We have two leaders with hugely differing views on how best to manage our economy.
Turnbul says no more taxes and has forced the state premiers into a position (very cunningly I might add) where they can no longer hold their hands out for more, saying they now have to live within their means.
This means no funding for Gillards unfunded education and health dreams which means this funding has to be found from more cuts elsewhere.

Shorten on the other hand wants to cripple the economy by taking an axe to negative gearing, and his aim is to use this perceived windfall to fund Gillards dreams.

Two major problems here, firstly where is a land going to come from for new housing and commercial buildings, and secondly, where are the buyers going to come from for the old houses or premises when people/businesses want to upgrade.

Talk about a slippery slope on a road to nowhere.

rehctub,

"...(very cunningly I might add)...."

Oh yes.....about as cunning as a farce can get.

The reason these taxes were abolished was because of inequity and complexity.

Mal would love to see all that return with a vengeance...retrograde confusion and complexity.

Good luck with that, Malcolm the Magnificent.

Can I just add, rehctub...that Turnbull's "cunning" idea didn't even make it to a written proposal.

He had a bit of blather to offer the premiers at COAG.

That was it...

So here's our fabulous leader proposing to make a seismic change to our country's taxing regime - and he doesn't even have documentation to support it.

Incompetent.

"Shorten on the other hand wants to cripple the economy by taking an axe to negative gearing,"
rechtub, you know that isn't true.

Shorten does not want to cripple the economy. He wants to close a major tax loophole that's pushing up house prices. Even if you think that's a bad policy in isolation, consider the combined effect of this and an interest rate cut. Recently the RBA's been reluctant to cut interest rates for fear of stoking a housing price bubble.

Some anonymous people are trying to give the impression that Shorten's policy would cripple the economy, and have released a report that gives that impression (to the delight of the Murdoch Press). But there are two problems with it: firstly the quality of the report is extremely low, and secondly it's not based on Shorten's policy at all. See http://www.abc.net.au/mediawatch/transcripts/s4424811.htm

Did you actually read rehctub's post Poirot?

He is saying that all this waffle by Turnbull was actually a clever trick to force the states into a position where they can no longer hold their hands out demanding more money. They have after all now refused the opportunity, to raise as much as they would like.

If I thought he was right, I would have a new healthy respect for Turnbull. I however think it was just a lucky accident by a blundering fool. He will have to pull a few more, & more obvious coups for me to believe it.

After all, he has just done another Rudd lookalike, & reopened the gate to the people smugglers with his last very stupid announcement.

If Shorten et al really wanted to do anything about house prices he could:

-reduce the over-enthusiastic immigration policies that saw new records regularly being set for immigration; and,

-reduce the taxes that affect land development and home building.

Shorten and Greens are playing the dangerous game of Class Warfare that didn't work for Julia Galah'd (Obama got that right!) and could easily result in the collapse of the already uneconomic and very shaky, rental homes industry.

Shorten could easily provoke a run of those mums and dads aspirational 'investors' away from housing. It would be a run that would be impossible to stop once it got going.

Just think, if Shorten, Plibersek et al get into office they could do something about the CFMEU and other unions that have been found to be corrupt.

Then again, maybe they would just pull the tarp over the stinking corruption again.

No bets taken!

onthebeach,

Class warfare is unAustralian. We're all in it together, and Aussies know this.

The Libs were smart enough to rail against Julia's dumbest remark, but their rhetoric runs contrary to the reality, for many of their policies benefit the rich at the expense of everyone else.

But improving things for the battlers is NOT class warfare.
And closing tax loopholes is NOT class warfare.
Both are responsible policies that benefit the nation as a whole.

And a policy that results in more people owning their own homes is likely to be a good thing.

Considering what they've said about the problem of corruption being much wider than just in the unions, I think it's likely that Labor will soon promise to set up a Federal ICAC, which would deal with union corruption and a lot more besides.

___________________________________________________________________________________

rehctub, sorry my original response neglected to address the two major problems you claimed:
"where is a land going to come from for new housing and commercial buildings,"
Probably the same as now: some from farmland, some from existing housing and commercial buildings, and some from old industrial sites.

"where are the buyers going to come from for the old houses or premises when people/businesses want to upgrade."
Some from people who want to live there, and some from those who want to rent it out, as it can still be profitable without being used as a tax dodge (and negative gearing would still be permitted for new development regardless of the current use of the land).

Hasbeen,

"Did you actually read rehctub's post Poirot?

He is saying that all this waffle by Turnbull was actually a clever trick to force the states into a position where they can no longer hold their hands out demanding more money..."

"Clever"? ..oh really?...

Hohoho!

Even right-wing shock jocks are calling out the "stunt".

"When it comes to interviewing Treasurer Scott Morrison, Sydney shock jock Ray Hadley is more familiar playing the role of partner-in-crime than sparring partner.

But on Monday, the two mates' usual love-in took on a more sceptical tone, as the broadcaster pushed back against the government's latest rhetorical flourish that "we must live within our means".

"Now hang on, that's a slogan," Hadley interrupted. "Live within our means, that's a slogan. That's a four-word slogan."

"This apparent distance between Mr Turnbull and Mr Morrison prompted their spin doctors to arrange a farcical photo opportunity on Friday afternoon, following the Council of Australian Governments meeting in Canberra. For all of about 15 seconds, camera-carrying folks were treated to the visual of Mr Turnbull and the Treasurer getting into the Prime Minister's car."

""I think it looked a little forced and so did other people," Hadley said. "Were you chained to the car or handcuffed?"

http://www.smh.com.au/federal-politics/political-news/thats-a-fourword-slogan-ray-hadley-lashes-scott-morrison-on-government-slogans-and-stunts-20160404-gnxjny.html#ixzz44q23WWYC

Pathetic....

Aidan, lets look at both, housing and commercial separately.

Housing. Many of our developments come from small acreages chopped into housing blocks, a typical 5 ac block returns about 20 600m2 lots, so with lots now as small as 270m2 the numbers are much higher.

When a developer/investor buys a 5 ac lot, usually with a house on it, they negatively gear this, either for years (land banking) or for the time it takes to get the DA's and plans in place. Shortens policy puts this at risk and this is why I say, "where will the land come from", also, if a new house drops in price by say 20% to say $400,000, who is going to buy that house as a rental when the owner wants to upgrade. Unless of cause the rents goes to $600 per week.

Commercial. It is common for businesses to outgrow their premises so say they built the old one for $1,000,000 and the new one costs $2,000,000, who is going to buy the old one if the interest cant be deducted.

Answer these questions and I will happily debate the issue with you as im of the opinion this policy will cripple our economy ruin the building industry at the same time.

Happy to be proven wrong.

*So here's our fabulous leader proposing to make a seismic change to our country's taxing regime - and he doesn't even have documentation to support it.

Incompetent.*

No Poirot. He thinks like an entrepreneur, not like a bureaucrat!

There is everything right with coming up with new concepts and presenting them for discussion, which is exactly what happened. The Premiers were not interested, fair enough. So he saved time and money, which is how it should be. You are nitpicking :)

Yabby,

Nitpicking, eh....

This "entrepreneur" waves around a new idea every second day.

He doesn't actually do anything...hasn't produced any economic policy of substance....excludes his Treasurer from his inner circle (which leader ever did that?)....and has an election simmering in the wings.

No doubt, you think he's really clever.

I think he's a vacuous clod - politically speaking - who has no idea what to do if he can't control the narrative.

