of what we are talking about. People ascribe a whole lot of stuff to the census that is actually delivered through other vehicles."

"The union is not right about births. Certainly the number of older people and number of hospitality workers does come from the census, but it is also produced by the bureau on a more regular basis through other means."

In The Age and Sydney Morning Herald


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Thursday, February 26, 2015

Super. Greens offer Abbott $13 billion

The Greens are offering the government a $13 billion budget saving. All it has to do is ditch its commitment not to touch superannuation before the next election.

The plan would tax superannuation contributions on a progressive scale rather than the present flat rate of 15 per cent and 30 per cent for workers earning more than $300,000.

Australians on the 19 per cent marginal tax rate would pay 4 per cent on their super contributions, Australians on the 33 per cent rate would pay 15 per cent, Australians on 37 per cent would pay 22 per cent, and Australians on the 45 per cent rate would pay 30 per cent.

As a supporting measure, the policy would also clamp down on "churning" wages through super funds. It will no longer be possible for Australians over 55 to get a tax benefit just for putting their salary into a super fund while drawing an equivalent wage from the same fund.

The change is backed by the Australian Council of Trade Unions, the Australian Council of Social Service, Anglicare and the Australia Institute. It is builds on a recommendation of the Henry Tax Review.

In the election the Coalition promised not to make any "unexpected detrimental changes" to superannuation.

An independent costing prepared by the Parliamentary Budget Office finds it would save $3.4 billion per year... Over the four years the saving would amount to $13.6 billion.

"The Greens are genuine about raising revenue. We can support people on lower incomes and at the same time raise billions to pay for schools and hospitals just by making sure that the rich pay their way on superannuation," said Greens leader Christine Milne.

The proposal would also fix an inequity. At the moment Australians earning less than $19,400 pay no tax on their income but the standard rate of 15 per cent on their super contributions. The proposal would ensure they paid no tax on their super contributions.

It leaves untouched the highly concessional 15 per cent rate of tax on super fund earnings. Dividend imputation means many super funds pay as little as 7 per cent tax on their earnings.

In The Age and Sydney Morning Herald










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Satisfied? Real wage growth is close to zero

Don't even think about asking for that big pay rise.

The latest figures from the Bureau of Statistics show wage growth has never been lower - not since the bureau began collecting accurate figures in the 1990s.

In the 12 months to December wages grew by an average of just 2.5 per cent, around the same as the Reserve Bank's long run inflation target. Four years earlier during 2010 they were growing at 3.9 per cent.

The low rate means that after inflation real wages scarcely grew.

Even in the states in which wages were climbing the fastest - Victoria, South Australia and Tasmania - they grew by just 2.7 per cent.

In NSW they grew 2.3 per cent and in the Australian Capital Territory 2.2 per cent. ACT public sector wages grew only 1.4 per cent.

The Australian government has offered defence force staff just 1.5 per cent per year, much less than inflation and the lowest pay rise on record. Staff in the department of the industrial relations minister Eric Abetz have been offered just 0.5 per cent along with cuts to conditions. Several agencies have offered nothing. The Australian Crime Commission and the Australian Research Council has proposed a rise of zero per cent.

Wages grew the slowest in the industry group the bureau calls professional, scientific and technical services, which services the mining industry. The climbed just 1.9 per cent. Wages in retail trade climbed a weak 2.2 per cent...

The biggest wage rise was 3.4 per cent, in education and training industry.

Commonwealth Securities chief economist Craig James said the low wage rises would restrain consumer spending.

"They are barely covering inflation," he said. "It might mean the Reserve Bank decides to cut rates again next week and then retires to the sidelines. Or the Reserve Bank might keep another rate cut up its sleeves in case momentum in the economy eases further."

This week's ANZ Roy Morgan consumer confidence index showed spending intentions at an eight-month low.

The Reserve Bank board cut its cash rate from 2.5 to 2.25 per cent when it met this month.  Financial markets have assigned a 42 per cent probability to another cut, to 2 per cent, when the board next meets on Tuesday.

In The Age and Sydney Morning Herald


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John Fraser. The new treasury boss defends austerity and Ronald Reagan

The new head of Australia's Treasury is a fan of the Ronald Reagan tax cuts in the US, believes austerity has had a bad press and is wary about using government spending to stimulate the economy.

Meet John Fraser, until a few weeks ago the head of UBS Global Asset Management in London. The Abbott government appointed him in December to replace the long-serving public servant Martin Parkinson, who stepped down after being told he didn't have the confidence of the prime minister.

Although he appeared before Senate estimates hearings in an earlier life when he worked for the Treasury in the early 1990s, Wednesday's appearance was Mr Fraser's first as departmental secretary.

And he was free with his opinions.

He was "a great believer" in the business and personal income tax cuts introduced by US president Ronald Reagan in the early 1980s. He was living in the US at the time and saw them up close. Their critics say they pushed the US budget deeper into deficit, but Mr Fraser told the hearing they "helped reinforce the entrepreneurial spirit which is alive in some of the smaller and medium-sized businesses in the US" which was one of the key reasons it did so well. Others were flexible labour and product markets.

Critics of austerity measures - including those in the International Monetary Fund - had failed to grasp their "clear success" in places such as the United Kingdom.

"I was in Great Britain when the IMF chief economist came to look, and he said he had been pleasantly surprised that the UK had been doing so well with the austerity program," he told the hearing.

"I think the clear success in the UK is interesting, and I would there's been clear success also in the United States as well as elsewhere. But we are a sovereign nation, we are a proud sovereign nation, we have to tailor policies to our own conditions."

When it comes to using government spending to stimulate the economy, Mr Fraser is cautious.

"My own view is that I approach fiscal stimulus, in whatever circumstances, with a great deal of care," he told the hearing. "I am old-fashioned. I don't like public debt...

"One of the reasons I don't like it is because public debt leaves you liable to the vicissitudes of the market. So when interest rates go up as they did in the late 1980s we suddenly had public debt interest taking up a massive amount of outlays."

While interest payments on government debt at present take up less than 3 per cent of government income, Mr Fraser said the impost would grow rapidly when interest rates climbed.

"To my mind that's money that could have been spent on better things, and I'll articulate that later in other places."

The Treasury's Intergenerational Report, due next week, would outline the twin problems of Australia's ageing population and government debt, he said.  It would have "very real implications for how we spend our money, and indeed also how we tax".

Asked to endorse the actions of the treasury in running up debt during the global financial crisis in order to avoid recession, Mr Fraser said he wasn't in a position to judge.

"I lived through it the global financial crisis and it was remarkably frightening, managing a very large global asset manager. 

"I am loath, if you weren't there in the heat of battle, to make judgments about the efficacy or otherwise of the reaction by countries around the world.

