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[Dryk]

People are speculating that the debt will be sold at a discount, which allows for a margin and a rate above inflation. It also makes it pretty obvious what a politically motivated short sighted decision this would be.

This would be a good move if they had a solid plan to make that money back by investing the HECS money that they otherwise wouldn't be able to spend until 20 years from now.

I'm not hopeful

 

[Fredescu]

This would be a good move if they had a solid plan to make that money back by investing the HECS money that they otherwise wouldn't be able to spend until 20 years from now.

I'm not hopeful

That's a fair point. I have a feeling that isn't part of Joe "Massive Debt Burden" Hockey's plan.

 

[Arksy]

That's a fair point. I have a feeling that isn't part of Joe "Massive Debt Burden" Hockey's plan.

Our debt levels aren't even that fucking bad. We're not Europe.

 

[bomma_man]

Debt scares are way more dangerous than debt itself.

 

[Deeku]

People are speculating that the debt will be sold at a discount, which allows for a margin and a rate above inflation. It also makes it pretty obvious what a politically motivated short sighted decision this would be.

Ahhhh ok, that would make it even more profitable (for the institution)! It's a good business deal in that sense, but I can definitely see how it's a short sighted decision by the gov.

 

[Fredescu]

Ahhhh ok, that would make it even more profitable (for the institution)!

"under a plan that has already won support in some financial circles." I think we can figure out which circles.

 

[hidys]

Am I imagining things or is this just more of the "the Left should move to the Right" again ?

Because as far as I can tell that's what its suggesting. The problem with this policy is it has no sane end. If the Left moves Right, the Right also moves Right and the position of compromise moves with it. It's essentially a one way ticket to ending up in the position of the USA where any one who's to the left of Theocratic Fascism is called a Communist.

As much as I may dislike right wing politics they have to be given credit for actually sticking to their values.

That is definitely not what Gallop was saying. In fact the sense I get is that he thinks there should be some sort of middle ground between Labor and The Greens. If anything i got the implicit interpretation that the "Christian Democratic" elements of the Labor party were doing them a disservice.

 

[Arksy]

That is definitely not what Gallop was saying. In fact the sense I get is that he thinks there should be some sort of middle ground between Labor and The Greens. If anything i got the implicit interpretation that the "Christian Democratic" elements of the Labor party were doing them a disservice.

Morgan Phillips, the Welsh colliery worker who served as (UK) Labour’s Secretary-General between 1944 and 1967 once said that his party 'owes more to Methodism than to Marxism'.

 

[Fredescu]

Nice to know the HECS thing doesn't make sense to economists either:

http://mattcowgill.wordpress.com/2013/10/16/privatising-hecs-debt/

The West Australian has a scoop today on one possible policy that could emerge from the new Government’s Commission of Audit:

The university education debt of millions of Australians could be sold off under a proposal to be examined by Prime Minister Tony Abbott’s inquiry into the state of the nation’s finances.

In a move that could boost the Budget bottom line, up to $23 billion of outstanding Higher Education Contribution Scheme debt would be effectively privatised under a plan that has already won support in some financial circles.

…

One proposal that has backing in the financial sector is to convert the $22.6 billion in HECS debt held by 1.6 million Australians into a financial product. In a process called securitisation, the responsibility for HECS debts would be bought by the private sector and then sold to investors.


This has been recommended before, as the article notes. The Commission of Audit established by the Howard Government in 1996 said “consideration should be given to securitising HECS.”

The proposal is kind of bananas.

Think about it from the perspective of a potential investor who might consider buying a security that entitled them to a stream of future HECS repayments from former students. As they’re currently structured, HECS debts have a 0% real interest rate (they’re just indexed by the CPI), there is no fixed timetable for repayments, and unpaid debts can’t be recouped from a debtor’s estate when he or she passes away.

