Comments on Paul Kelly “US bull wants help in the China shop”, http://www.theaustralian.com.au/national-affairs/commentary/us-bull-wants-help-in-the-china-shop/comments-e6frgd0x-1226071257169
Are the Americans unrealistically defying historical trends in hoping that it will be able to continue to dominant in the world economically and militarily?
Simple math suggests that Asia's giants, like China and India with more than a billion population each and faster economic growth, will take over the US as world top economic powers and with it military powers too.
The speed of China's economic growth in the past three decades suggests it is likely to take over the US in between 1 and 2 decades.
With such a background, the pure dominance mentality or intention of the US, if maintained and continued, will not be conducive to world peace. To the contrary, it would be more likely to lead to instability and conflicts.
It is time for the US to be more sober and recognise the inevitable historical changes. Its power is not declining, but the powers of others are growing faster.
Australia should influence the Americans to make the right decisions. It is in the interests of both, as well as world peace.
2011-06-07
Carbon tax and international ETS
Comments on Michael Stutchbury “Carbon price may take the heat off “, 7/06/2011, http://www.theaustralian.com.au/business/opinion/carbon-price-may-take-the-heat-off/story-e6frg9p6-1226070476597
While it is true that "the Labor-Greens carbon tax model does not allow business to buy international permits for up to the next five years", it is because no hard thinking has been done on how to linking a carbon tax with an international ETS, partly as a result of no international ETS available yet.
It is possible to have a carbon tax model in Australia and use the tax revenue to buy international carbon emission reductions. In this scenario, the nation as a whole is a buyer of emission permits, as opposed to individual companies to do it to allow them to emit above their domestic quotas that would be the case under a domestic ETS.
As long as the combined reduction in emissions under a domestic carbon tax and the purchased emissions reduction meets whatever targets set as the country's requirement, the country would have fulfilled its reduction obligation.
So, carbon tax models and international ETS can coexist with no difficulty.
It is interesting that for so long few people have focused on this most efficient system to achieve emissions reduction. A carbon tax is arguably more efficient means than ETS in administration.
It is time for domestic ETS proponents to discontinue their myth on ETS and recognise the more efficient carbon tax approach.
PS: of course, no matter it is the traditional ETS and my proposed system of carbon tax and ETS, they will all involve international transfer of payments for emissions entitlements. It would mean high emissions countries will need to pay for low emissions countries for above their average emissions. This can be politically difficult for any individual country at present without a well functioning international market.
While it is true that "the Labor-Greens carbon tax model does not allow business to buy international permits for up to the next five years", it is because no hard thinking has been done on how to linking a carbon tax with an international ETS, partly as a result of no international ETS available yet.
It is possible to have a carbon tax model in Australia and use the tax revenue to buy international carbon emission reductions. In this scenario, the nation as a whole is a buyer of emission permits, as opposed to individual companies to do it to allow them to emit above their domestic quotas that would be the case under a domestic ETS.
As long as the combined reduction in emissions under a domestic carbon tax and the purchased emissions reduction meets whatever targets set as the country's requirement, the country would have fulfilled its reduction obligation.
So, carbon tax models and international ETS can coexist with no difficulty.
It is interesting that for so long few people have focused on this most efficient system to achieve emissions reduction. A carbon tax is arguably more efficient means than ETS in administration.
It is time for domestic ETS proponents to discontinue their myth on ETS and recognise the more efficient carbon tax approach.
PS: of course, no matter it is the traditional ETS and my proposed system of carbon tax and ETS, they will all involve international transfer of payments for emissions entitlements. It would mean high emissions countries will need to pay for low emissions countries for above their average emissions. This can be politically difficult for any individual country at present without a well functioning international market.
2011-05-30
Bold reforms should start from government governance
Comments on Graham Bradley “We need to have faith in the government's sums”, 30/05/2011, http://www.theaustralian.com.au/national-affairs/we-need-to-have-faith-in-the-governments-sums/story-fn59niix-1226065153933
Bold reforms are needed and leadership to reforms is essential.
If the federal government is serious in reforms, it should start from reforming the governance of the government as the first step, or at least in conjunction with other reforms.
In terms of reforming government governance, maybe a national commission on economic policy should be established. Such a commission should have a component in budget integrity, as well as other economic policies, such as the desirable macroeconomic setting for both fiscal and monetary policies.
In terms of other bold reforms, while the Henry review report could be used as the starting point, its shortcomings should be recognised, such as the exclusion of GST in the review, as well as the lessons learnt from the RSPT/MRRT processes.
The tax forum should also include the carbon tax and related compensation measures, or ETS in its agenda.
Further, there should be a body to make sure the forum produce good outcomes and be implemented, as opposed to the 2020 summit.
To meet the challenges from population aging, there must be enough incentives provided for people to work longer, save more and optimise spending on healthcare and other consumptions.
Bold reforms are needed and leadership to reforms is essential.
If the federal government is serious in reforms, it should start from reforming the governance of the government as the first step, or at least in conjunction with other reforms.
In terms of reforming government governance, maybe a national commission on economic policy should be established. Such a commission should have a component in budget integrity, as well as other economic policies, such as the desirable macroeconomic setting for both fiscal and monetary policies.