"It was a very difficult situation, indeed an unprecedented one in the world's history."

In The Age and Sydney Morning Herald


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Tuesday, February 24, 2015

Pay no attention to the Telegraph. We need more debt, not less

I am worried about debt. I am worried about some of the things News Corporation newspapers are saying about debt. For most of its life News Corporation has been up to its eyeballs in debt. That's how it grew big.

In 1990, a few years after buying Twentieth Century Fox, it was paying more than $1 billion per year in interest. One billion dollars was an awful lot of money back then. News Corporation owed more than it was worth.

It split itself into two in 2013, leaving all of the debt in what it called 21st Century Fox and leaving News Corporation (the Australian arm) debt free. Fox owes 2.8 times its annual earnings, a sum that would make the Australian government blush.

But the Australian arm hasn't given up its attraction to debt. Michael West reports in this newspaper that News Corporation with its partner Telstra has lent the best part of $1 billion to their part-owned subsidiary Foxtel, much of it at a generous rate of 12 per cent. Foxtel has lent money back to News Corporation at an interest rate of zero.

Whatever the ins and outs of the eyebrow raising deal, it's hard to argue that News Corporation is unfamiliar with debt. And yet its newspapers commit howlers.

This month one of its tabloids headlined its front page: Australia's debt crisis is a staggering $1 trillion nightmare".

"Australia's mounting federal government debt will be $1 trillion by 2037 if urgent action is not taken," it said.

It backed it up with an editorial saying $1 trillion was a figure "most people are unable to fully comprehend".

One trillion is indeed a figure most people are unable to fully comprehend, perhaps because the newspaper won't put it in context...

By 2037 the Australian economy will be turnover around $6.5 trillion per year if trends persist, many times more than the $1.6 trillion it turns over today.

By then a debt of $1 trillion will be worth 15.3 per cent of the enlarged turnover, somewhat less than the 16.7 per cent it accounts for today.

That's right. The newspaper was reporting what would most likely be a reduction in Australia's debt to GDP ratio, but it didn't say so.

"I for one reckon Australia will be doing really well in 2037 if net government debt is $1 trillion, because it will probably mean the budget has travelled on a sustainable path for two decades," the economist Stephen Koukoulas noted.

Then the paper came back for more.

"A baby born today will have paid $90,000 worth of interest on servicing government debt by the time they hit 40," it said. The thinking wasn't clear. The story itself said the interest paid on government debt would reach $1000 per person by 2031-32, which is less compared to the size of the economy than it is today.

The government doesn't have a debt problem. It has a deficit problem. Its debt is a fraction of what corporations with growth prospects owe as a proportion of their income.

Its deficit problem is worrying. It is taking in $40.4 billion less per year than it is spending. It'll have to fix it by taking in more and spending less.

But that doesn't mean it should be borrowing less. Borrowing for long term projects has served Australian governments and corporations well. With the interest rate currently on offer at all time low (just a touch above the long-term rate of inflation) it's almost being offered money for nothing.

Former US treasury secretary Larry Summers sees the ultra low rate as a once in a lifetime opportunity.

"If a moment when we can borrow money, in a currency we print ourselves, for ten years at 1.8 per cent, in a moment when male unemployment is at record levels, is not the moment to fix Kennedy Airport, I do not know when that moment will ever come," he told the London School of Economics last month.

Australia is being offered money at 2.55 per cent, a somewhat higher rate than is the US, but almost as cheap as the US when consideration is given our higher inflation rate.

"A time when there is too little investment and therefore more people are out of work - that is the right time to replace all the old coal-fired power plants that are wrecking the planet," Summers went on. "There are plenty of very valuable things to do, we just need to be willing to make those kinds of investments in the future."

Australia's mining workforce has slid 44,000 in the past year. The unemployment queue has climbed 64,600. There are 100,000 more Australians unemployed than there were when Labor left office. Borrowing for big projects for which there are skills available makes complete sense. If the government is worried that the present ultra low rates on offer won't last it could borrow for 30 years instead of 10. The treasurer Joe Hockey suggested it in opposition.

His job isn't easy. But isn't helped by talk of a staggering debt crisis when debt is one of the few things that could help.

In The Age and Sydney Morning Herald


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Sunday, February 22, 2015

Sunday Explainer: What's the census and can we afford to do without it?


An ancient relic or an essential tool for the 21st century? The government is considering abandoning next year's census in order to help the Bureau of Statistics fund other priorities. In future we would only complete the census once every 10 years instead of every 5. Should the second Tuesday next August be freed up for other pursuits? And what would be lost if it was? Peter Martin starts counting.

What exactly is the census?

It's a questionnaire delivered to every household in the nation, even remote ones. It asks who was sleeping at that address on the night, where they normally sleep, their ages, relationships to each other (daughter, mother etc) and up to 60 questions including age, income, occupation, address of work and means of travel to work, as well as the one voluntary question - religion.

Many people don't take the religion question very seriously. In the 2011 census 65,486 Australians said they were Jedi Knights.

You say the religion question is voluntary. Is the census itself compulsory?

Yes. The Census and Statistics Act provides for penalties of up to $110 per day for people convicted of failing to complete it.

What is it used for?

Planning. It’s the only accurate means of measuring the population. In between times the ABS guesses the size of the population by using births, deaths and immigration records. But it gets it wrong. After each census its replaces its guesses with what the census tells it is the truth. In 2011 it cut its estimate of the Australian population by 294,400.

It also tells the Bureau where people live. Without counting them there's no way of knowing how many people live in each town or suburb. Tony Abbott talks of building the roads of the 21st century, but without knowing where the population is and where it moves to each day it's hard to know where to put them.

But it's just a series of snapshots. It can't tell us how people grow and change over time, can it?

It can now. Since 2006 the census has asked for our dates of birth as well as our names, enabling it to track our movements over time.

So it's just getting really useful?

Oh yes. We've had the census since 1911. Since 1961 we've had them every 5 years. Since 2001 we've been given the option of having our census forms retained for use by future historians.

Is the census a threat to privacy?

It seems quaint by the standards of today and the debate over metadata, but people used to think so. Broadcaster Derryn Hinch used to urge Australians not to return their forms.

The census comes with a promise of absolute confidentiality, but it has been broken overseas in times of war. During the second world war the United States census bureau supplied the authorities with the names and addresses of Japanese Americans who were rounded up and placed in internment camps.

Isn't the census outdated now we do surveys? The ABS surveys 26,000 households to get the unemployment data and does a pretty good job.

