The land where entitlement runs riot? Hardly

The land where entitlement runs riot? Hardly

By

Greg Jericho

Updated
Thu 17 Apr 2014, 9:25am AEST

Photo:
Treasurer Joe Hockey only talks of expenditure cuts, not revenue increases. (Alan Porritt: AAP)

Perhaps the reason Joe Hockey gets so
excited about the age of entitlement whenever he travels overseas is
because he needs to leave Australia to find an example of it, writes
Greg Jericho.

Since the election, Joe Hockey has
been talking big about the need for the government to cut expenditure.
Unfortunately his sales pitch rests on the fallacious view that
Australia needs to end its age of entitlement.

At a glance

• Australia has one of the smallest welfare budgets in the OECD
• The level spent on benefits in Australia now is slightly below where it was in 2003
• Reducing welfare spending tends to hurt low-income earners
• Tax concessions for superannuation see the government foregoing around $27.6bn in revenue

He also seems determined to force Tony Abbott to break his election promise told to SBS News
the night before the election that there would be "no cuts to
education, no cuts to health, no change to pensions, no change to the
GST and no cuts to the ABC or SBS".

On Sunday, news was leaked that the government was likely to cut funding for the ABC, and then Joe Hockey,
speaking from Washington DC, made it clear that changing the pensions
was very much on the table - from raising the eligibility age to 70, to
changing the indexation and the asset test.

You can see why he
might consider changing the indexation of the pension from average male
weekly earnings to either the inflation rate or the pensioners cost of
living index:

Embed:
Jericho graph 1

Over the past 10 years, average male
earnings have increased by nearly 22 per cent more than the inflation
rate and 18 per cent more than the ABS's cost of living index for
pensioners. So such a change would certainly temper increases in the
government's pension bill.

However, this would also exacerbate
inequality - as has occurred for those attempting to exist on Newstart,
which is indexed to CPI.  

But behind all the talk about galloping
government expenditure is the view that Australia is somehow now a land
where entitlement runs riot.

This view is complete bollocks.

Talk
of out of control welfare entitlement might sound true when said in a
press conference where the vibe can seem more real than actual facts.
But the reality is Australia does not have, nor ever has had a large
sense of entitlement.

After first attacking the disability-support pension, which, as I noted last month, involved the government ignoring a fair bit of reality, now the talk has shifted to the aged pension.

The
reason the pension is a concern is pretty much down to demographics.
There are fewer people in the prime earning (and tax revenue paying) age
of 25-54, and also fewer young people coming along to replace those
retiring:

Embed:
Jericho graph 2

So yes, it's an issue - one the previous
government took steps to deal with when it changed the pension age to 67
for anyone born from 1957 onwards - around three quarters of the
population.

And there is a case for suggesting we could work a bit longer.

Embed:
Jericho graph 3

Among OECD nations, Australian men retire
later than the average and women retire pretty much on average. The
reason women retire earlier is mostly because until this year they
could. But from now on the retirement ages for men and women are the same.

So
we're not shirkers when it comes to work, but because our life
expectancy is among the longest in the world, Australians spend more
years retired than most nations.

But before we get too carried
away by the problem of paying for our retirees, let's put Joe Hockey's
words in some context. Hockey loves to talk about our huge welfare bill,
and yet you rarely hear him talk up the fact that Australia has one of
the smallest welfare budgets in the OECD:

Embed:
Jericho graph 4

Only Korea, Mexico, Chile and Iceland spend
less than Australia does on welfare. And as for it growing out of
control, the level spent on benefits in Australia now is slightly below
where it was in 2003.

Embed:
Jericho graph 5

While it has increased since 2007 (as it
has for almost all nations due to an increase in unemployment benefits),
our increase was well below the average observed by other OECD nations.
Part of the reason is that we have one of the best welfare systems in
the world.

No bugger it, we have the best welfare system in the world.

As ANU economist Peter Whiteford noted, the OECD has recently published its latest edition of social indicators.
It found that Australia directs more of its cash benefits to the
poorest 30 per cent and less to the richest 30 per cent than any other
nation:

Embed:
Jericho graph 6

Perhaps one of the reasons why Joe Hockey
seems to get so excited about the age of entitlement whenever he travels
overseas is because he needs to leave Australia to find an example of
it.

But as the OECD notes, when you have a very targeted welfare
system like Australia's, reducing welfare spending tends to hurt
low-income earners unless you are very careful.

Even on pensions Australia is not just kicking goals; we are winning the World Cup (to use Tony Abbott's tortuous analogy). Using the most recent comparable figures, Australia spends the fourth least on pensions as a percentage of our GDP:

Embed:
Jericho graph 7

Little wonder that German insurance company Allianz
named Australia as having "the most sustainable pension system in the
world". It cited the fact that our "two-tiered system of lean public and
highly developed funded pensions - seems to be most sustainable in the
long run".

Oddly, no one in the government has been bragging about this report.

But
our two-tiered system also provides two ways to approach growing
expenditure and declining revenue. For while Australia's cash benefits
system is tightly means tested, our tax system is less so - particularly
with regards to superannuation exemptions.

Not so scary figures

The
record number of people receiving disability support seems alarming ...
until you take into account Australia's growing and ageing population,
writes Greg Jericho.

Even now the age that you can access your superannuation (the preservation age)
is well below the pension age. Those born after 1964 will be able to
access their superannuation at 60 years old - seven years before they
will become eligible for the pension. And of course those who can afford
to retire only on their superannuation are inherently wealthier than
those who need the pension.