And apparently I'm not the only one who thinks so....

"The Coalition has surrendered its lead to Labor for the first time since Malcolm Turnbull became Prime Minister, with the latest Newspoll revealing the Bill Shorten-led opposition has pulled ahead, 51 per cent to 49 per cent, in two-party terms."

etc....

http://www.theaustralian.com.au/national-affairs/newspoll-malcolm-turnbull-coalition-lose-lead-to-labor/news-story/481794644ea4fc1cb898cb7189fd84b0

*I think he's a vacuous clod*

You might well think that, but I would note that you are unlikely to be a hugely successful entrepreneur, with the ability to think outside of the square. As far as I am concerned, the more ideas the better, but Turnbull also made it clear that he would be more consultative, which is what he is doing.

Just claiming to have a plan and promising money which is not there, is great to suck in the gullible masses, but is doomed to failure in the real world. If the Premiers want more money, let them be politically accountable for it. Great idea!

Yes Yabby, let the states take care of their own back yards, rather than just make unaffordable plans then expect the feds to fund them.

The reality is that states such as Tasmania live well beyond their means, while states like WA, after handing much of their wealth over now have to struggle with the plummeting mineral revenues. That's simply unfair.

Just because someone decides to move to say Tassie, should not mean that WA or QLD pick up the tab.

The flip side of this latest endeavour from MT is that should the likes of QLD or WA rebound through another mining boom, they will be fighting tooth and nail to keep their wealth, and rightly so.

As for MT and his innovation plans, first, he mush fix restricting IR laws because as it stands, an innovator cant up skill without fear of retribution.

Of cause if Bill Shorten has his way, none of this will matter because our economy will die.

I say this because businesses and innovators will be restricted from expanding because there will be far fewer buyers for their old buildings thanks to his brain fart NG proposal.

That's why I say we are headed on a road to nowhere.

Yabby,

"You might well think that, but I would note that you are unlikely to be a hugely successful entrepreneur, with the ability to think outside of the square...."

Judging by Turnbull's performance, he'd also be unlikely to be a hugely successful entrepreneur - if his habit is to waft around ideas before they're fully formed, or at least have some semblance of integrity.

Btw, I agree with your take that Turnbull is demonstrating an entrepreneurial bent in his political conduct...he's just not doing it very well.

Entrepreneurs become successful only after they prove their projects to be goers.

Being consultative should mean that your are opening the dialogue between players - not attempting to bluff them into a corner while simultaneously shooting yourself in the foot.

We certainly are on the road to doom with either of these fools. The coalition needs to pay for its stupidity in swapping a reasonable, though not perfect leader, for a total idiot: that way they can reducate themselves back to what is required of them, and get rid of the likes of Pyne and other wets; and Labor can prove once and for all the foolishness of socialism before it is obliterated, hopefully for good.

*Btw, I agree with your take that Turnbull is demonstrating an entrepreneurial bent in his political conduct...he's just not doing it very well.*

So Poirot, you don't like how he is doing it. Fair enough, you don't like his style. As you are unable to think like an entrepreneur, more likely his plan is going over your head. How he is doing it, seems fine to me.

*Entrepreneurs become successful only after they prove their projects to be goers.*

Ah, but it is only the beginning of the project. Patience is a virtue!

Can I also add, Yabby...

That Turnbull's states tax was not "thinking outside the box".

It was straight from inside the box...the IPA box - which contains a 75 item wishlist.

Item No. 7 is "Return income taxing powers to the states".

http://ipa.org.au/publications/2080/be-like-gough-75-radical-ideas-to-transform-australia

Next....

Poirot, you are clearly way out of your depth, when it comes to how entrepreneurs think, despite being a poster whose contributions I commonly think, often make alot of sense.

So I will assist you a little :) Janine Allis was not the first person to have the idea of selling fruit juice, yet her Boost Juice chain has been wildly successful, as she thinks like an entrepreneur. She even documented it in a book which she called "The Secrets of My Success".
You might learn something about a type of thinking which you clearly don't understand.

So the fact that somebody had an idea before, simply does not matter. It is how things come together as part of an overall strategy which do, but it would be foolish for MT to display exactly how he is playing his hand. It is clearly also foolish of you to underestimate him, just because that plan might be going over your head and you don't yet understand it. The Libs need to get their stuff together, but if anything is going to damage them, it is Tony's goons on the far right, who don't yet seem to understand that the world has moved on

Yabby,

Turnbull didn't suggest a proposal to honour the IPA's wishlist because he had a good idea of how to deliver it.

He blathered it (without a written proposal) because he thought he was being "oh-so-clever" in his attempt to bluff the states and push his responsibilities elsewhere.

It has backfired big time...and shouldn't be compared to a successful enterprise like Boost Juice.

Marvellous Mal takes his "not showing his hand" to extremes...he shows nothing....his strategies are dashed off in the morning and scrapped in the evening.

I can assure you that he has no "plan"...you're another one who is sticking to the script that he's roolly "clever". He bloody well not clever "politically" - he's hopeless.

He sets things up for a DD...and ever since he's been wandering about in the garden looking for unicorns.

".....The Libs need to get their stuff together, but if anything is going to damage them, it is Tony's goons on the far right, who don't yet seem to understand that the world has moved on."

I agree.....that's the other fascinating aspect of this Coalition govt farce.

* He bloody well not clever "politically" - he's hopeless.*

He is Prime Minister of Australia. Not bad for somebody whom you claim to be "hopeless" :)

*I can assure you that he has no "plan"..*

Poirot, you have no idea what he has, more likely you just can't grasp his way of thinking, which is understandable. He clearly has a plan to make sure that union thugs in the building industry are held to account, looks like he should win that one. His efforts to encourage innovation are on the right track, much as acceptance of the fact that as a nation we have to learn to live within our means. If the States cry poor yet once again, he can hold them to account for failing to accept political responsibility for money which they want to spend. More good plan.

It seems that you are letting emotion interfere with good judgement. Fair enough, that is your problem, not mine

Yabby,

"He is Prime Minister of Australia. Not bad for somebody whom you claim to be "hopeless" :)"

I give him creditfor wrangling his way up the political ladder....mainly on his reputation for success in fields other than "politics".

Let's face it, he hasn't acquitted himself particularly well in this area (apart from becoming PM) - we have a crapped up NBN, outdated, criticised by most technical experts and now set to cost way more than was touted - cheaper, quicker, etc

We have utegate - a gargantuan miscalculation and embarrassing cock-up.

And the cherry on top of the compost heap (thanks PJK) is his woeful performance in the top job...tottering around, reliant on his reputation and charm to fool the plebs that he actually has some grand plan that he's just biding his time to release - when the reality is he has no formulated strategy for the way ahead.

Phooey to that...

Whew Poirot, I thought you might have some real reasons for your opinions, clearly not, judging by your points. Is that all?

Turnbull is clearly hamstrung by an obstinate senate, so fixing that is on the way.

Politically the smart thing to do, is give away as little as possible, given that an election is just around the corner.

Meantime Turnbull remains more popular that Rudd, Gillard, Abbott or Shorten. Political strategy is clearly not your best quality :)

Yabby,

We have differing opinions on Turnbull....I've heard exactly the things you are saying from various people many times before.

It's been like old times interacting with you here.

Even down to the cute little personal put-downs you lovingly leave behind at the end of each post.

