Government grants sloppy, and perhaps corrupt

Before the last election the Turnbull government had an unofficial budget: $20 million for each electorate in play. It could be handed out as picnic tables, fire trails, skate parks, netball courts, disabled toilets, or anything else that made it look as if the government cared about the electorate.

A senior source told me it was clever – Turnbull had managed to cap the financial cost. Labor said little. It couldn't. In office it had done it itself.

That these sort of grants weren't what the Commonwealth was for, as was tacitly acknowledged as Treasurer Scott Morrison tried to keep a straight face in a press conference days before the vote.

Journalist Phillip Coorey had asked him why the Commonwealth was funding dunny blocks.

"People need them Phil, people need them," the Treasurer replied. Addressing community cohesion was important.

But not important enough to have an independent panel access applications and award grants on the basis of need. If that had happened it is highly unlikely that 20 per cent of the funds would have gone to electorates representing just 2 per cent of the population.

Labor used to have such a panel, although it didn't always follow its recommendations. In 2014 the Audit Office recommended that the Department of Infrastructure and Regional Development do the job. The government "agreed" with the recommendation, although it merely "noted" another that said applications should have to meet published merit assessment criteria.

In an almost ideal world we would have an independent body deciding on grants, in the same way as the independent Reserve Bank decides on interest rates, and for the same reason – the government can't be trusted. In an absolutely ideal world the Commonwealth wouldn't hand them out at all.

At a minimum we should have a Commonwealth anti-corruption commission. And we ought to outlaw bigger grants that are just as sloppy, allocated without tender.

In the budget the government awarded Fox Sports $30 million to "increase coverage of sports that receive low or no broadcast exposure". The criteria are so broad it'll meet them easily. The documentation released this month says it's a direct offer, "available only to Fox Sports Australia Pty Ltd".

In The Age and Sydney Morning Herald

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MYEFO. Nowhere near enough to fund tax cuts

Scott Morrison wants you believe the budget's strong enough to fund tax cuts.

It isn't, and the update makes that clear.

As it is required to do, it spells out the stated aim of the budget - what the Coalition has pledged to achieve since its election - on page 31.

The aim is to "deliver sustainable budget surpluses, building to at least 1 per cent of GDP, as soon as possible, consistent with the medium-term fiscal strategy".

That's a surplus of 1 per cent of gross domestic product, as soon as possible, consistent with quality spending and economic growth.

After a boost to the budget of about $10 billion over four years, what has it been left with?

A budget surplus of just one half of one per cent of GDP by the end of the four year projection period.

It's an improvement. The May budget pencilled in 0.4 per cent. But it's nothing like the 1 per cent of GDP the Coalition itself adopted as a target to be reached "as soon as possible". And beyond those four years the graph in the update shows the surplus staying put at half a per cent of GDP right out to 2027.

Weakening that budget position by giving some of it away, as the Prime Minister and Treasurer are hinting they will in next May's budget, would be a further abrogation of a pledge the Coalition hasn't come near fulfilling ever since it made it in 2014.

Improving the budget, certainly improving it by the billions that would be needed to fund reasonable tax cuts, is hard. Almost all of the $10 billion improvement this time came came from (generally mining-related) higher company profits and superannuation earnings, as well as lower than expected payments to Australians who are out of work. Government actions improved the outlook by about half a billion. It won't be enough.

In The Age and Sydney Morning Herald

 

Fresh push for company tax cuts as economy lifts budget $10 billion

Treasurer Scott Morrison has signalled a fresh push to get the government's $50 billion package of company tax cuts through the Senate, saying that US President Trump is forcing his hand and that the changing composition of the Senate gives him a chance.

Higher than expected company tax receipts helped improve the budget position by $10 billion in the update released on Monday, improving the outlook for 2017-18 by $5.8 billion.

"The Trump tax cuts are coming," Mr Morrison told a Parliament House press conference. Allowing Australian rates to stay high while others fell would kill the goose that laid "the golden egg".