But rather than raise the preservation
age to that of the pension age, the current system attempts to keep
those people in the workforce by providing significant tax benefits for
those over the age of 60.

All up, tax concessions
for superannuation see the government foregoing around $27.6 billion in
revenue. To put that in context, the government spent $39.4 billion* on
the aged pension this financial year.

Yes, there is a case for tightening some pension eligibility rules
for those with low income but high wealth, but changes to the pension
indexation and increasing the age eligibility will save money by mostly
hitting the poorest.

Hockey has been talking big about everyone
sharing the burden. But he also only talks of expenditure cuts, not
revenue increases. He says he wants a discussion about the pension; he
also needs to talk about superannuation. He talks about expenditure; he
also needs to talk about revenue.

And while he's at it he might also talk about why he thinks Australia is in an age of entitlement, when it plainly is not.

*Editor's
note (April 17, 2014): An earlier version of this article incorrectly
said the government spent $54.8 billion on the aged pension this
financial year. That figure was the "total assistance to the aged". Aged
pension expenditure was $39.4 billion. The Drum regrets the error.

Greg Jericho writes weekly for The Drum. He tweets at @GrogsGamut. View his full profile here.

Topics:
hockey-joe,
budget,
federal-government

The Superannuation saga.....

The Superannuation saga…..

By Kaye Lee on April 14, 2014 • 

Crocodile tears

While a pained Joe Hockey tells us his “truth” about the mess Labor
has supposedly left, and that the old age pension is no longer
affordable so we must work till we drop, it is worth remembering the
Coalition’s history on superannuation. Had they listened to Whitlam, had
Keating won, had Howard kept his election promise, had Abbott and
Hockey stuck to their word, the future may not look so bleak for those
who have worked for a lifetime yet still face a retirement dependent on
the pittance the government chooses to give them.


1972


Compulsory national superannuation was initially proposed as part of the 1972 Whitlam initiatives but up until the 1980s superannuation was solely the privilege of predominantly male professions, clustered in the public sector or available after a long qualifying period in the private sector.


1985


In 1985 then Leader of the Opposition, John Howard, said this:

“That superannuation deal, which represents all
that is rotten with industrial relations in Australia, shows the
government and the trade union movement in Australia not only playing
the employers of Australia for mugs but it is also playing the
Arbitration Commission for mugs”.

Howard was commenting on the deal between the government and the ACTU which saw the trade union movement forfeit a claim to 3% productivity improvement as wages to instead be paid in compulsory superannuation
– endorsed by the Arbitration Commission and managed by superannuation
funds with equal representation of the unions in the industry and the
employers.


The Coalition has steadfastly opposed every increase in compulsory superannuation since that time, whether it be from 3% to 6%, or the 6% to the current 9.25%.


1995


In the 1995 budget, Ralph Willis unveiled a scheduled increase in compulsory super from 9% to 12% and eventually to 15%. It was to be one of the Keating government’s major legacy reforms.


1996


In its superannuation policy for the 1996 election, Super for all,
the Coalition, which had hitherto been implacably opposed to Labor’s
policies, promised it:


•Will provide in full the funds earmarked in the 1995 — 96
Budget to match compulsory employee contributions according to the
proposed schedule;


•Will deliver this government contribution into superannuation or like savings;


•Reserves the right to vary the mechanism for delivering this
contribution so as to provide the most effective and equitable delivery
of the funds.


1997


So why don’t we have 15% superannuation now? Because John Howard and Peter Costello nixed it in the 1996 budget barely six months after it released its policy, insisting it was too expensive. They didn’t “vary the mechanism” so much as halted it.


2007


Significant changes were also made to superannuation policy in 2007.
The majority of workers could now withdraw their superannuation tax-free
upon reaching the age of 60. Most self-employed can claim their
superannuation contributions as a tax deduction. In addition,
semi-retired people can continue to work part-time, and use part of
their tax-free superannuation to top up their pay.


Despite the relatively generous tax treatment of capital gains, the
new superannuation tax treatment led to the selling off of some assets,
particularly rental housing, as people sought to take advantage of the
opportunity to add funds to their superannuation accounts and claim them
back later tax-free.


People were allowed to transfer up to A$1 million into their superannuation accounts before the June 30, 2007, after which an annual maximum of A$150,000 of after-tax contributions could be made. The effect of this change in the rules was enormous.
In the June quarter of 2007, A$22.4 billion was transferred to
superannuation accounts by individuals. This compares with A$7.4 billion
in the June quarter of 2006. June 2007 was the first time in Australia that member contributions exceeded employer contributions.


2010


The Coalition’s superannuation policy  has drawn mixed reviews, with several major industry bodies expressing disappointment at the policy for being unsubstantial.


The Association of Superannuation Funds of Australia (ASFA), the
Australian Institute of Superannuation Trustees (AIST) and the Financial
Services Council (FSC) said in a joint statement that a failure
to increase the superannuation guarantee (SG) to 12 percent, the
failure to raise the concessional caps for individuals over 50 and the
failure to provide a super tax contribution rebate for low-income
earners would adversely impact Australian workers.


ASFA chief executive Pauline Vamos said that the majority of Australian voters would be disappointed that the Coalition’s only plan for superannuation was the promise of more reviews and delays.


AIST chief executive Fiona Reynolds said: “Australian voters are entitled to expect more than a policy document that has no
concrete plans or even fresh ideas on how to address retirement income
adequacy and the challenge of Australia’s ageing population.”


