Mid year economic review

[Ralphie]

Do not raise the GST.

Remember the GST is funding for the Nevills in the states not to improve the Federal bottom line.

Whilst you are technically correct, increasing the GST will enable the Feds to reduce the State Grants and improve their bottom line.

The simple reality is that there is a structural deficit issue that can only be addressed by increase taxes, which no one wants to pay. I would be very comfortable with an increase in the GST to 15%, which would just about solve the problems.

 

[COMMANDER]

The $120 Billion of "Labor Debt" i think that post is referring to is the four year projected accumulated deficit from this year onwards.

Labor did try to raise taxes in some form with the original Mining Tax and Carbon Pricing even if in the initial stages of each most of that revenue would be returned in subsidies and tax breaks in other areas.

I guess it's looking like the GST will go up to 12% and more reworking of tax brackets is necessary if total taxation revenue does not improve.

Or we have less Govt spending in a time when we need more to boost the economy which will speed up unemployment and hence increase welfare payments and retraining/education expenses.

Not much room for the reserve to stimulate with lower interest rates but the Libs i'm sure are pushing the reserve with all this "deficit talk".
Stevens came out recently to warn the Govt to stop relying on further drops in interest rates to boost the economy as it will not do much with diminishing returns from this point onwards.

So lowering interest rates will fuel an ever increasing housing bubble we don't need and i can also see the Australia dollar to be pushed downwards internally and internationally to stay competitive.

Yeah all all the Liberals fault. Wasn't the halfwit labour government that went from a 42 billion dollar surplus to this in six years.

 

[DSM5]

One forgets Commander that taxes pay for civilisation. Its not as if the ALP threw money away down a hole. It went to all those businesses, subbies and workers in the private sector to assist them through the GFC. and quite successfully too. Why we're in such a deficit hole is that Costello and Howard led you all down the garden path by reducing the tax take, whilst upping middle class entitlements. Now no-one wants to let any of those go, whilst resisting paying a fair tax rate. Labour did try to claw back taxes from the wealthy overseas mining companies, but got royally screwed, and the carbon tax was an attempt to reduce our reliance on coal and other environmentally damaging outflows. Both measures the libs want to throw away and in turn saddle us with a ridiculously expensive maternity leave scheme. I could go on, but I won't.

 

[Hamster Huey]

One forgets Commander that taxes pay for civilisation. Its not as if the ALP threw money away down a hole. It went to all those businesses, subbies and workers in the private sector to assist them through the GFC. and quite successfully too.

It was reckless, poorly planned and targeted funding that had little regulation on it. Whilst the intent was sound, the manner led to a massive amount of waste, whether it was paying overs to industry, or even demanding unwanted facilities be provided.

So in essence, yeah, a LOT of money went down a hole.

 

[DSM5]

Hampster, what I was getting at was it wasn't like the money went into a black hole, ala subsidies to big business, farming drought affected land, private school funding etc, it went into workers and subbies pay packets and small building firms in a lot of country areas that supported those communities through the GFC. Sure their were ripoffs, but mainly through dodgy public companies. 'Massive amount of waste', where? From my mates perspective in public schools, they were all pretty happy their infrustructure was built. If any was reckless, etc, its because the government relied on the private sector to manage these program's. silly that.

 

[Hamster Huey]

Hampster, what I was getting at was it wasn't like the money went into a black hole, ala subsidies to big business, farming drought affected land, private school funding etc, it went into workers and subbies pay packets and small building firms in a lot of country areas that supported those communities through the GFC. Sure their were ripoffs, but mainly through dodgy public companies. 'Massive amount of waste', where? From my mates perspective in public schools, they were all pretty happy their infrustructure was built. If any was reckless, etc, its because the government relied on the private sector to manage these program's. silly that.

Subsidies still went to industries and 'big business', farmers deserve more support in the event of issues out of their control, private school funding remained from the Howard era, and they put a massive amount of poorly accounted dollars into 'renewable energy' schemes, often wasting millions with nothing to show in the end but a rusting heap as the project is mothballed or abandoned.

Smart government spending ensures that the private business justifies the request for money, and takes into account what happens down the track. The BER and PBs didn't do this and allowed cowboys from everywhere to walk in and inflate prices, poorly install what was required (needing more money to rectify), and work to government demands, whether something is wanted, or not.

There was more important infrastructures to target the monies into than what was done to schools and peoples roofs, and at the very least more care was required to establish accountability processes, before a single dollar was handed out.