The survey does a good job because of the census. The Bureau 'bulks up' the answers to its employment survey by multiplying them by numbers that will give it results for the populations of each region. It only knows those populations because of the census. In between times its guesses get wonky. In January 2014 it revised down its estimate of the number of people employed by an extraordinary 167,300 because of new information from the census. Employment growth had looked acceptable in Labor's last year in office. It suddenly looked weak.

So why on earth would the Bureau want to axe the 5-yearly census, moving instead to a census every 10 years?

It says it has a new means of accurately measuring the population in each location, but curiously it won't say what it is. Some of the wilder guesses include counting the number of active mobile phones near each tower, and using traffic cameras. The truth is likely to be less interesting. But it'll be experimental. Moving to a new method of counting the population without also running the census as a check invites mistakes. The Bureau says it will still run a census every 10 years, but it is well aware of the size of errors that can accumulate in just 5 years.

Is there something else behind this?

Yes. The 2016 census was to be Australia's first predominantly online census. Australians would be posted a code and invited to log in rather than delivered a document. But planning for it is critically behind time and over budget. The Bureau would have big problems delivering it on time as promised. It wants to spend the money upgrading its computer systems instead. The last census cost $440 million, which would free up a lot of money.

Is the Bureau legally allowed to abandon the 2016 census even if the government wanted it to?

No. The parliament would also have to amend the Census and Statistics Act. The Act requires the Bureau to conduct a census every 5 years. The last one was in 2011. The Bureau would need the support of Labor and The Greens and Palmer Party and independents to get the amendment through the Senate.

So the Bureau is in serious trouble?

Yes. If it can't get the law changed it could conduct a scaled-down census with fewer questions, but that would be cheating.

How did it come to this?

The Rudd, Gillard and Abbott governments starved the Bureau of funds. The Abbott government left it without a chief executive for almost a year. Hundreds of staff have been shown the door. The census is dying of neglect.



In The Age and Sydney Morning Herald


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Stress. The hidden cost of having children

Ever wondered why people who've had children keep hinting that you should too?

It could be because they want you to suffer, like they did... so that you'll understand.

It's long been suspected that an awful lot of suffering is involved, especially for women. Surveys show parents are on average no happier than non-parents, even though most are keen to nominate their children as one of the most important things in their lives.

Many studies find that, all things taken together, couples with children are somewhat less happy than those without. Others find they are only slightly more happy. Most agree during the moments they are actually with their children they are less happy.

It could be that while having children does indeed make them happier people, there's something else going on at the same time that makes them feel terrible.

It would be stress. Mark Wooden and Hielke Buddelmeyer from the Melbourne Institute have quantified it in a new study written with a leading United States economist Daniel Hamermesh called The Stress Cost of Children.

They looked at two types of stress: financial, and being short of time. After examining data from surveys in Germany and Australia they found that financial stress wasn't that important. Time stress was critical.

To measure it in Australia the parents were asked: "How often do you feel rushed or pressed for time?" In Germany they were asked: "Think about the last four weeks. How often during this period did it happen that you felt rushed or under time pressure?"

In Germany, the birth of a child added enormously to the mother's time stress and not at all to the father's.

In Australia, both parents became more stressed, but for the mother the effect was three times as big...

Worse, it never really vanished. Whereas whatever financial stress a child brought disappeared quickly, the time stress for women continued for at least four years – the limit of the survey.

But how much stress?

The researchers used complex econometric techniques to answer the question: what transfer of earnings from the father to the mother would be needed to reduce the mother's financial stress by an amount equal to the increased time stress generated by the birth.

The answer shocked them. (They are all men by the way.)

In Australia the transfer would need to be more than twice as much as the father earned.

"Clearly, there is no reasonable transfer of earnings from husband to wife that can compensate for the increased time stress that she experiences with the new child," they concluded.

"These simulations suggest that the psychological cost of a new child is huge in comparison to the monetary cost. While other simulations would generate different monetary comparisons to the time stress experienced by new mothers, given our estimates it is doubtful that any reasonable simulation would suggest that these costs are small."

The extra stress is all the more shocking because before birth new mothers are likely to be unusually free of stress. It dips before birth and then soars. The report says that might be because parents pick times of unusually low stress in which to have a child. It might also be because women are more fertile when they are less stressed.

At the other end of childhood emptying the nest might be expected to dramatically lower stress in the same way that gaining a child raises it. But their study of a different group of parents whose children left home found what they called an asymmetry. Departures eased stress only gradually. Stress began subsiding four or more years before the child left and then kept falling at roughly the same rate in the years that followed. It's as if the child never really left, or as if the child began withdrawing before they said goodbye.

Wooden and Buddelmeyer found that having children generated "a permanent lifetime increase in perceived stress".

Which doesn't necessarily mean it's a bad thing. There are upsides from having children as downsides: pleasure, a feeling of importance and a feeling of contributing to humanity are among them. But they are likely to be forever offset by a feeling of being tired, or anxious or short of time.

None of these are reasons not to have children. But they are reasons to think about it carefully. Once made the decision can't be undone. And I don't know of many parents who would like to undo it.

It just means that when parents tell you how wonderful it is, they're not giving you the full picture.

In The Age and Sydney Morning Herald


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Saturday, February 21, 2015

Trans Pacific Partnership. What is being negotiated in our name?

When The Lancet and the Australian Medical Journal editorialise against Australia's next free trade agreement it's a fair bet they are concerned about more than just trade.

The Trans Pacific Partnership is the biggest free trade agreement hardly anyone's ever heard of. Bubbling along below the radar for half a decade, it's about to ermerge.become solid. It is set to deliver much more money and power to US pharmaceutical companies, to criminalise the use of technology in ways that presently don't attract jail time, and to set up outside tribunals to reconsider decisions already made by Australian courts.

Taking part is almost 40 per cent of the world's economy - the industrialised nations of Australia, Canada, Singapore, Brunei, New Zealand, Chile, Mexico, the United States and Japan and the less developed nations of Malaysia, Peru, and Vietnam. If China joins later (as expected) it'll be nearly 50 per cent.

It has reached the point where Australia's trade minister Andrew Robb is prepared to put a date on it. "I think it could be ready next month" he says, before adding that there have been slippages before. It was meant to be signed in 2011.

"The meeting we held in December was the first time I witnessed a change from people being predominantly exercised about their own sensitivities to being prepared to find middle ground," he says. "A lot decisions at the last two meetings were made in areas we previously hadn't been able to touch."

Quickening the pace is the imminent US election season. If there isn't an agreement within the next few months before it starts, political positioning will prevent the US sealing a deal until 2017 when the new president is in place.

Mind boggling in its complexity (the US United States takes 80 specialists to each negotiation, Japan 120, and Australia 22) the negotiating text is secret. Robb says even most of the negotiators don't know what's in the whole thing. Each knows about little more than the chapter they are working on, and there more than 20 chapters. The text won't be made public until after the leaders shake hands, as is typical in international trade agreements.

