Institute for Private Enterprise » Budget

Polling Shifts for Parties

Des Moore — Sun, 07 Apr 2019 22:46:17 +0000

Polling Improves Coalition’s Position But Still Leaves Them Struggling

Two new polls tell different stories, one favouring the Coalition but the other not.

First, Newspoll shows the Coalition’s TPP as up by two percentage points with Labor’s down the same two points compared with the March 7-10 poll. Hence the Coalition is up from 46 to 48 while Labor’s is down from 54 to 52 now. Also, while the primary votes ( before taking account of preferences from other parties) for the Coalition have improved (from 36 to 38), Labor’s have fallen (from 39 to 37). These send out a hopeful signal to the Coalition.

Newspoll also shows an improvement of two percentage points in Morrison’s net satisfaction rate (from 43/45 to 45/43) and, although Shorten’s also increased that was only by one point (36/51 to 37/51). As to who is regarded as better PM, Morrison improved from 43 to 46 while Shorten fell from 36 to 35.

The National Political Editor of The Australian describes this as a “bounce” for the Coalition (see Benson Says Newspoll Gives Coalition a Bounce) although it is still well below even the 50.4% vote it reached in the double dissolution election in 2016 when Turnbull was leader. That election gave the Coalition only a one seat majority in the Lower House of 150 and it had a swing against it of 3.5%. In the Senate the Coalition had 30 seats, Labor 26 and others had a record 20. In other words, the Coalition needs to do much more than catch up to Labor if it is to be able to at least control a Lower House which will have several independents as well.

Second, an Ipsos poll run by the Sydney Morning Herald ( the timing is presumably designed to display competition) shows that on a TPP basis the Coalition has fallen since its last poll in February 12-15 from 49 to 47. By contrast, over the same period Labor has increased from 51 to 53. Ipsos also shows a reduced net satisfaction rate for Morrison (from 49/40 to 48/39).

The Newspoll is generally regarded as a more accurate and reliable poll and Ipsos operates less frequently than Newspoll. It’s result is also questionable on this occasion given that its poll reported 41% believed the budget was a “fair” one and only 29% thought it wasn’t. More generally, the Budget appears to have been well received and it would be unlikely to have caused a fall for the Coalition. In fact, Labor would seem to have been more likely to have had a fall given the announcement of a policy requiring half of motor vehicles to become electrified by 2030 (there are now less than 1%) and the failure to provide details of how the proposal will proceed and what it will cost. These and other developments suggest that the Ipsos poll is not an accurate reflection of the views of the electorate.

As pointed out in my previous Commentary (see in particular Coalition’s Budget & Labor’s Reply on 6 April), while Labor has announced many policies there has been little back up so far on the costs whereas the Coalition has published a comprehensive budget and Labor has had access to the Parliamentary Budget Office which should have allowed it to publish estimates of the costs of major items of spending and major tax changes. Given the general dissatisfaction with the plethora of announcements on new policies, it would not be surprising if an increasing proportion of the electorate now wants more back-up.

I refer again to Terry McCrann’s piece of April 6 arguing that “Labour has a two-stage strategy to destroy Australia”. He lists policies announced by Labor which call on the Coalition to publicly attack and demand costs if it is to have a chance of winning the election.

Des Moore

Coalition’s Budget & Labor’s Reply

Des Moore — Fri, 05 Apr 2019 20:39:00 +0000

Shorten’s Budget Reply Speech Leaves Many Questions Unanswered

Economic Effects From Budget Aggregates

Shorten’s reply to Morrison’s Budget for 2019-20 does not offer any aggregate estimates for spending and revenue next year or for the four years aggregate to 2022-23. These are normally provided as a budget presentation and Morrison’s/Frydenberg’s figures are in the published Budget papers (see this summary in Federal Govt Budget Aggregates 2018-19 to 2022-23) .

Of course, Shorten does not have the access to the bureaucracy needed to construct estimates but he does have access to the Parliamentary Budget Office which will have provided confidential advice to him on possible variations to the official estimates. Yet even Shorten’s promise to have larger estimated surpluses than Morrison does not provide any indication of what the figures are. For one thing, while Morrison’s estimated surpluses for the four years are around a very poor $45bn (about 2% of GDP for those years), Shorten’s claim could be easily presented simply by indicating a miniscule higher estimate (say) $50bn. More questionably, Labor might have estimates for both total revenue and spending which are (say) 5 percentage points higher than Morrison’s but are undisclosed and yet still have the same estimate for surpluses. That would mean a significant increase in the size of government (tax and spending) with potential adverse effects on the economy and the private sector.

In short, so far Shorten has mentioned less about aggregate figures and focussed more on claiming what Labor will spend on a wide range of estimates of specific items. He does for example claim to be spending more on health and education, which will be among those which feature in the election debate. Perhaps the election debate will force him to expose the composition of the more important items of expenditure where he claims to be a bigger spender.

Shorten has of course attracted particular attention to his proposal to provide $2.3bn for a Medicare cancer plan through better diagnostic services and free cancer consultations, and this has attracted wide support because many people face expenses in attempting to overcome the disease. However, while this initiative seems to deserve applause, it does not provide a perspective on other items covered by the estimates for health or on spending already made on components of the plan.

It is pertinent that the Morrison government’s estimated total spending on Health over the next four years is about $500bn, including about $90bn to the states under the National Health Reform program and about the same amount for specific purpose payments on health to the states. Assessing the “new” cancer plan also needs to take account of the fact that public health is primarily a state matter and some of the items in the “new” cancer plan would already be provided by state run public hospitals. Thus this plan is not all new but is to a considerable extent increasing the eligibility for accessing the treatment of cancer already in place.

Economic Effects of Changes in Tax & Spending Policies

The Medicare Cancer plan illustrates on a relatively small scale how changes in government policy can improve the financial and health positions of individuals. What seem to have been neglected are the changes in tax policies which are likely to have net adverse effects on the decision making of the private sector and the economy as a whole.

