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Thursday, August 19, 2010
Let's see, those stimulus measures, did they work?
Melbourne research firm Lateral Economics says around 22.5 cents out of every dollar spent would have flowed back to the government in extra tax, leaving just 77.5 cents in debt.
Lateral chief Nicholas Gruen said his study was "borne of frustration" rather than being paid for or inspired by the the Labor party.
It says the stimulus cheques delivered to households appear to have been 70 per cent spent. Around 15 per cent of that was on imports, leaving 59.5 cents in each dollar boosting the economy. Extra spending induced by that boost would have brought the total effect to "somewhere between 70 and 80 cents in the dollar".
At typical tax rates the 70 to 80 per cent boost would have raised 22.5 cents in the dollar extra federal tax and 3.73 cents in the dollar state tax...
"Thus for each dollar Australians received from cash payments, they only increased the Australian governments' debt by around 77.5 cents with the other 22.5 cents being a tax windfall from extra employment," the study says.
"Australians received nearly $30 billion in one-off transfers but will need to service around $23.2 billion in resulting debt".
The study says the tax payoff from infrastructure spending was even bigger.
"For each dollar spent on infrastructure the debt incurred was of the order of 64 cents with the remaining 36 cents representing additional tax revenue from labour and capital resources that would otherwise be lying idle," the study says.
"Of course, being rushed, there were inefficiencies in building infrastructure," said Dr Gruen yesterday. "The interim report of the Orgill Taskforce estimated those inefficiencies
at around 5 to 6 cents per dollar spent. They cost around $1.5billion compared with the tax windfall of $9.5 billion from people who would not otherwise have been employed. The net result leaves Australians better off by around $8 billion."
Another open letter from University of Western Sydney economist Steve Keen released yesterday rubbished Coalition claims that China rather than stimulus saved Australia from recession.
"If it were true that the rest of the world saved us rather than ourselves, then Western Australia and Queensland would have dragged us out of the slump. That is the exact opposite of what you find. The State that dragged Australia out of the slump was Victoria, and the industries that did it were the most direct beneficiaries of the stimulus," the letter says.
Waste
Here's Nick in debate today, here.
Keen Bird Rejoinder
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. Reserve backs just about everyone else - stimulus stimulates
. That open letter. Labor had so little to do with it...
. Fifty leading economists say the obvious - stimulus stimulates
"Costings". Is that all there is?
Whereas the costings of the 51 Coalition policies prepared by the departments of Treasury and Finance before the Coalition walked away detail the assumptions used and the means by which the numbers were arrived at, the figures in the Coalition's document are just that - one line of figures for each policy without explanations as to how the figures were derived.
Instead the document is covered by a one-page note from the Perth-based accountancy firm WHK Horwath which says it "is satisfied that based on the assumptions provided, costed commitments and savings have been accurately prepared in all material respects".
Which is encouraging up to a point. That point is that Coalition has not seen fit to air those costings - as it would have had to if it submitted them to Treasury and Finance in accordance with the Charter of Budget Honesty - and that Horwath has not done so either.
We are asked to take both Horwath and the Coalition on trust. Then known as Hendry, Rae and Court, Horwath had as its founding partner in 1938 Charles Court, later to become Sir Charles Court, the long-serving Liberal premier of Western Australia and father of Richard Court, the Liberal premier from 1993 to 2001... Horwath principal Geoff Kidd told The Age last night Sir Charles kept an office in the firm after he retired from politics and maintained an active interest in its work.
Horwath costed the policies of the Western Australian Liberal Party during its successful run for office in 2008 and the South Australian Liberals in their unsuccessful tilt at government in March this year.
It began work on the federal Coalition's costings in mid-June, well before its leader Tony Abbott announced last week he was abandoing Treasury and Finance and would instead have his policies costed by "a respected, reputable, well known accounting firm".
Horwath says it charged market rates and did not so much cost the Coalition's policies as satisfy itself that given "the assumptions provided," the Coalition's costings made sense.
The limited information made available by the Coalition indicates that it used used different assumptions from those that would have been used by the Treasury.
For instance its one-line estimate of the saving in interest payments from not building the national broadband network adds up to $2.4 billion. The leaked Treasury document that apparently convinced the Coalition last week to abandon the process put the figure at $1.6 billion - $800 million less. The Coalition has gone ahead with the bigger savings figure without explanation.
And some of the assumptions defy credulity. We are asked to believe that after a two years of freeze in public service recruitment, it'll up the efficiency dividend asked of each department from Labor's 1.25 per cent to 2 per cent, making hiring difficult even after the freeze is lifted.
As the Coalition sees it
. Labor's first surplus doubled to $6.2 billion
. Net debt to peak two years earlier and $15 billion lower
. $10.5 billion in mining tax revenue surrendered
. Offsetting savings of $22 billion give net budget improvement of $11.5 billion
. No detail as to how figures arrived at
. Figures certified by WHK Horwath as accurate "based on the assumptions provided"
Costings document, August 18, 2010
Published in today's SMH
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Wednesday, August 18, 2010
Anther study boosting broadband
Actually it doesn't even mention the NBN, but that's the impression you are meant to get..
Minister for Broadband, communications and the digital economy
TELEHEALTH BENEFITS BETWEEN $2BN - $4BN PER YEAR
Senator Stephen Conroy, Minister for Broadband, Communications and the Digital Economy said a new report by Access Economics estimated the benefits of telehealth to Australia could be between $2 billion and $4 billion a year.
The report, Financial and externality impacts of high speed broadband for telehealth, found telehealth offers the potential for significant benefits to Australia’s population, especially for people who are elderly or who live in rural or remote communities.
“Telehealth including online consultations, electronic health records, in-home care, and online health education will not only open up new possibilities in health care delivery, but will have significant savings on the health budget,” said Senator Conroy.
The report found one of the reasons telehealth in Australia has been held back is the lack of high-speed broadband, particularly in rural areas.
