Malcolm Turnbull seeks legal advice on Hanson’s staffer Ashby


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One Nation is in hot water over the leak of a secret recording that reveals James Ashby suggesting a plan to scam public funds.
Mick Tsikas/AAP

Michelle Grattan, University of Canberra

Malcolm Turnbull has asked the Australian Federal Police commissioner, the attorney-general and the justice minister for advice about the revelation that Pauline Hanson’s key adviser, James Ashby, floated the idea of One Nation scamming public funds. The Conversation

Ashby suggested at a meeting last year that a way One Nation could make money at taxpayer expense in the coming Queensland election was to inflate receipts presented to electoral authorities.

The party did not pursue the idea, but its surfacing – via a recording of the meeting – is causing serious fallout for Ashby and for Hanson, who was present at the meeting.

Labor has written to the Queensland electoral commissioner and the Queensland police commissioner asking them to investigate.

In the recording, Ashby said: “There is an opportunity for us to make some money out of this, if we play it smart. Now I know they say you can’t make money out of state elections, but you can.”

Outlining the idea at the meeting, Ashby said: “I’ll deny I ever said this but what stops us from getting a middle man or gracing – I’m happy to grace in cash and double the price of whatever it is.”

The party would say to candidates that it would fund 50% of a package, he said. The package might be A$5,000, with the candidate told they were going to pay $2,500 and party would pay the other $2,500.

“The other $2,500 is profit. It’s the fat,” Ashby told the meeting. “When you lodge the receipt at the full price with the Electoral Commission of Queensland you get back the full amount that’s been issued to you as an invoice.”

At an extraordinary joint news conference with Hanson on Monday, Ashby said the revelation was “embarrassing”, adding that it was a “poor choice of words on my behalf”.

He complained that “these were secretly recorded conversations in what we thought was an environment where we could safely put any idea on the table and it wouldn’t go any further”.

“We’ve never implemented this idea that was put forward and it’s regretful that obviously a poor choice of words on my behalf had to be aired in such a public manner,” he said.

Hanson told the news conference: “Don’t forget I was at the meeting as well. You do not have the full recording of that meeting, so you have no idea what was said at the rest of the meeting. We knocked it on the head at the meeting. It didn’t go ahead – that’s why. It was an issue that was raised and it was knocked on the head there and then.”

In comments later, Ashby said he had felt it necessary to come forward to deal with the story – he cast Hanson as being at the news conference to support him. “At times I’m going to have to come forward and defend myself”, he said.

He said political parties were run like businesses, but formerly One Nation had been run in a dismal fashion.

His proposal had been a silly idea, he said. Amid suggestions there was more of the tape to come out, he said could not remember what else he had said at the meeting.

Crossbench senator Derryn Hinch said Ashby had committed a sackable offence but Hanson “won’t sack him”.

In parliament, Shadow Attorney-General Mark Dreyfus quizzed Turnbull about the allegations One Nation had conspired to defraud Queensland electoral authorities.

Dreyfus asked whether Turnbull had referred this and previous allegations about One Nation to the Australian Federal Police to investigate whether any Commonwealth laws had been broken, including whether any similar fraud had been perpetrated against the Commonwealth.

He also asked whether the government would be reviewing payments made to Coastal Signs and Printing – Ashby’s Sunshine Coast-based business – to make sure there hadn’t been inflated receipts.

Turnbull said the question raised “some serious matters” and he would be getting advice.

The government is somewhat conflicted over Ashby. It needs One Nation’s Senate votes for legislation opposed by Labor and the Greens – Ashby is Hanson’s right-hand man and arguably the party would be less stable without him. But anything that discredits Ashby and One Nation is useful ahead of the Queensland election.

Ashby is a divisive figure within One Nation, and bitterly attacked by some ex-members.

He has been the centre of controversy over the contested funding for a plane used to ferry Hanson around. He says he purchased the aircraft and it was owned by his business.

A former Queensland One Nation candidate, Diane Happ, who had a row with the party over the cost of campaign material, told the ABC on Monday that Ashby was “a viper, he’s a snake, he’s nasty stuff”.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Politicians: please ease off on ‘announceables’ until after the electricity market review



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Current political intervention in the energy market is haphazard and disconnected.
chriscrowder_4/Flickr, CC BY-NC-SA

David Blowers, Grattan Institute and Kate Griffiths, Grattan Institute

A series of dramatic events over the past year, most notably the September statewide blackout in South Australia, have revealed an electricity system under strain, and left many Australians worried about the reliability of their power supply. The Conversation

In response, state and federal politicians have announced a series of uncoordinated and potentially expensive interventions, most notably the Turnbull government’s Snowy Hydro 2.0 proposal and the South Australian government’s go-it-alone power plan.

Yet all of these plans pre-empt the Finkel Review, to be released early next month. Commissioned by state and federal governments and led by Australia’s chief scientist Alan Finkel, the review is expected to provide a new blueprint for the National Electricity Market (NEM).

Clearly, Australia is struggling to manage the transition to a zero- or low-emission electricity grid, and some commentators have concluded that the NEM is broken.

In our report Powering Through, released today, we argue that it is too early to give up on the market. But what we really need is substantial market reforms, rather than piecemeal government investments in various energy projects.

