Policy from behind the scenes


[Scott Morrison, Malcolm Turnbull and Martin Parkinson]

Any good public servant will tell you that policy is determined by government ministers. In Senate Estimates, and other committees, you will often hear public servants say they cannot comment on policy issues, that such questions should be directed to the minister. That is the way our system works in theory but does it actually operate that way in practice?

Recently in my piece ‘What can we expect in the coming election?’ I suggested that Turnbull’s proposal that the states and territories should be allowed to reintroduce their own income tax was a ‘thought bubble’. Now I am not so sure. Now I think it probable that it forms part of a continuing campaign by the Department of Prime Minister and Cabinet (PM&C) and Treasury relating to reform of the federation.

At least one journalist, Simon Benson in the Daily Telegraph, seems to have spotted this:
Most of Turnbull’s colleagues agree with the principle. It is the politics of it that are diabolical. It was for this reason alone that Tony Abbott roared down the idea when Treasurer Joe Hockey — after badgering by the then Treasury boss Martin Parkinson — took it to the Expenditure Review Committee.

Parkinson is now Turnbull’s top bureaucrat as head of the department of Prime Minister and Cabinet. No prizes for guessing who might be pushing it.
Ideas for reforming our federation go back a long time. Even before formal establishment of the federation Henry Parkes was suggesting that double the number of states may be better than the then existing six colonies. In 1920 Labor proposed 31 provinces to replace the states. At other times new states have been proposed.

The current approach to reform appears to go back to 1996. We have temporarily dropped the idea of changing the structure of the federation but issues about responsibility and funding are now central to the discussion. Howard’s Commission of Audit in 1996 commented on how to reduce duplication, overlap and cost-shifting between the states and the commonwealth:
Ideally, responsibility for the delivery of all services and the collection of revenue to meet costs should be with one level of government. In practice, however, there would be inefficiencies if this were located at the Commonwealth level when more appropriate decisions could be made at the local level; whereas if it were to be at the State level the Commonwealth would have to relinquish some tax powers or collect earmarked revenue on behalf of the States. [emphasis added]
The Commission noted that such reforms were beyond its terms of reference but I think you will recognise the highlighted part from the current debate. The idea obviously did not die but lived on in the bureaucracy.

In 2006 the Council for the Australian Federation (CAF) was formed. It comprises the state and territory leaders and has two major objectives:
  • work toward common understanding of the States’ and Territories’ positions in relation to policy issues involving the Commonwealth Government
  • take a leadership role on key policy issues, including the Federation, that are not addressed by the Commonwealth Government
In 2007 CAF proposed convening a Constitutional Convention in 2008. It didn’t happen but Rudd did hold his 2020 Summit. The summit’s idea for federation was:
Reinvigorate the federation to enhance Australian democracy and make it work for all Australians by reviewing the roles, responsibilities, functions, structures and financial arrangements at all levels of governance (including courts and the non-profit sector) by 2020.

A three-stage process was proposed with:
  • an expert commission to propose a new mix of responsibilities
  • a convention of the people, informed by the commission and a process of deliberative democracy
  • implementation by intergovernmental cooperation or referendum
As with most of the summit’s ideas, not much happened but it was another step to be considered and hung on to within the bureaucracy even if the bureaucracy would keep more of the process to itself.

I will jump ahead to 2014 when Abbott also conducted a National Commission of Audit and agreed to the development of White Papers on the reform of the federation and tax. The Audit was able to say:
  • The White Paper on the Reform of Federation has a broad remit aimed at clarifying roles and responsibilities between all levels of government to ensure that, as far as possible, each level of government is sovereign in its own sphere. [emphasis added]
  • However, in order to meet this goal, funding capacity is a key driver.
In April 2015 COAG ‘agreed the goal of federation reform is to improve the standard of living and wellbeing of Australians’. It also agreed that any reallocation of responsibilities between governments should aim to:
  • deliver better services
  • drive economic growth
  • be fair
  • provide clear responsibility — people should be clear which level of government is responsible for services so they can hold them to account [emphasis added]
  • be durable
Among the objectives for the White Paper were:
  • reduce and end, as far as possible, the waste, duplication and second guessing between different levels of government
  • ensure our federal system … enhances governments’ autonomy, flexibility and political accountability [emphasis added]
And in the ‘issues to be considered’, what about this?
  • the practicalities of limiting Commonwealth policies and funding to core national interest matters, as typified by the matters in section 51 of the Constitution
Section 51 of the Constitution includes:
  • trade and commerce with other countries, and among the States
  • postal, telegraph, telephonic, and other like services
  • lighthouses, lightships, beacons and buoys
  • astronomical and meteorological observations
  • quarantine
  • census and statistics
  • currency
  • banking, other than State banking; also State banking extending beyond the limits of the State concerned
  • weights and measures
  • bankruptcy and insolvency
  • copyrights, patents and trade marks
  • naturalisation and aliens
  • marriage
Ideally, they want an old style federation with the states exercising much more independence — but I thought we abandoned that in the name of a national economy and national consistency in services like education and health.

Vertical fiscal imbalance (VFI) is considered a major problem. VFI is simply that the commonwealth collects most of the money but the states deliver most of the services and so become reliant on transfers from the commonwealth. The Issues Paper on federal financial relations states:
The existence of VFI is not necessarily a problem in itself, but a high degree of VFI creates perverse incentives for both levels of government. It allows the Commonwealth to act in ways which can compromise the autonomy of States and Territories in their own sphere, thus creating confusion about democratic accountability … A high degree of VFI also creates incentives for the States and Territories to blame the level of Commonwealth funding for problems in State-delivered services, rather than to make the case to their own electorates for raising more funding from their own revenue sources. [emphases added]
From what I can glean, Turnbull has a proclivity for the number ‘2’. His approach to schools and taxation both appear to come from options 2 in the relevant sections of the reform of federation Discussion Paper.

For schools option 2 is:
States and Territories responsible for funding government schools and the Commonwealth responsible for funding non-government schools.
In considering this option, the paper blandly states that the states and territories ‘would need to consider how they could manage the issues relating to funding and regulating their own government schools’. [emphasis added] Despite that somewhat casual dismissal, funding is the key issue.

And on financial relations, option 2 is:
Increase State and Territory access to tax revenue
This could be by:
  1. reducing personal income tax rates by a certain amount and allowing the states to apply a ‘surcharge’ of an equivalent amount; or
  2. transferring a fixed percentage share of personal income tax collections to the states. (In both of these approaches, as regards the areas funded by the approach, such as schools, ‘it would need to be clear that the Commonwealth would not re-enter these areas of responsibility in the future’.) [emphasis added]
  3. expansion of the GST
We know that 1 and 3 have now been floated and rejected and only 2 remains on the table and is still being considered by Morrison.

In the light of all that has been written by public servants in the federation reform discussion papers, noting that even papers prepared by so-called Commissions are written by public servants who also assist and advise such bodies, take account of this statement by Turnbull after COAG rejected the state income tax idea:
If they’re not prepared to make the case to their citizens, through their Parliament, for higher taxes, they cannot seriously or credibly ask us to raise taxes to give money for them to spend.
Yes, echoes of the argument regarding the perverse incentives of VFI and the need for political accountability. So Turnbull did not pluck the ideas for state taxation, nor the commonwealth abandoning funding of schools, from out of the air. They were not ‘thought bubbles’ as I previously described them — so perhaps I owe Turnbull an apology for that — but no doubt a result of briefings he received and/or his own reading of some of the reform documents. As Simon Benson suggested, there are senior public servants strongly pursuing certain aspects of the reform papers (while ignoring other options actually mentioned in them).

Morrison supported Turnbull in his interview on AM on 4 April:
… what was basically put out there was the opportunity for them to have greater autonomy over these issues. They decided that they, they didn’t want to do that.

… the question really put to the states was a question about what level of sovereignty and autonomy they wanted to have over the revenue side of their budgets and the Prime Minister called that bluff last Friday.
Even the words ‘sovereignty’ and ‘autonomy’ feature prominently in the federation reform papers. So where do these words come from? — not from ministers’ own thoughts but from the influence of advice coming from their public servants (or advisers who have been briefed by public servants).

So who is really influencing policy? The ministers may still ‘determine’ policy, and do have to take account of the political implications (which public servants do not), but it seems many of the ideas actually arise in the public service. In the various reports and papers I have quoted, I think you will notice that the same concepts, phrases and even words recur which is a clear sign that the influence is coming from the public service.

And if we go back a little in history, the GST can be shown to be another idea from the public service. Ever since the late 1970s the treasury boffins were concerned about what would happen to government revenues when the baby boomers left the workforce and income tax revenue fell. Their answer was a broad-based consumption tax so that even when they retired the baby boomers would continue to contribute to government revenue. It appears it was first tried when Howard was treasurer in the Fraser government. Howard took the idea to cabinet in 1981 but it was rejected. When a new government was elected in 1983, and a new treasurer appointed, Paul Keating, they rolled out their next attempt to get it through. Keating supported treasury’s advice but had to take it into Hawke’s 1985 Tax Summit in the hope of getting consensus. He didn’t and the idea was dead, at least so far as the government was concerned, but not in treasury. In 1996, 13 years later, along came another new government and another new treasurer, Peter Costello, so treasury rolled out the idea again, despite the political fact that John Hewson had lost the ‘unlosable’ 1993 election with a consumption tax as the central plank of his policy. Howard had promised there would ‘never, ever’ be a GST under his government but by the time of the 1998 election, treasury had gotten its way and that consumption tax became part of the government’s platform. When it won the election (on seats, not overall votes) the government negotiated a deal with the Democrats to get the GST through the senate and it came into effect on 1 July 2000.

Treasury didn’t get everything it wanted in that deal but it had won a battle (if not yet the war) it had fought for 20 years. Treasury would have liked a higher GST on a broader range of goods and services but politicians have to negotiate what is possible, which is what Howard did at the time.

