Are budgets worth the paper they’re written on?


In this little exercise I have gone through commonwealth government budgets from 1999‒2000 to 2013‒14 to study changes in the figures.

The figures for each budget can vary quite significantly. For quite a few years now we have had the Mid-Year Economic and Fiscal Outlook (MYEFO) which updates and revises the figures used in the budget as presented on budget night. Even before MYEFO, it was not uncommon for budget figures to be revised during the year and this often became apparent during the process known as ‘Additional Estimates’. Then there is the next budget: while it provides the figures for the coming financial year, it also provides another set of figures for the current financial year — which still has about seven weeks to run at the time of the budget. And each budget also contains projections for the next three years (the forward estimates). To complete the picture, in about September each year, the ‘Final Outcome’ is released which presents the actual figures, the actual revenue and spending, that occurred in the previous financial year (and it compares those final figures not to the original budget but the figures used on the more recent budget night). So, before the Final Outcome, there could have been at least six different sets of figures relating to any single budget.

I will focus on two sets of figures: the budget figures as presented by the treasurer on budget night and the final outcome (which is why I stop at 2013‒14). That will give us an indication of how accurate (or otherwise) the treasury and treasurer estimates of income and spending actually are.

There is also an issue about accrual accounting and cash accounting, and there often seems to be a few billion dollars difference between the two: for example, in 2007‒08 the ‘final outcome’ revenue for the government in accrual terms was $303 billion but $295 billion in cash receipts. (One reason I have commenced in 1999‒2000 is because that was the year that accrual accounting was introduced.)

Accrual accounting assigns income and expenditure when a commitment is made whereas cash accounting only enters money when it is actually received or spent: for example, if the government promises an organisation $100,000 on 10 June this year but doesn’t pay the money until 10 July, it would appear in the 2014‒15 budget under accrual accounting but the 2015‒16 budget under cash accounting. While the budget papers do contain both cash and accrual tables, I have stuck with the figures from accrual accounting as they now seem to provide the headline figures. (Although from my reading it appears that governments may sometimes pick the figure which best suits them at the time.)

In the eight years from 1999‒2000 to 2006‒07, actual revenue exceeded the budget estimate in every year by an average of $6.7 billion (or about $9 billion in constant 2013‒14 prices), varying from $2.8 billion to $13.1 billion, or from 101.5% to 106.8% of the budget night estimate. We might argue that a difference of 1‒2% isn’t too bad when one is trying to predict the future but it was only that close in two of those eight years (and it has been that close only once since). Also, because in those years the mistake was to under-estimate revenue, it wasn’t a problem for the government. (It also helps explain how Costello managed to achieve his surpluses — the cumulative under-estimates for those years amounted to $54 billion.)

The year 2007‒08 was a turning point but initially for a different reason. It was the year the GST was counted in the government’s revenue — before that it was discussed in a separate budget attachment. For that reason, government revenue jumped by almost $57 billion above the original budget night estimate but $44.4 billion of that was the GST revenue. Without the GST, the final outcome for revenue was still $12.6 billion above the budget night estimate. The influence of the GST on the budget can basically be ignored because although it adds to revenue it is simply offset in spending as a transfer to the states. It does mean, however, that the headline revenue figure in the budget is a little misleading: for example, in 2013‒14 the government’s final revenue was $374.0 billion but that included $55.5 billion in GST, which left $318.4 billion for spending on commonwealth government programs (including additional support to the states for hospitals and schools). Despite that I will use the full budget figure as it becomes too time-consuming to re-arrange every budget to remove the GST.

From 2008‒09, the budget night estimates have tended to over-estimate government revenue, with only 2009‒10 under-estimating revenue (by $2.2 billion).

Revenue Budget estimate (billion) Final outcome (billion) Proportion
2008-09 $319.5 $298.9 93.6%
2009-10 $290.6 $292.8 100.7%
2010-11 $356.4 $309.9 87.0%
2011-12 $350.0 $338.1 96.6%
2012-13 $376.1 $360.2 95.8%
2013-14 $387.7 $374.0 96.4%

In dollars terms that amounts to an average ‒$17.7 billion each year. The cumulative total of budget night forecasts for those six years was $2,080 billion but the actual revenue was only $1,974 billion (95%), meaning the Rudd and Gillard governments had available for spending $106 billion less than they were originally told. That also suggests that when treasury over-estimates revenue it does so by more than twice as much as when it under-estimates revenue.

The forecasts in the ‘forward estimates’ in each budget also provide a picture of how treasury thinking changes over time. (The figures are billions of dollars on an accrual basis and start at 2001‒02 because I would need to go back earlier than 1999‒2000 to get the full three-year forecasts for previous years and those earlier years are cash accounting).

Government revenue Forecast 3 years earlier Forecast 2 years earlier Forecast 1 year earlier Budget night Final outcome
2001‒02 $153.8 $161.2 $158.8 $162.5
2002‒03 $163.1 $171.1 $164.9 $169.6 $175.0
2003‒04 $183.3 $175.5 $179.6 $178.3 $187.6
2004‒05 $185.7 $189.4 $185.0 $193.2 $206.2
2005‒06 $199.3 $194.2 $201.4 $214.5 $221.9
2006‒07 $204.7 $212.2 $222.9 $231.7 $237.1
2007‒08 $223.1 $233.4 $240.7 $246.8 $303.7*
2008‒09 $245.3 $252.1 $260.7 $319.5* $298.9
2009‒10 $265.6 $274.6 $336.9* $290.6 $292.8
2010‒11 $287.3 $350.9* $294.8 $321.8 $309.9
2011‒12 $366.9* $320.8 $356.4 $350.0 $338.1
2012‒13 $349.7 $381.9 $383.1 $376.1 $360.2
2013‒14 $407.2 $405.2 $402.2 $387.7 $374.0

* First includes the GST, which was not included in revenue figures in previous years

If you wonder why Labor had problems in its last budget, check out that last line of figures. The final outcome was below all of the previous forecasts, the only time that has happened since 2000 (although it also appears likely to happen to Hockey’s 2014‒15 budget but we won’t know for certain until September). The previous two years were above only one forecast, the one made two or three years earlier. In contrast, the Howard government during the 2000s saw the final outcome above all previous forecasts.

You can also see that treasury became a little uncertain between 2001 and 2004 after the ‘tech bubble’ burst and adjusted forecasts up and down and that has happened again in recent years, although for 2013‒14, and now for 2014‒15, each subsequent forecast has been lower: for 2014‒15 the figures run:
  • $425.8 billion forecast in 2011‒12
  • $424.8 billion forecast in 2012‒13
  • $411.6 billion forecast in 2013‒14
  • $391.3 billion estimated on budget night (which was reduced to $385.9 billion in the MYEFO)
The forecast three years out tends to be lower than the final outcome: that was the case in 11 of those 13 years. Leaving aside the change that the inclusion of the GST caused for the forward estimate for 2011-12, the only year in which that forcast three years out has been higher was in 2013‒14. That suggests the obvious: that revenue normally grows and it is difficult to predict by how much it will grow (which can also be influenced by inflation as these are ‘nominal’ dollars not adjusted to ‘constant’ or ‘real’ dollars). If you check the above table, you will see that revenue grew in all but two years (2008‒09 and 2009‒10) and, even with the problems since, has continued to grow although not as much as forecast.

Individuals’ income tax and company tax are the two biggest sources of revenue for the commonwealth government. The final outcome for individual income tax revenue was around 102% to 104% of the budget night estimate from 1999‒2000 to 2006‒07, with the exception of 2002‒03 when it fell to 98.1%. The year 2007‒08 was a good one for the government with individual income tax coming in at 105.5% of the estimate but since then the budget night estimates have been very good to poor: for four years (2008‒09 to 2011‒12) the individual tax income was between 99.3% and 100.4% of the budget night estimate, but in 2012‒13 it fell to 98.5% and in 2013‒14 to only 95.8%.

Company tax is more volatile and the forecasts rarely get it right. In the nine years from 1999‒00 to 2007‒08, the company tax came in at 98‒102% of the budget night estimate on only three occasions but, otherwise, it was generally under-estimated (coming in at 117.5% of the estimate in 2002‒03). Since the GFC, however, the estimates have failed to foresee the slowness of the recovery. In 2007‒08 it had come in $210 million above the budget night estimate but collapsed to 82.6% of the estimate in 2008‒09 (‒$12.8 billion). The estimate was better in 2009‒10, although actual revenue was lower — only $53 billion compared to $61 billion in 2008‒09. In the last four years (2010‒11 to 2013‒14), however, the estimate has been wrong every year and has over-estimated company tax by a cumulative $29.1 billion. It has provided as much as 25% of government revenue but in 2013‒14 was down to 18.4% (since 1999 it has averaged just over 19%).

The Howard government claimed to be low taxing but it achieved the highest revenue as a proportion of GDP in 1999‒2000 when it took 26.4% of GDP from the economy (it’s budget night estimate had been a high 25.9%). It did try to lower its GDP take in the following years aiming for 22.5% to 23% of GDP but generally its final take continued to be a little higher (most often just over 23%). Based on the budget night estimates, Labor also aimed for about a 23% take of GDP (other than during the GFC when it estimated 25.5% but actually took 24.9%). Since then the government’s take has been lower, and lower than the budget night estimates, falling to 21.7% in 2010‒11 and even in 2013‒14 was 22.7% (after predicting 23.5% on budget night). The Hockey budget of 2014‒15 estimates a take of 23.6% of GDP. It does seem odd that in the last few years as revenue growth slowed it also became a lesser proportion of GDP: one would think that it would remain more consistent and that revenue would fall if GDP fell or grow at a similar rate to GDP but that doesn’t appear to be the case. (If anyone can explain this, please do in a comment.)

Now I turn to spending forecasts. They could be more difficult as they are subject to government decisions that are taken after budget night and in that sense treasury can’t always be blamed if they are wrong. For example, the Rudd government decisions during the GFC boosted ‘social security’ spending by $22.1 billion above the budget night estimate and education by $3.8 billion. That would not have been the problem it became if the original revenue forecast had been accurate. Even with the increased spending, the total actual expenditure was only $5.1 billion above the revenue estimate on budget night: it was the fact that revenue came in $20.5 billion below that estimate that turned what should have been about $5 billion added to the deficit to over $25 billion. (Although, obviously, that additional expenditure was made because it was becoming apparent that the economy was in danger and revenue was falling.)

Health and social security are two of the government’s bigger expenditure items. While spending has continued to increase over the years (the reasons for that are a separate issue), the estimates of spending have been relatively good. Health, in particular, achieved 98‒102% accuracy in 11 of the 15 years from 1999‒00 to 2013‒14 and social security still managed to achieve 10 years despite the extra spending in 2008‒09. That makes sense because the spending is actually estimated by each line department, not treasury, and they basically know what they will spend under prevailing policies — major changes generally occur only when policy is changed during the year. In this context, I am taking no account of whether or not a government is spending more than it receives in revenue, only that the forecasts of spending are reasonably accurate.

Estimates and forecasts of revenue are important. Governments base their policy and spending decisions on them. When governments introduce new spending proposals, they do so on the basis of forecasts over the forward estimates — they usually allow that the future costs can be met within those revenue forecasts. But when the forecasts are wrong, and over-estimate future revenue, everything goes wrong: the government is locked into expenditure that no longer fits under the available revenue and that leads to deficits. That is a reason that deficits are sometimes considered acceptable when revenue growth slows, as at present — as long as government can foresee better revenue growth in future years.

While I have suggested that a +/‒2% estimate isn’t too bad as an estimate, it can still make a difference to the government in dollar terms. Even with the smaller budgets back in 1999‒2000 a 2% variation in total revenue would have amounted to $3.3 billion and in 2013‒14 would have been $7.8 billion (about three-quarters of the amount raised by the Medicare levy, so it is significant). So getting revenue forecasts and estimates right is important — but it never happens. It demonstrates how little control the government actually has over the economy. The economy moves to its own pace, influenced by many factors, including overseas events, and even the ‘expert’ treasury officials can’t predict it accurately, not even one year ahead.

It is not a problem when the economy is going well because then the errors tend to be under-estimates and every government would be pleased to see more in its coffers than it anticipated. But when the economy is in the doldrums, as now, faulty estimates and forecasts put additional pressure on government programs that are meant to provide services to all of us.

I do wish treasury could get it right but, given the economic reality within which it operates, I won’t hold my breath. And I don’t think this week’s budget will be any different.

What do you think?
After reading Ken’s piece, do you still think we should always blame the government for the financial mess or should treasury share the blame for giving the government faulty advice? Should governments only spend 95% of what treasury tells them they have so as to allow for treasury’s mistakes? We look forward to your comments — and answers.

Next week 2353 looks at a different approach to homelessness in ‘Hope for the homeless’.

The saga of Billy Gordon


On January 31 this year, Billy Gordon joined a very select group — indigenous members of parliament in Australia. He won the seat of Cook in far north Queensland from the LNP and joined the Queensland parliament as part of the minority ALP government. Late in March, the State parliament sat for three days and effectively confirmed that the minority Palaszczuk government had the confidence of parliament.

Queensland parliament sits again this week. During the month of April information relating to Gordon’s past criminal convictions, structuring financial affairs to avoid the payment of child support and claims regarding domestic violence in a previous relationship were given publicity. Palaszczuk, in what could be considered to be a gutsy political move, as she needs the seat to govern in her own right, moved to expel Gordon from the ALP and pressured him to resign his seat. Opposition Leader Springborg wasn’t far behind when talking to 4BC’s Patrick Coldren. Gordon resigned from the ALP prior to the expulsion and has chosen to remain in parliament as an independent, supporting the Palaszczuk government.

Along with a number of other jurisdictions around the world, Queensland has legislation that wipes the slate of certain criminal offences if they were committed a number of years ago. In Queensland the legislation is known as the Criminal Law (Rehabilitation of Offenders) Act 1986 and the cleansing of people’s records occurs after 10 years. Gordon’s convictions are considered wiped under this legislation. Gordon is understandably investigating legal action against those who publicised the information.

For some reason, we expect a higher standard of ethics and morality from our politicians than we do of others. Gordon, who also ran for the ALP in the seat of Leichhardt in the 2013 federal election should have disclosed his record, despite obviously not being proud of it. As Gordon was working for an ALP senator, the ALP should have been aware of the convictions in any case. Palaszczuk certainly ‘jumped the shark’ by calling for his resignation from parliament — and we’ll get to the LNP’s response in a minute. Unfortunately it is fair to suggest that Gordon’s life story is not uncommon amongst indigenous people in north Queensland as this government report to a 2014 Crime Enquiry documents. Gordon and the ALP could have declared his history and run his campaign on the basis of how well he understood his community and was a wonderful role model because he had turned his life around.

Up until January 31, the seat of Cook was a LNP seat held by David Kempton. The Guardian, while reporting a potential second government MP being involved in a domestic violence issue, observed:

Meanwhile, the Australian newspaper is reporting that the Liberal National party frontbencher defeated by Gordon at the state election was behind the initial complaint made by his ex-partner.

David Kempton, who lost Cook to Gordon in January, helped the woman make a complaint about unpaid child support in the days after the election, the paper says.

The independent Speaker, Peter Wellington, on Tuesday said it appeared Gordon’s former partner was being “used” by political forces in an orchestrated attempt to bring down the Labor government.

The Australian says Kempton was the first of three current or former LNP MPs to have had close contact with Gordon’s former partner in the weeks leading up to the child support allegations being sent to the premier and ultimately leaked to the media.

The LNP MP Warren Entsch, whose federal electorate of Leichhardt overlaps Cook, has rejected Wellington’s claims but confirmed he helped the woman with the child support issue after he was approached by Kempton.

Asked about rumours that Kempton, a lawyer, is now representing the woman, Entsch said: “He could well be.”

Entsch defended releasing to the media details of his correspondence with the woman, including the abuse allegations and Gordon’s criminal record, saying he had been forced to act because of the premier’s inaction.

The paper says the former LNP MP Gavin King, who until January held the neighbouring seat of Cairns, was also in contact with the woman for three weeks before the initial allegations were made public last Friday.
We should be applauding how the LNP is demonstrating the care and concern it has for the welfare of Gordon’s ex-partner as well attempting to restore faith in the political system — Yeah right!

At the January 31 State Election, the last seat to be declared was Ferny Grove, located in Brisbane’s north west. The seat was held by the LNP and the ALP had a small lead after the distribution of preferences. The fly in the ointment was that the Palmer United candidate was an undischarged bankrupt and therefore ineligible to stand for parliament. The brouhaha was all to do with the preferences of the ineligible candidate and if they had enabled the ALP to get over the line. With the Electoral Commission discussing whether the result should be taken to the court of disputed returns, and Premier Newman losing his seat at the election, the de-facto leader of the LNP at that stage, Lawrence Springborg, ‘kindly’ offered to run a ‘caretaker’ government until the situation became clear which, based upon the last time a similar occurrence happened in Queensland, could take seven months. William Bowe at Crikey explains the issues here and why Springborg was ‘dreaming’ (to pinch a line from The Castle).

Australian political tragics may remember the “Utegate” affair. One of the Rudd government’s responses to the GFC was to propose an alternate vehicle financing system to support car dealers, as some traditional financiers had suddenly removed themselves from the business. Rudd was in possession of a ute donated by an Ipswich car dealer (and fellow Norman Park resident). The car dealer subsequently approached the ALP MP representing the Ipswich area for access to the alternate vehicle financing system; the MP sent an email to Treasury; and suddenly then opposition leader Malcolm Turnbull was producing evidence that the car dealer was receiving preferential treatment due to his donation of a car to the prime minister. The documentation produced by Turnbull was later proven to be fraudulent and assisted in the downfall of Turnbull’s leadership. The car dealership is no longer trading after being inundated by the 2011 south-east Queensland floods.

At the same time as Billy Gordon was elected in the seat of Cook, Rob Pyne from the ALP replaced Gavin King from the LNP (and mentioned above as helping Gordon’s accuser) in the neighbouring seat of Cairns. Rob Pyne self-disclosed an email he received asking for details of a past conviction, which was obviously sent to him in error.

Springborg has claimed that his party will not accept the support of Gordon: an interesting concept considering the government he was a minister in changed parliamentary procedure to one where the major parties’ whips first advise the speaker of the number of votes for and against, before the independent MPs are asked for their vote. In short, the sight of Springborg or Langbroek running from the parliament to ‘void’ the vote of Gordon (in a similar way to Abbott and Pyne running from Craig Thomson) won’t occur — unfortunately!

There are two questions here.

The first is the morals and ethics of those who seem to be involved in promulgating false or damaging information. Churchill is quoted as suggesting ‘A lie gets halfway around the world before the truth has a chance to get its pants on.’ Are the various constituents of the conservative political parties in Australia so morally bankrupt that the ends justify the means or are they so simplistic that they believe that people will swallow the information provided without question? While there is no doubt the ALP would have damaging information on many LNP MPs across the country, they seem not to publicly release information that is irrelevant to the MP’s current role in life.

The second is how do we expect the disadvantaged to gain a voice in the management of our society unless past ‘sins’ are forgiven. Alecia Simmonds, writing on Fairfax’s ‘Daily Life’ website states the case far more eloquently than I can:

That Billy Gordon may also be a product of a racist society where Aboriginal and Torres Strait Islander people are poorer, sicker, more disadvantaged than any other group in Australian society seems to have escaped us. In our rush to pronounce upon his character we have strangely forgotten about his context; one where one in every 43 Aboriginal adults are in prison and Aboriginal people are eight times more likely to be taken into police custody.

It's hypocritical for us to ask Aboriginal politicians to redress their communities' problems and then be shocked when it turns out that they have experienced those problems. Or, in Gordon's case, that they are living examples of them. Many, like Gordon, may come from what he calls a 'troubled and fractured past.' And his past is our own past; Australia's 'troubled and fractured' history of colonisation.
While arguing that, if in fact Gordon is convicted of domestic violence, he should resign, Simmonds finishes her article with:

Finally, if we are to ask politicians to tell voters about their criminal pasts then I would suggest that we also ask politicians to tell voters about any civil matters that they've been involved in. Because it doesn't take a genius to work out that we have two systems of justice in this country: one for the rich and one for the poor. If you're a sandstone-educated white man, sipping mimosas harbour-side in Point Piper, then you're unlikely to have had any underhanded dealings channelled through our civil courts where you'll get a slap on the wrist and a fine. If you're Billy Gordon, cutting sugar cane or working in pubs in Far North Queensland, then you can exchange the fine for a prison sentence and the law's casual disinterest for hawkish vigilance.

If we genuinely want a democracy where our political representatives reflect the diversity of our population, and if we genuinely want these representatives to have had life experiences broader than undertaking an Arts/Law degree at Sydney University, then we need to treat people like Gordon with more empathy. After all, his context is our context; it's a product of our shared history and we need those who have suffered its worst effects to help change it.
What do you think?
2353 questions the ethics of those politicians who use another's past indiscretions for political advantage and the final quotes from Alecia Simmonds raise issues about the 'type of person' we want in parliament. They are important issues. Please let us know where you stand.

Next week, as a prelude to the Budget, Ken asks 'Are budgets worth the paper they're written on?'


Beware, there is a plan


There is much talk about the ‘chaos’ of the Abbott government but take a close look at what has been done, what it is talking about, and the reports it is gathering together. We need to look beyond the political catch-cries of the ‘debt and deficit disaster’ and ‘Labor’s mess’ and examine what is driving this government.

A simple starting point that helps explain Hockey’s 2014-15 budget is his mantra regarding the ‘end of the age of entitlement’. After obtaining government, and refusing assistance to SPC early in 2014, Hockey rolled it out:

Treasurer Joe Hockey has bluntly warned Australians that the days of governments saving businesses and jobs had passed, telling them, ''the age of entitlement is over, and the age of personal responsibility has begun''.

For Hockey that was not something new but something he brought to government with him. He had spoken about it earlier, while still in opposition, in a speech in London in 2012 and he did not abandon it. (I think many politicians have a rigid agenda about at least one item that they return to in one form or another: just as Peter Reith, even now as a political commentator, continually returns to the need for labour market reform.) The underlying message of Hockey’s ‘end of the age of entitlement’ is that there will be no more ‘socialist’ welfare policies. It is a clear catch-cry that government provided welfare is ‘socialist’ and discourages the independent, self-interested economic spirit which his, and the current Liberal party’s philosophy is based on. As Hockey said in London:

Entitlement is a concept that corrodes the very heart of the process of free enterprise that drives our economies.

In that approach everyone has to pull their weight, that is work, and get ahead by their own effort. It actually follows, in a slightly twisted sort of way, that government support (‘entitlement’) for the top of end of town is ‘good’ because it supposedly promotes economic activity that, in turn, provides the jobs that the otherwise lazy ‘dole bludgers’ require when they no longer have an ‘entitlement’ to socialist welfare. But Hockey did also warn that businesses need to be viable and not expect government assistance — it is just that not every member of the government agrees with him, particularly the Nationals when it comes to supporting farmers.

