Net Payers, Net Receivers, and “Hand Outs”…

unnamedStephan Livera discusses how cutting taxes will make us all better off:
Some people treat tax cuts for the rich as though they were ‘hand outs’. This is not an accurate characterisation. It all comes down to what vision of society you subscribe to. Are the things people make theirs to begin with? Or are they collectively owned by default?

Consider the amount of taxation people pay, and the amount they receive back in government benefits. From ABS 6537.0 – Government Benefits, Taxes and Household Income, Australia, 2009-10 (latest issue: 29/06/2012).

See this graph:

net benefits table 3.PNG

‘Final income’ in this case includes transfers and benefits paid by the government. So by assessing the movement up or down from private income to final income, we can understand who has paid more (Net Payer households) vs who receives more back in benefits (Net recipient households). Notice how only the top two quintiles are Net Payers.

Data drawn from this table: Continue reading

KPMG: cutting spending is better than raising taxes

unnamedStephan Livera discusses a recent KPGM report which finds that cutting spending is better than raising taxes to help achieve budget surplus: 
KPMG Economics Australia has come out with a research report: Debt, deficit and Australia’s credit rating: what it all means. Essentially, the approach was to model 5 different options to reduce Australia’s debt to GDP ratio by 5 percent against the Base Case between calendar years 2016 and 2020. The approach that yielded the best GDP end result was to cut spending.

Here are some insights that I learned from this report:

  1. The often cited net debt to GDP ratio of 15% is only counting the federal government and does not include state, local and multi-jurisdictional levels of government. It also does not include the unfunded superannuation liabilities and employee entitlements of both Federal and State government workers. Once we include these, the net debt to GDP ratio rises to 49.5%.
  2. The report also discusses the impact of a downgrade in Australia’s government credit rating, and what that does to public financing. This has come up in the news recently here by S&P, here by Moody’s and is thus very topical. If Australia’s credit rating fell from AAA to AA, based on recent bond prices this would be a 0.28% bond yield differential. This might not seem much but quoting the KPMG report: “the incremental interest payments would be about $1.06 billion per annum. This is about equivalent to what it cost to build the recently opened Comprehensive Cancer Centre in Melbourne.”.
  3. The modelling showed that cutting spending would have a ‘short term pain, long term gain’ impact relative to the other options. See the Dark Blue ‘Exp’ line on the graph:


Also fascinating is this analysis showing what kind of impact government debt has on the GDP growth of the economy:

Government debt and economic growth.png

We should be encouraging politicians to cut government spending. Over the long run, there is a big difference between growing at 4.2% versus growing at only 3.1%. Anybody who conceptually understands compound interest should understand this point quite well.

Australia’s true net debt to GDP is higher than the often cited 15% figure, cutting spending is a better way to reduce the budget deficit than raising taxes, and our society will prosper more effectively when Public Debt/GDP is lower.

Stephan is a corporate internal auditor with a passion for communicating libertarian ideas. He blogs at where this article was originally published. 

Pokémon Go is not an indictment of late capitalism

unnamedStephan Livera rebuts the arguments that “Pokemon Go is everything wrong with late capitalism”:
Contra the arguments presented by Timothy B. Lee in Pokémon Go is everything that is wrong with late capitalism, Pokémon Go is not a good reason to believe that modern day capitalism has failed us. I’ll quote liberally from Timothy’s article:

If you were looking to have fun with some friends 50 years ago, you might have gone to a bowling alley. Maybe you would have hung out at a diner or gone to the movies.

These were all activities that involved spending a certain amount of money in the local economy. That created opportunities for adults in your town to start and run small businesses.

This is based on the notion that in order to benefit, people have to spend into their local economy. But the real reason we are able to progress forward is not merely due to consumer spending going up (this is putting the consumption cart before the production horse). It is because of savings and capital accumulation. This capital accumulation enables us to make things in more productive and efficient ways. We’re getting more for less! Continue reading

Brexit is a win-win for Europe and the UK


Britain’s vote to leave the European Union should be celebrated by all, writes Nikola Kaurin:

When you resign a job you’re essentially firing your employer.

It means that you’ve compared what you have against what you can get and you’ve decided that it’s in your best interest to go somewhere else.

The United Kingdom’s vote to leave the European Union is no different.

On Thursday, British voters took a good hard look at the EU and they tendered their resignation.

What’s even more extraordinary is that the British electorate voted to leave in the clear absence of a defined alternative.

Or did they?

Contrary to popular wisdom, Britons voted for a very clear option. They voted for the option of successful European integration compared to the alternative of unsuccessful European integration.

But how is that possible? Simple. There’s no greater success story of European integration than the United Kingdom itself. Continue reading

The Biggest Pro-Liberty Event In The Asia Pacific Region!

I am delighted to invite all Menzies House readers to attend the 4th ALS Friedman Conference! Held in Sydney on May 13-15 at the award-winning Aerial Function Centre, the Friedman Conference is the largest free market conference in the Asia-Pacific Region tackling the biggest economic and policy challenges facing Australia.

