Economics

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24 October 2023

3

An Australian was on holidays in the south of France.

Strolling along outside his hotel, the Aussie was suddenly attracted by the screams of a young woman kneeling in front of a small child.

The Aussie knew enough French to determine that the child had swallowed a coin.

Seizing the little boy by the heels, the Aussie held the boy up and gave him a few good shakes and out popped the coin.

“Oh, thank you sir, thank you,” cried the woman.

“You seemed to know just how to get that coin out of him, are you a doctor?”

“No madam,” replied the man, “I’m with the Australian Tax Office.”

In my last post, Prison Break, I spoke of rights and responsibilities.

… when taxation rates are reduced revenues do not fall.

Regulations that prevent people from working under terms and conditions which suited them, was, I said, an infringement on liberty, freedom and dignity. It violated a person’s right to get a job and their responsibility to provide for their families.

I will now add a further hazard – it prevents them from paying tax to cover the many services the state provides to that person.

Rights … responsibilities … and tax. They are all linked.

Jean-Baptiste Colbert, Finance Minister to King Louis XIV of France, famously declared that “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

A modern finance minister might rephrase this as, “The largest possible amount of revenue with the smallest possible amount of economic and political damage.”

Which brings me to a man called Arthur Laffer.

I had the privilege of meeting the famous US economist in Parliament House in 2015. Dr Laffer was in Australia on a speaking tour.

Arthur Laffer is of course most famous for his Laffer Curve.

It is self-evident that tax revenue would be zero if tax rates are set at 0% (bottom left corner of the graph).

Revenue would also, of course, be zero if rates were set at 100% (bottom right corner).

Starting at 0%, as tax rates rise, revenue also rises until at some point on the graph it starts decreasing as it heads towards that 100% point.

Eminent Australian and UK economist Colin Clark once said economic growth declines if taxation is more than 25 per cent of GDP.

It’s also been said, “When the taxes of a nation exceed 20% of the people’s income, there is a lack of respect of government. When it exceeds 25%, lawlessness.”

In Australia it is close to 30%.

Take one example of this lawlessness – the cash economy, currently estimated at 15 percent of GDP, one of the largest in the developed world. An underground economy of that magnitude requires the involvement not only of a lot of businesses, but also of millions of consumers.

As we know, laws only work when people believe in them and clearly, they have no respect for our tax laws.

It’s also been said, “When the taxes of a nation exceed 20% of the people’s income, there is a lack of respect of government. When it exceeds 25%, lawlessness.” In Australia it is close to 30%.

Despite what many advocating tax increases would have us believe, the total tax take in Australia is quite high. They say that compared with other developed economies, Australia is a low tax country, and that workers and companies could comfortably pay more. Not so.

When it comes to taxing incomes, Australia is up there with the Europeans and is way ahead of most of our neighbours in the Asia-Pacific region.

A paper published by the Adam Smith Institute stated, “If you look at the experience of those who have introduced a single-rate flat tax, and also the tax reforms of the 1980s which took place in Britain and America, reducing tax rates causes revenues to rise.”

As Arthur Laffer showed, and as has been demonstrated many times, when taxation rates are reduced revenues do not fall. When the Australian company tax rate was cut from 39 to 30 percent, revenues went up, not down. The famous Reagan tax cuts from 70% to 30% in the 1980s produced a $9 billion increase in revenue when a $1 billion shortfall had been forecast.

When Sweden halved its company tax rate from 60 per cent to 30 per cent, company tax revenue tripled.

Nobody enjoys paying taxes, but in the 1950s and 1960s relatively low taxation and a comparatively simple set of tax rules meant that most people paid what was due without too much complaint.

Today, however, the Government and the ATO find themselves locked into a destructive relationship of repression and resistance with ordinary taxpayers.

Where people can avoid tax by exploiting loopholes, they will do so; where they can’t eg PAYG taxpayers, they become resentful at the unfairness of it all.

Bob’s contribution to the Australian community has been reflected in a wide range of appointments including National President of the Housing Industry Association, Co-Founder and Inaugural President of Independent Contractors of Australia, Director of The Centre for Independent Studies, and Senator for South Australia.

Full House?

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19 October 2023

1

As Australia grapples with a crisis of housing supply and affordability, the ‘M’ word is rapidly re-entering the lexicon, this time from both the conservatives and progressives. Yet I can’t help but wonder whether and how much Australia’s current levels of migration influences issues such as housing affordability. I believe this is a red herring that has allowed proper scrutiny of resource allocation within Australia to be lazily sidestepped.

