By Ross Hamilton

I first heard about a cashless society back in 1980 when I started work for the Commonwealth Bank. Our manager returned from a conference, informing us that the wheels had started turning to make Australia a cash-free society in as little as ten years. Thirty-seven years later, and a long time after the end of my banking career, it seems we are finally getting very close to that point of cash becoming a thing of the past. But so far, I am not seeing anyone talk too much about the very real negative that can come with this unless a government finally steps up to the plate for real for the first time.

The amount of cash used in the Australian economy will have been on the decrease the last few years with the continuing growth in eftpos including the maturing of the ‘pay-wave’ technology. The more we use those technologies, the less we need cash. But at what cost?

The Reserve Bank is about to introduce innovative technology which will make money transfers happening almost instantaneously, and, so the argument goes, we have less need than ever for the plastic folding stuff. And it can be argued that removing cash from society saves us the cost of producing it.

The pretty bits of plastic we currently use to pay for a steak sanger at the pub for lunch will be replaced by electronic transactions via the banks. And what shall the banks do? Continue racking up more fees for us all to pay. The big four banks in Australia already make literally billions in profit each year. And a massive part of that profit comes from all the fees they charge. The interest on your loans just essentially pays the bills. It is fees that create those obscene profits.

Banks have it down to a fine art – charging for anything and everything. The frequent excuse is that they are just recovering costs. And that is complete garbage. Are we really expected to believe that it costs a bank two-dollars or more to automatically process an electronic ATM withdrawal for a non-customer? Of course it doesn’t! It is a punishment fee for daring to not be that bank’s customer and adding to the pile in their Scrooge McDuck Money Bins.

What is going to happen once cash is removed from our grubby little hands? Everything becomes simply transactions on our credit card or bank account. And what will banks do in response to that? They can be relied on to keep charging fees which reflect the amount of transactions on accounts. Dumping cash in favour of an all-electronic system shall mean a drastic increase in the amount of transactions. And that means a massive bonus in fees for the banks and profit levels that could simply dwarf the current huge profits.

Now we come to the big crunch. Who is going to be paying all those added billions in fees? We are. Every single person in the country stands to have their transaction fees on their bank accounts simply soar. But a five cent, ten cent, one or two dollar fee to someone on current average wages of almost $80,000 pa (latest ABS data) is not as hard as it is to someone on a bit over $20,000 pension. These fees are not equitable according to capacity to pay. Yet the only way of opting out–paying as much in cash as possible–will be replaced by significantly increased costs on those least able to afford them.

This problem is nothing new. But no matter what political flavour our governments are, they all simply let the banks keep on their merry way. The problem is always shoved back into the Too Hard pile to be ignored. And that is before factoring in the massive bonanza coming their way in the cashless society which the RBA say we could be seeing as soon as 2020. In three years time, the low-income earners could be hit with a massive ‘tax’ payable to the banks.

No, Malcolm, the banking CEOs are not trembling with fear at the prospect of the annual visit to a completely pointless and powerless Senate committee. They’re laughing about it over Cuban cigars and Penfold’s Rare Tawny in a private club somewhere, courtesy of their millions in bonuses, all paid for by we poor schlubs. But if the RBA are correct and the cashless society could be on us by 2020, the buck has to stop with the Turnbull government right now. You have to do something meaningful which shall significantly ease the burden on those least able to pay, before it is too late to do anything. How about limiting the amount banks shall financially benefit from the cashless society bonanza? It would be a damned good start.

This article was originally published on Ross’s Rant.

Ok, some of you are trying to draw a link between Sam Dastyari’s acceptance of a payment of $1670.82 from a Chinese businessman and the gift of several Rolex watches to a number of Liberal politicians and their wives when the Liberals were in Opposition.

For a start, it needs to be pointed out that the Liberals all thought that the watches were fakes and only worth between $300 to $500 dollars which means that no individual received anything like the value of Dastyari’s donation. Of course, I suspect that a lot of you lefties will be suggesting that when you add all the watches together that it far exceeds the $1670.82, but that overlooks the fact that because nobody knew how much the watches were actually worth, then any attempt to add them would have been ludicrous. Particularly – as it turns out – when they were so wrong about the estimated worth and that the total value of the watches would have been enough to buy a nice little apartment somewhere. (Maybe not in Sydney or Melbourne, but don’t try and suggest that there’s a housing affordability crisis because I said “apartment”!)