Australia’s troubled transition

The problems are everywhere. Consumers have been hit with a 70% hike in real-terms electricity bills over the past decade, and there is more to come. Wholesale prices for electricity in most eastern states were twice as high last summer as the one before.

New vulnerabilities continue to emerge. The headline-grabber was South Australia’s blackout – the first statewide blackout since the NEM was formed in 1998 – but there have been other smaller blackouts and incidents too.

Poisonous politics means Australia is also failing to stay on track to hit its 2030 climate targets. The mixed messages on climate policy; the seemingly ad hoc public investment announcements; the threat of direct intervention in the activities of the market operator – all of this has created enormous uncertainty for private investors.

Meanwhile, the clock is ticking: Australia has enough electricity generation capacity for now, but more will be needed in the decade ahead.

The energy market is in a difficult transition.
georg_neu/Flickr, CC BY-NC

First, do no harm

There is currently an acute danger of politicians panicking and rushing into decisions that will only push electricity prices higher, and make the task of reducing Australia’s emissions harder.

Already, federal and state governments are committing taxpayers’ money to new energy investments. This is premature, with the Finkel Review’s recommendations not yet released. Stampeding white elephants loom ominously on the horizon.

Given the current uncertainties, it is vital not to grasp for expensive “solutions” or to lock in plans too soon. We do not yet know what technology mix will be needed in the future. Maintaining flexibility through the transition will ensure we can take advantage of the best solutions as they emerge.

‘No regrets’ short-term reforms

There are some “no regrets” moves that can and should be made, to address the short-term risks to the electricity system and buy time to resolve the longer-term ones. Australia should build on existing low-cost mechanisms before making major capital investments or redesigning the market.

The immediate challenge is to reduce the risk of blackouts next summer, in South Australia and Victoria especially. Most blackouts happen because something in the system breaks. Some simple changes to the market rules, like the recent AEMO and ARENA announcement to pay consumers to cut their electricity use, would make a big difference to managing equipment failures when they inevitably arise.

To ensure reserves are on hand, some mothballed generators should be recalled to service. Pleasingly, Origin Energy and Engie have already struck a deal to enable the restart of the second turbine of the Pelican Point generator in South Australia.

The longer-term task

The cheapest and most effective way to reduce long-term risks is to rebuild investor confidence. That requires Australia to agree, finally, on a credible climate policy. A carbon price is the best such policy, but any bipartisan policy that works with the electricity market and is capable of hitting Australia’s emissions targets will be a vast improvement on what we have now.

The transition to a zero-emissions electricity sector will be difficult. Even given a credible climate policy, there are still questions as to whether the current electricity market will be able to meet our future needs. And that’s without even mentioning the gas market, which is frankly a mess.

Politicians should begin by adopting pragmatic market reforms and giving clear direction on climate and energy policy. At the very least, they should wait until Finkel delivers his recommendations.

Hopefully the Finkel Review will define Australia’s energy security and emissions reduction needs, and provide a strong platform for politicians to work from. If so, a competitive market will find the cheapest path to a reliable and low-emissions electricity future.

The danger is that partisan politics will make the best policies untenable. If that happens, we can expect the blame to be shifted onto the market, which will be described as having “failed” – but the truth is that it will have been systematically (if not quite intentionally) destroyed.

More likely still is that governments give up on the market without giving it a chance. Scott Morrison’s budget promise of new federally owned power generation set a worrying precedent. If recent announcements deter private investors, still more government investment will be needed, which will shift yet more risk and cost onto taxpayers.

There’s a real danger of politicians focusing on “announceables” and shying away from the market reforms that will make the biggest difference to the affordability, reliability and sustainability of our electricity supply.

David Blowers, Energy Fellow, Grattan Institute and Kate Griffiths, Associate, Grattan Institute

This article was originally published on The Conversation. Read the original article.

With its 2017 budget the government is still discouraging women



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Recent figures show that women are adversely effected by the 2017 federal budget.
AAP Image/Tracey Nearmy

Helen Hodgson, Curtin University

The 2017 federal budget was pitched as a fair budget, but much depends on your definition of fairness. Reviewing the policies through a gender lens, there is little to address the entrenched economic disadvantage experienced by women. The Conversation

Australia was known for being a pioneer of policies that are sensitive to the impacts on different genders, but that 30-year history came to an end in 2014 when the Abbott government announced it was abandoning the practice. Rather than see this analysis disappear, the National Foundation for Australian Women (NFAW) stepped in and partnered with academics like us, to analyse the budget through the gender lens. We review the effect that each announced policy will have on women’s lives: their economic status and well-being.

We found there were no measures designed to specifically address gender inequality and the related women’s entrenched financial vulnerability.

It’s a relief that the government has abandoned the so-called “zombie measures” which included changes to the family tax benefit and paid parental leave measures. These measures would have had a direct impact on women by adding to the effective marginal tax rate. They would also have reduced the female workforce participation rate, having a long-term effect on the economic well-being of women and their families.

However the budget still includes measures that have a disincentive effect in the workforce. The increase in the Medicare levy will affect those on incomes greater than A$21,644. For those with eligible children, the Family Tax Benefit A payment rates are frozen for two years and those who pay child care fees receive will continue to face high effective marginal tax rates (EMTR’s).

