Thursday, March 31, 2011

Who wins from the new mining tax?

BHP, Rio and Xtrata - the co-called “big three” - have emerged as the three biggest winners of the mining tax deal they negotiated with the government on the eve of the election, according to evidence to a Senate committee.

Professors Henry Ergas and Jonathan Pincus, of Woolongong and Adelaide universities, told a hearing in Melbourne it was inevitable the redesigned tax would disadvantage smaller miners and explorers without profits of the kind the big three had with to offset losses against.

“It will make it difficult for innovators to challenge them,” Professor Pincus of the told the Senate inquiry.

Asked if he agreed the tax as now designed would be especially distorting to those companies not involved in its design, the Adelaide Pincus said he did...

Neither supported either version of the tax, Professor Pincus likening the notion of a tax on super profits or economic rents to that of “a frictionless machine, very useful in theory non-existent in practice”.

John Freebairn of Melbourne University said almost anything would be better than the present state-based mining royalties, which were “about the most distorting taxes you could think of,” costing the economy 70 cents per dollar of royalty collected by forcing otherwise marginal mines out of business.

The big three had received an extraordinarily good return from their campaign to overturn the tax as originally designed.

“If I was BHP or Rio and I had the choice of spending $100 million either lobbying the government to not impose the tax, or on spending $100 million getting minerals out of the ground, it is pretty clear what the best investment would be.”

“Their claims that the resource super profits tax would have caused them to stop investment and cut employment and so on just don’t stand up to scrutiny.”

“Quite the contrary would have happened. The royalty system is a tax on employment and investment - the resource rent tax less so.”

Professor Freebairn believed the Henry Tax Review was far from a wasted effort, nonetheless.

“Ken Henry didn’t really put that report out with a view that everything should be adopted within the next six months or the next term of government. He designed a tax system for the longer term.”

“My guess is that well after Ken has finished looking after hairy nosed wombats his epitaph will say ‘we listened to you Ken’.”

Published in today's SMH and Age

Related Posts

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. Five easy pieces - the Mining Super Profits Tax

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What's your chance of getting that job?

It depends where you are

Looking for a job? Don’t try here in NSW. On average there are four unemployed locals competing for each vacant position. In Tasmania it’s even worse - there are seven.

The best place to find a job, statistically, is in the Northern Territory. It boasts about one vacant job for each unemployed local. Australia’s most authoritative vacancy survey compiled by the Bureau of Statistics finds 3800 jobs going begging the Territory while its employment survey finds 3900 locals looking.

The Australian Capital Territory is also good, on paper. The number of unemployed locals only just outweighs the number of vacant positions. But it isn’t as good as it looks because many of the people who work and look for work in Canberra live just outside it in towns such as Queanbeyan, Bungendore and Goulburn and many of the public service jobs in it are designed to be filled by recruits from interstate.

If you are looking for big numbers of jobs and very little competition, Western Australia is the place to go. With less than a third the population of NSW, it finds itself with two thirds as many vacant jobs...

In February there were 31,000 Western Australian jobs going begging, and 60,000 Western Australians looking, a ratio of 1.9 vacant jobs for each unemployed local.

The persistence of the imbalance suggests the east of Australia doesn’t want to move there. WA sources most of its population growth from overseas.

And an increasing number of its jobs are ones many Australians can’t handle.

The mining industry had an all-time record 8,100 vacancies in February, dwarfing every other industry as a proportion of the 205,100 it employs. Australia's biggest-employing industry, health care and social assistance, was looking for 16,400 workers. But it employs 1.3 million.

Published in today's SMH

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Wednesday, March 30, 2011

What'll be the #FirstRBAtweet?

fluke88 Luke
#FirstRBAtweet..."we've got 4 to 1 on interest rates going up this month, 2 to 1 on them remaining steady, who wants to place a bet?"

fangbooks fangbooks
Today we're having grilled chicken salad for lunch. #FirstRBAtweet

Fiona Cameron
We're ditching the Howard appointees! Two down this week. #FirstRBAtweet

Jeanne A. Webb
...#FirstRBAtweet That tosser in today's Oz who said interest rates wouldn't move, guess again. UP!!! #Tosser. ?!

Gigi Huxley
"We're about to send a statement..." #FirstRBAtweet

Brigadier Slog
#FirstRBAtweet Edit+Copy Edit+Paste last month.

█████ ██████
#FirstRBAtweet Still able to fit our deficit figure inside 140 chars. Suckit, @treasgov

John Hanna ™
#FirstRBAtweet "We do complex economics in 140 characters" #alwayshave

Blue Lotus
#FirstRBAtweet Hang on, what *does* happen when you multiply infinity by 0?

#FirstRBAtweet WTF did we do with the gold reserve?

Hey Glenn! Glenn! Look. Charlie Sheen is on this twitter thing. Winning. Lion Blood. Ha ha #FirstRBAtweet

Stephen C
No-one really liked that Donald McGauchie prick anyway. #FirstRBAtweet

Brigadier Slog
#FirstRBAtweet "The RBA has decided to lift interest rates by 50 basi.... I mean cut rates. No wait! I was right the first t.. AH F***!!"

John Hanna ™
#FirstRBAtweet "We have more money than you"

Brigadier Slog
#FirstRBAtweet "Is this thing on?"

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The RBA to Tweet. Nerd heaven.

A few days back we got @SwannyDPM

Now we're about to get @RBAInfo

The Bank begins tweeting tomorrow Thursday March 31 (perhaps because April 1 is a bad look).

I am trying to get the team 1000 followers before they start

We are half way there. They are 560 and gaining by the minute!

Grogs suggests aiming for 10,000.

Come on nerds!

Others suggest a book on the first tweet.

Gillard hires Brumby and Greiner to unsettle the states

(Most aren't in Labor hands anyway)

Review of GST Distribution

The Gillard Government has commissioned a review of the distribution of revenue from the Goods and Services Tax to the States and Territories.

We have appointed Nick Greiner, John Brumby and Bruce Carter to conduct the review.

The review will lead to a simpler, fairer, more predictable and more efficient distribution of the GST to States and Territories.

Instead of States facing penalties for economic growth and rewards for economic underperformance, the GST distribution process should encourage economic reform and better delivery of services, and provide States with certainty.

This will build a stronger Australian economy and make for better, more efficient delivery of essential services like schools and hospitals.

Under any changes that might be considered by the Government, we will ensure that smaller States continue to receive a fair share of GST revenue, and that States with larger economies are not unfairly penalised for success.

At present, there are a number of elements of the distribution arrangements that could be improved. Under the current arrangements, there is:

· Not enough incentive for reform – currently underperformance in service delivery and economic growth can be rewarded. As far as possible, States should not be put in the position where they can be penalised for investing in economic growth and improved service delivery.

· A need for more certainty and predictability – currently States can be hit with unexpected shocks to their finances.

