Time to think “Flat” (no I’m not talking about the Earth!)

Andy-SempleAndy Semple provides some food for thought on the concept of a flat taxation system in Australia.

At long last, the Henry Tax Review will finally be released on Sunday May 2, ending four months of Rudd Government imposed delay. The word on the street is everything is up for grabs in the review (except for the GST) which is good I suppose, but I’m willing to wager that there will be no talk about a Flat Tax.

We should junk the ATO Taxation Code and replaced it with a system designed to raise revenue in a much less destructive fashion. The core principles are to tax income at one low rate, to eliminate double taxation of saving and investment, and to wipe out the special preferences, credits, exemptions, deductions, and other loopholes that caused complexity, distortions, and corruption.


The flat tax never made it through our parliament, but it’s been adopted by more than a dozen other countries since 1994.

Today, much of the world seems to have learned the lessons that members of our Parliament didn’t. Beginning with Estonia in 1994, a growing number of nations have joined the flat tax club. There are now 17 jurisdictions that have some form of flat tax, and two more nations are about to join the club. As seen in Table 1 below, most of the new flat tax nations are former Soviet republics or former Soviet bloc nations, perhaps because people who suffered under communism are less susceptible to class-warfare rhetoric about taxing the rich.

Table 1
Tax Jurisdictions
For Australian taxpayers, the key question is whether politicians in Canberra are paying attention to the global flat tax revolution and learning the appropriate lessons. There is no clear answer to this question. Policymakers certainly are aware that the flat tax is spreading around the world. Mart Laar, Andrei Illarionov, Ivan Miklos, and other international reformers have spoken several times to Australian audiences. It is important to continue to educate policymakers about the positive benefits of global tax reform.
 
So what Flat Tax Rate should Australia adopt?

Below is a summary of the 2008-09 Commonwealth Revenue and Expenses.

In 2008‑09, the States received $42.6 billion in GST payments. Inclusive of GST revenue, the total indirect taxation revenue raised was $77.26 billion. Total excise duty was $24.3 billion and total customs duty revenue was $6.27 billion. Non-taxation revenue for the same period was $20.28 billion.
Total income tax revenue was $201.38 billion in 2008-09, bring the total taxation revenue raised by the Commonwealth to $298.92 billion. Side note. FBT revenue raised was $3.58 billion
 
Total Commonwealth expenses were $324.6 billion in 2008-09. Notable expenses were $124.58 billion on Social Security and Welfare, $49.15 billion on Health, $45.25 billion on General Purpose Inter-Governmental transactions (wtf is this?), $22.6 billion on Education and $19.19 billion on Defence.
GDP for 2008-09 was approximately $1,188 billion.
 
Using the 2008-09 tax year as the baseline, Australia should seriously consider a 16 GST/16 Flat Tax Rate (FTR).
 
Increase the GST to 16%

By increasing the GST from 10% to 16% would generate $68.16 billion alone. Include the excise and custom duty revenues and the total indirect taxation revenue would come in around $98.73 billion.

Make the Income/Company Tax Rate 16%

Individuals to pay a 16 percent tax on wages, salary, and pensions, though a generous family-based allowance (more than $30,000 for a family of four) would mean that low income earners would be compensated.

Business regardless of its size or structure would also pay a 16 percent tax on net income, which would have been calculated by subtracting wages, input costs, and investment expenditures from total receipts.

A 16% flat income tax would generate $190.08 billion (16% of GDP). We could also get rid of that insidious FBT tax which in the 2008-09 year brought in $3.58 billion and the ‘rich’ bashing Luxury Car Tax ($389 million).
 
After adding up the GST and the FTR, along with the non-taxation revenues would give the Commonwealth $309.09 billion.
 
With some fiscal discipline (cut expenses by around 5%), the Commonwealth would also have the budget back into surplus.

By adopting a Flat 16/16 tax, the Commonwealth will be guaranteeing an ever increasing tax revenue flow – as our consumption increases so will the indirect revenue and as our GDP increases so will the direct revenue.
 
The flat tax revolution also suggests that the politics of class warfare is waning. For much of the 20th century, policymakers subscribed to the notion that the tax code should be used to penalise those who contribute most to economic growth. Raising revenue was also a factor, to be sure, but many politicians seem to have been more motivated by the ideological impulse that rich people should be penalised with higher tax rates. If nothing else, the growing community of flat tax nations shows that class-warfare objections can be overcome.

