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A more balanced approach to PPPs

Comments on Stephen King "As another toll road bites the dust, what is the future for PPPs?", 25/02/2013, https://theconversation.edu.au/as-another-toll-road-bites-the-dust-what-is-the-future-for-ppps-12386

The solution mentioned in the second last paragraph is a bit of too one sided in terms of risk bearing, because it would leave the future users and the government bear all the risks and the private partners virtually none.

A more balanced one is that a solution also make the private partners bear at least half of the risks and the government as the public partner bears half, similar to the Henry mining tax design, but differs to that design in a crucial and fundamental way, that is, the risk sharing is built in in the design before a project starts.

Unlike the Henry mining tax which would come into play in the middle after a lot of risky private investments have already been made and factored into the price of those mining venture as reflected in the share price.

Only in this way it would be a fair deal and the private partner will put likely maximum efforts into those PPP projects. Otherwise, moral hazard may arise, because, in most cases when government is involved and where the responsibilities are not clearly defined, the government (taxpayers) would end up if the projects go wrong, but the private partners will gain if the projects go upside.

As to the case that Australian governments can borrow at much lower rate, why don't they borrow and then quasi lend to the private partners to share the savings, say half and half, so that it does not change/affect the balance sheet of the government but the public partner (government, that is the taxpayers) can benefit from it?


Productivity Commission should be given more indpendence

Comments on Bill Carmichael "Expand the reform agenda and let Productivity Commission be heard", 20/02/2013, http://www.theaustralian.com.au/national-affairs/opinion/expand-the-reform-agenda-and-let-productivity-commission-be-heard/

I think it is important not only that the PC should be fully utilised in developing big policy items, but also that it should be well funded to the degree that it has the capacity to initiate its own policy review/research to deal with any areas where it sees there is big potentials in addition to government initiated reviews.

To do that, PC should be more independent and should be reporting to the Parliament as opposed to the government of the day.

Of course, government initiatives should have priority, should there is a conflict between government initiatives and PC's own.

In this way, it will be ensured that productivity will be in the centre and heart of government policies irrespective which side of political parties is in government. It will make Australia will be more efficient, more productive, more internationally competitive and less wasteful in spending government resources.

It might be called the Australian Parliamentary Productivity Commission, in a similar fashion to the newly established Parliamentary Budget Office.


Savings, investments and industrialisation/urbanisation versus external balance

Comments on Michael Pettis “Ten signals to watch as the world resets”, 19/02/2013, http://www.businessspectator.com.au/bs.nsf/Article/China-rebalancing-growth-markets-GDP-trade-pd20130219-52RAQ?OpenDocument
I am not too sure how much finance Professor Michael Pettis understands economics, even the basic economic principles.
China is still industrialising and urbanising. It's level of per capita income is very low compared to industrialised countries. It has more than half of its population, probably more 700 million, still live in rural villages. There are a lot of infrastructures that need to be built to facilitate its industrialisation and urbanisation.
Naturally, that needs investments, huge investments over many years.
It is against this background that Professor argues the following highly questionable points:
"China must bring both its savings rate and its investment rate down sharply. If it can bring savings down faster than investment, China is probably rebalancing in the right way, and this should show up as strong growth and a declining trade surplus."
Without savings and investments, how could China industrialise and urbanise?
This is where some academics just simply follows some popular topical sayings and prescribe non-sense ideas.
Given its needs for investments, the sensible policy is to channel its savings to investments in infrastructure and urban constructions to accommodate the transfer of hundreds of millions of rural people to urbanised living.
Professor is understndably worried more about so called external balance. But that should not necessarily require a cut of both savings and investments. As long as savings are balanced by investments, external trade should also be balanced.
That is probably economics 101 and even a finance professor should understand that.
Apparently Professor Pettis does not appear to.
This is also why many Chinese university students are so disappointed with their professors and lectures.
Now we can see some of the reasons why that is the case.


Wilkinson's sex and interest group' bias

Comments on Cassandra Wilkinson "If Rudd is Pepsi, can we have a Coke?", 18/02/2013, http://www.theaustralian.com.au/national-affairs/opinion/if-rudd-is-pepsi-can-we-have-a-coke/comments-e6frgd0x-1226579832152

Cassandra, with due respect, your view and analysis is nonsense, inconsistent, contradictory and sex discrimination. It is a shame even more given that you are the same side of the sex claiming victims.

It would have had a little appeal if this piece was coming from the opposite side.

You said Rudd Prime Ministership is a case that "it's already been tried, tested and rejected." But what about Gillard's? Relatively speaking, whose is worse or better?

Your illogical reasoning and analysis reflects how poor your analytical skills and how poor your judgement is.

Yes, we all watched on TV that Rudd didn't treat nicely the NSW previous premier who's female and your boss since you worked as an advisor to her.

But one should get over that given that changed politics since.

