ast Friday, after weeks of parliamentary objection and argument, the Federal Government finally passed their $42b economic stimulus package through the Senate. History will tell whether this day was the beginning or end of our country’s solvency but, as a nation that already owes $1trillion in foreign debt, an extra $52b (including last year’s economic stimulus package) is only fuel to the already kindling bushfire that is the Australian economy.
It is certainly true that our economy is faring better in this rocky economic landscape than the economies of our trading partners, but what strength it does have is will certainly be shaken by poor government planning and policy execution.
Basically, Australia is about to spend money we don’t have to resolve an economic situation that we haven’t yet felt the full brunt of. The Government says that, in spending this money, they are following the advice economists, but not all economists agree that we can buy our way of this situation (The US’ Cato Institute of economists, for instance, advise that policy makers should focus on reforms that remove impediments to work, saving, investment and production and avoid such fiscal packages – http://www.cato.org/).
The first $10.4b economic stimulus package of October ’08 failed to produce any lasting ‘stimulus’, although retailers didn’t mind the consumer’s extra spending money in their tills over the Christmas period. A better approach to increasing and maintaining the spending potential of citizens is to increase their earnings by increasing their employer’s capacity to pay them. How? Increase incentives for productivity; the follow-on effect being more jobs and a more stable economy. Strong economies have never been built upon money handouts and undisciplined spending.
This new package, if the last one is any yardstick, is throwing good money after bad.
Hard, hard work and personal financial discipline will get us out of the mire...not the opposite.
Bitter medicine – but worth taking. We cannot buy our way out of an economic crisis when overspending is what got us into this rut to begin with.
The week’s parliamentary proceedings offered some interesting political banter: The Opposition, in particular Malcolm Turnbull, argued that the stimulus package would be a debt worn by future generations – a debt that our country couldn’t afford; while the Government argued that, despite this, the struggling workers of Australia needed the money and that without it, their plight would be much worse.
The Black Saturday bushfires were a timely, if heartbreaking, distraction to the economic discussion. They softened the political stalemate, perhaps enough to see it through even the Opposition’s Senate blockade. Still, the package passed the Senate only by a whisker: 2 votes.
The hard workers and keen businesspeople around the country are going to feel it, too, but in their hip pocket when this debt becomes a national liability.
But, the background to this political battlefield is not necessarily one bogged down in the laws of reality as you and I know them. Rather, they find their roots in the science of Economics. Perhaps, this science finds its first difficulty in application: The economic to-ing and fro-ing is at least an indication that in Canberra, there is no a decisive plan of action to get our country out of the economic mess. Indeed the passing of unproven methods, such as fiscal economic stimuli (that, as said earlier, not all economists even agree with), prove out in fact that the nation’s monetary think tank are certainly groping for solutions.
As well, Labor’s current economic strategy flies in the teeth of its more grounded pre-election economic strategies that were outlined by the Treasurer himself three years ago (see link to the Treasurer's 2006 speech). Spending $50b odd on the economic equivalent of a defibrillator is not exactly encouraging saving which, in that speech, he said he would do. Perhaps the seats of politicians are a little too precious and, however opinion polls may gauge popularity, they will never measure wisdom. For wisdom is measured by results.
In fact, despite the upturn in retail trade, there has been no real growth in the Australian economy since the October package – if so, why follow it up with another five times the original amount?
What we would like to know is: What is wrong with the provision of stimulus to increase productivity and savings, as outlined in the Treasurer’s 2006 speech? Obviously, with Government revenue falling $115b, wouldn’t there be just cause to move this way?
I’ll take a punt and say that most business owners would love a little more reward for high and remunerative productivity. If businesses are making more taxable income and, with lower tax rates prompting them to do so, will it not reduce the $115b revenue hole and, in general, make the country more financially stable?
Maybe this is too simple a solution; but, no simpler pumping billions into an economy to ‘stimulate’ it.
Actually, there is much, much more to be said about this. And, indeed, much more will be said.
In particular, we would love to hear from business owners and economists alike as to your take on the matter and your proposed solutions.
Sunday, February 15, 2009
Tuesday, February 10, 2009
Labor’s Agenda for Growth and Competiveness – Mr. Swan’s 2006 Speech
This is a speech given by Mr. Wayne Swan, then in Opposition, on 20 March 2006.
I am delighted to be in Melbourne during the final countdown to the Commonwealth Games.
It will be a remarkable event: one of the world’s great sporting events being held in one of the world’s great sporting cities.
Victorians and indeed all Australians love to compete with the best in the world. We all relish success on the world stage.
But this desire to triumph extends beyond the sporting arena.
Each and every day Australian business competes to win against the best and brightest from around the globe.
The Victorian economy has been travelling well in recent years recording the biggest growth in output of any state.
Behind the numbers there are great success stories, including two recognised in the 2005 Governor of Victoria Exports Award.
? Rofin Australia sells forensic instruments for detecting fingerprints and document fraud to the FBI, CIA and Scotland Yard, and
? Ripe Maternity Wear manufactures contemporary clothing for mothers-to-be, almost half of which is exported.
But success stories aside, there are signs that Australian business is facing strong headwinds from intensifying global competition.
Last Friday, we learned that Australia notched up its 46th consecutive trade deficit in January - at $2.7 billion the highest on record.
Our trade balance is the ultimate barometer of Australia’s capacity to compete in the world and sustain our prosperity into the future.
Persistent deficits reflect the fact that productivity, which was fast approaching US levels in the 1990s, is now almost back where it started.
There is a raft of submissions setting out range of options to address the urgent challenge of getting us back on the high productivity path.
Tonight I want to present Labor’s plan to reverse the decline in our productivity and competitiveness and turn around our trade balance.
THE ISSUES
But before I do so, I would like to set the scene.
Australia has enjoyed great prosperity in recent years with fourteen years of uninterrupted growth.
The resilience of our economy in the face of economic shocks like the Asian crisis and dot-com meltdown has been remarkable.
The Treasury Secretary recently explained this resilience as the result of three key developments in the 1990s:
? the floating of the Australian dollar;
? increased emphasis on the supply side of the economy; and
? the adoption of a medium term framework for economic policy.
As the sole architect of the first two, Labor is rightly proud of the role it has played in creating our recent prosperity.
But luck has also played a part in our success.
Most recently, we moved almost seamlessly from record house prices to record commodity prices, keeping our economy buoyant.
But beneath the surface things are changing prompting business groups to warn the economy is slipping and heading for trouble.
This prompted the Victorian Government to release its National Reform Initiative – a timely and welcome contribution.
Like Federal Labor, it recognises that Australia needs a long-term plan to lift our competitiveness and sustain our prosperity into the future.
The central issue is why – when commodity exports are earning their highest prices in a generation – Australia is not running a trade surplus?
Why – when the world economy is growing and rural exports are in post-drought recovery – Australia is not running a trade surplus?
Unless we can lift our export performance, the stellar economic growth rates over the last 14 years will be a thing of the past.
