staringclown

A conversation with my ex RE mother this morning

36 posts in this topic

yeah i would at least allow people to earn the poverty level before taxes them. not that its a valiant goal , but saying to people , this is the level of income that defines you as poor. and we tax you from way before you get there ;) but thats so we can help the poor!

The problem with that idea is that the poverty level is different for different people.

A 16 yr old living at home with no dependants will have a much lower poverty number than a 30 yr old with 2 kids and a stay at home wife.

So either you need a tax regime which caters for this (remembering it would mean your payroll people get told about a lot of your private details so that they can figure out your PAYG) or you have to declare an arbitrary number above which you tax but (and this is the key part) you then give the 30 yr old family benefits and so on.

Avoiding that money shuffling would be a huge invasion of peoples privacy by people that are not qualified to do it and create a spectacularly complex tax system.

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I still think the problem with surviving on the minimum wage is not the level of the minimum wage, it's Australia's f***ing insane prices. Keep pushing up the minimum wage and it further reduces Australia's competitiveness.

Other smaller Western economies with larger distances to ship goods are much cheaper with similar wages. Australia's economy is large (13th out of 206 countries according to Wikipedia) so there should be competition and economies of scale.

It's one of my goals to understand fully why Australia has ridiculous prices. I have a few vague theories:

--A culture/history/call it what you want of paying top dollar without questioning it. I often tell people that I shop online for everything that I can because it's usually half the price and means I don't have to get off my arse. 95% of the time I get "the look"* in return. If I tell people that it would cost half as much to watch this same band perform in London, New York, Auckland or anywhere else I get the look.

Hypothetical *cough* example: if I had a website selling stuff, I would set the Australian price 50% higher than elsewhere without thinking twice. Why? Because Aussies pay more for stuff. Not because it's a small economy (it isn't), labour is more expensive here (it isn't much), more transport is involved (it isn't) or any other BS reason that gets trotted out by the vested interests.

--Privatising essential services whose costs flow into everything else. E.g. look at the price of electricity and water since privatisation and that flows into the cost of everything.

---Some stuff up** that has seemingly led to every major industry being a monopoly, duopoly or cartel. E.g. servos, grocery stores (FFS only 2 in an economy this size!), hardware stores (FFS one!), banks, power, water etc.

----The ridiculous property prices that feed into prices of everything via absurd rents (if anyone here has looked at commercial rentals then you know what I mean). Land banking, cozy relationships between governments/councils and developers etc all play their part I suspect.

All I know is that there is no really good fundamental reason for Australia being so expensive and that there is a shipload of rorting*** and inefficiency in there somewhere.

I suspect that it is going to take a major recession to change things; to force people to shop around, shop online and refuse to pay stupid prices. Most of all, I think this unwritten rule that everyone knows has to change and it will only change via a recession: "Australians pay more".

*The same look that I would get if I told people that a little green man shot a unicorn with a bow and arrow in my garden this morning. Only more incredulous.

**whether it was corruption, competition boards/ombudsmen not doing their job, something else or a combination thereof

*** If only I knew exactly where, I could benefit.

I think the answer you're looking for why Australians get charged more than the rest of the world for just about everything is

"because they can". It's the Australia premium. There is also a "Canberra premium" within Australia BTW. Every time I go to any other city and see how much more value my dollar buys I get pissed off I live here. It is completely accepted that RE in this town is more expensive because people have more capacity to pay higher prices.

gal1024-Pope-600x400.jpg

This gave me a chuckle. :)

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I think the answer you're looking for why Australians get charged more than the rest of the world for just about everything is "because they can".

I saw Opel advertisements on TV last night. Opel is owned by General Motors just like Holden. Germans don't buy Opel anymore and the company is on a GM lifeline. I guess the strategy to sell Opel in Australia is: "Since Germans don't buy bad value General Motors cars in Germany anymore which suckers unaware of this are left to burn their money? Australians." It will work too. Build low-quality cars, badge them as German engineering, sell them to an uneducated target on the other side of the planet, make a killing.

