Monthly Archives: July 2017

Australian Politics 2017-07-31 15:38:00


Greens plan to curb property investment

There are actually some good points in the plan.  Reverting to inflation adjustment for assessing capital gains rather than giving a fixed 50% discount is much fairer though more complex to administer

The attack on negative gearing is very unrealistic, however. It would simply prevent a lot of property investment occurring so would constitute no gain to the treasury while reducing the supply of rental accommodation.  But it is mostly the poor who rent so the plan would hit the poor while trying to hit the rich.  But maybe that scenario appeals to the elitist Greens.   

The Australian Greens are preparing to unveil the most ambitious plan yet to get young people into homes, costed at an extraordinary $51 billion. The $51 billion figure is a net saving to the budget rather than a cost, calculated over 10 by the Parliamentary Budget Office.

The three-point plan, Houses for Young People: Freeing up Investment Properties, would phase out the capital gains tax discount available to property investors over five years.

During the first year, the standard 50 per cent discount on capital gains tax would shrink to 40 per cent, to 10 per cent after four years and zero after five years.

Income from capital gains would be then be taxed at almost the same rate as income from other sources, except that the inflation component would be tax exempt, as it used to be before 1999 when the Howard government replaced the exemption with a 50 per cent discount.

Reverting to the original means of compensating investors for inflation would bring in an extra $2.75 billion over four years and $16.1 billion over 10 years.

It would make property investment and speculation less attractive, winding back the competition faced by owner-occupiers at auctions.

The plan would also end negative gearing for all new property purchases. Businesses would continue to be able to negatively gear non-property investments.

Landlords would continue to able to write off property investment costs against property investment income, but not against salaries and other income.

His part of the plan would bring in $2.4 billion over four years and $34.5 billion over 10 years.

The third leg of the plan would limit existing negative gearers to one property. Only 583,000 out of Australia's 1.5 million property investors invest in two or more investment properties.

The deductions available for second or more properties would shrink by one-fifth each year until reaching zero after the fifth year.

The limit would bring in an extra $100 million in tax revenue in the first four years and $1.3 billion over 10 years.

Launching the plan on Saturday, Greens leader Richard Di Natale will say it is "time to dismantle the rigged system that privileges investors and landlords over everybody else".

"Australia is facing a housing crisis. Everyone needs a home where they can feel secure, live comfortably and be part of the community," his speaking notes say. "But this is becoming increasingly difficult for millions of average Australians."

Greens Treasury spokesman, senator Peter Whish-Wilson will say the government has "rigged the tax system to favour wealthy people".

"Negative gearing and capital gains tax discounts have driven house prices sky high, making it easier for wealthy people to buy more homes and harder for first home buyers," he will say. "At the same time, stamp duty raises the price of homes and stops people from moving house, even when they're ready to downsize."

The Greens will also push the Commonwealth government to back state governments that replace stamp duty with land tax.

The plan goes further than the one Labor took to the election that retained negative gearing for all pre-existing investors, no matter how many properties they geared.

Labor proposed halving the capital gains tax discount from 50 per cent to 25 per cent rather than abolishing it and replacing it with indexation.

In the budget Treasurer Scott Morrison wound back some of the excesses of negative gearing by withdrawing deductions for things such as the cost of travel to inspect rented-out properties.


‘This is Pink Batts on steroids’: The national harm that lying Leftist historians created

Their "stolen generation" myth means that social workers are now reluctant to take abused children away from Aboriginal families -- and the kids sometimes die as a result

FAMILY: It’s supposed to be the core of society, the thing that protects our children and keeps them safe from harm.

But what happens when the family is the one causing the harm? And what happens when the government steps in and instead of taking the children away, sends them back to the same family that abused them?

This is the national shame that dare not speak its name, because it was born of another national shame. The shadow of the Stolen Generation looms so large over our governments that authorities are now placing children at risk of abuse because they are too scared to be seen as repeating the sins of the past.

And insiders believe the problem has been turbocharged by the mass outsourcing of child protection work to outside organisations.

Now a veteran foster carer is warning that child protection services are facing a looming disaster that will be “Pink Batts on steroids” and she has decided to blow the whistle to in an effort to save children from abuse.

The outsourcing has also prompted the Labor Party to introduce new landmark legislation that would force the Auditor-General to investigate all child protection providers in Australia’s largest state.

Denise Crisp is a former president of the Foster Care Association NSW and finalist for NSW Woman of the Year but has warned that the effective “privatisation” of child protection services, combined with different rules for indigenous and non-indigenous kids, is creating a perfect storm that will put more children in harm’s way.

The first issue, she says, is authorities focusing on either keeping abused or at-risk indigenous children with their parents or, failing that, with other family members, which puts them at risk of similar environments or their parents still having access to them. Unlike for non-indigenous kids, there is a bias against putting them in permanent foster care.

“This is clearly discrimination regarding indigenous children and justified by promoting cultural or country reasons,” Denise says.

In one case, an indigenous baby we shall call “Hannah” was removed from her at-risk biological parents at birth and temporarily placed with very experienced carers who wanted to keep her in permanent care until she was 18.

Yet despite these carers being indigenous, the guidelines meant they couldn’t take her unless all family avenues had been exhausted. As a result she was instead placed with her aunt. Three months later Hannah was admitted to hospital with horrific injuries and her aunt’s partner has now been charged with her assault. She was 11 months old.

In another case, a baby we’ll call “April” was removed at birth from her biological parents, who had a long drug and criminal history, and placed with the mother’s mother. It was later discovered during a police raid that the grandmother had been simply leaving April with the very same mother she had been removed from for her safety. The baby girl was found unsupervised by her supposed legal guardian in a home surrounded by drugs, alcohol and domestic violence.

As a result authorities then removed her from her grandmother’s care and placed her with another family member: The grandmother’s sister.

In yet another case, a mother had three children (to different fathers) and Denise was contacted by a carer concerned for their safety. The youngest child was so skeletal that a doctor reportedly warned that if he wasn’t removed from the family within a week “he’ll be coming out in a body bag”. He was 18 months old.

Following a direct approach to the then-minister for community services, all three children were removed, as was another baby she gave birth to soon afterwards. The 18-month-old was returned to his father’s care and the other three were placed in kinship care with two highly respected Aboriginal women, one of whom was a cousin of the mother.

The children thrived, however after three years the Department of Family and Community Services as well as the NGO handling the case went to court to have the children sent back to their mother. And they were.

NSW is the worst state in Australia when it comes to the number of kids in out of home care, with around one in 100 kids in court-ordered statutory care. Only the Northern Territory has a higher rate, of 16 out of 1000 or 1.6 per cent.

Denise estimates that around 40 per cent of kids in out of home care are indigenous, and while the number of non-indigenous children is staying relatively stable, the number of Aboriginal kids entering care this year has “skyrocketed”.

She has welcomed reforms announced earlier this year by Premier Gladys Berejiklian and Minister Pru Goward to focus on getting abused kids into permanent “forever” homes, however the new guidelines do not apply to indigenous kids.
In NSW, there are different policies for indigenous and non indigenous kids in state care. Picture: Marianna Massey / AAP

In NSW, there are different policies for indigenous and non indigenous kids in state care. Picture: Marianna Massey / AAPSource:AAP

“These ‘steps’ are very positive steps and very welcomed but are not promoted for or supported in relation to Aboriginal/indigenous children in OOHC,” she told

“The main reason for that is based around ‘political correctness’ and the Stolen Generation.

“The sad fact is for many indigenous people, historically there is evidence of two and three generations entering the child protection system due to a long history of abuse/neglect and living in dysfunctional family units.”

However Aboriginal groups still oppose placing children under guardianships or adopting them out because of cultural reasons and because the scars of the Stolen Generation are so raw.

The peak body in the field, the Aboriginal Child, Family and Community Care State Secretariat says it is vital that Aboriginal groups deal with at risk kids because there is still so mistrust of government and non-indigenous organisations.

“We know what hasn’t worked in the past: the top-down approaches of government control, where Aboriginal people were given little say over issues affecting us,” AbSec CEO Tim Ireland told

“We know why Aboriginal people often distrust white organisations, because of a traumatic history which is still very present in the minds of our Stolen Generations.

“Of course, we wholeheartedly support every child’s fundamental right to safety. But no child should be made to choose between their safety and their culture — which is also a basic human right. We need to explore solutions like placing children in the care of Aboriginal relatives or community members, rather than completely removing them from the place and people they know, which are so integral to their identities.

“AbSec opposes guardianship orders and adoptions of Aboriginal children because as they currently stand, these approaches lack the necessary safeguards to keep kids in touch with their culture and community. So many previous generations of Aboriginal people have had to grow up without knowing their family or identity, and it’s had disastrous effects. The last thing we want is to perpetuate that cycle.”

The NSW Department of Family and Community services also stood by the policy for “cultural” reasons.

“Open adoption for Aboriginal children is not considered culturally appropriate although legislation does allow it under special circumstances, when it is in the best interests of the child and clearly preferable to any other care arrangement,” it said in a statement.

“The law seeks to protect future generations of Aboriginal and Torres Strait lslander children from the negative effects of separating children from their families, communities and culture, which were the results of past practices.”

The department also said the outsourcing of out of home care to NGOs followed a recommendation from the 2008 Wood Special Commission of inquiry into child protection.

“This recommendation was made on the basis that NGOs were best placed to deliver OOHC services as they had lower casework ratios than the government, and strong links to services and facilities in the communities in which they operate.”

