Monday, October 31, 2011

A $400 billion investment boom, never mind the taxes

Australia’s investment boom is picking up pace despite economic uncertainty and claims about the impact of the carbon tax and the mining tax.

Today’s Deloitte Access Investment Monitor details a record 935 investment projects planned or underway, each worth $20 million or more. The total value exceeds $894 billion, an increase of 7.5 per cent in the past three months and 16 per cent over the past year.

Leading the way are what Access calls “an unprecedented number of mega projects” - 14 worth more than $10 billion and five of those worth more than $30 billion.

“Large projects are longer term investments – they take longer to construct, and need to be in operation for longer for investors to see a return on capital,” says Access director David Rumbens. “Amid the extreme short term volatility we have seen on share markets and currency markets, a continued focus on the longer term picture by is comforting.”

Mining accounts for around one third of the $406.8 billion of projects underway and almost all of the $487.3 billion in projects planned....

Western Australia and Queensland between the account for half of the investments, led by the $29 billion Chevron Wheatstone LNG project off the Pilbra coast and and the $20 billion Australia Pacific coal seam gas to LNG project linking Roma and Gladstone. Both projects will be subject to the expanded 40 per cent petroleum resource rent tax.

“This is yet more evidence investment in mining continues to boom in full knowledge of the taxes,” said Treasurer Wayne Swan ahead of introducing the mining tax legislation this week.

Access says 34 coal projects are under way or planned, 15 of them worth more than $1 billion. Opposition leader Tony Abbott told parliament last month (SEPT) the carbon tax would close mines in northern Queensland. Access finds ten of the big coal projects planned in Queensland.

Away from mining, investment is weak. The biggest Victorian projects are the $1.2 billion redevelopment of the former Carton and United breweries site and the $1.1 billion redevelopment of the former Royal Children’s hospital. The biggest in NSW is the $2.1 billion South West rail link.

Published in today's Age

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Saturday, October 29, 2011

Weekend listening - Laurie Oakes magnificent lecture

It's here:

(right click on the link below to download)

If you would like more, there's now Rob Chalmers book: Inside the Canberra Press Gallery
Life in the Wedding Cake of Old Parliament House

It's a free download from the ANU. I am several chapters in.

Rob has seen more than Laurie. A year or so back he told me (only half joking) that Laurie and Michelle were "young pups".

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Thursday, October 27, 2011

Rate Cut Tuesday: Why the Bank will move

The Reserve Bank will deliver interest rate cuts worth $49 per month to typical mortgagee households at its board meeting next Tuesday.

The 0.25 point cut - the first in more than two years - will be sold as ‘a small calibration’ rather than the first in a series.

It will take the Bank’s cash rate from 4.75 to 4.50 per cent, and bring Westpac’s standard variable mortgage rate back to 7.61 per cent and the National Australia Bank’s rate back below 7.5 per cent if fully passed on.

Treasurer Wayne Swan yesterday warned the banks not to use the European debt crisis as an excuse to withhold some of the cut.

“There would be absolutely no excuse for the banks not to pass on any rate cut that was delivered by the Reserve Bank should they chose to do so, absolutely none whatsoever,” he said.

One year ago on Melbourne Cup day each of the big four banks imposed near double rate hikes after the Reserve Bank lifted rates, infuriating the Treasurer and citing increased costs. If the banks do no more than fully pass on the Reserve’s cut on Tuesday their rates will remain well above November 2010 levels even though the Reserve Bank’s rate will be back to its previous level.

Consumer price figures released yesterday dramatically revised down the official picture of inflation giving the Reserve Bank room to switch settings from ‘mildly restrictive’ to ‘neutral’.

While official inflation rate slipped from 3.5 per cent to 3.6 per cent, two of the measures most closely watched by the Bank slipped to 2.3 per cent - well within and toward the bottom of the Bank’s 2 to 3 per cent target band...

Those measures are the consumer price index excluding volatile items and so-called trimmed mean that excludes both the strongest and weakest price movements.

Whereas the Bank had been forecasting an inflation rate well above 3 per cent for the next two years its new forecasts to be released Friday week will have inflation closer to 2.5 per cent.

Bank staff believe that with inflation set to stay around the target, with economic growth at the long term trend and unemployment broadly steady there is no need to keep interest rates mildly restrictive. Lending rates are at present around 30 percentage points above their long term averages. A cut in the Reserve Bank’s cash rate would return them to near those averages.

All but two of the 12 market economists surveyed by the Herald/Age now expect the Bank to cut its cash rate on Tuesday. One, former prime ministerial advisor Stephen Koukoulas believes there’s a chance of a double rate cut.

“The only debate now is whether we get 0.25 points or 0.50 points. The inflation rate is low at a time when the global economic conditions are deteriorating. Will they do 0.25 and then another 0.25 in February or start off with 0.50 to try and make sure we don’t have anything less than a slowdown in 2012?”

Mr Koukoulas was the only market economist to correctly predict the underlying quarterly rate of inflation would be a mere 0.3 per cent in the September quarter, just half the dominant forecast of 0.6 per cent.

Most prices pressure were muted in the quarter with utility charges and holiday travel the only big exceptions. Annual price rises pushed up electricity charges 7.8 per cent, water charges 8.6 per cent and property rates 5.2 per cent. Overseas travel jumped 5.1 per cent.

Fruit prices slipped 1.2 per cent in the wake of Cyclone Yasi and vegetable prices 2.5 per cent. Milk was down 10 per cent over the year and audio visual and computing software down 20 per cent.

Published in today's SMH and Age

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Wednesday, October 26, 2011

Alcohol is too cheap. It's doing us damage. Plans are underway.

Wine discounting and the cheap $5 cleanskin are in the sights of an informal coalition of lawyers, health professionals, and economists who met for the first time yesterday to draw up plans to raise the minimum price of alcohol.

Convened by the Foundation for Alcohol Research & Education, the Cancer Council of Victoria and the Melbourne Law School the forum discussed ways of building on the momentum of last month’s tax summit and the effective floor price in place for the past three months in Alice Springs.

Coles, Woolworths and IGA abandoned sales of cheap casks in Alice Springs on July 1 and now sell no wine for less than $8 a bottle, setting an effective minimum price of $1.10 per standard drink.

Russell Goldflam of the People's Alcohol Action Coalition told the forum recorded assaults in the Territory had fallen 20 per cent on the same period the year before...

The effective floor price was introduced at the same time as a banned drinking register making it difficult to untangle the contribution of each measure.

Indigenous affairs minister Jenny Macklin ruled out making the floor price mandatory in her visit to the Territory last week but health minister Nicola Roxon has asked her Preventive Health Agency to “develop the concept” nationally as part of an Australia-wide move against alcohol abuse.

A split has emerged within the industry with Treasury Wine Estates and Pernod Ricard, owners of the Penfolds and Jacob’s Creek brands breaking with the Winemakers Federation to petition the tax summit to tax wine per unit of alcohol as is beer. The move would more than double the price of a four litre cask and slice 10 per cent from the price of a top range Cabernet Sauvignon.

