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Goughfather
13-05-2010, 03:42 PM
I thought I'd dedicate a thread to discussion of the 2010 Federal Budget. It seems like perennial Rudd-Railers Jono and Howie have been atypically silent, which is interesting to say the least.

I'm still working my way through the budget details and analysis so far. I've read Ross Gittins and Peter Hartcher's pieces in the Herald yesterday, which had some fairly reasonable criticisms to make.

Abbott's budget reply will also be interesting. The big question will be whether the Opposition will outspend Labor after criticising their spending, like they did last year.

Basil
13-05-2010, 03:57 PM
I thought I'd dedicate a thread to discussion of the 2010 Federal Budget. It seems like perennial Rudd-Railers Jono and Howie have been atypically silent, which is interesting to say the least.
Might be interesting to you. There is much on the Rudd cock-up agenda I leave alone (as I do with the Footballers Behaving Badly and HADBBA threads - such is the volume of grist).

I haven't had a good look at the budget since its release some 48 hours ago, but my assessment is that it is reasonably prudent given the self-inflicted circumstances in which the government finds itself, viz, no cash, no trust, no goodwill, massive debt, mines plundered - in all it's a head-down, bum up and hope for the best. Anything else would have been crucified.

Igor_Goldenberg
13-05-2010, 04:09 PM
It had a declared 40 billion deficit, as well as undeclared (i.e. hidden) another 50 billions.
Labor splurged money left by the Howard government, then railed the budget surplus leaving us in massive debt.
Now they try to boast their economical credentials by claiming they will get budget in surplus in three years (which they will never do anyway).
Getting budget in surplus means they will stop accumulating debt. What about repaying it? Labor tactfully avoid discussing how long it'll take to get rid of debt.

Those that are still fooled by this Labor hypocrisy might be beyond hope, I genuinely feel sorry for them.

Basil
13-05-2010, 05:28 PM
This (http://www.theaustralian.com.au/news/opinion/what-tony-abbott-should-tell-wayne-swan-tonight/story-e6frg6zo-1225865727041) is what Gary Johns, a minister in the Keating government thinkas would a be good Budget reply.

Desmond
13-05-2010, 08:45 PM
Raising the threshold for claiming medical expenses as a tax deduction from $1500 to $2000. This is going to hurt vulnerable people. $1500 was already a lot.

antichrist
13-05-2010, 08:50 PM
Raising the threshold for claiming medical expenses as a tax deduction from $1500 to $2000. This is going to hurt vulnerable people. $1500 was already a lot.

But I think it was only worth claiming for the rich anyway, it was about 1000$ a few years ago. If one could afford to pay all those gap fees that funds don't cover one would have to be pretty rich anyway. The strugglers just aren't in the picture.

Goughfather
13-05-2010, 09:19 PM
Surprise, surprise. Despite criticising the government for its "reckless spending", Abbott declared that he would spend more (http://news.ninemsn.com.au/article.aspx?id=1052201) on health, would scrap the mining tax and would sell off the family silverware. As for the cost of his shambolic budget, Abbott has refused to provide details on how his initiative would be funded, probably because he doesn't want to admit that a Coalition government would only increase government debt. His insistence that his budget would return a bigger surplus than Labor is simply voodoo economics.

Kevin Bonham
13-05-2010, 09:51 PM
I reckon that Labor's promise to put the budget back in surplus within three years may well come back to bite them in, oh, about three years, but we'll see ...

Goughfather
13-05-2010, 10:09 PM
I reckon that Labor's promise to put the budget back in surplus within three years may well come back to bite them in, oh, about three years, but we'll see ...

Assuming of course that they are still in power. I guess that's what this Budget is primarily about - getting to the point where it could potentially bite them. And if it does that, I guess they figure that they can cross that bridge when they come to it.

Kevin Bonham
13-05-2010, 11:08 PM
This (http://www.theaustralian.com.au/news/opinion/what-tony-abbott-should-tell-wayne-swan-tonight/story-e6frg6zo-1225865727041) is what Gary Johns, a minister in the Keating government thinkas would a be good Budget reply.

