February 18 Edition
Clearly the big news in the last few weeks has been macroeconomic.
The crisis in the energy industry seems to be moving to the banking sector which is a very worrying trend and needs to be closely watched over the next few weeks. The European Banks are apparently in some considerable trouble according to the Economist - so there are clearly some issues.
Also, out of the blue, in Australia, we now see a continuing bun-fight on health insurance costs. Will be fun to watch.
Also out of the blue the Left Wing Think Tank the Australia Institute is on about Death Duties - after trying their luck earlier with Superannuation and Negative Gearing.
Parliament is now off until 22nd February.
Thursday Update: Mr Morrison gave a pretty uninteresting speech on the economy yesterday and the markets seem to be having a few good days - will it last?
Thursday Update: Mr Morrison gave a pretty uninteresting speech on the economy yesterday and the markets seem to be having a few good days - will it last?
Here is a summary of interesting things up until the end of last week:
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General Budget Issues.
Prime Minister Malcolm Turnbull should bring back 2014 Budget
February 8, 2016 1:00am
The Courier-Mail
Turnbull remains unconvinced by GST move
MALCOLM Turnbull is a salesman looking for a good economic message to sell.
The 2014 Budget was a good economic message desperately in need of a decent salesman. Maybe it’s time they got together.
The perceived wisdom among most of the chattering classes (of both Left and Right persuasion) who adorn our TV studio chat shows and newspaper columns is that the Abbott and Hockey 2014 Budget was an economic disaster.
This is simply incorrect – it was a political disaster, which is different.
Most serious commentators now broadly agree with what I wrote in The Spectator Australia only a few days after the infamous cigars-on-the-lawn Budget night, which I was fortunate enough to attend (the dinner, not the cigar smoking).
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- Feb 8 2016 at 10:13 AM
- Updated Feb 8 2016 at 2:14 PM
Scott Morrison says 'we are having to go the long road' on tax reform
Treasurer Scott Morrison has indicated there will only be small tax cuts in the May budget because increasing the GST rate was the only opportunity to fund large deductions.
All but confirming that the GST option was dead, he said "we are having to go the long road" on tax reform.
Last week, the government starting backing away from the GST option. As the week wore on, the government started defining criteria that must be met and on Sunday, Prime Minister Malcolm Turnbull all but abandoned it, saying he was yet to be convinced that case had been made that tax cuts funded by a GST increase would drive growth.
As well as the difficult politics involved, the government has been turned off by the size of the compensation that would need to be paid to low and middle-income earners.
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- Feb 8 2016 at 7:13 PM
- Updated Feb 9 2016 at 7:26 AM
Morrison could save $16b by restricting super contributions
by Sally Patten
Treasurer Scott Morrison could save $16 billion over four years by drastically limiting the amount of pretax earnings Australians can pump into superannuation every year.
By reducing the annual contributions limit to $15,000, the Treasurer could save more than $10 billion over the forward estimates. The $16 billion saving would require the annual contributions cap to be lowered to $11,000 from the current $30,000 that applies to most Australians, according to modelling by think tank The Grattan Institute. Restricting annual pretax contributions to $20,000 a year would result in $6 billion of savings over four years.
Under pressure to narrow the deficit and fund tax cuts, and with the GST apparently off the table, the federal government is analysing a range of savings measures ahead of the May budget. Restricting the amount that savers can inject into super would deliver a substantial resource.
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Deutsche Bank has a radical proposal for fixing Australia's budget problems
Paul ColganFeb 10, 2016, 5:15 AM
There’s never been a more exciting time to be an Australian federal treasurer.
This would particularly be the case if you were to follow the advice of Deutsche Bank’s chief economist in Australia, Adam Boyton, who believes the federal government could embark on a radical path of deploying fiscal tightening – most likely through cutting spending – when the economic circumstances permit, rather than waiting for the annual budget.
It raises the prospect of the government announcing significant spending cuts – or, conversely, tax increases – in response to improved economic data, dramatically speeding up the fiscal policy cycle.
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Parties need money, business supplies it
Date February 9, 2016 - 9:00PM
Ross Gittins
The Sydney Morning Herald's Economics Editor
According to the Labor Party's rising star, Senator Sam Dastyari, 10 big companies control our political process. They are the four big banks, three big mining companies, the two big grocery chains and the one big telco, Telstra.
The only surprise in that list was his third miner, not the foreign-owned Glencore Xstrata – to go with the foreign-owned BHP Billiton and Rio Tinto – but the largely Australian-owned Fortescue Metals.
I doubt it's quite that simple but, on the other hand, I doubt many people would believe me if I claimed that big business had no great influence on our politicians.
