The Howard government bears some responsibility for the failure of United Medical Protection.
The government has failed to properly regulate the insurance industry in Australia. There needs to be appropriately enforced standards on insurance companies to ensure that they maintain sufficient funds to cover any cash payments.
United Medical Protection, after HIH, is the second major Australian insurance company to collapse in a year.
The Howard government consistently avoids enacting and enforcing regulations on the corporate sector, despite the need for consumers and the public to be protected.
The Australian Prudential Regulatory Authority (APRA) is supposed to regulate the insurance industry in Australia. Despite its annual budget of over $50 million, the APRA does not appear doing its job properly. And who is the boss of APRA? The Howard government.
The Howard Government is beholden to the executives who run Australia’s large corporations. It has a pro-big business ideology, but it also receives large political donations from a lot of companies. In fact HIH, when it was operating, gave the Liberal Party over half a million dollars in donations. That is a conflict of interest. How can the Liberal Party, on the one had receive political donations from companies, and on the other hand regulate those same companies in the interest of the public?
If a mistake is made and someone is injured, someone has to pay for it, whether or not legal action is taken. Someone has to pay for the hospital bills, the time off work, the home care, repairs to property. And if someone has to pay for that, it’s more fair that the person who was at fault in causing injury be the one to pay, and not the innocent victim. The courts only award damages when someone is at fault, and this acts as a disincentive for people and organisations to take risks, and encourages people to be careful, and consider potential safety hazards.
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The low value of the Australian dollar currently is perceived by many as a problem, and that this is bad for Australia. People with a nationalist intent often are say that they want
- The value of the Australian Dollar to be higher than it currently is and
- More exports and fewer imports, a lower current account deficit, and tariffs, subsidies and other actions to encourage or achieve this.
This does not really make sense. A low
makes Australian exports to foreigners cheaper and imports into Australia more expensive. This leads to an increase in exports
, a decrease in imports
and a lower CAD
; which they think is good. Likewise, a higher leads to an increase in imports, a decrease exports and a higher CAD, which they think is bad. So they should want
a lower ! If more people understood this, they might be more upbeat about a slide in the value of the .
In the USA the situation is opposite to that of Australia*s, i.e. while the is increasing in value, exports are falling, imports are increasing, and the country*s Current Account Deficit is increasing.
Some financial or media commentators for some reason seem to be surprised and to not be able to explain the sizable fall in the value of the Australian dollar and say "the fundamentals are right" and it is lower than what it "should" be worth. But the recent devaluation can be explained as arising from the policy and actions taken by the federal and state governments, in particular three particular areas:
- Federal and state fiscal policy: The federal government has announced that it has a multi-billion dollar surplus, and many of the state and territory governments have surpluses or low deficits. This means that there is less demand for the Australian dollar (by those governments) so the value of the Australian dollar falls. If the governments borrow from overseas the effect on foreign exchange rates is the same as if foreigners invest in Australia. The value of the Australian dollar increases and the Current Account Deficit increases too. Conversely, if the government repays loans, the opposite will occur. If the combined budgetary positions of the state and federal governments are for example billion ahead of five years ago, then this is likely to have a very significant impact on the value of the Australian dollar.
Note that for this analysis to be valid, the governments don't necessarily have to themselves directly borrow from overseas, but if they borrow billion from the Australian financial market then Australia as a whole will borrow billion more from international markets. (Interest rates will adjust partially, but because Australia*s financial market is less than 2% of the world total, it will be the value of the currency which will have the largest adjustment, not the prevailing interest rates.)
- Federal and state privatizations: If governments repays debt then total net inflow of financial funds into Australia (i.e. the current account deficit) falls by the amount of debt repaid, and thus demand for the Australian dollar falls by the same amount. Over the last few years tens of billions of assets have been sold, including 49% of Telstra, ETSA (the South Australian power utility), GIO, and the Trust Bank (Tasmania).
Foreign investment into Australia may increase as foreign borowings decreases, so this will partly offset the effect. But only partially because international investment funds are widely sought after by most nations and are thus limited.
- The introduction of the GST: The GST taxes consumption, so consumption is discouraged and thus decreases, and savings increases. So by the same principle as point (1), this leads to a devaluation of the dollar.
The only way the economy can adjust to these factors (through exchange rates) is for exports to increase, imports to decrease, and foreign investment in Australia to increaseIn the short term it is difficult for the first two to adjust and as for the third, foreign investors appear to be favouring the USA over Australia. Furthermore, the problem is compounded by the fact that it takes time for exporters and importers to adjust to the new value, and part of the reason for that is the fact that they can forward trade on the value of the dollar, often for twelve months.
In terms of policy, in effect the government has a choice between (1) a fixed exchange rate and a volatile price level (i.e. inflation), or (2) a fixed price level (currently the Reserve Bank of Australia has a target underlying rate of 2-3% which it achieves by setting interest rates at the necessary level) and a variable exchange rate. Each of those two choices has positives and negatives, but since the price level directly affects the whole economy and everyone in it, and the exchange rate only affects a small sector, the second of these possibilities is more practicable and it is easy to see why most governments around the world adopt that model.