This analysis derives from today’s article in Weekend Australian by Terry McCrann (see McCrann on Labor’s Budget & CC Policies). He argues that “Labor has a two-stage strategy to destroy Australia”, even suggesting that Labor could take us down the Venezuelan track.

McCrann’s Stage One,

“to be delivered immediately, is designed to destroy the entrepreneurial, investing, business risk-taking, job-creating class — with a $200 billion-plus tax attack on them and them very specifically and deliberately, the biggest in Australian history. It is sobering to detail what a Labor-Green government — as it will be, with the Greens in de facto coalition and Richard Di Natale de facto deputy PM — proposes to do from the get-go.

End franking credit refunds.

All but abolish negative gearing.

Double capital gains tax.

Increase taxation of trusts.

Increase the top personal tax rate to 49 per cent.

Not cut the major corporate rate from an increasingly globally uncompetitive 30 per cent”.

A detailed analysis would need to be made of the adverse economic effects of these policies and of the likely adverse effects not mentioned by McCrann of the establishment of a policy of a living wage and the increased regulation of wages and conditions of employment (virtually nothing was done to make use of the Dyson Heydon report made when Abbott was PM). But when put together these policies certainly have the potential to seriously detract from Australia’s economic performance. The detraction could be similar to what occurred under Whitlam.

But account also needs to be taken of the adverse effects of McCrann’s Stage Two, the implementation of the climate change policy. Such a policy did not exist under Whitlam but was started under the Howard government and is now having serious adverse economic effects, notably in higher electricity prices which have increased by a large percentage under the Turnbull/Morrison governments and which would increase further under a Labor government (or require much higher subsidies than already exist). Labor’s policy was outlined in more detail last Monday before the Budget and it includes for the first time a policy requiring that 50% of motor car vehicles to be fuelled by electricity by 2030 (!) and a regulatory policy restricting the cutting down of trees.

Viewers of my Commentary will be aware of the many reasons why the rationale of the dangerous global warming theory does not stand up to close examination. I have also suggested that there is scope to moderate the existing policy. Such a moderation at the start of the electoral debate may provide the only way the Coalition can save itself in the election.

I conclude with one the last remarks made by McCrann in his article, viz

“What the old-is-new-again Labor party of Bill Shorten — a man with a figurative cloth cap and a brain to match but a wardrobe full of, if not Zegna, still Super 120s suits and a taste to go with them — proposes is to destroy the two core foundations of not just a modern economy but modernity itself and indeed civilization”.

Commonwealth Budget 2019/20

Des Moore — Wed, 03 Apr 2019 08:53:18 +0000

Commonwealth Budget For 2019/20 Won’t Save The Bacon

Today’s Media has included many comments on the Morrison Government’s Budget for 2019-20 as well as estimates of revenue and expenditure for the following three years. These include a large number of decisions and it would not be appropriate here to examine them in any detail: indeed I challenge anyone to examine what one journalist described as “a budget speech littered with references to plumbers, couriers, cranes, hard hats, teachers, tradies and nurses”. My general conclusion on the speech I watched on TV was that it did not impress most on the Coalition benches and some of those there tended to drop off and, after a time, showed little encouragement as Frydenberg continued well after the half-hour finishing time allocated to budget speeches. In consequence, what my comments below mainly relate to are the totals of revenue, expenditure and what is commonly treated as the deficit or surplus for the four years.

But these need also to take account of the possible reactions to budget decisions on taxation and spending on capital projects which increasingly purport to extend beyond the four years. For instance, the Morrison government’s budget announcement included an addition of $25bn to the existing infrastructure program of $75bn which is spread over in ten years. This reflects the increasing involvement of the Commonwealth in what are (or should be) basically State matters including the congestion resulting from higher immigration but which the Federal government also believes it needs to be involved in order to attract votes. The result of the election in NSW, in which both the Liberal and National parties lost seats, led the Morrison government to publicise in the Federal budget its involvement in regional NSW. On tax, the difficulty in assessing the tax policy is that the second round of personal tax reductions will not start until 2022-23 and that is then reflected in a reduction in about half the estimated surplus for that year.

In interpreting the budget it is also important to realise the Coalition will face the election in May with electoral polling which indicates it is almost certain to lose. As such, apart from possibly indicating the Coalition’s budget as no more than a manifesto with which to start the election debate, the same applies to the manifesto which Shorten has announced. He is now further developing that by announcing yesterday the 50% compulsory electric cars by 2050, which has (rightly) been widely characterised as absurd. Shorten has also failed to indicate the costs of his environmental policies. This situation further widens the gap between the two parties on the issue of dangerous global warming which appears likely to be a major discussion item. Unfortunately, the Treasurer’s budget address re-stated the Coalition’s existing policy of reducing emissions as stated in Paris and announced a $3.5bn “climate solution package” apparently designed to soften the moderates within the Coalition. Another bad poll would provide the opportunity to moderate this policy but it looks as though such a moderation is not politically possible.

Yet it is reported today that three senior ministers, including Morrison, have decided over-night to add over $300mn to energy supplements and amend the budget the day after it was introduced!

In a situation of emergency one possible policy change on the environment might extend to pointing out that the prediction in temperatures by supposed climate experts has been three times higher than the actual increase in temperature as published by the IPCC. This failure of “scientists” to get anywhere near a meaningful prediction in temperatures indicates the need to urgently review the dangerous warming belief and provides a basis for at least moderating current policies (see advertorial Global Warming as published in today’s Australian by the Climate Study Group). This research indicates that the most highly likely warming over the period to 2100 does not justify the current expenditure by governments of squillions of dollars on reducing the usage of coal.

