It’s never been clearer, there really is no place like home

ZSRenn says:

09:03am | 27/06/11

When she gets back I hope she can get a job as Ged just told us that the true unemployment figure for Australia is 12% and not Labors dodged figure of 5%.

I hope she was not going to look in the Mining Industry for work as it is clearly Green policy to close this industry. Ged does not mention this or talk about her members feelings regarding this closure and how they may feel about the Green alliance because of it.

Michael Rollins says:

11:11am | 27/06/11

@ZSRenn
The figures are not provided by the government, but by the ABS.  We all know the figures don’t really match up with what we see in real life, but it is not due to some cover-up by federal Labor (or, conversely, due to a coverup by the LIberals when they were in power).
My question is this: did you actually think what you wrote was true (and therefore need to learn how to look something up), or was it a blatant lie?

ZSRenn says:

02:43pm | 27/06/11

@ Michael Rollins.

I don’t care where the figures come from but when Labor continually sprouts the incorrect 5% figure in defence of it’s policy and you say we all know that it is actually 12%
Who is telling the lie?

Fiona says:

10:13pm | 27/06/11

We were in the US earlier this year and their official unemployment rate was 10%, but one of their more political leaning programs (don’t ask which one, there’s so many), stated that it was actually close to 30%. I’d say it’s not just Australia that has a difference between the official figures and the true ones. Given either of those figures, I’d still rather be in Australia.

nihonin says:

07:39am | 27/06/11

@ Super D Shhh you can’t say that

Bitten says:

08:42am | 27/06/11

Super D - Ssshhhh….Don’t embarrass Ged, she’s busy working on her posturing for a safe seat as her next career step.

St. Michael says:

11:25am | 27/06/11

Also notable the unions have been implicated in some of the massive demonstrations and therefore some of the rioting that’s been going on.

ASU says:

03:04pm | 27/06/11

No you clown,

It was the strong sense of corruption and almost non-existent compliance with taxation and financial regulation that got greece where it is. But hey, scream “union!” if it makes you feel better.

Bitten says:

04:05pm | 27/06/11

Oh OK ASU - yeah, you’re right, the fact that the entire population of ‘workers’ expects to retire at 53 on government-funded 80% pay didn’t affect the country at all!!

St. Michael says:

04:46pm | 27/06/11

@ ASU: If so, why were the unions out campaigning for their wages and their jobs to be kept and not for themselves to be taxed more to pay for it?

ASU says:

07:37pm | 27/06/11

Show me the business owners out there campaigning to pay more tax.
Show me the shop keeper who refused a handout.
Show me the banker who gave back his bonus when the system collapsed.
Show me the right wing politician donating his retirement fund.

None of these arguments actually mean anything and are all stupid, vacuous platitudes… but hey, you started it.

St. Michael says:

11:26pm | 27/06/11

- Show me the business owners out there campaigning to pay more tax.

Since a large number of individuals weren’t paying tax, one would have to assume that businesses were paying that portion that did make its way into the system.  Therefore they wouldn’t be out there campaigning since they are already paying enough.

- Show me the shop keeper who refused a handout.

Show me one who was given a handout.

- Show me the banker who gave back his bonus when the system collapsed.

Bankers are private sector.  The government is public sector, and the government ran up the debt, not the banks.

- Show me the right wing politician donating his retirement fund.

Show me the left wing ones donating theirs, and you might have an argument.

Although the only one who started ad hominem arguments was you, ASU, which I presume stands for the Australian Services Union.  Hardly an unbiased party in this.  And as I said: I didn’t see any unions complaining about the low tax take before the IMF said it’s time for the party to stop.  Just like unions don’t complain about the profitability of businesses until they’ve been run into the ground.

melle says:

08:47am | 27/06/11

@Brenda…...Well said!

C1 says:

09:40am | 27/06/11

Remember Paul Howes has membership to the Qantas Chairman’s lounge. I wonder how the members love that. Boone can stop being invited but someone with principles would decline the offer. He must be fighting the fight from within.

Bitten says:

10:06am | 27/06/11

@Brenda: props to you girl, telling it like it is!

