THE BIG DAY!



Racegoers pouring in to Flemington Racecourse for the Melbourne Cup

RACEGOERS have already started arriving at Flemington as Australians gear up for the race that stops a nation. With the Melbourne Cup still hours away, the gates are open at the track as organisers make last-minute preparations. It is expected the race will draw a massive betting plunge today, with punters shelling out $88 million last year with the TAB in Victoria and NSW alone.

The Melbourne Cup carnival will see gamblers bet much more. In 2008, a whopping $171.1 million was bet on Cup Day in NSW and Victoria with a grateful Tabcorp, not including the busy boomakers at the track.

Bart Cummings, the sentimental favourite, is seeking his 13th Melbourne Cup win, with last year's winner and favourite Viewed, which is backed at $4.80.

The South Australian gelding Alcopop is backed at $5.50 to win.

The Victorian Racing Club is expecting a crowd of more than 100,000. Melbourne streets are quiet for the Cup holiday, apart from punters headed to morning functions in their racing finery. Taxis are gearing up for a huge day and operators of the city’s trains and trams are under pressure to avoid any problems.

Melbourne’s plastic surgeons have reportedly been busy in recent days as women – and a few men – go under the needle to look their best.

Following overnight showers, the weather has cleared and forecasters say blue skies can be expected for much of the day. A top of 20C is tipped. Weather bureau senior forecaster Scott Williams said there had only been a small amount of rain at about 5am today and it would dry out quickly. "It will not affect the racetrack, and there won't be much for the remainder of the day at Flemington,'' he said. "There will be a cool blustery west to south-west breeze throughout the day. "It will average 35-40km/h gusting to 60km/h.

"It will be blustery for the ladies and their attire at the track, including those large brim hats they might regret wearing.''



The eldest granddaughter of Queen Elizabeth II, 28-year-old Zara Phillips [left above] will attend the event and present the winning jockey with a trophy. Ms Phillips is a world champion equestrian competitor.

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Carbon tax will light a slow fuse

A FORM of carbon tax such as the emissions trading scheme cannot reduce global emissions unless there is agreement for a similar level of tax across all economies. That aside, the government's immediate issues are how to spend the money the tax raises, including how to avoid compensating the privatised brown coal generators for losses the tax causes.

Naturally, to ensure re-election, the Rudd government wants as much of the revenue as possible to go to voters. But the government is constrained because the tax would cripple firms that are unable to pass on all its costs. Twenty-five per cent to 35 per cent of the revenues raised are, therefore, to flow to the emissions-intensive, trade-exposed industries. This has kept those firms quiet by cushioning the effects of the carbon tax on their existing assets.

That the carbon tax means nobody will again build an aluminium smelter, a steelworks or any other facility that makes use of Australian low-cost energy is not their worry. Nor, apparently, is it a concern of governments, all of which seem to envisage a dreamy, new low-energy economy that jettisons domestic consumption of our coal reserves and, eventually, our gas reserves.

Other business users also will be losers from the higher priced electricity brought about by the ETS tax. Higher energy costs will undermine the profits of all firms and even destroy some businesses. But the damage to relatively low energy users will be less easily traced to the government imposition.

The other major loser industry comprises carbon-based electricity producers. These provide 85 per cent of Australia's electricity. The ETS tax hits the brown coal generators hardest, followed by black coal generators. Notwithstanding the government's fantasy about new low-cost power generation technologies emerging, there is no alternative to the present supply profile, so it's more than likely we will see few generator departures.

Indeed, the compensation offered to the coal power stations is contingent on them remaining online when the only way the government can meet its stated carbon reduction goals is if they close down.

That aside, as with energy-intensive industries, the government has made it impossible for any firm to again build a base load power station in Australia without giving it a cast-iron carbon tax indemnification. As with the energy-intensive industries, the proposed tax will impose substantial costs on the existing generators. The most vulnerable are Victoria's privately owned brown coal generators.

Though Canberra refuses to publish its own estimates of the cost to the generators' shareholders, these are unlikely to differ from the $8billion to $10bn estimated by commissioned studies for the Victorian government and for the generators themselves.

Canberra is keen to avoid paying these costs to businesses it has already demonised as producing dirty energy. Its process has been to play the tough cop, soft cop game. The tough cop, Labor's consultant Ross Garnaut, argued that the generators should get no compensation on the (incorrect) basis that there was no tradition for such provision in Australia. Uncharacteristically, Climate Change Minister Penny Wong played the soft cop and offered $3.5bn in compensation.

The Coalition is arguing for $10bn in compensation, though an unknown amount of that is to go to the state-owned black coal generators in NSW and Queensland.

The issues are perceptions of "sovereign risk" on all future foreign investment and whether a hardline approach will mean distress sales and low maintenance causing power outages. The latter is an open question but has belatedly become a concern of the Brumby government since brown coal provides 96 per cent of Victoria's supplies.

With regard to sovereign risk, it is argued that the investors bought these facilities more than five years after the 1990 Kyoto Protocol writing was on the wall, and any business risk of expropriation by regulatory taxation should have been built into their decision frameworks. The generators would maintain that the state government sales documents contained no indication that a future government would impose a new discriminatory tax on the assets being sold, thereby reducing their value. Nor did the opposition at the time indicate such likelihood.

If the sale was by a private enterprise that withheld information about the imposition of post-sale measures, that would significantly devalue the assets and the buyers would have legal recourse.

In fact, the generators have a better case to be compensated than emission-intensive industries, at least those built or bought in the past 15 years, since the emission-intensive industries were not bought from the government, a related branch of which is now imposing a discriminatory tax on them.