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http://www.abc.net.au/news/2016-02-10/scott-morrison-welcomes-the-greens-input-on-tax-debate/7154966
Treasurer Scott Morrison welcomes Greens' input on tax debate
By political reporter Matthew Doran
Federal Treasurer Scott Morrison has welcomed the input of the Greens in the nation's tax debate, after the party offered to negotiate with the Government on changes to superannuation concessions and negative gearing.
Greens MP Adam Bandt wrote to Mr Morrison on Tuesday, asking the Government to consider a "Plan B" for tax changes, based on his party's longstanding policies.
Key to "Plan B" is scaling back superannuation tax concessions for high income earners.
"If we had a progressive tax system where those who are earning more than $100,000 start paying a bit more than they are now, we could save $3 billion a year," Mr Bandt said.
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State governments are about to hike up taxes
Date February 11, 2016 - 12:00AM
Peter Martin
Economics Editor, The Age
Victoria, NSW, and every other Australian state have been mugged.
Here's how it happened. The Coalition came to office in 2013 promising to continue to properly fund state hospitals and schools. It left the impression the commitment had no expiry date. Then in its first budget it abandoned funding some state programs (encouraging the states to continue them "at their expense") and announced that from 2017-18 it would lift hospital and school funding only in line with population growth and inflation.
Think about that. Population growth is 1.7 per cent in Victoria and 1.4 per cent in NSW. Inflation is 1.7 per cent. Combined, they are about 3 per cent. But the costs of running hospitals are soaring. In the past decade they've jumped 7.2 per cent a year.
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Scott Morrison's tax change would have taken from the poor and given to the rich
Date February 12, 2016 - 7:56AM
Peter Martin
Economics Editor, The Age
GST would hit poor hardest
Treasury modelling on the GST reveals the most vulnerable could be hit the hardest Fairfax's Peter Martin explains why.
The most shocking thing in the Treasury analysis delivered to Scott Morrison on January 25 isn't the finding that a cut in income tax funded by a lift in the goods and services tax wouldn't boost the economy at all.
Morrison had asked the treasury to model a change that enriched middle and high earners at the expense of the least-well off.
It's what Morrison asked the Treasury to model.
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The unexpected benefit of slugging the rich
February 11, 20162:49pm
A death tax on the rich could the way to reduce the deficit.
AS DEBATE moves away from the GST, other options are being explored to raise money, and some could have interesting impacts.
Today, the non-profit sector has called on federal Treasurer Scott Morrison to introduce a death tax, saying it could raise billions in new revenue as well as increase charitable donations.
A death tax would only be applied to estates over a certain value.
Community Council for Australia (CCA) chairman Tim Costello said it would be the fairest way to address budget repair.
The tax is estimated to raise more than $5 billion if applied to estates with a net wealth over $5 million.
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Malcolm Turnbull thinks small after large ambitions go bust
- The Australian
- February 12, 2016 12:00AM
Dennis Shanahan
The GST increases have been cleared off the table. We are waiting only for the scraps to be declared dead, buried and cremated. So too are personal income tax cuts of $30 billion, and any immediate and sizeable cut in the company tax rate.
Big-bang, once-off attempts to boost economic growth, which is the prime aim, are gone as well. Malcolm Turnbull and Scott Morrison, after months of speculation about immediate, big, growth-inducing reform based on heroic GST changes to the rate or base, have shifted ground to politically safer and economically less risky incremental change over years and years.
Politically, the Turnbull government is back where it started before the Prime Minister put the prospect of a GST rise “on the table”.
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Government’s ‘big-bang’ tax reform gone
- The Australian
- February 12, 2016 12:00AM
David Crowe
Malcolm Turnbull and Scott Morrison have rejected mammoth tax reform that could deliver personal income tax cuts worth $30 billion a year, in favour of “modest” change that delays relief for workers and companies, ruling that the economic gains are too small to justify the risk of a package that lifts the GST.
Mr Morrison admitted that future tax changes would have to be delivered “far more modestly”, as the government retreated from proposals that would have cut income taxes by increasing the GST from 10 to 15 per cent.
In a pivotal decision to scale back their plans, the Prime Minister and Treasurer are now focusing on spending restraint and smaller revenue measures as ways to pay for income tax relief at the coming election.
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- Feb 12 2016 at 11:45 PM
- Updated Feb 12 2016 at 11:45 PM
Labor pledges limits on negative gearing and CGT as tax wars heat up
Future property investors are in the sights of both major parties with Labor to limit negative gearing to new homes only and to halve the Capital Gains Tax discount to 25 per cent.
The policy, to be unveiled by Labor leader Bill Shorten on Saturday at the NSW state Labor conference, will give the Turnbull government political cover if it also chooses to target negative gearing now that its GST plans have collapsed.
