inCISe Blog

Govt furphy on Indigenous homeownership

Sara Hudson — Wed, 16 May 2012 22:00:16 +0000

In a media release on the Indigenous Affairs part of the 2012 Budget, the federal government insists it ‘will continue to prioritise access to the new program for people seeking to move into home ownership on Indigenous land’ – but this is a furphy. The government is well aware that people living on Indigenous land will not be able to access money from the new Indigenous homeownership program as long as they do not have security of tenure. To pretend that they are serious about helping people living on Indigenous land move into their own home without mentioning how exactly this will happen is misleading. The current lease arrangement for Indigenous lands is extremely unpopular, and the only community that has private housing leases is the Nguiu township on the Tiwi Islands. Communities could potentially bypass the controversial head lease arrangement for the 99-year leases initiated by the Howard government in 2006 if land councils issued residential leases to communities. But land councils have demonstrated myopic thinking on this issue. When the residents of Baniyala, a small community in East Arnhem Land, approached the Northern Land Council (NLC) for 99-year leases on their land, the council refused to issue leases...

A move long overdue

Alexander Philipatos — Tue, 15 May 2012 22:00:07 +0000

At long last, services on Sydney’s highly inefficient rail network are getting some attention. Transport Minister Gladys Berejiklian has announced that 750 jobs will be cut in a restructuring effort intended to reduce bureaucratic waste. Even more heartening is that RailCorp’s projected job cuts are relatively mild, consisting of voluntary redundancies to middle management, not to frontline staff who carry out the day-to-day operations on the trains. Of Sydney’s transport modes, none is as inefficient or wasteful as RailCorp . The service is more heavily subsidised than any other mode of public transport in Sydney. RailCorp recoups just 29% of its costs from passengers, compared to around 40% by the ferries. The rest of course comes from the taxpayer. Labour costs represent a large part of the cost structure of any business, and the situation is no different for RailCorp. Employee benefits and entitlements represent 41% of its total expenses. Any company looking to cut costs, and any government serious about making savings for taxpayers, cannot go past labour costs. Some jobs must be shed, and if a state-owned enterprise is run anything like a public department, there will be a significant amount of ‘fat’ that can be cut. Of...

Generalising about racism

Sara Hudson — Mon, 14 May 2012 22:00:25 +0000

The Sydney Morning Herald is running a poll asking if Australians are Racist. So far 74% of respondents say yes and 26% say no. Some of the commentators include Larissa Berendt who argues that Australia is a racist country because Aboriginal people have a shorter life expectancy. However, there are many reasons why their life expectancy is shorter than the average Australian. Berendt also claims that institutional racism is rampant in Australia. This is somewhat ironic given she was the beneficiary of some of that institutional racism herself – albeit in the disguise of positive discrimination. The gross generalisations used by a number of the people commentating on this issue are not good arguments for establishing that racism is rampant in Australia. A minority of Australians do appear to be racist but their prejudice does not discriminate to just one ethnic group. They are racist to all people they perceive as ‘different’ calling Aboriginal people Abo’s or Boongs, Asian people Chinks, Lebanese people Lebo’s and so on. While we should not pretend that racism does not exist in the ‘amazingly’ multicultural society that is Australia, we should also not view the offensive comments and actions of a few as representative...

A new broom at the FIRB?

Stephen Kirchner — Sun, 13 May 2012 23:54:45 +0000

New FIRB chairman Brian Wilson promises greater openness in an interview with Glenda Korporaal: The former investment banker, who has been on the board of FIRB since 2009 and took over as chairman last month, says FIRB is making a greater effort to communicate the government’s foreign investment policies through its website and in briefing sessions for advisers. “It is important for all our constituencies — the Australian public, Australian business, foreign investors and their governments — to understand that the processes FIRB goes through are sensible and rigorous, and open and consistent,” he says. “Being a little more forthcoming, and having a little more transparency, will actually reduce, for some, the suspicion that we hear or read about from time to time.” Wilson says FIRB is now putting up a lot more on its website about Australia’s foreign investment policies. The FIRB has some catching up to do when it comes to posting things on their web site. The fundamental problem with the legislation the FIRB administers — the open-ended national interest test — remains: There is only one test — is the proposal contrary to the national interest? What that may be varies over time depending on economic...

Business needs reform, not measly tax cuts

Alexander Philipatos — Sun, 13 May 2012 22:00:25 +0000

The Gillard government has reneged on its promise to reduce the corporate tax rate by 1% – a cut that was part of the package to secure the Minerals Resource Rent Tax (MRRT). Although this backflip will surely anger the business community, there are far bigger problems affecting the bottom lines of Australian businesses. Many small business owners cite a strong dollar, growing regulatory burden, and inflexible labour laws as major impediments to their competitiveness. There is not much the government can do about the strength of the dollar, since strong demand for minerals at home and weak financial markets abroad have caused large capital inflows. But the government can help ease the regulatory burden and increase labour market flexibility. On regulation, the Productivity Commission has published some meaningful proposals. In last year’s Review of Regulatory Burdens on Business, the commission drew attention to promising developments in the states. Victoria, NSW, South Australia, and Queensland have all implemented Red Tape Reduction Targets. These targets require departments and agencies to reduce existing compliance costs by a certain value within a specific time period. Most refer to the costs related to paperwork, but in some cases (Victoria, for example), this includes the...