Everyone – from economists to politicians and everyday Australians – loves simple solutions to complex problems. The so-called ‘housing crisis’ is no different, and this time the primary culprit appears to be immigration. In the midst of skyrocketing costs and severe shortages of materials, new housing construction is far from meeting growing housing demand.

Not only do we have an unrealistic image of what type of dwelling or location we need to live in, but both taxes and regulation act as a disincentive to the type of nimbleness that a housing ‘crisis’ demands.

The affordability of houses and land has long been an economic challenge in Australia and, as Bob Day pointed out, vested interests tend to keep it that way. High house prices are politically popular given many Australians own their homes, but they also form the backbone of state budgets through inflated stamp duty and land taxes.

There is another angle here too – Jobs and Skills Australia reported last month that a whopping 36% of occupations in Australia are experiencing a worker shortage. An economic vacuum exists that can only be filled in the short term by migration – yet apparently there is nowhere to house them.

Or is there?

Let’s take a look at a couple of graphs …

What this shows is that the most common type of dwellings in Australia have three or four bedrooms, yet the most common household sizes are single or two occupants. There is also a trend towards rates of single and two person households that has slightly accelerated in recent years. Do we have a ‘housing crisis’? Or do we have a ‘misallocation of housing crisis’?

It sounded callous and out of touch when ex RBA Governor Phillip Lowe told Australians to rent out an extra room or move in with mum and dad if cost-of-living was beginning to bite. But perhaps he was right. Maybe it’s not a case of Australia lacking the space for migrants, but that we lack the capacity to house each single or two-person household independently in their own dwellings. An attitude shift might be necessary.

This is highlighted by the fact that migrants on the whole – particularly the international students who anti-immigration economists have in their sights – are in fact adapting to the housing crisis much better than existing citizens. Housing researcher Dr Zahra Nasreen found that the majority of Sydney’s shared house accommodation was filled by international students and other migrants, along with young professionals.

Along with the drip-feeding of land supply, which artificially inflates prices, the difficulties in construction, the regulatory burden that stifles higher density infill, and the migration program, misallocation is a substantial contributor to our housing shortage.

Do we have a ‘housing crisis’? Or do we have a ‘misallocation of housing crisis’?

A major reason for this is stamp duty, which is an insidious block on housing mobility – punishing home-owners financially for up-sizing, down-sizing, or moving closer to employment opportunities. If we are to utilise our existing and future housing stock to its fullest capacity, we must abandon this tax.

Another reason is that family homes are not taken into account when assessing eligibility for welfare payments such as aged and disability pensions. This creates an incentive to remain in homes that, if sold for something smaller, would create surplus funds and threaten eligibility.

So far governments around Australia, particularly in Victoria, have simply targeted landlords, holiday home owners, short stay accommodation providers and empty land owners with new taxes and regulations. It is about time we had a serious conversation not only about how to increase our housing supply but how to maximise use our existing stock.

Not only do we have an unrealistic image of what type of dwelling or location we need to live in, but both taxes and regulation act as a disincentive to the type of nimbleness that a housing ‘crisis’ demands. Before we as libertarians abandon important principles such as freedom of movement and succumb to the allure of protectionism, we ought to ensure migration really is the problem they say it is.

Max Payne is the Australian Program Associate with Students For Liberty, a global non-profit that spreads the values of libertarianism on campus. He is also a twice former candidate with the Libertarian Party and maintains a keen interest in Austrian economics, classical music and organic gardening.

Live Sheep Export: Labor’s Sacrificial Lamb

By

Meaghan Whyte

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17 October 2023

1

The Albanese government manufactures political support using sacrificial lambs. One lamb lined up for sacrifice is the live sheep export industry. The Department of Agriculture, Fisheries and Forestry website currently states that “The Australian Government has committed to phasing out live sheep exports from Australia by sea”.

Labor demurred when questioned pre-election, but the WA Labor platform clearly articulates the party’s position: “WA Labor recognises that there are strong economic, jobs and animal welfare reasons for transitioning from the live export trade to domestic processing of animals for local consumption and the chilled and frozen meat trade.”