At the end of March, Hockey released the government’s tax paper. While he claimed everything was ‘on the table’, a number of commentators did suggest that it was primarily about increasing the GST, either in nominal value or the range of goods and services covered, or both. Even if we try to believe that the government will look at issues like ‘negative gearing’ and concessional tax rates for superannuation, we can’t be sure because Abbott continually repeats one of his new three-word slogans that under his government taxes will be ‘lower, simpler, fairer’. And he consistently promises that company tax will be lower: although company tax has provided as much as 25% of government revenue it currently provides about 18% (or about 22% if we take out the GST, which we must remember all goes to the states and territories and adds nothing to funding of commonwealth spending); so lowering the company tax rate requires higher taxes elsewhere or more cuts to government spending — no prize for guessing which way this government will go. Why was the government apparently so keen to increase the GST when it gains nothing from it? (Although the government has currently ruled it out because it cannot get bipartisan support, it has managed to put it in the public arena and it is being discussed, so I think it will raise its head again — read on.)

The answer lies in another White Paper the government is preparing on ‘federation’. Its purpose is described as follows:

Increasing overlap between the roles and responsibilities of all levels of government over recent decades has undermined the efficiency and effectiveness of our Federation. Hence, the Prime Minister and the Premiers and Chief Ministers have agreed that the Reform of the Federation White Paper should focus firmly on clarifying roles and responsibilities between different spheres of government and the need for all levels of government to coordinate action to ensure the best possible results for citizens.

A discussion paper was issued in February this year which raised the problems of vertical fiscal imbalance (VFI):

VFI refers to the mismatch between the expenditure responsibilities of the States and Territories relative to the revenue they raise, making them reliant on transfers from the Commonwealth to finance their activities. Around 45 per cent of total State and Territory revenue now comes from the Commonwealth (including the GST), although this varies across jurisdictions.

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. [emphasis added]

Now you can see why increasing the GST is important. It is not directly for the federal government but will allow the federal government to pull back from services under the control of the states, particularly in health and education. In March 2012 Abbott told the Victorian Employers’ Chamber of Commerce and Industry, in discussing his plan for a Commission of Audit when in government:

"Other questions that the Commission of Audit might ponder could include: whether the federal Health Department really needs all 6000 of its current staff when the Commonwealth doesn't actually run a single hospital or nursing home, dispense a single prescription or provide a single medical service?

"Whether the Federal Education Department really needs all 5000 of its current staff when the Commonwealth doesn't run a single school?” [emphasis added]

So for Abbott and Hockey the two papers are linked. Abbott can keep his promise to lower commonwealth taxes because his government will be providing less assistance to the states, other than through redistributing the GST (they hope for an increased GST). No need for commonwealth support of hospitals or schools because they are not commonwealth services.

And how many other commonwealth government services can he be rid of? The answer lies partly in deregulation and privatisation. During the Howard years, Peter Reith said that if a service was available in the Yellow Pages, there was no need for government to provide it. They applied that to IT services and outsourced departmental IT services and created a host of problems. Similarly they privatised employment services. While that still costs the government money, it has faith, because it believes in market liberalism, that such services are more efficient and cheaper. I won’t go into the argument as to whether or not that is true but only make the point that it is an underlying belief of recent Liberal governments.

Although ‘post and telegraph’ was specifically mentioned in the constitution as an area of commonwealth responsibility (that is, for which it could legislate), we have seen that power used to privatise most aspects of those services. The same goes for banking which was deregulated and the government-owned Commonwealth Bank sold off.

Now we have this government, with Pyne leading the charge, attempting to deregulate another sector: higher education. If it is successful, it will further reduce federal government funding for the sector and reduce commonwealth revenue requirements — allowing more room for ‘lower’ taxes. Universities were originally established under state legislation and it was not until after WWII that the federal government moved into the area to fund the demand for teachers to meet the needs of the ‘baby boomers’ and also to enhance education for the post-war reconstruction. It was not until 1974 that the commonwealth assumed full responsibility for universities (and the establishment of CAEs under the Whitlam government). Now with that power, introduced by a Labor government, Pyne and Abbott look to dismantle the system and effectively privatise it. Universities are already largely independent and this will make them more so without the constraint of meeting government funding requirements: it will also reduce, if not remove, the capacity for government to influence requirements for the broader economy — as was done with the post-WWII need for teachers — but that also fits the plan as it will be the market determining what professional skills are required and what it will pay for universities to provide them. It’s a shame that there is not a ‘market’ for teachers in the public sector — no, that will be totally up to the states under the Abbott/Hockey plan.

Part of the reason the commonwealth government moved, over the years, into areas like health and education was to ensure some form of national consistency or, as in the case of universities, to meet particular national needs. A prime example was in trade-training (provided largely through TAFE at the state level). For many years there was a ridiculous situation (that almost everyone knew was ridiculous) that a tradesman, say a plumber, in one state could not operate in another state unless he went through a process of registration in that state to recognise his qualifications — and if the plumber moved to yet a third state, he would need to go through the process again. Simple enough one would think but the states demanded more money to make the necessary changes. A similar process occurred in the more recent development of the national curriculum for schools when the states also sought more money to implement it. So, if the commonwealth has moved into such areas, it has often been for good reason and it was the states that demanded commonwealth funding as part of the price of their agreement.

It is true that the federal government does not have specific power to make laws about schools and hospitals, except to the extent that the states agree, but while it controls the purse strings, it obviously can have an influence and, as was done in health, link funding to the achievement of particular outcomes and attempt to ensure that the outcomes are consistent at a national level. And, in some areas, like the environment, it can call on its ‘foreign affairs’ power in terms of meeting international agreements to which it is signatory (which was how the Franklin dam was stopped — a valid commonwealth law over-rides state law to the extent to which the two are inconsistent). But the Abbott plan sees no need for the commonwealth government to exercise such powers and would prefer to leave the environment to the states.

So beware, this government is not as shambolic as it sometimes appears. It wishes to deregulate and privatise and hand as many services as possible to the market; it will hand back as many public services as it can to the states on the pretext that the states should be responsible to their own electorates for the costs of education, health and similar services. Abbott may be able to provide ‘lower, simpler, fairer’ taxes because the federal government will be providing little in the way of services. He can increase the GST and argue it is because the states need the money, not his government, and boast that he can lower taxes but that will only be for the commonwealth: it is likely that state charges will need to rise to meet the additional fiscal responsibility they will have to take on — so individuals may be no better off, perhaps even worse off. But that is consistent with the overall plan, the neo-liberal plan of lower taxes and small government, at least at the commonwealth level where Abbott and Hockey can apply it.

With that approach, perhaps we won’t need a federal government other than for defence, foreign policy, astronomical and meteorological observations, post and telegraph, and lighthouses. That rings a bell — something in our original constitution!

Floating above the economic approach, we have Abbott’s moral view of ‘Team Australia’, a white Australia that was only ‘bush’ before the arrival of the first European settlers, that requires values acknowledging the role of knights and ladies, that considers ‘work’ is the only validation of a person’s worth to society — unless of course you are rich and helping the economy in that way (whatever way that is — perhaps spending money on Qantas flights to travel to the casinos of Monaco!)

There is no room for ‘leaners’ in Abbott and Hockey’s plan; no room for ‘entitlement’ (aka ‘socialist’ welfare); no room for government services that the market can provide; no room for public services that the states can provide. It is the age of ‘personal responsibility’: bugger the ‘fair go’ and government assistance, you have to look after yourself! And as a result, the commonwealth government will proudly offer you lower income and company taxes — even if the states have to raise theirs.

Yes, there is a plan but not one that we can look forward to. Little wonder they don’t spell it out!

What do you think?

About Ken

Ken thinks Abbott and Hockey do have a plan. Perhaps not a good one but at least a plan — or perhaps we should call it a ‘hidden agenda’ since they won’t talk about it. Let us know whether you think Ken is right.

Next week 2353 looks at ‘The saga of Billy Gordon’ and raises important issues about where we should draw the line regarding a politician’s past indiscretions and their use for political purposes.



Instant Experts


To be in public life you need to have a sense of self-belief. How else would you cope with those that feel they can criticise your actions, private life, as well as decisions you have made in the past?

‘Stars’ such as elite sports professionals, actors, performers and so on can demonstrate that they excel in their field of endeavour. While you personally may not like how people like Michael Clarke or David Bowie perform their job, there are plenty of people that do — and they are entitled to their opinion. ‘Stars’ also usually keep their public pronouncements to areas where they have demonstrated expertise and considerable knowledge. If you don’t like the field of endeavour or the person, the public opinion of the ‘star’ is usually ignored and the world moves on.

It’s not the same for politicians. Politicians have a large influence over our everyday lives. On a recent Saturday morning, the Brisbane Times was reporting a newly elected Queensland parliamentarian whose former partner claimed she suffered domestic violence; leading to the premier referring him to the Police for investigation. He is also claimed to have structured his affairs to avoid his obligations in respect to child support. There was also a discussion on the number of federal politicians with more than one mortgage — the implication being that they may allow personal considerations to be a factor in any discussion or vote on the future of negative gearing in Australia. Neither of these issues would be ‘newsworthy’ if the subjects were the staff at the local supermarket.

Ask a politician why they went into politics and few of them would say it’s for the money or to gain fame. Until fairly recently they generally saw a need for something to be done in their community and decided that they were the ‘somebody’ that should do it. In recent years we are seeing the career politician emerging where they join the young [insert party here] club at university while doing a degree, then move on to the senior party and usually take a position in an existing politician’s office, or in the party hierarchy, before ‘blooding’ themselves in an ‘unwinnable’ seat then later being offered a winnable seat as a reward.

Once a person gains a parliamentary seat, they (depending on skills and popularity) may be offered a ministry. The person who can gain the most support then becomes the leader. While the system has worked for a century in Australia (and longer in the UK) with reasonable success — as evidenced by Robert Menzies, a lawyer, and Ben Chifley, a train driver, becoming prime ministers in the 1940’s — there seems to be a pattern for recent ministers to not understand the issue at hand. The Australian government’s website explains the role of a minister as a member of the legislature who has been chosen to also work as part of the executive, usually with responsibility for matters on a specific topic (his/her portfolio). It is a similar practice in the UK and other ‘Westminster’ parliaments such as in Canada and New Zealand. The website also notes that there is no mention of political parties, ministers or the roles of prime minister and opposition leader in Australia’s constitution.

In contrast, the United States of America has a different system whereby the president selects people they believe will perform well in the ‘secretary’ roles — which are similar to the ‘minister’ roles in Westminster parliaments. The person selected usually has some involvement in the industry he or she will regulate. The president can choose anyone he likes to be a ‘secretary’ but the US congress holds ‘confirmation hearings’ to endorse the decision. As party politics are involved in the selection and confirmation process, the confirmation process isn’t always smooth — as discussed here in respect to former Defence Secretary Chuck Hagel. Hagel lasted two years as secretary of defence: his resignation cited differences of opinion with the Obama administration.

In the ‘good old days’, while politicians nominally ran the various sections of the government in the Westminster system, they relied on the ‘frank and fearless’ advice of the permanent public servants provided to their (let’s face it) temporary leaders. The New South Wales Public Service Commission (PSC) discusses the concept here, while acknowledging that at times the action is fraught with danger. The guide includes the following cautions:

One approach (recommended by Stephen M. Goldman (2008) in “Temptations in the Office: Ethical Choices and Legal Obligations”) is to prepare yourself carefully before you give the advice by:
  • Digging into the facts. Seek out a complete account of the situation, including facts and acknowledgement of biases
  • Gauging similarities with past situations. Recognise any significant particulars between the current problem situation and past situations
  • Analysing your decision-making process. Don’t over-estimate or under-estimate your instincts or your rational analyses. Use them as “checks and balances” against each other. Propose options. Suggest a number of practical alternatives, both short-term and long-term, that could be taken to meet the Minister’s or manager’s objectives.
The NSW PSC also has advice for managers/ministers that are being told something they really don’t want to hear:

Your style of communication may not be compatible with the communication style of the person who is giving you difficult or distressing information. However, as a professional, it is your duty to get the information they are attempting to communicate even if you consider the way they are communicating is annoying or distracting. This is particularly important when people are giving you criticism or unwelcome advice, because if you become angry or defensive you may cause that individual to stop communicating with you, and more broadly, you may develop a personal reputation, a culture and work practices that will result in you becoming isolated, uniformed and ineffective.

It must have seemed to be a good idea for federal Treasurer Joe Hockey to appear on Q&A to discuss the release of his ‘Intergenerational Report’ during March 2015. Sadly for Hockey, it wasn’t. Hockey was shown to be out of touch on the economics of current ‘hot button’ issues such as negative gearing and infrastructure spending by John Daley, CEO of the Grattan Institute. As Hockey raised the usual talking points that had no doubt been tested by focus groups of party faithful and fed to him by senior advisors vetted by the prime minister’s chief of staff he was, as reported in Fairfax media, outclassed by someone who knew what he was talking about.

Education Minister Christopher Pyne was probably expecting a relatively friendly interrogation from David Speers on Sky (given the reputation of the broadcaster), however it didn’t happen. Pyne also forgot the adage that if in doubt say nothing, as his claim that he is ‘the fixer’ has come back to haunt him on a number of occasions since.

Prime Minister Abbott is not immune to criticism here either. Abbott claimed at a press conference that he had no concerns about metadata when he was a reporter in the 1980s. At best, Abbott was badly informed when he claimed to a group of journalists (the usual job description includes the ability to research quickly and accurately) that he wasn’t concerned by something that didn’t exist.

Prior to entering politics, Hockey was a banking and finance lawyer as well as a policy director for the New South Wales premier. Pyne also was a lawyer prior to being elected to parliament at the age of 25 and Abbott has various qualifications in economics and arts and, prior to being elected to parliament, was a journalist, concrete plant manager and director for an anti-republic organisation. While they have had varying experience prior to politics, and all have tertiary qualifications, it is unrealistic to expect that they become instant experts on all the matters in their portfolio.

As we discussed earlier, Menzies and Chifley were considered good prime ministers, but they also certainly didn’t have the personal experience to be instant experts in all the detail needed for a government to function — especially in wartime. The difference between the 1940s and 2010s is a permanent public service not afraid to give ‘frank and fearless’ advice, because in the 1940s the public servant delivering the dissenting view was a permanent employee and wasn’t neutered by the fear of their contract not being renewed. The public servant also was a long term employee — not someone appointed by the government of the day — nor did they have to deal with the ‘Minister’s personal staff’ (who have been ‘approved’ by the party hierarchy) disagreeing with them.

Not that the US system is any better. While the ‘secretaries’ are usually chosen because they have some direct experience in the area covered by their portfolio (unlike Australia), there is considerable opportunity through the selection and confirmation process for ‘the best person for the job’ to be ruled out due to some previous alleged misdeed or political belief.

Australia is also subject to political ‘ethnic cleansing’ of ‘permanent’ heads of departments, as witnessed in Victoria and Queensland following the recent changes of government. A master of the art was former Prime Minister Howard, who effectively sacked six ‘permanent heads’ soon after his election because of their perceived closeness to the former Hawke/Keating ALP government.

So Australia has the worst of both worlds. Not only do our ministers generally have no direct experience in the portfolio they control, the higher echelons of the public service are on employment arrangements that can be legally broken by either side should they feel the need. Could it be possible that the ‘need’ could be giving ‘frank and fearless’ advice to their minister?

The Political Sword has discussed the marketing and media management of politicians on a number of occasions. Is the ultimate expression of the failure of Australia’s current political system demonstrated by ministers clearly not being across the details of their portfolio? Is this because the political minders only give the minister the message or theme of the day rather than the information they need when someone goes ‘off script’?

The Westminster system of government clearly has the potential to deliver better solutions to the problems faced by the citizens of the country concerned, as the minister takes advice from experts in the particular field, employed by the government on a permanent basis and thinking with a ‘long term’ view. The experts know that they have the right and obligation to present dissenting options to the minister if needed and discuss the possible detrimental effects of the possible decision — which the minister subsequently makes with all the information at hand. The opinion given should not have any effect on the continued employment of the public service officer. The US system has flaws when the ‘confirmation’ process for the various (probably partisan) senior staff and advisers to the President can take some time or be declined for potentially some party political objective.

The problem is when the politics overrules good government. Those that operate successful businesses look for the best and brightest to manage the business elements the owners don’t understand — such as small business operators timetabling regular meetings with accountants and lawyers to assess the current situation and future plans. The current government maintains that Australia should be run like a business; and then buries the people that could provide the best advice under a layer of political appointees. The result is that ministers open their collective mouths to change feet as demonstrated above and policy is decided on party priorities rather than national priorities.

The scandal in all of this is that both sides are equally culpable; we’re paying for it now and will continue to in the future as less than optimal policy will be implemented.

What do you think?

About 2353

After reading 2353’s post, what do you think? Perhaps we can’t expect our politicians to be instant experts but are we, as a nation, allowing politics, instead of what is in the national interest, to rule our policy? Should the public service be encouraged to return to ‘frank and fearless’ advice? Is there another way?

Next week Ken suggests that the Abbott government may not be as shambolic as it appears in his piece: ‘Beware, there is a plan’.



How the economic rationalists tried to steal our hearts and minds


At the start of the year in my piece ‘Proud to be a bigot’ I mentioned that, before Abbott, Australian governments tended to look after those who were ‘down on their luck’. It was a phrase with which I grew up. People who were unemployed were not ‘dole bludgers’ then, nor even just bludgers (although there may have been a few, bludgers were usually identified when they were in work): they were ‘down on their luck’. I began to wonder why that approach has disappeared.

A key aspect of the phrase ‘down on their luck’ is that it is an egalitarian phrase. In an egalitarian society, success and failure are more usually attributed to luck rather than personal attributes because almost by definition personal achievement breaches the personal equality of egalitarianism. While there are always degrees of success, even in an egalitarian society, success is down-played or shared — either by emphasising the role of others or distributing the monetary rewards of success by throwing parties and ‘barbies’, or buying extra ‘rounds’ at the pub. Acknowledging personal achievement was usually limited to sports people and, to a lesser extent, performers and artists — although we were also good at cutting down the ‘tall poppies’.

We seem to have gone back to something closer to the ‘undeserving poor’ of Victorian times. That, in itself, provides a clue to the change. People are undeserving if they are perceived not to have made enough effort on their own behalf. It follows the logic that ‘if I am successful or moderately well-off then anyone can be’ if only they make the effort. It focuses on the individual and the effort made by the individual, not on initial conditions or community responsibility nor even the common good. And we all know who promotes such ideas: the neo-liberals, the economic rationalists, the free-marketers and, politically, the current Liberal party and the IPA behind it. Somehow they have managed to change us without many of us even noticing. Although loathe to say it, the Labor party has also contributed by accepting the free market philosophy.

Between the gold rushes and the 1890s, Australia was considered a ‘working man’s paradise’. The depression of the 1890s changed that somewhat but also fostered the growth of unionism and the birth of the Labor party to represent workers’ interests. That meant that by 1911 Australia was still considered a great country for the ‘working man’ with higher wages than in many other countries, shorter hours than the US and Canada and more holidays. Australia was also a world leader in social reforms, including universal suffrage, and was known for not having as large a gap between rich and poor as most industrial countries — it was effectively largely egalitarian.

For the purposes of this discussion, we can ignore 1914 to 1950, because it was dominated by two world wars and the great depression which obviously impacted working life and government approaches in ways specific to those events.

I think the first change came with the election of the Menzies’ government in 1949. Menzies’ new Liberal party focused on the small businessmen, the shopkeepers and small-scale entrepreneurs with the cry that these were the ‘forgotten people’ of Australia — which was partly true, as least as far as the pre-existing political parties were concerned. Of course, that emphasis also gave an emphasis to the ‘market’ but in Australia at the time it was still a market protected by government (through tariffs on imported goods) and was to remain so for the next three decades. Protection of the market also gave some protection to the workers: and there was also the Arbitration Commission and the ‘basic wage’ which helped maintain the standard of living of workers.

The major change came after the ‘stagflation’ and oil crises of the 1970s. Governments, led by the Thatcher and Reagan governments, began abandoning Keynesian economics, which had allowed for a degree of government management of the economy and the market, in favour of what is known in Australia as ‘economic rationalism’, or overseas as ‘market liberalism’. The latter name actually explains it better — market freedom. In articles last year I discussed the liberal view of individual self-interested freedom and that is the view that underlies market liberalism. It is the antithesis of egalitarianism and the ‘fair go’.

Also, following World War II, America had become the world’s dominant economy (and still is, although China threatens to surpass it in the coming years). The American ethos has always been focused on the individual and the idea that anyone can rise to the top by their own efforts, even from the humblest beginnings: Abraham Lincoln was often touted as an example. That meant that some looked to the American ethos, rather than an Australian ethos, as the exemplar for economic success. And, of course, modern market liberalism (as opposed to the old English version of the 1800s) also rose to prominence in America.

Reinforcing the changes was the appearance and growth of multi-national corporations and their creation of a global economy. The multi-national corporations loved market liberalism and they had the power to enforce it. They could threaten recalcitrant governments with the withdrawal of investment. Even a government trying to protect its workers knew that such withdrawal would reduce jobs, perhaps slow the national economy, even reduce wages, so that its efforts to protect workers would be in vain. Of course, it was rarely an open threat, more a reminder that the multi-national could do business elsewhere if the government was not favourably disposed towards it in such things as wages and working conditions or did not allow its other products to enter the country without high tariffs. Countries even vied to attract such companies, offering them incentives to invest, in contradiction of free market principles, but such incentives were never turned down on the basis that they breached principles — no, the other principle of self-interest won out.

Underlying all this is competition. Since the 1980s we have been continuously told that competition is the key to an efficient economy and that government regulation reduces competition and efficiency. And to make competition work, individuals need to be competitive in their approach.

I think all those circumstances created a ‘perfect storm’ to undermine the Australian ethos of egalitarianism and the ‘fair go’.

Hawke and Keating succumbed to the international pressure and the advice of the economic ‘experts’, including those at Treasury. While the changes they made did improve our economic situation, it was still threatening our ethos. The trick was to try to maintain both and to some extent they achieved that with the ‘Accord’ but it was a delicate balancing act that also left the ‘fair go’ in the balance.

Even small businesses were influenced by the new approaches. Previously, many small businesses were happy to co-exist with other similar businesses. An example was the old ‘corner stores’ which were dotted throughout the suburbs on every second or third corner. Everyone could walk to a local store. There are other factors that led to the demise of such stores, including changes in transport and food storage, but the people who ran those stores knew they were providing a local service, not just a business. They made a living but were basically little or no wealthier than the neighbours they served. As the world changed some hung on, still providing a local service, but they could no longer ‘compete’ and people eventually sought the cheaper prices at the supermarkets (even though they had to travel further to access them).

Small businesses that survived became more competitive. Some managed to grow by taking over or forcing out their competition or they banded together (and gave up their independence) in order to ‘compete’. For the most part, the idea of providing a service was relegated to second place. (Although I see that it is making a come-back, now as a means of gaining an advantage in the market.)

Companies began running seminars for their workers extolling the virtues of competition, of the need to out-perform and out-do their rivals. You have only to walk past some real estate offices early in the morning and hear them chanting and cheering and psyching themselves to sell, sell, sell in the coming day. In the case of the real estate office, the emphasis is not just on out-performing its rivals but fostering competition between its own sales-people, promoting success by out-selling one’s colleagues.

