Tuesday, August 31, 2010

Want a good investment? Get a degree - it's about the best there is

Mainly because it'll probably keep you in work

Aged 18 and looking for an investment that'll return far more than the share market, far more than real estate?

Enrol at university and stay there for four years.

An analysis of a quarter of a century of census data released by the Bureau of Statistics reveals extraordinary rates of return for the lost wages and expenses involved in obtaining a four-year degree - all the more so if you are a woman.

For a man graduating in 1981 the resulting higher lifetime income was likely to produce a return on investment of 13 per cent per annum. A woman would expect 18 per cent.

By 2001 a fresh graduate could expect even more - a lifetime rate of return of 20 per cent per annum for a men; 19 per cent for a women.

And then the return turned down. In a paper posted on the Bureau's website yesterday researcher Hui Wei said by 2006 the return had fallen back to 15 per cent for men, 17 per cent for women.

Taking the edge of the return was five years of very strong economic and employment growth meaning conditions for workers who had skipped university began to catch up...

Phil Lewis of the Centre for Labour Market Research at the University of Canberra says the return for university education is likely to take further hits in the decade ahead as the revival of the mining boom makes all workers more special, not only those with degrees.

"The biggest danger to the lifetime income of a worker without a degree is unemployment," he told the Herald/Age. "As the next mining boom takes hold that'll become less of a risk. Many of the new jobs created are in the construction industry. Wages and going up and unemployment down."

"But the return on a university degree is still huge compared to the rate of interest. I tell my students, especially the overseas ones, that if that have grandparent who wants to put some money into a venture for them, to forget about the stock exchange, buy a university education."

Professor Lewis said the payoff had increased despite the increasing supply of graduates because of the changing nature of work.

"We have moved from an industrial to a service-based economy. The skills that are really in demand are communication skills, the ability work in teams and so on."

"I think that helps explains the very high returns for women. A woman with a degree might work in the finance industry. A woman without one might work in retail."

Published in today's SMH

ABS 1351.0.55.032 

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Monday, August 30, 2010

John Howard's greatest gift?

Sydney Morning Herald
200 lives per year. Well done.

Ten years of suicide data in the wake of John Howard's decision to ban and buy back half a million semi-automatic rifles and shotguns has produced a stunning conclusion.

A paper forthcoming in the American Law and Economics Review finds the buyback cut firearm suicides 74 per cent, saving 200 lives per year.

A former Australian Treasury economist Christine Neill, now with Canada's Wilfrid Laurier University says she found the result so surprising she tried to redo her calculations in the hope the effect would be smaller.

"I fully expected to find no effect at all," she told The Age from Waterloo, Ontario. "That we found such a big effect and that it meshed with a range of other data was just shocking, completely unexpected."

John Howard's agreement with the states to ban and buy back more than 600,000 weapons in the wake of the 1996 Port Arthur massacre cut Australia's stock of firearms 20 per cent and roughly halved the number of households with access to guns...

Two of the independent rural MPs now holding the balance of power in the national parliament opposed the plan. Queensland MP Bob Katter said Australia had got "to the ludicrous point of completely disarming the nation" and claimed "everywhere they ban guns the death rates from guns go up". Tony Windsor, then in the NSW parliament, attempted to introduce an amendment that would have registered gun owners rather than firearms.

Dr Neill says while it seems surprising that a 20 per cent cut in the number of firearms would have the number of suicides from firearms 74 per cent, none of her academic colleagues have found fault with her finding.

Her co-author is ANU academic Dr Andrew Leigh, elected his month as a Labor member of parliament representing the ACT.

They used what is known as a difference-in-differences approach, exploiting the fact that some states withdrew guns faster than others and examining whether their firearm suicide rates fell faster.

A previous study had found no nationwide effect, noting that firearm suicides began falling before the buyback.

However Dr Neill and Dr Leigh found that states such as Tasmania which withdrew guns quickly had a much bigger decline in firearm suicides than states such as NSW which withdrew more slowly.

Whereas the earlier study had found an uptick in suicides by other methods, suggesting substitution, Dr Neill's study found no evidence of substitution within any state.

"It is simply not the case that there was an increase in non-firearm suicide deaths in states that brought back more firearms," she told The Age. "I am confident these lives were saved."

Most of Australia's 2100 suicides per year do not involve firearms, making the 200 lives saved as a result of the firearm ban small in relation to total suicides.

But Dr Neill says applying an accepted financial value to each of these human lives results in an economic boost per year of $500 million - an outcome she says represents $800 per weapon destroyed.

"This is clearly one of John Howard's greatest legacies," she told The Age. "Perhaps even one of his greatest economic legacies.

"It also succeeded in its stated goal. Before the buyback Australia used to have a multiple shooting every year or two. In the 13 years since there have been none. I have calculated the probability of that happening by chance - it's extraordinarily low."

Published in today's SMH and Age


"Note that the bump-up in non-firearm suicides seen in the
time series data (Figure 1a) in the 1996–1998 period is not easily
attributable to method substitution or other factors associated with
firearm withdrawals or other changes in firearm legislation that varied at
the state level, since in that case we would expect to see states that had
larger falls in firearm suicide also experience increases in non-firearm
suicide. There is no empirical support for that in the data. The very late
increase in non-firearm suicides in states with higher buyback rates is
somewhat of a mystery. The magnitude of the later increase is two to
five times the magnitude of the relative reduction in firearm suicides in
the same period. Taken at face value as an indicator of method
substitution, it would suggest that individuals only began substituting to
other methods 6 years after the gun buyback and that the rate of
substitution was greater than 100%. It seems unlikely that this is
consistent with any reasonable model of method substitution. It is
possible that this reflects a change in the collection of suicide data post
2002—that possibility is explored in Section 4.1.5."

