GRACEWOOD RETIREMENT VILLAGE

Gracewood Retirement Village 2017

I spent the first part of my working life as a chartered accountant, and people often ask how I went from accounting to journalism. Forty-four years ago I decided to take a break from my career as a chartered accountant, spend a year doing something interesting and then resume my accounting career. I spent the time doing the first year of what’s now the BA (Communications) at what’s now UTS. During that year I became the inaugural co-editor of the student newspaper at UTS, then called Newswit. As the year came to an end my journalism lecturer, Terry Mohan, asked me if I’d thought about making a career in journalism rather than accounting. I hadn’t, but on his prompting, I did. I applied to the ABC and the Fin Review and got nowhere, but Terry said he knew the cadet counsellor at the Herald and would get me an interview. It’s obvious to me now that he also put in a good word for me. I got the job and, at what was then considered to be the terribly mature age of 26, as a qualified chartered accountant, I started as a graduate cadet on a fraction of my former salary.

That was in 1974, the year following the first OPEC oil shock which ended the post-war Golden Age, the year our economy fell apart under the Whitlam government and the year newspapers discovered that politics was mainly about economics and decided they’d better start finding people who could write about economics. I was an accountant, not an economist, but the Herald decided that was near enough. I had a fair bit of economics in my commerce degree, of course. I soon realised the Herald was making quite extensive use of my professional qualifications, so I suggested it start paying me more appropriately and after about four months my cadetship was cut short and I was made a graded journalist. After less than a year I was sent to Canberra as the Herald’s economics correspondent. After a bit over a year I was brought back to Sydney as economics writer, replacing my mentor, Alan Wood, who had resigned as economics editor. About two years later - that is, about four years after I’d joined the Herald - I was promoted to economics editor. That was 39 years ago and I’ve been economics editor ever since.

Journalistic careers today aren’t as meteoric as mine was then. I just had the immense good fortune to be in the right place at the right time. But think of it another way: I’ve been doing almost exactly the same job for the best part of 40 years. I haven’t gone anywhere, haven’t had a promotion in 39 years. My one ambition in journalism was to be the Herald’s economics editor; I achieved that ambition in four years - far sooner than I ever imagined I would - and in all the time since I haven’t been able to think of any job I wanted to do more or any paper I wanted to work for more than what I had. The one big advance I’ve had in that time was when, a long time ago, The Age started running my columns. In terms of combined circulation and quality, newspapers can’t offer any bigger or better platform that the Herald plus The Age.

WRITING TIPS

Use the right words

• Strength in writing comes from the strength of the nouns and particularly the verbs you use. Excessive use of adjectives and adverbs is a sign of weak writing.

• Narrow the gap between words you know, and words you use commonly. That is, wherever possible use a more interesting, less common word, as long as the reader will understand it easily.

• Don’t try to impress people with big words and long sentences.

• Short words with non-Latin origins are preferable, where possible. For example, don’t say ‘employment’ when you can say ‘jobs’.

• Elegant variation: to avoid repetition, use synonyms when referring to something frequently.

• Avoid jargon: don’t say ‘equities’ when you can say ‘share market’; don’t say ‘fresh data’ when you can say ‘new figures’.

• Write as much as possible in the active voice, not the passive voice. A did B. Not, B was done by A.

• Grab the reader’s attention with the first sentence and paragraph. Keep the sentence short, clear, and focused on the part of the story likely to interest readers.

Write for the reader

• Explain concepts that are not immediately obvious. For example: ‘The dollar spiked yesterday’ should be followed by details that show the reader what ‘spiked’ means in this context.

• Write about events from your reader’s point of view. For example: ‘The dollar’ is always the Australian dollar; foreign dollars need to be labeled as such.

• Signal changes of direction clearly to readers. For example: If you say, ‘on the one hand’, you have to follow it up with ‘on the other...’

• Write in a way that will be most easily understood: Don't say April if you can say ‘last month’.

Explanation: 

• A big part of the journalist’s job is to translate complex events into a simpler form, make coherence out chaos.

• Be wary of the curse of knowledge. Don’t assume that because you know it, everyone else does.

• What to explain? If it is not common knowledge, it should be explained to the reader. If the reader has probably forgotten it, it’s new and should be included.

• When explaining a concept, use a concrete example that readers will understand wherever possible. For example: When referring to rural jobs, throw in an example, such as fruit-picker.

