How to help first home buyers, while keeping negative gearing

Malcolm Turnbull made the wrong call defending negative gearing in order to get re-elected. He needs to crawl back slowly. There's no shortage of people on his own side telling him to.

The latest is Jeff Kennett, who was Victorian premier just as negative gearing began to take off at the end of the 1990s. On Wednesday he tweeted: "It is inevitable that the rules affecting negative gearing will change – have a responsible bipartisan discussion in 2017." Victoria's present Treasurer, Tim Pallas, will echo Kennett at a round table of treasurers on Friday.

"It's all very well the feds telling us we need to boost supply, but whenever we do, their negative gearing and capital gains tax rules direct much of it away from first home buyers towards investors," he says he will tell the meeting.

The NSW Coalition Planning Minister and Premier agree with him, saying they can't see why someone buying a second house should get a tax deduction a first home buyer does not.

Graph the proportion of home loans going to investors since the early 1990s (which is as far back as the figures go) and you'll find out it began at 16 per cent, then climbed to almost 40 per cent, before soaring to nearly 50 per cent after the headline rate of capital gains tax was halved and negative gearing exploded. Would-be owner-occupiers (let's call them genuine home buyers) went from having not much competition to having half of all the money lent for housing amassed against them.

Then things improved for a while, especially during the global financial crisis when investors baled out, before lending to investors grew again and soared back way above 50 per cent to a record 55 per cent, at which point the Australian Prudential Regulation Authority (APRA) intervened to impose tougher rules on banks lending to investors, knocking the proportion back to 44 per cent. But it's growing again, and is again approaching 50 per cent.

John Alexander is the Coalition MP who chaired the inquiry in which the Reserve Bank's head of financial stability explained that it was "a truism that if an investor is buying a property an owner-occupier is not".

The inquiry was sidelined in the election campaign but has been reopened and will report by Christmas. Which is where it gets fascinating. Turnbull and Morrison are genuinely concerned about the inability of ordinary Australians to buy houses and are open to ideas.

So long as they can stick to their stated positions that they won't change the capital gains and negative gearing rules, they would be more than happy to introduce changes that would hold back investors and reskew the housing market toward genuine buyers at more reasonable prices, returning the Liberal Party to its historical position of championing a home ownership rate that was the envy of the world.

Within the Coalition's housing work group Alexander has been tossing around an extraordinary scheme derived from the hearings that has the potential to guarantee it the next election.

It's in three parts: The first would require APRA to continually adjust the rules governing how easily banks could lend to investors, each month; just as the Reserve Bank adjusts interest rates each month. But rather than targeting consumer price inflation as the Reserve Bank does, APRA would target house price inflation. Too much – perhaps more than doubling every 10 years – and it would make it harder to lend to investors, too little and it would be more generous. Home price growth would become predictable rather than scary.

The second part would be to advantage genuine buyers. Right now they are required to pump 9.5 per cent of their wages into superannuation. Instead they could allocate that 9.5 per cent to pay off the principal (but not the interest) on home loans, meaning they probably wouldn't need deposits and could start buying early. The usual criticism of any measure that advantages first or genuine homebuyers is that it would push up prices leaving them no better off. But this wouldn't, because of the role of APRA in restraining loans to investors to restrain price rises. It would just tilt the market back towards owner-occupiers.

The super funds would be upset, especially the union-dominated default funds, but they are not the Coalition's concern. The money put into owner-occupied housing instead of super would buy those who chose to do it more security than could super. Which brings us to part three.

Because part of the homes would be owned as "superannuation", that part would count toward the pension means test, keeping a lid on the cost of the pension. And because steadily increasing home prices would be as good as guaranteed, those increases could be borrowed against to fund fortnightly payments in retirement. For someone who bought a house at 25 and then retired at 65, the payments would be big.

It's a genuinely innovative idea, and it needs a lot more discussion. But if Turnbull could pull it off, or something like it, he would stand a chance of becoming the greatest Australian prime minister since Menzies. That's why he is listening.

In The Age and Sydney Morning Herald

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Win the election, buy some wheels. Seriously

Before the election that swept Tony Abbott to power in 2013, his incoming treasurer, Joe Hockey, forecast an explosion of spending as consumers opened up their wallets in celebration of a Coalition win.

As unlikely as it sounded, that's exactly what happened for some voters, even though the official figures didn't show it at the time.

The Reserve Bank has gone back and examined spending by postcode and used it to calculate what happened to spending by the supporters of each side of politics.

In the years after the 2013 election, Coalition supporters bought far more cars than did Labor supporters. Yet in the years after Labor took office in 2007, it was Labor voters that spent big on cars, an effect economists Christian Gillitzer and Nalini Prasad describe as far from trivial.

"Going from a hypothetical postcode with only Liberal/National voters to another postcode with only Labor voters is estimated to have increased per capita motor vehicle purchases by around 30 per cent four years after the 2007 election," they say in a research discussion paper released on Monday.

The purpose of the study was to try to find out whether the answers to questions in consumer confidence surveys reflect actual buying intentions. Those surveys invariably show that after each change of government, supporters of the party that won suddenly become more rather than less confident than supporters of the other side. If the surveys reflected actual buying intentions their purchases would shoot up relative to those of the other side, even though overall purchases hadn't changed.

That is what the study found: "evidence that self-reported spending intentions are indicative of actual consumption behaviour". And it has told us something else: we take politics seriously enough to vote with our wallets.

In The Age and Sydney Morning Herald

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The case for a basic income, no questions asked

What if the right to an income was as basic as the right to vote?

In Australia you don't get money unless you work, or can prove you've been trying to find work or are disabled or jump through some other sort of hoop. At 65 you get the pension.

In Alaska every citizen gets $US2000 a year, no questions asked. It's a dividend from royalties from oil extracted in the Arctic Circle. In Kenya a $30 million trial is about to give 6000 citizens a basic income for 12 years to find out what difference it makes. An earlier trial found it lowered their stress hormones, improved their psychological health and cut their spending on alcohol and tobacco. A trial in Uganda found those who got automatic payments invested more in education and starting up their own businesses. Four years on they earned 40 per cent more than those who hadn't.

That shouldn't be surprising. Many of us who start up businesses or enrol in courses rely on the income of a partner or parent to make it possible. Those denied that support can't do it.

Yet in Australia we seem to believe that if we simply hand out money, people won't work. Social Services Minister Christian Porter revealed on Friday that in the past year 3000 Newstart recipients had turned down offers of employment – that's 3000, out of roughly half a million. Even if we can accept that most people on benefits actually do want to work (either in paid employment or in equally valuable voluntary caring roles) many of us still seem to feel there's something morally wrong in delinking rewards from work.

Yet if we are honest, those of us with good jobs should probably admit that we have them largely through luck and the accident of where we were born. Much of our income isn't the result of our own efforts, it's a dividend from our society – a dividend we deny those without those jobs.

Switzerland just had a referendum on providing each of its adults with a basic income of $3450 per month. It failed. Finland, Canada and the Netherlands are about to run trials. In Australia, and New Zealand where the idea is being promoted heavily, the basic income might be $12,000 per year – not enough to live on, but a fallback that would enable hard-up jobseekers to turn down potentially dangerous or illegal jobs such as prostitution.

Yes, it would also go to the most well-off, Gina Rinehart and James Packer among them. But that's how it is with rights – they're universal. And we already hand those well-off Australians benefits such as tax-free thresholds. If a basic income replaced the tax-free threshold and was extended to all of us, Rinehart and Packer would be no better off and the payments wouldn't be too expensive.

The French poet Victor Hugo famously proclaimed there was "nothing more powerful than an idea whose time has come". As automation steadily eliminates even the kind of well-paid jobs most of us have always wanted, that time may be approaching.