Unless we can turn our trade deficits into surpluses our foreign debt – already at a record level of $473 billion in 2005 - will continue to climb.
At the heart of the issue is the slump in our manufactured exports – from double-digit growth in the 90s almost half are now in absolute decline.
As a result, since 2000 Australia has shed over 115,000 manufacturing jobs – 10 per cent of the workforce – many of them in Victoria.
Some might shrug and say that ‘manufacturing’s decline is inevitable – we just can’t compete with China and India and that’s that.’
Earlier today CEDA held a seminar in Melbourne entitled “Can or should Australian manufacturers compete against China and India?”
Perhaps they should ask Berri Ltd. Berri has been exporting packaged juices to India since the late 1990s, now holds 5 per cent of the Indian market and is experiencing growth of 30 per cent a year.
There are great opportunities to sell high value added goods such as clean, safe and high quality food products in India and China but also to open up markets in other sectors.
What we are looking at are two countries with rapidly growing demands for products and services sought by a large and growing middle class with rapidly rising disposable incomes.
The only way forward is to redouble our efforts to re-engineer existing processes and develop new products to fit the demands of these two emerging economic superpowers.
But we also need to recognise that the world economy is changing and we must change with it.
Less than fifty years ago, agriculture, manufacturing and services contributed almost equally to global GDP. Now services accounts for over two-thirds of wealth generated in the global economy.
Yet Australia’s service exports are just 4 per cent of GDP, the third lowest in the OECD and just one-third of the OECD average.
We have a once in a lifetime opportunity to position ourselves in India and China in a vast array of service industries.
These include biotechnology and medical research, environmental, information and communication technologies, financial, professional and technical services, education and health care.
AN AMBITIOUS STRATEGY
In light of these challenges, I ask you; what’s our plan? What’s Labor’s strategy for Australia for the next twenty years?
First we need to recognise that as Asia lifts its game we need to match and even exceed it.
We must understand and invest in our strengths. We must know which way the trade winds are blowing and set our sails accordingly.
Industry by industry, business, workers and Government need to work together to offset Asia’s low cost advantage and open new markets.
At the heart of Labor’s strategy is one key objective – to lift our productivity.
That is the only way to improve our competitiveness, turn around our trade performance and secure our prosperity for the future.
There are eight pillars to this strategy built on the foundation of budget discipline.
But before I go on, let me take this opportunity to set the record straight on Labor’s attitude to changes in workforce relations.
Labor does not oppose changes to workplace relations, it opposes the Government’s changes.
They are the wrong changes. Treasury’s own limited analysis did not support the proposition that they will lift productivity.
And there is ample independent analysis that questions whether they will deliver higher productivity.
This includes a damning critique from the Government’s own favoured expert labour market economist Professor Mark Wooden.
Kim Beazley will present Labor’s alternative proposals for genuine productivity enhancing workplace reform in a forthcoming Blueprint speech.
FISCAL DISCIPLINE
Labor knows that first and foremost business needs a stable macro-economic environment to flourish.
All policy options must be measured against our overriding objective of keeping the budget in balance, on average, over the course of the economic cycle.
How does that translate to the upcoming 2006-07 Budget?
Right now we are enjoying strong surpluses – the prediction in the Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) that revenues will exceed expenditure by $42 billion over the forward estimates is more likely than not to be revised up at Budget time.
In other words fiscal policy has tightened since MYEFO, which explains recent comments by the Reserve Bank Governor suggesting that fresh tax cuts would not necessarily trigger an interest rate response.
But Labor is acutely aware that a significant proportion – some analysts say as much as half - of the likely surplus will derive from a temporary surge in tax revenues, in particular in corporate tax revenue on the back of record commodity prices.
There is ample scope to outline and begin funding a major tax reform package but there is a strong case against using any of the temporary windfall to fund recurrent spending or permanent tax cuts.
We could quarantine the temporary surplus in the Future Fund or we could apply some to non-recurrent investment where such an investment eases capacity constraints and inflationary pressures.
This year’s Budget should be about striking the right balance between setting in train meaningful tax reform and investing in the productive and export potential of the economy.
LABOR’S ECONOMIC STRATEGY
Within the constraints of fiscal discipline lie Labor’s eight pillars for growth:
? Reform the tax system so that it offers real incentive, is competitive and simpler;
? Increase our workforce capacity and productivity by investing in skills and education;
? Remove export bottlenecks by showing national leadership on infrastructure;
? Get the regulatory burden off the back of business by adopting new simpler, flexible and competitive regulatory models;
? Remove road blocks to developing and commercialising new products and services;
? Accept that only co-operative federalism can deliver real reform and deal with state government’s of all persuasions in good faith;
? Raise workforce participation by strengthening incentives for people to move from welfare into work; and
? Foster a domestic savings culture and reduce our reliance on foreign savings.
In the time I have left I want to focus on five of these areas: tax reform, skills and education, infrastructure, R&D and regulatory reform.
Tax reform
Labor sees tax reform, guided by the principles of competitiveness, efficiency and fairness, as an investment in the drivers of growth.
With highly mobile capital and increasingly mobile labour, countries with uncompetitive tax regimes will suffer.
It is incumbent on governments, therefore, to regularly assess the competitiveness of their tax arrangements and make policy adjustments accordingly.
This applies to both personal and business taxation.
There has been a vigorous debate of late on personal taxation. Labor welcomes it, even if Treasurer Costello hasn’t.
As Labor sees it, the number one priority when it comes to reforming our personal income tax system is improving the incentive for hard work, skill formation, and savings.
To do this we must reduce the clawback on earnings caused by high marginal tax rates that exist right up and down the scale.
I’m not just talking about the 42 and 47 cent rate but also the interactions lower down the scale where the 15 and 30 cent rates interact with the withdrawal of tax offsets and transfer payments and result in even higher marginal tax rates again.
The Treasurer recently claimed it was wrong to refer to these interactions has high marginal tax rates.
I strongly disagree, and I suspect anyone who is on the treadmill – working harder with little apparent benefit – only cares about what ends up in their pocket, not how it gets there.
Clever adjustments to rates, thresholds, and other targeted measures in the tax system have the potential to mitigate the worst effects, but they won’t solve the problem.
Treasury has now been modelling significant reform options for more than a year.
If at this year’s Budget the Treasurer fails to outline his vision for a tax system which has at its centrepiece bold measures to boost work incentives, it will not be because of a lack of ideas and policy detail from the fine analysts in Treasury.
As the coming weeks unfold in the lead up to the Budget Labor will continue to increase the pressure on the Treasurer to bring out into the daylight the reform proposals that are so desperately needed.
A failure to get it right will result in a system that continues to shackle people to welfare, discourage people from acquiring new skills, and undermines the ethos to save.
If in the Budget we see more of the same – a threshold adjustment here a rate adjustment there - the Treasurer will be doing little more than putting a new coat of paint on a rusty creaking machine.
When it comes to our business tax regime, it too ought to be re-assessed for its international competitiveness.