Following are my brief comments on the major items in the Budget:

Overall, there is no indication that the Morrison government aims to reduce the size of government. Estimated payments (ie expenditure) by the Federal government are about the same proportion of GDP throughout the four years covered by the budget (24.5 -24.6%). That is fractionally lower than in 2018-19 (24.9%) but that probably reflects a spending splurge in that year to reduce the amount to be allocated in the budget year. That is estimated at 25.2% of GDP, which is fractionally higher than in the last year of the Keating government in 1995-96 and is higher than in the last few years of the Howard government;
Treasurer Frydenberg (and Morrison) have claimed that the budget showed they had not increased taxation. But tax as a proportion of GDP is shown as slightly higher in 2019-20 than in the previous year (23.1%) and only fractionally lower in the last of the four budget years (2022-23) for what that may be worth. As there is no data readily available on the split between company and personal income tax, the increase in company profits may mean that personal tax proportion of GDP may have been reduced. But total estimated taxation in the current and next three years is the highest proportion of GDP since the final years of the Howard government in early 2000s;
As has been much acclaimed by the Treasurer and Morrison, after 11 years in budget deficits and a consequent increase in net debt, a surplus is estimated for 2019/20 (0.2% of GDP). But this is not a result that a government would normally boast about, which is probably why Frydenberg has limited his reference to the four year total. It is also exposed to possible minor adverse effects from reduced company profits due to falls in commodity prices. It’s good to be “back in the black” but the aim should be to achieve a much higher surplus and pay off more debt.

Overall this is a useful budget (a “B” perhaps) but it falls short of what is needed to avoid scattering spending to buy votes, to reduce debt and does not provide a bulwark against attack from serious adverse changes in economic conditions here or overseas. It does provide a test for whether Labor is prepared to maintain the aim or fall back to the deficits incurred by Rudd. Hopefully, the latter are so recent that Shorten will be able to persuade his left wing to stick to the surplus aim.

How to Save the Coalition

wpadmin — Thu, 29 Nov 2018 06:30:38 +0000

Last Sunday I tried to explain in my Commentary why the Coalition lost the Victorian election with such an unexpectedly large swing to Labor (I then thought it was a 5% swing but it now appears closer to 6%) and this loss was immediately followed by a Newspoll showing at the federal level that Labor is ahead on a TPP basis of 55/45. While this is the same as in the previous Newspoll, and Morrison’s personal rating as Better PM actually improved to 46/34, it confirmed that the Coalition would almost certainly lose the Federal election, which Morrison has now set for March. I concluded my Commentary by saying that “whether at the federal or state levels this result is a reflection of the failure of the Liberals to distinguish themselves from Labor”.

There is no doubt that this failure largely reflects the views of Turnbull, who first tried to be head Labor but was rejected there and, despite his leftish views, was accepted as a member of the Liberals. Then, after his second period as leader and then obtaining the PM position since 2015 after defeating Tony Abbott in an internal challenge, Turnbull himself was defeated in a internal contest by Morrison in August which actually arose from a challenge to Turnbull by Dutton. In effect, that challenge indicated that a majority of the party had reached the conclusion that, after a sequence of negative polling throughout his PM-ship, Turnbull’s views would not be accepted by the electorate at the federal election.

I have written in previous Commentary that since taking over Morrison has either not outlined his views on most major policy issues or outlined them only half-heartedly. This has kept the Coalition’s polling at low rates and uncertainty about what the Coalition stands for. Moreover, Turnbull continues to attempt to influence policies and individual MP’s attitudes on particular issues. This has led to suggestions that he should be expelled from the party and there appears to be a basis for doing that (see Turnbull to be Expelled? and Turnbull v Liberal Party). As Andrew Bolt argues, “It’s not just that Turnbull is angry with the Liberals for doing, in his opinion, the wrong thing in dumping him. Psychologically he badly needs the Liberals to now lose to prove to himself that he was right and good and loved (see Bolt on Liberal Party & Turnbull).

It appears however that Morrison has now realised that, for the Coalition to defeat Labor under Shorten, he must return to emphasising the traditional important elements in an election, such as the budget (see attached Morrison v Shorten). As David Uren points out, “the Coalition managed to restrain spending under the tight rein of finance minister Mathias Cormann with growth of about 2 per cent above inflation, despite the rollout of the National Disability Insurance Scheme and increased defence spending. The revenue turnaround began in the second half of last year and has gathered pace. Company tax revenue was boosted by a surprise leap in coal and iron ore prices while business profits elsewhere in the economy strengthened. Deloitte Access Economics tips company taxes will reach almost $100bn this year. Capital gains tax revenue is also coming back. Treasury now finds its forecasts are unduly pessimistic” (see Budget Outlook).

However, for Morrison to improve polling and stand a chance at next year’s election he must do two things:

Make a public statement saying that, while he recognises that Turnbull attempted to attract votes through the policies he pursued, he is no longer PM and those policies need to adjusted to the new political environment;
Indicate also that an energy policy based on NEG is no longer acceptable (Morrison has already stated this) and that the Morrison government will modify its emissions/renewables polices so as to ensure that it establishes a situation where electricity prices will fall.

But at the moment it looks highly unlikely that he will make the necessary changes to energy policy to allow prices to fall. As pointed out by David Uren the policy apparently being pursued for consideration by party members next week reflects “surely none as bewildering as a Coalition leadership deciding the solution is to give the Treasurer unfettered powers to force the break-up of private corporations, dictate their prices and order them to enter contracts against their will” (see Uren on Energy Policy). This would be a disaster in effecting the de-facto nationalization of the electricity industry and as such would likely lead to lower polling.

One final word. The attempt by some female politicians in Canberra, including one minister, to suggest that the Liberal Party is treating women badly does not stand up to careful consideration. Their failure to nominate any supposed offenders indicates the accusers have allowed themselves to be unduly influenced by the emergence of increased feminism. They also appear to overlook that politics involves exchanges which will, in some cases, cause offence – as it does with exchanges between men (see also Bolt on Liberals Problems on Women)

Polling on Budget & Bad Assessments by Commentators

Des Moore — Sun, 13 May 2018 23:40:22 +0000

Today’s Newspoll shows the Coalition still behind Labor on third party preference votes by 49/51 and indicates that only 41per cent think the tax-cutting budget was “good”. But the improvement in Turnbull’s Better PM rate to 46/35, compared with the 38/35 at the previous Newspoll, has led The Australian to present the poll as a major victory to Turnbull, to argue that the budget was “one of the most well-received …in a decade”, and to claim “the result maintains an electoral position for the Coalition that it has not enjoyed since September 2016”. It also says the result “builds momentum” for the five by-elections expected in early July (see Newspoll Shows No TPP Change on Budget).