With over 300 participants, 8 international special guests, and 35 presenters from politics, business, universities, think tanks, and activist groups, this is one conference you do not wish to miss! Topics to be discussed include Industrial Relations reform, tax reform, the regulatory challenges to businesses, the 2016 Commonwealth Budget, and many more.

As a special offer, Menzies House readers are entitled to a 15% discount on the standard conference price by using the coupon code: ATA! 

Conference speakers include:

*North Korean escappee, activist and best-selling author Yeonmi Park
*Former French Cabinet Minister Herve Novelli
*NSW Finance Minister Dom Perrottet
*Professor Chris Lewis, Director Centre for Labour Market Research, University of Canberra
*Former Human Rights Commissioner Tim Wilson
*Senators James Paterson, David Leyonhjelm and Bob Day
*Chris Berg and Simon Brehney from the IPA
*Professor Sinclair Davidson from RMIT University
*John Osborn from the Australian Chamber of Commerce and Industry
*Matt Barrie, CEO,

And many more!

For a full program and speaker list please visit

A full conference package entitles you to the Friday Night Pre-Conference reception and launch of Chris Berg’s new book at the Hard Rock Cafe overlooking Darling Harbour, 2 days of conference, tea, coffee, delicious lunches,  a 3 course meal with drinks for the Gala Dinner and Award Presentation with keynote speaker Matt Barrie, CEO of, and aSunday evening post-conference movie night.

As someone who believes in free enterprise, and a prosperous society, I hope you will be able to join the 2016 Friedman Conference for what shall be a truly historic weekend!

To register, please visit We look forward to seeing you there!

How Tax Havens Help Us All

MH photo

Tax havens reduce poverty and help average and below income earners, argues Mark Hornshaw:

Tax is the price we pay for failing to build a civilised society. The greater the level of taxation, the greater the degree to which the brute force of confiscation has supplanted voluntary and peaceful interaction. So from that point of view, a tax haven is like a safe house, a Sherwood Forest, so to speak, where honest people can band together to shield themselves from the depredations of the greedy Prince and his cronies (see note below).

If you want to be a bit softer on governments than that, then tax havens can be seen as interjurisdictional tax competition. If governments want to attract businesses to set up headquarters in their territory, some may boast a nice climate, or an educated workforce, or an enclave of high tech suppliers and partners. But the governments of some smaller and poorer nations can offer none of those, and can only ‘compete on price’ in the form of lower taxes. By supporting tax havens, global companies are helping to close the gap between rich countries and developing countries. Meanwhile those who oppose tax havens are attempting to cartelise the tax collecting powers of large nations, by thuggishly forcing out the competition from smaller nations.

But for the average tax payer, that all seems a bit aloof and moralistic. You might be thinking “surely tax havens only serve rich people and big corporations, so why should I be concerned?”

Well I would argue that average or below average income earners benefit a lot more from tax havens than most people realise. Continue reading

Queen & Country: Elizabeth II’s place in post-colonial Australia

Jack Wilkie-Jans writes on the legacy of Queen Elizabeth II

In Australia there is much social political discussion (or a resurgence of) around the topics of Australia becoming a republic and of changing its national flag, as well as the growing movements of Aboriginal sovereignty versus the proposed changes to the Australian constitution to officially include First Peoples of Australia. Such topics seem mostly- if not only- prevalent on or near January 26th.  While such discussions continue to take place and precedence in the mainstream, populist press there also remains a great deal of war and famine around the globe and we are seeing a continuing and growing humanitarian crisis stemming from the Middle East.

Over decades we’ve seen historic paradigm changes in regards to numerous social conventions, such as race relations and most recently positive challenges around the issue of sexuality and marriage equality, taboos which have otherwise stood for centuries. We’ve also been witness to the resistance- some of it savage- such change often meets. The world has also seen in recent years the passing of so many great international leaders and great personalities who have helped shape the 20th and 21st Centuries. Through all of this and through all of the upheavals and positive changes over the past 89 years, 63 years and 11 months, there is one person representing an institution who and which remains a steadfast icon of stability, trust, diplomacy as well as tradition & progressiveness alike: Her Majesty Queen Elizabeth II.


While several Commonwealth nations no longer have the Queen as their Head of State, she still remains the Head of the Commonwealth. The Commonwealth, of course, is perhaps one of the Queen’s most magnificent jewels in her long career. A diplomatic feat unheard of in a world where monarchies are overthrown and republicanism has swept into the populist nationalistic discourse; transitioning the British Crown’s kingdom (upon which the sun never set- a remarkable feat of the Queen’s Great-Great-Grandmother, Queen Victoria) peacefully and sustainably into the Commonwealth would have seemed impossible under any other reigning monarch.