We need to ask whether our tax rates are still competitive internationally and whether the regime in totality may act as a disincentive to international investment.
With capital so mobile its treatment under the tax system must be at the centre of our deliberations.
In particular we should assess how our tax system accommodates capital-intensive investment relative to other countries competing for the same investment dollar, and whether the capital allowance system sufficiently supports capital deepening which will boost productivity.
With skill formation also critical to boosting productivity we are also interested in whether there are sufficient incentives for business to train or retrain workers - in particular whether the scope of the current arrangements for deductibility is too narrow.
We also need to make sure that the tax treatment of highly skilled foreign executives isn't disadvantaging the international competitiveness of Australia's businesses in the hunt for top global talent. I would note recently that the Government sought to address capital gains tax penalties for temporary residents – a measure which Labor supported.
We also need to ensure that Australia's corporate tax system encourages investment in much-needed national infrastructure.
And finally, we need to deal with the hardy perennial question of complexity.
Skills and Education
Our training and education systems are failing to keep pace with demand – with severe shortages in both the trades and the professions.
The Government has done too little, too late to fill the gaps and business is paying the price – capacity constraints, lower sales, lower exports and lower profits.
Public investment in our universities and TAFEs has fallen 8 per cent since 1995. The OECD average is an increase of 38 per cent.
Australia was the only developed country to reduce its investment. The next worst performing country increased it by 6 per cent.
Labor’s Skills Blueprint outlines our plan to solve the Howard Government’s skills crisis.
? First, give every student in every school district the choice of attending a senior trades or science and technology high school;
? Second, ensure they have first class facilities;
? Third, provide more school based apprenticeships; and
? Fourth, overhaul the New Apprenticeships Scheme to ensure it invests in developing traditional trade, skills; and
? Fifth, Labor plans to introduce the Skills Account which will have the effect of reducing TAFE fees for apprentices to zero.
Infrastructure
For 10 long years, the Howard Government has presided over a severe deterioration in our key infrastructure assets.
Analysis shows there is a $90 billion shortfall in Australia’s infrastructure and that substantive reform could lift the level of GDP by 2 per cent or $16 billion.
Even the Prime Minister’s task force found there were ‘underlying weaknesses’ in Australia’s export infrastructure that must be addressed to prevent capacity constraints and bottlenecks for exports.
Labor’s Infrastructure Blueprint outlines how a Labor Government will show the national leadership on infrastructure that has been lacking from the Howard Government by:
? One, conducting a National Infrastructure Audit;
? Two, establishing a National Infrastructure Priority List;
? Three, creating Infrastructure Australia – an independent agency to drive the rebuilding of our infrastructure;
? Four, putting in place the right competition policy framework, and
? Five, putting in place the right funding framework.
As part of this funding framework, Labor has already said it will retain the assets of the Future Fund in its Building Australia Fund but allow the income to be invested for productive purposes including infrastructure.
R&D and Commercialisation
Australia has a strong track record on innovation but a comparatively poor track record for taking new products from development through to commercial success.
In January, the 2006 Melbourne International Venture Capital Conference was told US venture capitalists had successfully invested in a myriad of Australian companies such as HitWise and LookSmart.
The conference was told that US VCs are interested in Australia’s expertise in semi-conductors, software, optical wireless LAN, immunology, oncology and stem cell research.
But the conference was also told that Australia needs to take urgent action to attract a greater share of the world’s private equity to our shores to support business innovation.
A Labor Government is examining a range of options to increase the depth and liquidity of our market for risk capital and we will bring forward concrete policy options to ensure innovators can successfully develop new products and services in Australia for export.
Regulatory reform
Another of Labor’s key priorities is to reduce the drag on productivity and cost to business from ineffective and unnecessary regulation.
Labor has been beating the drum on reducing the regulatory burden and calling on the Government to act.
They have since announced a review to reduce the burden they have imposed over ten long years.
The Regulation Task Force chaired by Gary Banks has reported to the Government, but they haven’t released the report.
Labor will keep a close eye on the process to ensure it delivers.
We have already made the following proposals:
? First, impose limits on regulation, such as introducing a rule that a regulation must be abolished before any new regulation can be introduced;
? Second, explore new flexible, low cost regulatory models being adopting by our competitors, such as the United Kingdom; and
? Third, reform Regulatory Impact Statements to ensure the economic costs of red tape do not outweigh its benefits.
CONCLUSION
Federal Labor recognises that there is an urgent need to lay out a long-term plan to lift our productivity and competitiveness.
This is the only way we will turn around our trade performance and sustain our prosperity into the future.
Labor had already put forward a raft of policy options to address key areas that are holding us back, and we will continue to do so.
This year’s Budget should be about striking the right balance between setting in train meaningful tax reform and investing in the productive and export potential of the economy.
Australia needs a long-term plan and a Government that is ambitious and confident in its future.
I am delighted to be in Melbourne during the final countdown to the Commonwealth Games.
It will be a remarkable event: one of the world’s great sporting events being held in one of the world’s great sporting cities.
Victorians and indeed all Australians love to compete with the best in the world. We all relish success on the world stage.
But this desire to triumph extends beyond the sporting arena.
Each and every day Australian business competes to win against the best and brightest from around the globe.
The Victorian economy has been travelling well in recent years recording the biggest growth in output of any state.
Behind the numbers there are great success stories, including two recognised in the 2005 Governor of Victoria Exports Award.
? Rofin Australia sells forensic instruments for detecting fingerprints and document fraud to the FBI, CIA and Scotland Yard, and
? Ripe Maternity Wear manufactures contemporary clothing for mothers-to-be, almost half of which is exported.
But success stories aside, there are signs that Australian business is facing strong headwinds from intensifying global competition.
Last Friday, we learned that Australia notched up its 46th consecutive trade deficit in January - at $2.7 billion the highest on record.
Our trade balance is the ultimate barometer of Australia’s capacity to compete in the world and sustain our prosperity into the future.
Persistent deficits reflect the fact that productivity, which was fast approaching US levels in the 1990s, is now almost back where it started.
There is a raft of submissions setting out range of options to address the urgent challenge of getting us back on the high productivity path.
Tonight I want to present Labor’s plan to reverse the decline in our productivity and competitiveness and turn around our trade balance.
THE ISSUES
But before I do so, I would like to set the scene.
Australia has enjoyed great prosperity in recent years with fourteen years of uninterrupted growth.
The resilience of our economy in the face of economic shocks like the Asian crisis and dot-com meltdown has been remarkable.
The Treasury Secretary recently explained this resilience as the result of three key developments in the 1990s:
? the floating of the Australian dollar;
? increased emphasis on the supply side of the economy; and
? the adoption of a medium term framework for economic policy.
As the sole architect of the first two, Labor is rightly proud of the role it has played in creating our recent prosperity.
But luck has also played a part in our success.
Most recently, we moved almost seamlessly from record house prices to record commodity prices, keeping our economy buoyant.
But beneath the surface things are changing prompting business groups to warn the economy is slipping and heading for trouble.
