Another failure in Aboriginal and Torres Strait Islander affairs

What is wrong with this paragraph from a report in July regarding the Aboriginal and Torres Strait Islander work-for-the-dole scheme?
A Territory community’s work for the dole program is about to collapse, with accusations a Sydney-based company stands to keep receiving funding while nothing happens on the ground and jobs hang in the balance.
Yes, another Aboriginal project is in danger of collapse. And, yes, the government appears to be doing nothing. But the big one that is ‘wrong’ to me is the reference to ‘a Sydney-based company’. What is a Sydney-based company doing running a work-for-the-dole scheme in a remote Northern Territory Aboriginal community? How does it effectively manage the scheme from 4000kms away? The fact the report suggests that the scheme may be about to collapse, even though the Sydney company is still receiving funding, indicates to me that perhaps it cannot manage from that distance.

That is a result of a process begun in the Howard years, and continued unfortunately during the Labor years, that put many services for Aboriginal and Torres Strait Islander communities out to a bidding process (not formally but effectively a tender). Even though Aboriginal and Torres Strait Islander community organisations could bid to provide services to their own community, or even to all communities in a local area, bids from distant organisations often had a price advantage. Ability to deliver the service to Aboriginal and Torres Strait Islander people in a culturally appropriate manner was part of the considerations but price was still a driving force — a government attempt to constrain funding.

In those circumstances, much depends on the people assessing the bids. In my day, many public servants working in Aboriginal and Torres Strait Islander affairs would have said that the condition regarding the ability to deliver the service in a culturally appropriate manner was paramount and as long as the price wasn’t outrageous that would over-ride pure price considerations — in economic terms, we were prepared to pay a premium for appropriate services. Many younger people who have grown up in decades of neo-liberalism and economic arguments of ‘price efficiency’ may take a different view.

The scheme that report refers to is now known as the Community Development Program (CDP) and is a result of a long history going back to the Community Development Employment Projects (CDEP) program in 1977. And there is a slightly longer history necessary to explain how CDEP came into being.

For a long time many Aboriginal people in remote areas had been employed in the cattle industry but were paid what was called a ‘training wage’ or ‘allowance’. In 1965 the then Commonwealth Arbitration and Conciliation Commission ruled that Aboriginals should be paid award wages under the Cattle Station Industry (Northern Territory) Award 1951. Were the station owners happy to pay award wages? Of course not, and the result was widespread unemployment for Aboriginal people in northern Australia. At the time Aboriginal people could not receive unemployment benefits if they were living on missions or reserves (which many stockmen would have returned to after losing their jobs) and there was still a ‘work test’, which basically meant that work had to be available but one was unable to obtain it — that continued to mean that many living in small remote communities where there was no available work were not eligible for benefits. Aboriginal and Torres Strait Islander people had only become eligible for social security benefits in 1966 and the requirement regarding missions and reserves wasn’t removed until 1976. But with so many then unemployed, and as the rules changed and the number eligible for and receiving unemployment benefits grew, the elders, in particular, became concerned about this ‘sit down’ money and the social problems it was causing in communities. So in 1977, CDEP was introduced.

Under CDEP, an amount equivalent to the unemployment benefit that otherwise would have gone into a community, plus a component for on-costs, was paid to the local Aboriginal organisation and people could then earn the equivalent of their dole by undertaking local work — the original work-for-the-dole scheme. Over the years a number of problems arose.

One was that CDEP was used to provide work in municipal services such as waste disposal, generator maintenance, road maintenance within the settlement and so on. That has led in more recent years to the commonwealth government demanding that states and local government take on that role as they do for other citizens. The jobs still need to be done but the commonwealth is insisting that the cost is met by the states (it is that which gave rise to the decision in WA to consider closing many small, remote communities).

Another was that as CDEP was expanded beyond remote areas, some Aboriginal organisations used CDEP labour to support the development of local businesses (as was intended under the original guidelines). In small regional towns the non-indigenous businessmen felt that gave Aboriginal businesses an unfair advantage. Unions were also concerned that non-award wages could be paid for work that was covered by awards. Under Keating, the new rule was that CDEP should be paid at award rates (where an appropriate award existed) and people work only as long as was required at the award rate to earn the equivalent of the dole. That also meant they were covered by normal industrial conditions, including health and safety, payment of superannuation, and so on. If organisations or businesses had the money, they were allowed to provide ‘top-up’ wages for extra work, without the person losing their CDEP entitlement.

CDEP had also expanded into urban areas where it was meant to focus on preparing people for mainstream work. The rationale, however, was that Aboriginal and Torres Strait Islander people would be more likely to use an Aboriginal and Torres Strait Islander service than go to a job centre. Under Howard that was abolished. Eventually CDEP was again restricted to remote areas but that was also abolished in the NT during the intervention. When it was brought back, it returned to being a straightforward work-for-the-dole scheme and was rejigged as the Remote Jobs and Communities Program (RJCP) under which people worked 16 hours a week for their Newstart allowance. Many people left the scheme (some received other welfare payments) and the ‘sit down’ money problem was re-created. That has now been rejigged again as the CDP in remote areas.

What have all these changes achieved? — very little.

The original idea was to provide some work in areas where there was little or no work available; it could provide activities that would combat social problems (such as ‘night patrols’); and projects could include economic ventures, town management activities, social advancement and environmental improvement.

In considering work in remote areas, it is interesting to note that non-indigenous people in remote areas have the lowest unemployment levels of any location in Australia, lower than urban and regional areas. That arises from the fact that most whitefellas don’t stay in remote areas unless they have work — as soon as the work ends, they leave. Aboriginal people, on the other hand, are bound by their culture and the need to maintain ‘country’ to remain there. That is why it is so difficult when governments talk about the need for Aboriginal and Torres Strait Islander people to be in employment. Jobs are scarce in such areas. I have personally witnessed examples where communities took on more people in the available positions than was actually necessary: that led to the funding for the positions being spread over more people so that they each received less than they were entitled to — which also led to problems, with people complaining of being underpaid. They were being underpaid but it was a genuine attempt to provide work to as many people as possible and keep young people in the community.

As CDEP moved between departments its purpose changed: at one time being little more than a welfare program, at another taking on stronger employment aspects. A more detailed political history of CDEP is provided in an address by Will Sanders here.

What seems to have been lost in many of the changes are the social benefits of the original scheme.

By the time ATSIC was managing CDEP, it was viewed as the one program over which Aboriginal and Torres Strait Islander communities actually had some control. All the talk of self-management meant little when the use of almost all of the funding that went into Aboriginal and Torres Strait Islander communities was governed by external decisions. CDEP allowed communities to make decisions about what work they would support, what work they viewed as important for their community — in some communities it could include undertaking traditional activities. (Many Aboriginal artists in the NT were receiving CDEP ‘wages’ before it was abolished.)

With the bidding process and organisations from 4000kms away winning contracts to provide the services, support for the social aspects of the program seems to have disappeared. We are almost back to a 1930s ‘guardianship’ model where we seem to believe that Aboriginal and Torres Strait Islander communities cannot make decisions in their own self-interest and cannot manage money. That has been a Liberal mode since the Howard years. When Herron came in as the first minister for Aboriginal and Torres Strait Islander Affairs in the Howard government, ATSIC was directed to audit every Aboriginal and Torres Strait Islander organisation to see if they were ‘fit and proper’ bodies to receive government funding. The new government believed there was waste and inefficiency, if not outright rorting. Only 60 out of 1,122 organisations were found to have breached funding conditions and the majority of breaches were for minor matters such as late submission of financial returns (there was no identified fraud): it was pointed out that the conditions were often so detailed that it was difficult not to breach some of them but 95% of organisations had managed it. The audit had been conducted by an independent organisation, KPMG, but it was not the result the government had wanted. The Aboriginal and Torres Strait Islander Social Justice Commissioner later compared the outcome of that audit to an audit of mainstream companies:
In contrast, “a 1997 survey of company fraud showed that roughly half the 490 large Australian companies surveyed had experienced significant fraud in the last two years”.
The audit also recommended:
… training for administrators of Aboriginal organisations for example, in financial management expertise, but noted that budget cuts imposed on ATSIC in the 1996‒1997 Commonwealth budget had resulted in the termination of the Community Training Program, significantly reducing “the capacity of ATSIC to fund management training in organisations”.
So even for what problems there were, the government had effectively cut the capacity to do anything about them. The approach underlay the government’s attitude to CDEP — it could not understand why Aboriginal and Torres Strait Islander organisations should have control of the money and, as shown earlier, the current approach means that money is again often controlled by outsiders.

Under the new CDP, people will be required to work 25 hours each week: a Christmas shut-down, some holidays and cultural leave are now included but weren’t in the original proposal. The CDP model pays lip service to ideas coming from the community but still insists getting people into jobs is the key outcome. I just do not see that there will be enough jobs. During the mining boom, which was seen as a possible source for Aboriginal employment in remote areas, I pointed out that modern mining is not labour intensive and even if every single mining job (including management positions) in remote areas was given to an Aboriginal person there would still be thousands unemployed — mining was not the answer.

The current minister Nigel Scullion’s description of the new CDP sounds eerily familiar to the original guidelines for CDEP:
In many communities there will be opportunities to establish businesses that can support the needs and desires of local people. Some communities will want activities that support critical issues like housing repairs and maintenance. In others, there may be a need to support older members of the community in aged-care facilities or their own homes, or to support children in school.
Even where jobs are available in remote areas, they tend to be jobs that rely on government funding, such as ‘shire’ work, environmental work, even work in schools. Yes, they are ‘real’ jobs but as we have seen so often their tenure can be precarious when governments change.
Most of these jobs are currently filled by people from outside of communities. There is no reason local people cannot be skilled up to take on these jobs.
Those words from Scullion are true but they have been said since the 1970s. The reason that approach has not had great success in that time is that it doesn’t recognise the Aboriginal perception of work. A traditional Aboriginal person may see a job as a way of getting money to meet an immediate need: once that need is met, the job is superfluous until another need arises.

More importantly, our view of regular work, five days a week for 48 weeks (allowing for annual holidays), is not appropriate in the still traditionally-oriented communities. There is much traditional business to attend to and that can take time: and, in the event of a death, most, if not all, workers will stop work for a time as traditional mourning activities (‘sorry business’) take place. If there are important jobs that need to continue every day, Aboriginal people themselves know that they are better off having a whitefella in that job who does not have to stop work for as long: it is probable the person would be required to stop but would likely be excused from the full mourning period and, of course, is unlikely to be directly involved in the actual ceremonies of ‘sorry business’.

I have an example concerning an Aboriginal man I knew personally. He had worked as a town clerk in a predominantly Aboriginal community and he had worked as a teacher at a distant location. It was while he was teaching that a death occurred in his home community. He returned home for the ‘sorry business’ but was then found by the elders to be responsible for the death: his absence had led to him not performing his ceremonial obligations and this had broken the ‘balance’ between life, land and spirit, contributing to the death. He was exiled to the bush for six months — which obviously meant he was unable to fulfil his whitefella-work obligations. In such circumstances, how can we demand that Aboriginal people take on work as we see it? How well does an organisation 4000kms away understand such circumstances; how well can it respond in a timely way when ‘blackfella business’ has to take precedence?

The only real answer to this problem is a completely different model that does not put a whitefella-style job as the ultimate outcome; a model that recognises traditional lifestyles and accepts them; that allows people to work when they want to but attend to traditional activities when they are obligated to. It would be a model that is entirely different to anything we have seen so far, that recognises Aboriginal and Torres Strait Islander culture as important enough to maintain. Perhaps recognition in the constitution will allow a basis to consider such a model but it will also require a change in mind-set of politicians and public servants.

The words of Canadian singer-songwriter, James Keelaghan, are an appropriate ending for this piece, and would make an apt plea by Aboriginal and Torres Strait Islander people to us whitefellas:
Take a walk under my skies
Try to see it once the way I do
If you look out through my eyes
You’ll find a different point of view
What do you think?
‘When will they ever learn?’ We have had a commonwealth Aboriginal and Torres Strait Islander agency since the 1970s, now over 40 years, and still there are seemingly intractable problems. But are many only ‘intractable’ because they are viewed from a whitefella perspective? Is Ken right in suggesting that more attention needs to be paid to the Aboriginal and Torres Strait Islander perspective?

Next week 2353 goes ‘where angels fear to tread’ to discuss the modern influence of religion in politics in ‘The silent majority’.


Pluto and the conservative mindset


In 1930, Clyde W. Tombaugh found a ninth planet in our solar system and, after a time being known as ‘Planet X’, it gained the name Pluto. Contrary to popular belief, the planet wasn’t named after the Disney character or the nuclear element plutonium; rather the planet was named after the Roman God of the Underworld as suggested by an 11 year old girl from England who was given £5 as a reward for her effort.

By the early 2000s, advances in the design and accuracy of astronomical instruments demonstrated to scientists that Pluto didn’t qualify as a planet as it didn’t meet the criteria:

  • It needs to be in orbit around the Sun — yes, so maybe Pluto is a planet.
  • It needs to have enough gravity to pull itself into a spherical shape — Pluto…check.
  • It needs to have “cleared the neighbourhood” of its orbit — Uh oh. Here’s the rule breaker. According to this, Pluto is not a planet.
Where Pluto apparently fell down is that it is located in the middle of a belt of small planet-like objects — so it hasn’t ‘cleared the neighbourhood’ of other objects.

There was considerable coverage of the downgrading of Pluto when it occurred and New Mexico in the US actually legislated that when Pluto traverses the skies of the state of New Mexico, it is still a planet!

One of the scientists who made the declaration that Pluto didn’t make the cut as a planet was Neil deGrasse Tyson. As well as a host of scientific awards, Tyson won the (US) People Magazine’s ‘Sexiest Astrophysicist Alive’ award in 2000 and an Emmy nomination in 2014. Charlie Pickering recently interviewed Tyson on the ABC’s ‘The Weekly’ and discussed some of the notoriety he gained as a part of the panel of scientists that decided that Pluto was not a planet, but a dwarf planet. There apparently were two groups of people: those that accepted the decision realising that over the 70 years since Pluto was discovered advances in technology had made a re-evaluation of the planet status warranted; while the second group had a number of issues with the decision primarily due to the letter writers learning that there were nine planets in the solar system — ranging from Mercury to Pluto — and no one had the right to change the basis of that absolute truth.

So why is The Political Sword suddenly interested in a discussion from around 10 years ago on the status of a (dwarf) planet that is located on average 39.5 Astronomical Units (the distance from the sun to earth is one AU) from the sun? Basically — we’re not. We are interested in the discussion between Tyson and Pickering on the science behind it. While some could accept the change in status for the dwarf planet formally known as Pluto, others could send Tyson a letter 10 years later saying that they had now researched the matter for themselves, decided Tyson was correct and apologised for calling Tyson a ‘poo poo head’ some time in the noughties (the discussion starts at around 1 minutes 43 seconds into the YouTube clip linked above).

Tyson talked about the distinct difference in the way the brain works in people. Some are able to take on new facts as they are determined and others don’t seem to have that ability. For the purposes of this discussion, let’s call those that will take on board the research of others as progressives, and those that believe the facts are immutable as conservatives. The example of progressive and conservative thinking has been done to death in regard to the environment, so let’s look at the economy instead.

There is an argument that Australia, together with the rest of the developed world, is entering the post-industrial economy and experiencing the end of capitalism. The development of the post-industrial economy is linked to the supply and availability of information. Building consumer goods, digging fossil fuels out of the ground and other activities that have sustained the Australian economy for a century are becoming, and will be part, of the ‘mix’ in the future. Australia will, however, gain a greater proportion of its national income from activities that involve the ‘sale’ of our knowledge and skills.

For example, motor vehicle manufacturers have decided that it is no longer profitable to screw their products together in Australia. While this will cause considerable grief for those who have been employed (in some cases for decades) in manufacturing Holden Commodores or Ford Falcons, General Motors, Ford and Nissan will still have considerable workforces based in this country for the foreseeable future — despite the media reports. The difference is that the work performed has a greater technical and intellectual input, be it designing and testing vehicles for worldwide markets or casting items with a great deal of complexity for a number of global vehicle models.

You are reading another demonstration of the information age — The Political Sword. This blog, along with our other site TPS Extra, is put together by a small group of people that live somewhere between Brisbane and Melbourne using the internet, email and the very occasional phone call to co-ordinate the information and work flows that are necessary. This blog is accessible in most parts of the world, costs us very little to publish and you nothing to read. Prior to the internet, someone with very deep pockets would have had to fund the printing and distribution of this article — and even then it would have not been accessible around the world at the same time. Prior to printing, records were usually kept by monks who spent their entire lives recording history. Today, information is all around us and the storage of it is cheap.

So how is the current government handling this structural change in the Australian society and economy? Rather than accepting that coal is a fossil fuel that some suggest may soon be a ‘stranded asset’, the government is attempting to change the law so that a large coal mine can be developed in Central Queensland. When the newly blackshirted “Border Security’ promise to check people’s visas on the streets of Melbourne was cancelled due to community protest, ‘our’ Prime Minister claimed they ‘should not be demeaned’.

The current government promised to stop the boats. When it was determined by others, based on information retrieved from elsewhere in South East Asia, that the boats hadn’t really stopped as claimed, our government responded that it doesn’t comment on ‘on water’ matters and tightened independent access to the charmingly named ‘Offshore Processing Centres’ (where processing refugees for settlement in Australian seems to be the last item on the agenda).

Australia over the years has entered into a number of trade agreements that in theory allow better access to markets and lesser trade barriers. Australia along with a number of other countries around the Pacific Rim have been negotiating a trade agreement for the past couple of years. If you are an Australian, you have no formal way to access the proposed agreement, which may contain clauses that override our national interests for corporate interests. If you are a stakeholder and live in countries including the USA, you do.

The ALP started a process when in power of creating a world class telecommunications system across Australia that would allow all Australians to access information on the internet much faster than most can today using digital cable to each household and known as the National Broadband Network (NBN). One of the current Government’s claims before the election was that the system that was under development was more than needed. (Stop fast Internet anyone?) While the rollout of digital cable continues at a snail’s pace, a recent Senate enquiry has determined:
The Australian people are being kept in the dark by the minister and NBN Co on the cost and rollout timeframe of the NBN.
It has been demonstrated in the past that in any period of uncertainty, those that take the lead do better. Mark Zuckerberg has made billions in the past decade or so by providing a system (Facebook) for people to freely and easily converse with their friends and soak up information — even if the information are the problems that can only be experienced in a first world economy, such as photos of last night’s dinner. Others with a large volume of resources such as Google have tried to manufacture rivals, with limited success.

So how does our government attempt to keep pace with the change to society that we are currently experiencing? In short, they are trying to keep the genie in the bottle. This is where the discussion between Charlie Pickering and Neil Tyson at the top of this article kicks in. You may recall they discussed how some people could accept new facts and assimilate them while others couldn’t. The Abbott government seems to be of the latter mindset. Above are a couple of examples of reactions to events that in the stated views of Abbott or his ministers are inimical to Australian society. There are plenty more, such as same sex marriage, education standards, tax reform and so on.

Conservative leaders in Australian politics were not always so intent on keeping the status quo. It seems that conservative leaders from Menzies to Bjelke Petersen could analyse new information and make decisions based on the material at hand. While the ALP started the Snowy Mountains Scheme, construction continued through the 23 years of Liberal rule from 1949 to 1972. While some changes were made, the NSW Liberal premiers continued the construction of the Sydney Opera House and surprisingly Bjelke Petersen’s National Party introduced and funded rail electrification at 25Kv to the Queensland rail system. At the time 25Kv electrification was new and is better technology than the 1500v systems in New South Wales and Victoria.

Abbott is a Rhodes scholar. Despite how and why he achieved the honour, he got there. There are two possible options for his reluctance to meet and adapt to the societal norms of the 21st century: either he believes that the ‘large C’ conservative values will win him power at the next election or he genuinely is one of the people that Tyson claims can only understand the rote learning he experienced decades ago.

The last 100 plus opinion polls would suggest that his performance does not meet the expectations of the Australian community. It could be argued that opinion polls are just opinion — but those that conduct the polls have businesses to run and frequent large discrepancies from reality would quickly end the pollsters’ business operations. So it could be said that you would have to be living on another planet to bet on (large C) conservatism as a winning strategy as Abbott seems to be doing.

The other option is therefore more likely. Abbott came from nowhere to cause a hung parliament in 2010 and win the 2013 election. In the opinion of those who are of the same mindset — winners are grinners — and there is a certain amount of blindness that comes from belonging to a winning team. Abbott’s mind cannot grasp the new information in relation to burning fossil fuels; cannot fathom how the society he lives in has moved on from the ‘meat and three veges’ on the table every night for the family comprised of ‘mum, dad and the two kids’; and is kicking the can on contentious issues, such as climate change, the republic, tax reform and same sex marriage, down the road for the next parliament to deal with. Should Abbott get back in, the can will be kicked further.

While Abbott’s mindset is not unique, it is taking the ‘first mover’ advantage away from all of us especially in relation to adjusting to the new knowledge and information economy of the 21st century. That will be an ongoing problem for all of us.

