http://archive.malcolmturnbull.com.auRSS feeds for Malcolm Turnbull MP60http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/603/Into-the-brave-new-world-of-making-a-difference.aspx#Comments3http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=603http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=603&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/603/Into-the-brave-new-world-of-making-a-difference.aspxNational Times It was Rupert Murdoch who shrewdly, if gloomily, predicted: "The internet will destroy more profitable businesses than it will create." And there are few businesses more vulnerable to the internet than newspapers, especially those dependent on revenues from classified advertisements. It is hard to imagine many people poring through hard copy classifieds if they have access, as most do, to the speed, functionality and comprehensiveness of online classified sites. While the demise of newspapers has been greatly exaggerated, the trend is certainly against them. As an avid consumer of news, I can say that I only buy hard copy newspapers nowadays out of habit. The vast bulk of the news and opinion I read I have received electronically – much of it before the newspaper itself actually finds itself to my front door. We all understand that the circulation revenue of most publications, and certainly all newspapers, was always woefully inadequate. The newspaper was a cheap, on occasions free, platform upon which to sell advertisements both display and classified. A similar observation could be made of free to air television, although there the oligopoly was a function of regulation. The internet has changed all that. As broadband, especially wireless broadband, becomes more and more ubiquitous the barriers to entry to compete against free to air television, newspapers and magazines are evaporating. From the consumer's viewpoint there is the prospect of almost infinite abundance of information and opinion. Our son in Hong Kong reads the Australian media online with the same ease as he, and we, are able to read the New York Times, the Financial Times, Wall Street Journal - not to speak of the South China Morning Post. And the access to opinion is not limited to those big names. Increasingly opinion leaders have their own online blogs. If you want to get an expert, often contrarian, insight into the Chinese economy for example you can go to www.mpettis.com a specialist blog by a professor at Peking University and enjoy not just Michael Pettis' views but also a vigorous debate and commentary on every post. The days when only a handful of media companies controlled access to the media megaphone are fading from view. There are four main players in this game and it is interesting to consider each of their positions in the old and new worlds. The author of the content – the journalist for example – faces the challenge of news organisations with diminishing revenues. But he or she still has a valuable and important contribution to offer. People want to read Annabel Crabb or listen to Alan Jones. But what about the humble news reporter whose byline is less memorable or compelling? The advertiser has it made. The avenues for spruiking their wares gets wider and cheaper all the time. The internet offers the opportunity of very precise targeting too – so its all upside for the advertiser. The consumer too has it made – content is becoming more and more diverse and almost all of it is free. Those sites which try to charge big money run the risk that they drive down traffic which then reduces their attractiveness to advertisers who after all are only interested in eyeballs. The publisher, the big, established media company, has the most to lose. It is all downside. The reason the Sydney Morning Herald could charge a premium for its classifieds (or indeed its display advertising) was because it had a large number of dedicated readers for whom there was no, or very few, alternative mediums – now there is an enormous range of alternatives most of them offering vastly superior functionality. Many traditional hard copy publishers have sought to move into online publishing, but in doing so they have arguably only hastened their own demise. Because they assumed the hard copy publication was paying for the content, the marginal cost of repurposing it for the internet was negligible. Hence access to online newspaper websites is almost invariably free. They therefore offered advertisers the opportunity to access the readers who were interested in the content offered in hard copy for a tiny fraction of the price of an advertisement in the newspaper itself. And you can see this decline in the share price of Fairfax. When the Tourang consortium took over Fairfax in 1992 the shares listed at $1.20. Today – seventeen years later – the stock price is $1.64. So who wins out of all this? Certainly the advertisers and the consumers, that's a no brainer. The established newspaper companies will struggle to build enough additional value in their online businesses to offset the loss of value in their declining hard copy businesses. But what about the writers and journalists? Are they to face an anarchic brave new world where they have to try to sell their wares on line as Alan Kohler and Bob Gottliebsen are trying to do? And what happens to investigative journalism? Opinion is relatively cheap to acquire or produce. But who now can pay for a team of reporters to work diligently away at government or corporate misconduct? This era of profitless abundance should give us cause for concern – it raises real issues for our democracy. Will newsrooms deprived of the resources to do their own sleuthing become more and more dependent on packages of information prepared and presented to them by the growing army of government media advisers and spinmeisters? How independent can the media be if it lacks the financial resources to do its work? The National Times has been revived online and while I had a celebrated run-in with its hardcopy incarnation, I wish the online incarnation the best of luck. This is a brave new world for journalism and news as it struggles to find a sustainable and profitable business model in the online age. National Times is pitched at an audience wanting something more than day-to-day news, rather, informed comment and analysis of issues. The line-up of writers is impressive and for the first time brings together all the senior commentators from across the Fairfax Media titles. I hope this new masthead becomes too a forum for ideas, to look beyond the square and stimulate discussion on issues on which we politicians struggle sometimes to devise solutions for the optimum benefit of the nation. The extent of the role of government, our water crisis, transport, communications, the environment, taxation, health, innovation, and the arts are matters of enormous importance to all Australians, yet the combative nature of our politics and our multi-tiered government structure sometimes works against best policy outcomes. Many of these issues are linked by the need for governments to manage their budgets prudently to enable them to act in a targeted way when necessary to repair or restore failings or inadequacies in these critical areas of the economy and society. Wasteful spending, deep deficits and high levels of debt severely limit a government's capacity to intervene where and when necessary in resolving, for instance, the critical water shortage in the Murray-Darling Basin, our failing hospitals, and transport bottlenecks that limit economic growth potential. The National Times can through intelligent and thoughtful discussion provoke, inspire and remind not only the country's leaders to act in the best interests of the nation, but all Australians who want to make a difference.  malcolmSun, 13 Sep 2009 22:39:00 GMTf1397696-738c-4295-afcd-943feb885714:603http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/546/Rudds-debt-to-burden-future-generations.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=546http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=546&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/546/Rudds-debt-to-burden-future-generations.aspxKevin Rudd’s latest manifesto acclaims the years ahead as “the building decade”. So far, all this Prime Minister has built is a mountain of debt. We are heading for $315 billion of total debt – the largest increase in borrowings by far of any government in peacetime. This debt represents about $13,000 for every Australian man, woman and child -- and never has so much public debt been accumulated with so little to show for it. There has been $23 billion in cash handouts – borrowed, then given away. There has been $14.7 billion to be spent on Julia Gillard Memorial Assembly Halls – coming to a primary school near you whether it is needed or not; and whether the school community wants it or not. And despite all the nation-building rhetoric, there is no more investment proposed by Kevin Rudd in road and rail than was already committed to by the Coalition. Labor’s wasteful spending is not only a poor use of Commonwealth funds today. It also has the effect of denying governments now and into the future the opportunity to direct more taxpayer resources to areas of greatest need without imposing either significant cuts elsewhere or higher taxes. This is a key point about Labor’s short-sightedness. As the nation ages demographically, and costs of health and pensions rise, the damage to public finances from Labor’s debt addiction will be profound and ongoing, for decades. When working Australians are asked to repay the mountain of debt incurred by this Government –a massive task facing taxpayers for years to come – they will be entitled to ask: what purpose did it serve, how did our communities benefit, how did all this debt make our economy stronger and more prosperous? Will they be satisfied by the 6000 words of tedious spin offered up to readers of The Age/The Sydney Morning Herald last weekend? Kevin Rudd likes to style himself as a philosopher-king issuing edicts from on high about how the world should be better governed. The fact is this Prime Minister is as poll-driven as any politician in living memory. He is forever adapting his message to suit the mood of the day. He changes with the seasons. In 2007 he was an economic conservative – no daylight between him and John Howard on economic matters. By late 2008, he had become a democratic socialist again, chastising Howard as a neo-liberal extremist, and proposing that the only answer to the global financial crisis was to put government at the centre of the economy. And now, as we have seen in his essay last weekend, he is moving back towards the centre, warning about the dangers of excessive levels of government debt and the need to return budgets to surplus. Not so much a Prime Minister as a political fashionista. If there is one consistency in his economic meanderings, it is a breathtaking, Orwellian, disregard for the truth. Let us consider some of the falsehoods in his latest essay. Once again he accuses the Coalition in Australia of being a leading force in an imagined neo-liberal experiment that brought on a global financial crisis. So determined to cast himself as the Great Helmsman, he is unable to credit the Howard Government for leaving Australia better prepared than most other advanced economies to weather the storm. Nor could he pay tribute to his own Labor predecessors for their role in creating a more open, flexible and resilient modern market economy. Instead, in Mr Rudd’s fantasy world, the last 25 years have been a bleak period of free market extremism, where not just John Howard but Labor leaders Bob Hawke and Paul Keating are cast as willing cohorts in a vast global conspiracy to impose on an unsuspecting world an ideology of unrestrained greed. How then could it be that the prudential and financial regulation put in place by the Coalition Government has resulted in Australia having, in Julia Gillard’s own words, the best regulated financial system in the world? How could it be that, unlike the USA, Australia suffered from no sub-prime mortgage crisis? Indeed sub-prime mortgages were less than 1 per cent of all mortgages outstanding versus close to 15 per cent in the United States. And as RBA Governor Glenn Stevens noted only this week, mortgage defaults in Australia remain at historically low levels. How could it be that Australia’s banks remain among the most secure and best capitalised in the world? The answer, which Mr Rudd cannot bring himself to utter, is that the Coalition left him with a national balance sheet free of debt and with cash at the bank -not to speak of the longest period of sustained economic growth in our history. While Mr Rudd has piled billions of dollars of debt onto the shoulders of present and future generations, the Coalition paid off all Government debt and then reached across the generations and by establishing the Future Fund made provision for the payment of previously unfunded public sector pensions. And the regulation of the financial system established by the Coalition has proved its worth, standing the test of the global financial crisis. When we look at the United States and the origins of the global financial crisis, we see a mortgage market in which Governments encouraged, and in some cases directed, the making of sub-prime loans – lending money to people whose prospects of repayment were poor. Two huge government-guaranteed mortgage funds, Fannie Mae and Freddie Mac, underwrote around 70 per cent of all residential mortgages. Mr Rudd said in his summer essay for The Monthly that he wanted Government to be at the centre of the economy; that government was the antidote to all global ills. Well, the truth is that if Government had not been at the centre of the US mortgage market, if the US Government had limited itself to prudential regulation as the Howard Government had done, then we may not have had a sub-prime crisis at all and, as a consequence, we may not have had a global financial crisis. Another example of playing fast-and-loose with the facts is his boast that Australia’s public debt is low, as a percentage of GDP, relative to other developed countries. This is no thanks to Mr Rudd. Plainly, it is a consequence of his inheriting a Government with no net debt at all and plenty of cash at the bank. The OECD recently summarised the size and composition of fiscal stimulus packages around the world for the years 2008 to 2010. Australia’s stimulus was the third largest, at 5.4 per cent of GDP, behind only South Korea and the United States. Germany’s stimulus was a much more modest 3.2 per cent of GDP, and half of that stimulus was provided through reduced taxes. So one can only imagine the bemusement of his German hosts when the Prime Minister recently visited Berlin and gave a speech about the dangers of excessive Government debt and the need to restore budgets to surplus. Another falsehood in Mr Rudd’s economic narrative is his claim that Australia is experiencing the worst economic crisis since the Great Depression. In fact, Australia faced far worse economic conditions in the early 1990s when, under Labor, unemployment was over 10 per cent for more than two years. Of course Kevin Rudd’s constant rhetoric of crisis had a point. It enabled him to justify extraordinary levels of borrowing and spending. And it is there in that borrowing and spending that we see the biggest barrier to a speedy recovery from this economic downturn. All of that debt will have to be repaid. Whichever way he tries to spin his message, the simple, brutal fact of life is that the higher the level of Government debt, the greater will be the burden of taxes and interest rates we all have to carry. For while you might think a lot can be said in 6000 words, the one unspoken truth in Mr Rudd’s latest offering is that Australians are going to be paying a high price for Labor’s extravagant and poorly-targeted borrowing and spending. Heavy debt will force governments to consider spending cuts or tax hikes. Only this week, we have seen Health Minister Nicola Roxon flag the likelihood of raising taxes if Labor is to spend more on public health. The Rudd Government’s debt-fuelled spending also risks reviving an inflationary spiral. Likewise, in the housing market, Mr Rudd may well have cause to fear the impact on home affordability if interest rates pressures begin to mount. He complains in his essay that house prices have “soared far above the true long term worth.” What will he have to say to the thousands of young couples encouraged by his government’s increase to the first home owners’ grant to get into the market at a time when interest rates were at an historic low? Will they thank him as the cost of their mortgage begins to spiral upwards, putting stress on family budgets? And the children of those young homebuyers? As they reach working age, they, too, will be burdened by having to pay higher-than-necessary taxes to meet the punitive interest costs of repaying the massive Rudd Debt. This is going to raise some fundamental questions about whether Australia can continue to live up to what all of us have come to expect of our nation. For at least 60 years, it has been a proud boast that every generation of Australians has left its children better off than their parents. As Rudd Labor’s debt piles up unrelentingly on the shoulders of taxpayers of the future, we