a government announces in a Budget that it will spend extra on health next year,
is that compared to
1.what has been spent in the current
2.what it intended to spend a year ago?
the case of health the answer is 2.
last year’s budget the Tasmanian Health Service THS spending was intended to be
$1,368 million in 2016/17 and $1,362 million in 2017/18.
one looks at the Policy and Parameter Statement in this year’s budget papers (Budget
Paper 1 page 67) THS’s estimated outcome for 2016/17 shows an extra $106.7
million being spent (or estimated to be spent) for 2016/17. This suggests THS
spending of $1,475 million for 2016/17.
looking at this year’s budget papers, intended spending by THS (Budget Paper 2 vol
2 page 109) for 2017/18 is $1,460 million. That may be $98 million more than what was
intended a year ago but it is less than what was actually spent in the current
the system is in crisis spending less is unlikely to fix the problem.
what Building Tasmania’s Future means. The Mercury was quite correct in
depicting the Treasurer in this morning’s edition as a snake oil salesman with a warning that the tonic being marketed may contain pork.
an unreality about the budget. Let’s have a look at the overall Income Statement
(Budget Paper 1 page 47), in particular the figures for employee expenses. To
make it easy part of the relevant table is pasted below.
added the estimated outcome figures from page 191. It easy to see the increases
in employee expenses are $29 million in 2017/18 then $30 million and $31
million in the next two years.
% terms that’s a 1% increase in each of the next 3 years. Scarcely believable when
the estimated outcome for the current year 2016/17 was $60 million above budget
and the Treasurer had the place ticking over like a well oiled machine. Even
less credible given wage increase are tracking at a rate higher than 1%, and
employment in the health area is supposed to rise.
“Australian banks are upset. Their
$30 billion per year gravy train of profits from the Australian people is
finally being slowed down.
A levy on bank liabilities of 0.06% annually was announced as
part of the 2017 Federal government budget, and is expected to raise about $1.5
billion per year, or 5% of bank profits.
To be clear, the banking system is a regulated cartel. Its primary function is
to provide a public good in the form of the money supply of the country. As
such, we would expect it to be uncompetitive, and use tight regulatory controls
to ensure that the privileged position of private banks is not being abused.
In my book, Game of Mates, I explain
that the result of this uncompetitiveness and lack of adequate regulation in
Australia is that over half of the banks' profits can be considered economic rents, which
could be taken back with better regulation and shared with the public at large.”
“This is the story of
how Australia became one of the most unequal societies in the Western world
while merely a generation ago it was one of the most equal. It is the story of
how groups of ‘Mates’ have come to dominate our corporate and political sectors,
and managed to rob us, the Australian majority, of over half our wealth.”
begins a just released book by one of my favourite economists Cameron Murray,
written with another Queenslander Paul Frijters.
Little is publicly
disclosed about the latest dispute between Hydro Tasmania (HT) and Basslink Pty
Ltd (BL) following the six month cable outage from December 2015 to June 2016. BL
has just revealed a little more with the lodgement of its 2016
Financial Statements and Report with Australian Securities and Investment
We knew HT has not
been paying the monthly facility fee to BL since September 2016 but that it has been making good faith
payments. However these are considerably less than the facility fees otherwise
payable. The amount in dispute between the parties could get out of hand?
Nicholas Gruen has posted a couple of interesting articles recently about reforming
banking. Our central bank, the Reserve Bank RBA, lies at the heart of the
banking system. Rethinking and adapting its role more in line with the internet
age could easily put thousands of dollars into the pockets of Australian
households and billions into government coffers he argues.
is an address to a breakfast meeting of the Burnie Chamber of Commerce & Industry
on 12th April 2017.
I’d like to advance the proposition
that most of what is commonly believed about money, government spending and
debt is wrong. Seriously wrong....and it’s stopping us from sensibly moving
You may remember the Queen in 2008 going
to the London School of Economics to open a building as I recall. Referring to
the GFC (global financial crisis).... Lehman Bros had just collapsed....she was
famously captured on camera saying "Why did nobody notice it?" Their models
were wrong that’s why. Money wasn’t in the models. Banks were assumed to be passive
intermediaries lending funds from patient savers to willing borrowers. That may
have been the situation pre 1971 before President Nixon abandoned the 1944
Bretton Woods agreement which incorporated the gold standard and underpinned
bank lending practices. The world changed after that .....and economics didn’t
simply...a lot of economists don’t understand accounting.
