Economic freedom

Australian debt control worst in G20: report

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The Australian economics correspondent Adam Creighton has written that Australia has the worst debt control worst in G20 ($):

Australia has shown less control over spending than any advanced G20 nation since the global financial ­crisis eight years ago and has squandered the opportunity offered by superior economic growth to gain control over its budget deficit.

A damning study by the former head of the IMF’s budget division shows the deterioration in Australia’s debt almost matched that of Italy, one of the most troubled European economies, suffering a deep recession and a blowout in interest costs.

Nations that fail to control the growth in their debt are at risk of a crisis when interest rates eventually rise, warns the study published by the Peterson Institute for International Economics, a Washington DC think tank.

Australia’s debt-to-GDP ratio fell 9.8 percentage points in the eight years leading up to the financial crisis but surged 27.1 percentage points over the eight years since the end of 2007, which was only slightly less than the average increase across Japan, Britain, the US, France, Germany, Italy, Canada and South Korea.

In principle, a government that is trying to cut debt should be keeping spending growth to no more than the overall rate of inflation, while revenue should be rising in line with nominal economic growth (the GDP plus inflation). The faster the growth, the quicker debt gets paid off.

However, the study shows Australia had instead used the best growth rate among G20 advanced nations to finance additional spending.

It shows Canberra increased real spending more than any of eight other advanced G20 governments since the end of 2007 — and by almost by double the average increase.

 

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Electricity prices in South Australia reveal the folly of renewables

Judith Sloan had this to say in The Australian on Tuesday, on the folly of renewable energy after it was revealed that wholesale electricity prices in South Australia reached 30 times the prices recorded in the eastern states ($):

How could this happen? How could it go so wrong for South Australia? The short answer is, contrary to Roy and HG’s famous prognostication that too much is never enough, too much is too much when it comes to intermittent and unreliable renewable energy. South Australia is paying a heavy price for its misguided energy policy, potentially leading to the further deindustrialisation of the state while also reducing its citizens’ living standards. But the real tragedy is that this outcome was entirely foreseeable.

Let us not forget that South Australia continues to boast about its status as the wind power capital of the country and having the highest proportion of its electricity generated by renewable sources. Since 2003, the contribution of wind to South Australian electricity generation has grown to more than one-quarter of the total.

Late last year, the state government issued the Climate Change Strategy for South Australia, ­ignoring completely the problems that were already apparent in the system. The wholesale electricity price in the state has been consistently above the national average since early 2015.

The statement reads that “to realise the benefits, we need to be bold. That is why we have said that by 2050 our state will have net zero emissions. We want to send a clear signal to businesses around the world: if you want to innovate, if you want to perfect low carbon technologies necessary to halt global warming — come to South Australia.”

But last week the confidence of that statement had been forgotten. Koutsantonis hysterically blamed what he saw as failures in the ­national electricity market and inadequate electricity interconnection for his state’s high and volatile wholesale electricity prices.

He even pledged to “to smash the national electricity market into a thousand pieces and start again”. How he thought this suggestion would be helpful is anyone’s guess.

The main problem with electricity generated by renewable energy — in South Australia’s case, overwhelmingly by wind — is what is technically called the non-synchronous nature of this power source, because of its inability to match generation with demand.

When the power is needed, the wind isn’t necessarily blowing. Or if the wind is blowing too hard, the turbines must be switched off and again the demand has to be met from other sources — in South Australia’s case, mainly from electricity generated in Victoria from brown coal.

What is clear is that overdevelopment of variable generation using renewable resources is a recipe for higher prices and lower than expected reductions in emissions because of the increasing costs of ensuring system stability and reliability.

… Bill Shorten should take note and immediately ditch his fanciful target of 50 per cent renewable energy lest the South Australian experience befall the rest of the country.

Continue reading here ($).

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7 graphs that show we’re better off

As usual, the news is all doom and gloom. More terrorist attacks in France and police shootings in the United States. A failed military coup in Turkey empowers a tyrant. Meanwhile, household income in Australia is allegedly stagnant.

Despite all this bad news, in the history of humankind we are living extraordinarily successful lives.

It is important to sometimes sit back, and see the sunshine. Here are seven graphs from HumanProgress.org that show how far humanity has come.

Continue Reading →

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McDonald’s expose shows the system is broken – but not in the way you think

Last week’s McDonald’s expose in The Age neatly demonstrates the extent to which Australia’s workplace relations system has been compromised by vested interests

But the problems at the heart of the system may not be the ones that first occur to many readers.