Cheers : )

It is pretty obvious that political strategy is not your strong point either Yabby, if you think he is being cunning

Turnbull is not working to a strategy, he is desperately trying to avoid doing what we all know must be done, cutting spending, or raising the money to keep spending. He is terrified of upsetting any section of the community, when he is likely to desperately need their vote to win an election.

The stupidity is, much he is doing is only winning socialist, Labor & green approval, & it is very unlikely any of those will put a cross against his name, in the cold bright light of the voting booth.

This winning of the dills is costing him a huge number of those who were more likely to put their cross beside his name. Among my friends around here, mostly poor hard working Liberals, as against the rich publicly funded socialists, very few will be voting for anyone in a party led by Turnbull.

Whether he is stupid enough to believe the global warming scam, or is using it to establish a carbon trading scheme to enrich his merchant banking mates is not important. We can all see it's one or the other, which alone makes him unacceptable to us, as a PM, or as a man. He engenders nothing but disgust. It will be very interesting to see the count in our local booth.

And yes I will even vote for Shorten to get rid of Turnbull. The only group below Turnbull & co will be the Greens.

*And yes I will even vote for Shorten to get rid of Turnbull.*

Hasbeen, it is well known that to win Govt, it is all about winning the swinging voter, not those on either extreme, who are unlikely to change their opinion.

Luckily few on the extreme right would be so irrational as to follow your example above, or frankly they would deserve a Labor Govt that screwed every Dollar out of them, for their stupidity and learn the hard way. Some people need pain to learn. Perhaps 6 years of Labor was not enough pain for you.

I'm a swinging voter. I voted informal the first time in my life when the choice was between Mr Rabbit and the Labor rabble.

Now we have a man who isn't a career politician, vs a union leader who seems genuine as a union leader (or politician) could be. He's alright Bill, a bit daggy, wouldn't vote for him probably and I'm more left leaning, but seems a nice enough human.

But the Merchant banker I would give a go. He's smooth and a little bit slimy, but The Liberal party hasn't been liberal for a long time, rather the conservative christian party.

The big end of town has won, it's just the whether you get a Christian fundie, a union hack, or someone who has achieved something outside of politics as the figurehead for big business.

"... or someone who has achieved something outside of politics as the figurehead for big business."

Yep...good old Magnificent Mal - he of the 24-hour thought bubble rotation.

He's fulsomely nobbled the NBN....

"It's probably the most expensive project to roll out an obsolete second-hand technology in the world's history..."

http://www.abc.net.au/news/2016-04-06/nbn-is-good-enough-to-meet-current-needs-ceo-says/7304684

And now he's hot on the track attempting a similar nobble with the CSIRO...not to mention education in general.

The "innovation" guy!

Haha Poirot, you are clearly unable to differentiate your deep hatred of MT, from what is good business practise! Peeing other peoples money up against the wall and calling it sensible Govt policy, without too much questioning of how it is actually spent, might flow deeply in your leftie veins, but it is in fact foolishness indeed! The devil is of course always in the details.

So what is actually your quibble? That it might take 5 minutes to download a movie instead of 10 seconds? I remind you that many young people don't even have a home phone anymore, they only own a mobile. Why spend 6000$ per home to connect the last node, when many people won't be using it?

The same applies to education and health. There is waste everywhere. In other parts of the world, kids are better educated with far less being spent. Just throwing money at things to make it look as if things are happening, might fool some of you gullible voters, but it is poor business practise and should also be considered poor Govt practise

Yabby,

"Haha Poirot, you are clearly unable to differentiate your deep hatred of MT, from what is good business practise! Peeing other peoples money up against the wall and calling it sensible Govt policy, without too much questioning of how it is actually spent, might flow deeply in your leftie veins, but it is in fact foolishness indeed! The devil is of course always in the details."

Lol!....peeing windfalls up against a wall is an LNP specialty - a la Costello the Great.

What is good business practice, Yabs?

Nobbling innovative ventures and world renowned scientific institutions is good business practice?

Who spends so much on technology that is already outdated?

""But look, the biggest infrastructure projects in this country's history were built with the future in mind.

"The Snowy Mountains Scheme was built to last hundreds of years, the Sydney Harbour Bridge was built with eight lanes, not two.

"But now, as we enter Malcolm Turnbull's 'age of innovation' and we're told the NBN is the most important infrastructure project of the 21st century, we're expected to rely on a decaying copper network that experts say is already past its use-by date, instead of investing in fibre which the same experts say could service our internet needs for the next 100 years."

http://www.canberratimes.com.au/entertainment/tv-and-radio/malcolm-turnbull-you-didnt-invent-the-internet-waleed-aly-slams-pms-nbn-hypocrisy-20160406-go02xz.html

Mal's idea for improving education is to federally fund private schools, but not public ones.

Great!

Not to mention the LNP penchant of late to destroy TAFE and replace it with private training companies which go bust at a rate of one per week.

The LNP are destoyers of innovation and education opportunities...but good for business, eh?

Guffaw!

Yabby, FTTN is a terrible false economy. It uses more energy, has much higher maintenance costs (and is less reliable) and will eventually have to be replaced with FTTP anyway. It's better to do it right the first time.

At a time when the official interest rate was 3%, the report that said FTTN was good value for money had to use a 7% rate in its calculations to reach that conclusion. Now the official interest rate has fallen to 2%, and the cost of delivering FTTP has also fallen, there is no technical excuse to waste money on FTTN. Bill Morrow's claim that "All evidence suggests what we're doing today is the right way" proves his incompetence. He should resign.

*The Snowy Mountains Scheme was built to last hundreds of years, the Sydney Harbour Bridge was built with eight lanes, not two.*

Which shows how little you and Aly understand, comparing apples and carrots. Adding extra lanes to the SHB would have clearly been uneconomic, so they have since built a tunnel. The Libs are focussing on rolling out the cables. The NBN already owns the copper wires, as they had little choice but to buy them back from Telstra, in order to gain access to the ducts. The bit of cable up your road can be done later, there is no rush. What matters is getting more mobile towers up to cover more of Australia, getting satelites installed and running etc, all that is going ahead. Poor Aly, having to wait 5 minutes for his movie. Boo hoo. What has actually limited the roll out is a lack of qualified people. Contractors just could not find them.

Our education system involves far more than Tafe. Waste occurs everywhere unless somebody gets serious about cutting costs. Anyone working in Govt or even large companies, where shareholder money is often pissed up against walls, would accept that. At least in business, heads can roll. Not so in the public service, it is nearly impossible to fire them for waste, so they spend any amount given.Only by cutting their budgets, are they forced to learn to prioritise and cut waste.

Yabby,

".... The bit of cable up your road can be done later, there is no rush..."

Which well sums up the methodology of right-wingers when it comes to "innovation".

So much for the infrastructure of the 21st century.

Sorry mate, but, as with climate science, I take my information from people who actually know what they're talking about - ask the experts and they'll all shake their heads at Turnbull's mash-up.

As for the imminent destruction of TAFE - and the rise of private training colleges. It's the old story, Conservative govts run down services and sell off opportunities to their mates. The "mates" in this case couldn't run a tea shop - and are continuously failing - leaving students in the lurch having paid for a service they can no longer access.

Typical:

"VET: An industry in crisis is an investor's worst bet"

""I found it astounding, really. It's a huge call centre with pop music blaring through loudspeakers revving people up. Their managing director proudly told me they give away 700 free coffees a day or something to their staff," says Brody who is chief executive of the Consumer Action Law Centre.

