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Congratulations to Prince Williams' wedding!

This century's first most important royal wedding is under way.

The Queen just arrived at the Abbey. The Queen has been the most well known royal figure in the world.

The pride, Kate Middleton, is in the car and on the way to the Abbey.

Best wishes for the handsome Prince Williams and the beautiful soon to be princess Kate.

Wish them the happiest of lives.

Carbon tax and compensation issues

Comments on Robert Gottliebsen “Alinta's fiery carbon resolve”, 29/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/carbon-tax-Dimery-Alinta-energy-prices-pd20110429-GCS8F?OpenDocument&src=sph&src=rot

That just points to why all compensations on a revenue neutral basis should go to residents and not businesses, because most residents have no where or no means to pass on the higher energy costs (they don't sell things) to while many businesses can because they sell more than they buy.

Businesses can pass on, at least some of the carbon tax to consumers, because the average industry costs, as opposed to just some firms in an industry, will be higher under a carbon tax, so all business members will pass on that higher average costs. A caveat is the shape of the demand curve - if vertical, then all the tax will be passed on to consumers; but if horizontal, none of the tax can be passed on. But in the short term, it is likely to be more vertical than horizontal, especially as energy products are concerned.
The second point is that brown coal power will be less profitable than gas fired power if the electricity has the same market price irrespective how it is generated.

That is the main point of a carbon tax to reduce emissions - a market mechanism as liked by many economists or the likes.

Australian federal relation issues

Comments on Rob Burgess “What's behind Gillard's new waste line?” 29/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/Labor-BER-spending-bill-funding-pd20110429-GCSU7?OpenDocument&src=sph

You may be right in saying "the disastrous home insulation scheme with the much less disastrous Building the Education Revolution scheme", but in dollar terms, the much less disastrous Building the Education Revolution scheme may be higher in total in terms of wastage.

Even leaving the normal and conventional definition of wastes aside, the effectiveness of many of those school halls to the so called "building the education revolution" is highly questionable - another form of effective wastage.

That is the first point.

The two indiscretions the Gillard government is committing reflect the long term trend and very unhealthy development in federal relations, that is, the federal government has been invading into states constitutional powers. The fed has been bullying and abusing the states on various matters.

That has not been helped by a pro-fed high court that has often sided with the fed on a number of federation relation issues.

Unfortunately, many Australians falsely and naively believe that many of the current problems with state government services can be resolved by further centralisation of government power to Canberra. It is illogical to think that a central government can do a better job where eight duly elected state governments have had difficulties to achieve.

That is a fantasy, especially after the huge wastage that the fed government did in the not so distant past and that government is still in government after the last federal election!

Protect union jobs and enhance national wealth too

Comments on Tony Maher “Where are jobs in carbon plan?” 29/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/where-are-jobs-in-carbon-plan/story-e6frgd0x-1226046535916

It is understandable that a union leader is and will be aimed at protecting jobs of its members.

It should be better done in the context that also enhances the nation's wealth.

If those two are combined, then few will object what Tony Maher argued, such as: "Unions should campaign long and hard to ensure any restructuring of the energy sector maximises the jobs dividend."

The key is productivity and international competitiveness.

We should use all internationally acceptable policy means and technologies and management practices to achieve the duel objectives.

Government and its carbon committee to blame

Comments on Siobhain Ryan “Tony Windsor's carbon call for BHP”, 29/04/2011, http://www.theaustralian.com.au/national-affairs/tony-windsors-carbon-call-for-bhp/story-fn59niix-1226046579423

While Tony Windsor has an obvious point, the government and the carbon committee have not helped in their own duties either, by not having stated of a broad trade neutral approach or framework.

That largely is the problem with the government and the committee.

Why haven’t they announced such a broad framework in the first place and leave any details to be worked out? Is an announcement of intention that difficult?

So Windsor may suffer a problem himself too, as a member of the committee.

The problem with boats policy is now Gillard's and no longer Rudd's

Comments on Dennis Shanahan “Boats policy left in a muddle”, 29/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/boats-policy-left-in-a-muddle/story-e6frgd0x-1226046531647

There is no point to continue to lay blames to Rudd for the current mess, given that he has lost his prime ministership for 8 months that is long enough for the Gillard government to introduce an effective border protection policy and to deal with those who were in detention.

Gillard could have used the Nauru existing detention facilities that Australia spent money to build for a temporary and transitional measure to have stopped the boats from arriving. At the same time to have developed a better solution, such as the essence of her regional processing centres, though not necessarily in East Timor, in a measured and much accepted diplomatic way.

In that way she would have allowed more time on her side.

Further, for the existing asylum seekers in detention in Australia, she could have established a temporary transitional visa for them to be out of detention, pending for permanent residency subject to security and character checks. The risk would have been small because few new boats will arrive if an offshore processing will be the way to go with an existing Nauru solution in place as an interim measure.

Unclear or confusing argument does not help a good cause

Comments on Brian Croke “Gonski panel must come up with new funding model”, 29/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/gonski-panel-must-come-up-with-new-funding-model/story-e6frgd0x-1226046537662

While I am sympathetic to the core of Brian Croke's argument, it appears that the article does not help much to the cause because it is confusing and the key underlying reasons apart from funding history are not well argued or explained.

Should the SES model continue to be used, it should probably take at least two factors into account:

1. The SES should be based on the actual student families of each school to be fair and accurate. This could be done by confidentially collect such information and selective audit by matching with ATO or other records, without violating privacy. This should ensure the funding will be based on actual SES as it is purported to be, as opposed to the CD’s where each student lives that can have various distortions.

2. There should be a transitional period to give schools time to adjust from the current funding to the new model, keeping funding neutrality, that is, the level of each year's total government funding for schools as a whole is not affected by the transitional arrangement during the transitional period.

PS: To add to my earlier comment, a funding model based on SES for non-government schools should also take the ability and capacity of self funding into account, though it should not completely destroy the incentives and benefits of higher self funding, that is, it should not necessarily be a dollar for dollar relationship.