Firstly, it is not actually clear that McDonald’s has done anything wrong. According to the Fair Work Commission website, the minimum wage for 16 year olds in Australia is $8.17 per hour, cascading upwards each year with age until a worker turns 21, when the adult minimum wage of $17.29 per hour applies.

According to the articles, most employees had a base rate of pay of $20 per hour. In America, where the adult minimum wage is US$7.25 per hour, or Germany where the minimum wage is 8.5 Euros per hour, this would not be considered a bad deal.

It is also almost triple the hourly rate of $6.94 that unemployed Australians have to live on when receiving the Newstart Allowance.

Given that the employer is happy, the union is happy, the Fair Work Commission is happy and over 95 per cent of employees are reportedly happy, a legitimate question should be asked as to whose business it is to intervene?

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Good news everyone: Uber has been legalised in Victoria

In a mammoth slap-down of government holding back progress, Uber is now effectively legal in Victoria.

As reported on FreedomWatch last November, Nathan Brenner became the first Uber driver in Victoria to be found guilty of driving a hire car without a commercial licence or registration. This ruling effectively made the service as a whole illegal.

However, Brenner refused to commit to not continue driving, and appealed the case.

A County Court judge has now overturned the original ruling, and ordered the Victorian government to pay Brenner’s legal costs.

This is fantastic news for all Victorians, who will be able to continue benefiting from the sharing economy.

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IPA research reveals the cost of red tape to the Australian economy

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New IPA research by Mikayla Novak and Chris Berg has found that red tape costs the economy an estimated $176 billion per year.

Regulation should improve the manner in which business functions, whether this be by enforcing safety standards and entitlements, or creating a more competitive market. But excessive regulation – that is, red tape – creates more problems than it solves. Employers spend time filling out paperwork when they could be growing their business. Youth and low skill labourers have their hours reduced and struggle to enter the job market as the cost to employ them outstrips the profit they are capable of generating. Rather than create competition, regulation entrenches monopolies and privileges for big businesses that have the wealth and connections to wield political influence.

Advocates of regulation often claim that their rules create a level playing field, but in fact it is the economically vulnerable, such as employees and small business, that red tape hurts the most.

In this sense, cutting red tape will do more than save $176 billion. It will create an environment where new businesses can thrive, increasing the overall wealth creation in the economy and thus giving consumers access to better services at a lower cost, creating a better quality of life for all Australians.

Disappointingly, despite consistent talk of cutting red tape, last year parliament enacted 6,453 pages of legislation over 177 bills, and the government deprioritised significant regulatory reform after repeal bills stalled in the Senate.

Eliminating unproductive regulations will create prosperity for business, jobs for the unemployed and better products for consumers. It is time for governments to begin maximising prosperity, rather than wrapping the economy in red tape for the sake of populist rhetoric and special interest groups.

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Venezuela: A modern socialist catastrophe

A typical Venezuelan supermarket with empty shelves: price controls have lead to massive shortages

A typical Venezuelan supermarket with empty shelves: price controls have lead to massive shortages

The situation in Venezuela is going from bad to worse.

A once relatively prosperous nation has succumb to the worst failings of a socialist system.

Joel Hirst, a Venezuelan living in the United States, has written an extraordinary blog post on the latest from his birth country:

Tonight there are no lights. Like the New York City of Ayn Rand’s “Atlas Shrugged”, the eyes of the country were plucked out to feed the starving beggars in abandoned occupied buildings which were once luxury apartments.

They blame the weather – the government does – like the tribal shamans of old who made sacrifices to the gods in the hopes of an intervention.

There is no food either; they tell the people to hold on, to raise chickens on the terraces of their once-glamorous apartments.

There is no water – and they give lessons on state TV of how to wash with a cup of water.

The money is worthless; people now pay with potatoes, if they can find them.

Doctors operate using the light of their smart phones; when there is power enough to charge them. Without anesthesia, of course – or antibiotics, like the days before the advent of modern medicine.

The phone service has been cut – soon the internet will go and an all-pervading darkness will fall over a feral land.

Venezuela’s impending collapse is directly linked to the policy failures of Hugo Chavez and his socialist successor, Nicolás Maduro.

Continue Reading →

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Obituary: Road Safety Remuneration Tribunal | 16 April 2012 – 18 April 2016

We note the passing of the Road Safety Remuneration Tribunal, in Canberra this week, aged 4 years. The tribunal was abolished this week by the federal parliament after a short but intense battle with owner-drivers.

