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66 responses to “You wouldn’t read about it”

  1. duncan

    First.

    Taxes are lower because profits are lower.

    .. and that’s somehow a good thing?

  2. Katz

    And the Rudd/Gillard governments are to blame for the GFC?

    Yes. The tax take is closely related to general economic conditions.

    But when Labor governments accept that surpluses are inherently good, they have abandoned a critical social democratic principle.

  3. Andos

    What Katz said.

    Koukoulas shits me to tears because he is trying to win an argument which is entirely a construction of the neoliberal conservatives.

    If Labor spent some time explaining that the budget outcome is so far removed from the welfare of the Australian people as to be almost irrelevant, then we might make some headway.

  4. Joe

    duncan,

    Brian said:

    in the past 20 years the LNP brought down 12 budgets, none of which with taxes less than 22% of GDP. Labor brought down eight budgets, all with taxes below 22% of GDP.

    Do you know what percentges are?

    This says nothing about the size of the tax intake or the size of GDP and therefore it is a terrible conclusion that you come to, that profits during years of Labor governments are lower. In fact, in this case, terrible means plain dumb.

    What the quote actually says is that contrary to a commonly held belief that Labor governments tax more to pay for their social/ welfare programs– they infact don’t! Labor governments actually tax less.

    The big taxing governments are the Liberal governments, which if you look at the package being offered by Abbott is only too believable. By any objective measure, the Labor governments since Keating have managed the economy better.

    Costello did nothing. All the reforming had been done by the time the cheshire cat appeared in Canberra. Smiling. Appearing. Reappearing.

  5. duncan

    Joe,

    # they don’t decide to tax less. It is an artifact of the general economic conditions
    # Tax is not the only input, government debt has ballooned.

  6. Debbieanne

    What is it with the perverse facination with ‘lower taxes’? The stupidity of the masses who want better health care, more police, more teachers, increased infrastructure, but reduced taxes, brings me to tears. Why can’t the Labour government actually encourage people to THINK.

  7. Jenny

    Andos @ 3

    Koukoulas shits me to tears because he is trying to win an argument which is entirely a construction of the neoliberal conservatives.

    The argument isn’t intended for you – you’re a lefty anyway. But it’s likely to be influential with my mum-in-law who:
    - is a swinging voter
    - found the ‘debt is bad’ argument strangely persuasive
    - mistakenly thinks the stimulus spending was the reason for the debt
    - worries that the ALP are big spenders
    - worries that the ALP give away too much money to the ‘undeserving’.
    Labor is going to need her vote at the next election.

  8. John D

    When Peter Costello was getting his free university education the top tax rate was 60%. What really pissed me off was that I helped subsidize his free education but he didn’t return the favour when it was my kids turn.
    Swan should balance the budget by getting the well off to pay more instead of cutting/not starting programs that make good sense.
    Would be interesting to compare how what % of their income the billionaire miners are paying compared with their workers.

  9. Andos

    Jenny: That’s my point.

    If, instead of buying into the “debt is bad, surplus is good” non sequitur which is simply designed to restrict government spending, the Labor Government actually explained to people how government spending is integral to advancing public purpose and actually public debt provides a risk-free income stream to people like your mum, then the Liberals wouldn’t have a leg to stand on.

    That’s why Koukoulas shits me. He’s trying to win an argument which is designed to disadvantage progressive politics by its nature instead of showing people like your mum that the argument is meaningless in the first place.

  10. Andos

    Whoops, sorry, that should be “mum-in-law”. Apologies.

  11. wilful

    Debbianne said:

    What is it with the perverse facination with ‘lower taxes’? The stupidity of the masses who want better health care, more police, more teachers, increased infrastructure, but reduced taxes, brings me to tears. Why can’t the Labour government actually encourage people to THINK.

    I’m not going to disagree that there’s an excess of debate about the tax rate, but I don’t want to throw the baby out with the bathwater, lower taxes are still a good thing, they’re just not the only game in town.