Nevertheless, the needs factor should not be neglected, similar like higher taxes for higher income in the progressive tax scale that is applied in Australia and many countries in the world.


Dan Ryan on why Gillard should talk human rights to China

Comments on Dan Ryan “Why Gillard should talk human rights to China”, 26/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/why-gillard-should-talk-human-rights-to-china/story-e6frgd0x-1226044650714

I was wondering about the interesting view of the author and having some difficulties with it when reading the post, until I noticed the author is a lawyer at the end of reading it!

We should not forget how people use various jokes to describe lawyers, because they have some implications even though one should only be heartily enjoying those jokes and not take them seriously!

Gillard spent first ANZAC day as PM in South Korea!

Comments on Joe Kelly “Julia Gillard urged to back new Asia order and embrace China's leadership in the region”, 26/04/2011, http://www.theaustralian.com.au/national-affairs/foreign-affairs/julia-gillard-urged-to-back-new-asia-order-and-embrace-chinas-leadership-in-the-region/story-fn59nm2j-1226044999397

Both security experts have a point each.

It is interesting that Gillard chose to visit Korea on Anzac day, given that Korea has had nothing to do with Anzac whatsoever.

If Gillard deliberately thought that Australia had participated the Korea war and that that was a good reason to spend that day in Korea, then that would not sit very nicely with her subsequent visit to China, given China was on the other side of that war as Mr Medcalf mentioned.

It is another Gillard's mystery decisions.

And she is good at making those decisions, even though few people would understand her - intelligent or rushing blood in the head?


Time to rethink exchange rate regime

Comments on “Aust dollar clears 107 US cents”, see NEWS – Currencies, http://www.businessspectator.com.au/bs.nsf/Article/Australian-dollar-clears-107-US-cents-record-high-pd20110421-G4SRZ?OpenDocument&src=hp2

Two points: 1. the $A has entered uncharted territory and no one knows how high it will go in the next year or so. It may go as high as $US1.10, 1.20 or even 1.50, though few people would dare to say the last figure. The point is no one is sure about it.

2. Given the pervasive effects of the high $A, is there a case for some RBA intervention to keep it lower? Why does the RBA continue its conventional operations and stay away from intervention while the US Fed has been doing unconventional quantitative easing? Isn't time for the RBA to catch up with the changed international finance and monetary politics?

I think those are legitimate questions to ask and the RBA needs to have a serious review of what is best for Australia, getting out of its comfort zone of conventional thinking and conventional operating.

While free exchange rate has been the norm and dominate economic theory, excessive movements and fluctuations of a currency against others, especially the ones that are having a big effect on the country such as the $US for Australia given that many commodities are priced in $US, may not be optimal or desirable.

If the GFC has promoted a rethink of macroeconomic theories, a thorough review of international exchange rate regimes is also overdue and equally important.

John Lee's fantasy on Gillard

Is John Lee trying to argue that Gillard who couldn't do a good job in domestic affairs as the prime minister even she had before been perceived as a competent deputy minister, but somehow can do outstanding job in foreign affairs even though she has openly acknowledged that this area is not her interest of strength?
So what is the credible line of argument for John Lee's logic?
It is beyond anyone but John Lee's belief, because it defies common sense and simple logic!
People had hoped that Gillard could do a better job as PM than Rudd did. But many if not all have been highly disappointed and their expectations have been completely shattered.
We would or should be dead should our experts do their jobs as lousy as this piece!


How Gillard has got it so wrong on carbon?

Comments on Paul Kelly “Perfect storm for carbon crusader”, 20/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/perfect-storm-for-carbon-crusader/story-e6frgd0x-1226041798709

The question, though a bit late now, is whether there were better strategies Gillard could have taken to avoid the current big mess?

I would think that Gillard rushed unnecessarily to form alliance with the Greens and to change her stance on not introducing a carbon tax.

The Greens will always support ALP and Gillard over the Coalition's Abbott irrespective Gillard's alliance with it or not, so Gillard should have realised that and formed an independent ALP minority government with no alliance with the Greens.

By being independent, it would have had more policy freedom and more power in bargaining with the Greens, as well as the independents in the house.

Secondly, in terms of carbon pricing, Gillard made the first mistake when she made the pre-election pledge of no carbon tax. She then made the second mistake by forming the parliamentary committee including the Greens and the independents. Her third mistake was to rush to a self imposed schedule of legislating for a carbon tax to be introduced from 1 July 2012.

She should have continued her pre-election cautious approach to this and adopt a strategy to have a full carbon pricing scheme ready to take to the next election as a central focus.


Time to consider and reform international exchange rate regime

Comments on Max Corden “Global imbalances and the paradox of thrift”, 15/04/2011, http://www.eastasiaforum.org/2011/04/13/global-imbalances-and-the-paradox-of-thrift/

Yes, I'd agree that this is an excellent piece of analysis over the issues of international balance or imbalance.

On top of the views on the core balance issues, I'd add that the past history and various painful experiences have also shown a more difficult issue in terms of excessive volatilities of floating exchange rate regime.

Just consider the dramatic swings and changes in rate between the US and the euro over the short period since the creation of the euro.

How much the rate has changed, back and forth?

Is it compatible with the macroeconomic goal of price stability?

Or, have those changes in the relative price of imports versus exports really reflected the underlying relative economic conditions?

Were they conducive to businesses involved in external trade?

It seems that while free international exchange rates regime has its merits, it also has considerable downside. It is uncertain whether its advantages outweigh its disadvantages.

It may be time to study what an ideal international exchange rates regime should be, so to balance the positive and negative sides to maximise net benefits for all nations.

ACCC's disdainful stance on the NBN Co monopoly

Comments on Henry Ergas “Regulate the regulators”, 15/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/regulate-the-regulators/story-e6frgd0x-1226039354279

The stance of the ACCC on the issues of NBN monopoly and Telstra reflected a strong revengeful body as a result of its past experience dealing with Telstra, not too dissimilar to the government's.

It used its power to do so, but was probably abused its legal position and betrayed the public and particularly the shareholders of Telstra unfairly.

That has been very unfortunate for the ACCC and the nation.