Role of speculators: it is thought by some in the media that speculators are responsible for driving the currency down. However, this is probably not true, and in fact it is more likely that the exact opposite is true - that speculators kept the value of the currency at the level it was a few months ago for too long, and eventually something had to give, as speculators cannot hold the value of the currency above its "true" value (based on exporters, importers, borrowers, lenders and investors) forever. And this is bad for speculators. If speculators get it right, they make money, but if they get it wrong, they lose money, and in this case many probably did. If speculators bought Australian dollars three months ago at US60 cents per Australian dollar, and now they are only worth US50 cents per Australian dollar, they lost US10 cents on each dollar. Financial institutions may have lost billions of dollars! But they probably would not admit it.
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BANKS: PROFITS AND REGULATION
There are two important issues concerning banks: (1) competition and competitiveness in the banking sector, the concern partly of the ACCC and the Fair Trading Act, and partly of the treasurer and his department; and (2) the issue of whether there should be a universal service obligation on banks to provide a low fee / easily accessible account to all members of the community. There are two ways these issues could be addressed: one is for consumers to shop around, which may not always be easy or possible, particularly in rural areas, and the other is for legislators (ie. politicians) to act
Didn*t the federal government deregulate the Australian financial sector and privatize the Commonwealth Bank? This after Chifley (and the government) nationalized it in the 1940s? Are we in the midst of the swinging political pendulum? If Australians are unhappy about the behaviour of the banks, there is one very quick way of changing it: the government simply has to pass a law forcing banks to, for example, provide everyone a zero-cost account. In fact, if the federal government still owned the Commonwealth Bank, they could direct it to do that itself (provide a no-fee account).
Unfortunately, what the federal Labor and Liberal Parties appear to be doing is the usual, where in public they may (particularly Labor), criticize their behaviour and say they should provide a better service for people, etc., but in private meetings with the board members and senior directors of banks its handshakes all round and only praise of the banks successful profits from the politicians. In fact, if Kim Beazely or someone else says in public that banks have an obligation to serve the community, it is not only a uselss message, but impossibe, because Company Law obliges directors to maximize profits for banks, so they donnot even have a choice. The only way banks would change their behaviour is if there was legislative change, and don*t hold your breath for that!
Think about this: every time small business people pay increased fees and charges to banks the money goes towards the banks profits, and if the banks profits are billions of dollars then businesses and consumers are paying billions of dollars, also in the form of paying higher interest rates than are necessary to give the banks a reasonable profit.
If the government made a law which made it compulsory for banks to offer a zero-cost, accessible and secure account for every Australian citizen, this would not cost the banks very much, especially in comparison to the very large (above normal) profits they are currently making. The deregulation of the financial sector in the 1980s and new technology have both benefited the banks enormously, but much of the benefit seems not to have been passed on to consumers. Thus, it would not appear to be unfair to require a small portion of that profit increase to be shifted to consumers, particularly those on low incomes who while often facing higher charges can least afford it.
Note that in our world it is either difficult or impossible for people to not use banks (or credit unions). Welfare payments are paid into recipients bank accounts, and so are many people*s wages.
The government has, or is supposed to have, control over the money supply, so why would this not include bank accounts, as well as cash, which the mint produces? With the increasing use of EFTPOS and credit cards and direct debiting and crediting of bank accounts, BPAY and cheques, why is it reasonable or justified for the government to only fund the supply of cash? Shouldn抰 a bank account be considered an essential service? As an analogy, Telstra as partially privately owned company operates in a competitive marketplace (to an extent), but the government has imposed a requirement on it by law that obliges it to give service to everyone including those in rural and regional Australia, even if it is not profitable. (The universal service obligation). Why shouldn*t banks have a universal service obligation too? This would be similar to government provision of telephone boxes, public toilets, roads, water, parks and football grounds, etc.. LINKS
Is the ABC good value for money? Its budget allocation from the fedral government is less than million. This figure divided by 20 million people is equal to dollars per person per year. This represents the cost of about two and a half movie tikets! And the average period of time on average that people spend watching and listening to the ABC is a lot more than the four hours of movie time that two and a half movie tickets would give. Another way of looking at is to calculate how much on average one hour of a person watching an ABC television show would cost. per person per year is equal to 50 cents per week, so seven days times three and a half hours per day (at a guess) gives the figure of 2 cents an hour to watch or listen to the ABC!
While it is thought that so-called economic rationalists, particularly members of the Liberal Party and right-wing members of the ALP, seem to want to reduce spending on public broadcasting and leave it to the private sector, in fact economic theory in the area of public goods (where television and radio broadcasting fit the economic definition of public goods) suggests that the free market? will actually fail to provide an adequate level of broadcasting service. This is largely because it is not possible or at least very practical for people to actually pay for radio and TV (and even if people could there would still be underprovision). In fact, in Australia if it could be calulated, the government should probably be spendings billions more dollars on publically funded radio and television to provide an economically efficient or rational level. LINKS
So the federal government definitely should not be cutting funds to the ABC, after already having cut funding by millions in the first trimester of its government, and after previous cuts by the previous labour government. Both sides of politics seem to want to stifle any critical or adverse commentary in the media about their governments performance.