Farmers Forced to Cull

Due to the La Niña system of the past three years, Australia has an excess of approximately 640,000 sheep. The incoming El Niño weather system will bring warm dry conditions, impeding feed growth. A recent report by Australian Bureau of Agricultural and Resource Economics and Sciences states that Australia’s agricultural sector will shrink by 14% in 2023-24. Simultaneously, Labor is pushing ahead with its live sheep export ban plan.

Both have contributed to the mutton price dropping from $100 per head in January 2023 to a devastating $1 per head over the last couple of months.

The government has played the live sheep export industry for a fool.

Trucking sheep to sales yards is particularly expensive currently, and there have been cases of unsold sheep returned to the farm at the producer’s expense.

In the face of this terrible confluence of factors, some farmers have been forced to shoot their sheep. A heartbreaking waste of life, work and resources.

World-class Sheep Welfare

Australia’s live sheep export is conducted by two exporters based in Western Australia. Sheep are sourced from across the state. An entire industry supports the complex logistics involved in this supply chain.

Throughout the live export process, sheep welfare is subject to rigorous oversight. Of over 100 countries that export livestock, Australia is the only one requiring adherence to specific animal welfare regulations for exported livestock, including after arrival in the importing country. These regulations include:

Farmgate to the ship: Australian Standards for the Export of Livestock 2021; and
Importing countries: Exporter Supply Chain Assurance System (ESCAS) 2011.

On board the ships, sheep are accompanied by an Australian-accredited veterinarian. Vets complete three rounds of the decks per day. In addition to this, sheep are inspected before, during and after their journey by additional accredited animal health professionals. To ensure exporters are compliant with Australian welfare guidelines, each part of the supply chain across Australia and importing countries are also audited by independent, qualified entities at least once a year. Auditors review:

Animal handlers and their techniques; and
Facilities: ports, transport vehicles, feedlots, abattoirs.

Treacherous Memo

Known for its world-class standards, Australia raises robust and sought-after sheep. For multiple reasons, both cultural and economic, the countries in the Middle East prefer live export over chilled meat.

Formerly, Saudi Arabia was Australia’s prime sheep market, reaching one million sheep annually until trade ceased in 2012 due to that country rejecting Australia being involved in welfare once the sheep have arrived. Efforts have been underway to reopen live sheep exports to Saudi Arabia, compliant with Australian standards, through a revised health protocol. This would significantly boost the Australian sheep industry and potentially more than double current exports.

The Federal government states that access to the Saudi market is open, subject to meeting Australian requirements and ESCAS regulations. However, this statement is in direct contradiction to its own actions. Documents obtained via freedom of information state that bureaucrats advised Agriculture Minister Murray Watt in a department memo in January of 2023 that they were ending negotiations with foreign governments regarding new live export agreements.

Australia’s agricultural sector will shrink by 14% in 2023-24. Simultaneously, Labor is pushing ahead with its live sheep export ban plan.

This was months prior to Watt deploying his panel to consult on phasing out live export. The Department announced this in spite of interest in live sheep export agreements from multiple countries including Saudi Arabia, Morocco and Kuwait. The government has played the live sheep export industry for a fool.

Kuwait has indicated it regards Australia’s live export ban policy as hostile. Kuwait’s Commerce and Industry Minister, Mohammad Othman Al Aiban wrote to Minister Watt stating the ban will imperil relations between Australia and importing countries.

Farmers

On the Department of Agriculture, Fisheries and Forestry website, the government assures us that, “The phase out will not take place during this current term of the Australian Parliament.” This attempt at reassurance rings hollow, considering the department’s memo on ceasing negotiations.

The treacherous actions of the Department, and lack of a specific timetable, means that farmers have no way of planning for the future. Agriculture carries a high level of unpredictable risk, including droughts, floods and bushfires. The Labor government has heaped an unnecessary burden of risk and uncertainty on the industry.

Labor’s duplicitous blundering will potentially deliver catastrophic consequences for the entire industry. As we have seen so often, government intervention in trade leads to tears.

Meaghan Whyte

Meaghan became a staunch anarcho-capitalist after a collection of life experiences that left her disabused of any vestige of goodwill towards the state and its attendant institutions. Notable experiences included university gender studies, and living under social democracy. Now, she writes to advocate for the abolition of the state.

The Simon-Ehrlich Wager

Economics

By

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10 October 2023

1

Human history is replete with apocalyptists. People who believe that the end of world is nigh and that only complete power, in their hands of course, can save the world.