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Friday, August 27, 2010

Abbott's caved? That's how it looks

Prime Minister Friday August 27:

PM: Can I thank everybody for coming along. As people are aware the Independents, Mr Windsor, Mr Oakeshott and Mr Katter sought access to the costings of the Government’s and Opposition’s election policies and the impact that has on the Budget bottom line. Of course the Budget bottom line was most recently disclosed in the Pre-Election Fiscal Outlook.

I sought advice from the Secretary of Prime Minister and Cabinet on that matter, and it was apparent from that advice, that it would require amending the Caretaker Conventions as we have generally known them to be.

In those circumstances I wrote to Mr Abbott on Wednesday, Wednesday afternoon, seeking his agreement to amend the Caretaker Conventions and enclosing for him a copy of the advice that had been provided to me by the Secretary of Prime Minister and Cabinet.

Mr Abbott yesterday sought some further clarification of the material and further clarification by way of letter was provided.

Initially I had asked Mr Abbott to respond to me on this matter by five o’clock yesterday. Mr Abbott’s office contacted mine and sought further time, specifically further time till nine o’clock this morning, I agreed with that.

Around nine o’clock this morning Mr Abbott’s office sought some further time, which I agreed to and that further time has been extended to Mr Abbott this morning.

Mr Abbott has now responded to me in writing and I have written back to him. I am pleased to report that Mr Abbott has generally agreed that the Independents should be able to get the material that they seek and I welcome Mr Abbott’s general agreement to that.

Mr Abbott in his correspondence to me did seek to put a series of further conditions on this matter, in addition to those new conventions that had been recommended by the Secretary of Prime Minister and Cabinet. Specifically Mr Abbott has sought that any costings assumptions or information, background information, that is provided by the Opposition to Treasury or Finance to assist with the costings of their policies not be provided to either my office of the Treasurer’s office, and of course I’ve agreed to that.

Mr Abbott has sought access to a full costing of the Minerals Resource Rent Tax and the National Broadband Network. I’ve advised Mr Abbott that those full costings are disclosed in the Pre-Election Fiscal Outlook, but if he seeks to have a briefing from Treasury and Finance for a more detailed assessment of those Budget figures then of course that will be made available to him.

Mr Abbott then raised some concerns about where information might go arising from this process. I have indicated to Mr Abbott that it is my view that the Independents should be able to participate in these briefings, what they say publically about the information obtained is then a matter for them.

I believe on this basis the matter is now resolved. Clearly, the Independents - Mr Oakeshott, Mr Windsor, Mr Katter – have sought this information in circumstances where their votes and their attitudes may be critical to who forms the next government in this country. In those circumstances, I think it was appropriate that each of them, where they will be asked to guarantee supply, seek to have full information on costings and on Budget figures. I think that is appropriate.

I think, inevitably, whatever decisions Mr Oakeshott, Mr Windsor and Mr Katter come to, they will be asked why they made those decisions. Consequently I think they do need to be able to freely and publically report on any matter that may have fed into their decisions.

Can I say I understand we are in an unusual set of circumstances, having said that, stable and effective Government continues. In these circumstances, I believed it was appropriate to facilitate the request of the Independents. I’m glad that we seem to have worked our way through to an endpoint where their request will be facilitated.

From the Government’s point of view, can I very clearly say this: the Government is happy to be transparent about its election policy costings, the election policy costings as checked by Treasury, and the impact of the Government’s election policies on the Budget bottom line. We have sought to be transparent about those things by participating in the Charter of Budget Honesty process in the election campaign, we will be transparent about all of the costings of our policies and the impact on the Budget bottom line now.

JOURNALIST: Could you explain exactly what information the Independents will get, specifically will they get access to any information in the red book or the blue book?

PM: What they have asked for, and let’s just be very clear about this, what they’ve asked for is briefings on the costings and impacts of Government and Opposition election promises and policies on the Budget, that is what they will receive.

JOURNALIST: Can I just clarify with the figures the Independents are going to get, does that just include the costings that Treasury has made including the estimates, stuff that hasn’t been submitted, or has Mr Abbott agreed to submit stuff that he didn’t submit so it could be costed more accurately?

PM: I think it is inherent in what Mr Abbott has said, that he will submit material as necessary so costings of every Government and every Opposition election policy and the impact of the total range of Government and the total range of Opposition policies can be disclosed on the Budget bottom line, as the bottom line was made public in the Pre-Election Fiscal Outlook. For the Government side of course, because we’ve been transparent every step of the way, people are basically in possession of that information. For Mr Abbott, because they did not file in the broad, their policies for appropriate costing, of course that information will be new.

JOURNALIST: Is it your advice that Treasury will be able to meet Bob Katter’s deadline for these costings, I think it was close of business Monday?

PM: Look I’m not in a position to set deadlines on this, that’s a question of Treasury doing the work, I don’t have any advice on timeframes for you.

JOURNALIST: There is one point that Tony Abbott made that he wants these costings not to go to you but to the Independents. In the Charter of Budget Honesty, the Opposition has to lodge their costings with the Office of Prime Minister. This of course was very agreeable to Coalition when they were in Government, not such when they’re in Opposition, would you want to amend this to-

PM: Look, thank you for the question, and I want to be absolutely clear about it. I don’t seek access to Mr Abbott’s costing material whilst he is working with Treasury to have his policies properly costed. But I would say this: when Treasury is at the end of that process, I believe every Australian should have access those costings. Every Australian has access to the Government’s costings, every Australian should have access to Mr Abbott’s costings, done by Treasury. I think that that is fundamental to the national interest and Mr Abbott should agree to that.

JOURNALIST: But that’s not part of this agreement is it?

PM: This agreement is about the access of the Independents to these briefings. What they then do with this material, I say, should be a matter for them. But separate to this, of course, we have proceeded with this transparently, absolutely transparently. I believe Australians are entitled to know what the Government’s election policies cost and their impact on the Budget bottom line and they do. I think Australians are entitled to know what Mr Abbott’s policies cost and their impact on the Budget bottom line; currently Australians do not. Through this process, that material in my view should be released to all Australians and it just seems to me that Mr Abbott cannot find a credible objection to that.

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Could our mining executives have been having a lend of us?

RBS Group (Australia) 
And Abbott, who said the tax would kill the industry "stone dead"?

Australian mining executives appear to have been saying one thing and doing another as they negotiated with the government over the resource super profits tax during May and June.

Investment and investment intention figures released yesterday show that while talking of putting projects on hold and moving offshore they were both boosting spending and dramatically lifting planned spending.

The Bureau of Statistics survey was conducted at the end of June and covers 8000 businesses including all those with big capital expenditure.

The super profits tax was announced on May 2. The Bureau finds that between the end of March and the end of June investment in the mining sector climbed 2.6 per cent.

Investment planned in the coming financial year surged from $49 billion one month before the tax was announced to $55 billion in late June at the height of the campaign against the tax...

The figures provided to the Bureau usually come from accounting departments and so detail changes in what is actually budgeted for rather than the public position of chief executives engaged in negotiations.

Investment actually undertaken almost always exceeds budgets.

The economics team at TD Securities says taking into account those so-called historical realisation ratios the mining sector is on track to invest 74 per cent more in 2010-11 than it did in 2009-10.

"These are aggressive expansion plans," said TD strategist Roland Randall. "Mining should invest around 5 per cent of nominal GDP."

"It would be wrong to see this as acceptance of the mining tax compromise," he said. "During the time the survey was taken the mining tax was very much up in the air."

The compromise brokered by Prime Minister Gillard was reached on July 2, days before the ABS deadline for returning the survey forms.

"The more likely reason for boosting investment plans is faith in the strong economic ties between Australia’s vast resources and China’s vast demand for energy and raw materials," said Mr Randall.

In April the benchmark price for coking coal climbed 55 per cent and the benchmark price for iron ore 90 per cent.

"There surprisingly little sign of the political uncertainty and concerns over the mining tax in these figures," said RBC Capital Markets analyst Michael Turner. "Planned mining investment climbed $6 billion, planned manufacturing investment $1.5 billion."

Ahead of the mining tax compromise mining was expected to dominate investment during the financial year, accounting or 45 per cent of all investment dollars spent.

"Over the coming year it is clear Australia will be riding on the back of the mining sector," said Commonwealth Securities economist Savanth Sebastian. "Of the $123 billion in expected investment, just under half will be spent by miners while only 11 per cent will be spent by manufacturers".

Underscoring the apparent two-speed nature of the investment surge, the figures showed total investment down 4 per cent in June quarter despite higher mining and manufacturing investment.

Investment by the service sector slumped 14 per cent and investment by the rental and hiring sector 19 per cent. Both sectors plan to expand in the year ahead.

Acting Prime Minister Wayne Swan declared the figures a "strong vote of confidence in Australia's economic prospects, despite continued global uncertainty".

Published in today's SMH and Age

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Robb says Perth auditor "as good as Treasury" as investigation begins

The Coalition has defended the work of the Perth accountancy firm that costed its election promises as the Institute of Chartered Accountants has launched a formal investigation into its conduct.

The institute revealed late yesterday it had received a complaint about the conduct of two members of the firm, WHK Horwath.

The Age reported last week that Sydney University accountancy professor Bob Walker was to make the complaint in a private capacity, arguing that if the firm had produced such on a prospectus it would be an offence under the Corporations Act.

The complaint alleges advice provided by the firm was clearly intended to influence the outcome of the election and failed to meet ethical and professional standards.

Professor Walker said yesterday his nine-page complaint alleged that the report prepared by Horwath was not an audit in accordance with the relevant standard despite Coalition figures including Shadow Treasurer Joe Hockey repeatedly referring to it as an audit.

"But there were no disclaimers making this clear... either in their report or after it was issued. In fact there were fewer than you would expect to find on a review of historical information or even on a report an accountant prepared making up a tax return on information supplied."

The Institute has commenced an investigation and may referred the complaint to its Professional Conduct Tribunal "which has the power to impose sanctions on individual members who act inappropriately". It is seeking comment from the members concerned.

Coalition Finance Spokesman Andrew Robb told the ABC the "costings done by Horwarths would be as good as you could get anywhere in the country, including in Treasury".

Horwath had "looked at the veracity" of the Coalition's assumptions and the Coalition would put itself at risk by allowing the Treasury to do the same.

"How do we know that some of the assumptions we used are not tampered with, that different assumptions are not used in a Treasury costing to show that we were out by some figure or not?" he asked.

Published in today's Age

Statement from the Institute of Chartered Accountants in Australia

26 August 2010

The Institute of Chartered Accountants in Australia (the Institute) has received a complaint about a matter that involves publicly raised allegations regarding the conduct of two members with accountancy firm, WHK Horwath, Perth.

The Institute has commenced an investigation which involves an opportunity for the members to respond to the allegations.

Professional Conduct Process

As a professional organisation, membership of the Institute is based on meeting the highest standards of professional conduct and performance. The Institute treats matters that bring the profession into disrepute very seriously.

Issues arising from members’ conduct are investigated under the Institute’s By-laws and relevant cases are referred to the Professional Conduct Tribunal for determination.

Based on legal advice, specific commentary cannot be provided while matters are considered for investigation or for the duration of any subsequent Tribunal hearings. All information relating to complaints lodged with the Institute and produced during the investigation process is confidential.

To ensure the privilege of professional membership is upheld the Professional Conduct Tribunal has the power to impose sanctions on individual members who act inappropriately.

The ultimate sanction that can be imposed is exclusion from membership and withdrawal of the right to use the Chartered Accountants designation. Other sanctions include suspension, reprimand, fines or the requirement to undertake additional professional training.