But as we have seen in the past 12 months, the GST was placed back on the agenda, this time on pretence that it would assist the states and territories and help fund hospitals and schools. For treasury that doesn’t matter, as any increase in that way in state revenue allows for the reduction of other commonwealth payments to the states. So the issue, almost 40 years after it was first conceived, is still burning within the public service and, although it has been laid aside for now, will no doubt raise its head again.

Similarly, I have no doubt that, although Turnbull has had the idea of state income tax rejected, the idea is not dead in the public service. It may be two or three governments into the future (perhaps ten years) but it will also raise its head again. In the meantime, there will be continuing efforts by Treasury and PM&C to transfer more powers to the states so as to reduce commonwealth expenditure. They will find other ways in the short term but as the fiscal pressure builds on the states expect another round of discussion on state levied income tax.

Governments come and go and the public service is effective in providing continuity. It is meant to be continuity in administration but I think my two examples in this piece also suggest that it plays a significant role in the continuity of policy, despite the fact that public servants will continually tell you that policy is a matter for the minister.

What do you think?
Is policy ‘a matter for the minister?’

Is reform of the federation needed?

Let us know your thoughts in comments below.


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One of the points of difference between the Turnbull government and the Shorten opposition is negative gearing. We would all still be here next week if the current regime and the proposals were discussed in full, so how about we attempt to do the ‘helicopter’ version. Just keep in mind that this article is general in nature and doesn’t consider your financial situation.

Broadly speaking negative gearing is a method of reducing your taxable income. You do this by purchasing an asset where the expenses from the asset are greater than the income you gain from the asset. As the asset is ‘income producing’ and you lose money on it, you can take the loss from other taxable income when it comes time to doing your tax return.

To negative gear effectively, you need to purchase something that will remain steady or increase in value. So buying a car and leasing it to an Uber operator wouldn’t be a good idea because the car is almost certain to decrease in value, regardless of the use it gets. By contrast, property and shares are excellent choices as both asset classes can produce an income (income producing) and frequently the expenses incurred in the purchase and maintenance of the asset (interest, fees and in the case of property, rates, maintenance, body corporate and leasing fees and so on) can easily and quite legitimately outweigh the income received from the asset. When you add up the costs, take away the income and then subtract it from your income from other sources such as your job, if you’ve done it correctly, your income for taxation purposes reduces to something under $80,000 per annum and voila, you qualify for one of the lower levels of income taxation.

Traditionally property and shares rise in value over time, so as well as writing off your losses you can usually sell for more money than you paid when the time comes. This is known as a capital gain. Capital Gains Tax is where you make a profit on the sale of an asset and the government of the day puts their hand out for some of the profit. Simplistically, the tax is calculated by adding the purchase price to the price of any capital improvements (say a new kitchen and carport), then subtracting that number from the sale price less the costs of the sale (real estate fees, legal fees and so on). If you hold the asset for more than 12 months, the current practice is for the tax to be calculated on only half the profit. If you hold a property for say four years and make $50,000 in capital gains, the government will only tax you at your marginal rate as if the profit was only $25,000.

On Easter Monday, Fairfax titles around Australia were reporting one of the strange outcomes of the current negative gearing policy settings. To be blunt
Sydney's housing affordability crisis is being artificially inflated by up to 90,000 properties standing empty in some of the city's most desirable suburbs, experts say.
While there is always some variation in rental returns, it seems that property in areas with higher capital growth are statistically more likely to be empty. And we’re not just talking ‘margin of error’ stuff here: in Sydney City, Haymarket and The Rocks, one in seven dwellings (somewhere where people are allowed to live) is vacant. If you go way out west, areas around Casula and Green Valley have a vacancy rate of around one in forty-two. Melbourne isn’t immune to the empty property trend with an estimated 82,724 or 4.8% of properties across the city being empty.

Admittedly, some of the empty dwellings in Sydney City and Melbourne may be on the market, undergoing major renovation or people are on extended holidays — but certainly not all of them. Those that look at the real estate advertising, either on line or in the ‘dead tree’ format, would be well aware of articles discussing the current capital gains that can be made in real estate with barely a mention of rental returns. Late in March, the question was whether Hobart or Brisbane were the places to buy now as housing prices were likely to increase substantially in the short term.
While the Sydney market peters out, Brisbane and Hobart are warming up with the Australian Bureau of Statistics Residential Property Price Index rising 2.5 per cent in Hobart and 1.6 per cent in Brisbane over the December quarter.

Domain Group data for the 12 months to January 2016 also showed Brisbane’s median house price increased 2.5 per cent to $485,000, while its median unit price was flat at $410,000. Hobart’s median house price grew by 2.4 per cent to $340,000 and its unit price jumped 9.7 per cent to $290,000.
There are a few fundamental problems with property investment. While those who already own property in one of the ‘hot spots’ are laughing all the way to the bank — sometimes to get the equity loan for the overseas trip, the massive renovation or the fancy car — those that grew up or rent in the locality can’t afford to purchase a first property in the area they are familiar with. In addition, those who purchase properties for investment can’t carve off $50,000 worth of the property should they have a requirement for the cash in a hurry.

The real problem here is that people are buying property for the wrong reason. A property is a place for people to live. It should be noted that a property only has to be available for rental before the ATO will allow negative gearing, there is no requirement that the property be rented, the property be advertised for rental if it is vacant or the rent value be appropriate for the market. The cynical could suggest that the way to maximise your negative income from a property is to leave it vacant as no income less expenses adds up to a greater tax loss than some income less expenses. The short term pain is alleviated by the increase in value of the property when the property is sold due to favourable capital gains taxation treatment where you keep something over 75% of the profit.

Like property, there are a number of factors that usually indicate if a share purchase should be made. In contrast to the oft repeated mantra of property sales “location, location, location”, the intrinsic worth of a share to an investor is usually calculated using a number of ratios. They are Price/Earnings Ratio; Earnings Yield; Return on Equity and Dividend Yield. This Fairfax article discusses what each of these terms actually means, should you wish to know more. For the moment let’s just consider one point; most of the share indicators are based on the price of the share in relation to the dividend (payment of a small proportion of the profit from the company’s operations).

Property prices and affordability are currently based on what capital gain is likely to be made over the short to medium term, not what rental income is received should the inner city unit you have purchased as an investment be actually used for its intended purpose. To be fair, some of the demand for property is generated by overseas residents attempting to purchase assets in Australia but this is estimated to be about 15% of the market, rising to 20% by 2020.

The point to all of this is that investors have manipulated the property market with the co-operation of the government. They have artificially increased the value of property, diminished the ability of your and my kids ever owning a place to call home, created the potential for a housing bubble and potentially reduced the number of ‘real’ properties available for rental or purchase which has caused a housing shortage.

There is also a waste of resources in having one in seven properties in Sydney City empty. The electricity and water supply organisations have to assume the property will be used for the intended purpose when calculating the potential demand for electricity, water and other services. This causes an overbuilding of infrastructure to service the affected areas — capital that could better be used to reduce utilities prices.

It seems that if you buy a property you can game the negative gearing/capital gains tax systems better than if you buy shares. If your property is empty, there is no income to account for when ‘losing’ money on the rates and taxes incurred when owing a property. Most Company Boards wouldn’t consider a request that they don’t pay a dividend this year solely to assist you in maximising your potential for reducing your taxable income.

Surely any investment decision should be made on the return expected on the investment, as well as the potential for profit on the sale? Most are, but for some reason the potential rent that could be earned on property is discarded. Some are happy to only accept the potential future capital gain assuming that someone in the future wants to buy a five-year-old property that no one has ever lived in. It’s too bad if the market does crash for some reason or other. Ironically, the rental income per square metre in inner city Sydney would be significantly greater than the rent you could expect to receive at Casula or Green Valley, so the ‘price/earnings ratio’ of an inner city property would be more attractive than the ratio for a property in the outer suburbs where vacant properties are statistically fewer.

Turnbull and the Coalition want to keep the existing policy settings; probably a good thing if you need to reduce your taxable income to under $80,000 and can’t use other tax management practices such as companies, splitting income etc. Shorten and the ALP don’t. Shorten wants to remove the ability to negative gear property unless the particular property is a ‘new build’. While the first owner of a property could negative gear the property regardless of whether a tenant was in place, logically a long standing tenant in a property paying a realistic rent per week would become the preferred situation if the property was onsold.

Shorten also claims that considerable research, time and effort has gone into the ALP’s proposed policy, that will go part way to addressing issues such as tax avoidance, housing availability and housing prices being out of reach if you are unfortunate enough to be trying to purchase your first property somewhere close to services like shopping, education, transport and health care in one of our larger cities.

It is probable that investors will return to the fundamentals of investment should the ALP scheme be implemented leading to a stabilisation of housing prices, an increase in property available for rental and slower rates of housing price growth. This will come about because investors won’t be pushing first home buyers out of the market and properties won’t remain empty for years.

There is also significant upside when it comes to eliminating the budget deficit (we’ll leave the inevitable discussion on Modern Money Theory for another time). The Balanced Budget Commission, established by the Committee for the Economic Development of Australia, believes the budget deficit can be eliminated by 2019.
The Commission finds that in order to eliminate the budget deficit by 2018‒19, spending should fall by $2 billion and revenue should climb by $15 billion.

It sets out five options for achieving that goal, all of which include a cut in the discount applied to the capital gains tax along the lines proposed by Labor.
In response to Turnbull’s claim that removing negative gearing and increasing capital gains tax will reduce investment, Commission Chair Mr McClintock said:
It doesn't mean it is a bad activity, but you can say there is too many billions of dollars going into that activity and we cannot afford that. With things like negative gearing, the inflation rates are lower, there is a strong argument to suggest you can lower that and still produce an environment where people are willing to invest. Our judgment call is that, yes, of course, it will have some marginal impact, so will everything, but it's a manageable impact.
Really, it doesn’t take the skills, research and knowledge of the CEDA to suggest future affordability of housing and availability of properties for rent or purchase outweighs the perceived right of others to reduce their contribution towards the provision of services to the entire community — aka minimisation or avoidance of taxes. Unfortunately, only one of the two major political parties has demonstrated that they see the connection.