In a sense, the whole drama showed the ACCC has not acted in the interest of the public and consumers by agreeing the NON Co. monopoly.

We've already heard the NBN Co. has used its legislated monopoly position to unfairly deal with a number of issues, including delays of construction of homes due to its requirement that have to be done in a particular way and its inability to have sufficient flexibility to empower other companies to meet technical standard with their won creativity to minimise costs.

How will the NON Co monopoly be better and not worse than Telstra’s dominant market position is an open question and anyone’s guess.

Under the current market conditions, other companies could build their own facilities to compete with Telstra in terms of infrastructure and market shares, such as those that have already been built fibre or hybrid ones to homes, e.g. TransacACTEWAGL lines in the ACT.

Under the NON Co monopoly, no one will be allowed to do so, in their words, for cheery picking!

How could the ACCC endorse such a poor arrangement, apart from its what the government has wanted to do.


Swan's strict fiscal rule

Comments on Wayne Swan “Fiscal policy is setting us apart”, 14/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/fiscal-policy-is-setting-us-apart/story-e6frgd0x-1226038712169

A comment first: yes Mr Swan, your fiscal rule is strict: if there are additional expenditures, you bring in a new tax to meet them.

That is as strict as it can get.

But whether that is responsible or not, or a good fiscal policy approach or not, is another matter altogether, isn't it, Mr Swan?

It is not too difficult for people to see it at least is a very lazy approach, no matter how you dress it up and spin around.

PS: maybe Mr Swan meant another strict fiscal rule: to only allow school to use the BER funding for building school halls and or libraries, irrespective what they need most and how effectively those school halls and or libraries contribute to those schools education needs.

Of course, it was wastage, as most people have realised.

Further, the pink batts scandals are worse than whether the insulations are effective or efficient or not, it still costs taxpayers money now to just fix up the messes left by those programs.

Gillard government is doing a 94.5 per cent compo for businesses and none for many consumers

Comments on Sid Maher “Carbon tax compensation fires up industry”, 14/04/2011, http://www.theaustralian.com.au/national-affairs/carbon-tax-compensation-fires-up-industry/story-fn59niix-1226038762894

The government and Climate Change minister Greg Combet have bowed to business pressure and sold the majority of the public out. See the following from the report:

"But seeking to counter warnings from big business about the impacts of the carbon price on their international competitiveness, Mr Combet said under a $20 a tonne carbon price and 94.5 per cent assistance, the steel industry would face a cost based on its core pollution of only $2.60 for every tonne of steel out of a current global price of $800 a tonne. And the aluminium industry would face a cost of $18.70 a tonne of aluminium, out of a price of about $2500 a tonne."

Note the number of "94.5 per cent assistance" to industry.

What does it mean? It means millions possibly well over ten millions of Australians will not get any compensation, or very little compensation for higher energy prices.

The Gillard government is no different from the Rudd one in terms of catering to large businesses at the expense of consumers and personal taxpayers.

Why should large businesses be compensated by "94.5 per cent assistance", and many consumers not at all? What is the rationale of that? This is in spite of the fact that businesses can pass on most of the costs to consumers and consumers on the other hand can’t pass any on to others.

It is a shame of an incompetent government.


Consumer compensation too little and its distribution unfair

Comments on James Massola “Carbon compensation via tax system: Combet”, 13/04/2011, http://www.theaustralian.com.au/national-affairs/climate/carbon-compensation-via-tax-system-combet/story-e6frg6xf-1226038354055

The Gillard government and Minister Combet have surrendered to powerful business lobbies and have sold out the interests of Australian consumers and personal taxpayers.

By any measure, 50% for consumers in total is too low and too little. Instead, the bulk, 80 per cent at the least, of the revenue should be returned to consumers.

Further, there is no justification that other consumers are not compensated for higher energy costs.

Carbon pricing and tax should not be used for income redistribution purposes. It should simply be distributed to each and every Australian resident living in Australia, according to well established and accepted economic principle to deal with environmental externalities, such as carbon emissions.

Each and every Australian resident is entitled to the same right of reasonable climate.

As such they should be compensated equally for damages done to their rights.

This is another case of a government lost its way.

PS: According to the report, 'Mr Combet said there were a number of ways to deliver the billions of dollars in assistance.

"One of the most efficient ways is through the tax and transfer system," he said, pointing to likely tax cuts or welfare changes.'

But why didn't he see the more efficient and just way to distribute the tax proceeds equally among Australian residents? Isn't an equal distribution more efficient and more just than his distorted way that is still unclear yet?

Reforming budgeting processes to raise quality of fiscal policy

Comments on Stephen Kirchner “Trimming to fit budget's reduced revenue”, 13/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/trimming-to-fit-budgets-reduced-revenue/story-e6frgd0x-1226038104396

It is always the case that both the macroeconomic level and balance of a government budget and its content of both expenditure and revenue are important.

Textbook macroeconomics assumes that the content of both expenditure and revenue measures is as good as it could get, then what is left is the level and balance of the budget.

In reality, the content should be more important, since it is there the microeconomic efficiency comes in.

Currently most governments don't publish the real ranking of expenditures in terms of their social and economic benefits, similar to private or government investments.

Maybe a far reaching fiscal reform is to publish estimates of the social and economic benefit of each significant budget expenditure item, including the average and marginal benefits.

Should such a reform is undertaken, then people can scrutinise government budget in a much consistent and transparent way.

More importantly, government has to work hard to get its expenditure right, better or close to best and it has explain major discrepancies or departures from higher social and economic returns expenditure to lower ones.

That will really improve the quality of government fiscal policy.

PS: To be fair to Treasury and Finance departments bureaucrats, they may have done a lot of calculations and estimates (though not necessarily in the explicit concept of social and economic benefits that I just wrote), but not many or much have been published except used by governments in their budget spins.
Secondly, a framework needs to be developed to do the job of estimating social and economic benefits of government expenditures. That framework may evolve and be perfected through practice.