 

[SeaEagleRock8]

So HH supports a greater level of government planning, control and regulation.

 

[Hamster Huey]

So HH supports a greater level of government planning, control and regulation.

Than what occurred during the billions in 'targeted' stimulus spending, for sure. Don't you?

 

[Daddycool08]

Do not raise the GST.

Remember the GST is funding for the Nevills in the states not to improve the Federal bottom line.

Whilst you are technically correct, increasing the GST will enable the Feds to reduce the State Grants and improve their bottom line.

The simple reality is that there is a structural deficit issue that can only be addressed by increase taxes, which no one wants to pay. I would be very comfortable with an increase in the GST to 15%, which would just about solve the problems.

Ralphie, I had been working for the ATO for almost 20 years when the GST came in.

I was one of the guys in the blue suits that was up in front of people telling everyone how good it was going to be way back in 1999 and through 2000.

I spent more time on the road explaining this tax to various fora (or Forums if you prefer) than I spent at home. I also spent a great deal of time in Canberra working on explanations for curly questions and getting the ATO answers correct. Also, I spent about 18 months as a technical advisor in a couple of ATO GST call centres.

I have since learnt the error of my ways and now operate my own practice as an accountant and tax agent.

To spell it out for you the GST is a retrograde tax. Everyone pays the flat 10% regardless of what they earn. Therefore the percentage of the GST to earnings increases proportionally if earnings reduce.

This means that if someone earning $100 pays $11 to go to the movies, ($10 for the movie and $1 or 10% for the tax component) that person would pay $1 of his or her $100 earnings in GST tax, or 1%.

However, if one earns $1,000 and goes and sees the same movie at the same cost he or she would pay $1 of their earnings of $1,000 (or .1%).

This can and does change spending habits of people especially on luxury and large-ticket items. It may put downward pressure on the economy thus further reducing the government's revenue stream as people pull back on nonessential spending if there is a 50% increase in taxation.

Now governments and various public service departments do not seem to realise as we do in small to medium business that they need to cut costs. Hell I look at the cost structure of my firm almost daily.

Whereas the governments don't seem to care. They seem to think that if they need more money they can simply increase taxes while leaving the public service untouched, it seems.

"The Henry Review" was commissioned with a lot of tax remodelling and a lot of recommendations of which two were acted upon. It seems a lot of waste to even have the review in the first place. How much did that cost the Australian public, I wonder?

The various governments must not be allowed to simply go to the public purse borrow and say 'oh by the way now we have to increase taxes to pay for this.'

There are two sides - one is revenue the other is cost or expenditure. Reduce spending, get the non-revenue generating public servants and government departments out there generating revenue or cut them to the bear minimum to reduce costs.

It seems everyone is thinking of increasing revenue and not looking at the expenditure side of the equation.

If ever you want to see how governments work or fail to work just watch a few episodes of Yes Minister - it's more on the point than you can imagine.

By the way Ralphie - thank you for picking up the "technical correctness" of my comments. As that was what I did for many years with the ATO I was a specialist in that area of the law.😉

Are you a public servant Ralphie? Either way you sound a little like on in your comments my friend.😛

Please do not think I am bagging your comments as I agree with them in principle but I think it is a much deeper problem than you and I or other mere mortals can change I only hope our new government can do something about this issue without raising taxes.

 

[SeaEagleRock8]

Mere tinkering with a rotten system.

 

[Technical Coach]

The $120 Billion of "Labor Debt" i think that post is referring to is the four year projected accumulated deficit from this year onwards.

Labor did try to raise taxes in some form with the original Mining Tax and Carbon Pricing even if in the initial stages of each most of that revenue would be returned in subsidies and tax breaks in other areas.

I guess it's looking like the GST will go up to 12% and more reworking of tax brackets is necessary if total taxation revenue does not improve.

Or we have less Govt spending in a time when we need more to boost the economy which will speed up unemployment and hence increase welfare payments and retraining/education expenses.

Not much room for the reserve to stimulate with lower interest rates but the Libs i'm sure are pushing the reserve with all this "deficit talk".
Stevens came out recently to warn the Govt to stop relying on further drops in interest rates to boost the economy as it will not do much with diminishing returns from this point onwards.

So lowering interest rates will fuel an ever increasing housing bubble we don't need and i can also see the Australia dollar to be pushed downwards internally and internationally to stay competitive.

