The AWU and GetUp!

This week’s extraordinary AFP raid on the AWU over donations made twelve years ago to GetUp! has all the hallmarks of a Godwin Grech Utegate overreach. Watching the thoroughly odious Michaelia Cash squirming in Senate Estimates over the role her staffer played in the fiasco was particularly enjoyable.

It’s almost a pity that Barnaby Joyce’s eviction by the High Court swept this story of the front page. For all Cash’s protestations about the purer than snow motivation of the ROC and the ABCC, so far neither organisation has exactly covered themselves in glory.

But the point of this post is just a comment on the funding of GetUp! that I think has been missed by the media. There’s been a lot of conjecture about whether the decision by the union to provide the seed funding to launch GetUp! was properly documented and approved, but it seems to me precious little as to why they might have done it.

I think it’s constructive to look at the decision in the context of the time it was made. Remember 2004-2007 was the term that followed the disastrous Latham-led election campaign, that resulted in Howard winning a majority in both houses. Cue WorkChoices, the sale of Telstra, and a lot of other legislation that ultimately proved the downfall of Howard.

Under those circumstances, with the federal ALP completely neutered, developing new methods of galvanising support and calling out the actions of the government seem quite reasonable, and I daresay that’s what prompted the union to look beyond the ALP to outfits like GetUp!

It’s easy to look at these decisions through the lens of how things are today, but sometimes a bit of context is necessary.

GST: It’s not a pie

Greg Jericho writes in his latest piece “Scott Morrison’s next trick – selling a GST revenue cut to every state bar one” that:

Perhaps the most accurate statement in the Productivity Commission draft report on horizontal fiscal equalisation (HFE) is when it notes that “there is a dearth of public understanding of how HFE works, and this is compounded by the lack of a strong neutral voice in public discussion”.

He’s probably right, but all the graphs and charts in the article don’t really cut through to the heart of the matter. And that is that all this banging on about “zero-sum game”, “winners and losers” and fighting over an equitable share of the GST is predicated on the complete falsehood that tax payments fund government spending. They simply don’t – dollars are not a resource that gets recycled. Every dollar of federal government spending is the birth of a brand new dollar that exists because the government spent it into existence, and every dollar returned to the government through taxation is the death of that dollar. A dollar not currently in the economy does not exist, for all intents and purposes. The federal government cannot run out of dollars, any more than Coles can run out of Fly-Buys, or Qantas can run out of Frequent Flyer points. Now of course, if your economy is overpopulated with dollars, and you have more of them currently “living” (in circulation) than things to buy with them, you get inflation. And that – inflation – is the real limit on government spending.

Money is being issued constantly by the Federal Government. Every pension day, several million bank accounts have their balances increased with a few keystrokes. With every tax return, PAYG paypacket and BAS statement, bank balances get reduced again. (To be clear: this is nothing to do with note-printing. The RBA’s role as the physical printer of currency is not what I’m talking about. There is vastly more money in the economy than there are notes and coins. The decision to physically manifest dollars as paper money is purely a function of demand from banks, when their customers want to convert money as recorded in a bank account to its physical equivalent, for personal commerce.)

It’s crucial to understand that the issuing of money is not inherently inflationary. To assume that you must assume that the size of the economy is fixed, or its productive capacity is maxed out. And clearly neither of those things are true today. As I said previously, inflation occurs when the dollars available outstrip the things you can buy with them. Too much money chasing too few goods. There is no other sane definition.

There is no reason whatsoever that GST should be a pie the states fight over. To switch metaphors, Federal Government spending is actually more like a magic pudding – you can eat too much, but you cannot run out.

And this is what makes me so angry about this hypothecation of “GST revenue” as income of the individual states. When you get down to it, what is the role of government? Is it not to ensure the security, health, education and welfare of its citizens? So the idea that we must fund our education and health – the nation’s investment in its own future – from the vagaries of the consumer spending cycle has got to be one of the most idiotic economic own-goals ever kicked. Even by Costello’s standards as a thorough economic charlatan, this is epic stupidity.

Ahead of the Curve

I came across this article the other day. It’s a fascinating glimpse of the future from the past. The Executive Computer; ‘Mother of All Markets’ or a ‘Pipe Dream Driven by Greed’?