The report noted that even where high-speed broadband was available, it often had slow upload speeds and reliability could be patchy.
“The National Broadband Network will fix these issues once and for all,” Senator Conroy said...
Telehealth Final Report
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Costings are Go!
3.00 pm AEST, Intercontinental Hotel, Sydney
Abbott?
Hockey?
Barnaby?
Robb?
Bishop?
Costings are - nearly - Go!!
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Abbott?
Hockey?
Barnaby?
Robb?
Bishop?
Costings are - nearly - Go!!
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Wednesday column: Oh to be a fly on the wall Sunday morning...
In 2007 the talks began in Brisbane Sunday morning and lasted two days.
By the time they were finished Kevin Rudd and his incoming Treasurer Wayne Swan would have got a fair idea that a number of their promises were duds.
Henry and Tune will carry with them one of two books, either the so-called "red book" routinely prepared for a new government, or the "blue book," routinely prepared for government's returning to office.
The most famous handover of a red book took place in the deserted bar of Canberra's Lakeside Hotel early Sunday morning in 1983 when Treasury Secretary John Stone explained to the incoming Prime Minister Bob Hawke and Treasurer Paul Keating that they faced a budget deficit far bigger than had been admitted by their predecessors and they would not be able to fund all their promises.
These days thanks to the Charter of Budget Honesty we already have a fair idea of what Gillard or Abbott is likely to be told about the state of the finances. What we don't know is what Treasury and Finance think of their promises.
So I'm going to guess.
First, Gillard's promises. In normal times Treasury and Finance would have already had their say about the promises of a reelected government - they would have helped draw them up.
But a series of slip-ups suggest these aren't normal times...
Gillard's $394 million "Cash For Clunkers" scheme was sent to Finance for costing during the campaign as part of what's normally a charade; Finance usually arrives at the same costings as the government because it prepared them before the campaign and gave them to the government at its direction.
In this case Finance came up with a different costing. It said the scheme would cost $429 million, which by the way is an unbelievably expensive way to cut greenhouse emissions by 1 million tonnes. The immediate point isn't that the scheme is a bad one (although it is hard to find anyone who will say good things about it) - it is that it looks as if Labor invented the policy on the run, without submitting it its experts for costings before the campaign began.
It's the same for the $2.1 billion Labor pledged for Sydney's Parramatta to Epping rail line. Gillard confirmed on the ABC's Q&A Monday night that she gave it the go-ahead during the campaign.
So given that unusually (and in contradistinction to her talk about proper process) Gillard has been creating policy on the run, how is her blue book likely to assess it?
The Treasury might have already reminded her that her $43 billion National Broadband Network is both unsupported by cost-benefit analysis and probably the biggest ever financial commitment entered into by an Australian government.
It'll now be able to add an insight into a finding by the Parliamentary Library that the government has under-funded it by $5.6 billion in first five years.
It might also observe that, although she conflated e-health and the NBN at her policy launch, there's no real connection. Long-distance specialist consultations and remote surgery do not need fibre to the home. Not at a world-beating cost of $5,000 per home to replace an existing service they don't.
Treasury might observe that the assumptions in the NBN's own financial modelling look dodgy, among them that the NBN will be able to increase the price it charges each year without losing customers to competing technologies whose prices will head in a more conventional direction.
It might ask her to consider alternative uses of $5,000 plus per household.
It might ask her why she plans to lift employers' compulsory contributions to 12 per cent of salary when the Henry Review found no such need and even suggested taxing super contributions as salary (which is what they are) so that incredibly well-paid Australians don't continue to get an incredible gift from the rest of us.
It might gently question the wisdom of extending the Education Tax Rebate to cover things such as school uniforms when in responding to the Henry Review the government committed itself to freeing taxpayers from the need to collect "a shoe box full of receipts".
The red book prepared for Tony Abbott may be more kind. For instance it'll most likely commend his parental leave scheme as being workable and properly funded.
But it'll have to ask him why he would voluntarily turn down $10.5 billion in extra mining tax revenue when the big three miners have signed on a dotted line saying they are prepared to pay it. Isn't he keen to return the Budget to surplus and keeping it there?
And it'll have to tell him that his commitment to freeze public service recruitment for two years is completely unworkable.
David Tune outlined the consequences before a Senate committee in May. The problem is highly-employable operationally-essential public servants would continue to leave and couldn't be replaced.
"There would be a reduced role in terms of advising government on its budget, there would be a reduced level of service to parliament and our capacity to project manage construction would be affected," he told the committee.
"The Finance Department loses 11 per cent of its employees each year. While the effect would not necessarily be immediate, losing an entire cadre of graduates would have an effect down the track." he said.
He might suggest that the Department of Finance would love to go through the public service with a knife, excising the positions, functions and people who actually weren't needed.
Did I mention knifes? He is likely to say there's an awful lot the incoming government should not be doing. Gangs and knifes are state, not Commonwealth responsibilities. If there has to be a National Violent Gangs Squad could it be located near an airport or something for which the Commonwealth is responsible instead of in western Sydney?
Published in today's Age
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Reserve backs just about everyone else - stimulus stimulates
The Reserve Bank has unintentionally entered election campaign, providing backing to a group of 50 of Australia's leading economists in an argument with Opposition Leader Tony Abbott over whether or not stimulus measures boosted growth.
The Bank's August Board minutes, prepared before Monday's release of an open letter from 50 economists supporting the measures, say they have boosted growth for "the past year and a half".
Opposition Leader Tony Abbott last week claimed "the global financial crisis in its most intense phase lasted about eight weeks".
"Stimulus programs such as the Building the Education Revolution program are longer than the First World War," he said. "So why do you need a programme that lasts longer than the First World War to save jobs in a crisis that lasted, in its intense phase, for just eight weeks?"
Former Prime Minister John Howard agreed telling a liberal fund-raiser in Perth he did not "rate the fiscal stimulus at all highly in relation to saving us from the global financial crisis".
