Right Pulse

From Treasury to a Senate Committee:

The Federal Treasury says wages growth will be up to 2 per cent slower under an emissions trading scheme…”Just looking at mitigation costs alone, the introduction of an emissions price in Australia will ultimately reduce Australia’s GDP slightly and would reduce real wages as a consequence,” she said.

The whole ETS scheme makes a mockery of Rudd’s election claim to protecting “working families.” Add to this the tens of thousands of jobs that will be lost in the mining sector, the collapse of regional communities, the transfer of billions in private wealth to the government for re-distribution and a rising cost of living. All in the name of promoting ‘green’ industries via a carbon tax that will promote severe market inefficiencies. Billions to be spent, thousands to be sacked and millions to suffer with a declining standard of living, in the name of what? At no point has a politician come out and said by how much the ETS will reduce Australia’s average temperature or increase rainfall. They have not reached that level of audacity, yet…

The Governor-General still can’t help herself from entering into politics by pushing her left-wing agenda:

The first woman governor-general was also honouring the daughter of a man taken from his South Sea island home to work as a slave in the Queensland canefields.

So this is how it works: create a victim myth, turn a person or people into a victim(s), publicly lament the victim myth in public education and through a sympathetic media, and then honour the ‘victims’ through speeches, apologies, honours, special rights and most importantly tax-payer money. Once the ‘victim(s)’ are locked into and then are addicted to tax-payer funded government benefits and programmes, you as a politician have got them and their children for life. From the Australian, back in 2004.

…Mr Windschuttle claims the trade in slaves was exaggerated.

“There were a small number of cases around 1860, but it ceased soon after,” he said.

“The government didn’t want any suggestion there was a slave trade in Australia and launched several royal commissions into it.

“In the history of the labour movement, it had to be the most bureaucratic labour trade in the history of the world.”

Running off to give China a special briefing about our military acquisition programme smacks of weakness. It’s not like China gives Australia special briefings on their buying intentions before they are officially announced:

The Opposition’s defence spokesman David Johnston says it is curious the Chinese government has been consulted before the Australian people.

“Our neighbours and our trading partners are getting a full and frank briefing from the likes of Mr Pezzullo who is a very senior defence official and I find it quite curious that the opposition can’t get a briefing,” Mr Johnston said.

UPDATE I

This is rich coming from a country that has a Navy with over 1000 ships, including 3 nuclear submarines:

“For us, this is confusing,” a Chinese diplomatic source told the Herald.

“Kevin Rudd was supposed to be the Chinese-speaking prime minister who would provide a bridge between the China and the US. But now it looks like he wants to act on behalf of America against China. This is going to be hard to explain to the Chinese people.”

Building our own Defence force serves Australia’s interests first and foremost. Hopefully the penny may finally drop with Rudd about China.

Costello makes an interesting point about the propensity of government to regulate and force retailers to detail their ‘buy now pay later’ sales strategies. Where as Rudd is unwilling to detail the total commitment of his ‘buy now pay later’ debt strategy:

I would recommend that families enjoy the Government’s “buy now, pay later” policy because a bill is coming. And it will be a big one. We don’t yet know how many years, or decades, of interest payments are in front of us.

Retailers would not get away with the kind of sales technique the Government has engaged in. Retailers have to detail the number of repayments, the interest rate and the all-up cost before the sale. You get to choose whether to take the package. What’s more, if a retailer gives misleading information the interest payments will be suspended. Try getting that from the Federal Government.

A back of the envelope calculation reveals what a bad deal Rudd is signing everyone up for:

During the next two years the Government will increase net debt from zero (the position it inherited in 2007) to about $200 billion. In round figures that’s about $10,000 for each of our citizens and $40,000 for our family of four. At today’s low interest rates that’s a bill of about $2000 for our typical family.

A family that has done well out of the Labor Government’s new spending will receive $2900. But its share of the Government’s future interest bill will be $2000 a year. The critical question is how many years of interest payments are we in for?

Uncommon knowledge from John Howard, being interviewed by the Hoover Institute via NRO. The interview tacitly re-affirms that Howard is the most well known and popular Australian leader in the USA ever.