This prompted the Victorian Government to release its National Reform Initiative – a timely and welcome contribution.
Like Federal Labor, it recognises that Australia needs a long-term plan to lift our competitiveness and sustain our prosperity into the future.
The central issue is why – when commodity exports are earning their highest prices in a generation – Australia is not running a trade surplus?
Why – when the world economy is growing and rural exports are in post-drought recovery – Australia is not running a trade surplus?
Unless we can lift our export performance, the stellar economic growth rates over the last 14 years will be a thing of the past.
Unless we can turn our trade deficits into surpluses our foreign debt – already at a record level of $473 billion in 2005 - will continue to climb.
At the heart of the issue is the slump in our manufactured exports – from double-digit growth in the 90s almost half are now in absolute decline.
As a result, since 2000 Australia has shed over 115,000 manufacturing jobs – 10 per cent of the workforce – many of them in Victoria.
Some might shrug and say that ‘manufacturing’s decline is inevitable – we just can’t compete with China and India and that’s that.’
Earlier today CEDA held a seminar in Melbourne entitled “Can or should Australian manufacturers compete against China and India?”
Perhaps they should ask Berri Ltd. Berri has been exporting packaged juices to India since the late 1990s, now holds 5 per cent of the Indian market and is experiencing growth of 30 per cent a year.
There are great opportunities to sell high value added goods such as clean, safe and high quality food products in India and China but also to open up markets in other sectors.
What we are looking at are two countries with rapidly growing demands for products and services sought by a large and growing middle class with rapidly rising disposable incomes.
The only way forward is to redouble our efforts to re-engineer existing processes and develop new products to fit the demands of these two emerging economic superpowers.
But we also need to recognise that the world economy is changing and we must change with it.
Less than fifty years ago, agriculture, manufacturing and services contributed almost equally to global GDP. Now services accounts for over two-thirds of wealth generated in the global economy.
Yet Australia’s service exports are just 4 per cent of GDP, the third lowest in the OECD and just one-third of the OECD average.
We have a once in a lifetime opportunity to position ourselves in India and China in a vast array of service industries.
These include biotechnology and medical research, environmental, information and communication technologies, financial, professional and technical services, education and health care.
AN AMBITIOUS STRATEGY
In light of these challenges, I ask you; what’s our plan? What’s Labor’s strategy for Australia for the next twenty years?
First we need to recognise that as Asia lifts its game we need to match and even exceed it.
We must understand and invest in our strengths. We must know which way the trade winds are blowing and set our sails accordingly.
Industry by industry, business, workers and Government need to work together to offset Asia’s low cost advantage and open new markets.
At the heart of Labor’s strategy is one key objective – to lift our productivity.
That is the only way to improve our competitiveness, turn around our trade performance and secure our prosperity for the future.
There are eight pillars to this strategy built on the foundation of budget discipline.
But before I go on, let me take this opportunity to set the record straight on Labor’s attitude to changes in workforce relations.
Labor does not oppose changes to workplace relations, it opposes the Government’s changes.
They are the wrong changes. Treasury’s own limited analysis did not support the proposition that they will lift productivity.
And there is ample independent analysis that questions whether they will deliver higher productivity.
This includes a damning critique from the Government’s own favoured expert labour market economist Professor Mark Wooden.
Kim Beazley will present Labor’s alternative proposals for genuine productivity enhancing workplace reform in a forthcoming Blueprint speech.
FISCAL DISCIPLINE
Labor knows that first and foremost business needs a stable macro-economic environment to flourish.
All policy options must be measured against our overriding objective of keeping the budget in balance, on average, over the course of the economic cycle.
How does that translate to the upcoming 2006-07 Budget?
Right now we are enjoying strong surpluses – the prediction in the Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) that revenues will exceed expenditure by $42 billion over the forward estimates is more likely than not to be revised up at Budget time.
In other words fiscal policy has tightened since MYEFO, which explains recent comments by the Reserve Bank Governor suggesting that fresh tax cuts would not necessarily trigger an interest rate response.
But Labor is acutely aware that a significant proportion – some analysts say as much as half - of the likely surplus will derive from a temporary surge in tax revenues, in particular in corporate tax revenue on the back of record commodity prices.
There is ample scope to outline and begin funding a major tax reform package but there is a strong case against using any of the temporary windfall to fund recurrent spending or permanent tax cuts.
We could quarantine the temporary surplus in the Future Fund or we could apply some to non-recurrent investment where such an investment eases capacity constraints and inflationary pressures.
This year’s Budget should be about striking the right balance between setting in train meaningful tax reform and investing in the productive and export potential of the economy.
LABOR’S ECONOMIC STRATEGY
Within the constraints of fiscal discipline lie Labor’s eight pillars for growth:
? Reform the tax system so that it offers real incentive, is competitive and simpler;
? Increase our workforce capacity and productivity by investing in skills and education;
? Remove export bottlenecks by showing national leadership on infrastructure;
? Get the regulatory burden off the back of business by adopting new simpler, flexible and competitive regulatory models;
? Remove road blocks to developing and commercialising new products and services;
? Accept that only co-operative federalism can deliver real reform and deal with state government’s of all persuasions in good faith;
? Raise workforce participation by strengthening incentives for people to move from welfare into work; and
? Foster a domestic savings culture and reduce our reliance on foreign savings.
In the time I have left I want to focus on five of these areas: tax reform, skills and education, infrastructure, R&D and regulatory reform.
Tax reform
Labor sees tax reform, guided by the principles of competitiveness, efficiency and fairness, as an investment in the drivers of growth.
With highly mobile capital and increasingly mobile labour, countries with uncompetitive tax regimes will suffer.
It is incumbent on governments, therefore, to regularly assess the competitiveness of their tax arrangements and make policy adjustments accordingly.
This applies to both personal and business taxation.
There has been a vigorous debate of late on personal taxation. Labor welcomes it, even if Treasurer Costello hasn’t.
As Labor sees it, the number one priority when it comes to reforming our personal income tax system is improving the incentive for hard work, skill formation, and savings.
To do this we must reduce the clawback on earnings caused by high marginal tax rates that exist right up and down the scale.
I’m not just talking about the 42 and 47 cent rate but also the interactions lower down the scale where the 15 and 30 cent rates interact with the withdrawal of tax offsets and transfer payments and result in even higher marginal tax rates again.
The Treasurer recently claimed it was wrong to refer to these interactions has high marginal tax rates.
I strongly disagree, and I suspect anyone who is on the treadmill – working harder with little apparent benefit – only cares about what ends up in their pocket, not how it gets there.
Clever adjustments to rates, thresholds, and other targeted measures in the tax system have the potential to mitigate the worst effects, but they won’t solve the problem.
Treasury has now been modelling significant reform options for more than a year.
If at this year’s Budget the Treasurer fails to outline his vision for a tax system which has at its centrepiece bold measures to boost work incentives, it will not be because of a lack of ideas and policy detail from the fine analysts in Treasury.