"It didn't seem to me the type of culture that would align with education and job seeking. It was all about sales."

http://www.smh.com.au/business/consumer-affairs/vet-an-industry-in-crisis-is-an-investors-worst-bet-20151112-gkxrrb.html#ixzz456mLlkAL

"Private colleges earn millions from phantom students as TAFE teachers axed because of government funding cuts"

"The crackdown on private colleges pocketing billions in government funding for handing out free iPads to students who will never graduate should be reason for the NSW government to press pause on its vocational training reforms.

Instead, there seems to be a disconnect between the realisation in Canberra that vocational training is a "shambles", in the words of Prime Minister Malcolm Turnbull, and the Baird government's latest announcement that it will shift more money from TAFE to the private sector."

http://www.smh.com.au/nsw/private-colleges-earn-millions-from-phantom-students-as-tafe-teachers-axed-because-of-government-funding-cuts-20151030-gkna72.html

Pfft....

I'll just add, Yabby, that I'm always entertained by your little pre-emptive starters - the "Hahaha" at the beginning...the "Which shows how little you understand..." etc.

After which you go on to wax lyrical and unload a spiel of the most pure right-wing vacuous bilge.

Carry on....

Why is the Australian electorate so narrow minded when it comes to voting.
Most people vote for one party all their lives.
A few will change as they grow older and stop voting labor and vote National or Liberal later in life,and watch the 6pm news to keep them informed about the latest scandal.
Very few Australians take the time to understand the political scene.
Most people will not study the "Form Guide."Check out who they have the opportunity to vote for.
In the last Federal Election.I was surprised that good honest independent,Family First or Palmer United candidates were ignored by the electorate instead LIB/LAB party hacks old and new were tested out and in most case were elected.
The new LIB/LABS make a maiden speech six months later and ask Dorothy Dix questions of their own party for the time they are in Canberra.
This process makes the Australian Parliament look like the very best days of Stalin's Russia.The public know the answer before the new MP asks the question.As well as deals being done in secret
Is Turnbull and Shorten the answer has to be no.
Shorten would be a financial and political train wreck and Turnbull
has shown that he is not upto the standard of Abbott as PM.
This election I will be looking for an honest candidate who has lived in my electorate for a number of years and who will represent our local people.
I will give my second preference to the next weakest so on and so until the very last who I do not representing me.

*Which well sums up the methodology of right-wingers when it comes to "innovation".*

No it does not. It shows that spending needs to be accountable and when it comes to mega billions, even more so. It remains to be seen as to how many users are prepared to pay the NBN extra, to download a movie in 5 seconds instead of 5 minutes. If they really need that, then then user should pay, not the taxpayer.

*"Private colleges earn millions from phantom students as TAFE teachers axed because of government funding cuts"*

Exactly! Govt cum the public service are so hopeless at what they do, that it is clearly beyond them to even police the service providers, let alone run an efficient enterprise. So scoundrels move in. Duh.
Do you think that if there were no police force, crime would not increase? So why is it beyond Govt to clamp down on fraud?

*unload a spiel of the most pure right-wing vacuous bilge.*

Ahh, but I am not a party person, but an issues person. So I think that Keating and Hawke both were ok and made positive changes which the extreme left spewed over. You must be extreme left! I am kind of in the middle, depends on the issue. Keating warned us 25 years ago that we would land up like a banana republic unless we changed our ways. Some still haven't gotten the message.

Yabby, I agree that spending needs to be accountable. But did you overlook my 10:32 AM post? FTTN is an insane waste of money. Regardless of user benefits, FTTP is much better value for the taxpayers. And if a lack of qualified people is what's limiting rollout speed, they should train and employ more people, not just give up and resort to inferior technology. 'Tis not as if there's a shortage of potential workers.

"Govt cum the public service are so hopeless at what they do, that it is clearly beyond them to even police the service providers, let alone run an efficient enterprise. So scoundrels move in. Duh.
Do you think that if there were no police force, crime would not increase? So why is it beyond Govt to clamp down on fraud?"
Clamping down on fraud requires two things: firstly it requires the activity to be illegal – far too often the government contracts are badly written, so the government doesn't get the desired results but still has to pay. Secondly it requires resources to enforce the law.

But when the public sector budget is continually cut, AS YOU ADVOCATE, the resources to enforce the law are in short supply. As indeed are the people who scrutinise the contracts. Consider the school halls scheme: in WA, where the state government scrutinised everything and demanded to know the reason if costs were higher than expected, it was very good value for money. But in NSW and Victoria, where the state government no longer had that capability and instead put the private sector in charge of managing it, it was very poor value for money.

True efficiency requires a capable public sector. The Right's dream of a minimal public sector may be superficially attractive, but it's a false economy – it gives the illusion of efficiency while pushing far higher costs onto future generations (and sometimes onto the present generation as well).

You've failed to notice that it's not the countries with big government that are banana republics, it's the countries with the smallest government.

*and the cost of delivering FTTP has also fallen, there is no technical excuse to waste money on FTTN

Yes Aiden, the cost has fallen and given the rapid change in IT, should fall alot further. Already the talk is about FTTdp. Give it 5 years and we will likely be using even cheaper and better technology, so it is foolish spending an extra 30 billion now.

*He should resign.*

How arrogant of you. Read the man's CV. He clearly knows how to crunch the numbers and is in a position to do so, with information at his fingertips which you and I don't have.

Spending 3 years training a whole lot of extra people, only to sack them all again after a mad rush to meet deadlines, would be even more foolish. This all for a product for which we do not even know, if demand exists to any large scale or if people are prepared to pay the extra cost involved. Any business doing something so foolish, would soon be out of business.

*The Right's dream of a minimal public sector may be superficially attractive, but it's a false economy*

Well no. It is people like me who see the huge waste going on in Govt enterprises and having run businesses without that kind of waste, see what needs changing. For a start, get rid of the dead wood and make people accountable for their jobs and waste, or have the right to fire them.

As a matter of interest, banana republics have a small public service, because they have no money. They usually have no money, because business refuses to invest there to generate wealth. Keating at least understood that, even if much of the left does not.

Come on Yabby, I doubt Turnbull ever crunched a number himself, & probably if his current performance is any guide, could not interoperate the result with out help when someone did.

Even if he can, it is highly unlikely he ever has had any interest in crunching numbers for the good of the general public. He has never shown any likelihood of it.

Around here the NBN is just a dirty word. Dozens, or perhaps hundreds can not get any access to the net at all, as the population has outstripped the exchange capacity. They have been told they may get access within 5 years or so.

Apparently no new work will occur before the NBN arrives. We have the useless grinning clones, Rudd & Turnbull for this state of affairs.

Don't you find it interesting that both of them have a habit of sprouting some new stupidity after long flights. Both have grasshopper minds. Land on a subject, take one bite, & fly on, with some half baked understanding, & even less intelligent thinking.

Yes they have us on a road to nowhere. With this pair, we are more likely to find ourselves on Alice's yellow brick road, than any other.

Yabby,

"Yes Aiden, the cost has fallen and given the rapid change in IT, should fall alot further. Already the talk is about FTTdp. Give it 5 years and we will likely be using even cheaper and better technology, so it is foolish spending an extra 30 billion now."
On the contrary, it's foolish waiting. Most of the technological advancements in optic fibres have already been made, and those that haven't are unlikely to significantly affect its cost. The cost only fell recently because of the introduction of skinny fibre (which is more flexible than normal fibre). Now that the additional flexibility is there, there are unlikely to be any major technological breakthroughs that could reduce costs. There will probably be minor improvements, but these will be counteracted by rising wage costs.

