File this one away for future reference

Next time Cossie starts ranting about “robbing the future”, go back and have a read of Tony Harris’ Fin Review column posted at Troppo.

The first thing to say about the future fund is that it is unnecessary. Before it was established last year, commonwealth unfunded superannuation liabilities were $95 billion. These are to be met over forty years. For 2005-06, they required less than $2.5 billion: one per cent of the commonwealth government’s cash expenses. This was entirely within the budget’s capacity.

And don’t forget that what the government is actually doing with our taxes, instead of investing in infrastructure like fast broadband, is creating a big stock market play pool for Cossie’s mates (and a stack of commissions and fees for the big end of town, as is par for the course with the Howard government’s economic irrationality).

The second point is that it is a shame that the commonwealth has nothing better to do with surpluses than to invest them in David Jones and Woolworths or, more interesting, in Tabcorp, Gunns Timber or other securities which many Australians class as unethical investments.

Some economists want Costello to invest surpluses in a taxation system that reduces the disincentive for those thinking of moving from welfare to work. Others argue for more infrastructure or for skills creation. If the government cannot identify needs which have a higher priority – and a higher return – than the shares to be acquired by the future fund, it is myopic. Even re-buying government office blocks would be a better deal.

You’d expect some of our “national affairs editors” or whatever the punditariat call themselves to grasp this point. Or maybe not.

Of course, Cossie might not bother with another round of ranting on this. The best focus group out there, the polls, suggest that none of the government talking points have laid a glove on Labor so far. And the easiest comeback in the world for the Labor Party is to make exactly the points Harris does, and lay out some positive policy for future investments.

Advertisements
Tagged with:
Posted in Economics, Federal Elections, politics
23 comments on “File this one away for future reference
  1. Alex on the Bus says:

    Ah yes, but investing in infrastructure or skills or the like isn’t sexy. As opposed to cold hard cash (Captain Testicles Triple-M-itis voice intended). No, unfortunately many of us have been conditioned to the idea that if someone’s throwing around obscene amounts of money – even if it was originally our money by way of the government – then that must be good because, sooner or later, it will come our way. Even if it never actually does.

    However, it does look as though the general public (or, at least, the subset of which that the pollsters get around to quizzing) is starting to look past this. Yes, having a share portfolio is nice – especially one as massive as the Future (Re-election) Fund – but it’s all rather pointless if you don’t use the proceeds for anything meaningful. And that’s where the comparison between the FF and a mum-and-dad portfolio ends. Making an investment with your hard-earned so that one can live more comfortably in retirement is meaningful; making an even bigger investment so that you can buy off certain sectors of the voting population isn’t. That’s why plans to use the FF to make key infrastructure investments is being received well by the public, rather than the rants about “stealing our future”.

    (Maybe ‘our future’ is code for ‘the future of the current government’ – just a thought.)

  2. pablo says:

    Fiddling with people’s super as the Cossie will, and has, portrayed it with the ALP’s fast broadband policy, will generate a tidal wave of baby boomer fury even where most will not be affected. I just hope Rudd is ready for freshly dusted off schemes like the very fast train to hit his desk. Even Coles and Qantas might have their government interventionist backers. Water security and global warming policies might offer a nervous public some sort of balance over the future fund zealotry of Costello.

  3. observa says:

    Well you might want to think of it like this. Suppose our govt bought out the PS Super liability by borrowing and paying out the $95 billion. Now that’s a lotta dough and a lot of borrowing. However the Super funds would most likely take up $95 billion of those Treasury Notes in the absence of any better returns. In fact they’d dearly love some TBs in their portfolios. Then you have to ask yourselves, should our Govt be borrowing above and beyond that $95 bill for all the lovely shopping lists leftys can dream up, or paying off the debt? That’s essentially the difference between a Rudd and a Howard Govt stance at present.