What do you think?
Like those who rejected the downgrading of Pluto as a planet, 2353 shows that Abbott and his ilk refuse to accept new information. Abbott is avoiding contentious issues like marriage equality, despite opinion polls, and will continue to do so. He is avoiding economic changes, pretending that we can continue forever to just dig and sell our minerals. As 2353 concludes, that approach is not in the best interests for the future of Australia.

Come back next week when Ken will discuss ‘Another failure in Aboriginal and Torres Strait Islander affairs’.


Bankers 3 Democracy 0 with Abbott running the sideline


In a piece in June, ‘The unhappy marriage of democracy and capitalism’, I discussed the then situation in Greece and the way democracy was being ignored by the wielders of economic power, particularly the bankers and the power brokers of the financial system. Since then the bankers have won, the Greek parliament has passed legislation to introduce further austerity measures and the people have rioted in the streets.

Greece was in a cleft stick. A majority of Greeks did not want to leave the Eurozone but nor did they want more austerity. The European Central Bank, the IMF and the European Commission (representing the other European governments that had provided funds to Greece) left them with Hobson’s choice — accept austerity or leave the Eurozone. The Greek government still opposed the outcome in principle but felt it had no choice: it could meet only one of the democratic demands placed upon it by the people, not both. The bankers had won by backing the Greek people and its government into a corner.

The Greek situation, however, is symptomatic of a much wider problem across most democracies in the world today but has brought it clearly into focus: it is now the bankers, the financial system, and the so-called rules of (neo-liberal) economics that dominate government thinking, not the will of the people. In an article in The Guardian in July, George Monbiot referred to it as ‘the financial elite’s war on democracy’:
The IMF is controlled by the rich, and governs the poor on their behalf. It’s now doing to Greece what it has done to one poor nation after another, from Argentina to Zambia. Its structural adjustment programmes have forced scores of elected governments to dismantle public spending, destroying health, education and all the means by which the wretched of the earth might improve their lives.

The same programme is imposed regardless of circumstance: every country the IMF colonises must place the control of inflation ahead of other economic objectives; immediately remove barriers to trade and the flow of capital; liberalise its banking system; reduce government spending on everything bar debt repayments; and privatise assets that can be sold to foreign investors.
It is a gloomy picture but, I think, we can all recognise it. In this new world, it is not governments, but the bankers, who rule. We have only to look at a common approach in many countries, namely the central banks adopting inflation targets, generally around 2%. Predictable inflation is considered necessary for economic planning and allowing consumers to feel confident, but for consumers and producers it is the predictability of inflation, not so much its rate (unless it has become hyper-inflation), that is important.

Financiers are more fearful of inflation because it has a major impact on financial assets. A simple example: I borrow $10,000 at 10% with an estimated 0% inflation, meaning I pay back $11,000; but if inflation rises to 5%, that $11,000 I pay back then has a purchasing power of only $10,475 — the bank has effectively lost $525. When we are talking of major international financial institutions, and the huge amounts they are dealing in, small variations in inflation can affect their bottom line, unless it is kept low and within a small predictable range.

Australian banks learned that lesson during the high inflation of the 1970s. Until then, most home mortgages were on a fixed interest rate (set by the government as I recall) for the life of the loan but banks stood to lose heavily in the 1970s and now are allowed to offer ‘variable’ interest rates so they can adjust to inflation. But that also means the borrower never gets ahead. Previously, as the years went by, the repayments became a lesser portion of the take-home wage, leaving the borrower with more disposable income — to boost consumption and thereby the economy — but now that is less likely to happen, or occur at a much slower rate and only to the extent that wage rises exceed inflation and the bank’s interest rate. So the overall economy doesn’t benefit from the current approach.

So the question is who benefits from all these efforts to keep inflation at 2-3%? Who benefits when a country adopts austerity measures which often cause deflation? Using that same example of the $11,000 loan repayment, if inflation became a deflation of minus 5%, I would effectively be paying the bank $11,550 in purchasing power.

But deflation is bad for the economy and for government coffers, as Greece knows. If growth turns negative, that means not as many goods and services are being purchased, not as many people are required to produce goods and provide services, and less tax flows to the government. It doesn’t, however, stop the financiers making money: they may even make more as people (even governments) may borrow more to overcome the loss of income.

So who do you think benefits the most?

It is not the people, as shown in the Greek situation. Governments have abandoned the people and, therefore, by definition, democracy. They no longer listen to the people but to the financiers and ‘the markets’.

In an article in The Monthly, Richard Denniss argues that we, the people, are being blinded by ‘econospeak’ and being led to believe that governments in making their decisions have to be conscious of the reactions of ‘the markets’. He writes that we should remember that ‘markets’ per se do not have feelings, do not have needs or demands. What we refer to as ‘markets’ is actually people buying and selling and attempting to manipulate trading for their own advantage. Denniss gives an example of ‘econospeak’ with his own translation into everyday English, which emphasises that it is really the feelings, needs and demands of rich and powerful individuals we are talking about:

  1. Markets reacted angrily today to news that the government is considering tightening thin capitalisation provisions that have provided foreign investors with strong incentives to expand their Australian operations.

  2. Rich people overseas reacted angrily today to news that they might have to pay tax on the profits they earnt in Australia. After the government announced that it was considering clamping down on some of the most lucrative forms of multinational profit-shifting, some very wealthy Americans threatened to take their bat and ball and go home if they were forced to pay tax.
We are being fed this propaganda constantly with the media now reporting numerous times each day on ‘the markets’ and stock exchange indexes from around the world. It suggests, as Denniss writes, that the markets ‘are watching and judging us’. We are meant to believe that this constant diet of market reports is important.

It is all crap!

When I was growing up we didn’t hear about the stock market. There was a page somewhere in the newspaper giving the previous day’s prices but we skipped that page. The stock market was called ‘rich man’s gambling’: where I lived, people gambled on the horses, most often with the local, illegal SP bookie. What changed? Why did ‘the markets’ become the be-all and end-all of economic progress? (And we could ask why in a free market economy was the off-course SP bookmaker made illegal and driven out of business?)

Joint stock companies have existed for a long time, in which people raise money, and spread risk, by allowing other people to purchase a share in the company. Stock markets (exchanges) were meant to be an organised way of allowing trade in those shares. It did mean that shares could be traded without affecting the company itself — it was only a change in ownership of a small portion of the company.

When companies are successful, more people want to buy shares in them and the share price rises purely on the old law of supply and demand. Hence England had the ‘South Sea bubble’ early in the 1700s. It involved the South Sea Company taking over a large portion of the English government’s debt following the ‘War of the Spanish Succession’, in return for trading rights in the Spanish colonies of South America and in the West Indies (referred to as the ‘south seas’ at the time). By the treaties at the end of the war, the company, however, was allowed only one ship per year to South America. Despite that, it was able to sell its shares because the government was paying 4% on its debt and the company ran an effective marketing strategy. Share prices rose quickly from £100 to £1000 before the bubble burst. The company had also encouraged share purchases by lending money to people to buy its own shares. Of course, it was those who were leveraged in that way who lost most when the shares crashed: the crash was started by the directors of the company selling their shares because they knew the ten-fold increase in the value of the company existed only in the shares and was based on nothing substantial. As a result, in 1720, the British government banned the issuing of stock certificates. (It was enforced for only a short time although not repealed until 1825.)

Bubbles keep happening, usually followed by a depression or a recession. Apparently the only difference between a market ‘crash’ and a ‘bubble’ bursting or a market ‘correction’ is the size of the devaluation of the market. (One article I read suggested that the fall had to be greater than 20% to be more than a ‘correction’, but that still means that many people will lose a lot of money.) Often, as after the South Sea bubble, these bubbles are followed by a burst of government regulation but ‘markets’ can now avoid such intervention by claiming it is only a ‘correction’.

Has anything changed? We have returned to laissez-faire capitalism under the new guise of ‘market liberalism’ and neo-liberalism. As George Monbiot wrote:
Neoliberalism is inherently incompatible with democracy, as people will always rebel against the austerity and fiscal tyranny it prescribes. Something has to give, and it must be the people. This is the true road to serfdom: disinventing democracy on behalf of the elite.
Monbiot argues that the imposition of budget surpluses as the target of governments (it is, for example, written into Eurozone rules) is the new ‘gold standard’ that limits public spending and what governments can do to stimulate employment. A limit on spending, either by the gold standard, or the new requirement for budget surpluses, effectively leaves the rich and the financiers in control. If a government needs more money it either has to take more ‘gold’ from the wealthy — and they have the ‘gold’ to be able to fight that as we saw when the mining companies successfully fought the mining tax — or borrow money. Borrowing money: doesn’t that mean the financiers are involved? — funny that! And if governments allow inflation to rise, they effectively pay back less money, so the financiers also want low inflation so they don’t lose.

The big financial institutions (and rich individuals) also invest their surplus funds in stocks as a way to make more money — or so as their surplus money is not sitting idle, as they would see it. So who has a vested interest in ensuring that we are all worried when the markets fall, or that we should be worried by the market’s reaction?

We gave the Reserve Bank the power to determine interest rates and the guideline that it should aim to maintain inflation between 2% and 3%. We were told that it removed monetary policy from politics. But why should it be removed from politics? Governments are meant to make political decisions and to the extent that inflation and interest rates affect people, they involve political decisions. By removing that power from political considerations, we effectively abandoned a part of democracy’s capacity to influence the market: that is control, in the broader interest of society, the behaviour of banks and wealthy individuals. That can only be a neo-liberal decision (even if Labor originally set the inflation target) that supports laissez-faire capitalism and its financiers.

And running the sidelines we have our current government. Abbott and Hockey have repeatedly told us that surpluses are sacrosanct and that, when we don’t have one, we have to cut government spending to ensure that eventually we do. They look to the markets to justify their decisions, but who do the markets represent? — it is not the people. They say we need less government regulation in the market but who benefits from that? — they tell us it will benefit workers in the long run but that’s what ‘markets’ always say, while the corporation owners and the bankers reap the benefits now.

I will end with something said by Sir Isaac Newton, after he lost £20,000 in the South Sea bubble:
I can calculate the motions of heavenly bodies, but not the madness of people.
I think ‘the madness of people’ still dominates the markets, despite what the neo-liberals, the economic rationalists and the Liberals tell us. In that regard, it is not a firm basis on which to run an economy.

What do you think?
Ken may have nailed his colours to the mast with this piece but has he also nailed the bankers there? Around the world new grass-roots political parties are emerging and, in some countries, enjoying electoral success, as people become disillusioned with the way the current political system is dominated by financial interests. It is not yet happening in Australia but Labor should remember that it began as a grass-roots party, created to give the workers a political voice. If Labor returns to its roots, it can still be the people’s party in Australia.

For next week, you can ponder what is the link between the (former) planet Pluto and Tony Abbott? Find out in 2353’s ‘Pluto and the conservative mindset’.


The challenge of renewables


Later this year a conference will be held in Paris that will determine the global response to climate change. While the international jockeying has commenced, it seems there is a ‘tipping point’ that, if exceeded, will ensure that the world will never be the same again. Australia’s contribution is being keenly watched.

Australia was one of the first to introduce an Emissions Trading Scheme (misnamed by both sides of politics as ‘the carbon tax’) and certainly the first to almost ditch it. The ALP at its recent conference has committed to generating 50% of Australia’s electricity using renewables by 2030. It seems the current government has yet to make up its mind. Given that the world’s environment is warming and 2014 was the warmest year on record, doing nothing is not an option — and if the worst result is that fossil fuels last longer, is that a bad thing?

The ALP’s commitment to 50% renewables made some people happy but others were claiming the costs could be excessive. Abbott went as far as claiming that the ALP policy would cost $60 billion — pity the claim was based on a calculation ‘on the back of an envelope’.

The reality is that, according to the International Monetary Fund, Australia will subsidise coal, petroleum and gas consumption to the value of $41 billion during 2015.
Australia's current electricity mix can supply power at about $30 to $40 per megawatt-hour, according to estimates provided by the Grattan Institute.

If we were to build new fossil fuel power plants today they would produce power at about $50 to $75 per megawatt-hour based on the same Grattan model. New wind power would cost about $80 to $90 per megawatt-hour, while large-scale solar would be about $180 (Estimates by other groups put the cost of new coal power at higher rates.)
As the article points out, this is just the cost of generation — not the cost of the environmental mitigation required from burning fossil fuel.

Not everyone agrees on the costs. Alan Jones claimed on Q&A during July that:
“Eighty per cent of Australian energy comes from coal, coal-fired power, and it’s about $79 a kilowatt hour,” he said. “Wind power is about $1502 a kilowatt hour.”
He was spectacularly wrong (and to his credit he did apologise for the error), but there seems to be a trend here of plucking numbers out of thin air and constructing an argument to ‘demonstrate’ the economic madness of renewable energy.

While the IMF has new coal-fired power stations at a slight cost advantage (before the ‘on-costs’) over renewable power, Bloomberg has a different view:
By Bloomberg New Energy Finance’s most recent calculations a new wind farm in Australia would cost $74 a megawatt hour.

“A new large-scale photovoltaic project would cost $105,” says the firm’s Australian head, Kobad Bhavnagri. “A new coal-fired power station would cost $119. And a new gas base-load station would cost $92. So both wind and solar are already cheaper than coal.”

What’s more, says Bhavnagri, the cost advantage of non-polluting energy is rapidly increasing. “Wind is already the cheapest, and solar PV [photovoltaic panels] will be cheaper than gas in around two years, in 2017. We project that wind will continue to decline in cost, though at a more modest rate than solar. Solar will become the dominant source in the longer term.”
The Saturday Paper reports that Bloomberg has determined global spending on the construction of renewable generation capacity since 2013 has been higher than coal, gas and oil combined. The trend is likely to escalate. On top of that, electricity demand across Australia is reducing. Stanwell Power in Queensland closed down two generation units at its Tarong Power Station — citing lack of demand in 2012. Renew Economy reported:
The closure of the two units at Tarong follows the closure of the ageing 600MW Munmorah power station in NSW, Stanwell’s 125MW Swanbank B power station in Queensland, and the 240MW Playford B and the 520MW Northern brown coal generators in South Australia. Energy Brix has also reduced output. Northern recently reopened and will operate in the immediate future only in summer, when demand is higher.
Climate Works Australia, a partnership between the Myer Foundation and Monash University, has prepared a report, housed on the United Nations Sustainable Development Solutions Network, that discusses the probability that Australia could effectively be ‘carbon neutral’ by 2050 while maintaining current economic growth. Denmark is targeting to be completely free of fossil fuel by 2050. They are well on the way, having around 40% renewable energy on their electricity grid now. The New York Times reports that there are a number of practical problems in the transition to a completely fossil-free future, from winter nights with little wind through to ‘range anxiety’ for electrically driven vehicles.

The Danes are now subsidising fossil and nuclear power stations to remain on-line to cover eventualities such as still nights, as the cost of fossil or nuclear electricity production exceeds the price the generators can sell electricity for. Believe it or not, some Australian states are having the same issue. In Australia, electricity is traded on a ‘market’ across Queensland, New South Wales, Victoria and South Australia. Queensland and South Australia have excess generating capacity so they can sell surplus electricity into the market, which acts, as economists will tell you, ‘rationally’ (the price paid for surplus electricity is governed by the demand for the product). Electricity generators make decisions on how much electricity they will produce based on the expected return from the market meeting or exceeding the cost of generation. If the generators miscalculate the demand, the price paid for electricity increases rapidly, causing generators to increase production. If there is a surplus of electricity available, the price goes down. Those that can change production quantities quickly make more money than those that can’t. On occasions during the middle of the day in July 2015, the wholesale price for electricity in Queensland was a negative value rather than the ‘normal’ $40 to $50 per megawatt hour. While not the sole cause (the infrastructure allowing Queensland to ‘export’ power to Southern States was not working at full capacity):
The influx of rooftop solar has turned this model on its head. There is 1,100MW of it on more than 350,000 buildings in Queensland alone (3,400MW on 1.2m buildings across the country). It is producing electricity just at the time that coal generators used to make hay (while the sun shines).
If Queensland has excess power during the time that is usually profitable for power generators, and South Australia has the capability of operating entirely from renewable energy, as occurred late in 2014, the world is changing without waiting for the government to change.

Ergon Energy in regional Queensland (which is owned by the Queensland government) is conducting a trial of battery storage for the power generated from solar panels in a domestic environment which, if successful, will allow the use of domestic solar panel generated power at night or if it’s raining heavily. The Queensland government is also planning to install a number of renewable energy powered electric vehicle chargers along the Bruce Highway, which runs from Brisbane to Cairns.

Clearly the world is changing. It is conceivable that in the not too distant future we will be able to power our houses using electricity generated on the roof and stored in batteries under the house. Our cars will be plugged into a charging point each night and when we do want to travel further than the battery capacity, there will be a recharging station en-route (in a similar way to filling the car at the petrol station). Both of these fundamental changes will reduce our need for fossil fuels as well as infrastructure such as power lines. These fundamental changes will also reduce the business plans of a number of companies to historical artefacts. These companies are in a similar position to the tobacco companies were some years ago when the evidence that smoking is hazardous to health was overwhelming but before cigarette packet warnings and education programs were introduced.

The problem for energy companies is that if they don’t adapt, they will gradually fade away. However, there is an economic problem here — who will be the first to try and adapt to a new business model that addresses the rise of renewable energy, potentially giving their competition a ‘free kick’? The first to withdraw from the traditional generate, distribute and retail business model will leave a hole in the market that others will attempt to fill, so unless the strategy is planned and executed correctly, the early adopter could fail completely. While Ergon is conducting a trial of battery storage, they are a government owned business with a legislated supply area and no competition — so they effectively have a monopoly. The business and economic risks of the trial are significantly less in Ergon’s case than they would be in the case of Origin or AGL.

This doesn’t explain the Abbott government’s reluctance to support renewable energy. The Abbott government has reduced the RET (Renewable Energy Target), instructed the CEFC (Clean Energy Finance Corporation) to remove funding from ‘established’ renewable technology — which was profitable to the agency and the government — and launched various hysterical campaigns on wind farms, emissions trading schemes and aspirational targets for the move to renewable energy by the country over the next 15 years.

It is even harder to understand Abbott’s responses when it is considered that Pope Francis (the spiritual leader of all Catholics — including Abbott) has released an encyclical that not only acknowledges climate change caused by humans burning fossil fuels, but demanded immediate action to stop the world becoming ‘an immense pile of filth’:
In the encyclical, titled Laudato Si (Praise Be), On the Care of Our Common Home, Francis advocated a change of lifestyle in rich countries steeped in a "throwaway" consumer culture and an end to an "obstructionist attitudes" that sometimes put profit before the common good.
Not that Abbott is alone in ignoring the Pope’s ‘teaching’. Father James Grant is an adjunct fellow of the IPA (Institute of Public Affairs) and wrote an article in The Australian (which is paywalled) on 10 July entitled ‘It’s unchristian to oppose coal generated power’. However, we can all read the smackdown of the article and the government’s lack of action written by Neil Ormerod and published in Eureka Street. Ironically, Eureka Street is published by the Australian Jesuits, the Catholic order that Abbott tried to join when younger.

The scientific and moral debate on climate change is over. Climate change is real — we are all are causing it. So why do Abbott and other conservatives continue to ‘fight the fight’? Is it, as Pope Francis commented, because profit outweighs the common good? Abbott is probably finding it hard to justify to other countries why they should purchase greater quantities of Australian coal at the same time that our national consumption is reducing dramatically. Or is it that the government is so bereft of capability to devise and implement cutting edge policy that the easy option is (with apologies to 1914 ALP Leader Andrew Fisher) resist to the ‘last man and the last shilling’ with a determination to (in the words of Churchill) ‘never, never, never give up’.

What do you think?
As 2353 points out, the world is changing. Why can’t Abbott accept the reality when even his beloved markets are reading the writing on the wall, are reacting to climate change and the challenge of renewables? We are seeing more investment banks divesting some of their fossil fuel assets as they foresee that they will, in future, become stranded assets. And yet Abbott continues to live in a different reality and will fight the changes to the last man. How can one man be so obstinate and ignorant and yet lead our country?

Next week Ken returns to his theme of the bankers versus democracy in his piece ‘Bankers 3 Democracy 0 with Abbott running the sideline’.


Funding health: part 2


This week I focus on the future of commonwealth government health funding and begin with consideration of the role of the Medicare levy in commonwealth government spending.

While health expenditure may increase so does revenue from the Medicare levy so long as wages and the workforce continue to grow. In constant (2012‒13) prices, the revenue from the Medicare levy grew faster than the growth in government health expenditure for six of the eleven years between 2003‒04 and 2013‒14. The levy revenue increased by 57% in that time (from $6.5b to $10.2b in constant prices) while commonwealth government health expenditure increased by 61.5%. In the early half of those years the levy provided around 17‒18% of commonwealth health spending but since 2009‒10 has been around 15‒16% and is currently about 16%. What the year-by-year figures actually suggest is that the Medicare levy covers a greater proportion of health costs when the economy is doing well and falls when the economy is performing poorly, so changes are not just a result of increased health spending. It is a concern currently that unemployment has increased and wages growth has slowed, both of which will impact Medicare levy revenue in the short term.