Also, even without skinny fibre, doing it right the first time is the most cost effective option. It's well worth spending an extra 30 billion now to avoid spending an extra 40 billion in the future.

FTTDP is better than conventional FTTN, but retaining a short section of copper is inefficient; it requires modems (wasting electricity) and will still be a significant source of unreliability.

"How arrogant of you. Read the man's CV. He clearly knows how to crunch the numbers and is in a position to do so, with information at his fingertips which you and I don't have."
Did you actually look at the report which concluded that FTTN was good value for money? I did. I noticed that, at a time when the official interest rate was about 3%, they had to use a rate of 7% to build enough short term bias into the calculations to reach their politically imposed conclusion. Now the cost of FTTP has fallen relative to that of FTTN, and the official interest rate has fallen to 2%, the case for FTTP is much stronger. So if he fails to see that, I make no apologies for accusing him of incompetence, regardless of what's on his CV.

(TBC)

(continued)
"Spending 3 years training a whole lot of extra people, only to sack them all again after a mad rush to meet deadlines, would be even more foolish"
Training those extra people needn't take that long, and they'd gain transferrable skills which are likely to make them more desirable to private sector employers. Meanwhile there's significant unemployment, and spending more on NBN construction to get it finished sooner will spur private sector growth.

"This all for a product for which we do not even know, if demand exists to any large scale or if people are prepared to pay the extra cost involved."
Even if demand for high speed internet were insufficient, ongoing costs mean that FTTP works out as the cheaper option.

"Well no. It is people like me who see the huge waste going on in Govt enterprises and having run businesses without that kind of waste, see what needs changing. For a start, get rid of the dead wood and make people accountable for their jobs and waste, or have the right to fire them."
But you mistake productive people for dead wood. You replace one kind of inefficiency for a much worse one.
Spending less on employees is a false economy when it means you have to spend more on consultants to get the work done.
Employing fewer of the people who ensure you get you good value for money is the worst false economy of all.

"As a matter of interest, banana republics have a small public service, because they have no money. They usually have no money, because business refuses to invest there to generate wealth. Keating at least understood that, even if much of the left does not."
Banana republics fail to attract business investment because they've failed to invest in educating their population.

Countries that have their own floating currency don't have to wait for outside investment; they can create their own money, spend it, and reclaim it via taxation. Keating had the foresight to float our dollar, but he and his successors have failed to fully take advantage of that.

Aiden, most of your questions are answered here:

http://www.malcolmturnbull.com.au/archive/coalition-broadband-policy-frequently-asked-questions#energy

As to Govt just creating money and letting the Dollar crash, what a great way to create massive inflation and a lack of trust in our $. Banana republic here we come....

Yabby,

I had to laugh - the first time I tried to open that link of yours it got a 524 error. It appears Malcolm Turnbull has failed to understand the importance of internet reliability!

But when I did finally manage to load it, I found that I had misremembered one crucial detail: the governments calculations were based on a discount rate of 8% not 7%. So there's an even bigger artificial short term bias than I remembered.

I'm not suggesting creating enough money to cause massive inflation. But inflation is low at the moment, as too little money is being created by the private sector. Public sector spending is no more inflationary than private sector spending.

The myth that the government borrowing from its own central bank would crash the currency is based on demonstrably false assumptions. In reality currencies only collapse when they're held above market value, where the government tries to print money to finance a war, and where the government tries to print money to pay off foreign currency debt. When Keating floated the dollar, the Australian government stopped borrowing in foreign currencies, though public sector businesses were still allowed to until about a decade later.

The long term value of a currency depends on balance of trade. We should remember that instead of needlessly panicking about our dollar's short term value.

*It appears Malcolm Turnbull has failed to understand the importance of internet reliability!*

Aidan, far more likely, you are confused as ever :) I remind you that the whole Telstra system failed the other day, due to human error, some guy pushed the wrong button. Cables will be cut as well, by people drilling holes through them accidentally, I can guarantee you. All this despite the very best of technology that is already being rolled out.

*on a discount rate of 8% not 7%*

You seem to have missed his point about return on investment. Spending 30 billion on technology that only a tiny percentage of the 11 million households even want and are prepared to pay for, is an extremely poor Govt investment and quite foolish, when the same money could be invested in other projects with a much higher return.

*I'm not suggesting creating enough money to cause massive inflation.*

Ahh, but this is just your little hobby horse that you are intent on seeing spent. 30 billion$. Along comes every other lobby group wanting Govt money spent and Govts intent on winning elections keen to spend it, as it is not their money that they are promising and hey presto, you land up with massive Govt spending and roaring inflation.If the NBB were my business, I would not be spending it, as it is a poor business decision. So it would also be a poor decision for the country, which is the point. Labor just love to promise everyone, other peoples money! How it is ever repaid, they conveniently forget. So are you going to force people to pay more to recoup your 30 billion, for a service that they don't actually want? That would be Govt monopoly gone crazy.

Yabby,

Appreciation of irony is not confusion.

You seem to have missed MY point about return on investment. interest rates have fallen to 2%, so anything with a return of over 2% is profitable. Therefore the government should not base its decisions on what's worthwhile on a discount rate of 8%. Doing so introduces a huge short term bias to decision making, and will inevitably cost the taxpayers more in the long run. And if the government really is failing to invest in other projects with a much higher rate of return, that's a failure of government policy. If such projects exist, they should be implemented as well, but right now very few things are so profitable, which is why interest rates are so low.

"Ahh, but this is just your little hobby horse that you are intent on seeing spent. 30 billion$. Along comes every other lobby group wanting Govt money spent and Govts intent on winning elections keen to spend it, as it is not their money that they are promising and hey presto, you land up with massive Govt spending and roaring inflation."
Right now the government is spending too little; not only is inflation not a problem, but lots of people are unemployed because neither governments nor businesses are willing to spend the money to employ them. So there is still plenty of scope for government to fund other things as well.

If there is so much government spending that inflation becomes a problem, they can deal with it by putting up interest rates or putting up tax rates (the latter is preferable to the former IMO). But governments should try to coordinate the projects so that they don't enter the heavy spending phase at the same time in the same region, unless that region has a high unemployment rate to start with. That way inflation will not become a problem.

(To be continued)

Yabby (continued),

To clarify my position: I regard inflation as the biggest constraint on government spending. But as my understanding of the causes of inflation has improved, so has my opinion on what course of action is best for the economy.

"If the NBB were my business, I would not be spending it, as it is a poor business decision. So it would also be a poor decision for the country, which is the point."
Interestingly enough, when the government were deciding which NBN option to go for, Simon Hackett, who was then head of Internode, said that FTTP was the best option but the second best option was for the government to do nothing.

"Labor just love to promise everyone, other peoples money! How it is ever repaid, they conveniently forget. So are you going to force people to pay more to recoup your 30 billion, for a service that they don't actually want? That would be Govt monopoly gone crazy."
These long term investments eventually pay for themselves; it's the false economies like FTTN that eventually work out more expensive. The NBN is about meeting future needs, not just present needs or wants.

There is nothing wrong with Labor (or any other party) promising to spend government money on worthwhile things. When the economy's running below capacity (as it is at the moment) most of the money will be recouped through the tax system anyway. Meanwhile what the money is spent on improves productivity, so it will eventually pay for itself.