As the coming weeks unfold in the lead up to the Budget Labor will continue to increase the pressure on the Treasurer to bring out into the daylight the reform proposals that are so desperately needed.
A failure to get it right will result in a system that continues to shackle people to welfare, discourage people from acquiring new skills, and undermines the ethos to save.
If in the Budget we see more of the same – a threshold adjustment here a rate adjustment there - the Treasurer will be doing little more than putting a new coat of paint on a rusty creaking machine.
When it comes to our business tax regime, it too ought to be re-assessed for its international competitiveness.
We need to ask whether our tax rates are still competitive internationally and whether the regime in totality may act as a disincentive to international investment.
With capital so mobile its treatment under the tax system must be at the centre of our deliberations.
In particular we should assess how our tax system accommodates capital-intensive investment relative to other countries competing for the same investment dollar, and whether the capital allowance system sufficiently supports capital deepening which will boost productivity.
With skill formation also critical to boosting productivity we are also interested in whether there are sufficient incentives for business to train or retrain workers - in particular whether the scope of the current arrangements for deductibility is too narrow.
We also need to make sure that the tax treatment of highly skilled foreign executives isn't disadvantaging the international competitiveness of Australia's businesses in the hunt for top global talent. I would note recently that the Government sought to address capital gains tax penalties for temporary residents – a measure which Labor supported.
We also need to ensure that Australia's corporate tax system encourages investment in much-needed national infrastructure.
And finally, we need to deal with the hardy perennial question of complexity.
Skills and Education
Our training and education systems are failing to keep pace with demand – with severe shortages in both the trades and the professions.
The Government has done too little, too late to fill the gaps and business is paying the price – capacity constraints, lower sales, lower exports and lower profits.
Public investment in our universities and TAFEs has fallen 8 per cent since 1995. The OECD average is an increase of 38 per cent.
Australia was the only developed country to reduce its investment. The next worst performing country increased it by 6 per cent.
Labor’s Skills Blueprint outlines our plan to solve the Howard Government’s skills crisis.
? First, give every student in every school district the choice of attending a senior trades or science and technology high school;
? Second, ensure they have first class facilities;
? Third, provide more school based apprenticeships; and
? Fourth, overhaul the New Apprenticeships Scheme to ensure it invests in developing traditional trade, skills; and
? Fifth, Labor plans to introduce the Skills Account which will have the effect of reducing TAFE fees for apprentices to zero.
Infrastructure
For 10 long years, the Howard Government has presided over a severe deterioration in our key infrastructure assets.
Analysis shows there is a $90 billion shortfall in Australia’s infrastructure and that substantive reform could lift the level of GDP by 2 per cent or $16 billion.
Even the Prime Minister’s task force found there were ‘underlying weaknesses’ in Australia’s export infrastructure that must be addressed to prevent capacity constraints and bottlenecks for exports.
Labor’s Infrastructure Blueprint outlines how a Labor Government will show the national leadership on infrastructure that has been lacking from the Howard Government by:
? One, conducting a National Infrastructure Audit;
? Two, establishing a National Infrastructure Priority List;
? Three, creating Infrastructure Australia – an independent agency to drive the rebuilding of our infrastructure;
? Four, putting in place the right competition policy framework, and
? Five, putting in place the right funding framework.
As part of this funding framework, Labor has already said it will retain the assets of the Future Fund in its Building Australia Fund but allow the income to be invested for productive purposes including infrastructure.
R&D and Commercialisation
Australia has a strong track record on innovation but a comparatively poor track record for taking new products from development through to commercial success.
In January, the 2006 Melbourne International Venture Capital Conference was told US venture capitalists had successfully invested in a myriad of Australian companies such as HitWise and LookSmart.
The conference was told that US VCs are interested in Australia’s expertise in semi-conductors, software, optical wireless LAN, immunology, oncology and stem cell research.
But the conference was also told that Australia needs to take urgent action to attract a greater share of the world’s private equity to our shores to support business innovation.
A Labor Government is examining a range of options to increase the depth and liquidity of our market for risk capital and we will bring forward concrete policy options to ensure innovators can successfully develop new products and services in Australia for export.
Regulatory reform
Another of Labor’s key priorities is to reduce the drag on productivity and cost to business from ineffective and unnecessary regulation.
Labor has been beating the drum on reducing the regulatory burden and calling on the Government to act.
They have since announced a review to reduce the burden they have imposed over ten long years.
The Regulation Task Force chaired by Gary Banks has reported to the Government, but they haven’t released the report.
Labor will keep a close eye on the process to ensure it delivers.
We have already made the following proposals:
? First, impose limits on regulation, such as introducing a rule that a regulation must be abolished before any new regulation can be introduced;
? Second, explore new flexible, low cost regulatory models being adopting by our competitors, such as the United Kingdom; and
? Third, reform Regulatory Impact Statements to ensure the economic costs of red tape do not outweigh its benefits.
CONCLUSION
Federal Labor recognises that there is an urgent need to lay out a long-term plan to lift our productivity and competitiveness.
This is the only way we will turn around our trade performance and sustain our prosperity into the future.
Labor had already put forward a raft of policy options to address key areas that are holding us back, and we will continue to do so.
This year’s Budget should be about striking the right balance between setting in train meaningful tax reform and investing in the productive and export potential of the economy.
Australia needs a long-term plan and a Government that is ambitious and confident in its future.
Is the Treasurer taking his own good advice?
On the 20 March 2006, when the current Treasurer Mr. Wayne Swan was in the Federal Opposition, he gave a brilliant speech outlining Labor’s policies for business growth and competitiveness. The ALP was on the campaign trail to the following year’s elections.
In that speech, Mr Swan intimated at the current economic crisis. He pointed out that Australia was, then, in a risky economic position. Exports were just 4% of the GDP and only one-third of the OEC’s average, the agriculture and manufacturing industry had declined and Australian businesses were facing stiff competition in the international marketplace.
And, he was spot on.
But, in true Aussie style, his keen eye noticed that despite the downturn there were once-in-a-lifetime-type opportunities Australian businesses could take advantage of.
His plan was brilliant – reduce national spending, increase our domestic savings and, importantly, increase our national productivity via tax reforms and other carefully researched measures. And it made sense, too – times were becoming tough so, we had better tighten our collective belts and get busy and, of course business would take advantage of tax cuts and spend surpluses on increasing their commercial earnings and competitiveness.
Truly, the only way to do Mr Swan’s words any justice is to quote some of them directly. Mr. Swan outlined an eight “pillared approach”:
1. Reform the tax system so that it offers real incentive, is competitive and simpler;
2. Increase our workforce capacity and productivity by investing in skills and education;
3. Remove export bottlenecks by showing national leadership on infrastructure;
4. Get the regulatory burden off the back of business by adopting new simpler, flexible and competitive regulatory models;
5. Remove road blocks to developing and commercialising new products and services;
6. Accept that only co-operative federalism can deliver real reform and deal with state government’s of all persuasions in good faith;
7. Raise workforce participation by strengthening incentives for people to move from welfare into work; and
8. Foster a domestic savings culture and reduce our reliance on foreign savings.
The plan is lovely in its simplicity and direct approach. Any business owner would have been proud to come up with a similar plan to get their own company solvent.
