Aussies & NZ: You're the Voice Try and Understand It

[Paxter]

31 minutes ago, Jeor said:

 Petrol was a big component of inflation which doesn't really lend itself to rate rises (which aren't going to crimp demand for petrol or make it cheaper) so that might be the only thing on a technical basis that argues for continuing the pause.

There isn't much difference though between the headline number (5.4%) and excluding volatile items (trimmed mean was 5.2%). This suggests that there are plenty of underlying/core items driving the outside-target inflation rate, which is more than enough of a technical reason to increase the nominal rate. 

As a point of contrast, the nominal rate is 5% here in Canada and we have got inflation down to 3.8% headline. My guess is we have benefitted here from keeping pace with the Fed, with the loonie having held its value better than the AUD. And note that Canada also has a massive stock of household debt (much more than the US), but has hiked a lot more than Australia.  

Edited October 25, 2023 by Paxter

[The Anti-Targ]

Whether interest rates add to or reduce inflation depends somewhat on the level of govt debt. If govt debt is very high then the interest payments the govt is making as passive income to the already wealthy negates or even reverses the pain felt by the higher interest being paid by private borrowers. Money keeps flowing into the economy which makes high interest rates stimulatory.

NZ has a reasonable level of govt debt so the overall effect should be economically depressive.

[The Anti-Targ]

Another severe weather event in the south Pacific. Poor tropical islands countries hardest hit, I hope they get the help to recover that they need.

For us the flooding, damage and power outages is a prime example of failing to plan is planning to fail. We've known for a long time that with global warming comes more frequent and more damaging weather events. Hopefully 2023 is an outlier and not the norm, with 3 major storm+flooding events this year. But I think we can probably expect at least one every couple of years somewhere for the foreseeable future, with the occasional year serving us double, triple or quadruple whammies. Not to mention the droughts that will hit the dry bits of the country more often and harder. We should have planned and invested in mitigating the worst effects 10 years ago. But our govt and private sector have failed to do that in the interests of balanced budgets and profits. I guess we'll see if our govt finally picks up what the weather gods are throwing down and actually start to do something. I don't expect the private sector to do anything except keep running after the profits.

I have low expectations.

[The Anti-Targ]

Interesting election turnout stat, possibly if my calculations are correct, this could be the lowest turnout election for almost 135 years. The only election with a turnout below 70% in the last century was in 1978 at 69%. This election the turnout is possibly as low as 65%, 64% was the turnout for the 1887 election.

I guess the defining characteristic of this election was disenchantment. Not that a higher turnout would have necessarily changed the result, both major parties have won high turnout elections. I think in this case a lot of people saw no party as offering anything worth voting for.

[The Anti-Targ]

We finally have a new govt.

Apparently it has a 100 point economic plan. I dunno, this seems perhaps a bit naive to me. The main thing I see about a 100 point plan is that it just gives your opposition up to 100 chances to point out what you've failed to achieve. Who knows, maybe it's making a commitment that will force them to work really hard. I just recall single promises made by the previous 2 govts that were failures: the last govt promise 100,000 new homes; the one previous to that promised pay parity with Australia, also failed. Still neither for these failures caused them to lose the first election after they became govt.

I haven't looked through the points, maybe some will be really easy to achieve, but harder to actually show how they've made real improvements. If you can fill a 100 point plan with 95 simple points many of which will happen anyway (bring down inflation) then you can hide the hard ones behind a mountain of simplistic / automatic successes and claim a great achievement. The good thing about becoming govt at the bottom of an economic cycle is you get to claim all the improvements that happen just as a natural flow of the cycle are due to the things you did and the promises you kept. "If the other lot had stayed in power it would have got worse". Though in this case the new gov has come in slightly after things started improving. Unlike in 2008 when things were still shit when the new govt came in.

[Makk]

It's a 100 day plan rather than a 100 point plan. Most of it is repealing legislation the previous government introduced. And a lot of it is to just prepare the legislation rather than action it all the way through the process. There is nothing in there that is particularly ambitious that I can see. 

I have to say I am not particularly impressed by our system of democracy. Once again Winston peters wields massively more power than he should. And the overhang system is just unfair and exploitable rather than proportional. 

 

[The Anti-Targ]

On 11/24/2023 at 7:01 PM, Makk said:

It's a 100 day plan rather than a 100 point plan. Most of it is repealing legislation the previous government introduced. And a lot of it is to just prepare the legislation rather than action it all the way through the process. There is nothing in there that is particularly ambitious that I can see. 