Abbott, Macfarlane, Robert, their wives and anyone else who received a watch immediately presumed that it a fake because -as a spokesman clearly explained at the time –
it wasn’t the gift, but “the way it was given”: they were taken out of a plastic bag and handed over, whereas usually genuine attempts to bribe politicians come in brown paper bags and aren’t taken out by the donor in public. We can perhaps put this down to a lack of understanding the Australian culture by the gentleman concerned.

Yep, once they’d decided the watches were fake, then it was perfectly ok to accept them. It’s no worse than say illegally downloading a movie or selling pirated CDs. And surely nobody could have a problem with that.

But when comparing it to recent events, there’s the big, big difference! You see, Dastyari received a personal “donation” whereas the Rolex watches were a “gift”. This might seem like a petty distinction. However, a gift is – as was explained back then – a “goodwill gesture”, while a ” personal donation” implies that there’s a possible expectation that the person is expected to do something in return.

Which is why it’s wrong to bring up the whole issue of political donations from overseas companies at this point. That just confuses the issue because if you hear that Dastyari may have been influenced by a personal donation, then you may think that parties would be also be influenced by the people who donate. But that’s just ridiculous. Particularly in the case of the Liberal Party.

The Liberal Party has a long history of wanting to take people’s money and give them nothing in return. You don’t even have to go back to Howard and Costello – just look at Joe Hockey and Scott Morrison’s approach to returning the Budget to surplus.

No, as property tycoon Huang Xiangmom (who’s donated more than a million to both major political parties in the past few years) said a couple of weeks ago:

“We need to learn… how to have a more efficient combination between political requests and political donations.”

So clearly he doesn’t feel that all that money has bought him enough influence.

Perhaps we should introduce a more transparent process where, for example a donation of $10,000 gets you one member voting the way you want on a particular bill, while a donation of $100,000 allows you to dictate his or her vote for an entire session of Parliament. And, if you agree to pay the MP’s salary then they’re yours for life. (Mm, this could even be a saving for the tax payer…)

However, a gift of Rolex watch – or several watches – gets you nothing. That’s just a gesture. Of goodwill. That’s just to make it absolutely clear that you expect nothing in return and it’s all ok and if you were expecting something in return… Well, you’d… um, pay their travel expenses.

Yep, that’s when it’s bad. That’s the only time it’s bad. And bringing up anything else right now is just confused the issue, ok?

By 2353NM 

According to the Coalition government, the ALP’s campaign over the privatisation of Medicare was somewhere between dishonest and outright lies. While it is true that the Coalition has frozen some Medicare rebates and eliminated others, attempted to introduce a $7 co-payment to see a doctor in the 2014 budget and set up a task force to examine the outsourcing of payments to Australians, the Coalition claims that these measures were nothing to do with the privatisation of the Medicare entity. Really, if the payment system was privatised, the Medicare rebate would still appear in your bank account at some point after the doctor’s visit. The election is over and Turnbull has promised not to outsource the payment services of the Medicare entity. We’ll see if his promises have more validity than Abbott’s did over time but at this stage let’s take him at his word.

There is a larger issue here — privatisation. Despite the rhetoric of governments around the world that they are trying to emulate business operations, the prime purpose of government is to provide the services that the society requires and can afford. The ultimate aim of business is, frankly, to make a buck (or pound or euro or rouble) for the owners of the business. The business could be the school-aged boy walking dogs after the homework is done or as large as Wesfarmers, Microsoft or General Motors — the profit margin is what any business is looking for. New walking shoes cost; just like employment of engineers, purchases of inputs to the production process and marketing people.

Ross Gittens observed recently that one of the reasons Turnbull’s government was considering the outsourcing of Medicare payments was:

… the department’s computer system is old and clunky and needing to be replaced — a prospect that always seems to frighten governments, especially those trying to keep their budget deficit low by postponing needed asset replacement.