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The shifting risk of superannuation


Since the 1980s, Australia has changed the way we prepare for our retirement. Rather than depending on an aged pension from the government and some personal savings, greater emphasis has been given to superannuation and building retirement incomes in that way. All three remain in play for retirement but for most employees superannuation has become the major component.

As part of the Prices and Incomes Accord, used throughout the Hawke-Keating years, compulsory award superannuation was introduced in 1986. At that time, it involved only a 3% contribution and was aimed more at helping control wages and inflation by having an effective wage rise paid into superannuation. It was legislated for all employees in 1992, as the Superannuation Guarantee, and the level of contribution has been progressively increased.

Treasury had already foreseen that the retirement of the ‘baby boomers’ generation would place a prohibitive cost on government if that generation was primarily reliant on the old age pension for its retirement income. In that regard, the mandatory superannuation contribution was a way of reducing government expenditure into the future: there was not enough time to make the baby boomers entirely independent of the government pension but it would at least reduce the amount of pension to which they were entitled.

Another issue for the Treasury, later addressed by Howard and Costello, was the superannuation liability the government was accruing for its own employees. At the time, the government made no forward commitment for that liability, anticipating that it would simply meet its superannuation liabilities from consolidated revenue in the year they fell due. Treasury, however, began pointing out that the amount was growing exponentially and could have serious budget implications in future years. Hence, the Future Fund was created to help meet those costs.

Superannuation for government employees, both state and federal, was traditionally a ‘defined benefits’ model, meaning the amount of superannuation to be received at retirement was predetermined by a formula. (Some large corporations, and other public bodies, both here and overseas, also used ‘defined benefits’ models.) In such schemes, it could be said that the employer bears the risk. Although the government did not put money away towards its future liability, if it had invested such funds there would have been years where its income from investments exceeded the accrued superannuation liability and years where it fell below: whether an employer ends up ahead or behind overall is entirely dependent on the success, or otherwise, of the investments.

Over the years there have been a number of significant changes: firstly, in the amount mandated to be paid into superannuation. Before his defeat in the 1996 election, Keating was discussing raising the contribution to 15% of a person’s income, through a combination of both employer and employee contributions. That never made it into law but during the first Rudd government it was decided that the amount should be increased to 12% by 2018 — that was considered the bare minimum to achieve a moderate level of retirement income over a person’s working life. It was legislated by the Gillard government to be achieved by July 2019. The Abbott government, however, when rescinding the Mining Tax in 2014 also extended the period over which the 12% would be achieved — instead of July 2019, it would now be 2025. The change was opposed by Labor and the unions, but also by the Financial Services Council and Industry Super Australia, but supported by business as it reduced its contribution for the immediate future, keeping it at 9.5% until 2021.

The Abbott government may have supported business with its decision but it did nothing to help the government’s long term budget problems. Delaying the increase only served to reduce the amount of superannuation workers would accrue, therefore leaving an entitlement to a larger part-pension from the government, whereas the real aim of the Superannuation Guarantee and the increased contributions was to reduce the government’s contribution to retirement income. Given the Abbott government at that time was carrying on about the ‘debt and deficit’ disaster, such a decision was contrary to the rhetoric and merely created additional budget expenditure in future years.

The taxation treatment of superannuation has also changed over the years. From 1 July 1988, the Hawke government introduced a tax on superannuation contributions but reduced the tax on superannuation benefits. Before that there was no tax on either contributions or fund earnings and people paid normal personal tax rates on their superannuation income stream.

The Howard government’s ‘simplification’ of superannuation included the abolition of tax on superannuation income for those aged over 60. Although some seem to believe that this applies to all superannuation, it applies only to benefits that have already been taxed at the contribution and earnings stage. A personal example involves my wife and I. We both paid additional income into our public service superannuation scheme but my wife did so via salary sacrifice and I simply paid into my superannuation from my after-tax income. Now my wife pays tax on that portion of her superannuation which comes from her additional contributions but I do not because my contributions were already fully taxed: without that concession I would effectively be paying something over 50 cents in the dollar, as the money would be taxed twice. It is the same principle that applies to ‘fully franked dividends’: if a company pays its dividends from its after-tax profit then those dividends are tax free for the shareholders.

The Superannuation Guarantee has been effective in drawing people into superannuation. In February 1974, only 29% of employed persons were covered by superannuation and the majority of those were in the government sector. That had reached 90% in November 1995 and 93% in August 2002. While the proportion has varied slightly in recent years, it has remained around 90% of all employed workers.

It has also given rise to a huge amount of ‘savings’ held in superannuation funds. It started slowly. At the end of 1991, before the Superannuation Guarantee was implemented, there was $146 billion in superannuation savings — equivalent to 38% of the nation’s then total GDP. That rose to $1.2 trillion by the end of 2007: equivalent to 110% of GDP. Again there have been fluctuations in recent years but superannuation savings have remained at a level of about 90‒100% of GDP.

As superannuation became more widespread, the cost to government revenue of superannuation tax concessions increased. The Hawke decision in 1988 to tax contributions was a way of bringing forward government revenue — previously government had to wait until a superannuation benefit was paid to gain any tax revenue. Despite that, Treasury figures for the 2014-15 Budget show that tax concessions on contributions cost the government $16.3 billion in foregone revenue, and a further $13.4 billion for concessions on superannuation funds’ earnings. The evidence is that these concessions benefit most those on higher incomes. The top income decile actually receive something like 37% of the benefits of superannuation tax concessions and the top 20% receive about 60% of the benefits. It was also found that there were 475 people with super balances in excess of $10 million who were earning tax-free income of about $1.5 million each year. Labor has proposed a policy that partly addresses this but the emphasis is on ‘partly’. It really captures only the top 2% and will raise revenue by only $1.4 billion a year (on average) which is only a fraction of the total value of revenue forgone but it is better than nothing — it is perhaps a ‘gentle’ approach in an election year.

In 2012, in a 20-year review, the CPA raised some other concerns about the impact of the Superannuation Guarantee:
The greater accumulated superannuation has allowed households to become more accepting of risk and debt in the knowledge that a payout is coming on retirement. The increased debt has allowed households to enjoy a higher standard of living during their working lives than their actual income could support. This higher standard of living has produced increased expectations for retirement. Against these expectations is the reality that they cannot pay for the higher expectations, as the superannuation is required to repay debt.

… It is now twenty years after the SG was introduced, and superannuation savings minus household debt effectively equals zero. [emphasis added]
The risk is magnified because nearly all new superannuation is an ‘accumulation’ model. Even new commonwealth public servants, since the Howard years, have been placed in accumulation funds (or can select the fund of their choice). That basically means that the amount of superannuation accrued over a person’s working life is entirely dependent on the investment choices made by both the individual and the superannuation fund.

As an example of how that may work, I will base the following on the premise that, on average, the superannuation grows at the rate of the stock exchange index for the All Ordinaries. If I had $100,000 in superannuation as at December 2004, when the index was 4053, it would have grown to $167,300 by October 2007 when the index reached 6779. However, the GFC then hit and by February 2009 the index was down to 3297 meaning my superannuation was then worth $81,350. The market index has still not reached the highs of 2007. At the end of January this year the index was 5059 (superannuation value of $124,800) and at the end of February 4948 (superannuation value of $122,000). So while my super may be above the original $100,000 in 2004 it is still $40,000 below the peak of growth in 2007 and has grown only slightly over $20,000 in 12 years, or on average about 2% per year (rounded). There are other factors that influence the growth of superannuation and it should be noted that total market capitalisation is now almost as high as it was in 2007 although the index is lower.

The point, however, is that in an accumulation fund all the risk is borne by the individual. The employer no longer has an interest in what happens to the money once it has been paid into an employee’s nominated fund, whereas in defined benefits schemes the employer bears the risk and therefore maintains a real interest in the growth of superannuation investments.

The volatility of the stock market is a double-edged sword. It may occasionally offer higher returns but it can also crash, wiping out millions in superannuation savings, and since the GFC the market recovery has been extremely slow — after over eight years the index is still 25% lower than its October 2007 peak. There is some evidence that since 2000, superannuation invested in fixed interest deposits (including government bonds) would have provided a slightly better return than investment on the stock market. But the default superannuation fund, which a majority of people do not bother to change, is what is called a ‘balanced fund’, which is meant to include elements of stock investments, fixed term deposits and sometimes commercial real estate. Many Australian superannuation funds have a higher proportion of stocks in their balanced funds than European superannuation/pension funds which have been reducing their exposure to stocks since the GFC.

So where does that leave the employee now largely reliant on his or her superannuation investment for retirement? — between a rock and hard place!

Some European countries had pension systems more akin to a defined benefits scheme where retirees were guaranteed a fixed proportion of their final working income — it was an expensive model which some countries are now trying to change and it was partly funded by a ‘pension’ or social security levy that all employees paid during their working lives but government picked up the balance.

Australia, however, began with a government guaranteed and funded pension, which is now guaranteed at 41.76% of Male Total Average Weekly Earnings (MTAWE) for a couple or about 27.7% for a single pensioner but that provides a modest standard of living, not much more than a safety net.

I don’t see why we can’t have a government defined benefits model for all workers, funded, as in the present superannuation model, by a combination of government, employee and employer contributions. Such a model would remove the risk from the individual and place it back with government and to a lesser extent employers. After all, the government, more than any other institution, is able to bear risk.

But no political party is going to change this. Markets now rule. Our retirement income is now determined by market manipulators who are seeking nothing more than making a profit from their share and bond trading. The effect that has on superannuation funds is not a consideration. Superannuation funds (and individuals) can change their investment choices but in most cases that tends to come after the event, so to speak, when losses have already been incurred. It is not a model that guarantees an adequate retirement income and, to that extent, will not reduce government outlays in providing pensions and part-pensions. If it is not achieving the aim of significantly reducing government outlays, why not use that funding to contribute to a genuinely adequate retirement income?

In my view, it is time to reconsider the model for our retirement incomes, not fiddle while the markets burn!

