Wry & Dry

Budget laid bare. Banks: go to Bunnings... Political suicide note.

Budget laid bare

New order of things...

“It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things.” 

― Niccolò MachiavelliThe Prince

Wry & Dry sees a new order of things in the budget.  Commonsense.

But hear the wailing!

The realities are simple.  Croesus Turnbull and Jim Morrison are within a Reality Cage, of four walls and a roof:

  • the Senate will not pass spending cuts, no matter how worthy
  • to lose the AAA credit rating would cause the cost of government debt to rise and mortgage rates to rise [1]
  • the FY-21 Budget-in-surplus target must be met for both political and economic reasons
  • the government has a one seat majority in the House and is behind in the polls
  • the detritus of Abbott/Hockey's budgetary house of cards needed to be swept away

The budget reflects the Reality Cage. Sure there are some optimisms and odd-ball allocations. But it is, after all, a political document as much as anything else.

But, the screams from the ideological right-wing lunatics: Peta Credlin, Andrew Bolt, etc all ignore those five realities.  

And the sometimes intelligent IPA lazily and theoretically opined that the budget "doesn't fix the deep structural problems with our national economy and finances."  Hello, given the Reality Cage described above, especially the first point, it cannot possibly do so.     

The wet-dream to somehow return to the glory days of Howard/ Costello ignores how different Australia was then: cash pouring into the coffers; the Opposition in disarray; the masses wanting change, etc.

This budget is really a new order of things, because for the first time since Costello we have a budget that reflects the political and economic realities of the day.

Since Costello we have seen two monumental economic illiterates, each of whom ignored the Reality Cage of the day: Spendthrift Swan was a latter-day Jim Cairns [2] (without the Junie) and Uncle Joe Hockey had no idea.  Still doesn't. 

Message to the banks: go to Bunnings...

...buy some timber; build a bridge; and get over it.

What the banks haven't told anyone (and they won't) is the two wonderful guarantees they receive.  Each free.  

Firstly, the implicit guarantee of the federal government in case of fiscal disaster (as what happened explicitly in the GFC).  This lowers their cost of funds.  The RBA estimates that this is worth over $3.8 billion p.a. - somewhat less than the new tax ($1.5 billion p.a.) they are now being told to pay.  

Secondly, the explicit guarantee they receive from the federal government for the first $250,000 of each retail client's deposits.  This increases their domestic deposits.

But never let the facts get in the way of a good story from a banker:

"The tax...is reminiscent of less-well managed countries in Africa and South America."

-  Mike Smith, former CEO of ANZ, whose personal mismanagement of the ANZ cost shareholders billions, for which he got paid some $80m in his tenure.

"..the tax cannot be absorbed...and would be borne by NAB's customers, shareholders, suppliers and employees."

-  Andrew Thorburn, incumbent CEO of NAB, forgetting that any tax is just an expense of the business, and the cost goes to the bottom line.  It's up to the CEO to manage the cost, but it's pulling a long bow to suggest that suppliers and employees would be affected.  That's hysterical nonsense.

"It's a stealth tax on their life savings..."

-  Andrew Thorburn, incumbent CEO of NAB, on a hyperbolic roll, reminiscent of a Greens' Senator is a lathering and outraged fury.  But there's nothing stealthy about this tax, Mr Thorburn.  It's all over the media.  It even made the front page of the Melbourne Herald-Sun.

"...it will make banks less competitive..."

-  Andrew Thorburn, incumbent CEO of NAB, continuing his hyperbolic rant; this time forgetting that all big five banks are equally affected.  So none of the five banks is at a competitive disadvantage.  Or was he fearing competition from those lesser minnows of the banking system?

"It's not just a tax on a bank.  It is a tax on every Australian who benefits from and is part of our industry."

-  Andrew Thorburn, incumbent CEO of NAB, forgetting that the revenue raised will benefit all Australians.

"...which includes retirees, and mums and dads who are building their nest egg for the future."

-  Andrew Thorburn, incumbent CEO of NAB, doubtlessly referring to same retirees, mums and dads, uncles and aunties [insert your favourite relative here] whom the NAB and other banks have ripped off for years and years.  