It was written a shade over 25 years ago, and begins:

Sometime around the middle of this decade no one is sure exactly when — executives on the go will begin carrying pocket-sized digital communicating devices. And although nobody is exactly sure what features these personal information gizmos will have, what they will cost, what they will look like or what they will be called, hundreds of computer industry officials and investors at the Mobile ’92 conference here last week agreed that the devices could become the foundation of the next great fortunes to be made in the personal computer business.

The business uses the participants describe – using your phone to order pizza, to “wirelessly fax”, to “plug in the latest disk-based novel” and so on are so adorably quaint.

But what I find fascinating about this article is the gulf between opinions. I’m reminded of the (possibly apocryphal) story about Thomas Watson, the president of IBM who said in 1943: “I think there is a world market for maybe five computers”. Look at the comment by Andrew Grove, chairman of Intel Corporation. He says the idea of a wireless personal communicator in every pocket is “a pipe dream driven by greed.”

It certainly contrasts with John Sculley, then CEO of Apple – a company who at the time was routinely described as “beleaguered”. He said these personal communicators could be “the mother of all markets.”

Now Sculley’s tenure at Apple was nothing if not controversial. He was, after all, the man who sacked Steve Jobs from the company he’d founded. And the company survived – just! – some pretty difficult times in the early 90s.

Today of course, the iPhone is ten years old, and along the way has completely revolutionised the smartphone market. Blackberry and Windows Mobile are nothing more than memories of another time, skid marks on the technological highway. (Remember the boss of Blackberry saying “these PC guys are not going to just walk in here and figure this out”? Good times.) Apple has grown to become the most successful company on the planet. So from the perspective of 2017, Sculley’s words are extraordinarily prophetic.

Peter Lewis’ article is a crazy echo from the past. Do go read it.


I wrote this just over four years ago, when I was blogging somewhere else. With the postal survey currently running and all the raging unpleasantness that’s come along with it, this seems like a really good time to revisit it.

They had a name for it, once upon a time. Sinister. People who wrote with their left hand. In every way, it was not right.

For ages, the majority of right-handed people tried to force the left-handers to be like them. Young people who showed a preference for writing with their left hand were forced to try and write with the “right” hand, to be like the rest. This was no more effective than it sounds.

Although it took a very long time, eventually most of the right-handers came to recognise that left handed people were just born that way, and there was no good to come from trying to make them be something they weren’t. It just made the left-handers miserable, and really did no good to anyone right or left-handed.

So left-handed people were allowed to write with their left hand, and most people went on with their lives and hardly thought about it again.

The hard-line right-handers continued to resist, and gritted their teeth and tried to ignore the left-handers and their writing in public left-handedly. But you have to draw the line somewhere. They sure as hell weren’t going to allow these left-handed freaks to paint left-handed. No way. Painting was the province of the good, right-handed folk. To let left-handed people paint would be the end of the world as we know it.

And many of the left-handed people didn’t care. They looked at the majority of the painting they saw that the right-handers had done, and said we don’t need to paint. We’re happy with our writing.

But some of the left-handed people did care. They had a strong desire to paint, to express themselves through painting. They wondered why their painting was forbidden. And when they asked, they were told “because it was decreed many years ago”. But many other things decreed then are no longer rules we live by, why is painting so important? “You might paint things that good right-handed people won’t like, and good right-handed people’s children might see your paintings. Your paintings might tempt right-handed children to be left-handed!”

And the left-handed people felt this was deeply unsatisfactory reasoning. Many right-handed people’s paintings were awful, just as many were good. And each painting was unique. The value of a painting was intrinsic to itself, the left-handed people said. The quality of our paintings doesn’t change the value of your paintings. They’re just our paintings. “No, only right-handed people can paint!”

Why? Will the left-handed people use up all the paint? “Well, no…”

Will letting left-handed people paint devalue your painting? “Yes it will.” Why? “Just, just because! Only right-handed people can paint.” Even if their paintings aren’t always good? Even if their paintings don’t stand the test of time? “Yes.” You realise that is very discriminatory? “Yes, but there are people who don’t want you to be allowed to paint. Important people who tell other people what to think and how to vote.”