Andy is the founder and Managing Director of Stockbroking firm ANDIKA and the co-founder and Managing Director of boutique Funds Manager Xcelerator Capital Limited. He blogs regularly at www.andylsemple.com

Progress for Liberal Democrats in UK and Australia

Peter-Whelan Peter Whelan writes on the flow-on effect the success of the UK Liberal Democrats might have in Australia.

The phone calls and emails started coming in about a month ago. “Hey, I’ve just had a call from the Australian Electoral Commission wanting to confirm my membership of the Liberal Democrats!” one said. Another proudly boasted, “The man from the AEC asked if I was a member of the Liberal Democrats and I replied 'Yes, everyone should be!'”.

These calls resulted from the “Test” applied by AEC as to whether a Political party has the minimum 500 members and can be re-registered, or if it is to be de-registered. For many minor parties this can be a nightmare; too many refusals and de-registration automatically follows. That means no party candidates in the upcoming federal election, no further exposure and a lost opportunity of receiving valuable electoral funding. Members have to be committed enough to actually remember that they had joined a political party. In Australia even the major parties have relatively low membership numbers; most people just aren’t that interested, or believe that simple membership is not enough to influence policy or direction.  Also, many people feel the phone contact at their homes from the AEC is an unwanted intrusion into their private lives, especially when membership of a minor party may be seen as a fringe or somewhat abnormal activity.

In the past the Liberal Democrats’ Executives have had complaints along the lines of “Why did you give my private number to them?” Some, who had clearly signed up as members, denied such when questioned by “someone calling from Canberra”. Maybe they thought the call was from ASIO and they were under suspicion of being a member of a terrorist’s cell!

But this time it was all very different!

Not only did the excellent positive response to the AEC’s phone calls result in the Liberal Democratic Party being re-registered, but we even had some members offer themselves as a candidate in the upcoming federal election, whenever it is called!

So, that got me wondering…

Maybe with the Labor Party being in so much trouble with their economic stimulus programs, the average voter is looking for an alternative? The media has exposed the failures of the home insulation program, the rorts involved in the Julia Gillard Memorial School Halls building program and the chopping and changing in handling and processing of illegal immigrants.

Perhaps the average voter has looked at the contradictory statements coming from the Coalition side and found them wanting. No sooner has Barnaby Joyce made a pronouncement about the economy, than Tony Abbott contradicts him. Abbott proposes that the unemployed should be forced into labour camps at the iron ore, oil and gas regions of Western Australia, but then others in the Coalition distance themselves from the plan.

Neither the Liberals nor Nationals can really explain whether they are in favour of population growth for Australia, or for maintaining a stable population, which would mean cutting immigration.

The Conservatives don’t really seem to be landing any blows against the Rudd P.R. machine. The media still refer to Tony Abbott as “the mad monk” and depict his cycling and swimming efforts as those of a latter day Solo Man.

Could it be that with both sides of politics being out of favour, the Liberal Democrats may at last be gaining some traction?

With the Liberal Democratic Party polling so well in the lead up to the UK General Election, could this be the signal for a surge in the vote for the Liberal Democratic Party in Australia? The latest polling indicates more than 35% of voters support the UK Liberal Democrats, with the first past the post system putting them in a strong position to take government, or at least give the established parties a fright.

The Liberal Democrats in Australia are a more libertarian, or classical liberal party, compared to the UK party of the same name, who have policies more akin to those of soft-left, social democrat-style parties. Additionally, the Australian preferential system of voting means that comparisons are not so simple.

However, the spin off for the Australian Liberal Democrats has meant  more exposure for the name in Australian media; the identification factor and increasing awareness of the “Liberal Democratic” brand cannot be ignored.

In the short term that recognition has at least help the (Australian) Liberal Democrats get over the hurdle of re-registration, so when the federal election is called, we say “bring it on”.

Peter has been the National President of the Liberal Democratic Party since 2008. He also the President of the Coalition of Law Abiding Sporting Shooters Inc (CLASS Action) and author of the publication Gun Prohibition in Australia: an expensive mistake.  

Why students aren’t better off with Youth Allowance

Dominic-Bohan Dominic Bohan argues why Youth Allowance doesn't necessarily benefit students.