Swan can't avoid Keynes's curse

Comments on Jessica Irvine “Swan proved Keynes works but can he avoid Keynes's curse?”, 13/04/2011, http://www.smh.com.au/opinion/politics/swan-proved-keynes-works-but-can-he-avoid-keyness-curse-20110412-1dcis.html

While there may indeed be Keynes's curse in a logic sense, but it is the real political economy of most government budgets that cause more grieves and cynics.

It is not the inevitable wastage of most government fiscal stimulus measures, but the stupid, sometimes deliberate and politically driven wastages that are the problem for the public.

For example, there have been so many examples of wastes shown in the BER programs. Further, the restrictions for the BER projects for each and every school to be either school hall or library were so problematic, because that is another form of wastage (it is not the best outcomes or the most effective projects for many schools and they could have been better off if they had been allowed to build what they need most) that could and should have been avoided.

The home insulation programs are another example. Why didn’t the government anticipate the potential risks and problems in advance and take measures to minimise them is beyond anyone’s belief?

On that account, Swan will not be able to avoid the crudest Keynes's curse due to those silly designs of the government policy and poor implementations.

Most economist students will be shocked to realise that the real world fiscal policy design in terms of its content is nothing like what they were taught from the textbook – a government that always acts with a good intention to achieve good fiscal policy objectives.

Welcome to the real world, at last.

Return carbon tax revenue to where it belongs - the peope

Sid Maher “Labor to ease the carbon squeeze with $6 billion for households”, 13/04/2011, http://www.theaustralian.com.au/national-affairs/labor-to-ease-the-carbon-squeeze-with-6-billion-for-households/story-fn59niix-1226038147201

It is so obvious and just that the bulk of the revenue from the carbon tax or sale of emission permits in the future needs to go to households as they will bear the bulk of the costs and have no means to pass on any of the higher energy costs under carbon pricing, and the fact that it is people who are the owners of the environment and are entitled to good climate.

Businesses, on the other hand, can mostly include the the carbon price in the price of its goods and services and pass on to consumers.

That difference is abundantly clearly.

The argument for 45% of the revenue to go to trade exposed businesses is ludicrous. Whoever argues it should tell us how much share of our exports in the GDP, should that be considered as a benchmark of the upper limit for possible compensation.

Further, many of our trade partners have one sort or another of direct or indirect carbon pricing may match or even more than match ours and that already levels the play fields for our exporters.

More importantly, the compensation to households must increase over time and the compensation for businesses should decrease over time.

Eventually all compensation should go to households with equal amount for each and every Australian resident living in Australia.


Imbalanced growth and possible stagflation

Comments on Olivier Blanchard “When it comes to the commodity crunch”, 12/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/oil-inflation-commodities-IMF-Blanchard-pd20110412-FTSM4?OpenDocument&src=sph

A couple of comments.

First, on balanced or imbalanced growth.

The article starts with the following:

"The world economic recovery is gaining strength, but it remains unbalanced.

Three numbers tell the story – we expect the world economy to grow at about 4.5 per cent a year in both 2011 and 2012, but with advanced economies growing at only 2.5 per cent, while emerging and developing economies grow at a much higher 6.5 per cent."

Although Olivier Blanchard clearly has a point here, but some of the message masks the trend in the past two decades or so, that is a converging trend characterised by much higher growth in emerging economies especially the larger ones like China and India on the one hand, and the lower growth of most industrialised economies, even in the event of over consumption in some of the latter countries.

So, the unbalanced growth will continue and has been normal and will continue to be normal for some time to come, although Olivier Blanchard means the below potential low growth in industrialised economies.

Secondly, on effects of high commodity prices on different economies, Olivier Blanchard may have ignored the effects of higher prices of exports from emerging to advanced economies as a result of the high commodity prices.

I see that in conjunction with the direct effects of commodity prices will be the main sources of stagflation in some industrialised economies, should that occur over the few years to come.

Argument of structural budget deficits nonsensical

Comments on Michael Stutchbury “We don't have a budget to manage boom”, 12/04/2011, http://www.theaustralian.com.au/business/opinion/we-dont-have-a-budget-policy-to-manage-boom/story-e6frg9p6-1226037422178

It would be better people make a clear distinction between the Howard/Costello tax cuts and family benefits and their successors' wasteful spending in BER, home insulation, and the kind.

If the mining bounty is returned to people, that is in one way one of the most efficient way to distribute the mining boom proceeds, that is, let people be richer and decide what they want to do with the mining bounty.

It is regrettable that Treasury people started and continue to use the argument of the line of structural deficits of the Howard/Costello late years in government. It has completely ignored the fact that people don't need government or bureaucrats to make decisions for them - most of them are wise and intelligent enough to make their own to the best of their own interests.

It is an empty, imaginary, illogical and false argument – an excuse for the current budgetary wastes to confuse people, to divert attentions. It is a ludicrous act.

Whoever invented that should have the intelligence to know that.

Further, there is no point for commentators to follow that line of argument, even though that is what the media does best.


Resolve the "Carbon illusion we can't afford"

Comments on Sinclair Davidson “Carbon illusion we can't afford”, 11/04/2011, http://www.theaustralian.com.au/news/opinion/carbon-illusion-we-cant-afford/story-e6frg6zo-1226036879214

While most of Sinclair Davidson's arguments are correct, there can and should be a very simple solution to many of the issues in his argument.

That is, to allocate the carbon tax revenue among Australian consumers on an equal per capita basis and the amount is adjusted according to the revenue. This should ensure revenue neutrality.

As Sinclair Davidson argued businesses can pass on most of the costs and also they will need to share of some the costs in emissions reduction as consumers as a whole will in terms of their real income due to rising energy costs they have to pay with little possibility to pass on or avoid.

In addition, Productivity Commission should be asked to advise on a simple, efficient and effective border adjustment that may vary broadly according to groups of countries that have a broadly and effectively similar carbon scheme and on very broad categories of products and services to make it trade neutral and take into account climate actions by others.

This should be accompanied by a country to country reimbursement scheme based on a country's relative emission level to ours’. That should ensure not only domestic fairness, but also international fairness - an important but largely and effectively ignored point by governments in industrialised countries in trying to achieving an international agreement, like that in Copenhagen in December 2009, which had an accidental effect in Australia that both major party leaders were deposed of their top posts.