  4. observa says:

    You’ll notice that under this regime (and that’s what dipping into the FF really is) if a Rudd Govt wanted to borrow and spend more, say for Broadband or more money for schools, etc, then it has to risk raising interest rates and fuelling inflationary spending at a time when unemployment is at 30 yr lows. Most economic commentators would howl them down and rightly so.

  5. steve says:

    Obby, the polls are saying that Howard’s line of thinking just doesn’t cut the mustard any more. They have seen what Howard has to offer and just won’t buy it anymore. The world has moved on. I will not be surprised if Costello’s budget this year gets the thumbs down from everybody except your Murdoch Press cheersquad too.

    Apart from the Workchoices disaster, the Howard regime haven’t achieved anything of value this term. Just bludged along waiting for a miracle to get them in the lead and still they wait…

    If you wrote what they have achieved this term on a postage stamp, half of the stamp would still be bare. Australians can’t stand bludgers who are well paid to achieve results but produce no goods. They would have to be the most pedestrian Government in Australia’s history. Could you ask Howard to work harder next time you see him?

  6. observa says:

    I’m not interested in the polls steve but sound economics over the long haul. Telstra was ‘our’ savings and as such we can do what we please with it, but Costello (Treasury)knows about the ageing problem and so should we all understand that. We can piss it up against the wall now and rue the day later perhaps, or perhaps spending it all on faster Broadband will bring all sorts of productive manna from heaven. My analysis still stands though and that’s what Rudd and Co are really doing in comparison to Howard and Co. There are tradeoffs to be sure, but there aint no free lunch in the long run.

  7. steve says:

    Sound economics over the longterm would have had the coalition leave it as a going concern earning dividends and providing a service to the Public who owned it, bit late to want to unscramble their egg now.

  8. PeterTB says:

    fast broadband

    I’d settle for cheap broadband. Or a tax cut in lieu.

    No one has adequately explained to me how increasing bandwidth 10 fold will generate the tens of billions of $ growth forecast. On the other hand, cheaper broadband would lower cost to business with obvious benefits to all.

    I’m guessing that if we leave it to the market, broadband will keep up with demand – but the Govt will need to ensure that rural dwellers are subsidised.

  9. steve says:

    I’ll tell you one thing before I go to bed Obby, even your property investing mates from your side of politics live by the principle that there is no good reason to sell an investment property ever. End of story.

    So where do Howard’s actions fit in with well established ideals of the rich, right wingers? Short answer is it doesn’t! Selling Telstra was the mistake and Howard and you know it.

  10. philip travers says:

    So I had a look at Troppo and the usual suspects haunt places like that.A Fred Argy apparently knows how to define a skilled worker from one that isnt.Seeing these are the definitional insights of the smug generally,why invest time in reading it?Tell me,since large amounts of dough are spent on Security Guards etc. of a private nature in our society as it is..do they think that in that job they are the skilled?Maybe not,because it is a job that they are accepting for the dough and previous work to them would seem more important and more skilled Iwould hazard a guess.The same with Taxi drivers and a host of people just doing work in demand right now.The snobbery involved in defining the skilled from those that are not is the most awful change beckoned in by Labor And Liberal governments,and, I do not forgive the economics graduates one little bit.

  11. steve says:

    Obby, even professional property investors never ever will sell a property for any reason at all. How is the sale of Telstra consistent with these principles? Having made the mistake of selling it from the Australian taxpayer, it should be used for a more broad use than Canberra Superannuation.

  12. zoot says:

    Observa, you really should read the article at Troppo.

  13. observa says:

    I did read it Zoot, especially this part-

    “The second point is that it is a shame that the commonwealth has nothing better to do with surpluses than to invest them in David Jones and Woolworths or, more interesting, in Tabcorp, Gunns Timber or other securities which many Australians class as unethical investments.

    Some economists want Costello to invest surpluses in a taxation system that reduces the disincentive for those thinking of moving from welfare to work. Others argue for more infrastructure or for skills creation. If the government cannot identify needs which have a higher priority – and a higher return – than the shares to be acquired by the future fund, it is myopic. Even re-buying government office blocks would be a better deal.”