As a student who receives Youth Allowance (which I qualified for through the noble achievement of earning an arbitrary amount of money in an arbitrary amount of time) I used to believe that I was better off as a result of this policy, despite disagreeing with welfare on principal. Today, I believe I can discredit the idea that most students who receive Youth Allowance are better off as a result of government policies. I will show that in the absence of any government interference, an average student with some drive and initiative could actually afford a better standard of living by working reasonable hours, without needing welfare.

Let’s look at some of the expenses faced by students, and how they are inflated by the government.

First, the easy ones; the GST means everything is overpriced by 10%. Since students spend almost all of their income directly, this is equal to a 10% loss, even for student on Youth Allowance.

Next, compulsory superannuation. That’s another 9% of any income earned that students can no longer use. You may think contributing nothing to super sounds foolish, but using the money while studying is actually a very sensible investment if you expect to do well in your degree. The higher your income, the less you have to work and the more you can study. Therefore, you can earn a higher future income and have more to contribute towards your retirement once you secure a “real” job.

Then there’s income tax. Let’s construct a very conservative estimate of a student’s earning potential. Working 20 hours per week at the minimum wage of $15 an hour equates to $300 a week or $15,600 per annum. Remember a student need not work 20 hours every week to achieve this average. You could work 10 hours a week during semester and 30 during holidays. Bear in mind also that most students make above minimum wage. I don’t know anyone who makes less than $15 an hour. Based on these calculations, our low income student is paying $1440 a year in tax, or a further 9% of their total income.

So already the working student is getting slugged almost 30% of the little money they make. But that’s just the beginning. Let’s examine the expenses typically faced by students. One of the biggest is housing, especially housing in prime areas close to transport and university campuses.

Height restrictions, heritage listings (even for dilapidated shacks), floor to area ratio requirements and general red tape that stifles new development keeps prices in areas where students want to live artificially high. Furthermore, public housing in the inner city limits the supply of housing available to people who want to work and study, and instead allocates it to unproductive people who will gain less from living near these amenities.

But perhaps the most grossly inflated expense for students, is the price of drugs; by which I mean alcohol, tobacco, illegal drugs and popular “study aids” such as black market amphetamines. While these are by no means a necessity, the reality is that on average, students spend a significant proportion of their income on these substances and their demand for them is highly price inelastic.

Alcohol prices are hugely inflated by taxation, with spirits which young people tend to choose being taxed astronomically more per unit of alcohol than beer and wine. A 700ml bottle of spirits is taxed $18 from excise tax alone, plus 10% GST and in most case 5% import duty. Students also spend a considerable amount of time in bars. The expensive of buying liquor licences, complying with illogical laws and the reduced competition the licensing scheme creates also drives up the price of drinks in bars even more.

Then approximately half the cost of cigarettes is tax. As for other drugs, their cost is inflated by an enormous factor due to criminalization and the exorbitant risk premium that dealers must charge.

Finally, Youth Allowance is not sufficient for a student to live comfortably on, and is highly punitive towards those who work. Now back to our student trying to get by on $300 a week, or $600 a fortnight, which will be more useful for our calculations. If he is eligible for Youth Allowance he is entitled to $377 a fortnight. But as soon as he earns over a paltry $62 a week, his payments are reduced by 50%, and 60% for income over $250. The result is that our working student only benefits from Youth Allowance by a pitiful $79.20 a fortnight, or 13% of their income. Note that the Youth Allowance money is taxable income which reduces this gain even further. I could ramble on about how increased competition and the elimination of corporate and income taxes would reduce prices further across the board, but I think I’ve made my point.

Sure you may not agree with all of my assertions about the benefits of removing government, but even a student on a very low income who doesn’t use drugs only needs to be 13% better off due to getting rid of government taxes and price increases to be better off.

Please feel free to check my calculations using the links provided.

Income tax rates: http://www.ato.gov.au/individuals/content.asp?doc=/content/12333.htm&mnu=42904&mfp=001/002

Excise Rates: http://law.ato.gov.au/atolaw/view.htm?docid=PAC/BL030002/1

Centrelink Rates: http://www.centrelink.gov.au/internet/internet.nsf/payments/ya_iat.htm

Dominic is an Economics student currently undertaking his final semester. He enjoys poker, martial arts, and occasionally having a few responsible beverages. Dominic is an ardent believer in individual liberty and personal responsibility.