Australia's Senate has passed only $24 billion of the government's $50 billion package of company tax cuts, cutting the 30 per cent rate for small businesses but not for big ones. President Trump is within days of cutting the US rate to 21 per cent.

"When you have the United Kingdom going down to 17 per cent and many jurisdictions, even France now going to 25 per cent, we can't leave Australian workers behind," Finance Minister Mathias Cormann told the press conference.

"The future of job security and the future career prospects and wages growth of Australian workers depend on the Senate passing the government's company tax cut."

The government needs the support of 10 crossbench senators. Resignations and disqualifications since the July 2016 election mean that next year six of them will be new.

Senator Cormann said the $10 billion boost was so big that after this financial year the government would no longer need to borrow to fund day-to-day business.

"That's a year earlier than anticipated at the time of the budget," he said. It would be the first time since the global financial crisis.

The fastest jobs growth in decades meant less was being paid out in Newstart and other benefits. Measures taken in the Coalition's first budget to slow the growth in welfare payments were bearing fruit.

Key measures in the budget update include longer waiting times before newly arrived migrants can access payments, including paid parental leave and family tax benefits.

From July 2018, the two-year waiting period for these payments will be extended to three, though some exemptions will apply for vulnerable groups and New Zealand citizens living in Australia. The measures will save $1.2 billion.

Savings from the university sector of $2.8 billion have been dumped after being blocked by the Senate. Instead, a series of measures including a freeze on Commonwealth payments to universities will deliver a net saving of $2.1 billion.

And $400 million will be saved over four years by withholding family tax benefit lump sums from people who have outstanding social security debts.

In what Victoria's treasurer Tim Pallas is describing as a slight, the update cuts Victoria's share of infrastructure funding from 10.3 per cent to 9.4 per cent. Victoria has 26 per cent of Australia's population, and 37 per cent of Australia's population growth. The NSW's share has climbed from 44.6 per cent to a mammoth 45.5 per cent. 

"The Prime Minister of Sydney has struck again," Mr Pallas said. "He continues to shortchange Victorians, while sending more money to his home state of NSW."

The update forecasts wage growth of just 2.25 per cent this year, down from the 2.5 per cent predicted in May. It forecasts 2.75 per cent in 2018-19, down from 3 per cent.

Offsetting this, the government is expecting better than previously forecast employment growth, with the unemployment rate expected to be 5.5 per cent by June 2018, followed by near full employment of 5.25 per cent in mid 2019.

The economic growth forecast has been shaved by a quarter of a per cent, down from 2.75 to 2.5 per cent. Consumer spending is forecast to grow by 2.5 per cent rather than 2.75 per cent.

"We had much lower-than-expected consumption growth in the September quarter, just 0.1 per cent, said Mr Morrison. "There was, rightly, a lot of concern about what was happening with household living costs. That's why the National Energy Guarantee and other measures have been put in place. We would hope to see  better consumption figures going forward."

Even so, the growth was forecast to climb to 3 per cent in 2018-19 on the back of a lift in private and public sector investment, both of which hade been revised higher.

Shadow treasurer Chris Bowen said he was happy to debate taxes with Mr Morrison because his priorities were "all wrong." 

"The reason the budget is still such a mess is because Malcolm Turnbull and Scott Morrison continued to shower the biggest tax concessions on the people in our community, the millionaires and multinationals, who need tax breaks least, as well as jacking up taxes on people who work in middle Australia," he said. 

In The Age and Sydney Morning Herald

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The jobs boom is real. Government can take the credit

The Bureau of Statistics has produced some shockers – wildly inaccurate employment statistics it has had to disown. But not this time.

An apparent employment surge in one month might be a statistical fluke, the result of a dodgy sample or flawed bad seasonal adjustment. But not a near-record surge that goes on for month after month, 14 of them in a row.

Over the past year a near-record 383,300 more Australians have been funnelled into employment, all but 87,700 of them full-time. In the past month (acknowledging the usual caveat) 61,600 were funnelled into work, all but 19,700 of them full-time.