have to ask ourselves the tough questions: will we be the first generation not to deliver on that dream? Will we through reckless and irresponsible decisions today deny the next generation of working Australians their fair share of opportunities in life? For all his sermons and essays, Mr Rudd will not be able to talk his way out of having to grapple with the consequences of his own poor policy choices. Soon enough, he will have to confront the reality of a budget in crisis. He knows there will have to be spending cuts. He knows the additional cost to the Budget of spiralling government interest repayments will mean putting under the microscope essential government services. And what he won’t admit himself is that his policies will lead to higher taxes. His Health Minister’s concession this week to the inevitability of rising taxes under Labor is the first signal from within government that they are beginning to comprehend the nature of the mess they have made of the Budget, and the policy dilemmas arising from that failure. They will do everything they can to tap-dance through to the next election, but the day of reckoning for Labor cannot be forestalled forever. This is a Government very adept at political spin. But what is clear is that they have no credible strategy or plan to get Australia through the difficult conditions ahead. If the Prime Minister has a detailed strategy to reduce Labor’s debt, why wouldn’t this be the centrepiece of debate at this weekend’s ALP national conference? The truth is, Mr Rudd has no plan. Meanwhile, the costs of Labor’s Big Spend become more apparent by the day. Australians are not gullible. When they see Labor dispersing a record $124 billion in new spending, they will soon begin to ask whether the community is getting value for money. There is now far greater scrutiny, for example, over the costs of the so-called Building Education Revolution. The Commonwealth Auditor General has this $14.7 billion program under investigation, after mounting evidence it has been grossly mismanaged, that local school communities are being provided with facilities they don’t want or need, and that far too much money is being wasted. It’s bad enough that Labor has destroyed the nation’s balance sheet, once the strongest in the advanced world, in little more than 18 months. But even worse is the growing likelihood that the nation will have little or nothing to show for it, other than $315 billion of Commonwealth Government bonds to repay. It didn’t have to be this way. Australia went into the global economic downturn in a far stronger position than most of the advanced economies in the world -- debt free, with a budget $20 billion in surplus, and unemployment and interest rates at historic lows. One of the great achievements of the Coalition government over 11 years was to record economic growth averaging at 3.6 per cent per annum. Over our time in office, unemployment fell from over 8 per cent to about 4 per cent Real wages grew by 21 per cent. This success story was in part a reflection of sound financial and economic management by government, and by the willingness to make hard decisions. But, more broadly, it reflected the hard work and enterprise of millions of Australians. Just as Mr Rudd cannot bring himself to acknowledge the efforts of predecessors in government, he seems unable to acknowledge the efforts of the Australian people. He tells us that he will build a “sustainable growth strategy” because “in the past, Australia relied almost exclusively on the rollercoaster of the boom and bust of the mining sector on the stock market”. Does Mr Rudd really believe Australians have been lazing around, doing nothing over all these years other than waiting to be spoon fed by our mining wealth? Does he not understand what truly makes this nation’s economy tick? Is he unaware of the extraordinary growth of Australia’s services sector, especially education and tourism as major export earners? Or the development of the Australian wine industry? Does he not know of the success overseas of Australian architectural and legal firms, of our farm sector, and of the strong international reputation of our doctors, nurses, teachers and engineers? And does he think that mining itself is just some fun park ride on the stock market, rather than an Australian success story characterised by high levels of investment, hard work, innovation and professionalism? Australia’s progress of the last decade or more was built on the energy, ingenuity and intelligence of millions of Australians, aided and encouraged by good government policies. It is because Australia’s progress was built on such solid foundations that there is optimism of a return to high growth in the next few years. The Howard years marked an era of AAA performance by the Australian economy The intrinsic strengths of that economic performance have allowed Australia to stand comparatively proud and tall during the global downturn. The Rudd Government would have done better to acknowledge those fundamental strengths, and to work in a measured and disciplined way to ensure nothing was done to undermine our capacity to emerge from this downturn as strong as ever. A smarter way forward for this nation involves less debt, less risk, more discipline, and more responsibility. In his essay, Mr Rudd offers no plan to promote small business enterprise. This is one of his blind spots. His 6000 words of prose reveals no genuine understanding of what actually drives growth and jobs in our economy. In contrast, the Coalition has been meeting small business people at Jobs for Australia forums around the nation. Drawing on what we have learned, we have proposed a number of measures --- tax loss carrybacks, fairer insolvency rules, better incentives for hiring apprentices, and a major assault on bureaucratically-imposed regulation and compliance costs. These are all practical, pragmatic measures to support jobs and businesses in challenging times, but have only a modest Budget impact. They aim to foster growth where it matters most – in the many hundreds of thousands of small to medium businesses enterprises that count for much of the nation’s economic horsepower. Instead, in his essay, Mr Rudd speaks airily about increasing productivity – yet without offering one practical measure to do so. Flexible labour markets have added immensely to productivity – yet Mr Rudd has made labour markets less flexible. Competition in financial services has also added to productivity – yet Mr Rudd’s ill considered unlimited bank deposit guarantee wiped out many non-bank lenders and contributed to a dramatic increase in borrowing costs for small business. In his essay, Mr Rudd boasts about his plans for the future. But he has not explained how he will finance the $43 billion he intends to dedicate to the National Broadband network, and no business plan on how to make it viable. On water security, our biggest environmental challenge, he is abandoning the vision of investing $10 billion in increasing water efficiency in rural Australia by diverting these funds to buy back more and more water entitlements without regard for the impact of those buybacks on food security or the communities that depend on them. As ever, Mr Rudd is more interested in the next day’s headlines. He is not interested in bedding down the hard policy choices. He spends most of his time merely playing for political advantage ---while staking hundreds of billions of dollars in taxpayers’ money, and the nation’s future economic security, on his belief that government always knows best. This is proving a foolish and reckless gamble. Mr Rudd is relying on the savings of foreigners to bankroll what is essentially a strategy to protect Labor politically, not an economic strategy to safeguard the nation. This is why, for the Coalition, the economy and the rapidly deteriorating state of our public finances remains the main game – the only game – in Federal politics. For who among us takes seriously the Rudd Government’s claim that it can provide the leadership and discipline to bring our public finances back under control? As a ready reckoner of the scale of the challenges now facing the Commonwealth budget after 18 months of Labor in power, it is worth noting that for every word Mr Rudd published last Saturday in The Age/The Sydney Morning Herald, his government is planning to accumulate more than $50 million in Commonwealth debt. We know the Prime Minister is never short of a word. But it is this Prime Minister’s actions for which Australians will pay the heaviest price. Large deficits for the best part of a decade, and debt for as far as the eye can see, do not represent strong foundations for the nation’s future. So when Kevin Rudd speaks of the next 10 years as the “building decade”, we in the Opposition will continue to ask: what capacity has this Government provided for Australians to build a stronger, more secure, and more prosperous future? What do Australians have to show for this massive accumulation of Labor debt? If a Prime Minister cannot answer those questions effectively in 6000 words, we can only assume he doesn’t have the answers.malcolmSat, 01 Aug 2009 02:10:00 GMTf1397696-738c-4295-afcd-943feb885714:546http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/424/Ruddnet-is-too-good-to-be-true.aspx#Comments30http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=424http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=424&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/424/Ruddnet-is-too-good-to-be-true.aspxKEVIN Rudd promised a broadband revolution if he became prime minister. A state-of-the-art, fibre-to-the-node broadband would reach 98 per cent of the population. It would be built by the private sector with a $4.7 billion investment from theGovernment. That was the promise in 2007. Last week the tender was proclaimed a failure. None of the bidders came up with a worthwhile proposal. The Rudd Government's broadband revolution was dead. So, in order to distract attention from the total failure of his broadband policy, Rudd made an even grander promise. He said he would provide affordable, high-speed broadband at a speed of 100 megabits a second to 90per cent of Australian households via a $43 billion fibre-to-the-household network. Who could disagree? Especially when the Prime Minister told us it wouldn't cost the taxpayer anything beyond the original $4.7billion investment because the new National Broadband Network would be a commercial venture, so commercially attractive the private sector would invest (up to 49 per cent). It was going to be such a great deal that the Prime Minister urged "mums and dads" to invest in it via "Aussie Infrastructure Bonds". But it is a story too good to be true, told by a prime minister with no experience of business, happy to denounce the corporate world but not prepared to abide by the rules that apply to mere mortals. The assertions he made in his announcement and which he used to solicit investments from the public are not supported by a business plan, a financial study, advice from Infrastructure Australia or, so far as we know, anything other than his desire to get a big headline (it worked). His own Treasurer, Wayne Swan, was unable to say how many people he expected to take up the service or what they would be asked to pay. And yet those are the two key assumptions that determine whether a venture such as this will be a good investment or a complete catastrophe. A company director who encouraged the public to buy bonds in a company in similar circumstances would be spending a lot of time in the company of Australian Securities and Investments Commission investigators. So, fantasy time is over. Let's look at some facts. Everybody is in favour of widely available and affordable broadband internet access. And nobody more than me. But I am also a believer in telling the truth. So here are some truths. Big infrastructure projects such as telecommunication networks, roads, tunnels and water schemes all have very high fixed costs largely made up of the cost of servicing the huge up-front capital investment. For that reason it is vital to accurately estimate the likely level of patronage and the price the customers will pay. Consider the Cross City Tunnel in Sydney. It cost nearly $1 billion to build; today, after a bankruptcy and its shareholders losing their investment, it is worth a fraction of that. Why? Because the owners' traffic assumptions proved to be wildly optimistic. As they were for the Lane Cove Tunnel and Melbourne's Eastlink. Just as wellthese were private-sector projects and the capital loss was not borne by the taxpayer. So if you invest $43 billion to run fibre into 90 per cent of Australian homes and businesses (about ninemillion potential connections) you need (unlike Swan) to have a view about how many will take it up and what they will pay. And there are real risks and real competition. Telstra has its own extensive broadband fixed line hybrid fibre network offering higher and higher speeds including, so Telstra claims, up to 100Mbps before Christmas in Melbourne and within a year or two in other capital cities. In addition to competition at the fixed-line level, the new company, let's call it Ruddnet, will face competition from wireless. In the past six months 650,000 people signed up to wireless broadband services, four times the number that signed up to fixed-line broadband. As wireless broadband becomes faster and cheaper, its mobility and flexibility will offer real competition with fixed-line services, just as it has with telephony. But let's make some very optimistic assumptions about Ruddnet. Let's assume half of all the potential customers covered by the network take up the new service: that's 4.5 million connections. Let's assume that they will pay $100 a month to their ISP and that $70 of that finds its way to Ruddnet. If we assume half of Ruddnet's revenues go on operating expenses and depreciation is a low 5 per cent, then Ruddnet will lose $260 million each year without having paid a cent in interest or dividends. All of these assumptions can be changed of course but whichever way you slice or dice the numbers, one thing is very, very plain. Unless we (completely unrealistically) assume the vast majority of potential customers take up the Ruddnet services and that they will pay very high monthly fees in the order of $150 to $200 a month then there is no way that Ruddnet can deliver a commercial return on $43billion of investment. Now some people might say: so what? Why doesn't the Government just pay for it and then sell the services for whatever price it can get and take the loss on the chin? This is another way of saying the Government should borrow $43 billion and build a business that will, when complete, be worth a fraction of that amount if it is worth anything at all. And Rudd has undertaken to sell the business five years after it is complete, so we could see the Government spending $43 billion on an investment it subsequently sells for a pittance. Too bad for the taxpayers. We could have a debate about the merits of investing and losing billions in broadband: after all, we do not demand a commercial return from public roads or schools or hospitals. But it is not the debate Rudd has kicked off. He has asserted his broadband network will be run at arms length from government in a separate company, generating a commercial return sufficient to entice private-sector investment in the shares and to warrant "mums and dads" subscribing to bonds, the interest on which could only be paid if the company was profitable. He made that assertion without any basis in fact. He has produced no analysis or advice to backit up. The truth is that a new broadband network of this kind could only operate with a massive government subsidy, probably most of the full $43 billion. It is not good enough for the Prime Minister to bathe in the glory of adulatory headlines for his "broadband vision". He must tell us, not later than the budget, what advice he has on the economics of this network, what assumptions it is based on, what returns it can deliver and if - as is inevitable - it requires tens of billions in government subsidies, what are the roads, the schools, the hospitals, the water projects and the ports that willnot be built to satisfy his broadband vision. Prime Minister, show us the numbers before you spend the money.malcolmMon, 13 Apr 2009 22:22:00 GMTf1397696-738c-4295-afcd-943feb885714:424http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/361/PMs-cheap-money-shot.aspx#Comments12http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=361http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=361&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/361/PMs-cheap-money-shot.aspxNOTHING beats a relaxing summer holiday with a couple of good novels: a time to wander lazily in the world of imagination and fantasy.     But while the rest of the nation chilled out over the festive season with a light and breezy summer read, the midnight oil was burning at Kirribilli House. There, a lonely figure sat hunched over his laptop constructing a political fantasy of his own. The Prime Minister was having great fun. Imagining himself once more in a heroic pose.   