RyaN says:

10:47am | 27/06/11

@Brenda: no you don’t understand, they want YOU to reduce your carbon emissions, not them silly.

Huey says:

11:46am | 27/06/11

Oooooooh! you are so NOT a good girl. You , Super D and jb will not be welcome in the union.

St. Michael says:

11:03am | 27/06/11

It’s a Flash conspiracy.

St. Michael says:

12:46pm | 27/06/11

Despite the best attempts of our governments to do otherwise, one might add.

Not for nothing is Australia called the lucky country.

Bitten says:

01:59pm | 27/06/11

Oh thank god someone put the actual facts of the debt crisis out there! You, sir, are fabulous!

John the Zombie says:

03:31pm | 27/06/11

Was listernin on the radio yesterday as a member of the communist party had a go at the govt and big business’s. The funniest part was when the report asked “isnt it the ppl who also must share the blame as 70% of employees in Greece dont pay taxes and avoid it” reply was “no”, it was all of big business’s fault.

Ged if you want to talk economics ill ask you if the wharfies get thier 6% p.a. pay rise and inturn patrick passes this cost on, will the union take the blame when prices of imported goods increase buy 6%

Gomez12 says:

04:17pm | 27/06/11

@John the Zombie

A 6% increase in the wages of dock workers does not in any way equate to a 6% rise in the cost of good imported.

Maths Fail.

Leopard says:

04:36pm | 27/06/11

@St. Michael…....gasp

St. Michael says:

04:52pm | 27/06/11

@ Gomez12: Even so, a 6% pay rise does raise the cost of the good being imported, whether that cost is put back on the supplier or on the ultimate consumer.

And let’s remember the 6% pay rise isn’t just on the packet of anyone who’s actually working.  It also applies to anyone who’s on worker’s comp, annual leave, sick leave, etc, etc.  Necessarily, it also adds up 12% to overtime rates if you assume the top rate is double time.  Thus, maybe not 6% added to the cost of the good being imported, but still a cost impost in general.

Gomez12 says:

12:11pm | 28/06/11

@St Michael,

It’s ok, I can do basic math, I was just pointing out the Zombie’s mistake/misinterpretation, whatever.

On the matter of the specific pay-claim at hand, I don’t feel I can comment much since I don’t know the basis for the claim. But I will posit two scenarios, for the sake of argument.

One, What if the Pay-claim is based on an equivalent increase in productivity?  It could then be argued that NOT approving the pay-claim is naked profiteering by the Employer - who would therefore be pushing up the relative cost of imports.

Two, What if the pay-claim is based on a relevant 6% increase in the Cost of providing that labour? Since even treasury are happy to admit that the cost of living is rising at a much greater rate than the official inflation rates it wouldn’t be a hard argument to make. And if the Employer is within reason to pass on the rising costs of providing a service to the customer, why would it be any less reasonable for the workforce to pass on their rising costs to their customer (the Employer)?

St. Michael says:

12:43pm | 28/06/11

@ Gomez: “One, What if the Pay-claim is based on an equivalent increase in productivity?”

I don’t have a problem with the concept of matching pay claims to productivity increases - it has its heart in the right place.  The trick is measuring it accurately so you can say that the business has increased its productivity by 6% to pay for a wage claim of 6%.  If you can’t measure it accurately, then there hardly seems a point to matching a percentage to a productivity increase: either the employer or the employee is getting screwed if it’s off by even one percent.  Personally I think piece rates are about as close as you can get to true incentivisation for employees, but I’m sure it doesn’t fit with all businesses.

“Two, What if the pay-claim is based on a relevant 6% increase in the Cost of providing that labour?”

I’m not sure this is a valid argument.  If it were true, every employee could claim their travel to and from work every day as a tax deduction since it would make every employee’s travel a business-related expense, which it isn’t.

A business has to buy the goods necessary to make its product, pay the overheads to produce the item, and then pay the costs associated with delivering or selling that good to its customer base.  Those costs are direct costs to the business and unavoidable.  It is the business that takes the investment risk and the losses involved if there’s downturn in trade.  An employee does not; they do not invest other than their own time and effort in the business—loss of opportunity to participate in other positions is not a quantifiable loss.  Although I do need to think about this one more before giving you a full answer.