A large computer system takes a considerable amount of time and money to replace. It’s not like you can go to your local ‘big box’ retailer, pay the money, take it home and plug it in. As Gittens observes:

For instance, one of the ways federal and state governments seek to retain their AAA credit ratings is by using “public/private partnership” agreements to have the borrowing for motorways and other big projects done by some private enterprise. This way, the debt appears on its balance sheet rather than the government’s.

Small problem: hiding the government’s debt in this way ends up being far more costly to taxpayers. The oh-so-holy credit rating agencies turn a blind eye.

So while the government doesn’t have the development and operational costs for the system on its books, it is locked into paying for the development, operation, staffing and depreciation over a period of many years.

In some ways it is like people who are moving into their first home away from their family. Rental of a new refrigerator is sometimes seen as an alternative to the only other affordable option — purchase of a second hand unit where the paint isn’t as shiny, there may be a few dents and a shelf or two might be missing. On the face of it, a few dollars a week is more affordable than a couple of hundred for the second hand one, but sooner or later the rental payments will exceed the cost of both the second hand fridge or even a new one. And that’s where the rental company makes its profit (which for the rental company is the major objective of the entire exercise).

Assuming Gittens is correct, the concept seems to be that a private company develops a computer system to handle the millions of payments that Medicare makes every week. They then get the right to operate the system on behalf of the Australian government for a number of years. While the government doesn’t pay up front for the development of the system (which will take considerable time, resources and intellectual property), included in the monthly payment for the processing of the claims would be the value of the claims made, the operational costs of the system (lights, power, staff, maintenance and so on), a proportion of the development costs as well as a profit for the company that operates the system. Assuming the system is large and complex it would be difficult for the government to change providers at the end of the contract as the initial provider would own the systems, processes and intellectual property associated with the system. If there was a clause to hand the equipment and intellectual property to the government, we’re back at square one with an obsolete computer system that needs to be redeveloped at the end of the contracted period.

A-ha, you say, governments have a lot of clever people who will ensure that they don’t get sucked into a scheme this simple to transfer public money into private profit. Well, they might not. In 1999, Coalition Premier Jeff Kennett privatised the provision of public transport in Victoria. The claim was that the granting of licences to operate trains, trams and buses in Melbourne and across regional Victoria would make the government $28.05 million per year in 2013 and more thereafter. The reality is somewhat different. The Victorian government paid the public transport operators around $2 billion in 2013.

The public elects governments to provide services. A lot of governments around the world provide subsidies to public transport services. Those that support public transport would argue that the subsidy is worth it as there doesn’t need to be as much ground covered in asphalt, space allocated for parking, oil consumed, traffic management costs and so on. Others would suggest that it is a waste of money as there should be more ground covered in asphalt, or they don’t get a direct benefit from the subsidy and so on. Regardless, governments around the world either provide or support public transport in larger towns and cities for the perception of benefit it provides to the communities serviced.

Brisbane’s Airtrain is not subsidised by the Queensland government and from the Brisbane Airport to just south of Toombul Station runs on a track constructed and owned by a private company. The cost for a trip from Brisbane Central Station to the airport is $17.50 one way (peak period on a weekday) with a trip time of 24 minutes. For comparison, a 24-minute trip from Brisbane Central to suburban Geebung, which uses similar rolling stock and the same tracks from near Toombul to the CBD as the Airtrain is a subsidised $4.66 (peak hour with a ‘Gocard’. Airtrain makes a profit on the $17.50 it charges to take an adult to the airport. The operator has to pay for the train (operated by Queensland Rail under contract), maintenance, staff and all the other business expenses. While Queensland Rail may have a different formula for cost recovery on its own services rather than as a contractor to Airtrain, it’s hard to believe that the formula is so vastly different that the $4.66 charged to travel to the delightfully named Geebung is profitable to the operator.

Medicare is also a government service that subsidises Australian residents who need medical attention. While Australians theoretically pay a levy on top of their income tax for the service, not all Australian residents are taxpayers. As Turnbull admitted soon after the election, the ALP’s Medicare campaign was successful because Coalition governments over the years had provided evidence that they were not averse to disadvantaging those without private health insurance on top of the universal ‘free’ Medicare coverage.