Economist John Marsden urged the forum to be careful about the harm the measure would cause the irrigated districts of Griffith, Mildura and Renmark that produce most of Australia’s boxed wine. Michael Thorn of the Foundation for Alcohol Research & Education said the effect on the Murray Darling Basin would be positive. It took 1000 to 1200 litres of irrigated water to produce one litre of cheap cask wine.

Several lawyers at the forum warned that a national floor price would be hard to get past the National Competition Council as it came close to government-approved collusion. Retailers would keep the extra margin rather than the government, as would be the case if the tax rates were changed. The Council would need to be assured there wasn’t an alternative way to curb sales.

Dr Marsden referred to preliminary estimates suggesting excessive alcohol consumption costs Australia $37 billion per year, $22 billion of it in harm to non-drinkers. Lifting the floor price would be particularly effective in curbing drinking among young people as they already spent almost all of their income.

Michael Livingston of Victoria’s Turning Point alcohol and drug centre said the only way a national floor price would get public support would be if moderate drinkers could be assured it wouldn’t touch the price of a $12 bottle.

Published in today's Age

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Tuesday, October 25, 2011

Evidence: Stimulus spending creates jobs

Delightfully, it is evidence from a Coalition program

It’s been one of the most fiercely-fought debates of financial crisis, conducted mainly in the absence of evidence: Do government stimulus programs create jobs?

The Coalition has derided Labor’s stimulus programs as “wasted money”. Labor says without the tens of billions it spent building school halls, insulating home roofs and sending cheques to taxpayers Australia’s unemployment rate would have skyrocketed.

Today the journal Economic Letters, publishes an attempt at an answer.

Economists Christine Neill and Andrew Leigh have been able to do what those before them have not: measure the effect of stimulus spending on individual regions by comparing those that received stimulus dollars with those that did not.

Christine Neill is an Australian at Wilfrid Laurier University in Canada. Andrew Leigh was until recently an economist at the Australian National University and is now a Labor MP. He completed the research while at the ANU but the long delays in the journal process mean it has only now been published.

The usual problem in such a study is finding a controls - regions as economically depressed as those that received government payments that had to make do on their own...

It can’t be done for Labor’s stimulus payments. They went to all Australians who fitted the financial criteria and to all regions throughout the country.

But Dr Leigh discovered this wasn’t the case for an earlier program run by the Coalition.

The so-called Roads to Recovery program begun in 2001 directed money for roads to some local councils and not to others.

Dr Leigh found “clear evidence” the money wasn’t evenly directed to regions that needed it. Electorates held by Liberal and National MPs got more funding than those held by Labor.

By using the poorly funded but economically-similar Labor electorates as controls he was able to work out what the big licks of money directed to National and Liberal electorates actually did.

His finding: a 10 per cent increase in stimulus spending in an electorate creases an extra 26 to 78 jobs. The cost per job amounts to $10,000 to $31,000 over a three year period.

“That’s not that expensive,” Dr Leigh told The Age. “At times when the economy is depressed such as during the global financial crisis you would expect the effect to be bigger.”

“As far as I know we are the first to use this method. It has gone through the peer-review process in an internationally recognised journal, so I think it can withstand criticism.”

Published in today's Age

Email from Christine Neill:

If you want to know whether in some particular instance government spending can reduce unemployment, you've got to worry about the fact that an increase in unemployment often causes government spending to increase (eg welfare spending, etc). So if you just look at correlations in the raw data, you will often find that higher government spending is associated with higher unemployment. In econometrics terms, there's an endogeneity problem. There are all sorts of techniques used to get around that problem in the macroeconometric literature (policy experiment case studies (wars studies), vector autoregressions, or various calibration-type techniques). All are somewhat contentious. A typical microeconometric approach is to find an instrumental variable - in this case, something that is correlated with a change in government spending, but that is not itself likely correlated with a change in unemployment. Here, we used politics. Previously, Andrew Leigh had found that electorates with (then government) National/Liberal reps got more spending in the Roads to Recovery program. We find that those electorates also had a bigger drop in unemployment than other electorates, suggesting that the higher spending in an electorate via Roads to Recovery led to lower unemployment in that electorate. While you can't extrapolate from this to overall fiscal policy effects (including because you wouldn't expect any crowding out via higher interest rates, which is a concern with national-level fiscal policies), it is interesting that in even a very small jurisdiction government funded local infrastructure spending seems to be sticky, and to increase local employment.

There are a couple of other recent papers that try to take the same basic econometric approach: Nakamura and Steinsson: "Fiscal Stimulus in a Monetary Union: Evidence from US Regions" (uses military buildups in particular regions); and perhaps more interestingly: Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-Experiment (this one is somewhat closer in spirit to our paper). They both have fairly similar findings, of quite large effects of government spending at the local level.

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A good CPI gets that little bit more likely

ANZ prediction
Australian shares have gained $35 billion and the dollar has hit a six-week high amid hope of a workable stability plan for Europe and news of a boost to manufacturing in China.

Manufacturing in China hit a five-month high in October according to the usually-reliable HSBC purchasing managers’ index. The index stood at a preliminary 51.1 in October, up from 49.9 in September and the first time it has gone above the neutral level of 50 since June.

The final PMI reading for October will be released as Australia’s Reserve Bank board meets to set internet rates on Melbourne Cup Tuesday, November 1.

HSBC economist Qu Hongbin said the news suggested China’s economy would escape a hard landing, despite slowing export growth and tighter credit conditions.

The turnaround was led by export orders, most likely to the United States after the settlement of its debt ceiling crisis.

“It gave the currency a kick along, taking it past 104 US cents,” said CMC Markets dealer Tim Waterer. The Aussie dollar closed up one and a half cents.

The S&P/ASX200 index climbed 113.1 points, or 2.73 per cent, to 4,255 points. The All Ordinaries index climbed 110.2 points to 4,313.6.

Markets were also optimistic about a settlement of the European debt crisis this week with eurozone leaders scheduling another meeting for Wednesday. “We haven’t got the result at this stage, but it appears from the rhetoric they are progressing in the right direction,’’ said Mr Waterer.

At home the odds of a Melbourne Cup Day interest rate cut advanced with the release of a benign-looking producer price index.

Traditionally released two days ahead of the consumer price index, the index showed prices rising at a quarterly pace of 0.6 per cent and an annual rate of 2.7 per cent...
The results are well down on the June quarter readings of 0.8 per cent and 4.3 per cent, and suggest producer prices will add little to consumer inflation.

But the relationship between the two indexes has become loose in recent years as consumer prices have increasingly come to depend on wages and margins as well as the price of inputs.

Domestic producer prices climbed 0.7 per cent in the quarter and imported prices were flat after falling 19 per cent since the first quarter of 2009 as the Australian dollar rose.

House construction costs, heavily represented in the consumer index, fell 0.2 per cent in the September Quarter. Utility charges jumped 8.2 per cent as annual increases kicked in. Encouragingly the increase was below the 8.9 per cent recorded in the 2010 September quarter.

“We have raised out headline CPI forecast to 0.7 per cent, but cut our underlying inflation forecast to 0.6 per cent,” said RBS economist Kieran Davies. “A 0.6 per cent result would probably see the Reserve Bank cut.”