The only point I would raise is that inflation is, almost by definition, only capable of happening with fiat money: that is, it is government interference with the currency that heavily influences if not creates inflation.  And asking for a 6% pay rise because of the cost of living, if repeated on a widespread scale, actually creates the cost of living increase that the union/employee fears: because wages are up, prices go up.

Gomez12 says:

01:36pm | 28/06/11

@ St Michael

One,
In the case of the docks I would imagine a simple $$ per Ton costing would provide the evidence of productivity increases. And the relevant input to that change is, in that case, the basis for the negotiations. Was it worker-based productivity increases, or major capital expenditure by the employer?

Two,
Ok, I disagree that the tax-deductibility of transit necessarily denotes that it is not a cost. It patently is, it has also been increasing. And Employees are in fact able to claim for transit between jobs. The tax-department’s view on travel to the primary employment is an argument for another place as it seems absurd that travelling to a business to participate in work is not a business related expense – why else is the Employee turning up but to exchange labour for remuneration – i.e. a business transaction. 

The best way to illustrate my point is to re-phrase your own words:

A Employee has to buy the goods necessary to eat, pay the overheads to live and produce the work, and then pay the costs associated with delivering or selling that work to its employer.  Those costs are direct costs to the Employee and are unavoidable.  It is the Employee that takes the career risk and the job-losses involved if there’s downturn in trade.  An employer does not; they do not invest other than their own time and effort in the business—loss of opportunity to participate in other positions is a quantifiable loss. 
(I think the opportunity to participate in other positions is very real and a part of every labour market decision – Can the Employee earn more elsewhere for equivalent work, and can the Employer get the same work for less are the basis of all wage negotiations in a capitalist economy)
The view that “Dock-workers” should simply take the hit to their profitability rather than pass it on to the employer does not recognise the worker as an economic unit in it’s own right. “The Worker” has exactly the same rights to pass on it’s cost to the Employer as any service or product provider in the economy, the employer is as free to not purchase the labour as the customer is to not purchase the employers product if the costs become excessive.

“And asking for a 6% pay rise because of the cost of living, if repeated on a widespread scale, actually creates the cost of living increase that the union/employee fears: because wages are up, prices go up.” Correct, it’s called a wage-driven or supply-side inflation spiral and can lead to stagflation. However the opposite is no better as failing to increase wages lowers the real-dollar wages of the workforce and leads to recession as the economy contracts. As with everything in economics it’s a fine balance that nobody seems to get right all the time.

St. Michael says:

02:05pm | 28/06/11

@ Gomez: like I said, I haven’t had time for a detailed response, but I don’t think rephrasing necessarily advances the argument.  An employee still bears comparatively less risk than an employer—to obtain other employment, all an employee has to do is find another job and then announce he’s leaving.  He can do that whether his performance was good or bad in the job.  An employer who wants to find another job has the process and inconvenience involved in winding down or selling a business—if indeed he can sell it if the business just isn’t working out.

The other thought I had is that, in the current industrial relations system, the employer isn’t as free to replace his economic units with better-performing ones or less expensive ones than the employee is to transfer his work to another employer.  If you’re an employee, you can generally just walk with a few weeks’ notice—restraint of trade clauses are pretty close to ineffective.  If you’re an employer, you can’t tell an employee to walk without risking the intervention of Fair Work Australia or a State Industrial Relations Commission, the expense of which is huge to defend or meet even if you are entirely justified in your decision.  That in itself is a risk the employer must bear which the employee does not.

You are right about economics being a fine balancing act.  Tangentially, this is why governments usually shouldn’t be interfering or trying to mess around with it that much, because (a) they’re no good at it even though they claim to be; and (b) Reserve Banks’ powers to affect the economy can be sort-of effective in inflationary conditions but have a capped limit in heavily deflationary conditions.

Gomez12 says:

02:48pm | 28/06/11

@ St Michael,

Don’t stress, I think we’re both rushing these out in between work.