In The Age and Sydney Morning Herald

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Wind can be fitted up for almost anything

Who better to ingratiate himself with Donald Trump? Joe Hockey is our man in Washington. Remember his thoughts about wind turbines, back in 2014 when he was Tony Abbott's treasurer?

"If I can be a little indulgent," he asked an extremely eager radio host. "I drive to Canberra to go to parliament and so on, I drive myself, and I must say I find those wind turbines around Lake George to be utterly offensive. I think they are just a blight on the landscape."

Trump thinks they're utterly offensive too.

"I don't know if you've ever been to Palm Springs, California; it looks like a junkyard," he told a US radio host a few days before the election.

"They have all these different companies and each one is made by a different group from, all from China and from Germany, by the way, not from here, and you look at all these windmills, half of them are broken, they're rusting and rotting. It looks like a poor man's version of Disneyland; it's the worst thing you've ever seen."

And worse still, wind power "kills all the birds".

"I don't know if you know that … thousands of birds are lying on the ground. And the eagle. You know, they put you in jail if you kill an eagle. And yet these windmills kill them by the hundreds."

And wind power sent South Australia into a blackout on the night of the big storms on September 28. You must have heard that. We've been told often enough.

Within minutes of the blackout, Twitter was alive with comments such as: "Bring back coal to SA! – this is bloody unacceptable to have a whole state sitting around in the dark. Aren't we a developed country?"

That one came from @rubensohn_gemma, a Sydney resident from Double Bay whose credo was "work hard to shop hard" and who, coincidentally, had signed up to Twitter as the storms hit. She wrote only about renewable energy on Twitter, as did dozens of new users who signed up that night, all of whom had a few other things in common: they used stock photos rather than real photos for headshots, they followed a Bangladeshi data entry specialist who earns a living "forum posting, content writing" and they followed the Twitter account of the eastern region of the Chamber of Minerals and Energy of Western Australia.

After Buzzfeed News asked the chamber about the accounts, all of them vanished. The chamber said suggestions that it was linked to their creation were "completely false".

Other Twitter accounts were real. Chris Uhlmann is the ABC's political editor. He suggested that night that the wind turbines had stopped turning because the wind was blowing too fast, a tweet that seems to have been since deleted.

The investigation by the Australian Energy Market Operator found that was not why the power went out. What did happen was that three of the four transmission lines bringing electricity into Adelaide from the north were cut after the pylons holding them up were blown over by the wind. Most of what was being generated by wind couldn't get through. Several of the generators shut down to protect themselves.

Energy specialist Hugh Saddler of Pitt&Sherry thinks that if the old coal-fired stations at Port Augusta had still been operating they too would have shut down for the same reason.

Without anything like as much electricity as it needed, Adelaide put a sudden strain on the connector from Victoria and it too shut down to protect itself.

AEMO says that all up only 20 megawatts of wind generation was lost because of excessive wind, barely enough to make a dent in the 883 megawatts of wind power being supplied at the time or the 1826 megawatts of power being supplied in total.

Prime Minister Malcolm Turnbull fed the hysteria by calling the blackout "a real wake-up call" for reliance on renewables. After at first refusing to blame renewables, his Energy Minister, Josh Frydenberg, fell into line, saying there was a need to re-examine the stability and reliability of the grid, with South Australia and other states hurtling towards ever-higher targets for the use of renewables.

Now he is saying it about Victoria, whose oldest and dirtiest coal-fired power station closes down in March because the French owners want to concentrate on renewables.

Hazelwood accounts for 20 per cent of Victoria's output. But it's hard to see how replacing that 20 per cent, predominantly with the output of underutilised NSW black coal-fired power stations, will make much difference. It'll push up wholesale prices because black coal is more expensive than highly polluting brown coal, but retail prices bear little relation to wholesale prices.

Pitt&Sherry point out that so far this century NSW and Victorian wholesale prices have climbed not at all, while in real terms retail prices have almost doubled. And by adding to supply, the growing number of wind turbines will at times take the edge off peak prices, meaning there might be little difference.

But don't expect to hear that from our leaders. Wind is offensive. It can be fitted up for almost anything.

In The Age and Sydney Morning Herald

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Wage growth sinks amid record waits for pay rises

If you think it has been a long time since you got your last pay rise, you're right. The Bureau of Statistics says over the past four years the average wait has climbed from 12 months to 14 months – the longest on record.

And the increases themselves are getting smaller. The bureau says the average increase received by a worker who did get one has shrunk from 3.6 per cent to 2.3 per cent.

Combined, the longer wait and the smaller average increase pushed wage growth down to 1.9 per cent in the year to September, the first time annual wage growth has been below 2 per cent since the bureau began compiling the index in the late 1990s.

The only good news for someone hoping for higher pay is that almost everyone is in the same boat. For the first time since the index began, no occupation group has recorded wage growth of more than 2.5 per cent.

In a paper released with the wage price index, the bureau says the proportion of wage rises that are "large" (above 4 per cent) has fallen from 29 per cent to 7 per cent. And the average size of a "large" increase has dived from 7.5 per cent to 5.75 per cent.

"The declining share of large rises has been apparent across all industries," says the paper, prepared by Reserve Bank economist James Bishop. "Although the shift has been largest in mining and the industries exposed to mining."

"During the resources boom there was a high dispersion in wage growth across jobs, with especially strong growth in jobs exposed to mining and weaker growth in the many other parts of the economy. The reduction in the dispersion also reflects the presence of 'downward nominal wage rigidity' – namely, an unwillingness or inability on the part of firms to reduce nominal wages."

Over the three months to September, the wage price index grew just 0.4 per cent, the lowest growth on record. On a quarterly basis it has fallen behind the consumer price index, which climbed 0.7 per cent in the September quarter. Over the year to September, the CPI grew 1.3 per cent.

On Tuesday, Reserve Bank governor Philip Lowe told the Committee for the Economic Development of Australia: "We hope inflation will be a bit higher, and there are reasonable prospects that inflation will return to 2.5 per cent.

"You shouldn't be worried that inflation was going to get stuck at 1.5 per cent. I think that's very unlikely."

In The Age and Sydney Morning Herald

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Donald Trump could be disastrous for the Australian economy

President Donald Trump will declare economic war on our biggest customer, wipe unprecedented amounts off global stock markets, usher in extraordinary financial instability, and risk turning the world's biggest economy into a basket case by pushing its national debt past 100 per cent of GDP.

And that's just what's known about his economic program. The Economist observed in the leadup to the election that while his policies were unusually short on detail, their direction "could not be clearer".

China takes 1 in every 3 shiploads of Australian exports, more than any nation has since Britain in the 1950s according to consultant Saul Eslake. Even small variations in what it wants sends our budget into conniptions.

Trump has promised from "day one" to designate China a "currency manipulator". That would allow him to whack a giant 45 per cent tariff on everything it tries to sell to the US, a prospect he has mentioned with relish. The US is China's biggest market, taking 18 per cent of everything it sells. China would have to retaliate (somehow), raising the prospect of a trade war that would damage both China and the US. War gaming by the respected Peterson Institute says it could push the US into recession by 2019. The last time that happened, during the global financial crisis, Australia avoided recession with help from China. We mightn't get it a second time.

In answer to questions after his first speech as Reserve Bank governor last month, Philip Lowe described the prospect of a Trump presidency as less than benign.

"We don't have a Trump plan," he added. "What we do is have a generic response plan to a whole range of shocks."

Financial markets lost $US2.5 trillion on Wednesday as it became apparent Trump was likely to win, just as they slid on each of his successes and surged on each of his setbacks throughout the campaign. US-Australian economist Justin Wolfers and his colleague Eric Zitzewitz have used those gyrations to put numbers to the Trump effect. They say a Trump win will knock 15 to 30 per cent off the value of the US stock market (during the global financial crisis it lost 50 per cent) and do much the same to other markets. US interest rates will climb 0.25 points.

