Set a revenue to GDP ratio to improve policy making and service delivery

Comments on John Freebairn "Federal Budget 2013: Why our unsustainable structural deficit must be tackled", 29/04/2013, https://theconversation.com/federal-budget-2013-why-our-unsustainable-structural-deficit-must-be-tackled-13723

I largely agree with the remark by the author that "The mix of tax increases and expenditure reductions require society to make judgements about the relative roles of government and the private sector, and about the relative merits of more or less limited income and resources allocated to government goods and services versus private sector provided goods and services."
Personally, I think there should be a ceiling of taxation revenue to GDP ratio to constrain any government irrespective to their political persuasions, otherwise, it is too easy for politicians to raise tax rates, increase new taxes and levies. Politicians' mandates should be set with a clear limit, so they can focus better on better policies and efficient service delivery.
I personally think that all government revenues to the GDP ratio should not exceed a third for the near future; that would leave two thirds to the private sector. In the longer term, 30% should be aimed for.
Within that broad parameter, the three levels of government should have an agreed shares of the different revenues according to their service responsibilities.

China dialogue - a further step in strengthening Sina Australia relations

Comments on Stephen Loosley "Time is right for China dialogue", 29/04/2013, http://www.theaustralian.com.au/national-affairs/opinion/time-is-right-for-china-dialogue/story-e6frgd0x-1226631142134

Stephen, it is an excellent idea.
The recent development in Australia-China relations and the wonderful achievements by the government and the prime minister in strengthening and upgrading the relations indicates Australia can play a much greater role in the Asia Pacific region in general and in potential bridging between the largest players in the region in particular.
How China conducts its international affairs is likely to affect not only the Asia Pacific region but also the world in this century. It is in everyone's interest that China is most productively integrated into the international system and plays a cooperative role.
Australia is uniquely and well positioned to play a role much bigger than its weight, so it is punching above its weight, due to its strong relations with both China and the US, as well as Japan.
Close relationships and frequent exchange and dialogues will be most conducive to mutual understanding not only between the two countries but also among the main players in the region.
As Chinese Australian who has studied, worked and lived in both China and Australia, I strongly and completely support your proposal and look forward to it being warmly embraced soon.

Reforming GST distribution requires creativity

Comments on David Uren "GST distribution needs a carrot for states", 18/04/2013, http://www.theaustralian.com.au/business/opinion/gst-distribution-needs-a-carrot-for-states/comments-e6frg9qo-1226622975731

The GST distribution in Australia reflects the extreme of Australian fiscal equalisation as currently practiced in the world and should be recognised as already past its used-by date. Unfortunately, the current arrangement for federal financial relations makes it impossible to reform the GST distribution system.

The federal government is generally uninterested in how the GST is distributed among the states because there is little relations for its own revenue or expenditures, so its attitude has been if all the states agree then it would agree. Because any meaningful reforms to the GST distribution system would undoubtedly result in some so called winner and loser states, how could it possible for them all to agree?

Maybe a practical way to change this impasse is to require the federal to contribute, from its own revenue, 50% of the amount that is required for the redistribution from the current calculation and the other half is from the GST pool. In this way the federal government would have some incentive to make the system more efficient and still keep its fiscal equalisation role.

Another way is to distribution the GST by population shares and let the federal government provide all the equalisation funding, so it would have an interest and say in having the system reformed for the better of the nation. But both political persuasions in Canberra are unlikely to be interested in such nation/federation building project. Maybe a worthwhile trade-off is to ask the states to implement some reforms of their inefficient taxes identified in the Henry Review report as a condition for the increased funding from Canberra. It seems another review would be needed, even though a number of reviews done previously ended in failures. 

There are entrenched "interest groups" that would like to maintain the current system devoid of any real reforms. This has been reflected even in the various reviews of the GST distribution, but all have failed as a result of that at least partially because of the divergence in any potential outcomes. It's an unfortunate tragedy for the nation.

The most recent one was commissioned by the PM and Treasurer and conducted by two former state premiers Mr Nick Greiner from NSW and Mr John Brumby from Victoria and a South Australian businessman Mr Bruce Carter, who were hand picked by Canberra. That review was first announced when the PM visited WA at a time there was strong tensions between Canberra and Pirth in terms of funding and hospital reform that the PM was keen to get it done.

The final report of that review was particularly disappointing because it represented a complete failure with virtually no meaningful reforms recommended except some face-saving wording, enormous waste of time and money and a huge retreat from its interim report which raised at least some hopes of reforms to the distribution system.

A potential reason for that failure is likely to be the lack of representation of people from WA and for that matter Queensland in the review panel. It was understandably difficult because any reforms would results in benefits to mining states at the time of mining boom when mining royalties can bring huge amount of revenue to mineral rich states particularly WA with Queensland ranked as the second.

The current GST distribution completely ignores the many changes in the past three and a half decades,such the many economic and tax reforms in Australia.

China is not an average country!

Comments on The Economist's Analects - China: "The post-industrial future is nigh", 17/04/2013, http://www.economist.com/blogs/analects/2013/02/services-sector


This argument in this piece relies heavily on the chart by Messrs Ghani and Kharas that is based on the so called world normal using econometric estimate.

The problem, or at least a potential problem with this kind of approach is that the average approach is itself problematic in a very diversified world and the huge differences between countries in many respects of their situations, including their primary productive factors endowment, their education level, their entrepreneurship, theirs sizes, land and so many factors.

Just ask a reverse question: should China follow the average approach how could it be able to achieve its extraordinary economic transformation with such a different speed from the average?

Once one understands this question and its implications, it will not be difficult for one to understand the problem with the average approach.

Federal should offer a better approach to Gonski

Comments on Paul Kelly “PM needs magic to get a Gonski”, 17/04/2013, http://www.theaustralian.com.au/opinion/columnists/pm-needs-magic-to-get-a-gonski/story-e6frg74x-1226622025078

While the offer of 2 for 1 is appealing to the states in general, it is not on an equitable basis between the states and some states like WA and the ACT are so much disadvantaged by such an offer. Besides, it is so much short of the Gonski recommended amount and who know in how many years the total amount will reach the Gonski amount.

Further, the government approach will create the undesirable effect of undue federal influence on state role and responsibility of school education.

Such a policy by the federal government, if implemented, is very undesirable and will not be a good public policy.

I think a better policy for any federal government on increasing school funding and to implement Gonski would be to offer an package of matching at least on a one to one basis in increased school funding with the states to a set amount in a future year with few strings attached by the federal government. The total amount should be divided among the states on a national Gonski formula basis based on student numbers and on those disadvantaged students numbers. When a state has already have a higher school funding, the matching should be higher by the federal government.

That should be the best policy for a federal government needs to follow in future in any areas where states have the responsibility to provide the services but the federal government wants to contribute to those services to achieve a better outcome.

The principle is to for the federal to help but with little interference in the running of those state services.