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Welcome for visiting my blog. Hope you enjoy the visit and always welcome back again. Have a nice day!


Hawker's interesting logic - clearly one sided

Comments on Bruce Hawker “Libs outsmarted by clever scheme to pair the chair”, 27/09/2010, http://www.theaustralian.com.au/news/opinion/libs-outsmarted-by-clever-scheme-to-pair-the-chair/story-e6frg6zo-1225929699265

While what you said might have some truth, they probably can also be applied to Labor and Ms Gillard.

For example, What moral conviction does Gillard have? E.g, carbon tax or no carbon tax? What about the dropping of education in her announcement of her ministry, considering she was the education minister for quite some time.

Further your view of the pairing is problematic. If it is not, why did the solicitor general have to use the wording of informal as opposed to formal agreement?

Why should the parliament be engaged in such dodgy work? To just suit the political needs of a political party at the expense of parliamentary integrity and constitution?

That is hardly worth it!

So, politics is politics. Neither side is tall in the high moral ground.

There is so much hypocrisy around!


Henry review needs a review

Comments on David Uren “ALP urged to embrace growth”, 25/09/2010, http://www.theaustralian.com.au/national-affairs/alp-urged-to-embrace-growth/story-fn59niix-1225929133040
Both Treasury and the Henry Review are not without their own problems.

The argument for a broad land tax by the Henry review is as ridiculous as its proposition on its now discredited mining tax. How can you ask pensioners to pay land tax on their homes when they don't have much or enough income to live on?

The argument for using larger population for coping with structural adjustment is equally ridiculous and short sighted, because it is an open ended approach and are not sustainable itself. It is a coward and easy approach to a perceived problem, as opposed to real welfare maximising approach.

Treasury needs some reforms and hard thinking to do. It needs to reflect itself.

The Henry review recommendations need to debated, because some of them are clearly wrong and rubbish.

Treasury needs a better framework

Comments on Michael Stutchbury “Briefing spells out the reform agenda needed”, 25/09/2010, http://www.theaustralian.com.au/news/world/briefing-spells-out-the-reform-agenda-needed/story-e6frg6so-1225929105339
The point on NBN is well made, although the problem is whether the government will heed that at all.

The point on population is confusing: why is 36 million inevitable? Is that driven by gross growth in GDP headline, or based on productivity growth, or welfare maximising for all Australians?

It appears unclear what framework Treasury has or uses to make that statement. That is unsatisfactory.
While it is understandable for businesses to argue for a big Australia or for higher immigration because it will be in businesses' interests if there is more labour supply.
But that is not necessarily in the interests of Australians as a whole.
Australians need better information and be informed correctly.
To do that, we need a well specified framework to model the effects, both on businesses and on labour, as well as other people.


Roach's use of statistics

Comments on Neville Roach “Rudd needs to make a deal with India”, 24/09/2010, http://www.theaustralian.com.au/news/opinion/rudd-needs-to-make-a-deal-with-india/story-e6frg6zo-1225928554544
While the trade surplus with India is encouraging, how much is Australia's total exports to India?

It is very interesting to see how Neville Roach uses statistics to support his point.

Good skills and well done, and congratulations!

PS: This is what Roach says: “The latest trade figures highlight just how rapidly India's importance to Australia is growing. Last year, India became Australia's third-largest export market. Australia's trade surplus with India was a staggering $15.5 billion, second only to Japan and significantly greater than the $10.6bn with China. With India also one of our main sources of skilled temporary and permanent migrants and overseas students, its growing importance to Australia cannot be overstated.”

Gillard likely a disappointing PM

Comments on Dennis Shanahan “Gillard dances to beat of green drum”, 24/09/2010, http://www.theaustralian.com.au/news/opinion/gillard-dances-to-beat-of-green-drum/story-e6frg6zo-1225928591170
Although Gillard showed some courage in deposing Rudd before the election, but she has become a person of purely power driven with no principle, no policy drive, no leadership quality apart from promises in negotiations, willing to accommodate anything to be in power and full of backflips ever since.

It is disappointing so far even without dealing with real issues in any legislation or policy yet.

It is likely that the government under her will be very poor and more wasteful than the BER and pink bats programs. More wastes have already started with the NBN by shifting implementation priority from more users with lower costs in urban areas to fewer users with higher costs of rural areas.

She has already shown she is better in people skills but much worse in policy and conviction than Rudd.

The longer she is in power, the clearer the public will see it.


Interesting Chindia from Australians' view

The following is an itneresting perspective on China and India.

Michael Pascoe “Chindia - you aint seen nuthin' yet”, 22/09/2010, http://www.smh.com.au/business/chindia--you-aint-seen-nuthin-yet-20100923-15o2v.html

It starts with the following paragraph:

“Even if you think you know the “Chindia” story, odds are you don't really know the Chindia story. And if you're still caught up in China “housing bubble” and US-consumer-dependency yarns, you're blinded by Western conceit and actually don't have a clue.”

Another interesting paragraph:
"Spare me the usual myopic line born of American xenophobia and ignorance about China being dependent on exports to the USA. There is neither time nor space here to go into the detail of these four presentations, but Dines quickly dispatches such nonsense, pointing out that net exports' contribution to China's growth over the past decade has averaged just 1.5 per cent. And the United States' share of China's exports is 20 per cent so the much ballyhooed American consumer is only good for 0.3 per cent of China's GDP growth - growth that runs along in double digits or close to it even in the Great Recession."

Issues of conventional macroeconomic policy

Comments on Andrew Sheng “US, Japan and EU monetary policy: Monkeying with interest rates”, 22/09/2010, http://www.eastasiaforum.org/2010/09/22/us-japan-and-eu-monetary-policy-monkeying-with-interest-rates/
While Hoenig's frank and realistic assessment of the current dilemma of excessive low interest rates is nice, it is not clear his prescription is a credible and better alternative within the current set of policy tools.

Any monetary policy by changing interest rate will have an effect on inter-temporary allocative efficiency and equity.