The fastest growing area of health spending by the commonwealth government is actually the subsidy for private health insurance. The private health insurance rebate cost the government $5.5 billion in 2012‒13 having risen from $1.4 billion in 1999‒2000 and in the Hockey 2014‒15 budget it was predicted to grow faster (by 5.9%) than Medicare costs (3.5%). What does the government get for that? The AIHW figures for 2012‒13, remembering they were for total health spending, show that private health funds contributed about $11.8 billion but the government spent $5.5 billion to achieve that, leaving a nett benefit of $6.3 billion. But private health funds also pay for dental, optical and other services and actually contributed about $8 billion to the major commonwealth costs of hospital and referred medical services (under Medicare, private health funds make no contribution to unreferred services) — so it could be argued that the real nett benefit to the commonwealth government was $2.5 billion. The Grattan Institute has estimated that the extra cost to public hospitals, if the private health insurance rebate was abolished, would be $2.5 billion, leaving the government $3 billion in front, which is $500 million more than the real nett benefit it currently achieves.

Treasury and the Intergenerational Reports (since 2002) have been continually arguing that the rising health spending in the coming decades is due to the ageing of the population. The 2010 Intergenerational Report (IGR) suggested that 40% of the projected increase came from ageing and population growth: the balance was through technology changes and demand for higher standards in health services. The 2015 IGR, however, suggested that non-demographic factors will actually account for 80% of the increase in health spending — ageing alone contributes only 10%, with the other 10% simply from population growth. If that sort of reduction in impact is repeated in the next IGR, ageing may not contribute at all to increases in health funding!

The other issue to consider in relation to meeting rising health costs is that government revenue generally grows, as a result of growth in GDP and wages, and it is usually just the speed of that growth that varies. Since 2003‒04 the only decline in revenue came in the years 2008 to 2010 when we were affected by the GFC: the final budget outcome was $4.8 billion lower in 2008‒09 than the previous year and another $6.2 billion lower the following year. Long term studies suggest that we can expect such short-term economic downturns about once every 8‒10 years.

As I pointed out in ‘Abbott continues to tell porkies’ government revenue has been revised downward on a number of occasions in the past three years. Despite that, the total revenue has still been slightly higher each year: $360.2 billion in 2012‒13, $374.0 billion in 2013‒14 and estimated to be $384.1 billion in 2014‒15 (the last figure is that included in the 2015‒16 budget papers, not the original budget figure). Earlier forecasts had suggested that revenue could be as high as $407 billion in 2013‒14, so there has certainly been a considerable slowing of the growth of government revenue and programs introduced on the basis of those earlier forecasts are now causing fiscal problems.

It is that ‘normal’ growth that allows governments to implement new programs as well as meet rising costs. Problems arise, as at present, when growth slows and those programs that have been introduced earlier, based on the previous forecasts of growth, still require increased spending — that is when expenditure starts to exceed revenue. But it also suggests that it only takes a few years before that revenue rises again at a faster pace to cover expenditure. It is interesting that the 2007 IGR predicted long term ‘real’ GDP growth of 2.5% (below the historical average of about 3.3%) but the 2015 IGR now places that long term GDP growth at 2.8%. Calculating from the size of the current economy, the cumulative difference of that apparently small 0.3% in the two projections is enormous: a difference of about $500 billion in the size of GDP in 40 years. And, of course, such a large difference also makes a significant difference to the government’s revenue — a difference of about $120 billion in 40 years (at the current revenue share of GDP). So very small differences in parameters make significant actual differences in GDP and government revenue and that is important in considering whether we can meet future health costs — remembering that this is based on ‘real’ growth after inflation.

The biggest danger to future commonwealth government revenue, as claimed in the IGR, is that the ageing population will lead to a relatively smaller workforce. Whereas in 1974‒75 the ratio of workers to aged people (the ‘dependency ratio’) was 7.3:1, it is projected to be 2.7:1 by 2054‒55. On the other hand, that was one reason the GST was introduced so that those who are not in the workforce are still contributing to revenue — except all that revenue goes to the states. But the IGR still predicts a 62% participation rate in the workforce and a much larger population with that average 2.8% real increase in GDP — so where is the problem?

What does that mean for health funding? Since 2002‒03 health funding has actually fallen slightly as a proportion of the commonwealth government’s total spending: from 17.4% in 2002‒03, reaching a peak of 18.2% in 2004‒05 to 2006‒07, a low of 15.1% in 2008‒09, and is now 16.1% — if it was still at 17.4% an extra $5 billion would have been available in 2014‒15. So there is a clear argument that it is not rising health costs that are impacting overall commonwealth government spending. On the basis of the proportional fall in health funding, it could actually be argued that funding that would otherwise have gone to health has been diverted to other programs.

As the data in Part 1 indicated, health costs aren’t out of control but the number of services is climbing and an ageing population may contribute to that rise: the most recent IGR, however, as stated above, considers that only 10% of the increase in costs will be a product of the ageing population. There will be other increases in health costs unrelated to ageing: for example, AIHW has projected rising rates of diabetes as a result of obesity. Dealing with obesity, and hence avoiding future costs associated with diabetes, is a matter that relates mainly to primary care.

The cost of GP services (non-referred) is already fully covered by Medicare and it could be said that it is the referred services that are causing the shortfall in the Medicare levy but individuals already contribute 16% of the cost of referred services — and that is the additional out-of-pocket contribution over and above the contribution through the Medicare levy and general taxes.

If ageing is the problem it is made out to be, the problem it gives rise to is some level of increased services and Abbott’s new ‘price-signal’ by stealth (the freezing of the Medicare rebate) will not significantly change that. Most people don’t go to the doctor simply because they can but because they need to and, in that regard, it is probably true that an ageing population may lead to some increase in the use of health goods and services (but, I repeat, even the government’s own report says only 10%). To the extent that people do put off seeing a doctor, it may lead to late identification of conditions, thus allowing them to develop into chronic conditions and so a greater burden on the health system and health funding. Alternately they will attend emergency rooms at public hospitals where they do not need to pay, only increasing the burden on public hospitals. Either way, it will not be beneficial nor cost efficient.

All in all, the Medicare levy works well for what it is intended — an equitable distribution of costs — and it works well when the economy is working well. The private health insurance rebate could be abolished and the government would be better off — keeping it is ideological, in support of private enterprise (privatised medicine). As pointed out previously on TPS, there is considerable scope for raising revenue by addressing tax expenditures, without directly raising GST, income or company taxes, or even the Medicare levy. There are many ways of meeting future health costs.

Basically health funding appears to be an economic issue, not simply a fiscal issue, and rising costs can be covered in a vigorous economy. The economy will continue to grow, even with an ageing population, just not quite as fast as we have been used to. Governments have a major role in encouraging a strong economy, including promoting new industries, promoting full employment (noting that unemployment costs the government twice, by reduced taxation revenue and increased expenditure on unemployment benefits) and ensuring good health so that people can remain active participants in the workforce for so long as they choose. Meeting health costs really requires the government taking more initiatives to promote economic activity, not tightening the purse strings which stifles economic activity.

In my view, increased health spending arising from an ageing population is not as big an issue as the government makes out, particularly when one remembers that we had a problem at the opposite end of the age spectrum in the 1950s and ‘60s — the need for more schools and teachers for the then young ‘baby boomers’ — and we managed to get through that. I think that older people are being used as scapegoats for inaccurate forecasts, ideologically-driven fiscal policy and to justify subtle attempts to push a greater share of health services to private enterprise.

What do you think?
Ken admits that, as an older person, he may have a vested interest in presenting this piece. Whatever the reasons causing increased health costs, should they be met by increasing taxes or should governments better manage the economy and rely on normal revenue growth to cover costs? Are there other ways? Is this government even capable of making the right decisions? Or is it no more than another Liberal battle in its ongoing war to introduce a privatised health system into Australia?

Next Sunday 2353 returns with his look at ‘The challenge of renewables’.


Funding health: part 1


Earlier in the year, there was much talk by the government about the ‘unsustainable’ growth of health funding. In July, the premier of NSW, Mike Baird, joined the party suggesting that the GST should be raised to 15% to help cover rising health costs. But how bad is the situation?

In 2012‒13, the most recent year for which full details are available from the Australian Institute of Health and Welfare (AIHW), total expenditure on health in Australia was $147.4 billion, about 9.7% of GDP — commonwealth government spending on health was about $61 billion. Overall spending had grown from $68.8 billion in 2002‒03 — or $90 billion in 2002‒03 in constant (2012‒13) prices. The average annual real growth of health spending over the decade was 5%.

Australia’s health expenditure as a proportion of GDP is very near the average for the OECD and most countries also saw their health spending rise over that decade (Iceland, Turkey and Israel were the exceptions).

There are a number of players in Australia that contribute to meeting those health costs, not just the commonwealth and state governments — and even in considering the commonwealth government we need to include the Department of Veterans’ Affairs which contributes over $3 billion a year. Private health funds obviously contribute a small amount, as do insurance companies through injury compensation payments. And, of course, so do each of us as individuals, through out-of-pocket expenses and co-payments (at present, the latter is mostly for pharmaceuticals).

The proportion contributed by each group at the start and end of the period was as follows:

Agency 2002‒03 2012‒13
Commonwealth government 43.6% 41.4%
State and territory governments 24.4% 27.0%
Health insurance funds 7.9% 8.0%
Individuals 16.6% 17.8%
Other (largely insurance companies) 7.3% 5.7%

Those figures show that state governments and individuals have seen their contribution increase since 2002‒03, and that was in 2012‒13 before the Abbott government was elected and proposed measures to further increase state government and individual contributions. Despite abandoning the GP co-payment, the government has acted to achieve the same result by freezing Medicare rebates until 2018.

There are many different areas of health expenditure, including dental (three-quarters of which is paid by health funds and individuals), patient transport services and community health (largely met by the states) and aids and appliances (largely met by individuals). They each add a few billion dollars annually to overall health expenditure. The main areas, however, are:

  1. hospitals, public and private: In 2012‒13, about $56 billion was spent on hospital services, 78% in public hospitals and 22% in private hospitals. The commonwealth government provided $16.2 billion and the states $23.7 billion for public hospitals and individuals contributed $1.3 billion. For private hospitals the health funds provided $5.7 billion but the commonwealth government also paid $3.6 billion and individuals $1.5 billion. Insurance companies also spent $1.8 billion in public hospitals and $760 million in private hospitals.

  2. primary care (unreferred) services and referred medical services: ‘Unreferred medical services’, about 90% of which are visits to GPs, cost the commonwealth government $8.3 billion in 2012‒13 out of total expenditure of $10.2 billion (with insurance companies contributing $1.2 billion). The commonwealth government paid $11.4 billion for ‘referred’ medical services, health funds $1.3 billion and individuals $2.4 billion. (When individuals contribute almost twice as much as health funds for referred services, there is a basis to question the real value of health insurance.)

  3. pharmaceuticals: For subsidised pharmaceuticals there are only two groups who pay: the commonwealth government ($8.4 billion in 2012‒13) and individuals ($1.5 billion). We also spent, as individuals, another $8.7 billion on other medications. Those are the AIHW figures for 2012‒13. The payments made by the PBS are lower because the overall government figure includes immunisation programs and some direct payments to pharmaceutical wholesalers. In 2012‒13 PBS reported 197 million prescriptions of subsidised medicines for which it paid just over $7 billion and $1.5 billion was paid by patients (the same as the AIHW figure). For 2013‒14, there were 209 million prescriptions at a cost to the PBS of $7.3 billion and patients again paid a little over $1.5 billion. It is interesting that the average cost (including the patient contribution) actually fell from $43.49 in 2012‒13 to $42.19 in 2013‒14.
There have been slight changes, between 2002‒03 and 2012‒13, in the proportion of overall health expenditure that these main areas represent:

Area of expenditure 2002‒03 2012‒13
Public hospitals 30.4% 31.6%
Private hospitals 8.5% 8.7%
Unreferred medical services 7.9% 7.3%
Referred medical services 10.6% 10.9%
Pharmaceuticals 9.4% 7.2%

While a greater proportion of health funding is being spent in hospitals and on referred medical services, we are spending a lesser proportion on unreferred medical services and pharmaceuticals. One of the bigger areas of growth is our own expenditure on non-subsidised and non-prescription medications which rose from 5.1% to 6.7% of health spending in those years.

All of the expenditure I have referred to above is ‘recurrent’ costs, that is the price of services and consumables. There is also capital expenditure, mainly the building and refurbishing of hospitals, including the purchase of major equipment, but this tends to be only a few billion each year: $8.6 billion in 2012‒13 of which the commonwealth government provided only $72 million. Almost all of the capital expenditure comes from state governments ($5.1 billion) and private providers ($3.4 billion).

The AIHW report states that for seven out of the ten years up to 2012‒13 health prices actually increased by less than the rate of inflation and that much of the continuing rise in expenditure was a result of an increase in the volume of goods and services. The year 2012‒13 was a bit of a hiccup with the volume of services declining but the price increasing. Based on Medicare data, the volume of services did resume rising in 2013‒14.

The commonwealth government’s main areas of funding are ‘medical services and benefits’ (largely Medicare payments but the private health insurance rebate is also included under that heading), pharmaceutical benefits, payments to support state-run public hospitals, and for ‘other health services’ (which incorporates mental health, hearing services, blood and blood products, and research).

In the decade to 2012‒13 the commonwealth government’s health expenditure usually required around 17% of government revenue. [That figure and many of the following figures up to 2013‒14 (including in Part 2) are my own calculations using ‘final outcome’ figures for each budget.] It fell as low as 14.6% in 2007‒08 and reached a peak of 18.8% in 2011‒12: in 2014‒15 it was forecast to be 17.6% but was projected to fall back to 17.1% by 2016‒17. The increase in recent years was mainly a result of the slow rate of overall revenue growth for government.

In the last Wayne Swan budget the commonwealth government was projected to spend $280 billion on health between 2013‒14 and 2016‒17. The 2014‒15 Hockey budget reduced that to $271 billion, the largest reductions being for pharmaceuticals (‒$4.5 billion) and payments to the states for public hospitals (‒$2 billion). Treasury indicated that most of the reduction in pharmaceuticals was related to more accurate information about the cost of medicines, as the government now requires pharmaceutical manufacturers to provide the actual price at which they sell to wholesalers and pharmacies.

Under the Abbott government there will be further reductions in payments to the states for public hospitals because it will abandon a number of agreements, that were made under the Rudd and Gillard governments. Under the National Health Reform Agreement 2011 the Commonwealth was applying:
… an activity based funding approach to determine an ‘efficient price’ for hospital services. The Commonwealth pledged to meet 45 per cent of the growth in the efficient price initially, rising to 50 per cent after 2017. The states and territories will meet the balance.
When that agreement now ceases in July 2017, Commonwealth funding will revert to the old model linking CPI and population growth.

Abbott and Hockey also abrogated the National Partnership Agreement on Improving Public Hospital Services as from July this year. That agreement was meant to help improve access to elective surgery, emergency care and subacute care. It will save the commonwealth government $201 million over the forward estimates but the states may have to reconsider what they can fund.

A lot is said about the Medicare levy and whether there is a need to increase it. In 2012‒13 it raised $10.2 billion, $10.5 billion in 2013-14 and was forecast to increase to $14.1 billion in 2014‒15 but that includes the additional 0.5% for the NDIS. Although the Medicare levy is simply paid into consolidated revenue, we can estimate that about $10.6 billion should be available for health, as opposed to disability funding.

Medicare statistics show there were 356 million services provided in 2013‒14, an increase of about 12.5 million on 2012‒13 (about 38% of those services were non-referred, mainly GPs). Benefits paid increased from $18.6 billion to $19.1 billion. So the Medicare levy covered about 55% of benefits. It more than covers the cost of non-referred visits, which amounted to $5.9 billion in 2012‒13 and $6.4 billion in 2013‒14. It is the referred services, which include specialists, obstetrics, pathology and diagnostic imaging (amongst others) which cost the most: referred services increased by almost 6.7 million in 2013‒14 (about 54% of the total increase in services), and cost $146 million more but that was after a reduction of $594 million in payments for ‘allied health’, so the real increase was more in the order of $740 million; non-referred services increased by 5.8 million and the payments increased by $411 million. Doubling the Medicare levy would certainly cover all benefit payments: if the levy had been 3% in 2013‒14 it would have raised about $21 billion, almost $2 billion more than Medicare payments. But is that necessary? The original aim of the Medicare levy wasn’t to fully cover costs but to make the cost-sharing equitable. It is also notable that the average cost per service for Medicare fell slightly, from $54.03 in 2012‒13 to $53.69 in 2013‒14 (or a saving of $116 million if the number of services did not increase).

Health costs a lot but the above figures indicate that health prices aren’t rising all that fast, and have actually fallen recently. We could have cheaper health but at what cost to our health! Our health services are highly regulated for obvious reasons: we expect that the people who examine us and operate on us are properly qualified; we expect our medications to be safe and efficacious; we expect our health services to be available to us in a timely manner. That all adds to the final cost of health services.

The issue is who pays? The commonwealth government is trying to reduce its contribution but that doesn’t necessarily reduce overall health expenditure — it just moves costs elsewhere, to state governments and individuals. Under the Abbott government, it is easy to believe that it may actually be a way of achieving greater privatisation of medicine by putting pressure on public hospitals, shifting costs to individuals, and so encouraging greater use of private health funds and private hospitals.

Next week, Part 2 will look at the commonwealth government’s future health funding issues.

What do you think?
The Abbott government is insisting that it cannot continue to meet the rising cost of health services but, as Ken points out, someone still has to pay. The data presented by Ken suggest that there has already been a shift in health costs to state governments and individuals since 2002‒03 and now the Abbott government seems intent on accelerating that transfer.

Come back next week for Part 2 of ‘Funding health’.


Doin’ the GST-a-rosy rag


Got a PM, PM we can’t trust
Said a higher GST is a must
Doin’ the GST-a-rosy-rag
Told the voters you must pay
If you want to see a surgeon on another day
He was doin’ the GST-a-rosy-rag

Been around, and new is old
Catch your cold and blow your gold and spend
Doin’ the GST-a-rosy-rag
[Apologies to Arlo Guthrie]

We’ve been around and around and back again, doin’ the GST-a-rosy-rag. I am usually not one to say ‘I told you so’ but back in April, in my piece ‘Beware there is a plan’, I suggested that Abbott and Hockey were looking to reduce the commonwealth government’s involvement in health and education and leave those matters to the states. How could they do that? — by increasing the GST, all the revenue of which goes to the states. At the time they ruled out an increase in the GST because it did not have bipartisan support. I did predict, however, that they had managed to put it on the political agenda and that it would raise its head again — I did not expect that it would be so soon.

So in July, what happened? Leading into the ‘leaders’ retreat’ before the formal COAG meeting, NSW Premier Mike Baird raised the prospect of increasing the GST to 15%. His main argument was that it was necessary to meet rising health costs — and, of course, those costs for the states rose dramatically after Abbott and Hockey cut $80 billion from future funding to the states for health and education.

When asked about it at the WestConnex sod turning in Sydney on 20 July, Abbott supported —
… Mike Baird’s willingness to discuss revenue issues because obviously, if there is a problem with revenue, it can’t just be the Commonwealth’s responsibility to solve.
Right? Wrong! Why isn’t it the commonwealth’s responsibility when it is the commonwealth government that collects all income tax and company tax and the states have to come as mendicants to get back some of the tax their citizens have paid? Has Abbott forgotten that income tax was originally levied by the states and they gave it up in a time of war expecting a fair deal afterwards?

The full transcript of Abbott’s words is here but there are some interesting things to note:
  • not once does he admit that he has anything to do with it nor that he has ever suggested it;
  • three times he manages to insert his new mantra of ‘lower, simpler, fairer’ taxes;
  • he constantly refers to it only as a ‘discussion’.
When specifically asked if this was part of the plan, ‘Having turned off the tap of federal health and education funding and forcing the states to come up with their own solutions’, he simply avoided the question and said:
I’m just really pleased that Premier Mike Baird, along with Premier Jay Wetherill, are prepared to have a constructive, responsible discussion. It is a sign that this generation of leaders at both the State and national level are prepared to do what’s necessary to make our country strong …
Still nothing to do with him! It is all about having a ‘discussion’ and luckily for him someone else raised it. (Was there any prodding behind the scenes? We will probably never know but is it merely coincidence that Abbott’s federal electorate takes in Baird’s state electorate?)
I want to see the overall tax burden go down. I want to see lower, simpler, fairer taxes. But at the same time, I do want to see a more rational arrangement of finances and responsibilities between the Commonwealth and the States.
With that last statement, Abbott is certainly pursuing his line that many ‘responsibilities’ should be handed back to the states and the real issue then is how the states will fund them. ‘A more rational arrangement’ could include giving back the right to tax individual incomes and the commonwealth government could totally withdraw from funding schools and hospitals and many other services — but that would be a step too far! The commonwealth government is now reliant on income tax for about 48% of its total revenue or 56% of its revenue if we remove the GST from the calculation (based on the 2015-16 estimates).