*and will inevitably cost the taxpayers more in the long run.*

No it won't, Aidan. Technology is actually driving costs down, as we have seen in this case. It is highly likely to become even cheaper, as new technology is invented. By then we might see if consumers actually want and are prepared to pay for something which you now want to force them to pay. You are not the first who thinks that he can predict the future and who invariably lands up being wrong.

Interest rates is something else which you claim to be able to predict. They may well rise, which leaves those who have borrowed too much, in all sorts of trouble. Already there is talk in the AFR of Australia losing its 3A rating, in which case all money borrowed overseas by Australian banks and others, would rise in cost. The very reason why Australia came through the GFC in good shape, was because Costello had paid down our debts, unlike other Govts (Greece and others) who did exactly what you are proposing for us to do.

*These long term investments eventually pay for themselves;*

Oh yeah. Like the billions upon billions invested in the MV industry, or the zillions of other Govt failed investments. Millions paid to Kodak for a film plant. Was that a wise investment? The list is endless.

*There is nothing wrong with Labor (or any other party) promising to spend government money on worthwhile things.*

Ah, there is the rub. Govt as been pretty hopeless at predicting the future and making smart decisions about what is worthwhile. So billions are peed up against walls. Perhaps we should start by making things a little more business friendly. It is pretty hopeless having a Fair Work Commission, where I gather people are paid 350K a year, which is not a bad lurk, which then has awards of 160 pages long, if you want to hire somebody to pump petrol. It was featured today on Switzer and shows why so many people say stuff investing in Australia.

Yabby,

You misunderstand how technology interacts with costs, particularly with infrastructure. Occasionally there are big reductions in cost when it enables something to be constructed in a way that it could not be constructed before. By enabling more of the existing Telstra ducts to be used, skinny fibre has done that. But we're unlikely to see any other big reductions. We will see continuing improvements in existing processes, but the reduction in price for that is likely to be counteracted by increasing wages. Improving technology is likely to enable the fibre optic cables to carry much more data than they can at present, but it's unlikely to further reduce the build cost.

I'm not merely predicting interest rates, I'm pointing out the influence the Federal government has over them. If interest rates have to rise, it will be to counteract inflation. But increasing taxes has a similar disinflationary effect. As indeed does cutting government spending.

Those who speculate about Australia losing its AAA credit rating are ignorant of the fact that Australia does not borrow money other than in the currency it prints. So we will never under any circumstances be unable to meet our debt obligations.

The reason why Australia came through the GFC in good shape was because the Rudd government stimulated the economy, unlike other countries which weakened their economies by cutting government spending.

Greece could not do that because it was not financially sovereign; it had surrendered its money printing ability to the European Central Bank. Hence (unlike Australia) the credit available to Greece was limited, and it was forced to make cuts even though doing so was bad for its economy. Even if Australia had twice as much debt as Greece, we would still be able to afford another stimulus just as easily as if we had no debt at all.

I do not regard corporate welfare as investments!

I couldn't find your link on Switzer. Lowering workers' entitlements is one way to make Australia more business friendly, but a much better alternative is to invest in better infrastructure... including the NBN.

http://www.afr.com/news/economy/federal-debt-load-pushing-against-aaa-boundary-warns-nab-20160411-go3fey

Aidan, the above link, if you can access the AFR, explains why Australia's credit rating matters to overseas borrowers, like our banks. I would guess that their chief economists are better informed on the topic than you might be.

http://www.switzer.com.au/the-experts/david-bates/wage-fraud-just-the-tip-of-the-iceberg/

There is a link to a written version of the Switzer programme, covering the fundamentals of the problem.

You seemingly forget that many younger people are choosing to have no landline connection at all on the internet, saving themselves another expense. All they need is their mobile and free wifi everywhere, yet you want to insist on installing expensive FTTN in every home? As mobile speeds improve, so there will be even less reason for them to want your 30 billion rollout and the expense associated with that.

*Even if Australia had twice as much debt as Greece, we would still be able to afford another stimulus just as easily as if we had no debt at all.*

No we could not. Markets are not silly and a Govt printing money to get out of debt, would see the Value of the Australian Dollar devalued to the Australian Peso. As we import everything, imported inflation would see our standard of living crash and goods become unaffordable to consumers.

Yabby,

Yes I can access the AFR link, but the explanation is ill thought out.

If a country's credit rating is downgraded, it's for one of three reasons:
a) The country's ability to service its debt is questionable.
b) The country's willingness to service its debt is questionable.
c) The ratings agency is incompetent.

In Australia's case, reason (a) is impossible, reason (b) is highly illogical, and the suggestion that the RBA would do so is defamatory. Reason (c) is plausible, but we shouldn't kowtow to incompetent ratings agencies. If they dare to suggest we're not creditworthy then we should sue them for libel, to highlight their idiocy to the world.

Whether we should bail out banks is another matter, and there is a coordinated international effort to avoid doing so. But whether we do or not, three facts remain
• it is better to avoid reaching the stage where the banks need bailing out,
• the government's credit rating is for government debt not bank debt; banks have their own credit ratings.
• the government's willingness to bail out the banks will not be influenced by what incompetent credit ratings agencies claim the government's credit rating to be.

Thanks for the Switzer link. I'm surprised the 711 workers are covered under that award. But I'd be a lot more surprised if the employers had to read through the whole award just to see the relevant pay rates.

(TBC)

(continued)

Mobile internet is good where demand is low, but where demand is high the need to share it between lots of users slows it to a crawl. It is not a satisfactory alternative to FTTP.

"No we could not. Markets are not silly and a Govt printing money to get out of debt, would see the Value of the Australian Dollar devalued to the Australian Peso. As we import everything, imported inflation would see our standard of living crash and goods become unaffordable to consumers."
I'm not suggesting the government should print money to get out of debt. What I'm saying is that the government borrowing from its own central bank is functionally equal to the government borrowing on the bond market, as the RBA lends to banks and drains excess reserves by paying interest on them, so the amount of money in circulation would be the same.

When the government stimulates the economy, it tends to reduce the short term value of the currency (regardless of whether or not the government has debts). But it is quickly self correcting, as a falling dollar results in us exporting more and importing less, which increases its value.

*but the explanation is ill thought out.*

Aidan, given that the information comes from the economists of two of Australia's leading banks, much more likely that they know a hell of a lot more about this than you do. Our banks borrow huge amounts on overseas money markets and clearly the Govts ability and willingness to bail them out if they had a problem, matters to foreign lenders and the interest rates which they charge.

*But I'd be a lot more surprised if the employers had to read through the whole award just to see the relevant pay rates.*

So be surprised, for that in fact was the point of the story on Switzer. There are literally thousands of combinations, depending if people wear or don't wear gloves, or pack shelves or a host of other variables. This guy consults to businesses, but spends most of his time having to explain the various awards to them and how they are in fact breaking the law, because it is all so foolishly complicated.

* But it is quickly self correcting, as a falling dollar results in us exporting more and importing less, which increases its value.*

That is wonderful in theory, but in reality we have few manufacturing industries left, so import less because we cannot afford things. We still need cars, medicines, oil and a host of other products which we import as we don't make them anymore. Our current account is still running at very high negative rates and total debts of about a trillion will continue to cost us a fortune to service it.