The Bank believes interest rate settings are mildly restrictive and will return them to a more neutral setting if Wednesday’s CPI result allows it point to continuing low inflation.

Published in today's SMH and Age

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Monday, October 24, 2011

CommSec: Adjust your maps, we're three-speed

Australia is no longer a two-speed economy. Commonwealth Securities says we're now “three-speed”.

“Western Australia is in a group by itself,” the stockbroker says in its State of the States report released this morning. [MON] “The next level comprises the Australian Capital Territory, Victoria and South Australia, then there is a gap before the next four: Tasmania, NSW, Northern Territory and Queensland.”

NSW slots into the also-ran category by virtue of appalling weak economic growth compared to historical averages and other states. Growth in the June quarter was just 8 per cent above the NSW decade long average compared to 28 per cent in Western Australia, 21 per cent in the ACT, 16 per cent in South Australia, and 12 per cent in the second-poorest performer Tasmania.

Retail spending in NSW was up just 11 per cent on the decade long average, compared to 20 per cent in the leading state Western Australia.

Dwelling commencements were down 18 per cent on long-term averages while those in Victoria were up 28 per cent and in the ACT up 82 per cent.

“NSW is struggling to find an X-factor that will drive growth,” said CommSec chief economist Craig James. “It has above average population growth, but so does the ACT and Western Australia"...

The CommSec methodology disadvantages traditionally strong states such as NSW by comparing their current performance to their historical averages. Mr James defends the method by saying it is how the Reserve Bank assesses interest rates. "Just as the Bank does with interest rates we use decade-long averages to decide what is normal," he says.

South Australia and Victoria, both traditionally weaker than NSW, look exceptionally strong when measured against historical performance.

South Australia’s construction work is up 40 per cent on the long-term average, Victoria’s 25 per cent, and NSW just 15 per cent.

Mr James told the Herald the state’s prospects might be about to turn up. “The new government has committed itself to getting more homes and units built, that should spark retail spending and employment as it did in Victoria. And the benefits of the mining boom might start to roll. NSW might move into the second tier, but a lot would need to go right. At the moment it is more of a Tasmania than a Victoria,” he said.

Published in today's SMH and Age


CommSec rating, strength


Western Australia - economic growth


Australian Capital Territory - home building
Victoria - dwelling starts, retail
South Australia - construction


Tasmania - employment
NSW - population
Norther Territory - employment
Queensland - investment

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Why the Bank is set to cut next week:


Sunday, October 23, 2011

You say you want a revolution, extended to ten minutes


Friday, October 21, 2011

Why the Bank will cut if inflation is under control Wednesday

Christopher Joye sets out the thinking here:

"By bringing the price of money back to what the RBA considers to be a "neutral" level, it can signal to the community that it is not going to unnecessarily punish it on the basis of a misguided pursuit of inflation-fighting zealotry. In doing so, it builds up more goodwill with the public that can be expended when the RBA has a real inflation battle to fight."

I reported Wednesday the RBA had made as much clear.

"The cut would be presented as a technical adjustment to a changed inflation outlook rather than as a response to a weak economy. It would be described as a ‘one-off’ - moving settings from mildly restrictive to neutral - rather than as the first of a series of cuts."

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Tax Commissioner Michael D'Ascenzo has done such a good job...

He wants way more than half a million

Australia’s top tax official has come under sustained attack in a Senate hearing for lobbying to get himself a 58 per cent pay rise.

Tax Commissioner Michael D'Ascenzo is at present paid just over half a million dollars.

He has written to the Remuneration Tribunal asking for a package of around $800,000 to bring himself into line with other agency heads such as the head of the Securities and Investments Commission and the Competition and Consumer Commission.

Asked by Labor senator Doug Cameron how much extra he was planning to pay his own workers, he said the increase would be about 3 per cent.

Asked if to put a percentage figure on the pay rise he wants for himself he said he “hadn’t worked it out”...

An increase from $505,000 to $800,000 would amount to 58 per cent.

Mr D'Ascenzo defended the application saying it was a matter of comparative wage justice.

Labor Senator Mark Bishop who chairs the committee said comparative wage justice hadn’t been used as a basis for justifying wage increases since the 1970s and 1980s.

“I was part of the negotiations where we were told enterprising bargaining was the future, comparative advantage was dead, he told the Commissioner. “To my knowledge it hasn’t been revived.”

Asked how much the increase would cost the ATO budget after some of it was passed on to Second Commissioners Mr D'Ascenzo said he couldn't be certain but agreed the cost would exceed $1 million.

Told by Independent Senator Nick Xenophon that most most workers seeking wage increases needed to provide evidence of increased productivity the Commissioner said he had been more productive.

In the top tax job for six years Mr D'Ascenzo oversaw the introduction of the new Tax Office computer system delivered two years late and $300 million over budget. Last year it delayed millions of returns. This year it has been performing to specifications.

Published in today's Age

Here's the Transcript:

Senator Sherry: I think that is the only one. I cannot recall any others.

Senator CAMERON: Mr D'Ascenzo, I notice there was publicity in the press about your salary. Are you aware of that? A proposed salary increase.

Mr D'Ascenzo : Yes.

Senator CAMERON: I understand you put out an internal memo basically saying that you hoped that your office would be paid the same as other statutory body heads. Is that correct?

Mr D'Ascenzo : That is correct.

Senator CAMERON: Is your salary about $500,000 at the moment?

Mr D'Ascenzo : As a package.

Senator CAMERON: A $500,000 package. To bring that up level with others would be nearly a $300,000 per annum increase?

Mr D'Ascenzo : I am not sure what everyone else is earning.

Senator CAMERON: You are not sure?

Mr D'Ascenzo : No, I am not. My proposition is that it would be unfair for the ATO to be regarded as a second-class citizen in terms of statutory appointment, given the size and scope of our responsibilities.

Senator CAMERON: How long have you been in the position?

Mr D'Ascenzo : Six years.

Senator CAMERON: I suppose on a package of half a million nobody is starving at home?

Mr D'Ascenzo : No.

Senator CAMERON: You have offered your employees three per cent?

Mr D'Ascenzo : In accordance with the government's framework—

Senator CAMERON: I am just asking: did you offer the employees three per cent?

Mr D'Ascenzo : Nine per cent over three years.

Senator CAMERON: Three per cent per annum. If your salary went up to $800,000, which is the equivalent of that of other heads, how much of an increase would that be—about 29 or 30 per cent?

Mr D'Ascenzo : I have not done the calculations. The point that needs to be made is that the government's bargaining framework is about aligning comparable pay.

Senator CAMERON: If I want to ask you about the government's bargaining framework, I will do so. I am asking you about your salary. Let's stick to your salary at the moment.

Mr D'Ascenzo : You asked me to compare that with others—

Senator CAMERON: No, I am asking you about your salary.

Mr D'Ascenzo : You did ask me to compare it with others—

Senator CAMERON: So it is $800,000 a year.

Mr D'Ascenzo : At the moment it is not.

Senator CAMERON: Just tell me this—

Senator Sherry: Chair, I do think Mr D'Ascenzo should have a chance to complete his answer.