That whole approach has encroached at the personal level and is readily displayed in job interviews. Even in the public service, I was once told that I ‘did not sell myself’ at interviews: my reply was ‘if I wanted to “sell” myself, I would have been a salesman, not a public servant’. Being able to ‘sell’ oneself in an interview is often not a valid indication of a person’s worth as a worker but it has become the competition in the interview, not the value or quality of a person’s work, that often determines who ‘wins’ the job. Even the fact that it is now more common to refer to a person ‘winning’ a job is an indication of a fundamental shift in values. Previously we would simply ‘go’ for a job and would be asked whether we ‘got’ it.

Some people now appear captured by the philosophy of the new economic world. In their personal undertakings they are competitive; they brag of their successes and claim the credit for themselves; they are concerned for themselves, not for their neighbours and may no longer care about fitting in with their neighbours. The economic rationalists have indeed stolen their hearts and minds.

I have my own theory that even if an ethos is ignored for long periods, people return to it in times of struggle or when they feel threatened because it remains in the collective consciousness. Howard abandoned the balance between the new world and the old ethos, that Hawke and Keating had tried to achieve with the ‘Accord’, when he introduced Workchoices. Abbott is taking the approach to the next level by imposing the underlying philosophy of market liberalism across society and not just to the economy. And, at last, people are seeing that as a step too far. It seems that, while many in the population may see individual self-interest as important for economic pursuits, they have not been convinced that it applies to society and are drawing a line in the sand. When it comes to social issues the ‘fair go’ still lingers or, as I suggest, is being resurrected as a threat is perceived to the way our society functions.

Labor needs to keep returning to the ‘fair go’. Not only does it resonate with a significant proportion of voters, it forces the Liberals to respond because, here in Australia, it would be political suicide to leave only one major party apparently defending the ‘fair go’. The Liberals, however, have trouble defending it because it is their approach threatening it and because their approach is, as I suggested earlier, the antithesis of the ‘fair go’. It leads to such bizarre statements as Hockey asking if it’s fair that the rich pay more tax (in dollar terms); or is it fair that three months’ worth of our taxes is required for those on welfare; or that poor people don’t drive as much as rich people, so a petrol tax is actually ‘progressive’. When reference to the ‘fair go’ can create such contortions by the Liberals, it is an idea worth pursuing.

And as for the economic rationalists stealing our hearts and minds, they almost succeeded — but not quite.

What do you think?

About Ken

As you are here reading TPS, we presume you are not one of those who were conned by the economic rationalists into abandoning our values in the name of economic success. But perhaps you know of some who were. Or perhaps you disagree with Ken’s view. Please let us know and leave a comment.

Come back next week for 2353’s ‘Instant experts’ which raises some pertinent questions about the expertise required of our politicians when they are expected to run our economy, our defence, our health system and so on. Are they qualified for such specific tasks? Should they be?



The ‘trickle-down’ effect


Next time a conservative politician or acquaintance tells you that tax cuts for the better off will help the state or nation’s economy, you might want to have ‘the discussion’.

Tax cuts for the better off is part of a theory of economics known as ‘trickle-down’ that seeks to prove that if the tax cuts are given to the better off, they will spend more, increasing the demand for goods and services to the direct benefit of the economy as well as the government’s tax revenue. So we’re all on the same page — here is a ‘trickle-down theory’ definition:

An economic idea which states that decreasing marginal and capital gains tax rates — especially for corporations, investors and entrepreneurs — can stimulate production in the overall economy. According to trickle-down theory proponents, this stimulus leads to economic growth and wealth creation that benefits everyone, not just those who pay the lower tax rates.

Probably the best known example of this theory around the world has been the Reagan Presidency in the United States. In the early 1980’s, he cut the top tax rate by 20%! Most conservative governments have also implemented similar cuts in the past although, to be fair, not of the same magnitude. Conservatives will also tell you that government spending should be reduced to an absolute minimum and the government’s budget should balance. Forbes (an American business publication) as recently as 2013 has been arguing that while it finds the term ‘trickle-down theory’ objectionable, it is a valid theory that has worked in the past. According to the article, the term was coined —

… by Democrats in the 1980s as a way to attack President Reagan’s economic policy combination of tax rate cuts and some relaxation of federal regulations. They needed a catchy, easy-to-remember zinger to fire at Reagan; a line that would keep their voting base angry.

The article goes through all the usual conservative talking points: small government is less of a drag on the economy; people need work rather than infrastructure such as schools and transportation; the better off are the ones that create wealth; that Obama is to blame and so on. It finishes with this:

What poor people should want is more freedom and more growth, so they will have better opportunities. The deceptive “trickle-down economics” notion was crafted to take advantage of their ignorance about the way the world works. Perhaps one day the pitiable Americans who now cheer when politicians who masquerade as their friends denounce “trickle-down economics” will realize that the massive federal Leviathan is their enemy.

While I take the point that the term ‘trickle-down theory’ may have been coined by a member of the Democratic Party in the US and it does have more ‘zing’ than ‘supply-side economics’, the fact is that the theory is all about those who are better off supporting the economy and the government reducing its influence. The conservatives have their own ‘zinger’ name for the theory as well — ‘Reaganomics’. Regardless of the name you want to give it, the theory suggests that benefits of tax cuts to the better off are supposed to flow to those that are less well off. If that isn’t trickling down, what is?

The other argument is that the reduction in regulation assisted Americans to find jobs — and contribute to the economy. While to an extend it did, the majority of the Reagan era was during a time in the world’s economic history when the economy was chugging along nicely thank you very much. It could also be argued that the seeds for the current social and economic woes in the USA were sown in that era where personal wealth was a far greater concern than the common good.

Seems it’s all cut and dried then, doesn’t it? US and Australian conservatives still call for a return to ‘supply-side’ or ‘trickle-down’ economics (depending on your point of view), citing amongst other justifications, Reagan’s success in 1981 in reversing the US recession.

Reagan’s tax cuts are claimed to be the event that ended the recession of the late 1970’s and early 1980’s in the USA. But what is (conveniently) forgotten is that he increased government spending by 2.5% at the same time. Government spending also stimulates the economy. Therefore the most cited example of the benefits of this economic theory doesn’t stack up, as there were other influences at the time. Despite later increasing taxes for the better off, Regan also tripled the US Federal deficit from 1981 to 1989 — hardly the action of a government reducing influence in the economy. George Bush (the elder) also increased taxes despite a ‘no tax increases’ promise.

Recently the Huffington Post reported on the success on the Governor of the US state of Minnesota (Mark Dayton) and his remarkable turnaround of the state’s economy. The full article is here and the highlights are that when he took office in 2011, he inherited a deficit of US$6.2 billion and 7% unemployment. In 2015, Governor Dayton handed down a budget surplus of $1 billion that he has pledged to spend on transportation and education. Unlike nations, US (and Australian) states do not issue their own currency, so balanced budgets are considerably more important than at the federal level.

Dayton is an interesting person. He has been in politics for some time but considered to be a terrible ‘retail’ politician. According to Mother Jones:

An heir to the Target retail fortune, Dayton, 68, has ploughed tens of millions of his own money into his campaigns, but it still hasn't come easy. He swallows his words in a rush, speaking in almost-unintelligible mumbles and frequently losing track of his point as he rambles on unrelated tangents. "He's not a terribly articulate guy," says Larry Jacobs, chair of the University of Minnesota's public policy school. "He's not a smooth talker; he struggles to give a smooth public speech." At public events, Dayton hunches his shoulders, which makes him appear shorter than his 5-foot-10 frame, and often appears to be trying to disappear into the crowd. No one wonders whether he'll seek national office someday. He's not the leader of the free world — he's your dad, struggling to make small talk with you and your friends after you get home from school.

So how did Dayton do it? Well you could say he threw the ‘supply-side theory’ out the window. Not only did he raise taxes on the highest earners in Minnesota; he increased the basic wage in the state to $9.50 an hour. Mother Jones reports:

Republicans went berserk, warning that businesses would flee the state and take jobs with them.

The disaster Dayton's GOP rivals predicted never happened. Two years after the tax hike, Minnesota's economy is booming. The state added 172,000 jobs during Dayton's first four years in office. Its 3.6 percent unemployment rate is among the lowest in the country (Wisconsin's is 5.2 percent), and the Twin Cities have the lowest unemployment rate of any major metropolitan area. Under Dayton, Minnesota has consistently been in the top tier of states for GDP growth. Median incomes are $8,000 higher than the national average. In 2014, Minnesota led the nation in economic confidence, according to Gallup.

Scott Walker is the Republican Governor of Wisconsin — the neighbouring state to Minnesota — and a potential Republican Presidential Nominee in 2016. For decades, the two states have been comparable in a number of social and economic criteria. In the past few years, it seems that the ‘unlikely politician’ in Minnesota is outperforming his counterpart in Wisconsin according to a number of sources including Minnesota Public Radio and Econbrowser. Walker was also the subject of a ‘recall election’ in 2012, when in excess of 500,000 Wisconsin voters petitioned for Walker’s removal from office. He won the subsequent re-election — only after allegedly receiving considerable financial support from outside the state. CBS News in the US is reporting there are some potential problems with the morals and ethics of how Scott Walker manages his fundraising. Never the less, Walker is seen as a conservative hero by legislating to remove considerable negotiating power from the public service unions in Wisconsin and other US states as detailed in this article from The New York Times . Walker is now claiming that his ‘success’ with unions gives him the experience to deal with Islamic State (when he becomes a Republican President in 2016 you would have to assume). Fighting with unions and reducing public services are not unknown in Australia under the current federal government or its predecessors. Dayton has announced that his current term will be his last — and yes, he did have to wait until the ‘stars aligned’ to actually perform what is considered to be a remarkable recovery.

Australia’s newly appointed (in January 2015) Treasury Secretary, John Fraser, has gone ‘on the record’ claiming that ‘Reaganomics’ had some positive effects. Gareth Hutchens, writing for Fairfax media (link above) suggests that the view of Fraser is somewhat different to Martin Parkinson and Ken Henry — the previous two Treasury Secretaries. Given that Parkinson and Henry demonstrated their credentials during the Global Financial Crisis and its aftermath, Fraser has some large shoes to fill.

It is fair to suggest that there will be economists discussing the benefits of ‘trickle-down economics’ for years to come. However, Governor Dayton has clearly demonstrated that trying to make society more equitable by increasing the basic wage and taxing those that can afford to fund the services will not only improve the state’s bottom line, it will improve the quality of life enjoyed by all its citizens, then when the ‘payoff’ comes, services such as education and transportation can be improved using government funding. It seems there is a better way than the frequent calls for ‘tax cuts for the well-off’.

Minnesota and Wisconsin have seemingly been joined at the hip economically and socially for a considerable period of time. Governor Dayton has improved the living conditions of those in his state, reduced unemployment and is now funding improvements to transportation and education using methods that are certainly not supported by Australia’s Treasury Secretary Fraser or Treasurer Hockey. Governor Walker cannot replicate the success of Dayton (or Reagan for that matter) using ‘traditional’ conservative economic measures in neighbouring Wisconsin; accordingly the citizens of that state are falling behind their ‘long time equals’ who live over the border in Minnesota.

So next time you hear the call for tax cuts, austerity and ‘small government’; why don’t you think about Minnesota’s Mark Dayton and have ‘the discussion’ about a better way instead?

What do you think?

About 2353

Welcome to ‘the discussion’ we have to have. 2353 provides plenty to discuss in this piece on ‘trickle-down’ economics and the alternative approach — that seems to be more successful. The piece is particularly timely as Hockey released the government’s taxation discussion paper last Monday.

Next week, on a similar theme, Ken discusses ‘How the economic rationalists tried to steal our hearts and minds’, which looks at how the economic rationalist approach was trying to change not just our economy but our basic Australian values.



Intergenerational Reports: what are they on about?

There have now been four Intergenerational Reports (IGR) from 2002  to 2015, issued by three treasurers: Costello (2),  Swan  and Hockey.  They were meant to come out at five-yearly intervals but Swan (and Rudd, although officially they are the Treasurer’s report) brought forward what should have been the 2012 report to 2010.

I will compare what each report has projected for the future, particularly the changes that have been made between each report, and how they relate to Hockey’s 2015 report.

The basics each report addresses are:

  • demographic changes (population, ageing, immigration)
  • GDP growth (population plus productivity and participation)
  • and what they mean for commonwealth government fiscal policy (revenue and spending)

 Population and ageing

There have been significant changes in the total population projections: from 25 million in 2042 in the 2002 report, to 28.5 million in 2047, 35.9 million in 2050 and 39.7 million in 2055 in the 2015 report. Australia’s population in 2014 was about 23.5 million.

The fertility rate has influenced the population projections as it was forecast to be only 1.6 in 2002 IGR but in the last two IGRs was forecast to be 1.9. The biggest change, however, comes from immigration projections. The original 2002 IGR forecast average nett immigration of 90,000 per year over the next 40 years but that increased to 110,000 in the 2007 report, 180,000 in the 2010 report and is now projected to be 215,000 per year, which suggests that immigration alone will add 8.6 million to the population by 2055 and leaves about 7.6 million in natural growth.

Those higher population figures have lowered the proportion of people aged 65 and over from a high of 25.3% forecast in 2007 (2002 was slightly lower) to 22.6% in the latest IGR (compared to 15% in 2014). The proportional fall is not quite as high as it could be in a larger population because it is forecast that people will live longer. 

Life Expectancy 2002 IGR for 2042 2007 IGR for 2047 2010 IGR for 2050 2015 IGR for 2055
Women 87.5 89.8 90.5 96.6
Men 82.5 86.0 87.7 95.1

 

What do you make of that? Quite a big jump in the latest IGR. One reason is that the methodology changed. The 2010 IGR used the ‘period’ method (as used by the ABS in its ‘Life Tables’) which applies age-related mortality rates in the year a person is born but Hockey’s IGR has used a ‘cohort’ method which makes assumptions about medical improvements over a person’s life time. Appendix C (Table C1) of the current report shows that, using the ‘period’ method for 2055, there is actually a marginal decline in the projected ages from those in the 2010 report: females 90.1 and males, 87.5.

I have my doubts of the headline figures in Hockey’s report. Unless we discover the ‘elixir of youth’ (which can’t be entirely ruled out!), I believe there is likely a biological limit to human lifespan. Some credence is given to my view by information contained in the reports that remaining life-span at age 80 has not significantly improved in a hundred years. I think Hockey has deliberately changed the approach to justify his cries of ageing and scare the population into supporting his draconian policies: the marginal drop in life-span using the ‘period’ method would not fit his argument.

Hockey has also emphasised the ‘dependency ratio’ of 2.7:1, which is the number of people aged 15-64 (the ‘working-age population’) for each person aged 65 and over, as though this is leading us towards disaster. The current figure, however, is slightly better than the 2.4 in 2007 and 2.5 in 2002 (and is the same as 2010). I find it interesting, however, that the ratio was 7.3:1 in 1974-75 and in 2014-15 is 4.5:1. We have already lost 2.8 workers for every ‘retired’ person and yet seem to have done so without major problems and will lose only another 1.8 over the next 40 years.

Despite all of the dire warnings about ageing, the international context, as reported in the IGR, makes it appear that Australia is still relatively well-placed.

Australia’s population, although ageing, is neither as aged nor ageing as fast as some other countries. Japan’s median age is almost 45 years and many European countries have a median age in the forties. By contrast Australia’s median age is 36.8. The proportion of the Australian population aged 65 years and over is smaller than many OECD countries, including Canada, France, Germany, Italy, Japan and the United Kingdom. On the other hand Australia has a much larger proportion of its population aged 65 years and above than China, India and Indonesia.

Economic projections

The main measures are real GDP growth, real GDP growth per person (which implies improvements in the standard of living), and they are influenced by productivity, participation (the proportion of people aged over 15 who are in the workforce) and hours worked. 

Annual average 2002 IGR for 2042 2007 IGR for 2047 2010 IGR for 2050 2015 IGR for 2055
Real GDP growth 1.9% 2.4% 2.7% 2.8%
Real GDP growth per person 1.5% 1.6% 1.5% 1.5%
Productivity 1.75% 1.75% 1.60% 1.50%
Participation 56.0% 57.1% 60.6% 62.4%
Hours worked per week 34.25 34.5 33.6 32.0*

 

* The 2015 IGR doesn’t give an actual figure, only a graph, and this is my best estimate from the graph, although it does seem a significant drop compared to the earlier figures.

The hours worked reduce as part-time work increases, catering for older people and more flexibility for working women. Productivity projections are simply based on the average of the previous 30 years, so as the reports now span 13 years, some earlier higher annual levels of productivity in the 1970s have dropped out. Productivity has been as low as 1.2% in recent years: if that picks up again in the next five years, before the next IGR, that would be reflected in a slightly higher figure then. The report does concede that lower productivity in the 2000s was partly a result of the massive investment in mining infrastructure: while such investment boosts GDP it adds nothing to productivity until the mines are actually in production.

The new, and higher, population figures in each IGR have led to a continuing rise in the participation rate. That change is partly due to the projected higher immigration as the majority of migrants are of prime working age. Hockey is also projecting that participation by those 65 and over will increase from 12% to 17%. The main working age group, aged 15-64, will increase from 15.8 million currently to 23.8 million in 2054-55 and while not everyone in that age group works (a number of the 15-24 age group are still in education), the workforce is projected to be over 20 million in 2054-55 compared to about 11.5 million at the start of 2015. We will have almost 9 million more people paying income tax and yet we have a major problem!

A significant change in the figures is in the ‘real’ GDP growth. It has improved in each successive IGR. If GDP had remained at 1.9% as forecast in 2002, then, I agree, that we may have been facing long-term problems but if we are now predicting real growth of 2.8%, then the problems should be proportionally less, not worse as Hockey is telling us — but perhaps he thinks no-one has bothered looking at the previous reports.

Some economic projections have remained consistent throughout the reports, notably inflation at 2.5% (the Reserve Bank’s target) and unemployment at 5%. The unemployment remains constant because this is the NAIRU (Non-accelerating Inflation Rate of Unemployment) level, below which inflation may increase. I have read criticisms of the whole NAIRU approach. To my layman’s eye, it seems no more than the neo-liberal position that lower unemployment may force employers to offer higher wages to attract workers, and that will lead to inflation. On the other hand, I would have thought that fewer unemployed would help boost GDP: it would certainly boost government revenue and also reduce government outlays for unemployment benefits (Newstart).

Government’s fiscal position

The four reports focus on commonwealth government expenditure that is influenced by demographic changes, such as spending on health, aged care, pensions, payments to families, and so on.

In the following table I compare only the first three IGRs because Hockey’s IGR approaches the issue differently and I will discuss that separately. 

Per cent of GDP 2002 for 2042 2007 for 2047 2010 for 2050
Health 8.1% 7.3% 7.1%
Aged care 1.8% 2.0% 1.8%
Aged & service pensions 4.6% 4.4% 3.9%
Payments to those of working age 1.9% 1.8% 1.9%
Payments to families 0.9% 1.0% 0.9%

 

As you can see, up until 2010 there was no major change to projections for aged care and payments to those of working age and to families. The projections for health spending and pensions were already trending down, indicating that previous governments had already taken measures to slow the rate of growth of commonwealth spending. That also suggests that a moderated approach with appropriate changes over time is already achieving reductions in future government spending. Instead of continuing that approach, Hockey was insisting we required drastic measures now.

Each of the previous reports has taken the line that the projections are based on current policy settings, although they also comment on possible future approaches to meet the fiscal challenges. As you know by now, Hockey included three projections based on previous (Labor) policy, current legislated policy (what he has managed to get through the Senate) and proposed policy. 

Per cent of GDP 2014-15 current spending 2054-55 current policy 2054-55 ‘proposed’ policy
Health 4.2% 5.7% 5.5%
Aged care 0.9% 1.7% 1.7%
Aged & service pensions 2.9% 3.6% 2.7%
Payments to those of working age 2.8% 2.6% 2.4%
Payments to families 1.8% 0.9% 0.8%

 

I have ignored Hockey’s so-called ‘previous policy’ because it is such a flagrant lie. He alleges it is based on former Labor policy but it is based on the problems created after Abbott and Hockey eliminated Labor’s revenue measures and increased the deficit in the 2013-14 MYEFO — and of course those changes carried into the 2014-15 budget. It is true that health spending was forecast to increase to 7.1% of GDP by 2050, and that was contained in Swan’s 2010 IGR, but it should be taken in the context that measures by various governments had already reduced that from 8.1%. And the same can be said of aged and service pensions.

Study the figures closely. Hockey is not only proposing slowing the rate of growth of spending, which may be justified, but wants to achieve a final result that is below what is being paid by government in 2014-15 for pensions and welfare for those of working age (payments for families were projected to fall anyway). If you need justification of statements that Hockey and Abbott are attacking those on welfare, then surely that is it.

The three earlier reports each summarised the commonwealth spending by giving a figure for the ‘fiscal gap’ (the difference between forecast government spending and revenue expressed as a percentage of GDP). In the 2002 report that fiscal gap was forecast to be 5% by 2042; by the 2007 report it was down to 3.5% in 2047; and in 2010 it was down to 2.75% in 2050. Hockey’s report does not clearly give a figure. Again this shows that since 2002 governments had already taken measures to close that gap — or that changes in the parameters were having an influence (such as the increase in population).

What the reports tend not to address in any detail are the issues arising from a growing population, not just an ageing population. If we have 15 million more people in 40 years that obviously means we require more housing, better transport systems, more energy and water, and so on and that also has implications for our environment, including carbon emissions. The 2010 IGR is the only one to make this more of an issue:

Population growth has implications for the environment, including: greenhouse gas emissions, biodiversity and water availability; urban amenity; and infrastructure and government service delivery requirements. The risks in these areas are manageable provided governments take early action to plan for future needs and introduce efficient market mechanisms to transition to a less emissions-intensive economy.

Swan’s IGR also introduced a chapter specifically on “A sustainable society’ which looked at well-being and sustainability, and human and social capital which included health, education and skills. It discussed health and education and training as means of adding to future economic growth not just as a potential drain on commonwealth finances. The three reports prepared by Coalition governments have notably ignored that, other than a brief mention that they may have an influence.

While the IGRs consistently suggest that commonwealth spending on education will decrease, partly a result of young people being a lesser proportion of the population, it has recently been suggested by the Australian Council for Education Research (ACER)  that we will in fact need additional education facilities because of population growth in recent years. ACER suggested that Victoria would require an additional 448 primary classes each year over the next decade, Queensland 443, NSW 385 and WA 351, and that will translate to additional secondary classes from about 2018. That is primarily a funding issue for state governments but it raises questions about what the IGRs are actually achieving by their singular focus on commonwealth fiscal policy.

The focus of the IGRs is justified to some extent in terms of the ‘fiscal gap’. What the gap implies is the need to raise taxes or cut spending to meet projected future costs; a warning that commonwealth government spending could result in very high taxation levels, even above 30% of GDP, whereas historically we have usually managed to keep tax below 25% of GDP. Despite that, the reports do not actually prove that gap exists, only that it might if the forecasts are accurate. The changes that have already taken place between reports show how inaccurate such long-range forecasting can be and the figures appear, to me, not to justify that ageing is the central problem to long term spending. Ageing was relevant to Treasury primarily in terms of the retirement of ‘baby boomers’ from the public service because the government had a huge unfunded superannuation liability — which is why the Future Fund was established.

