The Labor party's spending spree is now coming home to roost -- and shitting on the battlers

Particularly first home buyers and would-be first home buyers

First home buyers have just cause to feel betrayed by the Rudd-Gillard government as they struggle under the strain of seven consecutive interest rate rises which have been exacerbated by loose fiscal policy.

After the amount of Saturday's Kelly and Andrew had spent thumping the pavement looking for a house, they felt ready to kill the person who snapped up this one. Photo: News.com.au

A disturbing new survey by Mortgage Choice has found that 10 per cent of first home buyers, who purchased their homes in the past two years, have either sold their homes or are considering selling because of financial hardship, caused by interest rate hikes.

The survey also found that another 6 per cent would sell if interest rates climbed a further one per cent, while another 14 per cent would sell if they rose another 1.5 per cent.

Many of these first home buyers were lured into the market through generous first home buyer grants at a time of historically low interest rates.

The Rudd-Gillard Government was more than happy to artificially stimulate the lower end of the housing market so as to give the impression that they had done a wonderful job staving off the effects of the GFC.

Of course they didn't alert all the first home buyers they suckered about the inevitable interest rate rises that would follow their totally over-the-top $87 billion stimulus spend.

The seven consecutive interest rate rises included four last year alone. We now have by far the highest interest rates in the developed world with a current cash rate of 4.75 per cent whereas Canada is at 1 per cent, Hong Kong .5 per cent, UK .5 per cent and Japan .1 per cent.

As a consequence, the current average variable home loan rate is around 7.7 per cent, which Loan Market says has resulted in first home buyers becoming an "endangered species". By comparison first home buyers were dominant in the market in 2009 due to the beefed up first home buyer incentives and the historically low interest rates.

While first home buyers are particularly vulnerable, mortgage stress of course extends to those on higher incomes, who have upgraded their homes on the strength of increased equity built up as property prices boomed.

Growth has now certainly flattened and prices have dipped in some parts, although the economists remain optimistic that we will avoid a US-style property market crash. The last thing we need is the nightmare scenario where home owners are forced to sell properties for less than they paid for them and for less than they owe.

The irony of the difficult current environment is how Kevin Rudd and Julia Gillard were elected in 2007 on a promise to ease cost of living pressures for "working families" and to keep downward pressure on interest rates.

Their embarrassing Fuel Watch and Grocery Watch schemes have become the hallmarks of Labor's dismal attempts to deliver on their pledge.

Instead families have copped a double whammy because not only have interest rates added about $6,000 a year in repayments to the typical mortgage, but cost of living continues to soar, with electricity prices up almost 40 per cent in three years, water up 27 per cent and rates up 15 per cent.

Latest ABS statistics in fact show that living costs are up 4.5 per cent compared to the official inflation rate of 2.6 per cent. Wages are simply not keeping pace with mounting household expenses.

Add to this the further threat posed to household budgets by Julia Gillard's new carbon tax, including annual increases in power bills of at least $300 and 6.5 cents extra per litre of petrol.

What we have seen is a government that has dudded those who are most financially vulnerable to interest rate hikes and increases in everyday living costs.

The most frustrating thing is how Kevin Rudd and now Julia Gillard have ignored repeated and sustained warnings to rein in spending and borrowing and to pay off debt. And the warnings haven't just come from the Coalition, they have come from Treasury, Finance, the RBA, economists and business.

Reserve Bank board member Donald McGauchie took the extraordinary step of rebuking the government for its loose fiscal policy. He said "we are spending money on fiscal stimulus and other things we shouldn't be spending money on and that means higher interest rates than we would otherwise have."

This government simply lacks the discipline to tighten its belt, to stop all the needless spending and to trim the fat in the budget. Instead we have the perverse situation where fiscal policy is working at direct odds with monetary policy.

Until this government starts living within its means, first home buyers and other struggling households will continue to pay the price.

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Telstra makes broadband warning: NBN laws 'create new monopoly'

Why won't Julia abandon this dog of a thing? The fact that it's the only idea Kevvy ever had should not hold her up

TELSTRA says the Gillard government's proposed laws for the National Broadband Network threaten to wipe out the public benefits of the $36 billion project by allowing the NBN Co to monopolise new areas and strangle future competition.