It wasn't all bad for Australia on Wednesday. Shares in the gold miner Newcrest shot up 9.8 per cent.

Importantly Wolfers and  Zitzewitz say markets will become far more volatile, making it harder to plan, in what appears to be a first for a Republican win. They've analysed the market reaction to every presidential election going back to 1880 and found either a Republican "premium" or a "discount" whenever there was a significant move.

This is the first Republican discount, or as they call it, "Trump discount", a result all the more remarkable because Trump's policies are explicitly pro-business. Trump has promised to cut the US company tax rate from 35 per cent (a good deal higher than Australia's 30 per cent) to just 15 per cent.

But he'll spend big. The National Australia Bank and the US Tax Policy Centre say his promises will add $US7 trillion to US government debt over the first decade. His expansion of the military alone will add $US450 billion. Clinton's would have added just $US200 billion. The Economist describes her budget plans as "fiddly". It describes his as "absurd". The Committee for a Responsible Federal Budget says after 10 years US national debt will hit 105 per cent of GDP under Trump. Under Clinton, it would hit 86 per cent.

In an open letter, 77 US Nobel Prize winners have condemned Trump's platform, 20 of them winners of the Nobel for Economics. They are concerned about more than trade and more than recession. Trump says he will walk away from the hard-won consensus on the need to tackle climate change, describing global warming as a hoax "created by and for the Chinese". Australia's commitment to adjust its emission targets in line with those of its trading partners is about to become less onerous.

And he intends to build a wall along the Mexican border at a cost of $US5 to $US10 billion (funded by Mexico) in order to keep out illegal immigrants. Those already in the US would be deported (as happens here) rather than periodically made legal (as has happened in the US up until now).

On election eve the Economics Society and the Monash Business School polled 36 leading economists on whose presidency would be best for Australia. Thirty said Clinton, none said Trump.

One of the most stridently anti-Trump was 89-year old Max Corden, the doyen of Australian economists who is still working at Melbourne University. He said Trump would be a disaster for the world, "like another Hitler or Mussolini".

Unlike many who evoke Hitler, Corden has experience of him. He remembers the excitement when as a tiny boy in Germany he snuck out of his home to wave at Hitler's motorcade. He remembers his dad being interned in a concentration camp, and he remembers the incredible good fortune that allowed him to escape to Australia.

In The Age and Sydney Morning Herald

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And you thought the TPP was secret. The RCEP is even worse

There's another massive deal you've never heard of. The Trans-Pacific Partnership – negotiated in secret between Australia and 11 other nations over 10 years – appears to be dead.

It would have allowed US corporations to sue Australian governments in offshore tribunals, as they have long wanted to do, effectively trumping our own High Court. Donald Trump himself opposes it (bless him) as does Hillary Clinton, although she once helped to draw it up.

Whoever is elected president on Wednesday has pledged to abandon it.

So you would think we would be safe. Except that, in what The Wall Street Journal calls a long-shot, Barack Obama is going to attempt to push it through in the so-called lame duck weeks between Wednesday and the inauguration of his successor in January. Hundreds of economists and law professors have urged him not to, saying the provisions of the TPP would allow foreign investors – and foreign investors alone – to bypass "the basic procedures of the US justice system".

US corporations can't do it to us at the moment because the Howard government refused to include those provisions in the Australia-US Free Trade Agreement.

Right now, if US corporations want to sue us and don't find our court system to their liking, they have to pretend to be headquartered somewhere else, as the Philip Morris tobacco company did when it purported to move ownership of its Australian operations to Hong Kong in order to take advantage of the provisions of an obscure Australia-Hong Kong treaty after losing its case against our plain packaging laws in the High Court.

So far that case cost us more than $50 million to defend, and although we successfully fended off Philip Morris, we are yet to be awarded costs. It's a prospect that would terrify a smaller country.

Now there's a fresh move to have us face it time and time again, even if Obama fails to revive the Trans-Pacific Partnership. The TPP would have had 12 members. The lesser known RCEP – the Regional Comprehensive Economic Partnership – would have 16 members including China, accounting for one half of the world's population.

Leaked chapters of the draft agreement contain the same sort of investor-state dispute settlement procedures as the TPP. Although the Foreign Affairs website doesn't say so, our assistant trade minister Keith Pitt slipped into the Philippines on Friday to advance the negotiations.

Whereas in the TPP, Australia's delegations took community as well as business groups into its confidence, so far with the RCEP it's only been business groups. Patricia Ranald of the Fair Trade and Investment Network says that might be because, at least to start with, the US is excluded. It's a relatively open democracy. China, Indonesia, Malaysia and other RCEP members are not.

Just as with the TPP, our negotiators are releasing no texts and submitting none of what's proposed to cost-benefit analysis. There's every chance it will cut across rather than intermesh with the TPP and our other trade agreements. There's every chance we won't be told until it's too late.

In The Age and Sydney Morning Herald

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Why Turnbull should split the budget in two

Now that Turnbull's in charge we can all relax, right? We can certainly relax about politics. With the country well-run (and likely to be well-run for some time) there's less to worry about. But it would be a huge mistake not to worry at all.

In the aftermath of the mining boom and the real estate boom our living standards are set to flatline. GDP per head actually fell in the June quarter, for the third time since the financial crisis. Without something to pick up from the mining boom and the receding real estate boom, we will come to resemble Japan. For two decades now Japan's been happy enough and rich enough, but no richer. It's learnt to live with zero growth.

Also, >our budget keeps getting worse. Interest payments on debt will cost $11.6 billion this financial year, a sum the government has to borrow to meet because it is spending more than it earns. Unless we find an escape hatch, debt payments will one day cost as much as defence or education - especially when interest rates rise. Our budget will be so weighed down with debt payments there will be no easy way to get back to surplus.

And despite ultra-low interest rates and an army of soon to be freed construction workers we're not building the kind of things we'll need. Abbott boasted that he was overseeing the biggest infrastructure spend in Australian history. He wasn't. His last budget set aside almost nothing new for infrastructure. He wasn't able to actually spend big because he didn't want to push the budget further into deficit and risk Australia's credit rating (as well as his bragging rights for being tougher on the deficit than Labor).

Whatever he tried blew up in his face. When he talked about boosting productivity, unions saw it (often rightly) as an attack on conditions. When he brought in measures to bring down the deficit he was attacked (rightly) for going after the pension and family benefits rather than the tax breaks enjoyed by the wealthy.

And when he did try to spend something on infrastructure he was attacked (rightly) for his curious determination to spend it on roads even where their costs exceeded the likely benefits.

Turnbull has an opportunity to succeed where Abbott could not, and there's no time to lose.

The budget deficit has to be brought down; not necessarily straight away, but the mechanisms have to be put in place straight away so  they are locked in with a guaranteed improvement over time. Abbott's treasurer was on the right track. Hockey's first budget harnessed the power of compound indexation to restrain spending by more and more as each year passed. Pension and disability payments were to climb more slowly in line with prices rather than wages. The Senate opposed the change because it was seen to be unfair. But if he had created a credible sense of urgency about the budget and imposed the same sort of pain on high income superannuants and investors living off lightly taxed capital gains he might have succeeded.

Turnbull is in a position to create a credible sense of urgency. Unless he does, and unless he does it in the December budget update, the deficit will become harder and harder to fix.

He should do it by openly explaining the problem and saying he wants us all to do our bit, no matter how well off. He should wind back super tax concessions so that high earners no longer get the most (as a proportion of their income). And he should wind back the capital gains tax concession so that investment in housing is no longer particularly tax-preferred and negative gearing no longer particularly attractive.

