There were three very good articles today on the Budget and the Resources Super Profits Tax.
The first came from Ross Gittins, who pointed out that of course the Budget position had improved because tax receipts improved (he says “of course”, because this drives every single budget). But he also notes the the ALP can legitimately claim credit for reducing the deficit, because their policies also played a sizeable part. He writes:
Economists studying budgets focus their attention on what the government does. Did its decisions bolster the economy and help to minimise the downturn? Then, when the cycle has turned around, did it curtail its stimulus to get the budget back in surplus as soon as possible and start paying down the debt racked up during the recession?
The answer to the first question is yes, the government's alleged reckless spending on fiscal stimulus did play a significant role in keeping the recession so mild.
Treasury calculates that the fiscal stimulus added about 2 percentage points to the growth in gross domestic product in 2009. Since the actual growth was 1.4 per cent, this says that without that stimulus the economy would have contracted by about 0.7 per cent.
Next question: having used its discretionary spending to minimise the downturn, is the government now turning off that spending, and limiting any new spending, to allow the recovery to get the budget back in the black as soon as possible?
Surprisingly, the answer again is yes. That's why most economists were giving the budget a tick this week.
What’s that? The Government is turning off the spending? But didn’t Tony Abbott say “this reckless spending must stop”? One might almost think he doesn’t understand economics…
The first element of the framework was the requirement that its explicit stimulus measures be temporary - that is, one-off. Because that spending was temporary, and most of it has passed, the stimulus is being withdrawn. That is, it is now exerting a contractionary influence on the economy.
According to Treasury's calculations, the withdrawal of the stimulus will subtract about 1 percentage point from gross domestic product growth this calendar year, and a further 0.75 percentage points in 2011.
So the next time some bloke at work or at the pub tells you Rudd should wind back the stimulus, feel free to say, errr you do realise they have, and that they’re winding it back such that it is taking 1 percentage point off GDP growth – ie it has been withdrawn exactly as planned (and desired by so many in the media).
The next article was a surprising one for me, it was by Angela Shanahan (not a person with whom I often think – yep I’ll be agreeing with this article). She writes about the Resources Super Profit Tax, noting:
There is a big difference between a 40 per cent super tax on mining profits and the ETS, or indeed most other taxes. The difference is that for once it is not the already overtaxed average Australian paying it, but rather the great big companies that are getting rich from Australia's natural wealth.
There’s a phrase Rudd and Swan and Co must tattoo to their eyeball – getting rich from Australia’s natural wealth
Shanahan (Angela, not Dennis) compared Australia's current arrangement with that of how Norway taxes the miners digging up its natural resources (and Australia does not come out looking good by comparison). She finishes with a very telling point:
Unlike Norway, Australia is simply digging up its natural resources and selling them. Yes the spin-off profits stay here and yes the companies pay tax, but all the nervous talk of killing the golden goose only makes it clear that until now we have been too focused on the present benefits of our resources and not enough on how the profits they earn can be harnessed for our future.
From a calmer perspective, the mining tax is probably Rudd's only real long-term policy, and it might be good for Australian economic and social policy if managed correctly.
Interestingly a few commentators have noticed a shift in the government's rhetoric. Finally it has begun to replace the opportunistic working families mantra with a more substantial one: the future.
The fact is the RSPT is exactly the type of policy the voters elected Rudd to do – long term reform. The concern for some in the ALP (the more nervous ones, who have little knowledge of history) is that Rudd has damaged his standing so greatly that he won’t be able to sell this great reform. This brings me to the last good article – that by Laurie Oakes.
Oakes writes of Rudd supposed angry moment on the 7:30 Report. Mirroring what he wrote on his twitter feed, he writes:
WHEN Kevin Rudd showed a bit of fire in his The 7.30 Report interview with Kerry O'Brien, it was almost certainly a political plus. Every time the extract was shown on TV, his minders cheered.
Instead of the usual robotic Rudd, here was a real human being. Instead of hiding his message behind an impenetrable wall of sound, the PM - for a change - spoke with feeling.
All that stuff about rants and tirades and loss of temper was nonsense. Comparing Rudd's performance with a Mark Latham brain snap was ridiculous.
As for Tony Abbott's response ... well, as always, you had to admire his front. With a disapproving shake of the head, the Opposition Leader told journalists: "Look, if he's like that on The 7.30 Report, what's he really like behind closed doors? That's all I can say."
This, of course, is the same Tony Abbott who swore at Nicola Roxon in front of the cameras after arriving late for a debate during the last election.
The good thing about Oakes is he has a political memory longer than that of an elephant who has just won the world elephant memory championship. Too many members of the Canberra press gallery have the political memory of a gold fish who even other gold fish think, geez, his memory is bad.
He also pointed out (as may I add, so did I in my last blog – yeah great minds!) that Rudd needs to sell the RSPT if he wants to win the election, and he needs to sell it a hell of a lot better than he did (or didn’t) the ETS:
The truth is that Rudd cannot allow Abbott to win the mining debate or his Government is dead meat. He has to get out there and market the tax whether he thinks it's his job or not, and make a better fist of it than he did with the ETS.
And a bit of genuine passion now and then would not be a bad idea.
Now when I think genuine passion about the mining industry, as a child of the 80s, I think of one man – Bill Hunter spruiking for The Big Australian (BHP) (not to mention his great work in the mini-series The Dismissal as RFX Connor). Personally I think the ALP should be giving him a call*. They need to get him to talk about how the RSPT is great “for every Australian”.
I don’t know if he is an ALP man, but he looks like one, and if Bill Hunter thinks the RSPT is ok, then who would disagree?
*While googling looking for the old adverts, I came across an article in the SMH by Matthew Murphy last week, where the suggests Hunter should be employed by the miners to do their dirty work. Leading me to think, “Bugger, that was my idea!”