2011


OPPOSITION leader Tony Abbott has pointedly put down Victorian
Liberal MP Kelly O’Dwyer after she questioned his controversial decision
to keep Labor’s higher superannuation guarantee if a Coalition government inherits it.


Ms O’Dwyer asked at yesterday’s party room meeting about the process
by which the Coalition’s previous position was reversed – saying it was
her understanding such issues should go to the party room.


Mr Abbott said the party room had the right to change policy at any time. But there was no rule – and there should be no expectation – that every policy decision be brought to the party room.


“Mr Abbott, who several times made it clear he did not want to talk
about the backflip, said the Coalition would have more to say on
superannuation later, but repeated that it would not rescind the higher guarantee.”


Feb 2013


JOURNALIST:


So you would cut all those initiatives?


JOE HOCKEY:


Absolutely, you can’t afford them.


So there it was in black and white – the Coalition was cutting the increase in the super guarantee.


Except, apparently not so: a couple of hours later, Hockey was
complaining on Twitter about being misrepresented. “What an MRRT
debacle… Despite Govt’s failures we remain committed to not rescinding the increase in compulsory superannuation from 9-12%.” Hockey tweeted. After the Nine Network had accurately reported his remarks, he followed it up with:

Would be nice if Nine News had checked the facts…Coalition remains committed to keeping increase in compulsory superannuation from 9-12%.

Crikey understands Tony Abbott’s office moved immediately after Hockey’s doorstop to indicate there was no change in the Coalition’s support for the move from 9-12%


May 2013


Tony Abbott’s plan to delay the compulsory superannuation
guarantee increase for two years and do away with top-ups for low income
earners sets the tone for the Coalition’s policy on retirement savings to be announced in coming months.


The Liberal Party’s superannuation policy is
likely to encourage individuals to make more voluntary contributions
while scaling back government-directed super contributions.


The Coalition seems to be struggling with the concept of superannuation.
The Coalition has lost a lot of their super knowledge over recent years
with the retirement of many senior MPs, including Peter Costello, who
was the architect of the 2007 changes that brought in tax-free super for
over-60s, introduced caps on non-concessional contributions, reduced
the caps on concessional contributions, and removed limits on the amount
of super that you could withdraw at concessional rates. They
have promised not to make any unexpected negative changes to super, but
hey, a few weeks after making that promise, they announced they were
freezing the Superannuation Guarantee increase for 2 years.


November 2013


Labor went to the election promising a 15 per cent tax on superannuation pension earnings over $100,000.


Treasurer Joe Hockey said on Wednesday the policy was too complex and it would be scrapped.


The Treasurer has also decided to cut superannuation co-contributions for low income earners


According to the chief executive of Industry Super Australia, David Whiteley, this would result in
3.6 million Australians on low incomes being out of pocket $500 a year,
while just 16,000 of the nation’s top earners will benefit from the
scrapping of the 15 per cent tax.


With the rise of influence of the IPA within our current government’s policy making, this article by John Roskam from 2012 should sound warning bells to us all.


“Compulsory superannuation offends practically every
principle of what should be Liberal Party philosophy. If an Abbott
government does keep compulsory superannuation it must, at a minimum,
make drastic changes.”


Could I suggest, Mr Hockey, that this problem is very much of your own
making and your decisions to date are doing nothing to help.  Stick to
your word, increase the SG, and encourage lower income earners to
contribute to superannuation.  They are the ones more likely headed for
the old age pension than your mates who have over $2 million tax free
dollars invested with an annual retirement income of over $100,000 a
year!  Your lamentations lack credibility as do your ever-changing
promises and actions.

It was once said that the moral test of
government is how that government treats those who are in the dawn of
life, the children; those who are in the twilight of life, the elderly;
and those who are in the shadows of life, the sick, the needy and the
handicapped.


Hubert H. Humphrey

He Wouldn't Dare

He Wouldn’t Dare

By John Kelly on April 14, 2014 • 

No
matter what Joe Hockey says, he wouldn’t dare upset today’s aged
pensioners…would he? As much as he would like to, the consequences of
such an act would terminate his tenure as treasurer very quickly.


Yes, he will probably increase the pension qualification age to 70,
but it is unlikely it would come into effect before 2024 when the
increase to 67 introduced by Kevin Rudd was to take full effect. That
will give those in their forties and early fifties time to think about
their future. Sound alright? Of course, it might also make them
sufficiently angry enough to change their vote though….like now!


As an aged pensioner, I can tell you how I longed for the day when I
turned 65. I literally counted down the last 5 years, day by day as I
continued working a 60 hour week making an average $10 an hour driving a
taxi.


Having finally achieved that glorious age and be accepted into the
hallowed halls of the government’s financial reward program, I can tell
you it is not something I would surrender…ever. Well, maybe if I won
Tattslotto or something but hey, that’s never going to happen.


There are just so many ways for Hockey to find the money to improve
the bottom line and in time balance the books, he would have to be a
Grade A failure at his job not to see them. Slugging pensioners is the
cowardly way out. He could start by retaining the carbon tax and the
mining tax. That will create more revenue than hitting pensioners could
ever generate.

There was a time, albeit a very brief one, when I saw Hockey as the only
responsible minister in the government. But over the past few months,
having listened closely to his rhetoric, his cleverly chosen words and
having watched his mannerisms, my view of him has changed. He is the
quintessential Liberal. Their mantra is freedom; every man, woman and
child should be free to do what they like; free to succeed and free to
fail, all of which sounds great until you dissect such freedoms down and
discover what happens when they become the catalyst for wonton
destruction of our everyday way of life.

