2 thoughts on “Sandpit

  1. Once more there is some talk of using the Reserve Bank to facilitate low interest home loans. The Ajustralian Financial Review mentioned it in relation to budget measures to reign in the super profits of the big banks. But is this a solution or a cop out. The only way to reign in super normal profits is with punitive rent taxes. The resource rent taxes are a good example, in that they are both revenue raises and work to influence future investment strategies. The announcement, this week, of higher planned investment for the Bass Strait is one such outcome. There is some debate that it is only the escalating gas prices that have opened up the big three energy explorers to this new investment strategy. That may be true, but the resource rent tax will make sure that any super normal profits arising from this planned investment will be taxed for the benefit of all Australians. The argument that the big banks are only focussed on increasing profits, seems to be valid. Now this is not surprising in our current economic environment. But governments need to keep such private sector behaviour under close watch to stamp down on price gouging and other excesses. The taxing of super normal profits must be implemented in such a way as not to destroy incentives for economic growth. Having made this motherhood statement does not preclude all tax reform options. The Reserve Bank should not be seen as an easy way out of making such hard decisions.

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