Trump has ordered tariffs of up to 25% on about $60 billion worth of goods imported from China annually.
China has responded with tariffs on around $3 billion worth of goods, selected to cause maximum political pain for Trump. So what does it all mean? Reverberations have echoed around the world, so $34 billion was wiped off the value of Australian ASX listed companies in one day.
My impression is that the Chinese are signalling that they want to talk rather than fight, but fight they will.
Seems Trump has something of a case. When American firms invest in China they can only own 49% on the business set up, but contribute 100% of their intellectual property. However, if Chinese firms invest in the US they can own or buy the lot.
All this is in accord with WTO rules. What Trump is now doing is not, and the Chinese have indicated they will take a dispute to the WTO.
Economists say that Trump’s actions are a serious own goal in economic terms. Reagan tried it against Japan way back when, and succeeded in practically wiping out the American TV manufacturing industry.
Meanwhile unanticipated effects will reverberate around the world, unless calmer heads prevail.
That’s the simple story as I’ve received it, but I could be wrong and am open to correction and new information.
2. The company tax war is about to begin
Phillip Coorey in the AFR says the company tax battle is nearly over, but the real war is about to begin. In other words, the LNP government may get the company tax cuts past the senate, but Labor will take a promise to repeal them to the next election. This issue should crystallise the differences between the two major parties.
Michelle Grattan also has a good article.
In terms of the immediate senate issue, it needs to be solved in the next week. Labor and the Greens oppose the bill so the LNP need 9 of the 11 cross-benchers to support it. The two NXT senators oppose the bill, so all the remaining cross-benchers must sign up. Four have supported it as good policy without bribes – Fraser Anning (ex One Nation), Cory Bernadi, David Leyonhjelm and Steve Martin (ex Jacquie Lambie). Three One Nation will support it in exchange for a pilot apprenticeship scheme for the regions, which will probably be wound up before it does any good. However, I gather they want more and are still negotiating.
The focus is now on Derryn Hinch, who says he is getting so much flak from the public that he needs to offer them a sweetener. At present that is either excluding the banks, or increasing the bank levy. He admits this is politics rather than policy. I gather the LNP won’t come to the party on the banks. I understand Hinch is also after $2 billion worth of benefits for pensioners and older retirees. Whatever.
How spending extra money to get a bill through which will reduce revenue can be justified has got me stumped. I believe Leyonhjelm is threatening to pull his support if the boondoggles get too ridiculous. ScoMo and Cormann should be asked what is going to be cut to deliver the goodies.
Tim Storer, independent ex-NXT who arrived in parliament a week ago, isn’t saying what his stance is.
CEOs of large companies have written saying they will pay better wages and invest more if given a tax break. Whoever takes them at face value needs their head read.
However, most commentators believe the bill will pass. I’m not so sure.
At stake is about $35 billion of revenue over 10 years – a tax reduction from 30% to 25% for the companies with revenue over $50 million pa. But it’s more than that. Labor has now announced that their alternative policy to boost the economy is an immediate 20% deduction for any eligible new assets created by direct investment in Australia. They claim this will be a better stimulus to “jobs and growth” than a lazy 5% tax relief to all and sundry. Plus it looks as though they may repeal the existing tax cuts for companies with turnover between $2 and $50 million, worth about $30 billion in budget revenue over 10 years.
Then they will have a story to tell about accelerated balanced budgets and alternative spending, which will make a very different offering for voters to consider at the next election.
3. Dividend imputation
The core of the story is simple. It’s about the tax breaks given to the wealthiest 20% of older people who own shares:
- When superannuation withdrawals are stripped out from income in ABS survey data, as is done to calculate taxable income, almost half of the wealthiest 10 per cent of over-sixty-fives report incomes of less than $18,200. On average, though, they have wealth of nearly $2 million — and that’s even before considering the value of their home or any other property assets they might own.
I understand that through self-managed super it is possible to get an income of around $100K pa without paying tax on the income received.
Labor is working on a carve-out for the needy who are affected, and it looks a s though that will not cost much at all.
4. Share the dignity, axe the tax
Back when the GST was installed under John Howard, then Health Minister Michael Woolridge likened feminine hygiene items to shaving cream. As such, not a necessity, apparently. I’ve made inquires as to what my mother would have done, and I can assure you we don’t want to go back there.
Yet on local radio we heard the other day that some girls in Brisbane schools stay home every month, because they can’t afford the luxury of pads and tampons.
Apparently shipping costs make these items even more expensive in remote areas, such as Aboriginal settlements. The Share the dignity site provides opportunities to donate and get involved.
5. Gobsmacking stupidity from the Australian cricket team
A story broke this morning about a pathetically stupid attempt to tamper with the cricket ball to promote reverse swing perpetrated by 8-test newbie Cameron Bancroft, but hatched in the dressing room by captain Steve Smith and a group of senior players.
How they thought they could get away with such blatant cheating with up to 30 TV cameras focussed on the game beggars belief. However, it blackens the name of Australian cricket, Australian sport and Australians generally.
Steve Smith has apologised but still thinks he’s the one to captain Australia.
Cricket Australia are sending over their integrity officer and chief performance manager to find out what happened, saying they are “shocked and incredibly disappointed”.
I think that after this test the guilty senior group should be on a plane home. Smith can’t be captain and should have his card marked never to be captain again. Whatever the penalties are they should be severe enough to send a message that reverberates down the decades to come.
And cricket authorities should demonstrate zero tolerance for all the rubbish that goes around the actual playing of cricket within the rules.
For a variety of reasons I’ve been up to my navel in alligators all this year, which started with my younger sister’s husband dying on New Year’s Eve. Apart from that, in terms of family the big event on the calendar is my elder sister and her husband, who live in Mississauga (basically Toronto), coming to visit. They are here now, and there are birthdays to celebrate and a gathering of the Brisbane branch of the clan. Among other thing this will involve my wife and I taking a trip out to Miles next Thursday and Friday.
Apart from that we have to finish our taxation returns for last year, which is much ado about not a lot, but involves preparing over 30 spreadsheets. My wife has finished her bit and I have barely started.
Then I’ve been committed to a round of health checks, which see me in encouragingly good shape, but I have to work at it. If you want to guess my age, the blog photo was taken 10 years ago. It was done because I was being pestered for a studio photo.
In addition to that, a number of people depend on me to keep their lawns, yards and hedges in good shape. We had a bit of a hot spell in January when it didn’t rain, but the season has been mostly above average in precipitation. Anyone who lives south of here has no idea how things grow in the subtropics, given a bit of warmth and rain.
The bottom line for the blog is that I’m not going into complete hiatus, but things will be a bit sporadic until about mid-April.