Even as Telstra negotiates remaining hurdles to the $11bn deal to join the nation's biggest infrastructure project, it is demanding changes to the next set of NBN legislation, which sets the rules for the NBN Co building the national network.

Last night, the office of Communications Minister Stephen Conroy said the government was "keeping an open mind to any amendments" and was in discussions with Telstra about the legislation.

The telco giant has told a parliamentary inquiry that the so-called Companies Bill and the Access Bill for the project have deficiencies that put "the benefits of the NBN in jeopardy".

It has savaged rules designed to stop commercial operators from "cherry-picking" to serve customers in the most lucrative areas, declaring this would discourage investments in new super-fast networks that would give consumers lower prices by providing competition to Labor's NBN. This would limit future competition and innovation - the very benefits the NBN is supposed to achieve.

On top of this, the telco fears the way the laws are drafted could allow the NBN Co to provide services directly to companies such as Woolworths, miners, shire councils and government agencies - undermining the government's policy that the NBN Co should offer only wholesale services and not deal directly with customers.

The development comes as Senator Conroy yesterday defended the level of government intervention in the project, declaring Australia had had "some of the most expensive and the slowest broadband in the world". "We've had the least reformed telecommunications sector anywhere in the world, virtually," Senator Conroy told Sky News's Australian Agenda program.

The laws are not only critical to the rollout of the NBN but are also necessary to finalise the proposed $11bn infrastructure-sharing deal with Telstra so they can go to a vote of Telstra's 1.3 million shareholders on July 1.

Yesterday, a Telstra spokesman said the negotiations were continuing and on track. But the push for further changes to the Companies Bill and the Access Bill could add more pressure to the timeline.

Senator Conroy's spokeswoman said yesterday the government was "committed to debating and passing this important legislation".

Telstra stresses in its submission that it wants to see the bills pass through parliament - but amended first. The legislation has been introduced into parliament and referred to a Senate committee.

In its submission to the Senate, Telstra criticises the planned "cherry-picking" rules to stop the NBN's less regulated rivals building their own super-speed networks in metropolitan areas before the NBN is rolled out.

The government has said the cherry-picking provisions create a level playing field making other suppliers subject to the same regulatory requirements as the NBN Co.

According to Senator Conroy's spokeswoman: "NBN Co would be hindered in delivering its objectives if it is subject to strict regulatory requirements while competing against other, less-regulated providers of super-fast broadband."

The McKinsey-KPMG implementation study recommends protecting the NBN Co from cherry-pickers because it has to provide affordable services across all areas including regional and remote Australia.

The NBN Co forecasts that if it were "cherry-picked", returns on the project could fall to below 5 per cent - less than the long-term government bond rate. But Telstra says the provisions will make it "almost impossible" for other networks to compete with the government-funded NBN Co and discourage investment in infrastructure as they impose regulation.

Competition from other super-fast networks would encourage lower prices and more innovative products, the company insists. "If by 'cherry-picking' the government means competitive entry in areas where this is efficient, then it is not clear why this should be discouraged," the submission states.

"This type of so-called 'cherry-picking' has been a feature of telecommunications markets in Australia and around the world for the past two decades. "The government should be seeking to encourage efficient entry in all its forms, and thus promote competition. "Discouraging new entry where this is economically efficient . . . will not benefit consumers over the long term."

Internet provider Internode says the provisions will mean that no new fibre is deployed in Australia other than by NBN Co.

And Carrier Pipe Networks says commercial operators should not be subject to the same regulation as NBN Co, which enjoys advantages including $27.5bn in government funding and "opt-out" laws in some states to automatically connect homes to the NBN.

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NSW public hospital chaos gets even worse

Guess why nearly 50% of Australians insure themselves for private hospital treatment, despite the government hospitals being "free"

A LACK of recovery beds is forcing thousands of NSW public hospital patients to be sent home without having their operations.

Most are suddenly told to leave after they have been lying in a hospital bay, having fasted and had blood taken in preparation for surgery.

Figures obtained by the Herald under new public access laws reveal that for four years hospitals have consistently failed to meet the state government's benchmark on same-day cancellations, despite the federal government's $600 million elective surgery "blitz" in 2009 and last year.

The last-minute cancellations are occurring regularly at three times the accepted standard.