    He neglects the one glaringly obvious, gilt edged investment. Buy out the Super liability by borrowing at the cheapest available long term rates and when you’ve done that you’ve established the benchmark by which all other alternative investments can be measured. ie establish the true opportunity cost of govt investment in broadband, etc. Nic Gruen then points to the obvious risk about spending up big at the top of the resources boom.

  14. observa says:

    Steve, it’s not true that property investors never sell, as a quick trip to the Lands Titles Office or a perusal of States stamp duty revenues would show. Essentially Telstra was sold off before it became the next Kodak in a period of rapid technological change. In fact in the time the ALP obfuscated and delayed the full sale, the revenue for two Broadband rollouts was squandered, just to give you an idea of the taxpayer risk here. Think about that eh Kevvy and Co?

    Well what’s done is done but-
    “it should be used for a more broad use than Canberra Superannuation.”
    Que? Huh? What are you suggesting? The Govt renigs on its obligation to the PS? Steve, mate, money is money is money and it don’t matter whether you have lots of little jam jars full of different amounts to pay the bills, if you empty them all into one jar it’s the same amount and the bills on the table don’t change with the number of jars.

  15. steve says:

    I’m talking about people who are good economic managers who know what they are doing Obby, not the voodoo economics of the Howard Government and clowns who operate the way they do.

    Nobody ever got to be financially secure by selling the family silver. Wealth creation is about building up cash flow from assets not selling them off with barrels of Pork for their National Party cheersquad like we saw after the sale of T1.

    I’m not asking you to powerwalk down to the titles office to see how fools operate just try to understand the link that I linked to would be a good start for you.

  16. steve says:

    it don’t matter whether you have lots of little jam jars full of different amounts to pay the bills, if you empty them all into one jar it’s the same amount and the bills on the table don’t change with the number of jars.

    The fact that you are arguing with yourself about how to spend a couple of jars of cash proves my point.

    Eleven years ago, before Howard and your type of economics got to Telstra, it was a public asset owned by all Australian now a couple of jars of cash. Criminal is what I call it!

  17. observa says:

    “Nobody ever got to be financially secure by selling the family silver”
    True but the family would have been a lot better off selling out of their Kodak shares when digital digital cameras first appeared and using the proceeds to pay down the mortgage.

    Whether you agree with the sale of Telstra or not Steve, it’s a done deal and the objectors needn’t lecture us all about forcing the govt to pork barrell to the country, in order to get the sale done over political hystercs, the same as they did with forcing such compromises on electricity privatisation in my state. Those power privatisation benefits and national grid competition are being quietly enjoyed now and had to be done under the economic competition gun put sensibly to their heads by the Keating Competition Policy. What’s done is done and Swan understood that implicitly when he demanded the Govt lock up the Telstra proceeds for the future rather than using it for general expenditure. Now he has done the flip flop when the usual suspects want to dip their fingers in the honey pot for short run electoral purposes.

    Quite frankly Steve our telecommunications, banking and air travel have never been better value for money and I’ll leave you to work out why that’s so. Doesn’t change the fact that there’s a $95 bill liability to all those retiring baby boomer public servants that Whitlam and subsequent put on in the halcyon days and promised them all they’d retire on 85% of their final income. To be fair it was Hawke and Keating that saw the light and closed that unfunded liability pit down. Hey doesn’t worry me as I won’t be paying the taxes to pay for all that past largesse when the time comes. I just feel it might be prudent for my generation to do so now. ie forgo the pleasure of spending the Telstra dividend now, to spare the kids the pain in a decade or so. Stuff the little blighters eh? They need faster Youtube and Myspace now.

  18. Barney Maroon says:

    I reckon there are two debates that are tangled up uneccesarily.

    1. There should simply be money put into super funds to cover the liabilty so future gens don’t have to pay for our largesse now. End of story, “future fund” is just a weird hybrid political gimmick. Even though the funds may buy into big companies, the effective return is lowered if the prices are bidded up, causing more smart dollars to flow into venture and seeding capital at the growth end of the market.

