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Peter Martin

Last Build Date: Thu, 18 Jan 2018 02:26:35 +0000


Sugar's tobacco moment as voters call for new tax

Thu, 18 Jan 2018 02:26:00 +0000

Imagine a tax that Coalition voters actually wanted. They certainly don't want more income tax (only 12 per cent do, according to an Essential poll), they certainly don't want more company tax (they want less) and they will cop an increase in GST only if it brings down other taxes. But then there is sugar. This week's Essential poll reveals the sort of disdain for sugar there is for tobacco. An extraordinary 57 per cent of Liberal and National Party supporters say they want a special tax on sugar-sweetened drinks. That's more than the 54 per cent of Labor voters that want it. It is sugar's tobacco moment. When the tobacco question was asked two years ago a massive 70 per cent of Coalition voters wanted higher taxes on it along with 67 per cent of Labor voters. For both tobacco and sugar, it's the university-educated Coalition voters who want the higher taxes the most. What has sugar done to get lumped in with perhaps the most despised legal substance on the planet? Nothing it hasn't been doing for decades. It is just that it is doing more of it and we are learning more about what it is. The industry would like us to believe that obesity and the tragic diseases that follow are simply a matter of "energy in and energy out". Those are the words it uses. Put less into your mouth, do more exercise, and you won't get as heavy. Here's Geoff Parker, chief executive of the Australian Beverages Council: "All kilojoules matter, it doesn't matter where those kilojoules come from." It is what I call the "federal budget" approach to maintaining weight. If only the government spent less and taxed more it would bring down the deficit. It sounds true only because it ignores feedback loops. When countries such as Spain and Italy imposed austerity programs after the financial crisis, they did indeed cut spending, but they also plunged their economies into deeper recession, losing even more revenue. Sugar sets off the same sort of feedback loop. It is true that heavy people eat more than others and exercise less, but the causation is not all one way. It is easiest to see in children. They eat more during growth spurts, but it is not right to say their growth spurts are caused by the extra eating. It is truer to say that whatever it is that brings on their growth spurts does it by bringing on their extra eating. Here's another example. Someone with an aggressive tumour will eat more in its early stages. That is because the tumour grabs the incoming nutrition for itself, making the host heavier but weaker and hungry for more food. It is as true to say that the extra weight brings on the extra eating as it is that the extra eating brings on the extra weight. For sugar, the budget analogy misses the point. The point is that our bodies respond to sugar with insulin. Rosalyn Yalow won the 1977 Nobel Prize for tracking what insulin does. When it is released, our fat cells start to pack in fuel in the form of fatty acids, and close their walls to prevent them escaping. It is why, bizarrely, we often feel weak or hungry after taking in sugar. The energy we expect to get is rendered inaccessible until the insulin dissipates. And so we are likely to take in more sugar, triggering another flood of insulin, and so on. If we are especially unlucky, the repeated floods of insulin build up our resistance and encourage our bodies to produce more and more insulin until they exhaust their capacity, meaning we need to take it intravenously. It is worst for refined, dissolved sugar. It is relatively new in terms of human biology and it hits our bodies instantly, which is why soft drinks are being taxed on a worldwide scale not seen since cigarettes. Twenty-six countries including Mexico, Portugal and Thailand already have in place a punitive tax on soft drinks. Five more will put one in place by April, including Britain. Introducing the the legislation in 2016, Conservative chancellor George Osborne warned that within a generation, half of all boys and 70 per cent of girls would be overweight or obese. "I am not prepared to look back at my time here in this p[...]