Image courtesy of pbs.org

The wonderful documentary, ‘The Inside Job’ was on television the
other night. Narrated by Matt Damon it gives a step by step analysis of
how the GFC was created. It began with government deregulation of the
financial industry during Ronald Reagan’s presidency. Subsequent
presidents, Clinton and Bush gave away further controls granting money
hungry morons the freedom to rip the heart out of the American dream.
And because the economies of so many countries were inextricably linked
with America, it brought the rest of the world to its knees.


That’s the sort of freedom Liberals in this country want for us. From
the loosening of controls on financial advisers to the repeal of racial
discrimination laws, to slugging pensioners. All these measures are
designed to put financial power back into the hands of unregulated
morons who will have the freedom to play havoc with our money. All this,
in the mistaken belief that the principle of ‘trickle down economics’
works. It doesn’t and it has been proven so.


And as for broken election promises, we can be certain that there is a
small Liberal army of ‘double-speak’ cretins who are, at this very
moment, crafting the language we will hear, denying that any promises
have been broken, that the government has been true to its word and that
no one will be worse off, blah, blah, blah.


This ensures Joe Hockey will be able to continue with the forward
guard rhetoric preparing us with what sounds like responsible, sound
economic management when, all along the way, he is in fact laying the
groundwork for an attack on our social welfare system; a system that has
defined our nation’s responsibility to those least able to defend
themselves. All this in favour of opening up the gates to those, he
thinks will expand and develop the nations resources for the benefit of
us all. What balderdash!


And
so for the aged pensioner who has been protected from the heartless,
greedy eyes of Coalition governments ever since Gough Whitlam
established the formula that ensured they would receive 25% of male
weekly earnings back in 1973, a new paradigm is about to unfold; a time
honoured, sacrosanct principle is about to be scrapped.

He wouldn’t dare…..would he?

Yes, he would. It’s part of what being Liberal today, is all about

Tony Burke ‏@Tony_Burke 2m

First they double the deficit with an extra $68 billion. Now they want pensioners to pay the price

. #auspol pic.twitter.com/M1BlPTyevj

 

 

Budget bothers: Joe Hockey is no Paul Keating

Budget bothers: Joe Hockey is no Paul Keating

Alan Austin 5 April 2014, 11:00am  

EconomicsPolitics

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Developments this week should make many Australians apprehensive about their economic future. Alan Austin reports.



IT LOOKS HIGHLY LIKELY that lower middle and low income groups will take a pretty awful hit in next month’s Federal budget.



Incomes will almost certainly be driven down. And taxes will rise substantially. Probably including the regressive goods and services tax (GST).



Several recent events make this evident.



Firstly, Joe Hockey has started softening up the populace for hefty tax rises and cuts to services and benefits, impacting the disadvantaged.



In code for “hitting the poorest of the poor”, Hockey said on Tuesday:

 “Everyone is going to have to make a contribution — big business, small business, all people from all demographics across the community.”

Secondly, Treasury secretary Martin Parkinson issued
warnings to the Sydney Institute on Wednesday. He revealed indirectly
that he believes the recent period of effective economic management has
ended. He seems resigned to the fact that the lacklustre efforts of the
Howard years have returned under Abbott.  



But he also offered significant signs of hope, beyond the dismal period Australians will experience in the short term.



Recent figures show that, at the end of 2013, Australia’s rate of
expansion of gross domestic product (GDP) – that is, the measure of how
strongly the economy is growing overall – was a healthy 2.8%.



That puts Australia in the top six wealthy developed economies; just
behind Iceland, South Korea, Israel, Sweden and New Zealand — all
countries with much smaller budgets and workforces to manage.



Dr Parkinson showed that, following reforms implemented by Paul Keating
in the 1980s and 90s, Australia has had 22 years of continuous growth –
alone in the world – and this is now projected to stretch to 33.



Chart 12: Years of continuous GDP growth







(Source: Haver Analytics and CEIC)



So, Australia’s economy after six years of Labor is travelling
remarkably well and offers no grounds for Hockey or Abbott to accuse
their predecessors of laying booby traps or other dastardly deeds.



So what are the challenges ahead? Dr Parkinson highlighted four:

1. The resources boom is moving from the investment to the export phase. This offers fewer jobs.
2. Australia’s productivity performance, although boosted from 2009 to
   2012, remains too low and is projected to decline under the Coalition.
3. Australia’s terms of trade – the price of exports relative to the
   price of imports, which reached record levels in 2011 – is now falling.
4. The gap between the nation’s projected payments and its income –
   that is, the budget deficit – is unacceptably large and looks like
   staying high for a decade.

So what to do? The path to wisdom, always, is to ask: What would Paul Keating do?



Faced with the worst global downturn in 60 years, Wayne Swan asked
this and got the answers pretty right. Peter Costello seldom needed to
ask this because he was bequeathed an economy requiring no further
fixing. Or, as Keating memorably put it, “Costello was hit in the arse
by a rainbow”.



It appears the Abbott government is planning to reduce support for
the disadvantaged, including the national disability service and
increase both income taxes and the GST.



This week looked disturbingly like another 'inadvertent border incursion' situation.





In January, the Abbott cabinet was advised privately on Wednesday
15th that several naval vessels had violated Indonesia’s borders.



Immigration Minister Scott Morrison immediately called a press
conference for that afternoon with the purpose of solemnly announcing,
using Lieutenant-General Angus Campbell as spokesman, that

“... our activities and assets have never and will never violate the sovereign territory of another country.”