It may not all be bad news for Holden:

The Pontiac brand will be phased out by the end of 2010.

So the brand not the vehicles. Holden may just end up selling future vehicles through GM’s other remaining brands. I still believe Holden would be better off outside GM as a niche mid-priced rear-wheeled drive car maker for Asia and Europe. They can easily out compete anything that GM can offer up. From Auto Week:

And finally, the G8. This one befuddles me the most. Everyone here who has driven it raves about it, myself included. It is a car that competes well with the likes of the BMW 5-series and the Audi A6. But in terms of sales, it simply did not compete. The 5-series, for example, outsold it by some 3,000 units in the first three months of the year alone. I don’t get it.

I can’t find one bad review from the USA about the G8 (GT, GXP). Today from the NYT:

For the GXP is a terrific car; I’d rate it at or near the top of the list of 20-odd new vehicles that I’ve tested this year, and the less rascally G8 GT is high on the list as well. As Eddie Alterman wrote in his perceptive review of the G8sin The Times last December (before he moved on to become editor in chief of Car and Driver), these impressive new Pontiacs arrived at Detroit’s party as the floors were being swept and the last drunks were staggering out. “It’s too much, too late,” he wrote

…one of the best sedans Detroit has ever offered…credible auto writers have compared it favorably with the BMW M5, which costs about twice as much…If Pontiac had offered cars this good 10 years ago, it wouldn’t be flat-lining now in the critical care unit…

But the G8 damns G.M.’s management on another level, for this excellent yet very American-feeling sedan actually started out half a world away. It is heavily based on the Holden Commodore, a product of G.M.’s Australian subsidiary…

The G8/Commodore was also probably damaged by the Pontiac brand and the downturn in the economy. Although G8 sales have never been better. Despite that, I’ve reached the conclusion that people are destined to drive poor cars. Just look at the Camry. In terms of power, performance and handling it’s a dogs breakfast. But it gets to A to B in predictable boredom. I suppose that’s what people want.

UPDATE I

Go Auto has speculated that the Holden Commodore will be re-badged as a Chevrolet in the USA, in-line with a proposal to sell the Commodore to North American police agencies. Given the incredible reviews that the G8 has received, by virtually every car critic in the USA, it would only be political and Big Green interference that would stop the Commodore’s re-emergence in GM’s heart land.

Rudd government: funding for cancer drugs, no. Cash bonus for gambling, yes.

That’s not my opinion, but the opinion of aboriginal activist Lowitja O’Donoghue in the context of the setting up of a replacement ATSIC body:

Ms O’Donoghue said she did not support a directly elected body because Aboriginal people would always want to support their own people. “My view is that we are not a democratic people…”

So I never want to hear again from an aboriginal activist about how they were denied general voting rights by the Federal government (some exceptions were made for military service and previous state voting rights) upon Australia’s Federation.

This whole new body just smacks of entitlement and victimology, with its aim of taking the rights and money off other people. It is also typical of the left, who give token support to democracy and individual rights and liberty. While being funded by tax-payers, the new body also wants:

…a future fund financed via a percentage of mining tax receipts. They also want the body to gain charitable status to receive tax-free donations. The national representative body would play over the next 20 years a leading role in achieving constitutional recognition and a treaty.

In otherwords a seperate government from the Commonwealth, which will be undemocratic, paid for of course by the 56 per cent of families living in the Commonwealth that actually pay tax. Sounds like a great deal for aboriginal self-styled elites.

From the Inside Line:

According to a source at General Motors, the company will announce next Monday its new “faster, deeper” reorganization plan, which will likely include a death sentence for the Pontiac brand…Just as the G8 reawakened our interest in 83-year-old Pontiac, the brand falls victim to bad times and old mistakes

A shame, but Pontiac has become synominus with poor looking and driving vehicles, until the modern GTO and to a greater extent the G8.

Well, apparently he hasn’t learned from the past. In another TV advertisement during the 2007 election Rudd committed to maintaining a surplus over the full budget cycle, i.e. until the next election. While Rudd and Swan both committed to not raising taxes.