For further information about the Institute's disciplinary process please visit http://www.charteredaccountants.com.au/A116936841

Auditing Standard 804

Section .02: In an engagement to audit prospective financial information, the auditor should obtain sufficient appropriate audit evidence as to whether:

. management's best-estimate assumptions on which the prospective financial information is based are reasonable for the preparation of the prospective financial information;

. the prospective financial information is properly prepared on the basis of the assumptions;

. the prospective financial information is properly presented and all material assumptions are adequately disclosed, including a clear indication as to whether they are best-estimate assumptions or hypothetical assumptions; and

. the prospective financial information is prepared on a consistent basis with historical financial reports, using appropriate accounting principles.

APES 110 Code of Ethics for Professional Accountants

Section 130.6: Where appropriate, a Member should make Clients, employers or other users of their services aware of limitations inherent in the services to avoid the misinterpretation of an expression of opinion as an assertion of fact.

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Thursday, August 26, 2010

Economist needs help with politics

Usually it's the other way around:

You've got a week.

And it would probably help to live in (north) Canberra.

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Recovery goes private - we've made it through the wilderness?

TD Securities

We've finally made it through?

The Australian economy has dodged a bullet. Private sector construction has climbed faster than government-funded construction for the first time since the economic stimulus measures put in place to fight the financial crisis.

Bureau of Statistics figures show private construction work jumped 4.9 per cent in the June quarter as public work inched ahead a mere 0.4 per cent after a 37 per cent surge over the the previous year.

"The timing couldn't be more positive," said St George Bank economist Justin Smirk. "It's happening just as the stimulus from the Building the Education Revolution starts to peter out."

The government has committed to spend $14.7 billion on school buildings and $6.6 billion on public housing over two years. But the work will dry up as projects finish leaving the private sector to take up the slack. Private construction slid throughout 2009, going backwards 7.5 per cent...

"Public investment has peaked," said Deutsche Bank economist Adam Boyton. "It's going to wane from here on, making the return to growth in private investment encouraging."

Private residential construction jumped 6 per cent in the quarter after growing not at all over the previous year. Private non-residential building climbed 2 per cent after sliding 17 per cent.

Private engineering work surged 6 per cent led by a 14 per cent jump in Western Australia boosted by the start of work on the $43 billion Gorgon liquefied natural gas project. Western Australia accounted for half of the nationwide growth in engineering work over the quarter and now accounts for one in every three engineering dollars spent.

"This bodes very well the economic growth figures to be released next week," said RBC Capital markets analyst Michael Turner. "The Reserve Bank had been expecting 1 per cent for the quarter, but we are now looking at much higher economic growth, around 1.3 per cent."

"While high, this economic growth is unlikely to it is unlikely to force the Reserve Bank to push up interest rates. It's worried about the worsening run of news out of the US and Europe and its possible ramifications for Asia. Our strategists think United States growth will be utterly anaemic for the rest of the year. Our Reserve Bank could leave rates on hold until 2011."

US figures released Tuesday showed home sales collapsed 28 per cent in July to the lowest point in more than a decade, sparking talk of a double-dip recession.

Published in today's SMH and Age

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Wednesday, August 25, 2010

Abbott just stuffed up his shot at the Prime Ministership.

As twittered from 7.00 pm (reverse order):

Abbott's chance of being Prime Minister just evaporated #ausvotes #auswaits
less than 20 seconds ago via web

There's Abbott's third meltdown right there.
2 minutes ago via TweetDeck

Treasury incompetent Abbott effectively said! Oh dear
2 minutes ago via TweetDeck
Retweeted by you

Abbott just said public service not competent to properly cost opposition policy #ausvotes #auswaits
3 minutes ago via web

Abbott asked whether he would scrap the Charter of Budget Honesty #ausvotes #auswaits
4 minutes ago via web

Abbott is dying here. Suppose that's the lesson for having dodgy costings. Shit comes back to bite you
4 minutes ago via TweetDeck
Retweeted by you and 5 others

If Abbott somehow manages to bugger this up, this is the point where he did it.
4 minutes ago via TweetDeck

Will he let us see the assumptions behind the costings? #ausvotes #auswaits
5 minutes ago via web

It is clear, though, that Abbott is "only too happy".
5 minutes ago via TweetDeck

Abbott "I am only too happy to have candid conversations about our policies" #ausvotes #auswaits
5 minutes ago via web

Abbott's refusal to provide his policies to Treasury is an extraordinary step. How can it not be deeply damaging to his credibility?
6 minutes ago via TweetDeck

Special maths! RT @1petermartin: Abbott "It is diffficult for the public service to understand Opposition policy" !!!!
6 minutes ago via TweetDeck

Abbott will not send the policies to Treasury for costing - even now #ausvotes #auswaits
6 minutes ago via web

Abbott "It is diffficult for the public service to understand Opposition policy" !!!! #ausvotes #auswaits
7 minutes ago via web

RT @BernardKeane: Sounds like Abbott doesn't want Treasury to look at his policies even AFTER the election.
8 minutes ago via TweetDeck

@BernardKeane Can see why - you can drive one of those mining trucks his doners own through them
8 minutes ago via TweetDeck in reply to BernardKeane

Sounds like Abbott doesn't want Treasury to look at his policies even AFTER the election.
9 minutes ago via TweetDeck

I think Abbott he would make avail to independents what he made avail to Horwaths. Would he make it avail to us? ??#ausvotes #auswaits

Abbott Presser 25 August 10


Okay well thanks everyone for coming, I'm sorry the hour is later, but I've only recently finished my discussions with the non-aligned independents.

I just want to stress that my objective is to try to ensure that Australia gets stable and competent government arising out of last Saturday's election.

My strong contention is that onlyt he Coaltiion is capable of providing the country with the stable and competent government that it needs and deserves.

