Open letter to PM Turnbull about automation

Prime Minister

The people of Australia are aware of your desire that this nation and its people be agile, enterprising, and ever ready to adapt to change. I applaud your aspiration.

While some changes receive much publicity such as global warming, there is another, just as crucial, but which scarcely receives a mention. I am referring to the march of automation and the consequent displacement of humans from work they once did.

As robots progressively replace the workers who perform physical work, as algorithms make redundant people who perform cognitive tasks, the human toll increases as more and more are swept into unemployment.

The predictions are frightening. Robots are taking over jobs in manufacturing, agriculture, transport, tourism, hospitality, catering, retail, online sales, health and aged care, the service sector, and communications. Already, algorithms are being used in seventy percent of financial transactions. The trend is accelerating.

Whilst it is acknowledged that many benefits follow in the wake of automation and that productivity gains could be substantial, and while it is expected that automation will enhance national prosperity, the human cost is either being ignored or discounted by planners.

It is predicted that in the decades ahead many millions of people will lose their jobs, both here and overseas, leaving them without an income, dependent on welfare for survival.

Inequality, already high and rising, will be exacerbated.

Which brings me to the purpose of this letter.

Since it is the function of governments, civil authorities and planners to predict the future and plan for it, I seek your response to these questions:
  • What steps has your government taken to address the issue of automation and its sequelae?
  • Is there a department, a parliamentary committee, or an external body or group that has been commissioned to address the issue of automation?
If there is such a group:
  • What are the predictions about the proliferation of robots and algorithms?
  • Over what time frame has the predictions been made?
  • What effects are predicted to result from automation?
  • As people are displaced by automation and become unemployed, what provision is being made for their welfare and that of their dependents?
  • Has any consideration been given to the idea of guaranteeing all who unsuccessfully seek work or become unemployed a universal basic wage to enable their survival?
  • Does your government have a plan to manage this radical change to the work environment and the social contract of work for all?

I seek answers as a concerned citizen, deeply troubled by what lies ahead as automation takes its toll on our people.

I will anxiously await your response to my queries. In my view, in the same way as global warming threatens physical existence on our planet for all living things, automation threatens the very fabric of our human society. Both threats are dangerous; both demand the urgent attention of those to whom we have entrusted our future.

Yours respectfully

What do you think?
Have you seen any signs of Turnbull or his ministers taking any preemptive action on automation?

What action should he take?

Let us know in comments below.

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The hazards of voting Liberal

It’s clear that around half of all voters for the major parties will vote for the Liberal-National Coalition and half for Labor and the Greens. The result is likely to be close. There are many seats that promise to throw up intriguing results. If the Coalition wins, the Senate may end up being no more helpful to it than the last one.

The purpose of this piece is not to attempt to predict the election result, but rather to ask what might motivate voters to place the LNP first, and to examine the hazards of doing so.

It really boils down to what voters want of a federal government. Liberal-National voters seem to want different things from Labor and Greens voters, or for that matter different from what voters for independents want.

As our politicians tell us, whether they can do what they want to do, and what voters want them to do, revolves around priorities. Who would not like to see policies put in place that made us all well off, with the services we want and need readily available to us all whenever we needed them? In a perfect world we would have it all. Yet we know that we can’t have it all. The political and economic system in which we live produces disparity. There have been, and always will be the very well off at one end of the spectrum, and at the other those who struggle day to day simply to survive.

There is not room here to describe all the hazards of voting Liberal, so I will confine myself to examining just four areas: Inequality, Medicare, the NBN, and Marriage Equality, where Liberal priorities conflict with those of other parties.

Those who disparage the idea of equality do so because they believe those seeking equality want the same for all. Nobody believes we can all be millionaires or even modestly well off, but who would not want everyone to at least have the necessities of life? What the ‘equality’ advocates want is the gap between those at the top and those at the other end to be less grotesque than it is, to see it narrowing as a result of government policies, not widening. Inequality is currently at a 75 year high!