The IGRs are very limited in what they set out to achieve. Inter-relationships between some spending, such as health and education, and their capacity to improve future participation rates, productivity and GDP may be mentioned but are not explored in any depth. The impact of environmental change on the economy again is mentioned without going into great detail and yet climate change has the capacity to throw all those forecasts out the window. They are not providing a grand vision for the future of Australia. They are doing little more than addressing fiscal policy and then only the commonwealth government’s fiscal policy. They would be of more value if they did discuss a future Australia and the role of the states and what sort of funding they will also require to meet the infrastructure demands of a growing and ageing population (and to meet shorter-term challenges like the demand for more school places).

I can understand that originally they were Treasury’s attempt to warn the commonwealth government that it could not keep spending the way it was or handing away revenue. Even retaining a fiscal focus, they could have become so much more and could have fostered a conversation at all levels of government about Australia’s future and the finances required for it. I think the sole Labor government IGR did attempt to give the concept a slightly broader relevance but that has disappeared in Hockey’s IGR.

I think that while the reports maintain a sole focus on commonwealth government fiscal policy, the name ‘Intergenerational Report’ is a misnomer and, when Treasury can’t get budget estimates right from year to year, I’m not sure how much credence we can place on their projections 40 years into the future. 

What do you think?

About Ken

What do you make of the Intergenerational Reports? Are they giving us important information or are they not worth much in their current form? Ken doesn't think too much of them and certainly doesn't believe Hockey's most recent report. Let us know what you think.

Next week 2353 will look at 'The "trickle down" effect' in economics and discuss a successful alternative approach taken by a US state governor.

 

 

Does social media influence politics?


The new fashion in Australian politics seems to be leadership change. In the past ten years, we’ve seen Rudd overthrown by Gillard (only to succeed in a subsequent challenge a couple of years later), three federal opposition leaders in the Rudd/Gillard government era, the overthrow of a Victorian premier and subsequent election loss, two or maybe three leadership spills in the NT, and a Queensland premier suffer a thumping loss at an election. Political life seems to be a lot more unsettled now than it was in the late 1960s and early 1970s.

So, what would happen if Holt, Gorton and McMahon were reincarnated and chose to be politicians in the ‘twenty-teens’? How would they cope with the constant news cycle where any mug (this one included) can write a blog, send a tweet or post on social media and have a chance that it will be noticed and assumed to be ‘the truth’?

Technology is an amazing thing. Children today just ’don’t get’ the miracle of Instant Messaging, ringing people outside the same ‘zone’ and the ability to gain information on practically any subject on a device you hold in your hand. In the days of Holt, Gorton and McMahon, as there is today, there was a press gallery in the Federal Parliament House. The difference is that ‘back in the day’, the press gallery members were the only ones who had ready access to the political players of the day. Today, it is somewhat expected that political parties, politicians and members of the press gallery all maintain social media accounts, where should you feel the need or desire, you can read the infinite wisdom of the politician or reporter of your choice as it leaves their keyboard.

It is clear that political intrigue occurred in the past — otherwise the term wouldn’t be in common use. History tells us that Billy Hughes and Sir Robert Menzies were prime ministers while representing different parties at different times. The ALP split into two different organisations during the 1950s. In addition, John Gorton effectively ended his prime ministership when he voted against himself in a leadership vote in 1971.

Whitlam became leader of the opposition during the short reign of Prime Minister Holt (who vanished at sea off Cheviot Beach in Victoria). He was far younger than his predecessor Arthur Caldwell (1966 election campaign advertising clip here) and set about modernizing the ALP. By the 1972 election McMahon was prime minister. McMahon’s 1972 policy speech is an earnest appeal for votes but demonstrates how totally unprepared he was for the emergence of the ‘It’s timecampaign of the ALP led by Whitlam. Like Newman in Queensland 40 years later, Whitlam managed to alienate a significant section of the community in three years. The Liberal Party had developed a pale imitation of ‘It’s Time’ for the 1975 federal election, using the slogan ‘Turn on the lights’ with associated campaign material for the successful campaign to elect Malcolm Fraser. Since then, the marketing of our politicians and politics has only intensified. During the ’80s, Hawke and Keating announced proposed changes to the Australian taxation system prior to the 1984 election and promised to hold a summit to discuss the policy and its implementation after the election. The ‘tax summit’ was held in July 1985.

By the time the GST was introduced in 2000, the campaign had moved to television advertising. The internet was still young in 2000 and ‘social’ media was the ‘women’s section’ of the paper where the latest fashions and who was at the latest elite society party were the general subjects for discussion.

In the past 15 years, there has been a significant shift in the technology available to society. Social media is now considered to be a number of computer applications where anyone can write, discuss ideas and discuss issues relevant to them. Generally known as the ‘fifth estate’, social media (such as this blog, Instagram and similar platforms) gives people without any qualifications as a journalist the ability to discuss current issues and express opinions — potentially to a large audience. Traditional media (the ‘fourth estate’) has responded by creating websites that mirror the content of their existing publication — be it newsprint or electronic media — available through the internet for instant access (usually) wherever you are in the world. In addition, 24 hour news channels have been created such as Aljazeera, CNN and ABC News 24. Nature abhors a vacuum, so there has to be content for all these additional ‘instantaneous’ news channels. Those in the ‘fourth estate’ — some would argue attempting to retain their relevance — now seem to grab every opportunity to quickly publish on their organisation’s website any small piece of information they discover, only to be analysed and discussed by others and then republished.

It is clear that today’s political leaders have more training in how to behave in front of the media than Arthur Caldwell and Sir William McMahon did. Although being in the lifetime of a considerable percentage of the population, Caldwell and McMahon’s wooden delivery seem rather old fashioned today.

None of our three examples were examples of classical beauty. Holt looked his age, Gorton carried the reminders of a nasty accident when a pilot in World War 2 while McMahon was somewhat unkindly referred to as a VW Beetle with the doors open — matched with a crackly high-pitched voice. In contrast, more recent prime ministers, such as Julia Gillard have been subject to discussion of their looks, fashion sense and living arrangements, as well as their physical appearance. It should be said that looks, living arrangements and so on do not in any way determine the quality of decisions made in a leadership position.

We discussed above that you don’t have to be ‘in the media’ to make your opinion known. There are various social media sites that openly publicise their political beliefs (including The Political Sword, The Hoopla as well as the Don’t blame me I didn’t vote for Tony Abbott, a Facebook page). There are a number of equally blatantly conservative political Facebook and internet sites around — ‘search’ is your friend.

In the recent Queensland election campaign, various people and groups took to social media to attempt to influence the vote. It is fair to say that, in addition to the political parties, mining companies, unions and other interest groups all bought advertising on established media as well as social media websites to advance their respective positions. Others such as Dr David Pascoe created Facebook pages to discuss their individual views and by doing so they attempted to influence others. Pascoe somehow promoted an alliance between Alan Jones (2GB announcer), Katter’s United political party and Peter Wellington, independent MP for the Queensland seat of Nicklin, and made a number of posts critical of former Premier Newman and the state’s LNP for his alleged closeness to mining companies while ignoring primary production. While no one will ever know if Pascoe’s Facebook page affected the outcome of the election, he claims he has influenced large companies in their business dealings with their customers here and here — both ironically reported in a newspaper. Pascoe continued his crusade against coal seam gas development by commenting on the New South Wales state election.

Cathy McGowan is the independent federal MP for Indi. She won the seat — a conservative ‘stronghold’ — in 2013. In fact, Indi was the only Coalition loss at the 2013 election. ABC journalist Barrie Cassidy wrote a piece on The Drum describing the process. Cassidy’s article demonstrates social media played a large part in the organisation of the group, and McGowan’s win.

Holt, Gorton and McMahon were intelligent people and rose to the leadership level of a political organisation, so they knew how to ‘play the game’. In the days of media and image management, paid for by the political parties, their images could have been cultivated to make them ‘acceptable’ for the TV news sound bite. The major difference probably is that they wouldn’t have the luxury of reading the morning papers, crafting a message for broadcast that afternoon and moving on, only needing to interact with the established press gallery. The press gallery would have also respected ‘the rules’ and not led discussions on leadership spills and the like, realising that their access might be restricted if they did.

Has the rise of social media made it harder for politicians? In all probability it has because, while they still have the ability to ‘craft’ a message, any personal, private or public misstep is reported. They also have to be ‘on top of the game’ 24 hours a day, as once the audio and footage has been transmitted back to the base or someone has posted an event on Facebook or Twitter, it is out there, without the ability to ask for the story to be corrected or retracted. The public will no longer accept a speech from a politician sitting behind a desk looking authoritarian and like the protector of all they can see. Australian prime ministers for a decade or so now have been walking out to the podium in the courtyard at Parliament House in response.

It seems that social media has influenced politics. Dr David Pascoe and Cathy McGowan would certainly argue in the affirmative. Politicians now have to attempt to make the news, not be the news, while crafting a message and delivering it on cue and accurately. While they are doing that they have to seem to be relevant and responsive to their communities. The alternative is losing the leadership or, even worse, the election.

What do you think?

Postscript: You could also ask if Holt, Gorton and McMahon would be happy to be members of Abbott’s ultra-conservative Liberal Party — after all, former Prime Minister Fraser has resigned from the Liberal Party. That is another discussion entirely.


About 2353

This week 2353 asks whether social media and the fifth estate influence politics. Well, you are here reading this, so perhaps you can answer the question. Please leave a comment.

Next week Ken will take a look at the Intergenerational Reports, not just the recent one released by Hockey but the four that have been put out since 2002.



Surprise, surprise …


Not very long ago, during the annual meltdown into the pleasantly torpid stasis that is the great Aussie January holiday time, Peter van Onselen zapped out this Tweet:



From van Onselen, that was quite, well, shocking. More especially because just two days before he had tweeted:

Peter van Onselen…@vanOnselenP

The way the government has kept faith with voters up until now should give them the political capital they need to sell the Medicare cuts... 13 January 2015

While the Tweeps suggested he was in ‘irony font’ with that one (no, I don’t believe ‘PvO’ can ‘do’ irony either), in between the two tweets, Peter had dashed off a few others:

Peter van Onselen @vanOnselenP Jan 13

The govt start 2015 with a move putting the focus on health...consistently polled as a Labor strength. Plus the new minister is on holidays

Peter van Onselen @vanOnselenP Jan 14

What is wrong with this government, it is like watching a circus...

Peter van Onselen @vanOnselenP Jan 14

Yesterday the PM was explaining why the Medicare rebate cut is necessary, today they are backing down on it. They are SO incompetent...

Peter van Onselen @vanOnselenP Jan 14

Me: "what's going on?" (re Medicare rebate). Liberal MP: "How would I know, I'm only a minister". Adults in charge...

And two days after his ‘concern’ that he hadn’t made his apparent position on the government ‘clear’, came these:

Peter van Onselen @vanOnselen Jan 17

Yep this is what happened. Others didn't want to make the damaging change, PM insisted. He was warned, didn't listen.

Peter van Onselen @vanOnselenP Jan 17

There is a staggering amount of discontent with the PM amongst his colleagues. Day one back at work and hitting the phones...not pretty!

There’s general agreement in the Twitterverse, at least from more progressively minded Tweeps, that van Onselen is the weathervane, the cut-tin mainstream media rooster perched on the roof peak of Australia’s fourth-estate political commentary. Indeed, van Onselen oscillates on his rooftop so rapidly that it seems the only way to determine his ‘speaking position’ is unfailingly to remind ourselves of upon whose rooftop he roosts (Rupert’s of course: Sky, The Australian, the Sunday Times).

Take a look, though, at just a few of the columns van Onselen had written for The Australian during December and January and one just might suspect that van Onselen had ‘turned’:

    • December 3, 2014 ‘Respect the only answer for Abbott’: ‘Only a popular and well respected prime minister can mount a recovery for the government now, given the dire state of the polls.’
    • December 13, 2014 ‘Peta Credlin has become the story and that’s bad news for Tony Abbott’: ‘The volunteer firefighter, surf lifesaver and pollie pedalling fundraiser, who could almost always win over anyone he met, now seems to be living in a prime ministerial bubble …’
    • December 23, 201: ‘Tony Abbott’s reshuffle a rebuke for Julie Bishop’: ‘The Bishop slight within Abbott’s reshuffle didn’t end there ... Make no mistake, this was a deeply politically calculated and calibrated reshuffle …’
Well, almost suspect a turning — until you read this consummate bit of van Onselen sleight-of-hand: ‘ALP needs big-picture manifesto, not small-target strategy’, which, along with his sage advice to the ALP, includes these kinds of statements:

However dysfunctional Abbott’s team has been and continues to be, it pales into insignificance alongside what occurred under Rudd-Gillard-Rudd …

Bowen’s knowledge of financial issues and governance combined with Leigh’s outside-the-box thinking just might lift Labor’s economic credibility …

Really? Pales into insignificance?

Really? Lift Labor’s economic credibility? Not evidenced-based statements, these.

Van Onselen has been, and I think still is, a cake-and-eat-it academic who plays at journalism, or perhaps vice versa. His journalism, so-called, has always been and remains biased towards the LNP and its ideology, positions and policies. But he writes and speaks from a pose of academic distance. This translates into the false-prophet scourge of political journalism today — assuming that a position of so-called journalistic objectivity is achieved by putting the all-omnipotent boot into one’s own side, when perceived as needed, while measuring out in teaspoonfuls sage advice on how that home side can improve. Like the prime minister whose advisor he once was (when Abbott was Workplace Relations Minister in the Howard government), van Onselen is, while taking on the role of providing professional and fair reportage or commentary, the spinning weathercock incapable of offering his own political position for scrutiny, incapable of acknowledging that he is, indeed and inevitably, partisan. And that way reader distrust must inevitably lie.

Van Onselen’s almost naive posture of objective commentary could never hide his inevitable, default-position wish for a successful conservative government — even though he’s been pretty busy throwing Tony under a bus for quite some months. No, van Onselen hasn’t turned, but like a number of the fourth estate who gave Abbott and the LNP an unexamined free ride into power and the people a federal government not worth the examining, let alone the living with, he seems, variously of course, open-mouthed in surprise at what collusion in deceiving a citizenry and changing a government has wrought and, apparently, he has been fearful enough to show it. But not responsible, of course. Never that.

The 19th of January this year marked the 500th day of the Abbottian era of federal politics and political journalism.

While Peter van Onselen was spinning away, how have other political journalists fared in the now 500-plus days? In Peter Hartcher and Mark Kenny — two Fairfax journalists who in this first half of the Abbottian reign assumed that a calm, consistent, steady and above all ‘adult’ period of governance had been ushered in on the 7th September 2013 — we can spy a reluctant shift becoming more emphatic over time.

Hartcher:

In ‘Abbott’s in, now what?’ (November 30 2013):

The Abbott government has been quietly putting in place processes for a substantial agenda of economic reform. But none of that is yet showing results. In the interim, the news is full of Abbott's poorly managed events and Pyne's broken promise.

His government wants Australians to go to their Boxing Day barbecues remarking on how the new government is in charge, and looking after things that matter to ordinary people. They have a lot of work to do.

In ‘Tony Abbott choked by lack of vision, not ideology’ (June 21 2014):

… it was Hewson’s negative model of politics – how to lose an election by telling the people the truth – that had a greater impact on his apprentice than any of his positive lessons. Abbott so far has resisted the urge to utter a word of criticism of his former employer …

Besides, Abbott is not taking a vindictive approach to critics from his own side of politics.

In ‘Abbott unmasked: ideological warrior marches to the right’ (September 6 2014):

Abbott has set out to resume the Thatcher-Reagan revolution where Howard left off. He intends to advance it to a new apogee … To date, he has failed to take the country with him. But he has only just begun.

In ‘Tony Abbott’s national security address a siren call to the nation’ (February 26 2015):

By choosing to foster fear and division, by failing to embrace truly meaningful security recommendations such as a gun crackdown, Abbott has inadvertently exposed his weakness, not his strength. If we withdraw the benefit of the doubt, we see a failing leader merely posturing on national security in a sad effort to hold his job.

In ‘PM Tony Abbott’s “positive” poll shows he’s a dead man walking’ (March 2 2015):

Tony Abbott's supporters will claim today's poll as proof that there is life in his prime ministership yet.

Only a superficial reading can support this conclusion. In truth, it shows that it is already dead.

Kenny:

In ‘Abbott is a new man, but the left can’t see it’ (September 14 2013):

The truth is, Abbott in government is likely to be populist, political and pragmatic, rather than right-wing, reactionary and regressive.

In ‘Abbott in China shows skills beyond his years’ (April 10 2014):

But Abbott has spent a political career surprising those who underestimate the power of his intelligence, his people skills (funnily enough), and perhaps most importantly, his directness.

In ‘Abbott weak on home front, but a lion abroad’ (September 26 2014):

Despite his promise of smaller government and a smaller country, it has been Abbott's face-to-face relationship building and his deft leverage of Australia's Security Council presence, that has defined his administration's greatest heights – such as they are.

In ‘Abbott’s choice: change or face the axe’ (January 30 2015):

In a succession of dud decisions, their PM's gone quietly rogue, unburdened by the normal checks against gross error built into the system.

It’s the surprise at a failing Abbott, but even more the gravitas of the now-constant admonishing from some political journalists who before the 2013 Federal election failed to examine the kind of Abbottian government we were likely to get that … well … surprises. Never mind ‘don’t write crap.’ I just want to holler: ‘How in the name of every billion words poured onto the hapless heads of the previous Rudd/Gillard/Rudd government, not to mention on the heads of the Independent seers Windsor and Oakeshott, who detailed so fully what would come with an Abbott-led government, could YOU not see this coming?!!

I said to a mate recently that I was trying a look at whether and, if so, how Australian political journalists had managed to see through their own bias ‘for’ the Abbottian government and question its people and policy directions across its thus far brief era of custody. The mate’s response was that I should also consider ‘who cares?’ (implying himself).

So let’s consider who does care. Who cares whether political journalists and especially the press gallery, with noses pressed so closely to the ever-murkier glass of the chamber where the House of Reps sits, might have come to any realisation of what many have called their pre-election years of collusion or complicity or betrayal — or even treason?

Well I do.

And so, probably, do you, and every person who reads online blogs in Oz analysing the political state of the nation from a ‘progressive-ish’ point of view.

And every person of any and all ages and demographics who hit the streets, often for the first time in their lives, in the countless citizen protests, marches, demonstrations, sit-ins, vigils, lock-ins and lock-downs that erupted within three months of the Abbott government’s election and ceaselessly continue. Jonathan Green, host of ABC RN’s Sunday Extra, on the 14th December 2014 and in his last program for the year, ‘The Year That Was’, introduced a discussion segment with Melbourne-based playwright, activist and Guardian Australia columnist Van Badham this way:

There's a booming protest culture in Australia with almost as many people taking to the streets as the Vietnam protests of the sixties.

Green begins the segment suggesting that one way 2014 could be described is as ‘The year of protest’. Van Badham, in a brief but startlingly complete overview of protest activity across Australia in 2014, describes that parade of protest as a ‘carnival’ and pinpoints the use of social media as its vital and growing resource. (The Green and Badham discussion runs from 1 min 50 sec to 7 min 16 sec.)

Add, too, to those who care, every person who has been picking up in ever-increasing numbers on independent and ‘citizen’ online media outlets as they have grown ever-more dissatisfied with the fourth estate, this phenomenon being tracked especially by Margo Kingston’s No Fibs and David Donovan’s Independent Australia. (Very worthwhile reading lies at both links.)

Then add some well-known commentators on the state of Australian media.

Andrew Elder cares. Elder has been continuing his severe school for the serious reconstruction of recalcitrant political journalists all through the Abbottian era, handing out praise when considering it due and biting off those typing fingers considered fiddling about with irrelevance when not. Or savaging those media organisations, especially Fairfax (and no doubt soon the ABC), whom he considers have sunk to hiring the inept and avoiding the oncoming ‘brightest and best’ of future political journalism.

Tim Dunlop, eminently accessible as commentator on the media, cares, recently offering in ‘Is media objectivity an outdated mode?’, quite the most readable re-expression of the debate on the consequences of so-called objectivity and balance that has raged for decades across western journalism.

Dunlop compares two articles ‘reporting’ on Abbott’s Monday 23 February speech on national security (in front of six Australian flags): one by Michele Grattan and the other by Lenore Taylor.

About these he states:

… you could argue I am comparing chalk and cheese in that Taylor's piece is labelled analysis while Grattan's specifically isn't, and that's fair enough.

The bigger point, though, is: what even is the point of the sort of “straight” reporting Grattan has produced?

By striving to be "objective" her article is actually biased towards Mr Abbott's position. How does that help anyone? Except Mr Abbott, of course.

The bottom line is that governments and parties and various interests groups spend vast fortunes finding ways to manipulate information and public opinion. (All those flags behind Mr Abbott on Monday didn't appear by accident.)

Worse, the media is too often complicit in the manipulation.

Well, of course.

(And by the way, Hartcher’s pieces are labelled ‘analysis’ and Kenny’s ‘comment’. You spot the difference.)

Dunlop concludes by arguing that now social media can be the ‘journalist’s friend’ if they can bravely ‘own their own positions’ because ‘engagement with the audience is the new objectivity’. How? Because on social media a reader can demand the contexting of facts which, when only merely reported, can be intrinsically biased towards one side of politics or the other.

Last words to van Onselen:

Peter van Onselen @vanOnselenP March 3

I have to say, Tony Abbott is doing a good job of showing contrition on the GP copayment. Taking blame himself for the lack of consultation

Peter van Onselen @vanOnselenP March 3

.@MjrElvisNewton can I hire you to work your way through the right who slam me as a leftie to tell them all I'm actually one of them?

No, still don’t think Peter can do irony.

So, can we smell chunks of the political fourth estate on the run?

Or is it the scent of those who refused to see but — surprise, surprise — are now open-eyed and so very disappointed?

Are some turning?

What do you think?


About @j4gypsy

We hope you enjoy Jan's excellent piece on the changing media approach to Tony Abbott. Has the media turned against him or are the journalists, as Jan suggests, just 'surprised' and now frustrated that he has not turned out as they had hoped? Please let us know what you think. We know you won't be surprised but why are the journalists?

Next week we continue the media theme with 2353 examining the question 'Does social media influence politics?'



President Abbott: or why prime ministers should not be immune from removal by their party


After the failure of the ‘spill’ motion on 9 February, Abbott said:

We think that when you elect a government, when you elect a prime minister, you deserve to keep that government and that prime minister until you have had a chance to change your mind.

Ignoring that the polls were indicating the people had already changed their mind, the statement continued Abbott’s approach in the lead-up to the spill motion (and since) that he was elected by the people, whereas John Howard had previously said the ‘leadership’ was a ‘gift of the party room’.

Who is right?

Abbott’s approach, as was Kevin Rudd’s, is that he was elected by the people as prime minister but under the Westminster system of parliamentary democracy, which we use, members of the House of Representatives (where governments are formed) are elected by the voters of single electorates. They are elected to represent those electorates. Under the Westminster system, we have a strong party system in place to provide stable government — it would be next to impossible to have stable government if every individual member acted as an independent in the interests of their own electorate. That means that when we elect an individual member for an electorate, we also know to which party he or she will add their vote in the parliament. The leader of each major party, whether Liberal, Labor or National, is elected by the members elected to the parliament for that party (although Labor now includes an element of membership participation in a contested vote). It is true that we know the leader of each party going into an election and therefore who will probably be prime minister if the party wins enough seats to form government, but there is no rule that says that must be so — it is an expectation that has been created.

