Labor's tax policy

A system supposedly to avoid double taxation, has become a tax deferral system for the privileged. Company tax has become a withholding tax to be refunded later.

Lies, damn lies and budgets

A new year provides the opportunity to start with a clean slate. Health Minister Ferguson missed his chance. His Talking Point article Rolling out the health fix for growing needs (published January 2^nd) continued with the disingenuous claim that the current government is spending” an additional $757 million over the next 5½ years”.

Whilst not an outright lie, the claim nevertheless fits comfortably into the broader category of a Trumpian untruth.

What do banks do? An accounting perspective

This paper was given to a U3A Group. It's a look at settlement services and borrowing/lending practices. It is not intended to be a blueprint, rather an accounting explanation of what banks do and to question whether there's another way.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is appropriately named. There’s been plenty of misconduct revealed. The aim of this seminar is not to trawl through all the misconduct, but to have a closer look at what banks do. Do we need them? If we were designing a new banking system would we come up with the current model?

Progressives are their own worst enemies

Misunderstanding our current problems is reaching epidemic proportions if one is to judge by Dr Michael Powell’s comments ( see here )on the new GST arrangements and the wider more crucial issue of Federal budgetary difficulties.

Just to quickly address the GST issues before moving to the broader matters of budgetary policy.

Budget buffer?

The Treasurer is winning the post budget arguments because those who question his mastery aren’t acquainting themselves with the true situation.

The Treasurer is setting the agenda. We have fixed the budget mess he claims. There are surpluses as far as the eye can see.  Are there surpluses? Yes. Does this mean the budget is fixed? No.

The corporate world is littered with the corpses of companies which showed profits one day and went belly up shortly thereafter. Profits or net operating surpluses in this case, often coexist with cash deficits. Yet most people, innocently accept the Treasurer’s claim about future surpluses thinking he means cash surpluses, and respond by saying why not spend them now?  The Treasurer’s answer is essentially to say, no, they are needed to provide a buffer for the future.

This is the point where the Treasurer crosses the line from an arguable position, namely the existence of surpluses, to a baseless assertion that he is creating a future buffer.

Banks: Do we need them?

People who believe the good times will soon return are harder to find these days. It’s not just the loss of trust in our institutions and the political class but a more deep-seated scepticism as to whether the suggested remedies will work.

The laws of economics are not immutable. Many are mere transient beliefs that may provide a reasonable explanation of current machinations, but when a black swan event occurs, like the Global Financial Crisis, something outside previous experiences, the old ways of thinking are of little help.

Likewise, our treasured institutions have failed us. As part of the reported proceedings of the Royal Commission into Banking, investment banker UBS estimated $500 billion out of $1.7 trillion in mortgages across Australia, that’s one third of the total mortgage debt, could be ‘liar loans’, based on dodgy documentation.

With residential mortgages growing faster than the rest of the economy, our economy is out of balance. Everyone knows it. We shuffle existing assets amongst ourselves at ever increasing prices using borrowed funds under the mistaken belief we are growing the economy when the reality is we are involved in a giant Ponzi scheme. Now we discover that up to one third of the mortgage loans may be based on suspect if not fraudulent documentation.

The case for Basslink?

(Published in The Mercury on 20th April 2018. This blog includes additional endnotes.)

With all the talk about a second Basslink one would have expected to have a clear picture of the costs and benefits of the first interconnector. Surely if you’re buying another of the same, one of the determining factors would be how the first has performed? Has it worked as planned?

The short answer is no. It’s been a costly voyage into the unknown.