    I’ve been reading Peter Hartcher’s The Sweet Spot this week. I can’t say i agree with everything in it, but overall it does gel with what I (think I) know about the Australian economy. Tim Colebatch, Ross Gittins* and George Megalogenis seem to be the only consistently honest brokers reporting on this stuff ever – Australia does very very well by any metric, we manage a middle high level of government service (health, education, the important stuff) with a middle low tax rate, that is mostly fairly efficient, because the system is mostly fairly targeted. Howard did some good things here (GST, Future Fund, debt reduction, across the board tax reductions), he mostly lost it economically after 2004, lowering taxes only for the wealthy.

    Australia has mostly had quite good governance by both parties since 1983. The worry is that Tony Abbott is an irrational innumerate buffoon.

    *A closely related field is how crime is reported. Here‘s Gittin’s column from today.

  12. Duncan

    @8

    yeh.. what did those billionaire miners ever do for the country?

    Oh, other than the $21B in corporate tax and royalties, $18B in salaries, and $40B-odd in R&D and investment

    cheap bastards.

  13. Duncan

    per annum, of course.

  14. wilful

    Duncan, I believe that Twiggy Forrest has been paying 18% tax?

    I’m not quite sure how these particular billionaires get all the credit for all the jobs created. These non-renewable resources, our common heritage, able to be dug up and sold exactly once, were always going to be dug up and sold by someone(s), employing a lot of people in the process.

    Given that we collectively own the minerals, economic rents should be collected by ‘us’.

  15. joe2

    Hockey is doing very well at getting out there and telling his story with confidence. Swan may know what he is talking about but doesn’t inspire confidence.

    I disagree, Brian. As an example, I heard Hockey and then Swan a couple of days later on Faine/ABC. The contrast was very obvious. The waffling by Joe was palpable while Swan was well in control and backed up with definite figures and knowledge.

    Under any pressure Hockey is lost but Swan holds up well. The feedback support for the treasurer over his opponent by listeners was quite stark.

  16. Sam

    when Labor governments accept that surpluses are inherently good, they have abandoned a critical social democratic principle.

    Is it a key social democratic principle that deficits are inherently good? I would have thought that the social democratic principle is that government spends what it needs to spend, and collects taxes in an equitable manner to pay for it.

    The principle articulated by Wayne Swan (if that is not an oxymoron) is that deficits are needed in bad times, such as the GFC, and to pay for these, surpluses are needed in good times.

  17. Sam

    Swan may know what he is talking about but doesn’t inspire confidence.

    Swan is very good at following the brief that Treasury prepares for him, as was Costello. That is not the same thing as knowing what you are talking about.

    This factor is one of the things Bob Carr has going for him.

    Bob Carr is a bullshit artist par excellence. He got away with it for a long time as NSW Premier but it caught up with him eventually.

    He won’t FM for long enough for it to catch up with him there.

  18. joe2

    And, of course, it may just be that he will get the budget back into the black just in time for another crash, just about now. I must say, it is starting to look a bit that way.

  19. Howard Cunningham

    So, if the Liberals are the big taxing party, does this mean they can count on your votes at the next election?

  20. tigtog

    It’s only one half of the equation though, isn’t it Howie? The other half of the equation is which programs get expanded and which programs get defunded with the tax revenue which is raised.

  21. Roger Jones

    Duncan @13

    economist Nicholas Gruen, valued mining R&D in Australia at $5.3 billion in 2008-09, of a total $52.4 billion in mining investment.

    Mining R&D must have accelerated extremely rapidly in the past couple of years – can you point us to the source of those numbers?

  22. Grey

    The big taxing governments are the Liberal governments

    I want a big taxing government. Why is it every election we are always talking about tax cuts?

  23. Katz

    HC, you must be, in retrospect, a little embarrassed by your suggestion.

    Since when was taxation, any more than a disinclination to tax, an end in itself?

    It would seem that, in mature democracies like Australia, the difference between major parties is less in how much they tax as where they spend.

    John Howard, for example, was very keen on the bribe to mortgagors, on school chaplains, on flagpoles, and on bailing his brother out of the consequences of his business failure.