In terms of other bold reforms, while the Henry review report could be used as the starting point, its shortcomings should be recognised, such as the exclusion of GST in the review, as well as the lessons learnt from the RSPT/MRRT processes.
The tax forum should also include the carbon tax and related compensation measures, or ETS in its agenda.
Further, there should be a body to make sure the forum produce good outcomes and be implemented, as opposed to the 2020 summit.
To meet the challenges from population aging, there must be enough incentives provided for people to work longer, save more and optimise spending on healthcare and other consumptions.
2011-05-25
China and Japan are vastly different
Comments on John Lee “Japan's economic demons dog China”, 25/05/2011, http://www.businessspectator.com.au/bs.nsf/Article/Why-Japans-past-haunts-China-pd20110524-H6AP4?OpenDocument&src=sph&src=rot
John Lee's article is interesting, although it may be a bit simplistic to extrapolate the implications of the Japanese case to China.
The Japanese suffered not only from lack of innovation in policy approaches to its bubble burst in the late 1980s and the early 1990s, but also the lack of successful experience and precedence in dealing with that.
Further, it was a victim of its earlier success in rapid catch up with the US and in many areas exceeding the latter.
Another point is that lacked the political strength to do what it should have done in standing up against the US and other, re the Plaza Accord that forced its currency too much too rapidly.
The US fed response to the GFC has been different to that of the Japan’s, though its ultimate success still remains to be seen. If it’s successful, it will be an innovative approach and a precedence for policy approaches.
While China’s story may have some limited similarity to that of Japan’s, the two cases are vastly different.
It is inevitable to have large share of investments in the economy if it starts with very low infrastructure, low physical capitals and low housing stocks, as a low income developing economy has.
They are two countries with very different social, cultural and economic affairs and structures.
By the way, the income level and the level of infrastructure are still low now and have a long way to go to catch up with industrialised countries.
PS: while China may not fall into the same trap that troubled Japan, it does not necessarily mean that it will not encounter problems of its own.
John Lee's article is interesting, although it may be a bit simplistic to extrapolate the implications of the Japanese case to China.
The Japanese suffered not only from lack of innovation in policy approaches to its bubble burst in the late 1980s and the early 1990s, but also the lack of successful experience and precedence in dealing with that.
Further, it was a victim of its earlier success in rapid catch up with the US and in many areas exceeding the latter.
Another point is that lacked the political strength to do what it should have done in standing up against the US and other, re the Plaza Accord that forced its currency too much too rapidly.
The US fed response to the GFC has been different to that of the Japan’s, though its ultimate success still remains to be seen. If it’s successful, it will be an innovative approach and a precedence for policy approaches.
While China’s story may have some limited similarity to that of Japan’s, the two cases are vastly different.
It is inevitable to have large share of investments in the economy if it starts with very low infrastructure, low physical capitals and low housing stocks, as a low income developing economy has.
They are two countries with very different social, cultural and economic affairs and structures.
By the way, the income level and the level of infrastructure are still low now and have a long way to go to catch up with industrialised countries.
PS: while China may not fall into the same trap that troubled Japan, it does not necessarily mean that it will not encounter problems of its own.
Discord over WA increase in royalties and the Review of GST Distribution
Comments on Julie Bishop “Swan conjures up a Black Swan from the West”, 25/05/2011, http://www.smh.com.au/opinion/blogs/the-bishops-gambit/swan-conjures-up-a-black-swan-from-the-west-20110525-1f2y4.html
Maybe, the reactions by Swan, Gillard and Ferguson could be explained by the review of GST distribution commissioned by Gillard and Swan and announced in Perth by Gillard on 30 March 2011.
There might have been some understanding/misunderstanding or expectations (or false hopes) that that review would have WA to rethink about its scheduled increase in royalties of its fines iron ore.
The timing for that review is a draft report by February 2012 and the final report by August/September 2012 for consideration for 2013.
It is interesting to note that the final report is expected to be available after the introduction of the MRRT and the carbon tax, assuming both legislations will pass the parliament.
WA may think it will be too uncertain to rely on that review to secure a better funding for it.
Of course, the WA government is a liberal/coalition government and on the opposite political side of the Gillard ALP government.
PS: this fascinating discord involves politics, economics and taxation, as well as federal financial relations. Arguably, it is a very difficult issue even at the best of times of federal politics, not to mention the fact it is at a time the federal government has been experiencing serious difficulties.
Maybe, the reactions by Swan, Gillard and Ferguson could be explained by the review of GST distribution commissioned by Gillard and Swan and announced in Perth by Gillard on 30 March 2011.
There might have been some understanding/misunderstanding or expectations (or false hopes) that that review would have WA to rethink about its scheduled increase in royalties of its fines iron ore.
The timing for that review is a draft report by February 2012 and the final report by August/September 2012 for consideration for 2013.
It is interesting to note that the final report is expected to be available after the introduction of the MRRT and the carbon tax, assuming both legislations will pass the parliament.
WA may think it will be too uncertain to rely on that review to secure a better funding for it.
Of course, the WA government is a liberal/coalition government and on the opposite political side of the Gillard ALP government.
PS: this fascinating discord involves politics, economics and taxation, as well as federal financial relations. Arguably, it is a very difficult issue even at the best of times of federal politics, not to mention the fact it is at a time the federal government has been experiencing serious difficulties.
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