“Australians once led the world in political and social innovation (OK, you might add New Zealanders): the vote, building dams, highways and other infrastructure out of the uplift they gave to our land values, via municipal rates and land taxes, including a federal land tax until 1953. We didn’t really have a federal income tax until post WWII, but we now think it’s been there forever, and aren’t income taxes fair anyway? [Nup!]
Ken Henry’s tax review recommended scrapping most of our taxes on productivity and zeroing in particularly on those economic rents (land and mineral rents) the community as a whole has created, but it fell on deaf ears. The casino rent-seeking economy is now too entrenched in Australia as in most of the western world: you don’t have to work because there’s something you can get for nothing – and that’s OK with the 0.1% who steal by far the greater part of our economic rents. [Let the little people think they can do it too, because it certainly won't affect us!]
We could turn the economy around overnight:
1) The RBA could sell down the AUD.
2) We should institute the original Henry Tax Review recommendations, but nup, we’re too far gone. Rent-seeking has got Australia by the short and curlies, and the politically powerful want no real change.”
When, oh when, are we going to be able to display the same smarts as monkeys?
By exposing how the big rent-seekers have ripped Australians off, Gittens is rapidly moving himself upscale, away from the neoclassical dross, towards economists of the ilk of Mason Gaffney, Michael Hudson and Joseph Stiglitz.
So, which party is promoting The Henry Tax Review recommendations about an all-in land tax and getting a proper return for Australians–not just Gina–on our mining licences?
The Reserve Bank of Australia is worried about (a) exacerbating the property bubble by lowering interest rates any further, and (b) the Aussie dollar being too high. So it seems there’s no room to move – except maybe the RBA selling down the AUD, aided by Joe Hockey’s $8 billion injection? This would help Australian exporters.
Meanwhile, some commentators are astounded at the big four banks’ record profits given such ‘low’ interest rates and the sorry state of business in general. To which I’d pose two just questions:
- Are Australian real interest rates all that low after inflation? Not yet. Inflation’s low because we’re in the deflationary half of a Kondratieff cycle – towards the end stage. When we had 18% interest rates, inflation wasn’t too far behind. I think we make far too much of low nominal interest rates; and these ‘low’ interest rates entrap people into buying grossly overpriced housing at times like these.
- Could it be that banks are making record profits on the back of bubble-inflated residential land prices? I mean, it’s not only via interest that banks make their super-profits. Their greatest rip offs are made from capital repayments.
Misallocation of capital
Is there nothing we can do about it?
There is. Self actualization is incomplete without a genuine interest in where society is headed.
Note: Press X to REMOVE the “download now” and “play now buttons’!
Amongst other things, today’s “Inside Business” mentioned Australia’s banking conundrum – that few businesses apart from the banks are doing well.
The four discussants, including host Alan Kohler, all acknowledged the existence of a stock market bubble, but only one, Gerald Minack, was prepared to say Australia has a real estate bubble.
Minack has for some time now said that Australians will eventually have to pay for our grossly overheated residential property market.
I’ve enjoyed the taste of realism, the increasing unease, that has crept into the once too self-assured tone of Inside Business; the uneasy shifting in seats about what’s going on in the world of business and finance that accompanies barely discernible nods and self-aware grins that all’s far from OK these days.
I’ll watch the show with interest–as a sort of belated barometer–if things worsen before the ABC axes it next year.
And Paul Krugman’s getting closer, too. This blog in the NYT last week.
Michael West is one of the few journalists with a realistic grasp on where the Australian economy currently stands and where it’s headed.
His installment in THE AGE today demonstrates the complicity of banks in bringing about social and financial collapse, and their expectation of being rewarded by taxpayer bailouts when the inevitable collapse does occur.
Is not the current practice of banks lending against bubble-inflated land prices to make their billions in profits the very definition of obscenity?
What’s that Ian, Mike, Gail and Cameron? “No evidence of a bubble in land prices?” What’s this then?
Once you’ve seen the cat, the world of economics is no longer obscure.
You can see escalating land prices and mortgages are the result of rent-seeking in the community’s natural income; super profits for the few are coming at a severe cost to the many.
Where once small but committed communities were able to construct railways, highways, bridges and dams out of capturing some of the uplift in land values they provided, successive governments have now wound back this form of revenue, either in misguided or corrupt deference to rent seekers. Banks have become the main beneficiary.
We are now unable to maintain our existing infrastructure, let alone find funding for new capital works. Meanwhile, households are stricken with debt as billionaires continue to steal the public’s land and mineral rents.
In the search for money, governments make freeways private tollways. Privatisation, even of natural monopolies, is seen as the answer even though it has proven not to be. In our education systems publicly-generated land and natural resource rents have become ‘invisible’, so that private interests are able to keep taking them, unchallenged.
As government tax policy has come to reward rent-seeking parasites, and fine those who use their talents to work and create, rising land prices and greater taxes on labour and capital have become so pathological that western society has slowly ground to a halt.
Is it stupidity or complicity that has people, their governments, policy-makers and financial analysts running around in circles for answers?
Why is it that only Georgists are able to see that land price and taxation are the direct measure of society’s sickness, or that the capture of land rent as an alternative to taxation can provide the antidote for all this madness?
Have YOU seen the cat?
If not, as the American Henry George suggested, maybe you’re little different from this poor, witless bull?
“The dirty war for Europe’s integrity and soul” by Professor Yanis Varoufakis on Radio National’s BIG IDEAS is an eye-opener.