And he should lift the goods and services tax. Victoria's premier Daniel Andrews has opened the door, saying that if a proposed increase is put to the 2016 election and approved, he won't stand in the way.

But fixing the budget won't allow Turnbull to give the economy a boost by investing in infrastructure. Or it wouldn't, without a revolution in the way the budget is put together.

Two weeks ago the government borrowed $4 billion for 3.345 per cent. What was unusual was that that the loan stretched out to 2039 - almost a quarter of a century. Until recently the government had only borrowed for 10 years. It's now tested the market and found that it is able to lock-in extraordinarily low rates for a generation. That's long enough to be able to safely fund the removal of level crossings or the Melbourne Metro, knowing that payments won't rise.

Turnbull would need to be sure that whatever he funded was the best possible value for money. That would mean listening to Infrastructure Australia, something Abbott didn't do when he poured billions into Melbourne's East West Link.

And Turnbull would need to change the very nature of the budget, starting in December. In modern times all spending and income has been lumped together.

Turnbull could separate "recurrent" spending and the income needed to fund it, from "capital" spending and  the borrowing used to fund it. That way, he could borrow big for demonstrably worthwhile projects while at the same time tightening the recurrent budget.

The ratings agencies are likely to buy it. Labor would too, if it had any sense. Turnbull would be treating us like adults and getting us out of a self-imposed bind.

In The Age and Sydney Morning Herald

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Productivity Commission: how big data could work for us

What if we were on the cusp of one of the biggest ever advances in productivity and we didn't recognise it?

That's how it must have been for Alexander Fleming with the discovery of penicillin, for university technicians with the development of the internet, and for Bill Clinton, who with the stroke of a pen in the year 2000, made highly accurate military global positioning satellites available for everyone to use for free.

Peter Harris believes we are on the cusp of another transformation about as big – one only made possible by the development of the internet and all the things that surround it.

It's the exploitation of data. On one estimate we are now generating as much digital data every two days (five exabytes) as we generated in an entire year at the start of the 2000s.

Some of it is cat videos. Much of it mundane. But an awful lot is useful, and his best guess is that only 5 per cent of the useful stuff is being used, a figure that puts us way behind the countries we usually like to compare ourselves to, especially Britain and New Zealand.

We are behind partly for privacy reasons, partly because potential users don't know what data government agencies hold, and partly because the machines that hold it often can't talk to each other, even within the same hospitals.

It is an outrage that sick patients still have to act as information conduits between healthcare providers (10 to 25 per cent of the medical tests ordered are thought to be duplicates) and a disgrace that 60 years after the Thalidomide tragedy we still don't link prescription data to hospitalisation records to get insights into the side effects of drugs.

Research that could have saved the lives of Indigenous women was delayed five years while the researchers waited for ethics approval to see cervical cancer screening data; researchers wanting to study the link between vaccination and admission to hospital have had to wait eight years and counting.

Harris runs the Productivity Commission. It is a measure of his belief in the importance of the data inquiry commissioned by the Turnbull government that he decided to chair it himself and personally briefed journalists on the contents of his draft report on Wednesday.

His first recommendation is that all government-funded entities create easy-to-access registers of everything they've got. He wants them published by October 2017. If anyone wants a machine-readable copy of something on a register, they should be able to get it for free or for marginal cost, unless there are powerful reasons for holding it back.

Given how much personal data so many of us willingly or carelessly give away every day, he isn't particularly concerned about the privacy risks of releasing de-identified personal data (and allowing it to be linked to other data, as the Bureau of Statistics wants to do with the census), saying the risks are "likely very small". Where there's a clear public interest, he wants researchers to be given access to private information in secure rooms.

Right now they are often required to destroy datasets they create in medical and other research, a practice he says is akin to "book burning". He would require them to keep it.

Really important information would be curated in "national interest datasets", overseen by a national data custodian who would report to the parliament.

But that's just half of it. Right now, in spite of a widespread belief to the contrary, you and I don't have access to our own data.

If I ask my music streaming service for details of my listening habits, or my search engine for details of my search history, or my insurer for details of my claiming history, or my supermarket for details of my shopping history, or my electricity supplier for details of my usage history, they are perfectly entitled to refuse to hand them over. I might want to take them to a competitor.

Harris wants to enshrine in law my right to take them to a competitor. Even better, he wants my providers to hand them to the competitors or brokers I select at my direction. I probably wouldn't be able to make much sense of a machine-readable account of my electricity use, but a competitor would.

Suddenly, competition could really work. And it would cost almost nothing. There would be no privacy concerns because it could be released only at my direction. Harris would also give me the right to request edits or corrections to the data firms have on me, to be informed about their intentions to sell or pass it on, to be able to order them to stop collecting it (at the risk of losing the service) and to appeal automated decisions that deny me services or charge me more on the basis of it.

He is talking about a revolution. It's a revolution we ought to embrace and direct, rather than sit back and watch.

In The Age and Sydney Morning Herald

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Steady at 1.5%: Reserve thinks it won't need to cut again

Don't bet on another interest rate cut.

Behind the typically bland language used by Reserve Bank governor Philip Lowe to explain Tuesday's decision to keep the cash rate on hold ("the board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time") lies a belief that things are about to pick up.

That's what he'll forecast in his first quarterly statement to be released on Friday, and what his predecessor Glenn Stevens forecast in his final quarterly statement released in August.

Developments since August have strengthened Lowe's confidence.

After sliding since 2013, the underlying measures of inflation have been steady at an annual rate of about 1.5 per cent for three quarters. After sliding since 2011, private sector wage growth has been broadly steady for four quarters.

Commodity prices are no longer sliding. They've been climbing since May, and they climbed another 9.5 per cent in October.

While the RBA doesn't think they'll continue to climb for too much longer (some of the recent increases in the contracted prices of coking coal have been too good to be true and dependent on temporary conditions in China), it doesn't expect commodity prices to fall back to where they were at the time of the May budget. They are not likely to depress wages and prices as they once did.

Mining investment has slid so far the RBA believes it's about to stop.

When that happens, it'll no longer be depressing employment, and the employment figures themselves aren't bad, even if part-time jobs are replacing full-time jobs. The bank believes having a job - any sort of job - is a lot better than not having one at all.

And it has received encouraging news from the retailers it talks to as part of its business liaison program. They say they are beginning to claw back pricing power.

After squeezing their margins in food, alcohol, clothing and luxury goods for ever so long, they are starting to feel they can charge a bit more.

If things continue like this, inflation will recover all by itself and the economy will grow at a healthy pace of around, then above, 3 per cent.

Lowe can leave the cash rate at 1.5 per cent. Things might change, they often do. But that's his central case.

In The Age and Sydney Morning Herald

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Myth busted: parents don't get more on benefits than working

Welfare experts have ridiculed a government claim that thousands of parents on government benefits earn more than if they had a job, saying it is built around a mathematical mistake.

The claim, published in The Australian on Friday and backed up by Social Services Minister Christian Porter, is that single parents with four children can get payments totalling $52,523 per year if they don't work but only $49,831 after tax if they work and receive the median full-time wage.

Mr Porter said the data showed taxpayer-funded benefits could be providing a ­disincentive to work, a systemic flaw that required government ­attention. "What is not in any recipients' best interest is to be deprived of the incentives to reduce income from welfare with income from work," he said.

Treasurer Scott Morrison backed him saying it was "a crying shame that some Australians would have to take a pay cut to get a job in this country because of the way our welfare system works".

Former Department of Social Security analyst David Plunkett said the calculation excluded $30,916 in family tax benefits that the parent working full-time would also receive, meaning that when "apples are compared with apples", the parent would receive $80,747 if working and $52,523 per year if not working.