A government that was incompetent and unstable with a a majority is just going to get worse without the a majority. A government that was incompetent and unstable with the best possible political circumstances is going to be even worse in much more difficult political circumstances.

Now, I had today I think a very productive and very candid discussion with the three non-aligned independents, a discussion that for I suspect, well over an hour and a half.

I think that the three non-aligned independents are very conscious of the fact that the Coalition received half a million more votes than the Labor Party in the recent election. I think they’re also very conscious of the fact that the Coalition is likely to have more seats in the new parliament than the Labor Party.

I indicated to the independents that I was more than happy to make available to them for as long as they wanted, in as much detail as they wanted, all of my shadow ministers, including the Shadow Treasurer Joe Hockey, Shadow Finance Minister Andrew Robb and was more than happy to make available to them Horwaths, the accounting firm which has fully costed and signed off on our policies.

I also indicated to them that I was very committed to a process of root and branch parliamentary reform and I’m making available to you a note from Christopher Pyne to myself on the kinds of parliamentary reforms that the Coalition is looking at.

I also want to make it very clear that we discussed the issue of a Westminster-style speakership to which I have always been extremely attracted and the idea of Speaker Jenkins continuing in that role on a Westminster style basis.

We also discussed the question of funding of political parties and political campaigns and I’m more than happy to look at reform of the funding of political campaigns and political donations. If we are going to go down that path though, we do need to look at issues like the union funding of politically aligned third parties, such as GetUp.

I just want to make the general point that I can fully understand the independents desire to have a new politics and certainly I am very committed to try to ensure that we have a more consultative, more collegial, more genial style of political discourse in this country, but if we are going to have a new politics, we’ve got to have to have a new government. The current government is the product of the worst sort of old politics.

All of the issues which the independents find most unsatisfactory, the lack of due process, the lack of freedom for MP’s, are absolutely exemplified by the current government.

In fact, the caretaker Prime Minister owes her position to a political coup orchestrated from outside the Parliament. So, I’m very committed to these ongoing discussions with the three non-aligned independents.

I’m very hopeful that Australia will get stable and competent government arising from these discussions and as I said, I think it can only be provided by the Coalition.


Mr Abbott are you not going to give your costings to Treasury and Finance as requested?


Well, what was discussed with me today was making my shadow ministers fully available and I made a commitment that they would be available for as long and in as much detail as the independents wanted.


The request in the letter is that you do provide you policies for costings.


Well, the point that I made is that the government cannot discuss with them Coalition’s policies. The Government can discuss with them Government policies but only the Coalition can speak with authority for the Coalition’s policies.


Are you scared? Are you scared of what Treasury will find in your policies?


No, no. The point I make is that I am only too happy to give the independents full and complete access to my shadows and to Horwaths, the accounting firm which fully costed our policies and I just make this point in passing that the government itself comprehensively failed to honour the Charter of Budget Honesty, comprehensively failed to have Treasury cost its own policies. The Government released by way of press release, without even a press conference, costings of its own policies and its own budgetary outcomes late on Friday before the election.


Mr Abbott, the independents are you looking for a commitment that you will serve a full three year term? The Prime Minister has already done so and even offered to name an election date three years from now. Would you match that?


Well, Matthew, we didn’t get in to the precise level of specificity as to talk about whether it would be on the second weekend or the third weekend of October 2013 but I did make a commitment to serve a full term should I become Prime Minister. I did make a commitment that there would be no election prior to August 2013 should I become the Prime Minister.


Is it your position that you would not support any change to the caretaker conventions and therefore no release of incoming briefs to either the Government or the Opposition and that that information should stay within Treasury and not be available to either side?


Well, two points in response. The first point I make is that it is very difficult for the public service to understand Coalition policy, opposition policy, with the same degree of insight and depth that it has of government policy. I mean, that’s just the nature of these things. Now, I would like to see the advice that the Prime Minister said that she was obtaining and when I see that advice then I’ll come to a conclusion.


But Mr Abbott, I can’t see why we cannot conclude anything other than the fact that you are scared that Treasury will find gaping holes in your costings given that your own firm said that it was taking assumptions as the Coalition had put them.


Well, I am only too happy to discuss up hill and down dale, inside out and back to front, all of our policies with the non-aligned independents. I will approach these discussions in a spirit of complete and total candour because I believe we have good policies, I believe we have policies that should be implemented and I hope that, on full reflection, the non-aligned independents believe that a Coalition Government is worthy of support.


Then why won’t you submit them to Treasury?


Well, the point I make is that I am only too happy to have the most candid conversations about our policies, about how they might work, about what they will cost and I am prepared to make myself, my shadows and the accounting firm that has costed the policies fully available to the independents.


Have you fallen down here on one of their baseline requirements which is full transparency?


Well, I made the point that the government is not in a position to understand Coalition policies the way the Coalition is and the public service, for all their undoubted excellence, cannot provide briefs on Opposition policy that has the same level of depth and insight that they can provide…


They can't provide anything if you don't show them!

Mr Abbott, what does that say about the Charter of Budget Honesty that the Howard Government set up and you asked the Rudd Opposition to put in policies then but now you’re saying the public service is not going to understand any opposition policies.


The point I made was that I am only too happy for the non-aligned independents to have access to briefings by Departmental Secretaries and other officials. I’m very happy for that to happen but those officials are not in a position to give advice on Opposition policies which they haven’t implemented, in the same way that they are in a position to give advice on government policies.


So if you become Prime Minister will you scrap the Charter of Budget Honesty? You just said that it's rubbish.


That’s not quite what I said. I simply made the point that public servants are not able to provide advice on Opposition policies in the same depth that they are able to provide advice on Government policies and I said…


…so what if you become the next Government? Will you relinquish the Opposition of having to submit their costings then?