Mike Baird claimed that it is primarily to do with rising health spending. He suggested that state and commonwealth deficits in 15 years (in 2030) will total $45 billion of which $35 billion will be health costs. Even at an annual rate of 2% growth, government revenue in 15 years will be 32% higher than currently. Yes, all government costs will also increase in that time but surely there must be room within that increase to absorb some, if not all, of the rising health costs? (Also watch for my pieces on ‘Funding health’ in the next two weeks where I suggest that a key issue is managing economic and wages growth to cover costs, not simply increasing taxes.)

A problem with raising the GST is that it hits everyone the same in dollar terms and eats into proportionally more of the income of those on lower incomes and government benefits — a regressive tax. That is why Baird suggested that families on incomes up to $100,000 should be compensated. Abbott is also talking about lower income and company tax. So are we only paying more GST but getting it back in compensation and lower income tax with no nett benefit to the government? —and the bulk of that compensation would be borne by the commonwealth government while the states get all the revenue, so that doesn’t appear to make sense in solving the commonwealth government’s fiscal problems. So if there is no, or little, nett gain, who benefits?

The states will benefit: they will get the dollars as all the GST revenue is passed on to them. Given that the total deficit in 15 years, as Mike Baird pointed out, is $45 billion across all governments, it seems they do not really need a large increase. Based on the 2015-16 estimate of GST revenue, even the 2% growth in annual revenue I suggested would provide $20 billion extra in 2030. If the GST is increased to 15% and that same 2% real growth is applied, it would actually double the 2015-16 estimate to almost $120 billion in 2030: the additional amount ($60 billion) would give the state governments $25 billion more than Baird says they need for the health part of the deficit and $15 billion more than the total deficit: but Baird included the commonwealth government in his $45 billion estimate of deficits, so does that mean the states pick up extra funding that otherwise could have met commonwealth costs? — perhaps it is a neat trick he is attempting! (Personally I think Baird is smart enough to know that.)

Look also at the benefit for the Abbott government. It is able to make significant reductions in the funding (other than the GST) it provides to the states for health and education. With expenditure thus reduced, it can offer some of the tax cuts it talks about. It leaves the commonwealth government able to argue that it didn’t increase taxes — that was due to the states — and it has kept its promise and lowered taxes.

But does that add up? I do not see how a cut in income tax and company tax is valid as a cut if GST has also been increased. That is just shifting the tax mix (and shifting it between levels of government), not reforming taxes. Does it really lead to a lower overall tax burden as Abbott promised? It may benefit the Abbott government (politically) but not necessarily anyone else. Will an increase of 5% in the GST be enough for the states? Will they abolish stamp duty and payroll tax as was promised when the GST was first introduced? That didn’t happen then and I don’t think the proposed increase will make it happen now: so, effectively when state and commonwealth taxes are put together people are likely to be no better off, possibly even worse off. And if the commonwealth government has reduced taxes to compensate for the increased GST, of which it gets nothing, what nett benefit to the budget bottom line has it achieved? It can only benefit if the tax cuts do not match its reduced expenditure on health and education — but it won’t explain that because people would realise they will lose out in the deal.

Premiers Andrews (Victoria) and Palaszczuk (Queensland) suggested, instead, an increase to the Medicare levy. It has the advantage that it is a progressive tax. In my health pieces I suggest that isn’t necessarily the way to go, but could it work?

All the money raised by the Medicare levy goes into the consolidated revenue of the commonwealth government. The commonwealth government pays out significant amounts in Medicare benefits and the current levy covers about 55% of those costs. The levy does not directly contribute to hospital funding. An increase, however, would mean that the commonwealth does not have to use as much of its other revenue to meet Medicare benefits, theoretically leaving that amount free to be added to hospital funding to the states. The main drawback with that approach is that it leaves the funding entirely in the hands of the commonwealth government which may be okay when Labor is in power but, as we are seeing, not when the Liberals are. Given what Abbott and Hockey have already done to health funding for the states, and their pursuit of less commonwealth involvement in health and education, how could they be trusted to hand the benefit of a higher Medicare levy to the states? While an increase in the levy may provide some benefit, and as a progressive tax is preferable to an increase in the GST, I certainly wouldn’t have any faith in this government to pass on the benefit.

I note, however, that the leaders’ meeting actually raised the idea of extending Medicare into public hospitals which would guarantee the funding rather than relying on commonwealth government beneficence. I doubt the commonwealth would be keen on that approach as it would have little control over the amounts paid as they would be dependent simply on the number of services performed and, with the number of medical services increasing each year, the cost could end up being higher.

As many commentators have pointed out Abbott and Hockey are consistently ignoring, even ruling out, other ways of raising revenue. Changes to negative gearing and superannuation have been ruled out even though they disproportionately benefit those on higher incomes. To use their own words, that approach fails the ‘pub test’ because it will be seen as unfair — but that no longer seems to concern them.

Tax concessions on superannuation will cost the government $170 billion over the forward estimates (to 2018-19). While the current concessions provide a benefit in encouraging retirement savings, there is certainly scope to trim that amount as Labor is proposing but which Abbott is ignoring. Also over the forward estimates, the government will spend $27 billion on the private health insurance rebate and forego just over $7 billion in tax by not taxing that benefit — a notional total of $34 billion which could otherwise go to support health funding (even allowing that there may be an increase in demand at public hospitals if the private insurance rebate is abolished). I mention these only as examples of places the government might look for revenue without raising the GST, if only it wanted to, and if only it was willing to pass on at least some of the increased revenue to the states.

There is little doubt that the debate about the GST has arisen from the Abbott government abrogating agreements the Rudd and Gillard governments had reached with the states regarding health and education funding. The obvious intention was to put pressure on the states to request an increase in the GST. The states have few other ways of getting money out of the commonwealth government, especially when it has made clear that it intends retreating from its involvement in health and education. The commonwealth control of the purse strings is, in that regard, a problem but via the GST the states, at least, have more control of the money. The Abbott government wants to redefine the federation and reduce its involvement in areas over which the states have direct responsibility but it won’t hand back the funding to allow them to take responsibility and it won’t hand back the income tax power, leaving the states with few options. It is clearly a political and ideological push by the Abbott government dressed up in fine phrases regarding federation and fiscal reform but it has little to do with either.

The GST is always going to be a political football and so here we go again ‘doin’ the GST-a-rosy-rag’.

What do you think?
In the piece above, Ken discusses the ‘opportunity’ given to the Prime Minister to ‘discuss’ taxation. Is increasing the GST a better idea than increasing the Medicare Levy or are there better options? We welcome your views below the line. Who knows, if a political staffer reads your suggestion, it may just become policy!

Next week Ken follows this up by presenting Part 1 of ‘Funding health’ which looks at the data and questions the real extent of the problem.


Winter winds, wind farms and hot air


About this time of the year the all-year-round residents of Canberra enjoy a reprieve from the hot air produced on Capital Hill. Pity is that this usually combines with winds that come from the Antarctic via the Snowy Mountains to make Canberra shiver through another winter of sub-zero mornings! The politicians usually leave town, return to their offices and try to remind their electors why they should be returned to parliament next time with a thumping majority. It seems to be a bit different this year — government front benchers are hardly to be found.

They could be busy searching for a ‘wind farm commissioner’ who has the similar beliefs to the LNP. You may have seen our esteemed treasurer complaining about the ‘visual pollution’ from wind farm towers last September. While Hockey is entitled to his opinion, did anyone ask him why open cut coal mines, telecommunications towers, or power stations are less visually obtrusive? Abbott is clearly of the same opinion but he claims they are noisy as well!

At least wind tower poles are designed to be aerodynamic — which also brings symmetry and aesthetics to the design. The approved-this-month Shenhua open cut coal mine near Gunnedah will have approval to flatten 771 hectares of endangered local ecology, most of it box gum woodland, and no doubt carve a scar in the ground some kilometres long — clearly a better look than a wind farm in the view of Abbott, Hockey and Environment Minister Hunt.

During December 2014, the government body (in Hockey’s department) that decides which groups are permitted to claim ‘charity’ status and receive tax deductible donations revoked the Waubra Foundation’s ability to process tax deductible donations. While the reasons are not made public, the Waubra Foundation exists to claim that wind farms have health implications. The results of a study of 4000 investigations into the noise from wind farms reported last February that there was no conclusive evidence to suggest that wind farms create any health concerns — despite evidence from a Dr (her speciality is not specified) Judy Ryan:
The slow corruption of science education so that people could be fooled by the oxymoron ‘scientific consensus’ is part of politically driven global agenda orchestrated by the United Nations. We should crawl out from under its thumb and treasure our nationhood and democracy.
And this sterling contribution from Alan Scott:
The time has come for Australian politicians from all warring camps to speak the truth to their electors, rather than mouthing the party lines handed down to them by their United Nations masters.
(The links to the actual submissions are contained in the SBS News article above.)

Perhaps instead of giving conspiracy theorists the time of day, Australia’s Wind Farm Commissioner, when appointed, should start an enquiry into how to harvest the hot air emanating from Capital Hill using a number of wind farm turbines and storing it in available battery technology. S/he could determine if Parliament House could be removed from the National Electricity Grid. Even better, if all the staff and politicians caught buses to work, the batteries could be installed in the car parks to retain the aesthetics of Capital Hill (as well as allowing the ACT government to reduce the subsidy to its bus operations).

Clearly the Wind Farm Commissioner is required urgently and cannot be delayed due to the winter hibernation in Canberra as this clip explains.

The cultural war against the ABC is clearly top of mind for our government. The Australian Broadcasting Corporation hasn’t comprehended it is supposed to be the government’s media mouthpiece in the same way that Pravda was to the old USSR.

It seems that the ABC is a thorn in the side of most sides of the political landscape at times — as Mark Scott (ABC Managing Director) has correctly pointed out in response to the ‘crime’ of allowing a person with a less than impeccable past to ask a live question of a government minister on the Q&A program late in June.

After the ABC followed their normal process and ran a repeat of the show in question during daylight hours a couple of days later on one of their digital channels, Abbott was very quick out of the blocks to demand that heads roll for the gross insult (do you suspect he wanted to use the word ‘insubordination’?). As Scott noted in the same speech to the Centre for Corporate Public Affairs:
"But even for the ABC, things seemed to have been taken to a new level when on Wednesday we scored four covers in one day in the News Limited tabloids, complete with photoshopped ABC flags being waved by jihadi protestors," he said.
Scott went on to question why ‘the question’ was such an outrage when the same person had featured in articles in The Australian and The Courier Mail (both News Corp products) in the past few years with no apparent controversy.

Nevertheless, the Abbott government wants (the presumably lefty pinko) metaphoric head of the ABC on a platter and announced there will be an inquiry. The ABC Board gets in first and appoints Ray Martin (former reporter, tabloid current affairs and chat show host) and Shawn Brown (former SBS managing director) to investigate if there is any bias in the Q&A program. Abbott bans ministers from appearing ‘for a while’ — probably until the inquiry is completed or the Q&A show is transferred into a different division of the ABC that has a different view of balance and equity.

Agriculture Minister Barnaby Joyce was the first ‘victim’ of the boycott on 6 July and Malcolm Turnbull also complied on 13 July — John Hewson was invited to take his place as he is not susceptible to Abbott decrees. The ALP has a history of boycotting media as well: in 2012 it boycotted the 2GB radio program hosted by Alan Jones after he made a particularly cruel and heartless attack on the then Prime Minister Julia Gillard. At the time, then Opposition Leader Abbott said the comments were offensive,
But when asked whether he would boycott Jones' show, he said he would not. It was all about the numbers.
"I am certainly not going to ignore an audience of half a million people in Sydney," Mr Abbott said.
Joe Hockey, then the shadow treasurer, agreed.
Ray Martin, in a guest hosting spot on Channel 7’s Sunrise program early in July called the Q&A ban ‘silly’ and almost immediately faced calls from two coalition senators to stand down from the inquiry:
Senator McGrath said: "I think he should step aside. His comments make him appear to be an apologist for Q&A rather than someone who will conduct an independent review."

Senator Macdonald said: "Ray Martin has respect in the community but these comments make you question whether he is the right person to conduct an independent review.”
News Corp joined in the baying for blood by publishing a piece from their well known balanced, considered and independent writer/broadcaster Andrew Bolt, as well as the front pages referred to by Mark Scott above.

Our frontbenchers would probably not be in Europe on a ‘study tour’. You also may have noticed in the news there are economic problems in Greece that may affect the European Community. The Greek public recently voted against further austerity so that the country could start to repay debt to a consortium of banks. The ‘anti-austerity’ Greek government then went into negotiations with the rest of the EU and agreed to harsher restrictions than the public rejected! Regardless of the final outcome of the ongoing story, elected Australian frontbenchers wouldn’t want to be stuck anywhere near the south of Europe while there is considerable instability. Apart from the lack of things to study in a country that apparently can’t pay its debts (remember the ‘debt and deficit’ disaster is ‘so last year’ in the view of Hockey and Abbott), who knows, they may not be able to get back to Australia in time for the resumption of hostilities on Capital Hill next week.

There is continual brouhaha regarding marriage equality? Senator Wong bluntly reminded Senator Abetz recently that the majority of Australians don’t think you need either a marriage certificate or a traditional mother and father role to successfully raise children.
The Labor senator said the debate in the Australian community about gay marriage was currently “much more charitable, much more respectful, much more tolerant and much kinder in many ways on this issue than the members of our parliament”.
Seeing the failure of that particular argument staring them in the face, the government retired Senator Abetz from the play and substituted Barnaby Joyce. Joyce’s argument held even less credibility:
Some parts of south-east Asia could view Australia embracing same-sex marriage as “decadence”.
While news may take a while to reach the north west of NSW, which Joyce now calls home, New Zealand, Canada, and the US, amongst other countries, have marriage equality — in some cases for periods of up to a decade — and South East Asian countries still trade and deal with these ‘decadent’ countries on a daily basis. Regardless, it does take time and resources for government frontbenchers to make such informed comment to the debate that the majority of Australians seem to regard with a ‘meh’.

Are the frontbenchers sitting on the sidelines waiting to make a valuable contribution towards justification of the new Border Force Act? The Act apparently contains ‘secrecy’ laws around the possibly legal offshore detention policy for asylum seekers — a concept supported to an extent by both sides of politics. Apparently if anyone in Australia reports (one assumes unfavourably) on the conditions or treatment of asylum seekers held by the Australian government in Nauru or Papua New Guinea, they can be imprisoned. The government, through the newly named Australian Border Force Agency, disputes this. George Newhouse, writing in The Guardian (based in the UK), however, answers the government’s claims here.

Bill Shorten (Opposition Leader) faced the Royal Commission into Trade Union Governance and Corruption during July. While Shorten didn’t come out unscathed — there is the matter of the $75,000 donation to his election campaign eight years ago that wasn’t declared until early in July 2015 — Katherine Murphy writing for The Guardian reported:
This is how politics works, Shorten told the commission with a resolute tone and nothing approximating a flinch or a flicker of self-doubt. He’s absolutely right. This is how politics works. This conduct, and other conduct like it, is widespread and endemic. If you lack the self-belief to hustle, if you lack the network to fundraise, and if you lack the stomach for inhabiting a universe crafted in a material called grey area and powered on compromise, you really aren’t party or government material.
You could suggest that the strategy to discredit Shorten worked ... until someone looked at Speaker Bronwyn Bishop’s travelling allowance claims.

Bishop the elder should have known better than to charter a chopper at taxpayer expense for an 80km flight above the freeway from Melbourne to Geelong to attend a party fundraiser. The helicopter memes that have appeared everywhere from Facebook to News Corp papers in the last week or so are clever but starting to get a bit obvious.

Now the discussion is turning to who else has their ‘snouts in the trough’. A prime candidate seems to be Treasurer ‘it doesn’t pass the sniff test’ Hockey who is accused of paying rent on a Canberra house where the landlord is his wife and making a number of trips to Cairns while shadow treasurer with time allowed to inspect his (now on the market) property near Malanda on the Atherton Tableland, west of Cairns. Here’s a hint to Hockey: when Andrew Bolt is ‘oh dearing’ a conservative MP such as yourself, you have a problem.

The Premiers and Chief Ministers joined Abbott for a COAG retreat to reinforce our commitment to act against the threats to our community from violent extremists, family violence and the drug ice. New South Wales’ Premier Baird (who doesn’t have to face an election for nearly four years) opened a discussion on increasing the GST rate to 15% — strangely enough you can probably guess the headlines after the press conference which was also notable for the display of nine flags to signify greater importance than other announcements with less flags in the background!

The ALP held its National Conference in Melbourne last weekend. Shorten announced before the conference that the ALP would aim for a mandated 50% renewable energy use by 2030 as well as supporting an asylum seeker boat turn back policy as if they were done deals. If the outcomes are known before the conference starts, why the display of discussion and debate unless the party wants to further the impression that they do not agree on everything. Their media friends also get the chance to use headlines such as ‘Bill Shorten wins freedom to use boat turnbacks, but leadership split on issue’ without having to chase ALP leaders all over Australia for comment.

Agriculture Minister Barnaby Joyce did come out of hiding to disagree with the approval of the Shenhua mine (which is inconveniently in his electorate). Abbott claimed that Joyce was speaking as the local member — Joyce disagreed. Maybe Joyce doesn’t really see the difference between the aesthetics of wind farm towers so hated by Abbott or Hockey and open cut mining scars in the ground.

If you’ve got this far, you may wonder why anyone would be concerned what our elected officials do while there are long recesses in Canberra. There is a really simple answer. Towards the end of June, I sent an email to a ‘frontbench’ senator in my state as well as my local ALP MP. At the time of writing this I don’t have a reply from the senator, which I believe I deserve, as effectively I am one of the two million or thereabouts electors in Queensland who employ this senator. The MP has rung me to discuss the email I sent.

Frontbench senators could not be rude enough to ignore an elector’s genuine question, could they? Is the senator so caught up in waiting for instruction from LNP HQ on when he can leave the imposed seclusion to fire the next salvo in the political war, he hasn’t had the time to develop a factual and honest answer to a simple question regarding funding for an enquiry into the ABC? Although he could also just be dusting his bookshelves.

What do you think?
As 2353 suggests there are many issues to talk about but few heads appearing above the parapets, and yet they are so busy they don’t have time to answer his email. Well, next week they will be back in Canberra and will have to show their faces and be accountable.

Next week Ken takes a look at the latest craze, ‘Doin’ the GST-a-rosy-rag’ in which politicians seem to take turns to place changes to the GST back on the agenda.


How did we get a multi-party Westminster system? Part 2

[The opening of Australia’s first parliament by Tom Roberts]

Last week I gave a brief outline of how the Westminster parliamentary system evolved in England. Then came Australia which largely adopted the British parliamentary system and recognised the British monarch as head of state.

I won’t bother with the colonial era, although it doubtless had some influence, but will focus on Australia’s federation in 1901 and the foundation of our system, The Constitution, as passed by the British parliament and assented to by Queen Victoria. It drew on both the British and American systems: the Senate in particular is based on the US Senate. It seemed to be a given, following the British model, that we should have two houses of parliament but, without ‘lords’ to make an upper house, the American model was adopted to create a ‘states’ house. In reality, it was not essential to have an upper house — New Zealand is governed without one. The difference was that we were federating six separate colonies whereas New Zealand was a single colony. (Our constitution allows for New Zealand to become a state of Australia.) The smaller states supported the American concept of an upper house in which they could not be outvoted by the more populous states of NSW and Victoria. That is also reflected in the provisions for the passing of referenda to alter the constitution: that they must be supported not only by an overall majority of votes, but by a majority of votes in a majority of states — which meant the constitution could not, and cannot, be changed just by the sheer weight of numbers in NSW and Victoria.

Despite the fact that the Westminster system fuses the legislature and the executive, by selecting the ministers from the legislature, our constitution does set out the three arms of government: the parliament (legislature), the executive and the judiciary. It is important that they appear in that order: you may think that the executive should come first, being at the top of the tree, but that obviously wasn’t they way the framers of our constitution saw it — parliament is supreme, not the executive. On the other hand, the part referring to the Senate does precede that of the House of Representatives, reflecting the traditional style that the upper house is more important. It may no longer be so in practice but it does retain that final right of turning a Bill into an Act before it is presented for royal assent. And the monarch, or the Governor-General, still appears in the Senate, not the House of Representatives, when he/she attends parliament (just as the Queen attends the Lords, not the Commons, in the UK).

I won’t dwell on the chapter regarding the judiciary as that basically establishes the High Court to adjudicate on the constitution (and a few other matters), and the capacity to establish other federal courts. Like the parliament, many of the practices we attach to the judicial system are also a result of hundreds of years of evolution. Thus, although it is not spelled out in the constitution, we expect that only a court can impose punishment because only a court can rule whether or not a law has actually been breached. The constitution, however, does specify trial by jury when a commonwealth law is broken — and the case can be tried in a state court in the state in which the offence occurred.