However, the absence of any “bounce” in the poll after the supposedly well-received tax cuts, shows Turnbull’s improved polling has not been translated into an improvement in Coalition polling. Interestingly, The Australian’s National Affairs Editor offers sound reasons why the improvement may include that “Turnbull has been less noticeable”, has “avoided a major self-inflicted political crisis”, and has stayed “on message for more than 48 hours”. In short, he was previously acting in ways, and making decisions, which detracted some support from the Coalition but his passing of greater responsibility to Morrison may have helped lift support for the Coalition.

There is also the fact that today’s Fairfax/Ipso poll shows Labor’s TPP vote to be even higher at 54/46 per cent and only 38 per cent thinking they are “better off”, with 35 per cent thinking they would be worse off. This 54/46 result is based on how preferences flowed at the last election, which differ from how Newspoll recently decided to take more account of preferences shown in recent State elections, including an indication that more One Nation voters have shifted to increased favouring of preferences for the Coalition. My inclination is to conclude that the Newspoll result/assessment shows more support for the Coalition than there really is and that vice-versa applies to Fairfax (see Fairfax Poll Shows Coalition’s Reduced TPP).

The surprising aspect of assessments made since the Budget is that few, if any, commentators have offered an accurate account of the budget’s effect and the rubbishy explanations of it by Morrison and Turnbull. My own view is that, on this occasion, the commentators have put too much emphasis on the benefits from the tax cuts and to the changes in the structure of the tax system, and have implied much larger amounts are involved. I have already published some analyses in my last Commentary but the key point is that, over the next four years, total income taxes are estimated to increase by 26 per cent (from $305.4 billion to $383.8 billion) and they would only have increased by $11-12 billion more if there had been no tax cuts. Looking at total taxes, the increase is 24.7 per cent (from $ 416 billion to $519.6 billion) and would have increased by only about 2 per cent more in 2021-22 if there had been no tax cuts.

In other words there is a miniscule cut proposed in taxes and, even if all passed in the Senate, that will have a miniscule effect on GDP and employment.

Through letters and my Commentary I have attempted to expose this but only Quadrant has published the Commentary and only the AFR has published my letter (see AFR Letters on Budget), which regrettably understates the estimated increase in the tax burden by 2021-22 at $20 billion when it should be about $100 billion!

Disappointing Budget Assessment

Des Moore — Thu, 10 May 2018 01:09:14 +0000

A huge amount has been written about the 2018-19 Budget presented on Tuesday by Treasurer Scott Morrison as a 7 year plan to make personal income tax “lower, simpler and fairer” (see Morrison on Effect of Tax Cuts). But the proposed changes in the structure of the income tax system are not worth considering other than as possible thoughts for future budgets. There will be at least three more elections by 2025 and many thoughts raised or proposed about the structure. It is already apparent that the proposed changes in the tax treatment of those on high incomes will not get through the Senate and neither will the already proposed further reductions in company tax.

The proposed structural tax changes in this budget may, in part, be included to divert attention away from the absence of any significant changes in the levels of taxation and government expenditure included in the budget itself. The large proposed spending on infrastructure, of which Turnbull has sought to portray himself as instigator, does not impinge on the underlying cash result, which is estimated to now be in a miniscule surplus in 2019-20 (previously in 2020-21).

Coalition Federal Budget Disappoints

In my pre-Budget Commentary I asked whether the budget would meet the Coalition’s “small government” objective and suggested that the widely foreshadowed reductions in taxes would be limited because of the failure of the Coalition to effect a more substantive reduction in the budget deficit of $48.5 bn which Labor left it in 2013-14 and which was still at $23.6 bn (1.3 per cent of GDP) in the Mid-Year estimates for the current financial year (2017-18). I said that expert analysts predicted that the reductions would likely be limited to only about $8bn, which would be a reduction of only about 2 per cent of total taxes.

In fact, the budget provides that, even after allowing for the much flaunted income tax cuts, total individual income tax payments are estimated to increase by no less than 6.0 % in 2018-19. For the four years to 2021 the estimate of the cuts is only $11.6 bn, which means that the tax cuts over those 4 years would only reduce the collection of income taxes by slightly more than 1 per cent from what they would otherwise be (for comparison, the estimate/projection of income taxes for the four years is now $954bn).

The cuts in total taxation over the four years are fractionally more than $11.6bn (see below the Tax Outlook published in Budget Paper No 1 for 2018-19 which shows the small amount of policy decisions).

Overall, there is an increase in the proportion of national income (GDP) paid in total and income taxes. Total taxes and income taxes as a proportion of GDP are available from the budget papers as follows (income taxes in brackets)

2016-17 21.6% (11.0%)

2017-18 22.7% (11.2%)

2018-19 23.1% (11.4%)

2019-20 23.3% (11.4%)

2020-21 23.6% (11.8%)

2021-22 23.9% (12.1%)

The previous highest rate of total taxation was 24.3 per cent of GDP in each of 2004-05 and 2005-06 when the mining boom lifted incomes. The proposed maximum tax by Morrison is an arbitrary 23.9 per cent of GDP which, strangely, would allow for an increase in total taxes of 0.8% of GDP, or $17bn, between now and 2021-22.

TAX OUTLOOK

Table2 reconciles the 2018-19 Budget estimates of tax receipts with the 2017-18 Budget and the 2017-18 MYEFO estimates. Since the 2017-18 MYEFO, tax receipts, including new policy, have been revised up by $8.2 billion in 2018-19 and $12.0 billion over the four years to 2021-22. Excluding new policy, tax receipts have been revised up by $8.0 billion in 2018-19 and $25.9 billion over the four years to 2021-22.