It is also true that election campaigns now tend to focus around the leader of each party and, in that sense, there is an element of a presidential election about the campaigns. (Whether that is good or bad is a debate for another time.)

In essence, we now have a Westminster system operating for and in the parliament but something closer to a presidential system operating in the way election campaigns are conducted. It is little wonder that voters become confused.

Despite claiming he was elected by the people, like a president, Abbott tried to use the Westminster system to defend his position in the spill motion. He called on his ministers to support him under the Westminster convention of ‘cabinet solidarity’ but ‘cabinet solidarity’ is primarily about policy decisions: it says that, no matter how much argument goes on in a cabinet meeting, once a decision is agreed each minister is bound to support that decision publicly — it is not meant to be about internal party politics.

There are significant differences between a Westminster democracy and a presidential democracy, particularly as operates in the US — from which we seem to draw most of our election campaign techniques.

The first major difference is that the US president is not only head of the executive government but also head of state. Our prime minister is only head of the executive government. The Queen of Australia is our titular head of state but the role is fulfilled by the governor-general and under our system the head of state has next to no role in the daily activities of government but the US president does. Our governor-general still signs laws into effect but does so on the advice of the government of the day and, certainly by convention, has almost no power to over-ride that advice. The US President can veto legislation passed by the congress if he (no ‘her’ as yet) does not like it.

A second major difference is that the US president selects his cabinet from anywhere — they don’t have to be members of the congress, indeed rarely are. In our case, not only the head of the executive government but members of the cabinet are drawn from those elected to the parliament. There is no rule that this should be so but it is one of the conventions of the Westminster system. The fact that the Westminster system relies on convention, rather than being enforced by rules, was evident when Campbell Newman first became leader of his party in Queensland while still outside the parliament: we could not countenance, however, that he could become a member of the government while outside the parliament and a seat had to be found for him before the ensuing election.

The American system is very much the old system of a democratic monarchy. The monarch (president) selects his own ministers (secretaries of state) and they are required to appear before parliament (congress) to answer questions about, and be held accountable for, actions they may have taken or not taken, as the case may be. Basically all the Americans did when they achieved independence was replace the monarch in that system with an elected president. And a little like the Abbott and Rudd misapprehension in Australia that people vote directly for the prime minister, it is also a misapprehension in the US that people vote directly for the president. They are actually voting for members of an ‘electoral college’ at the state level, who then join all those elected by other states and select the president. Originally members of the electoral college were free to vote for whomever they liked but now most states nominate all their electoral college votes to the winner of the popular presidential vote in that state. The electoral college was introduced because the early founders of the US republic were wary of giving the people a direct say in the election of the president and because it was feared that someone sympathetic to the British could be elected and effectively ‘undo’ the revolution: the college was an intermediary that also gave the states a greater say in the election of the president. (Apparently there have been four occasions when the electoral college votes did not match the popular vote, including in 2000 when George W Bush was elected.)

Which approach is more democratic? (As an aside, I did once convince an American, using the preceding arguments, that their system was closer to a democratic monarchy.)

In our system all members of the government have been voted for: they have won an electorate somewhere in the country or a large enough proportion of the vote to be elected to the Senate. There are no outsiders. Ministers can be voted out of parliament just like any other member, as can prime ministers (Howard) and state premiers (Newman).

The closest our prime minister comes to a presidential power is the ability to select ministers, remove ministers and move ministers in what we commonly call a ‘reshuffle’. (Technically it is the governor-general who has that power but, because the governor-general must act on the advice of the government, it is effectively the prime minister.) While that has always been the Liberal way, Labor only adopted that approach when Rudd became prime minister. Before that the Labor caucus elected from its number those who would be ministers and a Labor prime minister could only allocate portfolios to those who were elected. (Labor returned to that approach in opposition when Bill Shorten was elected in 2013.) Ministers can be removed for many reasons: misbehaviour outside the parliament, not being a good minister, disloyalty (as perceived by the prime minister or the party), travel rorts, undeclared gifts, undeclared pecuniary interests, and so on, or simply the need to reward someone else with a ministry.

Abbott has already selected one ministry and conducted one reshuffle so he has exercised that power. If ministers can be removed in such a way, it logically seems to follow that prime ministers can also be removed within the parliamentary party system, not only by popular vote. Even the name ‘prime minister’ suggests that — the person is only the ‘first’ minister, or the ‘chief’ or ‘head’ minister, but still a minister. If people can only vote once every three years (in the normal course of events) who has the power to remove a prime minister in between? We know from 1975 that the governor-general is one such person but it requires extreme circumstances that cannot be resolved politically or by the courts.

There is an argument that democracy can be enhanced by the use of plebiscites and ‘recall’ votes, as in a number of US states. Such an approach certainly allows for democratic participation in consideration of major issues and legislation and provides a capacity to ‘recall’ a leader or representative who has lost the support of the majority of the population. Would such an approach work in Australia? I don’t think so.

Australians are notorious for viewing voting as an irksome duty, not something they willingly undertake to express their democratic rights. A majority tend to want to vote and then leave the government to ‘get on with it’ for the next three years and not bother them too much: as Howard once described it, we want to be left alone feeling ‘relaxed and comfortable’. But we do react when things are going on that we don’t like and that is expressed in the opinion polls, sometimes in public dissent and these days on social media.

Under the presidential system, when a policy proves unpopular, it is most likely that a secretary of state will be removed so that he or she is no longer a symbol of a disliked policy. The president, as head of state, must remain. Although it is also possible to remove a minister under our system, it has become the case that the prime minister now seems to represent all facets of the government and wears the blame for policy miscalculations. In Abbott’s and Rudd’s cases that blame is probably warranted because of the way they centralised power within their own offices. It can also apply more generally because our prime minister is head of the executive government and therefore bears some responsibility for all actions of the government (just as the CEO of a company does): our prime minister does not have the immunity of a head of state.

Popular expressions of discontent with policy can’t actually change the prime minister — only an election or a party-room vote can do that. Therefore public expressions of dissent between elections can only be meant to encourage the parties to change their policies or their leadership, or both.

Liberal party leaders have always had a lot of power, perhaps because the party was founded around an individual, Robert Menzies. That leads to many more ‘captain’s picks’ as we are now seeing with Abbott as leader. Labor leaders historically have had less power but Rudd changed that hoping to entrench his own position. Now a Labor party-room change of leader requires a petition signed by 75% of the caucus when in government, or 60% of the caucus when in opposition. It does not seem to apply if a leader steps down. If the new leadership is contested, then a vote takes place that includes Labor party members. It is not impossible to change a Labor leader between elections but it is more difficult under the new rules: it is likely to lead to greater use of the ‘tap on the shoulder’ to encourage a leader to resign rather than go through the petition process and also to factional agreements to nominate only one person for the leadership to avoid a vote.

One of the arguments that was put in favour of Rudd’s new rules was that it allows ‘hard’ decisions to be made without concern about the polls. In a democracy, however, governments should be in the business of convincing the people that hard decisions are justified. Hawke and Keating made major changes largely through consensus of key stakeholders and publicly arguing the need for change. Even Howard’s GST was spoken about for some time before it was introduced and did go through one election that the Liberals won despite the GST — so there was a mandate of a sort. If prime ministers are safe in their position, with no ability to remove them before the next election, then they may see no need to convince the people about the correctness of any policy approach — which seems to have been the attitude Abbott and Hockey took with the budget.

What is wrong with a party removing its leader if it is seen that the leader has lost the support of the people or that the policies being pursued are being rejected by the people?

I think that removing a party’s ability to remove its leader would lead us towards a presidential system that is undemocratic. Where is the democracy in a system that says the prime minister cannot be removed, except at an election, if the people are already speaking through the polls, through demonstrations and on social media? If a party cannot remove its leader in such circumstances, then it is not listening to the people — and that is not democratic.

Mr Abbott, like Mr Rudd before you, you are not a president, you are not a head of state, and your party room can remove you in the interest of democracy.

What do you think?

About Ken

This week Ken argues that the party-room removal of a prime minister is an expression of democracy, not an undemocratic procedure as Rudd and Abbott have claimed. Please express your own democratic rights and post a comment on whether Ken is right.

Next week we welcome the return of our resident gypsy, if a gypsy can be said to be resident. Jan presents a piece questioning why the mainstream media, after spending so long supporting Abbott, now seems surprised at his incompetence. The piece, of course, is entitled, 'Surprise, surprise ...'



But we’ve done tax reform – haven’t we? (Part 2)


Last week we briefly looked at some of the problems with the current tax system. It seems that a number of those who should have a high level of understanding of the fundamental flaws in the current taxation system agree that the system needs reform.

Price Waterhouse Coopers suggest:

. . . there is a clear need for comprehensive tax reform — done the right way. The ‘right way' means increasing those taxes that have the least effect on investment and employment, and at the same time reducing reliance on taxes that distort incentives to work, invest and transact business. It also means addressing those factors which increase the complexity of the tax system and the cost of compliance.

Business Spectator reports:

Without widespread tax reform, the Australian government faces a prolonged period of sluggish wage growth and poor productivity. That might sound pessimistic but that’s the simple equation laid out by outgoing Australian Treasury secretary Dr Martin Parkinson.

Peter van Onselen wrote in The Australian (pay walled):

To the extent that consensus among tax professionals on the best way to collect revenue can be found, broad-based taxes are preferable to direct taxes. That’s because direct taxes such as income tax fall victim to bracket creep and stifle productivity. They feed into higher wages, too, which can affect inflation and Australia’s international competitiveness adversely.

But broad-based consumption taxes such as the GST can be regressive, in so far as they hurt lower-income families disproportionately to higher-income families given their flat application.

But this is a situation that can be easily overcome, is generally overstated and certainly isn’t a reason to abandon GST reform, which must be tackled boldly by our political leaders. It is always possible for policy decision-makers to make up for regressive GST application on the spending side.

Firstly, lets discuss the difference between ‘broad based’ and ‘direct’ taxes.

A ‘broad based’ tax is something like the Medicare levy. Everyone who pays tax pays a percentage based on their level of income to fund the ‘free universal’ healthcare system supported by the government. Distortions exist to ‘manufacture’ compliance with various social policies such as the surcharge made to those on higher incomes without private health insurance. GST is another ‘broad based’ tax: as the value of the tax is based, however, on the goods or services being purchased, rather than people’s incomes, someone on $40,000 per annum proportionally pays a higher rate of tax than someone on $140,000 per annum should they decide to purchase the same product. This distribution effect can be ‘engineered’ out through use of rebates etc. — as was promised with the Carbon Pollution Reduction Scheme (Carbon Tax).

Direct taxes are charges such as income tax. You pay a certain percentage based on your income. While someone who is in the fortunate position to pay tax on the highest ‘margin’ pays more dollars than someone on the lowest margin, the person on the lower margin usually contributes a greater value of their annual income.

So, according to the experts, the problem is the complexity and ‘side effects’ of the current tax system: to fix the problems, move to broad based taxes based on equitable criteria and simplify the system. Sounds reasonably easy, doesn’t it?

This is where the politics comes in. In 1975, Asprey and Parsons handed over the full report of the Taxation Review Committee. The Asprey Report received little attention from Whitlam or Fraser: it did contain, however, discussion around the major taxation reforms of the 1980’s and 1990’s (capital gains, dividend imputation and GST to name a few).

The Rudd/Gillard government commissioned Ken Henry, former treasury secretary, to perform another review of the taxation system in 2010. Henry’s review (which was told not to look at the GST — one would assume for political reasons) suggested a number of reforms to improve the taxation system. The politics surrounding the review was that ‘a package’ would be recommended. Ken Henry obviously disagreed. The Henry Review advised:

The review has aimed to set strategic directions for the future architecture of the Australian tax and transfer system. It has not produced a one-off tax policy package, and it has not advanced the detailed design or timing of measures. Indeed, it is neither possible nor desirable to make all of these changes (138 recommendations) too quickly.

In the words of John Hewson:

. . .those expectations were there, so when they were thwarted, the Review was all too easily dismissed, politically, as “just another study/review/inquiry”, easily essentially shelved by the media, although [the government] also all too easily “cherry-picked” with attempts to implement just a handful of its recommendations.

Against this background, the [then ALP] government only picked some “high profile” recommendations immediately, such as the mining tax, and when that backfired, it then only did smaller issues, quietly, leaving the bigger issues like savings and State taxes untouched.

Hewson goes on to note that the Rudd/Gillard government implemented 40 of the Henry Review’s recommendations but the Abbott government has since reversed the implementation of all but seven of them — without identifying the recommendations came from the Henry Review.

This piece started with a comment from an accountancy/business services firm (Price Waterhouse Coopers) stating what it believes is necessary. Not to be outdone, others have expressed their opinion as well, including Ernst & Young, The Conversation here and here, the Housing Industry Association, Newscorp’s The Australian (pay walled) and Prosper, an organisation that has been campaigning for a century for a greater reliance on property taxes to replace direct taxes. There are no doubt others as well — time precludes finding them and space from listing them.

Each group that enters the tax reform debate overtly or covertly expresses an opinion that would assist their members or customers — as is their right. It certainly doesn’t help any government in designing a fair and equitable solution for all of society, especially when affected industry groups commission and use selected facts in television advertising that certainly don’t mention that compensation to taxpayers was a part of the deal.

Politically and economically, tax reform is a hard ask. Hawke/Keating and Howard/Costello both were successful to a degree in implementing reforms to the Australian taxation system. There are also those that suggest the whole system should be replaced by ‘flat taxes’.

Of course there are a number of versions of ‘flat tax’ from the ‘pure’ — everyone pays a percentage of their income with no deductions or rebates allowed — through to systems that allow deductions, negative taxes and other arrangements. Wikipedia discusses some of the different versions here.

The economics editor of The Australian argues that ‘flat tax’ is an economic necessity (pay walled). In 2010, Abbott, then opposition leader, suggested a version of flat tax would be beneficial and commented it was recommended by the Henry Review. The ALP disagreed. Greg Jericho, writing on ABC’s The Drum website, suggests that ‘Unless you’re wealthy, you’re not going to like flat taxes’. Jericho makes the point that flat taxes are by their nature regressive, as they are a ‘broad based’ tax.

Remember the disparity in the actual proportion of a person’s income when buying a product we looked at a couple of hundred words ago? Twenty per cent of $140,000 is $28,000 and 20% of $40,000 is $8,000. So the person on $140,000 still has $118,000 per annum to spend while the person on $40,000 only has $32,000. Regardless of the dollar amounts, the person on the lower income is paying more value from their income when a broad based tax (such as a GST or ‘flat income’ tax) is levied. Certainly there can be some ‘engineering’ of the tax system so that the value contributed by both the higher and lower income earner can be made fairer but that is adding to the cost of managing the tax revenue and reduces the ‘purity’ of the revenue collection system.

Hewson, in his paper, suggests that Hawke/Keating achieved some tax reform because they crafted a message supporting the need for change to the then system by way of the ‘Tax Summit’ and demonstrating that change would reduce the level of tax evasion, such as the ‘bottom of the harbour’ scheme that was apparent in the 1970’s and 80’s. He also claims that his “Fightback” package, that was taken to the 1993 election, was the subject of various campaigns to create fear, uncertainty and desperation. To an extent, it is a fair call. Hewson also suggests that 1% of tax revenue is taken by the administration of the tax revenue system — demonstrating its complexity.

It seems that a simplified revenue collection system is a given to make our taxes work harder. Another factor that needs to be considered is the current rhetoric from political parties of all colours that the country’s budget is closely related to a household budget and has to either balance or be in surplus.

To simplify the current revenue collection system, tax reform is needed. If tax reform is discussed, every ‘special interest’ group in the country will have its say in an attempt to protect the interests of their members/customers. While ‘flat taxes’ are superficially attractive, they do have a tendency to favour those earning a higher income unless ‘engineering’ is performed to make the tax impost fairer (in which case what is the point of a nominally one-size-fits-all ‘flat tax’ system?).

Something that recent governments have painted themselves into a corner on is the mythology that the country’s budget is similar to a household budget and must be balanced or in surplus. It doesn’t — as Australia issues it’s own currency. The Conversation recently discussed ‘Why the Federal Budget is not like a household budget’ and noted:

The real calculation faced by government should not be about how much money the government has — it has an infinite amount. The calculation should be about the capacity of the economy to absorb government spending without driving inflation.

Seeking a balanced budget and automatically borrowing any deficit spending (as we currently do) is an effective but unsophisticated way of ensuring government spending doesn’t cause runaway inflation. Taxes and government borrowing remove money from the private sector, creating space for government spending (which injects money into the private sector). Remember, the government does not have to borrow or tax in order to finance spending because they can create money.

The Political Sword has previously looked at the fallacy of the balanced budget debate here and here. Peter Costello (former treasurer) not unsurprisingly has a comment on the difficulty of balancing budgets versus tax reform:

This is harder than balancing a budget and I've done both.

John Hewson’s push to become prime minister in 1993 failed due in part to a lack of understanding of his tax reform measures. John Howard found that he could not pass the GST without diluting the ‘purity’ of the tax to appease the Australian Democrats; Julia Gillard had to negotiate to get a ‘watered-down version’ of the Mining Tax through the Senate. So far, Abbott’s government has not demonstrated that it can negotiate well enough to ensure that the minor parties and independents in the Senate would commit to a package of reasoned and logical tax reform.

During October 2014, Abbott called for a mature debate on inter-governmental relations in general and the GST in particular. It is unlikely to happen until either the current government learns how to build a consensus as Hawke and Howard did or has the numbers and the motivation to do something for the common good. Either way a mature debate cannot be conducted in 30 second sound bites so loved by our current prime minister and the media.

What do you think?

About 2353

This week 2353 completes his ‘Tax reform’ discussion and paints the political difficulties of achieving tax reform. As he writes, almost everyone agrees we need tax reform but we don’t seem able to come to agreement on what should be done. Please tell us your views of tax reform and how we can achieve it.

Come back next week for Ken’s view of "President Abbott: or why prime ministers should be not immune from removal by their party".



But we’ve done tax reform – haven’t we?


Here’s a tip for 2015. If the Abbott Government can remove the current opinion polls and stories of excess and incompetence from the front pages, it has been signalling that it intends to tackle ‘tax reform’ during the life of the current government. It wouldn’t be the first to attempt to do this: Governments back to the days of Hawke in the 1980’s have legislated large changes in the way the government charges for the services it provides — and the continual evolution of the Australian and international community would indicate that further changes are necessary now and in the future.

There is an implication that the governments that rate highly on ‘economic management’ also seem to be considered ‘good’ governments. The Hawke/Keating Government introduced a number of changes to tax collection practices during the 1980’s, as did the Howard Government in the 1990’s, and were still considered ‘good’ governments. No doubt Abbott would like to share the same perception.

This week’s discussion piece is a very brief overview of some of the issues with payment of taxes (charges and levies); next week we will look at some of the realities of ‘tax reform’ — why it isn’t as easy as some commentators, politicians and academics suggest.

In an ideal world, taxes would fund measures to ensure that everyone has an equal standard of living — ensuring that each member of society pays an equal amount of money to receive an equal amount of benefit. We don’t live in an ideal world.

Naturally, each member of society perceives their needs and wants to be more important than others: if for example I am retired and can’t fund my own living expenses, I expect the government to provide an allowance to make it easier to meet my ongoing commitments and live to a standard that is similar to that I enjoyed when I was employed. In contrast, if I am a parent with a young family committed to pay a mortgage and the expenses of young children, I would look to the government to give me a supplement to my income to assist in the provision of essentials to what are effectively non-productive members of the family (‘my’ children) as well as assistance towards the costs of child care, maternity leave and so on.

Both groups of people have an equal expectation of government support and an equal reason to believe the government should assist them — after all the retired person has contributed to society through their labour and payment of taxes for a considerable period of their lives; while a parent is still contributing labour and taxes while bringing up children who will in turn contribute labour and taxes to support the community into the future. The unfortunate thing is that when a government claims (probably with some justification) that it cannot afford to be as generous as it was in the past, there is a considerable proportion of the population who believe that their needs or wants are more important than other groups within the community: why are others getting some benefit which is reducing the funding that I can claim?

There is a ‘long and proud’ history of robust discussion of taxation matters in Australia. In 1854, the Eureka Rebellion in Ballarat was primarily a revolt against the imposition of a tax (licence fee) on miners, regardless of their success at their chosen profession. While it could be said that they lost the battle, the miners won the war with their leader, Peter Lalor, being elected to the Victorian Parliament along with eight other miners in 1855.

At the Print Media Enquiry in 1991, Kerry Packer is reputed to have said:

I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra.

‘In this world nothing can be said to be certain, except death and taxes’ observed Benjamin Franklin in 1817. There are also a number of comments regarding the morals and ethics of the Roman tax collectors in the Bible. It seems that Australians aren’t the only ones that don’t appreciate the need for taxes.

Packer altruistically assisted the funding of installation of defibrillators in most New South Wales ambulances, so he wasn’t averse to donating money to a ‘good cause’. However, he has a point: why should I pay proportionally more than the next person to the government to fund community services?

John Hewson, is the ex-Liberal Party Federal Leader who took a GST to the 1993 election as a part of his “Fightback” package, and lost. Hewson is now a professor of economics at Australian National University and an occasional media commentator. He observes when tax law was introduced into the Federal Parliament in 1915, the act consisted of 24 pages, but in the 1980s the legislation ran to some 1200 pages and today it tops out at some 5500 pages. Clearly as the government has discovered ‘faults’ in the legislation, it has amended the legislation to rectify the errors. That has led to those who can afford the cost finding additional loopholes that have yet to be plugged by the government of the day. After all, as Kerry Packer pointed out (above), tax minimisation is perfectly legal — tax evasion isn’t. The Australian Taxation Office (ATO) annual report for 2013/14 runs to 266 pages, which seems to be rather a lot when all they should really be saying is everyone paid their fair share and the world moved on.

There are a number of factors for the dramatic increase in the size, and one would imagine complexity, of tax law in the past 30 years. Let’s look at two of them: tax compliance and tax minimisation.

During the 1970’s, some lawyers and accountants devised a system where companies were formed, traded, made profits and just before tax was to be paid, the assets of the company were given to another related entity and the former company shell sold to an unsuspecting person without the financial backing to pay outstanding commitments, such as tax on the original company’s income. The ATO was an unsecured creditor (a person or legal entity who is owed money by the business without legal entitlement to any of the assets by way of a mortgage or charge) to the original company, along with unsuspecting service providers and employees, and effectively got nothing as it was a pointless exercise to bankrupt the unsuspecting person. The scheme is known as the ‘bottom of the harbour’ as effectively the companies that were stripped of assets were sent there to drown.

In recent times, the ATO has prosecuted a number of ‘famous’ and ‘influential’ people as a result of Operation Wickenby, including The Masters Apprentices bass guitar player and John Farnham’s manager Glenn Wheatley and star of television comedy and movies (including Crocodile Dundee) Paul Hogan.

