The Crossroads Are Looming

The upcoming federal election is going to be a pivotal time in Australian politics. The result is likely to affect the direction of Australian Government policy for the next decade. If the Liberal/National Coalition regain power, they will see it as an endorsement of their trickle down philosophy in spite of the blatant example of it not working as demonstrated by the stagnant wage growth in Australia and around the world. If Labor wins then its likely to result in a change of emphasis towards “working” Australians.

The fine tuning of government policy has to start contemplating the type of country that we want to have. For years we have moved toward a society based on fairness and tolerance, a multicultural society that aims to eliminate poverty by the redistribution of wealth. When the Howard Costello duo were running the country, instead of banking the income generated by the mining boom, they decided reduce the tax “burden” on the higher end of town. Subsequent Coalition governments continued this policy. The result (as outlined in the last Coalition Budget) is to provide further tax cuts that will provide tax “relief” for those currently on the third tier of the income tax rates. The cost to the budget bottom line is substantial with independent analysis showing the cost could be as high as $30 billion per year in foregone revenue. (See ) This ignores the tax subsidies provided to Landlords and high end Self Managed Superannuation Funds and the likelyhood of reduced economic growth in the forward period of the budget figures. This will undoubtedly result in continued budget deficits.

The Coalition is claiming success in getting the budget back to surplus despite not actually posting a surplus – they have PROJECTED a surplus next financial year and continued surpluses after that. However, the two areas that are in doubt are the projected growth in GDP and the dubious claim that the rate of government expenditure will only increase by 2.9% as opposed to the 4.3% that it is currently running at.

This means that either the Coalition is deliberately obscuring expenditure cuts or they just have no idea (or credibility). Labor does not get off scot free in this respect either. Ross Gittin’s article outlining the failures of both sides to actually consider the bottom end of town is worthy of a read. The fact that neither side find it politically attractive to increase the Newstart Allowance is to their great shame. Even ignoring the fairness argument, an increase to the Newstart Allowance would provide greater stimulus to the economy than a tax cut to the wealthy. Newstart Allowance recipients are more likely to spend the entirety of their payment than the wealthy are to spend their tax cuts. Politicians, it seems, have lost their sense of conviction repeatedly failing to explain in detail what their policies mean. They treat the voting public like idiots, relying on glib slogans and rehearsed, focus-group driven, one liners.

A great example of this is the proposed reduction to the Corporate Tax Rate for businesses with turnover greater than $50 million per year. The Coalition says that this is required to increase investment and lead to greater employment. This ignores the fact that both employment and investment have increased over the last few years without this tax cut. It also ignores the fact that many of the so called beneficiaries are multinational corporations that pay little or no tax in Australia anyway but they haven’t necessarily increased their workforce or their investments in Australia but neither have they fled our shores with their tails between their legs. The reality is that businesses make investments on the basis of the profits they will earn not on the tax they pay. If they are making decisions on the basis of the tax that they will pay then its a distortion of the market. We all know that according to the theories of Capitalism that governments should refrain from actions that distort the market.

The time has come for Australians to state clearly that they want a multicultural society that protects the old and infirm, encourages innovation, education and hard work, while protecting and helping those needing support to move into employment.

You Cheeky Buggars!

Deloitte Access Economics prepared a report for the Minerals Council Australia stating that although the major mining companies hadn’t paid a lot of tax, they had paid a total of $185 billion in company tax and royalties. To claim that royalties somehow represent a payment of tax is extraordinary – royalties are payments for goods that belong to the people that a private company removes from the peoples’ possession and on-sells. In other words, its the wholesale price of the iron ore that it mines that the company then retails to their customers. Its not tax, its a legitimate (and largely cheap) price that the company pays for raw product.

When BHP, a company established in Australia, exporting iron ore that once belonged to Australia, sells its ore overseas it claims that its owned by the Singapore marketing hub of BHP so no tax is payable in Australia. The ATO believes (I assume by the court cases that are pending)  that this is an accounting fiction and is suing for outstanding tax and penalties of $1 billion.

Its time the mining industry and its minders faced up to their responsibilities as far as tax payments and their responsibility of compensating the Australian people for the product they take and the impact they have on the Austrlaian land mass.

How Stupid Is Our Treasurer?

Morrison is up on his soapbox spruiking the improved financial position of the Australian Government. He pats himself on the back over increased company profitability while ignoring the stagnant wage growth – gosh does that mean that companies are increasing their profits at the expense of employees. And you expect Australian workers to pat you on the back. Then he goes onto say that the prospects of an increase in surpluses is a result of cracking down on welfare payments. Nobody expects that welfare cheats should get away with it but how come corporate tax minimisation and the tax breaks available to the wealthy aren’t targeted by this government. He is also claiming credit for the increase in employment of a thousand jobs a day and that this is led by business. But the reality is, according to Ross Gittin’s article in The Age today, that government infrastructure projects in Victoria and New South Wales have led to creation of 300,000 of those jobs. Additionally, the increase in health related jobs is caused by the introduction of the National Disability Insurance Scheme. While the jobs maybe in the private sector, they are funded by the government.