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The problem with that idea is that the poverty level is different for different people.

A 16 yr old living at home with no dependants will have a much lower poverty number than a 30 yr old with 2 kids and a stay at home wife.

So either you need a tax regime which caters for this (remembering it would mean your payroll people get told about a lot of your private details so that they can figure out your PAYG) or you have to declare an arbitrary number above which you tax but (and this is the key part) you then give the 30 yr old family benefits and so on.

Avoiding that money shuffling would be a huge invasion of peoples privacy by people that are not qualified to do it and create a spectacularly complex tax system.

all good points tor.

as the system is now we tax everyone and had lots of it back. the poverty level idea just means the start level of taxing is higher and so is the level of hand backs. less bureaucracy not more, less inefficiency not more. i guess what you are decrying is what level is poverty and who determines whos at it?

thats best left to a gov bureaucracy

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Up-front apologies if this post sounds like big-noting Sweden. Yet my point is that perhaps there are a few assumptions that may not hold up to scrutiny when it comes to what would be the ideal size of the public sector and how that is related to economic competitiveness.

Here is a list of total tax take as a proportion of GDP: http://en.wikipedia....rcentage_of_GDP

Australia: 30.8%

Sweden: 47.9%

UK: 39.0%

USA: 26.9%

Switzerland: 29.4%

Singapore: 14.2%

World Economic Forum competitiveness ranking:

http://www.weforum.o...competitiveness

1 Switzerland

2 Singapore

3 Finland

4 Sweden

...

20 Australia http://www.businesss...cument&src=hp32

OK, let's see here... with very little correlation between tax take (a proxy for public sector spending) and economic competitiveness, perhaps there are inefficiencies in the government of highly competitive countries that are masked by private sector productivity? Probably not - Sweden is ranked first in governance: http://www.google.co...64e310712d2.321

The implication from this data in my opinion is that the public sector can be cost effective and contribute strongly to a nations competitiveness. But the level of quality of the institutions is highly important. From that perspective, it may not be the case that Australia is a highly taxed country. It is not a given that we should just let the (efficient?) private sector and individuals control more of the revenue that is generated in the overall economy.

But the flipside of this coin is that the public sector productivity must be very high. This is possible as exemplified by Sweden. In my opinion, the efficiency of public institutions hold the key to economic and societal prosperity. The highly adversarial partisan political culture in Australia is not helping in achieving this.

Perhaps a strong social support system promotes innovation if there is a prevailing culture with a strong work ethic? It is much less risky to start a venture in a country with a strong social safetynet that enables you to get up and have another go if the venture does not work out. On the other hand, I think USA's innovative success has partly been due to their generous bankruptcy laws. It is easy to wipe the slate clean and start again.

Australia needs to think about how to strengthen their economic diversification in the future, to make sure that we will not be experiencing the boom-bust cycles of mining and real estate industries. Ricardian comparative advantage would work well in theory, but is foolish in practice in a dynamic environment (are economies ever in equilibrium?). A portfolio view of national economic resources would smooth out volatile business cycles and be much more resilient in a dynamic global macro environment.

Edited by AndersB

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Up-front apologies if this post sounds like big-noting Sweden. Yet my point is that perhaps there are a few assumptions that may not hold up to scrutiny when it comes to what would be the ideal size of the public sector and how that is related to economic competitiveness.

Here is a list of total tax take as a proportion of GDP: http://en.wikipedia....rcentage_of_GDP

Australia: 30.8%

Sweden: 47.9%

UK: 39.0%

USA: 26.9%

Switzerland: 29.4%

Singapore: 14.2%

World Economic Forum competitiveness ranking:

http://www.weforum.o...competitiveness

1 Switzerland

2 Singapore

3 Finland

4 Sweden

...