We won't get the detailed breakdown until next week, but a look at the latest detailed breakdown we do have, for the year to August, shows that almost all of the jump in employment of 324,900 was in two industries: 'healthcare and social assistance' (130,600) and construction (104,400).

On Monday, Victorian Treasurer Tim Pallas said the state was in the midst of a construction boom not seen since Premier Henry Bolte in the 1960s and 1970s. It's getting hard to find the right workers and hard to find steel and cement.

Much of it is the result of government road and rail projects, as in NSW. Much of that is due to the previous Australian treasurer Joe Hockey, who in 2014 awarded incentive payments to states that "recycled assets", selling roads and other things they owned in order to build new ones. Victoria and NSW started early, recycling some of their assets before the Commonwealth incentives.They made use of the riches that had been flooding in to their treasuries as Sydney and Melbourne property prices pushed stamp duty takings sky high.

Once it was thought that government investment "crowded out" the private sector. Not at the moment. It's because of the government investment programs that the private sector is investing too, building projects on contract, handing them over to state governments (which will later sell them) and then starting on the next one. The known pipeline stretches out beyond 2027.

It's not the same as widespread employment growth (employment in the finance sector and in administration went backwards) but it's worth having.

It's centred around Melbourne. More than half of those 61,600 extra workers found their jobs in Victoria. Over the past year more than one-third found their jobs in Victoria, 35 per cent when measured on a trend basis. Thirty per cent found their jobs in NSW.

Population figures also released on Thursday show Australians and foreigners pouring in to Victoria. In the past year its population has swelled 2.3 per cent. The rest of the country's has swelled 1.4 per cent.

Victoria's employment growth, as well as Australia's, reflects much more than more people. In the past year its employment-to-population ratio has climbed from 61.8 to 62.5 per cent. The NSW rate has climbed from 60.4 to 61.3 and the national rate from 61 to 61.9 per cent.

But Victoria's faster population growth has left it with a higher unemployment rate than NSW; 5.5 per cent instead of 4.6 per cent.

So good is that NSW 4.6 per cent figure, that Commonwealth Securities senior economist Ryan Felsman says it could be effectively considered "full employment". It's rare for an unemployment rate to stay below 5 per cent for long.

Australia's national rate is 5.4 per cent, heading down into territory not seen since the Gillard government and the second of Australia's two big mining booms.

Malcolm Turnbull is wrong to say that what's happening is "a direct result" of his government's policies, just as Gillard and John Howard were wrong to say that the earlier mining-related jobs booms were a result of their policies. But he might be more right than they were. What we are seeing is in large measure a government-related jobs boom. Turnbull and his Treasurer Scott Morrison owe Hockey a lot.

In The Age and Sydney Morning Herald

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No easy answers as the world's second biggest gas exporter prepares to run short

Surely the world's second biggest exporter isn't about to run short of gas?

We are, according to the Australian Competition and Consumer Commission, although not for the reasons that are widely believed.

The conventional wisdom has been that when three big exporters opened six big liquification plants at Gladstone in Queensland and locked themselves into long-term supply contracts with Japan that they couldn't fulfil they had to commandeer gas that the rest of us would have used.

That did happen, but it's not the main reason we're about to run short of gas. It's that the exporters also shipped a lot of extra gas overseas, in addition to the gas they were contractually obliged to export.

It's easy to understand why. They spent billions building the liquification plants and they are trying to get a return. The ACCC has a particularly good insight into their thinking. It's used compulsory information-gathering powers to amass a trove of 20,000 industry board papers and reports.

The commission says next year the big three are planning to export 64.3 petajoules of gas that they are not contractually required to export. One petajoule is enough to supply the residential needs of a city like Warrnambool, Wollongong or Penrith for a year; or enough to supply one very big industrial user.

It says coincidentally 64.3 petajoules "accounts for the entire expected gas supply shortfall".

Next year's expected gas supply is 1901 petajoules. Domestic users – industry, business and households – will need only 642 petajoules. But the exporters are planning to ship out more than all of the rest: 1314 petajoules, resulting in a shortfall of 55 petajoules. (A worse-case scenario, also modelled by the commission, is a shortfall of 110 petajoules).