I actually like it a lot better on the whole than I like the economics of either major party at the moment. Actually he comes across more like that apparently near-extinct species the Hewsonite Liberal, which given that he went almost directly to the Institute of Public Affairs after losing his seat is really no great surprise.

Kevin Bonham
13-05-2010, 11:12 PM
Assuming of course that they are still in power. I guess that's what this Budget is primarily about - getting to the point where it could potentially bite them. And if it does that, I guess they figure that they can cross that bridge when they come to it.

Yes, and if they're really lucky the Coalition will have found a new heap to collapse in by then, so that even if they don't meet that commitment it won't matter.

This kind of one-election-cycle-at-a-time thinking is quite common from incumbent governments.

Capablanca-Fan
14-05-2010, 12:28 AM
Andrew Bolt on Abbott's budget reply (http://blogs.news.com.au/heraldsun/andrewbolt/index.php/heraldsun/comments/abbotts_fighting_words_this_reckless_spending_must _stop/):

Tony Abbott’s address in reply to the Budget was typically clear and well-written, but also very effective politically. The take-out line - and the election strategy, attacking both Rudd’s manic spending and broken promises:


I have one message for Mr Rudd. It’s one he should be familiar with: this reckless spending must stop.

A brave analogy:


I know, as anyone who has spent time in remote indigenous townships should, that you can’t have much of a community without an economy to sustain it.

And, even braver, this promise to take away some toys:


A good cause never justifies wasting money. On coming to government the Coalition would immediately restructure the school hall programme and provide further funding to school communities, not to state bureaucracies.

This we already know, and, unlike the previous promise, will probably be delivered:


Likewise, the Coalition won’t go ahead with the National Broadband Network avoiding the creation of a $43 billion white elephant.

Not dodging this fight, and not least because dodging it would seem weak and lacking in credibility, so why not argue back:


The former government’s workplace reforms went too far but they helped to create more than 2 million new jobs, lift real wages by 20 per cent and more than double net household wealth between 1996 and 2007. We’ll seek to take the unfair dismissal monkey off the back of small businesses which are more like families than institutions.

We’ll make Labor’s transitional employment agreements less transitional and Labor’s individual flexibility agreements more flexible. We have faith in Australian workers who are not as easily pushed around and exploited as the ACTU’s dishonest ad campaign is already making out.

Sadly, this mad and expensive promise hasn’t been ditched:


For starters, there’ll be a fair dinkum paid parental leave scheme which gives women six months leave at their full pay… But all benefits have to be paid for and the fairest way to have a paid parental leave scheme anytime soon is through a modest levy on companies’ taxable income over $5 million a year.

A relative easy cut to promise, since it’s achieved by simply freezing Rudd’s expansion plans - a $4 billion gift to Abbott:


To rein in spending, the Coalition will introduce a two year recruitment freeze to reduce public servant numbers through natural attrition.,, This should deliver a modest reduction in public sector numbers without compromising essential services and save about $4 billion over the forward estimates.

More easy savings - the best part of another $1 billion over four years - that will hurt no one but green carpetbaggers and the Liberals themselves:


As well, the Coalition would not proceed with the budget increase to the renewable energy future fund and will cut government advertising by 25 per cent.

Yet another saving (and Abbott says Hockey will shortly outline more):


Of course, there should be an electronic health record but hundreds of millions of dollars have already been spent to make this a reality and no more should be spent until it’s certain that we’re not throwing good money after bad.

But all those savings and more will be needed to make up for blocking the Government’s $9 billion a year “super profits” tax on miners, which Abbott sees as a battle-turner:


...a different great big new tax that will now be the issue on which the election turns.

A credible pitch, and on economic management - which should always be the preferred battlefield for the Liberals. And hammering Labor right where it hurts.

Capablanca-Fan
14-05-2010, 12:32 AM
I actually like it a lot better on the whole than I like the economics of either major party at the moment. Actually he comes across more like that apparently near-extinct species the Hewsonite Liberal, which given that he went almost directly to the Institute of Public Affairs after losing his seat is really no great surprise.
Yes, that was pretty good.

