Wheels falling off FBT?

Chris Virtue writes: Re. “Automotive sector pleads: we need this tax rort” (yesterday). Bernard Keane’s article on the fringe benefit tax changes reminded me of a conversation I had with a mate who turned up with a flash people-mover four-wheel drive thing.

I asked him how he could afford it (public servant, young family, new mortgage, partner working part time). He said he had a novated lease with salary sacrifice and the fleet owner’s discount because he was a public servant.

Then the penny dropped. We will never get leadership from governments to provide decent public transport while the bureaucrats advising them have access to cheap cars. Hopefully, that situation might change now.

The real employment figures

Marcus L’Estrange writes: Re. “Bernanke’s caution and patience saving the US economy” (Friday). Stephen Koukoulas’ claim that the US is emerging from a lessor depression than the 1930s, when the unemployment rate came in at 22% is wrong, because the real unemployment in the US is still 22%, not the 8% as claimed. Additionally, Koukoulas doesn’t explain which unemployment rate he is using: the so-called “official” monthly unemployment rate, which is based on a political definition of unemployment, the full employment rate or the workforce participation rate. The true unemployment picture is hidden by essentially splitting jobless Americans up and putting them inside one of the three different “boxes” or rates.

Since 2009, 9 million-plus unemployed Americans have been removed from the labour force simply by the government defining them as not being in the labour force anymore. When we piece through this statistical smoke and mirrors trick caused by the definition of unemployment being based on a political definition of unemployment rather than not an actuarial one, then the true unemployment rate in the US is still 22%.

In an extraordinary cynical act, the US government is effectively saying that because the job situation has been so bad for many millions of unemployed people they can no longer be considered to be potential participants in the workforce at all. Because there is no hope for them they no longer need to be counted. The decline in any participation rate is a key figure in determining the so-called “official” monthly unemployment rate. When you include the long-term unemployed and discouraged unemployed, the real unemployment figure rockets up.

For investment advisers such as Koukoulas, the above is of crucial importance. In the US we have a real economy that isn’t experiencing healthy growth but is instead staggering with imploding employment levels. Much of the stock market is based on expectations of future growth. Remove the growth, and most of the current value of the markets goes with it, for when jobs implode so does the share market.

A Christmas present?

Peter Nevin writes: Re. “Give Christmas Island to Indonesia” (yesterday). John Richardson asks in the letters section, why not just give Christmas Island to the Indonesians?

It’s certainly a novel solution, but the reason why the government would never let it happen can be summed up in three words: “unsinkable aircraft carrier”.

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Peter Fray
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