The ACCC says it would be possible for the exporters to ship out less than they are planning to without breaking contracts, and although they've made some moves in that direction, it is "unclear" why they haven't done more.

In the meantime, in a disturbing development for the businesses that rely on gas, many are being offered blind auctions. Rather than being given a price, they are are being asked how much they would be prepared to pay to keep the gas on. It's a one-shot game. If they don't offer enough they miss out.

One offered 20 per cent more than it had been paying and missed out. Those that get offers are being given very short deadlines to accept, often just two to five days, a "significant constraint for many large users who are required to obtain approval from company boards and executive management". Even when they accept offers, some have them withdrawn.

One A third of the commercial and industrial users the commission spoke to were considering either winding back production or closing down.

So it's understandable that Prime Minister Malcolm Turnbull is considering "pulling the trigger", using the new powers granted to him by Parliament to restrict exports from next year.

He hasn't pulled it yet because he would prefer persuasion. So would the commission. It points out that the big exporters are also big producers. If forced to wind back exports the big three might respond by winding back production. We'd be no better off.

In The Age and Sydney Morning Herald

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Trusts. Shorten says what Coalition Treasurers think

John Howard, Peter Costello, Joe Hockey ... Every living Liberal treasurer but the latest has wanted to tighten the tax treatment of trusts.

Howard did. As more and more high earners used discretionary trusts to divert income to children, some very young with tax rates of zero, he amended the law in 1980 to tax payments to them at the top marginal rate, just as if they had been made to the people actually making the investments.

As prime minister he commissioned business figure John Ralph to conduct an inquiry that recommended he close the same loophole for adults by taxing payments to them at the company tax rate, even if (especially if) those adults were stay-at-home spouses on tax rates of zero. His treasurer Peter Costello took up the idea and then shelved it under pressure from other members of Parliament.

As shadow treasurer before taking the job Joe Hockey said trusts should be taxed as companies, regardless of the tax rate of the apparent recipient.

"Currently we have a maximum personal income tax rate of 47.5 per cent, a corporate tax rate of 30 per cent, and trusts which pay no tax in their own right but with income taxed in the hands of recipients," he told the Institute of Chartered Accountants.

"The difference in tax rates according to the type of legal entity seems to have no basis in logic. It would be simpler and more logical for all three types of legal entity to have the same or a similar tax rate."

He backed down a day later, but what he was proposing was a tax rate of 30 per cent, administered through the company tax system. Labor will do it through the income tax system, taxing distributions at 30 per cent. If you're on a higher tax rate, you'll pay at that rate. If you are on a lower rate (and if you are, you may well be getting the distributions precisely for that reason) you'll pay 30 per cent.

Farm trusts, charitable trusts and philanthropic trusts will be exempt. So too will non-discretionary trusts such as those used by disabled children.

The money raised, $1 billion per year, is probably less than half what's out there. But it's a start. And Bill Shorten's come around. When Hockey spoke out in 2011, Shorten attacked him for creating uncertainty, saying: "Used appropriately, trusts are a legitimate tax tool, not a form of tax avoidance."

In The Age and Sydney Morning Herald

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MYEFO. Morrison believes we can't handle the whole truth, yet

It's looking like we'll never see a surplus.

The first Hockey budget said we would get one in 2018-19. The second said it would happen in 2019-20. Now Treasurer Scott Morrison's update says it won't happen until 2020-21.

Every year the surplus moves a year further away. It's like driving towards an unreachable horizon.

Rather than level with us about the state of the budget, Morrison and Finance Minister Mathias Cormann have chosen to make things look better where they can. Several zombie savings from the Coalition's first budget live on in the mid-year update, even though the government will probably never see the money.

The $5 hike in the Pharmaceutical Benefits Scheme co-payment is one. Health Minister Sussan Ley killed it right after the May 2015 budget, declaring she was "not going to waste time putting things through the Parliament that are going to be voted down by my colleagues". Worth $1.3 billion over four years, for the purpose of the update, it is still alive.

