Friday, March 7, 2008

The Honeymoon Is Over

The news that the Federal Government has refused to deny plans to scrap the carer’s bonus payments has caused an enormous outcry. It follows the earlier news that the Medicare rebate introduced last year for some dental treatment will also be scrapped. These are just two programs to fall victim to the so called Rudd Government Razor Gang in the quest to curb government spending and drive down inflation. Whatever the reasons or the explanations, the people who voted Kevin Rudd into office will find this to be very hard to accept.

While it is true that inflation must be nipped in the bud, and part of the approach to doing that is for the government to be fiscally responsible, there seems to be an obsession with the focus on inflation which is distracting the government from all else. Inflation is not being caused by aged pensioners buying plasma TVs or disability carers buying imported cars. To take away what little they have is to punish the innocent. It is a slap in the face for people who might have voted for this government in the hope of a better deal.

It is also true that the carer bonus was never an ongoing program, but simply a one-off payment which was made repeatedly due to the favourable circumstances of a big budget surplus. Well, the surplus this year is set to be even bigger, and as far as old age pensioners, disability support pensioners and carers are concerned, all the talk about 1.5% of GDP and fighting inflation is just gobbledy-gook. All they know is that they can’t afford to buy decent food or fill up the car because it’s so hard to make ends meet. All they know is that they will not receive as much as $1600 which they have received for the past four years. All they know is that the government they have elected is letting them down.

The other important point to recognize is the fact that carers make a huge contribution to the economy. Carer’s keep disabled people in their homes and out of institutions, saving the taxpayer untold billions of dollars. It’s a worthwhile investment helping them to continue doing that.

If Kevin Rudd, and Wayne Swan, and Jenny Macklin, take this payment away now after four years, whatever the economic justification, they’ll be the bad guys. It’s not enough to blame John Howard’s reckless spending, because the electorate just won’t buy it. If this is the best they can do, then the honeymoon is already over.

Thursday, March 6, 2008


Mark Vaile, former Deputy Prime Minister and Trade Minister has taken personal leave from the parliament to travel to the middle east to work at a second job as a lobbyist for ServCorp Ltd, a company with which he had dealings while minister. Wilson Tuckey is currently on a cruise ship making a dollar by giving lectures to international tourists about the Australian political structure, the environment and Climate Change. He too is on personal leave. And of course it was widely publicised that Alexander Downer felt his time could be better spent having lunch in a five star restaurant than sitting in his seat in the parliament listening to the Deputy Prime Minister.

Opposition Leader Brendan Nelson has been embarrassed by the behaviour of his colleagues and should be able to expect better. It has been reported that Dr. Nelson said that he would not have approved leave to Mr. Tuckey if he had known about it, and that he would have advised Mr. Vaile “in the strongest possible terms” not to undertake his lobbying activites. Of course, Mark Vaile is not a member of the Liberal Party so that’s about all Brendan Nelson could do, but again he was caught out by not knowing about the problem until after the event.

With friends like these, who needs enemies. Senior Liberal Nick Minchin has called on the former ministers Mark Vaile, Peter Costello, Alexander Downer, and Peter McGaurin to declare their intentions. It is widely expected that they will all retire, and Senator Minchin says that it’s time for them to either commit to completing their terms or gracefully get out.

At least that’s what he has said publically. There is also the view expressed by some that if the round of by-elections that would ensue are held too soon the coalition could lose even more seats. The theory is that if the outgoing ex-ministers wait till after the May budget than the Government might by then have lost some of its popularity. Nick Minchin is well aware of that, so either his comments are a smoke screen or maybe he realizes that waiting until later won’t make much difference.

Wednesday, March 5, 2008

A Matter Of Interest

The reserve bank of Australia has now increased interest rates 12 times in succession, handing us the highest rates in 12 years with the cash rate now at 7.25%. That means mortgage rates will rise to about 9.25%. Or does it. There is widespread speculation that the retail banks will take the opportunity to make even bigger increases to cover the cost of the global credit crisis. Some have suggested the added impact could amount to as much as another 20 basis points, which will take mortgage rates to around 9.45%.