The parent would be almost $30,000 per year better off working than not working, rather than than $2692 worse off as claimed.

Australian Council of Social Service CEO Cassandra Goldie said the claims were part of a disturbing pattern.

"It appears to be a deliberate strategy to generate a story which creates this impression that we've got a social security system which is 'bloated and too generous' when the facts will show it's completely to the contrary," she said.

"It creates an incorrect and misleading impression that single parents are doing well on welfare. This is absolutely wrong."

She believes the claims are aimed to convince the Senate crossbenchers to support government cuts to family payments.

Peter Davidson, research director at ACOSS, said the "glaring omission" was remarkable because family tax benefits were the biggest source of income for the non-working parent. To have cited them as income while not working, but not while working biased the calculation by $30,000.

It also failed to build the case for government plans to scale back family tax benefits, because if those plans were approved by the Senate and legislated the differential would be unchanged.

"This single parent family with four children stands to lose about $4000 a year [$80 a week] in Family Tax Benefit payments if legislation is passed," Mr Davidson said. "That family would lose the same amount whether the parent is out of paid work or employed full-time."

A total government payment of $52,523 was not a lot for a family of five.

"There is a reason a large family receives much more money than 93 per cent of others receiving Family Tax Benefit: children are expensive," he said.

"Excluding rent assistance, those family tax benefit payments average around $7000 per child which has to cover all child-related costs including food, clothing, and school costs."

The $87 per week received in rent assistance would cover only a fraction of a Sydney or Melbourne rent.

A spokeswoman for Mr Porter defended the original figures.

"The point being made is simply that a person receiving the single parenting welfare payment, plus family tax benefits and other welfare payments, gets an amount equivalent to what another person might earn working full-time."

The amount of welfare being received in the example is equivalent to a full-time median wage, she said.

In The Age and Sydney Morning Herald

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I've got how long? Life expectancy hits new high

Life expectancy has hit a new high, with typical newborn girls now expected to live to 84.5 and boys to 80.4, up from 83.3 and 78.5 a decade ago.

New life tables from the Bureau of Statistics show a typical 30-year-old woman can expect another 55 years, with a further 36 years for a 50-year-old, 18 for a 70-year-old, and 2.4 for a typical 100-year-old.

For men, a typical 30-year-old will get another 51 years, with 32 years for a 50-year-old, 15.6 for a 70-year-old, and 2.2 for a typical 100-year-old.

Men at the traditional retirement age of 65 have another 19.5 years. Fifty years ago in 1966, they had only 12 years. Women at 65 have another 22.3 years. Fifty years ago they had 15.7.

The Australian Capital Territory has the highest life expectancy of 85.3 for newborn girls and 81.2 for boys, followed by Victoria at 84.7 and 81.1. The Northern Territory has the lowest, of 78.5 for girls and 75.7 for boys. Tasmania is the second lowest at 82.8 and 78.9. 

Indigenous life expectancies at birth are 9.5 years lower for girls and  10.6 years lower for boys.

But the reality is less grim. Academic demographers believe the ABS figures are almost certainly underestimates.

Peter McDonald, of the University of Melbourne, says they assume no improvements over the course of a life.

"They are not any individual's lifetime; they are just telling you the expectation of life you would get if life expectancy didn't change," he said. "And for the last 200 years it has been going up."

The ABS itself says the figures it quotes for life expectancies at birth are the average number of years that a group of newborn babies would be expected to live "if current death rates remain unchanged".

Professor McDonald said a rule of thumb was that improvements over an 85 or 81 year life would add anther four  years. That means a typical newborn girl might live to 88 and a typical boy to 85, unless improvements stop or accelerate.

In The Age and Sydney Morning Herald

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Who's to blame for rising house prices? We are, actually

If only we had a clue why home prices are soaring out of reach. On Monday Treasurer Scott Morrison offered half a clue. He told the Urban Development Institute it was all about supply. The more houses and apartments that developers were allowed to build, he said, the more residents would be able to buy.

That's true, if you avert your eyes from some of the more immediate reasons residents are unable to buy. And they're growing.

Morrison said over the past 20 years the proportion of households either owning outright the homes in which they live or buying them with a mortgage has slid from 71 to 67 per cent. For Australians aged 25 to 34 the proportion has dived from 39 to 29 per cent, and for those aged between 35 and 44, from 63 to 52 per cent. These days only 13 per cent of new home loans go to first home buyers, down from 19 per cent.

So expensive are homes becoming that the share of median household income devoted toon mortgage payments for Australians aged 35 to 44 has more than doubled in 30 years. Incredibly, it's happened at a time when mortgage rates have slid to their lowest on record.

Morrison says more houses and units will solve the problem, but at the rate at which they are being snapped up by investors (more than half the money lent to buy homes each month now goes to investors, up from 15 per cent during the 1990s) they won't help much.

As one of Morrison's colleagues, Liberal backbencher John Alexander, puts it: "It's not much good increasing supply if it's consumed by opportunistic investors."

What matters for a tolerable retirement (far more than superannuation) is owning the home in which you live. If you do, the age pension is enough to get by on. If you don't, you have to pay rent. Morrison's own figures show we are condemning more and more Australians to retirements burdened by rent.

Alexander conducted the inquiry into home ownership that the government seems to have sat on. Thirty hours of expert testimony and scores of submissions have produced nothing, so far. Work more or less stopped when Alexander was moved to another committee a year ago and then the inquiry was allowed to "lapse" after the election.

But looking through the hundreds of pages of transcripts it's possible to get a good idea of why home ownership is shrinking, and the best place to start is the evidence from Morrison's department, treasury, then run by Joe Hockey.

Graph 13 in its submission shows that up until the end of the 1990s the median dwelling price stayed in a tight band of 2.5 to 3 times household after-tax income. Then in the space of three years it shot up to near four times after-tax income and has stayed there ever since.

What happened at the end of the 1990s? In September 1999 the government halved the headline rate of capital gains tax, making negative gearing suddenly an essential tax strategy. Whereas before, renting out a house at a loss for tax purposes had been mainly an exercise in delaying tax, because the eventual profit made selling the property would be taxed at close to the seller's marginal rate; afterwards, with the profit taxed at only half the marginal rate, it became an exercise in cutting tax.

Would-be investors poured into the market. One in every six taxpayers became a landlord. To get there and stay there they've had to outbid would-be residents. As the Reserve Bank's Luci Ellis put it succinctly in evidence to the inquiry: "It is a truism that if an investor is buying a property, an owner-occupier is not."

Far from seeing the explosion in prices as a problem, the Howard government embraced it as a sign of success. "Rising house prices make for happy voters," one of his parliamentary secretaries, Ross Cameron, infamously declared. Howard himself said he had never heard of a voter complaining about rising prices.

The invasion of negative gearers has been followed by an invasion of foreign buyers, who push aside would-be owner-occupiers in exactly the same way. Rather than living in the homes they've bought, they treat them as investments and either leave them empty or rent them out to tenants who would have once had a chance of owning them.

The 2011 census found an extraordinary 12 per cent more dwellings than households, some of them not bought to live in, others bought as holiday homes and second homes.

One of the barely stated reasons why house prices have been climbing out of reach of first home buyers is many of us have been becoming richer, and we seem to want better located and more expensive, and second homes more than anything else.

Reinstating capital gains tax and imposing a land tax would help, as would building more houses. But there is something in our psychology that's doing it as well. We seem to want to push up the prices we complain about. Adding "supply" might do no more than give us something else to bid up.

In The Age and Sydney Morning Herald

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Lineball call for Reserve as underlying inflation sinks

Weaker than expected underlying inflation has two market economists predicting a rate cut on Melbourne Cup Tuesday – although neither with much conviction.