Her Majesty’s altruism, insight and unmatched experience in world affairs has ensured the successful maintenance, albeit morphed, of not only the “empire” but more significantly her own House. Like in Australia, calls for a republic and independence have been heard loudly from the United Kingdom. The Queen weathered the storm of both Scottish and Irish secession, made it through the other side in one piece while also being able to not simply survive as the Head of State but also thrive due to her ability to heal and ‘make better’ as opposed to merely ‘making do’, ensuring her subjects gained more out of having her maintain. Arguably the two main benefits of maintaining the Queen as the Head of State ensures a nation’s stability and strategic ally in Great Britain amidst a world of turbulence; the other main benefit is the income generated by tourism to estates and also the general interest level there is in such a withstanding institution. Removing the Queen as the Head of State doesn’t so much gain something as it loses something never attainable again and the fact that places like Australia are reluctant to try out a new structure of governance/rule adds to the confidence in the understandable and manageable role of the Queen. Unlike a President of a republic, Vice Regals or the Queen, while assenting to legislative changes, do not sign executive orders. Unlike presidents, Monarchs and their Vice Regals are bound by conventions and preside above politics. The comfort in this security and unknowing of potential abuses of executive power by possibly elected figure heads is what keeps a minimally drafted republic at bay here in Australia. Continue reading

The Issue With A Local Government Rate Cap

A local government rate cap is not the solution, argues Cr Chris Cornish:

It was suggested in a previous Menzies House article, ‘My issue with Local Government’  that  a legislative cap on local government rate increases to that of CPI is a good idea. But it isn’t.

Whilst it’s not a new idea, NSW have had a peg since 1977, it’s still a bad idea. And that’s despite Victoria recently announcing a CPI based rate cap will apply from 2016/17 and Western Australia also considering a rate cap.

The solution to controlling rate increases is to target the expenditure side of local government and not the income side. This is because the income side can easily be substituted with different funding methods, none of which will lead to a more financially responsible or sustainable local government sector. Quite the opposite in fact.

These include:

  1. Transfer funds from reserves. Reserves are funds set aside to fund future projects. It is responsible to have reserves, and in fact contribute to reserves on an annual basis, so that any planned future project will have the required funds available. Transferring dollars from reserves is a practice which is currently employed if a local government doesn’t want to increase rates to a politically unpalatable level. I don’t support this practice as it is raiding your long term savings to cover operational costs.
  2. 2. Use debt. Follow the lead of the State and Federal governments and rack up the credit card. Borrow funds so the current electors don’t have to bear the financial burden, and so that any rates cap can be met. Instead just leave the mess to a future generation.
  3. Sell assets. Again, follow the lead of State and Federal governments and sell long term assets to balance the annual budget. If it is a big asset sale then surplus proceeds can go into reserves for a repeat of point 1.
  4. Postpone necessary spending.  This is an insidious strategy because ongoing and regular asset management is of critical importance for responsible local governments. Whilst it would be very easy to delay, say, $1 million in asset maintenance, the impact can be costly and service levels will probably drop. For example, if you delay re-surfacing a road for an extra few years, you run the risk of the road failing and having to totally reconstruct it at a cost four times more.

The other problem with the rate cap proposal is that CPI is a poor peg to use when setting council rates. “CPI is a measure of the average change over time in the prices paid by households for a fixed basket of goods and services” (ABS). The fixed basket of goods bears little resemblance to the costs incurred by local governments; so why use it as a benchmark? Continue reading

Who do The NUS represent? It’s not me

belmonteThis past week I had the ‘honour’ of attending the National Conference of the National Union of Students (NUS)—the self-appointed ‘peak body’ of tertiary students.

Following this conference, one thing is very clear: the NUS does not represent the interests of students. It is insular, illiberal, and irrelevant to students. As a result, it is dying.

The NUS is nothing more than a training ground of hard-core Labor -Left student politicians. Some of whom have been attending the conference for almost a decade. These people purport to represent a majority of students from their campus. In reality, it is doubtful whether most students are even aware that an election had taken place.

Most delegates will one day ascend to the inner circle of trade unions and the Labor Party. Like the Labor Party, NUS is divided into heavily mechanised factions where individuals have little autonomy. It is disappointing that within this system delegates are deprived of the opportunity to fulfil their primary purpose for which they were elected: to represent the students of their university campus; and instead are expected to toe the factional line, often on motions that are of little relevance to the mainstream student population.

Factional bosses seize hundreds of votes as proxies. Those who vote against their faction on any motion are subject to a tirade of verbal abuse, physical threat, and even expulsion.

Come voting time for office bearers and executive positions, many delegates are again denied their own vote and these same factional bosses fill in thousands of ballot papers. The process is unrepresentative, and wholly undemocratic. Shady backroom deals between factions are the norm for national positions.

This behaviour may sound shocking, but unfortunately it is what we have come to expect of the Labor Union movement, even one run by and purporting to represent the interest of all students.

What was truly shocking was just how illiberal and bigoted these self-styled progressives could be to opposing ideas. The reality they live in is a different one to you and I. It is a reality where all whites are racist, all men are rapists, and all Jews are Nazi’s. These were just some of the disgusting and bigoted themes to be debated during the conference to almost unanimous agreement. Continue reading