But in more and more places, the right-handed majority began to realise that what they were espousing wasn’t fair. And the left-handed people who wanted to paint had a point. So in some places, they changed the rules and let the left-handed people paint.

Some of the left-handed people’s paintings were beautiful. Some of the left-handed people’s paintings were awful. But most of the left-handed people’s paintings were just average. Just like the right-handed people’s paintings.

And in those places, most people went on with their lives and hardly thought about it again.

Couch Potato

There’s a reason people say “ignorance is bliss”. Ignorance would stop one from getting riled up when one reads utter rubbish like “Scott Morrison finds $4 billion down the back of the couch“. According to The New Daily’s Money Editor, James Fernyhough,

The federal government has stumbled over an extra $4.4 billion, thanks to an unexpected boost in tax revenue and a drop in expenditure. The news, announced by Treasurer Scott Morrison and Finance Minister Mathias Cormann on Tuesday, reflected an unforeseen boost in economic activity in Australia.
The multi-billion dollar bonus does not mean that the government is out of the red – far from it. The budget for 2016-17 was still a massive $33.2 billion in deficit, meaning the government had to borrow that amount in order to fund its spending commitments.
But it means it had to borrow $4.4 billion less than it expected to back in May. As a result, the overall government debt expanded at a slower rate than expected. In total, the government now owes its lenders around the world $322.3 billion.

To suggest that the government “stumbled over” some money and has had to borrow less as a result is just factually wrong. The federal government does not borrow money. The federal government is the currency issuer. It is the only player in the economy who has that ability. If anyone else attempts to issue $A they will get a visit from the constabulary and a charge of forgery. So the idea that the federal government has to go out to “lenders around the world” to borrow the currency it – and only it – can issue is akin to saying that Qantas has to buy or borrow Frequent Flyer points from some market before it can issue them to its customers. Of course it doesn’t. Qantas can issue as many Frequent Flyers as it pleases, and it doesn’t need to get them from anywhere. They exist because Qantas issued them to someone. When that someone trades them back to Qantas in return for a service, they cease to exist again. So too every dollar exists because the federal government issued it into existence.

The back of that couch goes a long, long way. There is an infinite number of dollars down there. They are not a finite resource like gold. The only limit on their issuance is real resources and production: more dollars in the economy than idle productive capacity to absorb them and you get inflation.

Fernyhough goes on to say:

Where the money came from

In 2016-17, the government coffers took in a total of $409.9 billion, compared to the expected $405.7 billion. The lion’s share of that – $379.3 billion – came through taxation. The outperforming taxpayers were companies, consumers (via the GST) and importers (via customs and excise).
High income taxpayers contributed more than expected, while lower income taxpayers contributed less, bringing the overall income tax intake to sit around what was expected.
Non-tax receipts, which came from the sale of goods and services and interest on investments, stood at just over $30 million for the year.

Again, utter tosh.

There are no “government coffers” – the federal government does not run a bank account in a conventional sense, any more than Qantas have stocks of Frequent Flyers for a rainy day. The government does not recycle dollars – there’s no warehouse of them that must be stocked up before they can be issued on pension day. Every dollar the federal government spends is a new dollar that exists because it was spent by the federal government. So what stops all this money issuance causing inflation?

That’s where taxation comes in. It’s not the source of government funds, but the release valve that counteracts inflationary pressure. It’s the drain at the bottom that stops the flow from the tap at the top from overflowing the bath.

I have no idea what Mr Fernyhough thinks an “outperforming taxpayer” is. It’s not a term I’ve heard before, and I am hoping I don’t hear it again.

Where the money went

Over the 2016-17 year, the government spent a total of $438.9 billion, which was $1.3 billion less than it expected.

The savings came from slow take-up of the National Disability Insurance Scheme, lower-than-expected payments to states for infrastructure projects, and lower-than-expected spending on wage subsidies, among others.

These are not savings. There is no bank account to store such savings in. A more accurate way of stating this sentence would be:

the government reduced the size of the economy by $1.3 billion by withholding money from the disabled that they could have otherwise re-spent in the economy, by failing to invest in infrastructure projects and the employment that they would create, and by deliberately suppressing the spending capacity of wage-earners.