Table 2: Reconciliation of Australian Government general government taxation receipts estimates from the 2017-18 Budget

Expenditure and Net Debt

The foregoing assessment of the Budget in regard to tax cuts has similarities when the provisions for expenditure are examined. This shows that expenditures are estimated t o increase by 3.1 per cent in real terms in 2018-19, following an increase of 2.7 per cent real in the current year. In essence, spending under the Coalition government has been increasing at about the same rate as GDP since 2013-14 and hence has not shown any sign of reducing the size of government.

The forward estimates do provide for a slower growth after 2018-19, but the next election is likely to see a return to keeping pace with GDP. With revenues estimated to be higher than spending from 2019-20 on, there is an opportunity to start reducing net debt as the Howard-Costello government did (by 2005-06 net debt was almost zero and the Federal government became a net assets holder).

Net debt increased under the Labor government from 2009-10 to about 13 per cent of GDP in 2013-14 and an estimated 18.4 per cent in 2018-19. It is now estimated to fall to 14.7 per cent in 2021-22 but that depends on lowering spending and/or saving more from collections of taxes.

Responding to Islamic Threat, Climate Change, Financing Budget Deficits

Des Moore — Thu, 08 Jun 2017 23:02:41 +0000

More Islamic Problems

I suggested yesterday that there has recently been a higher rate of violent activity from Islamic jihadists and that has been confirmed by reports today of an arrest of a man for supplying a weapon to the now dead Brighton jihadist and police questioning of others possibly involved. Today’s Australian has also published a range of material on jihadism, including the whole of its letters page on critiques of Islam and suggestions of what should be done about it.

With some “adjustments” by the Ed, my letter below is the lead letter and refers to a welcome statement by Turnbull in a radio interview that Islamist terrorism actually seeks to destroy from within the Islamic religion. If Turnbull sticks to that sourcing it would be a major improvement in assessing the real problem. As it happens, the Australian Strategic Policy Institute (of which I was a board member) has an article in similar vein by senior analyst Anthony Bergin drawing attention to the Turnbull quote reiterated in my letter (see Bergin on Islam). Bergin also praises Turnbull government Assistant Minister for Multi-Cultural Affairs Seselja as being “absolutely right that too many public figures have been walking on eggshells and becoming hostage to political correctness in failing to state publicly the underlying cause and motivation of terrorism”. I have previously urged Bergin to use ASPI more as a means of drawing attention to the Islamic problem (ASPI was established with the agreement of both major political parties as “an independent, non-partisan think tank that produces expert and timely advice for Australia’s strategic and defence leaders”).

The difficulties faced in confronting the problem of how to deal with Islam is illustrated by the proposal by the Islamic Council of Victoria that “safe spaces”be established where young Muslims could make ”inflammatory”comments and criticize control orders against terror suspects (see Vic Islamic Council)! It has also indicated that it is withdrawing from a deradicalisation program because it refuses to work alongside Victorian police. Fortunately, Victorian Premier Andrews has immediately rejected the “safe spaces”proposal by saying the“there is no way to rail against the West. There is no safe way to rail against the values we hold dear”. But note that the Victorian government currently provides funds to the Council – for how much longer?

A similar question arises with regard to State funding of schools largely attended by Muslim children and where radicalisation appears to occur (see Funding Education of Muslim Students).

COAG should face the Islamist terror challenge (Lead Letter published in The Australian, 9 June 2017. Square brackets show bits deleted by Ed).

[When] Malcolm Turnbull [was interviewed yesterday he told 3AW that] says ““we are facing a global threat, this Islamist terrorism. It is a disease and it is corrupting, seeking to destroy from within the Islamic religion [and of course,] lashing out to destroy and undermine our way of life”. We also learn that Victoria alone has 3000 on a watch list. On the same day an [expert] Italian analyst wrote there are 66,000 official extremists in four major European countries and “a jihadist takeover of Europe is no longer unthinkable”.

One hopes that tomorrow’s meeting of Australia’s [political] leaders are [, as your editorial says,] “seized with the challenge of the moment” [which is in fact] – a serious challenge to the survival of Western values. But our leaders performance so far is abysmal.

[At a minimum,] COAG should conclude [that the Prime Minister should prioritise the construction of a major] with a statement identifying the characteristics of Islam that are unacceptable (such as sharia) and outlining the [major] measures to be taken to minimise the threat [which we and other Western countries] we face from Islam. These should include changes to human rights [which, as the British PM promises,] legislation that might otherwise hinder the control of Islamic extremists.

Des Moore, South Yarra, Vic

Climate Change

It is premature to comment on what has emerged on Climate Change Policy at COAG today. But I draw attention to the “Socrates” advertisement in today’s Australian by the Climate Study Group led by Richard Morgan (see Socrates). Not surprisingly, the wise old man convinces “Mr Smith” that CO2 is not the problem.

Note also that Tony Abbott has said that it is important that coal continues to provide an important source of energy in any arrangement. If some form of agreement emerges at COAG on reducing usage of coal but without having electricity price rises, that can only mean that governments will have to provide even more subsidies than the enormous ones already in government budgets. It would also be likely to add to opposition to Turnbull within the Coalition.

Financing Budget Deficits

Attached is an important article by Prof Tony Makin arguing that, when assessing government budgets, regard has to be paid not simply to the financing of any deficit from this year’s result but to the financing of deficits from results in previous years (see Makin on Financing Deficits). He points out that “Australia’s total budgetary financing need in recent years, inclusive of short-term debt falling due for repayment, has significantly exceeded actual budget deficits…. Whereas Australia’s budget deficit in 2017 on a calendar year basis was 2.4 per cent of gross domestic product, IMF estimates show the total government financing need, including maturing debt, was 3.2 per cent. A 3.6 per cent of GDP financing need is predicted for next year, almost three times higher than the budget deficit as a proportion of GDP”.