And, here we are...three years on. The ALP is now in government.
Last October the ALP spent $10.4b on an economic stimulus package to pump some life into our ecnomoy.
The money, per the PM’s join press release with Mr Swan, was spent as follows:
$4.8 billion for an immediate down payment on long term pension reform.
$3.9 billion in support payments for low and middle income families.
$1.5 billion investment to help first home buyers purchase a home.
$187 million to create 56,000 new training places in 2008-09.
You can decide for yourself whether or not these marry up with the 8-pillared approach above.
Several months after this money was spent, the IMF predicted a .2% shrinkage of the Australian economy over the course of 2009. They went on to state that it would stall at zero. And, in February 2009, the government announced a revenue (tax) slump of $115b.
Also in February, the ALP began harvesting interest in the provision of a second stimulus package, this time of $42b.
Naturally, some in the Liberal Opposition questioned the provision and effectiveness of more government ‘stimulus’ packages perhaps because the last one didn’t quite hit the mark. Couple this with our high external debt and the IMF’s predictions and you can understand why some would be chary about spending more money.
Additionally, where did the money for the first stimulus package come from? Where is the money for the second packaged proposed to come from?
What happened to the 8-pillared approach?
Not to bang on about it too much, the key thing that Mr Swan spoke of in that speech was increasing productivity. And, regardless of what is happening now, these were his words and words many a businessperson would totally agree with.
High and sustainable productivity in agriculture, manufacturing and services, in essence, are what makes nations and strong ones at that. Per his speech, Mr Swan agrees.
It is well worth reading his speech in full and I’d give you the web address to it, but I’ve found it is currently unavailable while the Minister’s website is being revamped.
So, to promote what, at least, we think is right and to give the Minister our full support, we have included it on our blog for you to read and to decide for yourself upon the direction of current national economic policy (see “Labor’s Agenda for Growth and Competiveness – Mr. Swan’s 2006 Speech” entry).
Of course, you may not be privy to policy formulation, but at least you can know more about the background of what is going on.
In that speech, Mr Swan intimated at the current economic crisis. He pointed out that Australia was, then, in a risky economic position. Exports were just 4% of the GDP and only one-third of the OEC’s average, the agriculture and manufacturing industry had declined and Australian businesses were facing stiff competition in the international marketplace.
And, he was spot on.
But, in true Aussie style, his keen eye noticed that despite the downturn there were once-in-a-lifetime-type opportunities Australian businesses could take advantage of.
His plan was brilliant – reduce national spending, increase our domestic savings and, importantly, increase our national productivity via tax reforms and other carefully researched measures. And it made sense, too – times were becoming tough so, we had better tighten our collective belts and get busy and, of course business would take advantage of tax cuts and spend surpluses on increasing their commercial earnings and competitiveness.
Truly, the only way to do Mr Swan’s words any justice is to quote some of them directly. Mr. Swan outlined an eight “pillared approach”:
1. Reform the tax system so that it offers real incentive, is competitive and simpler;
2. Increase our workforce capacity and productivity by investing in skills and education;
3. Remove export bottlenecks by showing national leadership on infrastructure;
4. Get the regulatory burden off the back of business by adopting new simpler, flexible and competitive regulatory models;
5. Remove road blocks to developing and commercialising new products and services;
6. Accept that only co-operative federalism can deliver real reform and deal with state government’s of all persuasions in good faith;
7. Raise workforce participation by strengthening incentives for people to move from welfare into work; and
8. Foster a domestic savings culture and reduce our reliance on foreign savings.
The plan is lovely in its simplicity and direct approach. Any business owner would have been proud to come up with a similar plan to get their own company solvent.
And, here we are...three years on. The ALP is now in government.
Last October the ALP spent $10.4b on an economic stimulus package to pump some life into our ecnomoy.
The money, per the PM’s join press release with Mr Swan, was spent as follows:
$4.8 billion for an immediate down payment on long term pension reform.
$3.9 billion in support payments for low and middle income families.
$1.5 billion investment to help first home buyers purchase a home.
$187 million to create 56,000 new training places in 2008-09.
You can decide for yourself whether or not these marry up with the 8-pillared approach above.
Several months after this money was spent, the IMF predicted a .2% shrinkage of the Australian economy over the course of 2009. They went on to state that it would stall at zero. And, in February 2009, the government announced a revenue (tax) slump of $115b.
Also in February, the ALP began harvesting interest in the provision of a second stimulus package, this time of $42b.
Naturally, some in the Liberal Opposition questioned the provision and effectiveness of more government ‘stimulus’ packages perhaps because the last one didn’t quite hit the mark. Couple this with our high external debt and the IMF’s predictions and you can understand why some would be chary about spending more money.
Additionally, where did the money for the first stimulus package come from? Where is the money for the second packaged proposed to come from?
What happened to the 8-pillared approach?
Not to bang on about it too much, the key thing that Mr Swan spoke of in that speech was increasing productivity. And, regardless of what is happening now, these were his words and words many a businessperson would totally agree with.
High and sustainable productivity in agriculture, manufacturing and services, in essence, are what makes nations and strong ones at that. Per his speech, Mr Swan agrees.
It is well worth reading his speech in full and I’d give you the web address to it, but I’ve found it is currently unavailable while the Minister’s website is being revamped.
So, to promote what, at least, we think is right and to give the Minister our full support, we have included it on our blog for you to read and to decide for yourself upon the direction of current national economic policy (see “Labor’s Agenda for Growth and Competiveness – Mr. Swan’s 2006 Speech” entry).
Of course, you may not be privy to policy formulation, but at least you can know more about the background of what is going on.
The following letter signed by "Your Boss" has been travelling the blogs of the world. It looks like it started in America and someone re-wrote it for Australia. As an owner of several businesses, and someone that started in business when I was 21 (17 years ago), I have a very high reality on what is being stated in this letter.
Hopefully, something will change because the world leaders and local Governments cannot keep taking from the productive and giving it to the poor and ultra rich.
Anyhow, read this an start talking to others about your concerns and feel free to voice your concerns more publicly.
A Boss Who Tells It Like It Is
Date: Sat, 03 Jan 2009
To All My Valued Employees,
There have been some rumblings around the office about the future of this company, and more specifically, your job.
As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job. What does threaten your job; however, is the changing political landscape in this country.
However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.
First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a back story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Subaru Outback outside. You've seen my big home at last year's Christmas party. I'm sure all these flashy icons of luxury conjure up some idealised thoughts about my life. However, what you don't see is the back story. I started this company 28 years ago. At that time, I lived in a 2 bedroom flat for 3 years. My entire living area was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you. My diet consisted of baked beans, stew and soup because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a wonky transmission. I didn't have time to go out with women. Often times, I stayed home on weekends, while my friends went out drinking and partying.