"I don't rate it at all. It was over-indulgent, it was way beyond what's necessary," he said.
The Reserve Bank minutes released yesterday say not only that the stimulus measures supported growth over the past 18 months but that their imminent withdrawal poses risks to growth...
"While growth had been boosted by fiscal stimulus over the past year and a half, this would be reversed in the period ahead as public investment declined following the completion of stimulus-related projects," the minutes say, nothing that an offsetting "strengthening in business investment is in prospect".
The minutes back the assertion in the open letter that the stimulus package boosted industry and created thousands of jobs, saving Australia from recession.
Signed by professors including Geoff Harcourt, Peter Kriesler, John Neville, Raja Junankar, Steve Keen, Steven Dowrick and John Quiggin, the letter endorses an assessment by visiting Nobel Prize winning economist Joseph Stiglitz that Australias' stimulus pacakge was "probably, the best designed of any advanced industrial country, both in size and in design, timing and how it was spent".
In a one-person open "response" yesterday University of Technology economics professor Ron Bird said while it could not be denied "that the local stimulus package had some effect" it was dwarfed by the effect of the stimulus packages of other governments, especially China's.
"The position we find ourselves in today is more due to our strong economic position going into the crisis and the massive stimulus packages undertaken by our trading partners," the letter says. "The Government can take little or no credit for either of these, a point it (and our learned academics) conveniently forget."
The Reserve Bank minutes describe an economy vulnerable to the phased withdrawal of stimulus measures noting that while surveys show to be consumers to be confident that is not reflected in spending.
"Liaison with retailers suggested households generally remained cautious in their spending, though a number of firms reported that conditions had improved a little from earlier in the year," the minutes say.
While the labour market is tightening, "other indicators, such as business surveys, suggest businesses in most sectors are not encountering significant difficulty in finding suitable labour".
"Average hours worked have picked up only modestly after falling significantly during late 2008 and early 2009."
A Chamber of Commerce survey released yesterday finds optimism among small businesses "receding" and notes that for the first time in a decade "insufficient demand has overtaken taxes and charges" as the number one constraint affecting small business.
Published in today's SMH and Age
Letter Response to Open Letter_Professor Ron Bird_17 August 2010
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RBAM
Stand by for Coalition costings
Hours ahead of releasing its privately-costed list of election promises the Coalition has accused Labor of "intimidation" saying it has tried to heavy three big accountancy firms, threatening them with loss of government contracts if they worked for the Coalition.
But each of the big four firms spoken to by The Age say no such thing happened.
"Three firms contacted us," Shadow Treasurer spokesman Joe Hockey told The Age. "They have said they were phoned by either a state or Commonwealth Labor staffer and asked whether they were planning to do Coalition costings."
"They were then told that if they did the government would need to reconsider its relationship with them."
Asked to name the firms Mr Hockey said they had spoken to the Coalition in confidence. None were the as-yet unnamed firm the Coalition has selected to do its costings.
"Labor didn't go through the entire phone book," he said. "There are a few big firms they didn't contact."
Labor laughed off the charge last night while declining to deny it outright...
"Only five days ago Joe Hockey was saying their independent costing firm would put their reputation on the line and now he won't tell the Australian people who they are," a Labor spokesman said in a written statement.
"It is the latest in a long line of pathetic excuses from Coalition to avoid subjecting their policies to the scrutiny of the independent umpire."
The Herald/Age approached each of Australia's so-called "big four" accounting firms, PricewaterhouseCoopers, KPMG, Deloitte and Ernst & Young. Each said it was unaware of any such calls from Labor staff and each said it was not doing the Coalition costings.
An industry source said it was "highly unlikely" the Labor party would attempt to intimidate them, as all of the major firms regularly worked with the federal government. It is understood each refuses to do political work with Oppositions as a matter of course.
Until 2007 Access Economics was the firm of choice for privately costing opposition policies from whatever side, a history that gave it the nickname "Treasury in exile".
A change of policy by Access left the Coalition scrambling for a firm to do the work it said Sunday it no longer trusted Treasury to do.
Declaring that its policies might leak if it submitted them for costing, Oppostion leader Tony Abbott asked, "why should we give our policies to the Labor Party before they're effectively going to Treasury and to the public?"
The policies would be costed by "a respected, reputable, well known accounting firm".
They are expected today.
Published in today's SMH and Age
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Tuesday, August 17, 2010
"It does demonstrate that there is an alternative to borrowing"- Andrew Robb
Just in
ANDREW ROBB:
"The third thing I’ll mention is this new announcement today of a proposal to introduce an infrastructure bond, an infrastructure bond which will leverage tens of billions of dollars of private sector investment with a relatively small investment by the taxpayer, so the taxpayer will not be at risk but we will attract with this infrastructure bond tens of billions of dollars of investment.
It does demonstrate that there is an alternative to borrowing $100 million a day. There is an alternative. If you can work with the private sector, this infrastructure bond will work, through Infrastructure Australia, identify a range of nationally important projects. It could be water-related, it could be road, rail, they’ll be significant infrastructure projects which give a strong productivity outcome then we will do benefit cost analysis and all of those we will get Infrastructure Australia to do that, then we invite tenders from major companies.
Those companies that are successful with particular projects will be able to issue infrastructure bonds, commercial bonds and we as a government will be provided a ten per cent tax rebate, so I’ll give you an example. A big construction company wins a project for a dam or a railway or whatever, they will issue a bond, let's say it’s $1,000 ten year bond, it’s a $1,000 bond, 10 years, if it has a return of ten per cent every year the investor gets $100 for that bond for 10 years.