By contrast, in the space of 7 months Rudd has announced – in the name of stimulating the economy – around $133 billion (including $43 billion for a broadband network) in un-budgeted policy measures, $1.5 trillion in new contingent liabilities (larger than GDP), a likely upcoming budget deficit upwards of $50 billion and $120 billion over the forward estimates, with the prospect of tax hikes to help pay for it all. This will also put pressure on Rudd’s $200 billion public debt limit, which he raised from $75 billion and with the possibility of it rising again to $300 billion:

UBS interest rate strategist Matthew Johnson said the borrowing requirement was now set to hit $300 billion…Mr Johnson said that while the Treasury has recently managed to issue at a rate of $1.4 billion a week, to sustain this rate over the next two years would probably require higher interest rates.

By the end of Rudd’s first term, the fiscal situation of the Federal government will make a mockery of Rudd’s election claims to being an economic conservative.

The government claims that these new policy measures are needed to boost the economy during a downturn. Yet as I have previously mentioned, by Treasury’s own figures the bulk of the money will not hit the national accounts until just before or well after the next election. Meaning the recession will be over by then. A case of too much too late. Furthermore, according to Treasury the multiplier effect from the $42 billion stimulus package is only around 0.7, meaning for every $1 spent by the government we only get .70 cents back in the economy. We lose .30 cents. So the spend is poor value for money.

Furthermore, in order to to pay for these new spending proposals, Rudd has needed capital, lots of capital. When Rudd began to announce this strategy back in October 2008 the stock market went south. I speculate this mini-crash was due to money funds positioning themselves to take advantage of future Commonwealth bond issues. A classic case of government crowding out private sector investment, magnifying the current shortage of capital within private markets. What bonds local capital are unable to buy will be going to overseas buyers, around half of the issuance. Now one does not need to be a great economic mind to realise the negative effects all of has had and will have on the economy.

Rudd spends billions to stimulate the economy, funded by capital from private markets. Capital that can longer be used to invest in the productive capacity of the economy and new entrepreneurial ventures. What’s left over is funded from overseas. This will mean billions of tax-payer dollars will be leaving the country that could have otherwise been used, to once again, invest in the productive capacity of the economy, etc… This is not a zero sum gain, but a negative return for the economy and it is certainly not the response a fiscal conservative would take in the face of an economic downturn. As Alex Robson at the WSJ has written:

A better stimulus plan would include spending cuts and tax cuts to stimulate investment and entrepreneurship; a timeline to remove banking guarantees to reduce contingent liabilities; and an outline of plans for further liberalization in sectors where the government intervenes most heavily, such as education, health and welfare spending. Such a plan would restore confidence by showing a commitment to fiscal discipline in Canberra, and position Australia to bounce back more quickly than it otherwise would as global conditions improve.

The NZ PM John Key announced an economic conservative approach to the economic downturn around the same time Rudd announced his approach. And look what happened to the stock market. The NZ50 began to outperformed the ASX200 for the first extended period of time on record.

UPDATE I

IMF chief economist Olivier Blanchard had this to say when asked on the 7:30 Report about Rudd’s cash give away:

…if we put money randomly in people’s pockets, they’re going to save most of it, and they may feel good about it, but in terms of what this does to the economy, it’s not very good. At this stage what we need is basically an increase in demand. So you basically want to put the money where it’s going to be spent. So, basically, this is one of the reasons we’re focusing on spending measures rather than tax measures, because spending at least in the first round gets you $1 for $1, and then maybe more after that.

So he is opposed to cash hand-outs but not increased spending on projects, etc… This last point contradicts Treasury advice on the matter. At no point has Treasury indicated that any of the spending measures would exceed a multiplier of 1. Back in February Dr Gruen from Treasury, while being vague, said before the Senate Standing Committee on Finance:

…the fiscal multiplier is somewhere between a half and one…

While Professor Davidson from RMIT at the same Senate Committee said the following:

Overall, all the economic analysis does seem to suggest that tax multipliers are far greater than spending multipliers and that tax cuts are going to have a far greater ‘bang for buck’ in the economy than is the spending proposed in the stimulus package.

So fiscal conservatives say tax-cuts, Rudd the socialist says more government.