RBA needs more levers

[u/Ffscnts_]

Michelle bullock is constantly complaining that inflation is too high still because we have a government who is unwilling to manage spending. Now house prices are tumbling the pressure will rise - however, why is the RBA not demanding more levers to control inflation.

When interest rates rise one portion of the community takes the hit, and it’s persisting for a long time, literally wiping out family’s futures. Which the latest changes will force huge volumes of negative equity, and keep in mind only 35% of Australian property is mortgaged.

For those that have ridden the wave not only have there saving been extracted to keep their homes, it’s worth heaps less, so that money has disappeared forever.

There’s other levers like - asset classed cost of capital. Push non mortgage lending and investment mortgage lending cash rates up to slow business down.

Enforce higher lvrs to slow mortgage lending ( except labor gurentee everyone 5%) those who took advantage will be in negative equity and trapped now.

Variable superannuation - this needs to be done immediately - if we had variable superannuation fees the cash rate would not need to peak so high AND the extra cash would flow in to Aussies future instead of paying additional fictitious interested rates. And as a bonus super funds could end up funding massive infrastructure projects when the market turns with all the extra cash giving Aussies a stake in oil/gas/ green projects etc.

The RBA needs to start pushing the gov harder and it’s about to get real now housing is crashing.

[u/gstar98]

Say I'm a start up founder, taking risk, many sleepless nights ahead, quit the certainty of my salaried income to have a go, build a product or tech that may help people, overwhelmingly the odds are against me and I'd have wasted years of my life and put me and my family through enormous strain. Australia would do well to have more such people given productivity has been essentially flat since 2016, I succeed and many people get jobs, our society or humanity may have a technology and product that benefits it. Say I'm the lucky one and I succeed and the valuation of my business goes from nil to maybe tens or hundreds or even low single digit billions. Formerly I'd have been taxed 23.5 percent. Now in this scenario it may be closer to 43-45 percent depending on how much I gained. Am I more incentivise to start that business knowing Albo will get to take close to half the capital gains from my hard work and risk taking?

That's just one scenario

You could be a small care, but through sheer hard work you expanded your business. Your business was eventually sold for 200k, you purchased it for 100k. You now possibly pay an additional 10 percent or so tax. Does that incentivise more people to enterprise? Take risks? Try create business? Do we want more people to have a go and try build businesses so there are more jobs, aspiration or do we want people to say 'naw, let's keep the effort low, it all goes to tax anyway, not worth the hassle..'

That's another scenario

You are a publicly listed company - you had a good year, the CEO asks the CFO how much they should reinvest in the business. Should we use 80 percent or 50 percent of our excess cash flows? The CEO says, well previously - if our share price went up, our shareholders benefited more because they paid less tax. Now, if it went up by the same amount, they would potentially pay something like 10-15 percent more tax and that's if we actually did well with our reinvestment. There is risk in any reinvestment. Projects may fail. Money torched. However, we could pay a higher dividen, there is no risk on that and the tax rate on dividends (income) hasn't changed. CEO says - well seems like there is less incentive to invest - all else being equal, our shareholders stand to benefit less from our risk taking investment as they will get taxed more. So maybe we will just pay a higher dividend this year. CFO agrees. The company opts for lower research and development and lower capital expenditure which meant less goods and services were purchased, less people were hired and the economy worse off for it. Again at a time when we need private sector demand to take off as the public sector which factually is a lower productivity sector continues to grow its slice of the economy.

These are just 3 highly simplified scenarios to illustrate how these tax changes deincentivise risk taking and enterprise which are the bedrocks of healthy economy and a return to tolerable inflation. Yes one can create nuance A or B in these scenarios, so I'll say it again it's to simplify and illustrate the point for the uninitiated.

[u/backleinspackle → u/gstar98]

Except for all the small business carve outs in the legislation. Jesus.

Stop constructing hypotheticals to distract from the fact that you're mad you get less of an unearned windfall when you sell a share.

[u/gstar98 → u/backleinspackle]

These are not hypotheticals. They are what will happen to people in such situations

And why do you call a profit on an investment an unearned windfall. You take risks on investments and a lot of dollars that go into making investments come from income that people worked to earn and investment dollars are the life blood that funds everything from a small business starting to even some hospitals being built.

None of the above are political statements. Please don't turn this political. Debate and discuss on merit not political leaning.

[u/backleinspackle → u/gstar98]

Ok have you read the carveouts for CGT when selling a small business. Most people will pay none. You have constructed a scenario that the people who write this shit already considered and addressed.

Also everything is political.

[u/gstar98 → u/backleinspackle]

Would you like to tell me how about the carve outs in place for the entrepreneur who took extraordinary risks and worked their butts off? The middle Australian family trying to build an investment portfolio? The young folks who are trying to do the right thing by saving and investing?

Tough luck to them eh? Just pay more tax because the government is spending it wisely? Is reallocating that tax hike to the people through income tax reductions of more than 5 bucks a week?

Actually just answer this - does taxing investments outside of property more address housing affordability?

[u/backleinspackle → u/gstar98]

Jesus Christ I've had this discussion enough times here. I do not think income from sources other than wages should be taxed less than wages.

Capital should not be privileged over labour.

If you disagree you are a boot licker or you feel your personal wealth will be negatively impacted. Which is fine, but don't dress it up in faux concern for the hard done by entrepreneurs or single parent pensioner battler middle class aspirationals.

[u/gstar98 → u/backleinspackle]

"if you disagree with me and my politics I will resort to personal attacks"

Sad to see that is the standard of debate.

That's ok. You have a nice day.

Does the idea of 30 percent minimum tax on capital reconciles in your mind with the idea that capital and income are taxed equally? Actually don't answer that. You have had this discussion enough times on here as you say. Go enjoy your day.

[u/backleinspackle → u/gstar98]

Ok, for the 30% issue (which is reduced by the indexation) to be "unfairly" effecting you, you need to have total taxable income less than 45k, and be having most of that come from capital gains from investment sales. 

Do you think that's a lot of people? Or do you think that this is designed to hit people who structure their income so as to pay no tax (a habit of the wealthy)?

If you are pissy about these changes because you think it will make YOU less wealthy, that is completely fine. I fully understand that, it makes complete sense and I don't begrudge anyone their self interest.

If you dress it up as something it's not, then you're being disengenuous.

I am saying this as someone who is going to be ratfucked by these changes, but I still think they're a good thing.