Monday, May 02, 2016

Monday Forum - a blank slate & the Australian budget

This Monday Forum is a blank slate - take it where you will.


Listening to Australian Treasurer Scott Morrison's first budget tonight, I wondered what you thought. Personally, it's changed my vote, if not in the way the Government would like. I am not voting Labor, mind you.

 Before giving you my analysis, I thought that I should grab your thoughts.


2 tanners said...

I thought it was brave (in the sense of not appalling cowardly exercise in pork barrelling) for an election budget. Apart from the tax breaks for business, though, it was a genuine Labor budget. The hopes that China will maintain its rate of growth and that iron ore prices (interlinked, of course) will remain stable are pretty forlorn.

I imagine that Labor will point out deficit (as claimed by Coalition coming in) and deficit (planned for after 3 years' management) do not reflect an improvement.

I also imagine that good Queen Bess's very distant kinsman may have your vote :)

Anonymous said...

I'll leave the equisite pleasure of parsing the if's and whynot's of the various possible permutations to Jim, et al. For mine, I think it's all about collectability, on the revenue side, and all about electability, on the expenditure side.

Collectability: the further from the end-user is the possibility of reneging/reducing payment, the better. See tobacco tax. Therefore, similarly increase the duty/excise/charge on alcohol, petrol, electricity, and share transactions. And also food. You use, you pay.

This nonsense about an extra x'ty-4 hundred tax officers to 'investigate and bring to book' the large overseas companies; probably equivalent to an extra 0.025 cents of petrol excise. But it 'sells' well with the public - i.e. 'Electability'! - never mind the inevitable/interminable High Court rulings about the distance between a gnat's arse and its elbow - and the taxability thereof.

Anyway, let's all rub our tummies in an anti-clockwise direction, whilst pondering what might have been the 'best' among several equally unpalatable expenditure cuts.

And Jim's eventual vote matters just as much as mine - which is to say, three fifths of five eights of sfa.


Anonymous said...

I'm concerned for my parents, who have self-funded superannuation, and after the GFC have already been hit. But I don't know that Labor's any better. Feeling pretty dejected.

I did one of those political quiz thingies, and I turned out equidistant between Liberal, Labour and Green, but in a combination of policies that is reflected in the policies of none of the major parties. No wonder I don't feel I have a horse in this race...

Ah well, I should have a new baby to cheer me up in the next few days!


Anonymous said...

I ignore the budget - my position is so hopeless and anomalous that it cannot make any difference to me. Damage by negative gearing has already been done and now it seems we are too far in on that to go back.

News Limited is saying that there is $1.5bn in reserve for pork-barrelling once the campaign gets under way.

Jim, don't know where you vote, but in a preferential system you end up having to make a two-party choice, surely? (Well, maybe not in the Senate now, if you so choose.)

My two-party vote isn't going to change, and it would never be for this government.

Jim Belshaw said...

2t, I'm just not sufficiently familiar with royal lineages! But you can probably guess.

Poor LE. Babies are good.:) On those quizzes, I keep shifting around. On the most recent one I appeared as a left libertarian!

kvd, that's a nice distinction. I will pinch it, may even parse it.

marcellous, I always think about my vote and it varies. It may be worth very little, but apart from voice its all I have. In the reps, my first preference is limited by candidates and by party balances in the electorate. Since in most cases my first preference doesn't matter, I have freedom there. Sometimes my vote that finally counts is simply the least worst choice. I do have more freedom in the Senate.

Anonymous said...

One thing I didn't understand in the budget was the lack of a tax increase on alcohol. I mean if we are talking about 'nudging' people to reduce the social cost of their bad habits, then surely booze creates more social problems than cigs?

It's not as if 'me and me mates' go out for a heavy night of smoking, and then glass or king-hit the odd passerby, or get involved in cigarette-induced road accidents, on our way home to beat the wife or the kids.

A caricature - yes - but there's some truth in it.


2 tanners said...


I rather wonder the same.

After our discussion about smoking, I did some research. Economist Harry Clark argued back in February that every cent increase in cigarettes would COST the government money, as cigarettes were finally price elastic. If I recall correctly, he calculated that a dollar increase in a cigarette packet would result in a $1.04 fall in revenue. He's anti-smoking, so this didn't worry him, but he's also against bad modelling and paying for promises with revenue that does not seem it will arrive.

I wonder what Treasury was smoking when it did its modelling.

Jim Belshaw said...

Looking at back at LE's comment, one thing I hadn't picked up at the time was the retrospective nature of one of the superannuation changes. Retrospective legislation really has to be avoided and, if proposed or implemented has to be very solidly justified as an exception. This does not seem to have happened in this case.

Actually, kvd, I don't think that's a caricature at all. 2t, the cig thing really has nothing to do with money, just attitude. If you are being objective, you have to model total costs including the social costs.

Anonymous said...

Just on the proposed gradual shifting of the company tax rate down to 25%, I'm assuming this measure is to free up more retained earnings for companies to reinvest? The alternative would be for companies to increase their dividend rate.

But if companies do not increase their dividend rate, this would mean (with tax imputation on dividend income) that the eventual recipient of, say, $10,000 in dividends will be slugged an extra 5c in the $dollar for those earnings. Retirees already have a large hit in the present low interest rate environment, and this may just add another.


Jim Belshaw said...

That's certainly the argument, kvd. The extra profits retained are expected to flow in part to investment, in part to dividends. And, yes, lower tax rates reduce the value of dividend imputation. It's not really an extra slug, though, although I'm not quite sure of the maths. Will think about that.

Jim Belshaw said...

A brief follow up comment, kvd. If the firm keeps the tax gains and maintains dividends at the same level,then you are worse off because the tax value of the imputed credits falls. If the total value of the tax cuts is paid out in dividends, then you should be a little better off. If the firm invests the tax cuts in Australian activities and these pay off, you are better off over time. If the firm invests in overseas activities and these pay, then you may be better off even considering the absence of imputation.

There is a broader issue that does worry me. Put simply, how do we save for retirement or survive in retirement if the income on our savings drops towards zero?

Anonymous said...

Put simply, how do we save for retirement or survive in retirement if the income on our savings drops towards zero?

Back in the '50's when I was a kid there was this quaint concept of spending less than you earned. The excess of interest over inflation was regarded as a (very small) bonus :)