A famous bet was made in September 1980 that challenged this thinking. In 1980, economist Julian Simon challenged biologist Paul Ehrlich to a bet based on their opposing views on the scarcity of natural resources.

Ehrlich was the author of the 1968 book The Population Bomb, where he warned of overpopulation and resource depletion, predicting dire consequences for humanity in the coming decades. One can easily predict the policy recommendation of Ehrlich to manage human over population.

One of the most important lessons from this bet is the power of markets which, when unbothered by the dead hand of government, can efficiently allocate resources and incentivise conservation.

Soon after Ehrlich’s book was the establishment of the Club of Rome, which in 1972 published The Limits to Growth. This book was based on computer simulations that predicted resource depletion would lead to the end of economic growth and global conflict. Peak oil and all that.

Simon, on the other hand, believed that human ingenuity would lead to technologic innovation and development. And that the market mechanism, not totalitarian government, would result in greater availability of resources and human flourishing. Norman Borlaug and dwarf wheat and all that.

Their bet was whether the inflation-adjusted price of five specific metals would be higher or lower at the end of a ten-year measurement period. The metals were copper, chromium, nickel, tin and tungsten. Simon bet that the prices would fall due to innovation and the price mechanism. Ehrlich predicted they would rise due to scarcity and depletion.

In the end, the inflation adjusted price of ALL five metals decreased. Simon won the bet, and Ehrlich sent him a cheque for the difference in the prices.

One of the most important lessons from this bet is the power of markets which, when unbothered by the dead hand of government, can efficiently allocate resources and incentivise conservation. When prices rise due to resource scarcity, it encourages producers to find alternatives or develop more efficient extraction and production methods.

Resource Depletion v Human Flourishing

More than 50 years after Ehrlich’s book and the Club of Rome, there are significantly more people on the planet than ever, and fewer starving people than ever. Humans have never lived longer and healthier lives. Meanwhile, Paul Ehrlich and his fellow travellers continue to preach that the end is nigh and that every environmental issue is an existential crisis. Ehrlich even once suggested that he “would take even money that England will not exist in the year 2000.”

As H.L. Mencken pithily wrote: “For every complex problem there is an answer that is clear, simple, and wrong.” And it is for this purpose we have governments.

Dimitri Burshtein is a Principal at Eminency Advisory and a former government policy analyst. He is a contributor to The Australian newspaper, Spectator Australia magazine and various libertarian blogs. Dimitri has also appeared on SkyNews and 2GB radio.

Better The Devil You Live Next To

By

Duncan Spender

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9 October 2023

0

There are plenty of things you cannot do with your own land.

Sometimes you can’t chop down a tree, plant a blackberry bush, or start a bonfire. In heritage suburbs you might not be able to knock down your house, or paint your current one any colour you like.

Regardless of where you are, you cannot add as many storeys as you like, possibly because of the shadows you would cast or the views you would block.

In urban areas you can’t have roosters as they would wake everyone up; nor can you set up a mosque and blare out a call to prayer. And after certain hours at night you can’t play loud music.

Sometimes you can’t hire out part or all of your house for short-stay accommodation, set up a brothel next to a school, set up a school next to a brothel, or develop a housing estate on land that is zoned for agriculture or conservation.

Dispute resolution would involve less of the opacity and potential corruption of bureaucracy, and more of the hard-nosed deal-making of markets.

To me, some of these restraints are reasonable and some are not. I suspect you would also judge at least some of these restraints to be reasonable – even though we might judge particular restraints differently.

Currently numerous decisions about what you can do with your land, like set up a brothel, are made by the State.

It is as if the State keeps in a vault, alongside the piece of paper showing you own your land, a separate piece of paper saying that the State owns the right to set up a brothel on that land. Only if both owners agreed can a brothel be set up.

In fact, every limitation on what you can do with your land can be thought of as a property right held by the State.

I propose that we take that imaginary situation, where pieces of paper in vaults define distinct property rights concerning what can be done with your land, and turn it into reality.

Here’s how.

If the State’s planning authority is about to reject a development application, it should make an offer to the land owner: the planning authority will rule in favour of the owner, if the owner agrees to create a restrictive covenant relating to the things the owner wants to do to the land, and to gift that covenant to the owner’s neighbours.