The chairman of the hospital practice committee of the NSW branch of the Australian Medical Association, Brian Owler, says the cancellations waste time and money. "Theatre resources are not being properly used because the doctors and nurses present in the operating theatre have no patients to operate on," he said.

"It comes down to beds. We do need to have a certain number of beds, particularly in places like Westmead and Nepean, where demand is high," Associate Professor Owler said. "It's unusual for us to cancel patients because we've run out of time." Another 1450 beds were needed to address the problem.

This year, almost 9000 patients are expected to have their operations cancelled on the day they are booked in, according to NSW Health.

Last September, 65,944 patients were booked for surgery in NSW some time within the next year. The so-called Surgery Dashboard data, a monthly snapshot of surgery performance, shows the only time the benchmark for same-day cancellations was met was when it was set at 5 per cent in early 2007. The benchmark was tightened to 2 per cent in March 2007, and since then six of the nine former area health services have failed to meet the monthly target.

Last year, only Northern Sydney Central Coast, which includes Royal North Shore, and Greater West area health services met the benchmark - and then for only two months and one month respectively.

A Herald analysis of four years of data shows:

- The average rate of same-day cancellations was at least double the 2 per cent benchmark for six of the nine area health services every year;

- The benchmark was met only 22 per cent of the time since March 2007 and usually during the holiday shutdown periods;

- Sydney West Area Health Service, which includes Westmead and Nepean hospitals, was the worst-performing area with an average same-day cancellation rate of 5.4 per cent in 2010 and 6.3 per cent in 2009.

Last year, South Eastern Sydney and Illawarra Area Health Service, which includes St Vincent's Hospital, not only failed every month to meet the 2 per cent benchmark for same-day cancellations but was at least double that rate every month.

Professor Owler said the figures represented "only a fraction" of the cancellations.

"If the patient has not been put on the operating list in the first place, it will make the figures look better," he said. "I think [the benchmark] 2 per cent is ambitious but clearly double or triple of that figure is unacceptable."

A deputy director-general of NSW Health, Tim Smyth, estimated 40-45 per cent of the cancellations were for "patient reasons", such as not turning up or being unfit for surgery because of illness.

"The other reasons are related to the hospital side: an ICU bed is not available due to trauma cases etc, so the procedure has to be rescheduled; a bed is not available as planned due to overnight demand; or there has been an unexpected problem with a supplier providing a necessary piece of equipment," Dr Smyth said.

He stressed that the 2 per cent benchmark was an "aspirational target" set by surgeons on the Surgical Services Taskforce because hospitals were generally meeting the previous 5 per cent target.

A statement from the department said: "A cancellation rate of around 4-5 per cent overall is generally the picture in other states as well, so NSW is not materially different. Across Australia we are all working on getting the rate lower."

A departmental spokesman said 400 more beds were funded for 2010-11. He defended the department's record on elective surgery by saying 91 per cent of patients overall had their operations on time.

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"Racist" Baa Baa Black Sheep put out to pasture

BLACK sheep are on the endangered species list as some children in north Queensland learn to sing Baa Baa Rainbow Sheep.

The English nursery rhyme may have survived for 200-plus years but political correctness could finally put it out to pasture. Some schools in Britain have banned the song for being racist, but Pelicans Innisfail Child Care allows children to sing about black sheep or rainbow sheep.

Director Pam McLaughlin said some teachers sang the changed lyrics, and some children already knew the changes. "We just go with whatever the children want," Ms McLaughlin said. "The kids are just singing and having fun. Some sing black sheep, some sing rainbow sheep. It's just a song. "We don't have anything that says, 'You have to sing it this way'."

The BBC reported in 2000 that Birmingham City Council had banned the song for being racist. It was later overturned after a backlash from parents.

The council said it had obtained the guidelines, which stated: "The history behind the rhyme is very negative and also very offensive to black people, due to the fact that the rhyme originates from slavery".

Six years later in 2006, a nursery in Sutton Courtenay in Britain banned the nursery rhyme.

Australian National University social psychologist Michael Platow said he doubted Baa Baa Black Sheep would teach racism.

"I don't know why a child would associate a black sheep with a black man," he said.

The Office of Early Childhood Education and Care associate director-General Zea Johnston said no direction had been given and centres were responsible for their own education programs.