Further, Sinclair Davidson arguments just expose the extraordinary influence and greedy nature of large businesses, in terms of asking for compensation and more compensation.

PS: One should note that the two simple measures have sound economics basis. Can you explain them?

Compensations for businesses and consumers for carbon tax

Comments on Dennis Shanahan “Pressure mounts as industry speaks out” 11/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/pressure-mounts-as-industry-speaks-out/story-e6frgd0x-1226036933238

There are a number of interesting questions:

1. Why do some people including businesses continue to talk as if Australia is indeed 'go it along', given that many countries have done much more than us already?

2. Even assuming a $25 per ton carbon tax, it is likely to fall below the real effect of the CPRS cap due to the government and Treasury miscalculation of that carbon price under the CPRS, so why they say the compensation levels to businesses designed then were out of date?

3. For some energy producers like LNG producers especially exporters, how much emissions do they produce directly in their production processes and how much carbon tax they have to pay for those emissions?

4. Given that many businesses can pass on part or full carbon tax, and consumers can't, so how much businesses would expect consumers should be compensated, if they think the compensations under the CPRS design are not enough for them?

When will US withdraw its troops from Korea peninsular?

Comments on Robert Edwin Kelly “Comparing North Korea to East Germany”, 9/04/2011, http://www.eastasiaforum.org/2011/04/09/comparing-north-korea-to-east-germany/

Should the two Koreas be unified and given China's the relationships with the Koreas, why will there be any need for the US to have its troops stayed in Korea at all?

Let's acknowledge it, China has not stayed its troops in North Korea since the truce in the peninsular and the US has had its troops there.

The former USSR collapsed and the cold war has ended now for over 20 years. The US still has its troops in the peninsular

So how long will US troops stay in there and what its purpose will be and who will they be against?

Whether the Koreas are unified or not, or when they will do so, there is always the question: when will the US withdraw its troops from the peninsular to both symbolically and really actually contribute to a more stable and peaceful Northeast Asia and East Asia?

It is ridiculous for the US to use its military bases in East Asia to conduct spy missions over other countries. Would the US accept others to do the same spy missions using planes or ships around it?

If this is what the US means for China to follow the rules, is that a just requirement?

You have the military power to project forces to anywhere in the world.

You have military bases bordering others.

You have nuclear arsenals to destroy the world many times over and you have the means to deliver those weapons in very short time to anywhere.

You have much superior technologies in nearly every combat areas.

You have invaded so many countries, for one reason or another, including Iraq that was pre-emptively conducted and is still going on.

You constantly spy on others.

You also bombed China's embassy.

You harassed China's ship in international waters.

So still, you want others to follow this rule forever?


Why should miners be compensated for carbon tax?

Comments on “Miners in row over carbon tax pay: report”, NEWS - Resources and Energy, 9/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/Miners-in-row-over-carbon-tax-pay-report-pd20110408-FQRNN?OpenDocument&src=hp3

How much a carbon tax will directly affect the costs of mining, due to its use of energy/carbon?

I would have thought that the impact on mining is indirect through reduced demand for carbon energy products.

If that is the case, why should mining be compensated at all from the first place, except for the fact that large miners have financial resources and power to extract subsidies or compensations if you like from the government?

To me, there is a broad and reasonable argument for a full or partial exempt of the tax on carbon for miners that export their products overseas, according to the proportion of output being exported. On the other hand, there is no or little ground for compensating them for any other reasons.

The government should set out a set of transparent criteria for compensation for businesses and articulate the rationale for them. Then it should stand firm against special interest groups' lobby for compensations beyond that would be eligible set out in the criteria.

At the moment, it is largely backroom bargaining and there is little transparency and the public is kept out of any scrutiny of any government compensations for businesses.

And that is hardly good governance and satisfactory.


Problems created by Resolution 1973

Comments on Donald R. Rothwell and Hitoshi Nasu “UN Security Council resolutions on Libya and the significance of ‘R2P’”, 8/04/2011, http://www.eastasiaforum.org/2011/04/08/un-security-council-resolutions-on-libya-and-the-significance-of-r2p/

While the intent of "R2P" is undoubtedly good, the outcome of passing Resolution 1973 as that form was not necessarily as good.

It has had too much ambiguity and created opportunities for abuse the "R2P" intent.

Instead of protection, it could be used to kill, albeit in the empty name of protecting.

For example, an independent person would ask the following: were many of the air strike bombings completely necessary for the imposition of no fly zone? Have any of the bombers and fight jets from the enforcers encountered any threats?

Let's be honest, were the bomb and killing of Libyan government military personnel when they didn't engage in killing civilians or when they were in some sort of military facilities that were not engaged in killing civilians justified and justifiable? Just ask for an innocent Libyan soldier why should they be killed while they are not in actions of killing civilians or in fighting with the enforcers, just because they are Libyan government soldiers?

How could anyone say that killing and bombing are humanitarian actions?

Some of the actions have clearly gone significantly beyond the “R2P” as a consequence of the loose and ill-defined (quite deliberately I’d say by some of its authors) Resolution 1973.

If that is international law, it is a dangerous law.

PS: as the authors mentioned the regime change was clearly beyond Resolution 1973. So far it has been clear that some of the leaders involved in the military actions against Libyan government forces simply used it as a cover and excuse to achieve their quite different objectives than the ‘R2P’.

Any arming of the rebels, including external military ground involvement to assist the rebels, would go beyond that. It would not be protecting people, it would magnify and prolong military conflicts and result in more killings and deaths including civilians.

The British are likely to get it right

Comments on Mumble Blog “Confusion reigns in UK referendum”, 8/04/2011, http://blogs.theaustralian.news.com.au/mumble/index.php/theaustralian/comments/confusion_reigns_in_uk_referendum/

No, you are wrong on this Peter. I think the British, if voting that down, are making the correct and right decision.

The Australian system is a farce. Only some of us who are used to this believe it is superior. In a sense, we are ‘extreme’ on this.

Maybe a compromise is better, that is, preference is allowed but only optional and then only in specified scenarios preferences count.

The current down to the wire context of among only two based on preference imposes and assumes too much on voters.

Truth about ETS and carbon tax

Comments on Henry Ergas “Treasury should know better about an ETS”, 8/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/treasury-should-know-better-about-an-ets/story-e6frgd0x-1226035611467

Good point, Ergas.

Maybe another way to put it more clearly would be that either the government, not Treasury can't honestly and truthfully tell how much the costs of energy would be for consumers under an ETS to achieve the 5% reduction in emissions.

Further and arguably, ETS won't be able to tell exactly whether a target of reduction in percentage terms is achievable or not, given the fact that surely certain sectors or activities will be excluded or not included in the ETS as the original one indicated. That ETS can only tell the parts that are included and that is only a partial as opposed to a full account emissions in the target reduction.

So, it is good politics to hide the costs and not to tell the public about hit pocket costs (leave that to the market, that is their argument of course).

But that is not transparent and honest politics with the public, nor will that provide any certainty to business in terms of investment decision, because the future price of carbon is unknown even though on any day the ETS market may give you a current price.

Any argument of business certainty was, is and will be fanciful thinking and self delusion.

It is good politics too clever by half.


Such a market is not good!

Comments on John Daley and Tristan Edis “Markets still best climate option”, 7/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/markets-still-best-climate-option/story-e6frgd0x-1226034919878

Parts of the article are nonsensical, as the following paragraph from it shows:

"Government should also set a floor to prevent the carbon price falling too low, potentially destroying the value of the market, if emissions reduction turns out to be easier than anticipated."

Isn't it crazy to have a carbon price that is higher than necessary to achieve the target of reduction in emissions?

Why is there a need to artificially inflate extra costs than necessary, for the purpose of that market?

Isn't it suggesting that kind of market would have unnecessarily higher costs?

Is it just to make that market for some people to profit, from that market at the expense of taxpayers and consumers, the same as those genius Wall Street financial engineers to create various complex financial products that led to the near death experience not long ago?

What a silly idea it is!

PS: it may imply that a carbon tax instead of the kind of concept of a carbon market is better and should be preferred.


There are reasons for changing our fiscal system

Comments on Ken Wiltshire “Why change our fiscal system?” 6/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/why-change-our-fiscal-system/story-e6frgd0x-1226034313730

Wiltshire has made a number of good points based on his experience at the Commonwealth Grants Commission.

The question on the inconsistency and contradiction between the Gillard and Swan rush to this review of the GST carve up and their strenuous refusal to include GST in the tax summit or forum late this year is particularly pertinent and significant.

However, as some commentators have said or would say, the current arrangement may be on the side of extreme with a strong equality centric that is in a strange way tentatively why Wiltshire argues that “AUSTRALIA'S approach to our GST carve-up is the envy of the world.”

It appears that there may be some dynamics in federal politics that could have forced Gillard to make some truce with the states and territories or delay some almost irreconcilable issues in federal relations that have a strong bearing on the Gillard government, so the latter won’t be seen as a complete retreat or abandoning its well publicised policies or reforms.

It is good tactics that both Rudd and Gillard governments should have adopted or adopted it earlier, so their focus can be on federal issues, as opposed to being seen as fighting with the states and territories at the same time being subject strong and formidable opposition attacks led by Abbott.

However, a fundamental review on the GST carve up is well and truly overdue. There have been so many reforms in Australian taxation to lower tax rates to provide stronger incentives to income earners. Equally the company tax rate has been reduced substantially. So far, there has been little change in the way of the GST carve up, or “the most comprehensive fiscal equalisation system in the world”, to use Wiltshire articulation.

It is the most comprehensive, virtually by the fact that it includes not only revenue equalisation as some other major industrialised federations (such as Canada and Germany) do, but also expenditure equalisation.

Further it is virtually 100% equalisation, only limited by the ability of CGC in devising assessment methods.

It is comprehensive indeed!

Good that SGX and ASX deal is dead

Comments on Stephen Bartholomeusz “Battling for ASX survival”, 6/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/Wayne-Swan-ASX-SGX-pd20110405-FM9EP?OpenDocument&src=sph&src=rot

Instead of being effectively taken over by SGX, the ASX should consider a formal alliance with it to facilitate the stocks are listed in one and is also listed in the other with nearly nil additional costs.

There could be a joint committee or super board consists only the chairmen and CEOs of the two exchanges to ensure the two exchanges operate in the most efficient way to benefit both.

It was a silly idea, at least on the ASX side, from the beginning to have decided and agreed to the so called merger with or being taken over by SGX.

Only they themselves didn’t realise that and see that under bright daylight.

It is extraordinary for an organisation that has so intimately been in and involved in commercial businesses.


Congestion tax is fanciful

Comments on John Stanley “Congestion tax – the great traffic jam breaker”, 5/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/Traffic-congestion-roads-infrastructure-tax-pd20110405-FM3Y9?OpenDocument&src=sph

It is fanciful to have a congestion tax in cities.

While some people talk about such a concept, it is a flawed and impractical approach. It is never clear whether it is the fault of those people who use the road, or it is the failures of government due to poor planning and/or management, that cause or result in congestions.

Congestion itself is already a cost or tax on those people who are caught in congestion.

In the unlikely event such a tax is introduced, it can be perceived not only as a government revenue measure and tax grab but also as government’s disguise or finding an excuse for its poor management. Further, government may deliberately create more congestions or more areas of congestion to simply raise more revenue.

Once that becomes clear, isn't it the case that the fanciful idea of congestion tax dead in the water already?

In summary, congestion tax might be a good theoretic and economic concept, it is a naïve thinking and nonsensical idea after all.

NBN will do advertisement for the government - indirectly

Comments on Charis Palmer “Inefficiencies that will plague the NBN”, 5/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/Heating-up-the-NBN-debate--The-NBNs-fundamental-fl-pd20110329-FE69K?OpenDocument&src=sph&src=rot

Given that only the whole sellers or larger ISP providers will need to deal with the NBN Co and most consumers and business users of the NBN do not need to know anything about the NBN, why there is any need for the NBN Co to do that education at all is a mystery.