“Supreme Overlord” Barnett more historically accurate than once thought

Kevin-WilkinsonThe resignation of Troy Buswell leaves open the possibility of a post-budget shake-up on the Barnett Government's front bench, writes Kevin Wilkinson.

As the fallout over the sacking of the Western Australian Treasurer, Troy Buswell, continues, a debate has sparked whether the Premier adopting the portfolio of Treasury is an attempt by Mr Barnett to demonstrate complete control over his government. 
 

It should be considered a loss to any government to lose its Treasurer three weeks before a budget is released; however it is made worse by the fact that there is no natural successor for the role in WA. One can derive this simply by looking at the university degrees of the members of Cabinet (Although a degree shouldn't be the only merit on which portfolios are allocated for the purpose of this blog I will assume that they enhance the holder to the position). There are only three current Ministers who hold a Bachelor of Economics. The obvious one is Buswell; however he has been disposed for the above mentioned reasons. The other two are the Premier, Colin Barnett and the Attorney General and Minister for Corrective Services, Christian Porter.
 
Now, it would be ridiculous to pass on the Treasury onto Porter, and although he may be a fine candidate, he has already shown himself to be perfectly competent in the role of Attorney General and to laden him with Treasury would probably see him buckle under the weight. So that leaves Barnett.
 
Now, Colin Barnett has had a rather stable first term, and this seems to be the first major blip in his Government. So would taking on the Treasury make him "Supreme Overlord" Barnett? Well historically, no it wouldn't. For at least three decades before the Gallop Government, there is a startling amount of Premiers who took on the dual role of Premier and Treasurer. Richard Court, Carmen Lawrence, Peter Dowding, Brian Burke, Ray O’Connor also played the vital role of Treasurer, as did Sir Charles Court.
 
It was only ever since 2001, when Geoff Gallop came into power have the roles been separated, (when he gave the role to Eric Ripper). As Alan Carpenter was thrust into the leadership 5 years later, the separation continued as it did once stand under Barnett.
 
As there are no constitutional regulations or conventions that prohibit whether the Premier can fulfil both roles simultaneously (Only that they must be members of the lower house, something which is currently ignored by NSW) then there is only logistical reasons why the Premier shouldn't be the Treasurer as well.
 
Firstly there is the idea that they become too over powerful. Seeing as the Treasury is one of the 5 big portfolios for State Governments (Treasury, Attorney General, Health, Education and Police), one can hardly suggest that the Premier has become over powerful as they wield very little power over cabinet decisions. This also gives the Premier an area of responsibility and is therefore more accountable to the Parliament, as is determined through the separation of powers.
 
Secondly, as I mentioned above, history seems to suggest that the Premier and Treasurer are designed to be combined in Western Australia, which seems to imply that Barnett taking Treasury is a sound decision as it has been tradition for the roles to be combined in the past.
 
In conclusion, the loss of Troy Buswell is a tragedy to the Barnett Government, as he is a talented and extremely competent Treasurer who had been rebuilding his profile since his dark days as Leader of the Opposition. Even though the rest of Buswell’s super portfolio has been passed on to the Member for Nedlands, Bill Marmion MLA, as the Premier took up Treasury, he will most likely not hold the portfolio for the rest of his term, just taking it for the State Budget due to be released in three weeks, which leaves the Cabinet open for future cuts. This leaves the future uncertain for many Ministers as Barnett could possibly bring the axe down on those who fail to perform well for the next few months.

Kevin Wilkinson is an 18 year old student at the University of Western Australia, currently studying a Bachelor of Arts/Economics majoring in Political and International Relations.

Cigarettes: The New Alcopops

The Rudd government's tobacco policies are regressive and could lead to unintended consequences, writes Milton von Smith

The government today announced a massive increase in tobacco excise, as well as a move towards plain packaging. 

For a government that has pushed so many stupid ideas (the ETS, computers in boxes, Fuelwatch, GroceryChoices, the NBN, the alcopops tax increase etc etc) this has to be one of its dumbest policies.  And that's saying something.  

Never mind the fact that smoking rates have been falling steadily for a long time and are likely to keep falling without any further tax increase. 