So instead of being banned from doing something, you would have to give the right to do that thing to your neighbours, as a tradable property right.

If the planning authority objected to your development application to add an extra storey to your house, your neighbours would end up with a property right to build that extra storey. If the planning authority objected to your development application to set up a brothel on your land that’s next to a school, the right to set up that brothel would end up being owned by the school.

I propose that we take that imaginary situation, where pieces of paper in vaults define distinct property rights concerning what can be done with your land, and turn it into reality.

The advantage of this arrangement is that the right could then be purchased from the neighbours, if an acceptable price is offered.

A banned development would instead become a potentially expensive development.

A disadvantage of this approach is that it would increase your neighbours’ incentives to complain to the planning authority about your development plans. And the planning authority might end up approving fewer development applications, sending an increasing number of potential developments into the world of deal-making over covenants.

But the advantages would exceed the disadvantages. There would remain hope after a planning authority’s objection to your development, unlike currently where such an objection kills all hope. Dispute resolution would involve less of the opacity and potential corruption of bureaucracy, and more of the hard-nosed deal-making of markets. You’d be dealing directly with your neighbours – real people with real concerns. And, on occasion, mutually beneficial deals would be done, making all parties better off.

Duncan Spender

Duncan Spender is CEO of Oysters Tasmania, having previously served as CEO of the Multicultural Council of Tasmania. He advised Senator David Leyonhjelm from 2014 and briefly served as Senator in 2019. Duncan’s early career was in local government and the Australian and New Zealand Treasury Departments.

Prison Break

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27 September 2023

3

In 1946, Viktor Frankl, Holocaust survivor and renowned author of the book Man’s Search for Meaning, proposed that the Statue of Liberty on the east coast of America be complemented by a Statue of Responsibility on the country’s west coast. He was later joined in this endeavour by Stephen Covey, author of The 7 Habits of Highly Effective People. The dream was to bookend the nation with two equally inspiring statues – one representing rights, the other responsibilities.

Both men have since passed on, but their dream is being kept alive by an organisation called Statue of Responsibility.

The dichotomy of rights and responsibilities is often raised during public policy debates.

Indigenous leader Noel Pearson, a key advocate for the Yes campaign, in discussing his work on rights and responsibilities in Cape York, has said:

“Until we take responsibility, there’ll be no turnaround in closing the gap.

“You think my mob like it when I talk about responsibilities?

“They love it when I talk about rights and how they’ve been victimised. They don’t like it, however, when I say take responsibility for your children – nobody’s going to save you until you get your family together.”

Can’t argue with that.

This is unquestionably an infringement on liberty, freedom and dignity. It violates a person’s right to earn a living and it violates their responsibility to provide for their families.

A core tenet of the Christian faith is that one day we all will stand before our Creator and give an account of our lives and be judged accordingly.

It must follow, therefore, that if people are going to be held responsible for their actions, they should have the right to decide how they live their life. Rights – responsibilities.

The first question I asked as a newly elected Senator in 2014 went something like this:

My question is to the Minister for Employment and Leader of the Government in the Senate, Senator Eric Abetz.

I refer to the Prime Minister’s statement on 28 May this year when he said, “People are more than capable of making decisions based on what is best for them”, and also to the statement by the Minister for Social Services when he said, “The best form of welfare is a job”.

If both those statements are true, why then can an 18 year old in my home State of South Australia

• get married

• have children

• drive a motor vehicle

• fly an aeroplane

• buy a house

• take out a mortgage

• enter into a mobile phone contract

• travel to some of the most dangerous places on earth

• smoke cigarettes

• drink alcohol

• enlist in the armed forces and shoot enemy combatants

• and, of course, vote

but NOT enter into an employment arrangement which, and I again quote the Prime Minister, “is best for them”?

It is customary for crossbenchers to send Ministers advance notice of questions they propose to ask during Question Time. I did so on this occasion. I also took the liberty of sending the Minister the preferred answer I would like to receive.

The Minister duly acknowledged my courtesy in sending him the question in advance and also informed the Senate that this was actually the first time he’d also received a suggested answer.

Humour aside, the answer I was looking for was, “Senator Day is quite right, this government is committed to putting in place employment arrangements which, as the Prime Minister has often said, ‘is best for the people making those decisions’. Accordingly, this government will, in due course, be tabling a simple, one sentence bill to be called the ‘Free to Work Bill’. The Free to Work Bill will state the following:

‘Notwithstanding the provisions of the Fair Work Act 2009, any contract of employment between a corporation and a natural person shall be lawful’.