Labor's measures will apply only to properties purchased after July 1, 2017, and are budgeted to raise $32.1 billion over 10 years and $565 million over the next four.
Following the collapse this week of plans to fund income tax cuts with a 15 per cent GST, the government, too, is now looking at changes to negative gearing, superannuation tax concessions and trading away tax deductions for lower tax rates. It is not looking at touching CGT concessions at this stage.
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Scott Morrison: ‘Labor’s higher taxes are not about delivering tax relief for Australians’
February 14, 2016 12:00am
The Sunday Telegraph
LIKE their famous mining tax, Labor’s proposed change to negative gearing promises big, but raises very little revenue. It could also have some very nasty consequences for everyday mum and dad investors just trying to get ahead.
If Labor want to strengthen the budget they need to support savings rather than just keep pushing for higher taxes.
In our midyear budget update we identified billions in additional savings to strengthen the budget. This comes on top of more than $80 billion in savings already put forward by the government.
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Health Budget Issues.
- Feb 9 2016 at 9:24 AM
- Updated 8 mins ago
Pathology Australia to launch campaign against $650m funding cut
by Tim Binsted
Pathology Australia will attempt to kill $650 million in cuts for diagnostic tests such as blood tests and X-rays with a consumer campaign to run in 5000 pathology collection centres across the nation.
The pathologists' lobby group, which represents big corporates such as Sonic Healthcare, said on Tuesday that it was "about to launch a consumer campaign" opposing cuts to the bulk-billing incentive for diagnostic imaging and pathology announced by Treasurer Scott Morrison in the Mid-Year Economic and Fiscal Outlook.
"We don't want people facing situations where they are unable to get their pap smears and their life-savings blood test," said Pathology Australia chief executive Liesel Wett.
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Premier Jay Weatherill says government could still close hospitals if health funding gap cannot be filled
February 8, 2016 9:53pm
The Advertiser
MORE hospitals could be closed and state taxes increased unless South Australia secures additional revenue to fund the health system, Premier Jay Weatherill has warned.
Mr Weatherill made the claim as federal Treasurer Scott Morrison on Tuesday said the federal Government would never have used revenue from a higher GST to boost funding for the states.
The Premier said it was “absolutely” still an option to consider closing more hospitals if a health funding solution could not be found.
He has conceded that an increase to the GST rate is looking increasingly unlikely but he has refused to resort to increasing state taxes.
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‘Enough is enough’: Pathology Australia puts government on notice
- The Australian
- February 9, 2016 11:16AM
Sarah-Jane Tasker
Pathology Australia has told the federal government “enough is enough” as it kicks off an election year with a country-wide campaign to inform consumers about proposed cuts.
The industry body has used its pre-budget submission to warn that patients could miss out on lifesaving blood tests and pap smears if the proposed $650 million cuts to pathology and diagnostic imagining are not reversed.
Health Minister Sussan Ley had outlined late last year cuts to bulk-billing subsidies for pathology and diagnostic imaging services.
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10 Feb 2016 - 10:22am
We're not privatising Medicare: Ley
Health Minister Sussan Ley says outsourcing Medicare payments means less money spent on backroom bureaucracy and more for patients.
Source: AAP
10 Feb 2016 - 7:10 AM UPDATED 42 MINS AGO
Health Minister Sussan Ley insists the federal government has no plans to privatise Medicare even though it's looking at outsourcing the payment of benefits.
"We need to move it on, and we need to make it work for everyone," she told ABC radio on Wednesday of a payment system that was designed in 1984.
Ms Ley said she wanted less money spent on backroom bureaucracy and more dollars for the frontline and patients.
"We're not privatising Medicare."
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More fed health cuts to hit Victoria
February 11, 20169:01am
More fed health cuts to hit Victoria
Victoria will lose another $73 million in federal health funding after an accounting change.
Health Minister Jill Hennessy says a change in how the National Health Funding Pool is calculated and allocated will leave the state worse off.
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Trimming the fat: how we could save billions in the health system
Date February 12, 2016 - 11:45PM
Jessica Irvine
Australia's health care system is captured by providers and their lobby groups.
Cervixes are the surprise new battleground in the fight to curb rising health costs.
Just before Christmas, the federal government unveiled a plan to save public coffers $650 million a year by scrapping a bulk-billing incentive for pathologists and diagnostic service providers.
They just close ranks, because if one part of the system's fiscal rorts gets addressed, God knows where it will end.
Jeremy Sammut, Centre for Independent Studies
The incentive paid providers between $1.40 and $3.40 a service and had done little to achieve its stated aim of boosting bulk-billing rates.
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States bypass efficiency to prop up ailing public hospital systems
- The Australian
- February 13, 2016 12:00AM
Sean Parnell
Services in some public hospitals cost twice as much as the same services elsewhere
Inefficient public hospitals are being propped up by state and territory governments, despite changes to the underlying funding formula intended to significantly slow growth in health spending.
