Resource rent tax statement

John Quiggin336 Comments

I’ve been busy for the last few days, working on a statement by a group of economists in support of the principle of a resource rent tax to replace existing royalties. The statement calls for informed debate about the proposal and takes no position on particular design issues, such as the choice between the existing system used for the Petroleum Resource Rent Tax (40 per cent on returns above about 11 per cent) and the government’s proposed Resource Super Profits Tax (40 per cent on returns above the bond rate, with a corresponding offset for returns below the bond rate).

My own view is that the RSPT design would be more efficient, but the losers under this design (those who can confidently expect high profits) have been very vocal, while the potential gainers (smaller miners undertaking riskier projects) have not given the government any support. Add to that the fact that the PRRT design is long-established (making scare campaigns a little bit harder) and simpler and there is a strong political case for a compromise along these lines. The most important thing is that the government cannot and should not back down on the basic principle of a resource rent tax.

Here’s the Press Release and Letter.

The policy ratchet and US civil liberties (crosspost at CT)

John Quiggin34 Comments

Apropos of recent proposals to stop giving Miranda warnings to terrorism suspects,

, the reaction is still exactly the same to every Terrorist attack, whether a success or failure, large- or small-scale. Apparently, 8 years of the Bush assault on basic liberties was insufficient; there are still many remaining rights in need of severe abridgment. Even now, every new attempted attack causes the Government to devise a new proposal for increasing its own powers still further and reducing rights even more, while the media cheer it on. It never goes in the other direction.

This kind of policy “ratchet” is quite common, but I haven’t seen a fully satisfactory, or general, analysis of either the metaphor or the phenomenon.

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Kiss of Death

John Quiggin9 Comments

Not that long ago, I said that, in the absence of a policy change on privatisation, I’d be putting Labor last on my next Queensland ballot, behind the Greens and, more relevantly, the Liberal National Party. Doubtless as a result, the LNP has promptly .

Australia Talks

John Quiggin23 Comments

I’ve been flat out with final revisions to my book manuscript and various other things. So I didn’t get time to say I would be on Australia Talks this evening talking about the resource rent tax. It went fairly well, I thought. You can judge for yourselves when the podcast becomes available

Not quite sure when I will surface from my current deluge of work. Light posting until then.

After the Budget

John Quiggin49 Comments

* Budget lockup low point: Only instant coffee, had to get my caffeine hit from Diet Coke. High point: Asked for autograph by Treasury officials. Also, a fun dinner with Robert Gottliebsen, Alan Kohler, Natasha Stott-Despoja, the Crikey crew and others. Not quite as lively as some accounts suggested, but a good time was had by all.
* One thing I missed: Got through some of the confusion on the aid budget but wasn’t able to work out if the money for Copenhagen commitments was additional new money (as promised) or old money taken from elsewhere in the aid budget. Unsurprisingly, it was old money
* A bigger thing I missed: What Possum’s Pollytics correctly calls the most important chart in the budget, a graph showing a regression of the size of economic stimulus against economic growth relative to IMF forecasts. The relationship is highly significant, and the coefficient is approximately 1. That is, each dollar of stimulus resulted in (roughly) a dollar of extra output. No doubt this will be subject to reanalysis, but it’s a striking result.

* Tony Abbott’s reply: predictably weak. Freezing public service recruitment is silly symbolism, not a serious way of cutting spending.

What I wrote in the lockup: Budget summary

John Quiggin12 Comments

Last year’s Commonwealth Budget represented a huge, and, for the most part, successful economic gamble. The gamble last year was that a big budget deficit would yield an economic stimulus sufficient to outweigh the associated increase in public debate and provide a basis for sustainable economic growth in the future.

As the Treasurer’s speech points out, the Australian economy has recovered strongly at a time when the US and European economies are only marginally stronger than at the depths of the recession. Public debt is now projected to peak at 6 per cent of GDP, compared to a developed world average of more than 80 per cent. The government’s claims as strong economic managers have a fair bit of credibility.

This year’s Budget is a political gamble; that the government can win re-election based on that credibility, without offering any significant electoral sweeteners. The government doubled down on this gamble with the series of backflips and repudiated promises in the leadup to the Budget, motivated largely by the desire to achieve an early return to surplus. The political price for these backflips, most notably the indefinite deferral of the CPRS, has been steep, and it’s far from obvious that the Budget will provide any offsetting bounce.
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