20 Australia http://www.businesss...cument&src=hp32

OK, let's see here... with very little correlation between tax take (a proxy for public sector spending) and economic competitiveness, perhaps there are inefficiencies in the government of highly competitive countries that are masked by private sector productivity? Probably not - Sweden is ranked first in governance: http://www.google.co...64e310712d2.321

The implication from this data in my opinion is that the public sector can be cost effective and contribute strongly to a nations competitiveness. But the level of quality of the institutions is highly important. From that perspective, it may not be the case that Australia is a highly taxed country. It is not a given that we should just let the (efficient?) private sector and individuals control more of the revenue that is generated in the overall economy.

But the flipside of this coin is that the public sector productivity must be very high. This is possible as exemplified by Sweden. In my opinion, the efficiency of public institutions hold the key to economic and societal prosperity. The highly adversarial partisan political culture in Australia is not helping in achieving this.

Perhaps a strong social support system promotes innovation if there is a prevailing culture with a strong work ethic? It is much less risky to start a venture in a country with a strong social safetynet that enables you to get up and have another go if the venture does not work out. On the other hand, I think USA's innovative success has partly been due to their generous bankruptcy laws. It is easy to wipe the slate clean and start again.

Australia needs to think about how to strengthen their economic diversification in the future, to make sure that we will not be experiencing the boom-bust cycles of mining and real estate industries. Ricardian comparative advantage would work well in theory, but is foolish in practice in a dynamic environment (are economies ever in equilibrium?). A portfolio view of national economic resources would smooth out volatile business cycles and be much more resilient in a dynamic global macro environment.

What is different between Swedish society to that of Australia do you think Anders?

I'm thinking a competitive public sector relies a lot on some kind of nationalism and a sense of purpose. I think you're right about the increasing partisanism. Politics should be an adversarial system no doubt but fought with ideas rather than invective. I was heartened to see Turner say so during the week.

Surely the aim of both sides should be the continuation of the prosperity for the country? What else would be the purpose of entering politics (or public service) if not this was not the aim?*

This is certainly the overriding message that is delivered from the executive in the departments I have worked for. I'm not that gung ho but I work with a lot of people who are very dedicated (for queen and country) I personally hate failure so I spend a lot of time avoiding it as much as I can. My motives are therefore more personal than nationalistic. :)

From tors excellent reports and the figures you provide it seems that quality of life is good in Sweden in spite of 50% tax. If you factor in higher housing costs (mortgage/rental costs, education costs, health care costs) I wonder how the two systems stack up in terms of quality of life for the majority. Sweden also seems to have a high tech educated work force. We would have to play catch up.

I keep ~65% of household income but if I bought a PPOR It would take at least 50% of household income. (Same house I rent) We're not a typical household though. DINKS. Not that I'm advocating 50% tax I'm just curious.

Well OK feathering ones own nest and that of ones friends could be another. :(

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What is different between Swedish society to that of Australia do you think Anders?

...

I keep ~65% of household income but if I bought a PPOR It would take at least 50% of household income. (Same house I rent) We're not a typical household though. DINKS. Not that I'm advocating 50% tax I'm just curious.

There are quite a lot of general cultural differences between Sweden and Australia. Using the taxonomy of Geert Hofstede's cultural dimensions theory, I would guess that Sweden has lower Power Distance, leans more towards the collectivism side, scores lower on uncertainty avoidance, is positioned perhaps on the feminine side of the masculine-feminine spectrum, and has a longer term orientation. All this is just my opinion of course. Others may have different views.

I have never worked in public service in either country so I am in no position to assess the relative effectiveness or efficiency of their PS sectors. There is no doubt that the vast majority people in public service both in Australia and in Sweden are working hard to provide the best quality service for the public. I think it is also reasonable to conclude that if Sweden has one of the highest tax takes in the world while being one of the most competitive economies - then their public service must be competitive also since it constitutes almost 50% of their economy.

My main assertion in my previous post was just this: that a large public service sector in a country (such as Sweden) does not automatically result in a non-competitive economy. Therefore, to reduce (or minimise) the size of the Australian public service sector in order to improve economic competitiveness is just ideology that is not supported by data in other countries. It assumes that only the private sector can be efficient.