Never mind the fact that there is no – and I mean zero, zilch, nada – evidence on the effects of plain packaging on smoking rates (the government's Preventative Health Taskforce couldn't find any evidence but, in the true spirit of evidence-based policymaking, went ahead and recommended the policy anyway). 

Never mind the attack on smokers' individual rights (yes, kiddies, this is still a free country and you have the right to consume things that are bad for you – even products as unhealthy as cigarettes).

Never mind the intellectual property rights issues associated with plain packaging. 

The biggest problem is that the policy won't work. 

Think back to the alcopops excise increase in 2008, and all the problems associated with it. 

The problem was that by raising the price of alcopops, the government induced consumers to switch into even unhealthier alternatives: unmixed spirits, wine based alcopops with higher alcohol content, and so on. 

The policy was a dud because the government hadn't bothered thinking about the unintended consequences of the tax increase.  Its solution?  To trot out dodgy Treasury memos to support its case. 

Now consider how the two parts of Rudd's new tobacco policy will interact with one another.  It is the alcopops debate all over again.  So get set for more spin and more dodgy Treasury "analysis". 

Here's the problem: on the one hand, the increase in the tobacco excise will drive up the price of cigarettes.  The demand for cigarettes is price inelastic, so there is the first problem: it would take a gigantic – and I mean gigantic,  a much higher increase in the tobacco excise than Rudd is proposing – for the increase in prices to reduce consumption significantly below the (lower) level it will get to without a tax increase.  

So much for the health objective.

On the other hand, plain packaging makes machine made cigarettes look more like what are already reasonably close substitutes for these products – "chop chop" and other illegal tobacco products. 

So, put the two effects together, and you see what could happen: here we have a set of policies that will increase the price of a product than has inelastic demand, whilst making illegal substitutes for the product an even closer substitute. 

The unintended consequences are obvious: as a result of this price rise and plain packaging, smokers won't be likely to quit.  They'll simply try to switch to cheaper, close (but less preferable) alternatives. 

And in a stroke of genius, the government's plain packaging policy will make that switch a lot easier by making the substitutes relatively more attractive to smokers. 

And what about the effects on low income earners of this policy?  It is widely accepted that of all the taxes that the government imposes, tobacco taxes are among the most regressive – perhaps the most regressive of all. 

But never mind: the government will simply deny that it is hurting the poor. 

Get set for the mother of all spin campaigns from the government on how this tax increase will help low income earners.  The government will claim that increasing tobacco excise is not regressive, because those who quit will have much better health outcomes and will be better off. 

But what about all of those smokers (mostly from low income households, and who probably mostly vote Labor) who don't quit?  The demand for cigarettes is price inelastic, so the fact is that most smokers won't stop smoking – they'll simply pay higher prices, without an offsetting improvement in their health outcomes. They'll be worse off.

It takes a very special lack of knowledge of basic economics not to anticipate these unintended consequences.  It takes a very special kind of arrogance to ignore these possible consequences once you have become aware of them.  It takes a special kind of idiocy to adopt a policy like plain packaging, which is not supported by any evidence.   

But that's our Prime Minister for you: he knows no economics, is extremely arrogant, and doesn't care about evidence. 

Rudd’s housing policy failure

Kevin-Andrews Kevin Andrews MP writes on the negative impact that the Rudd Government's foreign property ownership policies have had on housing affordability.

A comment on a financial blog recently caught my eye. The article referred to Edward Chancellor’s concerns about Australia’s reliance on China. Chancellor has studied speculative manias. In 1999, he predicted the tech bubble burst.

Chancellor subsequently warned about the growing credit bubble years before it also burst. His latest warning is that China is following the pattern of other looming disasters.

Writing in the Financial Times in February, Chancellor also queried Australia’s housing bubble, suggesting that we had become complacent about the increasing price of residential real estate.

“Aussie housing prices have not fallen since the early 1950s,” he concluded. “A certain complacency is therefore understandable. Yet not long ago many Americans also believed that domestic home prices could never fall. So far Australia has avoided its day of reckoning. But how long will the lucky country’s luck last?”

If this analysis is correct, it has profound consequences for Australia. A combination of factors has contributed to the high prices for residential properties. These include the shortages of land for housing, a growing number of heads of households, the ageing population and the Rudd government’s decision to engineer a significant increase in the immigration program.