“Our three economic regulators have finally revealed
themselves as the three witches busy tending their poisonous brew while
chanting “Bubble, bubble, toil and trouble!” to a nation of tone-deaf property
speculators and commentators-come-experts. The architects of our dreaded
housing and economic Frankenstein are among the last to formally recognise
the monster of their own creation for what it is – a hideous creature that
defies all reason, logic, decency, ethics and ultimately, any ability to
Such is the well documented exceptionalism and wilful
blindness of the collective Australian bubble psychology, that bubble believers
and sceptics alike have come to the physics defying conclusion that
Australia has invented an actual perpetual motion machine. The problem
with perpetual motion machines? They don’t exist. Can’t you just feel the
growing friction rubbing up against the bloated sack of housing hot air? I am
amazed at how tenacious the belief is that exponentially growing
imbalances can go on forever, when every fibre of the economy must
be sacrificed at the altar of housing speculation in ever more dramatic
interventions just to keep the damned thing afloat for another few
months or years. For just one more election cycle.”
Premier Hodgman was dismissive of
concerns about State Growth Minister Groom’s close relationship with Adrian
Bold, proponent of the Mount Wellington cable car project, as revealed on
“There are a lot of things that
require my attention ---- Matt Groom’s Facebook page isn’t one of those”, he
What if the chair of Tourism Tasmania
was a 50 per cent owner of a company which is the largest shareholder, apart
from Mr Bold, in the cable car venture? Would that appear on the Premier’s radar?
After all he is Minister for Tourism as well.
previous blog had a closer look at Tas Water’s cash flow statements to show how
Tas Water is managing to fund its capital programs with a mixture of operating
cash and borrowings and how the distributions to owner councils each year require
even more borrowings.
is the third in a series of blogs on Tas Water.
Tas Water saga is yet another example of our inability to solve simple
problems. It has quickly degenerated into a political imbroglio where the
issues that lay at the heart of the problem are quickly forgotten. This blog
will attempt to redress the imbalance.
doesn’t need Nostradamus’ foresight to realise that borrowing to pay dividends
is unsustainable. Especially if the business urgently needs to spend more on capital
Water’s 2016 financial statements are an eye opener. An extra $65 million was
borrowed during the year, $20 million of which went to councils as dividends in
addition to other distributions of $10 million. The rest was needed to fund
extra capital spending which coincided with a fall in net operating cash.
Another year or two like that and the undertakers would be placed on standby.
Treasurer Gutwein’s concerns about Tas Water aren’t without foundation.
The parliamentary committee
investigating Future Gaming Markets has received written submissions and has
held five days of hearings. Only a few
witnesses ventured into accounting and economic aspects of gaming and this
happened on the 7th and 8th February. The questioning by
the Committee was pretty low key. It seemed they were struggling with the issues,
not surprising given the enormity of the task in an area unfamiliar to all of
them. This note was written in response to the Committee’s offer to accept
comments from me that may assist in their deliberations following my brief
appearance on the 8th February.
The submissions and appearances
of interest (submissions and transcripts can can be found here) were from:
·Australian Leisure and Hospitality
Group, the largest pokie operator in Australia associated with Woolworths
·Dixon Hotel Group, a local group with
35 hotels (not all pokie pubs)
·Tasmanian Hospitality Association
·Tourism Industry Council Tasmania
One area where no progress was made was trying
to understand the costs associated with pokies at the venue level and at the
network level. Each face different costs some fixed and some variable. It is
crucial to understand the differences if pokies are allowed to survive outside
casinos,and a more equitable split is to be recommended between the network
operator, the venue, players and government. The note concludes with an Econ 101 presentation setting out costs and revenue for network and venue operator(s) before and after possible changes.
Hotels has presented its vision of gaming in Tasmania after 2023. Lower taxes
for table and EGMs in casinos and higher EGM taxes for pubs and clubs. Despite
the absence of a link between tourism and gaming Federal Hotels suggested a low
tax model which covers the casinos in Townsville Cairns and Darwin is the way
forward for Tasmania.
Hotels’ views are contained in one of the 147 submissions to the parliamentary
inquiry into post 2023 gaming arrangements in Tasmania. Over one hundred of
these only comprised a few sentences, of varying levels of disgust/displeasure
at EGMs in the community. Another twenty five were contributions from church
groups and NGO’s who have seen the effects of social damage from EGMs.