· The potential for greater simplicity – current arrangements are complex and accordingly not very transparent.

The incentive for states to pursue reforms which get the best performance from their economies can be excessively dulled by the current arrangements for distributing revenue gains away to other states.

On the other hand, major errors in economic management that lead to sustained slow growth in a way that hurts a state’s ongoing ability to raise revenue can be compensated.

States should have an incentive to invest in economic reform; they shouldn’t be unfairly punished for success.

As well as structural problems that need to be addressed, the Gillard Government recognises the impact of shifts in our economy over time.

In particular, we recognise growth in the mining sector is increasing the discrepancy in the amounts of revenue raised by States and Territories, as well as making it more difficult to anticipate GST distribution from one year to the next.

A key principle of GST distribution is that States and Territories have the ability to provide broadly equivalent services in areas such as education, health and public transport.

This is especially important given the differences in the cost of providing services between regions.

The Review will be advised by a Heads of Treasuries Advisory Committee comprising representatives from all States and Territories, and will seek submissions from the public. It will be supported by a secretariat within the Commonwealth Treasury, with representation from the States and Territories as well as other agencies as appropriate.

The Review will provide an interim report to the Treasurer by February 2012 and a final report by September 2012.

The Commonwealth Grants Commission will continue to serve as the independent umpire and make recommendations on the distribution of GST revenue.

The Federal Government will request the CGC to update its methodology to reflect any agreed recommendations from the Review.

The Review will not affect the distribution of the GST revenue in 2011-12 or 2012-13.

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Who'd want to leave NSW? Hordes. NSW and SA suffer net emigration.


Locals are fleeing NSW at the rate of 50 packed cars per day with the latest figures showing NSW in league with South Australia as the only state to experience significant net interstate emigration.

The official figures show Queensland the destination of choice for NSW departees, taking in half, followed by Victoria taking one quarter and Western Australia one fifth.

The NSW population is growing at the third-slowest rate in the nation. Our birth rate is the second-slowest, ahead of only Victoria’s. Our proud boast of being biggest beneficiary of net overseas migration is no longer true, Victoria overtook us in June 2010.

Only in raw migration numbers does NSW remain an Australian leader, taking in 36,400 overseas arrivals in the September quarter, well above Victoria’s 28,200. But because so many more Australians leave NSW for overseas than leave Victoria, its new migration intake is now bigger.

The picture that emerges from the Australian Bureau of Statistics demographic statistics is of a state Australians move to and leave. Some 19,000 Australians moved to NSW between the June and September quarters as 21,000 left. By contrast Queensland, which also had 19,000 arrivals, suffered only 9000 departures.

Western Australia is by far Australia’s fastest growing state, boosting its population at an annualised rate of 2.2 per cent, followed by Queensland at 1.6 per cent and Victoria at 1.5 per cent. NSW is in forth place at 1.2 per cent, beating only South Australia and Tasmania...

The bulk of Western Australia's population growth comes from overseas A net 6900 migrants moved to Western Australia in the September quarter, and only 1200 Australians.

Australia’s annual population growth rate of 1.57 per cent is the slowest for four years, well down on the long-term high of 2.16 per cent reached at the tail end of the previous mining boom. Net immigration totaled just 185,800 in the year to September, close to the weakest for four years and down 40 per cent on the peak.

“It appears there are both less people willing to move to Australia and more are voting with their feet and moving offshore,” said Commonwealth Bank senior economist Michael Workman. “If the trend continues annual net migration could be headed under 150,000. The government might seek to turn the slide around by boosting skilled migration.”

The slide in population growth comes as the population minister Tony Burke prepares to release a report on a sustainable population strategy for Australia, commissioned at a time when growth was much faster. Both sides of politics eschewed talk of a “big Australia” during the election campaign and in the leadup to it Mr Bourke was briefly titled Minister for Sustainable Population.

In a separate report released this morning (WED) the business advisory firm PKF warns that population growth is slowing as the need for workers is exploding.

PKF national director Matthew Field, says the slowdown means “workers will become harder to find putting pressure on wages, inflation and eventually interest rates as smaller businesses struggle to compete for workers with arger employers”.

The report says the downswing will be most felt in the working age population growth as baby boomers retire, marking the start of a slowdown that could last a generation.

Published in today's SMH

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Swan fills two RBA vacancies, one at the last minute

Treasurer Wayne Swan has appointed two new Reserve Bank board members, one who left yesterday amid uncertainty about whether she would be able to attend her first board meeting next Tuesday, and the other at present in the strife-torn principality of Bahrain, as the head of planning at its Economic Development Board.

A resources company executive Catherine Tanna will replace former National Farmers Federation president ational Farmers' Federation president Donald McGauchie whose term expires today.

Ms Tanna left for overseas yesterday and a spokesman for the BG Group of which she is an Australian executive vice-president said it was not clear whether she would be able to attend Tuesday’s meeting.

John Edwards, an former advisor to the Labor Prime Minister Paul Keating and his biographer is at present in Bahrain working for its Economic Development Board. He told The Age/Herlad by email he “was deeply buried in Middle East and Bahrain issues,” and as a result reluctant to talk about Australia.

Bahrain’s leading opposition group siad yesterday more than 250 people had been detained and 44 were missing after a security crackdown crushed weeks of protests...

Before leaving for Bahrain in 2009 Dr Edwards worked for 12 years as the chief economist for HSBC Australia.

He will replace Australian National University economist Warwick McKibbin on the Reserve Bank board in August.

Professor McKibbin, a critic of the government on details of its economic stimulus program, said he was told about the decision to deny him a third five-year term on Monday night. He wished Dr Edwards well saying he would enjoy the job and find it a great opportunity.

“It’s every economists dream really, to be on the board,” he said.

An internationally-recognised economic modeler, Professor McKibbin said he would devote more time to running the ANU Research School of Economics and to surfing with his partner and children.

Mr Swan said thanked both retiring members for their service, saying they had each served 10 years which was a “very significant contribution over a long period of time”.

Published in today's Age

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Tuesday, March 29, 2011

First Bob and Blanche, now Ita and Kerry - the telemovie.

Coming soon to ABC1:

HT: Mumbrella

Related Posts


The Aussie's sky-high, but... still can't buy much for one.

Here's what confronted me at the airport the other day:

So if this crowd buy US$100 from me and sell it to you, they keep US$17.

I want to be a banker.

. Learn to love the higher dollar

. $US1.02 may be just the start

. Don't wish too hard. Ralph Norris on bank costs.


Two new on RBA board

From Swan:


I am pleased to appoint Ms Catherine Tanna and Dr John Edwards to the Reserve Bank of Australia Board (RBA Board).

• Ms Tanna will be appointed for a five-year period from March 30 and replace Mr Donald McGauchie whose term expires today.

• Dr Edwards will also be appointed for a five-year period from July 31 and replace Professor Warwick McKibbin whose term expires on July 30.

I would like to take this opportunity to thank Mr McGauchie and Professor McKibbin for the valuable contributions they have made to the deliberations of the RBA Board over the past 10 years.

Ms Tanna and Dr Edwards will bring a unique combination of business, academic and professional economic experience to the RBA Board. They share an understanding of the macroeconomic implications of the strength of our resources sector and the opportunities flowing from Australia’s location on the doorstep of Asia, as well as an important perspective on issues affecting regional Australia and a deep knowledge of global financial markets.

Ms Tanna is currently Executive Vice-President of BG Group and Managing Director of its Australian unit QGC Pty Limited. She is experienced in the resources sector and has formerly served in a leadership capacity in resource sector firms such as BHP Petroleum and Shell.

Dr Edwards is currently the Executive Director of Economic Planning and Development for the Bahrain Economic Development Board. He will resign this position before taking up his role on the RBA Board. On his return to Australia, Dr Edwards will take up academic roles in addition to his current position as an Adjunct Professor in the John Curtin Institute of Public Policy at Curtin University. Dr Edwards was Chief Economist for Australia and New Zealand for HSBC Bank for over a decade prior to taking up the appointment in Bahrain.

These appointments are made in accordance with section 14 of the Reserve Bank Act 1959, which provides for nine Board members including the Governor, the Deputy Governor, the Secretary to the Treasury and six other members.

I take this opportunity to thank Ms Tanna and Dr Edwards for agreeing to their appointments to this key economic institution.

Related Posts

. Edwards has been in Bahrain

. Memo to Swan - Keep McKibbin


Ahead of Woolworths & Coles at the Senate Inquiry today...

From 9.30 am
Watch Here

Shane Wright, economics editor of the West Australian poses this question:

Does WA need a dairy industry?

Now before you start mailing in dry cow pats in anger, I am not advocating it’s time for the State’s remaining dairy farmers to walk off the land and take up jobs driving trains for Fortescue Metals or BHP Billiton (although financially they may be better off doing just that).

But with a Senate inquiry looking into the milk price war now being waged by the nation’s major retailers the heavy focus has been on the poor plight of dairy farmers with precious little attention given as to whether we should have them in the first place.

This would be the same industry that got a $2 billion assistance package in 2000 to end taxpayer-funded subsidies for drinking milk which was paid for via an 11 cent a litre levy on all milk for the best part of nine years (it was only ended by the Rudd Government).

Dairy farmers in WA quickly become an endangered species post-deregulation, evidence that they were only being kept afloat by the subsidies with only the most efficient and financially viable still alive.

Now those remaining farmers have raised concerns that the Coles $1 a litre pricing policy will drive them out of business leaving the people of Perth only sipping UHT milk.

Much has been made of claims that some parts of the country won’t have fresh drinking milk if the price war continues.

The situation in France, where every monsieur, mademoiselle and madam drinks UHT milk, was highlighted as an example of what is about to hit the milk drinking public of Australia.

By any measure the high percentage of UHT milk use in France is high at about 96 percent of total consumption.

But some witnesses to the milk inquiry (and some of the senators) tried to draw a link between the French experience with the supermarket structure of Australia. Pity that claim doesn’t stand up to any examination...

France is the second largest milk producer in the European Union (and one of the 10 largest in the world). The place is awash with milk.

The use of UHT appears more a cultural issue - little history of milk as a beverage, not a heavy focus on breakfast cereals – than a supermarket power issue. The fact France has high per capita consumption levels of cheese and butter suggest locals like dairy, just not as a drinking product.

Across the Channel in Britain UHT use is less than nine percent. And Britain is the third largest milk producer in the EU.

There’s no suggestion that competition among the supermarket chains in France and Britain has led to this huge discrepancy in UHT usage.

But somehow that argument is supposed to fly in Australia.

I don’t think so.

Often through the inquiry and public commentary on the issue Coles is made as the evil-doer, forcing its competitors into matching its pricing structure.

Consider the submission made by Woolworths.

The company has made much of its concerns that farmers will be driven to the wall.

In reality, it appears Woolworths is frightened that its differential pricing arrangements are the only thing in danger of disappearing.

Woolworths, before the price war, was offering its HomeBrand line of milk at around the $1.14 a litre mark.

But it also has its Woolworths brand which was on the market at about $1.47 a litre.

For that extra 33 cents a litre there is a small amount of extra fat (creaminess) in the milk but also a great wad of extra profit margin for our friends at Woolworths.

Instead of trying to argue to customers that for that extra 33 cents a litre customers who bought Woolworths brand over HomeBrand were getting a better product, the company surrendered to the threat posed by Coles and slashed its prices down to the $1 a litre mark.

Indeed, the company only cut the one litre cartons of Woolworths brand to $1 from $1.47. For two litre containers prices fell to $2.29 from $2.67 and for three litre containers the price is now $3.29 rather than $3.96 previously.

"We have publicly expressed our concern that this rapid price drop is unsustainable for the Australian dairy industry," the company’s government relations manager Nathalie Samia wrote.

But there was no gun being held at the heads of Woolworth officials (or those at other major retailers including at IGA) forcing them to slash prices in line with Coles. If they so believed in the unsustainability of $1 a litre milk then Woolies wouldn’t or shouldn’t be offering it.

It was a choice made by those companies that they had to compete with Coles.

That is largely in part because Woolworths, Aldi, IGA and others know that consumers see very little difference in milk.

Milk is, largely, a bulk commodity just like iron ore and coal (although I wouldn’t put splash of iron ore on my Corn Flakes in the morning).

Some, like the West’s Rob Broadfield, will argue long and loud that cheap milk turns a potential cup of coffee heaven into something approaching a mug of bitumen but most of us don’t have the same refined taste buds as Mr Broadfield.

All we want is some white stuff for the morning cereal, a bit to put in the coffee, and maybe if we’re feeling the heat a milkshake for a mid-arvo pick-me-up.

And we actually want it at the lowest price possible.

Unfortunately for WA dairy farmers, it’s clear milk drinkers are more impressed by low prices than much more expensive branded varieties.

Consumers already have a choice when they walk into a Coles or Woolies or an IGA – and they’re voting for the cheap unbranded stuff.

That means for dairy farmers and their processors the focus has to be on product differentiation, convincing shoppers that their higher priced milk is worth purchasing.

On that front they have failed so far.

But it’s much easier to criticise big bad Coles than have a look at your own marketing efforts.

Dairy farming has to be one of the toughest farming gigs going around.

It’s constant, it’s hard, the returns are low and you’re effectively selling something that by its very nature is the same as just about anyone else’s.

And the land dairy farmers are using now may be more productively used for other agricultural pursuits.

Perhaps the question is whether West Australians want, and are prepared to pay for, a dairy industry.