CHAIR: I agree with that.

Senator CORMANN: Thank you for that consistency, Minister!

Senator Sherry: I am always consistent. When I sat where you are and where I sit now—totally consistent.

CHAIR: Can we have the answer to the question, please.

Mr D'Ascenzo : Can you repeat the question?

Senator CAMERON: The question was about the percentage increase that that would provide.

Mr D'Ascenzo : I have not worked that out.

Senator CAMERON: So you do not even know what the salary would be?

Mr D'Ascenzo : At the end of the day, it is a question of an independent tribunal; I have no say in it.

Senator CAMERON: That is fine. You say it is a question of the independent tribunal. Why did you think it would be a good idea to say in the internal Taxation Office newsletter that you hoped that you would get a pay increase?

Mr D'Ascenzo : There was a newspaper report, and I thought I had better be clear with my people about the situation. What I said in that report was that there is an independent tribunal and it is outside my hands, but one thing that is important is that we get our pay aligned with pay in other statutory and government authorities.

Senator CAMERON: So you are a supporter of the principle of comparative wage justice?

Mr D'Ascenzo : I think that is important.

Senator CAMERON: Does comparative wage justice apply to workers in the ATO,? Can they make a claim for comparative wage justice?

Mr D'Ascenzo : I hope they do.

Senator CAMERON: You hope they do?

Mr D'Ascenzo : At the moment, the ATO—

Senator Cormann interjecting—

CHAIR: Order, Senator Cormann!

Mr D'Ascenzo : In the ATO, in every classification other than APS1, it is above the APS average. In the ATO at the moment, every classification above APS1 is above the APS average.

Senator CAMERON: But as a principle—

Mr D'Ascenzo : I agree with it.

Senator CAMERON: You agree with comparative wage justice.

Mr D'Ascenzo : In fact, not only that—we have been trying to make sure that ATO officers are recognised for the good and hard work that they do.

Senator CAMERON: I do not have an argument with that. As a former union official, I have had plenty of lectures about why comparative wage justice is not the way to go. In fact, you cannot run an argument—

Mr D'Ascenzo : I think—

Senator CAMERON: Just let me finish.

Mr D'Ascenzo : Sorry—my apologies.

Senator CAMERON: At the moment, as an ordinary worker you cannot run an argument on comparative wage justice but as the head of a public organisation you can.

Mr D'Ascenzo : The proposition is of course one of affordability within the government's bargaining framework. As far as my management of the ATO goes, in terms of the work that my people do, ATO people show great skills in an area of great complexity and great challenge and, over a period of time, they have achieved pay scales at classification levels which are generally above APS averages.

Senator CAMERON: In your 2009-10 report, you say that the executive level 2 agreements have to have an emphasis on organisational capability and agility. Do you agree with that?

Mr D'Ascenzo : I am sure that is right. It is still important.

Senator CAMERON: On productivity gains, you say:

Pay rises for employees covered by collective agreements are contingent upon achieving corporate outcomes based on productivity improvements.

Do you agree with that?

Mr d'Ascenzo : Yes.

Senator CAMERON: What productivity improvements will you be involved in for a $295,000 per annum increase?

Mr d'Ascenzo : I hope that we can continue to improve the service that the ATO provides to the community.

Senator CAMERON: So will there be any measure?

Mr d'Ascenzo : The ATO has many measures of which it is accountable—this forum, the annual report and other areas of governance.

Senator CAMERON: If you get this almost $300,000 pay increase—and, as you have indicated, whatever you get will be set by the tribunal—you set the conditions for second commissioners. Is that correct?

Mr d'Ascenzo : It is not as freewheeling as that. I think there are guidelines that the tribunal will set for me and it is within those guidelines that I have discretion.

Senator CAMERON: You describe it as 'a framework set by the tribunal'.

Mr d'Ascenzo : That is right.

Senator CAMERON: If the relativities between you and your second commissioners increased by $300 to your benefit, will you be arguing for your second commissioners to maintain their relativities to your wages now?

Mr d'Ascenzo : I have argued consistently that it is important that the ATO not be regarded as a second-class citizen relative to other agencies. I would like to ensure that the offices of commissioner and second commissioners maintain that relativity relative to other agencies.

Senator CAMERON: As a union official I used to have members who were qualified fitters in different workshops and they did not want to be considered second-class citizens, but it was an issue of capacity to bargain and capacity to pay. If they went to the boss and had an argument or an industrial dispute because workers elsewhere were getting $50 more a week than them that would be comparative wage justice and we would be told you cannot do that.

Mr d'Ascenzo : You are more experienced than I am in those matters. All I can say is that with the point of view I put to the independent tribunal was it is important that the ATO be given similar treatment and recognition to other agencies given the important work it does.

Senator CAMERON: So will you be arguing under these guidelines for maintenance of the second commissioners' comparative wage justice to you?

Mr d'Ascenzo : I would be arguing that, whatever the independent tribunal provides in terms of pay rises for similar senior officers as my second commissioners, my second commissioners do not get treated as second-class citizens.

Senator CAMERON: It is not about second-class citizens. I might have to ask you about this second-class citizen bit a bit later. What is the cost then to the ATO budget if you get a $300,000 rise and all of your second commissioners get a $300 rise? Are there any other knock-on effects that would apply to other senior executives in the ATO?

Mr d'Ascenzo : Again, whatever the independent tribunal adds together will add up as a matter of fact. If it is 300 then it is just for one commissioner and three second commissioners. We are very skinny in terms of the size of our senior executive relative to a lot of others in the APS.

Senator CAMERON: It might be skinny but it might mean $1 million.

Mr d'Ascenzo : If we had 10 it might mean even more than that.

Senator CAMERON: I am not saying you have got 10. You said you have got three or four.

Mr d'Ascenzo : I have three second commissioners.

Senator CAMERON: So you get $300,000. What wage increases would the three of them have to get to maintain their comparative wage justice?

Mr d'Ascenzo : That is a matter for the independent tribunal—

Senator CAMERON: What do you do in setting the wages?

Mr d'Ascenzo : The tribunal gives me a range. Let us say it is $200,000 to $300,000 total range. I have some discretion within that, but there are upper and lower limits.

Senator CAMERON: Can you understand why ordinary workers in the taxation department would go: 'This isn't fair. I've got to improve productivity, I've got to justify my wage increases, I've got to go through this tough bargaining process, but the Chief Executive Officer—the Commissioner— and the second commissioners can get $200,000 or $300,000 just because the tribunal says they get it'?

Mr D'Ascenzo : The fact is that there are other agencies that have got pay rises and are paid significantly more than senior people in the ATO. The independent tribunal sets that. It is very important to me that the office of Commissioner, the office of second commissioner and ATO officers generally do not have a situation where they are disadvantaged relative to comparable positions in the APS.

Senator CAMERON: When you applied to the job six years ago did you have relativity with those other agencies?

Mr D'Ascenzo : I think as a general rule there was relativity and it was lost over a period time.

Senator CAMERON: It was lost over the six years you have been there?