Yet LNP policies will widen the gap. Its proposal to spend $48 billion to reduce company tax, not just for small businesses, which Labor supports, but large ones, even our big banks and multinational corporations, is yet another example of the application of ‘supply-side economics’, colloquially known as ‘trickle down economics’. How many examples of the failure of this model do they need before they acknowledge that it does not work? All it does is increase inequality.

Tax breaks given to businesses do not trickle down to workers in the form of more jobs and better wages. History tells us that businesses save more of any tax break they are given than they spend; they do not invest it predominately to grow their businesses; and they do not roll out lots more jobs.

‘Jobs and growth’ is just a fine-sounding mantra, not a plausible plan for growing our economy or creating more jobs. It is a façade with almost nothing behind it. It is hard to contemplate that those who perpetrate this charade really believe in its effectiveness and its worth. If our PM, Treasurer and Finance ministers do believe their own ‘jobs and growth’ rhetoric, heaven help us; if they don’t, what we are witnessing is a grossly cynical political plot to deceive the electorate.

And what’s more, the Coalition has never explained why business tax breaks of $48 billion should have priority over the $37 billion needed for schools.

Research studies show that conservatives are resistant to change and are tolerant of inequality, which they regard as part of the natural order of societies, dating back to the days of feudalism and serfdom. They have no innate motivation to work for a more egalitarian social order, although this is what the average Aussie wants. Their support for reducing workers’ penalty rates on Sundays is an example of their tolerance of worsening inequality.

The first hazard of voting Liberal then is that inequality will increase and disruptive social consequences will follow.

The future of Medicare has been at the top of the issues discussed during the final campaign weeks. Labor is insistent that the Coalition is intent on disrupting and diminishing Medicare; the LNP labels this as a gigantic ‘scare campaign’ built on a ‘deceitful lie’. Malcolm Turnbull has been forced to react to Labor’s attack by denying any ill intent, and has promised, almost in legalistic terms, that no changes will be made to Medicare should his government be elected: “I am making a solemn commitment, an unequivocal commitment that every element of Medicare’s services will continue to be delivered by government. Full stop.”

That ought to be the end of it, but politicians have so diminished themselves in the eyes of the electorate, have told so many lies and broken so many promises, that only their rusted-on supporters believe them anymore.

Who can ever forget John Howard’s 1995 ‘never, ever’ GST reassurance? Who could possibly forget Tony Abbott’s 2013 promise of "no cuts to education, no cuts to health, no change to pensions, no change to the GST and no cuts to the ABC or SBS"? The GST was the only area to avoid the Abbott/Hockey savaging.

Voters are skeptical and highly cynical about any political promise, no matter how volubly made. Turnbull ought not to be surprised at the reaction of voters; frothing at the mouth with indignation will not change their views.

None of us can predetermine what will happen to Medicare. Words have no value in the bare-knuckle street fighting we are seeing as the election draws near. All we have to go on is past behaviour.

The most brazen upshot of the Abbott/Hockey push to reduce expenditure was the 2014 Budget. It contained attacks on Medicare with the proposed GP co-payment, blocked in the Senate, but now being put into effect with the freeze on GP bulk billing rebates until 2020. As practice costs continue to rise, the freeze means that bulk-billing GPs are making less and less profit from each consultation to the point that practice viability is being threatened. The government is forcing them absorb the deficit, or to charge their patients a co-payment. This is pushing them to the point where bulk billing is no longer a viable option. Expect more and more to abandon it, partially or completely.

The result will be that the less well off will not be able to afford the co-payment, and will not consult their GP when they ought to. Their illnesses will progress and the cost to them and the healthcare system, especially to public hospitals, will increase. This is dangerous healthcare, and wasteful to boot.

Writing in The Conversation about the threat of privatization of Medicare, Stephen Duckett, an architect of Medicare, says: “The greater threats to our national public health system lie in the increasing role of consumer co-payments and the power of vested interests that stifle policy innovation in health.

