Australians are more millennial, multilingual and less religious: what the census reveals

Census data to be released Tuesday shows Australia changing rapidly before COVID, gaining an extra one million residents from overseas in the past five years, almost all of them in the three years before borders were closed.

For the first time since the question has been asked in the census, more than half of Australia’s residents (51.5%) report being either born overseas or having an overseas-born parent.

More than one quarter of the one million new arrivals have come from India or Nepal.

The census shows so-called millennials (born between 1981 and 1995) are on the cusp of displacing baby boomers as Australia’s dominant generation.

Although the number of baby boomers (born between 1946 and 1965) has changed little, as a proportion of the population boomers have fallen from 25.4% in 2011 to 21.5%. Millennials have climbed from 20.4% to level pegging at 21.5%.

The changes are reflected in the answer to the question about religion, the only non-compulsory question in the census. Almost 40% of the population identified as having no religion, up from 30% in 2016, and 22% in 2011.

Whereas 47% of millennials identify as having no religion, only 31% of boomers fail to identify with a faith. Nearly 60% of boomers are Christian, compared to 30% of millennials.

The share of the population identifying as Christian has slipped from 52% to 44%. Other religions are growing, but remain small by comparison. Hinduism climbed from 1.9% of the population in 2016 to 2.7%. Islam climbed from 2.6% to 3.2%.

The five-yearly snapshot

Conducted every five years since 1961, and before that less often from 1911, and asking questions of every Australian household, the census provides information about the ways society is changing that couldn’t be obtained in any other way.

In the past five years the number of people who use a language other than English at home has climbed 792,000 to more than 5.6 million. 852,000 Australian residents identify as not speaking English well or at all.

Mandarin remains the most common language other than English used at home, used by 685,300 people, followed by Arabic with 367,200 people.

The real value is in the detail

The real value of the census is in the locational details. The information released on Tuesday will identify locations with any characteristic that needs particular services, such as the areas with more people who identify as not speaking English well or at all. It will also show which parts of Australia are growing in population and which parts are shrinking.

The broad-brush information released on Monday showed the number of single-parent families had climbed past one million. The information released on Tuesday will identify the suburbs and towns in which they live.

The information released on Monday showed the overall proportion of Australians owning their homes was little changed. The information released on Tuesday will report those proportions by age group and city.

New questions

Two new separate questions in the 2021 census ask about service in defence forces and long-term health conditions.

One quarter of veterans are aged 65-74, reflecting conscription during the Vietnam War.

More than two million Australians suffer long-term mental health conditions; more than two million suffer arthritis; and more than two million suffer asthma.

Tuesday’s figures will offer more detail on the locations of sufferers and details such as their income and occupations, as well as details such as whether those who’ve served in defence were conscripts, serving in Vietnam.

Saved from the axe

Seven years ago the Australian Bureau of Statistics tried to axe the five-yearly census, making it 10-yearly – as in the United Kingdom and the United States – to save money.

The outcry from planners and researchers who relied on the census resulted in the bureau being given an extra A$250 million to ensure it continued.

Tuesday’s is the first of three census data releases. In October, the bureau will release information about education and employment and travel to work.

Early next year it will release location-specific socio-economic information and estimates of homelessness.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Australia already has a UK-style windfall profits tax on gas – but we’ll give away tens of billions of dollars unless we fix it soon

The really bizarre thing about calls for a UK-style windfall profits tax on gas is that Australia’s already got one.

Gas prices have soared to levels never envisioned in the lead-up to 2015, when three resource giants spent A$80 billion building terminals in Queensland with the potential to export three times the east coast gas Australia had been using.

At the time, the “netback” international gas price (net of the cost of liquefying and shipping) was barely A$10 a gigajoule, and wasn’t expected to climb much higher.

Suddenly, in the space of a year, it has jumped to three times that level. Local industrial customers are now being asked to pay a barely-credible $382 a gigajoule – and gas suppliers were about to ask for $800, before the energy market operator stepped in and capped prices at a still “crippling” $40 a gigajoule.

Gas generators aren’t keen to power up

So expensive is gas that on Monday, when almost a quarter of Australia’s coal-fired power generating units were out of action and it looked as if NSW and Queensland would be plunged into darkness, gas generators were sitting on their hands rather than powering up.