Pelicans has indigenous and non-indigenous children, and recognises diversity. Children play with white dolls, darker-skinned dolls and dolls of both sexes.

Ms McLaughlin said she thought changing the lyrics was a bit confusing for children. "You can get a black sheep but you can't get a rainbow sheep."

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CARBON TAX ROUNDUP

Three current articles below

Carbon tax a pledge of suicide

Terry McCrann

JULIA Gillard is embarked on introducing two new taxes. he first is the big lie that last week was turned into a big tax: her Julia carbon tax, the tax you have when you promise not to have that tax. The second is the reworked resources tax.

One is designed to force us to cut our emissions of carbon dioxide. To stress, emissions of the life-enhancing gas, not the so-called carbon pollution of bits of grit subconscious image that Gillard and Co deliberately promote.

The other is based on the assumption that China, in particular, but also India will continue to increase exponentially their emissions of that very same carbon dioxide.

Needless to say, except it does apparently need saying repeatedly, the increase in their emissions will dwarf any reduction we achieve. Rendering any reduction by us utterly pointless.

Indeed, China for all its claimed commitment to aggressive world leadership in alternative energy, plans to get most of its electricity from coal-fired power. Not just today, but tomorrow and, indeed, the day after tomorrow.

Over the next 10 years, it plans to install net new capacity of coal-fired power equal to 10 times our entire power generation sector.

To stress, that's net additional generation. Its existing coal-fired power sector is already 14 times our entire power sector. To the extent it does close down any -- really -- grit-emitting old dirty coal-fired generation, that means even more replacement plants. All fired increasingly by coal from . . . you fill in the blank.

Our real "assistance" to increased Chinese CO2 emissions, though, won't be centred on shipping energy coals from Newcastle. But in pouring hundreds of millions of tonnes of iron ore and coking coal every year into Chinese, and increasingly, Indian mills. And not to forget our old customers in Japan and South Korea.

Gillard's proposed resources tax doesn't just assume huge increases in these exports but is designed specifically to encourage their maximum expansion. Along with -- dare I say it, carbon-based -- natural gas.

Does the Prime Minister have the slightest self-awareness of a certain hypocrisy, but even more an incongruity between her two taxes and the underlying hopes and realities they are based on?

That on the one hand, she has to turn every light switch in the country into a tax collection point, to cut emissions to save the Barrier Reef, if not indeed the planet? Yet, on the other hand, she says a silent, secular, prayer that China and India go gangbusters emitting, to utterly swamp any such domestic emissions cuts; to save her budget from deficit? And not just save her -- or her successor's -- budget; that the foundation of the entire Australian economy will rest increasingly on those increasing emissions?

There is a further point of damning intersection with reference to China that has utterly eluded the Prime Minister. To say nothing of the massed brainpower of Treasury and our down under 21st century da Vinci, Ross Garnaut.

There she was at it again on Wednesday, saying that we had to move to a post-carbon economy. That "the global economy is shifting". That "Australia is at risk of falling behind the rest of the world." That "the longer we wait, the greater the cost to the economy, and the greater the cost to Australian jobs".

Somehow this message seems to have escaped the Chinese. And the Indians. They are making every effort to move to a carbon economy. Indeed, that's precisely the reason argued for giving them a pass on their exploding emissions.

If indeed the future, and the jobs of the future, lie in a post-carbon economy, wouldn't the very canny Chinese go straight to "that bountiful future?"

What idiots they are for trying to build the carbon economy that our down under smarties Gillard, Garnaut and (Treasury secretary Ken) Henry want to discard like yesterday's worn-out snakeskin.

So what is Gillard "saying" with her two taxes? That we should feed the Chinese and Indian carbon addiction? We should profit from the destruction of the planet? Literally, in the case of the government's tax revenues?

The truth is that Gillard and Co have taken policy into the realm of the surreal. She and her cabinet have moved beyond incoherence. Guided you have to say by a Treasury that has lost utterly any semblance of rational analysis and advice.

She makes Kevin Rudd, who had firmly established himself as a prime minister worse than Whitlam, look like the very model of prudent thoughtful judgment in comparison.

His rush to lock in an Emissions Trading Scheme before the Copenhagen conference was ridiculous and mad. It would have left Australia right out there like the proverbial shag on the rock when Copenhagen collapsed without even the most basic binding commitments.