What do you think?
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What can we expect in the coming election?


[Saint Malcolm?]

Apart from the obvious statements, we can also tell there is an election in the air as, after six months of inactivity, the Turnbull government has engaged in a flurry of policy announcements — or in some cases what should be termed policy ‘thought bubbles’. That is not to mention the concomitant increase in television advertising for existing government programs and policies.

Until recent times, the government had made few major announcements. Early on there were funding packages for domestic violence and the purchase of army vehicles but those were obviously developed prior to Turnbull becoming prime minister. His major announcement was the innovation package on 7 December, long on rhetoric and promises but short on substantive actions and new funding. Many of its proposed actions required no direct funding whatsoever, such as legislative changes for venture capital investments, employee share schemes and changes to bankruptcy and insolvency laws. Some had a potential impact on government revenue into the future, such as the tax incentives for early stage investors that will cost $51 million in each of 2017‒18 and 2018‒19. There was some direct funding for certain aspects of the package but it seems much of this was also funding redirected or rebadged from existing related programs. Essentially the strategy focuses on innovative business start-ups, improved collaboration between business and research institutions, a small investment in STEM teaching and digital literacy in schools, and the government itself setting an example in adopting new digital technology.

In The Conversation, Tim Mazzarol, Winthrop Professor, Entrepreneurship, Innovation, Marketing and Strategy at the University of Western Australia, suggested that it was a start and was implementing some changes that had been sought since 2008. He quoted another professor, Mark Dodgson, that the money announced for the strategy did little more than ‘get us back to square one’. Mazzarol pointed out that successful start-ups were a very small percentage of businesses and many do not grow beyond ten employees. He referred to his attendance at a Business Council of Australia round-table regarding enhancing industry-research collaboration:
‘… there was also a recognition that many large firms, particularly foreign owned multinationals, do very little fundamental R&D in Australia. The pipeline for STEM graduates into industry and the willingness of many large firms to serve a “Keystone” role in local business ecosystems is currently missing.
So is the Turnbull plan missing the real issues?

On 29 February, Turnbull told Cabinet:
The challenge for us this year is to ensure we lead Australia in a way that delivers a successful transition from an economy that has been buoyed by a mining construction boom to the new economy.

That transition is the big challenge and the big opportunity for us and so in this election year we know that the choice will be who is best able to lead Australia through that transition, who is best able to deliver the innovation, the investment, the infrastructure, the jobs that are going to ensure that our children and our grandchildren have the great, high paying jobs of the 21st century.
Turnbull may be telling his Cabinet that but it is not exactly inspiring stuff for the electorate: probably the explanation for so many television advertisements now trying to sell it as important for our economy and for our children — the latter a deliberate advertising ploy.

There have been more uninspiring announcements but announcements that fit with Turnbull’s background in merchant banking. On 16 March, it was announced that, in accord with the Harper Review, Section 46 of the Competition and Consumer Act, regarding the misuse of market power, would be changed to prohibit those ‘with substantial market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition’. On 21 March, Morrison announced changes to support financial technology. He said:
FinTech is going to revolutionise how consumers and businesses, as the drivers of economic activity, interact. This is going to have big implications for demand in the future. We need to be part of these changes and we have got to work out the best way to engage with FinTech and prepare for the financial system and economy of the future.
And on 30 March, Morrison announced that the ASX would lose its monopoly on share clearing, ‘a move by the Federal Government to encourage competition’.

On issues that may gain more voter attention, there was an announcement to create ‘Health Care Homes’ to coordinate treatment of those with multiple chronic conditions (note, however, that this is only for multiple conditions, not a single chronic condition). And on 23 March, a $1 billion Clean Energy Innovation Fund was announced. This at last abandoned Abbott’s attempts to do away with the Clean Energy Finance Corporation (CEFC) as the fund would be administered jointly by it and the Australian Renewable Energy Agency (ARENA). However, whereas ARENA was previously able to make grants, the new arrangements will operate on a debt and equity basis.

And there was Turnbull’s promise on taxation reform where he initially said ‘everything was on the table’ but has subsequently taken the GST, negative gearing and superannuation changes off the table. They ran the idea of corporate tax cuts ‘up the flag pole’ but it remains to be seen whether they will make their way into the budget. Personal tax cuts seem to have disappeared, as too expensive, despite Morrison earlier having emphasised the need for such cuts to overcome bracket creep.

At the COAG on 1 April, Turnbull took another ‘thought bubble’ to the table: the idea that states could re-introduce their own income tax but it was firmly rejected by the Premiers and Chief Ministers. The idea was underpinned by the concept that states and territories would take over complete responsibility for education in government schools (and eventually hospitals), something which was also being pursued by Abbott and Hockey. I warned that this was likely in my piece ‘A smile is not enough’ early in February:
The Turnbull government is still pursuing the Abbott government policy of a transfer of powers to the states. Morrison has floated the idea that the states should receive a guaranteed share of income tax. The underlying idea is that the states become solely responsible for schools and hospitals and the commonwealth covers Medicare, the PBS and universities. Given that education and health are issues which the electorate sees Labor as better able to manage, the cynic in me suggests that this is also a political strategy to take away one of Labor’s strengths at the federal level.
State income tax was abandoned in 1942 and the idea that we could have different tax regimes between states runs counter to the concept of a national economy and would add to the complexity for businesses that operated in more than one state, whereas Turnbull and Morrison keep proclaiming the need to reduce red tape for businesses. We will now have to await the budget to see whether the Turnbull government can achieve any form of taxation reform to take to the election: the prospects do not look bright.

So far, very few of the government’s policies appear likely to inspire the voters. Perhaps Turnbull has a ‘vision’ with his innovative, agile economy but there is little substantive to talk about, little to grab the imagination of the voters.

Labor on the other hand has been releasing detailed policies for over twelve months, a strategy that has not been followed by Oppositions for twenty years. In that time, Oppositions have taken a low-profile approach and offered little in the way of major policy or have made such announcements only in the last week or so of an election campaign. The reasoning behind that approach was that the early release of policies allowed time for the government to refer them to the public service, or external consultants, to pull them apart and pick holes in them. The fact that the government has done little damage to Labor policies so far may suggest that the ‘holes’ are few and far between.

The government response to Labor’s proposed changes to negative gearing brought not an attack on the detail but a ‘fear campaign’ and it could not even get that right with contrary claims that house prices would fall and house prices would rise.

Labor is also proposing changes to the tax treatment of high income superannuation, changes to the tax concessions for capital gains, an increase in tobacco excise and a target of 50% renewable energy by 2030.

Abbott, following his classical three-word pattern (he seems to have no other) has labelled these as ‘five new taxes’: a housing tax, a seniors’ tax, a wealth tax, a workers’ tax and a carbon tax. He ignores, of course, that, for example, an increase in tobacco excise will help reduce future health costs as more people give up smoking and that the so-called ‘carbon tax’ will actually promote and invigorate the renewable energy industry in Australia, thus creating more jobs and boosting the economy.

In the absence of inspiring Turnbull policies, I would not rule out Turnbull adopting a similar approach. As a matter of principle he would not use Abbott’s phraseology but he may well attack Labor’s ‘new taxes’ — or perhaps he will give Abbott his head and allow him to run such a campaign while Turnbull himself can remain aloof from such tactics. Don’t rule out anything!

Underpinning the Turnbull approach is the report of Trade Union Royal Commission (TURC) and the legislation for the reintroduction of the Australian Building and Construction Commission (ABCC). Turnbull has recalled parliament with the aim of passing the ABCC legislation and has threatened to use it as a double dissolution trigger if it is not passed (that, of course, after having already achieved changes to Senate voting). In other words, union ‘corruption’ will be a key election issue although Turnbull is trying to cloak it as an economic necessity, claiming it will improve productivity in the construction industry (although the Productivity Commission found no significant improvement in productivity when it previously operated).

Probably more importantly, Turnbull can use the idea of union corruption and the TURC report to attack Shorten personally. Although Shorten was cleared of any wrongdoing by TURC, the Liberals earlier showed their hand by suggesting that Shorten had sold out the members of his union in sweetheart deals with businesses — despite the fact that the deals Shorten negotiated appeared to achieve successful outcomes for both his members and the projects in which they were involved. Surely the Liberals should be supporting successful business outcomes! No, not if it impedes an attack on Shorten. I think we can expect a lot more of this during the election campaign.

Unless the government pulls a rabbit out of the hat in its budget — and so far most of its rabbits appear to have been DOA — it appears to have little to take to an election. Its policies do not match those already put out by Labor, although there is some overlap as in, for example, support for STEM subjects in schools. Its grand vision may be a vision but it is not an inspiring one for the electorate as it consists mostly of words and legislative changes which will not impact most people — what interest do people have in ‘FinTech’, the removal of the ASX’s monopoly or changes to laws relating to venture capital?

Polls consistently show issues like education and health are major concerns for the electorate — they are issues which Labor is usually seen as better able to manage. Turnbull and the neo-liberals have not yet achieved their aim of transferring education and health to the states, so they will remain in play for the coming election and the government is not looking strong on them at the moment.

The economy is also ranked highly by voters as an election issue and Turnbull will claim that only he can take Australia towards the new economy of the 21st century (as he told his Cabinet) but that somewhat misses the point. When people say they are influenced by the economy, they usually mean issues like unemployment, wage rises and inflation, not some grand vision of an agile economy. At present wages growth is the slowest it has been in twenty years and that is the sort of issue voters will look at when assessing the health of the economy.

At the moment, I believe the policy issues are mostly in favour of the Labor party so don’t expect policy to be the major battle ground in the coming election. It may play a part but Turnbull is more likely to focus on union corruption. Expect a dirt campaign aligning Shorten and Labor with the ‘corrupt’ unions. Expect personal attacks on Shorten regarding his time as a union leader. Expect some suggestions that it is the unions that are holding us back from the golden age of an agile, innovative economy. Expect attacks on Labor as the party of high taxes and high spending (although that is traditional Liberal fare).