The article finishes with some quotes from Morrison about how he’s “keeping expenditure under control”. Nothing new there, our Treasurer has absolutely no idea what he’s doing. But Jim Chalmers (ALP) manages to keep the idiocy bipartisan, by blathering about “budget repair” and the size of the deficit.

The size of the deficit is not important. It is what it is. What matters is the level of unemployment and the level of inflation. To extend the earlier metaphor: do you care how many Frequent Flyer points Qantas have issued? Of course not. What matters is that there are not so many of them that Qantas could not provide the services to which holders of them are entitled when they want to claim them. That’s the employment/production equivalent in this metaphor, and if it’s not there when demanded, the value of those Frequent Flyers declines. You would need more of them to obtain the same service than you used to. That is the literal definition of inflation. It’s not the number of dollars in the economy that matters, but their stable purchasing power.

If the government allocated their resources and efforts in getting both unemployment and inflation below 2%, the economy would be in rude health. Focussing on the fiscal deficit or surplus is like a footy coach obsessing about the number of inside-50s their team takes, and not the scoreboard. It’s losing sight of the main game.

UBI gets the city press, but the bush wants a JG scheme

UBI continues to capture the imagination of people searching for ways that the status quo could be improved. As I’ve argued before, UBI is superficially a good idea, but ultimately will fail to produce the outcome its proponents suggest.

A perfect example is Tim Dunlop’s ‘Something big has to change’: could Australia afford a universal basic income? that appeared in yesterday’s Guardian. In arguing the pros and cons, he hits the problem on the head:

Although at first blush, UBI sounds like some idealistic, leftwing idea, the reality is it has long had support in rightwing politics and economics. Richard Nixon nearly introduced a type of basic income when he was the US president, while Milton Friedman – one of the most influential champions of “free” markets and small government – promoted a basic income scheme known as a negative income tax. Even today, right-of-centre organisations such as the Adam Smith Institute argue for the introduction of such a scheme.

This rightwing pedigree makes many on the left suspicious of UBI, and former union head Tim Lyons speaks for many when he says he is “deeply unconvinced by the push for a universal basic income”.

What the left fear, not without some justification, is that instead of UBI being used as a supplement to other forms of service provision, it would be used to replace them. Citizens would then be forced to use their UBI to buy health, education and pension services from private providers. This sort of rightwing UBI would simply be a transfer of public wealth to private businesses, a further marketisation of democratic society.

Of course, a UBI needn’t work that way, but such concerns mean the design and implementation of a scheme – the politics – are as important as the economics.

It needn’t work that way, but you know that’s what will happen. The demonisation of the unemployed as the architects of their own penury, refusing to work and just bludging off the taxpayer are neoliberal mythology that has become very hard to shake.

The problem with the UBI is that it does not directly solve the problem of unemployment. Yes, additional spending power at the lowest echelons will lead to increased sales and therefore might result in more workers being hired. But it can just as easily lead to price increases for the more inelastic products and services, as demand increases but supply cannot meet it. A good example of this is dental services, something that the poor are known to skimp on due to cost. There aren’t too many unemployed dentists that can be brought into “production” to meet an increased demand for their services if there is suddenly more disposable income that could buy it. The natural outcome will be a rise in price for dentistry.

And it strikes me as fanciful that giving everyone a living wage is going to somehow lead to some nirvana where we all just do charitable works and produce creative output, as people allegedly have their basic needs met by the UBI and can spend their time doing other worthwhile things. This argument is often linked to the rise of the machines – that robots are going to do all the work anyway, and there won’t be any need for jobs.

Well, for a very narrow definition of the word ‘job’, maybe. Automation has been happening since the industrial revolution, and there are always new jobs to replace old ones. I’m not sure why we simultaneously panic about automation and the ageing population issue: the idea that there won’t be enough workers to support the retired. Surely one offsets the other to some extent?

The Job Guarantee Concept.

If you’re going for radical change, a Job Guarantee scheme is a far better solution than UBI. Most advocates of a JG recommend that it be federally funded and locally administered. So that the local community can make the determinations on what services they require.