Last year he was Churchill defending us all from "the economic equivalent of a rolling national security crisis". But during the summer, in his essay on the "the ideological causes of the financial crisis", he has cast himself as a great socialist hero, carrying the banner of social democracy and striking out against the wickedness of neo-liberalism, 30 years of which, he assures, is the root cause of the global financial crisis.   Neo-liberalism's central thrust, he writes, is "that government activity should be constrained, and ultimately replaced, by market forces".   He says these "unchecked market forces have brought capitalism to the precipice". Only the intervention of social democracy -- a euphemism for socialism -- can "save capitalism from itself" and protect us from the perils of "the extreme Left and the nationalist Right". Phew! While the rest of us were relaxing during the summer, perhaps reading some fiction, our Prime Minister was tapping away, imagining himself battling off communists to the Left, fascists to the Right, clad only in a suit of shining ideological purity.   All of us remember Kevin07, shiny faced and earnest, proclaiming himself an economic conservative. In one television advertisement after another his message to Australians was clear: there wasn't a cigarette paper's difference between him and John Howard on economic policy.   Free markets? He loved them. Surpluses? The bigger, the better. Tax? Well, of course it should be lower.   Well, all of that is cast away now. Instead, he preaches social democracy. It is important to remember that social democrat was a term created by avowedly socialist political parties in Europe who wanted to emphasise that they were (unlike their communist comrades) committed to achieving a socialist society through democratic means as opposed to violent revolution.   So in little more than a year, the economic conservative has become a socialist. The essay in The Monthly is such a poor piece of work and has been so widely ridiculed and debunked, it is difficult to believe he imagined it would be regarded as a serious contribution to the debate about the global financial crisis.   It is above all a political document designed to ensure that Australians accord no responsibility to Rudd for our present economic problems. Everything is the fault of the global financial crisis. Nothing is to be blamed on St Kevin.   We saw a good example of this strategy this week. The gross domestic product numbers for the December quarter showed growth was negative. It was perfectly plain that the $10 billion December cash splash had been almost entirely saved: household savings were higher than they had been for many years.   So the cash splash had failed as an economic stimulus. What was Rudd's response? "We cannot swim against the tide."   As usual he is deliberately confusing impotence with incompetence. Just because our Government is bungling its economic response does not mean it is powerless. Rudd has chosen to borrow tens of billions of dollars to spend in ways that simply will not deliver an effective boost to the economy: too little bang for too much buck.   These borrowings will undoubtedly result in higher taxes and higher interest rates in years ahead.   We have offered the Government the opportunity to agree on measures that would cost less and be more effective because, like tax cuts and investment incentives, they would benefit every business across the board.   Because, whether it be fiscal measures or investments in infrastructure, the priority must be to spend money to improve the productivity and efficiency of the whole economy and every business.   Having sought to establish that there is nothing he can do to alleviate our problems -- in other words, however bad it gets it isn't his fault -- he then seeks to identify those people who are responsible for what he describes as 30 years of "failed neo-liberalism". A lot of politicians will argue that the reforms of their immediate predecessor were mistaken, but not many would contend that 30 years of economic reform has been a misguided failure. And yet this is precisely what Rudd argues throughout his essay. He pillories Margaret Thatcher, Ronald Reagan and John Howard as being exemplars of the neo-liberal extremism he so despises.   And yet the past 30 years of economic reform have been undertaken by governments of all political persuasions. If privatisation, deregulation, promotion of competition are symptoms of neo-liberalism then Paul Keating and Bob Hawke, Howard and Peter Costello have a lot in common.   And when we look overseas we see the same pattern. Reagan did undertake economic reform in the US, but then so did Bill Clinton. Indeed, Rudd criticises the repeal of the Glass-Steagall Act in the US, which had kept deposit taking and investment banking businesses separate. Whatever the merits of that particular reform, he should have mentioned that it was repealed under Clinton, not Reagan or the Bushes.   Equally, across the Tasman, the great microeconomic reforms were undertaken by Labour's Roger Douglas and even in Britain, when Tony Blair took the Labour Party into office he did not seek to wind back Thatcher's reforms, which had so transformed and energised the British economy.   The truth is that across the world, even in Rudd's beloved China, there has been a move, often uneven to be sure, towards more open markets and greater economic freedom, including greater free trade. Hundreds of millions of people have been lifted out of poverty as a result. As Henry Ergas observed recently, the 30 years of liberalisation was not a religion but a remedy for stagnant markets, inefficient work practices and, above all, for poverty and unemployment. But if Rudd's global ideological analysis is at odds with the facts, it becomes even more absurd when he turns to Australia. Naturally, he contends that the political home of the dangerous neo-liberal ideology is the Liberal Party.   "The contrast between the competing political traditions within Australia on the role of governments and the market is clear. Labor, in the international tradition of social democracy, consistently argues for a central role for government in the regulation of markets and the provision of public goods."   Rudd's thesis is wrong in every respect. First, the proposition that the global financial crisis was caused by wicked neo-liberal governments deregulating their financial markets and "letting the free market rip" is nonsense. At a fundamental level the crisis arose because of too much cheap money being available for too long. The developing world, especially China, ran huge trade surpluses assisted by an overvalued currency.   Instead of these surpluses being invested in China, domestic consumer demand remained constrained and these surpluses were on lent to the developed world, especially the US. There was some degree of symmetry. Chinese surpluses were lent to Americans to enable them to purchase more goods from China. But they also financed a bigger and bigger asset bubble. Real estate in particular became more overvalued. Interest rates were kept too low for too long.   I should digress here to note that Rudd argues that easy credit is the defining characteristic of "the neo-liberal financial order". But wasn't it Rudd who chastised the Howard government because interest rates were too high and in particular higher than they were in the US?   So if low rates in America were symptomatic of neo-liberalism, how can higher rates in Australia mean we too were in the grip of a neo-liberal conspiracy?   Nonetheless, right through the US financial system growth was fuelled by higher and higher levels of debt, especially in financial corporations and, of course, households. Many people predicted the debt and asset bubble would burst, but with long periods of growth complacency can set in and, as they say, nobody rings the bell at the top.   The immediate trigger was the collapse in the sub-prime mortgage market in the US beginning in the second half of 2007.   Far from being a creature of "unchecked market forces", the US mortgage market is the subject of extensive Government intervention.   For a start, large government-backed mortgage finance companies, in particular Freddie Mac and Fannie Mae, provided between them $7 trillion of low-cost finance to the mortgage market. These companies used an implicit government guarantee to borrow at lower rates than the private sector could borrow and then proceeded to finance about two-thirds of the US mortgage book.   Fannie and Freddie were using the credit of the US Government to finance a housing bubble. And why was that? As with most governments, the US through administrations of both persuasions has tried to promote home ownership, especially for people on lower incomes. Fannie and Freddie were part of that agenda as were many laws that obliged lenders to extend credit to minorities. Far from being a reckless lending practice, "low doc" and "no doc" loan forms were seen as a way of enabling people with bad credit histories to get into their first home.   Add to that the fact that for all practical purposes residential mortgages in the US are without recourse to the borrower. In other words, if a house is worth less than the mortgage, the borrower can give the keys back to the bank, which is unable to pursue the borrower for the difference. All of this added to a long period of cheap credit, which contributed to a housing bubble. Sub-prime loans, which were loans made to people with poor credit records, amounted to about 15 per cent of the total US mortgage book and about 40 per cent of the mortgages written in 2006.   As housing prices rose and rose, loans were made not because the borrower could repay them out of his or her cash flow, but rather out of the sale or refinancing of the property. When the housing bubble burst, as inevitably it had to, the sub-prime mortgage industry was exposed for the colossal exercise in imprudent lending that it was. By this stage the sub-prime mortgages had been sliced and diced into different financial instruments and had found themselves on the balance sheets of many, if not most, of the world's financial institutions. This added element of complexity, indeed obscurity, made the crisis much worse. It was not simply that banks were holding assets that were worth less than book value, their complexity made it extremely difficult to work out what they were worth. One of the perennial mistakes bankers make is not to connect the value of the assets against which they are lending to their preparedness to advance credit. Banks lend more money, asset prices go up. Encouraged by the growth in the value of their security, banks lend more money. And so it goes, until the bust.   But let us compare the US housing finance market with that of Australia. Unlike our American cousins, Australian governments had not sought to manipulate or influence the lending practices of banks. There is no Australian equivalent of Fannie or Freddie. Mortgages are with recourse to the borrower. Banks are expected to make their own credit assessments and lend on commercial terms. Overall, the financial and prudential regulation of our banks and other financial institutions was restructured by the Howard government with the establishment of the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission and the granting of independence to the Reserve Bank of Australia, among many other reforms.   We have had no sub-prime crisis in Australia. In fact, sub-prime loans in Australia represent less than 1 per cent of the total mortgage book. Despite the buffeting from the global financial crisis, our banks are acknowledged as among the most secure and well capitalised in the world.   So there are the facts that demonstrate the delusional nonsense at the core of Rudd's thesis. In the US a mortgage market in which government played a central and directing role blows up. In Australia, where government's role is simply to provide an efficient financial and prudential regulatory framework, the mortgage market remains sound.   And to underline how Rudd's essay is at odds with reality, in the same week that his 7700 words hit the newsstands, Deputy Prime Minister Julia Gillard was in Davos boasting of how Australia's system of financial regulation was "better than world class". She did not mention that it had all been put in place by the "neo-liberal free market extremists" in the Liberal Party.   While Rudd's essay is confused in terms of history and economics, the politics is transparent. He sees the reality of the global financial crisis as an opportunity to strike a blow against his political opponents.   Like a bent copper, he wants to fit up he Liberal Party with the crime of causing the crisis. Similarly, he wants to take aim at me as the leader of the Liberal Party, point to my career in business and investment banking and thereby link me with the downturn in the US. There is no word in English adequate to describe Rudd's audacity here -- but it is certainly covered by chutzpah, a wonderful Yiddish word that describes bare-faced, shameless behaviour.   A classic definition is a man who kills his parents and then seeks clemency from the court because he is an orphan.   It is bad enough to have Rudd trying to turn himself, in the blink of an eye, from an adherent of the cautious, responsible economic conservatism of Howard into a slightly more genteel version of a foaming-at-the-mouth radical such as Hugo Chavez. But to add to that effrontery, we see him every day in the parliament denouncing neo-liberal extremism as he describes me as "the member for Goldman Sachs". All the while, he knows there is not one person in the parliament who has been delivered greater affluence and personal benefits through neo-liberal policies than himself. Remember, Rudd defines the difference between Labor and the Liberals as Labor's commitment to "a central role for government in the regulation of markets and the provision of public goods".   One of those public goods is the provision of job placement services for the unemployed. In 1998, the Howard government closed the Commonwealth Employment Service and outsourced its functions to the private sector, and one of the private firms that benefited conspicuously from this deregulation was the Rudd family business.   I congratulate the Rudds, especially Therese Rein, on their success. Their business grew into a very substantial one in Australia and as other countries followed the Australian approach, grew there as well exporting the expertise developed by them when they seized the opportunity created by Howard's decision in 1998.   But what are we to think of the wealthiest Prime Minister Australia has ever had, a man greatly enriched by the privatisation and outsourcing of government services, standing up again and again to denounce the very policies from which he and his family have profited so extensively. It is more than a bit rich. It is as hypocritical, as chutzpadik, as his essay is absurd. malcolmFri, 06 Mar 2009 23:09:00 GMTf1397696-738c-4295-afcd-943feb885714:361http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/309/Rudds-splurge-is-too-much-too-soon.