This is an argument not as simple as a supermarket chain selling cut-price milk. This is an argument over how an industry goes about selling itself.

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Friday, March 25, 2011

I thought the price signalling law was directed at banks, until I read it

It wasn't as advertised

Legislation introduced into parliament Thursday to crack down on price signalling by banks has a much wider application and could soon be used to regulate firms such as petrol retailers and supermarkets, leading competition lawyer says.

Treasurer Wayne Swan told parliament the price signalling amendments to the Competition and
Consumer Act would mean the "big end of town" could no longer "dud Australian families" on interest rates.

But the bill itself is broader, applying to whatever classes of goods and services are "prescribed by the regulations".

"Once it becomes law it could be made to apply to other sectors of the economy without proper debate," said Allen & Overy competition partner Dave Poddar.

"In my view the draft regulations that will specify the industry sectors should be released at the same time as the bill so business and the parliament can properly consider them"...

A cabinet briefing sent to Mr Swan in October by Treasury released under the Freedom of Information laws warns that a series of court decisions had made it increasingly difficult for the Australian Competition and Consumer Commission Commission to prove collusion.

It says consumer laws should be changed to give the commission sweeping powers to impose so-called per se bans on the private exchange of pricing information between competitors, eliminating the need to prove an explicit intention to collude.

It is understood that when the regulations are made public they will only prescribe banks. The Treasurer will extend them to other sectors after detailed review and consideration.

Mr Swan told parliament the new law would convictions where banks gave each other a "nod and a wink" about plans to raise interest rates even where it wasn’t written down and signed in blood.

It includes exemptions allowing for disclosure to the stock exchange and where banks need to exchange information because they are part of a lending syndicate.

Published in today's SMH and Age

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RBA to the banks: Get real - your golden days are over

See below for the fantasy land still inhabited by our banks

Australia's banks have survived the financial crisis only to face a blunt message from the top of the Reserve Bank - the good times won't return, not like they were. Not now, not ever.

Assistant Governor (Financial System) Malcolm Edey told a conference on financial regulation in Sydney Australian banks were in good shape, and had emerged from the crisis profitable and well capitalised.

Despite complaints from banks about the rising cost their wholesale funding aired during the dispute over costs they are becoming less reliant on wholesale funds as their deposits grow faster than their loans.

They will nonetheless remain vunerable to sudden turns in sentiment in the wholesale market as they will have to replace government-guaranteed debt as it expires.

The bad news for the banks post-crisis is that "it seems unlikely we will be going back to the days of consistent double-digit credit growth we saw pre-crisis years".

"That growth was driven in part by factors that can't be repeated - the deregulation of the financial system in the 1980s, and the transition to low inflation in the 1990s," Dr Edey said.

"In the post-crisis environment borrowers and investors are more cautious than they were, both at home and abroad. That is likely to mean less demand for leverage and less growth in private balance sheets, even when the economy itself is growing strongly."

"If those trends continue, I think it will be good for financial stability, but it will also mean that our lending institutions have to get used to lower rates of expansion than were typical in the pre-crisis years"...

The statement is a warning to bank shareholders and directors not to expect a return to previous rates growth. If lending itself grows more slowly, any single institution can only return to the previously growth rate bycannibalising the business of another.

An industry-wide push for greater growth could endanger financial system stability.

As recently as October the Australian Bankers Association published a press release arguing that it was reasonable to expect a return to the rate of profit growth in the five years prior to the global financial crisis.

Dr Edey spoke after the release of the Bank's semi-annual Financial Stability Review, which said profitability of the big four had returned to to near pre-crisis levels.

Profitability had also picked up for the smaller
Australian-owned banks, "athough the increase has been less pronounced, reflecting their somewhat weaker asset quality".

The recent run of natural natural disasters was "unlikely to have a major effect on banks' asset quality".

Housing loan arrears remain low by international standards at 0.7 per cent, but are much higher in NSW than in other states and the highest of all in Outer Western Sydney.

Published in today's SMH and Age

Does this make the Bankers Association clowns?

False Banks Making Record Profits Due to Reduced Competition

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Wednesday, March 23, 2011

On the day of the Canberra carbon tax protest... some sense

Rod Sims, expert advisor to the Multi Party Climate Change Committee.

Dare I suggest you'll learn more here...

Rod Sims presentation March 23 2011

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Gillard's back-to-work campaign set to achieve achive bugger all

While Wayne Swan has been busy playing down expectations about the tax talkfest ("it's a forum, not a summit") his prime minister has been building up expectations about the budget she will never be able to meet.

John F Kennedy talked of sending a man to the moon. Julia Gillard has talked of welfare reforms that could move as many as two million Australians into full-time work.

Its a big ask. Eight million of us already work full-time. Around seven million of working age don't, making two million an awfully big chunk.

In February Gillard told caucus she wanted "work not welfarism" and told the Committee for the Economic Development of Australia that "possibly as many as two million" Australians stood outside the full-time workforce in addition to those registered as unemployed.

She said around 800,000 were in part-time jobs and wanting more. Another 800,000 were outside the labour market, many discouraged, and there were also "many thousands of individuals on the Disability Support Pension who may have some capacity to work".

Her maths look dodgy given what she has in mind...

She has set up a task force to examine "incentives for such potential workers to rejoin the labour market, while also investing in the intensive support needed to lift their skills and job readiness" and this week outlined to caucus a crackdown on Newstart recipients who don't turn up to job interviews.

But the 800,000 she listed as wanting to work more hours presumably don't need a crackdown or extra incentives - by definition they already want to work more hours. The official figures do indeed show a further 800,000 Australians available to work and not actively looking - but they also show that one quarter of them are students, meaning they are probably not available for full-time work unless they abandon their studies, which is probably not what the government wants. And then there are the extra 400,000 potential full-time workers Gillard would need to bring the total up to 2 million.

She doesn't say where they are, other than to say that there are "many thousands of individuals of the Disability Support Pension who may have some capacity to work".

But the DSP is paid to around 800,000 people. Getting half of them into full-time work, while perhaps laudable, is unrealistic.

It is wise to abandon the image of a flood of newly-incentivised full-time workers just waiting for Gillard to tweak incentives and tighten penalties. It won't happen, and there is a chance that making NewStart even less attractive will make things worse.

Dr Ken Henry said so in his much cited but often ignored tax review.

NewStart is now scandalously low, so low the OECD has raised concerns about its adequacy. Gillard herself has refused to answer questions about whether she could live on it.

Simple economic theory would suggest the lower the rate of Newstart the more incentive someone will have to leave it for a job.

But it has fallen so low relative to other payments the more powerful incentive is to leave it for a more decent benefit.

Half of all entrants to the Disability Support Pension move there from unemployment. Once there most never leave except to die or to move on to the old age pension.