But what is known, from draft chapters leaked to Wikileaks and from the generally more open US political system, suggests that it's about far more than trade.

Health

When the US negotiated its 2004 free trade agreement with Australia it pushed to eliminate "price controls", by which it meant the prices set by Australia's Pharmaceutical Benefits Scheme. What it got was an independent review process which had no authority to overturn decisions. Public health expert Dr Deborah Gleeson of La Trobe University says it's only been used twice. For the TPP the US wants something much stronger, the right to appeal against decisions and have them overturned...

It would apply to decisions about both the prices charged for drugs and which drugs to include in the scheme (and in similar schemes in other countries).

Among Australia's most expensive medicines are so-called biologics - drugs or vaccines made from living organisms. They are used to treat conditions including breast cancer and multiple sclerosis. To get approved in Australia they manufacturer needs to submit data from clinical trials which remains confidential for 5 years, and is then available to competitors to use in seeking approval for much cheaper versions. The US wants signatories to the TPP to lift the period of exclusivity to 12 years, which is what it is in the US. It would mean up to 7 more years of very expensive biologic medicines in Australia before the prices drop. Dr Gleeson and colleagues reckon the extension would cost Australia more than $205 million per year. Most of the money would go to US owned pharmaceutical companies.

A relatively rich country such as Australia can afford to send more money to the US for its medicines. Poorer nations such as Malaysia, Peru, and Vietnam would find it harder.

Robb responds by saying the critics don't know what will be in the final agreement. 

"They might know what the US position is, but there are 11 other countries, right? A lot of us are waiting to see what the rest of the package looks like. We're not going to give up on something unless we get something somewhere else."

It's that flexibility, the fear that health protection measures could be traded away to get something else that worries organisations such as the Australian Medical Association.

It says the US wants "industry" to have a guaranteed right to contribute to national nutrition policy making in member countries. It would mean letting the food industry help draft anti-obesity campaigns.

It the tobacco industry had been given the right to help draft anti tobacco campaigns they would have taken place later and been less effective.

Sovereignty

Australia is currently being sued in an international tribunal by Philip Morris Asia after the tobacco giant lost its case in the High Court against Australia's plain packaging law. It is only able to do that because of an investment treaty Australia signed with Hong Kong. Philip Morris moved its Australian business to Hong kong to take advantage of it.

So-called investor-state dispute settlement procedures are common in international treaties. The US has insisted on them in all of its free trade agreements but one. Australia is the exception. The Howard government said no in 2004 arguing that Australia's legal system was good enough to resolve any disputes it would have with the US without the need for an outside one.

This time the US wants a universal system. The previous Labor government refused to have them in any of its trade agreements and believed it was on the verge of getting a carve out for Australia in the TPP because of its strong judicial system. But shortly after taking over the new trade minister, Andrew Robb said he would instead consider agreeing to them on a case by case basis, depending on what he got in return. The statement weakened Australia's ability to get a carve out.

High Court Judge Robert French has complained that the judiciary is being frozen out of the decision making process. It knows more than any other branch of government about what allowing outside appeals beyond the High Court would do to the legal system, but he says as far as he knows, he hasn't been asked.

Intellectual property

The US is demanding extreme extensions in copyright terms. Already in the US-Australia Free Trade Agreement it secured an extension from 50 years after the author's death to 70, something former productivity Commission economist Philippa Dee believes cost Australia $88 billion in extra copyright payments. Now it wants to make 70 years universal in those countries that don't have it and to extend the copyright on movies and sound recording from 70 years after publication to 95 years. And it wants to turn into criminal offences breaches of copyright that presently attract only civil penalties.

Robb says none of this is known, in part because the decisions haven't yet been taken, but leaks from inside the negotiations suggest that most of the intellectual property chapter has been finalised.

What's in it for us?

An Australian National University study of the US-Australia Free Trade Agreement found there was very little in it for Australia. A recent US department of agriculture study found it would deliver a zero economic benefit to Australia and a zero economic benefit to the United States. For smaller nations the economic benefits are bigger which may explain why they are eager to join and why the US is driving a hard bargain on intellectual property and the rights of its pharmaceutical industry.

Robb is more optimistic. He says we'll like the agreement when we see it. It'll have to go to parliament. Until then he says we'll have to trust him.

In The Age and Sydney Morning Herald


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Bean counting not people counting: why the ABS can't afford the Census



Make other plans for census night next year. The Bureau of Statistics says it wants to cancel it, in part because of the "significant reporting burden" the census imposes on us. But its own burdens worry it the most.

The Rudd government hacked into the ABS budget just before the global financial crisis. It turned out to be an unwise time to do it. The bureau cut back the size of its retail survey and killed its job vacancies survey. Just at the time when the government needed to know whether its stimulus cheques were hitting the stores and keeping employers' doors open, the ABS found itself unable answer.

The cutbacks continued under Gillard and then under Abbott in the form of efficiency dividends. But it's hard to be more efficient when much of your work is manual, walking from door to door asking questions and finding an increasing proportion of the population not at home.

The bureau had planned a 'big bang' for census night 2016. It was to be the first predominantly electronic census, removing the need for much of the doorknocking. But the plan needed money and time to retool. With just 18 months to go until Census 2016, the project is woefully over budget and behind time. ABS has asked not to have to do it. If the Parliament doesn't release it from the obligation it'll be in serious trouble.

The bureau's problems are partly of its own making. And they're partly the fault of leaders from both sides of politics who haven't stopped squeezing.


In The Age and Sydney Morning Herald


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Friday, February 20, 2015

The ABS, not the Abbott government, is behind the plan to axe the 2016 census

The controversial proposal to axe the 2016 census has originated from the Bureau of Statistics rather than the Abbott government, the bureau has revealed.

The ABS has asked the government to legislate to remove the requirement that it conduct a census every 5 years and replace it with a requirement to conduct the survey only once every 10 years as happens in Britain and the United States.

The bureau has spent more than a year developing means of producing accurate population information without a census and is at the stage where it believes it can accurately update state populations every three months and smaller populations every year.

Asked how the bureau would be able to provide sufficiently accurate population information without surveying the entire population, the head of the ABS David Kalisch said he wasn't in a position to say.

But he said he believed the bureau could produce high quality data on the population of Australian states every three months instead of every five years.

"The census only provides a snapshot of Australia for one day every five years, and it also takes some time for the information to be released after census night; a minimum of 10 months for some of the very basic information, but then for some of the very detailed info it's two to three years later," Mr Kalisch said.