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=309http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=309&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/309/Rudds-splurge-is-too-much-too-soon.aspx Source: Sydney Morning Herald Thursday, 5 February 2009 The Coalition will vote against the Rudd Government's latest $42 billion expenditure package because it is poorly targeted and unnecessarily large. It is being jammed through Parliament with unseemly haste and, together with the cash splash of last December, amounts to the largest real increase in Commonwealth spending in 35 years. We know this decision will not be popular or earn us good ratings in the opinion polls, but it is the right decision for Australia. The objective of any package at the present time must be to protect and create jobs, support small business and strengthen our economy. But we see scant evidence that it is the most efficient way to underpin Australian jobs. There is no evidence the Government's $10.4 billion spending package before Christmas created the 75,000 jobs the Prime Minister promised - the only objective measure he provided to judge its success or failure. Likewise, there is no indication this package will maximise job creation. Perhaps this is why Wayne Swan's claim - that it will "support" 90,000 jobs over two years - is so modest considering the vast cost. Each job apparently requires an annual outlay by the Commonwealth of $233,000. Most of December's cash handout was saved by households, acting entirely appropriately given the Prime Minister's dire rhetoric and their own circumstances, whereas permanent tax reductions are not only more likely to be spent, but increase incentives. Household saving is prudent - and represents a return to values of thrift that eventually need to be restored in any case - but if everybody saves, the stimulus will be diminished. Too much of this package involves commitments delivered through … incompetent state Labor administrations. Does anyone really believe this money will be spent in a timely, efficient fashion? Can Nathan Rees really get it done? There are legitimate questions about the scale of the deficits and borrowing being contemplated, given the uncertain economic outlook and federal Labor's track record. Almost all economists agree this downturn has a long way to go, but the Rudd Government is firing all its bullets at the first engagement. Labor is good at getting into deficit, but not very good at getting out. The Keating government left behind $96 billion in national debt, and it took the Australian people a decade to repay this debt. Now, Mr Rudd has asked Parliament for permission to take us $200 billion into debt - $9500 for every Australian. Mr Rudd says our deficit will be lower than that of other countries. But unlike most other large industrialised economies, we depend heavily on foreign savers to finance our current account and do not possess a reserve currency supported by global investors regardless of domestic economic policies. And we face substantial intergenerational fiscal challenges. This is why it is so important that the Commonwealth borrow with great care. Even after all the free spending, the package still forecasts that unemployment will top 7 per cent in just over a year - another 300,000 Australians out of work. Given uncertainty over the economy this year, we believe a package of between $15 and $20 billion is more appropriate. If the situation deteriorates further, more can be done, but it is impossible to undo a one-time stimulus once spent. We propose the permanent tax cuts scheduled for 1 July this year and 1 July next year be brought forward, backdated to 1 January this year. By the middle of 2010, this would leave a two-income household earning $80,000 about $1700 better off. Second, perhaps the largest gap in the Government package is the lack of measures that directly and broadly support employment - particularly employment in small business. Accelerated depreciation has some merit but there are measures that would immediately improve the cash flows of small firms and protect jobs, such as the Commonwealth paying a portion of the Superannuation Guarantee Levy on behalf of small employers. This would directly cut the costs of employment, and preserve jobs. Third, we support infrastructure spending but smaller, better-targeted programs will be more cost effective. Unlike the Prime Minister, we do not believe there is no alternative to our approach and we invite the Government to sit down and discuss alternative stimulus measures, which would be responsible and allow sufficient capacity in public finances to meet emerging challenges. It is up to the Prime Minister to follow the lead of the Obama Administration and engage in a discussion about how to confront the crisis, rather than deriding any alternative opinion to his own as "neo-liberal extremism". malcolmThu, 05 Feb 2009 06:59:00 GMTf1397696-738c-4295-afcd-943feb885714:309http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/308/A-debt-burden-to-shame-Keating.aspx#Comments1http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=308http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=308&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/308/A-debt-burden-to-shame-Keating.aspx Source: Daily Telegraph EVERY time I meet a school group visiting Parliament House, I tell them how every MP and senator is working hard to make Australia a better place for them to grow up. As of today, there is nobody who can look those children straight in the eye to tell them their economic future is secure. Not when the Rudd Government's latest $42 billion spending package includes provision to borrow up to $200 billion - that is, a total of $9500 for every man, woman and child in Australia. It is important we understand exactly what Mr Rudd is threatening here: the single biggest spending binge since the Whitlam years, and a debt burden that would put the Keating Government to shame. And it is a package that doesn't do enough to protect and create jobs, support small business and strengthen the economy. When in government, we in the Coalition delivered 2.2 million jobs. This was the result of rigorous, well-crafted policies to create one of the strongest, most successful and prosperous economies in the world. We sought to remove financial burdens from coming generations, and we did so. We recognised that every billion dollars spent, every billion dollars of extra debt incurred, would have to be repaid by our children. So, from 1996, we paid off $96 billion of Labor debt. This was hard work, involving tough decisions. Mr Rudd has made not one hard decision since coming to office. He has wanted to be Santa Claus - everybody gets a prize. The problem with everybody getting a prize today is that our children will be carrying a very heavy penalty in the years to come. This is why we will vote against this package. That is why we do not support a further round of cash handouts. We know this will not be popular. But it is the right thing to do. Somebody has to stand up for future generations, and not cruel their chances in life by weighing them down with staggering levels of debt. We in the Coalition do not reject the need for a stimulus at this time. But our judgement is that $42 billion is too much right now. The Government is looking increasingly like a frightened soldier who fires off all his ammunition in a panic in the first minutes of a battle. This downturn may be very long lasting. We cannot afford to spend so much all at once. We need to keep a few shots in the locker. A more appropriate stimulus would be in the order of between $15 billion and $20 billion dollars. As part of that, we would support the bringing forward of the July 1 tax cuts to January 1 this year. Our plan would benefit all taxpayers, most significantly those on low and middle incomes. It is very well targeted. It would not put $950 in everybody's pocket today. But it would increase permanent income and create greater incentive to work and to invest, providing a bigger economic boost than public spending. We have said again and again that we are prepared to sit down and discuss with the Prime Minister the range of responses to deal with the economic challenges we face. All of our offers have been rejected. For my part, I am committed to ensuring every dollar is spent wisely. Most Australians will know in their hearts nothing comes for free and that, one day, somebody has to pay. malcolmThu, 05 Feb 2009 06:57:00 GMTf1397696-738c-4295-afcd-943feb885714:308http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/375/Rudds-rescue-plan-is-unnescessary-and-counterproductive.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=375http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=375&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/375/Rudds-rescue-plan-is-unnescessary-and-counterproductive.aspx THIS year the three top priorities should be jobs, jobs, jobs. Every element of Government policy should be focused on keeping Australians in jobs. That's why we have been consulting widely - including via our www.jobsforaustralia.com.au website - with small and medium businesses on the policies they believe will help them keep their employees on the payroll.   And yet for the past week the Rudd Government has been trying to sell its latest economic initiative, which will have no impact on employment other than perhaps creating a job for the National Australia Bank executive who proposed it.   Rudd is planning to put billions of dollars of taxpayers' funds at risk in a new "Ruddbank", whose purpose it is to refinance foreign bankers who choose to withdraw from lending to Australian property companies.   The purpose of the Ruddbank is to prevent commercial property values falling to a level where the main Australian lenders would lose money on their existing loans.   Australians who have suffered heavy losses on their share portfolios and superannuation accounts and seen the value of their homes decline will wonder why the big four banks and commercial property are deserving of such privileged attention from Government.   The Ruddbank is not designed to finance construction. It is, as the banks have made abundantly clear, designed to refinance foreign loans made on existing, built commercial properties.   So the Government's claim that Ruddbank will save 50,000 jobs is nonsense, a figure plucked out of the air to get a headline.   Equally outrageous is its claim that by propping up values in the commercial property market, residential values will be supported. Housing expert Christopher Joye exposed the total lack of evidence for such a connection in The Australian last week.   It is perhaps hardly surprising NAB made this proposal, after all if you don't ask you don't get. What is incredible is that the Government has gone along with it.   There is no evidence foreign banks are withdrawing from the Australian market. Indeed they increased their loans to non financial corporations by more than 15 per cent over the past year.   But if they were tempted to reduce their exposures, nothing is more likely to help them do so than a Government offering to refinance the loans they abandon. After all, once the Ruddbank is in place, the taxpayer will fill the gap, so they can scale back their syndicated loans without fear the venture will collapse, which would have forced them to take a loss on any amount they are still owed.   Bad enough that Rudd once again shows himself incapable of understanding the law of unintended consequences. But the real scandal is that it is the taxpayer who will pick up the tab.   Ruddbank is to be a joint venture between the Government and the four major banks. The conflicts are enormous. Consider a syndicated loan secured on an Australian office building. Valuations have declined in line with the market and in the normal course of events the lenders are likely to choose to stay with the credit rather than risk forcing a sale and a possible loss on their loans.   However, thanks to Ruddbank, the foreign lender knows that if he demands his money back and threatens to force a sale the Australian lenders will lean on their Government partner to secure a replacement loan from Ruddbank.   After all, the Australian banks don't want a forced sale because they might lose money. Better to get the Government to take out the foreign bank and ensure a lower value for the building is not realised with all of the implications that may have for their other property loans.   In the commercial world in circumstances like these, "new money" has a lot of leverage and can demand priority over existing loans. But in Ruddbank the "new money" of the Government is going to be guided by the conflicting vested interests of the "old money" of the big four banks.   It's a game in which the taxpayer is being set up to lose.   So it comes as no surprise that Ruddbank was dreamed up without consulting the Reserve Bank of Australia or that the chairman of the Future Fund and former chief executive of the Commonwealth Bank, David Murray, had grave concerns.   But it follows a disturbing pattern of naive and impulsive policy by the Rudd Government.   After all, it is only a few months ago that Rudd gave an unlimited guarantee of all bank deposits. He did so without discussing the proposal with the Reserve Bank and within days governor Glenn Stevens was pointing out the growing dislocation in financial markets the rash decision had created and begging the Government to impose a cap "the lower the better".   The dislocation was considerable and has not been reversed. Some 250,000 Australians saw their investments in mortgage funds and cash management trusts frozen. Finance companies were unable to raise short term finance with the consequence they could not continue to finance car dealers.   And so the Government moved to set up a finance company to provide finance to the vehicle retailers. Nearly two months later it is yet to start financing and car dealers around Australia are struggling to stay in business.   Rudd is keen to be seen to be doing something about the global financial crisis, but that is no excuse for doing anything.   Of course Rudd, who was an "economic conservative" in 2007 is now a reborn socialist, claiming the 11 1/2 years of Coalition government left Australia ill-prepared for the downturn.   Really?   Rudd inherited a Treasury with all Government debt repaid and billions of cash in the bank. The only reason Rudd has been able to splash cash around without having to go into debt is because of the Coalition's good economic management.   And let us not forget that the Australian banks did not plunge into sub-prime loans like their US counterparts and that the regulatory system that ensured this was put in place by the coalition government.   So far Rudd has given us an ill thought out and damaging unlimited deposit guarantee. We have had a pre-Christmas fiscal stimulus, or "cash splash", which however much appreciated by the recipients of the $9 billion does not appear to have been an effective stimulus at all.   We have had an angry Treasurer claiming tax cuts have no place in a fiscal stimulus strategy; he prefers Australians to line up for a one-off handout than let them keep more of what they have earned.   And now we have Ruddbank, designed to prop up commercial property values for the benefit of the big four banks. Rudd should drop the Ruddbank idea. It's unnecessary and counterproductive.   Wayne Swan says he is not interested in what the Opposition thinks. That doesn't surprise me. All we are thinking about are jobs for Australians. Swan and Rudd are only interested in their own.    malcolmMon, 02 Feb 2009 04:23:00 GMTf1397696-738c-4295-afcd-943feb885714:375http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/61/Why-Rudd-should-put-families-before-banks.aspx#Comments1http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=61http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=61&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/61/Why-Rudd-should-put-families-before-banks.aspxIf there is one lesson the whole world should learn from this credit crunch it is that banks and financial institutions should be more accountable. It is not populist, in fact it's responsible common sense, to question their assurances about financial matters. Less than two weeks ago, the Reserve Bank said: "In contrast to many other banking systems around the world, the Australian banking system continues to be highly profitable. For the five largest banks, headline profits after tax and minority interests were around $10 billion for the latest half year. This represents an increase of 12 per cent compared to the same period a year ago." It went on to say, in its Financial Stability Review, that while an increased level of bad debts would see profits decline, it was expected to be by about 10 per cent. At that level, profits would "be much higher than that being earned in many other banking systems around the world and many other industries in Australia". In the real world there are thousands of Australian businesses battling with higher interest rates and slower sales, who can only dream of this year's profits being 90 per cent of last year's. Last week I met with a Queensland developer who had a $50 million loan facility. It supported his business which employs hundreds of workers. It was priced at 1 per cent above the bank bill rate and his income had to be equal to or greater than one times the interest expense. His loan is being renewed. The margin is now 2 per cent above bank bills. His income must be 1.5 times the interest expense. This is a typical experience - money for business is getting more expensive and the terms on which it is lent are getting tougher and in many cases a lot more expensive and tougher than the example above. The developer will now have to slow his business right down. He will take on fewer projects and employ fewer people. This is how changes in interest rates feed into the real economy. The tradesman who will get less work from the developer will have a home mortgage to deal with. He will wonder why the Prime Minister and the Treasurer, rather than the bank chief executives, are arguing the case for the banks not to pass on the entirety of any official cut in interest rates. He will be wondering too why the largest companies in Australia have the Prime Minister to put their case, but nobody in government is there to put the case for the thousands of small and medium businesses that depend on credit for their operations, growth and survival. Is it "populism" to say that if highly profitable banks wish to increase their interest margins they, rather than the Prime Minister, should make the case that is right to do so? Is it populist to take the Reserve Bank's own appraisal of our banks at face value? We should not forget that the Prime Minister and Treasurer have repeatedly made wrong calls on this economic crisis. Earlier in the year they embraced the view that inflation was by far the biggest risk to our economy and the Reserve Bank should raise rates. Swan cranked up the rhetoric to say inflation was out of control and indeed we had two rate rises. At the same time, when I suggested the Reserve Bank should not raise rates but stay its hand and await further developments from the global credit crisis, which I feared would slow both global and Australian economic growth, I was also criticised by Rudd and Swan as being "populist". With the benefit of hindsight and as the Reserve Bank scrambles to reverse the rate rises of earlier in the year, my caution seems more prudent than populist. We do need profitable and secure banks - we all agree on that. But we want all Australian businesses to do well. We need households that can afford to meet their mortgage payments and plan for the future. If banks want to charge higher margins, then they can make their own case for it. The Prime Minister should be standing up for all Australians - small businesses as well as big, borrowers as well as lenders. Do you think Prime Minister Rudd is putting the banks before homeowners? adminWed, 08 Oct 2008 01:47:00 GMTf1397696-738c-4295-afcd-943feb885714:61http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/138/Home-buyers-pay-the-price.