A flat increase in taxes or levies will particularly impact low income earners. Women are overrepresented in the lowest income levels, so changes to government benefits and increases in taxes have a disproportionate affect on women. Recently released ATO statistics show the median income for women was A$47,125 in 2014/15, while for men the amount was A$61,711.
And the recent reduction in penalty rates has already been identified as disproportionately affecting women.

These changes hit those earning well below the average wage, and are particularly harsh for women. Combined, these changes could lead to effective marginal tax rates of possibly 100% or higher for some women, particularly as Family Tax Benefit Part A begins to decrease at A$51,903.

The long awaited housing package will have some benefits for women. But community organisations will need to be vigilant in ensuring that the new National Housing and Homelessness Agreement ensures that funding is guaranteed for the homeless and for women fleeing domestic violence.

There has already been criticism of initiative to encourage older Australians to downsize their homes, but when a gender lens is applied, the inherent bias becomes clear. Economic patterns established during a woman’s pre-retirement years mean that women are more likely to be in receipt of the age pension, and are more likely to be receiving the full age pension. They are also less likely to have superannuation, and the balance will be lower.

Where a person is in receipt of the age pension, the downsizing initiative will reduce it, so single women are more likely to lose entitlements if they access this benefit. For example, a widow maintaining a home that is bigger than she now needs, will not be able to benefit from downsizing with this policy.

The increase in the Medicare levy to fund the National Disability Insurance Scheme (NDIS) is also a mixed outcome. The primary carer for a person with a disability will benefit from access to the NDIS, as the additional funds for services will relieve financial and emotional pressure on the carer. But because women are still more likely to be the primary carer for a family member with a disability, this measure will disproportionately improve the lives of women.

Despite the commitment to fully fund the NDIS there are no measures to address workplace conditions. The caring economy is still largely based on women, whether they provide paid care or unpaid care.

Women working in the care sector still endure historically undervalued pay rates and working conditions, whether in the NDIS, childcare or aged care. The current consumer directed care model encourages the use of casual workers, which further reduces economic security for these women.

This year’s budget delivers some significant improvements in infrastructure, disability support, health and housing. These are welcome because they place a higher weight on the provision of government services, than unfair policies aimed at arbitrarily reducing the surplus.

The 2017 budget contains initiatives that help alleviate some of the worst aspects of its predecessors. However, it doesn’t radically turn things around for women.

Helen Hodgson, Associate Professor, Curtin Law School and Curtin Business School, Curtin University

This article was originally published on The Conversation. Read the original article.

Full response from the AiGroup for a FactCheck on how Australia’s top tax rates compare internationally



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original.

Sunanda Creagh, The Conversation

In relation to this FactCheck on the AiGroup’s Innes Willox’s statement that Australia has “one of the highest progressive tax rates in the developed world”, a spokesman for the AiGroup sent the following sources and comment: The Conversation

Innes was referring to top marginal tax rates. Data for 2016 show that Australia has a relatively high top marginal tax rate (49%) but not the highest among OECD countries (Sweden is top, at 60%). The rub is that our top marginal rate cuts in at a relatively lower level of income than most other OECD countries (2.2 times our average wage).

Chart created by AiGroup using OECD data.
AiGroup/OECD
Chart created by AiGroup using OECD data.
AiGroup/OECD

The spokesman also sent a screenshot from an OECD report titled Revenue Statistics 2014 – Australia:

A screen shot from the OECD report Revenue Statistics 2014 – Australia.
OECD

Sunanda Creagh, Editor, The Conversation

This article was originally published on The Conversation. Read the original article.

FactCheck Q&A: does Australia have one of the highest progressive tax rates in the developed world?



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The AiGroup’s Innes Willox, speaking on Q&A.
Q&A

Kathrin Bain, UNSW

The Conversation fact-checks claims made on Q&A, broadcast Mondays on the ABC at 9:35pm. Thank you to everyone who sent us quotes for checking via Twitter using hashtags #FactCheck and #QandA, on Facebook or by email. The Conversation


Excerpt from Q&A, May 15, 2017. Quote begins at 0.50.

Look, we just need to keep in mind that we have one of the highest progressive tax rates in the developed world at the moment. – Innes Willox, chief executive of the Australian Industry Group, speaking on Q&A, May 15, 2017.

When Q&A host Tony Jones asked if wealthy people should pay more tax, the AiGroup’s Innes Willox said that Australia already has one of the highest progressive tax rates in the developed world.

Is that true?

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Checking the source

When asked for sources to support Innes Willox’s statement, a spokesman for the AiGroup clarified that Willox was referring to top marginal tax rates.

The spokesman referred The Conversation to OECD tax statistics, and two charts built using that data, saying that:

This shows that Australia has a relatively high top marginal tax rate (49%) but not the highest among OECD countries (Sweden is top, at 60%). The rub is that our top marginal rate cuts in at a relatively lower level of income than most other OECD countries (2.2 times our average wage).

You can read his full response and see those charts here.

Is it true? Not exactly

Looking at OECD data, Australia’s highest marginal tax rate is higher than the OECD median. Out of the 34 OECD member countries in this data set, Australia ranks 13th for the top marginal rate of tax, meaning 12 countries have a higher top marginal rate, and 21 countries have a lower top marginal rate.