"When you are looking at population numbers for local government or business planning, often the time between getting contemporary information from the census and having to make business decisions means there have been very big changes."

Appointed only in December, Mr Kalisch has inherited an organisation running on a dual track. For the past year it has been both preparing a case for abandoning the 2016 census and preparing to conduct it...

Fairfax Media understands that it is well behind schedule and unable to deliver the census without cutting its size or compromising its quality.

The ABS wants to use much of the money that would have been used for the 2016 census to modernise its computing systems, some of which are up to 40 years old and need specialised knowledge to maintain.

The 2011 census cost $440 million.  It employed 29,000 census collectors making it what the bureau described at the time as Australia's largest ever peace-time operation.

Delaying the census would only be possible if the Census and Statistics Act was amended by Parliament. The Act requires the bureau to conduct a census every 5 years. The last was in 2011.

Mr Kalisch stressed that the Bureau was not asking the government to axe the census altogether, merely to make it less frequent. New Zealand is also considering moving from a five-yearly to a ten-yearly census.

In The Age and Sydney Morning Herald


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Thursday, February 19, 2015

Blowing out our brains. Our census faces the axe

Video

The government is considering abandoning the Australian census and replacing it with a smaller sample survey in the upcoming budget.

An Australian institution since 1911, the census surveys every household in the nation once every five years on the second Tuesday in August.

The most recent census, in 2011, marked 100 years of data collection, providing a century’s worth of information about where Australians came from, where they lived, what type of families they had and how they worked.

Preparations for the next, Australia’s first paperless census, have underway for seven years.

Asked directly whether the 2016 census would go ahead as planned on August 9, a spokeswoman for the parliamentary secretary to the treasurer Kelly O'Dwyer read from a prepared statement.

It said: “The government and the Bureau of Statistics are consulting with a wide range of stakeholders about the best methods to deliver high quality, accurate and timely information on the social and economic condition of Australian households.”

Asked whether that was an answer to the question: “will the census go ahead next year?” the spokeswoman replied that it was.

Abandoning the census at this late stage would waste years of preparation but would save hundreds of millions of dollars.

The 2011 census cost $440 million... The 2016 census was shaping up to be even more expensive because of the information technology requirements of moving to primarily electronic lodgement. Over time the change would save money as fewer collection agents and data entry staff were needed.

In an interview with Fairfax Media last week the new head of the ABS David Kalasch said he needed several hundred million dollars to refresh the Bureau’s aging technology systems.

Britain’s Conservative government announced plans to axe its census five years ago arguing that it was outdated and that better information could be obtained in cheaper ways.

After a parliamentary inquiry it reneged and agreed to allow the next census to go ahead in 2021. Britain conducts its censuses only once every 10 years.

Canada cancelled its compulsory census in 2010 and moved to a shorter voluntary survey. Statisticians testing the new data have described it as “garbage”.

New Zealand is considering replacing its census, using so-called administrative data from organisations such as the tax office to determine its population. It is also considering conducting the census only every 10 years instead of the present five.

Australia’s Bureau of Statistics is required by law to conduct the census every five years, and so any change would require legislation.

Documents released under the Archives Act show both the Fraser and Keating governments considered axing the census to save money.

A spokesman for the ABS said planning for the 2016 census was on schedule. He later phoned back and said all inquires should be directed instead to the parliamentary secretary’s office.

Australian National University demographer Peter Mcdonald said the census would be almost impossible to replace.

“It does what sample surveys cannot,” he said. “It can track what is happening to comparatively small groups of people, such those born in particular countries. It can’t be picked up by smaller survey.”

The biggest loss would be regional population information.

“There is simply no other way of knowing how many people are in each town or suburb. Planners would be working without guidance. Over time it would be harder to know the size of the Australian population.”

Ahead of the 2011 census the head of the population census program Paul Lowe argued that it was important for Australians to fill in their forms.

“It will shed some light on your community. Census information is used to allocate funding for critical infrastructure and services such as roads, schools, parks and hospitals.” he said.

In The Age and Sydney Morning Herald


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Tuesday, February 17, 2015

Budget 2015. Will Hockey ramp up tax on super contributions?

Joe Hockey may have just let the cat out of the bag.

The treasurer has an awful problem. Government revenue is falling well short of expectations and is about to slide further. Since his May budget the iron ore price has slid 40 per cent. The oil price, which sets the price of exported gas, has slid 50 per cent. The lower dollar will nowhere near offset the hits to export income and the hits to tax revenue. They are yet to reach the budget.

Already, as Hockey puts it, "the government is spending $100 million more than it collects every day. It has to borrow that $100 million per day just to pay its bills".

The $100 million figure comes from dividing the forecast budget deficit by the number of days in a year. It's accurate, and unless Hockey comes up with something clever it's about to grow.

He can't hack into it by slashing spending on education and health as he tried last time. His prime minister won't let him. Abbott says "with the wisdom of hindsight" Hockey's first budget bit off more than it could chew.

And in any event the economy is weak. It's the wrong time to rip money out of it.

Nor can he do it by further trimming the public service. Finance department chief Jane Halton went out of her way on Friday to debunk what she said was a myth: the idea that "if we just get efficiency of government working well, we could actually manage all of this".

The cost of running the government is on track to slide by a third over a decade, and it's not that big anyway in relation to total government spending.

The really big dollars have to be found where the government hands out money and where the government forgoes money by handing out tax concessions.

The really big dollars are in superannuation...

The government's latest Tax Expenditures Statement puts the cost of just one of the two big superannuation tax concessions at $16 billion per year, set to grow to $19 billion in 3 years time.

It's the concession that taxes super contributions at just 15 per cent instead of the employee's marginal tax rate.

(The other big concession, the lower tax rate on earnings within super funds, costs $13 billion. The treasury says that cost is set to double to $26 billion in 3 years time.)

By way of comparison the government spends $20 billion per year on Medicare.

The easiest concession to axe would be the one on contributions. It'd be simply a matter of collecting the tax from employers through PAYE at standard rates instead of from funds at 15 per cent. No-one's take home pay would be cut. The employers would take the tax out of the money they set aside for contributions to super.

Hockey would have made billions (a fair proportion of the Medicare budget) without ripping anything much out of the economy.

This column put forward the idea in December. Its beauty is its simplicity. Everyone would be taxed at their standard tax rate, and the tax would be collected where tax is usually collected, from employers through PAYE.

But it took the great simplifier, broadcaster Alan Jones, to put the case at its simplest.

Here's what he said on Q&A last Monday night:

"The notion that someone like me should be getting concessions - I pay 48 cents in the dollar tax but if I put my super in, I pay 15. I get a 33 cents in the dollar concession... Now, someone somewhere along the line has got to say, look, in an ideal world that would be terrific, but we ain't in an ideal world."