Tax minimisation is completely legal, but it reduces the tax revenue available to fund the services we as a community expect the various levels of government in Australia to provide. There are a number of ‘common’ schemes that are used on a daily basis including:

    • Negative gearing –To ‘negative gear’ you borrow money to purchase an asset that will not pay it’s own way (such as an investment property or share portfolio). The difference between income from the asset and the costs of the asset, including interest, can be claimed as a tax deduction. Those that use this scheme often offset the losses against other income (thereby reducing their taxable income) and also hope that a future increase in the price of the asset when it is sold will equal or exceed the losses they have claimed on their tax return.
    • Novated leasing - A three way agreement between an employee, employer and financial company where the employer nominally purchases a car (or similar) for an employee and funds the purchase from the employee’s pre-tax income effectively reducing the employees taxable income and tax liability.
    • Exporting profits - Apple is the subject of the link here as it apparently transferred around $2 billion to an Apple related entity based in Ireland while declaring and paying tax on a profit of under $100 million in Australia during 2013. Apple is not the only global company using this strategy. Other household names also move the bulk of their profits around the globe to avoid paying tax as well. How it works is the Australian customer deals with an Australian seller, but the financial transaction takes place in another jurisdiction where a significant proportion of the purchase price is claimed for the ‘production of the item’ and ‘intellectual property’ used in the product. That amount is sent directly to a related corporate entity in a country that offers the company a better tax treatment than Australia. The only part of the purchase that is ‘transferred’ to the Australian company is the price of the sale infrastructure and transport of the item to the purchaser. It is fair to say that a number of these ‘arrangements’ will cease to exist in the next few years as it has been recognised as a significant issue by governments and is now the subject of negotiations at events such as the G20.
In addition, governments of all colours introduce ‘targeted’ tax benefits or liabilities to manage social behaviours. There is a significant tax impost if someone purchases a packet of cigarettes — the argument being that there is a measurable drop in consumption of cigarettes (an arguable benefit to society in reducing smoking related illness) every time the tax rate rises. Australia also introduced a ‘Luxury Car Tax’ in 1990 in an effort to improve the viability of local vehicle manufacturing. Australian engineers can design a competitive product as shown by Ford and Holden/General Motors retaining the capacity to design a vehicle from the ground up once the current manufacturing capacity is withdrawn. A discussion on how and where Luxury Car Tax applies is here. Then GST is applied to the final cost of some products (including taxes), so we are paying tax on tax in some cases.

John Hewson claims:

… there are 125 taxes paid by Australians annually — 99 levied by the Commonwealth (recognising many agriculture and food levies), 25 by State and Territory governments, and one by local governments. These revenues are heavily concentrated with over 90% derived fro[m] just 10 taxes, reflecting 95% of Commonwealth revenue, over 60% of State revenue, and 100% of local government revenue.

Hewson also observes that over 66% of Australians use the services of agents to submit their annual tax return — surely an indictment of the perceived complexity of the system.

So we have a complicated system of taxes, charges and levies, which has been added to and amended over the past century. Is ‘tax reform’ a good idea in theory? — of course it is, but there is a political cost to doing it, ask John Hewson.

What do you think?

About 2353

The next part of this discussion will be posted next week and looks at the practicalities of introducing a fair, reasonable and easy to understand taxation system.



Abbott continues to tell porkies


I was surprised during last December (and again in the past week after the unsuccessful spill motion) when Abbott and his ministers reverted to the line that the LNP government had inherited a huge budget deficit from Labor.

Early in December they were claiming that Labor had been deceitful by going into the 2013 election claiming that the deficit was only $18 billion whereas when the Liberals gained the treasury benches it was shown to be $46 billion (and I noticed in Abbott’s appearance at the National Press Club at the beginning of February that he had rounded this up to $50 billion). That attack, in itself, was part of Abbott’s resetting of the agenda after his ‘ragged week’ and was obviously intended to turn attention back on Labor and away from the problems his government was facing: there is no doubt that approach will continue.

The first lie is the $18 billion deficit. That was the figure in the last Wayne Swan budget in May 2013 but Swan also made an ‘Economic Statement’ in August (during the election period) as the terms of trade deteriorated and economic activity slowed, reducing government revenue. By the time of the PEFO (Pre-election Financial Outlook) the deficit was actually $30 billion, which had been revealed slightly earlier in Swan’s ‘Economic Statement’. The $12 billion increase came from slowing GDP growth, and the subsequent decrease in revenue, and only $373 million (about 3% of the increase) arose from policy decisions by Labor. So Abbott’s claim that there was a $28 billion increase in the deficit is a fiction created by adopting a set of figures that had already been superseded before he was elected (although semantically it was the figure ‘going into the election’ — so perhaps Abbott is just playing with words again).

Abbott’s claim, however, was also dealt with at the time and found to be false. In June last year, Chris Bowen said that Joe Hockey had doubled the deficit by changes to government spending and changes to government economic assumptions and parameters: the ABC’s Fact Check found that Bowen’s statement — ‘checks out’. Other economic commentators also pointed to the spending and revenue decisions made by the Abbott government as making a major contribution to the increased budget deficit.

Although it has been done before, I will go through the details of the government’s finances. Please bear with me, as I will have to provide quite a few figures in explaining the situation, using the 2013-14 PEFO and MYEFO (Mid-year Economic and Financial Outlook), with some minor reference to the last two budgets. And it should be noted that the PEFO is the only financial document that is put out by Treasury and the Department of Finance. MYEFO and the budget are products of the government of the day after, of course, taking advice from the financial departments, but the final shape of those documents is always a result of government decisions. PEFO simply sets out the current situation based on the ruling assumptions and existing policies.

Firstly, we do need to understand that treasury forecasts are simply that — they are ‘estimates’ and ‘projections’. As such, they are subject to many qualifications and assumptions. Treasury itself states that:

The forward estimates of revenue and expenses … incorporate assumptions and judgments based on the best available information at the time of publication together with a range of economic assumptions and other forecasts and projections.

Major taxes such as company and individuals’ income taxes fluctuate significantly with economic activity. Capital gains tax is particularly volatile and is affected by both the level of gains in asset markets and the timing of when those gains are realised.

In addition revenue forecasting relies heavily on the observed historical relationships between the economy, tax bases and tax revenues. Such relationships may shift over time as the economy changes, presenting a further risk to the estimates.

(In relation to that last statement, the economy is currently undergoing changes as the mining boom ends and, therefore, there is an increased risk to the surety of the estimates.)

The MYEFO gives examples of the potential impact of certain hypothetical changes. If commodity prices fall, impacting the terms of trade and causing GDP to fall by one per cent, then government revenue could be reduced by $5.5 billion. On the other hand, if there is a 0.5 per cent improvement in both labour productivity and workforce participation, government receipts could increase by $3.7 billion.

Those examples are important because Treasury also explains the ‘confidence levels’ of the economic and fiscal forecasts. For example, although MYEFO forecast GDP growth of 2.5%, the 70% confidence level places growth anywhere between 1.75% and 3.25%, and the 90% confidence level between 1.5% and 3.5%, which means the preceding hypothetical examples actually fall within the range of possible forecasts.

With those provisos in mind, we can consider the actual figures and what went into increasing the budget deficit. If we believe Abbott the increase was $28 billion but only $16 billion if we believe PEFO. Or we can also look at the accumulated deficit over the forward estimates (to 2016-17) which increased from $54.6 billion to $122.7 billion, a difference of $68 billion. I will work on the last figure because that provides the full impact of Abbott government decisions.

Firstly, you will probably recall Hockey’s payment of $8.8 billion to the Reserve Bank, something the economic commentators said was not sought by the bank and was unnecessary. That leaves $59.2 billion to account for.

Abbott’s big ‘policy’ of repealing the carbon ‘tax’ was a major contributor to the loss in government revenue, to the tune of $13.7 billion over the forward estimates. That leaves $45.5 billion.

Repeal of the mining tax saw the loss of another $3.3 billion. That leaves $42.2 billion. (Those three big ‘decisions’ by the Abbott government cost the budgets over the forward estimates a total of $25.8 billion.)

There was another set of significant losses to revenue that many of us would not have heard about. Apparently there were 92 taxation and superannuation changes that had been announced by previous governments but not yet implemented. Abbott and Hockey decided to proceed with only 34 of those changes, foregoing another $3.1 billion in revenue. That leaves $39.1 billion.

The ABC Fact Check explains changes to a couple of the assumptions and parameters better than I can:

  • a change to the terms of trade methodology, reducing the economic growth forecasts, causing a $2 billion hit to the bottom line over the forward estimates
  • a change in the projected unemployment rate, leading to higher benefits payments totalling $3.7 billion extra
That leaves $33.4 billion.

But there was also a projected slowing of the economy: GDP growth figures were lowered. While this is something over which neither the Labor nor Abbott governments have much control, the Treasurer does have a say in selecting which figure to use for the forecasts (see the earlier paragraph on confidence levels). In MYEFO, the slowing economy was projected to reduce taxation receipts by $37 billion over the forward estimates.

So Abbott government decisions had actually increased the potential deficit by $71.6 billion over the forward estimates and it had to juggle the figures even to keep the increase to $68 billion. Even allowing that some of the worsening of the deficit would have happened no matter who was in government, Abbott government decisions directly added about $29 billion to the deficit (and up to $34.6 billion if we add the government influence in changing parameters).

Offsetting those losses, Abbott and Hockey had proposed abolishing the benefits introduced by Julia Gillard that were to be funded from the carbon and mining taxes. That would have decreased spending by $9.5 billion or reduced the deficit by that amount: but, of course, he has not been able to abolish all of those measures, so the deficit remains higher. Even if they had passed the parliament, the deficit would still have increased by $62.1 billion of which at least $20 billion would have arisen from decisions by the current government.

Estimates of government revenue for 2013‒14 were continually revised downward from the 2013‒14 budget through to the 2014‒15 budget:

  • $376 billion in the 2013‒14 budget
  • $369.5 billion in the PEFO
  • $364.9 billion in the MYEFO
  • $363.5 billion in the 2014‒15 budget
Despite that continual revision, the actual figure for the 2013‒14 financial year was lower still at $360.3 billion, $15.7 billion below the original budget estimate in May 2013 and even $3.2 billion below Hockey’s budget estimate in May 2014. So there are clear revenue problems for the government that have nothing to do with decisions by the former Labor government.

(As a postscript, Hockey’s more recent MYEFO in December 2014 also showed that revenue was continuing to decline in 2014-15; down $6.3 billion since his own budget estimate and down almost $21 billion on the forecast in Swan’s last budget.)

You would think that if a government takes decisions that decrease revenue it would also take other measures to increase revenue (not focus solely on cutting costs) but Abbott’s government has locked itself into the neo-liberal position of reducing taxes and so has very little room for manoeuvre. During the election campaign, it could be argued that Abbott lied by omission by not detailing how he would make up the foregone revenue ($17 billion) of his promises to abolish the carbon and mining ‘taxes’. People were left to believe that the ‘taxes’ could be abolished and nothing more need be done. I would suggest that Abbott knew that at the time and, given his promise not to raise taxes, already knew that he would undertake significant spending cuts to make up the shortfall — but of course he wouldn’t discuss that in any detail. And then, to justify the cuts, his government artificially increased the deficit and blamed it on Labor.

If Abbott and Hockey had really wanted to increase revenue to improve the budget position they would have kept Labor’s tax on annual superannuation earnings above $100,000 and the reduction in the fringe benefits tax concession on novated car leases: or have considered similar measures on other ‘tax expenditures’. Tax expenditures are foregone taxes when government provides certain benefits without taxing them or allows concessional tax rates: for example, military personnel receive a number of allowances and benefits that aren’t taxable although legally they are ‘income’. (It is only the tax foregone, not the full cost of the benefit that is counted.) Changing tax expenditures allows governments to increase revenue without increasing income tax, although there would obviously be vested interests who would ‘lose’ from such changes — such as the outcry from vehicle retailers and manufacturers when the change to the taxation of novated car leases was first announced.

In the 2013-14 budget the cost (foregone revenue) to government of tax expenditures was about $120 billion and was projected to rise to $146 billion in 2016-17 (which is the equivalent of 8% of GDP or about a third of projected government revenue in 2016-17).

While many concessions would be considered socially beneficial, there are others that appear to be of most benefit to those on higher incomes — superannuation is the one most commented on in that regard. In 2013-14 it was estimated that the concessional tax applying to superannuation cost the government $35 billion in revenue and that was projected to rise to $51 billion in 2016-17, or a total of $170 billion over the forward estimates. Eliminating the concessional tax rate for the earnings of superannuation funds would raise $65 billion over the forward estimates, and eliminating the concession for employer contributions would raise $62 billion, a total of $127 billion. While it would somewhat defeat the purpose of compulsory superannuation (to reduce old age pension payments) to entirely eliminate concessions, there is certainly scope for changes that could easily raise a few billion dollars: for example, even to raise the concessional tax rate from 15% to 17.5% could potentially raise $4.25 billion over the forward estimates: or $8.5 billion if raised to 20% — that is still a ‘concessional’ rate of tax but just not as generous.

Why isn’t Abbott considering such measures? Instead, he is even scrapping the changes that Labor made that would have helped revenue.

He is blaming the deficit on Labor when it is clear that about half of the increase in the deficit comes from a ‘natural’ fall in taxation receipts as the economy slows and transitions away from the mining boom, and the rest from decisions by Abbott and his government after it came to power. Other commentators, more expert than I, have already shown his claim is false and yet he returned to it in December, and again in the past week, obviously taking the view that because it was disproved six to eight months earlier most voters would not remember. That is probably partly true but it is also pure propaganda, no longer just ‘spin’: ‘spin’ is about putting the best possible light on a bad situation, not about blatant lies. Abbott, as he did in opposition, appears to be operating on the principle that if he tells the same lie often enough, people will believe it.

What do you think?

About Ken Wolff

Ken says that although this is old news he will have to keep returning to it because that is what Abbott and Hockey keep doing.

Next week we will continue the financial theme and how to raise revenue with 2353’s discussion of ‘Tax reform’.



If you doubt the scientists, what about the actuaries?


There’s an old adage that if you want to know who will win an election follow the bookmakers’ odds or where the punters are putting their money rather than the polls (particularly when the polls are close). Something similar could be said of climate change. For Mr Abbott and others like him who remain sceptical of the science, they should instead follow the risk assessment of the actuaries as they advise the insurance and reinsurance industry and the investment banks.

The actuaries do not concern themselves directly with the science but with evaluating the risk and the costs that arise from it. As the actuaries put it:

Our role as actuaries is to help optimise decisions. We don’t seek to prove or disprove the estimates made by the experts but we need to understand what they are saying.

Australian actuaries have been at the forefront in taking environmental factors, including climate change, into account, establishing a committee in 1998 to examine environmental and energy issues as they affect their profession. In January 2012 Australian actuaries played a significant role at the ‘Climate Change Summit for Asia’s Insurance Industry’ in Singapore. American actuaries were slower to react (their first climate committee appeared in 2005) but are now developing an Actuaries Climate Change Index and an Actuaries Climate Risk Index, initially for North America, that cover a range of factors, including obvious ones like temperature and precipitation and lesser known factors like soil moisture.

Munich Re, a major reinsurance company, issued details in 2011 [page 11 of link] showing that the number of weather-related catastrophes between 1950 and 2010 was on an upward trend (and weather-related events accounted for about 85 per cent of insurance claims). There was a sequence of bad years between 1986 and 1999, with a peak of 14 catastrophic weather events in 1993. The years 2004, 2005 and 2007 also had an above average number of major weather events. Although it seemed slightly quieter from 2008 to 2010, 2011 became the costliest year on record (but not just from weather events) for the global insurance industry following the earthquake and tsunami in Japan, the Christchurch earthquake and hurricane Irene in the US — total insurance losses for the year of $105 billion out of total economic losses from natural disasters of $380 billion. (To give those figures a context, the Australian government’s total revenue in 2010‒11 was $283 billion.)

A similar upward trend is apparent in plotting natural disasters in Australia.

The cost to the insurers and reinsurers of such events varies, depending where they occur. Some have argued that the increase in insurance pay-outs is attributable mainly to social and demographic changes, such as the growth of coastal cities and rising property values. That can be seen in the Sydney hail storm of 1999 or more recently the hail storm in Brisbane at the end of November: the Sydney event remains one of the most expensive for the insurance industry in Australian history at $1.7 billion, while the current cost of the Brisbane event is slightly over $800 million. (The most expensive event to date was the 2010 Queensland floods at $2.3 billion.) For the actuaries this is not an issue, in the sense that it is a given that must be taken into account, but it does concern them that, in the various climate change scenarios, catastrophic events may occur more often in major urban areas and that cyclones may move further south, bringing them within range of Queensland’s heavily populated and built-up south-east corner.

IAG in Australia is now utilising climate science figures that suggest that a 1°C increase in mean summer temperature will increase the risk of bushfires by 17 to 28 per cent; an increase of 2.2°C will cause a 5 to 10 per cent increase in cyclone wind speeds; that a 25 per cent increase in the volume of rain over short periods will mean that what is currently viewed as a one-in-100 year flood could become a one-in-36 year flood or, at worst, a one-in-17 year event.

The actuaries are also concerned that small changes created by climate change will not cause a proportional increase in damage (and insurance costs) but an exponential increase: for example, a 25 percent increase in a storm’s peak wind gusts from 40‒50 knots to 50‒60 knots does not produce a 25 per cent increase in damage but a 650 per cent increase. (For those who are metrically minded that is an increase from 74‒93km/h to 93‒111km/h.) It means our current housing stock is not well-suited to such an increase in the intensity of storms and that poses major challenges for insurance companies.

Terms like 1-in-100 year and 1-in-200 year will become meaningless as events of that magnitude occur on a more regular basis. In the UK [page 21 of link], it has been estimated that the insurance industry would require additional capital of £1 billion to cover 1-in-200 year flood events if there is a temperature rise of 2°C but £5.5 billion if there is a 6°C rise in temperature (the upper end of IPCC forecasts). To cover costs, it was also estimated that insurance pricing in the UK would need to increase by 16% for a 2°C rise and 47% for a 6°C rise. Those figures illustrate how the actuaries are examining the risk posed by both the high and low range climate change forecasts.

Insurance companies and their actuaries are not concerned merely by the local risks from climate change. The linkages between insurance companies created by reinsurance mechanisms means that they can each be affected by catastrophes anywhere on the globe. For example, the price to insurance companies of reinsurance almost doubled after cyclone Andrew in the US in 1992 (because that one event accounted for about 40 per cent of the then globally available capital for reinsurance) and it was three years before the price began to decline again.

The associated danger is that the cost of insurance becomes too expensive. More and more individuals may not take out insurance to cover their assets. In 2002, $1,500 billion of Australia’s wealth was locked up in homes, commercial buildings, ports and other physical assets. IAG’s Chief Risk Officer has stated:

The insurance industry currently underwrites the risk to the bulk of these assets from weather events but climate change threatens its ability to do so as effectively in the future. Therefore the affect to Australia from climate change is quickly becoming a social, economic and political issue.

The worst case scenario is that insurance companies themselves fail from the increasing insurance ‘losses’ and the rising cost of reinsurance, leaving people and businesses with no market mechanism to protect assets. In economic terms, ‘insurance’ is a means of spreading risk but if premiums become too expensive or insurance companies fail, the government will become the ‘insurer’ of last resort, as the main body able to spread and absorb the risk — but at what cost to taxpayers?

There is already some talk of greater government involvement. Following the 2010 Queensland floods the then Assistant Treasurer Bill Shorten announced the Australian National Disaster Insurance Review. The Review’s final report included recommendations for:

    • the creation of a government agency* to manage national coordination of flood risk management and to operate a system of premium discounts and a flood risk reinsurance facility
    • all home insurance policies to include flood cover
    • a system of premium discounts in order that most purchasers of policies in areas subject to flood risk are eligible for discounts against the full cost of flood insurance
    • a government guarantee for claim payments
(* A similar body had been created by the Howard government after the ‘twin towers’ terrorist attack to provide a government guarantee as regards terrorism insurance.)

The government response to most of the recommendations was, however, that it would ‘consider’ them as part of a broader consideration of disaster insurance changes, following a consultation process in 2012. Apart from action on the definition of what constitutes a ‘flood’, I am not aware of other government steps on this issue. One aspect that appears to have held up government action is that many insurance companies continue to operate on neo-liberal market principles and oppose government involvement:

In July 2011 Lloyd’s made it clear to the Review that government intervention in private insurance markets should be kept to a minimum and warned that the creation of insurance programmes or pools limits the effectiveness of the insurance industry, can be hugely costly for governments and hampers the application of sound actuarial and risk-based principles.

It is almost inevitable that in future years (despite Lloyd’s current approach), there will be more discussion of the government’s role in insurance. If the actuaries’ figures are borne out, the cost of insurance could become prohibitive either for the individual or for the insurance companies, or both. Alternately, governments have to be active now in taking measures to adapt to and mitigate climate change that will help contain future costs.

Actuaries are already speaking of the need for adaptation and mitigation. A simple example is ensuring that buildings in cyclone-prone areas are built to cyclone standards. Here in Australia, the actuaries are using the evidence that recent cyclone damage has been greatest to dwellings that were not built to such standards or, in some cases, where such standards were not enforced during construction. Taking action now may help avoid the high range climate change scenarios and the associated higher costs: not only insurance costs, but the construction costs of more stringent cyclone standards to cope with higher cyclonic wind speeds. The draconian alternative is abandoning some of the towns and cities that are subject to cyclones.

IAG has suggested that insurance companies can drive public awareness programs that identify vulnerable areas, can lobby governments to change or enforce building codes, and, in relation to emissions, can offer lower vehicle insurance premiums for those driving fewer kilometres. Insurance companies are also funding research to more clearly identify the risks they face. IAG is funding research into the development of hail storms over Sydney: warmer waters appear one contributing factor, so the risk is, if oceans warm as predicted, that those events will become more frequent.

Despite the need for adaptation and mitigation, last December we saw Queensland minister Jeff Seeney order the Moreton Bay Regional Council to remove from its regional plan reference to a climate change-derived sea level rise of 0.8 metres by 2100. The Local Government Association of Queensland feared that Seeney may enforce that for all coastal councils in Queensland and was seeking legal advice. The concern is that councils may be legally liable, like tobacco and asbestos companies, if it is shown that they knew of the risk but failed to act.

Seeney claimed he intervened ‘to ensure the residents’ rights to build and develop their properties were maintained and not restricted by their local council’. That relates to issues I discussed last year on TPS regarding the Right’s view of individual freedom and individual self-interest. And it manages to ignore completely the growing concern of the insurance industry and its actuaries.

The actuaries are also discussing the risk related to the market value of companies holding carbon (fossil fuel) assets. The argument goes like this:

    • to limit global temperature rise to 2°C we have a ‘carbon budget’ of 886 gigatonnes of CO2 between 2000 and 2050
    • in the first ten years of the century we have used 321 gigatonnes of that budget, leaving 565 gigatonnes
    • but known global reserves of carbon fuels would produce 2,795 gigatonnes of CO2
    • top listed companies represent around 25 per cent of those reserves
    • so what happens to the companies’ value if only 20 per cent of carbon fuel reserves can be used?
In economic terminology, these would become ‘stranded assets’ — assets that can no longer be used. That has implications for companies and the share markets. Insurance companies are particularly concerned because they rely on investments to help build their funds, so they need to reduce such risk in their investment portfolios. Actuaries who provide advice in those areas are starting to factor such considerations into their advice.