That is all that is needed. Needless to say, that’s not the answer I got.

I have argued that a person could be unemployed, living at home rent-free, with no (or very low) cost of living and would be willing to work at a starting pay rate of say $20 an hour (which is a lot higher than they would be getting on Centrelink), but because penalty rates on weekends or public holidays are around $40 an hour they are not allowed to take these jobs. They stay unemployed, the business stays shut, and the customer doesn’t get what they want to buy.

It’s been said that any place you can’t leave is a prison. Australia’s present workplace regulation system is a prison, trapping a person in thousands of pages of regulations. When I ask why we lock people up like this, I am told “Oh it’s for their own good – we don’t want them to be exploited.”

… if people are going to be held responsible for their actions, they should have the right to decide how they live their life. Rights – responsibilities.

But where’s the outrage when these same young people end up on drugs or get involved in crime or suffer poor health or become pregnant or become recruits for bikie gangs or even commit suicide?

If those claiming to protect the unemployed from exploitation really cared as much as they say, then why do they do not stop them from doing a hundred and one other things that have a far bigger and more permanent impact on their lives than getting a job – like smoking or drinking alcohol or getting covered in tattoos or getting married, or having children, or backpacking through South America. At least with a job you can quit any time.

This is unquestionably an infringement on liberty, freedom and dignity. It violates a person’s right to earn a living and it violates their responsibility to provide for their families.

Bob’s contribution to the Australian community has been reflected in a wide range of appointments including National President of the Housing Industry Association, Co-Founder and Inaugural President of Independent Contractors of Australia, Director of The Centre for Independent Studies, and Senator for South Australia.

Death, Taxes and … Death Taxes?

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21 September 2023

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“We know that there is a growing pot of wealth, sitting in the hands of older Australians that will be passed on in coming decades.”

Gosh, that sounds juicy. What government could refuse the temptation to take a slice of that pie?

However, that sentiment speaks to the fundamental flaw in the approach of our policy makers towards balancing our books – always trying to increase revenue without doing much to cut spending.

While it would take a brave government to set their sights on inheritance as a potential source of tax revenue, comments from incoming Productivity Commission boss, Danielle Wood, indicate the wrong question is being asked.

Structural Budget Pressures

Treasurer Jim Chalmers, who is arguably among Labor’s more agile and pragmatic front-benchers, has flagged the NDIS and aged care as key budgetary pressures going forward. While high commodity prices are currently keeping the wolves from the door, the rapidly rising cost of Government funded services and a forecast drop in revenue over time has even the typically Keynesian Labor camp concerned.

Australian Treasurer, Jim Chalmers. Are death taxes next on the agenda?

Although Labor has denied plans for an inheritance tax are on the agenda, Danielle Wood’s comments and the wider conversation nationally on debt and deficit are clearly not focussed on fixing the most glaring issue facing the budget – spending.

Out of control spending

For example, since its inception in 2013, the NDIS has grown astronomically and now accounts for the biggest cost of any social program the Federal Government runs – $30 billion last financial year. Originally designed to help those with genuine disabilities, the NDIS faces many unforeseen challenges. Its expansive criteria means that over 500,000 people now use the NDIS, participants don’t leave the program as quickly as first envisioned, and up to 20% of NDIS payments are estimated to be fraudulent!

Aged care is not immune either – one of the key recommendations of the Aged Care Royal Commission was to establish a ‘blank cheque’ style funding model. This would ensure outcomes remained uncompromised by ‘fiscal challenges facing the government of the day’. With attitudes like that, it’s no wonder social programs are growing at such a speed and are open to rorts – the government is being told the cash tap can never be turned off! What message does that send to users or providers? Of course, the first proposed solution to the issue of funding was to slap a levy on taxpayers – in other words, more tax.

Cutting through

Dramatically reducing the size and scope of all government programs would be a more ideal solution (Caroline White knows it!), but at the very least Chalmers and the relevant ministers could begin with more palatable reforms in the service sector. For example, a user-pays model for aged care services – reducing the share paid by the general tax-base and increasing accountability for providers. Meanwhile the NDIS could benefit greatly from increased scrutiny of payments made and more stringent eligibility criteria.

The government is being told the cash tap can never be turned off!