Each of the Reserve Bank of Australia's preferred measures of underlying inflation slipped in the September quarter. The so-called trimmed mean came in at 0.4 per cent, down from 0.5 per cent in June.

The weighted median came in at 0.3 per cent, down from 0.4 per cent. The annual underlying rate averaged 1.5 per cent, well below the bank's target band of 2 to 3 per cent.

Although the headline rate climbed from 0.4 per cent for the quarter to 0.7 per cent and from 1 per cent over the year to 1.3 per cent, most of the jump was due to outsized increases in the price of fruit (up 19.5 per cent in the quarter) and vegetables (5.9 per cent) with tomatoes, potatoes, cucumbers, grapes, peaches, plums, bananas and mangoes the biggest movers.

"Our view before today's numbers was that an underlying increase of 0.3 per cent or less would leave inflation trapped at the very low rates that contributed to the May and August rate cuts," said Commonwealth Bank chief economist Michael Blythe.

"As such we continue to expect the bank to cut the cash rate to 1.25 per cent at the November meeting, although we hold this view without great conviction."

'Strong case'

Bank of Melbourne chief economist Besa Deda said persistently low inflation and further signs of slack in the labour market made a "strong case" for a further cut.

"That said, the data may not be enough of a downside shock for the bank," she said. "With some hesitation, we continue to expect the bank to cut official interest rates by 0.25 points when it meets next week, but we admit it will be a very close call."

Tradables inflation, which measures changes in the prices of goods and services that can be traded internationally, climbed from zero per cent in the year to June to 0.7 per netcent in the year to September. Non-tradables inflation, watched more closely by the bank, remained little changed in the year to September at 1.7 per cent, up from 1.6 per cent.

HSBC chief economist Paul Bloxham said the results left the door open for the new Reserve Bank governor Philip Lowe to cut rates if he wanted to.

"However, with growth running above trend, the central bank having cut by 0.50 points since May this year and coal and iron ore prices having bounced, I expect the bank to stay on hold."

Futures market trading ascribed a mere 0.6 per cent probability to a rate cut on Tuesday. The Melbourne Cup day board meeting will be followed by the release of updated Reserve Bank forecasts on Friday.

In The Age and Sydney Morning Herald

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Census debacle: Turnbull to decide which heads to roll

The Prime Minister's special adviser on cyber security has told the Senate the denial of service attacks on the census website were small and predictable and should not have brought it down on census night.

Malcolm Turnbull now has the report Alastair MacGibbon conducted on behalf of the Prime Minister to determine "which heads will roll and when" as a result of the debacle.

"They were indeed small attacks," Mr MacGibbon told a Senate committee on Tuesday. "The attacks were around three gigabits per second. To have some comparison, it's not uncommon now to see attacks of 100 gigabits per second, and some of the attacks against some of the internet infrastructure such as domain name servers are up to 1000 gigabits per second.

"There was a massive difference between the size of the attacks on the Bureau of Statistics' census website and the ones that are encountered routinely by corporations and governments."

While the bureau had contracted IBM to defend its sites against attacks, its behaviour after awarding the contract was similar to that of a homeowner who employed a builder but then rarely went on site to check how work was progressing, he said.

The bureau's back-up plan to protect the site if denial of service attacks couldn't be overcome was logically flawed.

Labelled "Island Australia", it was to ask IBM to block traffic from overseas. But the password reset facility IBM used was hosted offshore and relied on traffic coming in from overseas to give Australians that password, suggesting it hadn't been properly thought through.

Larger failures were that IBM was unable to implement Island Australia in any event and that ABS staff misread a report they thought suggested census data could have been leaving the system as a result of hacking and decided to shut the system down.

IBM was for many hours unable to restart it because it had incorrectly coded a router connecting to Telstra, so that when it was turned off the coding "fell out", turning it into a "dumb unit" that had to be recoded.

Had the router been turned off and then turned on again as a test, the error would have been discovered.

"Had the router been properly configured, and had the router when it had been turned off fired back up again, then we wouldn't have a problem," Mr MacGibbon said. "But the most significant problem was really the misinterpretation of the traffic on the load monitoring system. We wouldn't have had the problem if the people monitoring the system had properly monitored the system, which was functioning oddly."

Millions of Australians were unable to complete the census on census night as a result of the shutdown and were locked out of the site for two days.

Mr MacGibbon delivered his report to Mr Turnbull on October 14.

IBM Australia managing director Kerry Purcell told the hearing no IBM staff had been dismissed as a result of the failure of the census website and none had been disciplined.

IBM had offered to pay the extra costs the ABS incurred as a result of the outage, estimated by the ABS to be $30 million. It is in "commercial negotiations" with Secretary of the Treasury John Fraser.

Mr MacGibbon also criticised the closeness of the bureau to IBM, saying there was a degree of "vendor lock-in", where the ABS saw IBM as a natural partner because it had worked with it in the past.

A representative of Capability Driven Acquisition, the company that advised the ABS on hiring IBM, said several other potential bidders had told it there was little point in competing against IBM because it would win the contract.

The bureau's chief, David Kalisch, told the committee he would have considered an open tender had "IBM not been able to satisfy the ABS that it could deliver".

One of many "learnings" the bureau had taken from the experience was that it might be worthwhile running the next census in-house and that the slogan "Get Online on August 9" may have contributed to the problem.

Mr Kalisch defended the bureau's decision to retain the names submitted with this year's census and revealed that in the past no one who declined to submit their name had ever been prosecuted.

A former head of the bureau, Bill McLennan, told the the hearing that in his time the bureau had received legal advice telling it that it lacked the power to compel people to provide names.

In The Age and Sydney Morning Herald

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Liberal MP who wants housing inquiry back

The Coalition backbencher who chaired the stalled inquiry into home ownership has appealed to Prime Minister Malcolm Turnbull to restart it, and says it will address the role of investors sitting on properties that should be going to owner-occupiers.

John Alexander is now chairing an inquiry into the potential for value-capture to fund large infrastructure projects such as high-speed rail.

He said the lapsed housing affordability inquiry – which considered 30 hours of evidence from organisations including the Treasury and Reserve Bank without reporting –  should be taken over and finalised by his committee, because there was no point in using infrastructure such as fast trains to create new affordable housing if it was snapped up by investors.

"We have been told time and time again that supply is the answer," he said. "But it's no good creating cities in the southern highlands and outside of Goulburn and outside of Shepparton if the same game is played time and again where the investor will have an enormous advantage over the homebuyer and then dominate that market.

"If we can build a city near Goulburn using the increase in the value of the land to fund a very fast train that could get homeowners to Sydney in half an hour, we could create affordable housing, so long as we knew it wouldn't be snapped up by investors.

"If you are going to have a complete suite of policies regarding home ownership, you've got to address your supply and you've got to address the opportunity of homebuyers.

"I feel owner-occupiers ought to be put in front of investors, but at the moment there is no restraint on how many [properties] investors can buy, which means they are dominating the market."

Mr Alexander, a former professional tennis player, said would-be owner-occupiers competing against negative-gearers were like ordinary tennis players coming up against Roger Federer.

"If you were to play Roger Federer you would lose," he said. "If you were to play him 1000 times, I promise you you would lose 1000 times, and that's what it's like for the homebuyer against the investor – it's stacked against them.

"The current level of supply is being completely consumed by speculative opportunistic investors who are driving the volatility of the market."

On Monday, Treasurer Scott Morrison told the Urban Development Institute the reason people were being locked out of the housing market was that supply couldn't keep pace with demand.

"The government will therefore also be discussing with the states the potential to remove residential land use planning regulations that unnecessarily impede housing supply," he said.

In evidence to Mr Alexander's inquiry, Reserve Bank official Luci Ellis said investors were themselves constraining supply, noting that "it is a truism that if an investor is buying a property an owner-occupier is not".