Put it this way. If you said to your local council: “here’s a standing army of people that the federal government will pay the wages for as long as you can put them to doing meaningful work, what services could they perform to improve your area?” Look around – what could be done to improve the amenities, functions and services in your area if there were people available to do them? Pretty much anything that would be considered socially “good” but won’t ever be done by the private sector because there’s not a quid in it would be a candidate for JG programme.

A JG scheme sets a minimum price for labour, and effectively buys all excess labour off the bottom. It is not competing with the private sector for labour, it is just mopping up the excess labour that the private sector cannot employ. As a result it’s not inherently inflationary (beyond some adjustment to its initial implementation – the likes of 7-11 might get a rude shock when no-one is prepared to work for less than the minimum wage offered by the JG scheme). Like the Wool Board, it buys excess when it exists so it can be released when demand returns, to smooth out the effects of the business cycle.

And of course there’s no coercion here. If you really are a bludger, you’re likely to stay in your current circumstances. On the other hand, if you don’t have a job but you do want to work, JG employment will be given to you. In the best possible scheme, a job that makes use of your existing skills, or trains you in new skills. Ultimately it keeps you job-ready, and employable, for when a better paid private sector opportunity comes along.

None of this is my idea, far brighter minds than I have been developing the JG scheme for years. The Centre of Full Employment and Equity and the work of Dr Bill Mitchell is largely the home of this concept, and there’s no shortage of research material available. Including costing, which shows such a scheme could be implemented for less than what a UBI would cost.

But it was very interesting to hear ABC PM yesterday, and in particular the segment Aboriginal groups call for alternative employment model. Unfortunately the ABC has cut their transcription of news stories, so the piece is only available as audio. (Another example of a socially good job that someone could be doing!) There is also a related article here.

The crux of the story is that rather than penalising or “breaching” the unemployed in aboriginal communities who are expected to travel vast distances to work for the dole, the local community has no end of useful things those people could be doing in their own area, and are calling on the federal government to allow them to find work for their unemployed community members. Breaching them (denying them welfare) is leading to greater hardship, and increased property crime. What this community is asking for is the Job Guarantee Programme!

Hypothecation, Jam Jars and Locked Boxes

In his speech on Thursday, the irrepressibly ignorant Scott Morrison made some very dubious claims about the Medicare levy. As Gabrielle Chan reported in the Guardian’s Politics Live thread:

In arguing the case for the Medicare levy rise, Scott Morrison has said in future, the government wants to lower taxes – apart from increasing tax for the NDIS.

Asked if 100% of the levy rise would go toward the NDIS, Morrison says:

“100%, all of it.”

The treasurer makes this point and while I usually speak Morrison, I am having trouble with this one. I think his main message it that the levy will be put in a separate bucket, otherwise known hypothecation.

“In the future, governments like our government would want to reduce taxes … if it was a Bill Shorten government he would want to increase taxes. In either case, the way this is designed is that the levy at 1% out of the total 2.5%, that would be secure so governments could on transfer payments, welfare payments, make whatever changes a government may wish to make but the funding flow from the Medicare levy would be secure.”

Gabrielle Chan goes on to comment later in the thread:

I want to go back to hypothecation (because it’s such a alluring term) and the idea that the Medicare levy increase for the NDIS goes into a locked box.

Fairfax’s Peter Martin addressed this issue back in February.

“In reality there are no locked boxes. Clause 81 of the constitution says “all revenues or moneys raised or received by the executive government of the commonwealth shall form one consolidated revenue fund, to be appropriated for the purposes of the commonwealth in the manner and subject to the charges and liabilities imposed by this constitution”.

There are no separate jam jars.

But it hasn’t stopped the governments of all persuasion from acting as if there are. The best-known is the Medicare levy, which we are told funds Medicare and the National Disability Insurance Scheme, but which in reality goes straight into consolidated revenue (and couldn’t anywhere near fully fund them in any event).”

Sorry, Gabrielle, but Peter Martin led you up the garden path as well. There’s not only no jam-jars or locked boxes, but no consolidated revenue either. Money that returns to the government through taxes does not get recycled. There’s no warehouse that your tax dollars end up in, waiting to get re-spent. Tax dollars cease to exist, and every dollar the government spends is a brand new dollar, brought into existence by the act of issuing it.