Be as clear as possible

• Aim to write so clearly that people never have to read your sentences twice – you only have one shot to get your meaning across.

• Write how you speak. For example, don’t say ‘said Ms Jones’ when you can say ‘Ms Jones said.’

• Cut out the pompous and unnecessary language that often clutters economists' statements.

• Don't sacrifice clarity for the sake of brevity. Unpack phrases that are not intuitive to readers. For example, 'the supply of money' is more meaningful than 'money supply'; don’t say ‘rate cut’ instead of ‘interest rate cut’.

• Avoid words derived from Latin: don't say ‘per week’ instead of ‘a week’.

Other points

I don’t just assert my opinion, I try to argue a case, quoting lots of facts and acknowledging both sides of the argument (eg It’s true that X, but Y). Sometimes your role is to remind the reader of why they disagree with you. That’s fine by me. But no matter how judicious you are, you must, as a matter of artistry, come to a conclusion and state an opinion. Only during an election campaign would I limit myself to on the one hand, but on the other.

You have to combine information with entertainment. Well written and an easy, enjoyable read. An informal, chatty style goes down well. Should inject some of your own personality.

Predictability is the great enemy of all columnists. Try to avoid having obvious, run-of-the-mill opinions on a particular subject. That doesn’t mean always having a contrarian view, tho if you view happens to be opposite to everyone else, that’s a plus. No, you have to have a more thoughtful, better-informed and thus novel view, which you achieve by giving the subject more thought and research than the reader has.

But you also need to avoid being too predictable over time. ‘I stopped reading Paddy because I always knew what he was going to say about any subject’ is the kiss of death for a columnist. Good to have views that are complex - that acknowledge differing shades of grey - and that evolve over time as you learn more from your experience but also your reading.

Criticise from a fixed viewpoint - a fixed model or view of the way the world works or should work - don’t keep changing your vantage point until you’ve got something to criticise. That’s the mark of an amateur.

I sometimes write what you might call primativist columns (like primitive art) - columns intended to connect with the unsophisticated view ordinary readers might adopt towards some development and move them forward, not columns that simply contribute to a debate being conducted at the sophisticated level by my expert contacts. That is, I act as a populariser and a bridge between punter and expert.

Readers are more interested in stories about people than about ideas. And they like stories to be stories.

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Abused public servants help bring Turnbull down

There's no clearer sign that the Turnbull government is in deep political trouble than the never-ending saga of the Centrelink robo-debt stuff-up.

A well-functioning government would have closed down the controversy more than a month ago. If the relevant senior or junior minister hadn't had the wit to do it himself, the Prime Minister would have told him to.

Instead, the controversy's been allowed to roll on, while the junior minister, Alan Tudge, and more particularly the man allowing himself to be described as general manager of Centrelink, Hank Jongen, have repeatedly denied that there's any problem with the automated debt recovery system that's been making life miserable for many Centrelink "customers", including many who, in truth, owe the government nothing.

To broaden the focus, this is the story of how a highly class-conscious government – which sides with the well-off "lifters" against the less fortunate "leaners" – has come adrift from political reality and is using and abusing its public servants to prosecute its war on those unfortunate enough to need to deal with Centrelink.

Its lifters-class sympathies have included the public service among the leaners-class, meaning it's been at war with its public servants, while using them to harass presumed welfare cheats.

Its class consciousness has blinded it to such simple truths as that, while you can always bully the top public servants into covering for you, when you mistreat the servants they stop warning you about the hazards you face and, ultimately, indulge in schadenfreude when you fall over the cliff.

As a class, public servants are not held in high esteem by the public. That's why the government has thought it safe to mistreat them, while also allowing the quality of service provided to the public to decline and using public servants to get tough with the many thousands of leaners imagined by the lifters to be ripping off the system.

Trouble is, when you oblige the public servants to deliver bad service to the public – phones that go unanswered, long waiting times, websites and phones that keep dropping out (not you, Tax Office) – or treat the public unreasonably, the punters blame the government.

As they should. Centrelink and Tax Office "customers" have votes, and their family and friends have votes, too. That counts treble when the "customers" are on the age pension.

First proof the government's at war with its public servants is that its determination to limit public service wages means it's failed to reach enterprise bargains with up to three-quarters of its staff.

One of the first acts of the Abbott government, like the Howard government before it, was to sack a bunch of department heads.

Nothing could be better calculated to make the remaining department heads fear for their jobs should they do anything to annoy the government.