Makin argues that the additional financing from previous deficits in effect reduces the funding available for private investment and, over time, this will slow down economic growth. It would be interesting to know whether this analysis has been made available to the government and whether Credit Rating Agencies take account of it in determining credit ratings

Polling on the Budget, Terrorists Sources Not Recognised, Nor are Climate Changes

Des Moore — Tue, 30 May 2017 01:52:12 +0000

Polling Does Not Support Budget

Turnbull’s further shift to the left (where is the middle now?) didn’t get any substantive support from the latest Newspoll, with the TPP percentages (47/53) unchanged. Some say that there was no budget “bounce” but the fact that it didn’t rise one bit sends a bad message on both the budget and Turnbull’s leadership even though his satisfaction ratio rose very slightly (so did Shorten’s). One commentator said that “the trend is set and it favours Shorten”.

What could the Coalition do now to even get to equal with Labor? The failure of Turnbull to make use (politically) of the Manchester bombing seems to confirm that he is not up to the leadership role. He had a marvellous opportunity to state that Islam is the source of terrorist activity, as Trump did in Saudi Arabia, and to say that the government will develop an assessment of extremist Islam with a view to disqualifying people from receiving citizenship and tightening policy against the preaching and advocacy of behaviour inconsistent with western values. The discussion paper issued recently under the names of Turnbull and Dutton and titled “Strengthening Australian Citizenship” provides a starting point for a policy on measures to protect democracy from terrorism. We also have counter-terrorism legislation which provides a basis for prosecuting foreign fighters returning to Australia. Yet we find that Attorney General Brandis is refusing to say how many such extremists have been prosecuted under that legislation, although the government has introduced a new offence for visiting a declared terrorist zone (article by Sharri Markson today not digitalised). It is timely to expand counter-terrorist policy.

Recognition of the Source of Terrorism Needed

Never before has there been such an important need for our political leader to make a statement on the source of almost all terrorist activity, Islam. As mentioned in yesterday’s Commentary we have the outrageous assertion by our head of ASIO, Duncan Lewis, that there is no evidence to suggest there is a connection between refugees and terrorism. Andrew Bolt says today that “if the ASIO chief truly doesn’t know of any links between refugees and terrorism, then he must be sacked, instantly, for being asleep at the wheel” (see Bolt on Lewis). But Lewis has also asserted that “I don’t buy the notion the issue of Islamic extremism is in some way fostered or sponsored or supported by the Muslim religion.” To coin a phrase, in some way this is an even worse statement for the Head of ASIO to make. This situation requires a statement by Turnbull explaining that Lewis’s remarks do not reflect government policy and that he has asked Lewis to stand down.

The need is enhanced by a submission made by the non-government Public Health Association to the Inquiry by the Joint Standing Committee on Foreign Affairs, Defence and Tradeinto The status of the human right to freedom of religion or belief. The PHAA says in its submission that the committee should include a recommendation that disavows the notion there is any inherent link between Islam and terror and that any politician who refers divisively … to any religious or ethnic group for the purpose of political gain should be disavowed (see Doctors Say No Link). The PHAA submission was co-signed by its president and former politician Michael Moore, Curtin University professor of international health Jaya Duntas, and David Legge, a scholar emeritus in public health at La Trobe University. With almost 2000 members, the association’s aim is to enhance population health results based on prevention, the social determinants of health and equity principles. To date, almost 200 submissions have been made to an Inquiry which is seemingly fruitless and will only serve to cause divisiveness.

Another development relevant to increasing terrorism (although not directly in Australia) and to “big government”, is this article on Islamic Influence Under Macron, the new French President. This article is by Dr. Guy Millière, a professor at the University of Paris who is the author of 27 books on France and Europe. Milliere claims that:

Macron’s victory was not decisive, that more than half of those who chose him were apparently voting against Marine Le Pen, and that Macron won by default because he was the last man standing;
He is not a centrist, was discreetly supported by most of the Socialist Party’s leaders and by the outgoing Socialist President, François Hollande, and all of Macron’s team-members were socialists or leftists;
Macron’s entire program is socialist, proposals for additional public expenditures abound, “climate change” is defined as “the key issue for the future of the world”;
Macron is the pure product of what analysts described as the “French nomenklatura” — an arrogant élite, composed of senior officials, political power-holders and the businessmen working in close collaboration;
His aim is to consolidate the power of those who placed him where he is; their goal is to create a large, single, center-left, technocratic political party that will crush the old political parties;
Another goal is to entrust ever more power to the technocratic unaccountable, untransparent and undemocratic institutions of the European Union: it is a goal Emmanuel Macron never stopped emphasizing;
Macron says the demographic deficit requires more immigration, to encourage mobility between the two shores of the Mediterranean, and to offer asylum to all those who seek its protection;
With almost all refugees arriving in France being Muslims, Macron wants Islam to have more room in France, a new structure will make it possible to relaunch the work sites of the Muslim religion in France;
The French branch of the Muslim Brotherhood congratulated Macron on his victory, publishing an official communiqué saying the new President of the Republic will allow the reconciliation of France with itself;
Macron’s prime minister, Edouard Philippe, has close ties with the Muslim Brotherhood and favoured their installation in the city of which he is the mayor, Le Havre;
Richard Ferrand, a Socialist MP, now Minister for the Cohesion of Territories, has been financially contributing to the anti-Israel BDS movement and to “pro-Palestinian” organizations for years;
Gerard Collomb, the Socialist Mayor of Lyon, and now Interior Minister, financed the French Institute of Muslim Civilization that will open its doors in December 2017;
Macron said he was “dismayed” over the Manchester Arena terror attack, adding that he was “filled with dread”, but did not express the necessity of confronting the danger. The French have every reason to be nervous.

Whether these objectives will be achieved remains to be seen, but they send a warning note of what can happen when a large body of Muslims accumulate in a country (France has the largest proportion of Muslims of any European country).

Climate Change Policy

Developments since the G7 meeting in Sicily suggest that, although our left media have claimed that Trump was “isolated” there on climate policy, a better interpretation is that the other 6 have been put on the defensive, with Merkel reportedly “angry” about Trump refusing to endorse the Paris Agreement and stating publicly that with Brexit and Clexit Europe is now on its own. As such, it will need to stop being angry and adopt some better policies.