Yabby,

Appeal to authority is at best a very weak argument, but in the field of economics it's never of any value at all. There's rarely any consensus – indeed Keynes himself is reputed to have remarked that if all the economists in the world were laid end to end, they'd still point in different directions! But worse still, there's a lot of misinformation that many economists regard as fact despite the lack of empirical evidence to support it, and despite its theoretical basis relying on assumptions that have been shown to be false.

The amount of Australian dollar denominated debt our government has does not affect its ability to bail out banks. But whether we should bail out banks is an important issue, and the G20 (that includes Australia) have resolved to adopt bailin policies instead – so although the depositors' money is still protected, the government would not waste its money on bailing out bondholders.

And there's also the issue of whether those banks should be sourcing their money from overseas anyway; doing so pushes up our dollar's short term value at the expense of its long term value. IMO the government should make it easier for banks to access funds on the domestic market.

"So be surprised, for that in fact was the point of the story on Switzer."
No, the whole point was that the awards are too long and complicated. But that doesn't mean nobody's published a summary. And I expect there's an index where you could quickly find out that pay rates for petrol station workers are shown on page 22 (for example).

(TBC)

(continued)

"That is wonderful in theory, but in reality we have few manufacturing industries left, so import less because we cannot afford things. We still need cars, medicines, oil and a host of other products which we import as we don't make them anymore. Our current account is still running at very high negative rates and total debts of about a trillion will continue to cost us a fortune to service it."
In reality there is still lots of manufacturing in Australia, but it has been hit hard by the dollar being much higher than our balance of trade justifies. This is partly because Australia's very good at attracting foreign investment, and there's much more foreign investment in Australia than Australian investment overseas

But there's a lot more to it than that: when you refer to "total debts of about a trillion", that's not government debt, that's the amount of foreign debt of Australia and Australians. We've made it far too difficult for Australian banks to source money domestically, so they're having to borrow overseas instead. And our interest rates are much higher than the rest of the world. Though the high dollar damaged our industries (particularly manufacturing) the RBA declined to intervene because they regarded doing so as anti-market – seemingly unaware that RBA decisions were the main reason why the markets had pushed our dollar so high.

Policies that maximise our dollar's short term value do so at the expense of its long term value, and that's harmful to Australia's economic interest.

http://www.afr.com/news/policy/budget/aaa-threat-as-bad-as-banana-republic-days-jpmorgan-20160413-go58t5

No need to appeal to authority Jaidan, but certainly an appeal to common sense. Bankers know how the banking market works, that is their job. It is their job to know what affects their cost of money.
So when it comes to how these things affect the banking market, it is their opinion and experience which clearly matters, as distinct from the economic theory which you read in some text books.

Now if I was about to have brain surgery, I would also respect the opinions of experienced brain surgeons, as distict to those who have read some books on the subject, even if they claimed to be well informed.

*IMO the government should make it easier for banks to access funds on the domestic market.*

You mean for the RBA to just create more? No wonder we have to keep our RBA at a foot length from politics, they would devalue the currency by printing money, at every turn. The banks are free to attract more money by paying higher interest rates, so that people who deposit and save money, are not actually losing it through inflation and taxation.

*pay rates for petrol station workers are shown on page 22 (for example).*

Now the same place might also employ people who don't pump petrol but who flip burgers or serve behind the counter. That is another award again, which clearly is confusing to many small business owners, or they would not have to hire a business consultant to sort out their compliance issues.

Yabby,

Knowing what affects the cost of money is one thing; common sense is quite another. It is entirely plausible that many bankers are dumb enough to take the word of an incompetent ratings agency; were that not so, we probably wouldn't've had the GFC. But governments should try to do what's best for the economy, not what incompetent ratings agencies want them to do. And if any credit ratings agency dares to downgrade Australia, our government should try suing it for libel!

Bankers are not brain surgeons. The most difficult thing bankers do is hedging; that's not in the same league as brain surgery (or indeed any surgery) in terms of knowledge required, let alone the manual dexterity which surgeons also require.

I was once under the illusion that borrowing from the central bank could cause a currency to collapse. I deduce you still are. I suggest you have a closer look at what actually causes currencies to collapse, as there's always another factor: usually the currency being fixed above market value and/or the government needing to make a foreign currency loan repayment.

The RBA creating more money is already an everyday occurrence. I'm not saying we should try to immediately become self sufficient with money creation, but having our banks rely more on the RBA and less on foreign money markets would dampen the wide fluctuations in our dollar's value that we've had since the GFC.

Tell me: do you think it was a good thing that during the Gillard years our dollar was so high that it made our manufacturers uncompetitive?

"The banks are free to attract more money by paying higher interest rates, so that people who deposit and save money, are not actually losing it through inflation and taxation."
Indeed they are, but high interest rates are bad for business.

BTW do any petrol station workers still pump petrol? It's all self service in my state.

Aidan, I was rather amused last night, when Mr Bowan of the Labor Party appeared on the news, stating much what bankers are saying. Sounds like your Labor party are confused as well :)

If banking were so simple, we would not have seen the dramatic differences which appeared during the GFC. Well managed banks like Wells Fargo, sailed through the whole thing, whilst Citibank were just about broke. As with any profession, things might look easy, but the devil is always in the details.

The RBA have to look at the big picture, not just one sector of the economy. They would have been well aware of the risks of a housing bubble and increased inflation, had they lowered interest rates. As it was, things were pretty well out of control in Western Australia, with wage expectations that had gone through the roof, due to the mining boom. It was much the same in Queensland. So decreasing interest rates in overall terms, would have been quite foolish.

Yes, manufacturing industry was hurt by the value of the Dollar, so was agriculture. Agriculture was forced to adapt. We do have a two speed economy, one which services local needs and has a monopoly, the other which has to be globally competitive to exist in the real world.
The costs of those who have a monopoly are simply passed on to those who have to compete globally, without much thought to the long term damage that they are doing, to make them less competitive. So when we are told that it costs 30% extra to build a building in Australia than it should, due to unruly unions, those of us who have to compete globally have to wear it, move overseas or shut down. If our local economy was a bit more efficient, industries like agriculture and manufacturing, could better deal with the vagaries of a floating Dollar.

Yabby,

The Labor party do indeed misunderstand the situation. As do the Liberals, the Nationals, the Greens, Family First etc.

Many banks lost huge amounts of money in the GFC because they'd relied on incompetent ratings agencies. 'Tis much better to highlight that incompetence than to suck up to those agencies.

I agree the RBA has to look at the big picture. And for everything except mining, our dollar was overvalued – you only have to look at our balance of trade for proof. But inflation was at the bottom of the target range, and interest rates had been put up unnecessarily. However wage inflation never reached pre-GFC levels. And with hindsight, probably the most sensible way to cut interest rates while avoiding a housing bubble would've been to restrict negative gearing!

And had the RBA actually made it easier (rather than merely cheaper) for banks to borrow on the domestic market, our dollar wouldn't have got up quite so high even if interest rates had.

You seem to think that a more efficient economy is one where the profit share is higher and the wage share lower. I disagree; I only regard it as more efficient if the benefits are passed on to the customers, and that's not something that makes us more resilient to currency fluctuations.

I'd rather see our dollar on a slow and steady rising trajectory, so that businesses can continually improve their efficiency rather than being suddenly forced to, and so that we don't get a lot of businesses failing at once. Of course there will always be fluctuations, but the government and RBA should try to avoid inducing a situation where our dollar's far above the level our balance of trade justifies.