Is it any wonder that when the bureaucrat really responsible for Centrelink, Human Services Department secretary Kathryn Campbell, who'd been refusing to speak to the media for weeks, had no choice but to front a Senate committee, she was full of denials and obfuscation?

No boss enjoys receiving frank and fearless advice, but only the dumb ones take steps to ensure they're surrounded by yes-persons.

The other way ministers limit the ability of their departments to pass on unwelcome advice is to interpose a bunch of young punks and political wannabes between them and their senior bureaucrats.

Successive governments' desire to avoid confronting unpleasant truths has prompted them to fill their departments with armies of public relations people – people who'd be of greater service to the public if they got behind a counter or answered a few phones.

It turns out that Jongen, the man who's happy to leave the public with the impression he's the general manager of Centrelink, has no responsibility for running it. He's just the department's "official spokesman".

He's the chief spin doctor – meaning when he knowingly misleads the public he can do so with a clear conscience. That's what he's paid to do. Apparently, the department has more than 30 people with "general manager" in their title.

The government's contempt for its public servants is reflected in the repeated rounds of "efficiency dividends" it imposes on its agencies.

These far exceed the improvements in labour productivity the private sector's able to achieve, and have become a euphemism for annual rounds of forced redundancies.

The public service union's claim that the 5000 jobs lost do much to explain the poor quality of Centrelink's service, as well as the government's mindless rush to use robots instead of humans, isn't hard to believe.

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The low down on our concerns about investment

Governments and economists have been worried for ages about investment. First we had too much, then we didn't have enough. But what is "investment"? What's so special about it and why are we likely to be living with less of it in future?

The first trap is that the word "investment" is used to mean two quite separate – though related - things.

People say they've invested in some shares in a bank or invested in some government bonds. This is financial investment in financial assets – a piece of paper (or, these days, an entry in an electronic ledger) that records the owner's legal claim on the finances of the particular company or government.

Companies and governments originally issue these securities to raise money from the public. Mostly, however, people buy the securities second-hand (in the "secondary market") from someone who no longer wants to own them.

What do the original issuers use the money they raise for? Mainly to invest in – to build or buy – tangible or physical assets, such as equipment, buildings and structures in the case of businesses, and buildings (schools, hospitals, police stations), roads, bridges, rail and power lines and so forth in the case of governments.

This is the "investment" economists keep on about – investment in the building of new (not second-hand) physical assets.

Households invest in new housing; businesses invest in new equipment, buildings and mines, and governments invest in new infrastructure (see above).

Economists divide the spending done by households and governments into two categories: on consumption and on new physical investment.

Both kinds of spending add to "economic activity" – the production and consumption of goods and services, the value of which is measured by gross domestic product. Our participation in this economic activity allows us to earn an income and use it to meet our physical needs for food, clothing, shelter and all the rest.

But here's the trick: although all spending, whether on consumption or investment, generates income and employment at the time it's done, spending on investment goods does something extra: it increases our ability to produce more goods and services and, thus, generate more income and employment.

In econospeak, both consumption and investment spending add to demand, but investment spending also adds to supply – our capacity to produce more goods and services in the future. (The future service produced by new housing, by the way, is accommodation – shelter – for many years to come.)

It's this special characteristic of investment in physical capital (but also, in "human capital" – the education and training of our workforce) that explains economists' obsession with "investment".

Four main factors contribute to economic activity, and hence to increasing it: using more hours of labour, investing in more physical capital (including infrastructure), investing in more human capital (education and training) and improving productivity – through better machines, economies of scale, better ways of organising work, and so on.

Now we've got all that clear, what's been happening lately to new physical investment spending?

Well, households have been investing in a lot more housing, particularly in Melbourne and Sydney, though this looks like easing back before long.

Governments – state more than federal – have increased their investment in infrastructure, though many would say they should be doing more, and some (like me) would say the investment they are doing could be in much more useful stuff than it is.

Which brings us to the main thing preoccupying economists, business investment spending.

According to a report by Jim Minifie and colleagues at the Grattan Institute, Australia's investment has been "exceptionally strong".

"Since 2005, the capital stock [aka the stock of physical capital at a point in time] per person has grown by a third. Even excluding mining, capital per person has growth by more than 15 per cent. By contrast, in both the US and Britain the capital stock per person grew by just 7 per cent," Minifie said.