Father the government has created and given NBN Co monopoly on landline communications and there will be no alternatives available. Why does it need to waste that money?

It has all the hallmarks of using/abusing/wasting taxpayer’s money – this time indirectly to do advertise for the government.

A creation and puppy of the ALP government, it has to show loyalty to its political master!

Don't get commercially "politically correct"!

Comments on Robert Gottliebsen “Australia's missing productivity link”, 5/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/TLS-Telstra-Orica-productivity-survey-CEO-pd20110405-FLS68?OpenDocument&src=rot

Here there is an interesting divergence between certain economists including some commentators who focus on the theoretic concept of productivity or the improvement of it on the one hand, and business people and entrepreneurs who are focused on the real world of profit and losses.

The claim that "unless you measure it you can’t improve it" is obviously a fallacy and the wrong type of characterisation or conceptualisation of the issue. It is nonsense to say if you don't measure it, you can't improve it.

It is just like if you don't understand the complex internal mechanics of a car, you can't drive it!

For businesses, understandably profit is the key - without it or without making it business people would fail and bankrupt, irrespective how they have or have not measured and / or improved productivity.

Presumably, there are many businesses that are quite profitable and well managed among those that have not "actually measure it (productivity)". Once you are focused on the essence and the key of business, productivity and the improvement of its may naturally fall into its proper place.

Equally, there must have been some failed businesses that did "actually measure it (productivity)".

In essence, let's not be too mechanical in business and become "commercially politically correct".


Stiglitz's wrong - SDR is not the best alternative to a new global currency!

Comments on Joseph Stiglitz “The best alternative to a new global currency”, 4/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/Stiglitz-US-dollar-yuan-debt-crisis-pd20110401-FH6E9?OpenDocument&src=srch&src=rot

I don't think the title quite reflects the content.

SDR can only be used as an official reserve and that would be perfectly workable if big countries, especially the US, EU countries, China and Japan agreed.

Even for that purpose, there would be a need for how weights of major currencies in the SDR are formed and change with explicit and transparent formula.

However, it would be a very different matter for daily transactions and it cannot be used as a global currency in daily use by ordinary businesses and people if they need to the foreign currencies for businesses or personal transaction needs.

Few people would be interested in holding some SDR for transaction purposes, even though they might be interested and willing to buy it for reserving the value of their assets, just like gold.

Gold is a commodity and is limited in its supply by production and reserves. It also has real world demand for jewellery or some other industrial applications (though seldom used for those). SDR, on the other hand, is a paper currency would be inferior to gold or some other commodities for personal holding.

Those high minded economists should distinguish those two very different roles of currencies.

When they confuse the two, then they create confusions for readers too , or waste readers' time.

Policy strategies for increasing labour participation

Comments on Judith Sloan “PM won't get two million more into jobs this way”, 4/04/2011, http://www.theaustralian.com.au/national-affairs/pm-wont-get-two-million-more-into-jobs-this-way/story-fn59niix-1226032907131

There are a number of good policy options that can increase labour participation rates, market flexibility, economic efficiency and people's living standards.

1. The employment income for people over a certain age, say, 60, or 65 should not be taxed at all and should not be counted to affect their other income for tax purpose.

2. The minimum wages should not be allowed to increase more than inflation plus a fraction of economy wide labour productivity increase to make it a safety net but not to decrease market efficiency.

3. People on minimum wages and standard working hours of 7.30 should not be taxed, that is, the minimum tax threshold should be set at least at that level and indexed with the rate of increase in minimum wages.

4. To encourage people to reduce welfare trap and dependence, the welfare withdrawal should ensure that their marginal tax rates don't increase within a sufficient level of income.

5. Welfare benefits should generally not be allowed to exceed people on minimum wages, unless they are seriously medically handicapped.

A strategy for government on compensations for big polluters - 'three birds using one stone"

Comments on Joe Kelly “Greens warn Labor against punishing households while rewarding big business”, 4/04/2011, http://www.theaustralian.com.au/national-affairs/greens-warn-labor-against-punishing-households-while-rewarding-big-business/story-fn59niix-1226033132019

So far the debate has been heavily focused on simple compensations.

But there are better strategies that the government could adopt to satisfy most sides.

Rather than simply providing compensations to big polluters, a better strategy is to provide them with options to have the priority to access government funded renewable or low emission programs.

It will be good for the government both politically, economically and environmentally.

That would be ‘hitting three birds with one stone’.

So why shouldn’t the government adopt this superior strategy?

Clearly it should. But it needs to employ competent people.

How to get Sydney moving?

Comments on Henry Ergas “Mere money won't get Sydney moving”, 4/04/2011, http://www.theaustralian.com.au/national-affairs/more-money-wont-get-sydney-moving/story-fn59niix-1226032905744

Only having read the concluding paras without reading the whole article, couldn't it be better both logically and politically, to combine immediate actions with longer term structural design at once?

Given the existence of the problem for so long, surely there must be some no-regret transport projects that can go ahead immediately, no matter what a longer term structural consideration will result in.

NSW/Sydney people are sick and tired of of spins and inactions, or worse wastes of taxpayer's money and expect action.

They have just voted for action and they deserve rightly it.

Of course, Ergas is right, only simple action without a long term best design can only lead to more wastes and more serious jams.

So, O'Farrell should and must combine the two to provide both assurance and best policy, for taxpayer's money and improve people's lives and living standards.

Economists also need to be aware of the real world too and combine long term perspectives with short term actions as well as a dynamic optimal trajectory, I am afraid to say.

Can't simply follow EU's past

Comments on Seamus French “Follow the EU and US on a carbon price or we will just export jobs”, 4/04/2011, http://www.theaustralian.com.au/national-affairs/follow-the-eu-and-us-on-a-carbon-price-or-we-will-just-export-jobs/story-fn59niix-1226032905550

How much is the EU carbon price now?