To say nothing of the whole bureaucratic imposition of the ETS. More complicated and more onerous than the GST and open to far more rorts than the building insulation fiasco.

But at least before Copenhagen, you could argue the hope of some global agreement requiring an Australian commitment.

Not so now after both its failure and even more the gas-emitting farce of Cancun. Gillard doesn't even have that excuse. She embarks on this destructive absurdity knowing that the world -- read: China, India and the US -- are not going to follow.

If we had a Treasury that retained any of its traditional competence, it would be telling the government that an attack on carbon dioxide emissions is an attack on Australia's core and pervasive national comparative advantage.

Why are we among the biggest emitters per head of CO2? The biggest by far, if we include the indirect emissions from the use of our resource exports?

Because we benefit from our bountiful coal and iron ore. Gillard's attack on the so-called carbon economy is not just designed to hurt every Australian. Permanently. It is effectively a national suicide pledge. From the nation's leader. Incredible. Surreal. All-too real.

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Tony Abbott hints he'd roll back carbon tax if he wins the 2013 election

Tony Abbott has signalled he will scrap Labor's carbon tax if he wins the next election.

And in a blow to the Gillard government, the Greens have suggested they will not support cent-for-cent cuts to the petrol excise to compensate for petrol price rises under the tax.

The Opposition Leader declared this morning: "We are against this in opposition and we will be against this in government."

The next election is not due until August 2013 - a year after Julia Gillard's carbon tax is scheduled to come into effect.

Mr Abbott said voters should be "crystal clear" that he was opposed to the tax, but said he had to consult with shadow cabinet before announcing his formal policy response. "What I am not going to do is totally pre-empt due process, as Julia Gillard did," Mr Abbott told radio station 2UE. "She didn't send this off to her cabinet, she didn't send this off to her party room and I have to do all those things."

The approach flagged by Mr Abbott appears similar to that taken by Kim Beazley with the GST. The former Labor leader went to the 2001 election promising to "roll back" elements of the GST, but the pledge was dropped at subsequent elections.

The government says no decision has been taken on whether petrol will be included in the scheme. But Greens deputy leader Christine Milne suggested this morning that compensation for petrol price rises should not be given across the board. "We need to be sure that we are compensating low income earners, the people who are most vulnerable," she said. "I want to make sure that we do that because our job is to make sure that they are not suffering because of this."

Selectively compensating voters for petrol price rises could prove difficult for the government, because of sensitivities over bowser prices.

Coalition MPs arriving at parliament this morning accused Ms Gillard of "lying" to the Australian people by reneging on a pre-election pledge not to introduce a carbon tax. "She's trying to weasel her way out of the fact she lied," Liberal MP Dennis Jensen said. "The simple point is she went to the election and quite explicitly stated on not just one occasion that there would be no carbon tax under her government."

But Labor MP Andrew Leigh accused Mr Abbott of running a fear campaign. "It's going to be a strong scare campaign and he's going to run hard on it, but it's not what I think the Australian people want," he said. "Direct action is very, very expensive. How do you pay for that? Probably a big new income tax rise."

Labor MP Janelle Saffin said the transition to a clean energy economy would create more jobs. A report to be released later today by the Climate Institute suggests a $45 a tonne carbon price could create almost 8000 permanent jobs in the electricity sector.

Another 26,000 temporary manufacturing and construction jobs would also be created, according to the research, which predicts billions of dollars would be invested in clean energy projects.

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Unilateral action on carbon creates costs without benefits

Henry Ergas

"Hawke and Keating floated the dollar; we will price carbon," Julia Gillard said just prior to last week's deal with the Greens.

The comparison is inaccurate, however, for floating the dollar, like cutting tariffs, was desirable even if Australia acted alone; in contrast, a carbon tax can only yield benefits if major emitting countries do the same.

Moreover, the Hawke-Keating reforms, including floating the dollar and reducing protection, enhanced our long-standing comparative advantage, which is based on our resource wealth. So did those of the Howard government. This policy undermines it.

Indeed, in terms of Australia's national interest, it is difficult to think of a policy more harmful than such a unilateral tax.

This is because a high share of Australia's emissions are accounted for by export-oriented activities: some 33 per cent, compared with 8 per cent for the US. These activities include mining, where large fugitive emissions occur as resources are extracted.