NewStart was once at a comparable level to the Disability Support Pension, but whereas the pension has been boosted from time to time, most recently in 2009, Newstart and its predecessors haven't been boosted since 1994, with the exception of the compensation package attached to the Goods and Services Tax.

Newstart is indexed, which is the nub of the problem. It increases in line with the consumer price index (typically at the rate of 2.5 per cent per annum) whereas the disability support and other pensions increase in line with average male earnings (typically 4 per cent per annum) or in line with one of a number of other measures if they increase faster.

Now only two-thirds of the pension, the Henry Review says Newstart will shrink to one-half of it by 2040 unless the indexation arrrangements change.

So stingly is Newstart in relation to the disability pension that according to the review a person receiving some of it and working 15 hours a week is only $2.67 per week better off than on the DSP.

The review finds "once a person receives a higher payment, there are strong reasons to avoid jeopardising it". It accepts that there are good theoretical reasons for keeping the unemployment benefit below the pension rate (one is designed as a short-term payment, the other determines a long-term standard of living) but it believes they have got too far out of whack and can see them getting worse.

In such a situation crackdowns on cheating of the kind planned for the budget will achieve little. They won't remove the big and continually growing incentive for someone who is out of work to to become and stay "disabled". To the extent that it makes like on Newstart even less comfortable it'll increase the incentive.

The Howard government's 2006 Welfare to Work reforms were designed to slow the flow of would-be workers into the DSP. They did for a while, and then people adjusted to the new rules and the effect faded.

As long as the DSP is far more attractive than Newstart the incentive will remain. Given that no government wants to be seen to cut a pension, the only way to do it is to increase Newstart and to have it indexed on the same basis.

It is counterintuitive to think that making it easier rather than harder to live on the dole might be the best way to increase the supply of potential workers.

But it is what Henry has found. Keeping Australians attached to the workforce is a goal too important to be sacrificed to slogans, or the desire for a balanced budget.

It might cost money, and it might be hard to explain, but we need to do everything we can not to lose a single worker to DSP.

Henry has presented the government with a road map. If it ignores it on budget night or does the opposite it needs to explain very clearly why.

Published in today's SMH and Age

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Monday, March 21, 2011

Hockey says the tax cuts would go (He's wrong of course)

And it took a while to get the answer

From SKY:

HOST: You’ve said the Coalition will repeal any carbon tax if you are successful at the next election. Will you also repeal whatever compensation goes with it, including tax cuts?

HOCKEY: Well, it is ridiculous if you have a situation where you’re imposing a tax and you have to compensate for it. That’s not a tax cut. That’s not tax reform.

What the Government’s saying is ‘yes, we want to introduce a painful new tax, and we’re going to compensate some people for it.’

Now, I suspect they won’t be able to deliver the compensation they’ve been claiming. I do not believe the Government when it says it’s going to properly compensate people because the Government has now said it’s not putting the carbon tax or the compensation in the budget.

HOST: I’ll get to that in a moment, but clearly there will be compensation, whichever form it takes. Will you repeal that compensation?

HOCKEY: Well, you don’t need to have compensation if you haven’t got a tax.

HOST: They will have a tax, and they will have compensation, so if you’re going to repeal one, you’ll repeal the compensation?

HOCKEY: Of course.

HOST: Including tax cuts?

HOCKEY: Well, because they’re not tax cuts. There’s no tax cuts on the table, David.

HOST: But if they go for tax cuts to compensate for the carbon tax-

HOCKEY: -They can’t go for tax cuts to compensate because if they do the tax cuts, which means adjusting thresholds or adjusting rates, it means that everyone across the board will have a reduction in income tax.

Now, this mob are incapable-

HOST: -But if they do that, you’ll repeal it?

HOCKEY: I’m not going to speculate on what they’re doing. They haven’t even said they’re going to do it.

HOST: But you’ve already said that you’ll repeal the carbon tax without seeing the details of that – who it will apply to, what the carbon price will be. You’ve said on the speculation you will repeal that.

HOCKEY: We will repeal the carbon tax, and there will be no need for compensation so we will unwind the compensation, because you don’t need to have compensation if you have no carbon tax.

HOST: Alright, so they both go if you get elected.

HOCKEY: Of course.

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Unemployment is about to become more painful. The minister doesn't seem to care

Unemployment is about to become more painful after the government rejected a last-minute plea to stop a rule change due on April 1.

The end of March marks the end of a two-year loosening of the so-called liquid assets test that determines how much cash someone can have on hand an still get an immediate access to Newstart on losing a job.

For two years the limit has been $5000 for an individual and $10,000 for a family. On April first it gets busted back down to $2500 and $5000, where the Howard government put it in the infamous "black hole" horror Budget of 1997.

"The increase in the threshold was a temporary measure funded until March 31 to cushion Australians from the full effects of the global recession," said a spokesman for jobs minister Chris Evans.

"Under Labor’s strong management economic circumstances have since improved and the unemployment rate has declined."

An 11th-hour plea to government ministers from Brotherhood of St Laurence executive director Tony Nicholson seen by The Age says the change will mean that for many people unemployment will almost completely wipe out personal savings...

"There are obvious financial benefits to having some readily-accessible assets," the letter says. "Job seekers with some savings are better placed to pursue further education and training opportunities or to afford the driving lessons or a new suit for an interview that might open up opportunities."

The minister's hardline response, conveyed to The Age and not to the Brotherhood means the threshold will be set at a level judged appropriate during budget cutbacks 14 years ago without any adjustment for inflation in the decade and a half since.

The reversion to the earlier limit will also apply to recipients of the Youth Allowance, Austudy and Sickness Allowance, requiring them to run down savings or wait 13 weeks before receiving payments.

"Two years ago the government promised a review before reverting to the old rules, said National Welfare Rights Centre president Marie O'Halloran. "It is not clear that it has had one."

Published in today's Age

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Sunday, March 20, 2011

Swan's having a Tax Summit see, but he'll make the tax changes first


TREASURER: Today I’m announcing that the Government has reached agreement with the crossbenchers to hold a Tax Forum on the 4th and 5th of October in Parliament House, Canberra.

This is a very important part of our plans to broaden and to strengthen our economy as we go forward. The Government has an ambitious reform agenda and we are already putting in place very substantial reforms particularly to small business taxation, to superannuation and of course investing in infrastructure. This is all part and parcel of responding to the challenges that come from dealing with Mining Boom Mark II and making our economy more prosperous into the future. There’ll be approximately 150 people at the forum. I want to see broad participation.

Having the forum later in the year gives us the opportunity for people to get involved, for people to engage in all sorts of interactions prior to the forum.

You will see from the release that I’ve put out today that we will put a framing paper in place in the next couple of months so it really does give everybody the time to be fully involved. I don't think this should just be a discussion between experts either. I do want to see broad representation from business, from unions, from community groups and individuals in our community. The Government is very proud of our record on tax. We’ve already put it place personal income tax reductions over three years worth something like $47 billion. We announced almost 12 months ago some very substantial responses to the Henry Report, and this will be part of an ongoing conversation about how we further reform our tax system.

