It’s time, once again for the Monday Message Board. As usual, civilised discussion and absolutely no coarse language, please.
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John Quiggin 
Last week, Cardinal George Pell made a speech criticising those who believe that climate change is caused by greenhouse gas emissions.
Can we conclude from this that Cardinal Pell shares the belief of his predecessors in Galileo’s time that climate change is caused by variations in the movement of the sun around the earth?
Those concerned about Australia’s worsening water problems will be interested in the item in yesterday’s Sun-Herald describing the water situation in the Hunter Valley. Here, water is being bought up by miners, electricity generators and horse studs. Some 42 % of licences are owned by miners and generators, but they “used only a fraction of the amount to which they had bought the rights.�
The item notes that “the recent deregulation of water licences has left the door open to speculation by investors who have no use for the scarce resource.�
An ironically-named Mr Flood, described as a license broker, commented that it was “questionable� that people other than water users are able to buy water licences.
Mr D. Dutton (Upper Hunter Shire Council general manager) complained that high prices were jeopardising a Council irrigation scheme aimed at benefiting farmers.
The article noted that “lush green fields attract racehorse breeders to studs such as Arrowfield, the theory being that no-one would leave their high-priced mare on a dusty brown paddock…� Mr Wallace (manager of Arrowfield stud) said “it was important to keep the pastures wall watered and lush,� and “Paddocks are irrigated because it looks good.�
Meanwhile, dairy farmers in the region are increasingly unable to buy the water they need.
In the Australian today if is reported that deductions on rental property exceeds the rental income by an increasing amount at a significant cost to the taxpayer.
All discussion seems to be directed to the deduction side of the equation.
Being a suspicious old B, I am wondering about the rental income side and ask is all rental income declared. Rent on housing is not generally tax deductible for the renter and I think it would be a difficult area for the Tax Office to access.
Perhaps this could be a factor in the deduction, rental income equation.
I see no problem Gordon.
Dairy farmers can’t afford the water but horse-breeders and miners and electricity generators can.
so what.
Are you saying society should be subsidising water to dairy farmers.
apart from them milking the market why should this be better?
Surely you mean at significant savings to the taxpayer?
It is a pretty inverted type of logic that classes tax deductions as a cost to the taxpayer. It sounds like a disturbing version of George Orwell’s “newspeak”.
The speculation that the budget will contain an increase in middle class welfare is disappointing. It would be better if the middle classes was rewarded with general tax cuts rather than further social engineering via increased family tax benefits. However if they must fiddle with family tax benefits I hope they look to lower the EMTRs via slower tapper rates.
On the topic of EMTRs I noticed an interesting article the other day that looked at the EMTRs faced by those in public housing in NSW that face rental increases as their income rises. Their EMTRs were exceeding 70%!!!!
Mark Lathams analogy about replacing “rungs on the ladder” makes so much sence in the context of fixing all the EMTR problems that are everywhere throughout the combined state and federal tax and welfare systems. The current federal government (and the current Beazley led federal opposition) seem completely indifferent to this issue.
I don’t think so. Just as scientists no longer think in pre-Galileo terms so to I think that the Catholic church has moved on and conceded that the earth goes around the sun.
However for what it is worth variations in the movement of the earth around the sun (as opposed to the sun around the earth) are widely acknowledged by scientists as being amoung the predominant causes of climate change on earth.
http://en.wikipedia.org/wiki/Milankovitch_cycles
BBTEPALP:
Surely there is an argument to sustain food production capacity at a level where the nation will be able to feed itself in the event of war/disaster etc. It’s essentially the same argument as the one about retaining agricultural land rather than building houses on it. The fact the market at present values race horses more than milch cows says little about what is essential and what is dispensible luxury. It takes a generation to build up a dairy herd, so it isn’t going to be possible simply to switch horse paddocks back to dairy production. Mares’ milk aint gonna feed the population if push comes to shove.
Hal9000,
Australia currently produces enough food to feed over 70 million people. In the event of war or disaster interrupting trade I doubt we would starve – infact food would become so cheap it would be ridiculous. Cars and DVD players might get more expensive, though.
I think the point of Hal9000’s comment is that we are presently using some very high quality agricultural land (and a lot of water) for purposes other than growing crops or grazing herds of food-producing animals. At the same time there is a lot of marginal land in the interior being used for agricultural purposes which arguably should be retired for a combination of ecological and economic reasons.
There are a number of gripes here(Cardinal Pell excepted) that point to a growing belief that the constitution of our current marketplace is seriously flawed and so is our income tax system.
I asked this question a while back in one of these threads but alas, the IR regs were a hotter topic of conversation. I’ll try again.
Given that inflation at the moment is “pushed” up by burgeoning oil prices (flowing on from rising costs to farmers / truckers / retailers etc) not “pulled up” by excessive demand (I can vouch for the fact that family people on moderate incomes are pulling their heads in) why is the Reserve Bank putting up interest rates? Surely that’s a measure which is supposed to mitigate “demand” inflation, and will have no effect whatever on prices which will continue to be “pushed up” by the cost of oil?