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=138http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=138&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/138/Home-buyers-pay-the-price.aspx Source: Sydney Morning Herald Normal 0 MicrosoftInternetExplorer4 st1":*{behavior:url(#ieooui) }st2":*{behavior:url(#ieooui) } /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-style-parent:""; font-size:10.0pt; font-family:"Times New Roman";} Home buyers will breathe a sigh of relief at yesterday's cut in official interest rates. But their relief may be shortlived, because the 0.25 percentage point cut in interest rates has been bought at a heavy price - the jobs of thousands of Australians. In yesterday's statement by the Reserve Bank Governor, Glenn Stevens, he noted "it is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead". Indeed, the Reserve Bank's two interest rate rises earlier this year may not have occurred at all, had it not been for Wayne Swan's relentless campaign of talking up inflation. Right from the election, MrSwan and Kevin Rudd argued that inflation was out of control, when headline inflation was 3 per cent. We will never forget Mr Swan telling the world that Australian inflation was out of control - "the inflation genie was out of the bottle" - the day before the Reserve Bank met in February and decided on the first of its two rate hikes in 2008. And in June, when the inflation rate was 4.2 per cent, Kevin Rudd blamed the previous government and said that the "inflation monster" would "wreak havoc" on interest rates. But now that inflation has risen to 4.5 per cent, both Mr Swan and Mr Rudd are calling for banks to lower their rates and are busy taking credit for a 0.25 percentage point cut in official interest rates, still around 0.75 percentage points higher than under the Coalition. And while we welcome the relief for mortgage holders and borrowers, the Reserve Bank did not cut rates because inflation is falling - it expects inflation to rise to 5 per cent. So why cut rates? The real reason is that even though inflation is still rising, our economy is showing signs of slowing. It is the slowdown that Mr Rudd and Mr Swan said we had to have. Unemployment is increasing, household wealth has fallen, retail and motor vehicle sales have fallen, and business and consumer confidence have plummeted. Not to be outdone on interest rates, Labor's inflation spin also extends to fiscal policy. Time and again they have said that their budget would put "maximum downward pressure on inflation and interest rates". But Labor's rhetoric is not matched by reality. In the lead-up to the November 2007 election, Labor copied the Coalition's tax cuts and many of our other policies. Even though there were no promises to increase taxes, the budget introduced tax increases that were unfair and inefficient. Labor created a new distortion in the alcohol excise by increasing the tax on ready-to-drink beverages, wrapping it in a cloak of an attack on teenage binge drinking. It decided to slug purchasers of new cars with an increase in the so-called luxury car tax. And it put upward pressure on gas prices with a new tax on condensate, a light sweet crude oil. In all, Labor took decisions that increased taxes and other revenue by $19.7 billion over five years. At that same time, Labor decided to increase Government spending by $18 billion. So much for fiscal responsibility. When the Coalition took office in 1996 we inherited a budget deficit of $11 billion and $96 billion of Government debt. We worked assiduously to pay off Labor's debt which was finally paid off on April 21, 2006. That meant Labor inherited net assets of $45 billion when it came to office. And over the 11½ years of the Coalition government, we took decisions that reduced taxes and other revenue by a net $214 billion. Yet the Coalition is now being criticised for opposing Labor's tax increases because that will "blow a hole" in Labor's surplus and will - you guessed it - put upward pressure on inflation. Let's be clear. Labor inherited surpluses of $94.4 billion over five years. Labor's tax-and-spend decisions will increase the accumulated surpluses by only $1.7 billion over five years to $96.1 billion. Given the extremely strong fiscal position Labor inherited, they simply had no good reason to increase taxes. Increasing taxes leads to higher prices, which should be avoided at times of relatively high inflation. And with the economy now weakening there is a further reason not to raise taxes. Most worryingly, Labor proposes to hoard these surpluses - rightfully the property of the taxpayer - to build up large re-election nest eggs to be deployed for political purposes.adminWed, 03 Sep 2008 22:42:00 GMTf1397696-738c-4295-afcd-943feb885714:138http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/139/Gloomy-words-to-take-a-nation-down.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=139http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=139&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/139/Gloomy-words-to-take-a-nation-down.aspxBack in January it was obvious the global credit crisis posed real threats to our economy. A credit crisis is a crisis of confidence. Interest rates are higher because investors are less certain about the prospects and security of those to whom they are lending. In response, our Government should have pursued at least two clear economic objectives. First, we had to be careful to ensure that economic policy reacted prudently to higher levels of inflation. It was almost inevitable that the United States credit crisis would result in a global credit squeeze. In other words, higher interest rates and tighter credit were coming our way, anyhow. Second, we had to do everything we could to differentiate our financial system, our banks and our mortgage markets from the wreckage in the US. Australia had a much more prudent lending culture than the US. Subprime loans amount to less than 1 per cent of mortgages outstanding. In the US, the number of foreclosures was rocketing but in Australia they remained at historically low levels. Banks were well capitalised and profitable. We did not deserve to be tarred with the same brush as the US mortgage markets. The securitisation markets, closed to US mortgages, should not, by rights, be closed to ours. That closure has made our mortgage market less competitive and raised the cost of finance for all Australians. We had a vital national interest in differentiating our market from that of the US. That is why in January I spoke about the underlying strength of the Australian financial system and encouraged the Reserve Bank not to raise interest rates but to stay its hand and watch international developments. There was likely to be, I said at the time, more than enough monetary tightening coming through the global system. To my horror, the federal Treasurer, WayneSwan, took the opposite approach. Again and again, and most notoriously on February 4 - the day before the Reserve Bank met - Swan repeated what became his own Swan song: "The inflation genie is out of the bottle." This was not just egging the Reserve Bank to put up rates; it was begging the bank to do so. Swan and KevinRudd then continued all year to talk up inflation and talk down the economy which, despite evidence to the contrary, they contended had been left in a smoking wreck by 11½ years of mismanagement by JohnHoward. Rudd developed his own theme. Not content with an "inflation genie," he talked of an "inflation monster". So intent were Swan and Rudd on their political strategy of fingering the Howard government for economic mismanagement, they forgot that every time they undermined confidence in our economy they increased inflationary expectations and added to the cost of money for Australian households and businesses. Swan is the only Treasurer in the world who has spent this year talking down his own economy. The US Secretary of the Treasury, Hank Paulson, with a much worse economy and graver challenges, consistently showed leadership and confidence. While Swan was shrieking about genies escaping from bottles, Paulson said on February 5: "The US economy is diverse and resilient, and our long-term fundamentals are healthy … While we are in a difficult transition period as markets reassess and reprice risk, I have great confidence in our markets. They have recovered from similar stressful periods in the past, and they will again." When Australia desperately needed leaders who would proclaim that we were different, that our economy was stronger, our mortgages more secure, our banks better capitalised - that we should not be tarred with the subprime brush - they instead made headlines with their repeated claim that inflation was out of control. Instead of trying to blacken the reputation of the Howard government, they should have been burnishing Australia's financial and economic reputation. They should have been using the bully pulpit of high office to pry open the securitisation window for Australian mortgages and restore international confidence in our financial markets. Australia is a much safer place to invest than many other countries and markets. But we need leaders who will shout that from the rooftops, who will look beyond the confines of party politics and recognise that the heavy price of trashing the economic reputation of JohnHoward in 2007 is undermining confidence in Australia's economy in 2008.adminWed, 20 Aug 2008 22:43:00 GMTf1397696-738c-4295-afcd-943feb885714:139http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/140/Labors-rhetoric-in-search-of-policy.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=140http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=140&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/140/Labors-rhetoric-in-search-of-policy.aspx Source: Sydney Morning Herald In March, Kevin Rudd proudly boasted that his Government had put "a considerable and necessary emphasis on macro-economic stability". Then, just two months ago, he declared in Parliament that the "inflation monster" was out of control in Australia. That was the considered assessment of the national economic situation by the new Prime Minister following the first Labor Government budget in more than a decade. Not to be outdone, before May 13 Wayne Swan travelled the country repeating again and again that the "inflation genie was out of the bottle" and that the swinging spending cuts that were planned for budget night would cause "pain" for ordinary Australians. The message was clear: Rudd and Swan believed the economy was overheating and needed to be slowed. Labor's budget focus would be on short-term macro-economic issues, and they would attempt to use fiscal policy in a counter-cyclical fashion. To sell their political message, they ramped up the rhetoric. Instead of speaking in a careful, measured way about inflation, both Rudd and Swan have been talking up inflation, exacerbating inflationary expectations and egging on the Reserve Bank to raise interest rates and slow the economy. Australian home buyers should never forget that it was Wayne Swan who coined his notorious and reckless claim that the "inflation genie was out of the bottle" just before the Reserve Bank met in February. It was a clear and unequivocal message to the Reserve Bank: put up interest rates. At the time, I urged him to stop talking up inflation and talking down the economy. It was obvious that the subprime crisis in the United States was not just a cloud on the horizon, but a gathering storm. It was clear that we were in for tougher economic times. A global credit squeeze was looming. Far from preparing for it, Swan and Rudd set out to make it worse. Well, it now looks as though Labor's wishes for a slowdown will be granted. Since Labor has come to office the growth rates of retail turnover, building activity and approvals, motor vehicle sales, and household and business credit have all weakened. Since December a plunging sharemarket has hammered superannuation returns, property values have started to slide in many of our cities and consumer confidence is at its lowest level since Paul Keating's 1991 "recession we had to have". The recent May Sensis Consumer Report found that 35 per cent of households now feel they are worse off than they were a year ago. To top it off, yesterday the Commonwealth Bank/ACCI business confidence indicator reached an all-time low. So much for creating economic stability. Yet, following the release of this economic data, Mr Rudd has run for the hills. On Friday, in one of the more bizarre interviews Rudd has given since becoming Prime Minister, he singularly refused to acknowledge either any slowdown or his Government's role in creating it. The interview, on the ABC's AM program, began with the straight-forward question: "Is this the slowdown we had to have?" Rudd refused to come close to addressing that or any other question. This flaky performance only served to underline the fact that Rudd has a political strategy built on spin but no economic strategy or substance. Since last year's election, Labor has been so busy trying to score political points, so focused on symbolism and so preoccupied with blaming the previous Coalition government for everything under the sun, that it has completely ignored, or misunderstood, warnings on the emerging economic threats. As a result, it has no clear and consistent medium-term economic strategy, let alone any answers on how to deal with an economic slowdown. Labor's budget even forecast lower economic growth and higher unemployment, but contained no policy measures to address these issues. And why would it? After all, every single piece of Labor rhetoric has suggested that the Government welcomes an economic slowdown. As Australians reflect on tougher economic times, they will know that this Labor Government has made tough times worse, a credit squeeze tighter and has shattered business and consumer confidence. adminWed, 06 Aug 2008 22:45:00 GMTf1397696-738c-4295-afcd-943feb885714:140http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/141/RSS-Feed--Email-to-a-friend--Archives-Vital-ingredient-missing-in-the-emissions-scheme-mix.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=141http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=141&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/141/RSS-Feed--Email-to-a-friend--Archives-Vital-ingredient-missing-in-the-emissions-scheme-mix.aspxAustralian taxes are being spent on an advertising campaign promoting the Government's green paper on an emissions trading scheme - only now it is not called an "emissions trading scheme". The spin doctors found that unsatisfactory and it has been renamed a carbon pollution reduction scheme - but an emissions trading scheme it is. This campaign earnestly seeks to attract the interest of Australians, to reach out to them for their views. "Tell us what you think of our great plan," the ads say. All will have their say - but must do so by the middle of September. Many people will struggle to read the 516 pages of the green paper by September, let alone the equally weighty "draft" report of Professor Ross Garnaut. But if they do they will find something missing: economic modelling - the numbers that assess the costs and benefits. That's right - Treasury's modelling will not be ready until October, perhaps even November. So we are being asked to prepare submissions on the green paper without any idea of what Treasury believes the emissions trading scheme might cost. And we do not know what the rate of emissions cuts will be either. A flat or gradual trajectory may be relatively painless - a steep one very painful indeed. Both might reach the same objective. Companies with thousands of jobs and billions of dollars at risk will be asked to write one of the most important submissions in their history in the dark. Kevin Rudd was elected on a platform of change. But will this change - this latest example of "new leadership" - catch on? Will public company directors be able to persuade their shareholders to re-elect them, let alone increase their remuneration, without showing them the accounts? I don't think so. The challenge of global warming and its response deserves better than this. The spin has to stop. The hard work, the detailed design, the careful painstaking analysis and consultation has to begin. Nothing screams out of the literature on climate change more than the importance of carbon capture and storage. With China building enough coal-fired power stations to equal Australia's total capacity every six months, there is little prospect of meeting those long-term emission reduction goals without carbon capture and storage being made to work. The Coalition government committed considerable funds to carbon capture and storage projects, including the Gorgon project in Western Australia. But all of the projects in operation are very small. While there are several carbon capture and storage projects of scale internationally in the oil and gas business, and with more to come including Gorgon, nowhere in the world is there a major coal-fired power station that is using it to make it emission-free. As the world's largest exporter of coal - and being heavily dependent on it - Australia has a very keen self-interest in ensuring that carbon capture and storage is shown to work effectively sooner rather than later. The Howard government was very focused on carbon capture and storage. I do not detect the same enthusiasm or commitment to clean coal technology from the Rudd Government. Indeed the Government's extended mandatory renewable target, in contrast to the Howard government's clean energy target, expressly excludes it as a qualifying technology notwithstanding its vital importance to the nation's, and the world's, clean energy future. And when it comes to the emissions trading scheme, Rudd is already off to a bad start by promising to introduce it in 2010, allowing too little time to take into account its many complexities, only some of which we have seen. When Rudd calls on the Coalition to be his collaborators, we say that we will certainly not collaborate on a rushed job. Nor will we collaborate on putting at risk Australian industries, jobs and our standards of living for no environmental gain. We are thoroughly committed to an economically responsible and environmentally effective response to climate change, one that will speed the world to a high-energy, low-emission future. In fulfilling that commitment we will act resolutely and responsibly in our national interest. adminWed, 23 Jul 2008 22:52:00 GMTf1397696-738c-4295-afcd-943feb885714:141http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/142/2010-makes-haste-not-sense.