Mr D'Ascenzo : I am not sure it was exactly the same against everybody. But against quite a number of APS remuneration packages, because they are done separately, there has been a reduction over time.

Senator CAMERON: I suppose a lot of your workers would be going, 'What does it matter whether it's $500,000 or $800,000.' Five hundred grand is a pretty generous salary, isn't it?

Mr D'Ascenzo : We are making sure that ATO officers are paid at least at APS averages. Across every classification except APS1 they are being paid above APS averages. In terms of work value across the APS, the work value that is considered for their classification, they are being paid more than the average. In relation to the senior positions, relative to some we are being paid below the average.

Senator CAMERON: Have you made a submission to the independent tribunal in relation to your wages?

Mr D'Ascenzo : A year ago, yes.

Senator CAMERON: Is that a public document?

Mr D'Ascenzo : It is with the tribunal.

Senator CAMERON: I am asking whether that is a public document.

Mr D'Ascenzo : The submission is made to the tribunal. I do not know whether the tribunal makes these documents public. I doubt that they would.

Senator CAMERON: Would you have any objection to it being made public?

Mr D'Ascenzo : Could I speak to the tribunal first about whether or not that is—

Senator CAMERON: I am asking for your opinion. I am not asking the tribunal.

Ms Granger : I think we would need the advice of the tribunal in relation to that. Perhaps we could take that on notice.

Senator CAMERON: Okay. On a very rough calculation there could be $1 million—maybe a bit less, but not much—in salary increases for your senior executives. With other knock-ons, it might be even more. Could you give me an estimate of how much it would be in terms of cost?

Mr D'Ascenzo : Firstly, there is no pay rise being allocated to the senior executives of the ATO yet because the tribunal has not made a decision in relation to the ATO. You are assuming that to be the case. I have indicated to you that I think it is fair that the ATO be paid similarly to other APS agencies given the important work we do.

Senator CAMERON: Yes, you have made that point. But the point I want to make is that everybody in the public sector is struggling under constraints, none more so than ordinary workers.

Mr D'Ascenzo : I agree. And one of the roles of manager is to try to manage within those constraints across the whole range of things that have to be done.

Senator CAMERON: I do not think sending out a memo saying you deserve a $300,000 salary increase is one of your best managerial decisions. Be that as it may—

Mr D'Ascenzo : Again, it is not my decision. It is an independent tribunal.

Senator CAMERON: But you are out there advocating for it.

Mr D'Ascenzo : And you were a union official advocating for your members.

Senator CAMERON: But you are advocating for yourself. You said, 'It is a matter outside my control but I do hope that the pay and conditions of the office get aligned.'

Mr D'Ascenzo : Did you notice that I said the pay and conditions of 'the office'? That is very important. What we are saying is that we want to make sure ATO as an organisation is positioned in the APS to continue to provide the right level of service to the community.

Senator CAMERON: You have said that six times now. You have got that point across. I am going to finish on this—

Senator Sherry: To be fair, you did ask the question six times, so I think it is reasonable that he answer it six times.

Senator CORMANN: I am happy he is one of yours, Senator Sherry.

CHAIR: Senator Cameron, do you have a question?

Senator CAMERON: I am nearly finished. In terms of the cost, you have not, as the commissioner, given that you are publicly out there advocating for this pay increase, done any calculations as to the cost to the budget of the ATO?

Mr D'Ascenzo : It is all speculative at this point. So, no, I haven't.

Senator CAMERON: That does not hold water with me. Anyway, thank you.

CHAIR: Senator Cormann on the same point?

Senator CORMANN: Yes, related to exactly the same issue. I depersonalise it a bit. What is the current status of the ATO general employees agency agreement?

Mr D'Ascenzo : We have put a new proposal to the ATO employees and we are going through the process of going to a vote. Second Commissioner Granger can elaborate on that.

Senator CORMANN: Is there an agreement currently in place or has the last agreement expired?

Mr D'Ascenzo : The previous APS1 to EL1 agreement expired a year ago. We still have the EL2 agreement in course until the end of this financial year. Under the new proposal we are trying to put the two together into one package.

Senator CORMANN: What are the key reasons why an agreement has not been reached since the last agreement expired?

Ms Granger : We surveyed of our staff after the agreement. The major reason is, firstly, they felt a higher pay rise was affordable; secondly, they wanted a different distribution of the pay rise to what we had offered—so how it was broken up over the three years; then there was also a range of more specific issues—for example, there was a time in lieu issue for our senior executive officers and a few things around conditions. Fundamentally they were saying that the conditions package at the ATO was very good. It was really on the quantum of the pay rise. There has been a debate all through the bargaining about our explanation of the affordability of the pay rise and could we afford more.

Senator CORMANN: How long have the negotiations between management and staff been going?

Ms Granger : Since the last vote, which was at the end of June, we have been bargaining until this Tuesday. We concluded bargaining on Tuesday.

Senator CORMANN: Have you now reached agreement, when you say you have concluded?

Ms Granger : We have the support of one union. We have two unions in the tax office. The ASU is supporting the current proposal. The proposal has to go through a process of the Public Service Commission looking at it before we can formally put the proposal, just to make sure it conforms with all the appropriate processes. The CPSU is polling its members between now and Tuesday to see whether or not it will support the agreement.

Senator CORMANN: So you are getting to the pointy end of the process, it is fair to say?

Ms Granger : Yes, if the relevant approvals are signed off. There is a process we need to go through of notifying staff who are absent about voting et cetera, so that takes a little while. But we think towards late October or early November we will go to the vote. If we are successful and staff support it they will receive their first pay rise just before Christmas.

Senator CORMANN: I assume there has not been a pay rise since 1 July 2011. Is that right?

Ms Granger : Executive level 2 officers who had an existing agreement that continues to run did have a pay rise.

Senator CORMANN: Sorry, I should have qualified that. I assume that ATO staff employed under the ATO general employees agency agreement have not had a pay rise since 1 July 2011.

Ms Granger : Except for the ones who are under the existing executive level 2 agreement. They have had a—

Senator CORMANN: For those who haven't—

Ms Granger : Yes, they have not had a pay rise.

Senator CORMANN: is the pay rise going to be from the time the agreement is reached?

Ms Granger : Correct.

Senator CORMANN: It is not back paid to 1 July 2011?

Ms Granger : No. Just in broad terms, the current proposal changes the rate at which pay rises and when they happen, but it still comes to nine per cent and there are two productivity linked payments but only on achieving those productivity gains.

Senator CORMANN: And I assume that the negotiations the ATO is conducting are within a framework that is set by the government?

Ms Granger : It is within the framework. There is one proposal in ours that needs an exception approved, and that is in relation to a full-day close-down on Christmas Eve next year.

Senator CORMANN: Who is the minister responsible for setting the framework for the negotiations?

Ms Granger : The approval of exceptions needs to go to the Special Minister of State.

Senator CORMANN: So that is Minister Gray?

Ms Granger : Yes.

Senator CORMANN: So, if Senator Cameron has any issues, Minister Gray is the gentleman that he should be lobbying?

Ms Granger : That is for Senator Cameron!

Senator CORMANN: Thank you.

Senator CAMERON: I missed that.