Cartoon robbing banksWillie Sutton (see Note [3])

The banks' media communication departments and consultants have gone into overdrive, briefing journalists with extraordinary tales of woe.  W&D is waiting for the 60 Minutes or Four Corners exposé.  But only after they have dealt with an Australian woman who finds herself, to her surprise, but to no-one else with a double digit or higher IQ, in a Colombian jail.  

The bank-tax realities are:

  • yes, bank dividends may be affected, but very slightly*
  • yes, the tax is an easy way to raise money: classic low hanging fruit being picked
  • yes, the Opposition will support the tax; it saves them having implement it
  • and yes, the sound of pigs squealing has a nice ring to it   

* moreover, the CEO of AustralianSuper (Australia's largest superannuation fund), Mark Delaney, said yesterday that, "a move by the banks to pass on the cost to shareholders would have no material impact on investment returns." 

But don't get W&D started on these shameless oligopolistic towers of fiscal self-indulgence and arrogance.

The Other Side

William Shorten, Opposition Leader, last night presented the Labor Party's view of the world.  W&D couldn't watch it, as he was sorting out his sock drawer.

But there were a few matters in this morning's media that merited a comment or two...

  • Agree: restrict the residential housing so-called negative-gearing taxation advantage to new dwellings
  • Disagree: increase the highest marginal rate of tax on high income earners by 2% (making an effective 49.5%) is absurd, and smacks of 'class warfare'*
  • Agree: apply increased Medicare levy only on those earning over $87,000 p.a. (W&D thinks that the government would have planned this already)
  • Disagree: spend $22 billion more on schools over next decade - throwing even more cash doesn't improve outcomes.  See Australia's declining PISA rankings [4]

*Hear the cries, "make the rich pay".  See Jim Cairns, below.

William welcomes the tax initiatives of the government, because they mean he can spend even more.  But, of course, as he's in opposition, he doesn't see himself in the Reality Cage. 

At the wealthy end of the bell curve...

...the rich and famous can now engage Norden nannies [5] who have been trained in how to protect their young charges from the threat of kidnappers and terror gangs.  The move follows the growing demand for Norden nannies among the world's oligarchs and super rich, whose children are seen potential targets for ransom demands.

The above is brought to Readers as a community service announcement, so that you can peek at the other end of the bell-curve.

Jean-Claude Junker notwithstanding... 

...English is still the most widespread and most taught language in the EU.

W&D makes this observation in response to Mr Junker's unfortunate comment last week. "Slowly but surely, English is losing importance," he said.  In English, before turning to French.

Among students in EU lower secondary schools outside Britain, 97% are studying English. Only 34% are learning French, and 23% German. In primary school 79% of students are already learning English, against just 4% for French. 

The comment of Mr Junker, an undisciplined Anglo-phobe, reminds W&D of the reason the French hate the English.  The English speak English.

Tsar Trump could try LinkedIn or seek.com

Tsar Trump's "off with his head" dismissal of FBI Director James Comey has got the hares running.  

Cartoon FBI

This follows a similarly rapid firing of Mike Flynn, the unfortunate National Security Adviser.  Whilst Trump himself appointed Flynn, Comey was an Obama appointee.

Nothing to see there.  Yet.  In fact Comey was for many years a registered Republican, father of five children and with a degree majoring in religion.  W&D would think that he's one of the chaps a Republican President would want nearby. 

But, no.  Until further and betters [6] appear, Readers will be pleased to know that W&D has sent Tsar Trump the link to both LinkedIn and seek.com in case he needs help in finding a new head of the FBI.

Meanwhile, in Europe...

...the new President of France has had his first meeting with the Chancellor of Germany, Angela Merkel.  Another older woman...

Merkel Macron

A First Samuel matter...

Later this month First Samuel is launching a new reporting system, its Client Portal, a state-of-the-art online reporting system.  

Clients should look out for a series of emails explaining the launch and what to do. 

Weirdly...

W&D wistfully recalls the masterful displays of forgetfulness and in-court illness portrayed by a couple of the great crooks of the recent past, Alan Bond and Christopher Skase.