However, the current more pressing issue in the US is how to solve the contemporary issue of resources allocation when there is high unemployment as well as under-used capital capacity.

It seems there is virtually no explicit framework to deal with these issues concurrently, in a way that can show what overall the best trade off is.

Leaving that aside, the Japanese experience of lost decade or decades is more terrifying if that were to be repeated in the US.

If one cannot survive now, what is the use to consider tomorrow? Just as Keynes said, in the long run we are all dead.

Economists may need to come up with more credible and effective solutions. This is an efficiency issue for economists!

PS: The Japanese experience, if it becomes more wide spread, indicates the ineffectiveness of current macroeconomic policies in dealing with such a “balance sheet recession” when it occurs and the consequences of conventional macroeconomic policy in preventing it from occurring in the first place.


The opposition should change tactics to be effective and credible

Comments on Tony Abbott “ALP should forget light on hill and follow Hawke”, 22/09/2010, http://www.theaustralian.com.au/news/opinion/alp-should-forget-light-on-hill-and-follow-hawke/story-e6frg6zo-1225927537315
Abbott has performed very well since becoming the opposition leader, brought down a prime minster and almost another PM in the recent election, partly due to his stance against the ETS and branding that as a big carbon tax.

However, now the situation has changed in Australia. An election was over and the Gillard government is returned with the support of the Greens and three independents.

While it is possible that the government may not last for the full term, but that is only possibility and not certainty.

The government and the Greens may be able to get a carbon tax through the parliament.

The opposition should prepare for the possibility of a full term Gillard government, while working to aim to become government if an opportunity appears.

In this circumstance, it would be in the interest of the opposition to be constructive on a number of policy areas where it has had very different policies from the last government, such as climate change and the mining tax.

For climate change, it should look at ways to hold the government to account by forcing it to minimise costs, such as a revenue-neutral (by returning the revenue to people) and trade-neutral carbon tax.

For the mining tax, it should try to hold the government to account by forcing it to consider and move to profit based tax with a slight increase in the level of tax, that is, close to revenue-neutral. That means the tax rate should adjust when mineral prices fall to avoid the case in the future the taxation may be too low as compared to the current royalties in the States.

The profit tax should replace the State current royalties with appropriate compensations for their revenue losses.


What does Josh Frydenberg really subscribe to?

Comments on Josh Frydenberg “Washington is integral to our region”, 21/09/2010, http://www.theaustralian.com.au/news/world/washington-is-integral-to-our-region/story-e6frg6ux-1225926937881
Similar to the concepts of positive versus normative economics, perhaps there could be similar concept in politics and international relations.

If borrowing those concepts, it appears that Josh Frydenberg has some considerable inconsistency in his argument.

On the one hand, he is saying values and similarities and differences, as well as the superior power of the US.

On the other he is arguing that potential problems for China with its projected rise, such as property bubbles, and so on.

One is left bewildered: does Frydenberg believe power politics and its implications for international relations, or does he believe value system?

Hypothetically, what will Frydenberg do should China one day become more powerful than the US?

It is likely to be an interesting test for Frydenberg!

A serious constitutional matter!

Comments on Sid Maher “Rob Oakeshott passes up Speaker's chair”, 21/09/2010, http://www.theaustralian.com.au/national-affairs/rob-oakeshott-passes-up-speakers-chair/story-fn59niix-1225927032831
Although the parliamentary reform agreement needs to rely on goodwill but there appeared to be some "shifting" of support on the issue, it must be constitutional.

If that agreement or part of that is unconstitutional, then any part unconstitutional should not be implemented.

Parliament should hold the constitution to the highest degree and should never hold any contempt of the constitution.

That is a simple matter and pollies should be good at that.

Otherwise, how do they expect the public to react on the laws they make?

Yes, it is disappointing to Rob Oakeshott because he tried very hard but cannot be the speaker. But he has been a victim of opportunistic behaviours of some other politicians including those on both sides of the politics (and possibly Mr Oakeshott himself included), to be frank.

That is life. On that disappointment account, the Liberals may not be any less disappointed than him by the outcome of the election, but Gillard is the real winner.

Mr Oakeshott has to get over it.


Timing and steps of China's political reforms important

Comments on Justin Li “Political reform in China: Wen will it happen and Hu will lead it?” 19/09/2010, http://www.eastasiaforum.org/2010/09/19/political-reform-in-china-wen-would-it-happen-and-hu-will-lead-it/
Although political reforms in China will be inevitable and will occur sooner or later, timing will be of essence and will determine the costs of the reforms and its progress trajectory.

Common sense means that it would be easier to embark on major political reforms when a new group of leaders are in place and have plenty of time to design and implement reforms and see them through.

Having said that, I think there are a number of areas where political reforms can be realistically expected.

For example, China could start political reforms from two fronts. The first is to increase press freedom, so reporters and journalists can freely report what is happening in the country’s political, economic, social and cultural lives. This will force the government to be more accountable and responsive to people’s needs, and reduce corruptions.

The second is to start direct election of lower levels of government. This will allow people to be used to direct election and to respect the simple fact of an election outcome whether it is in line with a person’s expectation or will. To start with lower levels of government will allow the political stability of the nation and will accumulate valuable experience and lessons for political reforms at higher levels of government.

Of course, it goes without saying that China will need to strengthen its law and order, and allow judicial system independence and enforce and operate under the law.


Wen's advocate of political reforms in China

Comments on David Kelly “China’s top leaders tango on political reform”, 19/09/2010, http://www.eastasiaforum.org/2010/09/19/chinas-top-leaders-tango-on-political-reform/
Whether there was any split in the Chinese top leadership or not, it is interesting to note why Wen didn't advocate more political reforms earlier in his premiership.

Just consider the fact, his tenure has always been expected to be 10 years from the day he become the premier. If he intended to introduce more political reforms, it should have been done or at least started much earlier. This is generally the case in western democracy, a government will introduce nastier budget in the first year of government and sweeten the electorate with a nicer budget for the election year.

The question is: why didn't Wen do that in his first 5 year term? Now it is close to the end of his premiership, he is talking about political reforms.