Should the outsourcing of Medicare rebates go ahead (and Turnbull reneges on a promise) the Australian public will again be accepting the conversion of public money into private profits for a considerable period of time into the future. While it’s a cheap shot to suggest that this process is broadly supported by the Coalition and its business backers, the rest of us are paying considerably more than we should for the provision of a service the Australian public demands for years into the future.

Problems with outsourcing are not solely related to computer systems. Apart from the failure of outsourcing of Victorian public transport discussed above there are the considerable costs that the Tasmanian, Australian and New Zealand governments incurred to restore the Tasmanian and New Zealand rail freight networks after the sale and operation of the networks by private enterprise. ABC Learning is an example of what happens when a private service provider (childcare in this case), reliant on a business model involving considerable government subsidies and taking the place of the various government and non-profit service providers, fails. The current problems with a number of private providers permitted to replace the state-owned vocational education and training providers is fast becoming a case in point where the ‘make a buck’ ethos outweighed the requirement for appropriate costs and services to ensure the education of a considerable number of young Australians in trades, which will potentially lead to those caught up in the scam not being able to repay training debt (they can’t get a job if the training wasn’t delivered to the appropriate level) and for the rest of us, a shortage of qualified tradespeople for the next few decades leading to poor service and higher prices.

Governments argue that passing the risk and potential for profit to private enterprise is more efficient — as well as running government like a business. The problem here is that government is not a business, as a government should be providing services, not making a buck. For a start, one of the main reasons that business will contract out ‘non-essential’ services (transport and refund payments to name two) is that the cost of the service is an operational cost, written off the cost of producing their major products and therefore tax deductable. The cost of new assets (such as new computer systems) is deemed under taxation rules for business to be a capital expense and depreciated (the cost is recouped) over a number of years. There is a debt on the financial books of the business for the cost of the capital asset until it is depreciated in full, which is considered to be a poor leverage of available capital. The fundamental problem with the logic is that governments do not pay income tax — and therefore don’t need to maximise their operational expenses or leverage their capital.

It is also a fallacy that the private sector is always able to do the work cheaper over the long term (look at the Tasmanian and New Zealand rail systems where government intervention and rehabilitation was required after only a few years). Private enterprise has to do the work paying similar rates of pay and cost of overheads effectively for less to ensure they make a buck and will probably take shortcuts to achieve this apparently contradictory task.

Governments raise taxes and charges to facilitate the services they provide. In the case of state governments (which do not issue currency), they have to have a conversation around raising taxes to pay for the requirements of the society that they are supposed to be supporting. The federal government is in a slightly better position in that it can issue currency: however, this is not politically attractive at present.

If ‘big ticket’ items, such as the computer system owned by Department of Human Services is obsolete, one has to ask how many other major government assets across Australia are well beyond their use by date and there are no funds available to replace them?

In 1983, then Prime Minister Hawke called employers, unions, non-profit groups and state governments into a room and explained the need to restructure our economy. As a result, some taxes were increased, there was wage restraint and employees and governments co-operated to work together for the benefit of all. Hawke remained prime minister for nearly a decade.

If Turnbull is the smart politician he claims to be, maybe he should sit down and have the conversation with Australia about why there is a need to find a different way to fund the services required by our society (in part due to the extravagance of the Howard/Costello years) and ensure that Australia can continue to support these services into the future. Who knows business and employees sitting in the same room as government may come up with a better plan than cutting services and converting public funds to private profit. It worked for Hawke.

What do you think?

Would a Turnbull Economic Summit be as successful as the Hawke summit?

Would the Coalition’s conservatives and big business co-operate with a summit?

When Barnaby Joyce relocated his family from Queensland so he could actually live in the seat he was contesting, he chose Tamworth to set up house and electoral office.

After he was elected he set up another office in Tenterfield whose fitout cost $305,148.

After being appointed Minister for Agriculture, rather than using an office in Sydney that had been provided to use for ministerial purposes, Joyce decided to set up a ministerial office in Armidale whose fitout cost $365,748.

Joel Fitzgibbon, the previous Labor Minister for Agriculture, questioned the move.

“All the stakeholders and industry leaders tend to be in our capital cities, so too the key research bodies which themselves are taking a cut in this budget. So there’s no real explanation for establishing the Armidale office other than to enhance his own local political infrastructure.”

