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Well said Mr Stevens

Discussion in 'General Property Chat' started by euro73, 10th Aug, 2016.

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  1. euro73

    euro73 Well-Known Member Business Member

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    Glad he has finally said it in such a direct fashion...

    Take on more debt, says RBA governor Glenn Stevens

    The debate in Australia (and on these forums at times) about Government debt is flat out dumb. As a nation we unbelievably two faced and hypocritical on this issue. Privately, we think nothing of carry debt at many multiples of household income ( call it household GDP) - in fact, we salivate for more wherever possible. At a corporate level , we have no issue at all with ASX listed companies carrying debt well in excess of earnings ( call it corporate GDP) and routinely reward them with share price increases. Yet when any member of Government; local, state or federal, dares to contemplate taking on debt, we crucify them.

    Australia can borrow money on 10,20 even 30 year terms at below the rate of inflation, and could be undertaking nation building projects where the assets being built would generate real economic growth, but instead gets nothing done. High speed rail could transform regional areas between Sydney and Melbourne - towns like Goulburn, Albury, Shepparton etc... Water retention and harvesting projects , similar to the Bradfield Scheme, could allow for reliable, drought proofing /irrigation of the other side of the Great Dividing range , allowing us to develop a genuine food bowl for the world. Or just quietly, a real NBN with FTTH and sufficient throughput to stop census night catastrophe's!

    Nope...this is 'straya.... Govt debt is bad,bad,bad.
     
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  2. barnes

    barnes Well-Known Member

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    Every single debt is BAD, not only the Govt.
     
  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Depends on how its used. I used it for good.
     
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  4. timetoact

    timetoact Well-Known Member

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    100% agree.

    A fun fact I came across the other day is the relationship between Gov debt and the future fund

    Debt is ~$750billion and costs ~$13b in interest,
    The Future fund is ~$117billion and earns ~$15b in income.

    We could theoretically borrow another trillion at ultra low rates and give it the future fund crew to handle.... not really suggesting that, there are better, more long term investments, but food for thought.
     
  5. inertia

    inertia Well-Known Member

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    So, not actually something that can be leveraged to create wealth?

    Cheers,
    Inertia.
     
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  6. Blacky

    Blacky Well-Known Member

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    @euro73
    I don't necessarily disagree provided that is what the debt is used for.
    Sadly - it rarely is. The previous labour govt wracked up a vast majority of the debt, mostly funding short term, one off solutions - and a lot of that was more welfare (should I mention $900 to every australian).

    If was pumped into long term infrastructure which provides ongoing benefit (and income) I'm all for it.

    We need to stop feeding the Australian welfare machine and build long term projects.

    Blacky
     
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  7. sanj

    sanj Well-Known Member

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    Umm yeah nah.
     
  8. albanga

    albanga Well-Known Member

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    Ahhh good old short Sightness! It's impossible to convince these morons to invest into something that may not deliver an instant result or benefit.

    The NBN disaster for me is the epitome of this. "Why do we want faster internet...so webpages can download faster...so I can stream more Netflix....so I can watch more po##"....

    Yes everyone that exactly what the NBN should be built for...sigh
     
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  9. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    I heard a stat the other day that revenue collected via taxation, only 10-30% is used for the actual purpose and the rest is burnt up on government administration costs.

    Wonder if something similar occurs with the borrowed funds?
     
  10. pinkboy

    pinkboy Well-Known Member Premium Member

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    You only have to look as far as the attitudes of a few public servants on this forum.....

    pinkboy
     
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  11. Blacky

    Blacky Well-Known Member

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    Look at the govt spending.

    Our two largest govt departments (exc military) the ATO & Family services (aka centerlink).

    Our largest recipient of spending = welfare... We spend more on welfare than on health & education....combined.

    Our system is screwed. Completely screwed.

    Blacky
     
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  12. sanj

    sanj Well-Known Member

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    Of which by far biggest component is pension followed I think by all the ******** family bonuses and unnecessary middle class welfare. Both greatly outnumber unemployment benefits yet often people quick to throw out the bludgeon call will now or in future be claiming these 2 money pits
     
  13. LibGS

    LibGS Well-Known Member

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    The federal budget document could be easily be restructured to show operational and capital expenditure. This been suggested many times. But then you can't smack your opponents with debt and deficit scare campaigns.
     
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  14. euro73

    euro73 Well-Known Member Business Member

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    Respectfully, that's a bogus argument. Net debt was $161.3 Billion when Libs assumed Govt in 2013. By March 2016 it reached $288 Billion. They added 78% to the debt in 2.5 years. Expected net debt for 2016/17 will be $326 Billion. ie they will have doubled the Labor debt in less than 4 years. See attached. Pretty hard to debate these numbers when they're on the Governments own documents....

