Alcopops Tax Refund - A Net Gain to Producers??

Does the defeat of the Alcopops tax legislation by Family First's Steve Fielding and the Government's refusal to vote with the opposition's legislation to keep the revenue lead to a profit for the distillers?

Using a D & S diagram shown right and Economics 101 to examine this question yields an interesting overall answer. Initially, in the market for pre-mixed drinks shown right the equilibrium price would be Pe and quantity sold Qe.

Once the tax is announced the price paid by consumers at the bottle shop increases to Pc. For the market to clear, there must be a new lower equilibrium quantity Qt (the diagram is not to scale and for illustrative purposes only, but it is certain that there will have been a reduction in the quantity of pre-mixed drinks consumed in Australia although the magnitude of this is still uncertain) the effective price received by producers is lower now at Pp. The imposition of a tax effectively places a wedge between Pc and Pp equal to the amount of the tax. This is an important element which is sometimes overlooked: the burden of a tax is SHARED between producers and consumers regardless of who it is levied upon (this is not necessarily equal or 'fair').

Fast forward to the present and the Government has raised $300m from the increase in the tax on alcopops (this is equivalent to the amount of tax per unit times the quantity sold or shown diagramatically by the area (Pc - Pp) x Qt which it will now return to distillers. This transfer is equivalent to the distillers having sold Qt units at Pc for the entire year. This leads to a higher overall Producer Surplus (or profit) for distillers than if the tax had not been imposed. So a distortionary tax and transfer to the producers leads to them effectively winning out at the expense of consumers.

There is no compensation being given to consumers even though they have paid unnecessarily higher prices (and no real practical solution to doing so). This fact has not been mentioned in the media and obviously there are many more complicating factors than the simplified model that has just been analysed (intermediaries, price elasticities etc) but the economic effects remain. This makes it a very astute manouver for the alcopop manufacturers to donate the return tax proceeds to alcohol education groups and voluntarily take up warning labelling initiatives in the failed package, so they are not seen as profiteering.

Rudd has failed to gain passage after a full 12 months of political incovenience and there will be substantial effects on the budget forecasts. He is unable to attack the opposition on forcing the budget into deficit as $1.2 billion looks miniscule next to a $42 billion stimulus package, he is only playing the health arguments which are currently unable to be substantiated.

It is interesting although not surprising that the coalition was the recipient of substantially more recent donations from alcohol industry lobby groups. The opposition does however have a strong argument that this was nothing more than a tax grab by the Gov disguised as social policy, even if the tax itself was only closing a Costello loophole and bringing the tax on alcopops in proportion to that currently on spirits.

Perhaps all this is why there seems to be no winners and losers in this whole debate. All this over advertising of alcohol during sports TV broadcasts during the day and less than 2% of the primary vote - Fielding sure knows how to stick to his guns.

Kings of Leon - Only By The Night Album Review

Ok ok so it's been almost six months since this was released. I wrote the shortly after and am posting it here more as a preview and context to a live review I will post in about a weeks time.

My expectations for their show (having seen them twice previously after the release of their two previous albums) are for a very lively sing-a-long show, flawlessly reproducing a wide range of songs spread over all releases and minimal 'reaching out' to the crowd from the band. It will be very interesting to see how they translate to a bigger arena setting, how the new songs stand up live and the crowd reaction now they are the band of the moment.

But anyway my review:

You know them, you love them and the Followill Southern Family Band are back again.

Lets be honest: Only By The Night will no doubt be the most successful KOL album to date, the single Sex on Fire (#1 UK, #1 AUS) has already assured that as one of their most catchy, radio friendly tracks. But does it pander solely to the mainstream or have they built further on their previous work?

The album begins with the haunting blips and bleeps of Closer, it is a very strong opener with the apocalypse having never sounded so good. Next up it’s all fuzz with the snappy Crawl, followed by the hit which has launched them into mainstream super stardom. It’s hard to understate just how good Sex on Fire really is, it’s got all the Kings’ classics – fast paced with a booming chorus with driving bass and drums.