And, of course, expect Turnbull to present himself as the saviour, the only one capable of leading our country into the new golden age.

What do you think?
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Inequality will be a hot button election issue



‘Inequality’ is a term used by economists. Joseph Stiglitz has been writing for years about its damaging effect. His book: The Price of Inequality is a classic. More recently, Thomas Piketty entered the arena with his Capital in the Twenty-First Century and hypothesised about the genesis of inequality. He asserted that the main driver of inequality, namely the tendency of returns on capital to exceed the rate of economic growth, today threatens to generate extreme inequalities that stir discontent and undermine democratic values. He reminded us that political action has curbed dangerous inequalities in the past and could do so again. But is anyone listening?

No matter who writes about inequality, the conclusion is the same: the gap between those at the top and those languishing at the bottom of the pile is widening in many countries, ours among them.

A more familiar way of talking about inequality is to talk about ‘fairness’, a concept every Aussie understands. The ‘fair go’ is valued by most of us. Who would argue against the idea that everyone should have a ‘fair go’?

So look out for emphasis on fairness during the election campaign. You will hear it from Bill Shorten and Labor people; you might not hear much about it from LNP people, although PM Turnbull has often insisted that whatever changes his government makes to the tax system, they must be ‘fair’. We are still waiting to see his version of fairness. Although aware of the angry reaction of the people to the unfair 2014 Abbott/Hockey Budget, he is still seeking approval of many of the elements of it in the Senate. Treasurer Morrison does not seem to have 'fair' in his vocabulary.

Have you noticed that ordinary people are becoming increasingly fed up with the inequality we see day after day where those at the top of the pile gain advantages over those at the bottom? In the past few weeks we have seethed as we saw instance after instance of this. More of this later!

If you question whether inequality really is a problem in this country, take a look at these statistics, which are based on a 2015 ACOSS study: Inequality in Australia: a nation divided:

• Inequality in Australia is higher than the OECD average.
• A person in the top 20% income group has around five times as much income as someone in the bottom 20%.
• There is an urban and regional pattern to income inequality, with people in capital cities more likely to be in the top 20%, while those outside capital cities are more likely to be in the bottom 20%.
• Wealth is far more unequally distributed than income. A person in the top 20% has around 70 times more wealth than a person in the bottom 20%.
• The top 10% of households own 45% of all wealth, most of the remainder of wealth is owned by the next 50% of households, while the bottom 40% of households own just 5% of all wealth.
• The average wealth of a person in the top 20% increased by 28% over the past 8 years while for the bottom 20% it increased by only 3%.

In other words inequality is steadily increasing.

If you need more evidence, read the 2014 study by The Australia Institute: Income and Wealth Inequality in Australia by David Richardson and Richard Denniss.

While everyone concedes that the rich are steadily getting richer, conservatives salve their consciences by insisting that ‘all boats rise with the tide’ as prosperity increases, a convenient but false metaphor that implies that as those at the top get richer, so do those at the bottom, and at the same rate. Whilst it is true that all boats rise equally with the tide, it is not true that the poor get richer at the same rate as the rich. Study after study over many years show that while in good times the poorer do get richer, they do so at a much slower rate than the rich. Thereby the gap between rich and poor widens and inequality rises. Conservatives still believe in the old trickle down effect, although it’s long since been debunked as fiction.

It has always been the case that while the rich get richer, the poorest have lagged at the back of the pack wallowing in poverty. Many of the revolutions over the centuries have been the tragic outcome of this inequality. Les Miserables tells this story poignantly.



Inequality results in social unrest, social disruption, and in the end, if unresolved, in revolution. It is a risky state of affairs. And the people are revolting against it.

Read what Nick Hanauer had to say in 2014 about the dangers of increasing inequality in: Politico: The Pitchforks Are Coming… For Us Plutocrats

In the US, Bernie Sanders has attracted massive grassroots support by railing against income inequality. In contrast, conservatives embrace inequality. A 2014 article in newmatilda.com by clinical psychologist Lissa Johnson What Makes Them Tick: Inside The Mind Of The Abbott Government concludes: “The two ideals most dear to our Government’s extremist ideological heart could be exposed for what they are: change-aversion and inequality.

Inequality comes in many guises. Some are obvious to all; some are subtle.

Let’s take a contemporary example. The purpose of the Gonski schools reforms is to iron out inequality. Inequality of opportunity exists in schools that have many children from poorer postcodes or disadvantaged homes, where the children have disabilities or are of other than Anglo-Saxon ethnicity. These schools need extra resources. Despite the oft-repeated LNP mantra that the problem of inequality in schools cannot be solved ‘by throwing money at it’, the undeniable fact is that money is needed for the extra teachers and teaching resources required. Notwithstanding that, the latest LNP ploy is to suggest that poorer outcomes might result when funding is increased! It’s all about avoiding properly funding years five and six of Gonski. Add to this the Turnbull suggestion that the federal government might focus on funding private schools and leave states to find the funds for public schools, and you have a recipe for deepening inequality. The well-funded private schools where the wealthy send their kids will leave the poorer schools further behind.

Voters are sick and tired of the LNP attitude to Gonski, which Abbott gave the impression he endorsed (we are on a unity ticket with Labor on education) before the 2013 election, only to walk away from properly funding it afterwards. They are sick and tired of the inequality of opportunity at public schools and the politicisation of school funding. It’s not fair and they want it fixed.

In the last few days we heard that in the tertiary sector student loans debt in Australia will likely top $185 billion in the next decade, much of it irrecoverable because graduates will not reach the income threshold where repayment of their loans begins. The reason they will not earn enough is that the courses they took did not qualify them sufficiently. Why? Because they were shonky courses, run by shonky operators, whose prime objective was to line their own pockets. They had no concern for course quality or outcome. Making money was their aim. They are crooks that have accentuated inequality. They prospered from students’ fees, which were borrowed from HELP. The students have nothing to show at the end except a massive debt, which the LNP is now threatening to retrieve from the student’s family, and even from deceased estates.

Education will be a hot issue at this election.

If you’re interested in seeing how good education might be delivered, in how excellent healthcare might be provided, in how women might contribute to good governance, be sure to see Michael Moore’s most recent brilliant film: Where to Invade Next. You will be astonished.

Next, take the recent scandal revealed by the leak of the Panama Papers. Here we have a flagrant example of the rich and powerful ferreting away their wealth in tax havens to avoid paying their fair share of tax. Presidents, prime ministers, politicians, sheiks, and thousands of wealthy individuals and businesses are implicated, 800 from this country. Some may have legitimate reasons for having assets overseas, but many are deeply suspect. Why does, for example, Wilson Security, which guards the ATO, have a need to open an account with Mossack Fonesca?



PAYE workers have no option but to pay their legal share of tax: the wealthy have the means of minimising it, or avoiding it altogether. The ATO reported recently that almost 600 of the largest companies operating in Australia did not pay income tax in the 2013-14 financial year. Many are household names: Qantas, Virgin Australia, General Motors, Vodafone, ExxonMobil, Warner Bros Entertainment, Lend Lease and Ten Network Holdings. Others made huge profits but paid miniscule tax: Apple, Microsoft, Google, VW and Spotless.

That’s not fair. That’s inequitable. The voters are sick and tired of unfairness. And yet the Turnbull government is contemplating giving business a company tax break!

As if that’s not enough to turn our stomachs, we now have our most prestigious banks behaving like shonky back room operators. We have our most prominent bank, the Commonwealth Bank, employing loans traders who put their bonuses ahead of their clients’ welfare, invested clients’ funds in dubious schemes, thereby losing their life’s savings. We heard about claims managers in CommInsure who refused or unreasonably held up legitimate claims in order to bolster their bonuses. Then we heard that ANZ and Westpac harbour BBSW traders who have knowingly rorted the bank bill swap rates to make massive profits for their banks.

It’s wrong, it’s unfair, and we are fed up. What sort of unethical behaviour, what kind of culture allows such shonky practices in our most prestigious institutions? Yet when this unseemly culture was questioned, we heard a very senior banker, David Murray, ex-CEO of CBA, angrily castigating those who questioned it. Take a look.



And while the top brass in the banks allow this toxic culture to develop and thrive, they are pocketing millions in salaries, bonuses and shares.

There are now calls for a Royal Commission into Banking, from Labor and the Greens, and even some Nationals who are angry about how some of their rural constituents have been treated by the banks. But there has been a noticeable lack of enthusiasm shown by the Liberals, who insist that ASIC can deal properly with the rorts, the corruption, the unfair behaviour. Yet they haven’t. Some regard it as useless!

Some Liberals have labelled calls for a Royal Commission as a ‘stunt’, and the bankers are up in arms – they’ve had enough enquiries they say! What a contrast this is to the relish with which the LNP pursued the unions via the Heydon Royal Commission into Union Governance and Corruption? Maybe the growing community sentiment will pressure government to establish a Royal Commission into Banking Governance and Corruption. Wouldn't that be nice!

Not long ago we heard of the corruption in NSW through its Independent Commission Against Corruption, ICAC. Countless politicians were shown to have their noses in the trough, ruthlessly exploiting the advantages of their positions. Many were forced to resign. The people are angry and fed up.

Only a week or two ago it was revealed that an elaborate mechanism had been set up to funnel donations from banned donors to the Liberal Party in NSW via the ‘Free Enterprise Foundation’. Key figures feigned ignorance, but the Liberals, having been caught out, were embarrassed. Key figures feigned ignorance, but the Liberals, having been caught out, were embarrassed. The NSW Electoral Commission is withholding some $4 million due to the NSW Liberal Party until it reveals its list of donors.

Reflect now on housing affordability. Young people, (and their parents), despair of ever owning their own home because competition from investors and the well-off using negative gearing to acquire a second or third dwelling are pushing house prices ever upward, so that now in Australia and particularly Sydney we arguably have the most unaffordable housing in the world.
The people want something done about negative gearing and the associated capital gains tax concessions. Labor has promised to do so and save the billions of revenue lost. The LNP, after talking about it, seems to have backed off.