Insurance companies are recognising that a risk from climate change already exists and, whether convinced by the science or not, are asking their actuaries to assess that risk. They are acting on the precautionary principle — expressed this way by a Swedish insurance company:

Climate change has been a hot topic for a long time now. Global warming is probably contributing to many of the changes in our weather. Whatever the reason, the conclusion is that we have to respond to the situation more effectively. [emphasis added]

It’s a shame that we can’t say the same of our government, although it is likely that the government will be the one left to pick up the tab if the insurance companies can no longer meet the cost of weather events arising from climate change. Someone should ask Mr Abbott and Mr Hockey what sort of debt and deficit disaster that will create for future generations.

What do you think?

About Ken Wolff

This week Ken takes a different look at climate change and suggests that Tony Abbott, and other climate science sceptics like him, should instead consider the risk assessment of the actuaries. The government may be taking no notice of climate change but the insurance industry certainly is.

Next week we start a series of articles on financial matters, starting with another piece by Ken, 'Abbott continues to tell porkies', which examines the detail of the so-called budget deficit disaster and asks why Abbott and Hockey did not also consider other tax changes, particularly regarding 'tax expenditures'. It will be followed by 2353 examining the issue of tax reform and why it is so difficult.



We’re all in this together

As human beings we each have a responsibility to care for humanity. Expressing concern for others brings inner strength and deep satisfaction. As social animals, human beings need friendship, but friendship doesn’t come from wealth and power, but from showing compassion and concern for others. [Dalai Lama]

It is common to make a resolution on New Year’s Eve that, if kept, will make us better people in the forthcoming year. It is also a period of reflection, of things we did well, things we could have done better and things that we just should consider — so with your indulgence, and as New Year’s Eve was only a few weeks ago, I would propose that we should all reflect on this quote from the Reverend Tim Costello (Baptist Minister, CEO of World Vision and brother of former Australian Treasurer, Peter), and that we should all aspire to it in 2015.

Ultimately we have got to co-operate for our common destiny.

If you’re reading this site you’ll probably remember that back at the beginning of November, the Memorial Service for past Prime Minister Edward Gough Whitlam was celebrated at the Sydney Town Hall. As you would expect, all the living Prime Ministers attended the service — and the public outside did not greet Prime Ministers Howard, Rudd and Abbott with any enthusiasm. Regardless of our opinions of the three gentlemen in question, it is my contention here that the treatment they received outside the Hall was inappropriate for three past and current leaders of our community. True, once inside, Abbott gave the impression he was there only because he ‘had to be there’, when speaker after speaker was pointing out the legacy left by Whitlam, so he was equally at fault.

Oliver Burkeman, writing in the US version of The Guardian opened a recent opinion piece with the headline ‘We can all get along — and for less than the cost of a Taylor Swift Album’. While Taylor Swift may not be your preferred musical choice (she certainly isn’t mine), the article asks why people ‘hate’ those with a different viewpoint. Burkeman looks at a recent study by the National Academy of Sciences of the United States of America that set out to look at the reasons for intractable disputes:

Political conflict between American Democrats and Republicans and ethnoreligious conflict between Israelis and Palestinians seem intractable, despite the availability of reasonable compromise solutions in both cases. This research demonstrates a fundamental cognitive bias driving such conflict intractability: Adversaries attribute their ingroup’s actions to ingroup love more than outgroup hate and attribute their outgroup’s actions to outgroup hate more than ingroup love. This biased attributional pattern increases beliefs and intentions associated with conflict intractability, including unwillingness to negotiate and unwillingness to vote for compromise solutions. In addition, offering financial incentives for accuracy in evaluating one’s outgroup mitigates this biased attributional pattern and its consequences. Understanding this bias and how to alleviate it can contribute to conflict resolution on a global scale.

In other words, can people be convinced to ‘see the values of their enemies’? Well it turns out that the answer is yes; people can gain an understanding that the motives of their ‘enemies’ are usually the same as their own motives but they come from a different viewpoint. Where the Taylor Swift comparison comes in is that when interviewing Americans about their hatred of the Republicans/Democrats (as applicable), it only took $12 — less than the cost of the aforesaid Taylor Swift album — for the interviewee to be able to describe the motivation behind those from the other side. Yes, the potential to gain $12 may demonstrate a number of human failings rather than an opening of awareness but maybe some of the interviewees actually did begin to question their rationale that the other side is completely wrong.

Burkeman links in his analysis to the writings of Arnold Kling who wrote The Library of Economics and Liberty and suggests:

The following thought occurred to me recently. Suppose we look at writing on issues where people tend to hold strong opinions that fit with their ideology.
Such writing can
(a) attempt to open the minds of people on the opposite side as the author
(b) attempt to open minds of people on the same side as the author
(c) attempt to close minds of people on the same side as the author
So, think about it. Wouldn't you classify most op-eds and blog posts as (c)? Isn't that sort of pathetic? Here are some more thoughts:
1. The default is (c). If you are not consciously trying to do (a) or (b), then you will almost surely do (c).

Burkeman then acknowledges:

Indeed, an awful lot of opinionating, in the media and elsewhere, just takes the hate-based motivations of the other side as given. The real purpose of such writing — and I’ve done plenty of it myself — is rarely to change opponents’ minds. That kind of project would surely benefit from accepting the possibility that those opponents think of themselves as decent, loving people. Instead, it’s to rally the existing supporters of one’s cause, reinforcing their perception of the other side as driven by hate.

This line of reasoning could support the motives and operations of various media ‘personalities’ and politicians both here and overseas.

Abbott became prime minister through unfailing negativity. In opposition:

They focused like a laser beam on any action by the Labor government that could be effectively attacked. It was primarily a negative opposition, with the biggest promises being the undoing of Labor’s legislative and infrastructure agenda. Abbott opposed the NBN, the mining tax, the carbon price, poker machine reform and much more.

However, in government, this process has now come back to bite them badly.

It’s almost universally agreed by economists and policy experts that a carbon price, through a tax or trading scheme, is the most effective and efficient method for reducing emissions. Julia Gillard opened herself to attack over the carbon price because of her promise during the election campaign that there would be no carbon tax under her government. The Coalition leapt on this broken promise and attacked the Gillard government relentlessly.

Gillard didn’t sell the ‘carbon tax’ well. One could argue that NBN, Disabilitycare and a number of other policies were sold equally as badly by the ALP under Rudd and Gillard. The continual infighting made known to the public through leaks didn’t help promote a sense of unity and purpose. Abbott’s relentless attacks on those policies now puts him in a position where he can’t offer the ‘effective and efficient’ method to reduce carbon emissions, neither can he offer the ALP’s technically superior NBN, the more cost effective ‘paid parental leave’ or any form of increased assistance for those with a long term disability. Hate politics has gotten in the way of good policy — and you and I (as well as our descendants) will suffer. Abbott now calls for mature debate surrounding increasing the GST — something that he claimed was ‘off the table’ while in opposition. When Clive Palmer is literally laughing at Abbott and even NewsCorp is reporting the request with some sarcasm, Abbott has a problem. Kaye Lee discusses Abbott’s conundrum on The Australian Independent Media Network by pointing out some of the other revenue-leaking measures Abbott has promised not to touch, despite being unfair to large sectors of the community.

In November, Senator David Leyonhjelm who is an independent, wrote an opinion piece for The Guardian headed:

‘Dear Bill Shorten: you're the opposition leader, not me. It's time to drop your soft bipartisanship.’

Rather than oppose for the sake of opposing, or donning a hi-vis vest and walking into some unsuspecting factory with a media circus in the manner of Abbott while he was in opposition, is Shorten playing a longer game here? If he is less ‘absolute’ now, he will be more able to determine the best practical policy outcomes in the future, assuming the opinion polls are correct. A search of The Guardian or Fairfax Media’s websites will show a list of items where Bill Shorten is actively and publically differentiating his party from Abbott. Some of his speeches have been (in the words of Yes Minister) ‘courageous’ — such as his speech at the Christian Lobby’s convention that he is in favour of blended families and same sex marriage.

Professor Selena Bartlett from QUT has developed a ‘brain vitality index’, which she hopes will become as well known as the BMI used as an indicator of physical health. Bartlett claims

“Often we are not aware of what we are saying to ourselves or the impact this has on our brain health,” she said.

“Your brain is a massive computer. If you get up in the morning thinking ‘I'm sad’, or ‘I'm worthless’, it's like entering a search for 'worthless'.

“Your brain then sets about finding the evidence to support these thoughts and so the whole negative feedback loop becomes part of your brain's hardware.

“Our brains hold onto negative thoughts more than positive thoughts and if we maintain and reiterate endless negative self-narratives it causes stress.”

Bartlett’s research puts a scientific and peer reviewed foundation to the writings of Kling and Burkeman discussed above. She also has a free ‘app’ on the Apple and GooglePlay download ‘stores’ should you wish to ‘measure’ your brain vitality.

At the end of the day, Tim Costello is right: we do have to co-operate to survive. No one person or group of people has all the correct answers. So why is it that there are a number of people prepared to tear down not only the opinions of those who haven’t come to the same conclusion, but tear down the person as well? Burkeman, Kling and Bartlett all demonstrate from different perspectives that negativity is a dangerous weapon. Bartlett also demonstrates that negative opinions are harder to ‘modify’ than positive opinions.

It is frequently said that people go ‘into’ politics because they have a genuine desire to improve the lives and outcomes for their community. Those who meet a politician from ‘the other side’ also frequently express that they seem to be nice people who are genuinely interested. Why then did it become acceptable for political parties and their acolytes to engender hatred of ‘the other side’ for political gain?

At the end of the day, no one gets off the earth alive and we need to be able to understand that others may have differing opinions developed through a similar reasoning pattern as our own. Surely as a society we have the ability to disagree with a person’s ideas or motives — but not hate the person.

What do you think?

About 2353

As the first ‘official’ post for the year (not counting our ‘warm-up’ or the announcement of changes for TPS in 2015 during the week), 2353 has asked whether we can in this new year be more understanding of opposing views, whether people can disagree with an idea without attacking the person holding it. It is an aim that all should strive for in 2015, including our politicians. Then we might have some genuine public discourse on ideas for Australia’s future rather than political name calling. We can only live in hope! Come back next week for: 'If you doubt the scientists, what about the actuaries?' by Ken Wolff



Enjoy a new era at The Political Sword


On Saturday, 13 September 2008 Ad astra wrote: ‘This is the first posting of The Political Sword blog. Its focus is Australian politics. It is intended to give expression to those who have opinions about contemporary political events. In particular it will provide a forum for exposing deception among politicians, bureaucrats and commentators.

‘The people deserve to know the truth about political decisions, how and why they were made, and about those who made them. They are entitled to know if political commentators are truthfully representing the situations they are reporting, and that they make clear what is fact, and what is opinion. They owe it to their readers to validate the facts they report and reveal their source.

‘By challenging politicians and commentators to stick to the truth and to justify their words and actions, it is possible that the quality of political discourse in this country might improve. The Internet provides ordinary citizens with the opportunity to influence political behaviour between elections, rather than only at election time.

‘Politicians, journalists and academics read political blogs - they are bound to be influenced by them, at least to some extent.

‘Al Gore said that political blogs have become a significant new force in political debate and decision making in the US. The same opportunity exists in this country to put politicians and commentators to the verbal political sword
.’

Over six years later, the words apply even more than when they were written. Blogs and social media now do impinge on politicians; sometimes the politicians do hear what the ordinary person says and sometimes they do respond. But their honesty and their transparency has not improved; indeed it seems to have deteriorated, most noticeably since the 2013 election.

When in September 2013, at the same time as Lyn, who provided TPS users with comprehensive links to political material day after day for many years, Ad astra decided to step back from TPS, Janet (jan@j4gypsy), not wanting to see it disappear, moved in and organised a team that has maintained the site ever since. In Ad astra’s words: “Her organisational skill, and the dedication of TPS team members have been outstanding. They have authored, sought other authors, reviewed, edited, and coded countless pieces that have appeared week after week on TPS.”

Over time the nature of our author contributions has evolved. In recent months, the emphasis of most pieces has been on the philosophical aspects of politics, with a focus on economics. The pieces have been learned treatises on the chosen subject, well researched and referenced with many links, fascinating and valuable reading that has evoked reflection and deep thought about the matters that influence politics profoundly. Because these matters are seldom addressed by politicians in their discourse with the public, and are usually neglected by mainstream media journalists, the electorate has been left to flounder in a sea of inconsequential superficiality, devoid of thoughtful consideration of the central issues that influence, and indeed mould our democracy. So important have these pieces been, that it is planned that such contributions shall continue to be the solid base upon which TPS will continue in 2015. You can look forward to more of such pieces from our talented authors.

Casablanca took over from Lyn, and since then has supplied a continual stream of links to important material from the media. Her dedication and perspicacity in selecting relevant items is deeply appreciated. You can look forward to her contributions in 2015.

As we enter a new year and contemplate the 2016 election in about eighteen months, as the substandard performance of the Abbott government continues, and as its leader’s performance declines by the day and his public approval sinks to greater depths, the need has become more and more pressing for incisive commentary on the government, its leader and its ministers, as well as on what the other parties are doing.

TPS Extra

To this end, TPS has added another component to its repertoire: TPS Extra. Older readers will remember how curbside paperboys in another era shouted: ‘Extra, Extra, read all about it’ as they spruiked editions of their newspaper that contained startling news. TPS Extra is TPS’s attempt to bring you the startling — in political commentary. We will not be generating news; there are countless news generators, and we don’t have the resources anyway. What we will be doing is dissecting the contemporary news from many sources, analyzing it, looking for meaning in the events, and interpreting what they might imply. We will provide links to the news sources and will often quote from them. The pieces will therefore be opinion pieces. They will reflect the opinion of the author, and they will invite your opinion.

It is our intention to post such opinion pieces on TPS Extra. There may be several in one week, or none at all, depending on what is happening politically. You will be able to read these by switching from the main site, The Political Sword, to TPS Extra. 'Buttons' have been provided on each site to enable you to switch from one to the other and back again as often as you wish.

Our Webmaster, who goes by the nickname Web Monkey, has skillfully designed the new site and the transit buttons. We are deeply indebted to him for his stylish design.

TPS Extra is now live at http://www.tpsextra.com.au. There are several posts there: four prepared last week to trial the new site, and one added this week that comments on Australia Day . You may wish to read them, comment upon them, and rate them. Commenting and rating are done just as on the main TPS site.

We suggest you make the original TPS site your default, and switch to TPS Extra as the desire takes you.

We trust you will enjoy the variety now offered by The Political Sword in its two forms.

While the main TPS site will continue to focus on more in-depth analysis of political and social issues, we are also making some minor changes in our approach for 2015.

A call to authors

The Political Sword will be accepting shorter pieces from authors for posting. Last year, our posts were usually around 2000 words (give or take 200‒300 words) but this year we will accept shorter pieces, anything from 400 to 1000 words. So if you have been reading our posts thinking you couldn’t write longer pieces like that, now you don’t have to. When we receive shorter pieces, we will attempt to put pieces addressing the same topic together and post them together: so instead of a single article constituting a post, we may have two, three or four articles.

To help you, we now also have a list of themes. This doesn’t mean that they are the only things we will post about but we do hope to address a number of them during the year and your pieces, both short and long, will help.

Our current themes are:

  • education
  • health
  • environment/climate change
  • immigration/asylum seekers
  • economy
  • social equity
  • tax
  • finance
  • work and the labour force in the 21st century
  • welfare
  • Aboriginal and Torres Strait Islander affairs
  • science, research and innovation
In addressing the themes, we will not only be looking for critiques of the current approach taken by the government but alternative approaches that may actually help improve the situation or approaches that you think Labor could take into the next election. Of course, some of the themes can overlap.

And, given our authors’ statement of beliefs (see below), there is also scope to ask them to expand on some of those beliefs and explain how they see our society achieving the ideals they have listed.

About our authors

We are also introducing a new feature: ‘About our authors’, for both TPS and TPS Extra. We all have our beliefs, our vision of the sort of country in which we want to live, and of course our biases. So that you can see where our authors are coming from as they write, a short bio and a longer statement of beliefs will be provided for you to read about each of them, all at the click of your mouse. To read about our authors, click ‘About our authors’ which you will see in the left panel immediately below ‘AA's Top Political Websites’.

During the year, each author will be asked to provide a short ‘bio’ and a statement of beliefs. A short ‘bio’ from each author will be necessary, but the statement of beliefs is optional, although we do think it adds to our readers’ understanding of the author’s position and approach.

As always, your feedback will be welcome as regards both TPS Extra and the approach on TPS.

The TPS Team

Be sure to come back on Sunday evening for our first main post of the year: ‘We’re all in this together’ by 2353.


Proud to be a bigot: a view from the barbie


Everyone knows about George Brandis’s now famous comment:

People do have a right to be bigots, you know. In a free country, people do have rights to say things that other people find offensive or insulting or bigoted.

I have decided to take him at his word and tell Tony Abbott to eff off back to where he came from. He arrived here as a £10 pom and I will willingly refund his £10 (or $20 in real Australian money) if he takes the next boat home — perhaps we can spare him an orange life boat for the journey. Why wasn’t his boat stopped at sea and turned back? Given what he is doing to Oz, he must certainly rank as an ‘undesirable’ immigrant.

Yes, before the conservative critics start pointing out that Julia Gillard was born in Wales, in my bigoted view someone born in Wales (or Scotland or Ireland) ranks considerably higher than a conservative wanna-be toff born in England. If you doubt my ‘wanna-be toff’ comment, why did he re-introduce Knights and Dames into the Order of Australia? We got rid of those stupid, meaningless titles years ago but obviously a pom like Abbott still thinks they are important to Oz — where’s he been for the past 30 years? Perhaps he is hoping that one day one of his successors will offer him a title for all the great work he has done. But I’m not sure where he thinks this ‘great work’ will be done: it’s certainly not here in Oz going by his current performance.

Why do we need a pom running our country? He’ll only ruin it. Sorry, he already is, as James Wight pointed out so well in his piece here on TPS.

Although he may have arrived here as a kid (and I mean that in both senses of the word because in my humble view he is a goat), he doesn’t seem to really understand this country. I don’t know what he was doing when growing up out here but it certainly wasn’t in any way, shape or form giving him a genuine understanding of the Australian way of life. I haven’t seen him at the pub.

He pretends he is one of us but he tries too hard. Who else but Abbott still appears on the beach in budgie smugglers? Anyone who does is up themselves, thinks they are Adonis, or god’s gift to women — in my blatantly bigoted opinion, that fits Abbott to a tee. He walks with an exaggerated swagger — ‘look at me, look at me’, it says, ‘ain’t I the best thing since sliced bread’. He is a ‘big head’ and that is un-Australian. He seems to think he deserves to be a Knight, or perhaps a Lord, who can tell the rest of us what is good for us — as long as it is also good for him and his up-town mates. Sorry (again), he’s already doing that as well.

He bicycles. He jogs. He is a member of the volunteer bush fire brigade, at least when it presents a photo opportunity. He is a member of a surf live-saving club but you wouldn’t think so the way he treats the rest of us. There are plenty of others doing those volunteer jobs who never make it onto the telly and they deserve all the praise and credit they get but when someone turns up for the photo that will appear in tomorrow’s papers, you have to ask yourself: is this bloke for real?

And he sleeps with the police! What sort of bloke sleeps with the police and doesn’t go home to his missus? Yeh, I know that they’re repairing the Lodge but they rented some posh place for him and his family — $3000 a week as I recall: I wouldn’t mind earning $3000 a week, let alone being able to afford pay it as rent. Why didn’t he take that place and have his wife with him? Doesn’t she want to be with him? Perhaps she had enough of seeing him every day during the 2013 election campaign. Yeh, that was different. He didn’t want to sleep with police then. He wanted his missus in every second picture then — and his daughters. Where is she now? Have you seen her recently? — other than in Abbott’s Christmas address, and then she looked very uncomfortable. I don’t doubt that they’re a fairly normal family (as ‘normal’ as any family can be) but, gees, I can’t figure it out.

He thinks women should be at home doing the ironing. Yeh, sometimes I think that wouldn’t be too bad. Would save a lot of money with the child-minding. But we wouldn’t have a home for the cheese and kisses to do the ironing in if she didn’t work. And I don’t need a whingeing pom telling me or the missus what she should be doing. He’s the one who’s making it harder for us to survive without the missus working, and now making it harder even when she is. He’s supporting the top end of town and our wages now aren’t even keeping up with inflation. Does he expect we should thank him for that — pig’s a*se! (or ‘ass’ as the septics would say).

I thought he said he would govern for all Australians but so many are missing out now. What happened to the Oz we knew where we looked after each other; where we did try to give everyone a fair go; when the government helped people who were down on their luck; when the government actually supported our local industry. Now if a factory decides to go to India or Vietnam, or some other cheap place, all the men and women under 30 who lose their jobs won’t get a cent for six months. Don’t tell me that’s fair! Yeh, there might be a few bludgers avoiding work but that’s no reason to take it out on everybody else who genuinely needs a hand. It’s more likely to make it harder to get a job.

He promised that abolishing the carbon ‘tax’ would help us with our cost of living and that it was his major achievement for women. I’m sure every woman in the land has thanked him for that! Yeh, there was a bit of a reduction this year but it’s a one-off. It will disappear in no time because electricity prices are still going up. And isn’t he worried about the kids? What sort of planet are we leaving them unless we do something about climate change? He can talk about it all he likes but he isn’t doing anything! He’s off in la-la-land, off with the fairies at the bottom of the garden and there’s no such thing as climate change in that garden.

He also promised ‘no surprises’ and it really was no surprise when there were surprises. Why can’t politicians ever tell the truth? We all know now that whenever a conservative government is elected, it will immediately drop most of its promises (that they made to us to get elected in the first place) and blame the previous Labor government for leaving a financial mess. It’s become a game and is so predictable: yet, as voters, we go into elections with the hope that, this time, they might actually keep their promises. They don’t have to look very far to realise why we don’t trust them anymore.

Abbott reckons he hasn’t broken any promises. He says we weren’t listening carefully enough to what he said. You can’t understand a pom at the best of times let alone when one like Abbott is twisting words to suit himself. How are we supposed to know what he means when half-the-time he doesn’t seem to know himself? And he takes so long to get a sentence out that we’ve given up listening before he’s finished.

Then he tried to big-note himself on the world stage. What a joke! He said he wanted to ‘shirtfront’ Putin. I bet that had the Russians quaking in their boots: more likely rushing to their dictionaries to find out what the hell he meant. Somewhat loses its effect, don’t you think, if the other bloke has to look up a dictionary to find out what you mean before you thump him.

Like Howard before him, he reckons that any job is better than no job. He would say that, wouldn’t he, when he’s never done a day’s labour in his life. He wouldn’t even have a parliament house to swan about in if it wasn’t for hundreds of labourers who built the place! But look at how he treats working people. He seems to think he’s lord of the manor and we are just his serfs — well, serfs for him and his mates. They think they own us and we should be happy that they’re providing work for us, even if some of them (and I won’t mention names) think we should be working for $2 a day.

Abbott wants to bring back Workchoices — under a new name of course because his mob ‘buried’ Workchoices years ago. They might have taken it off life-support but it didn’t die. He wants more individual work contracts — no awards and conditions just what the lord of the manor is willing to give you. It’s a bit hard to fight back on your own but that’s Abbott’s pommy world. And you’ll be arrested for poaching, for trying to get a feed for your kids. I can foresee it all.