One explanation is that his present political reform urge has been the knowledge accumulated or learnt over the past years.

However, if that is the case, it may have the risk to create problems for his future successor in terms of political stability or instability rather.

It is better for a political leader to finish what he or she can do and achieve while on the post.

It is another matter to bring in a situation where he or she could not do and cannot finish and leave difficulties to newcomers.
A true statesman needs to show leadership at the most appropriate time. Timing is the key in many issues, especially for difficult political reforms in China.


Tax refomrs should take the right approach

Comments on Michael Stutchbury “Complacent country under fire”, 18/09/2010, http://www.theaustralian.com.au/news/opinion/complacent-country-under-fire/story-e6frg6zo-1225925578140
The idea to use carbon tax to fund the other tax reforms is poor and is unlikely to gain public support.

It is important for a carbon tax to be revenue neutral and should act purely as a price signal to change consumer and business behaviour in energy use to lower emissions.

To reform personal income tax to flatter tax with $25,000 tax free threshold should be considered with other welfare reforms. Alternatively it should be staged or phased in with a clear future path.

Other reforms to state taxes should be considered with revenue reallocation between the federal and state levels of government, and possibly service responsibilities.

Challenging issues make the major parties work better

Comments on Jennifer Hewett “Issues bring parties back to reality”, 18/09/2010, http://www.theaustralian.com.au/news/opinion/issues-bring-parties-back-to-reality/story-e6frg6zo-1225925579971
The three instant pressure points that Jennifer Hewett listed, namely the NBN, climate change and the mining tax, are good and challenging issues to test the major parties. The current hung parliament means they will both have to work very hard to convince the independents and the greens which jointly hold the balance power in the lower house.

The costs and benefit of the NBN, its implementation / roll out and its take up rates will be important for both the major parties to battle. The government will need to strictly control the costs of roll out and rely on the consumers to take up and use it. The opposition will need to identify where cost issues or low taking up rates will be and use them to discredit the government's NBN rationale.

For climate change, the government is likely to go with the Greens' idea of a carbon tax and use the revenue for consumers / people as opposed to businesses or polluters, although the initial tax is likely to be low and tentative to test its effective. That is likely to increase efficiency and lower costs.

The opposition, on the other hand, needs to gradually realise its current direct approach with little use of market mechanism, will become irrelevant in the current political environment and need to come up with a good strategy to neutralise the issue and hold the government to account to make the policy the best possible, that is, to minimise the costs of any emissions reduction. If it persist with its no tax approach, it will lose credibility in its climate change policy.

The mining tax will be an interesting case for all parties. The current agreement between the government and the three biggest miners is unlikely to generate enough revenue as the government estimated. Besides, there are issues that other miners are unhappy with the agreement.

The greens want to have a higher mining tax, but that will make both the government and the rural independent MPs uncomfortable. The opposition does not want the tax. So the mining tax will greatly test Gillard's leadership skills. One clear danger is that Swan as the Treasurer will be a significant handicap to the government, as the initial stage of the government's mining tax development indicated. Again, the opposition should play a constructive role in the sense to hold the government to account to make the tax best possible.
The government needs to explain to the public what it ageed to for any policies for climate change and mining tax are the best possible under the current political circumstance.


Unique opportunties for parliamentary reforms in Australia

Comments on Graham Bradley “Parliament must focus on reform”, 16/09/2010, http://www.theaustralian.com.au/news/opinion/parliament-must-focus-on-reform/story-e6frg6zo-1225924277533
The list represents a good wish list from business of the current parliament, although only the last point falls mostly into parliamentary reforms and it is an excellent point.

The current parliament should undertake parliamentary and political reforms that are mostly impossible under the normal partisan approach with one of the main parties being in a dominant position in the lower house.

Those reforms may include election terms to a fixed term, removing preference requirement and whoever has the most votes should be the elected one, government to be formed with most MPs and only 2/3 of MPs' vote of no confidence can change a government to the next most MPs, parliamentary office of budget and policy assessments (Bradley's last point), limiting the federal government's power over the States and ensuring the rights of States not to be eroded by federal government, that is, needs a much higher threshold than a simple majority to take any state rights away from them, and so on.

These sort of reforms will be far reaching and in the long term interests of the nation and businesses.

The taxation summit is likely to be disappointing given the current political environment with the Greens in an important position to move the ALP to the Left even further and reduce efficiency.

Politicians should take the unique opportunities to reform the parliament and national governing mechanisms that will be long lasting but otherwise would be impossible to do.

Bradley’s other reforms can be undertaken under normal governance.

Rely on the market more and administrative measures less

Comment on Yiping Huang “Improving China’s art in dealing with external pressures”, 16/09/2010, http://www.eastasiaforum.org/2010/09/16/improving-chinas-art-in-dealing-with-external-pressures/comment-page-1/#comment-158342
While there is much more to be desired in the administration of the exchange rate in dealing with the so called international imbalance, the focus on the exchange rate, though having some merit, may have missed important points in the real issues of trade imbalance.

For example, it is often said trade subsidies like tax rebate for exports and import barriers, may be more important in terms of improving resources allocation and welfare.

Removing those market distorting factors and having a flexible and stable exchange rate linked to a basket of main currencies is likely to be a much better policy approach.

Further, it is beneficial to relax foreign currency management and allowing the Chinese and Chinese firms to hold and exchange foreign currencies inside China. That will also greatly reduce the superficial pressures for the yuan to appreciate.

Yes, all these mean to use the market more as opposed to administrative measures that are arbitrary and inefficient.

Kloppers' neutralities of a carbon tax and trade

Comments on Jennifer Hewett “BHP boss Marius Kloppers: It's time for carbon tax”, 16/09/2010, http://www.theaustralian.com.au/business/bhp-boss-marius-kloppers-its-time-for-carbon-tax/story-e6frg8zx-1225924335319
Mr Kloppers' argument for a carbon tax and the principle of revenue neutrality is excellent and should be considered seriously by the government, although revenue should be returned mainly to consumers as opposed to firms because they will bear the bulk of the costs and don't have ways to pass them onto others, and it is very difficult to be clear how much firms should be entitled to any revenue returned.