Think too about the superannuation tax concessions enjoyed particularly by the very wealthy, who are able to deposit large sums into their fund for their retirement with minimal tax implications, a privilege not enjoyed by the poorer. Inequality again. Ordinary people want to see these perks for the wealthy, which cost the government billions in lost revenue, reduced or removed.

All these examples illustrate how those with wealth and those who have influence, those enjoying the view from the top of the tree, put themselves ahead of those beneath them, those they are supposed to serve. They prosper and profit while the rest languish and the inequality gap widens and widens.

Whichever way we turn we see this. More than ever the ordinary people are waking up to the reality of inequality, are angry about it, and are incensed by the reluctance of politicians to acknowledge and address it. They are fed up with unfairness, and want something done about it now.

They want the crooks, the shonky operators, the corrupt, and those responsible for the inequality brought to heel and punished. They have had enough. They want the system cleaned up. They want change!

Any politician guaranteeing to do so will get their support at the ballot box; those who don’t or won’t will be ignored.

Inequality will be a hot button issue at the upcoming election.




What do you think?
What are your views about inequality in this country?

What do you want done about it? What party is likely to act?

We look forward to reading your views and your comments.

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The calamitous Abbott lies in wait



You may wonder why anyone would waste time writing about this man, erased from the top job by his own party, and discredited in multiple ways by commentator after commentator. For me, the reason is twofold. First, he is still confronting us day after day in the media, and just as importantly his successor is doing so poorly that some want Abbott to return.

He lies in wait hoping to do so. All the while his appalling legacy hangs like a dark cloud over his party.

I looked for an adjective to place in the title. Some of you might have chosen: catastrophic or disastrous or dreadful or tragic or devastating or destructive or ruinous or shocking or scandalous or appalling or dreadful or outrageous or deplorable or shameful or contemptible or despicable or disgraceful or woeful or even loathsome. While any or all might be applicable, ‘calamitous’ seemed to me to be the most appropriate. The Free Dictionary defines ‘calamitous’ as “having extremely unfortunate or dire consequences; causing ruin or destruction”. That description seemed to me to fit Abbott better than any of the others.

Abbott’s calamitous legacy is everywhere to be seen.

We need go no further back than the recent COAG meeting to feel the drag of the Abbott legacy on deliberations at that forum. PM Turnbull and Treasurer Morrison are encumbered by the ball and chain of Abbott’s decision, at the time of the 2014 Budget, to cut around $80 billion of funding to the states: $30 billion from schools and $50 billion from hospitals. I will not burden you with the convoluted arguments around this except to say that Labor claimed $80 billion was removed, while the LNP claimed it was never in Julia Gillard’s budget anyway. Despite denying the Budget had been cut, Abbott claimed he would achieve $80 billion in ‘savings’ over 10 years by reducing forward spending on schools and hospitals. Work that out if you can. If you want to probe deeper into this sorry tale, read the ABC’s Fact check: Does the federal budget cut $80 billion from hospitals and schools?, and look at the conclusion: The debate over the $80 billion figure - whether a cut or a saving - is hot air.”

Hot air or not, the premiers and first ministers are livid that this money, needed to run their schools and hospitals in the coming years, will not be forthcoming from the federal government, leaving them in a dire situation. Turnbull decided on the risky strategy of offering them the capacity to raise tax themselves to fund these essential services, announced it just a few days before COAG, provided no documentation for this momentous change before or at the meeting, and received the anticipated thumbs down. Now Morrison is out declaring that the PM ‘called the premiers’ bluff’, and they chickened out! Believe that if you can. The premiers are insulted and furious. What a way to encourage consensus!

All this serves to reinforce the sad fact that Abbott’s calamitous budgetary legacy hangs like a rotting albatross around the government’s neck.

And it’s not as if Abbott regrets any of his actions; indeed he is out and about insisting that he was right in his decisions, all of them, and that Turnbull is now following his policies and taking them to the election. This has forced Turnbull onto the back foot, declaring that his government is all about ‘Continuity and Change’on which subject 2353NM has written such cutting satire.

Let’s look deeper into budgetary matters.

Abbott’s fiscal legacy is the aftermath of his 2014 Budget, which is still causing anguish for the Turnbull government. Several measures designed to reduce spending are still held up in the Senate and are unlikely to be passed. The unfairness of that budget still hangs like a bad smell around the Coalition, even among its supporters. Hockey’s bluster about ‘ending the age of entitlement’ for those on ‘welfare’, while puffing Cuban cigars, still sticks in people’s craw.

Yet Abbott tells an audience in Japan that he wears that budget as ‘a badge of honour’! He is unrepentant; he would do the same budgetary damage again.

And he lies in wait to do so.

This week we saw the re-emergence of the Hockey/Abbott ‘we must live within our means’ mantra. Turnbull and Morrison, hoping this homely metaphor would resonate with voters, didn’t bother to explain how that applies to the federal budget. Perhaps they hope it will remind voters of the old virtue of saving before buying, or of using old-fashioned lay–by, notwithstanding the fact that homeowners certainly do not use this approach to purchase the new home. They borrow heavily and pay it off of later, just as governments ought to do.



The LNP wants voters to believe ‘living within our means’ equates with cutting expenditure, assiduously avoiding any hint that ‘means’ = income = revenue, and that increasing revenue would have the same result.

In last week’s Crikey Bernard Keane points out: “
…there's been no talk at all of ‘living within your means’ while government spending as a proportion of GDP went from 24.1% of GDP in Labor's last full year to 25.6% of GDP in 2013-14 and 2014-15 and then to 25.9% this year. Nor was there talk of ‘living within your means’ when the Abbott repealed the carbon price (cost: $6.2 billion over four years), the mining tax (cost: $3.4 billion over four years) or tax and superannuation changes announced by Labor but abandoned in December 2013 ($3.6 billion over four years, and much more over the long term), significantly exacerbating not merely the government's short-term fiscal position but crimping long-term revenue growth as well.”
It’s simply rhetorical claptrap designed to frighten voters into believing that Coalition members are prudent and ever-reliable stewards of the economy who will not waste taxpayers’ money, while Labor members are profligate spenders determined to tax us to the hilt to give the community the healthcare and education it needs: “Every time Bill Shorten opens his mouth it will be to tax you more”. Obviously, this will be an election slogan.

Since we began with the COAG skirmish on healthcare and schools funding, let’s look at Abbott’s legacy there. It still blights the Coalition.

New health minister Sussan Ley is still grappling with Abbott’s intention to emasculate Medicare, to introduce a co-payment, and to reduce spending in an area that inevitably will demand more as the population ages and as medicine offers more treatment options. Her introduction of ‘health care homes’ has puzzled doctors. Professor Brian Owler commented: “I’m president of the AMA, I’m a brain surgeon with a PhD, but I can’t keep up with the government’s planning process”.

In response to Bill Shorten’s promise to improve and properly fund healthcare, Ley is sounding desperate as she shouts at him telling him that he must “put up or shut up”.



The cost of the NDIS frightens the LNP, so their response is to restrict its development, always looking for ‘savings’ instead of doing what is required: raising more revenue to support this essential service that the people want and need.

After assuring us that he was on the same page as Labor over the Gonski reforms, Abbott’s legacy has been to obfuscate about the funding of years five and six, a position recently adopted by Turnbull, who is now talking about abandoning the funding of public schools and focusing federal funding on private schools!

Abbott’s legacy lingers, and he lies in wait.

Let’s look now at Abbott’s calamitous legacy in the vexed area of immigration policy.

Abbott (or was it Peta Credlin) thought that political capital could be accrued by demonising asylum seekers who came uninvited by boat. He learned that from John Howard. ‘Stop the boats’ became one of his infamous three word slogans, with which he flogged Labor mercilessly, claiming throughout that this would solve the problem of boat arrivals created by Labor. Not wanting to be seen as encouraging the arrivals, Labor allowed itself to become entangled in a web of derogatory dialogue about people smugglers and ‘illegals’, as Abbott termed boat people.

Abbott’s legacy is continuing antagonism towards asylum seekers among a significant proportion of the electorate. This has spilled over into anti-Muslim sentiment and the formation of Anti-Muslim groups such as the far right-wing United Patriots Front, who unveiled a “Stop the mosques” banner at the Collingwood AFL game last weekend, and a political group calling themselves Party For Freedom, which is opposed to multiculturalism and open borders, which was responsible for picketing and riots at the Halal expo in Melbourne this week.

Abbott’s extravagant language directed at Islamic State, his incendiary use of the term ‘Team Australia’ to divide Australians into them and us, and his provocative stance towards Muslim leaders accentuated the antagonism. He set a fire of hatred that still burns in the heart of many Australians. He could have taken an accommodating line, as did Malcolm Fraser who had to manage thousands of boat people from Vietnam. Fraser’s approach resulted in the cheerful integration of these Vietnamese immigrants into our society. Instead, Abbott preferred hostility, antagonism and the divisiveness this entails.

This is Abbott’s calamitous legacy. Yet he lies in wait.

He not only defends his divisive ‘stop the boats’ immigration policy, he has been abroad promoting it to anyone in the Eurozone who will listen as the way to solve the immigration crisis in Europe and the Middle East. The misery that so many asylum seekers suffer in detention is testimony to Abbott’s hard-hearted, punitive policies, but politics keep him on this hateful track.

Take now his calamitous attitude to climate change.

At times climate change skeptic, sometimes outright denier, always coal and oil advocate and renewables opponent, Abbott has gifted his do-nothing-to-curb-the-use-of-fossil-fuels legacy to Turnbull, who accepts the reality of anthropogenic global warming and knows what ought to be done about it, but is lumbered with the Abbott/Hunt Direct Action Plan that holds little promise of reducing our carbon footprint or meeting our emissions targets. Yet there is Turnbull lamely advocating it. Meanwhile, one thousand kilometres of the Great Barrier Reef has already been bleached, and more is threatened.

Turnbull knows that if he puts a foot wrong, Abbott is lying in wait, aided and abetted by a coterie of deniers, who would have this man back in a flash.

