Right Pulse

Rip rip rip away I say:

EDUCATION Minister John Della Bosca and Planning Minister Frank Sartor are being targeted for removal by ALP powerbrokers in a campaign that could rip the Iemma administration apart.

At the heart of the ructions are Treasurer Michael Costa, Ports Minister Joe Tripodi and powerful backbencher Eddie Obeid, who are being blamed for a smear campaign against Mr Della Bosca over his role in the power privatisation debate.

The Premier’s chief of staff, Josh Murray, was caught up in the tensions when he was fingered by senior ALP staffers as the author of an embarrassing mock video clip featuring Mr Della Bosca as Hitler, which appeared on YouTube last week. He denied any involvement.

The video is below.

Continuing:

Yesterday a rival video using the same footage, but this time portraying Hitler as Mr Iemma railing against Mr Costa and referring to Mr Murray, was also posted on YouTube.

The tit-for-tat video battle comes as Labor MPs plan a revolt on the floor of parliament over the privatisation legislation.

The counter video is linked here. Warning, there is a bit a foul language in the video, after all it is the ALP. Back to the story. Apparently there are multiple ALP MPs threatening to cross the floor and vote with independents opposed to the privatisation. I suppose they know they can’t block privatisation of the electricity network, due to conservative support, so the ALP left are looking for a scalp from the front bench – a bit of political bullying to keep any other dissidents in check.

If the conservative opposition wanted to be completely opportunistic, they could continue to give in principle support to privatisation but vote against it in Parliament due to a lack of community support, or something to that effect. Anything to get the independents and the ALP left to vote for a motion of no confidence against Iemma and hopefully spark an early election. With the opposition ahead in the polls, that would give them the best chance of getting back into power sooner rather than later.

There is a distinct possibility the gov’t may have over estimated the budget surplus by $3bn, by accounting for the indirect effects that might arrive in additional tax revenue from an increase in immigration:

The Federal Opposition has questioned why the Government is expecting almost $3 billion in revenue from a boost to immigration announced in this year’s Budget.

Opposition Leader in the Senate Nick Minchin has used a Senate Estimates hearing to question public servants about the impact of the immigration increase.

He says he is staggered the Government has listed the expected revenue in the forward estimates.

“All central agencies have always taken the view that particularly with respect to expenditure decisions, that it is highly dangerous to start counting secondary or indirect revenue consequences of expenditure decisions,” Senator Minchin said.

If this turns out to be the case, there may be other areas affected by the same error. It would be the biggest budget stuff up in history and would force the gov’t to issue a mini-budget to correct the error. Maximus Embarrasmus.

Former Reserve Bank governor Bernie Fraser has come out against further interest rate rises, citing exogenous shocks as the main source of inflation instead of the demand driven thesis normally given by the main stream media (msm):

The target band may need to be reviewed if the climb in food and fuel costs reflected structural changes in the global economy rather than the regular ebb and flow of prices.

“We’re not there yet but the question is going to arise, are some of these increases not seasonal, not episodic, but structural and secular?” Mr Fraser has told The Australian Financial Review.

“If we’re going to be faced with secular oil prices, that’s going to directly and indirectly push up inflation.

“But it would be wrong, in my view, for the Reserve Bank to respond to that sort of increase in inflation by pushing up interest rates.”

In other words, supply side shocks are affecting inflation and these factors are not best addressed by monetary policy, although as I have written before, the current money supply policy is making inflation worse. By contrast, demand in the economy has slackened off considerably:

Consumer confidence is close to a 15-year low and growth in retail spending ground to a halt in the first three months of the year…Business, too, is hurting from rising borrowing and fuel costs, forcing them to cut back on their hiring intentions and rein back on upgrading their facilities and infrastructure investment as sentiment dropped to the lowest level since 2001.

So if the current rate of inflation is not driven by demand, what is one to make of the msm coverage given to a tax cut – inflation link? Basically that the view is shallow, fed by the hard left in the media that are opposed to any reduction in Government revenue for fear of Government becoming irrelevant and in some way hurting the club for victim hood. The CIS has a less cynical take on the issue than my view:

Reductions in taxes can be useful in inducing increased labour supply. But the benefits of tax cuts extend well beyond their positive implications for labour supply, to issues relating to the distortions, compliance and collections costs that flow from the operation of the tax system.