However Denise believes many NGOs do not have the experience or capacity to handle these cases and may be susceptible to influence. She has likened it to the companies that sprang up to deliver the Rudd government’s home insulation program, which quickly spiralled into a fatal disaster.

“This is Pink Batts on steroids but at the expense and continued systemic abuse of society’s most vulnerable children,” she said.

Now the NSW Opposition is introducing a private member’s bill to force the Auditor-General to audit the performance and effectiveness of all NGO out-of-home care contracts prior to their renewal by the Department of Family and Community Services.

“Labor is urging the Berejiklian Government to offer bipartisan support for this legislation that will ensure non-government organisations are held strictly accountable for every single dollar of taxpayer funding provided to care for vulnerable children,” Opposition Family and Community Services spokeswoman Tania Mihailuk told

“Labor’s landmark bill will put the microscope of the Auditor-General through all OOHC contracts to support and prioritise better outcomes for the record number of children and young people now in care across NSW.

“NSW is fast approaching the highest rates of children in out-of-home care in Australia, second only to the Northern Territory, with many of these children staying longer in care and fewer being restored back to their families.

“Child protection has become more about dollars and business models as opposed to achieving the best possible outcomes for vulnerable children.”

It is hard not to wonder if in our desperation not to repeat the awful mistakes of the past we are destroying these children’s future. Indeed, one wonders what those children would say if only they could be heard.


Senior Australians say political correctness is ruining society

ATTENTION, Gen Y: Baby Boomers have had it with your political correctness.

New Australian research suggests over 50s are fed up with being told what they can and can’t say, and believe young people are the worst offenders.

The survey of 1000 Australians over 50 saw nine in 10 agree political correctness is ruining society, and thought younger generations were too worried about offending people.

According to the CoreData research commissioned by Australian Seniors Insurance Agency, 86 per cent of seniors believed “having to be politically correct all the time” was ruining society, and 86.6 per cent said it was “inauthentic”.

Bathurst teacher Vicki Evans is not afraid to admit she loathes political correctness.

The 55-year-old says she’s constantly being told off by her three children, all in their 20s, for opinions they say she shouldn’t be allowed to express.

“The number of times I saw something and my kids say ‘oh Mum, you can’t say that,’” she says.

“They say you can’t make assumptions about things, but I think you can make observations.

“You can’t say anything that’s offensive and that could be deemed to label anyone. You have to be always aware of perceptions, apparently.”

Ms Evans says that her children’s sensitivities are clearly not a product of her parenting, but blames universities and television for encouraging political correctness.

“I do get really cross with the whole idea that children aren’t allowed to talk about anything religious in relation to Christmas or Easter because it might offend someone,” she said. “I think if we can’t discuss any of these things we run the risk of losing our cultural identity.”

The data also indicated that Aussies grew less concerned about social norms and pleasing others as they grew older.

Almost a third (31 per cent) said they no longer cared about social norms or pleasing others.

Two in five (42.7 per cent) admitted to having shared politically incorrect jokes, and a quarter (24.3 per cent) said they used humour even it they knew it might make some people uncomfortable. One in five admitted they had used politically incorrect humour “among inappropriate company”.

Australian Seniors Computer Club Association president Nan Bosler said seniors were resisting societal pressure to be politically correct.

“Seniors are not letting this pressure deter them from staying true to themselves and their beliefs and they should be respected for that attitude,” she said.

“Australia’s older generation have been through a momentous amount of change and challenges, and this has made them a resilient bunch who value good humour and are not easily offended by lighthearted teasing.

“Therefore, it is easy to understand why this generation can be frustrated with certain political correct filters that are assumed in modern-day living.”


Family trusts run deep

The fact that Opposition Leader Bill Shorten’s crackdown on family trust income splitting was being described as “courageous” yesterday is a pretty good indicator of the special place that trusts have in the hearts of Australian business people.

It is, or at least should be, a no-brainer: income splitting is a device that should have been removed long ago, but ever since the failure of John Ralph’s effort to clean up trusts in his Review of Business Taxation in 1999, which was buried by the National Party, trusts have come to be the structure of choice for Australian small businesses, and splitting the income an annual accounting ritual.

These days the majority of business activity now goes through trusts; The Australia Institute reckons a fifth of national GDP sits in them.

And why not? Most small businesses are family affairs: everyone works in the business, or has to put up with mum or dad moaning about it over dinner every night, and one day the kids will be the owners (and moaners). So a family trust, with each family member as a named beneficiary, seems not only a natural way to run things, but a sort of dynastic battlement — our trust is our castle.

Oh, and you get to keep the assets from creditors and decide where the cash goes, and since it doesn’t get taxed until it gets somewhere else, spreading it around — or splitting it — can lower the average family tax rate.

Trouble is that the income tax system is designed around taxing individuals, not families. Maybe there’s a case for averaging taxation across family members, especially in family businesses, but that’s not the way it works and we’re not having that discussion.

John Howard, then Treasurer, made a half-hearted effort to fix the problem 40 years ago by introducing Division 6AA of the Tax Act (1936) which imposed the top marginal tax rate of 45 per cent on trust distributions to dependent children. But he left out spouses and other adult relatives, presumably on purpose.

In 1998 another Coalition Treasurer, Peter Costello, appointed John Ralph to review business taxation. However he failed to abide by the golden rule that you never have an inquiry if you don’t already know the answer, and Ralph proposed uniform taxation of business entities — taxing trusts as companies.

That recommendation went straight to the bin labelled “C” for courageous and from then on, trusts took off.

Perhaps the Rudd/Gillard/Swan Labor Party would have dusted off the Ralph Review after 2007 if they hadn’t been mugged by the GFC, but they were, and they didn’t.

And now, according to the latest Coalition Treasurer, the ALP’s attempt to revive Ralph 18 years later, almost to the day, by applying the company tax rate to trust distributions is a “dark economic vision”.

These words may well haunt Scott Morrison. If the Coalition makes allowing income splitting to avoid tax an explicit part of its election platform, and it somehow manages to win the election despite that, the policy will come back and bite it on the budget.

But this political battle over the use of trusts is not superficial. In some ways it is a new front in the eternal war between capital and labour, between business owners and employees, and it’s not entirely clear how it will turn out.

At one level, it is simply about improper tax avoidance: if distributing income to a dependent child is wrong, as decreed by John Howard and embedded in Division 6AA, then so is distributing it to a dependent spouse, or to a brother or sister who promptly gives the distributed cash back as a gift.

But at a deeper level it could be portrayed as an attack on family businesses generally and the organising structure that recognises that it’s a family rather than a company or a business partnership.

At least that’s presumably what the Turnbull Government will try on, unless the Prime Minister overrides the Treasurer again because he decides they need the money.

If he doesn’t, the argument could be an interesting test of both sides’ rhetorical skills, as well as an indication of where Australia sits on what might be called the Jeremy Corbyn spectrum — are we chanting or yawning?


Posted by John J. Ray (M.A.; Ph.D.).    For a daily critique of Leftist activities,  see DISSECTING LEFTISM.  To keep up with attacks on free speech see Tongue Tied. Also, don't forget your daily roundup  of pro-environment but anti-Greenie  news and commentary at GREENIE WATCH .  Email me  here

Bored by the S&P 500 in Week 4 of July 2017

The S&P 500 and, by extension, the entire U.S. stock market, was about as boring as boring could be in Week 4 of July 2017.

How boring was the week? Well, when you consider that the week's biggest event for market volatility occurred on Thursday, 27 July 2017 when, in the space of 30 minutes after lunch on the east coast, the S&P 500 lost 0.5% of its value (about 12 points), before going back to recover most of it by the market's close, ending the day at 2475.42, less than two and a half points below where it opened.

That's apparently what constitutes a market freakout in what has been this summer's low volatility environment. But that got us thinking - how much would stock prices have to change from where they are at today to constitute a legitimate freakout session?

The answer is revealed in the following chart, where we're plotted the daily closing value of the S&P 500 against its trailing year dividends per share.

S&P 500 Index Value versus Trailing Year Dividends per Share, 30 September 2015 through 28 July 2017

In this chart, what matters most is the relative period of order that has existed since 30 March 2016, where we find that with respect to the mean trend curve for the relationship between stock prices and trailing year dividends per share, we find that the S&P 500 is just under the middle of the range that we would expect it to be. If reversion to the mean means anything for the stock market, that's the mean the market would be reverting to in its current state of order.

It would only be if stock prices were to move outside the red-dashed curves that we would become concerned about the potential a breakdown in the current period of order, which given where the S&P 500 closed on Friday, 28 July 2017 at 2421.10, would either mean a decline of nearly 100 points or an increase of more than 100 points.

As a general rule of thumb, we would only really get interested in the daily action of the S&P 500 when it changes by more than 2% of its previous day's closing value (about 50 points in today's market). A more significant threshold would be if the stock prices were to alter their trajectory by two standard deviations, or 66 points for today's market.

So that's where we're at. We'll close out this bit of analysis by looking into the future for the S&P 500, which is pretty much behaving almost exactly like we anticipated last week.

Alternative Futures - S&P 500 - 2017Q3 - Standard Model - Snapshot on 28 July 2017

We believe that investors are focusing on 2018-Q1 in setting stock prices, which continues to be consistent with investor expectations for the timing of the next Fed rate hike.

Here are the headlines that caught our attention during the fourth week of July 2017.

Monday, 24 July 2017
Tuesday, 25 July 2017
Wednesday, 26 July 2017
Thursday, 27 July 2017
Friday, 28 July 2017

Meanwhile, Barry Ritholtz covered the positives and negatives for the U.S. economy and markets. And speaking of Barry, he took part in a Freakonomics' podcast with Ken French, Gene Fama and John Bogle on the topic of "stupidest thing you can do with your money" and is also featured in Meb Faber's new book, The Best Investment Writing, Volume 1!

Globalisation: the rise and fall of a truly terrible idea

There is a certain beauty and nobility about the idea that we are the world and wonderful things happen when we think of the rest of humanity as our brothers and sisters. Unfortunately, some very cynical people can take this beautiful idea and turn it into empire building. The sun never sets on the greatest civilization, you know.

Of course, the Roman or British Empires were harmless play-actors compared to the ruthless plunder available to those who can control the hydraulics of electronic money. And to keep the looting of the electronic money boys on track, the world needed some philosopher-pundits to convince the suckers that usury was harmless and the "structural adjustments" that threw whole classes of people into abject poverty were necessary for growth and prosperity. And to give the practitioners of empire building with electronic money a patina of beauty and respectability, they named their wickedness "Globalization" and "Free Trade" and "Reform."

In spite of the fact that none of these schemes benefitted very many people, the Globalists kept at it because the very few it did benefit became rich beyond the dreams of avarice. But pretty predictions advanced by the expensive think tanks couldn't cover the fact that these global schemes never work.
  • Big mass markets simply cannot work without a giant middle class with money to spend. Unfortunately, the primary goal of the money plunderers is to reduce the size and income of the middle classes.
  • The money boys tend to lack all respect for manufacturing and other forms of useful work. Ship those factories to China or Bangladesh where desperate brown folks will work for $10 a day. The de-industrialization of the formerly industrial countries has triggered some of the greatest calamities in human history. These moves were deliberately undertaken by hopelessly thoughtless people.
  • While we may all be brothers and sisters sharing a big blue marble in space, the realities of life are dramatically different from one region to another. One of the things builders quickly realize is that construction practices often don't travel very far. A house built for the blazing heat of the USA Southwest will be damn near worthless during a North Dakota blizzard. In macroeconomics, the same economic scheme that works well in Sweden may not work nearly as well in India or Egypt. Yet the money boys used their institutions to enforce economic orthodoxy from Ecuador to Korea and dozens of stops in between.
So now we are seeing some of the philosopher-pundits of Globalization coming ever so slowly to the realization that they have been selling some aromatic bullshit. Not all of them, mind you. The economics profession is mostly made up of very conventional people so they have no tendency to abandon their conventional wisdom. But some, apparently with the capacity to feel shame, have recognized that the vast majority of Globalization's major theses are just plain wrong and have formulated critiques. What follows is a damn fine article written by someone who has at least seen a brief flash of light.

Globalisation: the rise and fall of an idea that swept the world

It’s not just a populist backlash – many economists who once swore by free trade have changed their minds, too. How had they got it so wrong?

By Nikil Saval, 14 July 2017

The annual January gathering of the World Economic Forum in Davos is usually a placid affair: a place for well-heeled participants to exchange notes on global business opportunities, or powder conditions on the local ski slopes, while cradling champagne and canapes. This January, the ultra-rich and the sparkling wine returned, but by all reports the mood was one of anxiety, defensiveness and self-reproach.

The future of economic globalisation, for which the Davos men and women see themselves as caretakers, had been shaken by a series of political earthquakes. “Globalisation” can mean many things, but what lay in particular doubt was the long-advanced project of increasing free trade in goods across borders. The previous summer, Britain had voted to leave the largest trading bloc in the world. In November, the unexpected victory of Donald Trump, who vowed to withdraw from major trade deals, appeared to jeopardise the trading relationships of the world’s richest country. Forthcoming elections in France and Germany suddenly seemed to bear the possibility of anti-globalisation parties garnering better results than ever before. The barbarians weren’t at the gates to the ski-lifts yet – but they weren’t very far.

In a panel titled Governing Globalisation, the economist Dambisa Moyo, otherwise a well-known supporter of free trade, forthrightly asked the audience to accept that “there have been significant losses” from globalisation. “It is not clear to me that we are going to be able to remedy them under the current infrastructure,” she added. Christine Lagarde, the head of the International Monetary Fund, called for a policy hitherto foreign to the World Economic Forum: “more redistribution”. After years of hedging or discounting the malign effects of free trade, it was time to face facts: globalisation caused job losses and depressed wages, and the usual Davos proposals – such as instructing affected populations to accept the new reality – weren’t going to work. Unless something changed, the political consequences were likely to get worse.

The backlash to globalisation has helped fuel the extraordinary political shifts of the past 18 months. During the close race to become the Democratic party candidate, senator Bernie Sanders relentlessly attacked Hillary Clinton on her support for free trade. On the campaign trail, Donald Trump openly proposed tilting the terms of trade in favour of American industry. “Americanism, not globalism, shall be our creed,” he bellowed at the Republican national convention last July. The vote for Brexit was strongest in the regions of the UK devastated by the flight of manufacturing. At Davos in January, British prime minister Theresa May, the leader of the party of capital and inherited wealth, improbably picked up the theme, warning that, for many, “talk of greater globalisation … means their jobs being outsourced and wages undercut.” Meanwhile, the European far right has been warning against free movement of people as well as goods. Following her qualifying victory in the first round of France’s presidential election, Marine Le Pen warned darkly that “the main thing at stake in this election is the rampant globalisation that is endangering our civilisation.”

It was only a few decades ago that globalisation was held by many, even by some critics, to be an inevitable, unstoppable force. “Rejecting globalisation,” the American journalist George Packer has written, “was like rejecting the sunrise.” Globalisation could take place in services, capital and ideas, making it a notoriously imprecise term; but what it meant most often was making it cheaper to trade across borders – something that seemed to many at the time to be an unquestionable good. In practice, this often meant that industry would move from rich countries, where labour was expensive, to poor countries, where labour was cheaper. People in the rich countries would either have to accept lower wages to compete, or lose their jobs. But no matter what, the goods they formerly produced would now be imported, and be even cheaper. And the unemployed could get new, higher-skilled jobs (if they got the requisite training). Mainstream economists and politicians upheld the consensus about the merits of globalisation, with little concern that there might be political consequences.

Back then, economists could calmly chalk up anti-globalisation sentiment to a marginal group of delusional protesters, or disgruntled stragglers still toiling uselessly in “sunset industries”. These days, as sizable constituencies have voted in country after country for anti-free-trade policies, or candidates that promise to limit them, the old self-assurance is gone. Millions have rejected, with uncertain results, the punishing logic that globalisation could not be stopped. The backlash has swelled a wave of soul-searching among economists, one that had already begun to roll ashore with the financial crisis. How did they fail to foresee the repercussions?

In the heyday of the globalisation consensus, few economists questioned its merits in public. But in 1997, the Harvard economist Dani Rodrik published a slim book that created a stir. Appearing just as the US was about to enter a historic economic boom, Rodrik’s book, Has Globalization Gone Too Far?, sounded an unusual note of alarm.

Rodrik pointed to a series of dramatic recent events that challenged the idea that growing free trade would be peacefully accepted. In 1995, France had adopted a programme of fiscal austerity in order to prepare for entry into the eurozone; trade unions responded with the largest wave of strikes since 1968. In 1996, only five years after the end of the Soviet Union – with Russia’s once-protected markets having been forcibly opened, leading to a sudden decline in living standards – a communist won 40% of the vote in Russia’s presidential elections. That same year, two years after the passing of the North American Free Trade Agreement (Nafta), one of the most ambitious multinational deals ever accomplished, a white nationalist running on an “America first” programme of economic protectionism did surprisingly well in the presidential primaries of the Republican party.

What was the pathology of which all of these disturbing events were symptoms? For Rodrik, it was “the process that has come to be called ‘globalisation’”. Since the 1980s, and especially following the collapse of the Soviet Union, lowering barriers to international trade had become the axiom of countries everywhere. Tariffs had to be slashed and regulations spiked. Trade unions, which kept wages high and made it harder to fire people, had to be crushed. Governments vied with each other to make their country more hospitable – more “competitive” – for businesses. That meant making labour cheaper and regulations looser, often in countries that had once tried their hand at socialism, or had spent years protecting “homegrown” industries with tariffs.

These moves were generally applauded by economists. After all, their profession had long embraced the principle of comparative advantage – simply put, the idea countries will trade with each other in order to gain what each lacks, thereby benefiting both. In theory, then, the globalisation of trade in goods and services would benefit consumers in rich countries by giving them access to inexpensive goods produced by cheaper labour in poorer countries, and this demand, in turn, would help grow the economies of those poorer countries.

But the social cost, in Rodrik’s dissenting view, was high – and consistently underestimated by economists. He noted that since the 1970s, lower-skilled European and American workers had endured a major fall in the real value of their wages, which dropped by more than 20%. Workers were suffering more spells of unemployment, more volatility in the hours they were expected to work.