Another attack on Medicare was the change to bulk billing incentives for pathology and diagnostic imaging proposed to begin on 1 July, which is now on hold. This would have made it difficult for the less well off to have necessary pathology tests and imaging. Cancer patients particularly would be affected. Moreover, the proposed $5 increase in the cost of prescription drugs (also held up in the Senate) would penalize patients with chronic illness.

How can we believe Turnbull’s denialism about Medicare, and his mealy-mouthed rhetoric about preserving Medicare in all its facets, when past and quite recent actions show how determined the Coalition is to reduce its cost and thereby erode it, subtly yet persistently? It’s his government’s actions that belie Turnbull’s effusive reassurance.

The Royal Australian College of General Practitioners and the AMA support Medicare strongly and are mounting a powerful campaign with patients and the public to preserve it and shield it from attacks.

The maintenance of Medicare is Labor’s most important policy platform; it has received much prominence during these latter weeks. Voters will have to decide whether they believe Bill Shorten’s or Malcolm Turnbull’s rhetoric.

So the second hazard of voting Liberal is to invite more assaults on our universal health care system – Medicare – and further erosion of the benefits it offers. The less well off would suffer most.

The National Broadband Network
With someone supposedly as tech savvy as Malcolm Turnbull, it would have been reasonable to expect something better from him when he was when Communications Minister in the Abbott government. Although he did not carry out Abbott’s instruction to “demolish the NBN”, what he has given us is a cobbled together mess: a multi technology mix, fibre to the node on the street corner (FTTN) in most instances, and ageing copper wire from the street corner to the premises. Speeds are not what the original Labor fibre to the premises (FTTP) promised, roll out is slower than predicted, the cost is growing every month and is likely to be no less than Labor’s fibre to the premises rollout. The NBN rollout has been badly bungled by Turnbull and the Abbott/Turnbull government.

Turnbull insists that Labor’s plan was too expensive, too slow to roll, and that the speeds it offered were unnecessary. He cites the uptake of slower speeds as indicating that users did not want Labor’s 100 Mbps!

To give the lie to Turnbull’s assertions, let’s look at a public speech given last week at the University of Melbourne by the first chief executive of the NBN, Mike Quigley. He called the current rollout ’backward-looking’ and ‘incredibly short sighted’, saying the current state of the project is ‘such a pity’.

His scathing critique of the Coalition’s current multi technology rollout strategy included evidence that a majority of the NBN will quickly become obsolete.

He’s what he said:
"The Coalition regularly points to the fact that a majority of the data packages purchased by customers already connected to the NBN are lower-tier packages as proof the network is sufficient for the nation’s needs.”

“It seems especially curious that a government that styles itself as the innovation and infrastructure government, should argue this. Gigabit services are just starting to emerge elsewhere in the world, so the applications that can take advantage of this type of speed are in their infancy. But we all know they are coming.”
Writing in The Conversation, Quigley adds:
"To spend billions of dollars on building a major piece of national infrastructure that just about meets demand today, but doesn’t allow for any significant growth over the next ten or 20 years is incredibly short-sighted.

“It is such a pity that so much time and effort has been spent on trying to discredit and destroy the original FTTP-based NBN plan. Equally, it’s a pity the Coalition has put its faith in what has turned out to be a short-sighted, expensive and backward looking multi-technology mix (MTM) plan based on copper.

“The nation is going to be bearing the consequences of those decisions for years to come – in higher costs and poorer performance in an area that is critical to its long-term future. Betting tens of billions of taxpayers dollars at this time on copper access technologies, as the Coalition has done, is a huge miscalculation…

“It is becoming increasingly obvious, especially to customers, that an NBN based on FTTP is a much better network than an MTM-based NBN from every angle – speed and capacity delivery, maintenance costs, reliability, longevity and upgrade costs.

“An FTTP network would be a much more valuable public asset and could generate greater cash flows for the government due to lower maintenance, higher revenues and almost no upgrade costs. And it would be vastly superior in driving growth through the wider economy.