    2. Governments should get their heads out their a**holes and invest in infrastructure. Through surpluses is great, through debt if needed. Households do it, business does it. Real broadband lines are a natural monopoly, and will have GDP returns. Just do it.

  19. observa says:

    There are 2 parts to the debate here Barney but unfortunately they’re inextricably linked. It’s not true to think that Govts are not continually investing in infrastructure now. They certainly are, but there are a couple of questions as to whether they should be investing even more in the current stage of the economic cycle and can they pick better winners than those currently in the business, with such things as broadband rollouts. They may be able to do the latter, but even if they can, it may well be more prudent to do those things when the cycle turns down in typical, counter cyclical Keynesian fashion, rather than spending and fuelling inflation and tempting the Reserve. At present reducing taxpayer liability(ie setting aside more for the known PS super liability), may well be the most prudent and economically sensible approach. I agree the FF is really a misnomer here, because at present our true debt position is not on the books transparently. If PS super were bought out and the FF jam jar banished for good, which I believe it should be, the opportunity cost of more borrowing or taxing and spending would be absolutely unmuddied here.

  20. Brian says:

    I recall that just after the Harris article Brian Toohey did an article saying also that the FF was unnecessary. From memory, he said that curent tax payers are being hit with a triple whammy.

    They are paying for the super of all public servants now retired.

    They are paying for the future super of current public servants.

    They are paying for the future super of future public servants.

    One of the pundits, I forget which, said that the purpose of the FF was to prevent the spending ministers from spending it on the basis that more spending would be inflationary.

  21. This posting would not allow me to go into relevant details but whatever superannuation debtr was calculated, considering that Federal Policitions, federal judges, etc, are all in a unconstitutional superannuation scheme, it might be something to stop that rot and we might by this have a considerable lower superannuation debt.

    With Howard having done the Carriban deal to exchange people (slave trade under another name) perhaps we did better to exchange all Federal Parliamentarians, obviiously accidently, and all we might just be a lot better off.

    My blog at http://au.blog.360.yahoo.com/blog-ijpxwMQ4dbXm0BMADq1lv8AYHknTV_QH and my website, http://www.schorel-hlavka.com

  22. I just noticed that some typo errors were left in the above statement. Sorry.

  23. I will avoid using references to my published books as it might come across to advertising, but merely to say that next month I am publishing another book of which DRAFT Chapter 22 was forwarded to the judges of the High Court of Australia for their response, if any,.

    Chapter 22 in fact exposes how the judges of the High Court of Australia failed to consider all relevant issues and that they quoted what Griffith had stated After he became a judge but left out what Griffith had Stated as a framers of the Constitution, as that was considerably different.
    In my view the 14 November 2006 judgment regarding the WorkChoices legislation was, so to say, a con job.
    In fact I view that the judges ought to act honourable and set aside the judgment as it was obtained by FRAUD.
    It is now up to the unions and politicians to work it out and seek to have the 14 November 2006 judgment overturned, but I doubt they will pursue that because it suits them fine if people are, so to say, bleeding to death, loose their jobs or part of their wages and so perhaps their family home, etc. After all, the more blood is flowing (so to say) the better for the politicians in an election year to argue against their opponents and after one or the other party is elected they will prove to us all we are morons as they will not fix the problems as they care less about their constituents then about their fat pay packet.
    With the future funds it is unconstitutional and Section 94 of the Constitution proves this. Then again what is a Constitution for when politicians can ignore it as they desire and the lack-of-backbone judges allow them to get away with it.
    See my blog at http://au.blog.360.yahoo.com/blog-ijpxwMQ4dbXm0BMADq1lv8AYHknTV_QH and my website, http://www.schorel-hlavka.com

Comments are closed.

  • An error has occurred; the feed is probably down. Try again later.
%d bloggers like this: