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Joyce tactic unlikely to be wise

Comments on Alan Kohler “An ironic Qantas victory”, 31/10/2011, http://www.businessspectator.com.au/bs.nsf/Article/Qantas-Leigh-Clifford-grounding-Fair-Work-Gillard--pd20111031-N5RQA?OpenDocument&src=sph&src=rot

No matter what the situations Qantas was facing, the grounding of the entire fleet with such hastiness was not a good tactic to employ.

Instead, Joyce could give a real warning that he would do such a grounding in a week or 24 hours if ....

That would have also forced the government into urgent action.

Although it is hard to predict the real long term impact on Qantas of such a drastic grounding, Qantas may have shot its own foot by it.

However, Qantas management may have taken a view that its international passenger flight business will not be profit in its current form, so the damage to that part would come anyway.

The task for Qantas is to bounce back quickly in its domestic passenger flight business.


Better mix of macroeconomic policies needed

Comments on Bill Evans “WEEKEND ECONOMIST: Racing to a rate cut”, 29/10/2011, http://www.businessspectator.com.au/bs.nsf/Article/Reserve-Bank-November-Meeting-rate-cut-25-bps-pd20111028-N39US?OpenDocument&src=rot
It is interesting that both official and market interest rates in Australia are much much higher than in most advanced economies.

While one might argue that our economy is also much better than theirs, simply doing it masks a difficult policy questions. That question is: how can monetary and fiscal policies be more closely coordinated, as generally implied in economics textbooks, to achieve better and most desirable results.

I think fiscal policy should do much more to encourage people to work in regions and areas where labour shortage are the most severe, such as the fast lane areas of the so called 2 speed economy.

Taxation policy should be adjusted to do the job to give people more incentives to work in those region and areas.

Fiscal policy can be more flexible to target regions and industries sectors, while leaving the monetary policy to accommodate the whole economy.

I think there is a need to establish a national economic policy commission, so it can recommend to the government and the RBA on the best mix of the monetary and fiscal policies to achieve the best national outcomes and to benefit the consumers more, such as lower interest burdens on mortgages and other borrowings.


A hard call by Roubini, maybe

Comments on Andrew Burrell and David Uren “'Hard landing' coming in China, warns Nouriel Roubini”, 26/10/2011, http://www.theaustralian.com.au/business/economics/hard-landing-coming-in-china-warns-nouriel-roubini/story-e6frg926-1226176718241

China is in a much better position to weather another downturn in many of the world's advanced economies.

There are a number of reasons for such optimism about the Chinese economy. Firstly, its central government debt is much more manageable compared to many of the advanced economies.

Secondly, the Chinese government has a higher degree of control of its economy, largely as a legacy of its incomplete transition from its past planned economy.

Thirdly, it's domestic demand is large and there is considerable room to invest in infrastructure and housing due to its urbanisation process.

Fourthly, while another downturn in the advanced economies would reduce their aggregate external demand for each of them, it does not necessarily mean China's exports to them as a whole will be reduced to the same degree. To the contrary, China's exports may replace some of the trade between those economies including some of their domestic outputs.

So if one really understands the Chinese economy and its dynamics including its experience from the last GFC, one will certainly be optimistic about its growth over the next decade or so.

However, a good growth may not necessarily mean more growth in demand for raw materials over the next decade at the same speed as in the past decade or so.

The "material intensity" of the Chinese economy is likely to fall gradually at first and then more rapidly in a few years' time.
That is determined simply by its stage of economic development.

Euro solution, sustainability concept, long term and logic

Comments on James Kirby “The Nouriel Roubini CHOGM show”, 26/10/2011,

I think a better solution for Europe is that certain countries leave the euro but still remain in EU and receive some help from EU with the flexibility of own currency and monetary policy.

The claim of EU disintegration is overdone, although it is better for some euro members to leave to make their adjustments less painful and more effective and efficient.

In terms of the sustainability of the Chinese economy, one needs to understand stages of economic development and changes in economic structure along the path of development, especially rapid catching up.

It is just like a person grows in weight and height before maturity.
In that analogue, it is correct to say that growth in weight and height is not sustainable in the long term, but very few people would say it and would feel it laughable if someone says

If one understands that analogue, one would not be too fixated on using the sustainability argument, especially when it is combined with in the long term!

A mixed denomination is good for both sides

Comments on Robert Gottliebsen “France passes the baton to China”, 28/10/2011, http://www.businessspectator.com.au/bs.nsf/Article/France-China-US-EU-debt-deal-summit-loan-credit-cr-pd20111028-N2RD8?OpenDocument&src=sph&src=rot

If your information is correct, surely a mixed currency denomination required by the Chinese is fairer than using either currency alone.

The Chinese know its currency is rising in value, partly as international pressures. So if it is complete denominated in euro, then it is pretty hard to sell it to its people by the Chinese authority.

Most people understand why the Chinese are resisting rapid currency appreciation, because it will make huge losses due to its international assets or reserves, mostly in $US.

It is hypocritical of the US for it to pressure the Chinese to appreciate its currency against the $US without any mentioning of any considerations of the huge losses China will incur.

Qantas and Joyce need some flexible tactics

Comments on Stephen Bartholomeusz “A dead end for Qantas unions”, 28/10/2011, http://www.businessspectator.com.au/bs.nsf/Article/Joyce-Qantas-unions-IR-competition-airline-pd20111028-N34EM?OpenDocument&src=sph&src=rot
If the analysis is the case with Qantas, then surely Joyce and his management team should be able to convince the unions with a win-win outcome that will be the best outcome for both the airline and its employees.

I think Qantas and its CEO Joyce may be prudent to be a little more tactical in its dealing with its employees and the unions.

While many people probably don't the exact details of the disputes and the negotiations between the two sides, but on TV at least the unions have shown some flexibility in deferring their industrial actions, but each time it seemed that Qantas spokeswoman showed a very hardline attitude that hardly has been tactical, or win the sympathy of the public.


China needs a new national culture

Comments on Yao Yang “From production-oriented to welfare-oriented government in China”, 24/10/2011, http://www.eastasiaforum.org/2011/10/23/from-production-oriented-to-welfare-oriented-government-in-china/

While it may be ideal to have a good social welfare system, China cannot afford moving away from high economic growth any time soon.
There will be a stage for China to move from the current state of low, unequal and incomplete of welfare to a state of comparable social welfare to most other countries, but it relies heavily on its high economic growth to address many of its urgent tasks.

Clearly there are some who would feel as victims of increasing inequality, a slower growth may generate its own problems.
If a tax reform in Australia would require government revenue available to compensate the losers, China's high economic growth has a similar role to address many social problems. Without adequate growth prematurely before its income becomes largely comparable to middle to high income countries, the Chinese government would face the issue of the legitimacy of its one party rule.

This issue will be especially important when the Chinese society has increasingly lost historical and cultural heritages and in need of seeking a new national culture.

The Chinese government needs to lead in this endeavour, otherwise people would move ahead of it.

Professor Peter Morici's is China bashing, again

Comments on Peter Morici “Fed a US housing fantasy”, 24/10/2011, http://www.businessspectator.com.au/bs.nsf/Article/US-Fed-economy-housing-rates-oil-bonds-Bernanke-pd20111024-MWUW4?OpenDocument&src=sph&src=rot

Prof Morici balmes China for the US trade deficits.

Even let's assume he's correct in his that particular argument,

he, however, is not consistent fundamentally in his argument by only focusing on trade and ignoring the saving investment conditions.

It is too easy for some Americans to blame others for their own problems, but how others outside the US could make the US government huge budget deficits?

The US trade deficits with the rest of the world is at least partly a reflection of over spending and insufficient savings nation wide.

Unless the Americans recognise their own problems and take effective actions to rectify them, blaming other will not solve their saving deficits problems.

When Prof Morici is saying the Fed fantasy, he is also creating his own fantasies about the US economy!

It's just as simple as that!

Instead of blaming others, the professor should be grateful for the rest of the world for providing funds available to the US!


Gillard failed on border protection and leadership

Paul, you have really missed the most important point when you say the following: "These events reveal a failure of Australia's system of government. One of the cardinal responsibilities of any Australian government is to protect the borders, and every PM since
Federation has been a border protectionist.
That responsibility has now been compromised, and the consequences will be severe. Gillard can be rightly accused of poor tactics, but her offshore policy has been destroyed by forces beyond her control -- the High Court, Abbott and the Greens."

And that is, the prime minister has lacked the political leadership skills required to lead on difficult issues and in difficult times.

If she can boast the pass of the carbon tax legislations, she should have the courage to confront her own shortcomings and work on it.

That is the key to her problems.

The piece by Niki Savva yesterday on the prime minister, though a bit harsh, had nevertheless some excellent points.

PS: Whichever political persuade is in government it is its duty and responsibility to govern and to protect the border.

If it can't do it beyond its own ability, it should seek a fresh mandate from the voters.

That is the simplest way of the current Australian government system.

If and when Attott is the leader of government, if and when he can't get its own border protection policy, he clear should call a double resolution of parliament and get a fresh mandate. He should be expected to do so if and when it becomes necessary.

Gillard and Rudd

12/10/2011, http://www.theaustralian.com.au/national-affairs/opinion/poll-brings-julia-gillards-troubles-to-the-boil/story-e6frgd0x-1226164291828
It may or may not be too late for the federal ALP government's turn of fortune if it changed leadership in a bloodless and smooth transition from Gillard to Rudd.

Rudd has the experience to defeat the most skilful political opponent in the last decade and a half, that is the former prime minister John Howard, and rally the public, no matter it was
false appearance or not.

Abbott, while often underestimated by many for his powerful political leadership skills, may not be as effective as he has been to undermine Gillard's prime ministerial leadership, even though Rudd was deposed shortly after Abbott became the opposition leader. Rudd's demise from the previous prime ministership was his own unfortunate political skills towards his own caucus colleagues, and nothing more than that.

He should have learnt enough from the last political episodes, including the key shortcomings and failures such as overpitch of the climate change issues and his back away from the ETS after those kitchen cabinet colleagues advised him to do so, as well as his unfortunate role in the RSPT and his ill treatment of his colleagues.

He may be still revengeful, but he will be much more skilful next time.

And that is the hope the federal ALP can get if they act to ensure the leadership change is seen as natural and smooth and not as treacherous and bloody.

They will realise that and take necessary actions, no matter how painful they may be for some of them, especially those who played key roles in the removal of Rudd the last time. Self interest will dictate their actions, or rather inaction to oppose such a change in
leadership from the current one to Rudd.

I’d bet that is more likely than not to happen.

It would be interesting to see if the coalition will also need to change should Rudd become the prime minister again.

No need to confuse the purpose of the carbon tax

manufacturing, PM told by Andrew Liveris”, 7/10/2011, http://www.theaustralian.com.au/national-affairs/industrial-relations/use-new-taxes-to-rescue-manufacturing-pm-told-by-andrew-liveris/story-fn59noo3-1226160724916
Mr Liveris argument for setting aside the mining revenue for use for more productive and innovative purposes is good, but the same argument of his for the carbon tax is not necessarily equally well made.

The proceeds from the carbon tax should not simply be taken as a government revenue source as such, instead, it should be ideally completely neutral to the government. The main reason is that the purpose of a carbon tax is not to raise revenue per se, but to use it as a price signal to reduce carbon emissions. Treating the carbon tax as a revenue source just simply confuses the end with means and loses the public support for a carbon tax even further and makes it politically less feasible.

The proceeds from any carbon tax should be returned to the Australian residents who have the rights to a good and/or better climate. Only when it is done exclusively, explicitly and completely transparently for the purpose of emission mitigation that it will be most efficiently and effectively with the support of the majority of the Australian public.

Further, whether rescuing the manufacturing is the right course or not, needs a careful study and objective debate to be resolved. It is another matter entirely.