Igor_Goldenberg
14-05-2010, 09:13 AM
This (http://www.theaustralian.com.au/news/opinion/what-tony-abbott-should-tell-wayne-swan-tonight/story-e6frg6zo-1225865727041) is what Gary Johns, a minister in the Keating government thinkas would a be good Budget reply.
I liked it a lot. It was a surprise to see a classical liberal/libertarian approach from a Labor minister (albeit former).

Igor_Goldenberg
14-05-2010, 09:15 AM
With one exception (paid parental scheme) Abbott's reply was much better then the Labor budget. They can't even be compared, being in a different leagues.
But Gary Johns' reply is even better!

Jim_Flood
14-05-2010, 09:51 AM
Nice one. From SMH of 13/5


the government will impose a 2.5¢ a litre excise from July 2011, rising to 12.5¢ a litre over five years.

To clarify, the above is to apply on LPG which is presently free from such an excise.

Igor_Goldenberg
14-05-2010, 11:05 AM
Surprise, surprise. Despite criticising the government for its "reckless spending", Abbott declared that he would spend more (http://news.ninemsn.com.au/article.aspx?id=1052201) on health, would scrap the mining tax and would sell off the family silverware. As for the cost of his shambolic budget, Abbott has refused to provide details on how his initiative would be funded, probably because he doesn't want to admit that a Coalition government would only increase government debt. His insistence that his budget would return a bigger surplus than Labor is simply voodoo economics.
Scrapping the tax does not increase the spending, it reduces the tax intake.
Care to substantiate your claim that Abbott will spend more then Labor on health?
Care to substantiate your claim that Abbott would sell off the family silverware?
Care to substantiate your claim that Coalition would only increase government debt?

TheJoker
14-05-2010, 12:19 PM
Does anyone else think that the Libs policies are all about the "cooking the books" in the short-term to make budget look healthy?

I am assuming they are still proposing to sell-off to sell-off Medibank Private to retire debt. They'll need a sale price with a P/E of at least 18 for the reduction in interest payments to offset the current Medibanks profits, I doubt they will be able to achieve that. But I bet they will go ahead even if it will means sacrificing long-term value.

I know the Libs are going to scrap the NBN, but what is their strategy for getting a fibre-optic network up and running in this country. Again there will be short-term savings, but a fibre-optic network is surely important to our long-term national competitiveness.

Also what's the point of a public sector jobs freeze without public sector reform, all that will achieve is a temporary saving and a temporary reduction in service levels. You need to address the instituional factors that constrain productivity, like lack of performance based pay, excessive bureaucracy etc.

Not that Labour has much better policies.

Desmond
14-05-2010, 12:21 PM
But I think it was only worth claiming for the rich anyway, it was about 1000$ a few years ago. If one could afford to pay all those gap fees that funds don't cover one would have to be pretty rich anyway. The strugglers just aren't in the picture.
Mate, sometimes you have to get treatment even if you can't afford to.

TheJoker
14-05-2010, 12:22 PM
Care to substantiate your claim that Abbott would sell off the family silverware?

Abbott has recently re-stated his intention to sell-off Medibank Private in an ABC radio interview. You can access the transcript on his website.

Desmond
14-05-2010, 12:30 PM
...but a fibre-optic network is surely important to our long-term national competitiveness.Why? I think the main effect it will have is that people will be able to illegally download movies in minutes rather than hours. Huzzah. Seriously, I spend most of my waking hours on the Net and I think it's a waste of money.

TheJoker
14-05-2010, 01:43 PM
Why? I think the main effect it will have is that people will be able to illegally download movies in minutes rather than hours. Huzzah. Seriously, I spend most of my waking hours on the Net and I think it's a waste of money.

Assuming the IT industry is headed towards cloud computing, I would have thought that 20Mb/s wouldn't be sufficient bandwidth for many applications. Is that wrong?

Also surely traffic growth is inevitable, and given the global move towards fibre, content will be developed requiring that sort of bandwidth. What bandwitdth does 1080p 3D streaming require?

Desmond
14-05-2010, 01:54 PM
Assuming the IT industry is headed towards cloud computing, I would have thought that 20Mb/s wouldn't be sufficient bandwidth for many applications. Is that wrong? Well it depends on what you mean. Are you talking about hosting software & hardware here to sell as a service (cloud computing) to overseas or locally? I don't really think it would make much sense to do it between continents. Normally you would host data locally anyway. Of course doing it for local customers here is nothing new and in fact has been done over fibre for many years in Australia.


