I can’t complain about the first para being omitted from my letter in THE AGE today, because it amounts to blowing its bags for Saturday’s editorial piece.

Original first paragraph:

Saturday’s editorial “Digging deep for next to nothing” is a clear exposition of the manner in which Australians were dudded by Julia Gillard doing a backroom deal with the big miners in 2010. She managed to turn Kevin Rudd’s super profits tax which would have raised tens of billions of dollars into BHP Billiton’s, Rio Tinto’s and Xstrata’s minerals resource rent tax which will now raise tens of millions of dollars only.

LABOR COWARDS

A Labor Party government of yore would have stood tall through the miners’ twenty-two million dollar scare campaign, but Labor is now poll-driven and has sadly deserted its principles.

Someday, hopefully soon, Australians will come to see the Henry Tax Review’s recommendations to abolish more than one hundred taxes on labour and capital by a revenue switch to land and natural resource-holding as the prescription necessary to get the Australian economy moving again. We could be leading the world out of the downturn instead of descending further into it.

Bryan Kavanagh, Glen Waverley

————–

postscript

In an attempt to bury further the Henry Tax Review–the most far-reaching recipe for regenerating the Australian economy–the Gillard Government’s $1 Billion Jobs Plan was announced yesterday.

You almost sob with despair to see the incredible lengths to which the Gillard Labor government will go to ignore the common sense that resulted from “Australia’s Future Tax System” commissioned by the Rudd Labor government. It’s as though the Henry Tax review never occurred – so it becomes necessary to continue fiddling around the edges with such expensive “plans”.

They’re off and running. First, there’s the now weirdly-named Liberal Party which has morphed into populist hard-right conservatism to such an extent the misnomer is an affront to any sensible person.

They’re the hot favourite to win the government of Australia on 14 September.  Without some catastrophe happening to the Liberals, the Labor government’s gone.

On the other hand, despite its parliamentary representatives’ and adherents’ protestations to the contrary, the Labor Party’s “light on the hill” has been extinguished.

At least the hard-right Tories–against any societal change at all unless it favours the 1% because “they know how to run the economy”–understand what they represent. Labor, however, having also sold out to the 1% by its actions, if not its lingering high-minded words, no longer knows for what it stands, and much of the party’s diminishing membership resents its loss of direction.  The diehards know they’re now useful only to hand out how-to-vote cards on election day but stick to the party, dreaming it may return to its roots.

Is this too severe a critique of the Labor Party? Not at all.

When Prime Minister Kevin Rudd, dared to institute an all-in 40% tax on miners’ super-profits for the Australian people, which accorded with Labor Party principles, he was unceremoniously dumped by his colleagues. They’ve been unable to explain knifing Rudd in the back except in terms of his having been “non-consultative” and “too remote” from his fellows. The real story was Labor moving further rightward towards the requirements of the 1% and its rampant FIRE sector.

Enter new Prime Minister Julia Gillard to conduct a backroom deal with a handful of big miners. This reversed Kevin Rudd’s application of one of the key pillar’s of the Henry Tax Review’s proposed tax-shift off labour and capital, reducing the tens of billions in rent the miners would properly have had to pay to the Australian people by way of rent to a peppercorn rent yielding instead only tens of millions. (See THE AGE editorial 16 February)

Meanwhile, as businesses begin to tank, the revenue base has rapidly declined. The Labor Party is nowhere on the revenue conundrum whilst the Liberal Party’s response is to slash 24,000 jobs in Canberra. Sans Kevin Rudd, Ken Henry’s workable tax-shift is now ignored by both parties.

Incredibly, most Australians cling like limpets to one of these two sell-out political parties. Some, not liking the smaller parties or independents, will vote for them out of a sense of resignation for what they once stood.

Australia, you’re in for a lot of bluster and BS over the next six months. These two parties are no longer located at different ends of the political spectrum. They are the yin and yang of the 1%.

Where’s high public purpose in this election? Missing.

Where are the economic policies that might avoid the approaching depression?  Missing.

Both parties offer their version of status quo.

All is division and populism: the pollsters rule.

Though the charade is no longer enjoyable, I’ll continue to commentate by way of catharsis.

Well, to be fair to Alan Oster, Group Chief Economist National Australia Bank, at least he said today he’s come to see “the glass is half-empty”.  (See yesterday’s blog)

China’s still looks to be a goer for us, and watch out for Australia’s LPG sales rapidly escalating, he forecasts.

But do economies really work from the top down?

Almost in passing, he said people are leaving their money in the bank.

Unfortunately, he didn’t take that thought any further.

It was left to other speakers at “State of the Market” to mention that, apart from increasing their savings, the punters are also trying to pay down the mortgage. They’re still worried, and don’t quite believe the recent increases in some residential markets are indicative of a genuine upturn.