At the time the government minister on the program said only that super would be considered in the forthcoming tax review. But on Friday on ABC radio Hockey said more. Asked about what Alan Jones had said he referred not to the forthcoming tax review but to the Murray financial system inquiry already concluded, and to the May budget.

"We have obviously got a report from David Murray about the banking system and about retirement income; we are considering that," he said. "I am not ruling anything in or out. I am not playing those sort of games but we are looking far and wide for the opportunity to get the budget back to the point where we, as a nation, live within our means."

I read that as confirmation that Hockey is looking at superannuation tax concessions in the context of the May budget.

Murray endorsed the recommendation of the Henry Tax Review that super contributions be taxed as ordinary income, offset (for contributions or up to $25,000) by a flat rebate of 15 per cent; meaning that high earners would no longer get obscenely bigger concessions than low earners.

Labor ignored the recommendation. It had designed the system that taxed super unfairly. Only at the eleventh hour when it was about to lose office did it attempt modest modifications.

Hockey can't overturn Labor's tax system just yet. In 2013 he promised no change to super for 3 years. That commitment is about to expire. He can announce changes in this year's budget that will take effect from late 2016 and begin booking the much-needed extra revenue.

I think he might.

In The Age and Sydney Morning Herald


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Saturday, February 14, 2015

Hockey and Stevens agree. It's about trust

The one thing that's broken is the one thing our leaders can't easily fix.

It's confidence. The treasurer said so on Friday: "The problem in the economy is not a shortage of money, it's about confidence and jobs and growth."

Joe Hockey believes there's little point in injecting more money into the economy if people and businesses aren't prepared to spend it.

Reserve Bank governor Glenn Stevens said much the same thing before the parliament's economics committee while Hockey was speaking.

Stevens spoke of "that pervasive sense of caution, of feeling they don't want to take the risk".

He said it was what worried him most.

Adjusting interest rates (monetary policy) was probably less potent a tool than it used to be when people were keener to spend.

"A decade ago when there was, it seems, an underlying latent desire among households to borrow and spend, it was perhaps easier for a reduction in interest rates to spark additional demand in the economy," he said. "Today, such a channel may be less effective."

Hockey made the same sort point about tax and spending (fiscal policy)... Cutting tax or boosting government spending won't get us to spend more unless we want to. And right now we don't really want to, in part for reasons of which Hockey is well aware. We don't feel good about his budget and we don't feel good about his government.

The Westpac consumer confidence index dived after Hockey's first budget and didn't really pick up until February after the Reserve Bank's interest rate cut. Even now, it's still not back to the level it was during most of Labor's last year in office. Monday's attempt to remove the prime minister saw confidence among Coalition supporters dive 6.5 per cent. Confidence climbed among Labor supporters but much of it might have been from a feeling it made the government weaker.

All isn't lost. Cuts in interest rates still have some force, although mainly in boosting an already boosted housing market; something that concerns Governor Stevens. And targeted extra spending and extra tax cuts won't be completely wasted. But big spending cuts in order to reduce the deficit might be disastrous. Boosting consumer confidence will be hard, destroying it would be easy.

In The Age and Sydney Morning Herald


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Friday, February 13, 2015

New ABS chief David Kalisch: Don't take our numbers literally

Literally.

The new head of the Bureau of Statistics has a disarming reply to people who complain that the bureau's unemployment data is unreliable. It's to not rely on it. 

The January unemployment rate was 6.4 per cent. David Kalisch says the media and markets should focus instead on what the bureau calls its 95 per cent confidence interval, reporting that the bureau is confident the true rate is between 6 per cent and 6.8 per cent.

It would mean reporting that the total number of Australians in jobs did something between sliding 72,200 in January and climbing 45,800. It would mean reporting that the number of Australians unemployed did something between climbing 74,900 and falling 5900. It would mean acknowledging that the bureau's employment estimates are even less accurate than is widely believed.

And he says even those broad ranges should not be treated as gospel. "You've got to look at whether the numbers are in line with other economic conditions. You've got to ask: does this number have a clear alignment with other economic indicators and expectations?"

Kalisch comes to the ABS from the Australian Institute of Health and Welfare where he was chief executive. An economics graduate from the University of Adelaide, he has specialised in labour markets for the past three decades, working in Canberra for the Australian government and in Paris for the Organisation for Economic Co-operation and Development.

He says there's a good case for merging the ABS with the organisation he used to head,  a move that would bring the bureau more money, more staff and a more externally focused culture. It's a "live issue" currently before the government.

His immediate priority is more money, a lot of it... When his predecessor as Australian Statistician Brian Pink left in January 2014, he wrote that the bureau had barely enough cash to "keep the lights on".

Instead of replacing him promptly, the Treasurer and the Prime Minister's offices tossed around options and deferred the decision until December when they finally gave the job to Kalisch, one of the original applicants from earlier in the year.

Without a chief executive for the best part of a year, the ABS faced a crisis over the arrest of a staff member who later pleaded guilty to insider trading in the labour force figures and a convulsion in the figures themselves, which in August reported an unlikely jump of 121,000 in employment followed in September by what would have been an extraordinary slide of 172,000 had the bureau not disowned the figure and substituted it with something less volatile.

Kalisch says he believes those problems are behind the survey, but he says people need to recognise that it is just that – a survey, of  about 26,000 households conducted once a month. "Any sense that the number is exactly whatever we report to the second decimal point is not an accurate use of those numbers," he says.

But when asked whether the bureau's numbers were accurate to even the first decimal place, he deflects the question and says it is "wisest to look at  the published confidence intervals". They show the bureau is not always confident to first decimal place. They put the true unemployment rate at anywhere from  0.4 of a percentage point lower to 0.4 of a percentage point higher than the published rate. Kalisch says there's nothing new in this. The range has always been wide.

The bigger problem with the figures is that they are still being prepared on outdated stand-alone computer systems. Some are up to 40 years old and can't easily talk to each other. They are kept going by the idiosyncratic knowledge of the ABS staff who have nursed them for years. "To make things work requires a number of people with insights into that particular way of, operating," Kalisch says, acknowledging that "knowledge retention is an issue".

The calcified operating systems can't quickly accede to demands to do things differently. They are built to produce things in the way they have always been produced, not to experiment.

Kalisch wants several hundred million dollars from the government for an entire technology refresh – almost as much, but not quite, as the ABS annual $312 million budget.

The project will take at least four years – Kalisch has been appointed for five – and will draw from the experience of other organisations, such as banks, that have had to retool while continuing to deliver their core service.

It will also provide an opportunity to change the nature of the bureau, from an organisation that primarily conducts its own surveys to one that makes greater use of outside data, curating it and turning it into useful products.