As the states lose hope of a GST increase, having already lost $50 billion in future hospital funding in the federal Coalition’s first budget, there are questions over their commitment to make best use of existing resources.
In its original form, the formula known as activity-based funding was expected to save between $500 million and $1.3bn each year. But new data suggests its benefits have yet to be fully realised as some states, and many hospitals, remain grossly inefficient.
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What will it take to have a healthy Budget 2016-17?
Marie McInerney on: February 11, 2016In: Elections and budgets, Federal Budget 2016-17, public health
How will Health fare in the May Federal Budget this year after some pretty disastrous outings in the past two years?
The signs are not good, with continued focus by Ministers on cutting “spending” rather than seeing health as an investment and news that the government is (once again) considering the possibility of privatising the payment services associated with Medicare – see the Minister’s statement. (What DID happen to those expressions of interest?)
The deadline for submissions to the 2016-17 Federal Budget closed last Friday. Treasury doesn’t publish them, but this post compiles links to submissions from key players in the public health space. Croakey will add to these if organisations can provide them in the coming weeks.
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Health Insurance Issues.
HBF caves to lower health insurance rise
Andrew Tillett, Canberra
February 11, 2016, 12:55 am
HBF has become the first major health fund to publicly opt to reduce its planned insurance premium rise after the Federal Government blocked insurers’ initial requests for increases.
WA’s dominant fund will ask for a lower increase than the 5.96 per cent rise members were slugged last year, saying the Government’s pledge to overhaul pricing for prostheses will ease pressure on its bottom line.
HBF had been critical of Health Minister Sussan Ley’s decision to order every fund to resubmit their applications for an annual premium rise, warning it could see members hit with higher out-of-pocket costs.
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HBF scales back plea on health insurance premium hike
- The Australian
- February 11, 2016 12:00AM
Sarah-Jane Tasker
Private health insurer HBF has applied for a lower premium increase for 2016 in response to federal Health Minister Sussan Ley’s promise of major reform to the Prostheses List.
HBF is the first fund to publicly announce it has lowered its figure for this year’s premium increase. It follows Ms Ley’s directive that insurers review their 2016 submissions. The not-for-profit fund cannot disclose the increase it has applied for but it said it was lower than the previous year and lower than its original application for 2016. HBF’s increase last year was 5.96 per cent, while the industry average was 6.18 per cent.
Rob Bransby, managing director of HBF, said the insurer had reviewed its original increase application in the wake of the minister’s promise to curb the cost insurers pay for prostheses.
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Health Minister Sussan Ley warns families are on the brink of abandoning private health
February 13, 2016 12:30am
News Corp Australia Network
SECRET findings from Federal Government research reveal a quarter of households are thinking about dumping their health cover, fed up with being ripped off.
A survey of more than 40,000 consumers commissioned by Health Minister Sussan Ley shows 70 per cent of people contemplating some sort of action to cut the soaring cost of private insurance.
News Corp Australia has seen results from a draft report on the survey which show 39 per cent of respondents saying they had considered leaving their fund, while 25 per cent were looking to drop their cover entirely. More than two-thirds of respondents said they didn’t believe health insurance offered value for money anymore.
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Health premiums could be cheaper if the Australian government changes costs of medical devices
February 14, 2016 12:00am
News Corp Australia Network
EXCLUSIVE
HEALTH fund premium rises could be more than halved saving members $150 from next year if the government changes the way it prices medical devices like hip and knee replacements.
Health insurers have calculated Australians using private hospitals are paying $900 million a year too much for medical devices under an outdated government pricing system.
News Corp Australia revealed last year private hospitals have to charge health funds the government set price for medical devices even though they can buy them for more than 30 per cent less.
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Pharmacy.
Many pharmacies not choosing to discount $1: Quilty
While the second half of 2015 was positive for pharmacies, 2016 will be challenging with the further PBS reforms reducing wholesaler and generic trading terms, says Guild executive director David Quilty.
Quilty writes in this week’s edition of Forefront that pharmacies need to prepare for these further reforms, which include price reductions for combination medicines, the 5% price cut on brand medicines; and the exclusion of the originator from price disclosure calculations.
“Members should make use of the 6CPA Forecaster and the Guild is also committed to updating Script Map for the 6CPA,” he says.
“Two significant changes took effect on 1 January, namely the commencement of the optional co-payment discount up to $1 and the de-listing of certain medicines from the PBS that are available over-the-counter.”
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Health is also clearly still under review as far as its budget is concerned with still a few reviews underway and some changes in key strategic directions. Lots to keep up with here with all the various pre-budget kites being flown! Enjoy.
David.