CHAIR: If you have issues about the process, Senator Cormann advises you to take it up with Minister Gray!

Senator CAMERON: I do not take any advice from Senator Cormann. After his performance this morning, why would I?

CHAIR: That is fine. Senator Xenophon.

Senator XENOPHON: Mr D'Ascenzo, could I just follow up on some of the matters raised by Senator Cameron. It is government policy, though, that wage rises be determined by enterprise agreements, not by comparative wage justice; isn't that the government's policy?

Mr D'Ascenzo : Yes.

Senator XENOPHON: So isn't what you said about the ATO being treated as second-class citizens going into the comparative wage justice category?

Mr D'Ascenzo : I do not know these technical industrial relations terms, but all I am saying is that I did want to ensure that the ATO was aligned with comparable positions in comparable agencies. I think it is a relevant backdrop in context—

CHAIR: Let me just come in here. I have just got to get this right, and I am going to ask Minister Sherry. I have been around for 35 years in the labour movement. I went through this stuff in the seventies and the eighties, and I know where and how—because I was party to the decision—comparative wage justice was dumped in a rubbish bin forever. I was part of the negotiations. Now I am hearing you say that that is the basis of your wage rise. I do not believe that that is a policy of our government, but I want to hear from Minister Sherry: is comparative wage justice the way in which we move wages for workers in the Public Service?

Senator Sherry: I would make two points. Firstly, I would accept your contention: we do not have comparative wage justice. But, secondly, I would make the point that it is the commissioner's right to seek that the tribunal deal with the matter, and it is his right to make a submission—and the tribunal does deal with salary packages for this level of officer. That is his right.

CHAIR: I do accept that that is his right, and there is an independent tribunal and I do not quarrel with that. But, to my knowledge, we have not revived comparative wage justice for award workers or executives at any level.

Senator Sherry: I would agree with that. But, at the end of the day, we have an independent tribunal, as we know, and the tribunal will determine whatever the salaries may be of the senior service in the public sector—and some others I can think of!—based on criteria that it determines, and it will do that independently.

CHAIR: And will the reasons for those decisions be made public?

Senator Sherry: I do not know. I could take it on notice for Minister Gray.

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'If he wants me to go, I'm out of here' - Parkinson on being Treasury Secretary for Abbott

Treasury boss Martin Parkinson says he and his colleagues might have to “make a choice with their feet,” should the Coalition win office and direct them to dismantle Labor’s carbon trading scheme.

The Treasury veteran has worked on three versions of the scheme for three prime ministers. He headed the secretariat that drafted John Howard’s emissions trading scheme in 2006 and 2007, he ran Kevin Rudd’s Department of Climate Change from 2007 to 2011 and since February helped draw up the Gillard government’s carbon trading scheme as head of Treasury.

Asked in a Senate hearing yesterday whether he would assist a government elected on a policy of rescinding the carbon tax he had helped build, he told by Western Australian Liberal Mathias Cormannthat as a public servant he would serve the Australian people through the government of the day.

“Everybody has a choice in front of them,” he said. “If they are not prepared to implement the policies of the government chooses to pursue, and that government has been democratically elected, then they essentially have to make a choice with their feet.”

Dr Parkinson said the choice might not be his to make. Mr Abbott would have the right to remove him as head of the department.

“Whether I was Secretary of the Treasury would be a matter for the prime minister of the day,” he said.

“Were I to be Secretary I would serve the government of the day in the way as I have served previous governments."

The Treasury Secretary ridiculed suggestions carbon trading frightened away businesses saying since both major parties announced carbon trading plans in 2007 “there have been very very significant investments in the mining sector that have just grown and grown”...

The cost impacts of the carbon tax and the mining tax were “very, very small”. Much more worrying was uncertainty, as he spelled out in the report signed by John Howard’s emissions trading task group.

“The committee had on it departmental secretaries and very very senior people in business. They took the view that Australia should not wait for global action, that Australia should take action earlier rather than later and to do it in the form of an emissions trading scheme.”

Treasury’s chief modeller Meghan Quinn said the carbon tax would slice a cumulative $900 billion from economic growth over the next forty years meaning the economy would grow $20.4 trillion instead of $21.3 trillion.

If Australia was unable to make use of foreign emissions permits the economic cost would double.

“Those costs assume climate change doesn’t occur,” said Dr Parkinson. “If climate change is occurring then you need to also take account that as well.”

The Coalition yesterday hit back at the clean energy sector over its statements in support of carbon tax, branding green companies ‘‘vested interests’’ and ‘‘white shoe salesmen’’ trying to cash in.

Opposition Finance Spokesman Andrew Robb told The Age/SMH that the government’s $10 billion Clean Energy Finance Corporation, which will help fund green investment, was a Labor-Greens slush fund that would fund ‘‘all sorts of wild and whacky proposals that the banks would not touch in a fit’’.

His remarks follow industry criticism of Tony Abbott’s vow to scrap the green technology fund and the carbon tax, with companies such as AGL and Pacific Hydro claiming the Coalition policy created uncertainty and sent a bad signal to investors.

“Not surprisingly the vested interests are already coming out of the woodwork, talking about the need for certainty in response to us confirming the corporation will be axed should we win office,’’ Mr Robb told the Herald/Age.

‘‘This fund will be a honey pot to every white shoe salesman imaginable and it will be controlled by Labor and Bob Brown; give me a break,” he said.

He was referring to ‘‘those energy companies who have been critical but who have strong interests in renewables and could potentially be major beneficiaries of these subsidies.’’

Andrew Richards, executive manager of corporate affairs at Pacific Hydro, said: ‘‘It’s just a shame that we are investing five times as much in Chile as in Australia because they reward investment in renewable energy.”

‘‘If you were convinced by the science of climate change - and I know Andrew Robb isn’t, you would say the fossil fuel industry has been protected for a long time because they don’t pay for the pollution they create.’’

Published in today's SMH and Age

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Wednesday, October 19, 2011

You think the summit's over? The good stuff is just beginning

Wednesday column

Wayne Swan may yet go down in history as the father of a monumental change to the tax system. Not merely the far-sighted, poorly-sold and now emaciated mining tax applying to just four of the originally planned twelve or so commodities, but a truly massive change with the potential to set up Australia for decades to come.

Extraordinarily generous to ordinary businesses and much more demanding of those earning superprofits, the change would need the sort of patient consensus-building Swan completely failed to deliver in in the lead-up to the mining tax.

Unions in particular would need to be gently brought across the line. As they demonstrated by their unfortunate behaviour at the tax summit, union reps can’t be relied on to accept even good evidence that concessions directed at businesses could help their own members. Economist Harry Clarke wrote after the summit he “couldn’t work out if they were intrinsically stupid or just outlining a preconceived union viewpoint in bad faith; certainly they were not engaging with those who showed their views were wrong”.

Perhaps the single most important finding of last year’s Henry Review was that in a small open economy like Australia’s, high company tax hurts workers, low company tax helps.

“There is simply no debate in the academic community, there is a strong consensus,” Henry told the summit.

“Indeed in an academic conference that proposition would be considered so obvious that it would excite no interest at all.”

