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The Forum > Article Comments > Monetary policy revamp > Comments

Monetary policy revamp : Comments

By Peter Jonson, published 14/1/2013

If the current dilemma with Australia's monetary policy is not resolved, it will do great damage to Australian industry leading to a great depression.

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Tell us Peter Jonson,why cannot our RBA create just our inflationary money of 3% of GDP for our Govt and banks? Currently we are suffering a depreciation of our currency of 3% pa and having to pay principal + interest on money that is already ours.

It is the private banking system that is stealing from us by creating inflation via their fractional reserve system of banking.
Posted by Arjay, Monday, 14 January 2013 9:33:30 AM
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Tax incoming capital Peter?
Like say as it enters the banking system as term deposits? That then are ripped out en masse, like when the tsunami hit Japan?
We already tax interest earned or has deemed to have earned?
I see absolutely no merit in taxing foreign capital by any means, as it enters the country!
It's a regressive idea, and like stamp duty, taxes economic activity at the front end or before we have the said economic activity!
If applied as outlined, likely to cause the very contraction alluded to.
Much of this money is borrowed and impacted by interest rates, some of which are charged by parent companies at artificially high commercial rates, to effectively reduce/remove tax liability!
Why, some local firms have created subsidiaries in foreign tax havens, so they can then outsource various services, at exorbitant rates, simply to "legally" write down/avoid tax.
We certainly need overdue reform!
But rather, suggest a total reform of the current convoluted tax system, which ought to be jettisoned in its entirety and then replaced with a virtually painless single unavoidable expenditure tax, which set at 4.8%, would garner more net revenue PA, than all the revenue raising by all three tiers of government.
Moreover, with reconciliation removed as an element, immediately available to consolidated revenue, which could save the budget bottom line, by removing the need to borrow to run depts.
I believe the way to offset the cost to industry, of the high AUD, is to remove the often onerous cost of compliance off of the backs of industrial innovators and entrepreneurs!
After that, we need to de-privatise inordinately expensive energy provision and once again rebuild our manufacturing base on the back of very cheap energy!
Given we have copious NG, which is 75% hydrogen, we could do worse than use it to supply energy at cost to industry, and then rely on the increased economic activity, to provide additional tax receipts and tax payers!
There are other even more inviting carbon neutral/free energy options, endlessly sustainable biogas and thorium reactors, outlined in detail elsewhere!
Posted by Rhrosty, Monday, 14 January 2013 10:19:01 AM
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Interesting Peter, but I notice your whole article was about monetary policy.
I draw to your attention that growth is not dependant on money but energy.
As rising energy costs eat into whatever GDP we have we will not have the funds to repay debt & interest.
I suggest that you google Jeff Rubin, a Canadian economist that has
written much on the effects of declining energy on world trade.
"Your World is About to Get a Lot Smaller".

Another author you should read is Richard Heinberg, "The End of Growth".

The GFC was triggered by oil demand exceeding supply, or perhaps you
did not know that. Well, you are not on your own there, but it does
not change that we have reached the peak of oil production.
Perhaps you have been taken in by the shale oil hype, but that is
mainly a high cost Ponzi scheme.
Posted by Bazz, Monday, 14 January 2013 10:36:19 AM
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Rhrosty it is our high exchange rate that is destroying our industries that are import competitive, or are trying to export.

One of the little companies I used to run has seen it's export market shrivel up & die over the last 5 years, after 20 years of growth. At the same time, it is now importing components that used to be sourced here.

Some of those components simply became too expensive from local suppliers, while the cost of competing imports was continually falling. Even worse, some products simply ceased to be manufactured here.

When you can land into store, products made to your specification in Asia, for only 20% of the cost to produce them here, we are in big trouble, as will our labour market in the near future.

If you don't like a tax on non working capital inflows, what do you suggest we do, to prevent our industry being destroyed by imports made cheap by the exchange rate those inflows have generated?
Posted by Hasbeen, Monday, 14 January 2013 11:14:13 AM
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One can make a case for increased capital gains on the sale of Australian assets/land, commercial-residential investment property!
However, this impost ought to fall exclusively on the seller and their unearned windfall profits, which given my druthers, I would virtually tax out of existence!
Particularly unimproved, if rezoned land holdings, which should no longer be allowed to be held by lazy investors as land banks, which then detract from housing affordability.
This tax could however, be successfully avoided, by building within months of acquisition; and BA-development, ought to be implicit in any rezoning approval? [Why buy urban land other than to build (a) house(s) on it!?]
Moreover, the essential infrastructure, roads, water, power, ought to proceed rather than follow rezoning! [And a better way for councils to invest surplus funds; than say, in worthless derivatives!]
House building on a large enough scale, which includes significantly increased local manufacturing, is prevented by this sort of indolent land bank activity; and or, indolent unimaginative govts, simply seeking revenue; [maximised stamp duty,] which ought be repealed as promised, given; I believe, usually funds expansion of already over-bloated corrupt/incompetent govts?
No names, no pack drill.
Posted by Rhrosty, Monday, 14 January 2013 12:07:14 PM
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Hasbeen, I suggest we jettison all the current complex taxes. Inclusive of payroll tax, fuel excise, the current carbon tax arrangements, stamp duties etc, etc.
It's the only way to actually remove enough of the current cascading costs to make some of our manufacturing industries competitive.
A simple unavoidable expenditure tax of just 4.8% collects more revenue, around 25%, all while lowering overall costs on industry by as much as 30%.
This 30% is paid for courtesy of multinationals and others avoiders; or all forms of avoidance, which would be no longer possible or permitted.
Cheap energy supplied in a public format at virtual cost, is and remains the cheapest form of energy, and ought to replace the private price gouging model!
The actual cost of producing a kilowatt hour of coal-fired electrical energy is around 3 cents.
Coal seam gas ought to be cheaper, given actual total labour, development, and delivery costs, always providing it remains the poeples' property, until delivered as energy to the end user!
China's labour costs are inflating by around 20% PA; and all the so called cost benefit advantages, will shortly disappear just as they did in Japan, Taiwan, Singapore and Korea before them.
Moreover, one can seen most of the high-tech energy dependant industries relocating here, if we but provided the worlds lowest and fairest tax rate and the world's lowest costing energy.
We should also build our own nuclear powered shipping line, to take full advantage of these conditions, so as to lay the markets of the world before our own manufacturing, at stable predictable costs, even as the costs of conventional powered transport options, are rising through the roof!
I've heard the expression work smarter not harder, and we really do need to do a lot more of that!
Cheers, Rhrosty.
Posted by Rhrosty, Monday, 14 January 2013 12:51:43 PM
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