Morrison then called another press conference two days later to admit that, to his profound dismay and astonishment, Australian ships had, in fact,

“... inadvertently entered Indonesian territorial waters on several occasions.”

He was, of course, terribly sorry about it and had had no idea that
could possible ever happen — his sincerity proven by his assurances just
two days before.



On the GST increase, Joe Hockey's office said on Thursday:

“We are not changing the GST—full stop, end of story. Our position hasn’t changed.”

Foreign minister Julie Bishop gave the same assurances to the ABC:

“We're not changing the GST … Our promise at the last election
was that there'd be no increase to the GST and that remains our
position.”

Does that suggest there may soon be an inadvertent GST incursion?



We shall see.





So what would Keating do?



He would quite likely:

• Keep the GST where it is.
• Leave tax rates on low and middle income where they are.
• Maintain wages and conditions to keep domestic demand steady.
• Restore the mining tax, tweaked to make it effective as well fair.
• Restore the carbon tax, pretty much as it was;
• Reintroduce indexation of the petrol excise, which John Howard abolished.
• Reduce tax exemptions to the big mining companies.
• Increase capital gains tax.
• Abandon the paid parental scheme (PPS).
• Apply the targeted tax on companies mooted to pay for the PPS, but direct the proceeds to crucial infrastructure;
• Take back the $8.8 billion Hockey gave the Reserve Bank in October, in a tricky political ploy.
• Retain Medibank Private and other public assets, and apply the dividend stream to debt reduction. Asset sales do not affect the budget.
• Reduce superannuation tax concessions for the wealthy, as promised by Labor but un-promised by Abbott.
• Shift up, by one year, the age for superannuation and the aged pension.
• End, or at least tweak, negative gearing on investment housing.
• Encourage expansion of agriculture to meet predicted demand from Asia; and
• encourage high-value manufacturing to meet the same regional demand.

Keating would do these with consultation and persuasion and ensuring protection for the most vulnerable first and foremost.



He would explain Australia’s debt is not spiralling out of control
and that expanding borrowings modestly at a time of low interest rates
will have long-term benefits.



Australia still has the best economy in the world.



Australia’s prospects are extraordinarily bright, if things are well-managed.



Unfortunately for Australia, Joe Hockey is no Paul Keating.

Budget spin enters Fantasyland

Budget spin enters Fantasyland

Comment By Barry Tucker                    5 April, 2014


The Budget spin of Australian federal Treasurer Joe Hockey has
entered the world of fantasy. It’s a world where fantastic imagination,
lies, obfuscation, bull-dust, half-truth and distortion gets mixed in a
muddle — all designed to blind-side the voters.


Sometimes it blind-sides the news media. Sometimes some of the news
media get sick of the deception, get sick of being played for fools —
and let rip.


This is a story about such an occasion. Some mistakes were made along the way.


Let’s begin with this meme, circulated on Twitter on Thursday, April 3, 2014. It’s WRONG! Well, half wrong. The reference to “Treasury Analysis” is wrong.


Treasurer Hockey issued a “Briefing Note”. His note was supposedly
based on Treasury modelling. The online news magazine Crikey.com pointed
out how some news media portrayed the briefing note as a “Treasury
Analysis”.


Crikey said the briefing was written by Hockey’s media adviser, former The Australian Financial Review journalist Gemma Daley.


When I followed a link accompanying the meme above I found the Crikey story. It was written by Bernard Keane and Glenn Dyer.


They went ballistic over Hockey’s references to Treasury numbers and forecast revenues and expenditures:


“… Joe Hockey is treating us as complete idiots.”


“Hockey would like us to see him as a budgetary innocent who has
found himself in the middle of a fiscal minefield planted by Labor.”


“And if Hockey seriously expects us to believe his latest argument, he must have nothing but contempt for us.”


The two journalists then proceeded to pull the Treasurer’s Briefing Note to pieces.


He may not have written it but, as the issuing Minister, Hockey’s responsible for it.


This is not the way Canberra-based journalists normally deal with
material issued by government ministers. The ministers know that and no
doubt they count on it.


What Hockey is doing is softening up the public, mainly low income
taxpayers, for a tough May Budget and he’s trying to blame spending by
the previous Labor government for that.


Basic Liberal party ideology is to sell public assets, slash welfare
and enrich the middle to upper class and big business — their key
supporters. Late this week, on the eve of the re-run West Australian
election of Senators, Hockey had the gall to tell the public his Budget
was NOT ideological. He chose the friendly Andrew Bolt’s radio show to
sell the line that his tough Budget was necessary to provide for future
sustainability.


Hockey’s Briefing Note was not widely reported on, as far as I can
tell. It came on the heels of a meeting with State Premiers during which
Hockey hammered out his demands that they sell public assets to pay for
the projects that the “Infrastructure Minister” government leader Tony
Abbott wants to take credit for. He offered a sweetener of 15% of
something as an inducement.


So public assets will be sold to build infrastructure (the “roads of
the 21st Century” that Abbott has promised as his monument), plus 15%
from Treasury (taxpayer’s cash) and no doubt the roads will be
public/private ventures that will have tolls. All very nice for Abbott’s
corporate mates, but it does little for cities that are crying out for
more mass transit and light rail.


One journalist who ignored Hockey’s briefing was The Guardian
online’s Political Editor Lenore Taylor. Taylor told me if she reported
on every pre-Budget positioning she would not have time for anything
else.