While governments fear the political ramifications of being seen as ‘gutting’ social services, perhaps the issue needs re-framing. The Australian Taxpayers Alliance found in 2021 that a Victorian worker earning an average salary costs about $73,000 to employ. Of that amount, 55% is taxed! Our lifestyles, our productivity, our time and our future are being gutted – and all for what? So that whatever we have left when we finally kick the bucket can be taxed one last time?

We can only hope that one day governments will attempt some introspection, but it doesn’t look likely just yet. Apart from talk of scrapping the Stage 3 tax-cuts, aged-care levies and death taxes, Jim Chalmers has also flagged that he expects future nation-building funding to fall at least partially on the super funds.

At what point will we finally see the leadership required to start treating the problem of spending rather than the symptom of revenue?

Max Payne is the Australian Program Associate with Students For Liberty, a global non-profit that spreads the values of libertarianism on campus. He is also a twice former candidate with the Libertarian Party and maintains a keen interest in Austrian economics, classical music and organic gardening.

Funny People

Economics

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14 September 2023

2

Now deceased American comedian and actor Robin Williams used to tell a story of being interviewed on a German talk show. As a guest, Williams was asked why people aren’t funny in Germany? In reply Williams said, “Did you ever think that you killed all the funny people”.

A similar response can be offered to the question of why Australia has so little innovation and why small business is in decline. Did you ever think that Australian governments killed all the innovative businesses?

Every now and then, the Growth Lab at Harvard University prepares the Atlas of Economic Complexity. The Growth Lab says their analysis rankings “assess the current state of a country’s productive knowledge, through the Economic Complexity Index (ECI). Countries improve their ECI by increasing the number and complexity of the products they successfully export.”

So, what was Australia’s Economic Complexity ranking in 2021? It was 93^rd; bookended between Pakistan at 92 and Uganda at 94. Even New Zealand came in at 52. Ten years ago, Australia was ranked 81^st. So a ten-spot decline.

Why is this so? Well, in large part because Australia has become the quarry of the world, exporting lots of unprocessed resources. Over 56 percent of Australia’s exports in 2021 were of four commodities – iron ore, coal, natural gas, and gold. Approximately 22 percent was from the export of coal and gas.

Consider some recent market interventions, putting aside the daily assaults on super profits and evil business. Things like actual price caps on coal and gas. Threats of rental price caps. Threats of increases to capital gains taxes.

Every time this complexity study report comes out, it provides a platform for members of the central planning industrial complex to argue for more government money and intervention in markets. Here are a few samples from a quick internet search:

Ed Husic, Minister for Industry and Science, said in August of this year that “Australia’s narrowing industrial base shows the economy can’t be left solely to market forces”.
Someone, unnamed, from the University of Sydney said in 2021 that “If (infrastructure) investment of this scale was redirected towards the promotion of advanced manufacturing, enormous possibilities would lie ahead.”
Kieran Parker from the Australian Centre for Robotics said in April 2023 that “We believe a comprehensive national investment in robotics research, development and translation, structured in a manner that supports industry adoption would likely have the highest return on investment (ROI) of any such science industry related initiative.”

Could it be, just maybe, that Australia’s low complexity is a consequence of government policy? Of high taxes, excessive regulation, and incessant market interventions?

Consider some recent market interventions, putting aside the daily assaults on super profits and evil business. Things like actual price caps on coal and gas. Threats of rental price caps. Threats of increases to capital gains taxes. What about the market design mantra of Treasury Jim Chalmers in his 6,000-word Capitalism After the Crisis essay where he wrote earlier this year that “with coordination and co-investment – recognising that government, business, philanthropic and investor interests and objectives are increasingly aligned and intertwined.”

And of course the recent words of Assistant Treasurer Stephen Jones, who said about the Qantas protection racket that “instead of having two carriers we will design our markets in a way which will make it unsustainable for the existing Australian-based carrier.”

Why would anyone in their right mind risk their time and capital to develop a sophisticated and complex business in Australia when all that would happen would be more taxes and regulations?.

Another term for market design is central planning. And another title for the central planners is commissars. And we have seen the results: in the Soviet Union, in Cuba, in East Germany, in North Korea.

So next time you hear some one asking why Australia has low innovation, low business creation, low entrepreneurship, low economic complexity, you might suggest, as Robin William’s did, that maybe it’s because it’s government policy.