Yeah all all the Liberals fault. Wasn't the halfwit labour government that went from a 42 billion dollar surplus to this in six years.

I don't recall a 42 Billion surplus, i recall the first year of labor having a 19.7 billion surplus "BEFORE" the response to the GFC which generated a 27 Billion dollar deficit the following year.

"Targeted stimulus" is not all about targeting in the sense of the average Joe blows definition, targeted can also mean in economic terms "quick response quick injection stimulus for retail and services" defined by the Libs and the average Joe Blow as "The plasma tv bonus" of the time.

There was a planned short term response with quick injection cash mid and long term injections also in infrastructure. If the initial response was mid to long term on infrastructure there would not have been an immediate response like the cash hand outs due to planning and red tape before these projects got the ok and low market confidence might have started a free-fall.

The Libs at the time were talking about lowering tax to inject money into the economy the problem with this idea is that once you lower a tax it is harder to raise it again---you want a one off injection not a permanent structural revenue hit.

It was all about keeping confidence in the economy creating a buffer in hope that the world economy will improve no more no less. Trying to over simplify it as "waste" and not targeted is the easy way for a simpleton/not educated in economics person to view it.(It is not like running a home budget which people who lack an understanding view it as)

Australia's unemployment has been steady during this period when it could have dipped big time leading to prolonged pain in unemployment benefits, welfare payments and reduced taxation revenue on top of re-skilling people subsidies.

What people are seeing now is the slow and always planned removal of the stimulus and a slow rise in unemployment as a result. As the world economy improves so will Australia and the deficit will naturally come down as it has in the past.

Australia's deficit was trending down for the last few years of Keatings tenure and would have turned into a surplus no matter who was leading the country at the time.

---

Do not raise the GST.

Remember the GST is funding for the Nevills in the states not to improve the Federal bottom line.

Whilst you are technically correct, increasing the GST will enable the Feds to reduce the State Grants and improve their bottom line.

The simple reality is that there is a structural deficit issue that can only be addressed by increase taxes, which no one wants to pay. I would be very comfortable with an increase in the GST to 15%, which would just about solve the problems.

Ralphie, I had been working for the ATO for almost 20 years when the GST came in.

I was one of the guys in the blue suits that was up in front of people telling everyone how good it was going to be way back in 1999 and through 2000.

I spent more time on the road explaining this tax to various fora (or Forums if you prefer) than I spent at home. I also spent a great deal of time in Canberra working on explanations for curly questions and getting the ATO answers correct. Also, I spent about 18 months as a technical advisor in a couple of ATO GST call centres.

I have since learnt the error of my ways and now operate my own practice as an accountant and tax agent.

To spell it out for you the GST is a retrograde tax. Everyone pays the flat 10% regardless of what they earn. Therefore the percentage of the GST to earnings increases proportionally if earnings reduce.

This means that if someone earning $100 pays $11 to go to the movies, ($10 for the movie and $1 or 10% for the tax component) that person would pay $1 of his or her $100 earnings in GST tax, or 1%.

However, if one earns $1,000 and goes and sees the same movie at the same cost he or she would pay $1 of their earnings of $1,000 (or .1%).

This can and does change spending habits of people especially on luxury and large-ticket items. It may put downward pressure on the economy thus further reducing the government's revenue stream as people pull back on nonessential spending if there is a 50% increase in taxation.

Now governments and various public service departments do not seem to realise as we do in small to medium business that they need to cut costs. Hell I look at the cost structure of my firm almost daily.

Whereas the governments don't seem to care. They seem to think that if they need more money they can simply increase taxes while leaving the public service untouched, it seems.

"The Henry Review" was commissioned with a lot of tax remodelling and a lot of recommendations of which two were acted upon. It seems a lot of waste to even have the review in the first place. How much did that cost the Australian public, I wonder?

The various governments must not be allowed to simply go to the public purse borrow and say 'oh by the way now we have to increase taxes to pay for this.'

There are two sides - one is revenue the other is cost or expenditure. Reduce spending, get the non-revenue generating public servants and government departments out there generating revenue or cut them to the bear minimum to reduce costs.

It seems everyone is thinking of increasing revenue and not looking at the expenditure side of the equation.

If ever you want to see how governments work or fail to work just watch a few episodes of Yes Minister - it's more on the point than you can imagine.