I’m not an economist and I’m arguing against the Reserve Bank, but I can’t for the life of me see where they are right to do this. It seems to me more small businesses will go under as families restrict their spending even more.
Helen – most economists, other than those in the finance sector with a vested interest, agree with you that this latest rise was unnecessary. The Reserve Bank seems to have had a brain explosion. However, 0.25% is small beer – not much harm done (yet).
Helen,
Your question got discussed on another thread after being raised by Gordon. A link to the discussion and my main point is given below:-
https://johnquiggin.com/index.php/archives/2006/05/01/monday-message-board-22/#comment-49311
Here is an edited version of what I said to Gordon with the offending “Interest Rate� versus “Interest� mistake removed and a few other minor edits:-
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I don’t really agree with your reply. Higher taxes do not reduce inflation. If anything an upward move in taxation would reduce the demand for currency and all else being equal this would cause inflation. In fact Reagan attacked inflation by cutting the tax rate (as did Hawke).
“Interest� charges represent a price. They are the price of credit. When interest rates go up they are in fact another example of a price rise. The RBA and other central banks often filter out such price rises when measuring inflation. Central banks also sometimes filter out commodity prices (eg oil, gold, silver, copper, coal) with the view that excessive domestic demand can’t be the problem in these cases.
The question posed by the writer exposes an interesting point. An increase in interest rates may take more money from some peoples pockets but they add an equal amount of additional income to other peoples pockets.
An interest rate increase is achieved using open market operations. In practice this means taking currency out of circulation (or reducing the rate at which new currency was being added). Given the cash flow needs of businesses (and banks) this reduction in cash in circulation causes causes a change in the terms of trade between currency and real goods and realigns the entire financial system with the output constraints of the economy.
Amoung the many reasons that I advocate a commodity standard is that the operation of monetary policy is more readily communicated to the lay person. Under such a standard a concern about inflation is not addressed by increasing the price of credit (although such an increase may follow) but rather by reducing the price of commodities. Intuitively this is much easier to sell to the uninitiated. Although those more experience with the current paradigm would probably find it harder in the way that older people found the move to metric difficult.
Regards,
Terje.
Helen,
One of the RBA’s most important objectives is to control inflation expectations. If petrol price increases lead to ‘second-round’ price increases for other goods, then this inflation, even if it should really be a one-off effect, may appear somewhat ‘entrenched’ (possibly due to bad economic theory or to the fact that nobody knows exactly what is going on at any point in time), which could become a self-fulfilling prophesy. Arguably the RBA shouldn’t be too concerned with second-round effects if it can keep expectations completely under control, but I wouldn’t count on them being able to do so. If you say you’re going to target CPI inflation and then when it comes to the crunch you decide you want to target something else, then you’re probably going to lose some credibility.
Also, petrol prices could affect saving rates. If people don’t cut back their expenditure on other goods by as much as their petrol bill goes up (meaning saving goes down), then this gap must be financed somehow, likely leading to higher interest rates.
Terje, I’m not sure how your post really addresses Helen’s point.
derrida derider
The Reserve Bank seems to have had a brain explosion.
I disagree. If you look at what is happening in the USA right now, we are almost certainly entering a period of extreme political instability, which will no doubt have repercussions on the US and global markets.
True, the US economy still looks good on paper. But that’s because most of the
(whoops: continued)… most of the traditional economic indicators are watching the fortunes of the mega-rich, their companies and their stock-holders.
But gandhi, an end to US growth is surely an argument for lowering Australian rates. And the converse – an outbreak of US inflation – can surely be dealt with by a currency adjustment (that’s why we floated the bloody thing). With the Oz in the high 70s, its hard to see how we’re going to get inflationary impulses from overseas.
Bingo. We floated because being ties to a floating US dollar was worse than floating freely. Fixing to the US dollar only made sence when the US dollar was stable. With an unstable US dollar we should adjust relative to it.
Who wants to be floating at sea when there is a stable ship anchored close by?
Who wants to be fixed to a ship when it is unstable and sinking?
Francis Fukuyama has written a new afterword to his “End of history” book/thesis.
http://www.opendemocracy.net/democracy-fukuyama/revisited_3496.jsp
I notice that one Andrew Reynolds, an Australian with interests in economics, is a user at wikipedia. I don’t know how long this has been going on or if anybody has drawn attention to it already, but I thought I’d mention it in case anybody wanted to benefit from his contributions there.
Rally in Gympie to Save the Mary River
When : Saturday, 13 May, 6:30PM
Where : Memorial park, Gympie (near to Pool)
Bring a sign saying where you are from so that Beattie knows that it isn’t just the Mary Valley residents that are against this it is everyone.
A fighting fund has been set up and collections will be taken that night.
Thanks to everyone for your support, please send this email far and wide. This needs to be HUGE!
SAVE THE MARY RIVERhttp://www.savethemaryriver.com
How You Can Help…