Remember the Henry tax review?

Robert Carling — Sat, 12 May 2012 22:00:30 +0000

It is just a little more than two years since the review of Australia’s Future Tax System (AFTS, better known as the Henry review) was released to the public, with its 138 recommendations. The Gillard government, notwithstanding its enthusiastic embrace of an audacious 40% resources super profits tax at that time, was lukewarm about the Henry package as a whole. Eager to burnish its economic reform credentials, the government now likes to make out that it is following what the 2012 Budget papers describe as a tax reform ‘road map’ consistent in many ways with the Henry recommendations. This week’s federal budget, however, provides further evidence of just how much of the Henry review is not being implemented. The road map lists no fewer than 40 tax and transfer policy initiatives, 32 of which the government claims to be ‘consistent with’ the Henry recommendations. This is a generous interpretation. Many of the 40 measures are small adjustments, and many of the 32 only partly implement the relevant Henry recommendation. The strongest claim to consistency is that the government is substantially increasing the tax-free threshold and eliminating most of the low-income tax offset (LITO). That’s a step in Henry’s direction, but...

Good and bad reasons for a budget surplus

Stephen Kirchner — Fri, 11 May 2012 22:00:01 +0000

The federal government’s stated motivation for returning the budget to surplus next financial year is to give the Reserve Bank of Australia (RBA) ‘maximum room to move’ on interest rates. Yet a fiscal contraction is no more effective in restraining the economy than a fiscal expansion is effective in stimulating it. In an open economy with a floating exchange rate and an inflation-targeting central bank, changes in fiscal policy do not have significant macroeconomic implications. That is why the reaction of financial markets to budget statements is so negligible. The RBA’s statements also make clear that fiscal policy is a very minor consideration in its decision-making. During the financial crisis, the government tried to have it both ways, arguing that its fiscal stimulus saved us from recession but had no implications for interest rates. The second part of the argument was correct, but not the first. If the first part had any truth, then monetary policy must have been much tighter during the financial crisis as a result of the government’s stimulus spending. The government should have no concern over the macroeconomic implications of changes in the budget balance, so long as it is balancing its budget over time and...

Dreamin’ of a lean and mean welfare state…

Jeremy Sammut — Thu, 10 May 2012 22:00:57 +0000

This week we have witnessed the remorseless growth of the welfare state under the guise of the federal budget. Politicians, as unprincipled and unimaginative as ever, have found another excuse (‘pressure on families’) to use other people’s money to bribe voters with new and expanded entitlements. This has reinforced the impression that this country is still a ‘beautiful fool’s paradise’ (as the naysayers of Australia’s ‘working man’s welfare state’ of the early twentieth century used to say). It appears that we are indeed 20 years and one mining boom away from the dire fiscal situation the European social democracies are in. Given the profligacy of the Howard, Rudd, and Gillard Government, is it any wonder that voters have come to expect handouts for anything and everything. Take this article in yesterday’s Sydney Morning Herald. Since when was it the government’s problem if an ageing baby boomer can’t manage to have weekends away on the proceeds of their retirement savings plus the pension? What is the point of government-funded Super top-ups if they are going to be used to fund lifestyle goods like cars and holidays, instead of providing an alternative retirement income stream to reduce dependence on the pension? Shameless...

The false promise of international justice

Benjamin Herscovitch — Thu, 10 May 2012 00:00:56 +0000

In a revealing article in Foreign Policy, Christopher Stephen highlights the high costs and derisory results of the International Criminal Court (ICC). Despite the recent conviction of the former Liberian dictator Charles Taylor for aiding and abetting war crimes in neighbouring Sierra Leone, the ICC balance sheet remains disappointing. With its tenth birthday only months away, 750 staff and a price tag of more than US$1 billion, the ICC has only made two convictions, including Taylor. But this is not necessarily grounds to criticise the ICC itself: its poor record is rather an indictment of the international system of which it is a product. Given that the most powerful states, including the United States and China, want the ICC to be at best a limp instrument, it is no surprise that it remains hamstrung. The aspiration to deliver international justice notwithstanding, the ICC can only act when the accused is a national of a state that accepts its jurisdiction, the crime took place on the territory of a state that accepts its jurisdiction, or the UN Security Council refers a case to it. Although there are many crimes that warrant ICC treatment, we are unlikely to see a more muscular...

Another boost for the welfare state

Robert Carling — Wed, 09 May 2012 05:38:09 +0000

Forget about the ‘return to surplus’ – or more accurately, given the size of the said surplus, the ‘return to a balanced budget’. The really big story about this budget is how it enlarges the welfare state, mainly at the expense of higher income households and the corporate sector. No doubt Swan is happy for it to be described that way, but his policies will damage the economy and longer term fiscal sustainability. If eliminating the deficit is as important as he makes out, it doesn’t make sense to be adding to welfare costs at the same time, when there is no obvious need (other than the government’s political pickle) to do so. The net effect of all the policy changes in the budget is to save just $900 million in Commonwealth expenditure in 2012–13 and $250 million in 2013–14. By 2014–15, they’re actually adding $2,400 million a year to Commonwealth expenditure. The only reason this is not putting the budget in a worse position is that the government’s decisions on taxes and other revenues will raise an extra $2 billion in 2012–13 and almost $5 billion a year by 2014–15. There is no doubt it’s a ‘tax and spend’...