Also surely traffic growth is inevitable, and given the global move towards fibre, content will be developed requiring that sort of bandwidth. What bandwitdth does 1080p 3D streaming require?Why not wait until that need is more real and present, and the technology gets better and the costs come down.

Igor_Goldenberg
14-05-2010, 02:10 PM
Does anyone else think that the Libs policies are all about the "cooking the books" in the short-term to make budget look healthy?

In what sense? Apart from stupid parental leave scheme they didn't offer any new spending. Their cutting measures don't go nowhere near I'd like them to go, but better then nothing.


I am assuming they are still proposing to sell-off to sell-off Medibank Private to retire debt. They'll need a sale price with a P/E of at least 18 for the reduction in interest payments to offset the current Medibanks profits, I doubt they will be able to achieve that. But I bet they will go ahead even if it will means sacrificing long-term value.
The P/E ratio is debatable (many stocks are trading below that), but I agree that decent prise is important. However, there is another angle. High P/E ratio is expected from the companies with growth perspectives. Low growth companies usually trade at a much lower P/E (I personally wouldn't bother with anything above 12 if the growth perspective aren't there). Government companies are never as effective as private companies and have much lower growth potential.
Second part of Telstra definitely wasn't undersold:D


I know the Libs are going to scrap the NBN, but what is their strategy for getting a fibre-optic network up and running in this country. Again there will be short-term savings, but a fibre-optic network is surely important to our long-term national competitiveness.

It is already growing (and will grow faster when regulation relaxed and the threat of NBN is gone). Wireless broadband is also getting cheaper and faster. I think the markets will be able to deal with the problem quite efficiently. I was recently surprised with the wireless broadband speed and reliability when travelling in the country.


Also what's the point of a public sector jobs freeze without public sector reform, all that will achieve is a temporary saving and a temporary reduction in service levels. You need to address the instituional factors that constrain productivity, like lack of performance based pay, excessive bureaucracy etc.
If you are saying that Liberal are not as liberal as they should be, I'd agree.

Not that Labour has much better policies.
They are actually worse. The harm of worse policies is multiplied by incompetence not seen since Whitlam.

TheJoker
14-05-2010, 03:20 PM
In what sense? Apart from stupid parental leave scheme they didn't offer any new spending. Their cutting measures don't go nowhere near I'd like them to go, but better then nothing.

The public service cuts, are are not supported by any long-term efficiency/productivity initiatives, it'll end like Howard government, in that you will eventually have to restore them to previous levels in order to maintain the level of service required to keep the voters happy. You can't expect that reducing the head-count will magically make the public service more productive. Given that service levels are at bare minimum already, I doubt the public will be happy with them being reduced further.



The P/E ratio is debatable (many stocks are trading below that), but I agree that decent prise is important. However, there is another angle. High P/E ratio is expected from the companies with growth perspectives. Low growth companies usually trade at a much lower P/E (I personally wouldn't bother with anything above 12 if the growth perspective aren't there). Government companies are never as effective as private companies and have much lower growth potential.

Would you buy Medibank at multiple of 18 times earnings?
Anything less means the interest saving (at the current bond rate) for the government will be less than Medibank private profits.


It is already growing (and will grow faster when regulation relaxed and the threat of NBN is gone). Wireless broadband is also getting cheaper and faster. I think the markets will be able to deal with the problem quite efficiently. I was recently surprised with the wireless broadband speed and reliability when travelling in the country..

I would have thought that the major barrier to a private company building a comprehensive fibre network is high capital entry costs, and high exist costs. ANd the fact that it is likely to be a natural monopoly (i.e. two competiting networks side-by-side aren't likely to be profitable). Obviously there is a massive risk in building a network under these conditions, because of the threat of rival network from a competitor. A doubt private investors would be willing to take such a risk.

IIRC wireless does not have anywhere near the bandwidth capability of fibre.


If you are saying that Liberal are not as liberal as they should be, I'd agree.