The sequence is the more the company tax rate is cut, the more a country like Australia pulls in more foreign capital, the more firms invest in processes that make their workers more productive, the more valuable those workers become and the more they get paid.

Swan understands the argument... He had already began pushing down the company tax rate, and would have pushed it down further had his mining tax not been kneecapped. He is particularly attracted to a variant of the idea known as Allowance for Corporate Equity (ACE), so much so that he gave it a special mention in his closing address.

Then he went futher by asking his new business tax working group to draw up a system that would work.

This was far from a throw-away line. As well as asking the working group for an quick report on tax losses by March, he asked for a second more expansive report on long-term measures “particularly an allowance for corporate equity” by the end of next year.

In an inspired move he added to membership of the committee the secretary of the Australian Council of Trade Unions Jeff Lawrence. Lawrence was chief among union reps at the summit spouting nonsense about the incidence of company tax.

As part of a small eight-person team he will be forced to act less like a politician and more like a collaborator sifting through evidence.

At the moment companies that raise money by issuing equity are penalised relative to those that borrow. Interest payments are a tax deduction but dividend payments are not. An Allowance for Corporate Equity would level the playing field, allowing the companies to completely write off against tax “normal” dividend payments.

And this is where it gets really interesting. They need not make the dividend payments. “Normal” would be calculated by applying a reasonable rate of return to the firm’s total equity (even if it was a partnership rather than a public company). The reasonable level would most likely be the average corporate bond rate.

The result would be that firms making normal returns (and firms just starting to make profits) would pay no corporate tax whatsoever.

For manufacturers struggling under the weight of the two-speed economy the benefits would be enormous. Instead of paying 30 per cent (soon to fall to 29 per cent) most would pay nothing.

Australia would become a very attractive destination in which to set up a firm and an attractive one in which to invest.

It would be partly paid for by imposing a much higher tax rate on the portion of earnings that exceeded the corporate bond rate. At the summit Melbourne University economist John Freebairn mentioned a rate “more towards 40 or 50 per cent”. He will sit on the business tax working group with Jeff Lawrence.

Most Australian companies would scarcely be touched by the higher rate. They are lucky to make much more than bonds. Mining companies (at the moment) make far more. They would pay far more without the need for a special tax.

As would each of the big four banks. Not by design, but because along with mining companies they are about the only Australian firms consistently making over the odds profits. Their return on equity exceeds 15 per cent, something they say is “middle of the pack” only because it sits between miners and everyone else.

If markets were working perfectly, no firms would consistently make such profits.

Freebairn told the summit it happened where resource rents were given away cheaply, where new products cashed on demand before the arrival of competitors and where there was a “monopolistic-type rent”.

“And lets rub it into the banks,” he added. “They seem to make much higher returns than anyone else.”

Bankers and high-profit miners will squeal. But if Australia gets ACE they will continue to mine and continue to provide banking services. The real change would be to invigorate every other Australian business. If the change was presented as part of a simple within-business tax swap that also lowered the overall business tax take it might just get traction.

The Business Council of Australia is part of the tax working group along with the ACTU and academics including Freebairn. It has previously spoken approvingly about the idea. This time Swan is doing things the right way around. This time his idea might get up.

Published in today's SMH and Age

Business tax working group

Wayne Swan
October 12, 2011

Today I am pleased to announce the terms of reference and appointments to a working group that will look at how our tax system can best help businesses respond to the pressures of a changing economy.

The working group will look at reforms that can increase productivity and deliver tax relief to struggling businesses in our patchwork economy and develop a set of savings options within business tax, such as broadening the base and addressing loopholes or unnecessary concessions.

Dealing with the challenges of an economy where different sectors are growing at different speeds has been central to our tax reform agenda both in terms of what we have done so far and what we need to do next.

At the Tax Forum last week, I announced that Chris Jordan, the chairman of the Board of Taxation, had agreed to head the working group.

It will focus on reform options that relieve the taxation of new investment:

• in the near term, by looking at changes to the tax treatment of business losses; and

• in the longer term, by looking at options like reducing the corporate tax rate further or alternatives such as allowances for corporate equity.

The working group will also be required to identify options to fund any proposals from within the business tax system.

The tax system will continue to play a critical role in helping our economy adjust to change and spreading the benefits of the mining boom to all corners of our patchwork economy.

Terms of reference


1. The Working Group will make recommendations on how the Australian business tax system can be improved to make the most of the challenges and opportunities arising from transformations in the broader economic environment, including the patchwork economy.

2. The revenue neutral reforms to the business tax system will aim to increase productivity, while delivering tax relief to struggling businesses.


3. The Working Group will focus on reform options that relieve the taxation of new investment:

3.1. in the near term, by reforming the tax treatment of business losses; and

3.2. in the longer term, by reducing the corporate tax rate further or moving to a business expenditure tax system, particularly an allowance for corporate equity.

4. For its final reports, the Working Group will provide specific analysis of these business tax reform options, including:

4.1. descriptions of how these reform options operate overseas and evidence on their effectiveness;

4.2. potential priorities for reform, including transitional paths;

4.3. worked examples of how these options would affect business taxpayers, including their financial and tax accounts;

4.4. revenue integrity provisions, such as measures necessary to limit: the inappropriate claiming of tax losses; the equity allowance to new equity; and small and closely held businesses converting labour into business income;

4.5. how the reform options integrate with the rest of the tax system now and in the future;

4.6. impacts on national income and macroeconomic risks; and

4.7. costings.

5. The working group will also identify a range of off-setting budget savings from existing Commonwealth business taxation (or spending) measures. Changes to the GST should not be considered.

5.1. The savings to be generated by the particular options will be costed by the Treasury in accordance with the budget rules.

6. In developing its recommendations, the Working Group should have regard to the report of the Australia’s Future Tax System Review and relevant international experience and expertise.


7. The Working Group is required to provide the Treasurer with:

7.1. an initial report on the proposed directions for improving the tax treatment of losses and offsetting savings in mid-November 2011;

7.2. a final report on the treatment of losses and the offsetting savings in March 2012; and

7.3. a further report on longer-term business tax reform options and offsetting savings by the end of 2012.


8. For its final reports, the Working Group should consult widely with industry and the broader community.

9. The Working Group may establish technical sub-groups to consider specific issues or seek input from other sources of expert advice.


10. The Working Group will be supported by a Secretariat within Treasury.



Chris Jordan is a Fellow of the Institute of Chartered Accountants, the Taxation Institute in Australia, and the Australian Institute of Company Directors and is a Solicitor of the Supreme Court of New South Wales.

Chris is the NSW Chairman of KPMG. He is the Chairman of the Board of Taxation which is an advisory body to the Federal Treasurer and is a board member of the Sydney Children’s Hospital Foundation and the Bell Shakespeare Company.

Chris was awarded the honour of Officer of the Order of Australia in the 2005 Queens Birthday Honours list for high-level advice to Government.


Jennifer Westacott took up the role of Chief Executive at the Business Council of Australia (BCA) in April 2011.