Others were easily sucked in, like the ABC’s The World Today
presenter Eleanor Hall and Canberra correspondent Alexandra Kirk, under
the website headline: The full story … Hockey and Labor positioning
ahead of budget ‘hard decisions’. Hilarious!


Hockey: As we approach the Budget, more and more evidence emerges of what was left behind by our predecessors.


Kirk: Mr Hockey’s used the Treasury modelling
to argue that without a change in policy direction, spending is
projected to outstrip revenue in every year for the next decade, meaning
the Budget would be in deficit for a 16-year stretch.


Hockey: Sixteen years. Sixteen years of deficits
without a recession, without any significant downturn, is the legacy of
Labor. And unless we take immediate remedial action in the Budget, then
Australia will never have a surplus. The fact is we have to address this
and address this fast.


Kirk then spoke to Labor’s Treasury spokesperson, Andrew Leigh, who said the Budget position was to a large extent of Joe Hockey’s own making.


Leigh: Joe Hockey should not be allowed to try and
fool the Australian people into the state of the books when he took
over. That was clearly set down under the Charter of Budget Honesty and
the pre-election Economic and Fiscal Outlook. And it clearly said,
Budget back in surplus in 2016-17.


Then came economist Chris Richardson, of Deloitte Access. He said
there was a Budget problem that needs to be fixed, but it doesn’t need
to be fixed tomorrow.


There’s more from all parties in the ABC interview.


Rupert Murdoch’s The Australian, reported on the Briefing Note on April 1. Unfortunately that story is behind the paywall.


The URL in the Google search result says the story is “premium content”. Ha!


It’s based on a Briefing Note that Hockey was pushing into
journalists’ hands. The story must contain some terribly perceptive and
erudite comments from a Murdoch propaganda hack.


Much kudos goes to the two Crikey journalists who had the decency,
the integrity, the knowledge and the insight to treat Hockey’s Briefing
Note with the contempt it deserves.

Abbott and Hockey selling-off the silver: IAREM says Australians will suffer

Abbott and Hockey selling-off the silver: IAREM says Australians will suffer

Alan Austin 29 March 2014, 12:30pm  

EconomicsPolitics

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(Images in this piece by John Graham / johngraham.alphalink.com.au)

With ideological fervour, Joe Hockey says state governments must start selling their public assets. Alan Austin says the evidence suggests this is not the path to national prosperity.



DISMAY AT Treasurer Joe Hockey’s fervour for flogging off Australia’s productive assets seems strangely muted.



Perhaps, at the end of a month which has seen craziness and stupidity descend to depths Abbott’s most hostile critics could barely have envisaged, the benighted nation is just weirded out.



The evidence indicates, however, that privatising what remains of publicly-owned corporations would be further fiscal folly.



Hockey yesterday was jubilant at support from Coalition state governments for “asset recycling” — as though public corporations are so much junk.



Even more excited were company directors who stand to benefit from the sell-off. That popping and clinking you heard last night was champagne.



Arguments in favour of privatisation include that it enables the private sector to operate enterprises more efficiently.



Really?



The counter-argument is that privatisation usually involves selling
cheaply valuable income-earning companies which taxpayers have built and
paid for over several generations to private owners who then reduce
services and increase charges to reap a rapid return. Consumers who used
to win with fair prices and a return to the community in dividends lose
both ways.



A recent example of privatisation gone seriously wrong in Australia would appear to be the disastrous coal mine fire
in Victoria’s Latrobe Valley which burned for 45 days from early
February. Only just extinguished, this caused untold social, economic,
physical health and mental health problems for nearby residents.



Was this the result of selling assets to a foreign company which cut maintenance and safety costs, as claimed?



Perhaps the inquiry will determine that. Even if it does, it is too late to undo the damage.



The problem for serious analysis of this issue is that compelling evidence is virtually impossible to pin down.



Independent Australia’s recently-released measure of sound economic management – the IAREM score – may, however, assist.



What has been the policy on privatisation of the world’s top
economies? Does economic success correlate with privatisation? Or with
maintaining government-run enterprises?



The latter appears to be supported by the IAREM rankings.



 



Let’s consider the top eight economies in 2013:

8. Kuwait

Kuwait is a small, oil-rich nation with a history of extensive government ownership and control of the economy.



Private enterprise is now encouraged, but the government still
dominates with 100 per cent ownership of Kuwait Petroleum Corporation,
Kuwait Airways and many other enterprises. (Data from the CIA,
Wikipedia, the World Bank and elsewhere.)

7. Canada

Canada is a high-tech society which benefits greatly from proximity
to the United States. One difference between Canada and the U.S. is the
level of large public corporations.



There are hundreds of these in Canada if ownership by the states are
counted. They include Atomic Energy of Canada, Bank of Canada, Canada
Deposit Insurance Corporation, Canada Post, Canada Dairy Commission,
Canada Broadcasting Corporation, Defence Construction Ltd, Telefilm
Canada, Marine Atlantic Inc, Via Rail Canada and Federal Bridge
Corporation.



Is this one reason Canadians are so much better off than their neighbours to the South?

6. Luxembourg

This is a small, high-income economy with public debt among the world’s lowest.



Government-owned corporations include the Central Bank of Luxembourg,
Centre Hospitalier de Luxembourg, Société Nationale de Crédit, Post and
Telegraph Luxembourg and Luxair airlines 49.96% owned.

5. Switzerland

Switzerland’s market economy is famous for its financial services,
but also has a strong sector in high-technology manufacturing.