The argument for trade-exposed industries to have their emissions costs rebated until a global emissions reduction system was in place is also excellent, although it should ideally include both exports and imports in a simple way of accounting and implementation only at the border when international trade takes place. That is another neutrality of a carbon tax – trade.

These two neutralities, as I have argued before, are important for a country to be a leader in dealing with climate change and emissions reduction in the most efficient, effective and equitable way.

Australia can go it early and alone without sacrifice its growth too much in reducing emissions. In fact, it is likely to be in its interest to do so and create some earlier advantages in technologies and in lowering the costs of reduction.

Any changes to the mining tax agreed to before the election by the government and the three biggest miners should only improve the tax to be simpler and fairer to all miners and possibly broad based, but not to increase the overall burdens to them further or unfairly.


Yoichi Funabashi's interesting but confusing argument of water security

Comments on Yoichi Funabashi “Global water security: Japan should play key role”, 15/09/2010, http://www.eastasiaforum.org/2010/09/15/global-water-security-japan-should-play-key-role/
I am not sure some of the alarmist views on climate change and implications for water are not exaggerating beyond imagination!

While there would be an impact on some rivers if the Himalayan glaciers melt. But what would be waterfalls in the Himalayan region and the implications for those rivers?

If rainfalls remain the same, then those rivers might be more irregular in flows, but the total water may not be too different from the case where the glacier is feeding them.

It is a big natural circulation and recycling.

Further, while water is important, the argument for potential conflicts over water by nations is likely to be false.

The use of Israel and Palestine case is of little relevance, because they have been fighting with each other mainly over land but not water.

It seems the author has an interesting but winded excuse to argue for Japan’s role in global water security.

The mention and description of China may provide a clue.

Greedy Roxon/Labor trying to be crazy again

Comments on Sid Maher “Health rebate means test battle back on”, 15/09/2010, http://www.theaustralian.com.au/news/health-science/health-rebate-means-test-battle-back-on/story-e6frg8y6-1225923032398
It is crazy to force people to have private health insurance and means test for the 30% insurance rebate.

It is another form of tax grab by a government which wastes taxpayers' money and try to grab more from them to enable it to waste more.

What a crazy and greedy government it is!

If the government is to means test for that rebate, it should remove the health insurance surcharge altogether.

The government-forced impost of the private health insurance on middle and high income earners and the partial rebate, when introduced in the first place by the former Howard government, were a policy package.

It was already an unnecessary impost on those people because they already pay much higher taxes and that policy just conceals the hidden further higher effective taxes on them.

Now Labor wants to try it again to impose further burdens on them!

I haven't read the Henry taxation review report and don't know if this hidden tax was included in that review or not.

Turnbull should be flexible and tactful

Comments on Alan Kohler “The NBN may crush Turnbull”, 15/09/2010, http://www.businessspectator.com.au/bs.nsf/Article/The-NBN-may-crush-Turnbull-pd20100915-9ASWA?OpenDocument&src=sph
The business plan by Quigley's team can be double edged sword for Quigley and the government.

If its estimate is lower, then its lower figures will be used to judge the progress of the NBN project and delay or over-run are more likely to occur.

If its estimate is as $43 billion, then that figure will continue to be used as a negative.

Further, the change in priority of the NBN roll out to regions first will increase the costs of the NBN.

What Turnbull needs to do is to use the big stick of the big headline figure, push for publishing of detailed project progress costs, find and use any costs blow out as more concrete ammunition.

A public project like this under so delicate political situation will be very difficult and virtually impossible to manage and build according to detailed budget.

The taking up by consumers will be another area of differences between budget and reality.

So, attacking failures of the project and holding the government to account are two targets that Turnbull can work on to achieve.

Turnbull can play dual roles flexibly – destructive and constructive as the occasion fits.

Further, he can use any new progress in this technology area, like wireless, to his advantages.


United States and China: positive will relations endure!

Comments on Robert Sutter “United States and China: Will positive relations endure?” 13/09/2010, http://www.eastasiaforum.org/2010/09/13/united-states-and-china-will-positive-relations-endure/
It is probably fair to say that few countries at the moment want to challenge the US militarily because no country would win a conflict with it, now.

However, that does not mean that no country will defend its legitimate interests at all when those interests may cause differences to the US.

On the other hand, it is also probably fair to say that the US may also not want to go to war with too many countries directly especially with large countries, because that would be also potentially very costly too and there is no guarantee that it will win a war clearly at a reasonable cost.

If anyone wants to gamble, the Iraq war and Afghanistan wars may serve as a useful reminder, even though they were relatively tiny in the first place.

There has been and is continuing and will continue a power shift between the US on the one hand and large developing countries on the other. That power shift means the relative power of the US is in the decline.

No country, no matter how strong it is now, can completely ignore the interests of other large countries.

So international relations and diplomacy are conducted in such a delicate environment with extreme subtlety and carefulness.

As a result, what is likely the outcome for the relations between United States and China?

Of course, positive relations will endure! Why should any people doubt it now?

PS: the other 2 posts today on the EastAsiaForum may be interesting references:

Hugh White "The end of American supremacy", http://www.eastasiaforum.org/2010/09/12/the-end-of-american-supremacy/
Peter Drysdale "China and the challenge to American power? – Weekly editorial", http://www.eastasiaforum.org/2010/09/13/china-and-the-challenge-to-american-power-weekly-editorial/

Now Combet says coal industry is safe, what about consumers?

Comments on Samantha Maiden “Coal industry is safe, says Greg Combet”, 13/09/2010, http://www.theaustralian.com.au/national-affairs/coal-industry-is-safe-says-greg-combet/story-fn59niix-1225919936683
While it is reassuring that the Greens extreme policy on climate change is unlikely to affect the coal industry, there is a danger that Combet may continue to reward heavy polluters through industry subsidies.