Koukoulas analysis is biased

Comments on Stephen  Koukoulas "Western Australia's easy ride", 18/02/2013, http://www.businessspectator.com.au/bs.nsf/Article/Western-Australias-easy-ride--Why-Western-Australi-pd20130218-4ZRNT?OpenDocument&src=sph&src=rot

Stephen, you may have a point (Western Australia's easy ride, February 18).
However, one important point is missing from your analysis, that is, how much WA has been contributing to the federation financially in recent mining boom years, not only through taxation revenues, but also through higher FIFO workers possibly from Eastern states.
As an experienced economist, presenting only one side and ignoring the other side of a story is not convincing and cannot achieve the objective of decent and professional analysis.
Yes, federation does have its advantages and part of them are mentioned by you, that is, the scale and diversity of the federation over a much smaller state. It is like a in-built insurance that the federation affords without the need to pay for it.
But that does not equate to a one-sided story ad analysis.
To be comprehensive, a complete and representative analysis is needed to see and tell the costs and benefits of the federation to WA, not for recent years, but also for longer periods, including the past and possibly the future.


Rudd the unpredictable in the coming election

Clearly the Rudd factor is the most explosive and unpredictable in the coming election, not just for the ALP, but arguably also for the coalition, because if the ALP switches to Rudd, then the coalition may also switch to another person as opposed to continue with Abbott as the leader. The difference in voter appeal between Rudd and Abbott would make it too hard for the coalition to bear and for the fear of losing another unloseable election.

I think what Rudd and indeed his supporters should do is to devise a strategy of approaching the ALP heavy weights and assure them that the goal is to win the next election and to win as many seats for them as possible and there will be no retribution but complete reconciliation and the reliance on merits and talents.
Clearly, Shorten is a key figure among heavy weights. However, some more neutral heavy weights could also play a pivot role, given that the prospect of winning the next election is getting more and more impossible day by day and the interests of the whole party should be paramount in any consideration.

Gillard has been given enough opportunities and time to demonstrate her Prime Ministerial leadership skills, but her performance over the past couple of years has been mush less than satisfactory and boarded on the more disappointing to say the least.
Swan is another uncertain factor in the sense that should he realise that Gillard's fortune may certainly improve should he stand down as early as possible and leave at the next election. But Swan is unlikely to do that.

Should the Rudd supporters try to hand out more olive branches to the neutral and those within the Gillard strong supporters, the situation may change very quickly. It needs some real change from Rudd and the sooner he realise that the better his political fortune will become.

Rudd is smart enough to learn what is needed and required and take the necessary steps.
Past lessons are rich enough.


Volume based royalty regime not that bad as some think they are

Comments on Stephen Bartholomeusz “The premier factors undermining the MRRT”, 12/02/2013, http://www.businessspectator.com.au/bs.nsf/Article/mrrt-mining-tax-royalties-oakeshott-greens-politic-pd20130212-4U3P3?OpenDocument
Stephen, I think you and many people are mistakenly incorrect on the merits of the current volume based state mining royalty regime and how it practically operates, as well as some of the shortcomings inherent with the profit based resource taxes.
The current state volume based royalty regime is actually not as rigid as you people think it is and it can be changed to suit the actual situation with particular mines, e.g. no royalty or reduced royalty paid in the first number of years of producing minerals and in the late stage where costs are higher.
More importantly, volume based royalty reflects the estimated value of owning the minerals, as opposed to the profit sharing situation under the profit based resources taxes.
To sharpening the point, if companies are so inefficient that they would not produce any profits even though efficient companies would produce, one would have a situation that the value of owning the minerals would be becoming 0.
Further, more efficient firms would be taxed more heavily than less efficient firms in terms of the same minerals, simply because the former generate more profits than the latter do.
Why should owners give away their value to inefficient firms and punish more efficient ones?
Is that fair to the owners or minerals or mining companies?
Further, minerals are generally not renewable products, so a volume based tax can capture that value of non-renewable minerals.
Henry and Treasury people were either naively mistaken or deliberately misleading on this issue on the relative merits of the two regimes.
Other people including many economists and business commentators have been simply too lazy to use their own brain and as a result fallen into the same trap.
So, let's all have a cold shower and have a realistic analysis of the two royalty regimes and not simply ignore the reality and be mistaken hypothesis as actual outcomes.


Shameful for all involved in MRRT design

Comments on Sally Zou et al "Mining tax shortfall: the experts respond", 9/02/2013, http://theconversation.edu.au/mining-tax-shortfall-the-experts-respond-12105

When the truth comes to daylight and while we see the dreadful position and policy/taxation skills of the Treasurer and the PM, no one should forget those advisers and the economic and tax advisory institutions behind the scene who were involved in the design of the tax and its finalisation and provided the shameful and deceitful numbers to the public.

At the time, not many reporters, analysts and commentators questioned the numbers provided to the public, even though when both the tax bases and the rate had decreased as well as more generous deductions while the projected total tax didn't change much from the original Henry design.

An incompetent government is generally accompanied by equally incompetent advisers and related institutions.
A further shame is that is is equally likely that those advisers and key persons with the related institutions would have got their promotion similar to the way that the Treasurer became the deputy PM.