Taxes don’t pay for anything. What they do is drain money away, thus making room for further non-inflationary government spending.

The government does not need this tax to fund NDIS, or anything else they do. Not only is hypothecation an utter crock, all discussion of “but how are you going to pay for it?” totally misrepresents how a sovereign currency functions.

The government’s role is to ensure that the real resources (human and physical) available are put to work in the most optimal manner possible, for the betterment of the country now and into the future. And the issuance and reclaiming of dollars is a tool at their disposal to orchestrate that.

At the moment we have willing human labour going underutilised, the limited resources being consumed as if there’s no tomorrow, just so the government can feel good about the number of dollars (the one thing they have in limitless quantity) they’re issuing, as if that means anything real.

Winter is Here!

The Echuca Moama Winterblues Festival, that is. And what an awesome holiday Ryan and I had. Ten days in all, via Melbourne and Geelong first, and then back up to Echuca so he could participate in the Blues Boot Camp, which was followed by the festival, the 18th running of this terrific event. I was alerted to its existence by wonderful friends who have recently moved to the town, who will welcome you at the National Holden Motor Museum if you’re in Echuca, which I highly recommend.

Following the concert that marked the end of the Boot Camp and the start of the festival proper, Ryan was invited to play with professional musician Wayne Jury at his gigs on Saturday and Sunday. Mind you, there were no rehearsals, the plan was simply “we’ll play some standard twelve bar stuff”, but to watch these performances, you’d never know.

We had such a fantastic time in Echuca, we can’t wait to return next year.

There are six videos in all, and I highly recommend them all. Proud Dad, y’know.

Tony Abbott and his latest Manifesto

Ah, Tony Abbott. “No sniping, no wrecking, no undermining.” Well that’s proven to be about as believable as the “No cuts to education, no cuts to the ABC…” One thing about old Tony, he’s consistent.

And how about this new 6 point plan? They always go so well, just ask Jaymes Diaz. I will now – largely for my own bemusement, I suspect – explore this manifesto. Here’s what it says:

Fix the Parliament.

Hang on, didn’t we just do that? Wasn’t it the Liberal’s great masterstroke to change the rules about how we get to vote for Senators, just before the last election? How’s that working out? And if Tony’s planning on trimming the Senate’s constitutional powers, well, good luck with that. I assume he knows that will require a referendum…

Live within our means.

Here we find the Standard Neoliberal Groupthink. Government debt is not like private debt, unless the government has debts denominated in someone else’s currency (and they don’t). They – and they alone – issue our currency. It is literally the one thing they have in endless supply, and spending it no more puts our grandchildren into debt than Menzies’ string of unbroken deficit budgets indebted you or I.

The government’s “means” are the physical and human resources available in the economy that can be put to work. Not the small pieces of paper.

Take the pressure off power prices.

Apparently Tony thinks we must end subsidies of green energy, but it is perfectly OK to subsidise Adani, Rhinehart and the various other usurers that dig up and sell fossil fuels. Here’s the thing: the reason coal fired electricity is cheap is because the pollution costs of it are not borne by the producers. In economic terms, these costs are “externalised”. What that actually means is that we are putting the costs of that power “on the national credit card”. The cost of fixing the climate, or the effects of its changes – they’re the debt we’re leaving to our grandchildren.

Make housing more affordable.

It’s those immigrants, apparently. Not the toxic combination of capital gains tax discount and negative gearing that have caused the dramatic spike in house prices. Never mind the fact that we’ve always had immigration, but real estate has only skyrocketed since ’99, when Costello tweaked the CGT and NG rules. No, clearly it’s all down to the brown people who somehow manage to simultaneously take our jobs, buy our real estate and bludge on our welfare. And clog up the M4, according to former Liberal MP Fiona Scott. Remember her? Tony thought she was a bit of all right.

Make Australia safe.