Government-owned corporations include Hotel Bellevue Palace, Swiss
Federal Railways, Swisscom, Swiss Post, Ruag (aviation and space
technology), Swiss National Bank and construction companies.

4. Singapore

Small in area, Singapore is now Southeast Asia's finance and high-tech hub with a highly developed free-market economy.



It has one of the highest levels of government ownership in the
western world. State-owned companies include Singapore Airlines,
CapitaLand, Singapore Post, Singapore Pools, Singapore Power, SingTel,
Neptune Orient Lines, MediaCorp and the Government of Singapore
Investment Corporation.

3. United Arab Emirates

The UAE is a mixed economy with its IAREM score boosted by high employment, high income per person and strong growth.



The government dominates the economy owning hundreds of corporations,
many of them monopolies. These include Abu Dhabi Ports Company, Arab
Media Group, Dubai Lifestyle City, Emirates Post, Dubai World, Abu Dhabi
Terminals, Arabian Television Network and Emirates airline 100% owned.

2. Norway

Norway’s government effectively controls the economy through
extensive regulation and large-scale state-owned enterprises. About 20
per cent of the government’s total revenue comes just from public
petroleum corporations.



Norway saves petroleum revenue in the world's largest sovereign
wealth fund, valued at more than $822 billion in January. Earnings from
the fund help finance public outlays.



The government owns and operates hundreds of corporations in transport, communications, finance, real estate, mining, theatre, energy and venture capital.



Having such a dominant public sector has clearly not harmed Norway’s
prosperity — second highest in the world. Or is that the actual reason
for it?

1. Australia

Australia rose to the top of the IAREM rankings through the global
financial crisis with effective government intervention in its mixed
economy.







Federal government-owned corporations
include Australia Post, Medibank Private, ASC Pty Limited, Defence
Housing Australia and Australian Rail Track Corporation. The states own
many more corporations.



So it seems prosperity correlates positively with government
ownership of enterprises. (Although admittedly this is not an exhaustive
survey.) Most of the countries which have heavily privatised in recent
decades, such as the UK, Spain, Italy and the US, are well down the
rankings.



Most of these top eight IAREM countries also perform well on the Gini index
– which measures fair distribution of family income across the nation.
This tends to confirm the observation that privatisation leads to wider
disparities of wealth and income.



Norway’s Gini index is 25.0, ranked 6th lowest in the world on the CIA list, where the lower the score the fairer the income distribution. Luxembourg’s index is 26.0, ranked 7th lowest.



Switzerland’s is 29.6, ranking 19th, Australia’s is 30.3, ranking
21st and Canada’s is 32.1 ranking 35th. Singapore is well down the list
on 47.8. The other two nations are not listed.



So there appear strong arguments in both economics and social justice
for retaining as much public ownership of community assets as possible.



Ideology trumps these, it seems, in Abbott’s Australia. Or is it simply repaying favours?

Let’s get real here

Let’s get real here

By Kaye Lee on March 28, 2014 • ( 3 )

“TONY Abbott and Joe Hockey are convinced the government will be punished electorally if it does not produce a tough budget, and they believe there is a “public appetite” for decisive action to get the economy back on track.”


Sounds good? Well let’s get real here. Nothing pisses me off more
than getting lied to and you, Mr Hockey, are really pissing me off.
Listening to you rail at Labor this week, exhorting them to tell the
truth as you told lie after lie, nearly made me choke. There is a
“public appetite” for the truth so time for a reality check.


Firstly, to label MYEFO as Labor’s last budget fools no-one. It was
produced over three months into your term. You were elected because you
said you could fix the problems. The blame game is over sunshine, it’s
on your shoulders now and you have wasted one sixth of your term in
office crying.


The PEFO report is an independent report by the Secretaries to the
Treasury and the Department of Finance that provides updated information
on the economic and fiscal outlook. These are the same people who
advised you for your MYEFO report so to accuse Labor of lying about the
figures is rot.


PEFO showed the cumulative projected budget deficit for the years 2013 to 2017 as $38 billion. MYEFO, prepared under your watch, shows a deficit of $106.6 billion. To quote your own document


“The $68.1 billion deterioration in the budget position since the 2013 PEFO reflects two key factors:

• the softer economic outlook; and
• essential steps to address unresolved issues inherited from the former government”. (otherwise known as YOUR spending decisions).

You go on to say:

“Firstly, a softening in the economic outlook has
resulted in significantly lower nominal GDP, which has largely driven
the reduction in tax receipts by more than $37 billion over the forward
estimates.”

In the face of falling taxation revenue how does the Coalition react?
They forego $2.9 billion revenue in tax and superannuation measures
announced by the previous government.


Getting rid of the moves to tighten the requirements around tax
benefits associated with salary packaging a car under Fringe Benefits
Tax rules cost us $1.8 billion. All that was required was for FBT claims
of business use to be legitimate, verified by a log book filled in for 3
months once every five years – hardly an onerous task.


Joe and Tony said it would cost jobs in the car manufacturing
industry. Well subsequent actions by the Coalition show that concern to
be a sham as they went about dismantling the industry from their first
day, so I can only conclude that they support fraudulent claims of
vehicle business use as a legitimate form of tax avoidance.


Moves to tax earnings of more than $100,000 on superannuation
pensions and annuities at 15 per cent instead of being tax-free have
also been repealed. This move cost us $1 billion to allow the 16,000
wealthiest superannuation recipients to pay no tax at all on an annual
income of over $100,000. These would include the people that John Howard
permitted to put $1 million into superannuation tax free in 2007 as a
vote buyer.