“So it is a great pity that before making the shift to the MTM, the Coalition did not heed the words of the then independent MP for New England, Tony Windsor: “Do it right, do it once, do it with fibre.”
What more needs to be said? After vehemently criticizing Labor’s FTTP NBN, Turnbull has created a multi technology mess that will leave Australia struggling in the wake of the 58 countries that already have superior connection speeds.

This then is the third hazard of voting Liberal – an inferior broadband network, dangerously uncompetitive in the global market. Yet Turnbull thinks this is OK for his innovative, agile nation!

Marriage equality
It is with foreboding that LGBTI folk and their supporters anticipate the plebiscite forced upon the LNP by Abbott and his conservative faction, now slavishly adopted by Turnbull. Despite his protestations of support for marriage equality, his dependence on the support of the conservative clique in his party renders him impotent to substitute a parliamentary vote in place of a plebiscite.

He knows full well that Abbott’s choice of a post-election plebiscite was to frustrate the popular push for marriage equality, first by delaying its implementation, and more importantly by giving the bigots a chance to frighten the public with predictions of dire outcomes should marriage equality, or more baldly ‘same sex marriage’, come about.

We have already seen the fear mongering of the Australian Christian Lobby via its aggressive chief executive Lyle Shelton, who wants anti-discrimination laws suspended before the plebiscite so he can say what ever wants! And we have heard the grotesque utterances of the likes of Cory Bernardi, which do not deserve repeating. Pamphlets designed for the plebiscite campaign claim that ‘social outcomes’ for children of same-sex parents are ‘unemployment’, ‘sexually transmitted diseases’, and ‘drug use and abuse’, which is at odds with the body of scientific research demonstrating that children of same-sex couples are likely to have at least as positive emotional, social and academic outcomes as other children.

Penny Wong, a member of the LGBTI group, recently highlighted her apprehension. She pointed to ugly posters and hurtful social media hate speech, such as were seen in Ireland, that demean LGBTI people, hold them up to ridicule, hurt good parents, and induce uncertainty, fear, suspicion and loathing. Opponents of marriage equality do not care what hurt and anxiety they cause; their purpose is to stop it in its tracks, no matter what the cost to others. They are not kind or empathic; they are ruthless in the pursuit of their quasi-religious dogma. We now hear that Turnbull will allow his members to vote any way they wish and not be bound by the plebiscite outcome!

Here then is a fourth hazard in voting Liberal. It will result in a damaging lead-up to an unnecessary and expensive ($160 million) plebiscite that will hurt many, and which runs the risk of frustrating the wishes of a clear majority of the electorate which wants marriage equality, and wants it now.

This piece is already long enough. To detail all the other hazards of voting Liberal would take another piece, or two. So do read Michael Taylor’s excellent catalogue of reasons not to vote Liberal which you will find on the AIM Network in Why on earth would you want to vote for the LNP? He has compiled a comprehensive list that will astonish you. It makes one wonder how the LNP could possibly succeed on July 2.

I suppose voters who can’t see the ghost of Abbott with his cynically calculating conservative faction hovering over Turnbull, who don’t care about inequality, who are indifferent to the Coalition’s assault on Medicare, who don’t care that our NBN is slow and already antiquated, who don’t give a toss about marriage equality for our LGBTI friends, and who are unaware of the many other hazards of voting Liberal, would be comfortable voting this way, dangerously unaware of the awful consequences.

What do you think?
Let us know in comments below.

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Divining the federal budget

Some of you may question the purpose of trying to divine what will be in the May 3 federal budget when the Turnbull Ship of State seems to be all at sea, wallowing towards an unknown destination, facing strong headwinds, its sails flapping, its hull leaking, with a dithering Captain at the helm, a loquacious and at times incoherent First Mate insisting he knows where he’s going, and a motley crew.

In these days of social media diversity though, there is the opportunity for average punters to express opinions, to have them read, and to expect them to evoke responses from others. So here goes.