Abbott’s calamitous legacy in the field of communications is legend.

Look at what he’s done to the NBN. ‘Demolish the NBN’ was his command to Turnbull, not given because we did not need fast broadband for a myriad of reasons, commerce and health care to name but two, but because it was a Labor initiative.

Excruciatingly, Turnbull put himself through fiery hoops to placate Abbott but still save the NBN. As a result we now have a substandard multi-technology FTTN system that uses outdated equipment and ageing copper wire, that is not as fast as promised, is rolling out slower, and looks like being more expensive than Labor’s FTTP system, which experts insist should have been the target from the beginning.

Abbot’s destructive NBN legacy is still playing out, and is inhibiting what Liberals repeatedly insist our economy needs: ‘jobs and growth’.

I could go on for many more pages, so let’s conclude with Abbott’s legacy on two social issues: marriage equality and the Safe Schools program. He remains opposed to them both.

Although in favour of marriage equality, Turnbull has meekly gone along with Abbott’s delaying tactic of a post-election plebiscite, which he knows is Abbott’s way of maiming it, and perhaps killing it off altogether.

Abbott, always lurking in the background, has announced that Safe Schools, which is already doing so much to reduce gender-related bullying, should be defunded.

Abbott’s calamitous legacy on social issues haunts Turnbull. Abbott lurks on the backbench where he lies in wait.

When he’s not sitting on the backbench, he’s overseas soliciting photo-ops with such celebrities as Japan’s Shinzo Abe, Britian’s David Cameron, President Poroshenko of the Ukraine, US Secretary of State John Kerry, and even Henry Kissinger. Back home, he’s all over the place, never averse to a pic with group after group, and now he’s on his annual Pollie Pedal. He’s not sitting back like a vanquished leader: he’s promoting Abbott wherever he can! Take a look at his Facebook page.

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Among the conservative clique that still supports Abbott, he talks about ‘the second Abbott government’, which he insists ‘will be better than the first’!

Although an Abbott comeback still seems fanciful, he certainly believes in it, notwithstanding the recent ReachTel poll of 743 voters in his Warringah electorate, where almost two-thirds of respondents, including half of all LNP voters, said he should quit parliament at the coming election.

The calamitous Abbott lies in wait, ready to attack. His storm troopers are ready. They know that a winning strategy is to first weaken the enemy, then mount a surprise attack.

The commercial shock jocks, incensed by PM Turnbull’s refusal to appear on their programs, are spreading adverse publicity about him, which is weakening him. Several of the LNP’s traditional supporters in the media are writing columns critical of Turnbull. Softening him for an attack is proceeding apace.



Close to Abbott is a group of offended conservatives. These men meet in the so-called ‘monkey pod room’. They are urging his return and planning for it. Eric Abetz is still angry about his demotion. He says he has so much to offer. Kevin Andrews is angry and again has offered to stand should the party wish to replace Turnbull. Cory Bernardi is so angry about how the conservative clique is being treated by Turnbull that he is talking of forming a new conservative party. George Christensen is angry about the Safe Schools program and is echoing Abbott’s hostility. Government House Whip Andrew Nikolic remains a fervent Abbott supporter. Although Turnbull won the leadership contest 44 to 34, when Andrews stood against Julie Bishop for deputy, he garnered 30 votes, an indication of the strength of the conservatives in the Liberal party.

Following a discordant week for Turnbull and with the latest Newspoll of 51/49 TPP to Labor reflecting voter discontent with the LNP, the troops are contemplating an attack on Turnbull.

Meanwhile, Abbott lies in wait, believing he is the man for the top job, while still mouthing sanctimonious words of support for his adversary.

Nobody knows what the weeks ahead will bring. Despite the improbability of a second Abbott government, in the crazy and unpredictable world that federal politics has become, nothing is impossible. The vengeful wrecker intends to show that this is so.

All the time the calamitous Abbott lies in wait.



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Continuity and change


Malcolm Turnbull’s re-election campaign started well. He tried out ‘continuity and change’ as a slogan when announcing the potential election date of July 2. While it might have been accidental, pinching the ‘meaningless’ election slogan from a US political satire could be seen as an indicator of the standard of the research and advice Turnbull is getting. When the star of the TV show tweets
and one of the show’s writers comments
maybe it’s time to suggest the execution of the plan lacked something!

While the comparison to Veep and the US TV show House of Cards Twitter account sending up Turnbull’s recall of parliament is pretty funny and certainly embarrassing on day one of the really long election campaign, there is a serious issue with the pseudo-electioneering and the rationale for the recall of parliament in April.

Turnbull’s rationale for the recall of parliament is that it is time to stop playing games and pass the ABCC and Registered Organisations Bill through the Senate. The ABCC legislation, if passed, will re-create the Howard era Building and Construction Commission that had the right under law to investigate alleged corruption in the building and related industries. Despite the demonstration of not asking the question until you know how it is going to be answered, the Heydon Royal Commission did find some issues of apparent concern in the building industry. It is also worth noting that the same Royal Commission found nothing against either current Opposition Leader Bill Shorten and former Prime Minister Julia Gillard (not that small details like that will stop the whispering campaign from the ultra-conservative elements of the media and politics).

In the words of Turnbull, the 2013 Senate election results were an embarrassment. To ‘fix’ the problem, the Coalition and the Greens passed a bill through the parliament that (until they work out a way around the legislation) eliminates the ability of ‘preference whisperers’ to be elected through ‘back room deals’. Understandably, most of the crossbenchers in the Senate (who voted against the Senate voting bill by the way) object to the characterisation. Funnily enough, the same crossbench Senators are not all that interested in passing the ABCC legislation, because they claim, it has fundamental flaws. Fresh from working with the government to pass the Senate voting legislation, Greens leader Richard Di Natale claims Turnbull ‘is adopting the same tactics that people in the construction industry — he says — are using. That is, bullying tactics, that is using a piece of legislation to bludgeon his way through the Senate.’ The views of Di Natale and the other crossbench Senators can be read here.

Apparently a lot of the concern from the crossbenchers isn’t around the actual prospect of an anti-corruption body ‘supervising’ the construction industry, but the lack of a federal corruption body across other areas of federal influence. Queensland Senator Glenn Lazarus is quoted as saying ‘I said to Malcolm I’m happy to vote for the ABCC if he makes it an ICAC or equivalent’.

Actually, it’s a pretty good argument. The Coalition government wants to re-establish the ABCC to minimise the ill effects of corruption in the building industry (conservative political code for the building unions). Most if not all states in Australia have an ‘anti-corruption watchdog’ that will investigate alleged corruption across government, politics, workplaces and so on. The federal government doesn’t have a similar body.

What Turnbull is now saying (as Abbott was saying when he set up the Heydon Royal Commission) is that there is corruption in the building unions. Abbott was very careful with the powers he gave Dyson Heydon to ensure that the Commission didn’t stumble across another ‘bottom of the harbour’ where the Costigan [building industry] Royal Commission in 1982 followed a paper trail and found a tax avoidance scheme that was estimated to have cost the country billion dollars in unpaid revenue. (By the way, a 1982 billion is worth a lot more than a 2016 billion dollars.)

We’ve seen above that Senator Lazarus for one will vote for the ABCC if the scope of the proposed anti-corruption powers is not limited to just the building industry. Turnbull’s not budging and Attorney General Brandis has stated the government wants to pass the legislation in its current form. The position is rather illogical. What Turnbull and Brandis are saying is that while they want to eliminate potential corruption in the building industry, there is no corruption (or even worse, no corruption they want to eliminate) in other areas of society where federal legislation rather than state legislation applies.

Claims of corruption do to an extent besmirch a reputation, regardless of the veracity of the claim. In the recent Queensland Local Government elections, a number of councillors (and potential councillors) were reported to the Queensland Crime and Corruption Commission. The Commission eventually warned political operatives that false reporting was wasting time and money as well as asking the Queensland parliament for a new criminal offence in regard to false reporting used to injure someone’s reputation. If there is nothing to hide, surely a prime minister would welcome an independent body to investigate and determine the accuracy of corruption claims.

In the same week that Turnbull made his ‘decisive’ call telling the crossbench it was his way or the highway, the NSW Electoral Commission released a report advising the NSW Liberal Party that it was not going to pay $4.4million in public funding until the Liberal Party disclosed who donated around $700,000 to the party via the use of a Trust Fund before the 2011 NSW state election.

The treasurer of the NSW Liberal Party at the time was Arthur Sinodinos, Turnbull’s current Cabinet Secretary, who claims that he had no personal knowledge of the donations. Sinodinos has also instructed his lawyers to write to the NSW Electoral Commission ‘inviting’ them to remove references to him from the report and publish a correction on their website. The ALP are calling for Sinodinos to stand aside again, (he was forced to do so as assistant treasurer when Abbott was prime minister over some allegations regarding his employment with Australian Water Holdings between stints in parliament), the Liberals are suggesting it’s time to move on. As they say in the classics, the matter is far from over.

The NSW Electoral Commission believes that the NSW Liberal Party is hiding the names of political donors. Regardless of who did or didn’t know about it, the danger in hiding political donations is that you or I don’t know if the legislation passed is the best outcome for the country rather than the best outcome for the specific interests of a donor to a trust that ends up in political party coffers prior to an election. This is no better than collusion on a building site. Turnbull could be arguing for the elimination of collusion on the building site but not the hiding of political donations, or dubious decisions made by federal politicians or employees. Glenn Lazarus is right — if the federal government is to have a corruption body, why limit it to a specific industry (that conservative governments have used as a whipping boy for generations)?

You would have to wonder if the strategy was put together by the same crew that decided ‘Continuity and Change’ was firstly meaningful and secondly hadn’t already been used by someone — and a satire no less. Apart from the reference to HBO series Veep, which airs on Foxtel in Australia (and if Turnbull’s staff knew about it, did they think that no political journalist in Australia would watch a US political satire — really!), Continuity and Change is also an academic peer reviewed historical journal published by Cambridge University Press. Turnbull was one of the Internet Company pioneers in Australia and you would think his staff would have the ability to search the internet as search is your friend.