It wouldn’t make sense to buy such an asset at its full value, when there are other safe assets with guaranteed repayment that pay real interest. To induce people to buy his HECS securities, then, Mr Hockey would have to either:

Sell them at way below their face value; or
Change the terms of the debt by charging real interest and/or allowing the debt to be recovered from the estates of deceased debtors.
In option 1, Mr Hockey would be exchanging an asset from the Government’s balance sheet (outstanding HECS debts are an asset from the Government’s perspective) for a sum of money upfront that would be worth way less than that asset. This is the opposite of responsible financial management.

Imagine you owned a house outright and were looking to sell it. You’re confident the house is worth $1 million, but finding a buyer willing to pay the appropriate price might take a couple of months. If someone approached you offering $500 000 in cash for the house if you’ll sell it today, you’d have to be nuts (or have a seriously high discount rate) to take the offer. Accepting way less than face value for the HECS assets would be much the same type of craziness – selling an asset for less than it’s worth just to get the money now rather than later. This is the fiscal equivalent of hocking your possessions at Cash Converters.

It’s not clear to me that selling the HECS assets would even help the fiscal balance. It’s my impression that the Budget treats the loans to students as an asset. The discount for early repayment is an expense, as is the estimated portion of the HECS debt that is unlikely to be repaid. The indexation of the debt is treated as revenue. Unless I have misunderstood, selling the HECS assets for cash shouldn’t affect the budget balance at all – it will just reduce the net financial assets held on the Government’s balance sheet. If I’m right, the sale would affect the cash balance but not the fiscal balance, which uses accrual accounting. The Budget moved to accrual accounting during Peter Costello’s time as Treasurer, for good reason.

In option 2, the Government could make HECS more attractive to potential investors by changing the terms of HECS debts. It could lower the repayment thresholds, collect HECS from Australians working overseas, and/or recoup HECS liabilities from the estates of deceased debtors. These options would all reduce the proportion of HECS debt that is never repaid. It could also start charging real interest on HECS debts. Each of these measures would increase the flow of income from HECS debtors to the owner of the asset.

There are a few problems with this. First, any change like this that would make the ownership of HECS debt more attractive to private investors would also make it more attractive to retain on the government’s books. Raising the real interest rate would increase HECS revenue. Increasing the proportion of HECS debt that is recouped (through whatever means) would lower the expenses associated with HECS. These changes would benefit the government, as the HECS lender, if it retains the asset on its books. That means that investors would need to pay more to buy the asset from government, or else the government is getting a bad deal. So changing the terms of HECS debts doesn’t raise the attractiveness of HECS assets for private investors relative to government – it lifts the value of the asset by an equal amount regardless of the owner.

The second big problem with changing the terms of the HECS debt is that it could discourage people from going to uni, particularly prospective students from relatively poor backgrounds. At the moment, HECS is a pretty good deal. Your debt doesn’t rise in real terms, you don’t start paying it back until you earn somewhere around the median full-time wage, and the repayment levels are not too onerous. If you change that deal, you risk putting people off from going to uni. This risk was clearly identified in the review of base funding for tertiary education, although the evidence about whether past cuts to repayment thresholds affected participation is inconclusive.

It is difficult to imagine conditions under which this policy makes sense.

 

[Arksy]

Holy shit at what's going on in Queensland.

Police state incoming.

This legislation is ripe for a High Court challenge.

 

[Fredescu]

Bleijie seems way out of his depth.

 

[DrSlek]

Nice to know the HECS thing doesn't make sense to economists either:

http://mattcowgill.wordpress.com/2013/10/16/privatising-hecs-debt/

How the hell would the government convince investors to buy up interest free debt with no guarantee of repayment?

If the interest rate of the debt is increased, students will lose their shit and in the long term the program might end up like the abysmal US student loan program (thanks to the never ending quest of profit)

 

[markot]

I love the idea of the cabinet in a state determing who should stay in jail indefinately.

Oh wait I dont!