Legally, the parliament comprises the monarch (or the Governor-General as the monarch’s appointed representative), the House of Representatives and the Senate and it is given the legislative power of the commonwealth.

The Governor-General has the power to:
… appoint such times for holding the sessions of the Parliament as he thinks fit, and may, also from time to time, by Proclamation or otherwise, prorogue the Parliament, and may in like manner dissolve the House of Representatives.
It provides that parliament must meet at least once per year: there cannot be a twelve month gap between parliamentary sessions (the 1689 requirement for ‘frequent’ meetings of parliament). Many of the provisions are the details of numbers (but also allowing for later changes by the parliament), election of the Speaker, the conduct of elections and so on but it also spells out the functions for which the commonwealth parliament is responsible and these provide the basis on which the High Court decides whether or not commonwealth legislation is valid.

In our modern economy the commonwealth’s powers have actually increased as a number of its powers are only operative when an issue goes beyond a single state’s borders: for example, banking, insurance, arbitration of industrial disputes, commerce. Now it is more often normal for those matters to operate beyond the bounds of any single state. The commonwealth can also take on or share additional powers with the agreement of the states and that has happened in regard to, for example, income tax and universities.

Our constitution sets in law that proposed laws for appropriations or taxes cannot originate in the Senate — matching Henry IV’s grant of such power to the Commons in 1407. We do not have a Standing Order 66 limiting money matters to motions of a minister (at least not that I could find) but we do have Section 56 of the constitution that states that votes on appropriation Bills can only be taken after the purpose of the appropriation has been recommended in a message from the Governor-General.

Importantly the constitution establishes the right of the people to elect the members of parliament: the phrase ‘directly chosen by the people’ is used in regard to both the Senate and House of Representatives. That gave rise to the High Court’s decision that there is an implied right of freedom of speech, at least regarding political communication, because it follows that people should make an informed vote and therefore require free expression of political ideas to inform them.

Given the people’s right to elect the members of parliament, the constitution sets out that Senators will be elected by each state voting as one electorate ‘until the Parliament otherwise provides’. So although the parliament has the power to change how the Senate is elected (perhaps by creating ‘divisions’ within a state), we have kept that system of a single electorate and used proportional representation since 1948. The States do retain many powers relating to the Senate including the right to issue the writs for Senate elections and to select replacements in the event of vacancies.

While the constitution nominated the number of members for each state in the House of Representatives for the first election, it provided that in future the number of members in each state would be determined by:

  • dividing the total population of the six states of the commonwealth by twice the number of Senators to obtain a ‘quota’ (the territories are not included in the population count, nor are their Senators included, as they did not exist at the time) and note that this is the ‘total population’ not just the number of voters
  • then dividing the population of each state by the ‘quota’ and rounding to the nearest whole number — provided that none of the original states can have fewer than five members.
That is still the way the Australian Electoral Commission calculates the number of seats to which each state is entitled and is now also applied to the NT and ACT although they are not counted in determining the ‘quota’. The proviso regarding the original states allows Tasmania to retain five seats even though by the ‘quota’ method it is currently entitled to three.

It was allowed that the members of the House of Representatives could also be elected in that first election by the state voting as one electorate if a state had not yet created ‘divisions’: the commonwealth parliament, however, had the power to determine how this would be done in the future. We basically adopted a modern system of ‘boroughs’, or ‘divisions’, or what we commonly call ‘electorates’ (the Australian Electoral Commission still calls them ‘divisions’). Although only the number of seats is specified by the constitution, the Electoral Act requires that within each State each electorate should contain approximately the same number of voters.

The most interesting part of the constitution concerns the executive: it is clearly a constitutional monarchy and legally sets that out, relying on the the conventions inherited from England to underpin it.
The Executive power of the Commonwealth is vested in the Queen and is exercisable by the Governor-General as the Queen’s representative, and extends to the execution and maintenance of this Constitution, and the laws of the Commonwealth.
There it is — full stop! The monarch, through his or her representative, is the executive.

Now the finer detail of how that works.
There shall be a Federal Executive Council to advise the Governor-General in the government of the Commonwealth and the members of the Council shall be chosen and summoned by the Governor-General and sworn as Executive Councillors, and shall hold office during his pleasure.
That follows the ancient structure of a monarch and a group of advisers and is like an Australian version of the Privy Council: legally, there appears nothing to stop the Governor-General acting on the advice of such a council irrespective of the parliament. It is mainly the conventions (or England’s unwritten constitutional rules) that give it a modern appearance.

Then come ministers:
The Governor-General may appoint officers to administer such departments of State of the Commonwealth as the Governor-General in Council may establish.
(Although the word ‘officers’ is used, it appears under the heading ‘Ministers’ and, just so there is no confusion, I point out that there is a separate section on the appointment of civil servants to those departments of State.)

And there is a provision that ministers must be members of the parliament which, unlike the UK, actually makes that former convention law.

There is no mention of a cabinet or a prime minister, nor is it law that the Federal Executive Council must be made up of ministers, let alone members of parliament. That is where Westminster conventions come in and the history that gave rise to them. In Australia the Federal Executive Council actually comprises all ministers past and present — that allows former ministers to retain the title ‘The Honourable’ as that title relates not to their role as a minister but as a member of the Federal Executive Council. It appears that no one has ever been removed from the Federal Executive Council, although the Governor-General has that power. As in England since the 1700s, however, it is the current cabinet, as a ‘committee’ of the Federal Executive Council, that exercises the role as advisers to the Governor-General.

What helps make the system work is the provision that:
The provisions of this Constitution referring to the Governor-General in Council shall be construed as referring to the Governor-General acting with the advice of the Federal Executive Council. [emphasis added]
That effectively prevents the Governor-General acting alone except for certain residual powers left over from the days of the governors of the colonies. Apparently there was discussion during the framing of the constitution about codifying those ‘reserve’ powers but it was decided that it was too difficult and best left flexible (and the British government had also advised against it which meant the constitution may not have passed the British parliament if we had persisted).

When the constitution and the Westminster conventions are put together, the Governor-General is, in most matters, effectively tied to following the advice of ‘the government of the day’ which brings us back to ‘cabinet government’ and places effective executive power with the cabinet. But that is not the law, only convention. It would theoretically be possible, and seemingly legal, to appoint non-parliamentarians to the Federal Executive Council but that would require that they are also able to have the executive decisions legislated by parliament — hence we are back to the need, first identified over 300 years ago, to have members of parliament, particularly those who can command a majority in (or have the confidence of) the parliament, as advisers (members of the council). For even longer, those advisers have been ministers responsible for the different aspects of government — the departments of State which under our constitution must be created by the Governor-General with the advice of the Federal Executive Council. Our constitution states that all ministers must be members of parliament and all those members of parliament must be ‘directly chosen by the people’. In those ways the system links the council, cabinet, ministers, the elected members and the voters by a combination of law and convention:

  • the Governor-General acts with the advice of the Federal Executive Council — law
  • the role of the Federal Executive Council is fulfilled by the cabinet — convention
  • the cabinet comprises ministers — convention
  • ministers are members of parliament — law
  • members of parliament are directly chosen by the people — law
By the time Australia federated, we already had parties in place but not as we know them today. As we were just taking the first step to become a nation, the parties generally were organised within each state. At the first federal election in 1901 the two major parties were the ‘free-traders’ (officially the Australian Free Trade and Liberal Association) centred in New South Wales and the Protectionist Party centred in Victoria. Although not nationally organised, most candidates across the country did declare themselves as either free-traders or protectionists. And each state, other than Tasmania, had its own labour party. At that first election, 31 protectionists were elected to the House of Representatives, 28 free traders, 14 state labour members, and two independents who later joined the labour party (King O’Malley had been elected in Tasmania as ‘independent labour’ and the other was, in any case, a former member of state labour). A national parliamentary labour party (Labour — it became Labor in 1912) was formed when those elected state labour members first met at the parliament in Melbourne and Chris Watson was elected as the first national leader. The first government, headed by Barton, was a protectionist minority government with Labour support and had to meet a number of Labour demands.

At the next election in 1903, 26 protectionists, 25 free traders and 23 Labour members were elected, which led in 1904 to Labour splitting from the Deakin government and forming the first Labour government. It was short-lived (only four months) but helped lead to the realignment of Australian politics.

Tariffs were the major source of revenue for the early commonwealth governments and even some free-traders supported a limited range of tariffs for that reason. With Labour and protectionists supporting tariffs, by 1906 the free-traders had basically lost the argument and renamed themselves The Anti-socialist Party.

In 1909, Andrew Fisher was leading a Labour government and pursuing a labour program of legislation:
Far more provocative was the Labor proposal for a land tax to break up large estates and promote closer settlement, and the proposal to strengthen the Conciliation and Arbitration Act 1904. Perhaps the most contentious Labor project was the planned ‘new protection’ referendum to amend the Constitution and give the Commonwealth government the power to tie labour protection to industry protection.

This Labor program was precisely the bonding agent needed to bring all three non-Labor groups in federal parliament — Deakin’s Liberals [formerly protectionists], the Anti–Socialists … and John Forrest’s ‘Corner’ [a WA party] — into coalition.
Those groups merged to form the “Commonwealth Liberal Party’. And that is how it has been for most of the time since, a basic division between Labor and anti-Labor forces.

Rather than finishing this with the traditional TPS ‘What do you think?’, it seems more appropriate, as an information piece, to ask:
Do you have any questions?
We hope you enjoyed Ken’s two-part explanation of the complicated 800 year story that led to the parliamentary system we have (he does apologise for it being so long but suggests that it amounts to only about six words per year!). As Ken invited, we also urge you to express your thoughts on our system and ask questions. Based on the research he undertook, Ken will do his best to answer your questions.

Next week we resume normal transmission with a piece to get us in the mood for the resumption of parliament: ‘Winter winds, wind farms and hot air’ by 2353.


How did we get a multi-party Westminster system? Part 1

[Charles I in parliament: ‘Attempted arrest of the five members’ by Charles West Cope]

Earlier this year we had a couple of pieces that raised issues about the parliamentary and party system in Australia (‘President Abbott’ and ‘Instant Experts’) and in June we had the 800th anniversary of Magna Carta. Our system is known as a Westminster parliamentary system and incorporates a multi-party system (or sometimes a ‘dominant party’ system, as when the Coalition governed from 1949 to 1972). Some comments on those earlier articles raised questions about how effective our system really is and mentioned some of the quirks that seem contained in it. I thought that deserved some research as to how the system arose and how our constitution expresses it.

Of course the basis of our system is the English parliamentary system which operates in what is now a constitutional monarchy. England does not have a written constitution: instead, it has taken hundreds of years to develop some written and many unwritten rules (conventions) that determine how Britain is governed.
Parliament developed in the 13th and 14th centuries largely through the desire of Edward I and his successors to wage war. This needed more money than they had from their own wealth [personal royal estates] and they had to levy "extraordinary" taxes, with Parliament's assent, to raise the funds. But each time the King requested assent to a tax from Parliament, it could ask a favour back … and often used the King's desperation for money to get what it wanted.
While the ‘lords spiritual’ (abbots and bishops) and the ‘lords temporal’ (originally earls and barons and later including dukes, marquesses and viscounts) had been called together before to grant taxes to the king, during the reign of Edward I (1272 –1309) it became more common to also call in the ‘knights of the shire’ (two from each county) and ‘burgesses’ (two from each city and town, or ‘boroughs’ as they were known). Those knights and burgesses were usually ‘elected’ but both the franchise and the election procedure varied from place to place. From 1327, under Edward III, that became the norm and from 1341 the Commons (or representatives of the ‘communes’) met separately from the Lords — although most government business still belonged to the Lords. The Commons exercised its power in 1376 when it impeached some of the monarch’s ‘corrupt’ ministers and did so again in 1388 in what became known as ‘The Merciless Parliament’. The Commons complained about being ignored in the king’s discussions with the Lords about taxes and in 1407 Henry IV formally affirmed the right of the Commons to initiate all grants of money — a power jealously guarded ever since.

Petitions to the monarch and the parliament was the common way to present grievances and they would be remedied by a statute (an Act) of the parliament.
… petitioners began to submit their grievances first to the Commons and, based on these petitions, the Commons wrote draft statutes, known as Bills, to be presented to the Upper House.

In 1414, the Commons successfully insisted to Henry V that the King and Lords should not change the wording of any of the Bills submitted by the Commons without its agreement and that no Bill should become … a statute without their assent.
So by the early 1400s the presence of two houses in parliament, the Commons and the Lords, was firmly established and the Commons had gained clear and important roles.

The modern parliamentary system really starts with the Bill of Rights in 1689 which was presented to William of Orange and Queen Mary when they jointly assumed the throne. After listing the crimes of the previous king, James II, the Bill stated, among other matters:
That the pretended power of suspending the laws or the execution of laws by regal authority without the consent of Parliament is illegal.

That levying money for or to the use of the Crown by pretence of prerogative, without grant of Parliament, for longer time, or in other manner than the same is or shall be granted is illegal.

That the raising or keeping of a standing army within the kingdom in a time of peace, unless it shall be with the consent of the Parliament, is against the law.

That election of members of Parliament ought to be free.

That the freedom of speech and debates or proceedings in Parliament ought not to be impeached or questioned in any court or place out of Parliament.

And that for the redress of all grievances, and for the amending, strengthening and preserving of the laws, Parliaments ought to meet frequently.
(A brief aside here: in England, it was tradition that the monarch was not above ‘the law of the land’ and that had been set in writing in Magna Carta in 1215. So it was possible for an English parliament to assert that a monarch should not act illegally — something that could not be done in some other kingdoms.)

I think you will recognise the basis of our current parliamentary system:
  • laws are made by parliament
  • money can only be raised by, and spent with the consent of parliament
  • free elections
  • freedom of debate (the monarch cannot interfere and nowadays rules of slander and defamation do not apply, which is why we sometimes see politicians challenged to repeat a statement outside the parliament)
  • frequent meetings of parliament
There were other matters relating to ‘cruel and unusual punishments’, no fines or forfeitures before conviction, and the right of Protestants to keep arms, which were also to influence the American Bill of Rights a hundred years later.

About 60 years later (in 1748), the concept of the ‘separation of powers’ was spelled out by Baron de Montesquieu when he explained the difference between the executive, the legislature and the judiciary: his ideas drew on ancient Rome but also the system that was emerging in England. In those days it was highly relevant because the monarch (advised by his ministers, who were selected and appointed by the monarch) was still the ‘executive’. We need to keep that in mind because as the Westminster system evolved it actually fused, in practice if not in law, the legislature and the executive.

It was also in the 1600s that nascent political parties emerged although not yet formally organised as parties — more like-minded people grouping together, or factions. In England, they were the Whigs and the Tories and the grouping started over the Exclusion Bill in 1678: there was one parliamentary group (the Whigs) trying to stop James succeeding to the throne after his brother Charles II and another (the Tories) wishing to continue the Stuart line of succession. By 1689, however, they actually agreed that a limited constitutional monarchy was preferable to the absolutism of ‘divine right’ that had been displayed by James II — although some Tories did support later attempts by the Stuarts to reclaim the throne. Over time, the Whigs evolved into the English Liberal party and the Tories into the Conservatives (still commonly referred to as the ‘Tories’).

The rise of parliament also gave rise to the role of a prime minister because monarchs realised that to achieve their aims they would need someone who could command a majority in (or had the ‘confidence’ of) the parliament — but that was to take a little longer to be formalised.

William III (William of Orange) had tried selecting ministries comprising people from different factions (both Whigs and Tories) but soon realised he was better off appointing a unified group. Thus by 1710 Queen Anne could dismiss a Whig ministry and appoint a Tory ministry.

The ministers were still selected by the monarch (most often from the Lords but could include members of the royal household or royal family) but found that to convince parliament of the financial requirements, the power for which had rested with the Commons since 1407, they needed to attend the Commons frequently and were given a reserved seat at the front which became known as the ‘Treasury Bench’ as they were led by the Lord Treasurer (a title the British prime minister still theoretically holds).

A development in those early years (in 1713) was what in Britain was ‘Standing Order 66’ which states that the Commons will only vote regarding money on the motion of a Minister of the Crown. That was intended to prevent ‘ill-conceived’ money bills being introduced by any member of the parliament and continues to this day (now Standing Order 48 in the British parliament).

Robert Walpole is often recognised as the first prime minister in England (1721 – 1742) but he was still selected by the monarch — although ‘elected’ to parliament from a ‘family parliamentary seat’. He was able to manage the parliament in a way that set the example for the future. At first, the term ‘prime minister’ was an insult implying that the person was placing himself above the monarch as ‘head of government’ — even Walpole denied he was a prime minister. It was Walpole, however, who began conducting most of the business of government in the Commons rather than the House of Lords.

Cabinet government came to the fore during the reigns of George I, II and III largely due to historical accident. (The ‘cabinet’ was an informal name given to the group of ministers that met with and advised the monarch — technically it was a committee of the Privy Council.) George I Duke of Hanover was German, could speak little English and took little interest in English political affairs:
After 1717, George rarely attended Cabinet meetings. This allowed the Cabinet to act collectively and formulate policies, which, provided they were backed by a majority in the Commons, the king was usually powerless to resist.
George II, although initially active in politics (he was the last British monarch to lead his forces in battle), largely withdrew in the last ten years of his reign (1750‒60) and Pitt the Elder effectively ran the government. George III tried to govern as a monarch, being his own ‘prime minister’, and appointing and sacking ministers but then suffered mental debility for the last ten years of his reign (1810‒20) which again left effective governance in the hands of the cabinet. The American War of Independence (during George III’s reign) also contributed. When England lost that war there was a parliamentary vote of no confidence in the then ministry which led to the Marquess of Rockingham reasserting the prime minister’s control over cabinet:
Rockingham assumed the Premiership “on the distinct understanding that measures were to be changed as well as men; and that the measures for which the new ministry required the royal assent were the measures which they, while in opposition, had advocated.” He and his Cabinet were united in their policies and would stand or fall together; they also refused to accept anyone in the Cabinet who did not agree. King George threatened to abdicate but in the end reluctantly agreed out of necessity: he had to have a government.
Although Rockingham was not prime minister for very long, his stance set a basic principle for cabinet government — ‘cabinet solidarity’, which included the prime minister having the cabinet he wanted, not one selected by the monarch. And also the concept that a ‘party’ was entitled to bring to government the ideas it had pursued while in opposition.

Opposition had been a dangerous business during the 1600s as it was seen as traitorous, as opposing the monarch and his government. That idea had waned during the 1700s and in 1826 the term ‘His Majesty’s Opposition’ was first used. Although originally used partly in jest, it became part of the system, recognising a two-party system in which it was constitutionally possible to oppose the government without being a traitor: reflecting this, in the UK the phrase ‘Her Majesty’s Loyal Opposition’ is now common.

Although it seems to have been the practice for some time, the convention that ministers should be drawn only from the members of parliament, including the Commons, and not just be selected by the monarch became entrenched from the broadening of the electoral franchise early in the 1800s and particularly the Reform Act of 1832. That Act eliminated the ‘rotten boroughs’ which had allowed people to buy their seat in parliament and monarchs to place ‘their’ people in such seats. Among the problems with ‘boroughs’ was that the right to return members to parliament was traditionally granted by the monarch, so by 1832 their distribution had not kept up with the distribution of the English population — new industrial centres like Manchester and Birmingham had no parliamentary representation. With representation spread more evenly across the country after the Reform Act, public opinion, particularly as expressed at the polls, mattered.
It is significant that Lord Melbourne suggested that it would be impossible to carry on government without the rotten boroughs which the Act of 1832 swept away, so little could he realise the essential character of the new system which was being created. It is significant also that he never fully appreciated the new position; when he resigned in 1841 after an unsuccessful dissolution, regarded by him and the Queen as an appeal by the latter to the people to return her ministry to authority, he advised the Queen to state that she had only parted with her ministers in deference to the opinion of Parliament, though she still had confidence in them. Naturally she did not realise any more than her retiring Premier that in the nature of things the verdict of the electors deprived her of the right to feel confidence in ministers of whom the voters had disapproved, that it was no longer a question of personal integrity or sagacity in a minister, but of his right to represent the will of the people, as expressed by the suffrages of the electorate. [emphasis added]
So after six hundred years of evolution, by the 1840s the essential elements of the Westminster parliamentary system were in place, including a parliamentary party structure. Later broadening of the franchise, during the later 1800s and early 1900s, reinforced those changes and also led to more organised political parties as it became necessary to engage more and more of the population for elections.

Then came Australia …

Any thoughts or questions so far?
Come back next Sunday as Ken continues the story of how we ended up with the system we have and focuses on the federation of Australia and the form of government we inherited from England which relies not just on our Constitution but many of the conventions described above.


Where will we be in 50 years?