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=142http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=142&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/142/2010-makes-haste-not-sense.aspxLast year the Howard government committed to introducing an emissions trading scheme not later than 2012. It was to be the world's most comprehensive to date, including more than 70 per cent of all emissions. Its introduction was not conditional on a post-Kyoto global climate change framework being agreed to; in that sense it was unilateral action. We also recognised that while an ambitious long-term emissions reduction target could be set for 2050, the most important targets were those in the near and mid term. They would need to be carefully set in the light of many factors, not least of which would be the state of international negotiations. If the world quickly committed to substantial reductions, with all major economies playing a part, then we could be more ambitious. If progress was slow, then our emissions reduction targets would need to be moderated. The truth is that the most heroic emission reductions in Australia will be futile if there is no effective global action, especially from the largest and fastest-growing emitters such as China, the United States, India, Japan and Europe. In our policy we recognised that "It may take some time for an effective global framework for emissions reductions to emerge". We also recognised that "our first-hand experience in implementing … an emissions trading system" would be of considerable assistance in our international discussions and negotiations aimed at achieving an effective global climate change agreement. Following the announcement of our policy and other measures, John Howard achieved a breakthrough in climate change diplomacy at the Asia-Pacific Economic Co-operation forum in Sydney last September. For the first time China agreed to contribute to a global goal of emission reductions. Previously, China's position had been that emission reduction was the responsibility of the developed world. This unbalanced and ineffective approach was reflected in the Kyoto Protocol's first commitment period expiring in 2012. We recognised that a poorly designed emissions trading scheme could harm Australia's economy. If we imposed a heavy carbon price on our trade-exposed industries such as aluminium, steel, gas and coal mining, we could make them uncompetitive with rivals in developing countries without any carbon price. We would end up exporting the jobs and the emissions - a loss for our economy with no environmental gain to the planet. We have to strike the balance between being a leader on climate change and being left out on a limb. The most important leadership role for Australia is where we were most focused last year: the development of clean coal technology and new strategies to stop deforestation in tropical countries such as Indonesia and Papua New Guinea. Coal is the most abundant and cheap source of stationary energy, and carbon capture and storage is the key to effective global emission reductions, especially in China and India. Our clean coal partnership with China and global forest project with Indonesia are initiatives the world needs and the Rudd Government should continue. None of this is easy and principles readily expressed can be difficult to apply in particular cases. Our officials, and indeed business, advised last year that a start date of 2011 was possible, but that only 2012 was confidently achievable. Last year Kevin Rudd promised his emissions trading scheme would start in 2010. He had no basis for knowing whether that was feasible. He simply wanted to make a political point. Rudd should try an unaccustomed dish, humble pie, admit he was wrong and go back to the original start date that we were advised last year. It's more important to get this emissions trading scheme right than to start it a year or two earlier. The earliest we will know the shape of the post-Kyoto climate agreement is in December next year. Common sense says we should give ourselves time to fine tune our scheme in light of that agreement. A 2010 start date gives us no opportunity to do so. Rudd likes to talk about climate change in theological terms - you are either with St Kevin in all things or damned as a climate sceptic. The debate has moved on and he has to move on too. The challenge is to design an emissions trading scheme that efficiently delivers the least cost abatement, which protects industries and jobs and which is administratively straightforward. adminWed, 09 Jul 2008 22:53:00 GMTf1397696-738c-4295-afcd-943feb885714:142http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/143/Rudds-big-fraud-all-symbols-and-no-substance.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=143http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=143&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/143/Rudds-big-fraud-all-symbols-and-no-substance.aspx Source: Sydney Morning Herald Right at the heart of the Rudd Government is an emptiness - a vacuum between the rhetoric and the reality; between the empathy and the action. All last year Kevin Rudd wandered around Australia, in and out of petrol stations, supermarkets and hospitals. He built the expectation that he could fix our problems - prices would be lower and waiting lists shorter. And when he wasn't doing that, he had Peter Garrett in tow with a couple of solar panels strapped to his back, ready to tell us about our new clean, green energy future. And since election day we have had one grand symbol after another. Kyoto ratified, a Sorry statement, even a new promise to disarm the world of nukes to provide a theme for Rudd's latest overseas trip. But symbols without substance are a fraud. And while Rudd loves the spotlight, he appears blinded by the harsh light of the reality of Government. Far from reducing petrol prices, Rudd has FuelWatch, a scheme his own expert departments say will reduce competition and put prices up. Far from greening Australia, Rudd has destroyed the solar panel industry by slashing the Howard government rebate. And, perhaps worst of all, by changing the medicare surcharge levy he has simultaneously added up to 1 million people onto public hospital waiting lists and increased the price of private health insurance for everyone else. The recent reports of a chaotic Prime Minister's office ring disturbingly true. There is a growing concern in the community that this new Government is not in control, that it is reacting from one crisis to another, focused on the daily news cycle instead of the long term. And that is why we have seen such a sharp collapse in business and consumer confidence to near record low levels, according to the Westpac Index, which began in 1974. Rudd says it is not his fault - but rather that of the "international oil shock" that has shattered consumer confidence. So let us look at another international shock: the September 11 attacks in New York, when the two mightiest buildings in the centre of the world's financial markets were destroyed. Western countries like Australia then appeared to be a facing a threat from terrorism to our very existence. The Westpac consumer sentiment index fell from 107.6 to 99.5. But by the next month it had rebounded, and by January it was 110. Since the Rudd government came to office the index has dropped 23.3 per cent. It is now at its lowest level since December 1992, when the nation was crawling out of Labor's "recession we had to have". Why has Australian consumer confidence taken a greater dive than after the September 11 attacks in 2001? It is because of a lack of leadership. Confidence has to be based on consistency and competence - a real ability to deal with the big issues and take decisive action. But as we look behind the facade of symbols and photo opportunities, what we see from the new government is a void. Where is the substance? Where is the consistency? Where is the predictability? The thought bubbles are starting to become a joke. Rudd announces his plans for an Asia- Pacific economic community based on the European Union. Freedom of movement across borders, a common currency, common commercial laws and standards - no wonder it was panned by both Hawke and Keating within 24 hours. And then we learned that his emissary to lead this great endeavour had been advised of the new project two hours before Rudd's speech. We don't have a Prime Minister - we have a Prime Commentator. Like the Peter Sellers character Chauncey Gardiner in Being There, when it comes to fuel, Rudd likes to watch. His soft-soaping and spin have run their course. Kevin Rudd was elected not because he had new ideas, but because he was new. But the novelty has worn off, and the emptiness of the new Government is taking its toll. adminWed, 25 Jun 2008 23:18:00 GMTf1397696-738c-4295-afcd-943feb885714:143http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/147/Fuel-and-emissions-not-just-hot-air.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=147http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=147&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/147/Fuel-and-emissions-not-just-hot-air.aspxIs the Australian motorist caught in a perfect storm? Petrol is at an all-time high, driven by insatiable and growing demand for oil in the developing world and the prospect of declining supplies from the oilfields of the world. At the same time, the need to put a price on carbon dioxide emissions threatens to add to the price of fuel. Kevin Rudd cynically exploited concern about rising fuel prices last year, promising that he would be able to keep petrol prices lower. But false promises always catch up with those who make them and so we now see Rudd twisting and turning in a net of his own creation. His first effort was a price-fixing scheme called FuelWatch whereby petrol retailers would have to set their prices a day in advance and not move them up or down for the next 24 hours. And as leaked cabinet correspondence revealed, all of the relevant Government departments advised against the scheme saying it would, in fact, push prices up. A host of senior ministers, including the Energy Minister, Martin Ferguson, argued against it on the same grounds. As FuelWatch flopped, the Prime Minister turned to a new target: high fuel prices were the fault of the Organisation of the Petroleum Exporting Countries. They should pump more oil to bring down the price, he said, and he would use his hitherto unknown influence with Saudi Arabia, Iran, Kuwait and Venezuela, among other large producers, to get them to sell more of their finite and appreciating resource at a lower price. In other words to act against their own self-interest. And while he is in the mood for lecturing other nations, he could encourage the Chinese and Indians to stop subsidising oil prices and, by doing so, inflating demand and global prices. Good luck on both counts. Kevin Rudd is speared on his own spin. So let us leave the hollow posturing of the Prime Minister for a moment and focus on the real issue. The inexorable laws of supply (dwindling) and demand (growing) mean that the days of cheap oil are well and truly over. This does not mean there will not be plenty of retreats and advances in price along the way. But while the price line may be a jagged graph, the long-term trend will continue to head north unless there is either a significant increase in supply (improbable) or a significant decline in demand (unlikely, at least in the short term). And at the same time as the Australian motorist wearily fills up at $1.60 a litre, there is the prospect of further price rises caused by emissions trading. The Europeans chose not to include liquid fuels in the emissions trading scheme at the outset. Should Australia do the same? There have been two very significant changes in the economic environment since Dr Peter Shergold recommended its inclusion in his emissions trading report received and adopted by the Howard government last June. First, fuel prices have continued to rise. In the past year, the average price of unleaded fuel in Sydney has risen by 31 cents, the equivalent of a $132-a-tonne carbon price on petrol. If a carbon price is intended to promote more efficient use of fuel by raising prices - well the global oil market is already doing that. Second, most of the work done on the introduction of an emissions trading scheme in Australia assumes it would commence with a low price, say, $10 a tonne rising over time to $50 a tonne. However, recent work by the International Energy Agency suggests carbon prices as high as $200 a tonne (equivalent to nearly 50 cents on a litre of fuel) would be required in order to achieve a global reduction in carbon dioxide emissions to 50 per cent of today's levels by 2050. All of this means that the key objective for policymakers must be to ensure a transition with as little pain as possible to an economy that is less carbon-intensive and in particular less dependent on oil and, where it uses oil, uses it much more efficiently. Whether or not fuel should ultimately be included in the scheme and, if so, whether the additional carbon cost on fuel should be offset by cutting fuel excise, are questions our policymakers will confront after the release of Professor Ross Garnaut's draft report and the Government's green paper next month. adminThu, 12 Jun 2008 01:33:00 GMTf1397696-738c-4295-afcd-943feb885714:147http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/148/The-risk-of-creating-an-untouchable.