I have to say I am not particularly impressed by our system of democracy. Once again Winston peters wields massively more power than he should. And the overhang system is just unfair and exploitable rather than proportional. 

 

They also have / had a 100-point plan

https://www.national.org.nz/nationals_100_point_plan_to_rebuild_the_economy

Dunno if it survived the coalition negotiations though.

All systems of partisan democracy are shit, exploitable and fundamentally corrupt / corrupting. Non-partisan democracy is the answer.

Edited November 26, 2023 by The Anti-Targ

[Paxter]

I know I'm a broken record, but here I go again.

The upcoming Coalition/Labor middle-upper class tax cuts are:

• Fiscally irresponsible
• Procyclical rather than counter-cyclical (we should be closing the deficit during a time when the Reserve is trying hard to dampen economic activity, thus aligning fiscal and monetary policy)
• Mostly beneficial to higher income earners

Most people supportive of these tax cuts would be those who stand to gain from them.

[The Drunkard]

I'm glad they're (for now) still going ahead with them. Wealth is made too easily from hoarding assets and not from the value of your own labour, and this is a small step toward countering that. 

[Stubby]

Does anyone really give a shit if Woolworths drops Australia Day products?

I always feel a bit cringy walking past these sale displays anyway.

[Paxter]

It's all just culture wars stuff.

Canada Day comes in for some criticism but (for a number of reasons I won't go into), it's nowhere near as divisive as Aus Day. That means the Maple Leaf is readily available everywhere in July. 

[Jeor]

So Albo is set to break the Stage 3 tax cuts. He's preserving about half of the top income earner breaks but is giving some to the bottom by moving up the tax free threshold and fiddling with the middle brackets.

I know as someone who benefits from the original Stage 3, I've got a lot of self interest in not liking this change, though I can practically recognise that giving more relief to lower/middle incomes is definitely warranted in the current environment. But I think some things do need to be recognised by the people who are all for the changes:

1. It is absolutely a major broken promise by Albo. After campaigning on "integrity, integrity, integrity" and promising constantly before and after the election that they wouldn't change them, this is hypocrisy of the highest order. Labor voted for the original Stage 3 legislation (a fact that many Labor people are quick to forget), they promised before the election that they wouldn't change it. I understand that you can change your mind according to the circumstances, but John Howard with the GST did it the right way. Howard said no GST, he then changed his mind, went to an election with a platform pro-GST and won and then implemented it. The cowardly Albanese did it after the election.

2. Let's not forget that they're called Stage 3 for a reason. Stages 1 and 2 already addressed low/middle income earners and Stage 3 was to tell high income earners to wait until later. People talk about Stage 3 as being "unfair" and how a low income earner gets very little from Stage 3, but that's because they aren't considering Stages 1-3 in their entirety.

A lot of the onus on tax is put on higher earners already - the top 10% of incomes contributes greater than 50% of all income tax collected. Bracket creep takes more and more from higher incomes as the years go on, and the 180K threshold has not moved in 15 years (since 2008/09). If indexed, 180K should be at 250K. I agree that higher earners should bear more of the tax load - of course they can and should contribute more - but the top threshold of 180K is actually very low by OECD standards and some people living in Sydney or Melbourne, with children, aren't as rich as you think.

3. Thirdly, by their very own nature these altered tax cuts will be much more inflationary. Labor talks about not adding to inflation, but by putting more money into lower incomes, who are more likely to spend all of that extra money, it will by definition add to inflation more than the old Stage 3. I realise that's a bit of a silly argument (give more money to higher earners because they don't need it) but I also think Labor shouldn't be making the argument that they're not being inflationary because they absolutely are.

In summary - I can see why they altered it. It makes sense. But I am annoyed at high-minded Labor for breaking a promise, making a political calculation to lie to the whole electorate when they presented themselves as paragons of virtue, and making false or poor logic to sell it.

[The Anti-Targ]

The first mistake was thinking Labor was or is high-minded. As they say on my favourite Australian political Youtube channel, Labour is the shit-lite party, it's not the not-shit party.

raising incomes for the low and middle income brackets is only substantially inflationary if supply of those paycheck to pay check essentials is constrained. If supply is sufficient to meet demand then the inflationary effect is minimal. And so long as an x% income increase leads to a <x% inflation then the net effect is increased prosperity for the low and middle income bracket. People get too hung up on the absolute price-level inflation number when the important thing is price inflation relative to income inflation. There was only a cost of living crisis because incomes were not rising with price inflation. Any inflation below double digits can be tolerated over a medium term so long as incomes are rising too. Better to have above target inflation for a while longer so incomes can rise substantially than have inflation brought down without any increase in incomes.