Tax cuts have the capacity to increase supply more broadly, not just in the labour market, easing capacity constraints and reducing inflation pressures.

The appropriate focus for fiscal policy is precisely these microeconomic and supply-side issues, not demand management.

I also have another proposition. Tax cuts provided in the past were merely keeping up with inflation by reducing the rate of the ‘inflation tax’ or bracket creep. In order to help remediate the current rate of inflation, caused by supply-side constraints, larger tax cuts are need above and beyond the inflation tax. This will stimulate the supply side signals needed for the market to reduce the current rate of inflation through investment in productive capacity, continued expansion of the labour market and encouraging savings.

Andrew Bolt has a good summation of the latest FuelWatch goings on. I’d only add that the data provider for the ACCC study has come out against the policy:

Informed Sources managing director Alan Cadd said its figures actually found fuel prices were consistently higher in Perth compared with eastern states until the introduction of supermarket fuel outlets in 2003-04.

“It was increased competition that saw the prices drop, not FuelWatch,” Mr Cadd said.

And there has been an initial watering down of the policy:

Australia’s consumer watchdog the ACCC has come out strongly in favour of FuelWatch, but has warned it might lead to higher prices in bush areas with limited competition among petrol stations.

So its competition that drives prices down not government regulation of prices. So what’s the point of FuelWatch?

Documents leaked to the media indicate that four government departments, including Finance and Prime Minister and Cabinet (PMC), believe the ALP’s policy to implement a socialist style fuel price fixing system, FuelWatch, is a dud idea:

The Cabinet document, leaked to the Nine Network, contained a caution from Prime Minister Kevin Rudd’s own department that FuelWatch could lead to “a small overall price increase” in the pump price.

The finance department, the industry department and the department of resources and energy also argued against the scheme, under which service stations will be required to fix their prices each day.

PMC also reference Treasury estimates that further indicate the problems with the FuelWatch policy:

“The proposed scheme will also result in an increase in the compliance burden in the economy, with Treasury estimates indicating that the proposed scheme will result in ongoing increased operating costs of around $4000 per annum to affected small businesses.”

So that’s now the Government’s three senior departments, PMC, Finance and Treasury saying FuelWatch is a bad idea. And what about the ACCC and there supposed support for the scheme? PMC say:

“Econometric modeling undertaken by the Australian Competition and Consumer Commission (ACCC) is somewhat inconclusive with respect to the overall pump price, but indicates that a small overall price increase cannot be ruled out.

Well if FuelWatch was such a good idea then the proof would be clear, but it isn’t. All of the departments in question recommend against the scheme, especially the idea of forcing retailers to lock down prices for 24 hours. Government forms of price control don’t work and never have – they merely constrain supply which increases prices and shortages for everyone. As Turnbull said in the HOR:

You have to go back to the Soviet Union, you have to go back to Gosplan and Brezhnev’s era, to think of governments which would actually want to set prices and say that price movements are wrong. What have these guys learned? Nothing.

Rudd ignored FuelWatch warnings

Recently from the ABC by Aboriginal activist Lowitja O’Donoghue:

Every now and then I will be bursting into song, and that is really to bring to the attention of the heads of churches and that community that I am from a Stolen Generation, and bringing back some of the memories of what happened in the children’s homes and we were of course, removed from our land, our family, our mothers and our culture and our language.

So O’Donoghue is a member of ‘the’ or ‘a’ stolen generation? I’m not sure how significant that distinction is. This may provide insight, reported by Andrew Bolt of the Herald Sun:

Stolen Generations Alliance co-patron Lowitja O’Donoghue in 2001 admitted to me she wasn’t actually “stolen”, after all, but was given away by her father:

“(My father) didn’t want to be straddled with five kids,” the former Australian of the Year said, sobbing. “I haven’t forgiven him…

“I don’t like the word ‘stolen’ and it’s perhaps true that I’ve used the word loosely at times… I would see myself as a removed child, and not necessarily stolen.”

Asked whether it would be better to state clearly that she wasn’t a member of the stolen generation, Dr O’Donoghue said: “I am prepared to make that concession.”