Well, the point that I made is that I want to be as candid and as upfront with the non-aligned independents as I possibly can be and I am only too happy to make myself and my shadows fully available to them, and to make available to them all of the material that was provided Howaths and to provide Howaths to fully brief them on our costings.


Why can't you provide yourself and your Shadow Ministers and put the policies into Treasury as well?


Well again, I just make two points; that before I authorise any release of material under the caretaker conventions, I would want to see the advice that the Prime Minister is considering and I just reiterate the point that I’ve made before that the public service is not in the same position vis a vis Opposition policies, to provide advice and insight as it is to provide advice and insight on Government policies. Thank you.

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Gillard says yes!

And offers a fixed term, with the date for the next election selected now, and a briefing on broadband from the NBN Co:

Gillard Letter - 25 August 2010

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What the independents want


Requests for information

1. We seek access to information under the ‘caretaker conventions’ to economic advice from the Secretary of the Treasury Ken Henry and Secretary of Finance David Tune, including the costings and impacts of Government and Opposition election promises and policies on the budget.

2. We seek briefings from the following Secretaries of Departments:

1. Broadband, Communications and the Digital Economy
2. Health and Ageing
3. Education, Employment and Workplace Relations
4. Infrastructure, Transport, Regional Development and Local Government
5. Agriculture, Fisheries and Forestry
6. Climate Change, Energy Efficiency and Water
7. Defence
8. Resources, Energy and Tourism

3. We seek briefings from caretaker Ministers and Shadow Ministers in the above portfolio areas to discuss their program for the next three years.

4. We seek advice as soon as possible on their plans to work with the Clerks of the Parliament to improve the status and authority of all 150 local MP’s within parliamentary procedures and structures. In particular, we seek advice on timelines and actions for increasing the authority of the Committee system, private members business and private members bills, matters of public importance, 90 second statements, adjournment debates, and question time.

5. We seek a commitment to explore all options from both sides in regard “consensus options” for the next three years, and a willingness to at least explore all options to reach a majority greater than 76 for the next three years. Included in these considerations is advice on how relationships between the House of Representatives and the Senate can be improved, and a proposed timetable for this to happen.

6. We seek a commitment in writing as soon as possible that if negotiations are to take place on how to form Government, that each of these leaders, their Coalition partners, and all their affiliated MP’s, will negotiate in good faith and with the national interest as the only interest. In this same letter of comfort, we seek a written commitment that whoever forms majority Government will commit to a full three year term, and for an explanation in writing in this same letter as to how this commitment to a full term will be fulfilled, either by enabling legislation or other means.

7. We seek advice as soon as possible on a timetable and reform plan for political donations, electoral funding, and truth in advertising reform, and a timetable for how this reform plan will be achieved in co-operation with the support of the House of Representatives and the Senate.

The three non-aligned MP’s will now be heading home to families, electorate duties, and a long-standing appointment with the Governor-General (unrelated to this political deadlock). We have agreed to be back in Canberra on Monday for the full week of meetings in relation to the above.

We expect all the above information to be made available through best endeavours as soon as possible, so that formal negotiations with all stakeholders can begin by Friday 3rd September – if, based on final counts, negotiations are indeed needed at all.

Request for Info

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Okay, so who would be in my unity cabinet?

Tim Madden, ABC News Online

My dream team:

Human Services - Brett Mason

Tourism - Warren Truss

Resources - Martin Ferguson

Agriculture - Christine Milne

Attorney General - George Brandis

Arts - Joe Hockey

Water - Nick Xenophon

Climate Change & Environment - Greg Hunt

Innovation & Industry - Kim Carr

Broadband & Communications - Paul Fletcher

Infrastructure & Regional Development - Robert Oakeshott

Finance - Wayne Swan

Housing - Mathias Cormann

Families & Community Services - Craig Emerson

Indigenous Affairs - Peter Garrett

Ageing - Sharman Stone

Sport - John Alexander

Health and Disability - Bill Shorten

Trade - Julia Gillard

Foreign Affairs - Stephen Smith

Industrial Relations - Tony Abbott

Education & Social Inclusion - Andrew Leigh

Veterans Affairs - Julie Bishop

Defence Support - Ian Macfarlane

Defence - Greg Combet

Immigration and Population - Penny Wong

Consumer & Corporate Regulation - Barnaby Joyce

Financial Services - Bernie Ripoll

Treasurer - Kevin Rudd

Cabinet Secretary - Tony Windsor

Prime Minister - Malcolm Turnbull

What do you think?


This will strike terror into the hearts of Abbott and Hockey

It may even finish them politically.

From Lenore Taylor this morning:

THE independent Tony Windsor will ask the two main parties to submit all their election policies to the Treasury for costing so negotiations to form a government can begin with an agreed budgetary starting point.

The Coalition refused to submit most of its big-ticket policies to the Treasury during the election campaign on the grounds that a leaked Treasury document published in the Herald had eroded confidence in the process. Coalition costings were checked by an accounting firm instead.

The decision led to furious argument between the parties in the final days of the campaign.

Labor accused the Coalition of looking for an excuse to avoid scrutiny and said the costings released just three days before the election would blow out the budget bottom line by $5 billion over the next four years, rather than improving it by $11 billion as the Coalition claimed. The Coalition said it had released more detailed information than any previous opposition.

But Mr Windsor said he wanted an agreed starting point for the talks that will determine who forms government, and would suggest to his fellow independents a full Treasury costing of both parties' election platforms as starting point. He said the concern about leaks was no longer valid since the election was over and the policies were all on the public record.

''I think both of them should submit all their policies to the Treasury … we need to know where we stand.''

The point is, despite all the talk of auditing, the Coalition's figures were never designed to withstand scrutiny.

Such scrutiny will show many of the promised savings do not exist.

It'll show Abbott, Hockey and Robb to be anything but the sober, responsible managers they said they were.

And also a little less than honest.

They will have shot themselves in the foot, once again.

