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Aug 11, 2011

Lemmings are cute, fund managers aren’t

Crikey readers have their say.

Fund managers:

Andrew Lewis writes: Re. “Fund managers, investors on the Lemming Express” (yesterday, item 1). As a long-time subscriber and occasional contributor I can accept a lot from Crikey, but Glenn Dyer’s diatribe implying that superannuation advisers and investors are akin to lemmings must be challenged. Lemmings are cute little creatures, furry and nice and contrary to the Disney-inspired myth do not leap off cliffs in apparent mass suicide in a synapse free zone.

As for the other target of his piece, the fund managers, advisers and investors of the superannuation industry, no worries, go for it. If ever there was an industry that could be disbanded without an iota of difference in national productivity, then surely this is it. A very modest investment program could be written that could replace literally thousands of extremely highly paid employees of the industry and would have done a job infinitely better.

And it just gets worse when you realise that a junior administrative job in the industry which would attract around $50k at most in the public sector will pay upwards of $130k in these businesses, so overwhelmed by cash are they from clipping our superannuation ticket. Witness the court case of the junior clerk caught inside trading recently. Of course, these jobs only go to those connected old school tie boys.

You could look at this industry for decades and still marvel at their ineptitude, and their capacity to continue to clip that damned ticket regardless of performance. I know I have. Crikey should be all over this mob of bandits.

So lay off the lemmings Dyer, steer clear of sloths, at least they have a heart. Don’t make any allusions to grubs for they can be useful. I don’t want to hear any suggestions along the lines of alley cats, mongooses, skunks or rats, ovines or bovines, for they are all god’s creatures. I saw that reference to leaches too, Dyer. I’m on to you.

Terry J Mills writes: With brokerage and associated fees in the order of $400 million in one day of irrational indulgence, it seems that a financial transactions tax is very much needed; may go towards funding the disability insurance scheme.

Tax revenue volatility:

Matthew Auger writes: Sharon Grey (yesterday, comments) is indulging in some seriously poor use of statistics. Basing an argument on what US company tax revenue was in 2009 verses the mid-1950s is pretty ridiculous. The mid-1950s were boom times before the 1958 Eisenhower recession whilst 2009 was the depths of the GFC.

A company only pays company tax on profit, if you make a loss then you don’t pay company tax. Think about what was going on in America in 2009. Banks, media companies and the car industry (General Motors went broke) were making huge losses and consequently paying no company tax.

The comparison Sharon makes is with the mid 1950s. This was a time when General Motors, by way of an example, was an absolute industrial powerhouse best shown by the arrogance of GM president Charles Wilson’s comment “… what was good for America was good for General Motors, and vice versa”. (That is the correct quote BTW.) Sharon would be better off comparing the company tax revenue of the mid-1950s boom with the company tax revenue of the mid-2000s boom to get an apples/apples comparison.

Sharon’s letter actually points out the folly of having a tax base too heavily dependent on company tax revenue. Company tax revenue (and capital gains tax revenue for that matter) as we can see from the data Sharon quotes is simply too volatile, whereas GST by comparison, is quite steady. America needs a GST. If you are trying to fund steadily increasing government programmes, such as welfare, health, education, etc, you really want relatively steadily increasing source of revenue.

For me tax revenue volatility is why I dislike the idea of a mining profits tax (MRRT) as against mining royalties. Sure, in a boom time the MRRT revenue will be fantastic but what happens when the bust comes? At least with royalties governments still get paid something in a bust verses nothing with a MRRT.

It is political nature that popular spending programmes/income tax cuts will be introduced, all dependent on the MRRT revenue being ongoing forever more and come the bust the budget will collapse. This has already happened on a smaller scale with Howard’s baby handouts/income tax cuts introduced back in the days of pre-GFC mining boom revenue. Now Wayne Swan has to contend with a budget in structural deficit as a consequence.

Census:

Niall Clugston writes: Re. “The govt department with a census of humour” (yesterday, item 16). Just like the London riots, I’m sure a whole lot more people heard about the census from the old media than the new media. The diligent digiterati might have been amused and approving of the census tweets, but what did this social media adventure accomplish?

The Australian Bureau of Statistics seems to have made a headlong rush into new media that may prove a shambles. News reports today said that many people who tried to complete the census online failed to “submit” it.

Myself, I never received a paper form, just a “Dwelling Card” and an “eCensus Envelope”. I did fill out the census online, but I wonder how many in the same situation didn’t complete the census at all, from a mixture of lack of Internet access, apathy, and ignorance? Is Australia’s recorded population going to have a stock-market-style plunge?

Disability:

Martin Gordon writes: Re. “Government hastens slowly on disability care and insurance” (yesterday, item 2). The Productivity Commission has done good work on the disability scheme.

Friends of mine in the disability sector are not entirely convinced that the scheme will quite bring nirvana, but it will get lawyers out which alone has to be something. Given the need for another hike in Medicare Levy it might make sense to have the insurance also managed by Medicare which already pays out benefits.

As for lifetime care people why are they separated out? These are the very people that the scheme should help most as they are the people that miss out most now. Will they remain the second (and in some cases) third class people they are now?

London riots:

John Leahy writes: Re. “Rundle: riotous London when police couldn’t put the kettle on” (yesterday, item 4). Margaret Thatcher once said: “There is no such thing as society. There are individual men and women, and there are families.” She was right. It is there for all to see on the streets of London. She must be pleased.

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2 comments

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2 thoughts on “Lemmings are cute, fund managers aren’t

  1. Tom McLoughlin

    Andrew Lewis that was hilarious and disturbing.

  2. alex.rosser

    I take the point wrt the mining tax. When the boom goes bust, no more MRRT, no revenue to pay the dole to the unempoloyed mining workers.
    BUT it would be far better to invest ALL the MRRT in a sovereign wealth fund (SWF). That way it doesn’t inflate govt. expenditure in the present, and when the boom is over the govt. of the day can draw on the SWF to pay the doles, or rather to soften the blow when the next recession hits.