Compounding these factors was the Rudd government decision last April to relax the rules for foreign ownership of residential property. A consequence has been a flood of overseas buyers of Australian housing.

In parts of Melbourne and Sydney, locals are regularly outbid by foreign investors. One real estate agent said 80 per cent of recent sales in his area had been to non-residents. Other reports indicate that most of whole streets are now owned by non-residents. Reports filter in of houses left unoccupied, as the investors relying on capital gains.

Real estate agents from Perth to Melbourne told me about overseas families purchasing multiple residential properties.

While these were anecdotal reports, their consistency was worrying. There was no easy way to check the accuracy of the reports, because the Rudd government removed the reporting requirements.

Debt can be obtained from Chinese banks at much lower rates than Australians have to pay here.

This is an unacceptable situation. Many young Australians cannot get into the housing they want, as prices are being bid up. The impact is felt throughout the housing market, spilling over to rentals and public housing.

When the market turns, the overseas investors will withdraw their cash, leaving locals who have mortgaged overpriced properties with a negative equity.

Already the Australian housing market is 29 per cent above the long term trend. According to a recent analysis by The Economist, Australian prices are 56 per cent over-value.

The Rudd government finally reversed its changes, but not because of a belief in the harm to Australians, but because of the looming election. There is no guarantee that if re-elected, Labor would not relax the rules again.

Foreign investment should be in the productive capacity of Australia, not residential property.Kevin Andrews MP is the Shadow Minister for Families, Housing and Human Services.

Charitable Conservatives Give More, Chatter Less

Ben-Peter-Terpstra Ben-Peter Terpstra writes on why conservatives tend to give more than left-of-centre liberals.

I can see why Ann Coulter detests the compassionate conservative label. Indeed, it sounds as patronising as the articulate black label because conservatism is compassionate, period. In Makers and Takers Peter Schweizer explains (page 70):

Over the past fifteen years, the General Social Survey has consistently shown that religious conservatives are 25 percentage points more likely than [left-of-centre] liberals to donate money to help the poor and are 23 points more likely to volunteer time for that cause. As Arthur Brooks points out, the annual gap in giving is large: $2,210 for religious conservatives, $642 for skinflint liberals.

Now I can think of many unfashionable reasons why conservatives (and conservative Christians in particular) tend to be more generous with their time and money but one man stands above the rest: Jesus. Indeed, we know He valued one-to-one giving as opposed to taxation because He gave us the Parable of the Good Samaritan —not the Parable of the Good Bureaucrat.

The more conservative — the more generous. Schweizer adds (page 64):

While president, Bush’s charitable giving [already higher than Clinton’s and Gore’s]…increased.  In 2005 he gave away more than 10 percent of his income. In contrast, former senator John Edwards [a leftwing Democrat], who often bemoans the “two Americas” of rich and poor, and is a wealthier man than Bush, gave less.

To be fair, though, John Edwards was very good at giving to his mistress. When he cheated on his cancer-stricken wife he was also extremely generous with his time and energy. But, like Monicagate certain facts are hidden by establishment newspapers to protect the left’s myth.

While self-praising socialists love to brag about their charitable ways, and are ritually praised as people of compassion for providing condoms to kids in faraway nations with your tax dollars, our real charity doers happen to be conservative Catholics, prudent Protestants and Orthodox Christians. To make another point about media bias, Schweizer continues:

Sen. Barack Obama, who likewise talks regularly about his concern and compassion for the less fortunate, gives far less charity than Bush. In 2005, he made 1.7 million (more than 2.5 times what President Bush made) but gave the same dollar amount as Bush. In 2006, Bush made a third less than Obama, but actually gave more to charity.

Unfortunately, compassionless journalists aren’t ready to work in the light with inconvenient facts.

Ben-Peter Terpstra is an Australian satirist and cartoon lover. His works are posted on numerous sites from American Thinker (California) to Quadrant Online (Sydney, Australia). You can find him at his blogs Pizza Trays and Beer Bottles and Quote Digger.

Robbing Peer to pay Pavlos

Europe should not rush to bail out the failing Greek economy, writes Michael G.

Events unfolding in Europe at present are a timely reminder of the evil of wealth redistribution, which punishes prudence and rewards recklessness. A group of countries, but one in particular (Germany) are preparing to bail out another (Greece) due to its reckless level of government spending.