"Strong investment has helped to increase output per person in Australia by 10 per cent between 2005 and 2015, compared to 6 per cent in the US and just 4 per cent in Britain."

But – there had to be a but – we're now experiencing the biggest ever five-year fall in mining investment as a share of GDP.

"And non-mining business investment has fallen from 12 per cent to 9 per cent of GDP, lower than at any point in the 50 years from 1960 to 2010."

This, of course, is what's been worrying economists: the failure of non-mining investment to grow strongly as the mining investment boom ends. Latest figures do show growth in the non-mining states of NSW and Victoria, however.

What factors encourage greater investment? Textbooks tell us lower interest rates – lowering the "cost of (financial) capital" – helps, but the Reserve Bank believes that, while its manipulation of interest rates has a big effect on the behaviour of households, it doesn't have much effect on businesses.

Minifie says the Turnbull government's proposed cut in the rate of company tax would probably attract more investment by foreigners, but it "would also reduce national income [the bit Australians get to keep] for years and would hit the budget". Oh.

But the biggest direct effect on businesses' investment spending is how much spare production capacity they've got and how fast they're expecting the demand for their products to grow beyond their present capacity.

My guess is that many firms still have a fair bit of spare capacity and that many aren't confident of strong growth in the future.

Minifie reminds us, however, that there are good reasons business doesn't need to invest as much as it used to. The cost of capital goods – particularly computerised equipment – has fallen, and service industries, which make up an ever-growing share of the economy, don't need as much physical capital as goods-producing industries do.

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Politicians have worked hard to make house prices so high

It has cost the budget a lot of money to make the prices of homes as hard to afford as they now are.

If this shocks or puzzles you, it's intended to. It shows the economics of house prices is more complicated than most people realise. And than can be deduced from the things politicians on both sides say and do in the name of improving home affordability.

The surprising truth is that most of the things pollies – state as well as federal – do in the name of making housing more affordable actually make it less affordable – as well as having a significant cost to their budgets.

It's not surprising that most politicians, not being economists, don't know much about the economics of house prices. But the same can't be said of their Treasury advisers.

So we're left wondering whether our politicians pursue their counterproductive solutions in ignorance of their econocrats' knowledge, or whether the pollies fully understand they're making things worse for first home buyers, but don't care because they also know the punters won't realise they've been conned.

Why do such a thing? Because the pollies know – thanks to their econocrats' advice – that the actual beneficiaries of the things they do in the name of improving affordability are people who already own a home.

And that's a much larger group of voters than the group of would-be home owners.

Scott Morrison advises that the budget in May will have a "housing affordability package" at its centre. Fine. We'll see then how much it does to help or hinder first home buyers.

This is a tacit admission that home affordability has become too hot politically for the government to get away with merely repeating that the obvious solution is to increase the supply of new homes – which just happens to be the primary responsibility of the states, not the feds.

It's true that house prices rise when the demand for them grows faster than their supply is growing. But to imply that the problem can be solved simply by building more homes is to reveal your ignorance of how the housing market works.

Homes aren't a simple consumer good to be bought and soon used up. They're a long-lived asset, one that delivers a flow of service over many years – shelter – while retaining – and, everyone hopes, increasing – their resale value.

This means there's a huge stock of existing homes, the number of which is increased only a per cent or two by each year's building of new homes.

It means, too, that the demand for home ownership is driven not just by people's desire to own the home they live in, but also by their desire to invest in an asset whose value is expected to appreciate.

But if you already own a home, why stop at one? Why not invest in a few of them – especially if such investments are made more attractive by tax breaks such as negative gearing and the 50 per cent discount on the tax on capital gains?

Homes – units as well as houses – come in all shapes and sizes. Not to mention widely differing locations.

One thing this means is that merely building a lot more houses on the outskirts of the city will do little to satisfy the demand of people fighting over the limited supply of homes close to the centre of the city (where most of the good jobs are).

Sensible thinking about housing affordability is plagued by the "fallacy of composition" – the misplaced assumption that what works for the individual must work for everyone.

Take the Victorian government's decision to help first home buyers by reducing or removing the stamp duty they pay.

The individual couple hears this and thinks this will make it easier to afford a first home. Sorry, it won't. Why not? Because all first home buyers will get the same help, thus robbing the individual of any advantage over the other people competing for the place they're after.