  24. Roger Jones

    Some comparisons (ABS) 2009-10

    Employ Salaries Sales inc Tot inc Tot exp Pre-tax EBITDA Value add
    Mining
    144,000 16,751 153,488 168,887 118,740 51,291 57,767 87,807
    Manufacturing
    955,000 51,853 381,165 389,980 363,547 24,832 32,978 96,809
    Farming
    467,000 5,779 60,688 64,850 57,261 7,448 12,263 20,411
    Construction
    994,000 42,918 275,290 280,802 254,002 26,665 31,308 83,822
    Profs, tech, sci
    941,000 53,176 157,870 180,409 148,577 31,708 20,101 83,895
    The lot
    10,057,000 406,920 2,439,279 2,587,204 2,317,770 271,332 322,551 832,247

  25. Jacques de Molay

    Second, Gillard should be able to go to the 2013 election having cut real spending in two out of three budgets.

    This really sums up the quality of the ALP these days, a poor man’s Liberal Party.

    No government should ever turn a budget surplus.

  26. wilful

    No government should ever turn a budget surplus.

    Every government should borrow? How is that supposed to work?

  27. Katz

    As long a tax revenues can cover any increases in interest repayments, governments can run deficits forever.

    The crisis comes when bond buyers start doubting the ability of governments to make repayments, not just today, but maybe 25 years in the future. These calculations are an odd mixture of complex mathematics and blind panic.

  28. marks

    27@wilful.

    There is a school of thought amongst the user pays types that looks at items like infrastructure with long lives. In this school of thought, if a government borrows for infrastructure and pays it off plus interest over the life of the asset, then those generations using the asset actually pay for it. If OTOH, it is paid for immediately, then an old codger part pays for it all in his/her tax now, even though they might not live long enough to benefit from that asset. ie for capital works, you borrow and pay off over the life of the asset, and for recurrent expenses, governments should pay over a year. This is partly because generally governments don’t use depreciation like a private business would/must.

    There are plenty of holes in that one, but I think that is the rationale from the user pays types. Whatever, it was almost a universal funding method used by governments at State and Fed level for years. It also meant that there was a good market in government bonds for the likes of pension funds and trusts for widders and orphans as well. That served a quite useful social purpose too.

  29. Fran Barlow

    Every government should borrow? How is that supposed to work?

    As Katz notes, it’s not borrowing per se that causes problems but unmanageable debt service. Providing your borrowing will ultimately lead to greater revenue, this isn’t a problem.

    Borrowing is also worth doing in intergenerational equity terms when it funds programs from which people in the future will benefit and who ought to contribute. Servicing debt is the only way they can be asked to contribute and thus relieve those who began the program of bearing more cost than would be commensurate with the benefit they are likely to receive. Almost any useful piece of long-lived public infrastructure meets this test — heavy rail, roads, public housing, something like the NBN …

    Really, the focus on surplus budgeting as some sort of economic credibility test is simply wrong-headed. It’s the aptness of the programs and associated expenditure that ought to be key. The purpose of government is to ensure that people’s needs are met in a timely and equitable way. If it can achieve that persistently over time, then whether in any given year the budget is in surplus or deficit is irrelevant. Part ot that calculus involves guesses about the capacity to service debt at acceptable cost, but drawing arbitrary lines around target dates to be back in surplus is at best ridiculous.

    In practice, all else being equal, surplus budgeting dampens economic activity, and thus revenue collection. Deficit budgeting has the opposite effect. Having a series of small deficits or small surpluses makes almost no difference to the state of the economy. Hockey admitted as much himself on Fran Kelly’s show this morning. Ironically, if you’re someone who thinks the private sector is more efficient than government at delivering services and goods, then you ought to have a deficit bias. In that scenario, the government is handing back more than it is receiving in revenue. Of course, our “neoliberals” seem to have the opposite view, which is amusing, though not surprising.

  30. Keithy

    You never really need to run a surplus! If you are running surpluses you simply haven’t injected it back into your economy yet simply because you think it would be wasted/uneconomical for some reason or another, but injected back into your economy is where it has to go at some stage!! Where else can it go but someone elses economy??!!

  31. Keithy

    THE OBSESSION WITH SURPLUSES simply indicates we are greedy victims of irrational groupthink.
    ‘The group’ doesn’t understand the basics of economics and what an economy is as it has been specifically programmed not to.
    It has been programmed not to cooperate and instead wage war by demanding more and more out of the thin air given to it by MTV, which spruiks fashion and envy!!
    Who manages to keep a full tank of petrol from week to week?? Yet we all know nothing in life can grow exponentially….
    –>>> Very Interesting times ahead!! (…notLOL)
    The worlds biggest consumer of fossil fuels per capita was anthraxed only ten years ago don’t forget!!!