Germans are characteristic savers; Greeks are typically spenders. Germany operates a sound and corruption-free taxation system; Greece’s is riddled with fraud and abuse. Germans work until they are 67; Greeks retire at 58.

Yet Germans, who save, are honest, and work long years, are about to begin funding those who do not share these admirable characteristics. The earnings of a working 66 year-old Bavarian will provide for the pension of a retired 59 year-old Cretan.

Such is the outcome of the joint European Union-International Money Fund bailout, which, like all flawed government programmes, prioritises the short term at the expense of the future. The short term outcome of the bailout is to ensure that Greek bondholders are repaid and immediate crisis is averted, and this will be accomplished.

Yet the bailout reinforces the long-running causes of Greece’s ails: it provides the country with even more debt, subsidises its accumulation, and postpones the painful yet necessary austerity measures a bankrupt nation must undertake. Just like the last thing a heroin addict needs is another high, so the last thing a debt addict needs is ever more debt.

The Germans should follow from their own admirable saving habits and steadfastly refuse to spend. This will precipitate the real crisis that Greece requires. An inability to spend is exactly what Greece needs, and exactly what the financial markets will ensure if not for EU-IMF intervention.

There is no question of the level of temporary pain this is for Greeks—deflation, falling incomes and unemployment—but it is necessary pain for long term growth. It is the kind of natural, logical outcome that any person or company would have to endure. It is why we consider spending recklessly to be a bad thing: because it results in terrible consequences. Removing the obstacle to these consequences merely facilitates and encourages more of the problem at hand.

Providing the crisis plays out as it should, it is of immense benefit to the Greeks, for it provides them with that most important economic resource, information: that excessive debt and reckless spending is the primrose path to hell, and honesty and prudence is the tough road to heaven.

Michael G is completing studies in finance and history at Flinders University and works at Bendigo and Adelaide Bank.

Gillard’s taskforce charade

Alan-Eggleston There will be no accountability following Gillard's taskforce into the rorting of the Building the Education Revolution scheme, writes Senator Alan Eggleston.

It appears the Labor Party is attempting to change the well‐worn phrase “another day another million dollars”, to “another day, another billion dollars, another Government Taskforce”.

In recent months we have seen several major policies be rushed out the door by Kevin Rudd and his amazing team of spenders, only to have a taskforce appointed soon after to clean up the mess.

We have seen the Home Insulation debacle epitomise the Federal Government’s inability to successfully implement major initiatives, given their haphazard and rushed approach to rolling out multi‐billion dollar schemes.

A taskforce headed by Greg Combet has already spent countless millions cleaning up the mess left by an already expensive $2.45 billion mess, with reports today indicating the Labor Government has caved in to pressure and scrapped the scheme altogether.

After months of reports of widespread, systematic rorting of the Building the Education Revolution, the Labor Government caved in to overwhelming community pressure, introducing a taskforce to investigate the level of waste associated with the $16.2 billion program.

I would welcome such a move if we could be assured that such a taskforce would have the necessary power to adequately assess and define the flaws in the Building the Education Revolution.

However the reality remains that such a taskforce would be unable to get to the bottom of the problem, uncover the flaws in the program or even impose meaningful amendments to the scheme, given the structure and powers given to the taskforce.

The Deputy Leader has set up a team that will assess the Building the Education Revolution roll out and then report any problems, flaws and inconsistencies to the very Minister appointed to implement the scheme.

How can Australian’s possibly believe such an investigation can remain objective and thorough when such a structure ensures that those ultimately responsible for the alleged failures are effectively policing themselves?

It is difficult to retain confidence in a Government that is clearly reckless with other people’s money and then seeks to avoid proper accountability when flaws are exposed.

While the Labor Party has tactically moved away from any discussion on the systematic rorting of the BER and quickly diverted people’s attention to talk about health care, Australian’s are unlikely to forgive and forget another expensive lesson in how to completely mismanage taxpayer’s money.

Senator Alan Eggleston is a Liberal Senator for Western Australia.

ANZAC Day

Eric-Abetz

A transcript of Senator the Hon Eric Abetz's ANZAC Day address on Flinders Island.