The bureau is already using supermarket scanner data to help compile the consumer price index, relying less on its own staff scanning shelves with clipboards.
His vision is for the bureau to mine so-called administrative data held in places such as the tax office, Medicare and education systems to deliver products that tell us things we don't yet know, such as how a child progresses through the school system, and perhaps how that child gets ill along the way.  

These days the ABS is in an environment awash with information, he says. In the 1980s it was something of a monopoly provider.

Kalisch says he has found the staff up for change. "I am finding a workforce that understands we need to engage with a changing world and wants to be part of it. I am seeing more enthusiasm for change than I probably expected."

Coincident with his arrival, the government is considering merging the ABS with his old employer, the Institute of Health and Welfare. The 2014 Commission of Audit recommended merging the Institute with smaller health organisations. Kalisch thinks the ABS could be a better fit.

"Both organisations have a strong adherence to statistical standards," he says. "The institute has a strong reputation for engaging with other stakeholders, and it is that dimension that I would like to see more pervasive in the bureau. If government was to accept that as an operating model then I think there would be some synergies in the way both organisations operate. I think they would benefit each other."

He gives the impression the ABS he will leave in five years will be an organisation different from the one he has just joined.

In BusinessDay


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Unemployment hits 6.4 per cent. Hockey's Wayne Swan moment

Never at any point during Labor's reign or during the global financial crisis did Australia's unemployment rate hit 6 per cent.

It sailed past 6 per cent shortly after Joe Hockey's first budget in June and hasn't been back since. The January figure of 6.4 per cent is the worst for 13 years - the worst since 2002 when Tony Abbott was employment minister, Hockey was small business minister and John Howard was yet to be blessed by the mining boom.

Joe Hockey was small business minister in the Howard government in 2002, the last time the unemployment rate hit 6 per cent.

It's a reminder that nothing much has emerged to drive the economy since the mining construction boom ended; nothing much apart from home building. And that's the problem. Home loans are booming. Leaving aside refinancing, half of all new loans are now going to investors. Many of them are better described as speculators. The housing construction industry is working full bore in parts of the country and any further borrowing spurred by further interest rate cuts is likely to be diverted into pushing up house prices.

What's needed is an boost from the budget, not the Reserve Bank... Or from a series of measures announced before the budget. Abbott is pointing the way, holding out the prospect of a families package focused on childcare and a tax cut for small business within weeks.

It's a necessary corollary of such a budget that it will allow the deficit to climb - not because the government wants it to climb, but because it recognises that trying to stop it climbing right now could snuff out whatever prospects there are for new economic drivers to emerge.

The January unemployment figure provides Hockey with cover to move closer to Abbott and abandon his talk about cutting the deficit. He could consider it his "Wayne Swan moment".

In December 2012 Swan dramatically dumped his promise to return the budget to surplus, saying that changed circumstances meant his primary responsibility was to protect jobs. Hockey remembers it well. Bleeding and unwell, he had to drag himself out of hospital after gastric sleeve surgery to condemn the Treasurer.

Swan had to accept that revenue was collapsing and the economy was weak. Abbott and Hockey are going to have to accept it, too.

In The Age and Sydney Morning Herald


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Tuesday, February 10, 2015

Trust. Why Abbott has become a brake on the economy

Here's what's missing: trust. Not just between Abbott and his backbenchers, but also between Abbott and us. If anything,  the leadership contest has made things worse.

As Abbott brought forward the timing of the leadership vote on Sunday his supporter and finance minister Mathias Cormann told the ABC the economy was "heading in the right direction".

He wanted "to build on the achievements we made in 2014".

Take a moment to consider the achievements and the direction in which things are heading.

That year began with a quarterly rate of economic growth of 1 per cent. After the budget it slid to 0.5 per cent, and then to 0.3 per cent. It's falling, rather than rising. The direction is down.

(Ignore the through-the-year figures Cormann quoted. They make the budget look good by including the very strong economic growth that preceded it.)

The Reserve Bank made its view about economic growth clear on Tuesday. Here's what it said when it cut rates an hour or two before its governor briefed Cormann and others in cabinet:

"In Australia the available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak."

It's weak and it's bleak. It isn't heading "in the right direction".

Looking ahead the Reserve Bank expects growth to remain "a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected."

Unemployment has climbed from a quarterly rate of 5.3 per cent at the end of 2012 to 5.8 per cent at the end of 2013 to 6.2 per cent at the end of 2014. We get the first figures for 2015 on Thursday.

The direction is undeniably clear, but it's not the right one. Unemployment is worse than it was at the peak of the global financial crisis. The Reserve Bank expects it to get worse still...

Hockey and Cormann will tell you that while unemployment is growing, employment is too. But it's not, really. The number of hours worked per month grew barely at all throughout 2014. More people may have been employed at the end of the year than the start but on average they've been working less, some shifting to part-time work and others to fewer hours of full-time work. Disturbingly, the Reserve Bank says the number of hours worked per month has scarcely changed since December 2011 despite three years of population growth.

None of these facts would surprise anyone in business or anyone looking for a job. What would surprise them would be to hear from the team at the top that things are "heading in the right direction". It would make them think they were being lied to.

When trust vanishes, it's awfully hard to restore. That's because it vanishes slowly.

Joe Hockey's first budget was far worse than it seemed on the night in part because he didn't tell us the truth about it on the night. The usual calculations showing the households that won or lost were missing.   The treasury had prepared them as usual, the treasurer withheld them.

And he made up stuff. He said treasury had told him that fuel excise was "a progressive tax". It hadn't. He said the poorest Australians "either don't have cars or actually don't drive very far in many cases," something many of them know to be untrue. Petrol takes up a much bigger share of a low-income budgets than high-income budgets.  

He said his own wealthy electorate of North Sydney had "one of the highest bulk-billing rates in Australia". It had one of the very lowest in all of Sydney. He said "higher income households pay half their income in tax". They pay nothing like half. Even those on $200,000 pay just 36 per cent. Back from his holidays this January he revived the claim and went further saying typical Australians pay nearly half their income in tax.

"When Australians spend the first six months of the year working for the government with tax rates nearly 50 cents in the dollar it is a disincentive. You're working July, August, September, October, November, December just for the government and then you start working for yourself and your own household income after that for another six months, he said.

But Australia's tax-to-GDP ratio is around 30 per cent, including account all taxes, state and federal. It simply can't be the case that typical Australians pay nearly half their income in tax. They don't.