What will be in the budget, as distinct from what will not, remains a mystery. Although in only a few days Treasurer Scott Morrison will stand up in the House at 7.30 pm on May 3 to tell us all, we have heard very little from him or PM Malcolm Turnbull. It is now usual, days before a budget is delivered, for advance notice to be given about the good news, and some of the bad, as we have seen recently with the Victorian state budget delivered on 27 April. What have we heard from the LNP?

Have we seen an economic narrative, apart from the Turnbull admonition that we must personally, and as a nation, be agile, innovative and creative? In his first statement after his election to prime ministership, he said that his government would be “...focused on ensuring that in the years ahead as the world becomes more and more competitive and greater opportunities arise, we are able to take advantage of that…We can’t be defensive, we can’t future-proof ourselves…We have to recognise that the disruption that we see driven by technology, the volatility in change is our friend if we are agile and smart enough to take advantage of it.” Since then, that narrative has all but evaporated. The three-word slogan: ‘agile, innovative and creative’, has become meaningless in the absence of practical applications of those ideals.

Niki Savva summed up the situation in her opinion piece in The Australian on 28 April: Budget 2016: Morrison has one chance, yet he’s up against it: “There is so much riding on Tuesday’s budget, for the Treasurer personally and government generally, it is hard to pinpoint another time when there has been so much pressure on a treasurer… So little time, so little money, so few options. Everything about this budget promises to be modest, except what it is expected to achieve.”

Against that background let’s divine what might be in the budget and what will not.

There are some inviolate LNP principles that can guide us:

First, don’t upset LNP supporters:
  • voters in LNP electorates, especially those held marginally;
  • those enjoying the liberal tax concessions of negative gearing, capital gains and superannuation;
  • big business and the top end of town;
  • bankers;
  • coal miners and coal seam gas extractors;
  • small business and ‘Mum and Dad’ investors;
  • climate change skeptics;
  • those who share the LNP attitude to asylum seekers;
  • the right wing conservatives in the LNP, the Nationals, opponents of marriage equality, and the Australian Christian Lobby;
Next, adhere to the economic principles espoused by recent LNP treasurers and prime ministers:
  • 'we don’t have a revenue problem; we have a spending problem';
  • 'we must live within our means', an appealing metaphor for household finance that is inappropriate for national finance;
  • reduce and eliminate the budget deficit;
  • reward Joe Hockey's ‘lifters’ and penalise the ‘leaners’ who sponge on the welfare system;
  • reward those at the top and benefit will trickle down to those at the bottom;
  • reduce taxes; avoid raising taxes; avoid removing tax concessions;
  • focus on ‘jobs and growth’, a three-word slogan we hear day after day, week after week. It sounds good but when do we ever hear how ‘jobs and growth’ are to be achieved? It’s a meaningless mantra when devoid of a plan, but no doubt credible to the unthinking who avoid asking: "How?”
  • despite all of the above, Turnbull, with Morrison echoing sotto voce, will insist that the budget will be ‘fair'. But any attempt to reduce inequality will likely be minimal, despite the fact that inequality will be a hot button election issue because the electorate is becoming increasingly incensed by the unfairness and inequality it sees every day.
The difficulties in framing a budget in such difficult fiscal times have been well summarized by Niki Savva:
“It is impossible to see how he [Morrison] can meet the expectations or satisfy the demands of the voters, the ratings agencies, the media (social and traditional), lobby groups, think tanks and his colleagues. Expect any sensible debate to be drowned out by the whinger class united and assorted merchants of gloom from Left and Right.

“The budget has to provide the foundations and framework for the government’s economic narrative, which centres on jobs and growth in the new economy. It has to fulfil the Liberal credo of lowering spending, lowering taxes and lowering or eliminating the deficit; it has to be economically credible and politically appealing; it has to relaunch the government’s political fortunes and cement the Coalition’s standing as superior economic managers.

“All that as more people say they want the money spent on paying down debt, just so long as someone else – say the multinationals, or anyone on a higher salary than theirs – does the paying.”
Savva continues:
”There is always pressure on treasurers to produce budgets that refloat the government or sink the opposition, but it is much more intense this time because of the proximity of the election, combined with the newness of the government. It is the first Morrison budget, even though it will carry the full imprint of Malcolm Turnbull, and it will come a mere 60 days before the election.