I said last year around this time, it was a decade-long engagement. It will be and I’m really looking forward to the forum towards the end of the year.

JOURNALIST: Treasurer wouldn’t it be better to have the tax summit earlier so that those at the summit could have some input into the carbon tax and any tax cuts?

TREASURER: Can I just make this clear: the Government has got priorities that it must implement. The carbon tax is one, and of course the reforms we announced last year. We’re going forward implementing those reforms. It’s important that we put them in place as quickly as possible. But there’s a very broad agenda out there for people to further involve themselves in. We welcome participation in the discussion and that’s what I’m looking forward to at the end of the year.

JOURNALIST: If you went the Garnaut route and broadened the compensation to also include wider tax reform that would have to be done would it not before this Tax Forum?

TREASURER: Well the government has outlined our timetable if you like to reach agreement through the Multi-Party Committee on Climate Change. As you know, an emissions trading system puts a price on carbon for the largest polluters so they will pollute less in the future. The revenue used from the issue of permits to those large polluters will go -- every single cent – will go in assistance to households and to industry and to various climate change policies. That’s the position we’ve had and of course it’s always an option to have tax cuts as part of that mix, to assist people but the Government hasn’t reached a conclusion about that. We’ll work our way through those issues through the Multi-Party Committee as we said we would.

JOURNALIST: But it would have to be decided before October?

TREASURER: Well I don’t necessarily accept the premise of your question. Tax reform is ongoing in this country. One of the things I’m most proud of for example has been the very substantial increase in the LITO, the low-income tax offset - over the past three years which has delivered very significant tax cuts to those on lower incomes in our community. One option is to have initiatives in that area and as you know there are a wide range of recommendations in the Henry Review relating to personal income taxation. I think we can respond to the challenges that are posed by climate change through the Multi-Party Committee, we can do that within the timetable we’ve talked about, but that doesn’t impede a wider review of many of the issues that are raised in Henry’s recommendations or indeed, other views that people may have about those recommendations and the their ambitions for reform...

JOURNALIST: Won’t you, for a tax enquiry, tax summit, you won’t have the GST...

TREASURER: It’s a tax forum

JOURNALIST: Tax forum, you won’t have the GST on the agenda and the MRRT?

TREASURER: No, I’ve made it abundantly clear what the Government’s position on the GST is – we are not touching its base or its rate. If people want to talk about it at the forum they can, but the policy of the Gillard Government is not to touch the base or the rate of the GST, they’ll...

JOURNALIST: So it’s the same for the MRRT?

TREASURER: Well we’re going to get that in place, it’s very important. We took our proposals to the last election and we are going to put those in place as quickly as we can. I guess this is one of the reasons we have forums inside.

JOURNALIST: Why was it delayed by three months after June 30 and also can I ask you if it’s not going to talk about the GST, it’s not going to talk about pricing carbon, it’s not going to talk about..

TREASURER: No, I’m sorry, I haven’t said that. They can..

JOURNALIST: They can talk all they like.

TREASURER: No, no, no, look you’re trying to say the two are mutually exclusive, they are not. It’s going to have a role in shaping our decision making on the future of the tax system. In the meantime, the Government has and is putting in place the MRRT and we are doing that and that has to be done for business certainty. We are also working on a price on carbon and an emission trading system through the Multi-Party Committee. That has to happen in the name of certainty. But also, there are a wide range of issues...


TREASURER: The tax and transfer payment system generally, the environmental taxation, state taxation, the relationship of state taxation to federal taxation. All of the issues that are canvassed around the Henry Report and more that people want to raise. And we will have a broader discussion about all of those issues. So the two aren’t mutually exclusive, but the Government is going to get on with its agenda and we’re doing that as well.

JOURNALIST: Sorry to be obtuse, but wouldn’t the tax and transfer system, and environmental taxes all be sort of be tied up with a tax reform package around the carbon tax and why...

TREASURER: Well sorry, there are a wide range of issues, a wide range of issues, across those areas of taxation which we can and will be talking about when we get to the tax forum later in the year. And if people want to talk about the decisions that we’ve already taken in some of those areas and discuss their implications for the future of reform in the next decade, they’re welcome to do that to.

JOURNALIST: Would you be flexible about changing any of your decision in the light of the summit?

TREASURER: Well I am not going to go on and speculate about this. You all know and we all know that tax reform is broad and that you have to walk and chew gum at the same time. We’ve got priorities we’ve got to put in place and policies we’ve got to deal with, but this is about the next year or necessarily the year after, it’s a decade- long process that we spoke about when the report came out. There’s a lot of people that have got a lot of views, about a lot of issues that are raised in the Henry report and wider ones as well, and we can to do both and we’re going to do.

JOURNALIST: What’s the difference between a forum and summit?

TREASURER: It’s a forum because it’s got about a 150 people, and that’s what...

JOURNALIST: What's a summit?

TREASURER: Well that’s a pretty tiny forum.

JOURNALIST: And why have you decided to delay it, just on Phil’s question?

TREASURER: Well basically to give people the time to get organised. If I was walking out here and saying today that we were holding it by the end of June, people would be screaming and yelling and saying there wouldn’t be enough time...

JOURNALIST: Where’s the certainty for business in getting a carbon pricing regime that starts, potentially 1 July 2012, but then knowing that there is a whole lot of extra changes..

TREASURER: No, no, hold it, hold it, hold it. We can have a discussion about carbon pricing, about permits, about targets, about assistance for industry and put that in place. It still leaves plenty to be discussed more generally when it comes to business taxation. They’re a whole range of issues that business raise with us that don’t even come within the ambit of carbon pricing. For example, one of the things that upset businesses is a lot of the fiddly small state taxes that they’d like to see dealt with. This is a matter for the States, the States will also be at the forum. We will put certainty in place in terms of carbon pricing by working on and developing an emissions trading scheme. We’re going to do all those things, we can’t just suspend the whole of government. We don’t intend to do that, what we’re going to do is what we’ve said we’re doing and I think it’s a pretty good way to go about it.

Where's Clarke, Where's Dawe?

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Saturday, March 19, 2011

Carbon tax, your questions answered

My colleague Shane Wright, economics editor of The West Australian:

What is the difference between an emissions trading system, a carbon tax and "direct action"?

Under an emissions trading system, a government sets a ceiling on the amount of greenhouse gases that can be emitted.

"Permits to pollute" are then sold in an open market, allowing the owner to release a set amount of greenhouse production.

Over time the government reduces the ceiling on greenhouse gases, reducing the number of licences to pollute.

The money raised by the scheme can then be used to compensate households or businesses.