So, very attractive to individual investors and very attractive to superannuation funds. If they get their $100 return each year, there will be a ten per cent tax rebate, so there is a $10 tax rebate for every return on every bond that they own, so as a consequence, superannuation funds which pay 15 per cent on the return on their investments, two-thirds of their tax liability will be covered by the tax rebate. Ok? So, we have estimated, with advice from the market, that over ten years, with an investment which is capped, we know what the liability is, capped at $1.5 billion we will attract or leverage $20 billion worth of private sector investment. Now, that is very significant, if this scheme works we can take it further.
If this scheme works very successfully we can take it further but we’ve got a capped scheme, it is affordable and it will help generate significant funds and there is no taxpayer liability other than $1.5 billion. The rest is all covered, the announcements we have made about road and rail and other major projects."
Here's The Stubborn Mule
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Coalition to issue infrastructure bonds "as an alternative to borrowing"
No joke. That's what Robb said.
The document, just in...
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The document, just in...
An Infrastructure Partnerships Bonds Scheme
Australia is facing a potentially $700 billion infrastructure deficit at the same time that Labor has wasted billions and run up massive new public debt.
Clearly, we need to leverage the scarce funds available to facilitate larger investments in
infrastructure from the private sector:
To begin to address this infrastructure deficit, the Coalition will task the Office of Financial
Management with examining an Infrastructure Partnership Bonds Scheme in conjunction with
advice from the market.
Under this plan, the Coalition will seek advice about the creation of a new form of infrastructure financing product that will attract household savings through generous tax arrangements to lower the costs of financing infrastructure and ultimately boost Australia's domestic savings and its productive capacity.
A final decision on introduction of an Infrastructure Partnership Bonds Scheme will be a matter
for government upon receipt of expert advice but it is proposed that infrastructure projects will qualify for the concessional tax treatment through meeting set criteria, including:
. the project qualifies as a national priority under lnfrastructu re Austra|ia’s pipeline of
infrastructure projects;
. a public cost-benefit analysis of the project has been conducted; and
. the project generates sufficient returns such that the debt can be serviced by the revenues
generated by levies or charges that relate directly to the project.
In this way, the Coalition proposes that the Infrastructure Partnerships Scheme will provide
an impetus to spur on those projects that already make commercial sense, but not handouts
to projects that do not boost Australia's productive capacity to sufficiently generate economic
returns.
Private infrastructure operators and State and Local Governments will be eligible to apply for
the concessional treatment.
Under this proposal, the Infrastructure Partnerships Scheme will allow the operators of
qualified projects to issue Infrastructure Partnership bonds. These 10 year bonds will receive
concessional tax treatment in the form of a tax rebate.
Specifically the assessable interest income generated from the bonds will attract a 10 per cent
tax rebate irrespective of the tax status or rate of the taxpayen- Accordingly, a superannuation
fund would generate a saving of two-thirds of its tax payable on the interest from these bonds.
The 10 per cent tax rebate will provide a benefit to all taxpayers regardless of their income.
Australia’s tax system in general discourages savings relative to consumption. Infrastructure
Partnership bonds would increase domestic savings and somewhat address this imbalance.
Moreover; it would do so in a way that helps build the nation in stark contrast to Labor‘s wasted spending of the last two years.
Infrastructure Partnership bonds would lower the yield that is required on the debt that funds
infrastructure, and hence help meet Australia's infrastructure needs.
The Coalition believes that a successful issue of Infrastructure Partnership bonds will require
infrastructure operators to convince investors of the merit of their proposed investment. This
prevailing “market discipline" will help ensure that only projects that generate a sufficient
return will be chosen for investment.
Finally, lowering the costs of infrastructure investment will leverage the iimited public funds
available to generate a significant expansion in the private sector funds forthcoming.
It is proposed that funding for this initiative will be provided from remaining funds available
in the Building Australia Fund over the forward estimates. The total annual cost of the scheme
will be capped at $150 million per annum, which is estimated to provide sufficient funding to
generate financing for up to $20 billion of bonds in two rounds of applications, commencing
from 1 July 2011.
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Up, up and away? For some.
New figures from the Bureau of Statistics show he is right. While not increasing at the 10 per cent rate the Coalition sourced from Channel Nine early in the campaign, for many Australians it is climbing faster than the official inflation rate of 3.1 per cent.
The surprise is they are not the Australians they used to be. Until the June Living Cost Indexes released yesterday the Australians squeezed the most by high prices appeared to be those on the pension, on benefits and on superannuation.
The new indexes, construed to measure changes in the prices of the things households actually spend their money on, show the most squeezed are those with a breadwinner.
A low 2 per cent per annum back in March the living cost index for employee dependent households is now climbing at 4.5 per cent.
Mortgages make the difference. Excluded from the consumer price index but included in the living cost indexes, they climbed in March, April and May adding to rather than subtracting from the living costs as they had been doing when they were falling...
Mortgage payments and insurance matter twice as much to the budgets of employee households as they do to pensioners.
Petrol is also far more important in the budgets of working-age households and climbed strongly over the year.
Electricity, water and gas jumped in price 18, 14 and 10 per cent over the year, but have dented the budgets of working families far less than those of aged pensioners who find them 50 per cent more important and Australians on benefits for whom they are twice as important.
Age pensioners probably have the least to be worried about as their payments are increased each March and September in line with either the official inflation rate or their own cost of living index or increases in male wages, whichever is the greatest.
Australians on unemployment benefits have the most to lose from higher prices, suffering a 4.2 per cent increase in their cost of living the past year, but getting indexation at only the inflation rate of 3 per cent.
Once close to the pension, the NewStart unemployment allowance has slipped to two-thirds of the pension as a result of the different treatment. Projections by the Australia Institute suggest if the different treatment continues it will be worth one-half of the pension by 2050.
Self-funded retirees are the least hit by higher prices. The Bureau says they are benefiting form cheaper Australian holidays, cheaper overseas holidays, and cheaper pharmaceuticals.