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However, a straight comparison like this can be misleading. More than half (19) of the OECD countries impose “social security contributions”. The OECD defines social security contributions as “compulsory payments that confer an entitlement to receive a (contingent) future social benefit”. It notes that they “clearly resemble taxes” and “better comparability between countries is obtained by treating social security contributions as taxes”.

When social security contributions are taken into account, Australia’s “ranking” in terms of top marginal rate of tax drops to 16 out of the 34 OECD member countries – making it still higher than the OECD median top marginal rate, but not by much.

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The other point noted by the AiGroup spokesman was that Australia’s top marginal tax rate applies at a relatively low level of income compared to most other OECD countries.

Australia’s highest marginal tax rate applies to taxable income above A$180,000, approximately 2.2 times Australia’s average wage. The AiGroup spokesman was right to say this is relatively low, with the majority of OECD countries (20 out of 34) applying their highest marginal tax rate at income levels higher than Australia (that is, at income levels higher than 2.2 times the average wage).

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However, it is worth noting that based on the latest Australian Taxation Office statistics, for the 2014-15 tax year, only 3% of individual taxpayers fell into the highest tax bracket.

Where Australia does rank amongst the highest in the OECD is the percentage of total tax revenue that is derived from individual income taxation.

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In 2014, 41% of Australia’s taxation revenue came from income taxation on individuals. This is the second highest in the OECD (the highest being Denmark at 54%) and significantly higher than the OECD average of 24%.

Verdict

The statement made by Innes Willox that “Australia has one of the highest progressive tax rates in the developed world at the moment” is an exaggeration.

Australia ranks 13th in the OECD for the top marginal rate of tax, and 16th if social security contributions are taken into account.

However, Australia does rely more heavily on personal income tax (when compared to other taxes) than all but one other OECD country. – Kathrin Bain


Review

I agree that the statement is an exaggeration. 13th out of 34 is higher than the median, but it would be equally true to say that more than one-third of the OECD countries have a higher personal marginal tax rate than Australia.

It is always problematic to try to compare tax data across different countries. Although the OECD does try to make the data comparable the differences between tax and welfare systems can lead to misleading comparisons.

It is generally well known that certain Scandinavian countries, such as Sweden and Denmark, have a very high marginal tax rate. However those countries also tend to have a different approach to social and welfare spending. Australia does not have a dedicated social security tax: pensions and income support are paid from general revenue. This structural difference in the tax-transfer systems does limit the comparison.

Australia does have a high reliance on personal income tax, and the top marginal rate is higher than the median OECD level. Although the top marginal rate is relatively low at 2.2 times the median wage, the fact that only 3% of the population are in the top bracket says that we, in fact, have a relatively flat tax structure, with most taxpayers in lower tax brackets. – Helen Hodgson


The Conversation FactCheck is accredited by the International Fact-Checking Network.

The Conversation’s FactCheck unit is the first fact-checking team in Australia and one of of the first worldwide to be accredited by the International Fact-Checking Network, an alliance of fact-checkers hosted at the Poynter Institute in the US. Read more here.

Have you seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.

Kathrin Bain, Lecturer, School of Taxation & Business Law, UNSW

This article was originally published on The Conversation. Read the original article.

Vital Signs: dismal wages growth makes a joke of budget forecasts



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Pay packets rose just 0.5% in the first quarter.
bradleypjohnson/Flickr, CC BY-ND

Richard Holden, UNSW

Vital Signs is a weekly economic wrap from UNSW economics professor and Harvard PhD Richard Holden (@profholden). Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies. The Conversation

This week: investor loans continue to rise, unemployment ticks down, wages growth remains distressingly low, and consumers are unconvinced the budget will improve their financial situation.


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Now that Australia’s two major political parties (and the Greens) have decided that robbing banks is legitimate public policy, we return our focus to how the Australian economy is actually functioning.

ABS data released Monday showed that investor housing loans rose slightly, up 0.8% on the previous month. The really interesting figures on this front are still to come, since the Australian Prudential Regulation Authority announced tighter macro-prudential measures – especially on interest-only loans – at the end of March. There are already some anecdotal suggestions that these have started to dampen investor demand, but there is no proper evidence yet. The next round of ABS housing finance data will certainly provide some clues.

The ABS also reported this week that first quarter wage growth was distressingly low, with pay packets rising just 0.5%. That puts private-sector annual wages growth at 1.8%. The main concerns here are, of course, for workers struggling to get by and the fact that rising levels of income inequality are not being dented by robust wage growth.

Added to this, however, is the impact of low wage growth on the budget, and the economy more generally. The RBA has pointed out in recent months that around one-third of mortgage holders have less that one month’s repayment buffer. As the cost of living keeps rising, but wages don’t, people with close to no wiggle room get squeezed more and more.

Last week’s budget, and the forecast return to surplus in 2020-21, was predicated in no small part on very robust wage growth.

On budget night I wrote that these wage growth assumptions were bullish and unlikely to eventuate. 3% going to 3.75% annual wage growth looks really aggressive against a stagnating 1.8 – 1.9% (counting the public sector’s slightly stronger growth). When wage growth is lower than it has been since the mid 1990s, how can one forecast with a straight face that the growth rate will double?