Consumers will bear the blunt of any climate change policy in terms of either higher energy prices or higher taxes. As a result, they should be ones to be compensated by any revenue from either a carbon tax or emissions permit prices. In fact, any revenue should be wholly distributed to consumers on an equal per capita basis to recognise their right to better environment.

Any firms have rooms to adjust their prices and pass on the costs to consumers. But consumers don’t have this option.

The Rudd and Gillard government has never considered this issue rationally and is receptive to industry lobby at the expense of consumers. Combet has been part of that government and is now the climate change minister.

The government should get the priority right. Combet should consult much more widely than before.


Article useful for youth in many nations

The article, "We’re No. 1(1)!" on The New York Times by THOMAS L. FRIEDMAN on 11/09/2010, is very interesting with a distinctive perspective.

It is about seeking reasons for why "we're No. 11", in the context of the US. It attributes to attitudes of young people nowadays.

It is interesting reading. See for yourself: http://www.nytimes.com/2010/09/12/opinion/12friedman.html?hp


An excellent article by Peter Beattie

Comments on Peter Beattie “Hung parliament a chance to overhaul whole system”, 11/09/2010, http://www.theaustralian.com.au/national-affairs/hung-parliament-a-chance-to-overhaul-whole-system/story-fn59niix-1225917024971
This is an excellent article.

It's a pity that current politicians who should be able to see those important issues raised by Beattie and can do something about them don't see or haven't seen them or don't raise them.

It is also a pity that federal politicians only want centralisation and don't see how a successful federation is much better than a unitary government system.

High court’s power should also be well defined and there should be a special constitutional court to deal with federation issues.

A fixed 4 year election system at both federal and state levels, supported by a strong, stable, responsive and talented public services, will also be key to nation.

Preferential voting is a joke if voters aren’t even interested in the persons they vote in the first place.

Republic is an important symbol, although it does not change the efficiency and effectiveness of the system much.

Politicians should be well paid to engender competition and attract the best candidates.

Critique of Sheridan's criticism of White's paper

Comments on Greg Sheridan “Distorted vision of future US-China relations”, 11/09/2010, http://www.theaustralian.com.au/news/opinion/distorted-vision-of-future-us-china-relations/story-e6frg6zo-1225917582189
Sheridan's article is full of criticism of White's article: nearly possible to find any recognition of any positive side of White's from Sheridan's critique.

I haven’t read White's paper and am not in a position to comment it.

Having said, I find some of Sheridan's points stretched.

For example, he criticises White's argument on economic size and possible relative change in the 4th last paragraph. He says White is inconsistent in terms of real dollar and purchasing power parity because White says China’s economy could take over the US by 2020 and that Australia is the 14th largest economy. He argues that the latter is in dollar term and that the former “is complete nonsense but is only even conceivable as a dream if you use the essentially meaningless parity purchasing-power measure”.

It seems that Sheridan may have got the fact wrong and would be better of to do some serious checking and study.

Although China’s economy is a little over a third of that the US’ in dollar terms now, it is not inconceivable for China to catch up with that of the US in 2020. This is because it only requires the following to occur: the differential growth rate is 7.2% a year and a less than 50% appreciation of the Chinese currency.

The experience in the past decade shows both are possible and can be reasonably expected to occur.

If Sheridan can get this wrong, what else couldn’t his argument and judgment if based on relative economic strengths be wrong?


Innovation and intellectual property rights

Comments on Justin Li “China scores silver ahead of Japan in GDP Olympiad”, 5/09/2010, http://www.eastasiaforum.org/2010/09/05/china-scores-silver-ahead-of-japan-in-gdp-olympiad/
Innovation is obviously important for advancing the economy to catch up with international frontiers and China needs to adopt international best practices in economic and intellectual property rights policies.

To start with, intellectual property rights, both international and domestic, have to be protected according to international practices and balanced with economies of scale to promote innovation and remove unnecessary barriers to adopt new products, methods, technologies and techniques. Without proper protection of intellectual property rights, it is difficult to have indigenous innovations.

Secondly, China should use market mechanism and price to promote efficient resource allocations and correct most market failures such as externalities, as opposed to resorting to administrative orders to do so.

Thirdly it is important to balance symbolism with real benefits in meaningful way. For example, it is reported that many local governments in China ordered some factories to stop or limit production and stopped power supply in order to achieve the symbolic indicator of emission intensity for the end of this year (2010) set earlier, apparently to show China’s resolve to achieve its announced target for 2020 to the international community.

That kind of practice probably can only be adopted by China and a handful of countries in the world now. But that is silly and harmful.

Morality of Japan-India nuclear pact

Comments on Purnendra Jain “Japan’s nuclear pact with India”, 7/09/2010, http://www.eastasiaforum.org/2010/09/07/japans-nuclear-pact-with-india/
The issue involving Australia has just become a little more complicated following effective alliance of the Labor and the Greens with the support of three independents to form the federal government early this week. The Greens is likely to oppose any escalation of uranium in the parliament with its balance of power in the senate, especially from first July 2011.

It is clear from the article that two main factors played the decisive role in Japan’s decision, namely commercial and security out of concerns of the rising power of China.

The commercial reason just makes a mockery of any moral standard by members of the Nuclear Non Proliferation Treaty. If issues as serious as nuclear can be compromised, is there any moral ground for any involved to criticise China or any other countries such as Russia to develop conventional resources in Africa countries or in Iran for that matter?

For security, what do any of such agreements in obvious violation of the NNPT mean really? Does it promote peace and stability or does it facilitate regional and possibly global arms race?

The real question is whether the current superpower accepts the inevitable trend that there will be power shift around the world and some of the existing interests are unlikely to be maintained forever and will change accordingly.

Bad decisions by some may only act as distractions to some inevitable and big world trends. That is unlikely to produce the results wished by them probably.

G20 needs effective mechanisms in decision making

Comments on Thom Woodroofe “The G20: More development needed”, 9/09/2010, http://www.eastasiaforum.org/2010/09/09/the-g20-more-development-needed/#more-13997
While G20 should have its place on the world stage on important issues, it does not mean it will replace other important world/international institutions such as UN and UN Security Council.