I was using the re-phrase to demonstrate that both the Employer and Employee are economic units and that similar considerations will need to be applied to each. Trying to apply only economic considerations to the Employer and only social considerations to the employee misrepresents the status of the players. A point you seem to have conceeded in your statement that Employees bear “Comparitively Less” risk than Employers. Agreed, which is why they also receive comparitively less reward. In general the “Employer” earns a LOT more than the Employees - Risk Vs Reward. (Example - all 4 major banks posted profits in the Billions even during the GFC. No Employee could claim to have earned even a fraction of that during the same period) Therefore, the party that takes the greater risks, reaps the greatest rewards. I fail to see how this could morph into “Those that take the greatest risks should be the only people to get any reward at all”.

“(b) Reserve Banks’ powers to affect the economy can be sort-of effective in inflationary conditions but have a capped limit in heavily deflationary conditions.”  - I’d actually go one step further on that and say that the Reserve’s power to affect inflation is at an all-time low. You mention the cap in effectiveness in adressing deflation. But there is also the problem that it is no longer effective at addressing inflation either. With the Banks raising their rates outside of the official rises at will and having sold off the only player they did control (Commonwealth bank) the government basically can no longer “set” the interest rates. It also faces the increasing problem of self-funded pensioners, who by definition hold large asset pools and actually have their disposable income increased by a rate-rise which adds inflationary pressure via the exact mechanism designed to reduce it. Could be something of a problem coming up there….

Steve says:

03:07pm | 27/06/11

Richard M. european economies were overspending before the GFC.

Whilst I would describe myself as a free market advocate I am not a Laissez faire advocate. Some regulatory controls are necessary and the Australian finance sector is pretty close to the mark.

US Govt policy in stimulating the housing sector created the bubble which lead to the GFC. The bubble burst and globally we have replaced it with a new bubble called the stimulas bubble. In other words it was Govt policy that lead to the collapse. Even amongst economists there is very little debate about that. There is growing belief that global stimulas spending, including Austrlaia, has simply delayed the GFC.

I concur that history will not be kind to Greenspan.

Have you given any thought to the opening question I posed in my post?
Why pick those apparently arbitrary dates. Is it because Australia fell into recession after 1990/ Also it conveniently omits the massive growth from mining after 2006. A growth comparison between 1998 - 2008 between Australia and the UK would show an entirely different story. Perhaps I over reacted but I do not like the use of slimy statistics.

Leopard says:

07:48pm | 27/06/11

Steve, I’ve given thought to that opening question of yours.  Would discuss further, but St. Michael is lecturing on this one,  and I don’t want my contribution trampled on.

Steve says:

12:05pm | 28/06/11

Leopard. It is such a dilema for me because I like you and St. Michael.
I wish you would both reconcile your differences.

St. Michael says:

12:44pm | 28/06/11

“You mean you’ll put down your rock and I’ll put down my sword and we’ll try and kill each other like civilised people?”

Fine, then.  Truce, Leopard.

Gomez12 says:

02:13pm | 28/06/11

@Steve
“is it luck that we had 13 years of good economic management under the coalition?”

Sorry, you’ll have to clarify that one, are you referring to the period where Howard was treasurer, lied about the budget deficit and caused 22% interest rates? Or the more recent period where the almost criminal neglect of national infrastructure has crippled our competitiveness in the opinion of many economists while over-spending massively on pork-barreling and overseeing the quintupling of our national debt?

(Please don’t read this as support of the idiots in the ALP, I just object to the repition of the mantra that the coalition were “good” economic managers, they were not by many, many measures. Australia prospers DESPITE our governments, not because of them.)

Steve says:

03:19pm | 28/06/11

22 % interest. Wasn’t that Keating?

No I,m talking about the period where Costello delivered 10 or eleven budget surpluses while cutting taxes and retiring debt. After Keating the net debt was about $96 billion which was turned into a net credit of $20 billion. After 5 years of ALP that $20 billion dollar surplus will be about $200 billion back into the red.

Can you argue that more money could have been spent on infastructure in the Howard years. Yes. You could also argue that more could have been spent on useful infastructure by ALP in lieu of BER and insulation.

If I amend my statement to “better” economic managers instead of “good” economic managers will that work for you?

Gomez12 says:

03:59pm | 28/06/11

@Steve,

Keating only managed 18%. Howard is still the record holder.

