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L.A.W tax cuts backfire again

Greg Combet claimed the promised tax cuts are being put off. AAP/Dean Lewins

When senior ministers decided to scrap the proposed 2015 tax cuts, the dark shadow of the L.A.W affair must have crossed their minds.

Paul Keating legislated tax cuts before the 1993 election, talking them up as L.A.W. But he scuppered the second round afterwards, because of budget difficulties. He then said he’d divert them into superannuation but didn’t last long enough to implement his grand plan, which was scuttled by the Howard government.

The Gillard government legislated the 2015 tax cuts as part of its carbon compensation package. It has already delivered the first round but now it has confirmed the second round is “deferred”.

It desperately needs the money. And, with the carbon price having crashed in Europe, people are not going to require the extra compensation.

Climate Change minister Greg Combet tried to make the best of the latest difficult iteration of the carbon debate, but he stretched credibility to breaking point.

Faced with the European price (around A$4-A$6), to which the Australian scheme will be linked from mid 2015, Treasury has revised its price estimate (previously $29 a tonne) for that year.

Getting these 2015 tax cuts out of the budget is a sensible fiscal decision. Even if the European price rises, there is no chance of it reaching anywhere near the original assumption on which compensation was based. The compensation package will be out of kilter from 2015.

So it’s prudent to make what changes are possible, both to get the package better balanced and to help address the budget woes. The government may be still aiming for a surplus at the back end of the forward estimates period.

It is planning other cuts to the carbon package, with Combet saying it wanted it “broadly budget neutral” but declining to give detail of these or the assumed 2015 carbon price.

The government feels that it can’t change the welfare increases due in 2015. Too hard politically. The $1.4 billion tax cuts are easier to stop. They are a fair way away; Combet said they amounted to only $1.59 a week for most taxpayers earning up to $80,000 a year.

But instead of admitting the tax cuts are gone, Combet claimed they are just being put off. “I say they are deferred because when the carbon price rises again in the future… those tax cuts will still be implemented at that point of time”, he said. “They’ll be deferred until such time as the carbon price exceeds $25.40, whenever that may be”.

The “deferral” description is spin. Even in the improbable circumstances that Labor survived and the European carbon price rose dramatically, the “deferred” tax cut would be overtaken by other imperatives.

The opposition gains every which way. It can attack the government over its reversal but gets the advantage for its bottom line. And its own pledge to give people a tax cut while at the same time abolishing the carbon tax becomes somewhat more manageable.

Julia Gillard recently seemed to assure a people’s forum in Melbourne that people would get all the compensation that had been promised, despite what was happening to the European price.

But when her words are carefully parsed there is a get-out-of-jail phrase. “You will see all of the household assistance that is being delivered staying, absolutely”, she said.

The tax decision is yet another broken promise. But who is counting now? Anyway, better to break a promise just before an election than just afterwards, as Keating did following what, at the time, was considered the “unwinnable election”, and Gillard herself did many years later.

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50 Comments sorted by

  1. Leigh Burrell

    Trophy hunter at Trophy hunter

    "Anyway, better to break a promise just before an election than just afterwards"

    Is it? Perhaps we should ask Gillard. She's done both.

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  2. Ronald Ostrowski

    logged in via Facebook

    Abbott's core promise of a 1.5% company tax funded maternity leave scheme, skewed towards rich mums, has blown out by another $2 billion. Apparently this is NOT welfare but a workplace entitlement similar to long service leave or annual leave as outlined in the National Employment Standards. Well, hello, excuse me, long service leave and annual leave are funded by the employer. Unlike most in the fourth estate I don't buy the LNP's play on semantics. It is middleclass welfare from a political party which has long abandoned the principles of individualism and self-reliance.

    As for Labor's promises I will await Budget Night and also see if Abbott will for the first time as an Opposition provide a proper budgetary reply of alternatives as opposed to his usual anti-Government ranting dressed up as a budget reply.