Then it’s the highlight, Use Somebody, a ballad in the vain of Milk from Aha Shake Heartbreak which builds to an explosive chorus of whoahs destined to become a crowd sing along favorite. After Manhattan where the weaving groove of guitar and bass is exceptional, the KOL have yet again written the first half of their truly great album (I’m looking at you Because of the Times!).

The album from here settles into mostly paint by numbers ballads that pass without note (She’s only 17! Ugh!) where a ripping up tempo change is desperately needed. Notion at least puts up some sort of a fight as Caleb repeatedly snarls don’t knock it, don’t knock it, you’ve been here before (much like the album itself).

Much has been made of the ‘stadium’ sound of their 4^th album as the Kings continue to move to a greater production focus and instrumental experimentation as on last year’s smash Because of the Times and a world away from their raw, fast paced debut Youth and Young Manhood which has to be heard to be believed. Unlike some fans, I appreciated this development in sound as they grew up and as a band (who likes hearing the same thing over and over again anyway?). However there is a distance in the recording of Only By the Night with none of the instantaneous joy of Red Morning Light, King of the Rodeo or Charmer screaming through the speakers. Caleb’s voice remains the centerpiece as is the trademark KOL sound with some lush well balanced background instrumentation.

The finale Cold Desert is a perfect closing, the slow come down. The brooding hook-less guitar echo track fades out and cuts back in not wanting to lay down, serves as a reminder that this is a great record with some highlights - but it seems that we’ll have to wait (and pray!) yet again for the KOL true and defining masterpiece. And here’s to the hope that those currently jumping on the bandwagon can look in the rear view mirror.

IR Policy to see Turnbull Unfairly Dismissed?

The internal debate among the Liberals over it's leadership and IR position of whether or not to support the Government's proposed WorkChoices repeal is overshadowing 'real' issues such as Rudd's difficulty to gather the Senate crossbenchers to do so.

The Turnbull-Costello agenda showdown the media is currently delighting in may not be as fierce as is being portrayed (any relatively new opposition struggles with whether to rebrand itself or revert to 'core' principles, see GOP, US). In relation to the leadership, Costello has so far been able to avoid any public or party room confrontation with Turnbull with his LNP backers and rabble rousing journalists currently doing all his heavy lifting. As well as delighting in the spectacle of the self-destruction of their opposition, Rudd, Gillard and Swan are able to continue to press the opposition publicly to support the Fair Work Bill and clarify their positions whilst privately scrambling to gather the support of the Browns, Fielding and Xenophon.

For his entire political career, Turnbull has had to walk or rather zig-zag a fine line to prove to the party that he is a true social and environmental as well as the confirmed economic conservative. This is reminiscent of the Utopian 'Land of a Thousand Liebermans' dilemma where Turnbull must remain committed to the base in order to retain the leadership, while simultaneously trying to gather support among the more public moderates or Howard Battlers to pressure next election. His chances would improve dramatically if it wasn't for the ex-treasurer quietly looking over his shoulder. After he united the party for an instant in opposition to the so-called Cash Splash where the coalition message suddenly broke into the media cycle things looked like they might have improved. But instead of driving home the 'Rudd Recession' and the impact of the Government's agenda on the economy he has to spend countless hours fighting alone against a former treasurer who is pledging his support.

Turnbull does have policy platforms to appeal to moderates through his more progressive views on same-sex couples rights, the stimulus package, an openness to other environmental solutions instead of/in addition to an ETS. As the Minister for Environment and Water Resources he increased his margin of victory in his electorate in a change election swinging against him (albeit through leaked emails detailing his personal environmental position) which shows a capacity for broad appeal .

The simple reality is that he is up against a very popular PM in a time of crisis when the public wants to rally behind a leader and the right is deserting him in favour of Costello. He is fortunate that Costello has an aversion to challenging for the leadership and being in opposition, which may see him through to the next election as the leader for almost certain defeat as the shitstorm he is facing shows no signs of weakening.