Also, even though you keep 65% of your income after tax, I think the "total tax take" also counts all the other taxes you pay - such as GST on goods and services, stamp duty fees - as well as indirectly in business taxation, payroll tax etc.

Edited by AndersB

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There are quite a lot of general cultural differences between Sweden and Australia. Using the taxonomy of Geert Hofstede's cultural dimensions theory, I would guess that Sweden has lower Power Distance, lean more towards the collectivism side, scores lower on uncertainty avoidance, is positioned perhaps on the feminine side of the masculine-feminine spectrum, and has a longer term orientation. All this is just my opinion of course. Others may have different views.

I have never worked in public service in either country so I am in no position to assess the relative effectiveness or efficiency of PS in either country. There is no doubt that the vast majority people in public service both in Australia and in Sweden are working hard to provide the best quality service for the public. I think it is also reasonable to assume that if Sweden has one of the highest tax takes in the world while being one of the most competitive economies - then their public services must be competitive also since it constitutes almost 50% of their economy.

My main assertion in my previous post was just this: that a large public service sector in a country (such as Sweden) does not automatically result in a non-competitive economy. Therefore, to reduce (or minimise) the size of the Australian public service sector in order to improve economic competitiveness is just ideology that is not supported by data in other countries. It assumes that only the private sector can be efficient.

Also, even though you keep 65% of your income after tax, I think the "total tax take" also counts all the other taxes you pay - such as GST on goods and services, stamp duty fees - as well as indirectly in business taxation, payroll tax etc.

Is this why tor calls them cowardly swedes? :)

I agree in regard to the cultural differences and would wager that is why sweden can't exist in the antipodes. The individualism is already too strong here. We are already following the american model. If Sweden requires a personal reference for immigration purposes can I rely upon you? Ms clown and I both have skillz. ;) My mum is on the record as having me down as incapable of starting a business and I'm pretty keen on proving her wrong.

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Is this why tor calls them cowardly swedes? :)

Huh? When I suggested that Sweden scores lower on uncertainty avoidance, I meant that we don't avoid uncertainties. I think risk avoidance is much higher in Australian society.

But when tor calls Swedish blokes "girly men" he may have a point. But on the other hand, Parisians think tor looks like a homosexual. Perhaps that makes tor having an excellent position to make the observation about girly swedes? smile.gif

I agree in regard to the cultural differences and would wager that is why sweden can't exist in the antipodes. The individualism is already too strong here. We are already following the american model. If Sweden requires a personal reference for immigration purposes can I rely upon you? Ms clown and I both have skillz. ;) My mum is on the record as having me down as incapable of starting a business and I'm pretty keen on proving her wrong.

I'll be a reference for ya, SC!

For one of those yummy dinners of yours - I'll even make it a good reference!

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Huh? When I suggested that Sweden scores lower on uncertainty avoidance, I meant that we don't avoid uncertainties. I think risk avoidance is much higher in Australian society.

But when tor calls Swedish blokes "girly men" he may have a point. But on the other hand, Parisians think tor looks like a homosexual. Perhaps that makes tor having an excellent position to make the observation about girly swedes? smile.gif

I'll be a reference for ya, SC!

For one of those yummy dinners of yours - I'll even make it a good reference!

Tor is a sensitive individual. On the gay - straight spectrum I have him down as a 6. I think he favours humans. :D

If I get into sweden I will embark on a quest to create the perfect meatball and once I have achieved it you will be my first guest.

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After some searching around I found the research done by the academic Geert Hofstede himself:

http://www.geerthofs...tional-cultures

He has produced a table with all the scores for 93 countries here:

http://www.geerthofs...ion-data-matrix

The (now) six categories for cultural dimensions are:

  • Power Distance
  • Individualism
  • Masculinity
  • Uncertainty Avoidance
  • Long-Term Orientation
  • Indulgence versus Restraint

Country   pdi idv mas uai ltowvs ivr
Australia  36  90  61  51 	21  71
Sweden      31  71   5  29 	53  78

It seems my guess was fairly OK.

Edited by AndersB

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