The body in the US which has adopted a sceptical view for many years (The Science and Environmental Policy Project or SEPP) points out in its latest newsletter that “Those advocating the Paris Agreement have never offered physical evidence that CO2 emissions are the primary cause of global warming / climate change. They just assumed it. So did the UN Intergovernmental Panel on Climate Change (IPCC), and other political bodies such as the US Global Change Research Program (USGCRP), with a budget of about $2.5 billion per year”. One might add here that Australia’s supposedly scientific bodies also provided little substantive argument in support of the dangerous warming thesis and that Australian political leaders swallowed the hook.

If Trump now arranges for the EPA under his newly appointed leader Scott Pruitt to publish a meaningful document on what SEPP describes as the “physical evidence”, it will expose how these assumptions were foolishly accepted by politicians and scientists, including those in Australia. SEPP also refers to the latest economic forecasts by the OECD for G7 countries as being for Canada (2.34%), France (1.59%), Germany (1.74%), Italy (1.03%), Japan (0.83%), the United Kingdom (0.96%) and the United States (3.00%). It argues that, from this, one can conclude that there is no other country on the list whose economic policies are desirable for the US to imitate and concludes that “Mr. Trump has a powerful economic reason to abandon the Paris Agreement and no scientific justification for staying in the agreement”. Of course, the differences in growth rates cannot all be attributed to climate change policy differences. But Europe has been more global warmish than elsewhere and SEPP points out that “the economies of countries such as the UK, Germany, and Italy are stagnating in part due to government policies that did not appropriately account for the increases in electricity costs that occur in shifting from reliable fossil fuel generation to unreliable solar and wind generation. Germany is compounding its problem by shifting from reliable nuclear generation and is being forced to expand power plants burning brown coal, which produces more CO2 than black coal (a higher thermal content)”. Here too Australia is on the same economically wasteful track.

Budget Deficiencies Neglected in Media, Trump in Saudi Arabia

Des Moore — Tue, 23 May 2017 06:13:38 +0000

Budget Deficiencies

In recent Commentaries I have referred to a number of deficiencies in the Budget which have either not been referred to in the main media, including even in The Australian, or have only been given limited attention. Despite this even The Australian has not published four letters I submitted on what I believe are serious analytical deficiencies, and the AFR often couldn’t decide whether to have a letters page. The Age almost automatically refuses to publish anyone deemed to be right of centre.

I mention here only that, after dropping pursuit of the $14.7 bn proposed cuts blocked by the Senate, the government itself has now added $5bn from policy decisions to expenditure in 2017-18 and 2018-19; the real increase in estimated expenditure in each of those years is 2.3% compared with Treasurer Morrison’s claim that a 2.0 per cent real growth had been achieved; and by contrast with the underlying cash balance of a deficit of $29.4bn, I drew attention to John Stone’s article in Spectator pointing out that the more comprehensive headline cash balance of a deficit of $48.4bn is almost $20bn higher.

Latest reports about the debate on the budget suggest that significantly higher deficits are likely to emerge either from opposition in the Senate (see More Senate Opposition to Budget) or because economic forecasts fall short (see attached Sloan on Treasury & Forecasts). One wonders what effect this might have on polling, but it seems unlikely to be favourable. Yet Turnbull is unlikely to be in a position to threaten an early election if the Senate refuses to pass major measures in this budget.

Trump in Saudi Arabia

Trump’s phrasing, and the wide concern about the accuracy of his statements and the changes of his mind, make it difficult to assess his public statements. But account also needs to be taken of the exaggerated criticisms of him in Washington DC, where a very high proportion of the population (91%) of the District of Columbia voted for Clinton (beats Canberra!), as well as evidence that his political opponents are trying to create a situation in which an impeachment would be attempted. This helps undermine his credibility as President, which is also adversely affected by widespread media antagonism to him, including in Australia.

It will take some considerable time, and a much improved handling of the Presidency by Trump himself, to overcome this. But as Andrew Bolt’s article on the sacking of FBI head Comey (see Bolt on Comey) suggests, there are signs that more complete and favourable situations will emerge. Bolt points out that “Deputy Attorney-General Rod Rosenstein, who worked for Democratic president Bill Clinton and is so respected by both sides of politics that the Senate confirmed his nomination by 94 votes to 6” … “cited a long list of former attorneys-general and deputy attorneys-general from both sides of politics, as far back as the Ford administration, who had condemned Comey”. Even Eric Holder, Obama’s deputy attorney-general, agreed Comey had “violated longstanding Justice Department policies and traditions”. Bolt concludes that “as fake news goes, this one’s on steroids”.

Trump’s decision to make his first overseas visit to the Middle East rather than Europe can be seen as simply reflecting his view that previous approaches to the handling of policy should be radically changed. But it also suggests a view that the Middle East problem is the most important facing the US and the Western World. His 7 page address in SA to the Arabic Islamic American Summit (see Trump Speech to Arab Summit) is totally different to the texts he had been sending out in Washington – and totally different to the one which Obama gave in Cairo soon after he became President. What’s more it seriously addressed the Islamist problem in front of leaders of countries who are Muslims, but with one important exception viz Iran.

Important points made in the address include

There is “one goal that transcends every other consideration. That goal is to meet history’s great test –to conquer extremism and vanquish the forces of terrorism”.
The deadliest toll from terrorism “has been exacted on the innocent people of Arab, Muslim and Middle Eastern nations”.
”The true toll of ISIS, Al Qaeda, Hezbollah, Hamas, and so many other, must be counted not only in the number of dead”.
”This is a battle between barbaric criminals who seek to obliterate human life, and decent people of all religions who seek to protect it”.
“A better future is only possible if your nations drive out the terrorists and extremists. Drive. Them. Out. DRIVE THEM OUT of your places of worship. DRIVE THEM OUT of your communities. DRIVE THEM OUT of your holy land, and DRIVE THEM OUT OF THIS EARTH”.