Tax adjustments to put more money into people's pockets to cope with cost of living just gives employers an excuse to not increase wages. If company profits are high then higher wages should be how people overcome cost of living issues not tax cuts. If profits are being squeezed then low end tax cuts can alleviate the pain until profits start going up and wages can rise.

[Jeor]

8 hours ago, The Anti-Targ said:

The first mistake was thinking Labor was or is high-minded.

Well, I'm not sure anyone thinks any politician is really high-minded, but Labor (and every Labor MP) said they were, which is a deeply cynical move, since "Restoring integrity to government" was the campaign platform. You expect cynicism from the right wing, but in a strange way it's kind of impressive how dirty the left is playing now.

[Paxter]

Glad they U-turned somewhat. I'd prefer the Stage 3 was just scrapped altogether (per my previous posts - I think we should be raising taxes, not cutting them), but this is definitely better.

Go Albo!

Edited January 24 by Paxter

[Impmk2]

5 hours ago, Paxter said:

Glad they U-turned somewhat. I'd prefer the Stage 3 was just scrapped altogether (per my previous posts - I think we should be raising taxes, not cutting them), but this is definitely better.

Go Albo!

This is pretty much where I'm at.

My biggest problem was stage 3 wasn't the readjustment of the brackets to address creep, but the elimination of a bracket and flattening of the system to make it dramatically less progressive.

Also think it might be politically astute. I think most will forgive the breaking of a promise in a way that directly benefits them. Puts the coalition in the position of running against a bigger tax cut for the vast vast majority of income earners.

[Paxter]

1 hour ago, Impmk2 said:

This is pretty much where I'm at.

My biggest problem was stage 3 wasn't the readjustment of the brackets to address creep, but the elimination of a bracket and flattening of the system to make it dramatically less progressive.

Also think it might be politically astute. I think most will forgive the breaking of a promise in a way that directly benefits them. Puts the coalition in the position of running against a bigger tax cut for the vast vast majority of income earners.

And at least it creates some much-needed policy differentiation between the two major parties.

I know some people who were going to benefit from ex-Stage 3 will be annoyed, but the reality is that this new policy is more aligned with the values of those who voted Labor. In that sense, I don't see this is a "betrayal of trust". 

Edited January 24 by Paxter

[The Anti-Targ]

The reality is rich people never need tax cuts, so cutting their taxes is never serving the best interests of the govt or wider economy, it just keeps the political donor class happy. The question though is defining the low end of what's rich. To some extent I think our reserve bank has kind of helped to define that by setting debt to income ratios for getting a mortgage to buy a house. The ratio is set at 1:6 for owner occupier homes and 1:7 for investment property. Since the reserve bank thinks it's possible to service that sort of mortgage and still be able to live. There will be plenty of low/medium income people who will  struggle to ever qualify in the larger cities.

If your owner/occupier ratio lets you buy a national median priced house without a deposit, I think that means you're at the low end of rich. I think the national median is about $850,000, so if you have a household income of $142,000 you're at the low end of rich. Maybe there's an argument for something a bit above $150K, but that's the rough ballpark I think.

[Jeor]

5 hours ago, The Anti-Targ said:

The reality is rich people never need tax cuts, so cutting their taxes is never serving the best interests of the govt or wider economy, it just keeps the political donor class happy.

I don't think the statement "rich people never need tax cuts" is quite true unless you're very clear about what "Rich" means. Anyone over 140K is worse off under this plan. There are plenty of single-income families in capital cities on 140K who would vociferously disagree with you that they are "rich" - at least in the "don't need tax cuts". And yes, I realise they are still getting a tax cut.

If we want to tax the rich, it is better to tax wealth rather than income. I'm not as mad at Albo for breaking his superannuation promise. But it's clear he's on a Labor mission.

[Paxter]

12 minutes ago, Jeor said:

I don't think the statement "rich people never need tax cuts" is quite true unless you're very clear about what "Rich" means. Anyone over 140K is worse off under this plan. There are plenty of single-income families in capital cities on 140K who would vociferously disagree with you that they are "rich" - at least in the "don't need tax cuts". And yes, I realise they are still getting a tax cut.

If we want to tax the rich, it is better to tax wealth rather than income. I'm not as mad at Albo for breaking his superannuation promise. But it's clear he's on a Labor mission.

Good luck taxing wealth in Australia any more than it is now. The Right would never allow it. 

Given that, it's important not to give tax cuts towards the top end. We need people higher up to be doing the heavy lifting.

Edited January 25 by Paxter