G20 may, however, facilitate other world bodies.

Also, while G20 is much smaller in size compared to UN general assembly, it also needs a workable governing structure and mechanism to be effective and efficient.

For example, does G20 require complete unanimity or simple majority to make decisions?

Another issue is that while it should not adopt the veto mechanism by permanent members of UN Security Council, does it need some sort of representative mechanism as opposed to purely senate mechanism in parliament, by some measure of size like population or economy?

That issue reflects the differential impact of a decision on countries of different sizes.

That is also the core meaning of democracy, isn't it?

It may appear better to have some sort of combination of the representative and senate mechanisms in decision making.


More factors affecting housing prices

Comments on Christopher Joye “Popping the hedge funds' bubble”, 9/09/2010, http://www.businessspectator.com.au/bs.nsf/Article/Popping-the-hedge-funds-bubble-pd20100909-94UB9?OpenDocument&src=sph
Joye argues that many hedging on the Australian housing prices are overvalued and are going to burst are not supported by more accurate estimates.

While a more accurate price to income ratio is good for international comparison of affordability or potential bubbles in housing market, it may be also desirable to include some data for differences in housing quality, such as average housing areas.

It is obvious those larger houses are more expensive than smaller ones, assuming all other things equal.

Another point of interest is differences in land price that may reflect how efficient a country may be in terms of its housing market.

Are land prices the same of different with population density?

PS: Christopher Joye is managing director of research group Rismark International which produces the RP Data-Rismark Hedonic House Price Indices. Rismark also operates a series of funds that invest in residential mortgages.

Rismark shows that the price income ratio for Australia as a whole is 4.6 as opposed to 7.5 by US investment legend, Jeremy Grantham, who captured global media attention with the claim that Australia’s housing market was a “time bomb” on that basis.


America - both the main culprit and a big victim of the GFC

Comments on the article “The odd decouple”, The Economist, 2/09/2010, http://www.economist.com/node/16943853/
The article came with this sentence to accompany the title: “Theories about why some rich-world economies are doing better than America’s don’t stand up”.

Those mentioned theories including the one created by The Economist are all missing the point here.

They all ignored the fundamental point how the GFC occurred in the first place.

It was the sub-prime mortgages crisis in the US.

The effects of that crisis unfolding and unwinding have been, are and will continue to be different for different countries in the rich world - a similar version of the stronger contrast between the rich and the newly emerging economies in the past two years.

The US has been the epicentre of the GFC and incurred much greater damages to itself. As a result, it requires longer to recover from it.

Lethal Rudd factor yet to play out in full

Comments on Paul Kelly “Recipe for uncertain government”, 8/09/2010, http://www.theaustralian.com.au/news/opinion/recipe-for-uncertain-government/story-e6frg6zo-1225915572606
It would be fair to say that the new Gillard government is likely to be much better than the government under Rudd in the past three years or so. It has to be much more disciplined than ever before. But the Greens will exercise more power and that can be detrimental to regional Australia and the whole nation as a whole.

Having said that, I think it is not right that a government that was that bad has only been punished by the people but not by the two rural independents. That is unfair to the Australian people.

Further, a consequence of the two indies decisions is that the NBN waste will continue and the total costs will possibly be much more than the $43 billion price tag that the last government put on it.

One potential instability of the new Gillard government may be the Rudd factor within the ALP, no matter how the two indies act, hope and wish.

If any of Rudd supporters decides to pull the plug, then a by-election may be on the way coming.

That may be the ultimate way to do justice to the Australian people and ironically to the indies themselves.

PS: For Rudd and supporters, the most important issue may not be whether Rudd will be an important minister or not, it may be how the Rudd era will be viewed in history. On that front, big egos may come to play. That may defy some logic but will have its own logic.


Gillard will form government with support of two of the three rural independents

News from the independent rural MPs just broke out. They have made their decisions, two supporting Gillard government and one the coalition.

That means Gillard will form the next government with the support of 76 MPs and the coalition will be still in opposition with the support of 74 MPs.

It is very disappointing decisions and unnecessarily prolongs the life of a government that has lost its ways and made many disastrous mistakes.

What it also means is:
the current Labor government's poor management of taxpayers' money in the past 3 years.
the government's NBN will continue to be rolled out, meaning very high costs and likely huge wastes.
the combination of Labor, the Greens and the three independents MPs are likely to result in even larger government and more excessive government expending and wastes.

It is not a good sign for the nation and taxpayers will pay a dear price.

One question is how long the next Gillard government will be lasting.

If any of the MPs from the 76 who support Labor resign or has to resign, then there would be a by-election. there is no guarantee that the same party candidate will be returned. The stability that Windsor and Oakeshott have used as one of the main reasons may dissipate very quickly.

One serious possibility is that Kevin Rudd, the former Prime Minister may not necessarily stay for too long in politics.

Still a close call between Labor and the coalition

Comments on Dennis Shanahan “Coalition MPs find reasons to believe”, 7/09/2010, http://www.theaustralian.com.au/national-affairs/coalition-mps-find-reasons-to-believe/comments-fn59niix-1225915175930
It would be in their interests to support the coalition from gaming point of view: each of them would be more important when they are with the coalition than with Labor, because 76 is the minimum majority needed and 77 would mean one is potentially redundant.

That logic is premised on them understanding that number gaming.

I think the coalition would be able to offer them with a better package than Labor, purely because they are more conservative and should have more fire power with the same revenue bottom line.

However, Labor has some distinctive advantages with its current policy setting openly on the table over that of the coalition, mainly in terms of its NBN.

So far, Gillard seemed to have made better progress in negotiations, but may have made a strategic mistake to leave the independent trio in such a number gaming.

Abbott was right to focus more on the trio with strong rural supports. But he has so far got nothing to show his success in negotiations yet. Maybe it is the last straw that he hopes to have and use to break the camel’s back (get over the line).

Who knows!

The trio keeps us suspended and guessing!

They have been having a very good time for themselves and they clearly enjoy that!