I am saying neither side is looking at long-term savings.

Igor_Goldenberg
14-05-2010, 04:59 PM
Would you buy Medibank at multiple of 18 times earnings?

No. Too much uncertainty and risk for such a low return


Anything less means the interest saving (at the current bond rate) for the government will be less than Medibank private profits.

At the much lower risk and higher certainty.
Also privatised company is likely to have higher profit, thus generating higher tax receipt for the government, which also lowers target P/E ratio



I would have thought that the major barrier to a private company building a comprehensive fibre network is high capital entry costs, and high exist costs. ANd the fact that it is likely to be a natural monopoly (i.e. two competiting networks side-by-side aren't likely to be profitable). Obviously there is a massive risk in building a network under these conditions, because of the threat of rival network from a competitor. A doubt private investors would be willing to take such a risk.

It depends on the demand for such network. I found internet very fast at any place I am using it, and it's usually not the fastest option available.
Personally I find even 1,5 Mbit/c sufficient, and much faster plans are available. If there is a sufficient demand for much faster internet, money will flow.

About the cost - there are competing technologies for wired network. Chances are by the time government rolls out it's NBN it'll be already outdated.

On the other note - if private investor is unwilling to put the money in, why we, the taxpayers, are forced to take a loss? Let private investors take the risk and losses and profits, don't drag the taxpayers into dubious commercial enterprises.



IIRC wireless does not have anywhere near the bandwidth capability of fibre.

I can see it getting faster every day. It will soon become fast enough to guard against any possible "natural monopoly".

TheJoker
14-05-2010, 05:40 PM
At the much lower risk and higher certainty.
Also privatised company is likely to have higher profit, thus generating higher tax receipt for the government, which also lowers target P/E ratio.

Agreed but I still doubt the government's ability to get a high enough price.

It depends on the demand for such network. I found internet very fast at any place I am using it, and it's usually not the fastest option available.
Personally I find even 1,5 Mbit/c sufficient, and much faster plans are available. If there is a sufficient demand for much faster internet, money will flow.


About the cost - there are competing technologies for wired network. Chances are by the time government rolls out it's NBN it'll be already outdated.

If one used such a rationale in implementing new technology none would ever be implemented.


On the other note - if private investor is unwilling to put the money in, why we, the taxpayers, are forced to take a loss? Let private investors take the risk and losses and profits, don't drag the taxpayers into dubious commercial enterprises..

Because the government can ensure it has a monoploy through legislation, that is it can block any rival networks. This removes a significant part of the risk. The government has a much lower cost of capital, which significantly reduces the hurdle rate.



I can see it getting faster every day. It will soon become fast enough to guard against any possible "natural monopoly".

I recently asked the same question at to telecommunications expert Tom Frtunik about the possibility of wireless becomming a subsitute for fibre, much in the same way mobile phones are replacing the land-line. He commented that he didn't think it was technologically feasible for wireless networks in the foreseeable future to compete directly with fibre.

Capablanca-Fan
15-05-2010, 02:12 AM
If one used such a rationale in implementing new technology none would ever be implemented.
It might be, but the innovators would be risking their own money not other people's.


Because the government can ensure it has a monoploy through legislation, that is it can block any rival networks. This removes a significant part of the risk. The government has a much lower cost of capital, which significantly reduces the hurdle rate.
Lovely. We all know how wonderfully monopolies treat consumers.

TheJoker
15-05-2010, 04:53 PM
It might be, but the innovators would be risking their own money not other people's..

Actually in the private sector management make decision on implementing new technology all the time, they don't consult each every shareholder. The only real difference is the ease in which one can opt out of a publically listed company ownership. It's not so easy to opt out of being and Australian resident/citizen



Lovely. We all know how wonderfully monopolies treat consumers.

Well given that the fibre network is most likely a natural monopoly, I'd rather have a non-profit seeking public monopoly, than a profit seeking private sector monopoly.

antichrist
15-05-2010, 04:59 PM
Nice one. From SMH of 13/5



To clarify, the above is to apply on LPG which is presently free from such an excise.

The more they tax all the fuels the better, will mean less unnecessary trips, people living closer totheir jobs and less pollution - bring it on