If we don't do anything and only start it in 100 years later, then should we still adopt the EU starting carbon price and its trajectory?

Isn't it absurd?

Many argue that we only emit 1.4%, but never mention at the same time that we emit more per capita than EU. How much is Australia’s share of the world population? And what is EU’s share of that?

What logic is that?

It is misleading, isn't it? Or it is not too far from hypocrisy, is it?

PS: while the argument that carbon leakage and distortions of international competitiveness and trade have some merits, most people conveniently forget the fact that high per capita emission countries of industrialised economies including and particularly Australia should compensate the low emission developing countries for damages to their equal rights to good climate.

Taking that into account, while Australia can have a carbon price and a scheme of broad and country specific border carbon adjustments, it should also reimburse to the governments if not pay more to most developing countries.


NBN Co. in trouble already!

Comments on Joe Kelly “High prices force NBN to suspend cabling tender process and look elsewhere”, 1/04/2011, http://www.theaustralian.com.au/business/in-depth/high-prices-force-nbn-to-suspend-cabling-tender-process-and-look-elsewhere/story-e6frgaif-1226031831542

Here is the problem with the NBN Co. business plan that uses unrealistic assumptions and projections.

Employment is tight and construction activities do not allow for the price that the NBN Co. has assumed in its plan.

What do you do if there is more demand for labour than supply, or more construction activities than the current capacities can meet? Of course that means firms have to offer higher wages for labour and higher prices for materials to attract more resources or even to keep their existing ones.

Now the NBN Co. is saying tender prices are too high and have to suspend the cabling tender process.

This is just an example of what will emerge in building the NBN in Australia in the future, costs overrun and blowout.

Didn’t the NBN Co. consider this when making its business plan? What a joke it is!

What is a responsible stakeholder in climate change?

Comments on Katherine Morton “China and non-traditional security: Toward what end?” 1/04/2011, http://www.eastasiaforum.org/2011/03/31/china-and-non-traditional-security-toward-what-end/

I find the following characterisation of China's position on climate in the context of own development needs and responsible stakeholder interesting and amusing.

"Climate change is the one global concern that has yet to be securitised in the official Chinese discourse. Contrary to the logic of interdependency, while water, food, energy, and natural disasters are all perceived as security issues, climate change is classified solely as a development issue. This is largely a result of the Chinese concern over maintaining leverage in global climate change negotiations. The principle of common but differentiated responsibility relies upon China’s claim to developing country status rather than responsible stakeholder status."

It appears to imply that China is not a responsible stakeholder on the climate change issue. If that is true, it is more likely than not to misrepresent China’s position, or has misinterpreted or misunderstood it.

I think China, by not asking or not strongly asking for equal per capita emission entitlement, indicates that it is a more responsible stakeholder than most if not all industrialised countries on climate change.

There has been an unmentioned underlying and distorted logic internationally on climate change and emissions mitigation, that is, the disregard of the equal rights of everyone irrespective their income living in both developed or developing countries to the atmosphere by high emission countries. Instead of paying appropriate and adequate compensations to citizens/residents in low emission countries for excessive emissions by high emission countries to cause damages to the former’s rights to the atmosphere and cause adverse climate changes, they have dressed up some inadequate and future money as assistance or aid.

Most economics textbook would contain principles on how to deal with negative environment externalities such as pollution. They are not complex and are simple to understand. It should not be a too much stretch to one’s imagination to assume that most leaders and officials in industrialised countries have some knowledge of them.

They should have the courage to live up to their obligations to the human kind and to face their responsibilities in paying for the costs of above average per capita emissions which are currently unaccounted for, as if they make sacrifices. What a joke it is.

They should practise what they talk about universal human rights. Where have their attention been to everyone’s right to the atmosphere?

Tony Shepherd's myths

Comments on Tony Shepherd “Eight myths of a carbon tax”, 1/04/2011, http://www.theaustralian.com.au/national-affairs/commentary/eight-myths-of-a-carbon-tax/story-e6frgd0x-1226031613147

Instead of expose the myths as the title suggests, the author creates his own myths, by misleading information, incorrect facts and distorted logic.

In another word it is purely self-interest serving, implying lobbying for potentially more compensation.

Let’s expose this by one example in the article. It says: “1. The greatest myth is that if we lead the world in carbon pricing the rest of the world will follow. We produce 1.5 per cent of the world's CO2; China and America account for 40 per cent. A 5 per cent reduction in Australia's emissions would be cancelled out by as little as a 0.3 per cent increase in China's emissions.”

There is no such a myth in here in Australia at all. We are not leading the world. To the contrary, we have been lagging or dragging it behind. As Tony Shepherd mentioned in the article, there is the CO2 trading in Europe as the obvious precedent scheme.

What does that mean to his distorting argument as if we are leading the world? It means he is contradicting himself.

Note that that is his number one and greatest myth!

Credible or incredible?

Gillard needs to deliver

Comments on Matthew Franklin “We are the party of the people: Julia Gillard”, 1/04/2011, http://www.theaustralian.com.au/national-affairs/we-are-the-party-of-the-people-julia-gillard/story-fn59niix-1226031640696

Gillard is making some interesting speeches, with lot of rhetoric.

In terms of national leadership, Gillard is so far shown to be the least principled among the living prime ministers, though she deserves some benefit of doubt due to short time she has become prime minister.

She is no Hawke, no Keating and certainly no Howard. They are of different orders.

Rather than attacking Abbott, she should focus on reforms and delivery of good policies and good governance, including tax reforms to simplify the tax system and to make it more efficient to enhance incentives and productivity and possibly a carbon tax as a price signal and an efficient way to deal with reducing emissions and compensate consumers adequately and fairly.

The job of oppositions is to hold the government to account. The job of government is to govern and deliver.

She should resolve the difficult issue of asylum seekers arriving in boats. Good immigration policies together with water and environment issues are also important.

Returning the budget to balance or surplus should and can be achieved by withdrawing from certain emergence stimulus fiscal programs in anticipation and in the wake of the GFC without excessive cuts to public services provided to the public. This is because there has been no or little FC in Australia.