Better emasures to 'rebalance' China’s economic structure

Comments on Yiping Huang and Bijun Wang “Rebalancing China’s economic structure”, 3/09/2010, http://www.eastasiaforum.org/2010/09/03/rebalancing-chinas-economic-structure/
Leaving the causes of the current economic issues/problems in China aside, some measures could significantly if not greatly diminish the problems.

For example, allowing the private sector and corporate sector in china to hold and buy and sell foreign currencies will reduce the pressure for the authority to buy them and invest them in low return foreign government bonds.

Whatever the private and corporate sectors do is likely to increase the returns. Further, it is likely to reduce current account surplus and hence the pressure for currency appreciation.

Another issue relates to the profits and taxes of the SOEs. Rather than tax them more heavily that would distort the market, government should set mechanism for returns of profits, either linked to what the private sector average, or a fixed percentage, then if needed to make some general adjustments to mimic the private sector.

The private sector and the SOEs should compete on an equal footing in terms of price and taxes. Of course, entry can be a big issue that should be addressed clearly in terms of development strategies.

If monopoly is an issue, then anti-monopoly policies should be applied irrespective the targets are private sector or SOEs. SOEs must face effective competition to be efficient enterprises.

For environmental issues caused by externalities and mispricing, the most efficient and effective way is to use taxes to correct them as opposed to direct administrative measures. The later can be effective but are unlikely to be efficient.

Labor lost the election unequivocally

Comments on Kenneth Wiltshire “On all counts, Coalition deserves independents”, 5/09/2010, http://www.theaustralian.com.au/national-affairs/commentary/on-all-counts-coalition-deserves-independents/story-e6frgd0x-1225914501944
On top of those, it could be argued that Gillard has lost the election because she has lost the advantage afforded to incumbency.

Generally the electorate would give the benefit of doubt to the incumbency, so it would win if the electorate is really close.

Further, Gillard is the first female prime minister in Australia and should have had natural affection and sympathy from most Australians.

But Gillard has not got that mandate from either of the above!

That is why she has lost the election!


Arguments without substance

Comments on Meganomics Blog “Giving a little will gain a lot more”, 4/09/2010, http://blogs.theaustralian.news.com.au/meganomics/index.php/theaustralian/comments/giving_a_little_will_gain_a_lot_more/
There are very different and opposing views on the mining tax, that is, the RSPT.

We've seen a bunch of so called leading or eminent economists writing an open letter in supporting it and the Greens asking for an even higher mining tax on the one hand. On the other, we've seen some arguing that it was a stupid idea coming out of some Canberra bureaucrats with no sense of the real world and that international investors were holding their investments and many talked about the so called sovereign risks.

So problems with such a serious divide lie in that they haven't got or don't have a clear and consistent set of criteria what a good tax is to judge the RSPT.

Those economists and commentators arguing it was a good idea or tax just compared the two cases superfacially that left many details out, that is, a tax on resources either based on either price or profit. Obviously that kind of approach clearly has a problem. For example, no one would/could argue for an 100% tax rate, but that is among the profit based tax set.

Those on the other side haven't articulated a clear set of criteria to base their case either.

There was a lack of quality there.

That has been a serious problem in that debate.


Gillard on the move for power or to oblivion in history?

Comments on Paul Kelly “Gillard on the move for power”, 4/09/2010, http://www.theaustralian.com.au/news/opinion/gillard-on-the-move-for-power/story-e6frg6zo-1225914022561
Paul, it does show her negotiation skills and the incumbent advantages!

However, it also shows her lack of strategic leadership!

It puts the other trio, more decisive group, into a conner where it would be advantageous to support Abbott, because of the pure number games!

It appears to be a win in a battle but a loss of the war!

Strategic gaming in forming a minority government

Comments on Peter van Onselen “Labor ahead in strategic power game” 4/09/2010, http://www.theaustralian.com.au/news/opinion/labor-ahead-in-strategic-power-game/story-e6frg6zo-1225914014166
The strategic game has not necessarily been won by Gillard yet. To the contrary, the current state of play may present a dilemma for the other trio independents and could prove strategically fatal for Gillard.

Just consider it is a game for the trio as a whole - would they be more important to Gillard or Abbott now?

To Gillard, one of them may be redundant and therefore they could be divided on different issues and as a result they would lose out collectively if they support Gillard.

On the other hand, each and every one of them would be indispensable under Abbott and would have to be accommodated all the time. There is no case or condition that they could be divided and conquered at all.

So from their point of view, which is the best for them?

It is obviously it is the one to support Abbott.

Further, with $1 billion offer from Abbott for the other independent now unnecessary and unused, the three independents would have even more to gain.

A better and much superior gaming for Gillard could have been to secure the support of that independent and keep it undisclosed until after the securing of the other trio independents!

So it appears that Gillard is to clever by half as opposed to strategically smart!I could be wrong, but it is highly likely that now Abbott will form the government.

PS: the announcement of the last agreement was a win for that independent, but a loss for Gillard.


The hung is good for the Greens but bad for the nation

Comments on Robert Carling “Tax policy devised by party that is green with envy”, 3/09/2010, http://www.theaustralian.com.au/news/opinion/tax-policy-devised-by-party-that-is-green-with-envy/story-e6frg6zo-1225913534872
While the GFC may have caused people to reflect on the far right approach or market fundamentalism, the far left like the Greens in Australia are by no means the solution to the problems/issues that contributed to the GFC.

Unfortunately for Australia, we've just got a hung parliament and the Greens are in a very strong position to explore the situation to its advantage to move Australia to the Left's agenda.

The gutless current government has been so keen to embrace the support of the Greens for alliance to form the next government.

That is bad for the nation, and for the ALP itself in the media to long run.

It is likely that the ALP will see more of its supporters to move to the Greens at the next election.


