Australia’s “fundies” will have breathed a sigh of relief if they were lying awake watching the US markets overnight. US bond yields came off by a hefty nine basis points and share prices had one of the biggest increases for several months. The local market resisted the gloom well last week and should enjoy another surge of asset-price inflation today.

We look forward to hearing from RBA Governor Glenn Stevens on monetary policy today. If he includes his views on asset price inflation we shall be especially grateful.

Tax-welfare churn

Middle-class welfare is one of the stickiest questions for conservative economic analysts. The gurus at organisations like the CIS and the IPA campaign tirelessly on this matter. Henry admires their efforts but wonders sometimes if there might be more useful matters to pursue.

Now the ABS has produced new numbers that will help fuel further debate. David Uren reports for The Oz:

New figures have shaken the widely held contention that the Howard Government is lavishing middle Australia with welfare while the genuinely needy go without.

The tax and welfare systems are redistributing income from high- to low-income earners, who receive the lion’s share of government assistance, new Australian Bureau of Statistics figures show.

The average household receives more in government services than it pays in tax, with corporate taxes redistributed across the community.

But the welfare churn so disliked by the policy wonks is alive and well:

According to the figures, only 40% of households actually pay any net tax, after the value of all government benefits is counted.

The average household pays total taxes of $360 a week, but gets back $375 in both cash benefits and government services, such as health and education. Tax raised from the corporate sector covers the difference.

Being an election year, the powers that be see tax — and the minimising of it — as an effective tool to grab votes. However, when Cossie’s tax cuts come into effect on 1 July, Henry isn’t expecting a sudden surge in support for the Coalition.
Yet from a campaigning perspective, the Government will be buoyed by a Morgan Poll released yesterday that found 42% of electors think JWH would be best for “minimising the tax you pay” compared with 34% for Rudd. Similarly, the same poll found that 50% think JWH “would be better at managing Australia’s economy” compared with 35% for Rudd. 

Read more at Henry Thornton.

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