Mr Alexander said he had made a formal request for his committee to take over and complete the home-ownership inquiry and that the Prime Minister was supportive.

The decision would have to be signed off by Mr Turnbull. There would be no need to take any further evidence and both reports could be completed by Christmas.

In The Age and Sydney Morning Herald

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Policy priority? Housing affordability inquiry scrapped

The government is sitting on hundreds of pages of evidence and scores of submissions about housing affordability it is unable to use because it let its inquiry into the subject lapse.

News of the quashed inquiry emerged as Treasurer Scott Morrison delivered a speech in which he declared housing affordability to be an "important policy focus" of the Turnbull government in the new parliamentary term.

The inquiry was initiated by Morrison's predecessor, Joe Hockey, in April last year. Undertaken by the House of Representatives economics committee and chaired by Liberal backbencher John Alexander, it took evidence from the Treasury, the Reserve Bank, ANZ Bank, the Law Society and housing economists.

Mr Alexander said at the time it painted a picture of a nation turning from a "commonwealth", with huge home ownership, into a "kingdom" made up of landlords and serfs. One of the ideas considered by the committee was a winding back of negative gearing.

He was replaced as chairman by Liberal MP Craig Laundy shortly after hearings concluded in September last year. Mr Laundy has told Fairfax Media he had worked on a draft report with the committee secretariat but wasn't able to put it to the committee before he was promoted to the ministry and replaced with backbencher David Coleman shortly before the election.

Under the rules governing committees, the inquiry "lapsed" with the election, meaning Mr Coleman is unable to restart or conclude it without a fresh referral from Treasurer Scott Morrison.

A Labor member of the committee, Pat Conroy, believes the inquiry was allowed to lapse because its conclusions would not have suited the government.

"There were incredibly strong arguments for reform to the current system of incentives to make housing more affordable," he said. "We got lots of good evidence out of the Reserve Bank and Treasury to that effect, so any balanced report would have had to reflect that testimony."

Opposition Leader Bill Shorten strongly  criticised the government for saying nothing about housing affordability during the election other than to attack Labor's plans to wind back negative gearing and capital gains tax concessions.

"They rubbished Labor's plans," he said. "Now, belatedly they are engaging in a cruel hoax. They are pretending to want to do something about housing affordability, yet all they're proposing is the states make some administrative changes."

Economist Chris Richardson, of Deloitte Access Economics, said young people who were struggling to get into the housing market shouldn't be too worried, because renting made more financial sense at present.

"It makes sense to rent because there are a hell of a lot of people taking a large punt [on buying property]," he said.

While interest rates were unlikely to increase in the short term, Mr Richardson said that inevitably they would have to rise, and at that point house prices would cool and affordability would begin to improve.

On the policy solutions pushed by the two major parties – Mr Morrison's calls for states to ramp up housing supply and Labor's policy of reducing capital gains and negative gearing tax concessions – Mr Richardson said both approaches would have a limited but beneficial impact.

"Doing something on the supply side is good – it's overdue, I'll applaud it," he said. "But it's also hard to do, because you are herding cats; the states and territories and councils have a lot of power, too. These are sensible changes being talked about, but they are not make or break around affordability."

Asked whether the Treasurer would restart the stalled home ownership inquiry, a spokesman for Mr Morrison said there had been "a number of inquiries into this issue".

The government was "able to draw upon the testimonies and reports of those reviews in framing initiatives going forward", he said.

In The Age and Sydney Morning Herald

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Treasury ditches wellbeing as the rest of the world catches on

The head of the Treasury moves quickly.

John Fraser told a Senate hearing this week he wrote the department's new corporate plan "between 6 and 8.30 one night as I was waiting to go out to dinner".

In it, he tossed aside the "wellbeing framework" that for a decade has been supposed to guide the treasury in its assessment of what government decisions are good and bad.

All that really mattered was jobs and growth. "We are talking about living standards," he said. "And if living standards are not about wellbeing, then I do not know what is."

But there is much, much more to a good life than jobs and growth, and the head of the treasury ought to know it.

Who gets that growth is the start. The framework used by his predecessors (which Fraser says he has never seen) had as the second of its five points "the distribution of those opportunities". Under that criteria a decision that further concentrated wealth (such as tax cuts for the already wealthy) would clearly have been recognised as worse than one that spread it more broadly and the government would have been told so.

The third point was sustainability. If economic growth was built on sinking sands – such as burning brown coal and using up Australia's allocation of carbon emissions quickly – it would arguably have been regarded as worse than one than one that cut back on emissions earlier and more gradually. In fairness to Fraser, there's no reason to think he doesn't get this. His idea of targeting "living standards" easily incorporates making sure living standards are sustainable.

But it incorporates points four and five not at all. These days, when for most of us material wealth isn't too bad, they might be the most important of all.

Increasingly, what really matters to us is stress. It weakens us, regardless of our wealth, and it is often brought on by government decisions that force us to go through needless hoops.

Points four and five were "the overall level and allocation of risk borne by individuals and the community" and "the complexity of the choices".

Simplifying life was this week recognised in Britain the United Kingdom as an explicit policy goal, particularly when designing programs for people who are already highly stressed.

While our government tried to get through the Senate rules that would further stigmatise and inconvenience Australians applying for unemployment benefits, the British Behavioural Insights Team Behavioural Economics Unit nominated reducing "cognitive load" as one of the most important things governments could do.

"We all have limited mental processing capacity to reason, to focus, to learn new ideas," it said. "The worries involved in making ends meet already deplete bandwidth, so government services aiming to tackle disadvantage – such as savings schemes, employment advice and parenting programmes – should be required to pass a cognitive load test to ensure these services do not make it harder for people on low incomes to make good decisions."

If only we'd cottoned on first.

 

The Treasury's now-ditched wellbeing framework

In undertaking its mission Treasury takes a broad view of wellbeing as primarily reflecting a person's substantive freedom to lead a life they have reason to value.

This view encompasses more than is directly captured by commonly used measures of economic activity. It gives prominence to respecting the informed preferences of individuals, while allowing scope for broader social actions and choices. It is open to both subjective and objective notions of wellbeing, and to concerns for outcomes and consequences as well as for rights and liberties.

Treasury brings a whole-of-economy approach to providing advice to government based on an objective and thorough analysis of options. To facilitate that analysis, we have identified five dimensions that directly or indirectly have important implications for wellbeing and are particularly relevant to Treasury. These dimensions are:

• The set of opportunities available to people. This includes not only the level of goods and services that can be consumed, but good health and environmental amenity, leisure and intangibles such as personal and social activities, community participation and political rights and freedoms.
• The distribution of those opportunities across the Australian people. In particular, that all Australians have the opportunity to lead a fulfilling life and participate meaningfully in society.
• The sustainability of those opportunities available over time. In particular, consideration of whether the productive base needed to generate opportunities (the total stock of capital, including human, physical, social and natural assets) is maintained or enhanced for current and future generations.
• The overall level and allocation of risk borne by individuals and the community. This includes a concern for the ability, and inability, of individuals to manage the level and nature of the risks they face.
• The complexity of the choices facing individuals and the community. Our concerns include the costs of dealing with unwanted complexity, the transparency of government and the ability of individuals and the community to make choices and trade-offs that better match their preferences.

These dimensions reinforce our conviction that trade-offs matter deeply, both between and within dimensions. The dimensions do not provide a simple checklist: rather their consideration provides the broad context for the use of the best available economic and other analytical frameworks, evidence and measures.

In The Age and Sydney Morning Herald

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ABS chief: census meltdown cost $30 million and I'm sorry

The head of the Bureau of Statistics has apologised for poor judgment and testing the patience of Australians during the 2016 census, and revealed that the failure of the digital system cost taxpayers $30 million. 