“Although that sounds like a long campaign, there is not enough space between the budget and the expected July 2 election for a misfire to be forgotten. There is no margin for error. If Morrison mishandles it, it could well be his last major economic statement, and a serious setback for what had once seemed a clear path to leadership. If budget measures or projections collapse under scrutiny, if his speech is a flop, if he pays too much attention to the politics rather than the policy, if he makes a mistake in the selling of a document that he should, by now, know backwards, it could spell the beginning of the end of the Turnbull government.”
Against that realistic backdrop, let’s look at what might be in the budget, or perhaps more sensibly look at what won’t be in the budget: Policy wise there will be:
  • no Royal Commission into banking, despite all the evidence of unfair practices, dishonesty and fraud;
  • further attempts to introduce changes to Medicare, the Pharmaceutical Benefits Scheme, and imaging and pathology rebates to reduce health costs;
  • further attempts to restrict the costs of the National Disability Insurance Scheme;
  • further attempts to effect changes to university funding towards a ‘user pays’ arrangement;
  • further attempts to avoid the cost of the Gonski schools reforms in years five and six;
  • further attempts to rationalize the LNP’s approach to the NBN, in which costs are blowing out, implementation is slowing, and speeds are poor;
  • further attempts to rationalize and sell its Direct Action Plan for climate change to a skeptical audience of economists and environmentalists and a suspicious public, who ask what is causing the unusually severe drought and the coral bleaching, and what is the LNP doing about them;
  • further attempts to justify its ‘border protection’ policy, and the slow receipt of refugees from Syria.
No doubt there will be some surprises, maybe a few bits of good news, and likely some flimsily disguised bits of bad news that will be painted as necessary, even good for us. After all, we have ‘to live within our means’ and we can’t spend more than we collect in revenue, like Labor always does.

There will be an abundance of hesitant, unconvincing spin from Malcolm Turnbull, lots of econobabble from Scott Morrison’s motor mouth, lots of backing up from dalek Mathias Cormann, who will repeat his lines tediously, repeatedly, endlessly, with Kelly O’Dwyer bringing up the rear in her own inimitable style.

Whatever is in the budget, it would be impossible to satisfy all, or even a fraction of the stakeholders. There will be lots of commentary from experts and amateurs alike, many confrontations in the media between them and the politicians, and hesitant and unconvincing responses from them.

We will hear endlessly that the budget is all about ‘jobs and growth’, lavishly embroidered with the LNP’s favourite mantras. We will go to sleep murmuring ‘jobs and growth’, ‘jobs and growth’, ‘jobs and growth’ until men in white coats take us off to receive therapy for obsessive compulsive disorder. At least it will be peaceful there!

What do you think?
We are looking for your comments.

What do you think the May 3 Budget will include?

Do you believe that Morrison and Turnbull have got the message about the need for more revenue?
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So we do have a revenue problem after all – now Moody’s says so

Who could ever forget Scott Morrison’s astonishing statement when he became our nation’s treasurer: Australia doesn’t have a revenue problem; we have a spending problem!

Balanced economists were aghast. Any analysis of our balance sheet left no doubt that we needed more revenue to enable the government to provide the services the people need: quality healthcare for the aged, the disabled and all; excellent education at all levels; a welfare safety net for those who need it; infrastructure; and all the other services people are entitled to expect in this prosperous country where we are privileged to live.

This piece, written just two months ago, needs updating. Morrison persists with his aversion to raising revenue, but is now under the hammer from a different direction. Moody’s credit rating agency, has questioned the government’s strategy to fix the budget and warned that continued increases in national debt would risk the nation’s AAA credit ­rating. Moody’s went onto say that the Turnbull government must raise taxes [to increase revenue] as well as cut spending to reduce the budget deficit.

Confronting this warning, Morrison’s retort was that “‘of course’ there will be revenue measures in the budget” on May 3, despite previously declaring Australia had a ‘spending problem, not a revenue problem’.