Liberal Senator Bill Heffernan was also critical.

“So a whole lot of ministerial staff are actually going to relocate their living, their homes, their families to Armidale. Have you calculated the added cost because it’s not a hub – I have an office in Sydney ’cause it’s a hub – of the extra flights to get to the ministerial office, have you calculated all that?”

A spokesman for Mr Joyce said the Minister believes it is more appropriate for his Ministerial office to be in Armidale than Sydney. He says if any peak bodies want to visit him they can still use the Canberra parliamentary office. That would be office number four (or five).

When recently asked about chartering a helicopter to visit a town which is about 40 minutes drive from Barnaby’s Tenterfield office, his response was “I don’t sleep in my second electoral office.”

Which begs the question as to why he maintains that office if it is so far from home that he needs a chopper to get there. It also shows a lot of chutzpah considering it was two days after the report into politicans’ rorting which specifically stated “in the absence of compelling reasons, helicopters cannot be chartered to cover short distances”.

Mind you, letting him drive has its own costs.

In late 2010, when Barnaby was still living in St George, Queensland, he decided to visit his 1000ha grazing property at Baradine in north western NSW. He made the very unwise decision to drive his $80,000 government Toyota LandCruiser wagon through flood waters. Unfortunately he stalled and the car was a write off.

Barnaby is renowned for his questionable expense claims. In 2012 he was given free tickets to watch the State of Origin and NRL finals in corporate boxes. He claimed flights to Sydney, Comcars and overnight ”travel allowance”, costing taxpayers $4615. His spokeswoman said that attending the matches was legitimate ”official business”.

He also, after being flown by Gina Rinehart to India to attend the wedding of someone he had never met, came home via Malaysia where he didn’t even stay overnight but called it a “study tour” so he could claim a $5500 flight home for him and his wife out of Kuala Lumpur. He also claimed $3,600 + $350 travelling allowance to get to Perth to board Gina’s private jet to go to the wedding.

Gina and Barnaby are close. She bankrolled his campaign and also made a surprise trip to Canberra in November 2013 so she could attend Parliament House to watch Mr Joyce’s maiden speech as the newly elected MP for New England.

Some of Mrs Rinehart’s closest political friends, the Speaker Bronwyn Bishop and Liberal Party senators Cory Bernardi and Michaelia Cash, were invited to join the billionaire for an intimate gathering in her private hotel suite.

Barnaby is hot on the campaign trail once again doing his “retail politician” thing – politics in the pub, taking credit for Labor initiatives, having his photo taken with mobile phone towers, and, in a recent Facebook offering titled Delivering for ‪#‎NewEngland, “Announcing the $400m White Rock Wind Farm will begin construction at the end of the month, producing ‪#‎renewableenergy to power 75,000 homes. Here with John Titchen, CEO of Goldwind.”

Makes you wonder why we are spending $2.5 million on a National Wind Farm Commissioner and the Independent Scientific Committee on Wind Turbines to research how they make you sick.

Mind you, what’s $2.5 million to a man who, in the first six months of 2015 (the latest available figures), claimed $1,073,991.45 in expenses.

Like Scott Morrison with his nasty little jibe about Bill Shorten’s suit, Barnaby is resorting to personal attacks on Tony Windsor, calling him a “grumpy old man” who is suffering from “relevance deprivation”.

If sanity prevails, it will shortly be Barnaby Joyce who will be irrelevant, and that in itself will save the country a lot of money and embarrassment.

It seems obvious that Joe’s $25 billion promise to cut income tax was made in haste in the hope it could influence the Canning by election because he has no idea how he is going to pay for it – all he knows is that rich people pay too much tax. One wonders if Joe understands the concept of progressive taxation.

As Hockey valiantly tries to get the sick to fix his budget woes by suggesting we need to broaden the base for GST to include health, and Abetz suggests further possible savings could be found in the federal public service (read less services and more unemployment), a quick look at a few recent news articles shows the government’s spending priorities.