Nicola Roxon calls on Kevin Rudd to quit Parliament, says he had been a 'bastard' as PM
http://www.abc.net.au/news/2013-10-...bastard-james-button-memorial-lecture/5027030

"We didn't explain the dysfunctional decision-making and lack of strategy I’ve focused on a lot tonight," she said.

"We didn't talk about his rudeness, or contempt for staff and disrespect for public servants.

"Removing Kevin was an act of political bastardry, for sure, but this act of political bastardry was made possible only because Kevin had been such a bastard himself to too many people already.

"Even though the reasons were there to justify our action, I don't think we handled it properly at the time, and Labor has paid a very high price for this mishandling ever since."

 

[wonzo]

Holy shit at what's going on in Queensland.

Police state incoming.

This legislation is ripe for a High Court challenge.

joh 2.0

 

[Whiteshirt]

Holy shit at what's going on in Queensland.

Police state incoming.

This legislation is ripe for a High Court challenge.

That literally happened in the past, I almost expect it from Queensland. Need I remind you of Joh Bjelke-Petersen's legacy as a literal fascist. He also only got away with running a police state in Queensland because he was too old.

I'm not sure if Campbell Newman & Friends together are as outwardly evil as Joh was as an individual but they're definitely trying to have some sort of legacy up there.

 

[Arksy]

That literally happened in the past, I almost expect it from Queensland. Need I remind you of Joh Bjelke-Petersen's legacy as a literal fascist. He also only got away with running a police state in Queensland because he was too old.

I'm not sure if Campbell Newman & Friends together are as outwardly evil as Joh was as an individual but they're definitely trying to have some sort of legacy up there.

I don't actually know much about Joh and his time in office. I have some reading to do....

 

[viciouskillersquirrel]

What just happened in Queensland?

On a side note, I've been updating my blog of late, mostly with recycled content I wrote for other reasons, and I found a text file about the refugee issue on my phone. I wrote it in a huff during this past election campaign and decided not to post it because I felt too upset at the time. It seems rather late, but I thought some of you might be interested.

 

[TriangleOfCorruption]

The fucking audacity by the LNP to capitalise so blatantly on this bikie beat-up. I can't work out if it's the power-grabbing or vote-grabbing that's worse.

Of course QLD Labor are happy to support it as well, we wouldn't want them to even pretend to have a spine.

(I'm also grumpy about imminent casinos)

 

[Mondy]

http://www.smh.com.au/federal-polit...olution-on-carbon-pricing-20131015-2vkvj.html

Tony Abbott will have the first half of a constitutional trigger for a double-dissolution election in place by Christmas, after announcing plans to present his carbon price repeal legislation this year.

The move keeps open the chances of another election in the first half of 2014 if the eight-bill package is rejected in December as expected and then rejected a second time by a hostile Senate in March or April.

Abbott isn't having a bar of Palmer and the micros, and probably knows he won't get the CT repeal through under the current Senate either. He's gonna go all in on going back to the polls next year. Double Dissolution incoming.

 

[Jintor]

Wow. Daring.

Maybe he's just really confident about negotiating with the greens (lol)

 

[hidys]

http://www.smh.com.au/federal-polit...olution-on-carbon-pricing-20131015-2vkvj.html



Abbott isn't having a bar of Palmer and the micros, and probably knows he won't get the CT repeal through under the current Senate either. He's gonna go all in on going back to the polls next year. Double Dissolution incoming.

There is absolutely no way there will be a double dissolution.

 

[Dryk]

SA tried to pass laws that made associating with bikies illegal and it got slapped down. Hopefully the same happens in this case.

 

[hidys]

SA tried to pass laws that made associating with bikies illegal and it got slapped down. Hopefully the same happens in this case.

If that got slapped down, then these laws will definitely get slapped down.

 

[Fredescu]

I don't actually know much about Joh and his time in office. I have some reading to do....

I watched this this other day: http://youtu.be/xSQueJdwwB4

Basically a George Negus interview with Joh. It's not exactly hard hitting, I think he comes off fairly lightly in it, but it might give you a good framework for the major controversies of his time.