In the next few months, most Australians will be considering their financial affairs and the preparation of their annual tax return. It is usually a time for some questioning around how you did manage to spend all that money in the past year and what changes you can make to become thriftier in the upcoming year.

Most of us get so involved in the day to day activities that govern our lives, we have little inclination or time to think about the long term. It is also a truism that those who forget their history are bound to repeat it. Those who look at the long term can see patterns and trends that escape us mere mortals. Those long term thinkers — usually called Futurists — can give a valuable insight into our future based upon reflection and observation of what has occurred in the past. The results can be fascinating and worth thinking about.

Taking the reflection theme to heart, let’s look at where Australia has come from and where we as a society are heading. So go and prepare a beverage of your choice, click on this link for one of the better ‘80s Australian pop songs and read on while we discuss ‘where will we be in 50 years’.

Apart from the convenient segue to a song, there is a good practical reason to choose to look 50 years into the future. There seems to be a 50 year (more or less) cycle in Australian economic and immigration history going back to the days when Australia was comprised of six (sometimes friendly) colonies. It is a cycle of boom and bust — boom when we are using the land to produce riches beyond compare and bust when the rest of the world has moved on from our particular riches, and Australia has not adapted. There is a moral overtone here as well: it appears that we as a society welcome new immigrants during the ‘lean’ years, and throw up barriers to their entry when we are booming.

In the 1880s, the city with the highest per capita income in the world was Melbourne. While the streets were not literally paved with gold, they might as well have been. Next time you are in Melbourne have a look at the expansive and quality buildings built towards the end of the 19th century (which fortunately still exist), as well as the good quality housing stock in the inner suburbs originally from the same era. The impressive thing is that the ‘working class’ could afford to live in an expensive place.

The wealth of Melbourne was based on the mining of gold in the (then) colony of Victoria that commenced in the 1850s. Ballarat and Bendigo were the centres of the gold industry and also have a rich history of 19th century buildings to admire. Gold was the method of exchange in the day and extracting it from the ground increased the wealth of everybody in the colony. In 1852, it was estimated that mining comprised around 35% of the Victorian colony GDP and wages in Victoria rose by 250% between 1850 and 1853. Not that Victoria was alone. Gympie, in Queensland’s south east, boomed after the discovery of gold in the late 1850s and with some justification claims to be the ‘town that saved Queensland’ during the early years of the new colony — as Queensland was technically bankrupt.

By the mid 1860s, the initial boom was over. Immigrants to the gold fields were not only from the same or other colonies, there was a significant immigration from overseas. While the English, Scottish and Americans that immigrated to the gold fields could blend into the cities and towns to find work, the Asians that immigrated (predominantly Chinese) could not and, once the money stopped flowing, their different appearance, customs and language made it easy for those that were suffering unemployment to single out and victimise.

By the early 1890s, the six colonies that were to form the Commonwealth of Australia within a decade were feeling the effects of a long drought that caused a recession and industrial disruption (as well as the formation of the Australian Labour Party at Barcaldine in 1891 during an ongoing shearers’ strike). The South Australian premier at the time said:
I regard as second only to the necessity of protecting our shores against actual invasion, the necessity of protecting Australia against the influx of aliens, Asiatics, criminals, paupers, and other undesirable classes
By the 1890s, the gold rushes were back, due in some part to the availability of capital (from the UK) that could not be used elsewhere due to an ongoing economic conditions in Europe and the Americas. As a result, Charters Towers in northern Queensland was a town of over 20,000 at the turn of the century and had its own stock exchange. It was also considered necessary and economically viable to build a water pipeline from near Perth to Kalgoorlie in the last few years of the 1800s so that the extraction of minerals — again primarily gold — could continue apace. While the Charters Towers Stock Exchange is a shopping arcade today, the water pipeline in WA is still in daily use.

In 1901, the Australian colonies federated and became Australia. In the then population, 98% of Australians were of British heritage (70% born in Australia) and one of the first pieces of legislation through the Australian Parliament was the Immigration Restriction Act — later known as the White Australia Policy.

Even though 98% of Australians had some British ancestry, it didn’t stop the Australian government interning those with ‘enemy’ bloodlines during World War 1. As various trade agreements and imports from Germany and Austria-Hungary were seen as ‘unpatriotic’ and the Australian economy benefitted from product substitution, higher output and the associated profiteering, Australia encouraged immigration (from the ‘winning side’) post World War 1 and like most of the world was caught up in the Great Depression at the end of the 1920s. People again began to feel threatened by immigration and joined local versions of the New Guard (remember Francis de Groot who ‘unofficially’ opened the Sydney Harbour Bridge) and the Communist Party. While both groups were ideological chalk and cheese, they both wanted ‘strong’ government who would keep Australia for Australians.

The economic pattern continues through World War 2, the 1950s and the Snowy Mountains Scheme, the 1960s’ ‘Credit Squeeze’; the largesse of the Whitlam years and subsequent contraction under Fraser and so on to the current day where Australia has not had a recession for over 24 years.

The immigration pattern continued from the propaganda fuelled racism in World War 2, through the ‘new Australians’ that largely supplied the labour for the Snowy Mountains scheme as Australia was rebuilding after the war — until there was a return to restrictions in the 1960s when we were booming after overcoming the ‘credit squeeze’ early in the 1960s. Malcolm Fraser to his eternal credit (with support from politicians in general) assisted a large number of South East Asian asylum seekers to come to Australia in the late 1970s (we had contributed to bombing their country almost to oblivion after all), when we were still suffering the after-effects of the oil crises and stagflation. Over the past 10 years, as our prosperity increased, the rhetoric from politicians to restrict immigration increased again to the ludicrous situation where the government of this country apparently implicated all of us as people smugglers by paying cash to those that profit from the miserable conditions endured by asylum seekers coming to Australia by fishing boat.

So we as Australians have a choice. Are we going to perpetuate a pattern of history that is, if nothing else, racist and economically irrational or are we going to break the mould? There does seem to be a correlation between economic activity and immigration. At the time of writing, the official cash rate is 2%; the government is allowing immediate tax write offs of $20,000 to kick some life into the economy; and, while the US seems to be coming out of a prolonged economic downturn, there are some real and structural economic problems in the Eurozone.

Australia seems to have an economic choice. As a nation we can continue to believe that our current export markets will again expand which is highly unlikely —

  • China is buying less coal than previously and plans to decrease consumption of fossil fuels by at least 20% between now and 2030.
  • India plans to reduce significantly (or even eliminate) the importation of thermal coal within two to three years.
  • NASDAQ reports falling demand and prices for iron ore exports

  • Or Australia could look at the new economy — such as renewable energy or even computer games:

  • The Queensland Government and US Navy are discussing using biofuel grown and produced in Queensland.
  • Australian computer games producers are asking for government assistance to expand

  • Instead our current prime minister is more intent on appointing a wind farm commissioner because they look ugly. In the words of President Obama:
    But we also inherit the beauty and the joy and goodness of our forebears. And we’re on this planet a pretty short time, so that we cannot remake the world entirely during this little stretch that we have. … But I think our decisions matter. And I think America was very lucky that Abraham Lincoln was President when he was President. If he hadn’t been, the course of history would be very different. But I also think that, despite being the greatest President, in my mind, in our history, it took another hundred and fifty years before African-Americans had anything approaching formal equality, much less real equality. I think that doesn’t diminish Lincoln’s achievements, but it acknowledges that, at the end of the day, we’re part of a long-running story. We just try to get our paragraph right.
    It seems that the first sign of a coming decline in our lifestyle is the imposition of barriers against 'unsuitable' immigrants, be they boat people now or Chinese in the 1860s.

    This government (with support from the ALP) has been attempting to remove the legal rights of people to claim refuge in Australia. The previous ALP government wasn't much better.

    At the same time, it seems that our major exports, minerals and other primary produce are finding greater difficulty in attracting and retaining overseas markets. The government’s tax concessions to small business as well as official interest rates indicate that Australia's economic conditions are flat at best. There is even an iron ore price war occurring in Western Australia between BHP and Rio Tinto to move product. All of this would suggest that economic times will get worse rather than better in the next few years.

    When it comes time for others to judge our paragraph in Australia’s history, wouldn’t it be nice for those in 50 years time to recognise our generation as the one that observed there was a pattern and chose the sustainable alternative of assisting people in fear of their lives, value adding exports of high technology devices and supporting those in our society that need help?

    What do you think?
    2353 suggests that we actually first act to identify and restrict ‘unsuitable’ migrants while times are still good. Is that greed? Do we just not want to share our success? And does that blind us to changes? Do we not see our future economic opportunities because we are so caught up in our success that we inevitably slide down into the ‘lean’ years again? — and realise we need migrants to help rebuild. A cycle that 2353 hopes we can escape — once we recognise it.

    For the next two weeks we will be presenting something a little different — an historical approach rather than opinion. We are taking advantage of the parliamentary winter recess to present a two-part piece by Ken on “How did we get a multi-party Westminster system?” In the first week Ken looks at how parliament developed in England and the historical creation of some written but many unwritten rules about how it operates. In week two, he will look at the Australian Constitution and how that reflects the English system by a mixture of law and the accepted unwritten rules (conventions).


    A failure of the Left


    This is a piece about politics but not the politics we normally discuss on TPS. It is a tale of two radical youth: one from the late1960s (me) and one from the 2010s (Jake Bilardi).

    You probably know the story of Jake Bilardi, the young Australian who early in March became a suicide bomber for Islamic State (IS) in Iraq. For the media and the politicians, it raised questions about the radicalisation of youth, particularly of Middle Eastern background, and what could be done to counter it: why are ‘our’ youth running off to Syria and Iraq to join IS?

    For me it raised a different question: where now is the radical Left?

    I have read Jake’s alleged blog. My own reading of it is that much of it is probably his own work but there are parts which I think may have been ‘massaged’ by IS.

    He appears a very intelligent young man. He writes that he was a 13 year old atheist in a working-class area of Melbourne when his interest in international politics was first aroused by his elder brother. He had hopes of becoming a political journalist, particularly in foreign trouble spots, and so did his own research into the world’s conflicts seeking to understand the reasons behind them. On Afghanistan, he wrote:
    I saw the Taliban as simply a group of proud men seeking to protect their land from an invading force, while I did not necessarily agree with their ideology, their actions were in my opinion completely justified.
    He also studied the violence of the street gangs in El Salvador, Brazil, Mexico and Los Angeles, and saw them in political terms:
    The elite prefer to portray them as simply groups of young men looking to make some quick cash and who love killing and mayhem but when asked what the real reasons for the establishment of their gangs are, the founders of the these criminal organisations as well as their members always seemed to agree that they had the right to steal, rape and murder because the government and police force were doing the exact same to them in their communities. … They are predominantly from poor communities unfairly targeted by law enforcement and government policies and they are denied the opportunity to integrate into the system and build a regular life, so turning to a gang becomes their most viable option.
    His research led him to question America’s role in many of the conflicts, including its attempts to introduce democracy into the Middle East, and it raised questions about democracy itself:
    The reality of democracy became clear to me, place in people’s mind the idea of freedom and convince them that they are a free people while oppressing them behind the scenes.

    On top of this the Western world throws celebrities and false reality into the spotlight to distract people from what is really going on in the world, hence the widespread political ignorance among Westerners.

    This was the turning point in my ideological development as it signalled my complete hatred and opposition to the entire system Australia and the majority of the world was based upon.

    It was also the moment I realised that violent global revolution was necessary to eliminate this system of governance …
    When I read his words, I thought of my own years between 17 and 22 when many of my political views were formed and how close they were to Jake’s. And I was not alone. On March 13 ‘Kat’ commented on-line:
    What is scary is how similar I was in my world view with him up until the point where he makes the transition from recognising the damage the west has caused to him thinking that blowing himself up to kill others would be a good idea. … I remember at that age exploring other religions as well. However, I came to the conclusion that there is no god. But what he has written I can completely relate to as far as a journey into realising what the world is really like at a young age.
    Although I came to my own politicisation a few years later than Jake (perhaps a sign of the times), I can well imagine writing very similar words myself, expressing disillusionment with the mainstream system. I didn’t write such words but I certainly engaged in conversations about revolution. I supported liberation movements, as they were known then, and found myself supporting (at least in thought and speech) foreign fighters like the IRA, the ANC in South Africa, ETA in the Basque country, the Black Panthers in America, and the PLO. And I shared a similar disdain for America. Such radicalisation is a fairly normal process for at least a proportion of politicised youth. If you understand the system at a young age, understand its faults, and you have not yet been captured by the system, you have the youthful enthusiasm to want to do something about it.

    I didn’t rush to join those overseas fights, not just because I may have had a sense of self-preservation, but because the Left then believed that those people deserved to fight their own fight, their own way, without foreign fighters interfering or, at worst, trying to tell them what to do. We saw those movements as liberation movements and that, almost by definition, required the people involved to achieve their own liberation — just as supportive males were not part of the ‘women’s liberation’ movement, nor supportive whites welcomed into the Black Panthers.

    There was some talk of violence in my radical days. People knew how to make Molotov cocktails but saw no real need to use them in Australia. And their use could be counter-productive. One aspect of a genuine revolution is the need to win popular support. In the context of Australian politics, we weren’t leading a revolution but we were hoping to change popular perception of the system and seeking popular support to change the shape of Australian society. The radical youth and university students (who in those days often formed the majority of ‘radical youth’) may have led the way and brought issues into the public arena but, alone, we could be dismissed by government — but not if that wider community support was gained, as in the anti-Vietnam war movement.

    While I can see similarities in Jake’s approach and my own, he turned to radical Islam and Islamic State: why?

    His family background is not clear although one report suggests his family is of Italian background. He grew up in Melbourne and his mother died in 2012, which some suggest had an influence on his conversion to Islam.

    And yes, it is Islam that is providing most of the revolutionary movements these days but in my terms many of them are Right-wing revolutions. I say that because, while I can accept Jake’s argument that freedom in the West is limited and a bit of a con, I cannot see how a strict system of Sharia law offers greater freedom nor that a system effectively allowing for male domination over women is a better system. If a revolution does not enhance freedom then it is not a true revolution, at least from a Left perspective: it is a Right-wing reactionary movement that will curtail freedom.

    Jake did not use his best critical facilities to question the group he was looking to join. I had also come from a working-class background but I saw that many of the more radical leaders in my time came from upper-middle class families. To my mind, while they may also oppose the system I opposed, they did not oppose it in the same way because they did not really understand what mattered to the working class and, for that reason, I could also question their motives.

    Jake does not appear to question whether IS was gaining popular support which, as I said from the earlier Left perspective, is considered essential for a successful revolution. IS does appear to have limited support from some Sunni groups, and in his blog Jake claims that it is ‘providing services to the people’, but IS, and similar Islamic groups like Boko Haram, also undertake mass killings of non-Sunni groups. In this context, the religious underpinning of IS is important.

    In the West, our freedom and the ‘relativism’ of the post-modernist era have created ‘uncertainty’. Young people need role models to help determine what personal boundaries and values they will adopt: they go through a stage of looking for some ‘certainty’ in the values that will take them through life. Our society does not offer any one system of ‘certainty’ but says that we are free to determine our own values — within a few legal limitations. I recall that the famous poet T S Eliot became a Roman Catholic in his later years and the reason was the ‘certainty’ it offered in relation to worship and faith, whereas the Protestant religions said that each individual could find their own path to god.

    If even a renowned poet can succumb in the quest for ‘certainty’, how much more so young people still searching for their adult identity? Apart from anything else, IS offers a ‘certainty’ of politics and backs it with a certainty of faith.

    Jake wrote that he did research a number of religions, as he saw them as the key to many of the conflicts taking place in the world:
    I found myself deeply confused by all of these outlandish and odd religious systems, that myself as an Atheist had never been exposed to. However, it was Islam that for me stood out as easy to understand and shockingly consistent with established historical and scientific facts ... Slowly but surely I began being drawn towards the religion and it was no longer a political interest for me but the truth I had been circling around for years … [emphasis added]
    I, like Kat and Jake, also went through a period in my young life when I studied many religions. I still have in my library Buddhist scriptures, the Hindu Bhagavad-Gita, the works of Lao-tzu regarding Tao-ism (my personal favourite) and the Koran, not to mention the Book of Mormon and a Bible. But I also have many revolutionary works including Che Guevara’s Guerrilla Warfare, Bobby Seale’s Seize the Time and Frantz Fanon’s The Wretched of the Earth.

    One difference is that the Left focus in my time was essentially economic, against the capitalist system, and opposed to governments and the politics they represented mainly to the extent that they supported capitalism and denied freedom to groups that suffered under the capitalist system. These new radical youth seem much more focused on the politics (if Jake is any guide). Radical Islam may be attractive because it is offering a different political system (or more correctly a politico-religious system): it doesn’t seem to discuss economics to any degree and the social aspects are set by Islamic teachings. With the demise of socialist governments (and even China now using a form of guided capitalism), the Left no longer really offers either political or economic alternatives, only variations to the existing system, a socio-economic alternative. That may also be a sign of the times. I could still see things around me in terms of the class structure, or, in Australia, the economic structure that created class. Jake appears to have been viewing things through the prism of political systems and appears to have failed to examine fully the social and economic consequences of his choice.

    If I am right in suggesting that the current radicalisation is based largely on politics, not socio-economics, then the government, for all the noise it is making, will not be able to change this because it is the system the government represents that is the very thing the youth are reacting against. Changing social and economic circumstances may help but will not be enough.

    I had available other ways of expressing dissent. I took part in protests, including the Vietnam Moratorium marches. I took part in sit-ins. I could express my disdain of the system and feel self-justified when police carried me roughly away from demonstrations and sit-ins. I could discuss my views with like-minded people before and after demonstrations; we could share tales of abuse by the police; the way police did not wear their numbers when they planned to ‘get rough’ with the demonstrators; of government seeking to stir a violent reaction from us for political purposes; and we could identify the then Special Branch officers who watched and photographed us. We could discuss how the system needed to change and we had an alternative socio-economic view of a future Australia. There was an outlet that didn’t have to result in violence — at least not here in Australia.

    Where are the Left movements (if not revolutions) that such young people can join now? Where are the Left organisations that provide an opportunity to protest against the current system? Why don’t we have movements that can draw these young people to protest and express dissent against the political and socio-economic system here in Australia?

    We have had many demonstrations against the Abbott government and its policies but it seems that, for many, they knew what they were demonstrating ‘against’ but not necessarily what they were demonstrating ‘for’. That raises the question: where now is the philosophic basis of protest? Some might argue that the Greens offer the best Left approach at the moment but they are now a mainstream political party, embedded within the political system which youth like Jake are rejecting.

    So, these young people need not only a protest march or sit-in but an alternative narrative outside the mainstream political system — which is exactly what radical Islam and IS is offering them.

    The problem is not just that IS is waging a successful propaganda war on social media but that the Left in Australia is failing to provide an adequate radical alternative for disaffected youth.

    What do you think?
    With a piece like this, is Ken still an ‘unreconstructed Leftie’ or does he have a point? Has the Left been so marginalised in our politics and replaced by a liberal Left or progressive approach, that groups like Islamic State are filling the void and attracting some politicised youth who see it as an avenue to express their radicalism? Could that radicalism be expressed more constructively if a radical Left still existed as a significant movement in Australia?

    Come back next week for 2353's 'Where will we be in 50 years' which asks whether, in Australia, there is a connection between immigration and economic conditions.



    Where does Abbott really stand on national security?


    The idea of ‘national security’ arises from the ‘social contract’ referred to by political philosophers. The concept is that the people gave the power to enforce rules and punishments to their leaders, whether monarchs or elected governments, in return for ‘protection’. Otherwise, in going about our daily business we would also have to build into our day the need to protect ourselves and our families and property from any threats that may emerge.

    So in a functioning society, we say I will largely divest myself of my right to defend myself and grant that power to our leaders, leaving me free to go about my business without those additional security concerns. The quid pro quo is that the government defends my other rights and my property, as well as my security. (I won’t go into the issue of protection of property as that is the dominant theme of neo-liberals and, in my view, is somewhat contentious for reasons that would make this piece two or three times as long.)

    There are two aspects to protection: one from external threats and one from internal threats. As I recall, in international relations, one trait that was used in defining a nation state was its capacity to protect itself and defend its borders. Hence the need for a standing army or these days also a navy and an air force. And ever since the Middle Ages, there have also been spies and intelligence services as a means of gaining advance warning of potential threats and what one’s enemies may be up to. Note, however, that these are meant to protect us from external threats.

    For internal threats the protection comes primarily from the police which also has a key role in protecting our rights — and, in fact, the main internal threats do relate to our rights. Our rights link to the basic John Stuart Mill tenet that freedom is about ‘pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to attain it’. Thus we allow our governments to create rules that protect that freedom and, importantly, also stop us from impinging upon the freedom of others. Stealing, assault and fraud, for example, each deprive someone else of their rights and so are subject to punishment by the rules we create. That is where the police and the courts come in. We have many freedoms or rights, such as freedom of speech, freedom of assembly and freedom of movement which we consider important to our everyday lives (even if we sometimes take them for granted). Franklin D Roosevelt also spoke of freedom from want and freedom from fear — two that I think we do not hear enough about.