While many economists attributed much of the insecurity to technological change – sophisticated new machines displacing low-skilled workers – Rodrik suggested that the process of globalisation should shoulder more of the blame. It was, in particular, the competition between workers in developing and developed countries that helped drive down wages and job security for workers in developed countries. Over and over, they would be held hostage to the possibility that their business would up and leave, in order to find cheap labour in other parts of the world; they had to accept restraints on their salaries – or else. Opinion polls registered their strong levels of anxiety and insecurity, and the political effects were becoming more visible. Rodrik foresaw that the cost of greater “economic integration” would be greater “social disintegration”. The inevitable result would be a huge political backlash.

As Rodrik would later recall, other economists tended to dismiss his arguments – or fear them. Paul Krugman, who would win the Nobel prize in 2008 for his earlier work in trade theory and economic geography, privately warned Rodrik that his work would give “ammunition to the barbarians”.

It was a tacit acknowledgment that pro-globalisation economists, journalists and politicians had come under growing pressure from a new movement on the left, who were raising concerns very similar to Rodrik’s. Over the course of the 1990s, an unwieldy international coalition had begun to contest the notion that globalisation was good. Called “anti-globalisation” by the media, and the “alter-globalisation” or “global justice” movement by its participants, it tried to draw attention to the devastating effect that free trade policies were having, especially in the developing world, where globalisation was supposed to be having its most beneficial effect. This was a time when figures such as the New York Times columnist Thomas Friedman had given the topic a glitzy prominence by documenting his time among what he gratingly called “globalutionaries”: chatting amiably with the CEO of Monsanto one day, gawking at lingerie manufacturers in Sri Lanka the next. Activists were intent on showing a much darker picture, revealing how the record of globalisation consisted mostly of farmers pushed off their land and the rampant proliferation of sweatshops. They also implicated the highest world bodies in their critique: the G7, World Bank and IMF. In 1999, the movement reached a high point when a unique coalition of trade unions and environmentalists managed to shut down the meeting of the World Trade Organization in Seattle.

In a state of panic, economists responded with a flood of columns and books that defended the necessity of a more open global market economy, in tones ranging from grandiose to sarcastic. In January 2000, Krugman used his first piece as a New York Times columnist to denounce the “trashing” of the WTO, calling it “a sad irony that the cause that has finally awakened the long-dormant American left is that of – yes! – denying opportunity to third-world workers”.

Where Krugman was derisive, others were solemn, putting the contemporary fight against the “anti-globalisation” left in a continuum of struggles for liberty. “Liberals, social democrats and moderate conservatives are on the same side in the great battles against religious fanatics, obscurantists, extreme environmentalists, fascists, Marxists and, of course, contemporary anti-globalisers,” wrote the Financial Times columnist and former World Bank economist Martin Wolf in his book Why Globalization Works. Language like this lent the fight for globalisation the air of an epochal struggle. More common was the rhetoric of figures such as Friedman, who in his book The World is Flat mocked the “pampered American college kids” who, “wearing their branded clothing, began to get interested in sweatshops as a way of expiating their guilt”.

Arguments against the global justice movement rested on the idea that the ultimate benefits of a more open and integrated economy would outweigh the downsides. “Freer trade is associated with higher growth and … higher growth is associated with reduced poverty,” wrote the Columbia University economist Jagdish Bhagwati in his book In Defense of Globalization. “Hence, growth reduces poverty.” No matter how troubling some of the local effects, the implication went, globalisation promised a greater good.

The fact that proponents of globalisation now felt compelled to spend much of their time defending it indicates how much visibility the global justice movement had achieved by the early 2000s. Still, over time, the movement lost ground, as a policy consensus settled in favour of globalisation. The proponents of globalisation were determined never to let another gathering be interrupted. They stopped meeting in major cities, and security everywhere was tightened. By the time of the invasion of Iraq, the world’s attention had turned from free trade to George Bush and the “war on terror,” leaving the globalisation consensus intact.

Above all, there was a widespread perception that globalisation was working as it was supposed to. The local adverse effects that activists pointed to – sweatshop labour, starving farmers – were increasingly obscured by the staggering GDP numbers and fantastical images of gleaming skylines coming out of China. With some lonely exceptions – such as Rodrik and the former World Bank chief and Columbia University professor Joseph Stiglitz – the pursuit of freer trade became a consensus position for economists, commentators and the vast majority of mainstream politicians, to the point where the benefits of free trade seemed to command blind adherence. In a 2006 TV interview, Thomas Friedman was asked whether there was any free trade deal he would not support. He replied that there wasn’t, admitting, “I wrote a column supporting the Cafta, the Caribbean Free Trade initiative. I didn’t even know what was in it. I just knew two words: free trade.”

In the wake of the financial crisis, the cracks began to show in the consensus on globalisation, to the point that, today, there may no longer be a consensus. Economists who were once ardent proponents of globalisation have become some of its most prominent critics. Erstwhile supporters now concede, at least in part, that it has produced inequality, unemployment and downward pressure on wages. Nuances and criticisms that economists only used to raise in private seminars are finally coming out in the open.

A few months before the financial crisis hit, Krugman was already confessing to a “guilty conscience”. In the 1990s, he had been very influential in arguing that global trade with poor countries had only a small effect on workers’ wages in rich countries. By 2008, he was having doubts: the data seemed to suggest that the effect was much larger than he had suspected.

In the years that followed, the crash, the crisis of the eurozone and the worldwide drop in the price of oil and other commodities combined to put a huge dent in global trade. Since 2012, the IMF reported in its World Economic Outlook for October 2016, trade was growing at 3% a year – less than half the average of the previous three decades. That month, Martin Wolf argued in a column that globalisation had “lost dynamism”, due to a slackening of the world economy, the “exhaustion” of new markets to exploit and a rise in protectionist policies around the world. In an interview earlier this year, Wolf suggested to me that, though he remained convinced globalisation had not been the decisive factor in rising inequality, he had nonetheless not fully foreseen when he was writing Why Globalization Works how “radical the implications” of worsening inequality “might be for the US, and therefore the world”. Among these implications appears to be a rising distrust of the establishment that is blamed for the inequality. “We have a very big political problem in many of our countries,” he said. “The elites – the policymaking business and financial elites – are increasingly disliked. You need to make policy which brings people to think again that their societies are run in a decent and civilised way.”

That distrust of the establishment has had highly visible political consequences: Farage, Trump, and Le Pen on the right; but also in new parties on the left, such as Spain’s Podemos, and curious populist hybrids, such as Italy’s Five Star Movement. As in 1997, but to an even greater degree, the volatile political scene reflects public anxiety over “the process that has come to be called ‘globalisation’”. If the critics of globalisation could be dismissed before because of their lack of economics training, or ignored because they were in distant countries, or kept out of sight by a wall of police, their sudden political ascendancy in the rich countries of the west cannot be so easily discounted today.

Over the past year, the opinion pages of prestigious newspapers have been filled with belated, rueful comments from the high priests of globalisation – the men who appeared to have defeated the anti-globalisers two decades earlier. Perhaps the most surprising such transformation has been that of Larry Summers. Possessed of a panoply of elite titles – former chief economist of the World Bank, former Treasury secretary, president emeritus of Harvard, former economic adviser to President Barack Obama – Summers was renowned in the 1990s and 2000s for being a blustery proponent of globalisation. For Summers, it seemed, market logic was so inexorable that its dictates prevailed over every social concern. In an infamous World Bank memo from 1991, he held that the cheapest way to dispose of toxic waste in rich countries was to dump it in poor countries, since it was financially cheaper for them to manage it. “The laws of economics, it’s often forgotten, are like the laws of engineering,” he said in a speech that year at a World Bank-IMF meeting in Bangkok. “There’s only one set of laws and they work everywhere. One of the things I’ve learned in my short time at the World Bank is that whenever anybody says, ‘But economics works differently here,’ they’re about to say something dumb.”

Over the last two years, a different, in some ways unrecognizable Larry Summers has been appearing in newspaper editorial pages. More circumspect in tone, this humbler Summers has been arguing that economic opportunities in the developing world are slowing, and that the already rich economies are finding it hard to get out of the crisis. Barring some kind of breakthrough, Summers says, an era of slow growth is here to stay.

In Summers’s recent writings, this sombre conclusion has often been paired with a surprising political goal: advocating for a “responsible nationalism”. Now he argues that politicians must recognise that “the basic responsibility of government is to maximise the welfare of citizens, not to pursue some abstract concept of the global good”.

One curious thing about the pro-globalisation consensus of the 1990s and 2000s, and its collapse in recent years, is how closely the cycle resembles a previous era. Pursuing free trade has always produced displacement and inequality – and political chaos, populism and retrenchment to go with it. Every time the social consequences of free trade are overlooked, political backlash follows. But free trade is only one of many forms that economic integration can take. History seems to suggest, however, that it might be the most destabilising one.

Nearly all economists and scholars of globalisation like to point to the fact that the economy was rather globalised by the early 20th century. As European countries colonised Asia and sub-Saharan Africa, they turned their colonies into suppliers of raw materials for European manufacturers, as well as markets for European goods. Meanwhile, the economies of the colonisers were also becoming free-trade zones for each other. “The opening years of the 20th century were the closest thing the world had ever seen to a free world market for goods, capital and labour,” writes the Harvard professor of government Jeffry Frieden in his standard account, Global Capitalism: Its Fall and Rise in the 20th Century. “It would be a hundred years before the world returned to that level of globalisation.”

