The Welfare State

30 January, 2007

In most western countries tax payers pay a great deal of money to the government in taxes, much of which comes back to themselves and others in the forms of various kinds of welfare. It seems to me that there are three distinct rationales for paying welfare and that they are often not stated but somehow assumed and I think lead to confusion over what we are trying to achieve. My three rationales are:

1) A social safety net. This is the barest minimum level, and the idea is only to protect those in real hardship from starving etc and ensuring all minors say have the ability to obtain at least a basic level of education.

2) Redistribution of wealth. Welfare (along with progressive taxes) become a way of ensuring a flattening of the income distribution. We are taking from the rich to give to the poor.

3) Social engineering. Can come in various forms but the recent ones we’ve seen in Australia have been with regards encouraging families. eg. Family Tax benefit B and the Maternity payment. In principle though it could be anything but this is not income or poverty based, rather it tries to target various social goals.

It seems that you could divide these three into welfare that would be supported by clasical liberals in the first case. Social Democrats in the second and Conservatives in the third, although Social democrats also do the third rationale. There are no hard lines between the three categories. Obviously what is a bare minimum for a safety net is up for debate, but they do I think underline different ideas behind running welfare.

While I’ve been happy to enjoy the benefits of rationale 3, it seems to me the main purpose of welfare is 1) with an element of 2). I think some form of progressive taxation is a good idea and that the basic level of cover should be better than just avoiding starvation.

Where proposals such as mutual obligation come is also interesting (ie deserving poor tests). Generally it seems that they are an attempt to turn basic insurance into more social engineering. Its not clear to me that we should ever be doing welfare on the basis of 3.

Probably not my greatest post but just wanting to get some ideas down.

Sydney rentals

18 January, 2007

There has been a bunch of articles in the SMH recently about how tight the sydney rental market is. This was a little disappointing given that we had just started trying to find a place the day the headline proclaiming a 20% increase appeared in the paper the day before we started seriously looking. As usual this was some “research” by one of the various property industry bodies which regularly come out with rosy predictions about sectors of the property market. Typical lazy journalism runs these articles without any scrutiny, indeed they’ve been predicting rebounds in housing prices the entire time its been going down.

The article had the desired effect, overnight some of the advertised properties increased their asking rent 10%, ringing to enquire about another on the following Saturday I was told that “the asking price has gone up because the owner read the article in the paper saying rents were going up 20%”, again they had jacked it up 10%, for a property that already looked a little pricey. Obviously if the prediction is wrong then the market won’t sustain these rises, but at least in the short term it will probably have the desired effect. I do wonder when this research stops being research and starts being market manipulation. Not all of the newspaper articles fall into this category, the discussion of the effect the changes to super rules are having is legitimate, but what I dislike is the hyped up price increase amounts.

My story has a happy ending. We found two places we like on the first weekend of searching, got offered both and took the one we liked best. Further out from the city now, we’ve gone from Glebe to Strathfield, which means I won’t be walking to work in the CBD anymore, but on the upside we now have about 3 times as much space and a yard for the little fella to crawl and soon run around in, but the upside is we are paying a bit less rent.

Update: Another article today but this time about house prices rather than rent. Two different surveys two different answers. Unsuprisingly the mortgage industry research, says

…a contrasting survey of 958 people by the Mortgage Industry Association of Australia (MIAA) and BankWest showed that Australians were becoming increasingly optimistic that house prices would increase in the next year.

The study showed that 42.9 per cent of respondents expected residential property prices to be higher in the next quarter, despite higher rates

(my emphasis)
where as a more independent poll found

A survey of 1,894 Australians by found that 68 per cent of respondents said that higher interest rates would force home sellers to cut prices, while 42 per cent expected house prices to fall in the next quarter.

Long time no post

9 January, 2007

Its been a while since I’ve added anything, but I do intend to add more material here sometime soon. Although, as I will be moving house over the next month, its likely to be light on for a while.

No exactly a hiatus, but more of a quiet period.