And exaggerated claims have eaten away at trust. Hockey said Australia was on track to run out of money to pay for its health, welfare and education systems. The figures put forward by his then health minister suggested otherwise. In ten years the cost of Medicare had climbed 124 per cent, the cost of the Pharmaceutical Benefits Scheme 90 per cent and the cost of public hospitals 83 per cent. But Australia's gross domestic product - the money we would use to pay for these things - climbed 94 per cent.

The government tells us it's concerned about future generations, but won't release the treasury's intergenerational report. It tells us it wants a discussion about tax, but won't release the tax discussion paper finalised late last year.

Without trust we lack confidence. We are neither spending nor investing what we should. Business and consumer confidence has been sliding since September.

Specific businesses are at a standstill. Universities don't know what fees they will be allowed to charge, students enrolling don't know what fees they will eventually be asked to pay, doctors don't know what will happen to their incomes, electricity generators don't know what will happen to the renewable energy target, big businesses don't know whether they will be hit with the 1.5 per cent paid parental leave levy and what it will be used for.

If they applied themselves, Abbott and his ministers could methodically work through each of these issues. But they wouldn't be trusted.

The government itself has become an impediment to economic growth. It had the ability to make a fresh start. On Monday it didn't take it.

In The Age and Sydney Morning Herald


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Sunday, February 08, 2015

The economics of love, happiness & marriage. Marry your best friend

Take heart. In the leadup to Valentines Day I am the bearer of incredibly good news.

Getting married - to someone you really, really like - will make you happy for the rest of your life.

Trust me. I am speaking partly from my own experience and party on the basis of new research that overturns much of what had previously been thought.

It's long been known that married people are happier than those who stay single. (Naturally there are exceptions. The finding is an average, derived from answers to the standard question used to establish life satisfaction: All things considered, how satisfied are you with your life as a whole these days?)

But what was also known was that happier people were more likely to get married. This meant that the people themselves might have made marriage happy rather than the other way around. Or it might have been something else about the married people themselves; such as being more social, healthier, better-educated or in more engaging jobs - all features of life common in people likely to married and all likely to boost their happiness whether or not they tie the knot.

And there was something else. While marriage seemed to lift happiness briefly, after two to five years of it happiness receded, leaving those got married little happier than before.

The new research finds neither of these qualifications persuasive and adds something extra - a guide as to who you should marry.

It's entitled: How's life at home? New evidence on marriage and the set point for happiness. It was published in Decembert by the US National Bureau of Economic Research and prepared by two Canadian economists, Shawn Grover and John Helliwell.

First, the observation that happy people get married, as well as the other way around. The economists find that being happy before marriage does indeed increase the likelihood of getting married, but not by enough to explain the link between marriage and happiness. Marriage itself does the rest...

Second, the observation that married people start out happier and then get less happy over time. It's true that marriage gives a burst to happiness which appears to fade, but that's because happiness itself is U-shaped. Most of us are very happy in our twenties, much less happy in our thirties, forties and early fifties and then increasingly happy again from our mid fifties. By our mid seventies we are about as happy as we were in our mid twenties.  

For people who are married happiness is also U-shaped, which is why after lifting at the time they get married, happiness fades throughout their thirties, forties and early fifties. But at each age for the rest of their married lives they remain happier on average than if they had never married. People who believed the decline in happiness in the early years of marriage meant the effect of marriage faded were drawing the wrong conclusion. Almost everyone has a decline in happiness in those years, but the people who are married are floating on a higher plane, their U-shape higher than the U-shape of people who had never married.

Even more importantly, the U-shape is flatter in people who've married, less like a V. The gloom that many of us sink into in the middle of our lives is less severe if we've someone by our side.

Not content with this finding, Grover and Helliwell went further and tried to work out was the best kind of person to have by our side, from the point of view of happiness.

It's the person who is also our best friend.

Only around half of the married people taking part in the  British Household Panel Survey said their husband or wife was also their best friend. (For couples living together but not married the figure was just 5 per cent.)

The half that were married to their best friend had almost twice the boost to happiness as those that were not. The effect was stronger for women than men. Being married to your best friend appears to be about the best thing you can do for your lifetime happiness when it comes relationships.

But what if you don't love your best friend? The New York Times offered one particularly adventurous solution in January in an article entitled To Fall in Love with anyone Do This. If suggested looking into each others eyes and asking a series of 36 questions. If that seems too much it might be worthwhile adjusting what you're looking for. Friendship is about the most important thing there is.

In The Age and Sydney Morning Herald





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Saturday, February 07, 2015

The economic case for changing leaders

Government MPs wondering whether to ditch Prime Minister Tony Abbott now or give him a few more months to get his act together ought to have a close read of the Reserve Bank's latest economic statement.

It's upped its forecast for unemployment and cut its forecast for economic growth. So bleak were the original forecasts presented to the board on Tuesday that they had to be massaged in the document made public on Friday in order not to harm confidence.

The budget update presented by Abbott and Treasurer Joe Hockey in December forecast low economic growth of 2.5 per cent this financial year followed by 3 per cent in 2015-16, each figure well below Australia's potential growth rate, which is why unemployment was going to climb to 6.5 per cent.

The figure presented to the board would have been for growth of around 2.75 per cent in 2015-16, embarrassingly low for a country with Australia's potential and painfully low for a government about to face re-election.

This information isn't the result of a leak from the board. It's the result of a calculation that works backwards from the forecasts published on Friday. Those forecasts are for economic growth of 3 per cent in 2015-16. But they were made after taking into account the most recent interest rate cut (which hadn't happened when the board was presented with the forecasts on Tuesday) and at least one more subsequent cut...


The Bank's rule of thumb is that two interest rates cut cuts taken together boost economic growth by around 0.25 percent after a year to eighteen months. It means that the forecasts presented to the board on Tuesday were for unsettlingly low economic growth of 2.75 per cent right through to mid 2016. They would have made Abbott's promise of half a million new jobs in five years impossible to achieve and would have seen the unemployment rate steadily rise.

The message government MPs will get if they delve into the economic statement is that things are far weaker than had been thought, so weak that action is needed now rather than later.

If Abbott survives and he and Hockey cobble together another budget like the last one only to be brought down later, the opportunity for a timely reset will be lost.
The message is that now is the time to look at everything afresh, followed by a period of stability later.

As well-intentioned as Abbott and Hockey might be, they are gaffe-prone and shown themselves to be unable to build a budget that inspires confidence and unable to get things through the Senate.

Business and consumer confidence took a hit after the May budget and didn't recover.

The mere installation of a new team is itself likely to lift confidence.

If it is installed next week before too much work is done on the next May budget there's a chance it can be used to turn things around.

The Australian economy is worth $1.6 trillion. Delaying restoring economic growth for another year would cost Australia $40 billion.

Waiting is costly.

In The Age and Sydney Morning Herald


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