In addition to military force, what underpinned this convenient arrangement for imperial nations was the gold standard. Under this system, each national currency had an established gold value: the British pound sterling was backed by 113 grains of pure gold; the US dollar by 23.22 grains, and so on. This entailed that exchange rates were also fixed: a British pound was always equal to 4.87 dollars. The stability of exchange rates meant that the cost of doing business across borders was predictable. Just like the eurozone today, you could count on the value of the currency staying the same, so long as the storehouse of gold remained more or less the same.

When there were gold shortages – as there were in the 1870s – the system stopped working. To protect the sanctity of the standard under conditions of stress, central bankers across the Europe and the US tightened access to credit and deflated prices. This left financiers in a decent position, but crushed farmers and the rural poor, for whom falling prices meant starvation. Then as now, economists and mainstream politicians largely overlooked the darker side of the economic picture.

In the US, this fuelled one of the world’s first self-described “populist” revolts, leading to the nomination of William Jennings Bryan as the Democratic party candidate in 1896. At his nominating convention, he gave a famous speech lambasting gold backers: “You shall not press down upon the brow of labour this crown of thorns, you shall not crucify mankind upon a cross of gold.” Then as now, financial elites and their supporters in the press were horrified. “There has been an upheaval of the political crust,” the Times of London reported, “and strange creatures have come forth.”

Businessmen were so distressed by Bryan that they backed the Republican candidate, William McKinley, who won partly by outspending Bryan five to one. Meanwhile, gold was bolstered by the discovery of new reserves in colonial South Africa. But the gold standard could not survive the first world war and the Great Depression. By the 1930s, unionisation had spread to more industries and there was a growing worldwide socialist movement. Protecting gold would mean mass unemployment and social unrest. Britain went off the gold standard in 1931, while Franklin Roosevelt took the US off it in 1933; France and several other countries would follow in 1936.

The prioritisation of finance and trade over the welfare of people had come momentarily to an end. But this wasn’t the end of the global economic system.

The trade system that followed was global, too, with high levels of trade – but it took place on terms that often allowed developing countries to protect their industries. Because, from the perspective of free traders, protectionism is always seen as bad, the success of this postwar system has been largely under-recognised.

Over the course of the 1930s and 40s, liberals – John Maynard Keynes among them – who had previously regarded departures from free trade as “an imbecility and an outrage” began to lose their religion. “The decadent international but individualistic capitalism, in the hands of which we found ourselves after the war, is not a success,” Keynes found himself writing in 1933. “It is not intelligent, it is not beautiful, it is not just, it is not virtuous – and it doesn’t deliver the goods. In short, we dislike it, and we are beginning to despise it.” He claimed sympathies “with those who would minimise, rather than with those who would maximise, economic entanglement among nations,” and argued that goods “be homespun whenever it is reasonably and conveniently possible”.

The international systems that chastened figures such as Keynes helped produce in the next few years – especially the Bretton Woods agreement and the General Agreement on Tariffs and Trade (Gatt) – set the terms under which the new wave of globalisation would take place.

The key to the system’s viability, in Rodrik’s view, was its flexibility – something absent from contemporary globalisation, with its one-size-fits-all model of capitalism. Bretton Woods stabilised exchange rates by pegging the dollar loosely to gold, and other currencies to the dollar. Gatt consisted of rules governing free trade – negotiated by participating countries in a series of multinational “rounds” – that left many areas of the world economy, such as agriculture, untouched or unaddressed. “Gatt’s purpose was never to maximise free trade,” Rodrik writes. “It was to achieve the maximum amount of trade compatible with different nations doing their own thing. In that respect, the institution proved spectacularly successful.”

Partly because Gatt was not always dogmatic about free trade, it allowed most countries to figure out their own economic objectives, within a somewhat international ambit. When nations contravened the agreement’s terms on specific areas of national interest, they found that it “contained loopholes wide enough for an elephant to pass”, in Rodrik’s words. If a nation wanted to protect its steel industry, for example, it could claim “injury” under the rules of Gatt and raise tariffs to discourage steel imports: “an abomination from the standpoint of free trade”. These were useful for countries that were recovering from the war and needed to build up their own industries via tariffs – duties imposed on particular imports. Meanwhile, from 1948 to 1990, world trade grew at an annual average of nearly 7% – faster than the post-communist years, which we think of as the high point of globalisation. “If there was a golden era of globalisation,” Rodrik has written, “this was it.”

Gatt, however, failed to cover many of the countries in the developing world. These countries eventually created their own system, the United Nations conference on trade and development (UNCTAD). Under this rubric, many countries – especially in Latin America, the Middle East, Africa and Asia – adopted a policy of protecting homegrown industries by replacing imports with domestically produced goods. It worked poorly in some places – India and Argentina, for example, where the trade barriers were too high, resulting in factories that cost more to set up than the value of the goods they produced – but remarkably well in others, such as east Asia, much of Latin America and parts of sub-Saharan Africa, where homegrown industries did spring up. Though many later economists and commentators would dismiss the achievements of this model, it theoretically fit Larry Summers’s recent rubric on globalisation: “the basic responsibility of government is to maximise the welfare of citizens, not to pursue some abstract concept of the global good.”

The critical turning point – away from this system of trade balanced against national protections – came in the 1980s. Flagging growth and high inflation in the west, along with growing competition from Japan, opened the way for a political transformation. The elections of Margaret Thatcher and Ronald Reagan were seminal, putting free-market radicals in charge of two of the world’s five biggest economies and ushering in an era of “hyperglobalisation”. In the new political climate, economies with large public sectors and strong governments within the global capitalist system were no longer seen as aids to the system’s functioning, but impediments to it.

Not only did these ideologies take hold in the US and the UK; they seized international institutions as well. Gatt renamed itself as the World Trade Organization (WTO), and the new rules the body negotiated began to cut more deeply into national policies. Its international trade rules sometimes undermined national legislation. The WTO’s appellate court intervened relentlessly in member nations’ tax, environmental and regulatory policies, including those of the United States: the US’s fuel emissions standards were judged to discriminate against imported gasoline, and its ban on imported shrimp caught without turtle-excluding devices was overturned. If national health and safety regulations were stricter than WTO rules necessitated, they could only remain in place if they were shown to have “scientific justification”.

The purest version of hyperglobalisation was tried out in Latin America in the 1980s. Known as the “Washington consensus”, this model usually involved loans from the IMF that were contingent on those countries lowering trade barriers and privatising many of their nationally held industries. Well into the 1990s, economists were proclaiming the indisputable benefits of openness. In an influential 1995 paper, Jeffrey Sachs and Andrew Warner wrote: “We find no cases to support the frequent worry that a country might open and yet fail to grow.”

But the Washington consensus was bad for business: most countries did worse than before. Growth faltered, and citizens across Latin America revolted against attempted privatisations of water and gas. In Argentina, which followed the Washington consensus to the letter, a grave crisis resulted in 2002, precipitating an economic collapse and massive street protests that forced out the government that had pursued privatising reforms. Argentina’s revolt presaged a left-populist upsurge across the continent: from 1999 to 2007, leftwing leaders and parties took power in Brazil, Venezuela, Bolivia and Ecuador, all of them campaigning against the Washington consensus on globalisation. These revolts were a preview of the backlash of today.

Rodrik – perhaps the contemporary economist whose views have been most amply vindicated by recent events – was himself a beneficiary of protectionism in Turkey. His father’s ballpoint pen company was sheltered under tariffs, and achieved enough success to allow Rodrik to attend Harvard in the 1970s as an undergraduate. This personal understanding of the mixed nature of economic success may be one of the reasons why his work runs against the broad consensus of mainstream economics writing on globalisation.

“I never felt that my ideas were out of the mainstream,” Rodrik told me recently. Instead, it was that the mainstream had lost touch with the diversity of opinions and methods that already existed within economics. “The economics profession is strange in that the more you move away from the seminar room to the public domain, the more the nuances get lost, especially on issues of trade.” He lamented the fact that while, in the classroom, the models of trade discuss losers and winners, and, as a result, the necessity of policies of redistribution, in practice, an “arrogance and hubris” had led many economists to ignore these implications. “Rather than speaking truth to power, so to speak, many economists became cheerleaders for globalisation.”

In his 2011 book The Globalization Paradox, Rodrik concluded that “we cannot simultaneously pursue democracy, national determination, and economic globalisation.” The results of the 2016 elections and referendums provide ample testimony of the justness of the thesis, with millions voting to push back, for better or for worse, against the campaigns and institutions that promised more globalisation. “I’m not at all surprised by the backlash,” Rodrik told me. “Really, nobody should have been surprised.”

But what, in any case, would “more globalisation” look like? For the same economists and writers who have started to rethink their commitments to greater integration, it doesn’t mean quite what it did in the early 2000s. It’s not only the discourse that’s changed: globalisation itself has changed, developing into a more chaotic and unequal system than many economists predicted. The benefits of globalisation have been largely concentrated in a handful of Asian countries. And even in those countries, the good times may be running out.

Statistics from Global Inequality, a 2016 book by the development economist Branko Milanović, indicate that in relative terms the greatest benefits of globalisation have accrued to a rising “emerging middle class”, based preponderantly in China. But the cons are there, too: in absolute terms, the largest gains have gone to what is commonly called “the 1%” – half of whom are based in the US. Economist Richard Baldwin has shown in his recent book, The Great Convergence, that nearly all of the gains from globalisation have been concentrated in six countries.