In fact, I was married to my business -- hard work, discipline, and sacrifice. Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50,000 a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the David Jones for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn't look like it was birthed in the 70's. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.
So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don't. There is no "off" button for me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden -- the nice house, the Subaru, the vacations... you never realise the back story and the sacrifices I've made. Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't. The people that overspent their pay suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for.
Yes, business ownership has its benefits but the price I've paid is steep and not without wounds.
Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why: I am being taxed to death and the government thinks I don't pay enough. I have GST. Income taxes. Property taxes. Payroll taxes. Workers compensation. Superannuation taxes. Taxes on taxes. I have to hire a accountant to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time.
On Oct 15th, I wrote a cheque to the Australian tax Office for $288,000 for quarterly taxes. You know what my "stimulus" cheque was? Zero. Zip. Zilch. The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare payment? Obviously, government feels the latter is the economic stimulus of this country.
The fact is, if I deducted (Read: Stole) 50% of your pay you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work?
Well, I agree which is why your job is in jeopardy. Here is what many of you don't understand ... to stimulate the economy you need to stimulate what runs the economy. Had the government suddenly mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Canberra black-hole, I would have spent it, hired more employees, and generated substantial economic growth.
My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now. When you have a comatose man on the verge of death, you don't defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart?
Business is at the heart of Australia and always has been. To restart it, you must stimulate it, not kill it. But the power brokers in Canberra believe the poor of Australia are the essential drivers of the Australian economic engine. Nothing could be further from the truth and this is the type of change you can keep.
So where am I going with all this? It's quite simple. If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your 4WD and your child's future.
Frankly, it isn't my problem any more. Then, I will close this company down, move to another country, and retire. You see, I'm done. I'm done with a country that penalises the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.
So, if you lose your job, it won't be at the hands of the economy; it will be at the hands of a politicians that swept through this country changed its financial landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about.... Signed, Your boss
Monday, February 9, 2009
Australia will struggle for years to get back to budget surplus after stimulus package: Kohler
Monday, 9 February 2009
This is a brilliant article by Alan Kohler is taken from www.businessspectator.com.au - plainly, is Australia in dire straits or not? Do we have the money to be spending on economic stimulus...or not?
The managing director of the IMF, Dominique Strauss-Kahn, might come to regret letting the political big spenders off the leash when he said in December that fiscal stimulus of at least 2% of global GDP was justified.
He also said “not all countries can undertake fiscal stimulus”, and added; “some will need to contract their budgets rather than expand them".
But of course no one believes that applies to them, so we are now witnessing the most colossal expansion of government debt in history, with no strategy for returning to surplus.
In fact, although Australia begins its fiscal expansion with no debt and a healthy surplus – thanks to the “neoliberal” disciplines and privatisations of the past two decades – it is difficult to see how the debt now being taken on will be repaid.
I’m as gloomy as anyone about the economy, but it’s bemusing to see a government bang out two fiscal stimulus packages in two months, worth $53 billion, even though unemployment is still at generational lows well below 5%.
With its eye, perhaps, on the collapsing, deflating US, Japanese and British economies, the IMF called for large and “timely” fiscal support. But in Australia there is simply not yet the sort of employment crisis or deflation fear that requires big debt-funded cash handouts.
Kevin Rudd and Wayne Swan have apparently switched from insouciance to panic in the course of a month or two, and have gone for Strauss-Kahn’s entire 2%, and a bit more, in one hit.
And when the Opposition leader, Malcolm Turnbull, demurs, the response is: “Well, YOU tell the primary school kiddies they can’t have a new library.”
But Turnbull’s fiscal rectitude is now wilting under the pressure, and yesterday he plaintively demanded that the Prime Minister “get down off his bulldozer” and negotiate with him, even though he had previously said he simply wouldn’t vote for the fiscal stimulus, which took him out of the game. (In the US, the Republicans, meanwhile, have been negotiating hard, and successfully, with Barack Obama).
That leaves the Greens and the independents to negotiate for their favourite bits of pork to go in the package before they let it through.
None of which is remotely to do with what is actually needed by the economy.
Fiscal credibility is hard won and easily lost. It’s true that Australia’s budget and government balance sheet is in far better shape than most to begin with, but it won’t take much for that to be blown up.
Specifically it is hard to see how the budget will return to surplus and/or which assets can be sold to repay the debt.
Meanwhile Infrastructure Australia, chaired by Sir Rod Eddington, is due to report in March on the national priorities for spending on transport and other infrastructure projects.
But Eddington and his colleagues will be like Old Mother Hubbard – the money’s all gone; the cupboard is bare.
This is a brilliant article by Alan Kohler is taken from www.businessspectator.com.au - plainly, is Australia in dire straits or not? Do we have the money to be spending on economic stimulus...or not?
The managing director of the IMF, Dominique Strauss-Kahn, might come to regret letting the political big spenders off the leash when he said in December that fiscal stimulus of at least 2% of global GDP was justified.
He also said “not all countries can undertake fiscal stimulus”, and added; “some will need to contract their budgets rather than expand them".
But of course no one believes that applies to them, so we are now witnessing the most colossal expansion of government debt in history, with no strategy for returning to surplus.
In fact, although Australia begins its fiscal expansion with no debt and a healthy surplus – thanks to the “neoliberal” disciplines and privatisations of the past two decades – it is difficult to see how the debt now being taken on will be repaid.
I’m as gloomy as anyone about the economy, but it’s bemusing to see a government bang out two fiscal stimulus packages in two months, worth $53 billion, even though unemployment is still at generational lows well below 5%.
With its eye, perhaps, on the collapsing, deflating US, Japanese and British economies, the IMF called for large and “timely” fiscal support. But in Australia there is simply not yet the sort of employment crisis or deflation fear that requires big debt-funded cash handouts.
Kevin Rudd and Wayne Swan have apparently switched from insouciance to panic in the course of a month or two, and have gone for Strauss-Kahn’s entire 2%, and a bit more, in one hit.
And when the Opposition leader, Malcolm Turnbull, demurs, the response is: “Well, YOU tell the primary school kiddies they can’t have a new library.”
But Turnbull’s fiscal rectitude is now wilting under the pressure, and yesterday he plaintively demanded that the Prime Minister “get down off his bulldozer” and negotiate with him, even though he had previously said he simply wouldn’t vote for the fiscal stimulus, which took him out of the game. (In the US, the Republicans, meanwhile, have been negotiating hard, and successfully, with Barack Obama).
That leaves the Greens and the independents to negotiate for their favourite bits of pork to go in the package before they let it through.
None of which is remotely to do with what is actually needed by the economy.
Fiscal credibility is hard won and easily lost. It’s true that Australia’s budget and government balance sheet is in far better shape than most to begin with, but it won’t take much for that to be blown up.
Specifically it is hard to see how the budget will return to surplus and/or which assets can be sold to repay the debt.
Meanwhile Infrastructure Australia, chaired by Sir Rod Eddington, is due to report in March on the national priorities for spending on transport and other infrastructure projects.
But Eddington and his colleagues will be like Old Mother Hubbard – the money’s all gone; the cupboard is bare.
