By Bryan Kavanagh
Treasury’s mission is “to improve the wellbeing of the Australian people by providing sound and timely advice to the Government, based on objective and thorough analysis of options, and by assisting Treasury Ministers in the administration of their responsibilities and the implementation of Government decisions.”
It aims to assist:
1. A sound macroeconomic environment
Although it covers monetary, fiscal and monetary issues, Treasury has little or no understanding of the theory of valuation insofar as it relates to the national real estate market, a proven driver of the economy. This is demonstrated by the manner in which it allowed the residential real estate bubble to continue develop ever since 1999. Of course, it is possible that it did offer advice to the government in this regard but was ignored. If this was so, we need to know so that blame may be sheeted to the Howard government.
2. Effective government spending and taxation arrangements
Whether government spending has been effective is always open to debate, but it is demonstrable that most of the 56 taxes listed by the Business Council of Australia have had a negative impact on Australia’s productivity, adding to inflation and making us less cost competitive on international markets.
The winding back since the outset of the 1970s of those revenues not able to be passed on in prices, namely, rates and land taxes, assists to explain why Australia’s land prices have escalated wildly beyond the rates of population growth and GDP, and why housing has become unaffordable.
Maybe Treasury has advised a succession of governments to shift their emphasis from taxes impacting adversely on production to land-based revenues, but it is doubtful. Again, we need to know if this is the case.
3. Effective taxation and retirement income arrangements
Insofar as encouragement from the tax system has patently directed many self-funded retirees to invest in the real estate market at the same time as it has penalised more productive activities, this criterion would have to be marked as an abject failure for Treasury. More questions must be asked when the tax regime nakedly encourages a compulsory superannuation industry to gamble in the property and share markets with its prospective superannuants funds. If this charge seems to be over the top, perhaps it needs be judged on the extent to which property and share markets head south during the tax-induced recession of 2009-2010.
4. Well functioning markets
It’s already been mentioned that Australia 56 taxes do little for our markets nor for productivity. However, although it is possible constitutionally, we have no federal charge on land that may be tweaked to stop real estate bubbles arising. And, as rates and land taxes may be regarded as holding charges on the use an abuse of land and have been wound back as a percentage of taxation revenues at local and State levels since the early 1970s, it is arguable anyway that the so-called real estate market is not a genuine market at all. Otherwise, how is it possible that so much vacant land and non-utilised property is held off the market as demonstrated in Karl Fitzgerald’s I want to live here study conducted in just one ward of one inner-Melbourne municipality? In what other market essential to human life may a product simply be held off the market until a blackmail price is met for it? Yet another bad failure against this criterion, I’m afraid, Treasury.
Mark: 2 /10
Overall mark 9/40 (22.5%) Come on, lift your game, Treasury!