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    1. John Phillip
      John Phillip is a Friend of The Conversation.

      Grumpy Old Man

      In reply to Ronald Ostrowski

      Ronald, I know it is hard for you to understand, but TA's PPL is not skewed towards 'rich mums' as you put it. It is simply not skewed away from them. It makes perfect sense for someone who believes in supporting the concept of family structures to facilitate those structures. As a proponent of the welfare state (judging by your previous posts) I am surprised to see you fail to support such a libertarian policy. Perhaps Eva Cox was right and it isnt the policy but, rather, from whom it came. You've climbed nicely into the semantics of 'class warfare', which is interesting in itself. I am glad to see you focussing on TA's response to the impending budget, which seems to imply your understanding of the incompetence of the incumbents - why else would you disregard the actions of the party that is actually in governemtn?

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    2. Greg North

      Retired Engineer

      In reply to Ronald Ostrowski

      " It is middleclass welfare from a political party which has long abandoned the principles of individualism and self-reliance. "

      Ah Ronald your mind is set in a particular place, set so hard it seems, can you advise what additives I can get for some concreting.
      For something more concrete and of better quality Ronald, as any leave entitlements are usually applicable to those in employment, it is not just going to be middleclass working mums that will get the parental leave and just how many…

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    3. Michael Shand

      Software Tester

      In reply to John Phillip

      unfortunately John It is skewed towards rich mums

      Why does one mum get $75,000 support from the government and another get $10,000?

      Why is there a $65,000 difference? Because the policy gives more to the already rich and privaliged in society

      So the mums on lower incomes get less support from government than mums on high incomes and remember we are talking about people of modest means getting less than the already affluent in society

      This is perverse, what is fair dinkum about that?

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    4. Jack Arnold

      Polymath

      In reply to John Phillip

      Oh dear Grumpy John you are so predictable ... following the Liberal Party propaganda without analytical thinking at every opportunity.

      Did you see that Twiggy Forrest is selling off assets to reduce debt? Or, that the major miners have $6.2 BILLION accumulated credits to offset the MRRT? Perhaps the government should ramp up "assistance" to these "struggling" foreign owned corporations.

      The facts are that tax revenue is down so responsible management requires spending to also be reduced. Better to cut middle class and corporate charity especially since unemployed single parents have already been seriously whacked.

      Ms Grattan continues her campaign of yellow churnalism ... yet spin is what TC is supposed to overcome.

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    5. Ronald Ostrowski

      logged in via Facebook

      In reply to John Phillip

      "You've climbed nicely into the semantics of 'class warfare', which is interesting in itself. I am glad to see you focussing on TA's response to the impending budget, which seems to imply your understanding of the incompetence of the incumbents - why else would you disregard the actions of the party that is actually in government?" For a second there I thought you might accuse me of the politics of envy, a catch phrase which was very popular during the Howard years.

      You talk of me ignoring an…

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    6. Ronald Ostrowski

      logged in via Facebook

      In reply to Greg North

      Greg, this argument that the Government has the resources and time to provide a budget and the poor old Opposition does not is mute when we consider the long history of Opposition leaders in presenting a budgetary reply through a critique of the Government's budgetary priorities and an outline of the framework for the Opposition's budgetary approach.

      Abbott has broken this mould, and has strongly reinforced the impression that economics is not a strength of his, but rather sloganeering and abuse based on a false premise. If that is acceptable, as it seems to be to you and much of the fourth estate, then we should eliminate the budgetary reply altogether, because Parliament's time is wasted on just another LNP rant, which includes falsehoods and personal attacks.

      Truth, sir, is made of concrete while lies are made of a more malleable substance, which can be stretched, compressed and continuously reshaped.

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    7. Ronald Ostrowski

      logged in via Facebook

      In reply to Rex Gibbs

      Rex, I meant 'moot'. Thanks for the correction. I am so embarrassed that I could die.