Each had their day in court, each pleading, "I don't recall."  And each clutching an oxygen mask.  Readers will recall that Bond ended up in the slammer but Skase easily dodged the Keystone Cops of the day and fled to Majorca, Spain (no extradition treaty).

Well, history repeats itself. On Wednesday, former Member of Parliament and leader of the now buried Palmer United Party, Clive Palmer appeared in a Queensland Court clothed on an oxygen mask and breathing apparatus.  

Mr Palmer, who has left a trail of unpaid employees and creditors in his wake, was making what will be the Nth, where N is a large number, court appearance in relation to the demise of his business empire.

W&D, of course wouldn't wish ill health upon any body.  But he cannot help but wonder if Mr Palmer knew that his actions were putting him in same stable as those two 1980s scoundrels.  

Briefly...

Australian retail sales fell 0.1% in March, somewhat below the forecast 0.3% increase.  Retails sales have now fallen in three of the last four months, the worst four-month period since 2012.  Much finger-pointing among the cone-heads as to why.  W&D ponders whether consumers are tightening their belts in fear of interest rate increases.

The market capitalisation of Apple Inc, a distributor of mobile telephonic devices much favoured by the fashionable elite, has exceeded US$800 billion.  The company's stock price has leapt 33% since Christmas Day. 

And...

And Tesla, a US based maker of electric cars and battery panels for home and business use has announced the pricing of its 'solar roofing tiles'.  This remarkable new product is a blend of a normal roofing tile and a solar panel.  The cost is about A$600 per square metre, somewhat less than the traditional bled of terracotta (or slate) tiles with separate solar panels on top.

And turning back the clock...  Or, more accurately, the calendar, the UK Labour Party's election manifesto (such a Leninistic word) shows that if elected to power, it would renationalise energy companies, railways, bus companies and Royal Mail. University fees would be abolished.  Reminiscent of the 1983 manifesto adopted by the Labor leader Michael Foot.  Which, at 39 pages, was dubbed the longest suicide note in history.   And so it was.  Margaret Thatcher's Conservatives routed Labour, winning a majority of 189 seat with 63% of the seats.  See also Jim Cairns (above).

And, of course, Miscellany to soothe your troubled mind.   

[1]  The banks borrow much of the funds used for home lending offshore.  The interest rate at which they can borrow depends upon their credit rating.  That rating is party determined by Australia's credit rating.  If the latter falls, so the 'cost of funds' for the banks will rise.  Hence home lending rates would rise.

[2]  Jim Cairns was Australian Federal Treasurer is the latter years of the Whitlam Labor government of the early 1970s.  An active left-wing politician, he was woefully out of his depth in the portfolio.  Whitlam sacked him in July 1975.  Cairns' greater notoriety was his much publicised alleged affair with Junie Morosi, a young and somewhat  attractive Canberra public servant, whom Cairns offered the job of his principle private secretary in 1974.  In 2002, Cairns admitted to an ongoing affair with Morosi.           

[3]  William Francis "Willie" Sutton, Jr. (June 30, 1901 – November 2, 1980) was an American bank robber. During his forty-year criminal career he stole an estimated $2 million, and he eventually spent more than half of his adult life in prison.  Sutton was asked by reporter Mitch Ohnstad why he robbed banks. According to Ohnstad, he replied, "Because that's where the money is."  In his autobiography Sutton denied having made the remark.

[4]  Programme for International Assessment.  An OECD initiative that assess countries' educational success for 15-year-old students.  Notwithstanding the massive increased funding for education at both federal and state level, in each of science, maths and reading, Australia's performance has fallen dramatically since 2003.  See www.oecd.org/pisa/.

[5] Norden Nannies are graduates of Norland College, Bath, UK.  Founded in 1892 by Emily Ward, it is a provider of childcare training and education. Norland graduates are employed worldwide as nannies, nursery nurses and in other positions in a variety of settings for childcare.

[6] Legal jargon; 'further and betters' refers to 'further and better particulars', i.e.  additional information required to provide sufficient accuracy with respect to a set of pleaded facts in an earlier document.  For example, W&D's pleading of 'a few drinks down the pub' as a reason for a late night home would lead to a request from Mrs W&D for 'further and betters'.