They only acted when ordered to by the energy market operator.

In Britain, where export gas prices have climbed just as high (and one of the same companies, Shell, is involved) Prime Minister Boris Johnson has imposed a 25% windfall profits tax on oil and gas producers.

The special tax will help fund support for households struggling with high bills, and will be phased out when oil and gas prices return to normal.

Australia already has a special tax on gas

There are precedents here for singling out an entire industry for an extra tax. Scott Morrison did it in 2017 with a special tax on big banks, which continues to this day.

The Rudd and Gillard governments tried it with a short-lived 40% super-profits tax on the mining industry, which was based on … well, it was based on the longstanding 40% resource rent tax applying to the oil and gas industry.

That’s right. Australian oil and gas producers have had to shell out 40% of their profits in tax, in addition to 30% company tax on profits, for years.

That’s a total big enough to ensure the windfall profits resulting from Russia’s invasion of Ukraine are well and truly taxed along the lines announced in the UK, allowing Australia’s government to grab most of the windfall and use it to support households suffering from high energy prices. Or so you would think.

And yet the amount collected is tiny: $2.4 billion, which is no more than was collected in 2005. At times, it has fallen as low as $1 billion. In the words of the Grattan Institute’s Tony Wood, himself a former energy executive, it is a “rather strange thing to have a tax that nobody pays”.

Australian Institute analysis of Tax Office data suggests that none of the big three Queensland gas exporters has paid any income tax since their projects began in 2015, except for $3 billion paid by Santos, once, on revenue of $5.3 billion.

Designed for oil, used for gas

In 2016 Morrison commissioned retired public servant Michael Callaghan to inquire into why the minerals resource tax was raising so little money.

Callahan found it well designed for oil, which it was set up to tax in 1988, but poorly designed for gas.

One of the two biggest problems was “uplift”. Profits are taxed after deducting earlier losses. These losses are carried forward using an uplift rate.

For oil projects, the uplift rate on losses doesn’t much matter because they start making profits fairly soon.

Gas projects are much more expensive and take many more years to produce a return, making the uplift rate significant.

Australia applies two uplift rates: the long-term bond rate plus 5% (for general losses), and the long-term bond rate plus 15% (for exploration losses).

So much can the long-term bond rate plus 15% grow over time that Callaghan found it allowed exploration deductions to

almost double every four years, which means that a moderate amount of exploration expenditure can grow into a large tax shield

And firms hang on to the high-uplift deductions, using the low-uplift ones first.

The second big problem is that, whereas with oil it is easy to tell when the oil has been mined and the profit should be taxed, with integrated liquidated natural gas projects, it is hard to tell when the mining stops and the liquefaction starts.

Taxing in the dark

Without an observable final price for the gas before it is liquified, three methods are used – two of them complex and one a private agreement with the tax office.

Callaghan found that if the simpler “netback” method was used, the tax would raise an extra $89 billion between 2023 and 2050 including a “particularly strong” extra $68 billion between 2027 and 2039 at the prices then prevailing.

In his 2018 response Treasurer Josh Frydenberg cut the uplift rates and asked the treasury to review the method of calculating the transfer price. It was to report back “within 12 to 18 months”.

For all we know, the treasury did report back, perhaps two years ago in May 2020.

It’s a fair bet our new government will be keener than the old to actually raise more than a couple of billion from the petroleum resource rent tax, especially given the amount now available to tax.

If the extra tax was used to provide relief from high energy prices, Australia’s government could no more be criticised than could Boris Johnson’s in the UK.

And if it merely said it was thinking of properly applying the tax we’ve got, it might find Australia’s gas exporters suddenly more co-operative.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Expect the RBA to go easy on interest rate hikes from now on – we can’t afford rates to climb as steeply as the market expects

By lifting its cash rate by 0.5 points, from 0.35% to 0.85%, the Reserve Bank has added about another $120 per month in payments for a A$500,000 mortgage.

If financial markets are to be believed, by the end of this year it will have added a total of $800 per month – and, by the end of next year, a total approaching $1,000 per month.

Those figures are for variable mortgages, but homeowners on fixed rates won’t escape them long. Those rates are typically fixed for up to three years.