There is absolutely no way there will be a double dissolution.

Yup. No chance.

 

[hidys]

I don't actually know much about Joh and his time in office. I have some reading to do....

I've said it before but he is the only Australian politician to hold high office I'd call a fascist.

 

[legend166]

With the HECS thing, is there any reason why we shouldn't be collecting the debt from those who move overseas? I'm not even sure of the practicalities of how that works, but it seems reasonable to me.

Privatising it would be a huge mistake. Hopefully they don't do it.

 

[Fredescu]

I guess they've just never created a mechanism other than taxes to pay it back.

 

[hidys]

With the HECS thing, is there any reason why we shouldn't be collecting the debt from those who move overseas? I'm not even sure of the practicalities of how that works, but it seems reasonable to me.

Privatising it would be a huge mistake. Hopefully they don't do it.

And there you have your answer.

 

[Fredescu]

And there you have your answer.

That's not an answer.

 

[markot]

Because you cant enforce it if they are overseas.

Are you going to get them extradited over a 30k debt to the tax office?

I doubt most countries would even bother to entertain the idea of using their police or resources to do that.

Also I doubt many people at all do go overseas afterwards to skip out on their uni debt.

 

[Fredescu]

Because you cant enforce it if they are overseas.

What do banks do? Oh, that guy is overseas, better just call his debt a write off. Not bloody likely.

 

[hidys]

That's not an answer.

How the hell are people who move overseas supposed to pay their HECS debt? HECS is paid as part of your tax obligations.

 

[Dead Man]

What do banks do? Oh, that guy is overseas, better just call his debt a write off. Not bloody likely.

Quite often, yeah, if it is unsecured debt. Westpac often kept the debt on the books, but if you were overseas you got a letter to your last address every couple of months, and eventually the debt would either be sold or written off, and a credit listing placed against the person. Not really that important to anyone living overseas, and not really the end of the world even you come back before the listing drops off.

 

[Jintor]

How the hell are people who move overseas supposed to pay their HECS debt? HECS is paid as part of your tax obligations.

Don't you continue to pay taxes if you're still an australian tax resident though?

 

[Dead Man]

Don't you continue to pay taxes if you're still an australian tax resident though?

I am supposed to do a tax return for the US as well. I don't.

Edit: Most countries seem to only want that to make sure you are paying taxes somewhere, very rarely will you be taxed on income in another country if you already paid tax on it the country you are residing in. That's the way the US does it anyway, I might be generalising too much.

 

[Fredescu]

How the hell are people who move overseas supposed to pay their HECS debt? HECS is paid as part of your tax obligations.

If only there was some way to pay for something from another country.

Quite often, yeah, if it is unsecured debt. Westpac often kept the debt on the books, but if you were overseas you got a letter to your last address every couple of months, and eventually the debt would either be sold or written off, and a credit listing placed against the person. Not really that important to anyone living overseas, and not really the end of the world even you come back before the listing drops off.

Damnit. Defending you is hard work legend.

 

[Jintor]

I am supposed to do a tax return for the US as well. I don't.

Edit: Most countries seem to only want that to make sure you are paying taxes somewhere, very rarely will you be taxed on income in another country if you already paid tax on it the country you are residing in. That's the way the US does it anyway, I might be generalising too much.

Well you're never supposed to be double-taxed on income, but you're supposed to offset it for your home country, not don't pay it

Better hope the IRS isn't on gaf!

 

[Dryk]

What's the legality of forcing people to report on income they're earning from jobs in other countries like? Could that be a significant hurdle?

 

[Dead Man]

Well you're never supposed to be double-taxed on income, but you're supposed to offset it for your home country, not don't pay it

Better hope the IRS isn't on gaf!

IRS can come chase me when they give me a way to do a tax return that doesn't involve needing information that is only available in America. If they want to give me my birth certificate so I can get confirmation of my SS number they are welcome to Tried to get it sorted once years ago, without showing up in person in the town where I was born it seemed impossible.