Barring some political catastrophe, in which rightwing populism continued to gain, and in which globalisation would be the least of our problems – Wolf admitted that he was “not at all sure” that this could be ruled out – globalisation was always going to slow; in fact, it already has. One reason, says Wolf, was that “a very, very large proportion of the gains from globalisation – by no means all – have been exploited. We have a more open world economy to trade than we’ve ever had before.” Citing The Great Convergence, Wolf noted that supply chains have already expanded, and that future developments, such as automation and the use of robots, looked to undermine the promise of a growing industrial workforce. Today, the political priorities were less about trade and more about the challenge of retraining workers, as technology renders old jobs obsolete and transforms the world of work.

Rodrik, too, believes that globalisation, whether reduced or increased, is unlikely to produce the kind of economic effects it once did. For him, this slowdown has something to do with what he calls “premature deindustrialisation”. In the past, the simplest model of globalisation suggested that rich countries would gradually become “service economies”, while emerging economies picked up the industrial burden. Yet recent statistics show the world as a whole is deindustrialising. Countries that one would have expected to have more industrial potential are going through the stages of automation more quickly than previously developed countries did, and thereby failing to develop the broad industrial workforce seen as a key to shared prosperity.

For both Rodrik and Wolf, the political reaction to globalisation bore possibilities of deep uncertainty. “I really have found it very difficult to decide whether what we’re living through is a blip, or a fundamental and profound transformation of the world – at least as significant as that one brought about the first world war and the Russian revolution,” Wolf told me. He cited his agreement with economists such as Summers that shifting away from the earlier emphasis on globalisation had now become a political priority; that to pursue still greater liberalisation was like showing “a red rag to a bull” in terms of what it might do to the already compromised political stability of the western world.

Rodrik pointed to a belated emphasis, both among political figures and economists, on the necessity of compensating those displaced by globalisation with retraining and more robust welfare states. But pro-free-traders had a history of cutting compensation: Bill Clinton passed Nafta, but failed to expand safety nets. “The issue is that the people are rightly not trusting the centrists who are now promising compensation,” Rodrik said. “One reason that Hillary Clinton didn’t get any traction with those people is that she didn’t have any credibility.”

Rodrik felt that economics commentary failed to register the gravity of the situation: that there were increasingly few avenues for global growth, and that much of the damage done by globalisation – economic and political – is irreversible. “There is a sense that we’re at a turning point,” he said. “There’s a lot more thinking about what can be done. There’s a renewed emphasis on compensation – which, you know, I think has come rather late.” more

Australian Politics 2017-07-30 15:51:00


Bill Shorten promises $17.2 billion tax crackdown on trusts

This attack on trusts takes no account of alternative tax avoidance measures. Say I own a business and have a non-working wife.  I simply give my wife a 25% share in the business.  So the profits are legally and properly shared in that ratio too.  So I have a smaller tax base and she pays little or no tax.  Voila! More money for the family and less to the tax man.  "Tax the rich" attempts always runs up against avoidance strategies.  And let us not mention the "black" economy. I might mention that I have a family trust but don't use it for tax avoidance so would not be hit by the new measures. Trusts have many uses

Bill Shorten will slam the door shut on tax loopholes that let high income earners legally use trusts to slash their tax bills, in a move designed to raise $17.2 billion over 10 years.

The new tax policy, foreshadowed by Fairfax Media a week ago, is the second-largest revenue raising measure announced by the federal opposition, after its ambitious plan to curb capital gains and negative gearing tax breaks, designed to raise $37 billion over 10 years.

Mr Shorten will tell Labor's NSW conference on Sunday that, if he wins the next election, he will introduce an across-the-board minimum 30 per cent tax rate on discretionary trust distributions to people over the age of 18.

The policy, Labor argues, will only affect 2 per cent of taxpayers and is a fairness measure that puts middle-income earners on level pegging with Australia's most wealthy.

The bold plan to change the rules for discretionary trusts – put in the too-hard basket by previous governments – will be framed as a tough but necessary decision to tackle Australia's ballooning debt, which is on track to pass half a trillion dollars under the Coalition government.

Discretionary trusts allow high-income earners to distribute money to family members on lower incomes and tax rates – for example, to adult children at university – and, by so doing, reducing their own tax liability.

This sort of income splitting is legal but, Mr Shorten will argue, it is effectively a subsidy for wealthy Australians paid for by middle-income earners and is unfair as ordinary PAYG workers cannot split their income in the same way.

Mr Shorten will say that, over four years, the changes will raise $4.1 billion in revenue for the Commonwealth and that, with Australia's AAA rating under threat, "we don't have the luxury of leaving everything in the too-hard basket".

"We need to make the tough decisions to build a fairer tax system, a stronger budget, a stronger nation. This must include cracking down on artificial income splitting to avoid tax.

"A healthcare worker at the Nepean Hospital can't go down to payroll and request that they split her income to reduce her tax. A hospitality worker in Blacktown doesn't get to give herself a tax cut by moving some money into her partner's account.

"I don't begrudge anyone the money they've made. But our system should not be subsidising those who are already wealthy, and our budget cannot afford to."

Labor says non-discretionary trusts such as special disability trusts, deceased estates and fixed trusts will not be touched and – in a move that will shut down a key line of attack from the Turnbull government – it will also not apply to farming or charitable trusts.

Similarly, Labor will attempt to firewall itself from criticism by arguing the policy change follows a change made by John Howard, when he was Treasurer in the early 1980s, that saw income distribution to minors taxed at the top marginal tax rate.

Australian Taxation Office figures from 2014-15 showed there were 823,448 trusts in Australia with assets of $3.1 trillion and revenue of $349.2 billion and that about 78 per cent, or 642,416, of those trusts were discretionary trusts used by high-income earners to reduce their tax bill.

According to research from the progressive Australia Institute think tank, the use of discretionary trusts may be costing the Commonwealth as much as $3.5 billion a year in revenue. University of NSW tax professor Dale Bocabella has estimated the figure at about $2 billion a year.

Labor's estimated revenue numbers, from the independent Parliamentary Budget Office, are well below these figures.

The Turnbull government is likely to attack the plan as another example of class warfare from the Labor leader that does nothing to grow the economic pie but, rather, relies on the politics of envy and serves only as a redistributive measure.

Taken together, these promises are a gamble by Mr Shorten but, also, demonstrate his determination not to repeat the mistake of Tony Abbott's "small target" strategy ahead of the 2013 election.


Bill Shorten vows to hold vote on republic during first term of a Labor government

The last referendum returned a big vote in favour of the monarchy so this should be a loser for Shorten

Opposition Leader Bill Shorten will promise to give Australians a vote on whether to become a republic during the first term of a future Labor government.

The promise, to be made in a landmark speech to the Australian Republican Movement on Saturday, will dramatically reignite debate about whether Australia should have its own head of state.

In a move that will energise republicans and give supporters of an Australian head of state a clear choice between Labor and the Turnbull government ahead of the next election, Mr Shorten will pledge to hold a simple "Yes" or "No" vote.

The question would be: "Do you support an Australian republic with an Australian head of state?"

The promise means a first vote on the issue would be held sometime between 2019 and 2022, to be followed by a second vote after that would settle on the tricky topic of the best model.

Prime Minister Malcolm Turnbull has said the republic debate should not be considered until after the Queen dies. But Mr Shorten will argue the debate does not require Australia to "wait for a change of monarch, we don't need to tip-toe around our future".

"I'm confident Queen Elizabeth would farewell us with the same affection and good grace she has shown every time a Commonwealth nation has made the decision to cut its ties with the monarchy. We can vote for a republic and still respect Queen Elizabeth," he will say.

Mr Shorten has previously said he would like to see an Australian head of state by 2025.

Mr Shorten believes Australia can retain its sporting and cultural links to the Commonwealth even if it voted to leave it.

"We can vote for a republic and recognise that Will and Kate have two seriously cute kids. We can vote for a republic and still binge watch The Crown on Netflix. And we can vote for a republic without derailing the business of government, or the priorities of this nation," he will say.

"I know an Australian republic isn't front-of-mind for everyone, but I don't buy the argument that we can't have this debate until every other problem in the nation has been's no good hoping for a popular groundswell – we must set a direction and bring people with us, and we have to do it early."


Residents fight to stop NBN and Telstra from axing 'state of the art' HFC network

For the residents of one of Sydney's tallest buildings, the arrival of the national broadband network has spelt the end of fast and affordable high-speed internet.

But last year, NBN ordered Telstra to scrap the HFC system and move customers onto its fibre-to-the-building (FTTB) technology, which it had installed using the building's 20-year-old copper phone lines.

One angry resident is well-known property developer Rick Graf. He is refusing to switch, aghast at the poor experiences of his neighbours.

"With the HFC backbone, I'm getting 120Mbps internet – over Wi-Fi," he said. "A neighbour of mine has switched to NBN and on a high-paying plan, and he can't get more than 50Mbps."

A quarter of Elan's 276 households are estimated to be using the HFC internet service.

Late last year, Telstra began telling Elan residents, via information sessions and letters, to move to the NBN and experience "fast downloads, better productivity, a brighter future", before it turned off the HFC system in February 2018.

NBN has the legal power to compel telcos such as Telstra to decommission their HFC and ADSL networks in return for compensation.

Mr Graf said NBN had effectively "downgraded" the building's infrastructure by choosing to connect the fibres to old copper lines instead of the HFC backbone.

"I'm not moving. Once we hear back from NBN about their reasons, we'll be taking this to the Ombudsman," said Mr Graf.

"It's counter-intuitive for NBN to downgrade the technology and give everyone half the speed."