All such attempts to make homes more affordable to first home buyers by supposedly lowering the cost of homes backfire. Because demand continues to exceed supply, what happens is that competing buyers use their tax concession to bid the price of first homes even higher.

So the supposed benefit to first home buyers ends up in the hands of those existing home owners who sell them their home, then move on to another. But this doesn't diminish the concession's cost to the state's budget.

When the Howard government introduced the 50 per cent discount on the tax on capital gains in 1999 and made it available to people with negatively geared property investments, it could argue that, by making property investment more attractive, it would increase the supply of homes.

To the extent it induced investors to buy newly built homes, it probably did – a bit. But the main thing it did was to increase investor demand for existing homes, particularly the type of homes bought by first home buyers.

This tax change prompted a massive increase in negatively geared property investment, at great benefit to the investors (almost all of whom would be existing home owners) and at huge annual cost to the federal budget.

It has cost the budget a lot of money to make the prices of homes as hard to afford as they now are.

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Reserve Bank spells out company tax choices to politicians

The pollies can't help themselves. When the Reserve Bank heavies make their regular appearance before the House of Reps economics committee, the main game is to get the governor to say something that favours your side of politics and gives the finger to the other side.

So, when Dr Philip Lowe and friends appeared before the committee a fortnight ago, the Liberal chair of the committee, David Coleman, saw his chance to get Lowe to repeat his remarks in favour of cutting the rate of company tax to make it internationally competitive, remarks that drew headlines of Governor Slams Labor in the national press.

Sorry, Lowe had seen this game before, and wasn't playing. He'd switched to "analytical" mode. In truth, he was backing off at a rate of knots.

Tax, he said, is one of the considerations that internationally mobile capital takes into account when deciding where to do investment, but only one.

"There are a lot of other factors as well," Lowe said. "The kind of legal and political environment, human capital [how well-educated our workers are] and all the other things we value in this country."

Corporate tax rates had been edging down around the world, but in the post-crisis environment some countries had seen lowering the corporate tax rate as a potential strategic advantage to attract business from elsewhere, so we heard governments talking about 15 and 20 per cent rates, he said.

"I think you could argue … that, from a global perspective, this is not actually that useful, because the lowering of the corporate tax rate from one country to another just changes the location of investment and does not increase aggregate [global] investment.

"I hear some economists saying that in a perfect world we would have a common global corporate tax rate, so business would decide where to locate based on the strategic and comparative advantages and not on corporate tax.

"But that is not the world we live in."

So the analytical choice the Parliament faced was to respond to this international competition or to say, "No, we are not going to respond to that because we have other advantages that [make] people want to invest in Australia", he said.

"Australia has other advantages, and the tax system is supposed to deal with issues other than attracting investment – there is equity and fairness and other considerations," he said.

Soon it was time for another Liberal, Scott Buchholz, from my ancestral home of Beaudesert, to try his luck with the assistant governor economic, Dr Luci Ellis. Sorry, no luck.

"If you are a primarily locally oriented corporate entity, you have dividend imputation and it is more or less irrelevant what the corporate tax rate is from the perspective of people who wish to invest in your firm," she said.

"That is also true for the very large pool of superannuation savings that we have in this country."

So the benefit from cutting the company tax rate was limited to its ability to attract investment from foreigners.

But not all foreign capital was equally valuable. Foreign direct investment, she implied, was more valuable than portfolio investment involving "purchasing of existing securities or existing assets [such as businesses]".

Direct investment was where, if the decision to cut the rate was put off, this could "potentially be more damaging to an economy" but – here comes the two-handed economist – "investors think about more than just differential tax rates when they are making foreign direct investment decisions".

"Also," Ellis went on, "you have to remember that many multinational corporations do have the capacity to decide where the revenue [they earn in Australia] is recognised".

"To the extent that there are transfer-pricing alternatives to where you locate your income, it is not clear to me that [the level of our company tax rate] changes people's decisions about whether Australia is a good place to have some business. It might change which government gets the revenue.

"You could imagine that it would become increasingly attractive for multinational firms to seek to locate their revenue recognition in lower tax havens.

"But there are already very low tax jurisdictions where [multinationals] can do that, and we still see investment happening in [this] country.

"I cannot imagine a scenario where a few more countries moving in this direction [of cutting their rates below ours] results in the entirety of that activity moving outside Australia's borders," Ellis said.

What a comfort it is that, while our politicians do little more than try to score points off each other, our econocrats are still capable of laying out the choices we face.

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