Small land holdings and large scale agriculture production

Comments on Sherry Tao Kong, Xin Meng and Dandan Zhang “The impact of the global financial crisis on China’s migrant workers”, 1/09/3010, http://www.eastasiaforum.org/2010/09/01/the-impact-of-the-global-financial-crisis-on-chinas-migrant-workers/
Just a comment on the main point in the following paragraph: “In the long run, small-scale farming will inevitably give way to large landholding and higher agricultural productivity. This will naturally lead to the consolidation of farmland, and many small landholders will need to sell their land. For these workers, then, future employment shocks will have to be cushioned by other means.”

There may be alternatives to just selling their land. For example, some of them may find it more beneficial in holding their land and rent the land to some organisations or persons. In that way, it is still possible to consolidate land holdings for larger scale agricultural production, but allows a diversified ownership, not too dissimilar to share holding in listed firms.

The potential appreciation of some land, especially those likely to be used for other more valuable purposes means some holdings may be good for some small “land holders” to continue to hold their land.

In short, there should be a diversifying and flexible system to provide different options for land holders of different circumstances.

On China’s prospects for diminishing regional disparities

Comments on Jane Golley “China’s prospects for diminishing regional disparities”, 31/08/3010, http://www.eastasiaforum.org/2010/08/31/chinas-prospects-for-diminishing-regional-disparities/
If Chinese top policy makers are willing to use the most appropriate policies to coordinate the development strategies of the whole country inclusive of the eastern, central and the western regions, it should be possible for China to do much better than "regional inequality between the west and the rest of China is likely to be diminished marginally at best".

For example, they could use some sort of fiscal transfers and link them to encourage the private sector in the eastern region to invest in the other less well off regions to tilt a bit the balance between investing abroad and inland.

There are advantages in investing inland. For example, due to various reasons including cultural, language, systems, transport and market, the barriers or the costs and the risks of investing inland are likely to be much smaller, thus to raise the return to investment. It is also much easier to coordinate the required infrastructure development within a country, especially given the policy priority of the central government.

There are also vast labour supplies including skilled and educated personnel. Certainly it will be easier to train or educate workers if needed.

Pact - likely a strategic political blunder

Comments on Paul Kelly “Pact puts Labor brand and Gillard leadership on line”, 2/09/2010, http://www.theaustralian.com.au/news/opinion/pact-puts-labor-brand-and-gillard-leadership-on-line/story-e6frg6zo-1225913036640

Picture ourtersy of The Australian online

While this has occurred in the wake of the situation of a hung parliament, in considering Gillard's citizens' assembly idea on climate change policy and the decision to go to the poll so soon after her having Prime Ministership, there are serious questions about her judgement and leadership quality.

This is unlikely to be a good look of her. It lacks a common sense and may be a strategic blunder at the highest order.

She may be a skilful political opportunist, but her strategic ability may not necessarily match her political desire to be and hold on to PM.

Those serious matters remain to be seen. But she has shown a glimpse of those in less than two months.


The longer as time passes by, the stupid the NBN policy!

Comments on Stephen Bartholomeusz “Industry's better broadband plan”, 1/09/2010, http://www.businessspectator.com.au/bs.nsf/Article/nbn-telstra-optus-alliance-of-affordable-broadband-pd20100901-8V3Y2?OpenDocument&src=sph
It appears increasingly that the NBN has failed business test and become a stupid idea.

The government should simply create an environment for the private sector to build what they think the best is, using targeted incentives to deal with any market failures.

But the government has chosen the $43 billion NBN instead.

PS: extracts from the article:
There is an underlying commonsense to the themes of the Alliance for Affordable Broadband’s arguments for version three of the national broadband network.

The Alliance, a group of senior telco executives that includes AAPT CEO Paul Broad and Pipe Networks’ founder Bevan Slattery, issued an open letter this week arguing the case for a largely wireless-based NBN with high-speed fibre deployed to deliver speeds of up to 1G to schools, hospitals and businesses.
The alliance advocates a mix of broadband technologies and public and private funding rather than the government mandated and taxpayer-funded $43 billion monopoly wholesale network envisaged by the federal government.
In that sense it is closer to the Coalition’s NBN policy than Labor’s, although it revolves around a next-generation 4G national wireless wholesale network that it says could deliver speeds of up to 100 Mbps to 98 per cent of Australians. It says the network could be built for around $3 billion.

Better or worst way to print money?

Comments on Ricardo Caballero “A better way to print money”, 1/09/2010/ http://www.businessspectator.com.au/bs.nsf/Article/treasuries-bernanke-federal-reserve-bonds-fiscal-p-pd20100831-8U4HZ?OpenDocument&src=rot
A rather old and stupid idea, dressed up as a good way!

Why not abolish all taxes and just print money for the Treasury!?

It is laughable by any standard!

Where did it come from? An economics professor from the US?

It cannot be more interesting, or stupid, should I say!

PS: The following is some extract of Caballero's article:
Instead, what we need is a fiscal expansion (e.g. a temporary and large cut of sales taxes) that does not raise public debt in equal amount. This can be done with a “helicopter drop” targeted at the Treasury. That is, a monetary gift from the Fed to the Treasury.

Critics may argue that this is simply voodoo accounting, as it is still the case that the consolidated balance sheet of the government, which includes the Fed, has incurred a liability. But this argument misses the point that the economy is in liquidity-trap range, and once this happens the system becomes willing to absorb unlimited amounts of money. In this context, by changing the composition of the liabilities of the consolidated public sector in the direction of money, the government gets a sort of “free lunch.”

Citizen's assembly dumped - what is next?

Comments on Samantha Maiden and James Massola “Gillard replaces citizens assembly in Labor alliance deal with Greens”, 1/09/2010, http://www.theaustralian.com.au/national-affairs/gillard-replaces-citizens-assembly-in-labor-alliance-deal-with-greens/story-fn59niix-1225912717634
The idea of a citizen's assembly was silly from the start and now it has been dumped by Gillard.

How many days did that item of election policy proposal last? Not too many!

The proposal and ditch of it has demonstrated a failure in leadership, in the process of policy formation and development and in judgment.

That does not reflect well on the maker of that policy proposal.

What are the implications for the future policies of the Gillard government, especially now with the alliance with the Greens?

You guess or bet, but I shudder at the thought!