The cost of tax concessions for superannuation continues to grow by about $5 billion per year and will soon top $50 billion.


The revised projections for revenue from the mining tax showed it
raising $3.3 billion over the forward estimates. You may call that
nothing but think what those charities you have cut funding to could
have done with that. Perhaps the childcare and aged care workers could
have got that pay rise after all. You cannot say, on the one hand, that
it raises no revenue and then on the other, say it is a burden on
business that is costing jobs and investment. All this at a time when
record mining industry profits have outstripped growth in taxes and
royalties.


The Coalition have also pledged to reduce company tax by 1.5% which
will cost us $5 billion. One reason given for this is to offset Tony’s
paid parental leave scheme. Tony and Joe assure us that PPL is fully
funded by a 1.5% levy on businesses with a turnover of over $5 million –
they neglect to mention that the country loses $5 billion which will
now be diverted to pay wealthy women to breed. Let’s just imagine that
we had someone sensible in charge, scrapped Tony’s PPL scheme, scrapped
the reduction of company tax, and kept the 1.5% levy on the top 5000
businesses. We would have an extra $10 billion a year to spend on, oh I
don’t know, renewable energy perhaps?


The carbon price raised $6.6 billion in its first year which was
passed on to households, trade-exposed industry, and research and
development grants. Repealing it could punch a hole as big as $7.6
billion a year in the budget. Compare that to the Coalition’s Direct
Action fiasco which will not raise revenue and cost the budget $3.2
billion over the next four years. Instead of collecting about $30
billion and taking action on climate change we will be paying over $3
billion to polluters – makes sense, NOT.


Moving on from the revenue side to spending, MYEFO tells us that the
majority of the $17 billion deterioration in this year’s budget is due
to Coalition spending decisions.


As soon as Joe Hockey got the keys to the safe he borrowed $8.8
billion and gave it to the Reserve Bank of Australia in what has been
described as a gamble on the foreign exchange market. The RBA certainly
didn’t ask for Hockey’s $8.8 billion capital injection and didn’t think
it was necessary. It wanted to rebuild its capital over several years by
retaining its profits and not paying the government dividends. Hockey’s
$8.8 billion injection this year means dividends will be paid to the
government over the next few years.


So the truth of this exercise is Hockey wanted Labor’s deficit to
look bigger and he is happy to blow several hundred million dollars
interest a year in an attempt to make his performance as Treasurer look
good.


After years of abuse about the cost of Labor’s asylum seeker policy,
Hockey added an extra $1.2 billion for offshore processing. Presumably
this will be spent on extra guards and orange life rafts and bribes to
other countries to see to our problem.


An extra $1 billion was allocated to fund eight infrastructure
projects that were to be funded from the former Government’s Regional
Infrastructure Fund which was paid for by the mining tax. Instead of the
MRRT providing the funds, they will now come direct from the taxpayer
as the Roads Prime Minister fulfils his dream. And now we have Matthias
Corman telling us that the possible $4 billion raised from the sale of
Medibank Private will also be spent on roads. Enough with the roads
already – we don’t want to become another Beijing. How about another
airport for Sydney or high speed rail or urban public transport?


Hockey goes on to say that “Without any policy changes, the budget is
projected to be in deficit in each and every year to 2023‑24.” A little
further down the page we read that “The Government is committed to
returning the budget to sustainable surpluses that build to at least 1
per cent of GDP by 2023‑24.” Ummmm, what’s the difference? Does that
mean that you intend to make no policy changes, or that your policy
changes will make no difference?


Much has been made of the promised Commission of Audit. MYEFO stated that:


“The Commission of Audit will be guided in its work by the principles that government should:

• live within its means;
• have respect for taxpayers in the care with which it spends every dollar of revenue; and
• do for people what they cannot do, or cannot do efficiently, for themselves, but no more.”

Considering what you are prepared to spend money on – Fleets of joint
strike fighters, submarines, unmanned drones and one-use orange life
rafts, $10 billion to keep asylum seekers locked up, gold plated paid
parental leave, grants to polluters, billions a year on fossil fuel
subsidies, endless reviews, audits, white and green papers, and Royal
Commissions, bigger new planes so Tony can accommodate the film crews in
VIP luxury, a $70,000 pay rise for Campbell Newman, $16 million for
Cadbury – I think it is YOU who should be fearful of what the Commission
has to say.


Rather than telling all of US to tighten our belts and prepare for
big cuts, how about you think about your priorities. You are throwing
away money by your tax cuts and your spending priorities are crazy. I
will be interested to see if the Commission of Audit agrees with me, or
will those bits be excluded from the censored version? It’s amazing how
this government, champions of free speech, refuse to release documents
and information and when they do, they redact so much it reads like a tv
guide.


At the risk of sounding sexist, perhaps having a few more women in
Cabinet might help. They are often better at seeing the big picture and
making the most of the income you’ve got.


Stop the theatrics Joe. We are on to you. The dispatch box is your
stage, but your script of blaming Labor and giving misleading
information is becoming very tired. Every time you and Tony spoke this
week, in your softening us up for the budget, you said Labor left us
with a debt of $667 billion and cried shame shame at the Opposition.
Well shame on you for your purposeful distortion. To counteract your
manipulation, and to make sure the public understands the truth I will
once again quote from your own document.


“Net debt is forecast to be $191.5 billion in 2013-14 and reach $280 billion in 2016-17.”


Let’s get real here!