Ratings agency Standard & Poor’s certainly understands this. It almost grudgingly reaffirmed Australia’s AAA credit rating this week, but cast doubt on the projected return to surplus, saying “budget deficits could persist for several years, with little improvement, unless the Parliament implements more forceful fiscal policy decisions”.

Figures released Thursday showed the unemployment rate fell from 5.9% to 5.7%. This is seemingly good news, although this ABS series has been notoriously unreliable in recent times.

The workforce participation rate was steady at 64.8% – and this may be a better and more relevant measure of short-term fluctuations in employment.

There was also a continued shift to part-time employment. Total jobs were up 37,400, but people in full-time work fell by 11,600 and the number of part-time jobs was up 49,000.

Consumer confidence weakened a little in May according to the Westpac-Melbourne Institute Index. It was down a point to 98.0 in May (recall that for indices like these 100 is the level at which optimists and pessimists are in equal supply).

Westpac chief economist Bill Evans said:

Respondents’ confidence in housing and the outlook for house prices deteriorated sharply, while the assessment of the budget around the outlook for family finances was decidedly weaker.

And why wouldn’t it be? The budget contained essentially nothing to address the housing affordability crisis, further fuelling concerns that there will be a messy correction to prices.

Meanwhile, the government’s best ideas for how to grow wages and incomes were to waive a white flag about spending restraint, whine about how the Senate won’t pass their legislation (“this is a Senate tax”, said the treasurer on budget day), and launch a populist attack on our five largest banks.

And that attack – the bank tax – will be passed on to consumers, just like the last increase in regulatory capital required by APRA.

So the government raised the taxes of most Australians and blamed the cross-bench. That doesn’t fill me with confidence. And it seems I am not alone.

Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW

This article was originally published on The Conversation. Read the original article.

$89b shipbuilding plan is a major step forward – but sovereignty remains a problem


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The naval shipbuilding plan is undoubtedly a major step forward for industrial capability in Australia.
AAP/David Mariuz

Graeme Dunk, Australian National University

Australia’s long-awaited naval shipbuilding plan, released earlier this week, claims it is a national endeavour: The Conversation

… larger and more complex than the Snowy Mountains Hydro-Electric Scheme and the National Broadband Network.

Irrespective of this particular claim’s validity, the investment of A$89 billion for nine new frigates, 12 submarines and 12 offshore patrol vessels is a substantial commitment to Australia’s security. The plan is a comprehensive approach to establishing a continuous program for building these platforms in Australia.

Apart from the future introduction of these and other vessels into service, one of the plan’s key outcomes is a “sovereign Australian capability to deliver affordable and achievable naval shipbuilding and sustainment”. The development of a sovereign capability is stated as “the government’s clear priority”.

But what is sovereignty in this context? And is it attainable from the naval shipbuilding plan?

Two clear weaknesses

The plan has two interconnected weaknesses when it comes to sovereignty.

First, the Australian defence industry environment is dominated by companies whose parentage and ultimate control rest offshore. This is not necessarily a bad thing. But given the shipbuilding plan’s focus on Australian jobs and resources, it is a reality that needs confronting.

To that end one might have expected to see, both in this document and in earlier ones, a definition of Australia’s defence industry – what it is and, importantly, what it is not.

The UK’s 2005 description of its defence industry embraces the combination of local and offshore companies contributing to defence outcomes in terms of:

… where the technology is created, where the skills and intellectual property reside, where the jobs are created and sustained, and where the investment is made.

A similar definition for Australia would provide a foundation for sovereignty in the shipbuilding environment to be properly assessed. The plan suggests the Australian subsidiaries of offshore companies will be considered as sovereign without discussing how local control might be maintained, and how Australian sensitivities might be tackled.

The proposed definition for defence industry also highlights the second weakness of the shipbuilding plan: it is focused on building and sustaining the structural component (the “float” and “move” aspects), rather than the total capability the ship or submarine represents.

The lists of skills cited as necessary are those primarily associated with building and sustaining the structure. The shipbuilding plan gives scant coverage to the important combat system and weapons elements upon which the war-fighting capability rests.

The plan does not address the industrial capabilities necessary for the local maintenance and improvement of these ships. Access to the detailed design information for the combat and sensor systems in particular is required so that such systems can be upgraded locally if required. An offshore equipment supplier may not give the same priority to our needs.

The plan for naval shipbuilding in Australia says it will source many systems of the future frigate and other naval platforms from the US. However, the closest it gets to recognition of this reality in the context of sovereignty is that:

Australia’s alliance with the US, and the access to advanced technology and information it provides, will remain critical.

The plan therefore implies that sovereignty is sought for the “float” and “move” aspects of the naval capabilities, but not necessarily for the important “fight” aspects. This means the systems elements of ships and submarines will be tackled in some other context – outside the naval shipbuilding plan.

More than just ‘doing stuff’

The naval shipbuilding plan is undoubtedly a major step forward for industrial capability in Australia.

A successful implementation will provide significant benefits for the Navy in terms of force structure, for industry in terms of a long-term enterprise upon which to grow overall capability and capacity, for innovation, for workers in terms of continuity of effort, and for the development of shipbuilding-related STEM skills. These are all worthy outcomes.

But sovereignty is more than just “doing stuff” in the country.