The gang crisis our leaders help create

Sun, 14 Jan 2018 01:31:00 +0000

What is it about the African gang crisis that's so disturbingly familiar? In case you haven't been paying attention, Melbourne is supposedly in the grip of a crime wave. Not on the basis of statistics, which show arson, property damage, burglary and theft down (sexual offences and robbery are up), but on the basis of a series of front page articles over summer in the Herald Sun and also The Australian about African gangs, most of them South Sudanese. Victoria's opposition wants to recall Parliament. Federal minister Greg Hunt, whose day job is Health Minister and who last year had to apologise to the Supreme Court for calling it soft, says African gang crime is "out of control". Prime Minister Turnbull says he is alarmed by "growing gang violence". And Home Affairs Minister Peter Dutton says people are scared to go out to restaurants "because they are followed home by these gangs". It's feeding on itself. A nationalist group says it's planning a rally on Sunday in order to "take a stand on the streets". African Australians are being harassed and worse by vigilantes who are suddenly emboldened. Police say a Daily Mail photographer helped create the latest "flare-up" by taking close-up photos of a group of Africans socialising. "The teenagers had been doing nothing of public interest prior to the photographer's decision to move in," a memo reported by The Guardian says. The Mail labelled the scuffle that it helped create "the latest gang flare-up" and boasted that its pictures were "exclusive". It is familiar because it happened in Sydney with Lebanese Muslim youths (remember the Cronulla riots?) and before that with "Asian gangs" in Cabramatta. In Adelaide a decade ago it was the "Gang of 49". There never was a Gang of 49, but The Advertiser coined the term to describe 49 mainly Aboriginal youths the police said they were looking for. The catchphrase had incredibly unfortunate consequences. Former police say it created gangs. Dispossessed, often homeless, youths started saying they were part of Gang of 49 and stealing cars and doing ram-raids to prove it. "It hypes them up, they think they are famous, it's them against the police," a grandmother of one of the self-described members told the ABC. Very young Aboriginals, too young to be part of a gang, started romanticising the idea and looking forward to the day when they could. It happened after Melbourne's Moomba riots in March 2016, which the media were quick to attribute to the "Apex Gang". More a grab bag than a gang, it grew swiftly as all sorts of petty criminals started scrawling the word "Apex" wherever they had been. The more it was talked about, the bigger it became. That's why on Wednesday Police Commissioner Graham Ashton rubbished the idea of a gang and referred instead to low-level crime. It was "complete and utter garbage" to suggest, as our leaders have, that Victorians aren't safe. "The sort of concept that somehow it's unsafe to go out to dinner, how long since you've been out to dinner?" he asked. Big cities have had aggravated burglaries and home invasions for years, less so in Melbourne in the past two quarters. The perpetrators are overwhelmingly Australian-born. Although Sudanese youths are over-represented in minor crime statistics (as might be expected given high socio-economic disadvantage) and are involved in many more armed robberies than before (98 in 2016-17, up from 20 in 2014-15) the perpetrators of serious assaults are 25 times more likely to be born in Australia or New Zealand than in Sudan or Kenya. Talk about gangs has probably always created gangs, at least as far back as the Mods and Rockers in the UK in the 1960s. But it's worse now. Would-be gang members can find each other on social media. Words can do even more damage, all the more so when they are used carelessly by newspapers and "leaders" to fill space and score points. In The Age and Sydney Morning Herald Peter Martin is economics correspondent for The Age and the Sydney Morning Herald. He blogs at pete[...]

Axe negative gearing, boost GDP - RBA conference paper

Fri, 12 Jan 2018 01:17:00 +0000

Axing negative gearing would lift home ownership to as much as 72.2 per cent of households, cut home prices by just 1.2 per cent and lift rents "only marginally", a study shown to the Reserve Bank of Australia has found. Preliminary results from the economic modelling exercise, believed to be the first of its kind in Australia, were presented to a RBA workshop last month and released on Friday. Melbourne University researchers Yunho Cho, Shuyun May Li and Lawrence Uren conclude that eliminating negative gearing entirely would lead to an overall welfare gain of 1.5 per cent of GDP, making three quarters of the population better off. The figure compares to a Treasury prediction of welfare gain of 1.2 per cent from Turnbull government's plan to cut the company tax rate. Speaking after the release of the paper, Dr Uren stressed the research was incomplete and said it was possible the size of the lift in home ownership could be revised down. But he said the directions of change and magnitudes were unlikely to change much. An ownership rate of 72 per cent would be the highest since 1991, before 1999 when the Howard government cut the headline rate of capital gains tax making negative gearing more attractive. It currently stands at 66.7 per cent. During the 2016 election campaign Prime Minister Turnbull said a Labor plan to wind back but not eliminate the negative gearing tax concession would "smash up home values", and "pull the rug out from under the property sector". The claims were at odds with advice to the government at the time released on Monday under Freedom of Information laws that characterised the likely impact of Labor's proposals as "relatively modest". Negative gearing allows investors in housing and other assets to deduct investment losses from their wage incomes for the purpose of calculating taxable income. The losses can be recouped later when the asset is sold for a profit, which is taxed at only half the rate of wage income. Treasury found the arrangement predominantly helped high income families, with more than half of the benefit going to the top 20 per cent of earners. Dr Uren said his modelling examined only what would happen after a transition process that might take several years. Renters and owner-occupiers would be the biggest beneficiaries. Landlords, especially young, high earning landlords, would be the biggest losers. Renters would benefit because although rents would climb by 2.4 per cent, the government would be in a position to compensate them and others with the extra $2 billion it would make in increased tax revenue. "We are comparing two small changes," Dr Uren said. "One would be a small price change for renters and the other would be a small increase in transfers." Young owner-occupiers would benefit from the lower house prices "as they can move up a housing ladder more easily". Landlords who rely on borrowings would be "driven out of the market for investment properties". Most are "young, but rich enough to afford the downpayment requirement for their investment". Other landlords would also scale back their holdings. Thirty per cent of rental properties would be freed up and bought by Australians who would have otherwise rented. Almost every income group and every age group would increase its home ownership rate. Acting Treasurer Kelly O'Dwyer disparaged the paper as "preliminary and incomplete", prepared by university academics. She said Labor should not boast about a finding that house prices would go down and rents go up. It should "be of concern to every Australian, whether they're a prospective first home buyer who rents or they own their own home". Labor Treasury spokesman Chris Bowen said it supported the direction of Labor's reforms and showed they would boost home ownership. In The Age and Sydney Morning HeraldPeter Martin is economics correspondent for The Age and the Sydney Morning Herald. He blogs at and tweets at @1petermartin. [...]