    Yes thats true. But again, look a little deeper and you'll see it's Howard and Costello who are largely responsible for that ; they deployed the 90's and early 00's surpluses that were hard won by Keatings structural reforms, to buy votes. They used some of the surpluses to pay down @ 90 billion in debt - which was great, and for that they should be applauded - but then they got stupid. They didnt reinvest the rest of it. They didnt spend it on nation building. They didn't spend it on infrastructure. Instead, they engaged in the greatest pork barrel vote buying exercise of all time, called Family Tax Benefits - which now cost us 38 Billion per annum. And now it's almost 25% of the total welfare bill.

    He is now long retired and the mining surpluses are gone too , and now 15 years later it's coming back to bite because it's just so unaffordable. Always was. But the problem is, now that he has built the biggest welfare dependent middle class in the world, they will be loathe to give any of it up - just like the hardcore LIB base is loathe to give any of their overly generous super concessions up and almost handed the lodge back to Labor after 1 term! Conundrums, conundrums.

    One thing they should do right way is look at Pensioners and their property exemptions. This should be getting far more public support. If this program was better utlised, and FTB was trimmed back a bit, billions could be saved Pension Loans Scheme - Australian Government Department of Human Services





    "According to the 2015–16 budget papers, the Australian Government will spend an estimated $154.0 billion on social security and welfare in the 2015–16 financial year.This represents 35.4 per cent of total government spending"

    Screen Shot 2016-08-10 at 10.08.55 PM.png






    Then - borrow some money - now, while you can get it at less than 3% , and get back to building a real NBN, high speed rail and irrigating the other side of the great dividing range . Might take 20 years, but they need to start now. We are nudging 9 years since the GFC and none of the Northern hemisphere Governments have embraced borrowing for infrastructure, and after trillions in printed money has been injected into the system, and after years of zero or near zero rates, still effectively nothing has really improved. All thats really happened is that trillions in unproductive private sector debt has been transferred to the public sector.

    Alas, Malcolm looked promising when he started talking "Value Capture" and "innovation", but 12 months later and there's literally zero momentum to either idea.

    Right now it seems like the best plan we (by we I mean those useless, gridlocked , partisan, short sighted Canberra based folk) have is " Gee I hope Australia discovers some really rare commodity the worlds next big economic miracle nation is willing to pay us squillions for, to get the place going again" :)

    Seems to me that in most modern democratic nations, the political system is showing the same cracks and deficiencies as the financial system . It just isnt working.
     

    Attached Files:

    Last edited: 10th Aug, 2016
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  15. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    Some revenue considerations:

    Corporate tax avoidance
    Who pays for our Common Wealth?
    8.6 billion a year.
    https://www.oxfam.org.au/wp-content/uploads/2016/06/OXF003-Tax-Havens-Report-FA2-WEB.pdf

    The essential services of NG and CGT (poor property investors and their trusts)
    http://grattan.edu.au/wp-content/uploads/2016/04/872-Hot-Property.pdf
    1. The 50 per cent capital gains tax (CGT) discount is estimated to provide a tax discount to individuals and trusts worth $6.2 billion in 2015 - 16 .
    2. In 2013-14 1.2 million people claimed $10 billion in losses on property-pp40
    The Fuel tax credit:
    Tax white paper calls for urgent upheaval
    the Australian Conservation Foundation estimated between 2014-15 and 2017-18, tax incentives which encourage the use of fossil fuels will total $47 billion. This figure includes almost $28 billion in fuel tax credits, predominantly paid to mining and agriculture as business inputs, $5.5 billion on excise concessions for aviation....

    Some other lost revenues (2013-14)
    Billions lost in tax concessions exposes Australia's hypocrisy over federal aid
    • Concessional taxation of super entity 14 Billion
    • Concessional taxation of super employer contributions- 13.5 Billion
    • GST (Various concessions) 14.5 billion
    • Carbon Pricing mechanism (Agriculture) 2.0 Billion
    • FTB 1.3 Billion
     
  16. Blacky

    Blacky Well-Known Member

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    @euro37
    Fantastic post. Great balanced argument.
    I probably shouldn't have thrown stones in my post. In reality, as you point out, both sides are just as bad as each other. There is no thought to the future - it's all about buying votes.

    I don't think anyone disagree with a welfare of the 'safety net'. It's the 'middle class' welfare, which costs so much for no real benefit that is the issue.

    Ultimately I think we generally agree with each other. You just articulated it better than I can.
    You be the PM. I'll be treasurer.