Jennifer has extensive policy experience in both the public and private sectors. She has held critical leadership positions as the Director of Housing and the Secretary of Education in Victoria, and most recently was the Director-General of the New South Wales Department of Infrastructure, Planning and Natural Resources.

Jennifer was a Director and National Lead Partner at KPMG and provided advice and assistance to some of Australia’s major corporations on climate change and sustainability matters, and provided advice to governments around Australia on major reform priorities. She previously chaired the Public Sector Performance Commission in South Australia, and was a member of the Commonwealth Grants Commission.


Jeff Lawrence was elected as Secretary of the Australian Council of Trade Unions (ACTU) in August 2007.

Prior to that, he was National Secretary of one of Australia’s largest unions, the Liquor Hospitality and Miscellaneous Union (now known as United Voice). Jeff is a Director on the AustralianSuper trustee board.

Under Jeff’s stewardship, the ACTU was a key negotiator in the drafting of the Fair Work Act, which features a guaranteed safety net of rights and conditions, improved protection from unfair dismissal, the abolition of Australian Workplace Agreements, an independent umpire, and rights to collective bargaining.

During his time as Secretary, Australian unions have successfully advocated for economic stimulus measures to protect Australian jobs during the downturn, won the first national paid maternity leave scheme, and received government commitment to increase superannuation guarantee to 12 per cent to ensure all workers have financial security in retirement.

Jeff has devoted his entire career to advancing the interests of working Australians and their families, particularly the low-paid.


Rob was appointed Ernst & Young’s Oceania Managing Partner and CEO in 2010 and was previously Ernst & Young’s New Zealand Country Managing Partner. He has more than 30 years experience in corporate and international tax.

Rob has held a number of high profile roles in New Zealand including Chairman of the New Zealand Business Roundtable. In 2001, he conducted the most recent comprehensive New Zealand government tax review – the McLeod Review. In 2009, he was appointed to the government-sponsored Tax Working Group and the Capital Markets Development Taskforce, both of which had a strong focus on tax reform. He was also a member of the New Zealand Government appointed Consultative Committee on Capital Gains Tax in 1989.

He has been appointed to numerous government committees, the latest ones focusing on defence, infrastructure and Maori economic development.


Teresa Dyson is a Tax Partner in Blake Dawson’s Brisbane office, specialising in providing income tax advice on corporate and financing issues to domestic and international businesses. Teresa is a member of the Board of Taxation and the Resource Taxes Implementation Group.

Teresa is the National Chairman of the Law Council of Australia, Business Law Section, Tax Committee and, in that capacity, represented the Law Council of Australia at the Tax Forum. She is currently recognised as a leading individual in tax in Chambers Global 2011 and Best Lawyers 2011.


Dr Peter Burn, Director of Public Policy, Australian Industry Group (Ai Group), has extensive experience in taxation policy through his role at Ai Group since 2002 and as Director – Policy at the Business Council of Australia with particular responsibilities for taxation policy from 1997. Peter was also the Secretary of the Business Coalition for Tax Reform in the years around the Australia's New Tax System.

Prior to these roles, Peter lectured in public finance and microeconomic policy at the University of Queensland and the University of Newcastle and still earlier served in the Tax Policy Division of Treasury during the 1980s reforms to Australia's tax system.


Frank Drenth has been in the role of Executive Director of the Corporate Tax Association (CTA), since 1998. The CTA represents the taxation interests of about 120 of Australia’s largest companies. He is also Deputy Chair of the Business Coalition for Tax Reform, which brings together the views of the broader business community on tax reform issues.

Over a period of many years Mr Drenth has had extensive experience as an external stakeholder in the development of Australia’s tax policy and law, as well as aspects of tax administration that are relevant to large companies. Mr Drenth has previously occupied corporate tax roles in large Australian companies. He has also worked a large chartered accounting firm after starting his career with the Australian Taxation Office.


John Freebairn holds the Ritchie chair in economics at the University of Melbourne. He has degrees from the University of New England and the University of California, Davis. Prior to joining Melbourne in 1996, his preceding career includes university appointments at the ANU, LaTrobe and Monash, and periods with the NSW Department of Agriculture and at the Business Council of Australia. John is an applied microeconomist and economic policy analyst with current interests in taxation reform and environmental economics.


Executive Director, Revenue Group, The Treasury

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Field guide: What'd give us a Melbourne Cup Day rate cut

The Reserve Bank has spelled out the conditions under which it would cut interest rates at its next meeting Melbourne Cup Tuesday.

Board minutes released yesterday show Bank economists have scaled down their estimate of underlying inflation from 2.5 - 2.75 per cent, near the top of their 2 to 3 per cent target band, to 2.25 to 2.5 per cent.

If the Bank can tell ‘a credible story’ about how inflation is set to stay at around 2.5 per cent, it will cut its cash rate 0.25 points.

The cut would be presented as a technical adjustment to a changed inflation outlook rather than as a response to a weak economy.

It would be described as a ‘one-off’ - moving settings from mildly restrictive to neutral - rather than as the first of a series of cuts...

A cut in the cash rate from 4.75 per cent to 4.5 per cent would cut the typical variable mortgage rate from 7.8 to 7.55 per cent, slicing $49 off the monthly cost of servicing a $300,000 mortgage in the lead-up to Christmas.

Futures markets expect the Bank to go further, cutting rates three times by February.

Late yesterday traders lifted the implied probability of a Melbourne Cup day rate cut from 64 to 70 per cent.

But the bank won’t make the cut at all unless it is convinced it can credibly say inflation will remain contained. Helping it will be updated information on spending patterns obtained by the Bureau of Statistics which makes inflation look “less concerning” and reports from its business liaison program that outside the mining sector wage pressure is easing.

The Bank will need both a benign inflation outcome in the September quarter figures to be released next Wednesday and a set of believable forecasts for continued benign outcomes.

If decided on by the board the cut would be the first since the global financial crisis. It would also be the first one-off cut not clustered with others since December 1998.

While the Bank believes the non-mining economy is subdued it expects it to pick up. It is particularly sceptical of the official employment figures which show weak or negative jobs growth, noting that at the same time job vacancies are increasing and the number of people on unemployment benefits is falling.

“The Bank is considering a cautious policy tweaking rather than an interest rate slashing,” said ANZ senior economist Craig Michaels. “It looks like an insurance rate cut rather than a string of them.”

Access Economics forecasts due for release this morning (WED) have interest rates falling just once between now and March and not falling further. While Access does not think there will be a new global financial crisis it does think the risk has increased.

“If there is one, we would look to the Reserve Bank to do more than it did in the last crisis and for the government to do less. But ‘doing less’ is not ‘doing nothing’. For all the unpopularity of the recent stimulus spending, it did its job very well,” Access director Chris Richardson writes to clients.

Chinese figures released yesterday showed economic growth moderating from an annual 9.5 per cent to 9.1 per cent.

“It remains strong,” said HSBC economist Qu Hongbin. “Sluggish western economies will weigh on exports, but the domestic economy is supported strong retail sales growth, rising continuing infrastructure investment and accelerated public housing construction.”

“Even if western economies slip into a renewed recession the impact on China's growth will be much smaller than three years ago.”

Published in today's SMH and Age

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