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=148http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=148&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/148/The-risk-of-creating-an-untouchable.aspx Source: Sydney Morning Herald How's this for a financial nightmare: the governor of the Reserve Bank is discovered to have been engaged in insider trading - using his position to influence the outcome of a takeover of an Australian bank. When the news breaks, the market drops 10 per cent. The governor refuses to resign. Confidence in the Australian financial system plummets. The International Monetary Fund refuses to admit the governor to its upcoming meeting of central bankers. Calls are heard from around the world for the governor to be fired. As every week goes by, the situation at the top of Martin Place gets worse. But the law does not allow him to be sacked. Fantasy? Well, it happened in Italy in 2005. Antonio Fazio had been the governor of Banca d'Italia since 1993. He was a pillar of respectability - as noted for his devotion to the central bank as he was for his religious piety. Then he was found to have been improperly involved in a takeover of a commercial bank. The scandal was overwhelming. He refused to resign and under Italian law could not be sacked. The Fazio affair was absurd. Who in their right mind would have a central bank with an unsackable governor? How about Wayne Swan? This week the Treasurer introduced a bill that would give the governor the same exemption from being fired by the government of the day that the Australian statistician and the commissioner for taxation enjoy. Under the law as it stands, the Reserve Bank governor and deputy governor serve "subject to good behaviour". The act also provides that if the governor or his deputy becomes "permanently incapable" or bankrupt, or engages in outside paid employment, the Treasurer shall terminate their employment. Of course, bankruptcy or having an outside job are simple factual matters, and even "physical or mental incapacity" is unlikely to be contentious. A court order demonstrates bankruptcy, a doctor's certificate incapacity and outside employment is proved by a contract. So automatic termination makes practical sense. On the other hand, if the tax commissioner or statistician were guilty of "misbehaviour" they can only be removed by a vote of both houses of Parliament. Mr Swan's bill removes the mandatory obligation on the Treasurer to sack a Reserve Bank governor who is incapable, bankrupt or engaged in outside employment. It makes those three conditions the only grounds on which both houses of Parliament may, if they choose, vote to request the governor be terminated. So why would Mr Swan want to give the Parliament the right to keep in office a Reserve Bank governor who was bankrupt? So poorly is Mr Swan's bill drafted that no less an authority than the Parliamentary Library has concluded in its official Bills Digest that the consequence of the new provisions is that there is no longer any power at all to terminate a Reserve Bank governor if he or she is guilty of misbehaviour. In other words, the fantastic scenario I painted at the beginning of this column could be made possible by this incompetently drafted piece of legislation. If in the future a governor is bankrupt, or in a coma, both houses of Parliament will have to meet and deliberate on whether he or she should stay in office. On the other hand, if the governor is caught inside-trading or taking bribes, there is considerable doubt whether anybody - Treasurer or Parliament - will be able to remove him. Mr Swan says the library is wrong. He agrees the Government could not terminate a governor for misconduct, but argues it would be able to go to a court to seek a declaration that "misbehaviour" had occurred. Why would the legislation allow any element of doubt as to its effect? And why, in the cause of greater Reserve Bank independence, give Parliament the right to consider whether a bankrupt or incapacitated governor should stay in office but not whether allegations of misconduct are validly made? The Government has used its numbers to carry the bill through the House of Representatives. A Coalition amendment to double the number of Reserve Bank meetings with the house economics committee was defeated. But on Friday the "Enhanced Independence" bill is being considered by the Senate committee and then the Senate itself. One hopes this will see Mr Swan's bungling exposed and rejected. adminThu, 29 May 2008 01:34:00 GMTf1397696-738c-4295-afcd-943feb885714:148http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/149/How-does-increasing-prices-reduce-inflation.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=149http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=149&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/149/How-does-increasing-prices-reduce-inflation.aspxThe key test the Government set itself in this budget was whether it would strengthen the economy and put maximum downward pressure on inflation and interest rates. Regrettably, it has failed miserably on both counts. Most importantly, it has failed to act decisively and has not set out a clear economic strategy which addresses the cost of living pressures on families. The Rudd Government's first budget is not an inflation-fighting budget. It is not a budget that lifts a single finger to help those battling with rising costs of living - petrol, groceries, private health insurance and home interest rates. The only bright light in which we can all take comfort is the strength of the economy and the cuts in personal income taxation - which are all courtesy of the previous Coalition government. The Rudd Government has inherited the strongest, most flexible and dynamic economy in Australia's history. It could not have inherited a better fiscal situation. The surplus, which is substantial, is a tribute to strong economic management over many years. The reality is that the budget is a missed opportunity. It is tinkering at the edges. There is no new leadership. There is no decisive action. There are no courageous decisions. In truth, we have the same old Labor Party. Families must be scratching their heads. The effect of this Government's policy decisions will be that spending will go up and that tax revenue will increase. The budget reveals that this Government is wedded to the same old Labor way of managing the economy: higher spending, higher taxes, higher unemployment, and lower economic growth. That is what the budget forecasts, and there is no clear economic strategy to address any of these issues. It is an ad hoc set of measures, none of which will strengthen the economy or put downward pressure on inflation. The Coalition left the economy in the best shape it has ever been in. Real wages increased by more than 20 per cent. Real gross domestic product per capita grew by 32 per cent. The unemployment rate was halved and is now at a 34-year low. More people are now in work than ever before. Labor's $96 billion in debt was eliminated and there was no net debt. Inflation was kept at 2.5 per cent on average over the cycle. That did not happen by accident. It was the result of good economic management by the Coalition. The one thing people knew about Peter Costello's budgets was that they were decisive. The Coalition took strong decisions and took action. There was a coherent economic strategy. The dividend was a strong and resilient economy that increased living standards for all. With results like these, there was good reason for people to remain optimistic and confident about our economic future. But since the Rudd Government has come to office, that optimism about our economic future has faded. Business confidence and consumer confidence have plummeted. Time and again, the Treasurer, Wayne Swan, has gone around the country saying that government spending would be cut. But, as the budget papers show, as a result of policy decisions taken by this Government, spending will increase by $14.9 billion over the forward estimates. And that does not include the extra spending of $3.1 billion as a result of policy decisions taken in this financial year, 2007-08. The Treasurer has been beating his chest for the past few months about spending cuts. Now we know what he actually meant. He seems to think that if you cut $15 billion in planned Coalition spending and replace it with $30.1 billion of Labor spending, you are still cutting spending. So there you have it: this Treasurer seems to think that when you increase spending, you are actually cutting spending. Perhaps that is what Mr Rudd meant when he talked about "new leadership". Here's another example. The Treasurer is directly increasing the price of cars and alcohol in this budget by increasing taxes on those goods. And the budget papers clearly show that the Government expects people to drop out of private health insurance, which will put upward pressure on premiums. What families want to know is: how does increasing the price of things reduce inflation? What on earth was Mr Swan thinking? He apparently has a cunning plan to put maximum downward pressure on inflation and interest rates by increasing prices. Is that what we can expect from the Government during the rest of its term? What hope is there for families struggling with higher prices, when the Government's only strategy is to increase prices? Is this what new leadership is all about? adminFri, 16 May 2008 01:35:00 GMTf1397696-738c-4295-afcd-943feb885714:149http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/150/Wayne-a-word-in-your-ear.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=150http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=150&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/150/Wayne-a-word-in-your-ear.aspxIf the Treasurer is looking for some ideas before Labor hands down its first budget in 13 years, here are a few suggestions, writes Malcolm Turnbull. WHEN Wayne Swan delivers Labor's first federal budget in 13 years on Tuesday, he has to deliver higher living standards and a more prosperous economy for Australians. That's what the Coalition did for the last 12 budgets. The best bit of this week's budget will be the tax cuts. But they aren't Wayne's idea - he's just the postman. They were the Coalition's election promise immediately copied by Kevin Rudd. In this budget, Mr Swan has to do something himself. Here are some suggestions. First, he must stop talking down our economy and instead restore confidence. But Mr Swan is a creature of political habit, and I suspect that he will do neither. To date, his only achievements as Treasurer have been to cause consumer and business confidence to nosedive and to exacerbate inflationary pressures with his claim that the inflation genie is out of the bottle. He said that just before a Reserve Bank Board meeting. Can you believe it? What other Treasurer in our history has rubbished our economy and effectively egged the Reserve Bank on to put up rates? He got what he wanted with higher interest rates, but now recent news suggests that there is a real risk that this irresponsible rhetoric could set off a wages breakout. Second, Mr Swan has been saying that the overall level of Government spending needs to be cut to help reduce inflationary pressures. When the Coalition released its first budget in 1996, it cut government spending significantly in order to pay off $96billion of Labor debt and a growing budget deficit. Labor is already behind the eight ball on spending. When it took office it had more than half of the 2007-08 fiscal year to slow Government spending. As I said in March this year, if Labor was serious about slashing spending to fight inflation, why didn't Mr Swan deliver a mini-budget straight after the election and cut spending in this financial year? If Mr Swan does not fulfil Labor's commitment to reduce the overall level of spending and by a very big sum, then he will make no difference to overall demand in the economy and so no difference to inflation. He needs to be honest with the Australian people and admit that cutting Coalition programs and replacing them with profligate Labor spending and tax increases will do nothing to reduce inflationary pressures. Only cuts in net spending will slow down the economy in the way he has said he is going to do. Labor should be fiscally responsible and reverse its decision to raid the Future Fund and spend its earnings. If it does not do that, it should at least count those earnings as revenue, and revise past surpluses to reflect this change. As an example, last year's budget surplus of 1.6percent of GDP would be about 1.8percent of GDP had the Coalition included the Future Fund earnings. Third, Mr Swan must follow through on his promise to eliminate wasteful or inefficient spending. I have always argued that irrespective of the level of inflation or the state of the business cycle, government spending programs should be frequently examined to see that they will not be wasteful and that they will achieve their objectives. That acid test should be applied to every single one of Labor's spending proposals that are announced on Tuesday night. Fourth, Labor promised that it would not increase tax revenue as a proportion of GDP. But Mr Swan appears to have foregone that opportunity too with tax increases on spirit-based ready-to-drinks and on diesel fuel. Who knows what other taxes or nasty surprises are hidden in the budget next week? Mr Rudd and Mr Swan claim to be economic conservatives. So far we have seen a lot of symbolism and the only new Labor measures announced involve raising taxes. We will see on Tuesday whether the budget is economically conservative, or just an economic con.adminMon, 12 May 2008 01:35:00 GMTf1397696-738c-4295-afcd-943feb885714:150http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/151/Mr-Metoo-is-back-to-talk-tax.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=151http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=151&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/151/Mr-Metoo-is-back-to-talk-tax.aspxAS a result of reforms implemented by the Coalition in July 2000 (which Labor opposed), dozens of inefficient taxes have been or soon will be eliminated, as long as the Labor states honour their commitments. The list includes wholesale sales tax, financial institutions duty, debits tax, stamp duty on marketable securities, conveyancing duties on business, stamp duties on leases, stamp duties on mortgages, bonds and debentures, and the bed tax. But tax reform is like painting the Sydney Harbour Bridge: the task is never complete. The Australian people deserve a tax system that is efficient, fair, internationally competitive and guarantees a low overall burden oftaxation. That is why on March 26, in a speech to the Sydney Institute, I announced that distinguished economist Henry Ergas would assist the Coalition in a full review of Australia's system of taxation: federal, state and local. One of the key objectives will be to explore options for reducing the burden of taxation generally. In the same speech I predicted that, having driven the tax-reform agenda while in government, the Coalition would do so again from Opposition. It did not take very long for that prediction to come true. Less than four weeks after I announced the creation of the Ergas review, the Rudd Government released its initial report on the 2020 Summit. The report encouraged the Government to undertake a comprehensive review of state and federal taxes. Mr Rudd then followed that up with an announcement on the ABC's The 7.30 Report that he thought it was time to look at a root-and-branch reform of the Australian taxation system. So, after having shown little interest in (and indeed a great deal of hostility towards) tax reform for more than a decade, Labor has been forced into looking as though it is doing something about tax. If the lofty standards that the process-obsessed Rudd Government has set itself are any guide, then looking as though one is doing something on tax must be considered progress. One may even paraphrase one of Rudd's most oft-cited philosophers - chairman Mao Zedong - and describe it as a great leap forward for Labor. But the real question is whether Rudd will follow the Coalition's lead and investigate ways of reducing the overall burden of taxation. Evidently not. The initial report from the summit makes no mention of reducing the overall tax burden. Instead, many of the big new ideas from the summit involve increasing existing taxes (such as those on cigarettes and alcohol) or levying new taxes (the fat tax). If Labor adopts these proposals, which taxes will it cut to fulfil its commitment not to increase tax revenue as a proportion of gross domestic product? The Prime Minister's summit ended with a recommendation for more than 20 new agencies and substantial funding programs, but with no proposals to cut existing government programs. Since government spending is ultimately financed by taxation, that can mean only one thing: the overall tax burden will rise under Labor. Given Labor's record on tax, none of this is surprising. It opposed the income tax cuts associated with the GST and the income tax cuts of 2005, which reduced the 17 per cent marginal tax rate to 15 per cent. In 2005 it also rejected measures that provided tax relief for seniors and improved the international competitiveness of our tax system. And at the 2007 election Labor had to be dragged kicking and screaming to the polls on tax cuts. It proposed to cut taxes only after the Coalition announced its intention to do so, and Labor's election tax cuts for low and middle-income earners were an exact replica of the Coalition's. Shamelessly, Labor claims these cuts were its idea all along. And, to top it all off, it appears to have backed away from its campaign promise to eventually reduce the top income tax rate, flatten the income tax system and reduce the number of rates from four to three. There is every indication that these aspirational tax cuts were really a politically expedient pledge that could be discarded at will. Let's hope Rudd's commitment to undertake root-and-branch tax reform does not suffer the same fate and become a great leap backwards for the Australian economy.adminFri, 25 Apr 2008 01:37:00 GMTf1397696-738c-4295-afcd-943feb885714:151http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/152/Cut-tax-carbon-to-green-economy.