• “Australia is projected to subsidise coal, petroleum and gas consumption by $41 billion in 2015, the International Monetary Fund said last month. That is the equivalent of 2 per cent of Australia’s annual economic output. Fairfax Media understands the government has been considering the Adani mine for support under its $5 billion northern Australia infrastructure fund.”
• “Prime Minister Tony Abbott is set to announce a $20 billion plan to build future frigates in Adelaide as the government looks to restore its political fortunes in South Australia.Mr Abbott will guarantee the ships will be built in the South Australian capital as part of an $89 billion naval ship and submarine building program.”
• “An analysis of last year’s budget found that in the 2014-15 financial year, the Australian Government spent $2.91 billion on detention and compliance-related programs for asylum seekers who arrived in Australia by boat. To put Australia’s spending in perspective, the total expenditure for the United Nations High Commissioner for Refugees (UNHCR) in 2014 was AUD$3.72 billion. “
• “At a stakeholders’ breakfast in Perth on Saturday morning, Mr Abbott announced the $10 million Federal Government contribution towards the $60 million Lathlain Park precinct redevelopment. The project will include a training and administrative facility for West Coast which is expected to become the Eagles’ new headquarters within three years.”
• “The Rich Mates Act amendment bill was introduced to Parliament on Thursday. Billionaires are desirous of an exemption from tax transparency laws, and the government is happy to oblige them because, if they are forced to disclose how much tax they pay, they apparently may be kidnapped. The real reason, however, for the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015 is quite shamelessly paraded in the preamble: “These amendments will reduce the compliance costs … the amendments will reduce the need for such private companies to correct probable misinterpretation of the information and to manage reputational risk.” First there was the multinational mates’ deal of last year that sneakily unwound “thin cap” reforms. Now it’s the Rich Mates Amendment.”

It is becoming increasingly difficult to take Joe’s “national conversation” seriously.

While their philosophy remains to cut spending and lower taxes, the Abbott government are unlikely to produce an equitable budget.

As John Daley of the Grattan Institute put it,

“If you try to fix on the spending side, you only hit the bottom half. If you fix on the tax side you more or less hit the top half.”

Abbott and Hockey recently attracted the ire of the business community for scrapping the planned cut to company tax.

Increasingly, Singapore, where company tax is 17%, is attracting global corporations (and wealthy individuals) seeking to minimise their tax obligations.  Business would like us to reduce our tax rate to something competitive.

What they don’t mention is that Singapore has scant welfare, no free health or pensions. Unemployment, aged care, disability and illness are all the responsibility of the individual or extended family.  Many are forced to work into their old age.

While lowering corporation tax makes sense for nations competing with other nations to stimulate manufacture and service industries, for primary industries like mining, there is little need to compete. It is not as if Gina Rinehart can go and mine iron ore in Bangladesh if the tax regime here isn’t to her liking.

And given mining is such a small employer relative to the wealth it generates, a decent corporation tax is necessary if the nation wants to get any wider economic benefit.

Australia is one of two OECD countries (the other being New Zealand) that do not levy social security taxes. In contrast, social security taxes are a large source of direct taxation revenue (27.1% on average) for a significant number of OECD countries.

When it comes to personal income tax, Australia’s top marginal rate of 49 per cent is almost eight percentage points above the OECD average of 41.58 per cent.

However, it is by no means the highest.  For those who are willing to exchange high income tax for excellent public services, Sweden (57 per cent) and Denmark (55.56 per cent) are much more appealing destinations than Australia.

While Australia doesn’t tax at the top rate until your annual income hits $180,000, these two Scandinavian nations start a lot lower – Denmark at $86,000 a year, and Sweden at $93,000.

Austria, Belgium, Finland, Israel, Japan, the Netherlands, Slovenia and Spain all have top marginal rates above 50 per cent. Interestingly, this group of countries plus Australia boast nine of the world’s 11 most liveable cities, as judged by Monocle.

This suggests that, as a rule, a high level of income tax corresponds to a high level of liveability.

If the people of Australia want protection for our vulnerable, health care and education for all, as well as improved infrastructure,  then we must be prepared to pay for it.

Likewise, if businesses want to take advantage of a wealthy market in a resource rich, politically stable country with well-established infrastructure, then they must contribute their fair share.

You get the society you are willing to pay for.