Stop this crap about small government. We want a just and fair society and we only ask that ALL of society contribute financially to this through taxes. NO MORE TAX CUTS!!

Change Has to be in the Air (Part 1)

The financial crisis of 2008 bought the failings of the Capitalist System (as it currently operates) in to stark relief. The bastions of capitalism, the banks, had abused their market position to initially write loans to clients with doubtful ability to repay them, using valuations that were dubious at best and fraudulent at worst. The Banks then on-sold those mortgages to unsuspecting/careless brokers and second tier banks. When the inevitable happened and the borrowers were unable to repay their loans, the Banks coerced governments into supporting the Banks with the mantra “To big to fail”.

The end result was that the working poor and the middle class ended up paying for the Banks’ systemic failures through cuts in social services, losing their jobs and losing their homes. The worst  of it was that everybody other than the rich were the ones that felt the pain. Superannuants were hit by the falling stock market and the cuts in interest rates. Governments around the world instituted austerity programs, cutting pensions and raising taxes on ordinary people. Social services were curtailed and yet not one banker in the United States was prosecuted. When questioned about such outrageous schemes such as short selling (where you sell shares that you do not own at a discount in order to drive the price down so you can make a profit by forward selling the same shares at a later date for a higher price) the response was that its legal because we’re the players in the market and we make the rules. I’d like to see anyone else who sells property that they don’t own,  successfully argue to a judge that what they did wasn’t fraud.

But this was all just a sideshow in the market place. The recent research released in the United States showing that the wealthiest in society have increased their wealth in the last twenty years by 80% and that productivity per capita has shown a marked increase (although its slowing now) while at the same time real wages have dropped by almost 8%. As Artificial Intelligence (AI) and robots start eating into employment rates in the developed world the days of full time employment are disappearing.

In Australia, the problem has already reached previously untouched rates of under-employment and part time employment. With housing costs in the major capital cities rising to heights that make home ownership much harder for ordinary workers attain and even rental rates beginning to verge on the unsustainable something has to give. Its this sort of exclusion from society that leads to anti-social behaviour and increased crime rates. Even as the unemployment rate falls, wages are not increasing. This stagnation in wages growth hurts the economy in several ways – reduced ability to spend means that GDP drops on a per capita basis (and the capitalist system relies on increased consumption to keep the wheels turning) and the tax take by governments is reduced. But there is a solution.

(In the next instalment we talk about one possible solution)

The Robots Are Coming

Zan and Dr Karl’s guest today  is Quantum Physics Professor Stephen Bartlett. While they discuss heady quantum mechanics  topics, it confirms that with the increase in computing power, especially when quantum mechanics can be fully utilised in computing, the robots are coming. ABC news have been running articles all week on the future workplace that includes robots. As noted in the article on the 7.00 PM News, 5/7/2017, it will not just be labouring jobs that will be lost or those doing repetitive tasks. There are already computer programs that can find case studies in law that means lees junior lawyers or law clerks doing research for court cases.

Time for a new societal structure – stay tuned.

You’ve Gotta be kidding me!

The Business Council of Australia (BCA) has teamed up with the BHP CEO, Wesfarmers CEO, Qantas CEO and the boss of Energy Australia to demand that the Senate crossbench pass the company tax cuts. According to the BCA, the full company tax cuts should be left on the table because, wait for it, “it is the only plan  Australia has got to drive growth and investment”. You are joking right? The only hope, according to these clowns, is that multinational companies who currently spend most of their time dodging paying of their fair share of tax in Australia must get this tax cut because its the only thing that they have come up with to improve growth in Australia. I would suggest that these CEOs hand in their collective badges if that is the best that they can offer their shareholders. Where are the visionary plans, where is the investment in new sources of energy production, where are the plans for creating meaningful jobs, instead  a tax cut so that the rich can have an extra coffee on Sunday served by a part time worker on reduced penalty  rates. How about coming up with full time jobs for young Australians, not in shuffling paper and pretending to create wealth by shuffling said paper, but in real wealth creation jobs such as manufacturing or agriculture.