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=152http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=152&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/152/Cut-tax-carbon-to-green-economy.aspx THE Rudd Government is set to introduce its emissions trading scheme in 2010 which will impose a price on carbon, as would a carbon tax. The key difference is that under an ETS the government sets the amount of emissions permissible and the permit price is set by the market, whereas under a carbon tax the price is set by government and the amount of emissions is the result of market behaviour. An ETS is preferable not simply because it allows the market to find the least cost abatement but it will be able to interact with similar schemes elsewhere in the world. Under an ETS the commonwealth will collect substantial additional revenue. The Department of Climate Change projects that Australia's greenhouse gas emissions will be about 600 million tonnes in 2010. So even if Labor's ETS only covers two-thirds of all emissions, an auction price of $25 per tonne would raise $10billion per annum in the early years. In 2010 this would almost offset the revenue that will be foregone as a result of the income tax cuts. What should be done with this revenue? The Rudd Government has committed not to allow tax revenue to increase as a percentage of GDP and the revenues from the ETS should, for that purpose, be classed as a tax. We will be holding the Rudd Government to account on this vital point. This means that ETS revenues must be matched by a reduction in other taxes. There are other claims on the ETS revenues apart from tax cuts, of course. We should continue to invest in research and development on low emission technologies. We should also consider providing additional incentives to households and businesses to invest in energy efficiency. But the sums flowing from the ETS are going to be much greater than these items are likely to absorb. We should take the opportunity with the revenues from the ETS to address both inefficient taxes as well as inefficiencies and inequities in our income tax system. A lot has been said about assisting low-income households who will be hard hit by higher energy and fuel costs. Reducing tax, including high effective marginal tax rates, on low-income households should be a key priority. But the objective should be this: compensating tax and welfare measures must ensure that low-income or pensioner households are not overall made worse off by reason of the introduction of the ETS. The ETS also offers an opportunity to phase out inefficient state government taxes. There is always a strong case for replacing relatively inefficient taxes with relatively efficient taxes. And with government raising new carbon revenues, the total tax take should be kept constant, or reduced. But it is not only an issue of compensating the most vulnerable. An emissions trading scheme in which permits are auctioned and traded will interact with existing taxes in a complex way. As a result, the deadweight costs of many existing taxes could rise. When viewed through the lens of climate change policy, tax reform in other areas makes good economic sense. Consider stamp duties on property transfers. We want markets to work efficiently and we want to eliminate barriers to trade. Right? Well not exactly. We eliminated stamp duty on stock market traded shares many years ago for precisely that reason, but stamp duties still remain in other areas notably on transfers of real estate. Is that a property tax? Not at all. Stamp duty is a tax on changing locations. The more you buy and sell, the more you are taxed. And yet at a time when housing affordability is so much debated wouldn't we want a property market that was as unfettered as possible, where there are as few barriers as possible to trade? Well we should, but every year states raise about $11 billion in stamp duties on property transfers. This is just one example of an inefficient tax. Australia has much at risk in this epic transition to a low emission future. And there will be a price to pay. Being green is far from easy. The design of our ETS, its response to international developments and the way it interacts with the rest of our economy will determine how high that price will be. The emissions trading system will open up a major new source of government revenue. If we were to invest much of the revenue earned from the ETS into removing inefficient and inequitable taxes we would not simply keep the tax share of GDP neutral, we would also be reinvesting those revenues into a more efficient and productive Australia. The challenge of climate change will not simply be met by the ingenuity of a free society finding unimagined technological solutions tomorrow to the intractable problems of today. Our capacity to respond to climate change is founded in the strength of our economy. We must use the transition to a low carbon future as an opportunity to make our economy stronger, so that the costs we impose on carbon will be more than matched by the dividends from a more productive future. adminFri, 28 Mar 2008 01:39:00 GMTf1397696-738c-4295-afcd-943feb885714:152http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/153/Swan-wrong-to-blame-inflation-on-Howard.aspx#Comments0http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=153http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=153&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/153/Swan-wrong-to-blame-inflation-on-Howard.aspxYESTERDAY'S interest rate rise came as no surprise to our new Treasurer. He and the Prime Minister have been talking up inflation and talking down the economy as though they wanted to make that rise, already likely, a certainty. Does Wayne Swan seriously think he is looking after Australian working families when, the day before the Reserve Bank meeting, he wails: "The inflation genie is out of the bottle"? In the past two months, he has said everything he could to encourage an interest rate rise, short of explicitly urging the RBA to hike rates. Recall that Swan and Kevin Rudd inherited a strong, growing economy with unemployment close to 35-year lows and low and stable inflation, consistent with the RBA's inflation target. No other government in Australia's history has taken office under such favourable economic conditions. Our economy is growing faster than the economies of the US, Japan, Europe and Canada. Our unemployment rate is lower than the level in the US, Europe and Canada and our annual inflation rate is lower than in the US and Europe. And that is why The Economist has described the Australian economy as the wonder down under. But there are always challenges and in a strongly growing economy inflation is going to be a threat. Price pressures arise from domestic and international sources; the latter are often not within the influence of the federal government or the RBA. But in managing the economy it is vital that treasurers and prime ministers be measured and, above all, accurate in what they say. Right now, Swan and Rudd are misrepresenting our economic history, talking down our economy and talking up inflation. Far from managing economic problems, they are contributing to them. Last week, for example, Swan said I was "completely out of touch" because I had said the Howard government had kept inflation within the RBA's target band of 2 per cent to 3per cent over the economic cycle. Rather, he said the fact was "inflation was well out of the target band under the previous government". Really? As recently as December 6, Swan and the RBA governor issued a Statement on the Conduct of Monetary Policy. It stated (as had the previous statement made under treasurer Peter Costello) that monetary policy aimed to pursue medium-term price stability and that this would be achieved by "keeping consumer price inflation between 2 and 3 per cent, on average, over the cycle". The statement went on to say that since inflation targeting began in 1993, "inflation has averaged around the midpoint of the inflation target band". So did Swan read his own statement? Did he understand it? Why is he misrepresenting not only the performance of the Howard government (average annual increase in the CPI during the Howard years was 2.5 per cent) but also the inflation objective of a statement that he agreed to less than two months ago? Swan also does not seem to understand that the more inflationary expectations are fuelled, the more likely they are to be fulfilled. And that, of course, is why most treasurers and central bankers discuss the economy in language that is strictly accurate and measured. Rudd is no better than Swan. Indeed, his economic pronouncements have an Orwellian feel to them, as though he believes he can rewrite history by stating the precise opposite of the truth. In his recent economic speech in Perth, for example, he said: "For over a decade, the past government did not put forward a strategic vision for the tax system." Really? The introduction of a new tax system with the GST in 2000 was the most comprehensive single reform to our tax system in a lifetime. Rudd did not support it. Indeed, he described its passage as "fundamental injustice day". But to pretend it never happened is disingenuous and irresponsible. In the same speech, the Prime Minister said: "For the last couple of years, slowly but steadily inflation has once again let loose in the Australian economy, resulting in inflation numbers for Australia that are significantly above most OECD countries." But official data from the Organisation for Economic Co-operation and Development shows that Rudd is simply wrong. And according to The Economist's most recent survey, Australia's latest inflation figure (3 per cent) is below that of the US (4.1 per cent), the euro area (3.1 per cent), Singapore (4.4 per cent) and South Korea (3.6 per cent), not to mention China (6.5 per cent) and India (5.5 per cent). Among other major OECD economies, only Japan, Canada and Britain have lower inflation, and their rates of economic growth are much lower than ours. So what sort of government is it that, on inheriting a strong, fast growing economy with unemployment at record lows and inflation running at manageable levels, immediately starts to misrepresent our economic history, talk down our economic prospects and talk up inflationary expectations? The Financial Times on Monday had headlines telling the world that we face "a very substantial" inflation problem. It quoted Swan as saying: "The inflation genie is out of the bottle." Far from dealing with economic problems, Swan is now exacerbating them. Swan says he does not welcome an interest rate rise. Yet all of his remarks seem calculated to encourage the RBA to raise rates. The answer may be found in the repeated reminders from the RBA that labour costs and inflation have been contained in this cycle of economic expansion because of deregulated and flexible labour markets. There is no question that an increase in labour market regulation and union influence will, in a tight labour market, add to inflationary pressures. Is Rudd's and Swan's misrepresentation of our economic history a ham-fisted attempt to convince the Australian people that higher interest rates caused by a Labor-induced wages breakout are in fact due to the previous government? No wonder Swan refuses to guarantee Labor's new industrial relations regime will not fuel inflation.adminThu, 07 Feb 2008 01:41:00 GMTf1397696-738c-4295-afcd-943feb885714:153http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/154/Well-all-pay-for-ALP-not-getting-a-full-reckoning.aspx#Comments1http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/RssComments.aspx?TabID=90&ModuleID=403&ArticleID=154http://archive.malcolmturnbull.com.au/DesktopModules/DnnForge%20-%20NewsArticles/Tracking/Trackback.aspx?ArticleID=154&PortalID=0&TabID=90http://archive.malcolmturnbull.com.au/Media/MediaReleases/tabid/90/articleType/ArticleView/articleId/154/Well-all-pay-for-ALP-not-getting-a-full-reckoning.aspx Kevin Rudd and Wayne Swan have inherited an Australian economy which has never been stronger. The Federal Government is free of (Labor's) debt and is running strong budget surpluses. Unemployment is at a thirty five year low - and at the same time the trend participation rate is at  its highest level ever.  In short, more Australians are able to find work now than ever before in our history. Our economy is growing at 4.3%and will grow faster over the next few years than Europe, the US, Japan or New Zealand. Yet already, we are seeing disturbing evidence of Labor's naïveté and inexperience. Wayne Swan's performance over the recent interest rate rise has been embarrassing to watch. Ever since the sub-prime crisis started to impact wholesale borrowing costs in August last year, it was obvious that the cost of some of the Australian Banks' funding base had risen and that they would seek to recover that cost through increasing interest rates on their loans. But by how much and when? Whereas a change in the official cash rate set by the Reserve Bank affects all the Banks in the same way - like a rising tide lifts all boats - the impact of the sub-prime crisis was not uniform. The larger retail Banks had big domestic, retail deposit bases and  were less affected by the events in the US. However the smaller banks and the non-bank mortgage originators were much more at risk. They had much smaller deposit bases but had been able to compete with the big banks by packaging up the mortgages they sold and selling them off to investors, including US investors  - in other words by securitising them. This enabled companies like Aussie Home Loans, RAMS, Wizard and others to drive down the cost of mortgages. If they could outsource their balance sheet requirements to the market through securitisation they could make money on mortgages with a lower margin because they did not have the huge cost structures of the big trading banks. The financial sector reforms introduced by the Howard Government significantly increased competition in the market, driving down bank margins.  So not only did the Howard government reduce pressure on interest rates by sound economic management, but its micro-economic reform of the financial services sector reduced rates further still. It was obvious therefore, and widely reported in the financial press, that for the big Banks, the sub-prime crisis was not all bad news. In immediate terms, that part of their funding base which was dependent on the wholesale market (something less than 50%) was becoming more expensive to fund as the lack of liquidity and risk aversion caused by the global credit crunch increased investors’ required rates of return.. But at the same time the capacity of their smaller rivals to compete was dramatically reduced in the short term and in all probability would remain impaired longer term. Indeed, the big 5 Banks have seen a dramatic increase in their home loan market share ever since the sub-prime crisis materialised. Citigroup commented in September that the crisis “should ease price competition for the majors” and ABNAMRO wrote at the same time “…the recent credit crunch will develop into a structural benefit for the major banks in 2008/2009.” So financial analysts were predicting the credit crunch would work to the advantage of the major banks. So, in the midst of this disruption the big Banks had an opportunity to improve their competitive position and formidable profitability – in aggregate $17.9 billion last financial year up 10.7%. So a more experienced Treasurer would have said to the Banks: If you wish to put up your mortgage rates and claim that it is not an increase in your profit margin, but rather a response to the sub-prime crisis, and if you want people to believe it, then you will need to demonstrate how it has affected your cost of funds – in other words prove that the rise reflects the increase in your costs. MrSwan couldn’t oblige the Banks to do that, but if the Treasurer asks for more accountability and transparency it is hard to resist. As soon as a Bank were to say: over the last year or so we have funded X% of our loan book from the wholesale market and the cost of financing there has increased by Y%, it would then become obvious that if those costs in the wholesale market declined then so too should the rise in mortgage interest rates be reversed. In other words, simply asking for accountability and transparency would have set a benchmark of sorts against which interest rates could be judged in the future and which would make it much more obvious if the increase in rates became a permanent increase in the Banks’ profit margin. MrSwan did nothing of the sort. Instead when NAB announced a rise in its variable mortgage rate of 0.12 percentage points on 3 January 2008MrSwan endorsed it as reasonable and gave it his blessing without asking for any explanation. He appeared to be impersonating a public relations spokesman from the Bankers’ Association so soothing was his commendation. The ANZ then lifted their variable mortgage rate by 0.20 percentage points. In the meantime Mr Swan’s unquestioning acquiescence over NAB had earned him a flaying in the media and so he did a complete backflip and denounced the ANZ’s rise  as being “excessive”. Yet he had no more reason to condemn the ANZ rate rise than he did to warmly commend the NAB’s.  The two Banks have different businesses and different funding bases so it may be that ANZ’s was no more reasonable or unreasonable than that of NAB – but WayneSwan has no idea. Some of Mr Swan’s defenders have sought to accuse me of challenging the Banks’ freedom to vary their interest rates or even proposing some form of new regulation!  Banks are free to price their products as they wish, after all they are in the business of making profits and all things being equal they will charge as much for every product they have on offer as the market will allow them. However if a Bank increases its rates and the Treasurer then assures us it is a reasonable measure to recover increased costs, we are entitled to ask Mr Swan to justify his opinion. Transparent  and accountable information is essential to effective competition. Before he gave the Banks his imprimatur to raise mortgage rates, Mr Swan had a chance to promote greater transparency but failed to take it. And we may all end up paying more adminTue, 22 Jan 2008 01:42:00 GMTf1397696-738c-4295-afcd-943feb885714:154