The Road Safety Remuneration Tribunal was established in 2012, under the Gillard Labor government and fathered by Labor minister Anthony Albanese. The tribunal’s godparents were the Transport Workers Union, which had campaigned for the wage setting body under the ruse of “road safety”.

As Grace Collier explained in The Australian:

In November 2011, Prime Minister Julia Gillard lunched with union powerbrokers at Kirribilli House. “She gave the unions everything they wanted,” Martin Ferguson later said. “It was ‘lock in behind me and I will deliver for you’.”

And Gillard did, in so many ways, although not all of these ways became apparent until much later on.

In 2012, not long before Gillard was overthrown by Kevin Rudd, “safe rates” legislation was passed and a new body, the Road Safety Remuneration Tribunal, was set up. Hansard shows that in 2014, the Coalition’s Minister for Northern Australia Matthew Canavan reflected on the event: “I remember thinking, ‘I do not exactly know how this is going to deal with safety’ … it was something that was pushed by the Transport Workers Union at the time.”

The Coalition government made a commitment before the last election to review the tribunal. The review in 2014 recommended that the tribunal be stripped of its power to set mandatory rates. The system was reviewed again in 2016 which showed that the orders of the tribunal will result in a net cost to the economy in excess of $2 billion over fifteen years.

These reviews found no link between rates of pay and road safety.

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Australians want less spending, not more tax

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Last week “the fatuous 50” of usual left-wing suspects were calling for higher taxes and more spending, a move supported by The Age editorial yesterday.

As usual, the elites are out of step with mainstream opinion. A special question in Newspoll released yesterday has revealed Australians actually want a reduction in government spending, not more taxes:

A special Newspoll question found 39 per cent of voters believe the priority for the next government should be to reduce spending to pay down debt, with 59 per cent of Coalition voters backing this option, but just 27 per cent of Labor voters.

Reducing spending and using the money to cut taxes was backed by 26 per cent, with the result consistent across the political parties, including the Greens, where 24 per cent support tax cuts despite the party’s official position being to increase taxes.

Some 23 per cent supported increasing spending on government programs, with this option the most favoured among Labor voters (35 per cent) and Greens supporters (41 per cent), but by only one in 10 Coalition voters

A whopping 65 per cent of Australian voters support reducing government spending, to be spent on either reducing debt or lower taxes.

Australia’s public expenditure as a percentage of GDP has now surpassed the levels at the height of the GFC in 2007-08. The latest budget update revealed our national debt will reach $667 billion in the next 10 years, around $30,000 per a person. Our spending has reached extraordinary levels, placing a massive burden on future generations to pay back today’s excesses.

The message from the Australian people is clear: the government has a spending problem. The Turnbull government’s foremost responsibility in the upcoming budget is to fix it.

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Left wing establishment have no idea about the real world

In The Australian today ($), John Roskam responded to recent calls from the usual suspects for tax increases:

A high-profile group of unionists, academics and former public servants who oppose a corporate tax cut in the budget has been dubbed “the fatuous 50” by a conservative think tank.

Institute of Public Affairs chief John Roskam said many in the group had “spent so long on the public teat and no doubt have ­defined benefits superannuation schemes and won’t be affected by changes to superannuation”.

“Their real world experience, for so many of these people is limited to the university common room. They have little idea about what it takes to run a business, ­employ people and create wealth,” he said.

Mr Roskam’s jibe sparked an immediate backhander from the progressive Australia Institute think tank, which declared the group spoke for most Australians who wanted a clampdown on tax concessions for “the big end of town”.

In an open letter published in Fairfax newspapers, the group urged Malcolm Turnbull “not to cut tax at this time — and certainly not for companies”.

The letter comes as the government debates income and company tax levels as a proportion of GDP, which next year is set to rise above its long-term average of the past 30 years, and bracket creep puts more workers into higher tax brackets.

The “fatuous 50” letter also cite OECD data that suggests Australia is a low taxing country. Comparing us to other countries which are even worse is irrelevant, and reveals nothing about what Australian workers are experiencing.

In fact, recent OECD data confirms that Australian are working longer to pay the tax government already demands of them. I’ve collected the data hear:

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For a single, childless individual at the income level of the average worker, you have to work an extra week to pay your taxes than seven years ago (and this doesn’t even account for compulsory superannuation).

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