All up, more than $20 billion of neither dead nor alive measures remain in the mid-year update, $7 billion worth of which are in the last year of the forward estimates, 2018-19. This means that if they don't spring to life, that deficit will be $7 billion worse and a surplus still further away.

Even though the iron ore price has collapsed from about $US60 a tonne to $US37 since May, the update assumes $US39 instead of $US48, a figure that's meant to hold for the rest of the next two years. Westpac's Bill Evans thinks that's bold. After all, the iron ore price is sliding. If it did stabilise it would be somewhere below, rather than above, where it is now.

Morrison's decision to play down the bad news is understandable. He reminded us that we are about to go into Christmas. There is "fresh momentum emerging in our transitioning economy". It would be wrong to threaten it.

It would certainly be wrong to hack into the budget, and Morrison hasn't. The announced savings do little more than compensate for the extra spending announced since May. Seriously cutting in order to return quickly to surplus would "have consequences".

The Treasurer didn't spell them out. The worst would be to snuff out the emerging economic recovery and bring closer the prospect of a recession. The recovery we've had so far is fragile. Even the boost in employment is centred in one state if we are to believe the Bureau of Statistics.

While the update has boosted the outlook for employment (the unemployment rate should fall to 5.5 per cent by mid-2017), it has downgraded nearly everything else. The economy will grow by 2.5 per cent this year instead of the earlier forecast of 2.75 per cent. Next year it will grow by 2.75 per cent instead of 3.25 per cent.

We are going to have to address the deteriorating budget outlook soon, even if the outlook remains fragile. The best way to do it would be to introduce measures that will take effect slowly, in the future. Next year's tax white paper provides the perfect opportunity.

In The Age and Sydney Morning Herald

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Jobs growth is nothing like the 71,375 Michaelia Cash trumpets

No one can accuse Employment Minister Michaelia Cash of failing to take advantage of an opportunity.

Presented with official employment figures that were literally incredible (impossible to believe), she took them at face value and trumpeted them in tweets and in a press conference as a triumph for her government.

There were 71,375 more Australians in jobs last month and 301,725 more in jobs over the year, and since January the unemployment rate has tumbled from 6.4 to 5.8 per cent.

"It equates to around 2500 jobs per day," she told the press conference. "Over the calendar year, it's the highest jobs growth since 1989."

She could have added that it equates to one new job every 12 seconds, which it does if the jobs were only offered in working hours. It's even more than the 56,100 new jobs created in October, and way above the long-term average of 15,000 per month...

 

Since the Government came to office 425,800 jobs have been created #auspol pic.twitter.com/iBrpkRv4zN

— Michaelia Cash (@SenatorCash) December 10, 2015

 

But it's not the real thing. The Bureau of Statistics makes that pretty clear. It's had a run of misfortune with its sample rotations.

The employment survey is massive - 26,000 houses and flats each month, representing about 50,000 people. But they are not always the same people each month. Every survey one-eighth of the survey is "rotated out" and a new one-eighth is "'rotated in". It stays for eight months.

Occasionally, the one-eighth that is rotated in is very different from the one-eighth that is rotated out, making the number of people in work appear to either jump or fall, even if the employment status of everyone in the survey hasn't changed.

It happened in October, and the bureau was upfront about it. It said then that only half of the reported jump in employment would have been seen if it had examined just the participants present in both surveys.

Now it has happened again, for the second month in a row. The bureau says that if it had restricted itself to comparing like with like, employment would have climbed a mere 5300 in November, a fraction of what was reported.

The dollar soared more than three-quarters of a cent on the news, climbing back up above 73 US cents. The traders weren't waiting to find out the truth, which is probably that employment is growing, but more slowly than we are being told.

The minister was asked whether she had concerns about the reliability of the figures. She said she did not.

In The Age and Sydney Morning Herald

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Off the table: why the GST won't be lifted to 15 per cent

So out of favour is the idea of increasing the GST that by the time the government releases its tax options paper in the new year, a 15 per cent GST might not even be on it.