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Tuesday, August 24, 2010

The three independents

Tomorrow, at the National Press Club.

Wednesday 12.30pm ABC TV

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Crisis? Yea, sure.


Crisis? Hardly. Financial markets shrugged off talk of "mayhem" and "turmoil" to trade roughly as normal Monday, in same cases a little better.

The Australian dollar closed higher than on Friday, more than regaining the one US cent it lost in thin overseas trading before domestic trade opened. At 89.2 US cents late yesterday it was buying more than at any point on election eve.

"The speculators who sold early were probably squeezed a little bit during the course of the day," said Royal Bank of Scotland foreign exchange strategist Greg Gibbs.

"Basically it comes down to that there's no burning macroeconomic issue that needs addressing. The economy's underlying strength remains in place."

The share market closed almost unchanged in defiance of a slump on Wall Street with mining shares gaining as Telsra lost value.

"It's a squall in an Australian thimble," said economic analyst Sean Keane, from the Asia-Pacific consultancy Triple T.

"While it is absolutely correct that markets dislike uncertainty... they will quickly move past this. Whatever the form of the ultimate coalition it is unlikely to do anything significant to affect the overall positive story that is unfolding in Australia."

Long-range projections released by the Australian forecaster BIS Shrapnel this morning have Australia's economic growth rate accelerating to a high of 4.3 per cent before easing back to 3 per cent over the next five years and the unemployment rate dipping to a low of 3.9 per cent before climbing back to 4.6 per cent.

Senior economist Rachel Logie said the election outcome should make no difference whatsoever to the projections. Even abandoning the mining tax would make little difference, as mining investment would be constrained in any event.

"Miners can't get labour, miners can't get machinery," she told The Age. "Employment in construction is already as high as it was before the crisis. Oil and gas and iron ore miners are in competition with each other for that labour. That's the big constraint, not whether or not there is a tax."

BIS Shrapnel is predicting a series of interest rate hikes, taking the Reserve Bank cash rate from 4.5 to a peak of 6.5 per cent over the three years. It expects the standard variable mortgage rate to climb to 9.1 per cent.

Long-term bond rates edged up early Monday but most of the increase was reversed as buyers returned throughout the day.

"There are legions of bond hunters around the world looking for that rare mixture of a strong government issuing at a high yield," said Mr Keane. "Those who own Aussie bonds have been well paid to do so, and they know it's likely the currency will climb higher."

Funds Manager Christopher Joye of Rismark International said the injection of three independents into Australia's political decision-making should be a plus for foreign investors.

"It's much like the addition of independent directors to a public company's board that is controlled by insiders," he said. "We will likely see an emphasis on better governance and transparency as flagged by the independents. This should bring more rigour to the business of government with the cost being slower decision-making speed and arguably more bureaucracy."

Published in today's SMH and Age

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Interviewing an empty chair

It's a grand tradition.

But the those in charge of last night's Q&A could have gone further... (Hi Peter, Hi Amanda)

...as did the BBC game show Have I Got News For You after a Labour MP cancelled on them for the third time:

It'd never be allowed in Brazil. Or Fiji.

HT: Mumbrella

Here's the correspondence

"We cannot accept your request that you choose a substitute panel member for tonight’s Q&A since this would be a clear breach of the ABC’s editorial independence. Mr Arbib will be represented by an empty chair at the Q&A desk.

I hope that the Prime Minister and Mr Arbib might still be responsive to the obligations that all Australian politicians have to face Australian citizens and the media on matters of national significance such as the future government of Australia."

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Sunday, August 22, 2010

How did it come to this?

A view from Taiwan:

What the?

Next Media Animation is the largest full-service 3D animation studio in Asia. We provide animation-to-order to some of the biggest entertainment and news providers around the world. Our services are end-to-end, provided all under one roof. From concept to story board to 3D modeling to production, we take your creative ideas and make them a reality. We're also fast. Turnaround times can be measured in HOURS, not days. And we have some of the lowest production costs in the industry. Next Media Animation is a unit of Next Media Limited, Hong Kong's largest publicly listed Chinese-language print media company and publisher of Apple Daily and Next Magazine in Hong Kong and Taiwan.


Saturday, August 21, 2010

Frankie kicked a mine

While we were preparing to vote

"The nation has been informed in the last few minutes by the Acting Chief of the Defence Force that two Australian soldiers have been killed in Afghanistan, two soldiers have been wounded. The soldiers killed are Tomas Dale and Grant Kirby.

Their families have received the worst news families could get. The shock of it, the violence of it, the loss of it will obviously be bearing very heavily on them today."

Here's a photo of Defence Minister John Faulkner and others at last month's funeral for Private Tim Aplin.

Andrew Norton wrote later:

"All the politicians look affected by the moment, but it was the pain on Faulkner’s face that held my attention. I’d seen it before, as our Afghanistan casualities mount and military funerals become more frequent. Faulkner is feeling heavily the special burden all Defence ministers carry.

So while I was not expecting today’s announcement of Faulkner’s retirement from the ministry I was not surprised. That photo was the first thing I thought of when I heard the news that he was standing down.

But the practice of politicians attending soldiers’ funerals is a good one. While no minister takes the decision to send troops into combat lightly, it is important that they see firsthand the consequences of those decisions. The soldiers do want to go, but wives, kids, parents and friends can pay a terrible price."

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Today is special:


"Despite the cynicism many of us feel about both sides of the campaign, despite the leaders treating us like idiots and despite the general malaise in our political system – today’s election, like every election, is an important day that we should never fail to appreciate – not because of the quality of the choices we have on offer, but simply because we, unlike so many others, actually have a choice. As we said on the morning of the 2007 election:

So go and do your part for our democracy – man the booths, assist the booth workers or simply just exercise your franchise. This day is our day, your day, the day where that little piece of paper and its accompanying little pencil make all of us equal."