This haggling over compensation is vital to present investors and of concern also to the government, which could see some depletion of its election-buying pot of new taxes.

For the Australian economy the stakes are far greater. The planned carbon tax regime (and opposition to nuclear generation) makes significant new power plant investment impossible. This lights a slow fuse under the economy's growth potential.

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Hard decisions on "refugees" must be made by the Australian government

An editorial from the Sydney "Daily Telegraph" below, referring particularly to the recent capsize and sinking of an illegal immigrant boat

THE current refugee crisis - and that often-overused word is sadly justified, with at least 16 people presently unaccounted for in the waters off the Cocos Islands - has effectively paralysed Australian politics.

Decisions are difficult to make in circumstances where so many lives are at stake. An error could lead to a further massive increase in the number of deaths of those seeking unauthorised entry. Yet decisions must be made. An absence of authority on this issue guarantees yet more attempted arrivals, and with them the attendant deadly risks.

The decision-making process would be far easier if the atmosphere were not so charged with allegations of racism. These accusations ought to be put aside. Australians, including those who argue for strong border protection, are not - in the overwhelmingly majority - racist. It is not racist to insist on orderly procedures for immigration, be it formal or through requests for asylum.

Nor is it racist to make Australia a difficult target for people-smugglers and others who would exploit both this country's welcoming nature and the desperation of those who wish to come here. In fact, a case can be made that deterring people-smugglers is a humanitarian act, in that it exposes fewer people to the dangers of rogue sea travel. By some counts, more than 50 have perished since the recent upsurge in attempted arrivals.

Prime Minister Kevin Rudd has faced criticism over his claim to be both tough and kind over refugee issues, as though it is impossible to be both. This is not the case. By maintaining the toughness of our approach - for example, by not caving in to those who threaten self-harm unless their immigration demands are met - Australia is extending a kindness to others who might be inspired to attempt the same thing.

In response to the current situation, Rudd must add steel to Australia's border protection policies. It matters little that some opponents may make capital from this. Lives are in the balance. Some issues are more important than politics.

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Stupid home ownership scheme

By Terry McCrann

THERE is only one thing dumber than the First Homeowner's Grant and that is the ceiling that politicians around the country have now put on it. Talk about designing something specifically to hurt desperate home-seekers, especially the very ones that most need real help, this is it. This is an all-too classic example of the politics of envy over-riding good policy and even just some basic thinking.

Thinking, you know, the sort of thing that we used to rely on public servants doing, and then hauling politicians back a little way from their tendency to utter populism and stupidity; when we used to have public servants.

Controversial economist and property market soothsayer, Steve Keen, says it should better be called the 'first home vendor's grant' and on this, he is dead right. That its primary achievement is to push up the price of property - and not just of 'used' property but new homes as well. Even when 'generous' builders 'give it and more' to buyers.

Yes, it might 'help' someone into a property. But at huge and largely unrecognised cost to both the 'beneficiary' and even more to all the other desperate home-seekers. The ones that don't succeed, and see the 'affordable home' disappearing out of sight.

So you have a dreadful policy and you now make it exquisitely worse. With what is at best a 'good idea at the time.' To stop 'rich people' buying expensive homes and getting the grant, by placing a cap on the property price. Over the weekend, the federal housing minister, Tanya Pilbersek announced that state governments would be allowed to set a price cap on the grant. She twittered (in the old fashioned way) they could set it at the level they thought "most sensible."

Almost all of them were ready to go Three, NSW, WA and the NT, opted for $750,000. Our premier John 'chip on my shoulder' Brumby, showed again his tendency to slip towards envy politics by going for $600,000, Queensland confirmed itself as the home of white shoes by opting for $1 million. Terrific. So if you stop the children of rich parents getting the grant if they buy a house/property that costs more than those sums, what is the single most obvious thing they are likely to do?

Buy a house under the limit. That works just great for Joe and Joanna average trying to buy the average home. Now they've got somebody extra bidding against them. Somebody with much deeper pockets. Before the weekend they might have worried that competition amongst similar stressed home-seekers to them could have forced that $500,000 house up to, say $550-560,000. Now they can rest 'assured' that the pollies have guaranteed it will go to the rich kid at say $595,000. Indeed if push really came to shove and he or she wanted the property, the rich kid might be happy to go to $601,000 and lose the grant (in Victoria); whereas they the average home-seeker couldn't.

This just adds further pressure to a broader trend so damaging to first home-buyers. As they get priced increasingly out of 'used' property in the inner city, they go looking for cheaper houses in the new estates in the outer and now very outer suburbs.

Thanks to the 'wisdom' of the pollies, more will be doing so. The developers will certainly be happy - they get to lift their prices at the margin. And what do the buyers get? To put it bluntly, a very bad investment. You buy a house in the inner suburbs for $500,000. You might be able to sell it for $900,000 (tax-free) in ten years time. You buy a cheaper house in the sticks for $250,000. In ten years time you will be selling an even cheaper (in relative terms) house, for say $350,000. Do the math.

Thank you prime minister, thank you premier. You pretend to whack the rich, the only people you hurt are the very ones you should be helping and who rely on you not to wilfully hurt them.

Quite apart from the way it also stupidly hurts the state itself. The cap stops a rich kid buying a $1.5 million house and paying $82,500 in stamp duty. Instead our premier has insisted that the rich kid shouldn't pay more than $31,000. That's wonderfully 'clever' budgeting, 'chip'.

The really clever thing would be to actually persuade rich kids to buy $1 million-plus houses. The extra tax wouldn't only pay for their first home grant but a few other ones as well! Or more preferably a more sensible form of assistance. But then public servants would have to think and politicians forego pompous preening.

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