The thinking in Canberra is that there's no point listing it as an option if the Turnbull government has no intention of doing it.

Prime ministers Abbott and Turnbull undertook to examine the GST at the request of the states, and the Treasury is still doing so. It's continuing to carry out an analysis of winners and losers which won't be complete until the new year, but the end result is already apparent.

There's a load of trouble in it for the Commonwealth. It is far more difficult to compensate the losers than it was back in 2000 when the GST was introduced. Back then the tax-free threshold was only a third as big as it is today, meaning there were few Australians who couldn't be compensated with tax cuts. These days most self-funded retirees pay no income tax, meaning they can't be compensated with tax cuts either.

About half of what was raised would have had to be given back, and probably more when those who missed out started complaining.

Extending the GST to fresh food was never going to happen. Extending it to private schools and private healthcare would have penalised Australians who looked after themselves, or that's the way it would have been portrayed. Schools, hospitals, parents and patients would have their hands out. All to enrich the states, who wouldn't have thanked the Commonwealth; or to cut the income tax rates of consumers, who wouldn't have thanked it either.

Fifteen years on, few Australians remember the tax cuts that accompanied the introduction of the GST, but they remember the GST.

Scott Morrison has formed the view that the states are perfectly capable of fixing their own financial problems without him shouldering the political burden of pushing up the GST. If they wanted, they could impose and increase land taxes, the most efficient of them all. Land can't escape.

Without an increase in the goods and services tax, there's a good chance the states will look at land taxes, especially as neither Morrison nor Turnbull is keen to give them back the money Joe Hockey ripped out of their budgets in his first.

With an increase in the GST effectively off the table, the real talk about tax can begin.

In The Age and Sydney Morning Herald

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Lifting the GST to 15 per cent is far harder than it seems

The agenda paper prepared for Thursday's treasurers' meeting ought to come with a big red stamp that reads "danger".

All but one of the options listed for boosting the GST are fraught. Each requires "compensation".

If the GST was lifted to 15 per cent, households earning up to $100,000 would need to be completely compensated. Households earning up to $155,000 would need to get back "at least half of the extra GST revenue".

It would end up costing "at least half of the extra GST revenue".

The real danger is that "at least half" would be only the beginning. If the treasurers so much as mention compensation in public, they run the risk of being heard to make commitments.

"Making commitments now risks overcompensation for households and adding significantly to the cost of household assistance," the paper warns.

Lifting the GST to 15 per cent would raise $32.5 billion, the Treasury says. But $16 billion to $17 billion of it would be given back in compensation, which would be messy...

Some Australians would get increased cash benefits: pensions, family payments and the like. Others would get tax offsets. The retirees who neither pay tax nor get get benefits would get a seniors concession allowance. Others who missed out would get a "transitional payment".

And this time it would be harder to convince people the compensation would last. When the Howard government introduced the GST in 2000 it pushed up family allowances to compensate. Fifteen years on, the Turnbull government is planning to wind back those increases because it faces budgetary problems.

The only option for boosting GST revenue that wouldn't need compensation is extending it to financial services. It wouldn't raise much either, but the people it would hit most would be too well off to need compensation.

Victoria's option of lifting the Medicare levy from 2 to 4 per cent of income is simple by comparison. It would raise $15 to $16 billion, about the same as would the GST hike rise after compensation, but because the low-income earners are already excluded from the levy, it could be done without paying anyone anything.

It's looking like a long meeting.

In The Age and Sydney Morning Herald

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Like the Black Knight. Why the tax white paper needs a reset

The tax white paper was badly in need of a reset. Like the Black Knight in Monty Python and the Holy Grail, the Treasury was continuing to draft the paper after its arms and legs had been chopped off.

Originally told that nothing was off limits, the Treasury was then told (through the prime minister via the media) that superannuation was off limits, that negative gearing was off limits, and that capital gains tax was off limits.

It had already got the message that mining taxes and carbon taxes were off limits.