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    8. Ronald Ostrowski

      logged in via Facebook

      In reply to Jack Arnold

      Psst, Jack, check this fifth estate perception of Michelle's biasness and the journalistic company she keeps.
      https://pbs.twimg.com/media/BJo0bhYCQAEJPp2.jpg

      Personally, I would like to reserve my judgement for the time being, but the link says it all about what some people think about her objectivity.

      PS: Warning, Greg and John. This might upset your political sensibilities. Michelle, be prepared for a shock.

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    9. Peter Redshaw

      Retired

      In reply to Ronald Ostrowski

      Ronald, if Abbott does win government and implements his maternity leave scheme if it has the potential to influence if not distort how long women wait to have their babies. After all if you wait long enough to have climbed up the ladder to where your pay rate is higher that will mean they will have a higher income while they are off work for that 6 month period that the scheme will cover them.

      This would be in reverse of more recent trends where many women have not been waiting to have children as long as what they had been doing. That is one thing about labor's scheme in that every women receives the same amount so it does not matter when they have their children, or how long they wait to do so.

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    10. Peter Redshaw

      Retired

      In reply to John Phillip

      John I am not sure of your logic in saying that it is not skewered towards rich mums. Of course it is. It is the same with the 15% flat tax on super, medicare subsidies and a number of other policies. More of the budget compensation goes to the higher income groups whether it be in tax breaks, subsidies or concessions. So why would I expect anything different from them.

      The other problem with these proposals is that they are open ended, there is not cut off amount to be paid out for them. And for that reason they have an increasing impact on the budget over time. That is why such polices tend to end up causing structural problems for future budgets and make it much hard to achieve budget surpluses. But than the coalition are very good at arguing for smaller government while giving out more and more middle and upper-middle class welfare.

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    11. Peter Redshaw

      Retired

      In reply to Jack Arnold

      Jack I would have thought that the major miners had far more than $6.2 billion to write off against their future taxes with the now how many hundreds of billions of investment from both Mark 1 mining boom and Mark 2 mining boom. I for one am not surprised that the mining companies are not paying as much tax as Treasury expected.

      I also doubt they will be for some time until they have written off that investment against their future earnings. And of course the downturn in mineral prices over…

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    12. John Phillip
      John Phillip is a Friend of The Conversation.

      Grumpy Old Man

      In reply to Peter Redshaw

      Peter, the problem is that, over the years, the rhetoric that dominates our welfare policies has normalised the notion that discrimination on the basis of one's income is not only acceptable but is actually desirable. This has led to the situation where people refer to practices such as means testing and wealth redistribution as equitable . They are not. By definition they are discriminatory.For the proposed PPL scheme to be skewed towards rich mums, it would have to pay them MORE than they would be sacrificing in order to take time off for the first six months of their child's life. ( BTW I dont think the PPL is limited to women only.) Again, the spectre of class warfare is raised - as if the 'middle class or upper midle class' must be excluded from any such process. Why do so many seem to have such a view that they are less deserving than the 'lower classes' (whoever they might be.)?

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    13. Peter Redshaw

      Retired

      In reply to John Phillip

      John I am a little stunned as it seems you have created a new definition of the meaning of welfare. It seems under your definition welfare is not simply support for the poor, the disadvantaged and the less well off. Welfare is now needed as support for the well off and the rich.

      Equally you seem to have created a new meaning for equity. It appears equity requires welfare to be given to both poor as well as the rich, but given disproportionally. It appears because the rich earn more they…

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    14. John Phillip
      John Phillip is a Friend of The Conversation.

      Grumpy Old Man

      In reply to Peter Redshaw

      No, you're right. Funny though how notions of 'equity' vary according to use, application and political perspective. It's an interesting idea, is it not, that this argument hangs on a monetary value as a definition of support rather than defining it in terms of time. If you choose the second parameter as the defining one, my argument is entirely valid and yours fails. The converse is also true. Cheers.