Where to start?
Budget Surplus’ are not a “good” thing. The government has removed too much capital from the economy and refuses to put it back in. It is especially galling for that “Over-tax” to then be used to bribe the electorate.

“Retired Debt” - Would this be the $96 Billion that the government sold several hundred Billion of national assets to pay off? And you do understand that debt can be good where it supplies said national assets?

“Cutting Taxes” - My personal favourite! Sadly, it never happened. Sorry, refusing to index the tax-tables to inflation, then doing a partial adjustment to specific (and electorally awarding) sectors of the community while all the time increasing tax-take as both a $ value and % of GDP doesn’t qualify as “Cutting Taxes” - Note Costello himself refused every FOI request for information on Bracket Creep which would have given the game away. (In fairness, a rejection that prior and post Labor gov’ts have endorsed.)

And of course the destruction of our terms of trade to the point where we have Quintupled our national debt. That’s right, National Debt x 5!

Simply put, the prior government gives the current one a run for it’s money in terms of incompetence.

“You could also argue that more could have been spent on useful infastructure by ALP in lieu of BER and insulation.” - I do argue that. While the spending was appropriate and timely according to all reports, I think it was totally mis-aimed and the only way we the public could have gotten worse value would have been to spend it all on used chewing gum.

I’m tempted to accept “Better” as a compromise position, But I somewhat feel thats akin to “That Lucifer fellow is a fair kinder and more just devil than that Satan bloke.” 

Would you accept “We, Australian’s, deserve more and better from those that purport to represent us”?

Steve says:

06:56pm | 28/06/11

I hope you haven’t been comparing the pre 1990 cash rate with the post 1990 cash rate? They are 2 different eras in how much the cash rate influenced lending rates.

Why don’t you go back and see what the actual rates businesses were paying to their banks under Keating. Business rates got up to about 22 - 24% which ultimately resulted in the recession we had to have. I don’t believe you can point to a period where interest rates got to anywhere near that level in the Fraser years(Howard as treasurer) It is disengenuous to suggest that rates were not their highest under Keating.

Sale of assets are off budget items just as the acquisition of the NBN will be an off budget item. You cannot escape from the fact that Costello recorded surpluses from the budget not from asset sales. I haven’t researched it but i recall much if not all of the asset sale proceeds were put in the future fund.

There are plenty of times that surpluses(monetary policy) are appropriate to counter inflation. The present ALP is even recognises that the massive inflow of funds into the economy to develop new mines will need to be offset by budget surplusses or inflation will break out.

There is however something wrong with continuous budget deficits and continuous increasing of public debt. That is what has happened over many years by leftist european countries including UK. Now they can’t meet interest let alone retire debt.

With hindsight would Costello have done some things differently. probably. Did he manage the economy better than Swann. Yes.

Steve says:

07:36pm | 28/06/11

Gomez. sorry i referred to monetary policy instead of fiscal policy when talking about budget surplusses. ( still had my mind on interest rates at the time)

Also on tax cuts under Costello you have to factor in the family tax benifit part A and B as tax cuts. That presents a different picture.

St. Michael says:

01:18pm | 27/06/11

APRA having real teeth was a godsend, that much is true.  This is an example of what is called “Goldilocks regulation”—not too little, not too much, but just right.

Most of the GFC was caused by trading in derivatives that were highly exposed to subprime loans.  But you also have to query the various ratings agencies, like Moody’s, or government regulators who simply looked the other way or were positively negligent in trying to prevent the crisis arising.  It was a simple case of all the signs being there but nobody wanting to stop the party.

But you are entirely wrong on the causes of Europe’s problems.  They come entirely from government overspending.  Their debt crisis—which springs mostly from Portugal, Spain, Ireland, and Greece—is a sovereign debt crisis.  That is, a government debt crisis, not private sector debt.  It is derived from the economies of these countries running very large structural deficits for long periods of time.  In Greece’s case, they’ve been running deficits ever since democracy was restored in 1974.  They’ve also deliberately lied about their economic statistics, and hid the level of their borrowing, in order to deceive the EU.