At the same time, we have seen rising rates of repossessions in the housing market, along with falling house prices in some locations. On top of that, the newly released economic growth figures reveal that the economy grew at 0.6% in the December quarter. Wages growth for the same quarter has fallen to 0.9%. Other reports indicate that retail sales have slumped in January. So has the Reserve Bank already succeeded in stopping the inflation threat?

It’s tempting to say yes, but going by the hard figures alone it is too early to tell. But that is the challenge. The lasting impact of interest rate adjustments take time to filter through to the economy, and more time to show up in the reported results. It is possible that the Reserve Bank has already gone too far, but as yet there is nothing to indicate that. What makes this all the more difficult is the fact that conditions in the United States might yet have more impact here than was previously expected.

The bottom line however is that for those people whose homes are being repossessed the damage has already been done.

Tuesday, March 4, 2008

But Where Will They Live?

Following hot on the heels of the announcement that the federal government plans to increase the commitment to its affordable rental housing scheme, comes the suggestion that Australia should take in as many as 15 000 immigrant construction workers to help build new housing. The proposal has been put forward by the Housing Industry Association and does recognize one important point: even with extra financial incentives for investors to construct new low cost dwellings, who is actually going to build them?

The national skills shortage has been the focus of just as much debate as the housing affordability crisis, and was one of the reasons that the 457 visa program became open to exploitation and abuse. The plan calls for similar visas to be issued to foreign workers to help construct new housing. The workers would most likely come from the United States where the dramatic housing market downturn has seen many construction workers thrown out of a job.

Here in Australia, there are also pressures that might push the market towards a downturn, including the credit crunch, rising interest rates, and prices already falling in some areas. The thing holding prices up in many cases is a shortage of supply, coupled with an increasing gap between the battlers and the affluent which has seen high income earners in a position to keep paying high prices for premium properties. None of this does anything to encourage investment at the lower end of the market, where tenants are now desperately competing for affordable rentals.

The risk of course is that a sudden increase in supply could trigger a more serious decline in prices which would be attractive to some, but devastating for those already invested in the market. In fact, that is exactly what is already happening in those parts of Sydney where values are falling and repossessions are rising. That is a problem which could easily spread much more widely in the community.

If the government approves of the proposal to import 15 000 construction workers, there is one more question to consider. Doesn’t that mean that we will then need a further 15 000 houses beyond the 30 000 shortfall that we already have?

Monday, March 3, 2008

A Fair Go Is The Australian Way

Over the years Dick Smith has impressed a lot of people as being a pretty sensible bloke, as well as astute, and a clever businessman. He has been known to combine altruistic activities with the opportunity to make a dollar, such as his line of food products cashing in on national pride by encouraging people to buy Australian. So when he says he is asking his friends to help find a job for David Hicks, it might be tempting to ask if this is some sort of stunt, and if there’s anything in it for Dick. But you’d have to be pretty cynical to think so because that overlooks a couple of fundamental things.

Firstly, given the odium in which many people hold David Hicks there really isn’t anything to gain in it for Dick Smith. Opinions are divided over Mr. Hicks, but there’s no shortage of people who would refuse to spit on him if he was on fire. For some people, Dick Smith could be seen as giving comfort to a confessed traitor. Of course, nothing could be further from the truth.

Secondly, David Hicks has done his time. Now that he is expected to rejoin the community it is essential, for his benefit and ours, that he finds something productive and useful to do with his life. Without that we run the risk of allowing Mr. Hicks to simply become a disaffected alienated individual with no prospect for a happy life. That is an outcome which is not good for him, but also not good for the community generally.

Dick Smith claims that David Hicks has told him that, as many people suspect, he initially rejected a plea bargain because he claimed not to be a supporter of terrorism, but ultimately came to believe that the only way to ever be released was to accept whatever deal was put to him, regardless of the facts. Whether that’s true or not, we may never know, but it certainly amounts to reasonable doubt.

As Dick Smith says, so far we have only had one side of the story, the official one from the American Government, supported by our own. It’s time to give David Hicks a fair go… it’s the Australian thing to do.