    Of course, over time, societies can change their emphasis on some of these rights, considering one more important than another, and hence also change the rules that support or enforce them. And in times of genuine external threat, such as during World War II, we may accept the need to forego some of our freedoms in the name of national security.

    So we come to the Abbott government’s view of national security.

    Firstly, the so-called ‘boat people’. Are 50 or 100 people in a leaky wooden boat an external threat to our national security? I doubt any reasonable person would say so but Abbott dresses the Australian response to the ‘boat people’ in security terms. He created a secret operation (‘operation’ being used as military jargon) and refuses to provide any details because these are ‘operational’ or military or intelligence matters. That may be justified in time of war when a heavily armed invasion fleet is menacing the country but does not appear so when we are talking about boat loads of refugees.

    Are we merely protecting our borders? That is a safer argument to make, at least up to a point. Yes, the boat people may be breaching our borders but only if they come within 12 nautical miles (22km) of our coastline (including off-shore islands). Beyond that, they are in international waters and should be free to move as they wish. They may come within our 200 nautical mile (370km) ‘economic zone’ but that applies only to economic activities such as fishing and also restricts the right of other nations to search for or exploit other natural resources within that zone — I don’t think the boat people are there searching for oil so that doesn’t apply. So the argument must be that our ‘intelligence’ suggests that these boats will breach our borders if they are not stopped in international waters — which, on the surface, is a valid argument.

    The UN convention on refugees, however, does give people the right to breach borders in certain circumstances — when we recognise that their own government is failing to protect them and their rights. We have processes to assess such people to distinguish ‘genuine’ refugees from economic migrants who may simply be trying to skirt the immigration programs that most countries have.

    So can Abbott justify that a major military-style operation is necessary to stop ‘breaches of our border’? Certainly not in a philosophic sense. It was Howard who said ‘we will decide who comes to our country and the circumstances in which they come’ and Abbott has basically continued that approach. It is ‘son of the White Australia policy’ and plays on the same fear of being over-run by hordes of ‘Orientals’, now refugees, who may bring with them a different life-style. Abbott ramps up those fears in the populace by exaggerating the threat to one akin to a military invasion, requiring military responses and the language of national security — all in the name of stopping a few leaky boats.

    Logic would suggest that controlling the flow of refugees actually requires actions to manage the flow, and steps to reduce the flow, at their source. That would require assisting in the processing of refugees in refugee camps (as was done by the Fraser government for Vietnamese refugees) and providing aid that may improve the circumstances in countries of origin, so diminishing the need for people to leave. We are doing nothing on the first and actually cutting our international aid on the second. Therefore, it can only be a political decision to ignore measures that may reduce the problem at its source and instead focus on creating a situation where our government can react with overwhelming power on the basis of national security — it would not suit its political agenda to take pro-active measures. It also follows that this is only a ‘border security’ issue because the government chooses to make it so and it is the proverbial sledge hammer to deal with a mosquito.

    Then we have the internal and external threat of ‘terrorism’. There is no doubt that this is a real threat but how great a threat to Australia and how far should we go in dealing with it?

    Genuine terrorism is based on the premise that by creating terror and fear in a population, its government will be forced to change its policies in a way that meets at least some of the political objectives of the terrorists. Thus the IRA conducted a ‘bombing campaign’ on mainland Britain in an effort to change the British government’s policy on Ireland (this was done twice, once in the 1940‒50s and again in the 1970s). For a long time, the British government treated captured IRA members as criminals: they were tried under normal criminal law. It was the IRA itself that campaigned for its members to be treated as political prisoners or prisoners of war. It was an approach that refused to acknowledge publicly the politics of the situation and, as far as it went, down-played the threat (and the fear) by treating the acts as mere acts of criminality.

    What terrorist threat does Australia actually face? The biggest threat at the moment appears to be the possibility of ‘lone wolf’ attacks inspired by radical Islamic and IS propaganda. There was the stabbing of the two police officers in Melbourne and a small number of threats that have allegedly been stopped before being carried out.

    Abbott likes to refer to Monis at the Lindt Café siege as an example of terrorism reaching our shores despite evidence suggesting that Monis was mentally unstable and an attention-seeker wanting to link himself to IS. Reports emerging from the inquest indicate that there is no evidence of him ever having been in contact with any terrorist group and, when even a bikie gang found him ‘weird’, you do have to have some doubts that he was a genuine terrorist with political motives.

    While we may find any single event terrible, we must keep a sense of perspective. We have had mass murderers with no political intent, such as Martin Bryant, and they do not generate the same degree of fear. We may be shocked but we perceive such events as a ‘one-off’, even if, as in the US, they occur on a regular basis. Terrorists, on the other hand, are trying to convince us that they are capable of carrying out their attacks again and again. If we perceive some events as worse because we also perceive them as ‘terrorist’ events, then the terrorists are winning the battle for our minds.

    It was George W Bush who declared the ‘war on terror’ after the 9/11 attack on the twin towers. As horrific as that event was, taking the US to ‘war’ was giving Al Qaeda a status beyond its real power. Abbott is now doing the same in Australia, describing IS as a ‘death cult’ which really, as Abdul-Rehman Malik who runs an outreach group for young Muslims said, is accepting the IS propaganda and giving it an inflated status:
    The propagandists of the Islamic State, when they hear themselves referred to as a death cult hell-bent on global domination, are patting themselves on the back because you know what? You’ve bought in to their narrative.
    We seem to be adopting the former British approach but only in part. We tend to ignore the politics of radical Islam but we accept its proponents as political enemies whom we must engage in war. Can anyone else see the inconsistency in that? War is sometimes said to be an outcome of the failure of diplomacy but if we refuse to recognise the political elements of our enemy, which rules out diplomacy, and don’t treat them merely as criminals, then war becomes the only recourse — as it seems to be now. (There is little doubt IS is playing a similar game.)

    In the case of IS, war may be justified because it does have some components of a ‘state’ in the areas it occupies and does see itself as forming an Islamic government of a caliphate. But as a ‘state’ it is not yet a direct threat to Australia. We can, if we so choose, be involved in supporting other states who are threatened by it: so there can logically be some justification for our current involvement in Iraq — it is a political or diplomatic decision to support another state.

    Abbott, and Howard before him following 9/11, have used this so-called threat to our national security to curtail our rights. These laws are justified on the basis of our fear of terrorism and the need to protect us. The extent of that protection is driven by the intensity of the fear but, as suggested above, the level of fear being expressed by the government seems to outweigh the real extent of the danger.

    Under laws that have been introduced to address ‘terrorism’:

    • ASIO can detain people for up to seven days and it is illegal to speak of that detention afterwards. You can be detained merely for questioning about your possible knowledge of an event even if you were not involved and you may not be told why you were detained. The warrant for your detention is decided merely on security advice without your presence and with no opportunity to challenge it. It sails very close to arbitrary detention.

    • ASIO has the power to monitor computers but that is now defined as including a network. At its broadest it means the internet can be treated as a single network: it is more likely to relate to smaller networks but that may still capture the computers of many people who are not directly under investigation. It also has the power to alter and delete material from those computers and you will not be told.

    • Journalists cannot report ASIO activities that involve Special Intelligence Operations (SIOs) but there is nothing to allow identification of which ASIO operations are SIOs and which just normal activities. Effectively, journalists are barred from reporting on ASIO with the threat of 10 year gaol sentences.

    • There are ‘control orders’ that can limit a person’s movements and who they can meet and again these can be decided without any other parties being present or able to challenge the decision. They can be likened to bail conditions except that the person has not been charged and may never be tried.

    • There are also travel bans under which it is an offence, also carrying a term of up to 10 years imprisonment, to be in areas ‘declared’ by the Foreign Minister as areas where terrorist organisations are operating. There are exclusions for legitimate purposes, such as providing humanitarian aid, but the presumption of innocence is reversed: the onus is on the individual to prove they were there for a legitimate purpose, and prove it was the sole purpose for their presence.

    • We also have laws that people can be charged for ‘planning a terrorist act’. It takes us into dangerous territory. There is a difference between planning an action and being about to carry it out (which is when police often act if they have advance intelligence). Also, what constitutes a ‘terrorist act’ is not clearly defined, so how far could this law go?
    Some of our traditional rights that are affected by these new laws include freedom of movement, freedom of speech, freedom of association and the right to a fair trial, procedural fairness and judicial review. The danger is not just from the current laws (which we may think won’t affect many people) but the precedent they set. We must always be vigilant of our rights and remember that the elected Nazi government began with small limitations to freedom in the name of maintaining social stability.

    These approaches are also tearing up the ‘social contract’. Our national security actually depends on the social contract — a binding trust between the government and the people. If governments ignore their part of the bargain by undermining the rights they are meant to protect, then people may begin to question the value of the social contract and the role of government. Isn’t that exactly what the terrorists want us to do?

    Finally, I return to Roosevelt’s ‘freedom from fear’. That is one of the rights that is supported by government when it provides for our protection. When, however, it is the government itself that is generating fear, and using that fear to weaken our rights and renegue on its side of the social contract, isn’t it actually the Abbott government that is threatening our national security? Isn’t it actually the Abbott government that is behaving like a terrorist organisation by creating fear to achieve its political objectives?

    What do you think?
    Are ‘terrorists’ just common criminals on steroids used to promote governments’ ‘law and order’ platforms? Why are asylum seekers labelled with the same description? With the increase in security measures - where are the corresponding increases in safety, or any scrutiny, checks and balances to ensure that the additional powers are used wisely or correctly? Ken’s piece is timely and relevant given the current discussion of the ‘race’ of ’terrorists’.

    Next week Ken continues the national security and terrorism theme when he discusses the young Australian suicide bomber Jake Bilardi but comes to a very different conclusion in his piece ‘A failure of the Left’.


    The politics of marriage


    While Australia had a uniform Marriage Act from 1961 until 2004, there was nothing specific (except for common law) that prohibited marriage of two people of the same gender. The requirement that marriage was between a man and woman was only inserted into the act by the Howard Government. The government at the time claimed the change was to clarify the term ‘marriage’. The 2004 amendments were introduced in the final two sitting weeks of parliament and only a few months after the UK introduced its Civil Partnership Act. The Australian amendments were supported (nominally at least) by all political parties except the Democrats and the Greens.

    During 2009, the Rudd government legislated changes to allow ‘civil unions’ to be recognised for all couples (regardless of the partner’s gender) as well as formally recognising rights for de-facto couples. Something like 85 pieces of legislation were changed to allow this to happen.

    In February 2012, Fairfax Media reported that two thirds of Australians were in favour of same-sex marriage. By July 2014, there was 72% support. Greens Senator Hanson-Young has had a bill before parliament since 2010 and there have been various attempts to change the law since.

    On 1 June 2015, Opposition Leader Bill Shorten introduced a private members bill into the House of Representatives that would delete the words inserted by the Howard government’s 2004 amendment to the Marriage Act as well as other sections that prohibited marriage equality or similar marriages solemnised overseas being recognised in Australia. Despite the lack of government members in the House at the time, the bill was shunted off to a committee. Tony Abbott’s response is that while marriage equality may be considered by the government in time, it is currently more important to pass the budget measures. In the same week, according to The Saturday Paper, Abbott himself is attempting to change the discussion to yet another ’national security’ debate:
    First we got senior diplomat Greg Moriarty appointed to the newly created position of national counterterrorism co-ordinator. (Sherlock fans, I regret to inform you that Moriarty bears much more resemblance to Mycroft than to his evil namesake.) Justice Minister Michael Keenan got the new title of minister assisting the prime minister on counterterrorism, and then Philip Ruddock and Concetta Fierravanti-Wells got new posts aimed at tackling radicalisation.
    Being fair to the Abbott government, it has spent considerable time both inside and outside parliament urging the ALP to allow the small business measures associated with the 2015 budget to pass — and to be fair to the ALP, passing the small business measures is something the ALP always said it would do. On 3 June, Shorten moved a motion, to a lower house almost empty of government members, to pass the small business legislation immediately. The government voted against it:
    "Let us pass this bill straight away," Prime Minister Tony Abbott said on Monday.

    "Let's get it through this place in a hurry," Small Business Minister Bruce Billson said last week.

    On Wednesday, Mr Shorten obliged.

    The government seen voting against putting their own small business budget measures to an immediate vote.

    "We are not going to delay this legislation for one minute longer," he told the House of Representatives and then put forward a parliamentary procedure that if approved would allow an immediate vote.

    The government opposed Labor's motion so it failed by 47 to 77 votes.

    The leader of the house Christopher Pyne immediately decried the incident as a stunt, because the Senate is in estimates and not sitting this week.

    "Labor are a joke. Ending the debate on small business won't get the bills to the Senate any faster – the Senate isn't in session!" he tweeted.

    "So why the calls for Labor to get out of the way in such urgent tones," Labor backbencher Joanne Ryan immediately responded.

    Small Business Minister Bruce Billson released a statement describing the spectacle as a "another pointless piece of politics by Labor".

    Speaking at a media conference in the Canberra suburb of Dickson a short time later, Mr Shorten said: "If they're in such a hurry to help small business, why were they so slow today?"

    "I think the government's got some explaining to do," he said.

    In question time on Wednesday, Labor pursued the Prime Minister, asking why his government had voted against passing its small business bills straight away.

    Mr Abbott said the Senate was not sitting.

    "What we saw from the opposition this morning was yet another childish stunt from the Labor Party, an attempt by the Labor Party to deny 11 Labor members and 31 Coalition members the right to speak on this bill and ensure that they were able to demonstrate their support for the small businesses of Australia," Mr Abbott said.
    Stunt? — yup, it probably was. It is pretty amusing that on Wednesday the government is voting against something it was calling on the opposition to pass on Monday and Tuesday. It seems that there is an alternate agenda within the government: probably something to do with a number of government members getting a speech into the Hansard appealing to a part of the LNP’s core support base — small business. Getting and keeping the front page free of the budget (after the 2014 fiasco) also reduces the risk of adverse polling for Abbott and his government — which could be construed as keeping Abbott in a job.

    Chris Berg, writing on the ABC’s ‘The Drum’ website suggests
    The budget was delivered on Tuesday, May 12. National security week was launched on Monday, May 25. That's 13 days. Really just 12, if you factor in the budget lockup and newspaper print deadlines.

    This quick hop from economics to security is indicative of a broader problem with the Abbott government's populist push. It knows it doesn't want to be unpopular. But it's not sure what it wants to be popular about.

    The 2015 budget is nothing like the political catastrophe that the 2014 budget was. If anything it has been well received. Everybody likes the accelerated depreciation changes for small business. The fiscal reckoning has been postponed, and nobody but sticklers, obsessives and economists could object to that.
    Clearly, changes to the Marriage Act don’t figure prominently in the Abbott government’s agenda. This fits with Abbott’s public pronouncements in the past, as well as the public pronouncements of other ‘well known’ government members such as Concetta Fierravanti-Wells who was recently interviewed on ABC’s PM radio program:
    Senator Concetta Fierravanti-Wells was recently given the job, in harness with Philip Ruddock, of inquiring into tough new citizenship laws.

    Today, she says allowing a conscience vote on same sex marriage would be a "cop out".

    Senator Fierravanti-Wells says it could lead to a fracture between the Liberal Party's base and its parliamentary wing.

    She spoke to James Glenday.

    CONCETTA FIERRAVANTI-WELLS: I don't believe that this issue is a conscience issue. It's not a life or death issue, which has traditionally been the purview of conscience votes.
    Thirty seven of the USA’s fifty states already allow marriage equality— although North Carolina is currently involved in a political intrigue that would surpass Game of Thrones to allow magistrates to choose only to marry those who fit their particular moral and/or religious beliefs. As the New Yorker discusses in this article, the proposed law — that was vetoed by the Republican (conservative) governor in spite of his personal support — is demonstrating signs of having the governor’s veto vetoed by the legislature! The (possibly) unintended consequence is that there could be the re-instatement of the long overturned ban on couples of mixed ethnic backgrounds marrying each other — despite the marriage being that of the seemingly all important man and woman — if the particular magistrate doesn’t approve. Apparently the US Supreme Court is currently deciding if equality in marriage will be legal in all fifty states, which may overrule the North Carolina brouhaha in any case.

    Other countries, including New Zealand and Ireland, have allowed marriage equality over the past few years. In Ireland, a traditionally Catholic country, it was put to a referendum during May 2015 and 62.1% of the voters approved the change. Ireland’s parliament now will introduce the necessary legislation by the end of the year.

    Reaction to the Irish referendum was generally positive around the world. The Canadian Broadcasting Corporation reported:
    Political analysts who have covered Irish referendums for decades agreed that Saturday's results mark a stunning generational shift from the 1980s, when voters still firmly backed Catholic Church teachings and overwhelmingly voted against abortion and divorce.

    "We're in a new country," said political analyst Sean Donnelly, who called the result "a tidal wave" that has produced pro-gay marriage majorities in even the most traditionally conservative rural corners of Ireland.
    Politicians live and die in Australia at the whim of polling data. Just ask John Howard, Kevin Rudd, Julia Gillard and Tony Abbott. Unless there is a significant problem with the data in a number of surveys, there seems to be a significant level of support for marriage equality in Australia — despite the protestations of various members of parliament (from both major parties). So what is the problem here: is it that both sides of politics are scared of making the change, or are they attempting to differentiate themselves and lose the vote from the unaligned voter?

    Shorten knows very well that his private members bill will not become law. Hanson-Young’s similar legislation has been sitting on the table since 2010 (when the ALP was in power). A number of political players have advised him that his bill wouldn’t help the process — assuming he does want the changes he has sponsored. Abbott has indicated he is prepared to allow a bi-partisan bill into the parliament for debate. The ‘problem’ with bi-partisan bills is that no political party can ‘take the credit’ for the initiative.

    There are LNP members of parliament that have indicated they will co-sponsor a bill with the ALP to make the debate happen. The experience in other countries demonstrates that changes that allow marriage equality do not cause revolution, moral decay, pestilence or any real impact to most people’s lives. Maybe if the polling is correct, both sides of Australian politics should take a reality check and listen to what the public actually want. If Ireland can ask the public and act on public opinion, why can’t Australia?

    Ironically Fairfax Media claims that changing the marriage act would cause a $1.2 billion boom to the economy. With the Australian economy almost flat-lining, perhaps it’s the boost we all need.

    What do you think?
    Apparently focus groups are showing that voters consider this a non-issue, not because they are indifferent, but because they see it as inevitable and just want the government to deal with it and move on. As 2353 points out, politicians are too busy playing games with the issue to listen to the people. As ‘the people’, speak up now and leave a comment.

    Next week Ken will take a philosophical look at national security and answer the question ‘Where does Abbott really stand on national security?’. His answer may surprise you.


    The $19,990 special

    The amount of ink spilled in the analysis of the 2015 Australian budget would probably fill Sydney Harbour. The number of electrons expended in the same way would probably light up a small town for a week. There is no need to add to the consumption of electrons here. Instead, let’s look at the sales pitch.

    To put it into perspective, there is, unfortunately, a little bit of economics that we have to endure. Australia is one of the few countries in the world to maintain a AAA ‘credit rating’. Nominally, that means that the country can borrow money at lesser cost. Australia is one of the few countries in the world that can truthfully claim that the economy has not been in a recession in the last 20+ years. Things are, however, not all rosy in the garden: while it is a positive that we do have a Reserve Bank official cash rate above 0%, it is at the time of writing a hardly stellar 2%. In fact 2% is the lowest it has ever been. The official cash rate is the measure of how much interest the Reserve Bank is prepared to pay lenders should it decide it will hold on to money that banks can’t place elsewhere (at a higher return).

    Interest rates, to an extent, also refer to consumer confidence. If consumers are confident that the economy is bubbling along quite nicely, they are more comfortable to borrow to upgrade the house, buy the shiny new car or spend the ‘rainy day money’ on a visit to Disneyland, the new lounge suite or buy the larger TV (because a 55 inch TV would look absolutely fabulous!). In a similar way if business thinks that the consumer is going to ‘walk’ into their business and make a purchase, they will be more inclined to upgrade the computer system, buy the new delivery van, upgrade the shop fittings and so on.

    The problem is that once consumers lose confidence, it takes a lot to get the confidence back. At the start of the Global Financial Crisis, the Rudd Government, on the advice of Treasury, distributed billions by way of $900 cheques. The Opposition at the time decried the extravagance claiming that some would spend the money wastefully — and produced examples of people taking the money straight to the local pokie palace or to the local electronics store to purchase the largest TV they could get. Regardless of the morality, those that work in pokie palaces and electronics stores kept their jobs as a result of the expenditure. While Rudd was trying to appeal to his constituency, the $900 cheques did keep the economy ticking along and, with assistance from other programs, did keep Australia from tipping into recession. The pumping of the economy by the Rudd/Gillard Government also retained consumer confidence — people were prepared to go out and spend the windfall. The other parts of the Rudd/Gillard package prolonged the demand through both quick and long term infrastructure improvements to people’s homes (while assisting to reduce energy usage and costs) as well as considerable new infrastructure to schools, health care providers and so on. Human nature being what it is, if people have a reasonable expectation of receiving an income next week, they will not conserve every cent they have this week.