So who is stealing the truth now? I see this a concession. Saying as O’Donoghue does that she is a member of a stolen generation indicates the weak factual foundation of ‘the stolen generation’ claims, the apology and therefore reconciliation generally. Who is a member of ‘the stolen generation’? Why not have a judicial inquiry to identify and verify members of this supposed generation? It is a reasonable proposal which would help to get to the truth of the matter – but some how I don’t think O’Donoghue and her fellow actors for victim hood would be willing to front up to such an inquiry.

Last night in the House of Reps Appropriation Bill (No.1) was debated. I know know you’re all thinking excitement plus how did I miss such an occasion. Well I’ll give you what the main stream media won’t. The opposition assistant Treasurer Dutton noted the following regarding the ALP’s infrastructure fund which was part of the recent Budget:

Labor has announced that it will place $41 billion into these slush funds and then spend $41 billion of the slush funds, as well as the interest, on infrastructure projects. This was announced in the budget and there is precious little detail available on how these slush funds will be set up and how the slush will be administered….what rate of return will the government seek; will the government be seeking public-private partnerships; how will this be legislated; will the legislation…include a target rate of return for the investment? Not that that would be too important in the long term, of course, because Labor is intent on spending not just the return but also the capital….

Presumably, the people who assess the projects will then put recommendations up for cabinet consideration, where it will then go behind closed doors for no-one to see. This is where the political interference certainly will come in…and the Australian public will have no idea about the decision-making process and which projects get missed and why…Cabinet documents will not be released and the government cannot commit to not announcing projects during election campaigns. Thus I think we are seeing the birth of the biggest election war chest in Australian political history. Read the rest of this entry »

The ALP is now divided on what to do with fuel taxes. Resources/energy Minister Mr Ferguson wrote the following about the ALP’s plan for a ‘Fuel Watch’ system:

“Your assertion that Fuel Watch will be pro-competitive is unsubstantiated and ignored the very substantial evidence that it is anti-competitive,” Mr Ferguson wrote. “I remain more concerned about the substantive elements of Fuel Watch, which I believe will seriously damage the Government’s economic and regulatory reform credentials.”

And state government’s are basically telling Rudd to go take a hike if he thinks he is going to take the GST off fuel:

New South Wales Treasurer Michael Costa says it would cost his state up to $400 million and he warns there is not likely to be a deal unless his state receives the full amount.

“We’d expect that the $400 million would be compensated in full,” Mr Costa said.

As one reader commented, ’so much for the end of the blame game’. It is only beginning. I’d like nothing better than to see the ALP tear itself apart over fuel. Given that Rudd has announced he has already done all he can to reduce the cost of living – including fuel - the Government is looking for ideas from the public:

IF ANYONE out there has any ideas about how the Government could cut out waste and make savings, now is your moment.

Finance Minister Lindsay Tanner is inviting ideas from the public, saying yesterday that the Government’s “razor gang” had started looking for a second round of cuts, targeting the processes and programs of government. He said there were always pressures for new spending, and “we would welcome any suggestions or savings proposals from anybody in the general community”.

So much for Rudd having a vision.

From the IPA on fuel:

The ACCC’s new Petrol Commissioner cannot do anything to reduce the price of petrol. Creating a Petrol Commissioner is also a distraction from how government can actually reduce the price of petrol: reduce Government taxes.

Hallelujah! Some body gets it.

If the Federal Government really wants to reduce prices they can reduce fuel excise. In his budget reply speech Federal Opposition Leader, Brendan Nelson, proposed a fuel excise cut. The Government has attacked the proposal for being economically irresponsible. It is not.

Fuel excise is added onto the price of petrol before the GST. The GST is a percentage tax that is added after excise and increases as the final price. As the market price of petrol continues to rise, so does the Government’s GST take. Any cut in excise will be sufficiently compensated in the increased take from the GST.

Furthermore, a cut in the excise will not fuel inflation, for the same reason that Government’s are so addicted to fuel taxes – fuel is price inelastic. This means demand for fuel remains relatively steady compared to the movement in fuel prices. So a cut in the excise will not cause demand driven inflation but will reduce prices across a range of goods and services, which is good for inflation.

A topical issue addressed by Dinesh D’Souza:

In overturning the California voters’ ban on gay marriage, the state’s high court argued that homosexuals are a special class, somewhat similar to blacks and women, and deserve special judicial scrutiny for the protection of their rights. At the same time the court insisted that gay marriage must be allowed because gays deserve, no less than anyone else, the equal protection of the laws. Read the rest of this entry »