Inflation: Worse for some
Annual living cost increase
Employee households: 4.5%
Welfare beneficiaries: 4.2%
Age Pensioners: 3.3%
Self-funded retirees: 3.0%
Consumer Price Index 3.0%
ABS 6463.0
Published in today's SMH and Age
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6463.0 6467.0
That open letter. Labor had so little to do with it...
...it didn't even know about it. Trust me.
More than 50 of Australia's leading economics professors and lecturers have entered the political fray declaring in an open letter that Labor's stimulus program worked and the economic achievements of the Labor government" should be "recognised by the population".
Organiser Raja Junankar from the University of NSW said the letter had nothing to do with the Labor Party and developed from a meeting with his colleagues 10 days in which expressed despair at a stream of newspaper articles "claiming the stimulus didn't work, that it cost a lot of money, that it caused deficts".
"The Australian had a big front page a week ago quoting Warwick McKibbin who they said was a Reserve Bank director saying the stimulus didn't work," he told the Age.
"The only people who have been quoted by Tony Abbott are McKibbin who is in fact an ANU economist who sits on the Reserve Bank board and Griffith University professor Tony Makin, and possibly one other."
"I don't think anyone could get anything like the 50 signatures we have obtained of leading academics taking the other point of view."
Some academics decided not to sign because they felt the letter was too political, others because they thought it might affect their position within their university.
Asked whether the name of the political party in power would have really affected the handling of the global crisis Professor Junankar said he thought it would.
"I do give a lot of credit to the Treasury for designing some of the programs. I am sure the Treasury would have proposed something similar to a Caolition government had it been in office instead. But would the Coalition have done the same thing? My view is it would have gone softly softly. It would have worried about the deficit more than the economy."
Published in today's Age
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Monday, August 16, 2010
Meanwhile Abbott is taking on violent gangs
In Western Sydney - an odd location given that the Commonwealth's rationale would seem to involve airports and stuff crossing state borders:
Joint Press Release - Violent Gangs
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Joint Press Release - Violent Gangs
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Don't believe the banks - Bankers Association
As Prime Minister Gillard promised to outlaw such offers on reelection, her financial services spokesman Chris Bowen declared them "wrong, when you are in financial difficulty".
"Many people tell say to me when they are in difficulty they get these unsolicited credit extension offers saying, ‘We can increase your credit limit by $5000, he said yesterday. "It is very tempting, but it’s often not the right thing to do. We will change the law so you can only get credit extension offers if you sign up for them from the beginning."
But the Bankers Association believes there's no need. In fact it believes the Financial Services Minister has got hold of the wrong end of the stick.
"Credit card limit offers are just a form of advertising," the Association's chief executive Steven Münchenberg responded yesterday.
"It's advertising to customers whom banks believe might want greater flexibility with their existing credit limit."
According to Münchenberg an offer of a higher credit card limit does not actually mean credit limit will be instantly increased... "The customer must still fill in a form to accept the offer. This means the customer has to make a decision to apply for the credit card or accept the credit limit offer," he said.
Offer of increased limits were only made after the bank had assessed the performance of the customer with hjis or her credit card.
"Overall this is a more reliable basis of assessing credit worthiness than relying on information provided by the customer at the time the application for the card was made," he said.
"It is very important that policy proposals do not cause unintended consequences for customers."
Mr Münchenberg probably has little reason to worry. The fine print of the Labor proposals makes clear they will only apply to new credit cards and only after mid 2012.
Treasurer Wayne Swan said yesterday 150,000 new credit cards were issued each month suggesting three million more will be issued before the rule kicks in.
The National Australia Bank welcomed other Labor proposals including that customers not be charged over-the-limit fees unless they specifically agreed to allow their cards go over the limit.
Also from mid 2012 credit card providers would be required to allocate payments to the debts with the highest interest rate first.
All interest rate calculations would have to be done in the same way and accounts would have to detail the implications of making only minimum payments including how long it would take to repay the debt.
"We are targeting problems of community concern," said Prime Minister Gillard. "Lots of Australians would get a shock when they get their credit card bill and run up debts over what they think is their limit. Lots of Australians get a shock when they realise how quickly interest was going to escalate on their card."
And that's often because even though Australians seek to shop around, they don't have the ability at the moment to compare interest rates because they're not displayed on the same basis. Many Australians would have got a shock about how long it's taking them to pay off their credit card, not realising that their payments are being applied to the lowest interest part first, not the highest interest part, so the worst possible deal for them. So I want to step forward and better regulate, so Australians can better manage their finances with more information and more choice available."
Labor's credit card crackdown
. Unsolicited credit limit offers banned
. No over-the-limit fees without consent for over-the-limit transactions
. Repayments pay off highest interest rate debt first
. Changes to apply only to new credit cards
. Changes to apply after implementation, by mid 2012
"A better financial deal for hard working Australians" Australian Labor Party
Published in today's SMH and Age
Fairer Simpler Banking - Fact Sheet
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Coaliton "too dim" to stop its own rules being used against it
Tony Abbott walked away from the system yesterday pledging instead to have his promises costed by an as-yet unnamed "respectable, reputable well-known accounting firm".
What's wrong with Treasury and Finance?
Whereas the government can get the departments to quietly cost its promises anytime up until the election is called, the Opposition can only ask at the last minute after the issue of writs.
All such requests have to go through the Prime Minister's office meaning that if the Opposition want's to get something costed quietly ahead of announcing it, it's got Buckley's chance (given its fear of leaks).
If it waits until after it has announced the policy, it'll have to endure the humiliation of Treasury and Finance coming up with slightly different costings (in all but the simplest cases) and be seen to have made a "gaffe".
No wonder Lindsay Tanner declared in opposition the system was "effectively rigged
against the Opposition" and vowed to change it when in office.
He didn't. But he did set up an inquiry... As an extraordinary act of goof faith he appointed as its head a member of another political party, Democrat Senator Andrew Murray. Murray's report Review of Operation Sunlight made recommendations exactly along the lines Tanner himself had proposed in opposition.