If the plan really wanted to tackle sovereignty, it should have provided a foundation on which aspects of industrial and operational sovereignty could be properly assessed, prioritised and managed. It would also have addressed the systems aspects of ships, rather than just the structure.

Graeme Dunk, PhD Candidate, Australian National University

This article was originally published on The Conversation. Read the original article.

Ratings agency S&P keeps Australia’s AAA rating but doubtful about government’s surplus timetable



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Shadow Treasurer Chris Bowen told the National Press Club that a Labor government would “show the ratings agencies the quality of our plans.”
Mick Tsikas/AAP

Michelle Grattan, University of Canberra

Standard and Poor’s Global reaffirmed a negative outlook and is questioning the government’s projection about when the budget will return to surplus, but has still maintained Australia’s AAA credit rating. The Conversation

The agency’s maintenance of the AAA credit rating following last week’s budget will be a relief to the government, but its detailed outlook is less than confident.

The initial negative outlook from the agency was made in 2016. In continuing it, it points to “risks to the government’s fiscal consolidation plan and risks to the economic, fiscal, and financial stability outlook should the rapid growth of credit and house prices continue”.

The budget projects a return to surplus in 2020-21. But S&P Global says it continued to think surpluses “could remain elusive beyond fiscal 2021”.

“The balance of risks to government revenues remains negative. On the policy front, enacting further savings or revenue policies could remain a challenge, given the Senate’s unwillingness in recent years to legislate many of the government’s fiscal policy measures or doing so after considerable delay.”

“This dynamic, which could continue, presents further downside risk to the outlook for fiscal balances.”

Craig Michaels, director of sovereign & public finance ratings at S&P Global was blunt: “We have seen governments forecast surpluses for many years now and they haven’t materialised. They’ve continued to be pushed back. So we don’t think further pushback on the surplus target is consistent with the AAA rating here on in.”

“We will continue to assess the likelihood or otherwise of whether the government will reach a balanced or surplus budget by 2021 and that will have a large bearing on whether we leave the AAA rating where it is or whether we downgrade it,” he told the ABC.

The S&P Global report cites the potential for low wage growth and low inflation as a “downside risk” for the projections on getting to budget balance. In the wake of the budget many commentators threw doubt on the budget’s wage growth projection – to get to more than 3% – as likely to be too high.

Noting that the outlook has been negative since July last year, S&P Global warns:
“We could lower our ratings within the next two years if we were to lose confidence that the general government fiscal deficit will revert into surplus by the early 2020s.”

S&P Global says “a strong fiscal position is required to offset Australia’s weak external position. It is also needed to allow for a strong buffer to absorb the fiscal consequences if the ongoing boom in the credit and housing market were to abruptly end.”

The report expresses concerns about the financial stability risks in the housing market in Sydney and Melbourne.

S&P Global highlights the debt problem. “Australia’s high level of external indebtedness creates a high vulnerability to major shifts in foreign investors’ willingness to provide capital”, it says. “We consider that strong fiscal performance and low government debt are important to help ameliorate this risk.”

Scott Morrison tweeted:

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Responding to the S&P Global report, Shadow Treasurer Chris Bowen said that if he became treasurer he would talk to the ratings agencies early in the term, taking them through an ALP government’s plans, which would also be clear before the election. “We’ll do what is necessary to work with the ratings agencies and show the ratings agencies the quality of our plans.”

Bowen said the budget showed new record debt for the next three years, a deficit for 2017-18 which was 10 times larger than was predicted in the Coalition’s first budget, and gross debt equivalent to A$20,000 for every man, woman and child in the country.

https://www.podbean.com/media/player/55eic-6aa7da?from=yiiadmin

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Research shows the banks will pass the bank levy on to customers


Fabrizio Carmignani, Griffith University and Ross Guest, Griffith University

Studies of European countries show that bank taxes similar to the 0.06% bank levy introduced by the government in the 2017 federal budget will be largely borne by customers, not shareholders. The Conversation

The levy could also make the banking system more, rather than less risky. The fact that a bank is asked to pay the levy is a confirmation that it is “too big to fail”. This could in turn encourage riskier behaviour. The levy might also trigger a higher probability of default by reducing a bank’s after-tax profitability

But it is difficult to say whether banks will pass the levy on to customers by increasing their loan rates, fees or both.

In its response to the levy, NAB confirmed it will not just be borne by shareholders:

The levy is not just on banks, it is a tax on every Australian who benefits from, and is part of, the banking industry. This includes NAB’s 10 million customers, 570,000 direct NAB shareholders, those who own NAB shares through their superannuation, our 1,700 suppliers and NAB’s 34,000 employees. The levy cannot be
absorbed; it will be borne by these people.

Aware of this problem, the government has asked the Australian Competition and Consumer Commission (ACCC) to undertake an inquiry into residential mortgage pricing. The ACCC can require banks to explain changes to mortgage pricing and fees.

When banks pass on these taxes

The bank levy is similar to taxes recently introduced by some G20 economies, including the UK. These had the dual purpose of raising revenues and stabilising the balance sheets of large banks in the aftermath of the global financial crisis.

An analysis of bank taxes in the UK and 13 other European Union countries shows that the extent to which taxes are passed on to customers depends on how concentrated the banking industry is.