We all know that at best, by the Productivity Commissions own research, after 20 years the expected increase in GDP due to this tax cut is less than 4% OVER TWENTY YEARS. This is not a plan, this is simply the rich continuing to line their pockets while governments have to reduce their services in order to balance the books. If the rich want to see what happens when the poor say enough is enough, just continue on this path of greed and indifference to the plight of ordinary working Australians. Its appalling the way that young people are being treated at the moment with only casual work and/or part time work, house prices and rents getting further out of reach, employers using sham contracting to further cut wages… all of this is leading towards a dangerous situation.

God dammit, He’s back again

The belligerent buffoon has returned. Fresh from showing his two-faced climate belief credentials in the lower house as he joked about coal fired power stations, the country was melting under severe weather with even more records being broken today. Still its good for a laugh to pass the lump of coal around while South Australian’s lost power again, not because of renewable generation but because power companies were playing the system to increase the wholesale price of electricity and refusing to take up the Regulator’s request to increase output. But, hey, we’re not in parliament to look after the people, we are in parliament to look after ourselves (just ask Senator Ian McDonald as he bleats about having his entitlements cut even after he has lived off the public purse for 30 years and currently earns, nay receives, around $200,000 per year)

Its one thing to play political point scoring, its quite another to dismiss offhand the problems that are facing Australians and the rest of the world. This is the same clown who thinks there is nothing wrong cutting the Newstart allowance to 22 and 23 year olds and paying them under the Youth Allowance instead. Apparently landlords don’t charge full rent for these people and supermarkets offer them a discount on their food – buggar me I hadn’t realised. But wait there’s more – not steak knives but how about giving companies a tax cut while cutting welfare payments, lining up the old and the disabled for the firing squad while allowing multimillionaires tax breaks using negative gearing which keeps pushing up house prices especially for first home owners. But Scott the Twot says it will improve the economy and increase wages. Its a miracle! Mind you his own modelling says that the increase in GDP will be in the vicinity of 3.5% AFTER 20 YEARS! I thought he was bad as Immigration Minister but as Treasurer he seems to have become totally blind to the needs of the poor, working families, and ordinary hard working Australians in small business, while being only to happy to accomodate the rich, multinational companies, many of whom are dodging paying their fair share of tax.

This has to stop, you cannot persist in this thoroughly disreputable theory of Trickle-down Economics. It hasn’t worked, the disparity between rich and poor continues to grow and the vast majority of us are feeling powerless hence the desperate moves to whacko right wing political parties. If you want to save Australia, if you want to save the western democratic system, this basic current tenet of capitalism has to change. We can no longer (as if we ever could) trust the market to self regulate. They won’t act fairly because they know they will not be punished by governments, quite the opposite. If they stuff up governments use the taxes of the poor to bail out the rich, greedy capitalists. The poor have no power in this unequal relationship. This why governments have to intervene. If there is no shift in the current positions of the major parties, they will fail within four terms of the parliament and we will end up with unstable coalitions of either right or left leaning parties and policy failures as illustrated in the United States of America in both the Presidency and Congress.

You have been warned.

Oxfam’s Rich List

Interesting/alarming news from Oxfam today with their annual richest in the world conference in London. The top eight billionaires in the world have a combined wealth greater than the poorest 50% of the worlds population. And Australia isn’t exempt from this inequality. I quote from Oxfam’s 2017 Inequality Report for Australia.

The latest data from Credit Suisse shows that wealth in Australia is concentrated in the hands of a few: the top 1% have over 22% of total Australian wealth.

And, the top 1% own more wealth than the bottom 70% of Australians combined.

The two richest billionaires in Australia, who are part of the top 1%, own more than US $16 billion between them, which is more than the combined wealth of the poorest 20% of the Australian population.


Now I can see all those merchant bankers and land developers jumping to justify this inequality with grand, self promoting explanations how they work so hard and the structure of society expects, nay, demands that you have people like this earning vast sums, how else can society advance?

The reality is that a society that only values people by their wealth and that allows the aggregation of wealth by a select minority is not a society that is moving forward. Equally, we cannot fall back in to the extreme left’s utopian view. The reality is that there have to be incentives in the form of profits and wages in order for the system to function efficiently. The problem is that we’re not all on an equal footing. There are many examples of unjustified government interference in the market, just look at the incentives for planting grape vines, creating movies and, the latest, negative gearing on investment properties. Negative gearing is a classic example of government largesse being given to the wealthy (and before you start bleating about mum and dad investors, Scott Morrison, if you can afford a second mortgage for an investment property then you are wealthy. Banks won’t extend those services to poor people). Not only are you allowing wealthy people to reduce their tax liability (once again Scott, that’s why these people do it), but you are concentrating wealth into the hands of the wealthy again by making it harder for renters to purchase their own home by driving the prices of houses up. And this is a symptom of a greater problem. Governments have reduced their expenditure on social housing because they claim its more efficient for the private sector provide it. Their concession to the poor is to provide rental subsidies to those on welfare payments. So in effect the government takes a double hit – they have to pay welfare recipients a subsidy and they give the property owner the ability to write off more tax. I wonder if anyone in Treasury has ever bothered to do the sums? What is the total of rental subsidies and tax breaks costing the government? Add to this the increase subsidies given to first home buyers in an attempt to relieve the financial stress on them trying to buy their first home.