The Elan building has become another flashpoint in the ongoing blame game between NBN and telcos over the escalating complaints about and general dissatisfaction with the $49 billion project.

NBN Co chief executive Bill Morrow last week sought to downplay growing complaints by admitting to a 15 per cent dissatisfaction rate among customers connecting to the NBN. This could add up to more than 2 million users.

Mr Morrow said complaints from that cohort were becoming more audible now that the network was being made available to about 100,000 new premises every week.

An NBN spokesman said FTTB was the "best fit" and the "easier" option from an engineering point of view.

He said FTTB was capable of delivering speeds of 100Mbps, but retailers had to buy sufficient capacity or bandwidth.

He claimed retailers, including Telstra, were automatically placing customers on 12Mbps or 25Mbps plans unless they specifically asked for faster speeds, causing speed and congestion problems.

A Telstra spokesperson said customers shouldn't see much of a difference if they remained on the same speed tier.

"We actively monitor and manage our capacity on the NBN network to ensure we have the right level of bandwidth to support customer speeds," she said.

"Speeds on the NBN vary due to quite a large number of factors ... some are managed by retailers, others are designed and controlled by NBN."

Another resident, electrical engineer John Flanagan, who is refusing to switch, said his neighbour's internet connection had dropped from 110 to 30Mbps.

He is paying $29 per month for 25GB of data, which is a relatively small amount, delivered at an enviable 100Mbps.

Based on flyers left in his mailbox, he would have to pay iiNet or TPG $100 per month to remain in the same speed tier. IPrimus' best offer was unlimited data at 25Mbps for $80 a month.

"It's ridiculous," said Mr Flanagan. "I'm not going to pay more for an inferior service."

He said NBN should use the HFC cables to provide internet services or upgrade the cables.

This is because elsewhere in Australia, NBN is upgrading HFC technology to "DOCSIS 3.1", which can deliver lightning download speeds of 1Gbps.

"NBN says that HFC is the way of the future, so why can't they upgrade our existing system so that we can get speeds of 1GB [1000Mbps] and 100Mbps upload speeds and beyond?" he asked.

Residents who have tried to switch back to the HFC network have been blocked by Telstra.

Emeritus Professor Rod Tucker, an electronic engineering expert at University of Melbourne, suggested NBN could take a more flexible stance and allow Elan to keep the HFC network. "This is an isolated case and it is not going to cause NBN any significant financial disadvantage," he said.

"If NBN can provide a high-quality service on their network, they might be able, over time, to attract some of the residents using HFC onto the NBN."

He said under Labor's NBN plan, any shortfall in the bandwidth provided to customers would be the retailer's fault, and the tensions now emerging could have been avoided. "The best possible outcome for the residents of this complex would be to upgrade their network to DOCSIS 3.1, and retain it for access to the NBN," he said.

NBN spokesperson Tony Brown said the logistics around new connections were more complicated than they used to be, when there was a good chance that a single company – Telstra – owned the relationship with the customer from the retail face to the copper and exchanges underlying it.

"Now you've got NBN Co, then 43 retail service providers buying directly from the NBN, and another 141 sub-resellers buying capacity from Optus or wherever it might be, so it's not as simple as it used to be," Mr Brown said.

Resident Pam Cassidy's plan is to "jump up and down" until NBN changes its decision. One afternoon, she popped into her neighbour's flat to compare internet speeds. Her neighbour's NBN-delivered internet was "extremely slow".

"Call me old-fashioned but if you've got a service that's good, why change it?" she asked.  "Why change it to something that is not good?"


NSW ALP set to back Palestine despite 'furious' lobbying by Israeli government

The Left love Muslims because they both hate the rest of us

Labor leader Bill Shorten will be under increasing pressure to recognise Palestine after the party's NSW conference appears set to make an "historic" push to do so, despite some MPs complaining about "extraordinary interventions" and lobbying against the motion by the Israeli government.

On Friday afternoon shortly before NSW Labor Right figures met to negotiate on the wording of a proposal that would "urge" a future federal Labor government to recognise a Palestinian state, state MPs who were delegates at this weekend's NSW party conference received an email.

"Time and again throughout its history Israel has extended a hand of peace only to have it rejected by the Palestinians," the three-page document from the Public Affairs Section of the Israeli Embassy labelled as a fact sheet and obtained by Fairfax Media, reads. "The international community must speak up against the culture of oppression, genocidal rhetoric, terror and incitement that is prevalent among the Palestinians."

Former Premier Bob Carr told Fairfax Media there had been a "furious" lobbying campaign against the motion, which will "urge" a future federal Labor government to recognise Palestine and be voted on by 800 party conference delegates on Sunday.

"How did they know which MPs were delegates [only up to one-third of caucus go to conference]?" one NSW MP told Fairfax Media on condition of anonymity, saying the list was not publicly available.

An email and phone call to the Israeli Embassy in Canberra was not returned.

Former foreign minister Bob Carr said: "It's an honour to be asked by the party to move an historic motion that supports recognition of Palestine and to do so in the face of a furious lobbying campaign."

The final motion, unlike that originally presented to conference, includes an affirmation of a two-state solution and supports Israel's right to exist "within secure and recognised borders" something pro-Israel Labor MPs said was a significant addition to the party's original approach and a significant watering down of a provocative motion.

Some MPs in the right dismissed the addition as mere boilerplate but another observer said the phrase "within secure and recognised borders" could prove highly significant.

Pro-Palestinian NSW MPs claim they were subject to other lobbying last week from official and back channels, such as suggestions of alternative motions including that Australia only acknowledge Palestine when that country's institutions improve.

Mr Carr caused a fissure in the Gillard government by advocating abstaining on a motion before the UN on upgrading Palestine's official observer status, when the then-PM advocated voting against the proposal.

Mr Carr later wrote in his memoirs that the former prime minister was overly influenced by the Israel lobby and constituents in Melbourne.

Backers say the motion is an historic break for Labor, whose support for Israel dates back to its the 1940s and backing from party legend and former UN General Assembly President, Doc Evatt.

But that support, particularly in the NSW Right, has been weakening recently, particularly as the party relies more heavily on voters descended from middle-eastern countries in Sydney's west for its supporter base.

Earlier this month frontbencher Tanya Plibersek said foreign affairs was a matter for the party's national conference and would not be influenced by state branches.

But state conferences can influence policy debate significantly, party insiders say. Queensland Labor's conference this weekend also reportedly backed recognition.

At Labor's last national conference leader Bill Shorten's Victorian Right faction opposed any change to policy on Palestinian recognition.


Posted by John J. Ray (M.A.; Ph.D.).    For a daily critique of Leftist activities,  see DISSECTING LEFTISM.  To keep up with attacks on free speech see Tongue Tied. Also, don't forget your daily roundup  of pro-environment but anti-Greenie  news and commentary at GREENIE WATCH .  Email me  here

Australian Politics 2017-07-29 16:45:00


Powerful ‘after rape’ pics show university problem (?)

I don't quite see why pictures of young women holding signs is "powerful". Given the pro-female bias in the educational system, I doubt that the story is true.  University culture from top down is pro-female so the claim that universities have a rape culture and even cover up rapes on campus could not be true per-se, but making the claim fits perfectly with university feminist mentality. It is an example of feminist detachment from reality and a needing to see things in a negative way, even the opposite of how they really are.

So the women with signs are just attention-seeking, more likely. 

And as we see from many British court cases, false rape cries are common so --  in that context -- at least initial skepticism displays proper caution.  Many innocent men have had their lives ruined by false accusations -- even after being exonerated

RAPE survivors and other university students have launched a powerful social media campaign to expose how Australian universities have mishandled rape and sexual assault complaints.

Holding messages condemning university inaction and cover-up, the survivors and other students are photographed holding signs calling out their institutions.

“My university punishes plagiarism more harshly than rape” wrote one student from the University of Sydney.

“I was sued for defamation for speaking out against a college covering up rape” wrote another. has confirmed the woman’s claims.

End Rape On Campus Australia, along with myself, designed the campaign to ensure that the voices and views of students are not sidelined next week, when a national report into rape at universities is released by the Australian Human Rights Commission.

After all, it’s often all too easy to forget that behind every statistic there lies a real person.

All too often, the temptation is to reduce sexual assault survivors to mere numbers without recognising the horror and complexity of each survivor’s story.
Students’ powerful plea to #EndRapeOnCampus

University students pose with signs in support of the End Rape on Campus campaign.

By putting a face on the issue, we not only humanise students’ stories, but importantly, it makes it much more difficult for universities to dismiss concerns via damage control strategies aimed at whitewashing the issue and protecting their own reputations.

And some of the stories we have heard at End Rape On Campus are absolutely harrowing.

One rape survivor called out her head of college for disbelieving her when she reported her rape to him.

“This does not sound like a boy who just raped a girl” the head of college allegedly remarked.

As for me, having spent a solid year reporting on sexual assault and rape at Australian universities — including revealing cases where staff members have raped students — the message I most want to send to all survivors next week is a very simple one:

I believe you. It’s not your fault. You’re not alone.

We’ve got your backs.


Prof Peter Ridd: the Great Barrier Reef recovers, our science institutions are failing us, science needs to be checked

Who is Peter Ridd? Some context first:



When marine scientist Peter Ridd suspected something was wrong with photographs being used to highlight the rapid decline of the Great Barrier Reef, he did what good scientists are supposed to do: he sent a team to check the facts.