The other nations have massive deficits: Ireland with a deficit equal to 14.3% of its GDP; Portgual 9.4%; Spain at 11.2%.  Again: these are government debts, not private sector collapses, and the only way government gets too much debt is when it spends more than it earns by taxation.

Tubesteak says:

01:30pm | 27/06/11

Wrong. The GFC was caused by an inflationary housing bubble caused by the US government who encouraged and endorsed loans to people who would never be able to repay them. The US government even said they would back these loans. This started with Carter but was beefed up under every President since then.

Therefore, to banks they were essentially risk-free because the US government said they would back the loans.

However, that is only part of the problem. The other main part comes from lax monetary policies since the dot.com bubble. In order to stave off an imminent recession caused by the dot.com collapse and then Sept 11 Greenspan was encouraged to lower interest rates. This further fuelled the housing bubble.

It all came to a head when loans given to people who could never afford them had to pay the balloon payments and were allowed to walk off the property if they defaulted. These types of loans did not exist in Australia.

In short, the GFC was not a fault of banks but of the US govt in adopting poor policies and poor regulatory oversight.

In Europe, it is similar. Too many governments have relied on middle-class welfare for too long. That is the problem in Greece right now. They are now required to tighten their belts but because too many people have been living off the public purse for too long they are complaining. Too bad for them. These reforms are necessary.

St. Michael says:

02:29pm | 27/06/11

“It all came to a head when loans given to people who could never afford them had to pay the balloon payments and were allowed to walk off the property if they defaulted. These types of loans did not exist in Australia.”

Bear in mind that what these debtors did was entirely legal and entirely a part of their contracts as signed with the banks.  I did some reading about it recently.  In each case, the loan was called a “non-recourse” loan—i.e. the bank and the borrower contracted that they could only take the house for payment of the loan if the borrower defaulted, and couldn’t sue the borrower for any balance left outstanding.  The debtors being “allowed” to walk away from their loans was actually entirely legal and entirely the bank shooting themselves in the foot, because it invariably was a condition of the contract.

I’d also argue, on reflection, that in cases where the person could not afford their loan for entirely unpredictable factors—not cases of fraud on the loan, as many homeowners did—that to just hand over the keys and walk away in a non-recourse loan is not only legal, but moral.  You are able to restart your affairs elsewhere without the threat of bankruptcy or being hounded by the bank to the end of time.  The bank presumably did its own valuation and concluded that taking the house in lieu of the full loan sum was a good deal.

As said, non-recourse loans are very, very rare in Australia.  Most loan contracts state explicitly that the bank can sue you for the remainder of the sum owing even if they’ve repossessed your home.  For that very reason, I think bankruptcy planning for people who are nowhere near bankruptcy is a very important risk management strategy.

Steve says:

04:37pm | 27/06/11

It is a credit to you that you were able to survive the 11 years of the coalition. How did you retain your sanity and grip on reality?

St. Michael says:

05:06pm | 27/06/11

@ Steve: please do not feed the troll.

St. Michael says:

11:06am | 28/06/11

“Thank God our currency isn’t tied up with another sovereign nation’s currency therefore if the shit hits the fan and Austerity tax Bailout Number 1 and Bailout Number 2 doesn’t work, we can always print another form of currency with PM Gillard’s face on it. You can bank on us.”

The problem is that our currency *is* tied up without another sovereign nation’s currency: the US dollar.  And the US dollar is in deeper shit than the euro could ever dream in, mostly because the IMF is not big enough to bail out the US.  They have a 14 trillion debt and rising.  Eventually, when it gets to the point that the interest payments exceed America’s Federal tax intake, and the bond market stages its own Atlas Shrugged moment, they’ll either hyperinflate that dollar or cut spending by 50% (expect the former, people.)

At that point, most currencies on the planet are borked since their value is set as a measure of the US dollar’s value.  BIS came out yesterday urging industrial economies (i.e. the US) to cut their debt.  This is pretty important since BIS is the reserve bank to reserve banks.  When they say “cut your debt”, you know there’s trouble.  It’s like Moody’s saying “Um, we think you might possibly have a small problem here.”

Gran Depine says:

04:45pm | 28/06/11

@BS spot on mate!