Many of the fixed-rate mortgages were taken out during COVID at annual rates as low as 2%. When those fixed rates end (and many will end in the next year or so) those homeowners will find themselves paying 5% or 6% per year, shelling out as much as $3,000 per month instead of $2,000.

Unless financial markets are wrong. The good news is, I think they are.

The pricing of deals on the futures market factors in an increase in the Reserve Bank’s cash rate from 0.10% to 3.5% by June next year, enough to push up the standard variable mortgage rate from around 2.25% to 5.65%.

We couldn’t afford the rates the market expects

One reason for suspecting it won’t happen is that many homeowners simply couldn’t afford the extra $1,000 per month. Most of us don’t have that much cash lying around.

US President Richard Nixon had an economic adviser by the name of Herbert Stein with an uncommonly-developed sense of common sense. In his later years he wrote an advice column for Slate magazine.

To a reader wanting a cure for unrequited love, he wrote that the best solution was “requited love”. To a reader concerned about her inability to make small talk, he wrote that what people want most is a “good listener”.

In economics, Stein is best known for Stein’s Law, which says: “if something cannot go on forever, it will stop”.

Mortgage rates can’t keep climbing to the point where homeowners pay an extra $1,000 per month.

For new homeowners, it’s worse. The typical new mortgage taken out to buy a home in NSW has climbed to $700,000. In Victoria, it has climbed to $585,000. These people will be paying a good deal more than an extra $1,000 per month if the bets on repeated rate hikes made on the futures market come to pass.

The Reserve Bank says it lifted its cash rate from 0.35% to 0.85% today to withdraw the “extraordinary monetary support” put in place during the pandemic.

But the bank says from here on it will be guided by data, and, in a nod to homeowners concerned about continual rate hikes, said it expected inflation to climb just a bit more before declining back towards its target next year.

The bank will be guided by data

Financial markets don’t see it that way. They have priced in (in other words, bet money on) rate hikes in July, August, September, October, November, December, February, March, April and May.

But there are reasons to believe the bank is right about inflation.

It doesn’t seem that way with electricity prices set to climb 8-18% in NSW, 11% in Queensland, 5% in Victoria, and as much as 20% in South Australia. (The only jurisdiction without an increase in prospect is the Australian Capital Territory, which has 100% renewables and fixed long-term contracts.)

Fortunately for overall inflation, electricity accounts for less than 3% of the typical household budget. Gas accounts for less than 1%. Even low earners spend little more than 4% of their income on electricity.

While the price of vegetables is soaring (heads of lettuce are selling for $10), we spend less than 1.5% of our income on vegetables.

The best measure of overall price increases remains the official one of 5.1% for the year to March, calculated by the Bureau of Statistics.

It is a more alarming increase in inflation than Australians are used to. But what matters for the Reserve Bank is whether the 5.1% is set to turn down and head back towards the target of 2-3%, or climb further away from it.

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Australia is almost uniquely disadvantaged among developed nations in getting a handle on what’s happening to inflation, being one of only two OECD members (the other is New Zealand) to compile its consumer price index quarterly, instead of monthly.

By the time Australia’s index is published, several of the measures in it are months old, and they don’t get updated for another three months.

It has been said to make the bank’s job like driving a car looking through the rear-view mirror.

Using our rear-view mirror, with caution

Fortunately the Bureau of Statistics is gearing up to produce a monthly index. Meanwhile, in the United States – which is subject to the same international price pressures as Australia – most measures of inflation eased in April.

Wages growth, which the Reserve Bank said last month seemed to be “picking up”, remained dismal in the figures released a few weeks later – at just 2.4% in the year to March. That was well short of the 2.7% forecast in the budget for the year to June, and not enough to do anything to further fuel inflation.

Australia has a history of aggressive interest rate hikes to tame inflation.

In 1994, Reserve Bank Governor Bernie Fraser rammed up the cash rate from 4.75% to 7.5% in a matter of months. But that was when wage growth was well above inflation and the bank was trying to dampen “demands for wage increases” to prevent a wage-price spiral.

We don’t even have the beginnings of that yet. Unless the bank wants to needlessly impoverish Australians, and keep going until it pushes them out of work, it will increase rates cautiously from here on.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Australia’s biggest economic threat isn’t home-grown. It’s a recession, originating in the United States

A recession in the US usually brings on a recession in the rest of the world, although not always in Australia.