The rest of his mob may not be poms but they’re just as bad. Foghorn Leghorn and Schwarzenegger having cigars when they handed down their budget that attacked working people and the poor. It reminds me of an old Irish song, ‘The rocks of Bawn’ and the lyric:

Come all you loyal comrades wherever you may be
And don’t hire with any master ‘til you know what your work will be
For you must rise up early from the clear daylight of dawn
And I know you’ll never be able to plough the rocks of Bawn

A curse attend you Sweeney for you have me nearly robbed
A-sitting by your fireside with your dudeen in your gob

(A ‘dudeen’ is an old Irish clay pipe.)

It all fits doesn’t it? And shows that the poms like Abbott haven’t really changed. They kept the Irish down. They kept the Irish in Australia down in the early years. And they keep the workers down. They want us to do the impossible, like ‘plough the rocks of Bawn’, while they sit there smoking their cigars. And you wonder why I’m bigoted!

I can finish with some fine English words that a wanna-be toff like pommy Abbott might understand: ‘You and your toffs, just naff off back to Eton’.

What do you think?

TPS presents this piece as a warm-up for the year ahead, just to get us back into a politcial frame of mind and boost the political spirits.

Our first serious post for the year will appear next Sunday. But watch out later in the week for a special post about some changes for TPS in 2015.



And that was . . . 2014


Welcome to 2015. Happy New Year from The TPS Team.

Traditionally The Political Sword tends to avoid too much politics and media bashing in January as in reality Australians are more interested in the beach, cricket, being with friends and complaining about how hot/cold/unusual the weather is. While it would be easy to write a piece about the less than impressive record of the Abbott Government, there are other sites already expending much effort on this — some examples are here and here — and in any event Ad Astra foretold the reality in 2012 but boasting of TPS’s past achievements in the first post of the year is not a good look! However we digress.

It’s often said that a week is a long time in politics. While the daily news cycle gets faster and less detailed, let’s look back at 2014 and see if there really was that much change in Australian politics during the year.

The newly minted Abbott Government came to power late in 2013 in part by pointing out that the leader of the other side of politics was either a liar or so controlling his supporters had to sack him. The federal government opened 2014 having to put out a minor bushfire over who was really running the country, the elected politicians or the Prime Minister’s Chief of Staff, Peta Credlin.

Senator Abetz told a Senate estimates hearing last week: "At the end of the day it was decided by the Prime Minister as to who would be appointed to my ministerial staff and to the staff of my ministerial colleagues,"

As revealed by Fairfax, Ms Credlin has insisted that all 420 government staff appointments right down to junior electorate officers are approved by the panel.

The ‘axing’ of the ‘carbon tax’ was a work in progress early in 2014. Despite promising that the repeal of the carbon pricing scheme would be one of the first actions of the Abbott Government, reality hit when it didn’t pass the Senate. Abbott had to wait until the Senate changed to get a ‘watered down’ repeal of the necessary acts of parliament through with the assistance of Clive Palmer’s Palmer United Party. Various utilities are now passing back the ‘savings’ that were made by the repeal of the ‘carbon tax’. When Ipswich City Council in Queensland recently announced that a refund to ratepayers would be paid just in time for Christmas and average $14.04, the response was rather underwhelming according to the Queensland Times:

Carla Kompenhans posted: "$14; early Christmas present? Are you serious? I don't know anyone who would be excited about that.

"What part of Christmas will that cover exactly?"

In 2014, Australia was the ‘Chair’ of the G20 Group of Nations; consequently the Finance Ministers’ meeting was held in Cairns and the Heads of State meeting held in Brisbane during the latter part of 2014. The leadership of the Australian government (Prime Minister Abbott) was also keen to keep climate change off the agenda at the G20 meetings — much to the concern of the Europeans. With China and the USA announcing an agreement to actively reduce carbon emissions by up to 28% below 2005 levels on the Wednesday prior to the G20 Heads of State meeting, the subject was never going to go away. Widely reported was Obama’s speech to University of Queensland students in suburban ‘Brisvegas’ where he discussed his, China’s and the United Nations concerns about climate change and carbon emissions.

He then described the impact of climate change on Australia:

Here, a climate that increases in temperature will mean more extreme and frequent storms, more flooding, rising seas that submerge Pacific islands. Here in Australia, it means longer droughts, more wildfires. The incredible natural glory of the Great Barrier Reef is threatened. Worldwide, this past summer was the hottest on record. No nation is immune, and every nation has a responsibility to do its part.

Obama also called on the country to reduce its greenhouse gas emissions:

And you’ll recall at the beginning, I said the United States and Australia have a lot in common. Well, one of the things we have in common is we produce a lot of carbon. Part of it’s this legacy of wide-open spaces and the frontier mentality, and this incredible abundance of resources. And so, historically, we have not been the most energy-efficient of nations, which means we’ve got to step up.

Abbott’s response, as reported on the Mashable website, was less compelling.

In contrast, Abbott told reporters that the U.S. and China have a far greater responsibility to address climate change than Australia does. “China emits some 24% of global carbon dioxide,” Abbott told reporters in Canberra on Nov. 14. “The U.S. emits some 15% of global carbon dioxide. By contrast, Australia’s about 1%. So, I think it’s important that they do get cracking when it comes to this.”

Despite Abbott’s wishes, the final communiqué from the Brisbane G20 included some action on climate change. Turkey is the ‘Chair’ of the G20 in 2015 and has stated support for a number of climate measures in the past.

No recollection on political events within Australia in 2014 would be complete without a reflection on the life of Edward Gough Whitlam. It is claimed that Gough Whitlam made the ALP electable again. Geoffrey Robinson writing on The Conversation website suggested that the claim Whitlam was solely responsible for making Labor electable may be overblown:

The truth is more complex and interesting. Whitlam was a man for his time: his achievements were representative of new and old social movements, including the emerging progressive intelligentsia, feminists, non-Anglo migrants and the working class.

Robinson also observes

Like Keating or Julia Gillard, Whitlam has functioned as what cultural theorists call a “floating signifier” — a symbol whose power and significance is necessarily distantly connected to historical events. “It’s Time”, “the sweetest victory of all” and the “misogyny speech” exist in a world of symbols but are none the less real for this.

While there doesn’t seem to be a 1972 campaign advertisement for the Liberal Party online (if you find one, please post the link below the line), the performance of then Prime Minister McMahon on Mike Willesee’s A Current Affair is a stark contrast to the Labor Party’s ‘It’s Timeelection campaign and probably explains in part why the Liberal Party was not re-elected.

Fast forward to November 2014, and the Victorian state election. The Liberal/National coalition was removed from office after one term by the ALP, led by Daniel Andrews, who came from behind to win the fancy office in Spring Street. The common opinion at the previous election was that the ALP (then led by John Brumby) would retain Government with a reduced margin with the polls for the then state Liberal leader (Ted Ballieu) rising and falling in line with the corresponding falls and rises of Gillard’s ALP government in Canberra. Ballieu had won then but didn’t even last out the four year term as premier, being replaced by Denis Napthine soon after Rudd replaced Gillard. While Newman is still premier of Queensland, there seems to be a concern within the ranks of the LNP that Newman may also lose his seat and the LNP lose Government early in 2015 when the next Queensland election is due. The Abbott government is significantly less popular than the ALP or in fact themselves when elected some 18 months ago:

In opposition, Abbott liked to say that Julia Gillard was the most incompetent and untrustworthy prime minister in Australia's history.

The voters now have decided that they have found one that's more incompetent and just as untrustworthy.

"Only half of people polled said that Abbott is competent," says the Fairfax pollster, Jess Elgood of Ipsos.

"That's lower than for any prime minister we have figures for," a data set starting with Paul Keating in 1995.

Compared to Abbott's 50 per cent, the comparable figure for Gillard four months before she was deposed was 53 per cent.

Not a lot did change in the world of Australian politics in 2014. At the start and end of the year, we have the Prime Minister’s Chief of Staff being the news rather than managing the PM’s office. At the end of 2014, there are claims of disagreements with Foreign Minister Bishop and of ruling the government with an ‘iron fist’.

The media is still leading discussion on climate change and how to manage it (with price signals — such as a ‘carbon tax’ being mentioned as an effective mechanism), and that Abbott either is changing or should change his view that ‘climate change is crap’.

Governments in various jurisdictions around the country are still not doing well in polling after they have been accused of lying or not being able to organise themselves — with Victoria changing government; Queensland’s Premier implying he will lose the significant majority won at the 2012 event at the next election; and the Federal Government some 10% behind the opposition after 18 months. Australians are still complaining about the ‘carbon tax’ — this time the small refunds that are gradually making their way onto invoices from its repeal; and the country has lost another ‘person of renown’ in the guise of Gough Whitlam.

Let’s hope that 2015 is another year of civilised discourse on The Political Sword and that the genuine nature of the discussions here spreads to other blog sites, the media and our civilisation in general. Prime Minister Hawke achieved more results through building a consensus than Prime Minister Whitlam did by trying to crash through. Please keep your hatred for the mozzie that bit you at the BBQ last week — we on this site and on this earth genuinely don’t need it.

A bit of housekeeping to conclude this piece. The TPS Team will be reducing our output for January. The ability to comment ‘below the line’ will be open all month and we invite relevant comment as usual. There will be some new commentary posted during January on an irregular schedule (so keep looking). We will return to our weekly (or better) schedule on 1 February 2015. Be aware it’s not all sitting by the pool in the banana lounge for The TPS Team, there is usually one of us sitting near the computer with our finger poised over the ‘delete’ button for those that haven’t yet lost the hatred.

Happy New Year and may all you wish for come to pass. We look forward to your continuing support and comments in 2015.

The TPS Team



A year on TPS: 2014


As we come to the end of another year, please forgive a little self-indulgence as the TPS Team discusses what TPS has achieved in the past 12 months.

It was a year in which we saw Abbott and his cronies trying to destroy the country and make us a paradise for the neo-liberals, the neo-cons and the economists that support them — and, of course, big business. We saw the worst budget in living memory and have, so far, only been saved from its full ramifications by the senate. We saw Clive Palmer appear with Al Gore to talk about the importance of climate change but, at the same time, cave in to support the repeal of the carbon price. We have seen Abbott, more through luck than design, deflect the budget issue and ‘bask’ in the glory of the world stage, taking on the Russian bear and alienating our closest Asian neighbour. He has ‘stopped the boats’ but also stopped government transparency in the process. He is undertaking more privatisation of government services and encouraging the states to do the same. Without openly saying so, he is pursuing a neo-liberal and economic rationalist agenda backed to the hilt by the IPA (and, as others have noted, he is, to a significant extent, following its ‘hit list’).

Talk Turkey has made the point numerous times about the need to keep up the fight against this government and what it is doing.

We believe TPS has been doing that but not always directly. We are not a news site, and with only a few people volunteering their time behind the scenes we could never be, so we do not react to every government announcement, no matter how bad. TPS sometimes takes a longer view, looking at socio-political issues and the political and economic philosophies that underpin this government, as Ad Astra also did at times.

We published 43 pieces during 2014 over 46 weeks: those 43 pieces actually encompassed 48 postings as we had four multi-part pieces and we also posted mid-week on a couple of occasions. We had six ‘guest’ writers during the year, now counting Ad Astra as a guest since he retired from full-time blogging, but 2353 and Ken provided the bulk of our pieces — 35 between them. We haven’t bothered counting the words but, given that most pieces are between 1500 and 2500 words in length, it would be getting towards 100,000 words. Plus all the words our friends have posted in their comments.

We didn’t ignore Abbott in our quest for wider truths and have launched attacks, both directly and with satire. We first asked whether Abbott remembered the twentieth century in his rush to take us back to some halcyon previous age; we wondered whether he was ever meant to be PM as he originally won his position as opposition leader by only one vote; we suggested he was a ‘con artist’ and questioned his Humpty Dumpty words; and James Wight exposed the extent of destruction wrought on our society in just one year. We presented ‘Tiny-er-er O’penmouth’ who morphed into ‘Tiny Napoleon O’penmouth’.

The LNP and the government more broadly were also in the spotlight in David Horton’s piece on LNP electioneering, Ad Astra’s piece on what underlay the budget, the government’s seeming blindness to major issues raised at the World Economic Forum at the start of the year, its links with the IPA, and the way it snuck through changes in its approach to climate policy during the 2013 Christmas/New Year break.

Political ethics were questioned by 2353 in several posts: he questioned the morality of using refugees for political advantage; the ethics of those who legislate hardship for many in the community but accept expensive gifts and high paid jobs requiring little work; their use of slogans and sound bites rather than taking the time actually to address issues; and asked why we allow politicians to regulate donations to their own parties when we have witnessed that self-regulation doesn’t work for industry. Twice 2353 specifically questioned the link between religious and political values asking how politicians could claim to be religious when implementing policies that clearly breach their religious morality. As Ad Astra commented, it is a brave man who addresses the religious link to politics.

As we have moved from being a ‘society’ to being an ‘economy’, we couldn’t ignore the underlying economic approach of the government and the rising inequality it gives rise to. Piketty’s work on inequality was discussed and was preceded by a piece showing how rising inequality matched the rise of the economic rationalist approach. Finally, Ken suggested that inequality wasn’t an economic question at all but the result of witchcraft (presented as some dark humour to end the year.)

It was also suggested that economic rationalism, after 40 years, may be on the wane: pieces like 2353’s on modern monetary theory and Kay Rollison’s on ‘middle out’ economics reinforced that there are new economic approaches emerging that may, indeed, lead to the demise of economic rationalism.

Kay’s piece was also presented as an alternative approach for Labor. It was one of five pieces that addressed new approaches for Labor, including the speech Ken would like to hear and Ad Astra’s letter that actually was sent to Bill Shorten.

Associated with economics, were pieces on governments’ approach to infrastructure and privatisation.

Ken presented a piece on our understanding of ‘freedom’ which, at first, may have appeared something from left-field, but it was a prelude to his discussion of the lack of freedom in the free market and the loss of social responsibility as the neo-liberal concept of freedom, embracing individual self-interest, took over political thinking.

We also briefly discussed Aboriginal affairs, the role of unions and the role of experts.

We prophesised the future with David Horton’s piece correctly suggesting that conservative governments resort to war in their quest for popularity; Ken’s piece on Abbott’s efforts to take us back in time foreseeing that coal would become more, not less, important in Abbott’s world; and 2353, in ‘The thought thief’, providing a fair reflection of what did eventuate from Pyne’s review of the national curriculum.

The one area we have been lacking this year is putting the media to the sword, other than for Jan’s two-part piece. Perhaps that is because some segments of the media now seem to be doing a better job: Abbott’s broken promises and the down-side of the budget were more widely reported (but still not so much in News Ltd papers). It has been our commenters who have continued to point out the flaws in the media’s approach, including the ABC’s attempts at so-called ‘balance’.

And throughout the year, Casablanca has continued to provide us with numerous links relevant to each post, as well as other news of the day.

We trust we have continued Ad Astra’s tradition by putting the sword to Abbott as prime minister, the government and its policies more generally, its political ethics, its political and economic philosophy, and the approach of the economic rationalists and neo-liberals that support it.

Take the time during the break to revisit some of the pieces that were posted during the year and see what you think now that the year is coming to an end and you can see how the different posts tie together. If you have topics you would like us to address in 2015 please let us know, either in a comment or in a message to the Team (the Contact tab above).

This thread will stay open until 4 January, when another piece will be posted with an extended thread, so please post any new comments and insights you may have. And, as we asked last year, please also feel free to post any video, music video or photo that takes your fancy and that you may wish to share, with a short story as to why you selected it.

Wishing all our lurkers and commenters a happy festive season and looking forward to you being back with us in 2015.

The TPS Team



Time to resurrect witchcraft


Back in 1971 I wrote my honours thesis for social anthropology at Sydney University. Its theme was a link between witchcraft/sorcery beliefs and egalitarianism in native and peasant communities around the world. Given discussion earlier this year about inequality, I believe it has a relevance.

Its principle argument went something like this:

The basic concept of egalitarianism is that everyone is equal and has an equal share of abilities and resources. Of course, in reality, this is never quite true. And in those native and peasant communities, witchcraft was a common approach to explain the differences.

It worked in a number of ways. Those who rose above the norm and those who fell below it were prone to witchcraft, either being attacked by it or accused of it. (Please note that when I say witchcraft, I include sorcery — there was a difference in the anthropological literature of the time that wasn’t relevant to my thesis nor to this discussion. Also, I use the term ‘witch’ to include both males and females.)

Those who rose above the norm could include those who were ‘conspicuously fortunate’, those who had outstanding innate talent (such as a Bradman or a Mozart), and even the ‘big men’ of the village.

For those with talent, it helped explain why they were so good but it also helped keep them within the bounds of the community. While it may only be thought that their talent was a result of witchcraft, if they did not use that talent in acceptable ways, or if they boasted of their talent, it could become a public accusation, leading to public sanction.

Similarly ‘big men’ were recognised as being important for the community, particularly in its dealings with other communities, but they had to maintain the welfare and best interests of their own community or they would also be publicly accused of being witches.

Being ‘conspicuously fortunate’ is clearly an egalitarian crime. The threat of being accused of being a witch helped ensure that those people spread their wealth in socially acceptable ways — catering for large ceremonies, for example.

Those at the bottom (below the social norm) were rarely attacked by witchcraft but prone to being identified as witches, the ones paid to provide the potions or spells. This often related to an illness occurring after an argument between two people (and the argument most often related to one person having more than the other). Both sides of the issue would then have to be addressed, the argument (and which party paid the witch), and the role of the witch.

Some of this demonisation of those at the bottom, those falling below the social norms, can be seen in the European and North American witch trials. Elderly widows struggling to survive on their own and young women perceived as promiscuous were among those more commonly accused.

I saw this operating like three concentric circles reflecting the values of the community. The majority of people fell within the central circle. Then those who were different, the probable witches, operated within the second circle. As long as they remained within that second circle they could be tolerated in a somewhat ambivalent way, but if they moved beyond that second circle they had moved too far beyond the bounds of egalitarianism and would face sanction, exile, or even execution.

I read a simple example of this in a story by Camara Laye about an African childhood. A boy was with his uncle, the village headman, and as they worked their way along a field they were moving ahead of the other men. Then the uncle slowed down and the boy pointed out that the others were catching up. His uncle told him it was not good to get too far ahead. In my terms, he was reaching a boundary where greater success (his speed working the field) would be seen as extreme and probably the result of witchcraft.

Witchcraft in this way acts as a sanction to acceptable behaviour. One tries to stay within the egalitarian norms, even if those norms are somewhat extended within the second circle, so as to avoid witchcraft.

So there you have it in a nutshell. What does this mean for our society?

We no longer believe in witchcraft but perhaps we should.

The majority of us sit comfortably in the middle (within the central circle), follow social norms, at least within acceptable bounds, and are free from accusations of witchcraft. We understand disease much better and no longer need witchcraft or other supernatural sources to explain it. Although it is interesting that arguments or disagreements and the associated stress can lead to illness — perhaps we still need witchcraft to explain that and should focus more on the argument as the root cause of the illness so that the argument is dealt with before a cure is found.

We are much better off in terms of our material possessions but still find blatant displays of wealth unacceptable. When someone builds a house twice as big as those around it, or suddenly appears in a Porsche when everyone else has a Holden or a Toyota, we no longer accuse them of witchcraft but we may think they are crooks, or dealing drugs, or something similar.

We elevate and praise our successful artists and sports people but only so long as they don’t abuse their position or become ‘big heads’. When that happens they become dangerous to our social stability and an element of witchcraft comes back into play. They are seen not to have played by the rules and need to be brought down or cast out.

We accept that we need leaders and powerful people to protect us but are equivocal about their power. We have a democracy which is supposed to control that power but sometimes we wonder whether it does. Of course, we are outraged when we find the powerful misusing their power to increase their own wealth but, after a brief time, nothing really changes and we await the next occurrence.

Our society has its share of people who drop below the norm and they are often perceived as a threat. I think sometimes it is because it is a reminder that there but for a bit of luck goes any one of us. We are not always comfortable knowing they are there but generally we wish to help them back within the inner circle. Many, however, in their day-to-day activities, will avoid them if they can.

The poor and outcast may no longer be witches but they are demonised by the rich, the LNP government and the economic rationalists: they are too lazy to be helped. We are told they use the services and taxes of the core circle and reduce the services available for the rest of us within that circle. They are told by the rich and powerful that they can never get back into that inner circle except by their own efforts, that they are undeserving of help, but that approach is not fully in accord with the egalitarian values of the central circle, so the rich and powerful are treading dangerous ground.

And we have ‘the one per cent’ sitting at the top with all their wealth. How did they get there? Where I grew up, the common view was that almost all who were fabulously rich must have done something wrong, not necessarily illegal but certainly breaching the norms — a few deals that sailed close to the edge of legality, or a few mates abandoned or ‘knifed’ along the way, a bit of insider knowledge, tax avoidance (or should I say tax minimisation so as not to be sued) and so on. Of course, only the rich have this special knowledge and the resources to implement it.

As a society we seem to struggle to find good explanations for these situations, and perhaps find some of them puzzling, even troubling, but witchcraft explains them all.

The conspicuous displays of wealth are obviously the result of witchcraft. An ordinary person in the inner circle cannot get their Porsche any other way. They don’t need to be crooks, just witches. When they know that such conspicuous displays can lead to accusations of witchcraft, they will be less likely to step so far out of line.

The same goes for our successful artists and sports people. They will behave in more acceptable ways if they know that they are always on the verge of a witchcraft accusation because of their ‘unnatural’ talent.

Our leaders may need their witchcraft to counter the witchcraft of other leaders but if they know that we know they are witches then they may be more careful how they use that power. They will know they need to support the central circle or face public accusation and the sanctions that follow.

If those who drop below the norm are thought more likely to be witches, perhaps we will work harder to bring them back into the central circle and so tame their witchcraft. And we will work to keep them in the inner circle because if they drop back again, anything could happen — we might all be turned into sheep (if the rich and powerful have not already turned us into sheep).

Alternately, we may draw on their magic to bring the rich and the powerful into line. While they are there, they are also a threat to those at the top — a reminder that the second circle belongs not just to the rich and powerful but the poor and outcast, that they are in reality in the same situation, operating outside the core values of the society. The poor and outcast have their own spells to attack the rich and powerful and it is a potential battleground for witchcraft.

Finally, how did the super-rich gain all that wealth? Bugger economics! — it was witchcraft pure and simple. They have the secret knowledge that they share only within their cabal.

It follows that they demonise and accuse those at the bottom, the others occupying those outer circles, of witchcraft because they are so conscious of it and fear being accused themselves. The rich and powerful (and the LNP) persecute these other witches to divert attention from their own witchcraft.

I say it is time to bring back witchcraft. It will support our egalitarianism and help us explain so much. We would not need economic arguments to explain inequality, just witchcraft.

We can bring back the witch trials and place ‘the one percent’ before the Witchfinder General. Then let them try to explain that they did not achieve their wealth by witchcraft. We can ask the banks and global corporations to show that, in making their super profits, they have not beguiled us with witchcraft. We can demand that the current prime minister justify his accusations of witchcraft against a certain red-haired former prime minister and, if he can’t, it follows that he, himself, was using witchcraft.

There may be many executions to follow. I think, however, that I could be tempted to become a tricoteuse at the bonfires.

What do you think?