Continuity and change was an explanation for Abbott’s claim from the other side of the world that of course he would support Turnbull — the policies are the same (and hasn’t he been doing a great job supporting him so far!). Maybe the Coalition looked at the ALP’s 2013 election campaign when Rudd didn’t mention anything done by that person with the ‘G’ name (Gillard), or the 2010 campaign when Gillard did the same thing with the ‘R’ name; and decided that this strategy effectively tied the ALP’s hands behind its back, as both Rudd and Gillard had made some valuable contributions to the financial and social wealth of Australia. So they decided to at least acknowledge Abbott’s existence. It is of course debatable if Abbott did do anything worthwhile while prime minister — we might go there another day.

The thing is that the Coalition voted twice on Abbott’s prime ministership. The first time in February 2015 when 39 out of the 100 MP’s and Senators decided that an empty chair was a better option as no one ran against Abbott in the leadership spill. The second time, Abbott was trounced (remembering he originally only won the leadership by one vote anyway). Turnbull is asking us to believe that he and the ultra-conservatives led by Abbott are on the same page, and the continuity is what we need; in which case why go through the hassle of replacing Abbott? We’re also supposed to believe that corruption in the building industry is rife; yet there is absolutely no corruption elsewhere in the federal sphere. Both arguments have holes large enough to drive the mythical Selina Meyer’s campaign bus through.



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The small government myth


Politicians are a strange breed. They will spend millions at election time attempting to convince you that their side is better than the other because they will better manage the country. They will also tell you that they have irreconcilable differences with their opponents and in essence, it’s their way or the highway.

Of course the reality is somewhat different. In the past few weeks the Australian public have observed the farce of an overnight Senate sitting when the Greens and the LNP had already come to a deal to pass the legislation at the root of the so called angst. Sure, the politicians ‘signed up’ for this childlike behaviour to prove political points and lay down a perception of what they and other parties are alleged to stand for.

The people who staff the Senate chamber, the Comcar drivers and so on would not be in a mood to appreciate the political and ‘image’ benefits of this action - they were missing their kids’ bedtime, a dinner date, coaching the Under 14’s sporting team - because they were hanging around all night just in case the Senators came to a realisation at 2am that bed was really a better idea than reinforcing the ‘narrative’ that they were better than ‘the other guy’ to a really small group of people, as most really didn’t care.

Let’s call the farce for what it is – marketing. Somehow the behaviour in the Senate was supposed to convince you to change your vote – just like a toothpaste advertisement on TV is supposed to convince you that Brand X will clean your teeth so well, you’ll exceed your wildest dreams. Was it successful – probably not in any meaningful way. But the entire cohort of Senators contributed. You could suggest that they are all the same.

There is however a difference between the respective mindsets of the two major political parties in Australia. In the 1980s, the Hawke Government hosted a summit in Parliament House. The outcome was a consensus decision that for Australia to grow holistically, all sections of the community must make some of the changes and reap some of the rewards for the changes made. Part of the success of the package – known as the Accord was the agreement between industry, unions and the government to pursue economic and cultural growth.

The Accord lasted most of the Hawke and Keating government era and to be fair a lot of the work undertaken by Hawke and his treasurer Keating set the country up for the impressive run of economic growth that has occurred since – even during the tech wreck and GFC that pulled a lot of other similar economies into recession in the past 20 years.

Keating’s ALP lost to Howard’s Liberal/National Coalition in 1996. The Hawke Accord had at its heart the concept that if the economy grew, all should receive some direct benefit from the growth. Howard tried a different tack:
Official statistics show that between the time Howard came to power in March 1996 and the time he lost office in December 2007, per person household incomes grew by about 25 per cent in real terms. But when you dig a little deeper, things look less rosy, for the rising economic tide did not lift all boats by the same amount.

Economic inequality grew through that period, as did relative income poverty, says Professor Peter Whiteford of the ANU’s Crawford School of Public Policy.

Household income for the top 10 per cent went up 60 per cent.

“It was the highest for any OECD country for the period,” says Whiteford.
For the median household, it went up about 53 per cent. For the poorest 10 per cent, it went up about 37 per cent.

So the story is that everyone did better, but the rich did much better. It was the economic boom that drove incomes higher, but it was primarily the government’s approach to tax and welfare policy that caused the inequality.
One example of Howard’s methods was the replacement of the federally operated Commonwealth Employment Service (CES) with the ‘Job Network’. Whiteford in the article linked above claims:
The introduction of the Job Network saw the stripping out of about $1 billion of assistance for people unemployed long term.

There was the welfare-to-work policy that shifted single parents and people with disability off to the lower Newstart allowance.

They redirected money away from those on working-age benefits towards older people generally, and particularly the upper middle class.
Apparently Howard also wanted to introduce income splitting (where the earner of the majority of household income could gift some of it to the lesser earner and reduce both party’s income tax liability) but didn’t win the argument within the Government. It fits with his traditional views of the husband being in the workforce and the wife staying at home and ‘homemaking’.

To be fair Hawke and Keating also enthusiastically privatised some functions of Government. However, generally the businesses that Hawke/Keating privatised were stand alone operations where the public were encouraged to (re)purchase some of the equity in the business. Howard’s concept was to invite existing private enterprises and some non-profit organisations to initially compete with and then completely take over the operation of government services – such as the CES or the current proposal for the privatisation of the payment of benefits incurred by Medicare.

This brings about a fundamental question of government in general – what is it there for? Should government take an active role in society to attempt to equalise as far as possible the expectations of those in the society (sometimes termed ‘big government’), or should it be a body that enables private enterprise to provide services while providing some oversight (sometimes known as ‘small government’)?

While both concepts will certainly increase the wealth of parts of the community, which one is fairer to all those who live in a society? Clearly the Howard era Coalition government were firm believers in enabling private enterprise – as those who had the financial and intellectual capital to become part of say the Job Network couldn’t set themselves up in business on a ‘wing and a prayer’ – rather they needed sufficient staff, business systems and so on to meet the government’s Key Performance Indicators (KPIs).

While the theory that once those who had the financial and intellectual capital would support those on lesser incomes and innovate to ensure that the service was provided at a lesser cost than the Government could do it, the reality was somewhat different. If you think about it for a minute, the number of people that apply, choose not to apply, choose to actively seek work or those that don’t really doesn’t matter. So it really doesn’t matter how job ready people are, how many job applications they have prepared in the past week, or if they have completed a thousand how to get a job courses, unless an employer really wants to offer anyone a job, the job isn’t available.

Because is it admittedly difficult to measure if a local business has an opening for another worker or Woollies is opening a new store in Upper Timbucktoo West in nine months’ time, the Government has to justify the decision and demonstrate that the system works in another way. So we again look at KPIs – only the indicator this time is how many jobs people have applied for, how many contact hours they have with their job councillor and so on which ultimately is meaningless.

Rather than attempting to measure how we as a nation are increasing the common wealth of all citizens which will lead to jobs being created for those who need them, we pay the Job Network providers to produce courses and measure success rates of those who are, in a lot of cases, victims of their own circumstance. Most people who are unemployed really do want to do meaningful work – even if it is at the local Meals on Wheels or other volunteer organisation. In fact, you could argue that if government was actually looking after its citizens effectively, organisations such as Meals on Wheels would not be necessary.

Really, there is a whole new bureaucracy formed, but because none of them are public servants, the Coalition government claims they don’t interfere in business, they don’t have a bloated bureaucracy and they are driving a small government agenda. If members of the Job Network can demonstrate that people are job ready, they get paid – regardless of the actual success in getting people into work. A 2007 report discussed the problems of the Job Network providers being motivated by profit rather than an objective of finding a job for all who want one.

Small government seems to be a mantra of the conservative chattering classes. The gold standard in middle and upper income support from Government is the Howard Costello years with the generous family benefits, frequent tax cuts and so on. It’s all very well for the government to support the better off, but if the government looks at applying stimulus to an entire community there is hell to pay.

You may remember that one of the Rudd government’s targeted measures to ensure Australia didn’t become a victim of the late noughties Global Financial Crisis was the delivery of a means tested $950 to most taxpayers in Australia. The theory being that regardless of how the money was spent (as opposed to saved), there would be a benefit and demand generation in the economy. Stories abounded of large screen televisions being out of stock, or the increased takings at the local TAB or pokies palace. Thinking about it for a minute, the electronics stores and pokie places also employ people who get to keep their job and pay as a result of the continual revenue created in their place of work – and the staff then buy such luxuries as food, petrol, tyres and maybe a night out at the movies themselves. Then the people who work at the food and petrol shops then get to keep a job and spend money and the process continues.

If anything Rudd’s $950 no strings attached cheques favoured those on a lower income as $900 is a greater proportion of someone’s annual income if they are on $50,000 per annum than it would be for someone on $100,000 per annum. However, the criticism was effectively suggesting those on a lower income didn’t have the right to make expenditure decisions.

It seems the fundamental question does have an answer. If we want to allow those who already have considerable financial resources and influence to further increase their wealth, we support the actions of conservative governments, as the Howard era statistics above demonstrate. The small government mantra is as much of a myth as the concept of trickle down economics that has been previously discussed here on The Political Sword.

When the Republican Governor in Utah can understand that direct assistance to those in need (in this case giving them a roof over their head) is a good use of public funds as discussed in this article we published last May, why does our federal government choose to continue to believe that company tax cuts, seeking bids to run government services and not considering any change to benefits enjoyed by the better off is an acceptable practice in 2016?

Let’s finish with the words of Tim Dunlop writing on the ABC’s The Drum website
In other words, by hiding behind the rhetoric of "small government" the right has managed to co-opt the functions of the state and bend them to the benefit of private firms and individuals at the expense of the majority of citizens.

We are told government has to cut back on health, education, childcare, infrastructure and other public services, while public money is funnelled to private businesses. All under the guise of "small government".

It is the ultimate democratic sucker punch.


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