By the way Ralphie - thank you for picking up the "technical correctness" of my comments. As that was what I did for many years with the ATO I was a specialist in that area of the law.😉

Are you a public servant Ralphie? Either way you sound a little like on in your comments my friend.😛

Please do not think I am bagging your comments as I agree with them in principle but I think it is a much deeper problem than you and I or other mere mortals can change I only hope our new government can do something about this issue without raising taxes.

GST is a regressive tax that increases the tax as a proportion of income especially for people on low incomes, tax brackets can help alleviate this impact though.

If a person has $500 in the hand at the start of each week and requires $440 to be spent on rent, services etc etc to live you are adding an extra layer of tax on top of the tax bracket.

Mind you some indirect taxes always existed and it is not a simplistic one for one calculation. The main point is as a proportion people on lower incomes get hit more than people with high disposable incomes who spend less as a proportion of their income each week on goods and services.(This will always be the case it is really how much of a difference is acceptable)

I am still in favour of a GST due to no-one else really coming back with a better alternative but that does not make it a fair tax and it should not be raised any further.(it usually does though in most places)

I'm sure there are many alternatives just requires guts and forward thinking but also requires some people to take a real hard look at themselves thinking they are always entitled to tax breaks for various reasons.

 

[Daddycool08]

Great comments Technical Coach. You sound like you know what you are talking about and not saying the 10 second sound-bite "raise taxes."

It's interesting to see the government has now imposed GST on long-term residents of caravan or mobile home parks.

Most of these residents are lower level income earners. Hence their rents have now increased by another 10%.

 

[Hamster Huey]

Do not raise the GST.

Remember the GST is funding for the Nevills in the states not to improve the Federal bottom line.

Whilst you are technically correct, increasing the GST will enable the Feds to reduce the State Grants and improve their bottom line.

The simple reality is that there is a structural deficit issue that can only be addressed by increase taxes, which no one wants to pay. I would be very comfortable with an increase in the GST to 15%, which would just about solve the problems.

Ralphie, I had been working for the ATO for almost 20 years when the GST came in.

I was one of the guys in the blue suits that was up in front of people telling everyone how good it was going to be way back in 1999 and through 2000.

I spent more time on the road explaining this tax to various fora (or Forums if you prefer) than I spent at home. I also spent a great deal of time in Canberra working on explanations for curly questions and getting the ATO answers correct. Also, I spent about 18 months as a technical advisor in a couple of ATO GST call centres.

I have since learnt the error of my ways and now operate my own practice as an accountant and tax agent.

To spell it out for you the GST is a retrograde tax. Everyone pays the flat 10% regardless of what they earn. Therefore the percentage of the GST to earnings increases proportionally if earnings reduce.

This means that if someone earning $100 pays $11 to go to the movies, ($10 for the movie and $1 or 10% for the tax component) that person would pay $1 of his or her $100 earnings in GST tax, or 1%.

<snip>
.

I understand what you are saying, but generally you spend more disposable income on GST items as you earn more. Perhaps any change to bring in basics that currently do not attract GST will require a rethink, but I don't mind the current setup.

 

[simon64]

Remember also that a series of taxes were abolished when the GST was introduced and some items actually went down in price.

It also has a broader base so even tourists pay it. And honestly, we were one of the last major economies to have some form of consumption tax.

I'm not a high income earner by any stretch of the imagination. I don't remember the cost of living changing drastically when the GST came in.

As long as I can afford my membership, life is good.

 

[Fluffy]

Reportedly the clubs plan is to make Tony Abbot the number 1 ticket holder. Hopefully that all falls into place. That may sure up some funds.

So HH supports a greater level of government planning, control and regulation.

Than what occurred during the billions in 'targeted' stimulus spending, for sure. Don't you?

The issue there is everything had to happen very quickly, sure in hindsight we could have been more efficient but if we had of wasted the time in getting that info then the overall cost to our economy would have been far greater and most probably we also like most of the world would have been in a recession.

Speaking from industry on the "pink bats" (dumb abbort quote as that is just a brand name for only 1 supplier) the politicians were advised by Fletchers (one of the top 2 suppliers in Australia) that their plan was a really good one. The mistake was that he underestimated the rush/effect or GFC factor and rather than creating the estimated 5-10,000 new jobs in the industry is was 15,000+.

 

[mozgrame]

Tim Tams Yo!!

 

[Fluffy]

line 5, not mine, it was mint slice today, smells sooooo goood

 

[mozgrame]

Just thinking about your workplace makes my nipples hard. That's normal though right??