*The Labor party do indeed misunderstand the situation. As do the Liberals, the Nationals, the Greens, Family First etc.*

Fair enough Aidan, I can't argue with such a classic OLO argument! It seems that all the politicians have it wrong, all the journalists have it wrong, all the bankers have it wrong, the overseas lenders have it wrong too, only Aidan has it right :)

*And for everything except mining, our dollar was overvalued* You forget that mining was affecting everything, in places like WA. Fox claimed that they had to pay an extra 50K, to hire a truck driver. When I went to visit an engineering works, the apprentice had left as the miners were offering 6 figures. When I tried to place an order with a Qld manufacturer, he could not fill it as his workers had gone to the mines and he had no staff. The list goes on. The RBA had to consider all these things. Now these workers are busy losing their jobs, many having still to learn that they can't earn 150k anymore. There are jobs, but more realistically at maybe 60k.

*And had the RBA actually made it easier (rather than merely cheaper) for banks to borrow on the domestic market* Why should the RBA do that, when there is plenty of money to be borrowed on international money markets, or from domestic investors? Why should they subsidise interest rates which are below the inflation rate?

*You seem to think that a more efficient economy is one where the profit share is higher and the wage share lower.*

Both need to be catered for. Workers have 2 trillion$ in Super, that needs a return on investment, not be a subsidy of low interest for some kind of job creation scheme or subsidise artificially high wages. Grey nomads have the most savings. They need a return on their investment, or they will have no reason to save, but simply pee it up against the wall on gambling, as already happens to 20 billion a year, when people clearly think that is a better option-than-saving.

Yabby,

Not all the journalists do have it wrong. Some acknowledge that Australia will never default on its debt, but there seems to be a reluctance to properly consider the implications.

I suspect some of the politicians have a better idea of how things really work, but choose to maintain the illusion for political reasons (because they think it makes them look more responsible than their opponents). But it's difficult to determine who (if anyone) is in that situation.

The markets did not respond in the predicted way to credit downgrades of other countries, which suggests not all of the bankers and overseas lenders have it wrong. But for those who do understand, it might be more profitable to keep their competitors in ignorance.

Though there were parts of Australia where mining affected everything, but in most of the country it didn't, and the unemployment rate didn't get anywhere near its pre-GFC low.

"Why should the RBA do that, when there is plenty of money to be borrowed on international money markets"
Because borrowing money on international money markets raises our dollar's short term value and depresses its long term value. The dollar was already unsustainably high; there was no need to exacerbate that.

"Why should they subsidise interest rates which are below the inflation rate?"
Making it cheaper is a separate issue from making it easier. But there are very good reasons to set the interest rate lower: it makes business investment more profitable and it reduces the amount of short term bias in business decisions.

I'd rather the benefits of productive work go to those who do the work rather than those who merely supply the money. Super funds are free to chase the best returns they can, anywhere in the world (except where sanctions have been imposed). But we should not distort public policy just to make private investments more profitable. Gambling isn't the only alternative to saving. Why not invest in rooftop solar panels? It helps the environment and, as long as interest rates remain low, it's more profitable than leaving your money in the bank.

Aidan, I think that somehow you are missing the point. Yes everybody knows that Australia could in theory print endless amounts of money. The point is that when evaluating the Australian economy, if it needs to do that, then clearly the economy is in a bad way and Govt spending out of control, so the Australian Dollar is at risk of crashing in value. That increases the risk for foreigners to hold Australian Dollars, as at some stage they will want to convert that back to their own currencies. Now both the Americans and Europeans have done that, to bail out banks that were at risk of crashing, leading to a potential collapse of the whole money market. Their currencies however are large enough to be seen as global reserve currencies. The same does not apply to a small player with 24 million people.

Hedge funds take everything into account, when deciding if they should buy one currency or sell another. IIRC, it was Stanley Druckenmiller who turned up in Sydney, only to be shocked for being charged 25$ for a burger in his hotel room. He mentioned it on Bloomberg and felt that clearly with these sorts of prices, the A$ was overpriced and he was going to short it. I kind of followed the story and lo and behold, within a few weeks the A Dollar was reducing in value. So these huge speculators, who control trillons of $, are really the ones who determine the value of our currency.

*but in most of the country it didn't, and the unemployment rate didn't get anywhere near its pre-GFC low.*

Most areas were still under 6%, so hardly a huge problem when 5% is considered to be close to full employment. Any lower that and we land up with wages induced inflation, which we don't want. People could have moved to where the jobs were, but most chose not to.

*But we should not distort public policy just to make private investments more profitable.*

Yet you want the RBA to interfere in the money markets, to make business investment more profitable. If the Govt really wanted, instead of robbing mums and dads, they could make the inflation component of interest received, tax free, to compensate savers for inflation. People are well aware that they are losing money having bank deposits, so they invest in real estate instead, leading to a housing bubble.

*I'd rather the benefits of productive work go to those who do the work rather than those who merely supply the money.*

So what will you do, when you are retired and too old to work?

*Why not invest in rooftop solar panels?*

Savers already do that, but 5000$ invested in solar, does not pay their bills when retired.

"Most areas were still under 6%, so hardly a huge problem when 5% is considered to be close to full employment."
The trouble is 5% is nowhere near full employment; it's just that when the overall unemployment rate is 5%, there are likely to be some areas with full employment.

"Any lower that and we land up with wages induced inflation, which we don't want"
But there were no signs of wages induced inflation, and anyway the claim that it's necessary to keep unemployment high to prevent that is dubious, as the underemployment rate is quite high.

> But we should not distort public policy just to make private investments more profitable.
"Yet you want the RBA to interfere in the money markets, to make business investment more profitable."
I want businesses to succeed. Enabling them to profitably invest in the things that make them more productive is an important part of this. But I don't see it as the government's role to ensure those who are already rich can effortlessly get richer!

"People are well aware that they are losing money having bank deposits, so they invest in real estate instead, leading to a housing bubble."
Restricting negative gearing on real estate investments is quite a good response to that, as is taxing land more.

"So what will you do, when you are retired and too old to work?"
That's what the pension's for, and there's also superannuation despite it not being as profitable as you might hope.

> Why not invest in rooftop solar panels?
"Savers already do that, but 5000$ invested in solar, does not pay their bills when retired."
It cuts the bills when required, which is effectively the same.

*But there were no signs of wages induced inflation, and anyway the claim that it's necessary to keep unemployment high to prevent that is dubious, as the underemployment rate is quite high.*

There certainly were in places like WA. All those increased wage costs, were passed on to consumers. A certain % of people are frankly unemployable as people have to pass a drugs test for many jobs. If somebody really wants extra work, its not hard to become self employed as a cleaner, a landscape gardener or similar service industry jobs.
Many people are also between jobs, so 5% unemployment IMO is quite acceptable.

*I want businesses to succeed.*

If a business is going to succeed, only if subsidised by artificially low interest rate deposits held on behalf of our old aged mums and dads who put away some money for a rainy day, as they believe on standing on their own two feet, then frankly it will probably fail anyway as a bad business investment. The notion that only rich people provide our banks with retail deposits, is a foolish one.

*as is taxing land more.*

You certainly can do that and it will have to be reclaimed through higher rents, which not everybody thinks is a good thing.

*That's what the pension's for,*

Err, the Govt can't afford to have everyone on the Govt teat, if you remember. As people live longer, this will only get worse, so those who provide for themselves as much as possible, are a blessing to society as a whole. You should thank them.

*It cuts the bills when required, which is effectively the same.*

It deals with maybe 2 or 3% of expenses, not the other 97-98%