  32. Keithy

    The pareto priciple says ,… the smallest things make the biggest difference.
    You and I are responsible!!
    You and I are responsible!!!
    Do I need to say it again because I will simply get modded so why don’t we all grow up and stop idolising the violent superstars of fashion!!!!?
    IMHO, let us first demand an end to the racist hate-mongering media! Afterall, it is simply brainwashing….

  33. Joe

    Under Howard we saw record levels of household private debt accompanied by record low levels of household saving and a dramatic blowout in private industry debt. The best policy under Howard was the incentives to invest in the stock market, right before the whole deck of cards came tumbling down. Thanks a million, John.

    What Katz says above is interesting– Australia has in an international comparison two very interesting features– low government debt but an overly high proportion of foreign investment in government bonds. It’s almost the inverse situation to Japan.

    Maybe some of these mining magnates might like to invest a bit more in their own country’s future? But in any case, in the current situation, our debt rating is intimately linked to the perception that we are in the future going to be able to pay our debts. Government or otherwise.

    Another issue is the trend towards ever lower taxation of the wealthy. Why is that? What are the dynamics that have caused this to happen? Is it just the traditional power of the wealthy coming to bare upon the political system in times of peace, or has it got something to do with the effects of a globalized financial system? Finance has never had it so good– financial companies can instantly move large amounts of money anywhere to anywhere in the world, while the goods and commodities, with which finance is supposedly associated are unable to do that. Really, this has to change.

    What’s really striking about the article in the AFR is that the centre left party is taxing less than the centre right party. This in itself shouldn’t be, as others above have said, the issue. But it’s interesting that the SPD government under Schroeder also reduced tax rates in an attempt to win over private industry. (But here once again, the reason given was to maintain competitiveness with the USA.)

    Anyway, we can argue for ever about taxation, but the fundamental issue for governments is how tax money is re-invested in the community.

  34. Terry

    “No government should ever turn a budget surplus.”

    The Greek model of economic governance. See how your sovereignty ends up under that model.

  35. Terangeree

    @ 35:

    Just don’t bid for Olympic Games.

  36. Jacques de Molay

    The Greek model of economic governance. See how your sovereignty ends up under that model.

    It’s pretty simple stuff if a govt budget is in surplus you’re either not spending enough on the people or taxing them too highly.

  37. Lefty E

    Agree the whole narrative is crap, but it is interesting to note that the coalition loses the Bullshit Cup anyway.

  38. robbo

    How come peta’s puppet gets away with calling his “chuck obscene amounts of money at breeders on high incomes” as a “levy” but describes everything that the Govt does as a “tax”?

    Please explain as best you can all of you liebral lovers.

  39. GregM

    It’s pretty simple stuff if a govt budget is in surplus you’re either not spending enough on the people or taxing them too highly

    The Greek model of economic governance restated.

    Let’s see how that plays out over the next 72 hours as the Greeks try to stitch up the bondholders from whom they have borrowed to fund their deficits.

    If they can’t then they are in default and good luck to them in having any more budgetary deficits ( which requires borrowing, and who would lend to them then?) for the next twenty years.

  40. faustusnotes

    so GregM, that means you’ve always voted labor, right? So you can keep the taxing and spending down and have balanced budgets. Don’t want to end up on the slippery slope to the Greek situation by having budget deficits, like happens under the Liberals – right?

  41. Andos

    Don’t just conflate a currency user with a currency issuer.

    We are not Greece and never will be.

    Italy had the same ratio of debt to GDP before it joined the EZ as it does now. It wasn’t a problem back in the early 90′s, why is it a problem now? Monetary sovereignty.

    Or how about comparing Japan now with Italy now? Japan has 200% of GDP in public debt but the lowest yields in the world. What’s the difference? Monetary sovereignty.

    Get a clue.

  42. Ootz

    Thanks robbo for mentioning the Queen of No. It gave me a vision of the liberal federal government’s kitchen cabinet sitting out the next GFC over at Peta and Brian’s!