You are more likely to die in Australia from a collapsing chair than you are from terrorism. Having Police shooting people in the street, or soldiers patrolling the city do not strike me as measures that will make me feel safe. I’m perfectly happy to go about my normal life, confident that the cops know what they’re doing, that they have eyes and ears on any trouble-makers, and that we can only be terrorised if we allow ourselves to be. And I say that as someone who knew Curtis Cheng personally, and considered him a friend. He was horribly unlucky to cross paths with that radicalised kid, and his death was a shocking, senseless act. But if you want to defuse home-grown terrorism, you need to get to the root causes, not sow division and increase the us vs them mentality.

Celebrate Australia – don’t run it down.

Tony wants to “End funding for bully bureaucracies”. I assume he’s talking about Centrelink, and their “robodebt” debacle, sending the debt collectors around to people to collect debts they don’t owe? And by “straight talking”, is he referring to Brandis’ line that “people do have the right to be bigots”?

So here’s some straight talking. This manifesto is some of the most transparently racist, bigoted and economically illiterate garbage to ever be promulgated by a so-called “senior politician”. If you really want to “Make Australia Work Again”, what you need to do is implement policies that provide the means for people to work. If you’re not doing that, you’re full of shit. As if that wasn’t patently obvious from recycling a Trump slogan, of all things.

GST on imports: plumbing new depths in stupidity

I thought the Backpacker Tax was the high watermark of brain-dead macroeconomics, but it turns out this government is capable of anything, and not in a good way. So just how stupid is this proposal to apply GST to privately imported goods purchased through international sellers? Let me count the ways:

  1. So much argy-bargy, so little money. This is something that the GST on Imports shares with the Backpacker Tax. It raises such a pathetic amount of money it is simply not worth bothering with. This policy is expected to raise $300M over 4 years. That’s $75M per year. To put that in perspective, the federal government expects to collect $63B (that’s Billion) in GST in FY2017/18. So this sop to the Gerry Harveys of the world is worth just 0.1% of GST. And that’s before we even discuss the cost of implementation.
  2. So little jurisdiction. The federal government does not have the power to levy taxes in foreign countries. It is completely unclear how they think they can impose this tax on companies that have no presence in Australia. I can easily imagine a scenario where unscrupulous sellers collect the GST when selling to Australian customers, and quietly trouser it. What’s to stop them?
  3. So little business acumen. How much is it going to cost to collect this tax? Currently any import of less than $1000 in value is not subject to GST, because it is not worth the while of Customs, the Post Office, the Tax Office or any other agency to recoup the money. Now it’s feasible that the cost of recoup has gone down since that decision in 1999/2000 (when the GST was first implemented). Perhaps the threshold should be reevaluated, but removing it completely? How can it possibly be cost-effective to recoup GST on a $4 parcel from Hong Kong?
  4. So little business understanding. This GST collection is supposedly going to be imposed on Ebay. That shows that the government have no concept of how Ebay works. You don’t actually buy anything from Ebay. Ebay is a marketplace that brings buyers and sellers together. When you buy something on Ebay, you pay the seller directly. The seller is charged by Ebay for their use of Ebay’s service. To suggest that Ebay are liable for the GST is like saying Westfield should pay the GST on behalf of their tenants.
  5. So little so late. This policy is well past its use-by date. Joe Hockey first proposed it. Back when he was Treasurer, the $A was buying $US1.10, and that made foreign goods pretty attractive. Now, the dollar hovers around $US0.73, which has put the handbrake on private imports in a big way. Even if this policy was a good idea when it was first broached (and it wasn’t), you would still have to ask the question whether there’s any continuing need for it.
  6. So little fiscal necessity. There’s not room in this post for the full MMT discussion, but taxes don’t fund spending. The government does not need this money, regardless of whether it’s the pitiful amount under discussion or some massive chunk of cash. This policy simply trims the public’s purchasing power by 10% when privately importing goods and services. It in no way changes the government’s ability to fund services or people.
  7. So little consistency. This government have made a great virtue of their “repeal of red tape”. It would seem that small government, light-touch “invisible hand” leave-it-to-the-market philosophy doesn’t apply when we’re talking about big donors like Gerry Harvey.

That’s seven reasons why GST on imports is bad policy off the top of my head. No doubt there are more. I can’t see any angle from which it makes the slightest economic sense to implement this policy, unless you’re Gerry Harvey.