Under the Tanner/Murray reforms the Opposition would be able to privately consult Treasury and Finance about costings for 12 months before an election was due. The agreed costings would be made public. The Prime Minister would not be involved.
The first step was to refer the idea to the Joint Committee on Public Accounts and Audit. The committee's staff began to get the ball rolling, but the inquiry never took place.
Asked why in Perth yesterday, former Senator Murray was blunt.
"It wasn't in the interests of the Government to fulfill its desire for accountability, and the Opposition was too dim to realise that if they didn't push for it, they would suffer when the election came around."
"That's the problem with people who design partisan laws," he told the Herald/Age. "They hang on to them because they are not honest enough to acknowledge their limitations."
Asked whether the Coalition threw away the best chance it had to fix the system about which it now complains, the former Senator replies, "yes - their best chance to advance reform was well before the next election, well before people people got concerned about hanging on to advantage."
Murray believes Tanner meant well but was stymied by "hard heads".
"I wouldn't know exactly what happened, but tell me why someone like Tanner with his absolute commitment to Operation Sunlight never got his way," he said.
Published in today's SMH and Age
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Sunday, August 15, 2010
Danger... Journalism warning labels
There are more. You can print your own.
HT: Tom Scott via Nick Gruen
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Saturday, August 14, 2010
Richard Glover is Australia's best radio interviewer
I had promise. Mike Carlton was peerless.
But now, Glover is the best.
Because he gets in people's heads (as you should) and couldn't give a stuff about #hesaidshesaid
Here he is with Julia Gillard the other week.
It's better to listen.
PM: Good afternoon, Richard.
HOST: What parts of you do you feel you haven’t managed to communicate thus far?
PM: Look I think it’s a question of how forcefully and with how much determination I want to explain to the Australian people my plans for our future. There’s a lot of orthodoxy about political campaigning, that you run a risk-adverse campaign. Tony Abbott’s doing that you know. He said yesterday on TV oh look I’m being kept under control effectively. Look, I want to throw away that rule book, be out and about meeting people, talking to people, making myself available. There are about 20 days left in this election campaign. I think the future of the nature will be defined by who wins, you know, what happens next with our economy, with jobs, with schools, with hospitals, but how we tackle the big challenges of the future. So I’m going to be pushing on that.
HOST: Okay, you accept that up to this point you have allowed yourself to be controlled.
PM: Look, I accept that up to this point I’ve gone with the standard campaign model, which is you go out for a press conference and an event each day and the whole focus is to try and make sure there are no gaffes, no problems, very risk averse. My style is to play my own game, to be out there, taking a few risks, being passionate about it.
HOST: Hang on, your style is obviously not to play a few risks if you’ve managed to be controlled thus far.
PM: Look, I have decided to chuck away the rule book that comes with modern political campaigning, yes.
HOST: You’re admitting to me that someone’s had you under the thumb up til now?
PM: Oh look, what I’m saying to you is that I’ve adopted so far the campaigning style that is the orthodoxy in modern politics. What I’ve said during the campaign are things I believe in. No-one can make words come out of my mouth. But for the future, what I want to do is be out there, very visibly, day after day, making myself available, talking to the Australian people, that’s a change of style. And I also want to be out there on the substance, the big things, that make a difference for this nation’s future and we’ve dealt with, you know, two really big policies today.
HOST: If we can just go to this change of style for a second longer, Prime Minister, if you’re saying to me that somebody else has been running else has been running your campaign, who has been running it, if you haven’t been?
PM: What I’m saying to you is that I’ve gone with the orthodoxy of modern campaigning. Of course we have, and we will continue to have, people doing things for the campaign. We’ve got a campaign headquarters that’s taking thousands of calls and emails, people wanting policy documents, people assisting our candidates get material out that explain our policy for empowering school principals, that explain our policy for better family benefits, I mean those things –
HOST: Sure, but head office gave you bad advice, do you feel now?
PM: No, I’m not saying, what I’m saying to you is, the orthodoxy of modern campaigning is to do an event for the media each day and that’s basically it. And you know, Tony Abbott is doing that too. I can’t make that point too strongly to you and he admitted yesterday on TV that basically, yes, he’s been contained. They don’t want the real Tony Abbott out there spruiking WorkChoices, so you know, for myself, I want to bust out of that and I believe I am busting out of that.
HOST: If someone is so easily contained by someone like Mark Arbib for the first couple of weeks –
PM: No, no, you are –
HOST: Then are they a real candidate for Prime Minister?
PM: No you are, you are putting an assumption on this which is not the right assumption. What I’ve said to you is that, you know, in modern campaigning if you talk to Brian Loughnane at the Liberal Party he would say there is a style in modern campaigning and it is the style that I‘ve described. I’ve just decided to change the style. I’ve also decided to make sure we’ve got some big ideas out there for the future. I’ve spent a large part of the last three years as Education Minister before I became Prime Minister, tackling the too hard basket for Australian schools – national curriculum, MySchool, transparency, things people had wanted to do for 30 years and hadn’t got done. I’ve put another big policy out today about empowering school principals, and another big policy out about modernising our family tax benefit structure so that we are not working on a model that says that kids kind of leave school at 16, which is what our current model does.
HOST: Obviously education’s the extremely important, but you’re hobbled by the fact aren’t you that from the very beginning, on things like asylum seekers and carbon policy you seem to be tethered to Tony Abbott? You seem to be fighting over this middle ground in which you’re not presenting Labor voters with a distinctive message on either of those important things.
PM: Oh Richard, I don’t agree with that at all. So excuse me for being a little bit feisty and argumentative, but on asylum seekers, Tony Abbott is trying to peddle you a slogan and pretend it’s true. He’s wandering around –
HOST: He’s sending them to Nauru, you’re sending them to East Timor.
PM: No, no, no. Tony Abbott
HOST: Maybe.
