If you have a taste for serious economic policy, then you were in for a treat this week. There was a veritable feast of the stuff. And most of it came in TLAs (three letter acronyms): GSTs, ETFs, a new RET, an ALP conference, ANZ and CBA raising their VRLs.
So pull up a chair, tie on your bib, and tuck in. First course, Tony Abbott versus Bill Shorten on climate change.
‘Bring it on, Tony’
Beyond the embarrassing sub-Shakespearian rhetoric and awkward on-stage family posing, Bill Shorten’s opening speech at the ALP National Conference set a dramatic tone for the next election.
And it looks like the key battleground will be climate change.
Tony Abbott is quickly getting an international reputation as the world’s most regressive leader on climate change (including among British Tories), and Bill Shorten has sniffed out an opportunity.
His answer to Abbott’s “do-nothing” approach? Generating 50 per cent of Australia’s electricity through renewables by 2030, and introducing a carbon emissions trading scheme (ETS).
The renewables plan is likely to go down well with voters, who like renewable energy (what’s not to like?). But the ETS is more risky. While it is not a carbon tax, it is a price on carbon. Julia Gillard’s hated carbon tax may have single-handedly brought down the last Labor government.
Tony Abbott thinks the Australian people will feel the same way about an ETS. Indeed, just before Bill Shorten’s speech, Sky News aired a Liberal attack ad aimed at resurrecting the old carbon tax fear that was so good to Mr Abbott in opposition. It felt very much like an election campaign ad.
Bill Shorten’s response: “Bring it on.”
Keeping an ‘open mind’ on GST
Would you like to pay more tax, or less tax?
If you said ‘more tax’ then you’re in luck, because it looks like a hike in the goods and services tax is very much on the cards. This week the country’s most popular and handsome leader, NSW Premier James Bond … I mean, Mike Baird came out in favour of hiking the GST to 15 per cent.
You get the strong sense that Tony Abbott and Joe Hockey, both Sydney North Shore-dwelling Liberals just like Mr Baird, had a hand in this announcement.
And later, following the Council of Australian Governments ‘winter retreat’ (it sounds nicer than it was – there were actually no curling contests, and talks were held in a regular meeting room, not a Swedish sauna), Mr Abbott came out with cautiously positive things to say about raising the GST.
But harking back to the initial question, if you said ‘less tax’ you may also be in luck, particularly if you’re well-to-do. Mr Abbott said he does not want a GST rise to be a simple tax grab. It must be part of broader reform to “make our economy more efficient and more productive, that increases incentives”. In other words, it must be accompanied by lower income and company tax rates.
The golden age of property investing is over
If you’re one of those property-hungry baby boomers buying up all the houses so that no one else can get a look in, then it’s bad news I’m afraid.
This week the Australian Prudential Regulation Authority announced new capital requirements for banks lending to property owners. In short, for a home loan of $300,000, a bank will now have to put aside an extra $2000 to back it up.
That $2000 will have to come from somewhere – either from the banks’ multibillion dollar profits, or from customers.
So far, the signs are it will come from customers – specifically, property investors. As of Friday, Commonwealth and ANZ had both announced they will raise the interest rates on their variable loans for investors by 27 basis points (0.27 percentage points). However, they have not changed the interest rates for owner-occupiers.
All in all, this is good news for first-home buyers, good news for the property market in general – it lowers the risks of a price crash – and good news for the stability of the financial system. Not so good for investors though, who will be paying more interest on their loans. Which means they’ll be even more grateful for negative gearing rules, which show no signs of changing anytime soon, if we are to believe Messieurs Hockey and Abbott.