Reading from a prepared statement at the start of a Senate estimates hearing, David Kalisch said he wanted to thank the Australian population for "their forbearance and diligence" in completing the census which was taken offline at what would have been the peak period for submitting forms.

"The ABS tested the patience and commitment of many households especially through the difficulties accessing the call centre and the unavailability of the census online form for nearly two days," he said.

"We made a difficult decision to take the system off line on August 9 to ensure the security of census data, but we should not have got to that point, and the system should have been robust to denial of service events."

"The ABS made a number of poor judgments in our preparation for the 2016 census that led to the poor service experienced by many households. I apologise to the community on behalf of the ABS and I repeat that apology sincerely again today."

Mr Kalisch revealed that while the move to a predominantly digital rather than paper-based census had been intended to save $100 million, the attempts to recover from the system shutdown cost another $30 million, cutting the net saving to $70 million.

"We have to date probably incurred additional costs of around $20 million ... and we anticipate possibly spending another $10 million," Mr Kalisch said.

The census website suffered a further denial of service attack after it had been put back on line, one the Bureau and its contractor IBM put a lot of effort into successfully repelling.

The Bureau also badly handled its bid to retain the names submitted with the census, which had previously been disposed of after processing.

It allowed only three weeks for comment and received only three submissions.

"I think it's probably fair to say there should have been a longer consultation process," he said. "We should have planned that better."

Ninety six per cent of households appear to have completed the census, more than the target of 93.3 per cent, but a full accounting won't be possible until March or April next year.

Fifty eight per cent completed the forms on line, much less than the target of 65 per cent.

Prime Minister Malcolm Turnbull has ordered an inquiry into the census to determine "which heads will roll and when".

Mr Kalisch was appointed to the $705,030 post in  2014. He will appear before a specially-convened Senate inquiry into the census next week.

In The Age and Sydney Morning Herald

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Why 'mortgage tilt' means you might never pay off your home

What can you do when your dreams come true,
and it's not quite like you planned?

- Don Henley, Glenn Frey

Anyone would have thought Philip Lowe had it made. The new Reserve Bank governor has taken the helm at a time when the Bank's traditional enemy, high inflation, is dead. He says he is the first to have done so. Yet he is worried by the fruits of that success.

If you're wondering what could possibly be worse than high inflation, the answer is "very low inflation". It may not destroy savings or spiral upwards, as inflation did when it soared to 18 per cent in the middle of the 1970s, but it can do things that are worse.

It can leave sellers – be they workers, manufacturers, retailers, importers or whoever – without power. And without power, without the hope of extracting higher prices, businesses have little reason to invest. Japan has been lumbered with extremely low inflation for most of the past two decades. They are called the "lost decades" because businesses and consumers have kept their wallets shut.

It's not like that here, not yet. But the household saving ratio, which was close to zero when inflation was high before the global financial crisis, has shot up to 8 to 10 per cent. Like low inflation, high saving is good – we've forever been exhorted to do it – but too much of a good thing can stop the economy turning.

On Tuesday, in his first speech as governor, Lowe explained that headline inflation had fallen to just 1 per cent – the lowest, with two brief exceptions, since the recession at the start of the 1960s. So-called underlying inflation is the lowest in records dating back to the start of the century, at 1.5 per cent.

It's fallen because producers and workers worldwide lack pricing power, in part because globalisation has exposed them to competition from producers and workers from elsewhere who will do the job for less. Information technology means that these days service industry workers such as academics, journalists, accountants and financial planners are no longer safe.

The Bureau of Statistics wage price index grew by just 2.1 per cent over the past year, the least since it began in the late 1990s. Lowe says when the Bank and the Bureau examined the individual records for each of the 18,000 jobs that make up the index they discovered that wage rises were happening less often, and that in most industries were smaller.

"The decline in the average size of increases is largely due to a very sharp drop in the share of jobs where wages are increasing at what, by today's standards, would be considered a rapid rate," he explained. "Six years ago, almost 40 per cent of jobs received a wage increase in excess of 4 per cent. Over the past year, less than 10 per cent have got that type of increase."

You might be thinking that low wage rises aren't a problem so long as prices are increasing by less. But that ignores a little-recognised phenomenon known as "mortgage tilt".

When you take out a mortgage in a world of high inflation, your payments are "front-end loaded". That's a technical term used by the former governor Glenn Stevens and the head of his financial stability department Luci Ellis to describe the phenomenon where payments used to start high, but then fall as a proportion of income with each wage rise.

In a world of low inflation the "tilt" becomes much less severe. If repayments consume a large proportion of your wage at the start, they'll keep doing it for decades. Ellis says the banks either haven't caught on to this, or don't want to own up to it. They use the same formulas to assess how much they'll lend as before. They link repayments to income. And because low inflation means low interest rates, repayments are lower than they used to be for any given loan, meaning they can lend more. The result is higher house prices, and harder-to-repay loans.

Even the head of the treasury complained on Wednesday that houses were becoming impossible to afford (and he could have added, impossible to pay off).

If anything the "tilt" matters more for businesses. They are not as easily fooled as homebuyers. Knowing there's little chance of their repayment burden shrinking if they can't push up prices, and believing they won't be able to push up prices, they become much less keen to borrow, however low the interest rate.

They become less keen to invest and to take on more workers.

In May the budget forecast a rebound in non-mining investment of 3.5 per cent this financial year. The latest investment intentions survey shows non-mining businesses expect instead to cut investment 14 per cent.

To the extent that "tilt" is one of the reasons, deeper cuts in interest rates won't much help.

We've a problem, one born of success. Low inflation looks good, until you're in it.

In The Age and Sydney Morning Herald

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ASIC chief: The banks are having us on over tracker mortgages

Australia's top financial regulator has dismissed as self-serving arguments by the big four banks that they can't afford to offer so-called "tracker mortgages" whose rates would automatically rise and fall in line with the Reserve Bank cash rate.

Westpac, the Commonwealth, ANZ and National Australia banks each argued in parliamentary hearings earlier this month that there would be little demand for tracker mortgages of the kind that are offered in the United States and Britain because they would have would have to charge too much for them.

In testimony on Wednesday, Australian Securities and Investments Commission chairman Greg Medcraft tabled a 10-page briefing note he said showed each of the bank's funding costs "completely tracked" the cash rate.

"And the reason for that is not really rocket science, it reflects the fact that 60 per cent or more of their funding comes from deposits, which are based on the cash rate," he said.

"Where they get it wrong on funding, that risk shouldn't be passed to the borrower. All a tracker rate would mean is having, like in most parts of the world and in corporate Australia, a rate that is a simple margin over a benchmark."

On Monday, a small Queensland bank, Auswide, launched what is believed to be Australia's first tracker loan, offering 3.99 per cent, which would vary only in accordance with the cash rate.

The rate cannot fall below 2.49 per cent - which it would hit if the Reserve Bank cut the cash rate to zero.

Mr Medcraft said the fixed margin would last for the entire life of the loan, a better deal than was offered overseas, and said that if a little bank could do it, "a big bank can do it".

"It may be technically correct, as the banks have argued, that they don't fund off the cash rate," his briefing paper said.

"However, overall, the weighted average funding cost for a major bank is correlated to the prevailing RBA cash rate. This is because most debt securities and deposit products either automatically adjust or are hedged using interest rate derivatives against adverse interest rate movements."

"I think that this would actually assist borrowers to have greater trust and confidence in rates, which would allow them to think about switching mortgages more easily," said Mr Medcraft.

"They wouldn't be confused between movements in the margin and movements in the standard variable rate as they are today. Comparability would not be an issue."

In The Age and Sydney Morning Herald

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