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Don't know how to vote in the Senate?

Go to belowtheline.org.au and work it out.

Then print it out, take it with you, and vote.

And take comfort from the words of my much-missed colleague Andrew Olle.

At the end of each election night telecast he said something like:

"Just remember, whoever you voted for, the sun will still come up tomorrow morning".

Vote well.

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Friday, August 20, 2010

Looking back at moving forward


Tony's debt

Congratulations Stubborn Mule!

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But wait, stimulus was even cheaper...

What about all NewStart and other spending it saved?

Peter Whiteford reckons that by spending high (3rd highest), we ended up spending relatively low (11th lowest).

Paper below.

Oh, and here's David Gruen of the Treasury:

It is worth providing a brief summary of some of the benefits of avoiding a recession that would not be relevant if a recession was instead simply an equilibrium market outcome.

The first, and most obvious, benefit is that involuntary unemployment is lower than it would otherwise be. Among other things, lower involuntary unemployment implies less long-term unemployment and hence less skill atrophy and less general disaffection with society on the part of the long-term unemployed. Treasury estimates imply that the fiscal packages reduced the peak unemployment rate by 1½ percentage points. I suspect, however, that this is an underestimate, both because it was calculated using conservative fiscal multiplier estimates, and because it takes insufficient account of the favourable feedback loop that I spoke about earlier when discussing the impact of expansionary macroeconomic policy on confidence.

But there are further benefits to avoiding a recession that would need to be taken into account in a realistic cost-benefit analysis of discretionary fiscal stimulus. Recessions break productive links between firms, and between firms and workers, when firms that would otherwise be viable over the long-term are driven into bankruptcy by a recession.13 In other words, plenty of the destruction that occurs in a recession is not creative destruction.

Finally, recessions do long-lasting damage, particularly to that cohort of people entering the labour market at the time the recession hits. Thus, for example, university graduates entering the labour market in a recession suffer sizeable initial earnings losses, losses that persist for a period estimated at between eight and fifteen years – that is, long after the recession has ended (Oreopoulos et al., 2006, Kahn 2009).

The Stimulus and the Costs of Unemployment

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Hockey: "It was an audit" Auditing firm: "We are not responsible for what he says"

The firm the Coalition says audited its election costings has been accused of breaching both auditing and ethical standards in a complaint to be lodged with the Institute of Chartered Accountants.

Professor Bob Walker of Sydney University, a 40-year member of the Institute, will lodge a private complaint because he says it is "in the public interest that auditing standards be respected".

"If they had produced a report like this on a prospectus, they would be in trouble because it would be an offence under the Corporations Act not to comply with relevant standards," Professor Walker said.

"But as this does not fall under the Corporations Act, it is a matter for the profession."

Geoff Kidd, one of the principals of WHK Horwath who signed the letter endorsing the Coalition's costings is a former Western Australian chairman of the Institute.

Australian Auditing Standard 804 requires an auditor to "obtain sufficient appropriate audit evidence as to whether management's best-estimate assumptions on which the prospective financial information is based are reasonable".

The one-page letter from WHK Horwath attached to the Coalition's costings released Wednesday explicitly states it relied "on the assumptions provided".

The standard requires auditors to instead investigate whether "all material assumptions are adequately disclosed, including a clear indication as to whether they are best-estimate assumptions or hypothetical assumptions."

The costings document discloses no assumptions...

The firm did not assert that it had in fact conducted an audit in the one-page letter released Wednesday. Instead it said it had been engaged "to review the costings estimates prepared by the Coalition".

However in spruiking the document on radio and television yesterday Coalition Treasury spokesman Joe Hockey repeatedly described it as an audit.

"We have the fifth biggest accounting firm in Australia auditing our books and certifying in law that our numbers are accurate," he told ABC TV. "They have certified our numbers based on all the information we have provided them, they have legal obligations and legal risks," he added.

Speaking to ABC radio he said the analysis was "signed off by the fifth-biggest auditor in Australia".

"I tell you, it is an audit. This is an audited statement," he said.

The code of ethics requires accountants to endeavour to make sure clients and others do not misinterpret their work.

Asked by The Age yesterday whether Mr Hockey had been correct to describe the work as an audit Mr Kidd said he was "not responsible for what Mr Hockey says".

"We are well aware of our obligations. We provided one document and we believe it speaks for itself."

Professor Walker said big firms had "backed away from sprinkling holy water over political forecasts" precisely because of the danger their work would be misused.

Institute general manager Lee White said it took seriously the requirement that members ensure their work was not misrepresented, but "in some ways you can only do so much".

Dr Christine Jubb of the ANU's National Centre for Audit and Assurance Research said it was clear the document was not an audit.

"Audit and review have very distinct meanings. Joe Hockey is playing fast and loose, there's no doubt," she said.

An economist who has previously costed policies for oppositions told the The Age he was surprised by the work presented Wednesday.

"Anyone doing costings has to do an assessment of assumptions," said. "Otherwise it is just 10 plus 10 equals 20, and you say, yes we agree it equals 20."

Published in today's SMH and Age

Auditing Standard 804

Section .02: In an engagement to audit prospective financial information, the auditor should obtain sufficient appropriate audit evidence as to whether:

. management's best-estimate assumptions on which the prospective financial information is based are reasonable for the preparation of the prospective financial information;

. the prospective financial information is properly prepared on the basis of the assumptions;

. the prospective financial information is properly presented and all material assumptions are adequately disclosed, including a clear indication as to whether they are best-estimate assumptions or hypothetical assumptions; and

. the prospective financial information is prepared on a consistent basis with historical financial reports, using appropriate accounting principles.

APES 110 Code of Ethics for Professional Accountants

Section 130.6: Where appropriate, a Member should make Clients, employers or other users of their services aware of limitations inherent in the services to avoid the misinterpretation of an expression of opinion as an assertion of fact.

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