Under a carbon tax, a straight fee is imposed on the production of greenhouse gases by a company.

The money raised by the tax can, like an ETS, be used for compensation measures.

Direct action can encompass a range of things including direct regulation, the government of the day investing in low emissions technologies, buying-out heavy polluters or opening tenders for subsidies/assistance programs.

Unlike the ETS or carbon tax, all the cost of direct action is borne by the budget.

And the budget is built on taxes on households and business.

What is it supposed to achieve?

The aim of both an ETS and a carbon tax is to create a financial incentive for businesses and households to cut their greenhouse gas footprints.

At present, greenhouse gases are – to use some economic lingo – externalities.

That is, a third party is forced to pay the cost of greenhouse gas. That third party is currently the environment, and the people, businesses and animals that inhabit the environment.

Like anything that is free it is being over-exploited.

A price signal – either through an ETS or tax – means a business that is a heavy emitter has an incentive to find a way to cut their emissions.

It also means households have an incentive to reduce their greenhouse footprint. It might mean cutting the use of some electrical devices or even buying new more efficient devices (such as a hybrid vehicle).

Direct action does not put a price on carbon emissions, although they can be determined. In the case of the Gillard Government’s now abandoned "cash for clunkers" program, the estimated cost per tonne of abated carbon was more than $300.

Is Australia going it alone?


The EU and its 30 member countries started an emissions trading scheme in 2005.

New Zealand’s emissions trading scheme began last year.

States in the US and Canada have introduced their own trading schemes.

India last year introduced a tax on coal as an initial measure aimed at cutting emissions.

However, while other countries such as the US do not have an ETS or carbon tax they are engaged in direct action so the cost to taxpayers is difficult to determine.

Won’t a carbon price drive Australian manufacturers offshore?

International studies on how the ETS has worked in Europe have failed to find businesses rushing to leave the continent for countries without a direct price on carbon.

The costs, so far, of an ETS are less than the cost for a firm to move operations to another country which is unlikely to have the same type of legal protections available in Europe.

Movements in the Australian dollar are much more likely to hurt domestic manufacturers.

While steel producers such as OneSteel and Blue Scope have complained about the possible impost of a carbon price, they’re biggest threats to profitability have come from the strengthening Australian dollar and the huge spike in their raw materials.

They are the same raw materials benefiting the nation’s coal and iron ore miners.

However, there may be a case for the worst emitters – the aluminium industry – to leave Australia because they currently benefit from very low electricity prices.

Have emissions trading schemes been used before?

The trading scheme proposed for greenhouse gases is based on the successful ETS created in the United States in 1990 to deal with acid rain.

The Acid Rain Program targeted sulphur oxide emissions (and later nitrogen oxide) largely from largescale American power plants, almost all of which were coal-fired power plants.

Over its 20 years of operation the amount of sulphur emissions has been cut more than 40 percent, the incidence of acid rain has fallen more than 65 percent, and the cost of the scheme was between $1 billion and $2 billion lower than had been anticipated.

Emission trading schemes are also similar to quotas on wild fish stocks. Governments set quotas on amount of fish or seafood which can be harvested and then reduce the quotas if there are signs of a collapse in stocks.

Fish quota licences are then sold among market players.

How will I be affected?

The most obvious impact will be on electricity prices which will increase.

Modelling for the Carbon Pollution Reduction Scheme showed a $20 a tonne carbon price would push up electricity prices by 16 percent. On an annual $2000 bill that’s a $320 lift.

To put it in context, Perth electricity prices have lifted 50 percent since the end of 2007.

Gas and other household fuels were modelled to lift by nine percent.

But the overall impact on the consumer price index was a much more modest 0.9 percent.

While agriculture will be excluded, there may be a small increase in some food prices due to higher priced inputs (largely fertiliser).

Will petrol prices go up?

No decision has been made on whether petrol will be included.

Under the CPRS the impact of the carbon price on petrol was to be offset by a cut in fuel excise so that for the first few years of its operation there was no price impact.

Who will be compensated?

The Government has said low and middle income earners will be compensated fully for the price impacts of a carbon price.

Based on the CPRS model pensioners and low income earners were likely to get more compensation than the expected costs of the carbon price.

Trade-exposed and emission intensive businesses are likely to be compensated, especially until other countries introduce their own carbon reduction schemes.

Electricity suppliers are also likely to get assistance to make the transition out of emission-heavy fuel sources or to compensate for the decline in the value of their existing infrastructure.

Why don’t we build nuclear power plants instead?

Australians benefit from particularly low cost power – most of which comes from carbon intensive coal.

Nuclear power, by any measure, is a much more expensive power option. On some measures it is much more costly than renewable energy sources including wind, solar and tidal.

For nuclear power to compete in Australia would require a carbon price, or direct government subsidies that would then have an impact on taxpayers.

What if Australia doesn’t introduce a carbon price?

Not introducing a carbon price means any efforts to cut greenhouse gas emissions will have to depend on the government of the day.

Any of those efforts have to be paid by taxpayers.

There are also threats, largely out of Europe, that tariffs could be imposed on the imports from countries that do not have an explicit carbon price. The EU accounts for more than 10 percent of Australia’s exports.

Shane continues...

No matter how you look at the climate change political debate, one fact stands out – Australians will end up paying to deal with a warming globe.

The political battle, however, is over how we pay for the bipartisan policy position that Australia should cut its greenhouse gas emissions by five percent by 2020.

The carbon price proposal from Julia Gillard and her cross-party climate change committee aims at making the cost of dealing with carbon pollution obvious.

Be it through an initial flat price on carbon, or through the second stage emissions trading scheme, consumers and business will know the true cost of greenhouse gases.

The only full economic modelling of a carbon price on Australia, done for the now abandoned Carbon Pollution Reduction Scheme, put that cost in terms of an overall increase in prices at about one percent.

By contrast, the introduction of the GST in 2000 lifted prices by about five percent.

Of course, that overall one percent increase masks some big price rises. Electricity prices would rise by about 16 per cent or more than $300 a year.

However, the cash raised by the trading scheme/tax is already earmarked to go back to help offset costs. Pensioners and low income earners will certainly get more in handouts than they pay in higher prices.

The other side being pushed by the coalition (which, under John Howard, backed an emissions trading scheme), the direct action option, will have a cost.

It’s just that cost will be hidden in the overall budget, which ultimately means taxpayers will have higher taxes than they would otherwise be.

So far government "direction action" programs have proven to be far more expensive than a market approach to carbon reduction, while there are doubts over the viability of a key element of the coalition’s proposals involving direct payments to farmers.

While the Opposition claims the Government’s plan will push up the cost of living, the Government claims the Opposition’s proposal will cost Australians an extra $720 per household in higher taxes.

It is an argument largely over the transparency of the cost of encouraging businesses and consumers to find ways to reduce their carbon footprint.