People know there’s more correction to be wrung out of this bubble but today’s trying-to-be-upbeat speakers were unprepared to say as much.

To me, this all this decodes to ineffective demand being slowly visited upon Australia. Retail’s certainly in the doldrums: just pop into any Myer or David Jones.

And isn’t it really whether people are spending that determines the direction of the economy?

Oster said eateries and health are sustaining us – but I guess health cuts both ways, Mr Oster?

I’m suggesting the glass may have recently been half-empty, Alan, but its contents continues to diminish.

Congratulations Bill Evans, Group Chief Economist at Westpac Bank, you got it right in May 2012 about the “endless easing” of the Reserve Bank’s overnight cash rate.

But it was typically belated for a bank economist to wake up so slowly to what’s happening around you, Bill. Seven years late.

In an article in THE AGE on 15 June 2005 I said “We have now inflated the current residential bubble to voluminous proportions and economic growth is primed to tank into a major deflation (and) …. the next adjustment of Australian interest rates would more properly be down.”

And the RBA simply shouldn’t ratchet interest rates up during a major deflation, Bill.

Tomorrow, if I’m to earn my continuing professional development points, I’ve got to go and listen to Alan Oster of the National Australia Bank give me his latest assessment of the state of the market.  [Sigh!]

I don’t say this to disrespect these men. Unfortunately, they’ve been tightly shackled to a false economics.

When will the Australian Property Institute give Steve Keen or me a guernsey to speak to valuers in more realistic terms? Of course, that’s a largely rhetorical question because, as with banking, the property industry per se is usually backward in coming forward with the facts about bubbles.

The apparent reason for this: “We don’t want to scare the horses” may alternatively be read as “We want to squeeze the last drop of blood out of this bubble market before it bursts”.

So, let’s simply disregard the damning consequences of inflating the bubble even further, eh guys?

“It’s not a bubble?” Oh? And black is white?

I consider not becoming compromised is a pretty good reason for valuers to be at arm’s length from bankers and real estate agents who continue to deny the existence of a land price bubble.

♦  Economics is the way we arrange our daily lives once we’ve seen a country’s natural resource rents are owed equally to all citizens.

♦  An economist is a person who understands natural resource rents can’t be privatised, short of corruption.

♦  As the rentier runs the show, the way of the world is corruption. Politics, business and sport are built around this corruption and labelled democracy.

♦  Classical economics (where land isn’t capital) has been made heterodox, and fudging and ‘equilibrium’ orthodox.

Young researcher Philip Soos has shown the enormous tension that has developed around home ownership in Australia is capable of being resolved with a little honest analysis.

Whilst baby-boomer grandparents believe their departure from this mortal coil might assist their grandchildren into a home, their grandkids are starting to ask a pretty fundamental question:  What’s happened to the fabric of Australian society that their hard-earned wages are now insufficient to service a mortgage?  And why did the oldies seem to experience a warm inner glow as the value of their properties escalated skyward, effectively locking Gen Y out of home ownership?

Australia has developed a split personality over the cost of a home.  Grandkids ask: Aren’t the baby boomers avoiding the real issue? How can Australia’s twenty-two million people generate higher houses prices than America’s three hundred and fourteen million?  Shortage of land? Growing population? Rubbish!

Soos has studied the data and, unlike many of our institutions, has been unable to avoid the logical conclusion. It seems baby boomers have fallen for a series of lies fed to them by the Reserve Bank, APRA, ASIC and the FIRE sector, i.e. finance insurance and real estate.

If we don’t agree with it, we’ve almost come to understand the self-interested spin of the real estate industry, but how is it possible that our publicly-funded instrumentalities can be permitted to contort housing figures into lies, thereby becoming the FIRE sector’s partners-in-crime?

It all comes back to the land.  It’s the land prices that have been increasing – because we’re capturing too little of its annual rent for public revenue, and increasingly taxing labour and capital. Land price is notoriously volatile, coming down with a thud every eighteen years, but banks nonetheless accept it as ‘security’.

Land prices are high because of insufficient residentially-zoned land? Nonsense! If Australia was to do as the Henry Tax Review suggested, that is, tax land and natural resources more, and labour and capital less, the divide on home ownership would be resolved once and for all.  Grandma and Grandpa’s house might be valued less, but at least Gen Y would be able to afford a roof over their heads.

The Reserve Bank, ASIC and APRA have obviously sold out to real estate interests and can no longer tolerate a truthful interpretation of housing data. They’ve a lie to uphold – that these are not bubble-inflated property prices.

But inveterate crusader for victims of the banking sector, Denise Brailey, has seen through this grand lie for twenty years.

Click on photo