Coal is now the biggest threat to energy security

Thu, 11 Jan 2018 01:11:00 +0000

Worried the electricity system won't keep up over summer? Worry about coal. Seriously. One of the four giant units at Victoria's ageing Loy Yang A power station broke down on Tuesday night at 11.05, taking out 230 megawatts, and then at 1.10 on Wednesday morning after being partially restarted, taking out what by then was 161 megawatts. When demand soared during Sunday's heatwave, the Eraring plant on Lake Macquarie in NSW lost 275 megawatts. A few minutes later, Loy Yang A lost 264 megawatts. On New Year's Day, unit 1 of Millmerran in Queensland stalled, taking out 156 megawatts. On December 28, unit 2 of Tarong in Queensland stalled, taking out 314 megawatts. On Boxing Day, unit 4 at Loy Yang stalled, taking out 528 megawatts. On Christmas Day, unit 1 at Gladstone stalled, taking out 230 megawatts, then unit 1 at the Tallawarra gas plant in NSW, taking out 187 megawatts. And so on, back to the start of summer. When unit 3 at Loy Yang shut down without warning on December 14 taking out 560 megawatts and imperilling the entire system, the new Tesla battery 1000 kilometres away in South Australia sprang into action ahead of the coal-fired power station that was contracted to restore stability. It proved to be "dispatchable" in a way coal-fired power stations are not. Age, heat and the steady encroachment of renewables are destroying the only advantages coal-fired power stations ever had. When Treasurer Scott Morrison stood up in Federal Parliament and waved around a lump of coal in a stunt unworthy of his office, he said coal was an important part of ensuring a "more certain" energy future. But he was speaking about the past. Coal-fired power stations didn't used to get critically hot as often as they do now. The February 2017 heatwave that took out 2438 megawatts in one day in NSW might have once been a once-in-500-year event. Now it's a once-in-50-year event and perhaps soon a once-in-five-year event. The calculations are by the Australia Institute's Mark Ogge and Hannah Aulby in a study of the risks to energy security entitled Can't Stand the Heat. Ogge is the person who has been keeping a record of power station outages. When temperatures in control rooms get as high as 50 or 60 degrees the electronic control systems buckle and the boilers leak. Failures are inevitable, although unfortunately not predictable. Wind power and solar power are in large part predictable. Yes, they are intermittent, but it is usually possible to tell a day or two ahead of time when and where the wind will blow and the sun will shine. There's time to put batteries, hydro and gas on standby. But in summer it's becoming impossible to know when and where coal-fired power stations will blow. They are becoming unpredictably intermittent, all the more so each year they age. And standby power is costly. Tony Wood of the Grattan Institute helped run Origin Energy for 14 years. He says the industry standard is to have as much back-up as the biggest independent unit, so that if it drops out it can be instantly replaced. But the biggest independent coal units are huge. They require big back-up. The biggest wind and solar farms are much smaller. While they require storage and gas peaking plants to fill in overnight and when the wind's not blowing, they don't need anything like as much back-up for when mechanical problems knock them out of service. There are caveats. Independent turbines can stop blowing at once, and sometimes unpredictably. That's because most are located together in South Australia and Victoria, where the wind systems are synchronised. It would be better to have more wind farms in NSW, where the weather cycle is different. At times cloud cover is also unpredictable. A future without coal-fired power stations is inevitable, and entirely manageable. Wind accounts for 40 per cent of South Australia's electricity supply, 8.5 per cent of Victoria's supply, and 2.8 per cent of the NSW supply. One of the many reasons no new coal-fired power stations [...]

What a job? Move to NSW

Wed, 10 Jan 2018 01:07:00 +0000

It's the easiest to find a job since the mining boom.

The latest count from the Bureau of Statistics shows there were a record 216,000 job vacancies in November and 661,400 Australians out of work, the lowest total since 2012.

The ratio of 3.1 means there were roughly three job seekers for each vacant job, a step up from November 2016 when there were 3.7.

In NSW, the state with the best odds, there were only 2.2 job seekers for each vacant job, one of the lowest ratios ever recorded. A year earlier there were 2.7.

While Victoria has recorded the biggest improvement, the odds remain nowhere near as good as in NSW. There were 3.1 unemployed Victorians trying to get each vacant job in November, down from 4.2 a year earlier.

In Queensland the odds improved from 4.5 per vacant job to 3.9, in South Australia from 6.1 to 5.7, in Western Australia from 4.7 to 4.3 and in Tasmania from 7.9 to 5.7.

In the Northern Territory the odds remained little changed at about two unemployed per vacancy, and in the Australian Capital Territory they slid from 1.6 to just 1.3. But the ACT figures are unrealistic because they are biased downwards by the number of ACT workers living outside of the territory and the number who come from interstate for jobs.

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Because much of the income from that production goes to corporations or overseas, a better measure of living standards is gross disposable household income per capita. It is $91,627 in the ACT, $62,893 in the Northern Territory, $51,412 in Western Australia, $50,814 in NSW and $43,516 in Queensland.

In The Age and Sydney Morning Herald