Opinion piece by Australian Senator Malcolm Roberts & Australian-American economist Darren Brady Nelson.
Recent reports of a $13 billion hole in the Turnbull Government’s 2017 budget, once again painfully highlight the urgent need for Trump-like economic policies in Australia as we used to see more of ‘back in the day’ especially under Sir Joh in Queensland. In light of the budget hole, the Treasurer warned that if budget cuts did not pass the Senate then the only options were to increase taxes and/or go further into debt. He presumably meant increase tax rates and/or borrow more money.
We at Pauline Hanson’s One Nation party, as well as some of our cross-bencher colleagues, would certainly like to see a non-partisan plan presented to Parliament and the people for greater fiscal responsibility including significant expenditure cuts over time. Cuts could firstly focus on government waste, duplication (between federal and state) and welfare (both household and corporate). Such a plan needs to be evidenced by proper and independent cost-benefit analysis (CBA), perhaps with the aid of the Productivity Commission, Auditor-General and Parliamentary Budget Office.
Any plan should more broadly address Australia’s ‘cost-of-living’ crisis and what successive governments at all three levels over many years and even decades have recklessly done to drive this crisis, whether intended or unintended. These drivers are all the plethora of government interventions that, not only increasingly skew the balance of freedom v control away from freedom, and thus necessarily reduce economic growth and jobs whilst at the same time raising costs and prices.
Key amongst these drivers are the ‘four pillars’ of energy, tax, regulation and banking. Dramatically fixing these also means dramatically fixing the Turnbull-Morrison budget hole as reducing energy prices, tax rates, regulation burdens and banking inflation both brings in more tax revenue and reduces the need for budget expenditures through greater ‘private sector’ wealth. To this end, we at One Nation will be organising and hosting, over the course of 2017 and 2018, four separate ‘cost-of-living’ action summits that focus on real-world solutions based on both sound economics and common sense.
Regarding energy, the main cause behind the almost constant upwards pressure on these prices are state and federal regulations. The two most prominent types are environmental and economic. Economic regulation of energy (transport and retail) not only helps create so called ‘natural monopolies’ in the first place but then regularly facilitates high prices, low quality, bad service and little innovation thereafter. This has been the case Australia-wide for decades and America-wide for over a century. Environmental regulation of energy (extraction and generation) has taken these bad effects to new levels, particularly in the past decade or so. Chief among these are the almost countless restrictions on CO2 generation and so called ‘fossil fuels’ extraction. Environmental regulation mainly works directly on energy supply by reducing it. Economic regulation mainly works indirectly on energy supply by reducing competition. Both put additional upwards pressure on energy prices.
All types of regulation in general have a major impact on ‘business climate’. For example, in the annual snapshot of the US Federal regulatory state entitled Ten Thousand Commandments, the Competitive Enterprise Institute (CEI) estimated “regulatory compliance and economic impacts at $1.88 trillion annually” which amounts to “US households ‘pay[ing]’ $14,976 annually on average in regulatory hidden tax”, amounting “to 23% of the average income of $63,784” and households thereby spending more “on embedded regulation than on health care, food, transportation, entertainment, apparel and services, and savings”. The situation is no different in this country, if not worse.
As for tax, higher rates are not simply ‘passed on’ to the consumer by businesses as often wrongly stated by governments and media commentators. Greater taxation always reduces the quantity, quality and innovation of supplies as well as raise prices. This hurts businesses as well as consumers along with the broader economy, or in economic-speak tax reduces ‘producer-’ and ‘consumer-surplus’ along with increasing ‘dead-weight-loss’. The exact nature, degree and timing of this ‘pain’ is subject to factors like market competition. Reducing tax rates has the opposite effect, with the added bonus to any government of collecting greater tax revenue through the Laffer Curve economic growth dividend.
The final and hardest to understand ‘cost-of-living’ driver is banking. This primarily means the combination of the anti-competitive policy behind the ‘four big banks’ along with the unaccountable monopoly supplier of Australian money ie the Reserve Bank of Australia (RBA). As Chris Leithner pointed out in his book The Evil Princes of Martin Place, the RBA “doesn’t fight inflation, it manufactures and maintains it”. To put it bluntly, the RBA prints and lends money to the ‘four big banks’ who then in turn print and lend even more money through “fractional reserve banking” which is a legalised ‘pyramid scheme’ of sorts. As Milton Friedman concluded in The Counter-Revolution in Monetary Theory: “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” This results in too many dollars chasing too few goods.
In a ‘nut-shell’, counter-productive government efforts in energy, tax, regulation and banking largely restrict and distort Aussie business supply and innovation. Aussie households then feel this as a ‘double whammy’ of the high ‘cost-of-living’ and low economic growth. President Trump is also aware of all this in the American context, and has started to take “huge” steps in his first 100 days to address these areas. This has certainly not been the case here, for way too many years. To quote Senator Pauline Hanson, PM “please explain”.
Senator Malcolm Roberts represents Queensland in the Australian Parliament as a member of Pauline Hanson’s One Nation party. His primary policy interests are in energy, tax, regulation and banking. He has qualifications in business, engineering and atmospheric gases.
Mr Darren Brady Nelson is an Austrian School economist, conservative-libertarian and Christian who lives in Brisbane Queensland but is originally from Milwaukee Wisconsin. He is currently the economic policy adviser to Australian Senator Malcolm Roberts of Pauline Hanson’s One Nation party as well as on the advisory board of LibertyWorks. He has also been an economic policy adviser for the American Republican party presidential campaign of Donald Trump.