The more the industry is dominated by a small number of banks, the greater the share of the tax that is passed on to customers and the less that is borne by shareholders. In more concentrated industries customers have relatively fewer alternative options and therefore tend to be less mobile across banks. This in turn gives the large banks greater market power to increase interest rates and fees without losing customers.

Australia’s banking industry is quite concentrated. In fact, we’re around the middle of the pack of OECD countries, much higher than the US, but lower than some European countries. From this we can surmise that at least some of the cost of the bank levy here will be passed on to borrowers through higher loan rates, fees or both.

An IMF study of G20 countries suggests that a levy of 20 basis points (i.e. 0.2%, approximately three times higher than the Australian government’s bank levy), could lead to an increase in loan rates of between 5 and 10 basis points. This means that the monthly repayment on a loan (assuming an initial rate of 5.5%) would increase by approximately A$6 for every A$100,000 borrowed.

The IMF also found that the bank levy doesn’t just hit customers. A 0.2% levy would reduce banks’ asset growth rate by approximately 0.05% and permanently lower real GDP by 0.3%.

The impact on customers

If the banks pass on the levy to customers then it becomes just another indirect tax, similar to the GST. The question then is whether this is regressive – does it have a greater impact on those on lower incomes than higher incomes.

Lower income earners are likely to borrow less than higher income earners. However, lower income earners are also less able to bear an interest rate increase. They are also more likely to be excluded from borrowing when the cost of borrowing increases.

In this sense, then, if the bank levy is passed on to customers it could become a barrier to home ownership for some lower income borrowers.

More generally, if the value of bank transactions is a higher proportion of low incomes than of high incomes, then the bank levy would operate as a regressive tax and contribute to sharpening (rather than smoothing) inequalities.

Both of these would be unintended, but undesirable, consequences of the levy.

Fabrizio Carmignani, Professor, Griffith Business School, Griffith University and Ross Guest, Professor of Economics and National Senior Teaching Fellow, Griffith University

This article was originally published on The Conversation. Read the original article.

Coalition fails to get post-budget boost predicted by commentariat


Adrian Beaumont, University of Melbourne

After the release of the Federal budget on Tuesday night, much of the political commentariat thought that the budget would be popular, and predicted a lift for the Coalition in the post-budget polls. Graham Richardson in The Australian said the government would “no doubt get a sugar hit from the budget”. The Conversation

All the regular post-budget polls are instead at least 53-47 to Labor, with little change apparent from the pre-budget situation. In Newspoll Labor gained a point, while in Ipsos the Coalition gained two points, leading to different commentary from Fairfax, which sponsors Ipsos, than The Australian, which sponsors Newspoll.

The last Ipsos was 55-45 to Labor in late March; this seemed an outlier at the time. The last Newspoll was 52-48 to Labor three weeks ago, and was probably influenced by the announcements on the citizenship test and 457 visas.

Here is the post-budget poll table. Two separate ReachTEL polls were conducted on 11 May, one for Sky News and one for Channel 7. They are the first public ReachTEL Federal polls since before the 2016 election. Only half of the Essential sample is post-budget, though this week’s additional questions are based on the post-budget sample.

post budget.

The Sky News ReachTEL was reported as 53-47 to Labor, and the Channel 7 ReachTEL as 54-46. However, both these results were based on respondent allocated preferences. To match polls that only give the previous election preferences, I am using Kevin Bonham’s calculated two party vote from the decimal primaries of both ReachTELs. Since the rise of One Nation, ReachTEL’s state polls have leaned to the Coalition, and this lean appears to be happening federally.

While individual budget measures, such as the bank levy and additional Medicare levy, are popular, the budget as a whole gets only a middling rating on a range of measures. Commentary suggesting that the overall budget would be very popular has been shown to be wrong.

While the budget allocated much spending to health and education, voters trust Labor more on these issues. A government that has tried to cut spending for three years, but suddenly has a poll-driven about-face strains credibility. Labor’s fairness criticisms of the termination of the 2% deficit levy for high-income earners, and the now $65 billion for company tax cuts, are likely to be accepted by a large portion of the population.

Kevin Bonham’s poll aggregate is at 52.7% two party preferred to Labor, a gain for Labor of 0.2 points since last fortnight.

Perceptions of this budget

After each budget, Newspoll asks three questions: whether the budget was good or bad for the economy, good or bad for the voter personally, and whether the opposition would have delivered a better budget.

45% thought they would be worse off and 19% better off, for a net of -26. 36% thought the economy would be better with this budget, and 27% worse, for a net of +9. Compared with previous budgets, neither of these scores are very bad nor very good.

Coalition governments do better than Labor ones on whether the opposition would have delivered a better budget. In this Newspoll, by a 47-33 margin, voters thought Labor would not have delivered a better budget. This 14-point margin is about the same as the last two budgets, but better for Labor than any budget in the Howard era, except the 2007 13-point margin, which came shortly before Rudd ousted Howard at the November 2007 election.

In other Newspoll questions, 45% said they would be prepared to see a reduction in taxpayer funded entitlements to pay down debt, while 41% thought otherwise. By 39-36, voters thought this budget was fairer than others under this government. As one of those budgets was the widely hated 2014 budget, this is not saying much. By 71-19, voters thought the banks would not be justified in passing on costs from the bank levy.