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    15. margaret m

      old lady

      In reply to John Phillip

      Just remember how Mr Abbott (the paragon of not inciting class warfare) I think the endless comments about unions now mothers who prodogy will be more productive??? People of that calibre. Mr Abbott will tax the top profitable businesses to support this generous maternity leave but he forgot to tell you big business will pass on the cost to the ordinary citizen so bingo business will not pay for the scheme you and I will via our tax money and what we purchase.

      I will go with the more responsible scheme this hung parliament has come up with because of the GFC and our world that has been exposed to Globalisation an investors delight at the expense of ordinary citizens instability of countries and their financial system Federal Government has got it right it calls for restraint it may even have to in our national future interest adjust policies. It is time we had an adult debate about taxes promises etc.

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    16. margaret m

      old lady

      In reply to Ronald Ostrowski

      I feel until we deal with the lack of real information or the flood of marketing trivia manipulation delivered via our media seeming more to feed a bias or create confusion what is the point. Britain is a current example of the very least we should be doing. If lies are printed broadcast there is a definate swift penalty.

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    17. Jack Arnold

      Polymath

      In reply to Peter Redshaw

      An excellent comment Peter, thank you.

      Even allowing for your lucid comment I cannot understand why foreign owned mining corporations are given enormous tax allowances that merely benefit foreign shareholders.

      Perhaps it is time to have a Henry style Review of mining investment ... that the government of the day could then ignore for the benefit of the foreign owned miners.

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    18. Jack Arnold

      Polymath

      In reply to Peter Redshaw

      Now now Peter, you have to understand that Grumpy John only reads non-Black armband Australian history, neoCon US tax policies and TA IR re-definitions.

      It is a little like the Shrubya Bush campaign to create 'illegal combatants' to describe the deaths and incarcerations of hundreds of Iraqi civilians upset with the US immoral, illegal, imperialist invasion of Iraq to 'steal' the oil reserves for the benefit of US multinational oil corporations at the total cost of the US taxpayer.

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    19. Michael Shand

      Software Tester

      In reply to John Phillip

      Its not more expensive as expense refers to an out going cost not a loss of revenue - nice attempt at propaghanda but check your terms first john

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    20. Michael Shand

      Software Tester

      In reply to John Phillip

      Why dont you go tell a new mother that even though she is receiving $65,000 less than other mums it is equal becuase she still gets 6 months off - you know that you wouldnt have a bar off this and nor should you

      John again this is clearly dishonest and you must know this as from previous conversations with you I know you are not this dense

      The time off is not in dispute here and you know this

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    21. Michael Shand

      Software Tester

      In reply to John Phillip

      "Funny though how notions of 'equity' vary according to use" - when we are dealing with real people in the real world, people of modest means, this type of obfuscation and manipulation is anything but funny john

      You shouldnt be having a laugh at the expense of those less fortunate than you

      Of course language can be manipulated to serve a purpose but that doesnt make it correct, honest or accurate

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    22. John Phillip
      John Phillip is a Friend of The Conversation.

      Grumpy Old Man

      In reply to Michael Shand

      Michael, my point is that you are comfortable saying to the higher income earner that she cant afford to take the time off work because she will only be compensated to the amount paid to the lower income earner. Others on this forum have said that it's hard luck for the higher earner - that she has made the choice to have a family and commit herself financially. So what's the difference between her making the choice and person on a lower wage making that same choice?

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    23. John Phillip
      John Phillip is a Friend of The Conversation.

      Grumpy Old Man

      In reply to Michael Shand

      Michael, for what it's worth, I am a person of modest means. I am not having a laugh at anyone's expense. I am heartily sick to death of the sense of entitlement and jealously demonstrated by many who claim to be, or represent, those of modest means. If your idea of an egalitarian state is one where everyone has the same income, as is implied by hyour coments, you are promoting system that will rapidly collapse under the weight of its own lethargy and lack of initiative.