Australia has escaped such a recession twice in the past 50 years.

We avoided the early-2000s so-called tech-wreck recession, and we avoided the so-called “great recession” during the global financial crisis.

Amid ominous talk about yet another US-led global recession, there’s a chance we could escape for a third time.

But it will require being prepared to change our budget and interest settings in a heartbeat. That’s something our new treasurer Jim Chalmers – who many don’t realise was an advisor to the treasurer during the global financial crisis – knows a good deal about.

The hunt for savings, now and then

Right now, Chalmers and finance minister Katy Gallagher say they are going line by line through the budget to look for waste and rorts. They’ll find a lot.

That’s how it was 15 years ago for another new treasurer, Wayne Swan, and his finance minister Lindsay Tanner.

Swept into office with Prime Minister Kevin Rudd in 2007, in an election marked by plummeting unemployment, a mid-campaign interest rate hike, and growing inflation, they identified A$3 billion they could cut without blinking.

It was, said Tanner, “just for starters”.

Cuts are easy – at first

Incoming governments can always find savings because their priorities are different, and because the outgoing government has grown used to spending big.

Desperate to stay in office, the Howard government shovelled $500 cheques to senior citizens on its way out. The Morrison government handed them $250 cheques, dressed up as cost of living payments.

Chalmers and Gallagher say they’ll save $350 million instantly by removing funds from the Coalition’s marginal-seat-focused community development program, and millions more by axing the $500 million regionalisation fund announced in the March budget before it gets started.

But circumstances can change

But even before Swan and Tanner had handed down their first budget in 2008, they were confronted by realities that made them wince.

As Swan tells it, he took a call at 6.30am, while sheltering in his car from bucketing rain near a beach on Queensland’s Sunshine Coast, from US Treasury Secretary Hank Paulson.

It was January 10 2008, one year into the US sub-prime mortgage crisis. Fifty US mortgage companies had declared bankruptcy. Paulson had asked for the call.

As Swan remembers it, Paulson told him:

Look, if we can avoid a meltdown in house prices, then we might be able to see a way through this.

That was a very big “if”, Swan thought, later writing he suspected the aside might be the real reason for the call.

“It seemed a dicey prospect that the health of the entire US economic system was underpinned by the housing market stabilising,” Swan wrote. What if the US housing market didn’t recover?

Swan sought advice from Australia’s treasury, which warned him the risks to the global economy from the US housing market were “substantial”.

From that day on, Swan performed a balancing act – as Chalmers, then the treasurer’s advisor, later wrote.

On one hand, Australia was facing accelerating inflation, which would necessitate higher interest rates and “savage across-the-board” spending cuts.

On the other hand, by the end of the 18 months it would take for those spending cuts to really hurt, the world might be in crisis.

Swan withdrew the harshest cuts, warned in his budget speech about “economic turbulence” and looked on in dread as the Wall Street giant Lehman Brothers collapsed and the globe slid into recession.

A US recession is entirely possible

Fast forward to 2022, and the US economy was once again in trouble, even before Russia invaded Ukraine on February 24.

Inflation had climbed above 7% for the first time since the 1979 oil crisis. It is now above 8% and the US Federal Reserve is ramping up interest rates in an increasingly desperate attempt to contain it.

The world’s leading economic journalist, Martin Wolf, believes it won’t be able to do it without bringing on a recession.

If the entire United States can be made to spend less, it will indeed restrain global prices. (This isn’t true for Australia, which has too few people to affect the global price of commodities such as oil.)

But it is enormously hard to get right; all the more so if Americans decide to spend the savings they’ve built up during COVID.

Wolf says the Federal Reserve has to run the risk of recession in order to tame inflation. It has to “screw up its courage and do what it takes”.

Treasury is on to it

Chalmers and his officials are attuned to what’s happening overseas.

There’s speculation China’s zero-COVID lockdowns are sending its economy backwards – though there’s also speculation that, even if that’s happening, it’s unlikely to be reflected in China’s official figures.

After briefings with treasury officials, Chalmers warned last week that while commodity prices have been stronger than expected, there was no guarantee that would remain the case by the October budget.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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