PM: Tony Abbott is on TV every day, his ads as well, saying he will stop the boats. And even his own former Immigration Minister, Phillip Ruddock, who was Immigration Minister for so many years has admitted that’s not possible. People smugglers are evil people. They know if a boat’s going to be stopped, that what they’re going to do is scuttle the boat and then our brave defence personnel dive in the water to save women and children and people who are in trouble and they put themselves at risk. That’s you know, Tony Abbott’s peddling a slogan. I’m peddling, or talking about, peddling’s not the right word, I’m talking about a plan that will make a long-term difference. I’m specifically saying it’s not a quick fix. I’m not trying to be anything other than factual about the problem. Tony Abbott’s out there talking about an armada of boats and a peaceful invasion. I’m making the factual point, using Julian Burnside’s words that at current rate of arrivals it will take 20 years to fill the MCG. But having said that, I don’t want people making that dangerous journey. I don’t want people smugglers to have a product to sell. That’s why I want a regional processing centre, so, you know, boats don’t leave those foreign shores.
HOST: Don’t you agree that with both the big problem solving exercises, the mining tax and the asylum seeker, you got well ahead of what you’d actually achieved in your announcements to the Australian people. The mining tax was announced as solved when it wasn’t really solved. It was solved for three miners, not the rest of them, and the asylum seekers was solved in the sense that you really had only had one phone call to those people in East Timor?
PM: Well Richard I said in my speech on asylum seekers there’s no quick fix. This is going to take some time. I never went to the Australian people and said, you know, 24 hours, here’s a fix here. That’s Tony Abbott’s way to be that misleading. That’s not my way. I’ve been clear with the Australian people about what we’re doing and we’re having a dialogue with East Timor –
HOST: I think the implication in that first speech was that you had proceeded matters a bit further than one phone call.
PM: Well I’m content to rely on the words of the speech and you and I will have to differ on that. On you also said to me, well climate change, is there a difference on climate change. Well, you know, excuse me, I believe in climate change. I believe in the science. Tony Abbott’s described the science as “absolute crap”.
HOST: At other times he’s said he has an identical view to you, that he believes in it.
PM: Well I’ve always believed in it. His closest colleagues describe him as a weathervane who works out his position on climate change depending on how he thinks the issue is running in that day’s newspapers. I’ve said –
HOST: But how is that different to you and the Government of which you are a part and which advocated this policy and then dumped it when the polls showed it wasn’t as quite as popular as it had been?
PM: Well certainly we’ve faced real difficulties, real difficulties delivering the Carbon Pollution Reduction Scheme. We lost the consensus in Parliament House. Mr Abbott came to the Liberal leadership by one vote and then the Liberal Party wouldn’t vote for the legislation even though they’d shaken hands on a deal to do so. But what’s the difference now - I believe in climate change. I believe we need to put a cap on carbon pollution. I believe we need a market based mechanism to do that. I’m going to lead the national debate to take us there and get the community consensus to do it. In the meantime, we’ve got some huge projects that we want to invest in, record investments in solar and renewables. I want to put a $1 billion into the transmission lines to get that clean green energy from the remote parts of the nation where it’s generated to you and me and everybody else who needs energy.
HOST: Would you agree that the Citizens Council looks just like an attempt to put all these decisions off for a year?
PM: Well certainly not, no. And once again let’s actually go to what I announced. Yes I said we needed a deep and lasting community consensus on climate change and that a Citizens Assembly wouldn’t be the determiner of what we did, but would be one thing that helped us develop that consensus, something for Australians to be involved in. But you know that’s that much of our policy. Sorry, hand gestures don’t really work well on radio. That’s a small part of a broad suite of policies, transmission lines to get solar and renewable energy to you and me and households around the country, no more dirty coal fired power stations, giving –
HOST: Well no more new ones but if they’ve been approved and not yet built they’ll still be built under this proposal.
PM: Yep well but no more new ones, absolutely because we’ve got –
HOST: Yeah but all the ones that we’ve got will still belch out their carbon.
PM: Well we’ve got to give the industry certainty about the new developments for the future –
HOST: There’s a way to give them certainty. It’s called a carbon tax.
PM: Yes and in order to do that and, well, number one – Carbon Pollution Reduction Scheme would have had a market mechanism to price carbon – couldn’t get it through the National Parliament. You want to know why – ask Tony Abbott because it’s Tony –
HOST: You could have kept on. Just because the Senate turns you down is no reason to drop a policy, you could have kept on with it.
PM: Well, and let me explain why I formed the view that we needed to develop a deep community consensus, rather than a political consensus. If we are going to do the transformative things that putting a cap on carbon pollution will require of our nation we can’t have that done on the swings of a political pendulum. That you put a Carbon Pollution Reduction Scheme in for three years, then the government changes and then it’s gone again and then the other political party comes back and it’s back again. Our economy couldn’t take that which is why we need the deep and lasting community consensus. And I just to reinforce and in the meantime, you know, solar and renewable, transmission lines, no more dirty coal fired power stations, greener buildings, transforming the nation’s car fleet. These are amongst the things that we’ve announced during this election campaign.
HOST: When you say you acknowledge that there’s a sort of risk adverseness to campaigns, that’s not only about what you say and the manner in which you say it. It’s about the policies themselves isn’t it? And number one piece of risk adverseness was saying that we were not willing to go to an election and make the case for a carbon tax, lest the Opposition say, this could result in higher electricity prices and you didn’t have the courage to take that argument and try to win it.
PM: The question here is if we are going to do this transformation, of how we live and how we work, then we need it to be supported by a deep and lasting community consensus. We’re not talking about things that politicians in Parliament House, you know, can talk to each other about. We did that and that consensus didn’t last. It got smashed by Tony Abbott. If we’re going to make this deep change the best way of ensuring that deep change lasts is to make sure the community comes on board with us. I’m going to lead the national debate to get us there but we will not be standing still. We have put forward a big suite of climate change policies in this election. I understand that the public focus has been on the Citizens Assembly and I’d say to your listeners, look at all the rest. We have got some big-picture policies out there that’ll make a difference to the power that you turn on and that comes into your house, to the building you work there, and to how you travel when you go to work.