In Ipsos, by 45-44 voters approved of the budget, and by 42-39 they thought it was fair; these measure are much better for the government than following the 2014 budget. 50% thought they would be worse off with the budget, while 20% expected to benefit. By 58-37, voters supported increasing national debt to build infrastructure.

The Sky News ReachTEL found that 52% thought their family would be worse off with this budget, with just 11% for better off. 36% thought the government had done a good or very good job explaining its budget, 37% an average job and 27% poor or very poor. 34% of non-home owners thought the budget made it harder to buy a home, 13% easier, and the rest said there was no change.

The Channel 7 ReachTEL found that the budget was rated average by 38%, poor or very poor by 33% and good or very good by 29%.

In Essential, voters approved of the budget by 41-33, though 29% said it made them less confident in the government’s handling of the economy, with 27% for more confident. On both questions, the strongest disagreement with the budget came from Other voters, not Labor and Greens voters.

Explaining why Shorten did not mention punitive measures against the unemployed in his budget reply speech, a crushing 76-14 supported payment reductions for jobseekers who fail to attend appointments, and 69-22 supported a drug trial for jobseekers. The second airport in Sydney was supported by 54-18.

By 51-27, voters agreed with the statement that the budget was more about improving the government’s popularity than the economy. 56% thought higher income earners should bear a greater share of the cost of funding the National Disability Insurance Scheme, while 27% thought applying the Medicare levy for all taxpayers is the right approach. Scott Morrison was favoured over Chris Bowen as preferred Treasurer by 26-22 with 52% undecided.

There was strong support for the bank levy (68-21 in Newspoll, 62-16 in the Sky News ReachTEL, 60-18 in the Channel 7 ReachTEL, 68-29 in Ipsos and 66-19 in Essential). The additional Medicare levy was also well supported (54-36 in Newspoll, 48-34 in the Sky News ReachTEL, 51-28 in the Channel 7 ReachTEL and 49-39 in Essential).

Primary votes, leaders’ ratings and other polling

Primary votes in Newspoll were 36% Coalition (steady), 36% Labor (up 1), 10% Greens (up 1) and 9% One Nation (down 1). 33% (up 1) were satisfied with Turnbull’s performance and 53% (down 4) were dissatisfied, for a net rating of -20, up five points. Shorten’s net rating was -22, down two points.

In Ipsos, primary votes were 37% Coalition (up 4), 35% Labor (up 1) and 13% Greens (downs 3 from an unrealistic 16%). 45% approved of Turnbull’s performance (up 5) and 44% disapproved (down 4), for a net rating of +1, up nine points. Shorten’s net approval increased a sizable 13 points to -5. Turnbull’s ratings in Ipsos have been much better than in other polls. Ipsos skews to the Greens, but less this time than in their first two polls of the new parliamentary term.

The Sky News ReachTEL had primary votes of 37.8% Coalition, 34.2% Labor, 10.3% Greens and 10.2% One Nation. In the Channel 7 ReachTEL, assuming the 9.2% undecided are excluded, primary votes are 37.1% Coalition, 35.0% Labor and 10.8% for both the Greens and One Nation.

Primary votes in Essential were unchanged on last week at 38% Labor, 37% Coalition, 10% Greens, 6% One Nation and 3% Nick Xenophon Team.

In the Channel 7 ReachTEL, both leaders’ ratings tanked from the final survey prior to the 2016 election. Turnbull’s (total good) minus (total poor) score fell 18 points to -24, his record lowest, just ahead of Tony Abbott’s ratings before Abbott was replaced. Shorten’s rating was down 17 points to -21, his lowest since March 2016.

38% preferred Turnbull as Coalition leader, followed by 29% for Julie Bishop, 17% for Abbott, 11% for Peter Dutton and 6% for Scott Morrison. Among Coalition voters, it was 61% Turnbull, 18% Bishop and 14% Abbott.

For preferred Labor leader, Tanya Plibersek had 31% with Shorten and Anthony Albanese tied on 26%. Labor voters had Shorten leading with 40%, Plibersek on 33% and Albanese on 20%. Plibersek was strongly favoured by the Greens, with 51% support from them.

Turnbull led Shorten as better PM by 47-35 in Ipsos and 44-31 in Newspoll, but only 52-48 in the Channel 7 ReachTEL. ReachTEL uses a forced choice question, and this method usually benefits opposition leaders.

ReachTEL’s respondent allocation problem

As noted at the beginning of this article, ReachTEL’s respondent allocated preferences are over a point more favourable to Labor than using the previous election method. It appears that some of this difference is explained by ReachTEL asking National voters which of Labor or Liberal they prefer.

This is a mistake, as in most cases the Nationals are not opposed by a Liberal, and so their preferences are not distributed. In the few cases where National votes were distributed, 22% leaked to Labor at the 2016 election. Applying this rate to the 3.5% National vote in the Sky News ReachTEL would mean that Coalition leakage would increase Labor’s two party vote by 0.8 points; the actual Coalition leakage is worth only about 0.1 points to Labor.

Ipsos also asked for respondent allocated preferences, and had Labor ahead by 53-47 on this measure, the same as when using the previous election method.

Adrian Beaumont, Honorary Associate, School of Mathematics and Statistics, University of Melbourne

This article was originally published on The Conversation. Read the original article.