Don't expect too much from businesses

Comments on Peter Shergold “Business must engage in battle for hearts and minds”, 18/10/2011, http://www.theaustralian.com.au/news/opinion/business-must-engage-in-battle-for-hearts-and-minds/story-e6frg6zo-1226169108879
It seems Professor Shergold is creating a new capitalist economics for business.

It is, however, unclear whether it is realistic or feasible to ask business of so many firms to do so.

It ignores the difference in the role the government should play and the role businesses should play.

Certainly there would be free riders, and perhaps many will be such free riders under what the professor is proposing!

A fundamental economic principle from Adam Smith is that social value is created at the same while every unit is pursuing it own interests!

That has been the social basis for capitalist businesses.

Now the professor is challenging that very principle!

I am not sure his proposal is sound from business point of view.

I think a possibly feasible proposal is to appropriately regulate businesses by government, so the Smith principle can always hold even when market is imperfect!

That role is for government, not for businesses, I would imagine.


Commenting 'Death and taxes'

I suspect there is some contradiction in your argument somewhere.
If on the one hand, no tax on superannuation after 60 benefits the oldies, it should arguably reduce the burden on the social pension system and hence the burden for the young.
Further, if the non tax of superannuation can encourage people to put aside more of their own money into superannuation, that can work as alternative to increasing superannuation guarantee!
You seem to be as greedy as the government to only see the potential revenue from taxes, but to have forgot the beneficial side of no tax on superannuation after 60!
One needs to be consistent after all!

What China should do on rare earth minerals?

Comments on Nabeel A Mancheri “China’s export restrictions on rare earths”, 6/10/2011, http://www.eastasiaforum.org/2011/10/06/china-s-export-restrictions-on-rare-earths/

While there are complaints of China's export restrictions on rare earth minerals, most do not show the impact on prices of those minerals. It would be useful to include price information in such discussions.

I am not familiar with the situation of rare earth mineral deposits, production and supplies in both China and in the world. I think if China produces 97% of world supplies, a fair rule for China to play should be index the prices of rare earth minerals with other international minerals and metal prices and imposes some sort of royalties based on such indexation.

Australia is an introducing mineral resources rent tax on some minerals, following the failure of an earlier attempt by the Rudd government to introduce a mining super profit tax.

Arguably, there are some differences between China and Australia in terms of the ownership of minerals (more broadly the land). Private ownership of land is not as significant in China as in Australia. The Chinese government arguably has stronger legal authority to impose a mineral rent tax based on the ownership status.

Once the mineral rent issue is resolved, China should not impose export quotas, so both Chinese and non-Chinese customers of rare earth will face the same price.

Of course, China can take additional measures based on environmental concerns, but that should be done on the non-discriminatory basis, that is, not targeting trade.


Which is worse - the tax forum or the 2020 Summit?

Comments on Peter Anderson “Six immediate reforms to make tax forum more than a talkfest”, 3/09/2011, http://www.theaustralian.com.au/national-affairs/six-immediate-reforms-to-make-tax-forum-more-than-a-talkfest/story-fnab4up0-1226156384664

No matter how much cynicism, it is well justified.
When the 2020 summit was held, the Rudd government was very strong and popular. But how many of the ideas from that summit have been actioned?

Back to now, the Gillard government was a minority government and deeply unpopular. Besides, there is the Henry taxation review report with the government for nearly two years. So, what can one really and seriously expect from this taxation forum?

Now back to your argument about lower tax rate to raise more tax revenue. It is not too dissimilar to the already tried and failed Reagan experiment in the US based on the Laffer curve idea. Hoping it will work in the Australian context is more likely to be akin to wishful thinking.

One of your proposals is to blame the states for the green energy measures they have introduced, without mentioning federal failures in this area,such as the pink batts program. That also means your argument that the GST is not raised by the states and hence they don't have incentives to contain their expenditures is empty.

Your suggestion of increasing the efficiency dividend from the APS is more like an insult to many APS employees who work very hard but their pay increase cannot even match the inflation. It is so easy for you gays to say to increase the efficiency dividend! Why don't you say to increase tax on business profit to provide revenue for services?