This ongoing inequity in society is starting to crack the fabric of society both here and abroad. The signs are there – Brexit, Trump’s success and the ongoing disillusionment with politicians in Australia, all signs of people feeling that they are missing out and that their voices are not being listened to. People will only take this crap for so long.

Its time for at least one of the parties to listen, and my guess it will have to be the Labor Party. Its time to end government subsidies to the wealthy in the form of tax write-offs. No more negative gearing, no more tax schemes that allow the wealthy to use the public purse to top up their wealth. No more exemptions on superannuation for people with extreme wealth. We have the answers, we just need people to listen.

Are We Going Down the Path to Oblivion?

Australia is not immune to Trumpitus, as is illustrated in the recent successes of Pauline Hanson’s One Nation at the last federal election. Once again, someone with no practical policies, playing to the disgruntled, largely white, working class – never correcting misleading beliefs regarding asylum seekers and their entitlements. Never acknowledging that global trade has increased the wealth of all Australians by providing low cost consumables and decreasing the cost of living but quick to bemoan the loss of Australian jobs. Of course job losses in Australia are an anathema to all fair minded people. The loss of jobs leads to decreased  income for workers at the lower end of the education spectrum and a reduction in cash flowing though the economy. With the advent of Artificial Intelligence systems, even jobs previously immune to automation are slowly coming under threat. Sadly the Liberal Party is facing this looming crisis by lurching to the right, intent on saving the bacon of its dominant financial base. Most Australian voters still do not understand that the Liberal Party (or rather, the economic dries of the party) are chasing that false American dream of small government. False because in reality, the wealthy are in fact fleeing taxes and that reduction in the tax base means that government programs have to be cut. Yet someone like Trump says there is a need for infrastructure investment – according to the economic dries, if infrastructure really needed to be upgraded then the private sector would step in and do it as part of the market at work. Tony Abbot has been fond of saying no-one has taxed their way to prosperity but that simplistic view of economics belies the truth that State and Federal Governments in the first eighty years of federation, especially in the post war period, built the infrastructure to create the conditions for a vibrant economy. The reality is that the private sector didn’t get involved with large infrastructure projects until Jeff Kennet’s reign in Victoria allowed them to take effective ownership of public property at bargain prices to underpin the creation of new Public/Private Partnerships (PPP). Indeed, many people still question how these PPPs are cost effective for the taxpayer. Surely if a private company is going to rake in ten billion dollars over the life of a project, the state should receive some of the benefit.

We need to be vigilant and call out people and parties that make outrageous claims against immigrants, or who express that tax cuts for the rich are vital for the economy, that companies can’t survive without massive corporate tax cuts.

Australia wake up, the future is in danger!

GST Increase to Fund Income Tax Cuts

The Turnbull Government has suggested that everything is on the table when it comes to tax reform. Turnbull himself has said that it would be possible to increase either the rate of GST or the spread of GST as long as the was compensation for the less fortunate. The thinking apparently being that income tax rates are unfair so the GST increase could be used to fund reductions in income tax. My question is why?

We are constantly being told that the government is facing a problem where expenditure is exceeding income. The future projections for expenditure on health and pensions appear to show that extreme pressure will be placed on the federal budget. So why would you collect more tax in the form of increased GST revenues but offset that by reductions in income tax. Don’t we need to have a net increase in the tax take? Or would it make more sense to limit the tax deductions that are available in various parts of the economy?

According to recent figures, removing the generous tax concessions for superannuation would save the same amount that is currently being expended on the aged pension. When you consider that these tax breaks are mainly used by the wealthy, there would be no need to pay compensation to the people in lower income brackets. The GST is a regressive tax, it penalises consumption but it is consumption that grows the economy. Income tax, on the other hand, increases with your capacity to pay. I must admit I am sick and tired of hearing commentators saying that the top end of town pay 49 cents in the dollar tax. That is patently incorrect – the top tax rate is only paid on the top end of the scale, i.e. when your weekly income exceeds $3461. I’m sorry, but I think if you are earning that much you can afford to pay the extra tax. In any case most don’t pay that rate as they minimise tax through superannuation arrangements and negative gearing arrangements for investment properties – both of which are of questionable benefit to Australia’s economy.