Bias in the ABC: The ABC might be biased compared to the commercial media, but that is because they are biased by their very nature (of serving commercial interests, rather than the public interest in general). Ie. they are biased toward people and the opinions of people who have more money (and therefore are more likely both to buy newspapers and to buy products that advertizers wish to advertize for. On the other hand, the ABC does not or is not supposed to serve advertizers, but the entirety of the public. So when talking about media bias it should the ABC that is the standard and the commercial media criticized as being too far to the right, rather than the other way around.
Another point is that the more media outlets there are, the less likely is the problem of systematic bias, as each media outlet will have less influence and be subject to more competitive and consumer pressure. If some Liberals think there is bias in the ABC why would they want it to merge with SBS? This will decrease the number of media outlets. More diversity is better to achieve a less partial media. It is better to have two independent public broadcasters as they will be able to present material from different points of view.
It would be in the public interest if government funding to SBS were increased too, as they run on a very low budget. In fact, if to have two government television stations is better than one, why not have three or four? It is only blind ideology (and the political influence exerted by the commercial media to protect their own position in the market) that prevents these things from happening. We could also do with more funding for public radio in the form of more radio stations to cater for a broader range of tastes and preferences. Even the newsradio/ Parliamentary station only goes to the capital cities and Newcastle (by statute) so half of the country misses out on that important service. This would cost a minimimum amount of dollars, relatively, to fix. (Apparently after four years in government the National Party is happy to keep its constituency in the dark about the performance of its MPs!)
Television and radio broadcasting is a very cheap and effective way of transferring information to people. Information and knowledge are probably the most important and valuable economic goods in the modern world (if not the pre-modern world), so it is important that people can have access to them. Also, if the cost of radio and television broadcasting is compared to the cost of the education system, advertizing, pamphlets, catalogues, flyers, seminars, etc., it comes out as being cost effective.
Another point is, why can*t SBS be more mainstream? There are only five free-to-air television channels, so why should one fifth of free-to-air television airspace be used to show programs for 2% of the population? Instead of showing the test pattern all night (even with nice music), wouldn*t the public benefit more from being able to see actual programs? More government funding for SBS would be good value.
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The federal Coalition often has stated that they are interested in reforming the tax system in Australia because it is "is in a mess" and "in need of fundamental reform". If this were really so, why did they introduce the GST? It is regressive (both politically and economically) and it makes the tax system far more complicated than previously, not less, by simply adding an extra layer of complexity to the previous system. Currently, many small businesses are finding it very difficult to comply with the GST and possibly tens of thousands of small businesses are going out of business, or will in the near future as a result. It seems that a large number of small businesses were conned by the Howard government, but unfortunately it is now too late to go back.
Another backward, regressive and very unfair change to the tax system by the Howard government has been the cut in capital gains tax to half the comparable income tax rate. How is it fair that people will pay half as much tax on income earned through the value of their assets increasing compared to income they have to work 40 hours a week to earn? On one hand the government is introducing a tax (the GST) which hurts the poor the most and cutting a tax which benefits mainly the rich (capital gains tax)? The government also cut the company tax rate from 36% to 30%, which obviously benefits mainly the rich too because companies are mostly owned by the rich.
What about payroll tax (see PAYROLL TAX - THE HIDDEN TAX ON EMPLOYMENT) and death duties? The abolition of payroll tax should be a top priority because it discourages employment. Death duties would be a fairer tax than the GST because it requires more tax to be paid by the wealthy. What about the top marginal rate of income tax? In Australia it used to be 60% more than a decade ago but it has been lowered now to 47%. This change has of course benefitted the rich. Although 47% seems like a high rate, it is actually far lower than the effective marginal tax rate faced by people on low incomes. This comes about through the interaction between the welfare system and the taxation system - as more income is earned it is taxed plus welfare benefits phase out. The effective marginal tax rate can be actually over 100% in some cases. In fact, this really means that, although the income tax system alone is progressive, if the effect of loss of welfare benefits is taken in to account the tax system is regressive. Ideally, or optimistically, it would be desirable if at an income level of, say, 10,000 per annum, a marginal rate of income tax of, say, 55% would apply, and even a few higher rates at higher levels of income - say 65% at an income over 200,000. Another problem with the tax sytem that needs reform is tax avoidance and evasion by high income earners, which costs the government . LINKS
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PETER COSTELLO’S $5 BILLION BUNGLE
Liberal Party Mismanagement Responsible for HIH Disaster
POOR RECORD OF ECONOMIC MANAGEMENT BY COALITION GOVERNMENT
VFT AND THE NEW SYDNEY AIRPORT