Re-engineering MMT

This policy paper builds upon two foundational papers advocating for structural changes to Australia's monetary and economic systems:

https://www.theradicalagenda.au/the-agenda-for-australia/the-case-for-a-targeted-spending-account

https://www.theradicalagenda.au/the-agenda-for-australia/the-case-for-a-dual-equity-market

Re-engineering Modern Monetary Theory: How the ASSE Reserve Mandate, Private Debt Destruction, and Retail Super Funds Solve Inflation

The central critique leveled against Modern Monetary Theory (MMT) has always been mechanical: if a sovereign government uses its money-issuing power to fund public priorities, debt destruction, and social guarantees, how does it reliably prevent runaway demand-pull inflation without causing a severe economic recession?

Standard taxation and central bank interest rate hikes are simply too blunt and slow to absorb liquidity in real time. To safely deploy state credit, an economy needs a structural, automated liquidity vacuum embedded directly into the corporate and financial sector.

By combining three structural reforms, the Australian Sovereign Stock Exchange (ASSE) mandatory 5-year operating reserve, total corporate debt destruction, and untaxed retail super funds—we create a self-balancing monetary engine that controls inflation at the institutional level.

1. The ASSE Requirement: Debt Wipeout and the 5-Year Reserve

Under the proposed ASSE framework, publicly listed corporations like Woolworths, Coles, BHP, or Telstra receive a total exemption from all federal corporate income taxes, payroll taxes, and capital gains taxes. In exchange, they must satisfy two non-negotiable entry requirements:

1.A - Complete Private Debt Destruction: The company must raise direct equity capital to fully pay off all bank loans, corporate bonds, and commercial paper, entirely eliminating private financial debt leverage from its balance sheet.

1.B - The 5-Year Total Operating Reserve: The company must raise and maintain a static cash reserve equivalent to five full years of total business operating costs (including inventory purchases, wages, leases, and administrative expenses).

For a major retailer like Woolworths, whose annual operational expenditures sit at roughly $66 billion alongside $4.4 billion in net financial debt, joining the ASSE requires an initial upfront equity raise of approximately $334 billion AUD.

Rather than relying on tax collectors to slowly drain income after it circulates, this requirement forces major corporations to act as immediate liquidity vacuums. To claim tax-free status, corporations pull massive amounts of broad money (M3) out of circulation and deposit it inside operational vaults.

2. The Quarterly Re-Absorption Cycle

Holding five years of operational expenses in cash is not a one-time event; it is a continuous regulatory lockup. Every quarter, as companies draw on their cash vaults to pay suppliers, staff, and overhead, they are legally required to top up their reserve back to the 5-year threshold before distributing any dividends to shareholders.

If a firm's operational costs rise or its cash reserve is drawn down, it must issue new equity on the ASSE to absorb circulating market liquidity. Corporations constantly contract the circulating money supply simply to maintain their tax-exempt status, driving structural inflation down far more efficiently than interest rate adjustments.

3. Retail Super Funds: Untaxed Equity Engines

To make this constant equity financing mechanism work, there must be a deep pool of domestic capital ready to absorb every corporate share issuance. This is where retail super funds (commercial wealth managers) fit into the architecture.

Unlike industry super funds whose entire portfolio yields are subjected to a direct 100% state tax levy to generate non-tax revenue for the Commonwealth; retail super funds operate under a 0% entity-level corporate tax rate on the ASSE:

3.A - 0% Corporate Tax for Capital Retention: Retail super funds pay zero entity-level tax on investment returns, dividends, or capital gains. This allows them to retain maximum untaxed liquidity.

3.B - The Domestic Asset Buyer: Armed with massive, untaxed cash flows, retail funds are structurally positioned to buy up newly issued corporate shares every quarter, acquire greenfield infrastructure, and absorb any domestic assets liquidated by foreign entities.

3.C - Taxation at the Individual Level: The state captures its revenue and executes personal liquidity drainage when retail funds pay out quarterly dividends to their commercial shareholders. These payouts are taxed under personal marginal income tax brackets (up to 45% + Medicare levy), draining excess private purchasing power from high-net-worth investors.

3.D - The Reserve Bank of Australia (RBA) directly reimburses all individual worker balances into their TSAs and permanently relieves employers from payroll superannuation contributions, the underlying liabilities owed to individual retirees are fully satisfied by the state.

4. Industry Fund Restructuring:

Under the realization of the Targeted Spending Account (TSA) framework, industry superannuation funds will undergo a profound structural evolution, transitioning from traditional worker-pension trusts into specialized, state-remunerated asset management corporations. Because the Reserve Bank of Australia (RBA) directly reimburses all individual worker balances into their TSAs and permanently relieves employers from payroll superannuation contributions, the underlying liabilities owed to individual retirees are fully satisfied by the state.

Consequently, the industry funds' multi-trillion-dollar pool of tangible physical assets spanning critical infrastructure, greenfield energy networks, and domestic commercial holdings remains operationally intact under union and board management, but its profit destination is fundamentally altered. All investment returns and dividend streams generated by these independent funds become subject to a 100% state tax levy, directing hundreds of billions in annual capital yields straight to the Commonwealth Treasury to destroy circulating fiat liquidity and balance the MMT ledger.

In exchange for managing these national assets, board directors and trade union trustees receive a guaranteed, state-funded management fee (ranging between 1% and 2% of total assets under management). This aligns institutional expertise with the national interest, ensuring industry funds remain hyper-motivated to maximize portfolio yields on the Australian Sovereign Stock Exchange (ASSE) while permanently insulating everyday citizens from retirement market volatility.

5. A Structural Solution to MMT Inflation

By integrating these mechanics, the state establishes a complete macro-monetary loop:

- Debt Destruction: Eliminates private credit interest burdens and removes banking sector leverage.

- Asset Growth: Retail super funds retain untaxed yields to perpetually fund domestic infrastructure and productive industry.

- MMT Inflation Neutrality: The mandatory 5-year cash reserve forces major corporations to continuously drain active money supply (M3) from the market, ensuring that state liquidity injection can occur without generating inflationary pressure.