And then there is the science underpinning the whole argument.

The decade 2000-2010 was the warmest on record. That followed the previous warmest which was 1990-2000, which was preceded by the former record holder, 1980-1990.

The Government’s greenhouse gas tsar Ross Garnaut, who has reviewed the available scientific evidence since his initial report in 2008, this week reported the situation is getting worse.

The projections made earlier this decade about increasing temperatures, more intense weather events, ice-melts have proven to have been under-estimated.

Professor Garnaut was also blunt in his assessment of the arguments put up by some arguing that climate change is not occurring.

"The review said that to ignore the wisdom of mainstream science and hold on to the hopes held out by the small minority of genuine scientific sceptics, let alone to give credence to the wild claims of climate change dissenters, would be to hide from reality," he said.

"It would be imprudent beyond the normal limits of human irrationality."

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Friday, March 18, 2011

Friday surprise. Senior citizens are better at using ATMs

The RBA says so

Older Australians are far from helpless when it comes to using banks. If anything it's the young who get fleeced.

New research conducted by Roy Morgan for the Reserve Bank finds that instead of being disadvantaged by the introduction of fees at automatic teller machines as expected, older Australians are better than anyone else at shopping around.

A Reserve Bank report released yesterday says it was expected that when it forced ATM providers to charge users from other banks directly rather than to charge their banks, older Australians would be "less willing or able to travel to seek out an ATM provided by their own institution and therefore more likely to pay a fee".

Instead it found older Australians were the canniest of all when it came to avoiding
ATM fees, with those aged over 60 paying them just 8 per cent of the time. By contrast busier Australians in their thirties and forties paid fees 26 per cent of the time, and younger Australians 29 per cent of the time...

"This is likely to reflect a variety of factors, such as different preferences regarding the use of their time and the locations of cash withdrawals," the report says in a tactful suggestion that young people are too busy and blinded by convenience to care.

Those who do care often change their mind when confronted with a request for a fee at the machine. Around 10 per cent of those surveyed said they had began making a cash withdrawal in the past month but had cancelled it when the machine told them there would be a fee.

Most fees remain at $2 with only 17 per cent of withdrawals charged at a higher rate, almost all less than than $2.50.

The Reserve Bank says the fees are high enough to make ATMs profitable, noting the number of machines has climbed 10 per cent since fees came in.

Australians in regional areas find it harder to avoid paying them than those in cities, typically paying fees 29 per cent of the time, compared to 20 per cent in the city because of less easy access to fee-free ATMs.

Surprisingly Australians in really remote areas pay very little in ATM fees in aggregate, avoiding them and using cash-outs at EFTPOS machines.

The Australian Financial Counselling and Credit Reform Association reported late last year that
one machine in remote South Australia charged $10 per withdrawal. Another, in the Torres Strait limited withdrawals to $100 at a time at a cost of $5 each.

Treasurer Wayne Swan set up a task force to report by February 28 on the provision, fees and impact of ATMs in remote Australia.

Published in today's SMH

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We need workers for the mines... just not that many

Mining might be powering Australia's economy, but it's employment needs are tiny.

New figures show that in the year in which 302,000 extra jobs were created the mining industry added 27,300. By contrast the biggest-employing sector, health and social assistance, piled on 91,500 extra workers; retail 49,300 and transport and postal services 34,000

Even as a proportion of workers employed the growth in mining of was eclipsed by real estate which expanded its workforce 21 per cent or 35,600 workers to mining's 16 per cent.

The detailed employment figures prepared by the Bureau of Statistics show that as hard as the mining industry is finding it to get skilled workers its needs are modest. As of last month it employed 1.7 per cent of the Australian workforce.

The needs are concentrated in just three states... All of the growth in mining jobs in the past year took place in Western Australia, Queensland and NSW. The three states between them employ 87 per cent of the mining industry, with Western Australia taking the lion's share. Curiously the mining industry also employs around 100 people in the mining-free Australian Capital Territory, possibly as lobbyists.

Health and social services overtook retail as Australia's biggest employing sector a year ago. With 1.3 million workers to retail's 1.24 million, and growing at twice the rate it will soon be incontestably Australia's biggest employer.

In third place is the construction industry with 1.19 million workers, growing at just 1 per cent per annum now that building stimulus programs are being wound down.

Manufacturing, once Australia's biggest employer, is in forth place with 995,000. Agriculture, once Australia's second-biggest employer is now a minnow with 326,000 employers having shed a further 40,000 in the past year.

Australia's smallest employer is the electricity, gas and water sector, providing jobs to 153,000 workers but growing again after cutbacks as a result of the privatisations of the late 1980s and 1990s.

Vying for the second-bottom position are mining, arts and recreation and real estate and rental, each with around 200,000 workers.

As relatively small as mining's employment needs are is is actually taking more workers than ever before. As recently as May 2009 at the low point of the economic crisis it employed just 155,000 Australians.

Published in today's SMH

Australia's biggest employers...

Health and care: 1.3 million
Retail trade: 1.24 million
Construction: 1.19 million
Manufacturing: 995,000

Australia's smallest...

Arts and recreation: 205,200
Mining and exploration: 205,100
Real Estate and rental: 201,800
Electricity, water & gas: 153,000

ABS 6291.0.55.003, February

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6291.0.55.003 6291.0.55.001


Thursday, March 17, 2011

Suddenly tax cuts are back. Garnaut at the Press Club

The carbon tax on industry will fund big cuts in personal tax

Here are his answers to the two crucial questions:

Q: You recommend that the new carbon price be used to fund new personal income tax cuts, what proportion of the revenue from permit sales should be used for personal tax cuts? How much of Dr Henry’s reforms would that pay for? And how does that recommendation sit with your other recommendation that the CPRS compensation for trade exposed industries be kept for the first three years?

A: I have in mind about half of the revenue going to a package of tax and social security reform, an integrated package directed at reducing marginal effected tax rates and cutting taxes in the bottom half of the income distribution. You can do some simple arithmetic and see that could pay for an awful lot of Henry type recommendations. I don’t want to get too far into the detail, other people like the Treasurer no doubt will have views on those things but we can get a long way towards a large productivity-raising reform of tax and social security at the bottom of the income distribution, in the bottom half of the income distribution.

Q: There’s a lot of confusion about this in the community, diff side of politics have diff views on this, what is your message for the individual households who they are say they recycle at home, they curb their water use, they try to be energy efficient, but then they hear about a carbon tax with the money given back to them as a tax cut, do you understand why this is a confusing money go around and what is your message to them about why you think we need to do this?

A: Overall, low and middle income earners in Australia will be better off directly as a result of these arrangements. And in addition future generations of their family will be protected from dangerous climate change.

Address to the National Press Club 17 March 2011

Garnaut Review_Update Paper 6_Carbon Pricing and Reducing Australia's Emissions

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