Regulation

With the Rudd Government spending billions of dollars of taxpayers’ money in an effort to encourage consumer spending and keep the economy afloat, there are calls for an increase in the number of controls with more complex regulations. (See “Neo-liberalism is dead...markets need regulation” by Chris Bowen, SMH May 6th, 2009)

We all know that “greater regulation” means more and bigger Government Departments with thousands of well paid bureaucrats wasting even more taxpayers’ money. As if Australia isn’t already over-regulated, with businesses bound up in complex red-tape from all levels of Government.

Let’s remind the Rudd Government about Allco, Centro, Opes Prime, Storm Financial, Firepower, and many others. Where were ASIC, APRA, ACCC (and all those other acronyms) when these were failing? Did the complexity and over-regulation we already have help?  Simply adding even more layers of bureaucracy will just result in more waste of taxpayers’ money.

More Government intervention and red tape does not help; in fact the “dead hand” of Government will only get in the way of Australia’s recovery. The billions of dollars the Rudd Government is wildly throwing around will ultimately have to be repaid. That will require a healthy, free-market economy generating profits and paying (too high) taxes. 

Public Debt

Australia in the red—public debt set to soar

Australia’s five percent current fiscal deficit may look modest next to the US’ twelve percent, and the UK’s thirteen percent. However, the Bank of International Settlements (BIS) is forecasting Australia's fiscal deficit to grow to over $200 billion in the next 4 years. This would be a FOURTEEN percent of GDP!

BIS is well qualified to comment. It is the central bank to central banks, and was the only international body to have correctly predicted the current crisis. To give this deficit some sense of scale, the Maastricht treaty, which created the European Union in 1993, considers a fiscal deficit of more than three percent to be reckless.

In a paper on the state of public finances published in March this year, the IMF outlined that doubts over the solvency of governments will lead to rising borrowing costs. The more debt we need to fill the gap, the more expensive it’s going to get. Research from the Fed in 2003 suggested that each percentage point above the projected fiscal deficit increases the ten-year bond rate by up to forty basis points for five years.

And what of household debt? Thanks to mortgage debt, credit cards and car loans, Australians carry $1 trillion of debt. BIS also points out that Australia still has one of the highest household debt-to-disposable income ratios in the world. Unlike other nations with high household debt levels, we are yet to start reducing these debts by saving more and spending less.

Surely this process will have to start soon? Or are we going to sleepwalk into crippling debt like the US?

Reported in The Daily Reckoning, 11 July 2009

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Happy Tax Freedom Day!
Oliver Hartwich

A tax is ‘a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered.’ At least that is the way the High Court defined it way back in 1938. To put it simply: A tax is something you must pay to the government; what you get in return is another matter.

In all other areas of life, when we pay someone we would like to see what it is for. With taxes, it is not that easy. Your hard-earned money that goes to the government may be used to pay fire-fighters in the country or fix potholes in your street. It may fund the government’s broadband network or morph into your neighbour’s $900 cash bonus. Even more strangely, your money could well return to you as your own cash bonus (minus the costs of administering this redistribution).

With so little control over the use of our money, it is little wonder that nobody likes paying taxes. That’s the reason governments have become very good at concealing them. Imagine if you physically had to write a ‘tax cheque’ to the Treasurer every time you refilled your car, did your shopping, or received your salary. No doubt it would keep reminding you just how much money you pay the state. But because we don’t write such cheques, most of us are blissfully unaware how much of our money goes to the government.

Last year, the average Australian paid a total of $16,401 to the tax authorities. This sounds substantial already – the equivalent of a small car. But it is also quite a lot compared to the average income – 30.8% to be precise. It means that the average taxpayers need to work the first 112 days of the year just to pay taxes to the government. Only on 23 April do they actually start earning money for themselves to spend and save as they please.

So on 23 April, celebrate your Tax Freedom Day for 2009. You will be free from the taxman for the rest of the year. But enjoy it while you can: The government is working hard to push your Tax Freedom Day well into May next year.

Dr Oliver Hartwich is a Research Fellow at the CIS.

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LDP Business Cards

Would you like an LDP business card containing your name and contact details, to hand to friends and colleagues who are interested in the party?

They are free for all members, financial and honorary. Just email your details to David Leyonhjelm (treasurer@ldp.org.au). 

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Contributions

Contributions and details of meetings are welcome up to 6pm on the second Friday of each month, after which the newsletter is submitted for editing.

Send to Graham Nickols at secretary@ldp.org.au

Urgent material missing the deadline should be forwarded directly to David Leyonhjelm at treasurer@ldp.org.au

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Liberty Links

Given the size of the LDP a lot of our members aren't able to make it to our state branch meetings. So here's a list of links of websites that may interest you. None of the listed websites are affiliated with the LDP and none of the views expressed represent LDP policy.

Australian Libertarian Society
Catallaxy Files
Free Market.Net
Introduction to libertarianism
CATO Institute
Centre for Independent Studies
Institute for Public Affairs
US Libertarian Party

If you have a link you'd like to appear here email info@ldp.org.au and let us know about it.