    Agree with leftyE, the old narratives will fly out of the window anyway in the next financial tectonic shift. The trophy question is who are the key decision makers on either side and how well are they equipped to deal with a crisis.

  43. Sam

    Let’s see how that plays out over the next 72 hours as the Greeks try to stitch up the bondholders from whom they have borrowed to fund their deficits.

    The bondholders can blame themselves. They wanted to believe that the Greek government was telling the truth about its finances.

    If you lend money to someone, there is always the chance they might not pay it back.

  44. alfred venison

    dear editor
    joe said: “Maybe some of these mining magnates might like to invest a bit more in their own country’s future? ”

    i echo that sentiment certainly for the magnates. their personal responsibility to their country. but that which they work for, the transnational corporation, does not have a country. and that’s a problem. transnational, they are of no nationality and they are of all nationalities. they are “persons” (“corporations are persons, my friend”) with no country – their loyalty is always to their shareholders never to the nation states of their consumers. their behaviour is borderline sociopath.

    the financial worth of many of them exceeds by many times the financial worth of most nation states. they bully & they intimidate nations states. they pay as little as they can of what they rightly owe and they withhold or postpone as long as possible the minimal payments they agree to owe. they force changes in the governments of nation states when governments threaten real change to these arrangements.

    by their actions they every day further deny nation states revenue sufficient to discharge the traditional responsibilities of the nation state to its citizens. they intentionally work to weaken the nation state & they court ecological disaster, as a dual strategy to force a crisis of state legitimacy, out of which they expect, from a position of relative strength, to consolidate their hegemony & displace the nation state as the locus of authority & loyalty in society.

    when economy & ecology crash corporations will be the barons in a new anarchical society. governments will be company stores, shop fronts for the delivery of corporate relief to desperate populations whose nation states no longer can afford the means to relieve them in their distress. potemkin nation states, potemkin national governments, sociopath corporations pretending to be persons, masses of people scared enough to hock their democratic inheritance for a chance to get through the crisis.
    yours in a mood of dreadful anticipation
    alfred venison
    p.s. – on other occasions my mood is cheerful as warm bran muffins on a winter morning. a.v.

  45. Katz

    What Katz says above is interesting– Australia has in an international comparison two very interesting features– low government debt but an overly high proportion of foreign investment in government bonds. It’s almost the inverse situation to Japan.

    How much is too much? If foreign capital is prepared to by bonds at a competitive price, why stand in its way? The alternative is sweetheart deals with local capitalists, who use their privileged position to enrich themselves and to inject extortionate practices into commercial decisions.

  46. zoot

    Duncan @13: In a parliamentary enquiry last year I heard evidence extracted from one of Twiggy’s executives that Fortescue Metals Group (4th largest iron ore miner in the world) was yet to pay any tax.
    Just sayin’

  47. zoot

    Addendum – any company tax, that is.

  48. GregA

    A for-profit government is a kleptocracy.

  49. duncan

    @47

    Honestly.. do you just believe everything you hear?

    How about some simple research. 2012 financial report for FMG

    Deferred tax liabilities: $229M
    Government Royalties: $185M

    That’s on an EBITDA of $1.5B

  50. adrian

    Very well said Mr Venison.

  51. Katz

    Here is the quote in question:

    THE mining company owned by billionaire Andrew “Twiggy” Forrest has not paid any corporate tax for seven years.

    And the high-profile critic of the Federal Government’s proposed mining tax has admitted it may not be liable to pay that either.

    Mr Forrest is Australia’s richest man, worth an estimated $6 billion, and recently acquired a $50 million private jet. His Fortescue Metals Group is valued at $16 billion.

    Fortescue Metals’ tax manager, Marcus Hughes, conceded to a parliamentary committee yesterday: “We have not cut a corporate tax cheque to date.”

    But Mr Hughes said that after writing off exploration and development costs since 2003, the company would be “paying our first company tax cheque effective 1 December this year”, of $100 million.