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    24. Michael Shand

      Software Tester

      In reply to John Phillip

      "If your idea of an egalitarian state is one where everyone has the same income" - Come on john stop the strawmanning

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    25. Michael Shand

      Software Tester

      In reply to John Phillip

      Your missing the point john, we shouldnt give more to those who already have more, you know this and you agree with this and this is why people dislike what has been proposed

      Its perverse to give more government support to those who dont need it

      are you for or against giving people entitlements? you cant both complain about giving out welfare and at the same time argue for welfare for those that dont need it, its hypocrisy

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    26. Ronald Ostrowski

      logged in via Facebook

      In reply to Michael Shand

      Michael, what John is saying has been said by the Howard Government and more recently echoed by key LNP frontbenchers such as Joe Hockey, when angrily reacting to means testing welfare proposals in order to deliver savings in Government spending. During the Howard years critics of middleclass welfare, really election bribes, were accused of engaging in the 'politics of envy'.

      It appears that in fostering and promoting middleclass and upper class welfare the LNP has long abandoned its Menzian principles of encouraging individualistic endeavour and self-reliance. These guys, heaven forbid, have morphed into socialists for the middleclass and wealthy at the expense of the unemployed and working poor. We now have the entire demographic, irrespective of income, with a strong dependence on welfare. Next they will be expecting assistance from charity workers and still call that equitable.

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    27. John Phillip
      John Phillip is a Friend of The Conversation.

      Grumpy Old Man

      In reply to Michael Shand

      Ditto, Michael. I know it must bite hard to fiind a coalition policy with which you actually agree - despite the obvious point of opposition. The trouble is, many of the people of whom you speak would lose their houses if one partner took 6 months without pay. Why should it only be the poorly paid who benefit from such a scheme?

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    28. Michael Shand

      Software Tester

      In reply to John Phillip

      I dont agree with many liberal nor labour policies, I think both are misguided and there similarities are greater than their differences.

      Why is should a policy only benefit the poor? - depends, with this policy it shouldnt but neither should it favour the rich, it shouldnt depend on your income, a new mother is a new mother in need of support regardless of their social class or income

      There could be a point to be made that the policy should actively discriminate based on living costs, eg…

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    29. Peter Redshaw

      Retired

      In reply to John Phillip

      John that is the interesting thing about language, as over time language tends to evolve according to its common usage to the extent that some words take on their opposite meaning. And of all languages English is the most evolving language in this world. We have so many languages around the world disappearing while English is both expanding in the number of peoples who speak it, but also in the number of words in its vocabulary. And that is because even as it expands over time into different lands…

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    30. Peter Redshaw

      Retired

      In reply to Jack Arnold

      Jack you are right, but as we saw with the attacks on the Rudd labor government when it attempted to introduce the first MRRT, big business has a lot of money to throw into the political fight to fend off such changes. When one party or another sees it as their political advantage to join in with big business to go against such changes, it is hard to do anything about the Status Quo. And when the public poorly understands the pros and cons of such an issue it is also hard to bring about changes…

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    31. John Phillip
      John Phillip is a Friend of The Conversation.

      Grumpy Old Man

      In reply to Peter Redshaw

      Very true, Peter. It never ceases to amaze me how much and how fast it changes. Your comments about how easily communication can break down to to different interpretations on words are bang on. I find the mode of delivery affects this too. So often I'll make a post and, upon comparing it to the reaction it recieves, realise that the subtleties were totally lost (usually due to my attempts at brevity.). The same must apply to others. Cheers :)

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  3. James Hill

    Industrial Designer

    "The tax cuts are gone" only if the international carbon price is "gone", which will only happen if the GFC, which is depressing the carbon price, finally ensures that the entire European economy is "gone".
    Just like the Australian economy will be "gone" when Tony, the economic Turkey, invites the GFC into Australia by replicating the recessionary austerity measures of his East Coast State counterparts.
    THE GLOBAL FINANCIAL CRISIS IS REAL AND IS ON ITS WAY TO AUSTRALIA!!!
    And will arive like a size ten boot right up that blindspot the MSM use to scrutinise on the Australian economy.