Seemingly realising the contradiction in his position over time, he went on to qualify himself by saying that “…overall, the budget would continue to focus on reducing the government spending as a share of the economy”. He insisted that by reducing the tax burden in other parts of the economy the overall tax burden would be no greater than it is.

For years, sensible economists have accepted that we have a revenue problem, but they also acknowledge we have a spending problem. Reducing government waste and more prudent spending of taxpayers’ money should always be a fiscal objective. That has never been disputed, but it seems mysterious that the government has consistently placed so much emphasis on the expenditure side of the budget, while ignoring the need for more revenue. The only plausible explanation seems to be the way the government frames its fiscal policy.

Harking back to the Howard era, Costello’s boast was always: “We are a low taxing government – we want to give money back to the people, not take it away.” How many times did you hear him say that?

Morrison echoed Costello. To Morrison, increasing revenue equates with increasing taxes, which is anathema to him. It seemed too that in Morrison’s mind removing concessions from superannuation, negative gearing and capital gains was tantamount to increasing taxes. So all he could suggest to balance our national budget was to cut expenditure. He was no better than his failed predecessor; we knew that his expenditure cuts would hit the poorest in our community just as they did in Hockey’s 2014 Budget. He was bereft.

He seemed to be channeling his ‘Stop the boats’ rhetoric into ‘Stop the revenue’ so as to ‘Stop the taxes’. In fact he went the other way, the Costello way, towards reducing personal and corporate taxes. His approach is ideologically driven; it is shored up by the discredited concept of ‘trickle-down economics’, which posits that supporting the top end of town creates prosperity that eventually trickles down to those at the bottom of the pile. A more colourful descriptor is ‘horse and sparrow’ economics – feed the horse enough oats and the sparrow will get his share in the manure. In recent weeks Morrison has backed away from personal tax cuts but is still entertaining a corporate tax cut, which Arthur Sinodinos assures us will benefit workers. Trickle down all over again!

Morrison seems to have now almost come to his senses, perhaps he’s listened to the sagacious economists who have not only insisted that we have a revenue problem, but have pointed to where it might be addressed now that a rise in GST has been ruled out by all parties.

The contemporary debate about negative gearing, prompted by the recent release of Labor’s policy, has focussed attention on revenue raising by reducing the present concessions which allow the well off to benefit substantially by acquiring multiple properties. We all know that negative gearing applies also to equities and other assets, but it is when it’s applied to housing that the concessions have the most impact.

On AM on 16 February, in introducing Ben Oquist, executive director of The Australia Institute, Michael Brissendon began:
"New research shows young Australians are receiving little benefit from three of the biggest, most expensive tax concessions.

“The modelling, commissioned by think tank The Australia Institute, shows Australians aged under 30 receive only 6 per cent of the combined tax concessions on superannuation, the capital gains tax discount and negative gearing. The concessions are worth more than $37 billion in total, yet young Australians only receive a share of around $2 billion.

Is it such a surprise that young people are missing out on the benefits of tax concessions? After all, they earn less and pay less tax."
Ben Oquist replied: 
"I think it's a surprise the extent of it. It's worse when it comes to the capital gains discount and negative gearing in particular.

You mention that overall it's 6 per cent of those tax breaks combined but when it comes to negative gearing and the capital gains tax, it's 1 and 1.7 per cent respectively of tax breaks that are growing all the time.

The capital gains discount in particular is projected to be at seven or eight billion in the next few years and it's that discount in particular that I think is unfair.

It's widely known that 73 per cent of that tax break goes to the top 10 per cent, but it isn't as widely known that only less than 1 per cent of it goes to young people.”
Later Oquist, referring to this debate, said:
"I guess overall that's the good thing that's happened…we are slowly accepting that we have a revenue problem…that's the big shift from 2014 to this year's budget. We're debating tax reform and it's been accepted that we have a revenue problem.