My income levels have been so pathetic it would cost more than they could hope to gain from it.

Damnit. Defending you is hard work legend.

Not saying that is the only way, just the way it was done when I worked at one bank 10 years ago.

 

[Deeku]

Tax is so confusing, like, reading the crap on ato site was lik OMGGG!

I just went to an accountant and said I'm leaving Au but I might come back later and I don't want ato to come after me, do what you do! And it was done!

 

[Arksy]

Speaking of foreign nationals...

Do you know that the US Government requires citizens living and earning money abroad to pay federal income taxes?

I think it works something like...if you live in a place where the income taxes are lower than the US, you have to pay the difference to the US Government.

The funny thing is, people who were born in the United States to parents of foreign nationals are citizens of the US (if you're born in US territory you're a citizen no two ways about it) and who've never really lived in the US might owe thousands of dollars to the US Government.

 

[Dead Man]

Speaking of foreign nationals...

Do you know that the US Government requires citizens living and earning money abroad to pay federal income taxes?

I think it works something like...if you live in a place where the income taxes are lower than the US, you have to pay the difference to the US Government.

The funny thing is, people who were born in the United States to parents of foreign nationals are citizens of the US (if you're born in US territory you're a citizen no two ways about it) and who've never really lived in the US might owe thousands of dollars to the US Government.

Nowhere in the developed world has lower personal income tax than the US

 

[Arksy]

Nowhere in the developed world has lower personal income tax than the US

That's not necessarily true, especially when you consider that a number of places don't collect income tax at all. For example, Monaco, Kuwait, UAE and Qatar.

Hong Kong, Singapore and Switzerland seem to have quite low income taxes as well.

 

[markot]

Yesterday Immigration Minister Scott Morrison said there was an incident at the centre and that Australian staff were evacuated for their own safety onto HMAS Choules, which is stationed at the island.

However, a short time later Mr Morrison put out a written statement to say no staff were removed to HMAS Choules.

http://www.abc.net.au/news/2013-10-...rison-to-details-27security-incident2/5033124

 

[roosters93]

So this is what The Twilight Zone feels like.

 

[Fredescu]

25% swing to Labor in a NSW by election: http://www.abc.net.au/elections/nsw/2013/miranda/result.htm

 

[Arksy]

You couldn't pay me a million dollars to be immigration minister.

 

[bobnowhere]

25% swing to Labor in a NSW by election: http://www.abc.net.au/elections/nsw/2013/miranda/result.htm

Wow, that's quite the swing. Miranda is pretty much inside of Scott Morrison's seat isn't it? So even with NSW Labor's corruption still in the news, a big Federal win less than 2 months ago it's a complete wipeout. It seems the swing back is even larger than the swing to the LIbs at the last election.

As much as there is definitely some buyers remorse going on federally in no way could it account for the result. Maybe they underestimated the influence of the previous "celebrity" candidate as much as a referee could be a celebrity.

Edit: Potenial factors:

There are lots of factors: Sutherland Shire’s ICAC issues, Barry Collier’s return, the premature departure of Graham Annesley, but here’s one to consider. After the worst bushfires in NSW in over a decade, Miranda was completely blanketed in smoke this morning, and firefighters were at every booth asking people to put the Liberal Party last.

 

[Fredescu]

I'd say Annesley not bothering to see out a full term going up against a guy who had been in the seat for ages prior to 2011 is probably the main factor. There's probably a small amount of it being a swing against the federal government party. I doubt any of it is the fires.

edit: Oh wow, the Fire Brigade Union had representatives at every booth.

edit #2: Antony Green points out "the swing in the pre-poll votes was just as big", suggesting that the FBEUs booth presence didn't make a huge difference.

 

[wonzo]

I wouldn't really read anything on a Federal level into the NSW bi-election result. It's just the inevitable swing back to the NSW ALP after their catastrophic defeat at the last election.

You couldn't pay me a million dollars to be immigration minister.

I'd totes do it.