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    1. Peter Redshaw

      Retired

      In reply to James Hill

      James you have to understand that the coalition have this blind spot in their brains as far as the existence of the Global Financial Crises (GFC). I do not know how they have done but it is though that word has been wiped from their memory. Now if they could teach the Europeans, British and Americans that trick of how to wipe the GFC from their memory I am sure the GFC would be over tomorrow.

      But instead the Europeans, British and Americans have clung to the fact that the GFC happened and…

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    2. James Hill

      Industrial Designer

      In reply to Peter Redshaw

      Thanks. Peter, for that confirmation that the GFC exists; that explanatory tyranny of distance began to look like Australia was on an other planet, rather than another continent.
      But as one of the "last", who has learned how to live frugally, I expect to become one of the First when the blinded debt-junkie High-riders take their GFC tumble.
      Beyond that comparative lack of vested interest in the outcome of the GFC coming to Australia, I do think that we could and should continue to avoid the GFC, but this will not happen under the Coalition.
      Remember Turnbull gloating that the GFC coming to Australia at the same time as the rest of the world would sweep Labor out of office in its first term and so started his team's continuing denigration of the "Stimulus Package"?
      There is the method in their economic insanity and it does not bode well for the future.

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  4. Peter Redshaw

    Retired

    Michelle, I am not sure what you are arguing other than trying to make a political point. The extra tax cut was always going to be based on there being an increase in the price on greenhouse gas emissions in 2015. If we are to be linked to the European scheme and there is to be no increase on the current price per tonne of greenhouse than there would not be an increase in compensation. So as far as I can see all that Greg Combet is stating is the bleeding obvious.

    And I have no doubt that Combet and Gillard will let everyone know in the lead up to the election that if Tony Abbott gets in and manages to scrap labor's Carbon policy its current compensation paid to householders will also be scraped. Whether Gillard and labor win or lose the election all they are doing is stating the obvious for all to see. There is no deception, no failing to live up to any promises as far as I can see, so I fail to see what all the fuss is about.

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    1. Jack Arnold

      Polymath

      In reply to Peter Redshaw

      Uhm ... Peter ... perhaps you can explain ... if it is absolutely essential for the government to run its budget and financial polices to generate a surplus each and every year, then why are foreign owned and indeed Australian corporations, including banks, allowed, indeed it appears common practice, to operate with loan overheads and deficit budgets that are reported in the MSM without any derogatory comment for the 'captains of industry'?

      I am reminded of the case of the Bank of NSW, now Westpac, in the 1987 'crash' that nearly went broke, providing big investors with shares at $1.92, and no sackings of Directors from their sinecures, even though deals like the proposed Eastern Suburbs railway air space development cost the bank about $40 million in defunct loans..

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  5. ERIC KELLY

    retired

    If its the prudent thing to do why spend most of the article dropping a bucket on Combet and talking about broken promises?

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  6. Lee Emmett

    Guest House Manager

    In any attempt to 'balance' a budget there are choices: and in the context of smaller than expected revenues, it is okay to examine expenditures (existing and proposed). I'm fed up with journalists harping on about 'broken promises': when economic conditions change, then governments need to respond appropriately.

    If the idea is to minimise the coming budget deficit, then 'luxuries' should be culled before 'necessities'. Since the projected carbon price is much less than originally expected, then it is logical and sensible that future compensation to families and entities can be reduced (or abandoned, if just a miniscule amount is involved).

    Labor, Greens and Independents would do well to immediately modify the MRRT so that the hundreds of billions of dollars in profits are taxed to bring in a reasonable amount of revenue. So far the mining industry has determined the terms of the mining tax, and got away with paying only a minute proportion of earnings as taxes.

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  7. John C Smith

    Auditor

    It is so obvious cuts have to be cut as people have brains. So accept some lies before the election day and best approach is to do it as soon as possible.

    Haw -Keat mess repeated in Gil-Swa show.

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