    He expected it would pay $800 million next year.

    http://www.heraldsun.com.au/news/more-news/twiggys-tax-bill-a-blank-cheque/story-fn7x8me2-1226190659022

    While it is true that Fortescue paid no company tax for 7 years, the exploration and development cycle of the company appears to be levelling off. At that point Fortescue starts behaving like a mature company, claiming a more normal menu of tax minimisation loopholes.

    Of interest is this website:

    http://www.spankyourbank.com.au/home

    which when compared with the data in this website:

    http://www.fmgl.com.au/investors_and_media/Top_20_Shareholders

    demonstrates the level of control of Fortescue by Australia’s Big Four Banks, and by some of the biggest banks in the world.

    These websites also help to demonstrate how Australia’s Big Four are part owned by the same huge banks that own a large part of Fortescue.

    These data, in turn, help to clarify how important the Australian mining sector is in the world economy and the world financial system.

  52. su

    A deferred liability has not yet been paid, Duncan, and in practice, these liabilities can be deferred almost permanently. A great deal of strange asset shuffling between different entities seems to happen with that outcome in mind. I imagine that the resources sector is no less keen to go to the limit of the law in their accounting practices. Why do you mention royalties, they are not a tax?

  53. Roger Jones

    And to put all that in perspective, in 2009-10 the mining industry achieved about $400,000 EBITDA (gross earnings) per employee. Similar figures for manufacturing were $34,500, ag/forest/fish $24,500, education (private) $4,500, average $32,000. The only sector that came close was power, water and waste – mainly through power (the other licence to print money in the lucky country).
    If we don’t get investment in high employment sectors, if we forego proper rents for non-renewable natural assets as a country, if we assume that the mining boom will prop up the rest of the economy (the data suggests otherwise), we’re stuffed.

  54. alfred venison

    dear adrian
    thanks for the nod. its great to know i’m (a) not mad, or (b) not mad alone.
    yours sincerely
    alfred venison

  55. Chris

    su @ 54 – royalties are still an revenue stream for governments though which they use to pay for public services. And I bet they don’t count it as selling of an asset when it comes to budget time.

  56. su

    @ Chris Yeah sure, but they are collected by the states and have nothing to do with corporate tax, the comment @51 just didn’t seem to follow from Zoot’s comment about corporate tax.

    There is a very good reason why R&D is always cited as a higher figure than the corporate tax, the ATO is said to be scrutinizing all of this, I am sure the renewed vigour of the tax office is causing some of this squealing from Twiggy and co.

  57. Mercurius

    Well I for one am glad that at least Duncan is prepared to think of the billionaires’ welfare.

    I’m sure they will be every bit as compassionate and generous in looking out for his.

  58. duncan

    Mercurius,

    the mining magnates aren’t looking out for me, but they’re growing the pie.

    That’s the important concept that many here don’t seem to grasp.

  59. Mindy

    They might be growing the pie but they’re not sharing it.

  60. Fran Barlow

    They might be growing the pie but they’re not sharing it.

    They aren’t growing the pie. They are eating it from the fridge in the middle of the night and reacting with defensive guilt at those wondering where it all went the next morning.

  61. Mercurius

    Duncan, they’re walking off with the pie and leaving a few crumbs for you and the rest of your family to fight over, and you think this is good and right and the Natural Order of things, and the Way It Should Be, and you are grateful to the generous lords and masters for leaving such delicious crumbs, and you thank them humbly, like the obedient little serf the neo-feudalists have trained you to be.

    That’s an important concept that you don’t seem to grasp.

  62. Katz

    Those big banks that own a large slice of Fortesue Metals won’t make a zack from their investment in the company until it declares a dividend or until they sell their holding for a capital gain.

    Alternatively, Fortescue can suppress their profit margins inside Australia by selling their ore for less than market price and have the elevated level of profit declared under a low cost tax regime. That being the case, it is hard to see why those big banks would see ownership of Fortescue as being an attractive commercial proposition.

    Whatever, those figures cited by Roger Jones above demonstrate how disconnected the mining sector is from the rest of the Australian economy.

  63. alfred venison

    . . . aorta grow the pie and give australia a bigger slice. . .

  64. jane

    Why can’t the Labour government actually encourage people to THINK.

    What? THINK? When the msm and the Liars Party are prepared to do all that heavy lifting for you? And all you have to do is parrot their slogans!!