    Blacky
     
  17. euro73

    euro73 Well-Known Member Business Member

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    That NG figure will be cut in half with another rate cut. We are reaching a point where NG claims will be minimised due to the positive cash flow nature of properties when rates are mid 3% :)

    But to your other points. Just getting serious about corporate tax avoidance to a point where they could recover even 40% of the corporate tax being missed right now, would raise @ 4 Billion.

    Cutting the fuel tax credits by even 25% would save $7 Billion without destroying those industries reliant on it.

    Change the way pension asset tests work. 25% , or perhaps 50% of the value of the PPOR should be included in the pensioner asset test. Offer people who would be excluded from the pension the capacity to top up their pension to the full rate using the Pensions Loan Scheme . We have a $5 billion + reverse mortgage industry offering the private sectors version of the pension loan scheme at a much higher rate. The PLS offers facilities at 5.25%. Thats 1% -1.5% cheaper than the market offers. I am going to take a crazy guess that this could save $10-15 Billion from the $60 billion annual pension bill.

    But even if all of this was done- I still want them to build stuff. They should still be issuing Aust Govt Bonds ( borrowing ) at below 2.5% for 30 years and getting things built . Thats the central theme to what Mr Stevens is arguing.
     
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  18. LibGS

    LibGS Well-Known Member

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    “Yes, I did cut the company tax rate from 49 per cent to 33 per cent but paid for those vast reductions by a massive broadening to the base of the tax system: capital gains taxation at full marginal rates, a comprehensive fringe benefits tax, the abolition of entertainment as a deduction, tax on company cars etc.

    Tax reductions are desirable provided they are affordable. But I would never have countenanced a $50 billion impost on the budget balance with a discretionary unfunded tax cut."

    Paul Keating

    This is economic leadership. Not what is going on now.
     
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  19. euro73

    euro73 Well-Known Member Business Member

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    Oh No. Couldnt pay me enough to do either of those jobs. who would want to endure it?

    Honestly.... Not me. Not for millions.

    I run my business. I make the decisions. I dont answer to backroom boys or faceless factions. I profit or fail on my own merits.

    The problem in Australian politics is that you cannot get to the front bench or into the top job without being placed on a very tight leash. You cannot be an independent, ambitious, visionary leader. Its quite literally impossible in Australian politics nowadays - with one exception. . The only way to do the job without being on a leash, is to absolutely hold zero fear of losing the job. ie running the gauntlet ,bullying your agenda through while not giving a single damn about the factions. Then you have to hope that your agenda is embraced - not just a little, but a whole lot - by the public, so the factions cant do you in. and even if that happens, then you have to try and stop the factions leaking and leaking and leaking and just slaughtering you from the shadows.

    Why do you think so few successful, smart business people give back to Australia by serving in public roles, compared to the US where that sort of public service philanthropy is quite common for corporate leaders? The answer is... factions.

    No thanks. We have entered a period where its almost impossible to govern. Our system is failing us enormously, and has been for several years now. Voters have to break the dominance of the two parties if they want change... or they have to demand that politicians can only serve 9 years maximum terms ( 3 election cycles) so that new blood is always revolving through, and factional bloodlines are broken up. Neither of those things will happen though, because we hate change. Just like what happens when banks rip us off, we moan. WE roar. we give them more business. Politics is the same. We moan. we roar. but we dont really think about taking our business down the street to the other, smaller brand. or at least, not enough of us do it to make the banks change their way. Same with our pollies.

    And this is why its unlikely we will ever see malcolm or any other pollie push for high speed rail or a real NBN. Look at what happened to Rudd when he went hard for the full shebang NBN... the media slaughtered him. Look at your comments earlier about Labor and debt. Upon review you have conceded my argument, but your first reaction was to lambast labor.

    This is just endemic in Australia - Australians for the most part dont really think very critically - that comes from an abundance of wealth , extremely high standards of living and and 30 years without a recession . We have become lazy and complacent. The papers or shock jocks say things loud enough and often enough and suddenly everyone believes it. What chance does any brave pollie have against that sort of lazy thinking across the nation?

    We will need a bad bad recession for a real leader to evolve
     
    Last edited: 11th Aug, 2016
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  20. sanj

    sanj Well-Known Member

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    Brilliant post. We are also not in any way aided by the one eyed supporting of any side of politics where it ends up with no conceding ofor any point any no interest in working together or learning from each other. Both sides are as bad as eaxh other in that respect.

    I believe we should be at very least as critical of any "side" we support as we are of others, if not more so, as we should be demanding high standards. The quick instinct to excuse away any crap because that's our side of politics is harmful but entirely commonplace.