It’s not about the watches …

John Quiggin2 Comments

… is Australia Post a commercial operation or a public service?

That’s the headline for a piece I wrote for The Guardian (my first there in quite a while). A key point is that the deal that allegedly justified the expensive gifts was, in essence, the continuation of an arrangement established a hundred years ago between what was then the Post Office and the publicly owned Commonwealth Bank. Whoever put that arrangement together deserves commendation, but I doubt that they were rewarded by anything more than a promotion adding a few shillings a week to their salary.

The conclusion:

The Australian public has long since seen through the claims made for privatisation, even if the financial and corporate sectors (the real “inner city elites”) continue to push the ideas of competition and choice. Australians want basic services to be delivered cheaply and reliably, by organisations set up to serve the public, rather than to maximise profits.

The statutory authority model, under which most of the infrastructure on which we now rely was built, is the best way to achieve this.

Sandpit

John Quiggin3 Comments

A new sandpit for long side discussions, conspiracy theories, idees fixes and so on.

To be clear, the sandpit is for regular commenters to pursue points that distract from regular discussion, including conspiracy-theoretic takes on the issues at hand. It’s not meant as a forum for visiting conspiracy theorists, or trolls posing as such.

Hank Jongen, the general manager who isn’t

John Quiggin18 Comments

When a PR man presents himself as the boss of the organization he spruiks for, you are well advised to disbelieve anything he says. Hank Jongen “general manager” of Services Australia and its predecessors (such as Centrelink) has been doing this for years, most recently here . In reality, Jongen is the agency spokesperson.

The trick is that “General Manager, Function X” is a title given to lots of middle-ranking public servants. By contrast, Jongen’s statements never qualify the term, sugggesting that he is general manager of the entire organization. In fact, it’s unclear what his actual job title is. According to this org chart, Jongen works for the General Manager, Communications, a position currently held by Susie Smith.

But Jongen and Services Australia are happy to give the impression that he is the boss of the organisation, and never attempt to correct puff pieces that describe him this way, like this one, headlined Dear Hank: Centrelink boss offers personal email as complaints over ‘fraud accusations’ soar

The trick is that Services Australia hands out the title of General Manager to lots of mid-rank executive, seemingly with the sole purpose of enhancing Hank’s apparent status. It’s as if you got a call from the CEO of a major company, personally offering you a special deal, only to discover that sales staff were accorded the title of CEO.

As was said by in the famous feud between Mary McCarthy and Lilian Hellman[1], every word Jongen says is a lie, including “a” and “the”. He is lying from the moment he announces himself.

The same is true of Services Australia. Any statement issued by this organization is tainted by the dishonesty of Jongen’s byline.

fn1. On which I don’t have enough evidence to form an opinion, or interest to pursue such evidence. Just pinching a good line. Here’s the details from when Jongen was the face of robodebt.

UBI: For individuals or households?

John Quiggin22 Comments

This post is about a point which has come up here and there in the discussion about Universal Basic Income, but which I’ve never worked through properly.  


A preliminary observation is that it’s necessary to consider tax and welfare together as an integrated system. What matters most is the effective marginal tax rates (the sum of marginal income tax and benefit reduction rates). 


Then, starting with the current Australian tax-welfare system, and considering possible paths towards UBI, the key problem is that the tax system is organised (mostly) on an individual basis while the welfare system is organised (almost entirely) on a household or family basis. 

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Transmission too

John Quiggin46 Comments

In my article arguing that electricity from solar PV (and wind) could soon be too cheap to meter, I didn’t mention transmission networks. That was for space reasons.

The case for public investment is actually stronger for transmission than for generation. Electricity transmission lines have the same cost structure as renewables (low operational cost and long lives), if anything more so, meaning that the cost of transmission depends primarily on the need to secure a return to the capital invested.

More than this, the electricity grid as a whole is a complex network in which valuing the services of any individual component is just about impossible. That in turn means that relying on markets to make optimal investment decisions is untenable.

For these reasons, the electricity transmission network should never have been privatised. I’ve been arguing for renationalisation for years.

Amazingly, in the new low interest environment, this idea seems to be gaining traction, at least as regards new investment. Labor has proposed a $20 billion public investment. The government hasn’t gone that far, but is seeking to use its own borrowing capacity to provide low cost finance for transmission investment ( a half-baked compromise, but better than nothing).

Too cheap to meter

John Quiggin21 Comments

That’s the headline for my latest piece in Inside Story, looking at the implications of zero interest rates for renewable energy sources like solar and wind. Key para

Once a solar module has been installed, a zero rate of interest means that the electricity it generates is virtually free. Spread over the lifetime of the module, the cost is around 2c/kWh (assuming $1/watt cost, 2000 operating hours per year and a twenty-five-year lifetime). That cost would be indexed to the rate of inflation, but would probably never exceed 3c/kWh.

The prospect of electricity this cheap might seem counterintuitive to anyone whose model of investment analysis is based on concepts like “present value” and payback periods. But in the world of zero real interest rates that now appears to be upon us, such concepts are no longer relevant. Governments can, and should, invest in projects whenever the total benefits exceed the costs, regardless of how those benefits are spread over time.

The arithmetic of retirement income: the case of zero interest rates

John Quiggin34 Comments

Back in 2009, I looked at the implications of the GFC for retirement income, working on the assumption that retirees could safely aim for a 2 per cent real rate of return. The bottom line was that current workers need

double contributions, to 20 per cent of income and shift the work-retirement balance, so that you work from 25 to 65 to finance an expected 20 years of retirement income.

Since then, the real rate of return on safe investments like government bonds has fallen to zero (maybe below). That means that you can treat your net worth at retirement as being equal to the amount you have to live on for the rest of your life. In particular, if you work from 25 to 65 and want finance 20 years of retirement income holding your consumption constant, you need to save one-third of your income.

When I wrote in 2009, the general view was that we were saving too little, so the increase in required savings seemed like a good thing for the economy in general. Now, the reverse is probably true.

Sandpit

John Quiggin16 Comments

A new sandpit for long side discussions, conspiracy theories, idees fixes and so on.

To be clear, the sandpit is for regular commenters to pursue points that distract from regular discussion, including conspiracy-theoretic takes on the issues at hand. It’s not meant as a forum for visiting conspiracy theorists, or trolls posing as such.