Given the ready availability of alternative sources of supply, including Canada, the US and Brazil, a unilateral tax on these exports cannot cut global emissions: it merely alters their location.

But it would reduce Australian incomes, transferring overseas gains we would otherwise obtain from the resources boom. This policy therefore imposes costs without any obvious benefits.

In its defence, supporters of unilateral action make four claims. None of these stands up to scrutiny. The first is to deny our tax would be unilateral, pointing to carbon abatement policies elsewhere, notably Europe.

In reality, those policies are costly and ineffectual: the abatement they secure could be obtained by a carbon price well below that envisaged here. But even putting that aside, our export industries do not compete with the European economies. So whatever their carbon policies may be, they do not make our action any less unilateral in its consequences.

The second claim is that even if unilateral action did cause income losses, the creation of green jobs would offset them. The whole notion of a green job is confused: jobs are no more colour-coded than are people. And it is even more confused to think low-emission jobs are inherently preferable to those that are emissions-intensive: rather, what matters is each activity's contribution to wealth creation, assessed taking proper account of the social cost of emissions.

The extent of that wealth creation does not depend on whether a job is green, blue or purple; it depends on opportunity costs, that is, on what society gives up to generate a dollar of output in that activity. A well-functioning economy specialises in those activities in which its opportunity costs are lowest: that is what specialisation in line with comparative advantage means. Because we are so abundantly endowed with natural resources, Australia's opportunity costs are especially low in mining. That is why our share of world mineral exports is more than 25 times greater than our share of world exports overall.

And it is that specialisation in line with comparative advantage that makes us well off, as it allows us to import the many goods in which we have a comparative disadvantage from wherever their costs of production are lowest.

Given how pronounced our comparative advantage is in mining, shifting resources to other activities must make us substantially poorer. The claim that jobs tending windmills or speculating on emissions permits could offset those losses is implausible.

It is especially implausible as our pattern of comparative advantage is becoming more pronounced: in the nine years from June 2000, the net present value of Australia's mineral assets more than trebled. With the world placing ever higher value on our natural resources, relative to our other factor endowments (such as capital and labour), the income loss from unilaterally taxing mining exports must rise.

That loss is all the greater because the carbon tax acts like a supplementary royalty, as the amount to be paid rises with volumes produced. It therefore compounds the distorting effect of existing royalties and of the new mining tax. How the government can stridently criticise mining royalties because they tax production but want to aggravate their impact is yet to be explained.

The third claim defenders of the tax make is that by acting now, we increase the prospects of global agreement. That claim is also implausible. It accords Australia an influence at odds with the experience of international negotiations, not least at Copenhagen. Additionally and importantly, it ignores the fact that by undermining our own exports we make preventing agreement even more profitable for our rivals.

That the government has no plan for repealing the tax should international agreement not eventuate in a set time frame makes our rivals' incentive to delay even greater. To believe altruism will trump self-interest in determining their negotiating stance involves a considerable leap of faith. Fourth and last, supporters of a unilateral carbon tax claim it will bring certainty.

However, the only certainty for the community as a whole is that incomes will fall. What is left uncertain is just how great that fall will be, as that depends on what happens when the time comes to shift from a fixed carbon tax to a scheme based on emissions permits.

It is, for example, widely rumoured that the carbon tax will be around $20, increasing annually by 4 or 5 per cent more than inflation. Given that starting point, were the government, at the end of the three year period, to set the number of permits so as to cut emissions in 2020 to 15 per cent below 2000 levels, the implied carbon price would treble, causing enormous dislocations.

The government knows that; little wonder it is determined to postpone those decisions to a later date. But far from providing certainty, thus multiplying decision points, with fuzzy decision criteria at each juncture, compounds uncertainties and invites rent-seeking. Finally, would these problems be ameliorated were the tax only on domestic consumption, exempting exports but taxing imports, as Geoff Carmody has proposed?

Of course they would. But that is only because we are acting unilaterally, damaging our exports. Shifting the burden on to domestic consumption reduces the harm. But the harm does not go away: it is just diminished. The question remains, therefore, why we would act unilaterally, creating costs for so few environmental benefits. To that question, the community still awaits a sensible answer.

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