With so few arms left to reform the tax system, it would have produced a document that would have not only lacked impact at the time it was released, but that wouldn't have even been filed away for bringing out when the time was right.

When it restarts work it will get a clearer idea of the priorities of the new administration, and it will be able to make it an administration document.

That's what a white paper is: a statement of the goals to be pursued by the administration. (The "green paper" that precedes it is a statement of options. It's green because it's not fully formed).

It is highly likely Malcolm Turnbull will lead by example. There's nothing to stop him making a few quick symbolic changes to the tax system before the white paper process is complete, giving the Treasury and the public an indication of his priorities.

The green paper would be postponed until the first half of next year, and the white paper, with concrete serious options for further tax reform, until after the late 2016 election.

It's easy to guess at the measures that won't be candidates for quick reform.

The goods and services tax can't be changed quickly. It would need the agreement of the states, and it would need a lot of time to persuade the public.

While cutting company tax might be a good idea, it's a difficult case to put before an election, and (as was generally agreed at this week's Australian Financial Review tax summit) it's expensive to do to the extent that would actually make Australia competitive.

The government has already cut the small business rate from 30 per cent to 28.5 per cent. Doing the same for big business would scarcely make any difference in a world where some of Australia's competitors offer tax rates as low as 16 per cent.

By instinct Turnbull would like to cut personal income tax and fund the cuts by removing the "swiss cheese" raft of exemptions and concessions that make the system so complex. He said so, shortly joining Parliament.

But that's very hard work. It can't be done in the next few months.

What can be done, right now, is to blunt superannuation tax concessions. The biggest of them are overwhelmingly directed to high earners, who don't need them to put away for their retirement.

Former NSW treasurer Michael Egan told the tax summit it was a scandal that he and everyone else well advised over 60 paid nothing on their super, thanks to Peter Costello.

"It is the worst thing that any treasurer has ever done in the history of federation," he said. "It is a treasurer's responsibility to protect the revenue, and he didn't."

Action on super, perhaps limiting the absurdly generous amounts high earners can pump into funds each year in order to pay less tax, would raise big dollars straight away. It would show that the new Prime Minister lacked the blindspots of the old one. It would be a downpayment on more complete tax reform when the time comes.

In The Age and Sydney Morning Herald

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FOFA. How the Commonwealth Bank got what it wanted, quietly

When someone is proud of what they have done they make an announcement. When someone is not, they keep quiet. With no announcement whatsoever last Thursday morning finance minister Mathias Cormann had the Governor-General sign into law regulations that neutered parts of Labor’s financial advice rules.

The Financial Planning Association is generally supportive of Labor’s rules. The Commonwealth Bank is not. In the runup to the election it gave the Coalition $56,000. It wants to continue to reward its staff and advisers for steering customers into the bank’s own products. So severe is the pressure that a union survey obtained by Fairfax Media this week finds stress, depression and bullying among staff as they try to meet expectations.

A few hours after the Governor-General quietly signed the changes into law thursday morning the Senate economics committee called for a royal commission to the behaviour of the financial planning division of the Commonwealth Bank.

It found “forgery and dishonest concealment of material facts".

On Thursday Mathias Cormann said he would comment on the report when he had “worked my way through it”. At no point did he acknowledge that earlier that day he had had the Governor-General sign into law regulations that would enable the bank to keep rewarding staff for the volume of business they wrote, one of the practices that concerned the Senate inquiry...

The next morning on the ABC’s AM program he called on the Commonwealth “to provide a proper response to the allegations that have been raised”.

He defended the changes to the financial advice law he was “proposing” saying: “The changes that we are proposing to financial advice laws in no way interfere with what is required in order to ensure that these sorts of events don't happen again.”

At no point in the interview did he acknowledge that he had actually changed the regulations one day earlier.

Later on Friday asked by Fairfax Media when the Governor-General was going to sign into law the regulations Senator Cormann’s office said it “had no idea”. It would make inquiries. It never returned the call.

The Commonwealth Bank got what it wanted, but quietly. It wasn’t the time to make a fuss.

In The Age and Sydney Morning Herald

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