The Australian Financial Crisis - Welcome to our Blog!
Hi All.
Welcome to our new blog dedicated solely to discussion of the Australian Financial Crisis. We apologise if you find the name a litte chary; naturally, we thought it would grab your attention. Don't be too alarmed, though, this isn't a site only for doom and gloom.
THIS SITE IS FOR ANYONE interested in the economic state of affairs and the future prosperity of our good country.
As the key contributors to this blog and businesspeople, we have been keeping abreast of information as it comes to hand about any and all aspects of the global economic crisis and, particularly, our government’s activity to curb its effects upon our market. And, as businesspeople, we have had our share of disagreements with the fiscal policies chosen and the actions taken. Although we support our government, we are concerned that the foundation from which they act – being their understanding of money and their economic advice – is gravely at fault.
You see, money and economics are probably two of the most fundamentally misunderstood faculties of human endeavour. Certainly, where our government is concerned, there have been successes; but there have also been many failures and, key faiures that have seen us to this predicament. Incident to this misunderstanding has been the ill intentions of some to take advantage of the system which, in effect, has now lead to the collapse of economies in many countries.
Today, in the United States, unemployment has surged to a 17 year high despite their government’s best attempts to stabilise the economy. Australia, too, despite the injection of funds directly into the markets, is not forecasting a rosy financial future.
Many of us know someone who has lost a job, had a pay cut or who’s industry is under threat as a result of this crisis. The government scrambles to push through another cash injection, this time of $50b, to which there is much opposition and debate and argument. It’s natural to question our government in the light of such behaviour and ask if politics are getting in the way of our economic salvation or if the government has completely got it wrong?
Even the reasons for the downturn in the economy are debateable – there is little agreement, too, as to whether stimulus packages will even work.
What then is the cause of this, so called, economic crisis? Is the ‘system’ at fault or certain elements within it? For without knowing the cause, how can we even proffer a solution? Many conspiracy theories have been suggested – that this is a means of enabling bank or government control of the populace, that this has been instigated by the Federal Reserve to enslave the population... But, what is true and what is hearsay? Indeed, have such conspiracy theories been manufactured only to manipulate us by anxiety?
What then, is the solution? Many have been put forward, but which will work? Should more money be injected into the economy? Less? Is the solution not even fiscal? Is it production-based?
There are lots of questions, but time appears to be limited. In Australia, we are yet to face the full brunt of the economic recession. Despite this, Australians are working less hours than ever before, six of ten of our trading partners are in recession, unemployment is on the rise and other key performance indicators of our economy are crumbling despite the government’s best efforts to reverse the trends.
Sure, the experts may provide reasons and handlings and causes and solutions – but these are the very experts who are currently at the helm of the ship that, despite evasive efforts, is a ship heading towards the eye of the storm.
Brace yourselves. For WE ALL NEED TO KNOW about this thing: the Economic Crisis. The experts have gotten it wrong. They may have predicted it – and hats off the them for being right – but what is needed now is CORRECT actions, REAL applicable REASONS AND SOLUTIONS and, most importantly, EVERYONE – every worker, foreman, clerk, manager, business owner – needs to know what this thing ‘the recession’ is before it hits hard.
We will all be affected; better we know what ill it is with which we suffer and take what responsibility we can to kill the disease or stave off the plague.
Your dialogue and optimism is very welcome.
These are shaky times, to say the least but there is definitely a way through.
If you would like to contact us directly to register for our monthly newsletter or are interested in our books on the subject, please do so by emailing us at ausfinancialcrisis@sagecon.biz
Welcome to our new blog dedicated solely to discussion of the Australian Financial Crisis. We apologise if you find the name a litte chary; naturally, we thought it would grab your attention. Don't be too alarmed, though, this isn't a site only for doom and gloom.
THIS SITE IS FOR ANYONE interested in the economic state of affairs and the future prosperity of our good country.
As the key contributors to this blog and businesspeople, we have been keeping abreast of information as it comes to hand about any and all aspects of the global economic crisis and, particularly, our government’s activity to curb its effects upon our market. And, as businesspeople, we have had our share of disagreements with the fiscal policies chosen and the actions taken. Although we support our government, we are concerned that the foundation from which they act – being their understanding of money and their economic advice – is gravely at fault.
You see, money and economics are probably two of the most fundamentally misunderstood faculties of human endeavour. Certainly, where our government is concerned, there have been successes; but there have also been many failures and, key faiures that have seen us to this predicament. Incident to this misunderstanding has been the ill intentions of some to take advantage of the system which, in effect, has now lead to the collapse of economies in many countries.
Today, in the United States, unemployment has surged to a 17 year high despite their government’s best attempts to stabilise the economy. Australia, too, despite the injection of funds directly into the markets, is not forecasting a rosy financial future.
Many of us know someone who has lost a job, had a pay cut or who’s industry is under threat as a result of this crisis. The government scrambles to push through another cash injection, this time of $50b, to which there is much opposition and debate and argument. It’s natural to question our government in the light of such behaviour and ask if politics are getting in the way of our economic salvation or if the government has completely got it wrong?
Even the reasons for the downturn in the economy are debateable – there is little agreement, too, as to whether stimulus packages will even work.
What then is the cause of this, so called, economic crisis? Is the ‘system’ at fault or certain elements within it? For without knowing the cause, how can we even proffer a solution? Many conspiracy theories have been suggested – that this is a means of enabling bank or government control of the populace, that this has been instigated by the Federal Reserve to enslave the population... But, what is true and what is hearsay? Indeed, have such conspiracy theories been manufactured only to manipulate us by anxiety?
What then, is the solution? Many have been put forward, but which will work? Should more money be injected into the economy? Less? Is the solution not even fiscal? Is it production-based?
There are lots of questions, but time appears to be limited. In Australia, we are yet to face the full brunt of the economic recession. Despite this, Australians are working less hours than ever before, six of ten of our trading partners are in recession, unemployment is on the rise and other key performance indicators of our economy are crumbling despite the government’s best efforts to reverse the trends.
Sure, the experts may provide reasons and handlings and causes and solutions – but these are the very experts who are currently at the helm of the ship that, despite evasive efforts, is a ship heading towards the eye of the storm.
Brace yourselves. For WE ALL NEED TO KNOW about this thing: the Economic Crisis. The experts have gotten it wrong. They may have predicted it – and hats off the them for being right – but what is needed now is CORRECT actions, REAL applicable REASONS AND SOLUTIONS and, most importantly, EVERYONE – every worker, foreman, clerk, manager, business owner – needs to know what this thing ‘the recession’ is before it hits hard.
We will all be affected; better we know what ill it is with which we suffer and take what responsibility we can to kill the disease or stave off the plague.
Your dialogue and optimism is very welcome.
These are shaky times, to say the least but there is definitely a way through.
If you would like to contact us directly to register for our monthly newsletter or are interested in our books on the subject, please do so by emailing us at ausfinancialcrisis@sagecon.biz
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