After attempting to blow the whistle on what he found — healthy corals — Professor Ridd was censured by James Cook University and threatened with the sack. After a formal investigation, Professor Ridd — a renowned campaigner for quality assurance over coral research from JCU’s Marine Geophysics Laboratory — was found guilty of “failing to act in a collegial way and in the academic spirit of the institution”.

His crime was to encourage questioning of two of the nation’s leading reef institutions, the Centre of Excellence for Coral Studies and the Great Barrier Reef Marine Park Authority, on whether they knew that photographs they had published and claimed to show long-term collapse of reef health could be misleading and wrong.


Alan Jones, interviews Peter Ridd,  James Cook university professor of physics about the state of the Great Barrier Reef

The coral reef recovers.

Peter Ridd: Coral Reefs recover — “the scientists make hay when it dies in a spectacular way but they are quiet when it recovers.”

On symbionts — “There is a large variety of symbionts and some allow coral to grow faster but are more sensitive to bleaching.”

All the corals on the Great Barrier Reef live and grow much faster in Papua New Guinea, Indonesia and Thailand where the water is much hotter than it is on the reef and the corals just juggle these symbionts.  

Corals have a little thermometer built in them, when you take a core of them from many years ago we know what the temperature of the water was back when Captain Cook sailed up the coast, it was actually about the same temperature then. It was colder 100 years ago, but it has recovered from that. The temperatures on the reef are not even significantly warmer than average on a hundred year timescale.

Corals that bleach in one year will be less susceptible to bleaching in following years.

On the failure of modern science:

Peter Ridd: We can no longer rely on our science institutions. This is a very sad thing.

We are like a ship upon the ocean when our science fails and we need to do something about it. … This science is almost never checked.

Alan Jones: All these things [bleaching, crown of thorns] have been around for millennia, I love this line, as you write “long before scientists got hold of any scuba gear.”

Peter Ridd: These things only became a problem when scientists pop up on the scene.

Scientists are trying to close down, or affect adversely the sugar cane, the cattle, and the coal industry, and they are also telling the world the reef is dead which affects the tourist industry in Queensland.

Like a bushfire… It [bleaching] looks terrible when it happens but it grows back.

On the future:

Peter Ridd: There needs to be a properly funded group of scientists who sole job is to find fault in the science with which we are basing expensive public policy decisions ….


Australian liberalism is conservative in sense Disraeli would appreciate


A dogma, Groucho Marx might have said, is a man’s best friend. After all, no one could deny that a fixed set of beliefs can sustain good combat, soothe defeat and simplify hard choices.

But in democratic politics, the blinkers dogmas impose are the surest road to ruin.

Malcolm Turnbull was therefore right, in his recent Disraeli Prize oration, to raise the fundamental question of what the Liberal Party stands for. And the mere fact that his speech fuelled yet more debilitating infighting does not detract from the importance of the issues he raised.

Yes, disunity can be death; but suppressing debate is a recipe for extinction.

Of course, Labor doesn’t have that problem. As a coalition of rent-snatchers — going from the thugs of the CFMEU through to the interest groups that live off the taxes of others — the only dilemma that seems to torment it is how to extract the resources needed to fund its many promises.

Little wonder then that any real thought perished long ago, smothered in the rhetoric of fairness, with Julia Gillard’s effort at articulating the ALP’s raison d’etre highlighting the intellectual collapse: Labor, she famously declared, is as it is because “we are us”.

But Labor’s determination to imitate the sea squirt — which starts life swimming with the aid of a brain but once it finds a home, ­digests the now redundant organ and basks in the life of a vegetable — cannot excuse the Liberal Party from re-engaging with its history, values and principles.

To say that is not to suggest those form a monolithic whole, whose meaning can be discerned by consulting a sacred source. For all his enormous merits, Menzies was not a prophet, and nothing he wrote or said amounts to holy writ.

Indeed, it is hard to conceive of an approach more antithetical to liberalism than the belief that, as Isaiah Berlin put it, “somewhere, in the past or in the future, in divine revelation, in the pronouncements of history or science, or in the simple heart of the uncorrupted man, there is a final solution” to the practical problems of governing.

It is precisely because liberalism dismisses that Promethean conceit that it respects institutions that have stood the test of time, rejects grand projects of social transformation and accepts the inevitability of trade-offs between equally meritorious ends.

Like Dr Bernard Rieux, the hero of Camus’s The Plague — who says: “Salvation is just too big a word for me. I don’t aim so high. I’m concerned with man’s health; and for me, his health comes first” — its goal is not to endow life with splendour and greatness.

Rather, in resisting the temptation to put too high a hope on political achievement, it contents itself, as Michael Oakeshott suggested, with providing a framework for “the gradual readjustment of human relationships by fallible men”.

That is necessarily a matter of time and place.

And Menzies’ genius lay precisely in grasping the changing realities of postwar Australia and attracting the social forces Labor had ignored and ill-treated. It is that achievement the Liberals need to emulate, instead of descending into scholastic disputes about Menzies’ views.

The difficulties that lie in the way of replicating Menzies’ achievement are formidable.

In the postwar world, the threat of communism created a natural fault line; today’s adversaries are less sharply defined. Australian society is also far more heterogeneous, and has lost all sense of a shared past or a common future.

Moreover, although liberalism is not tied to any religion, its underlying premise — that men are not gods, and that salvation, like ultimate truth, is not of this world — clashes with the unbounded self-assurance of a secular age.

Yet the threats Liberals need to confront are as great as ever. At one end are the jackboots of the unions, whose lawlessness has been condoned by the ACTU secretary; at the other, the new totalitarians whose belief in the ability to reshape the messiness of human affairs along “rational” lines, whatever the cost, reaches its peak among the climate change zealots.

How Benjamin Disraeli would have reacted to all of that is impossible to know. What is certain is that many viewers would have felt an element of irony in watching Turnbull receive a prize honouring a man of whom it was said, only slightly unfairly, that “he never thought seriously of anything except his career”.

That Disraeli coined the phrase “the greasy pole” was therefore unsurprising; and it was unsurprising too that in his rush to dislodge Robert Peel, he launched what David Cesarani, in a brilliant study, terms an “unprecedented parliamentary vendetta”, with his triumph of “intellect and unscrupulousness” transforming the Tories into “a party in chronic revolt and unceasing conspiracy”.

Yet it is equally certain that no one better understood that, as Disraeli himself put it, “Great politicians must feel comfortable both in themselves and in their times.”

Whatever his flaws, he forced the Tories to adapt to a society reshaped by the Industrial Revolution; and his greatest political achievements — the Reform Act of 1867, which gave ordinary working men the vote, and the avalanche of social legislation that followed it — reflected a conviction that workers, far from wishing to destroy society, were natural conservatives, united in their respect for national institutions and in the aspiration for a better future.

In that sense, Australian liberalism has also always been conservative: not in trying to preserve the past but in balancing continuity and change, stability and aspiration, self-reliance and mutual assistance.

Reasserting its core principles requires lucidity, not dogma, and mature reflection, not personal attacks.

Whether our political class is capable of that remains, at best, unproven.


Our students and teachers deserve better

Jennifer Buckingham

I had the privilege of travelling to England to speak with some of the world’s best researchers on how children learn to read, and to observe how high-performing schools use this research to get all children reading.

There is no longer any serious debate in England about the need for explicit phonics instruction in early reading instruction. In fact, it is mandatory for all English primary schools to teach synthetic phonics — a method of instruction that systematically shows children the connection between spoken and written language, and how to use the English alphabetic code to read and spell.

The quality of synthetic phonics instruction is still uneven. Not all teachers have sufficient depth of knowledge and expertise yet. Nonetheless, there is evidence via the Year 1 Phonics Screening Check (PSC) that instruction has improved. In the first year of the national PSC in 2012, 58% of Year 1 students achieved the expected standard. In 2016, 81% of students achieved the standard.

England’s progress in implementing effective early reading instruction was accelerated by the ‘Rose Review’ of early reading by Sir Jim Rose, published in 2006. It strongly endorsed the ‘Simple View of Reading’– a conceptual model which emphasises the importance of both decoding (word reading accuracy) and comprehension — and found that synthetic phonics was the most effective method of instruction, especially for children from disadvantaged backgrounds or with language difficulties.

The Simple View model is strongly supported by research from multiple disciplines. UK Schools Minister Nick Gibb was influenced by this research and has relentlessly pursued the adoption of effective reading instruction, firmly believing that reading is key to educational success and social mobility.

Australia had its own review of the teaching of reading — the National Inquiry into Teaching Literacy (NITL) — the report of which was published in 2005. Its findings were remarkably similar to the Rose Review.

Yet it\ has had very little impact on reading instruction in Australia. Instead of citing the recent scientific research of Professors Maggie Snowling, Kate Nation, Anne Castles, or Charles Hulme, our Australian literacy academics drag out the outdated, unsubstantiated socio-theoretical views of Ken Goodman and Stephen Krashen.

Australia has many outstanding teachers of reading, but they are too often swimming upstream against poor quality reading programs and policy. Australian teachers and students deserve better.


Posted by John J. Ray (M.A.; Ph.D.).    For a daily critique of Leftist activities,  see DISSECTING LEFTISM.  To keep up with attacks on free speech see Tongue Tied. Also, don't forget your daily roundup  of pro-environment but anti-Greenie  news and commentary at GREENIE WATCH .  Email me  here