It is an honour to have been invited to share ANZAC Day with you. It seems very appropriate to celebrate ANZAC Day on Flinders Island, which was largely built on the Soldier Settlement Programme after World War II – so poignantly described in Bob Mainwaring’s book the Gold Coast Settlers noting that Bob himself was a soldier settler and a former warden of Flinders Island.

A few years ago when I became Parliamentary Secretary to the Minister for Defence, I nearly drowned in a sea of acronyms. I found Defence had a language all of its own.

No longer did IR stand for “Industrial Relations.”

No longer did GST stand for “Goods and Services Tax.”

Instead, IR stood for “infra red” and GST for “ground surveillance training.”

So fed up did I become with all this Defence talk of using acronyms, I one day told the bureaucrats briefing me that I was finding the use of all these TLAs a bit tedious.

To which I got this uniform look of incomprehension. I thought to myself – at last – I’ve got them.

I said, “I’m sick of all these TLAs – you know – TLA, three letter acronyms.”

I soon discovered humour was a rare commodity in the bureaucracy.

Now whilst most of us quite rightly get tired of jargon and acronyms, there is of course one acronym that is embedded deep in the Australian psyche and soul and held with great and deep and abiding affection – ANZAC. The abbreviation, or dare I say, acronym for Australian and New Zealand Army Corps.

If historian Charles Bean is correct, that acronym also has its genesis with a bureaucrat in Defence, for legend has it that it was the idea of a clerk at Headquarters that came up with ANZAC to give a code name to the Australian and New Zealand forces.

And today, 95 years ago, many young Australians made a name for themselves and their country in their pursuit for freedom for us. Their sacrifice and their forebears’ and successors’ sacrifices have provided us with the peace, security, freedom, way of life and wealth which we enjoy today.

Some of you here today are the successors in title of the ANZACs.

Those who may have served in the Second World War, Malayan Emergency, Korean War, Vietnam War, Afghanistan or Iraq, to name just some of the theatres in which Australian troops have served and sacrificed since World War I.

In honouring not only the original ANZACs, but all our Defence personnel we celebrate not the war, not the loss of life, not the injuries, not the dislocation, but we celebrate the sense of service, the sense of sacrifice, the sense of subjecting ones own wellbeing for the benefit of a greater cause – values which are the very essence of Christianity and the bedrock of our western civilisation.

So today we celebrate those qualities of our forbears and currently serving personnel who embody those values in their willingness to serve and sacrifice not only for us here in Australia but around the world for other peoples as well, like they do today in Afghanistan and Iraq.

In recent times it has become fashionable for parliamentarians (with the benefit of hindsight) to say sorry for the shortcomings of previous generations.

Have you ever noticed how easy it is to apologise for other people’s shortcomings – it sure takes the focus off your own shortcomings!

For when I’ve reflected, those shortcoming complained about, were undertaken by the same generations that so willingly sacrificed themselves for our good so that we could have the quality of life we enjoy today. I wonder why we don’t have a few official congratulations and thank you statements to our forbears.

I sometimes wonder – as I do out loud today – whether the things for which we seek to flagellate our forbears would be so important if, for example, the world had been allowed to be subjected to German National Socialism or Japanese Imperialism.

I firmly believe that on any Profit and Loss statement, or in the scales of good and bad, we as a people and as a country have a lot for which to be thankful – very thankful – for the contribution and faith of our forbears.

So I’m glad in this current climate of revision of our history by some, we still set aside time such as ANZAC Day to recall and remember not only for ourselves, but to pass on to the next generation our nations history of service before self, of sacrifice, of fighting for God ordained values and rights, for the benefit of future generations of which we today are the beneficiaries.

And our nation’s history of service and sacrifice and helping is nothing but the sum total of all the individual Australians who shared those values and commitments.

Our task, like that moving scene at the end of the film Saving Private Ryan, is to ask whether we are living a life worthy of the sacrifice of our forbears.

And in another 95 years, will the Australians of 2105 AD be able to look upon our contribution of today with the same heartfelt thanks as we do for the service of the ANZACs 95 years ago and their tradition which we need to uphold both individually and as a community.

That’s my challenge. That’s your challenge. That’s our challenge as a country. God bless. Lest we forget.

Senator the Hon Eric Abetz is a Senator for Tasmania and is the Deputy Leader of the Opposition in the Senate.