Incentives alone not enough to solve the problems

Comments on Cassandra Wilkinson “Mollycoddling jobless is not compassionate”, 24/05/2011, http://www.theaustralian.com.au/national-affairs/commentary/mollycoddling-jobless-is-not-compassionate/story-e6frgd0x-1226061416518

While incentives are important themselves, they are not enough.

The government, society, the employers and the unemployed need to tackle this holistically.

The Australia's employment system can be very strange in some respects. For example, many employers require employment experience even for the most basic labour work.

Maybe that reflects some inherent deficiencies in the work relations system that may prevent flexibility because of some explicit or implicit/hidden costs in hiring and firing.

It has been reported over and over again that people work to work but just could not be accepted by any employers. Some are in perfect working age.

So, simply taking about incentives will not solve the problem. The government must look at the issues from those who are unemployed or on welfares and then design policies/strategies, and also put in place the real assistance available to those who need it or in need of it. Work in partnership with them.

PS: If people who want to find a job very actively can't get one, it is no wonder many on welfare can't get employment, or get off from the welfare system.

Respect the constitutional rights of states

Comments on Kenneth Wiltshire "WA pays heavy price for a problematic federation", 23/05/2011, http://www.theaustralian.com.au/national-affairs/wa-pays-heavy-price-for-a-problematic-federation/story-fn59niix-1226060664190

Professor Kenneth Wiltshire is one of few rare voices to acknowledge the constitutional rights of the states in mineral resources in the mining royalty/tax debate.

Most people ignore the constitution issues and simply argue that mineral resources belong to all Australians. It has become a complex issue with the MRRT/RSPT.

The MRRT/RSPT should have been designed as a replacement of the current less efficient state royalties and belong to the states, as opposed to the designs adopted by Canberra. In that way, the states including WA would have been on side and land their strong support.

In terms of further tax reforms, it is important that the Commonwealth learn from the GST experience to focus on national efficiency and national outcomes, as opposed to attempt to use it to further strengthen the revenue power of the Commonwealth as typified by the MRRT/RSPT designs.

As Professor Kenneth Wiltshire argued, it should consider how to address the vertical fiscal imbalances between the Commonwealth and the states and territories, currently to the tune of about $100 billion.

Swap the GST and personal income revenue is an option. Alternatively, a well designed income tax sharing arrangement may also work, still leaving the GST revenue to the states and territories as currently the case.

This, together with a new design of GST distribution, hopefully resulting from the current review Commissioned by the Prime Minister and the Treasurer, will rationalise the federal financial relation, to make it more efficient by better aligning service responsibilities with adequate revenue sources at the two levels of govenrment in the federation.

Challenges and opportunities for Australian federal relations

Comments on Rob Burgess “WA opens a new front for Abbott”, 20/05/2011, http://www.businessspectator.com.au/bs.nsf/Article/Coalition-Treasury-budget-MRRT-GST-revenue-mining-pd20110520-GZT5S?OpenDocument&src=sph&src=rot

To a person with little knowledge of federation politics, I would think the front that Rob Burgess identified should be handled with a similar principle to the GST agreement that Howard/Costello reached with the state and territory governments.

And that is, in the national interests of reforms to be more efficient, Canberra should provide more growing resources to the states and territories as not only incentives but also an implicit recognition of the rights of the states and territories in the federation.

Further, this front could be combined with the tax reforms front.

In that perspective, it would be wise for Canberra to reconsider its approach to the MRRT proposal.

PS: we have on the one hand that Canberra has been saying that the states and territories would not have the required financial resources to meet the future challenges of healthcare, on the other hand Canberra has been trying to get more and more revenue sources from the states and territories, such as the MRRT or its immediate philosophical predecessor, the RSPT.

Under this kind of approach, how can and will the states and territories have the required financial resources to provide sources including healthcare like public hospitals?

Isn’t the message from Canberra contradicting itself and confusing to the public, knowledged in the field or not alike?

It is other way round - Wayne stole states revenue

Comments on Peter van Onselen “Wayne, they stole your surplus”, 20/05/2011, http://www.theaustralian.com.au/national-affairs/commentary/wayne-they-stole-your-surplus/story-e6frgd0x-1226059271800

The MRRT should be the revenue of the mining states in the first place, given that it was designed and sold as a more efficient form of royalty regime to replace the current less efficient price based royalties.

The federal government has stolen this revenue from the states.

It is not a tax reform any more but a revenue grab by Canberra.

With this as a precedence, it will be more difficult for the federal government to proceed or introduce more national tax reforms involving the states from now on.

PS: the federal government could have involved the mining states for the RSPT or MRRT on a revenue sharing basis, say 50-50.
 
That would get all the mining states on board and saving the need for them to jack up their own royalty rates.
 
More importantly, that would mean the MRRT would be a really national tax reform.

PPS: Additional comments:

The wording in the title of the post does not appear to be correct or appropriate.

Mineral resources in each state belong to that state and imposing royalty on mining production is a right of the state.

Rather than they stole surplus from Wayne, Wayne's surplus proposition has been based on the inclusion of revenue that is rightfully the states'!

Who stole from whom?

The author probably should get some advice from constitution layers on the issue.

Daniel Gros' solution to Irish sovereign debts no credible

Comments on Daniel Gros “How to make Ireland solvent”, 19/05/2011, http://www.businessspectator.com.au/bs.nsf/Article/Ireland-foreign-debt-bail-out-Irish-pension-funds--pd20110518-GY97D?OpenDocument&src=rot

Daniel Gros appears to have been confused by different ownerships and their implications.

A/the government of a country is different from its individual constituency. Their interests may be the same on some matters, but can differ in a whole range of other matters.

In another word, their interests may converge on some and diverge on some others. Further, the interests of different constituent members are different.

This is no different to taxation.

A country (or rather its government) may bankrupt, but some of its constituency members may not be affected by that, or may even benefit from that.

Even in the context of Daniel Gros concerns, those funds may actually do better if they avoid poor Irish government bonds altogether, given the risks associated with them.

It is the risk weighted returns that matter, not what Daniel Gros simply argued.

Daniel Gros may have assumed away those risks, but those funds are unlikely to do the same.

Daniel Gros may argue that the GFC cannot happen because there are always credits for any debts owed, so if all parties come together, there will not be any credit crunch and shortages.

Is that line of argument credible in the real world? Even Daniel Gros must admit it is not.