HOST: The Citizens Council idea has stolen a lot of oxygen from your other ideas. Should you have mentioned it to your Cabinet colleagues? It’s been suggested that that was one thing which you went with on your own and of course right at the beginning of this process you’d promised to be much more consultative than Mr Rudd had been.
PM: Well I’m not going to go into the details of Cabinet discussions because they’re confidential, but I will say this – we talked about climate change policy with my colleagues. I talked about it extensively and talked with them extensively about the need for a deep and lasting community consensus.
HOST: Did you mention the idea of a Citizens Council?
PM: I’m not going to the details of Cabinet discussions but –
HOST: Everyone else seems to leak from the Prime Minister.
PM: Well and ah, and you know what’s in the newspaper is what’s in the newspaper. Cabinet is confidential for a reason, but certainly with my colleagues I’ve had the discussion about the need for certainty as we move to a carbon pollution reduction scheme which means the community needs to come with us, which means if we’re re-elected and that’s – if, if we’re re-elected, I’ll lead this national debate and we will move when the Australian people and the Australian economy is ready.
HOST: Can I ask you about the leaks? The Liberal Party view I suppose is that a government which is leaking so much against itself cannot be put into power, it’s not responsible enough. What’s your answer to that?
PM: Oh, well let’s say number one, I’ve made it clear that if I’m elected Prime Minister on the 21 August, and this is a tough, close contest, you know, genuine photo finish material, l and people will be thinking about who they want to be prime minister on the 22 August – but if I’m elected on the 21 August I will run a traditional style of cabinet government. You’ll come into the room, you’ll have your say, you can be as frank as you like. Once you leave the room if you breathe a word then you’ll know longer have your job. That’s the style that I will run. Then on the –
HOST: But you know you’ve got rats in there, don’t you?
PM: Well, look I’m going to leave the, you, know the political chatter to others and I’ll run a government like that because I want to make sure we are strengthening our economy. There’s nothing more important to our economy, the future, than making sure that people have got jobs, making sure we’ve got the ability to improve services. When it comes to risk questions, Tony Abbott in the words of Peter Costello: ‘bored by economics’, ‘not up to economic questions’. Nothing more important to Australians than keeping the economy strong. I’m a member of a government that made the right economic choices when we were threatened with the global financial crisis. If we’d done what Mr Abbott wanted us to do , we would be like New Zealand now, deep recession, lots of people unemployed. We avoided that, we’ve got the better plan.
HOST: You’d agree though you could have spent that money, and maybe it was necessary to spend all that money, and maybe it had a good outcome but it would have had a better outcome if it had been wisely spent and not wasted in as it was in the BER Scheme and indeed the Home Insulation Scheme.
PM: Well some very broad brush statement there. Of course the home insulation scheme was a mess. I’ve acknowledged that publically before and it’s been shut down. The Building the Education Revolution Program I’ve certainly learned some things during the course of that and we’ve moved with things like commercial expertise being brought into the roll-out of Building the Education Revolution –
HOST: But we could have had 20 per cent more buildings had it been properly run. I mean –
PM: Well lets actually deal with the facts and we have a leading Australian businessman now, Brad Orgill, leading the Building the Education Revolution Task Force and he will provide a report. It will be provided before the election day. What I would say is this: yes, I’ve learned some lesions from Building the Education Revolution. I certainly have, but let’s not lose site of the fact either that there are literally thousands of schools around this country that now have twenty-first century libraries, new classrooms, new multipurpose halls who would not have had them if we hadn’t moved to stimulate the economy. And you know, I mean one small example, I was in Perth one day at a school. I met the builder, you know the head builder, the boss, he said to me he’d given his blokes redundancy notices and he withdrew those notices because Building the Education Revolution came on stream. Mr Abbott, no stimulus, those blokes would have been out of work. And at the very same school I was told by the Principal about the Librarian who had deferred her retirement, because she was so excited about getting to work in the new libray. Now these stories too –
HOST: The builder got such big profits he’s been able to send his kids to private schools!
PM: Oh, well look it’s a nice debating point, ah but you know look have I learned some things? Yes, I’ve learned some things. Have there been some problems? Yes, there have been. I’m going to be really honest and acknowledge that, but I don’t want us to lose sight of the fact that there are mums and dads with kids in schools around this country who are delighted by their Building the Education Revolution grant.
HOST: Yeah, I know you’ve got to go so let me ask you one final question. Every columnist in the country has been presenting their theories as to, about why your polls have suddenly gone down. What’s your theory?
PM: I’ve always said, and you know I said on the first day of this campaign: tough, close, contest. And I’ve said that at media interviews where the journalists were rolling their eyes like: ‘oh, gee’, you know, ‘how can she be telling us that’? I’d said it then because I always believed it.
HOST: Last week was particularly bad though, on a number of counts. What do you think was the count that cost you?
PM: Look obviously –
HOST: I mean I can listen but you don’t want me to?
PM: Look obviously we’ve got work to do and I am showing a great determination for the fight to come. I am in the fight of my life. Labor, the Labor Government is in the fight of its life. But the fight is about the future of the Australian Nation and I’m not going to analyse campaign questions, but I am going got say this: for the future I’m going to be leading this, leading it clearly by, from the front and I am going to leave no stone unturned because I’m not going to die wondering on the 22 August whether there is more I could have done to, you know, end up with a government that values jobs. We value jobs, Mr Abbott no valuing of jobs, he didn’t want to do stimulus that wants decency in work places. I brought decency to work places, Mr Abbott advocated WorkChoices and still believes in it and the list goes on. I’m investing in schools, investing in hospitals, with reform plans for both. He’s got cut-backs for both.
HOST: You go and unleash the real me onto the world.
PM: Thank you.
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