Some will see the address as overly optimistic and unlikely to result in meaningful cooperation. But whether realised or not it signals a fundamental change in US foreign policy compared with Obama. This was reflected on his arrival in Israel, when Netanyahu said to Trump during a joint press conference “I want to tell you how much we appreciate the reassertion of American leadership in the Middle East.” Netanyahu added that for once it gave him hope for the future. This is a totally different attitude to the one Trump is receiving in Washington but will have work to do when he returns.

Budget Doubts Enhanced, Threats to Trump

Des Moore — Fri, 19 May 2017 00:29:23 +0000

Debate on Budget

Both main sides continue to debate the second budget of the Turnbull government, with the most interesting development being the view expressed by Albanese that Labor should welcome the Coalition’s budget measures! But there is no indication from most Commentators that initial views have changed and that an improvement in the Coalition’s polling is likely to occur. In fact, doubts about the achievement of estimated budget outcomes have increased following the publication of a much lower growth in wages than assumed in the 2017-18 Budget estimates (1.9% cf 2.5%), a further fall in consumer confidence (the sixth successive occasion when pessimists have outweighed optimists), and a warning from credit agency S&P that while it kept Australia’s credit rating at AAA it also warned that it is at risk of a downside over the next two years. The improvement in the latest employment survey may help if it is sustained. But doubts continue about the survey’s reliability.

Debate also continues over whether the budget has provided adequate grants to the States for (in particular) education and health because no detailed agreement with the States was effected before the budget. Debate has also occurred over the bank levy following the revelation that Treasurer Morrison has indicated that details of the enforcement legislation are not to be revealed before the legislation is presented to Parliament.

Former Treasury Secretary, John Stone, has also had a highly critical article published in this week’s Spectator Australia (see Stone on Budget). His conclusion is

More fundamentally, the consequences of this massive philosophical U-turn for the Liberal Party (and also for the Nationals) are incalculable. Most observers expected a ‘sugar hit’ for the Coalition in the polls. Since that was clearly the aim to which this travesty of everything Menzies’ party was supposed to stand for was directed, they needed at least to be right about that. But as Monday’s Newspoll showed, they weren’t, with the Coalition primary vote unchanged on 36 per cent and its two-party preferred vote actually falling a point. Even if future polls were to improve somewhat (which they won’t), that wouldn’t ward off this budget’s destabilising effects. Anyone for the Australian Conservatives Party?

Importantly, Stone also draws attention to the little recognised “Headline Cash Balance”, which is much larger than the “Underlying Cash Balance” normally treated as the deficit (or surplus). The difference between the two is that the former covers all Commonwealth spending including by off-budget entities, such as the NBN Co, and the purchase/sale of financial assets for policy purposes. As such, when in deficit the Headline Cash Balance has to be financed by borrowings or sale of assets. In 2017-18, for example, the estimated Headline Cash Balance is – $48,4bn (only $2.6bn less than this year) while the estimated Underlying Cash Balance is – $29.4bn ($8.3bn less). In short, the budget presentation suggesting that the Coalition made a substantial reduction in the deficit is grossly misleading: the “real” deficit is much higher than is being debated and the estimated reduction is much less.

My last Commentary (16 May) also questioned the Coalition’s claim that tax increases are needed because the Senate blocked proposed spending cuts. Yet the budget provides for substantial increases in spending in the next two years including policy decisions costing about $5 billion each year. If those decisions had not been made, there would have been no need for the tax increases. In short, the Turnbull government has also “blocked” spending cuts. This seems to have been largely overlooked by commentators.

Threats to Trump

It is apparent that attempts are being made in Washington to create an environment aimed at reducing Trump’s credibility or even allow action to consider his impeachment. Reflecting the importance of US policies and behaviour, Turnbull has made a very brief comment effectively rejecting security concerns for Australia. The Australian has editorialised on this more than once, including in yesterday’s edition (see More Media Attacks on Trump), and has been broadly sympathetic to Trump. The ABC and SBS have also given Trump’s statements and the criticisms of him extensive coverage. On Wednesday the ABC’s 7.30 report conducted an interview with Dennis Richardson who retired just recently after many years involvement in security and foreign relations with the US (see transcript Dennis Richardson). While he was being diplomatic, perhaps his most pertinent remark was “I think we can certainly trust and rely on the United States, regardless of the personality who happens to be President at any one time. That’s been the case since 1951 and I see no reason why it would change and when you look at some of the people President Trump has appointed, we have… we have great cause to be confident.” Another 7.30 report interview last night with a former adviser to President Bush produced a similar response, with the person interviewed pointing out that, while Trump’s popularity is down to around 40%, most who voted for him seem to continue to support him.

It is difficult to assess the situation in Washington from here. But from what has emerged so far it does seem that the concerns expressed about Trump’s statements and actions are overblown and largely come from political opponents rather than those genuinely concerned about possible adverse security implications. For example, it is difficult to see that there can be serious concern about Trump giving securitised information obtained from Israel to the Russian Foreign Minister to the effect that IS was planning to use computers as sources for bombs inside planes. Equally, although his reasons for dismissing the head of FBI have not been adequately explained, the behaviour of the head on more than one issue could be said to have warranted such action. More importantly, while Trump’s request to the FBI head to “go easy” on handling Flynn’s connections with Russia have been seen as an attempt to cover alleged pre-election contacts with Russia, it is difficult to see that even if such contacts did occur they amounted to an attempt to “obstruct justice” and as such a basis for action to consider legal action for impeachment. The appointment of a Special Prosecutor to investigate the extent of such contacts and their implications, which is likely to take some time, may clarify the situation.

Putting all this aside, there is no doubt that Trump is not observing what some see as the normal practices of a leader in a democracy and is failing to properly explain his policies. The former director of the CIA, Micahel Hayden, has described Trump as a “useful fool” and many will agree. But that characteristic was apparent before he was elected President as a challenger to traditional processes . The election of leaders is often followed by a period of regrets by voters who elected the person. We are experiencing that in Australia right now. Trump will be further tested on his handling of his first current overseas trip.