“Now, we don't have to increase tax rates to solve that revenue problem, we can address tax concessions, loopholes. If you like we can broaden the base. And in that way you raise the revenue and you don't have to compensate people…With the GST being taken off the table it's actually allowing us to look at the smorgasbord of options that we've got for increasing revenue without having to compensate people and having that churn.”
The fact that we have a revenue problem has been publicized long enough for Morrison to hear. Why did he take so long?

So exasperated was South Australian premier Jay Weatherill that he took a swipe at the treasurer for not telling the truth about Australia’s revenue problem:
“Scott Morrison is perpetrating the same deceit on the Australian people as his predecessor Joe Hockey…Prime Minister Malcolm Turnbull promised a new government, but they perpetrate the same lies to the Australian people that we have a spending problem and not a revenue problem”
Around the same time, John Menadue, businessman, public commentator, and formerly a senior public servant and diplomat, wrote on his blog:
"In a submission to a Senate Select Committee into the Abbott Government’s Commission of Audit, Jennifer Dogged, Ian McAuley and I contend that the problem is not that government expenditures or that the public sector is large in Australia compared with other countries. We contend that the problem is a short-fall of revenue and that on international comparison, our tax revenues are low.”
In their summary to the Committee they say:
"The Commission of Audit’s brief is based on assumptions that Australia is burdened with “big government” and that taxes are an impediment to business investment and workforce participation.

“There is no evidence for either assumption. The trend in Commonwealth expenditure has been downwards since the mid 1980s, falling from a peak of around 28 percent of GDP to a range of 24 to 26 percent of GDP in recent years. In comparison with similar prosperous countries Australia has one of the smallest public sectors.”

In May of last year The Australia Institute published a paper titled It’s the revenue stupid. It’s worth a read.

I could cite many others who are saying the same thing: Australia has a revenue problem. Thankfully, it seems that at last our treasurer has heard this strident oft-repeated message. His, and Malcolm Turnbull’s prime criticism of Labor’s policy on negative gearing, is not that it generates revenue that we don’t need, but that it does not generate enough revenue fast enough! In launching Labor’s policy Bill Shorten said it was a long term measure which would start modestly but generate substantial revenue over the long term, but it seems the government is intent on raising revenue urgently! Perhaps we now have a ‘revenue emergency’. Await their policy with open-mouthed anticipation!

What this updated piece contends is that hog-tied with an ideological rope, our treasurer has been far too slow to concede what has been obvious for so long: Australia has a revenue problem, and now one of the world’s rating agencies, Moody’s, says so.

Instead of Morrison’s loudmouthed rhetoric about 'Labor taxing only to spend', what is now needed is a serious debate, uncontaminated by ideological or political overtones, about how to raise this revenue now that the level and scope of the GST is not to be changed, and other avenues have seemingly been discarded or put in the ‘too hard’ basket. Pegging back concessions that are enjoyed mostly by the well off in the areas of superannuation, negative gearing and capital gains tax, is an obvious place to start, but the Coalition is terrified of upsetting its benefactors. Fairness must be at the heart of any revenue-raising moves, but does the Coalition know what ‘fairness’ is?

It is encouraging to see this debate gathering the force of a flash flood. Hopefully it will sweep Turnbull and Morrison along arms flailing until they come up with some practical ways of addressing Australia’s revenue problem. Predictably, the property rent seekers and Turnbull’s ideologically driven, top-end-of-town fawning backbenchers are out peddling their ‘wouldn’t it be awful’ scenarios. For their own electoral safety, in the face of falling poll ratings, he and Morrison had better ignore them. Maybe Morrison’s concession that ‘of course’ there will be revenue measures in the budget marks a tentative admission of the bleeding obvious, and that the May 3 budget will include revenue measures, which of course our Treasurer will assure us will not increase the overall tax burden. May 3 promises to be an entertaining event!

What do you think?
We are looking for your comments.

Do you believe Australia has a revenue problem as well as a spending problem?

What revenue sources do you believe the government should explore?

Do you believe that at last Morrison and Turnbull have got the message about the need for more revenue?

What do you think the May 3 Budget will include?

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