    In contrast, prior to the 2014 — it’s going to be tough — budget, Hockey and Cormann were pictured smoking cigars. The reason for the ‘toughness’ that was to be imposed on the community was claimed to be due to the ‘debt and deficit disaster’ inherited by the Abbott Government.

    Regardless of the truth of the ‘debt and deficit’ claim, Hockey killed consumer confidence. The marketing of the budget in 2014 resulted in News Corp publishing an article like this, dryly listing the adverse effects of the budget on ‘the average person/family’, such as:
    IF YOU NEED TO SEE A DOCTOR WHO BULK-BILLS ... All the rumours were true. From July 1, 2015, you will have to pay a $7 “patient contribution” fee each time you visit your GP.

    You’ll also get slapped with that charge when you visit out-of-hospital pathology and imaging services, such as getting an X-Ray or an MRI.

    Concession card patients and kids under 16 years will only have to pay the contribution for their first 10 visits a year.

    Doctors have discretion to choose who pays the fee, but there is a catch.

    If GPs choose not to charge a patient, they won’t receive their $6.20 bulk billing consultation payment from the government.
    While Abbott and Hockey were effectively telling us all to swallow our medicine, they were showing a distinct inability to get budget measures through the Senate. The ABC reported in late May 2014 that Hockey was threatening that interest rates, as well as taxes and charges, would increase if the budget measures did not pass the Senate. History will tell us that a lot of the measures that weren’t passed by the Senate were quietly rescinded in the 2015 Budget. We also now know that the official interest rate set by the Reserve Bank fell over the period of the 2014 budget to the lowest level ever — 2% — causing the Chief Executive of CPA Australia, Alex Malley, to comment, as reported in The Saturday Paper:
    “A 2 per cent interest rate is another way of saying there’s no pulse in the economy,” says Malley.
    So then we come to Budget 2015. If Hockey and Cormann shared some time smoking cigars again, it certainly wasn’t in public view. Hockey returned to his ‘genial Joe’ persona pointing out the benefits to all from the latest budget. Sophie Morris, who wrote The Saturday Paper article linked above, observed:
    In an extraordinary about-face, Hockey has gone from being the treasurer who helped destroy consumer and business confidence last year, with a tough budget and talk of “debt and deficit disaster”, to an enthusiastic hawker going all-out to try to rekindle it. He’s throwing himself into the task with all the gusto of a steak knife salesman on daytime television.
    In an interview with one of the ‘doyens’ of the Australian media, Laurie Oakes, Hockey was asked what happened to the ‘debt and deficit disaster’ last year since there has been little improvement in the Australian Government’s budget position:
    Hockey replied: “Well, we made significant progress last year, Laurie, and that’s underestimated, but we actually have come a long way. Now we are on the next stage of our plan to build growth, and we’re investing.”
    You could also question if the change in attitude was somehow influenced by the last 12 months of opinion polls, as evidenced by the commentary that the 2015 budget has ensured the ALP would now win an election by a smaller margin than for most of the past 12 months.

    The ‘highlight’ of this year’s budget is the $20,000 immediate write off for asset purchases by small business. The plan apparently is for small business to go out and purchase business related equipment — which in turn means money is pumped into the economy, people in the businesses that supply equipment to small business retain their jobs and go out and spend their income to inject further money in the economy. Of course it is a complete coincidence that the strategy is similar to the Rudd/Gillard strategy to address the GFC, which the LNP so roundly criticised at the time for being economically reckless. There are some differences of course: Rudd/Gillard were responding to a worldwide event; Abbott and Hockey are responding to an event of their own making. Both political parties are of course favouring their preferred demographic.

    It appears, however, that the ‘sales job’ to unaligned Senators in 2015 is no better than it was last year. Fairfax Media is reporting:
    Almost three weeks into its budget sales job the Abbott government is still struggling to secure Senate support for some of its key proposals, leaving billions of dollars of savings in doubt.

    The government's age pension changes, childcare package, cuts to paid parental leave and plan to impose a one-month wait for the dole all still face an uncertain fate in the upper house.

    While crossbench negotiations are set to ramp up even further in the coming weeks, it looks increasingly likely the government will be forced to abandon or heavily amend some of its plans. The latest crossbench talks come after the Parliamentary Budget Office warned Senate intransigence could carve a $100 billion black hole in revenue in the next decade.
    Abbott, Hockey and others have accused the Rudd/Gillard Government of spending excessively, in turn making the dramatic spending cuts of the last two budgets prudent and necessary. For a number of years, this ‘self-evident’ truth has been accepted at face value by a large proportion of Australian media (and the community). It is clear that the unaligned Senators have thought differently when disallowing a number of the revenue measures proposed by Abbott and Hockey.

    It is perhaps ironic that the elected Senators of Australia have demonstrated the sales pitch doesn’t convince them and the ABC’s FactCheck unit determined that Abbott and Hockey are now spending more that Rudd/Gillard did. Hockey’s sales pitch this year is better, but the budget is still about ideology rather than improving the status and wellbeing of our society.

    What do you think?
    What can we expect from this government except a litany of failure? 2353 points out that in selling their two budgets they have shown that they couldn’t sell a glass of water to a thirsty man. Worse, they demonstrate their hypocrisy with an approach in 2015 that they roundly criticised when in Opposition and is the polar opposite of their own approach in 2014. Can they get any worse? Let us know what you think.

    Come back next week when 2353 will consider the politics of the marriage equality issue.


    The unhappy marriage of democracy and capitalism


    Most Western countries, including Greece and Australia, have a system of democratic-capitalism. It marries a democratic political system with a capitalist economic system and they are perceived as being well-matched because both are founded on philosophies about individual freedom. It is, however, not necessarily a happy marriage. In the current Greek situation, it is very clear that capitalism is abusing its spouse democracy, and capitalism is dominating the marriage. What does that mean for the future of democracy? Can the marriage be saved? Or should democracy move out and find a new partner?

    In January 2015, the people of Greece expressed their democratic right and elected a leftist government — a reaction to austerity measures that had been imposed on the people by previous governments since 2010.

    Admittedly, Greece had been living beyond its means, accumulating mounting deficits each year, but as part of the euro-zone had no control over its own currency. With such control it could have devalued its currency or, if floated as an individual currency, it is likely that it would have been sold down well before the situation became as bad as it did. Germany, however, is the heart of the euro and its economic performance tends to drive the relative value of the euro on the world’s currency markets: so Greece was always going to end up in trouble and did so when the GFC hit.

    But austerity measures made the situation worse, not better. Unemployment rose, reaching 26.8% in January 2013 and by April that year youth unemployment was 60%. Overall unemployment continued to rise, to 28% in February 2014, no doubt helped by the sacking of 15,000 public servants during 2013. Three-quarters of the unemployed were then long-term unemployed (longer than 12 months). The latest figure I was able to find shows unemployment has fallen slightly but is still at 25.3%.

    GDP has been in ‘negative growth’ (that is falling rather than growing) for most of the time since the GFC in 2008, dipping to ‒8.9% in 2011 and was still at ‒3.3% in 2013. By 2013 GDP per capita had fallen to 2004 levels (GDP per capita is often a proxy for standard of living). In all, Greece’s GDP has slumped by 25% since 2008. In 2010 the government’s revenue was €97.2 billion but had fallen to €78.1 billion in 2014 (this for a population of about 11 million). And yet it is the revenue side of the equation that has been Greece’s main problem: its historic spending levels, around 50% of GDP, are similar to many other European governments but its revenue (around 40% of GDP) has been lower. If revenue had not fallen so disastrously (largely a result of the austerity measures), it could have achieved a balanced budget in 2012 or 2013 with no further cuts to spending. It is little wonder that Greek people took to the streets in reaction to the waves of austerity that were introduced. Apparently, Greece now has a ‘primary surplus’, meaning revenue can meet government expenditure, but it is the interest on loans and repayment of loans that is causing the problem, as the total government debt is now 170% of GDP.

    There was a glimmer of hope in 2014 when GDP grew marginally but as successive presidential elections late in the year failed to achieve a clear outcome, and then the election of the leftist Syriza government in January 2015, GDP began falling again as financiers and big business pulled money out of the country (I have read estimates ranging between €40 billion and €55 billion). With the uncertainty, including the prospect that Greece may withdraw from the EU, people also began withdrawing their money from the banks, threatening the stability of the banks. The banks had been able to support themselves by borrowing money from the European Central Bank (ECB) using Greek government debt (bonds) as collateral but in February this year the ECB said it would no longer accept Greek government bonds — leading to more money being withdrawn (€23 billion so far this year). Despite that announcement, the ECB has made a €1.9 billion profit from trading Greek government bonds: it has agreed to pay that to the Greek government but has not yet done so. Greek government bonds are now considered ‘junk’: the rate demanded on the financial markets has varied between 19% and 25% to cover ‘risk’ — that is the sort of rate charged by ‘loan sharks’ and means the value of an initial loan would double in 3‒4 years. Borrowing at such rates would create an impossible situation which is why the Greek government is now mainly reliant on loans from the ECB and the IMF. Many of the private financiers were paid off in earlier bail-outs in 2010 and 2012 when they also took a 20% ‘hair cut’ (in other words, they were paid 80 cents in the dollar on what they were owed).

    The new government has been trying to renegotiate the loans from the IMF and the ECB. It wants an easing of the austerity conditions. It does not want to undertake any further labour market reform (at least in the short term); it wants to rehire 4,000 public servants; and is refusing to make any further cuts to pensions although it is open to reform of the pension system. The government recently said that if forced to choose between repaying loans and paying the pensions, then it would pay pensions — in other words it would default on its loans.

    The people have spoken in the home of democracy but the bankers aren’t listening.

    Mark Weisbrot from the US Centre for Economic and Policy Research said of the move by the ECB to refuse to accept Greek government bonds:
    “They are trying to force the government to abandon its promises to the Greek electorate, and to follow the IMF program that its predecessors signed on to. … The ECB should be ashamed of its latest assault on Greek democracy. And they should not be able to get away with disguising it as anything less than that.”
    And Joseph Stiglitz wrote:
    Seldom do democratic elections give as clear a message as that in Greece. If Europe says no to Greek voters’ demand for a change of course, it is saying that democracy is of no importance, at least when it comes to economics.
    It fits with a common criticism of our society since the 1980s: that the ‘economy’ has come to dominate political debate rather than debate about ‘society’; that we have become an economy, no longer a society; that dollars, not people, now rule and determine the actions of governments.

    While money may be an essential part of our system, allowing exchange between people who do not know each other, for items that may be made by someone else, it appears to have also become a tradeable item (a commodity) in its own right. Capital markets do allow for borrowing for genuine purposes, like banking needs and productive activities, but they have also become, like stock markets, a source of speculation and profit making. In Australia we know that banks are amongst our most profitable institutions and, in Greece, banks are among the biggest private companies in the country. How have we allowed that? Money is meant to be a servant, a medium of exchange, but it has become so much more.

    Consider who benefits from bail-outs to countries. A country may borrow funds to meet the normal activities of government, particularly for public infrastructure, but if the government cannot repay the loan when it falls due it may be bailed-out. That bail-out is not to help the government directly but to allow it to pay the original financiers. It is done because a ‘default’ is considered a threat to the international financial structure — why? One reason is that if one or two countries are allowed to get away with defaults, then others may follow suit, lenders would no longer feel confident about lending if they weren’t going to get their money back and lending could dry up. With no capacity to borrow, governments would have to print their own fiat currency — which they can do anyway — and there would be no need for international financiers! (And, of course, they can’t allow that to happen.)

    We also saw during the GFC that the Wall Street banks were bailed out — they were ‘too big to fail’ — while ordinary people lost their homes. Why couldn’t people have been paid that money to pay out their mortgage and thus save their home? — the money would have gone back to the banks in payment of the mortgage. The government could make the payment as a loan, even at concessional rates (though given that US interest rates are so low it wouldn’t matter too much). As I understand it, the housing bubble burst, house values fell, so people owed more than their house was then worth and many just walked away. The government could have paid people to buy their houses at the lower price, saving the government money, and the banks would take a ‘hair cut’: they would get some money back but not the full value of the original loan. What’s wrong with that? Isn’t that just allowing normal operation of the market?

    The banks had created the problem by buying and selling debt as a means to make a profit. They had mixed risky debt with a small amount of ‘safe’ debt and sold the entire package: they were making a ‘killing’ until it unwound. But still they were bailed out with taxpayers’ money.
    Whatever regard they [the banks] may claim to pay to the wider concerns of the nation, their policies are dictated in the last resort by the desire to make profits and to secure the value of their own assets.
    That was said by Ben Chifley in 1947 and nothing has changed.

    Yes, we need a financial system but it has gone way beyond its original purpose, which was to support the operation of the market, and has become a market in its own right. Traders buy and sell currencies, not just to make necessary international transactions, but to speculate on a currency’s rise and fall and make a profit. Such speculation may even impact the value of a currency. Is that a valid use of the financial system? — I think not, but that’s only me.

    I do not propose that we should go to a socialist system as that certainly didn’t work, as least as it was pursued in the Soviet Union, but governments should, at the least, be playing the role of arbiter between the market and society and not simply supporting the big end of town because of its economic power. Governments in a democracy are elected by the people and are meant to represent the people but too many seem bent on putting the economy, and the companies allegedly contributing to the economy, first.

    As Eva Cox wrote in a piece for The Conversation:
    … mainstream centrist parties’ economic emphases are struggling to engage voters as their policies are failing to respond effectively and acceptably to GFC-damaged market models.

    A consistent trend is voter concern about public spending cuts and economic priorities that promote markets as the means to cut “excessive” public costs.

    Questions need to be asked about why there is little or no serious discussion on the relative roles of government, markets and communities in delivering goods and services for the nation. [emphasis added]
    The emphasis on the ‘free’ market that arose from the rise of neo-liberalism in the 1980s may have contributed to increased overall wealth but at the cost of greater inequality. Even the IMF has raised concerns that increasing inequality is leading to public distrust in the political process and greater social instability. In essence, the system is failing to support democracy and the people are realising it.

    Is China the modern example we should be following? — a form of guided capitalism. We may not adopt its political system but a system where the government exercises greater control of the economy. There would be an outcry that that is against individual freedom as embodied in the free market but capitalism, in practice, already undermines the individual freedom of the majority as rising inequality makes clear (and according to Piketty that is inherent in the capitalist system).

    I found it passing strange that Catherine Livingstone, President of the Business Council of Australia (BCA), told the National Press Club:
    As it stands in Australia ... the gap between the digital literacy of our young people and that of our competitor nations is increasing.

    If we want increased productivity and participation, we need urgently to embark on a ten year plan to close that gap. [emphasis added]
    I didn’t think we were allowed to mention 5 and 10 year plans: aren’t they something associated with socialist systems? But perhaps now that those systems no longer exist we can talk of such plans without the Cold War political implications. If even the BCA can be talking about 10 year government plans, then there is a case that business recognises that the market cannot provide everything that makes the market work. Governments still have a key role and should be fulfilling that role, not simply dreaming (as our current government does) that the market is capable of doing everything ‘better’ and more efficiently. Without that ‘10 Year Plan’, the BCA is well aware that efficiency and productivity may become historical constructs that we can only recall with fond memory. (It is also of more than passing interest that Bill Shorten’s emphasis on science, technology and maths education in his Budget Reply speech is exactly what the BCA asked for.)

    The Greek situation has, in my mind, brought this tension between capitalism and democracy into sharper focus. But governments are in thrall to the big capitalists and the financial institutions and are yet to acknowledge it. They will not recognise it while they remain blinded by the ‘free market’ philosophy of neo-liberalism, and refuse to see that it is not only the market but also governments and communities (as Eva Cox said) that have a role in ensuring a country gets the goods and services it needs and wants.

    Is it time that ‘democracy’ sought a divorce from this domineering and aggressive ‘capitalism’ so that governments again understand that the ‘demos’ in democracy means ‘the people’, not markets and money?

    What do you think?
    Who is really running the nation? The government or the bankers and capitalists? And where do we, ‘the people’, fit in that? While Syriza in Greece is trying to redefine and reassert the government’s role in the economy, and a similar party, Podemos, is gaining popularity in Spain, should the people of Australia, as Ken suggests, also be demanding a change? Or are most Australians too apathetic to care? Is Labor offering an alternative or not? Ken’s piece raises many questions and we will be pleased to share your views on those questions.

    Next week we return to budget issues when 2353 discusses ‘The $19,990 special’.


    NAPLAN — a guide or a competition


    Most educational institutions in Australia have a ‘tag line’ — a statement that is supposed to be a pithy description of what the entire school community believes in. It isn’t surprising that a lot of the ‘tag lines’ have something to do with recognising the individual talents of each student and working with those talents to develop self-reliance and the ability to cope with whatever circumstances arise in the future. In other words, a lot of educational organisations claim that each student is a unique individual, with recognition made for the different life skills, aspirations and capabilities in their future lives — and is treated as such.

    So to assist the educators in respecting each child as an individual, we as a society make the million or so Year 3, 5, 7 and 9 students in the country sit a standardised test every year. Counterintuitive isn’t it? The testing takes place over thee days (in 2015 the dates were 12, 13 and 14 May) and is called NAPLAN.

    The claim is standardised testing ‘supports good teaching, valuable data and school improvement’. The data is also used on the Myschool website. According to the NAPLAN website:

    NAPLAN is not a test of content. Instead, it tests skills in literacy and numeracy that are developed over time through the school curriculum. Excessive test preparation using previous tests is not useful.
    So what is standardised testing? Wikipedia will tell you that:

    A standardi[s]ed test is a test that is administered and scored in a consistent, or "standard", manner. Standardi[s]ed tests are designed in such a way that the questions, conditions for administering, scoring procedures, and interpretations are consistent and are administered and scored in a predetermined, standard manner.
    Standardised testing has a place in society. Medicine is put through a number of standardised tests prior to release to ensure that the health benefits outweigh any short or long term negative effect. Vehicles are crashed into concrete walls around the world to assess their safety should the vehicle unfortunately replicate the incident on the road with people inside it. Food, drink and many other substances are also tested to reduce or eliminate ill effects. Generally speaking, science knows that if a person ingests a known quantity of a pain relieving medication, it will perform certain actions in the body to give the effect of less pain. It’s the same with food, drink, detergents and so on — there is a certain amount of chemical that is considered to give a beneficial effect with little or no adverse side effects. Modern vehicles with engineered crumple zones and airbags also protect a human’s biology, so they can walk away from a crash that in the past would have caused severe injury or death.

    That our medicine, motor vehicles, food, drink and other substances are subject to standardised testing is to be applauded and ensures our safety. Testing at this level also looks at our biology and how it interacts with external influence — not how our intellect is affected with stimulus.

    If every school student in Australia were being prepared to be a statistician, standardised testing would be a useful method to ascertain if progress was being made. You could also argue that if everyone in Australia was a statistician, there would be a lot of necessary work that wouldn’t be done — and we probably don’t need more statisticians in any event.

    Australians have a large variety of roles and obligations. While the country does need statisticians, we also need farmers, transport operators, sales assistants, office workers, teachers and a host of other professions. You might be able to argue that we also need politicians — after all ‘someone’s got to do it’!

    Although we need a variety of people with different skills to run our society, there is probably an argument for the imposition of a standardised test across the country to determine that people can read, write and have a degree of numeracy as they leave school. Which would be fine if that’s all it was used for.

    A few paragraphs earlier, I mentioned that the NAPLAN results are being fed into the school data that are freely available on the Federal Government’s Myschool website. Humans are a competitive species; accordingly, some will look for any advantage to give their children a perceived competitive edge. While the Myschool website is not supposed to be a ranking table

    … the results have now become an informal selection test, taken into consideration by schools when accepting new students. For another, schools and parents have come to regard the test results as an absolute measure of education delivery.
    The logic that your child will obtain a certain result because similar results were achieved in previous years is fatally flawed as it doesn’t take into account the very real probability that different cohorts of students have different abilities and skills, despite the educators teaching to the same script. Again, each person is an individual. If for example, the school that Einstein or Steven Hawking attended was subject to the NAPLAN process, it is likely that the result would be skewed as the particular cohort went through the school; others would have excelled as well due to the interaction between Hawking or Einstein and those around them on a daily basis.

    If we are testing mathematical ability, standardised testing may have some validity — after all if the answer is 42, it is what it is. The only variable is if the student showed how they worked it out, or guessed the answer. While numeracy is tested, so is the student’s reading, writing and language (spelling, grammar and punctuation). Writing on the Fairfax website, Emily Frawley suggests:

    NAPLAN's persuasive writing tasks do not showcase the skills teachers value nor those students need to master.
    There would be a great deal of difficulty in ensuring standardised marking when it comes to persuasive writing for a test administered across Australia. While there would have to be a moderation system in place at the end of the day, most students would have a result based upon one educator’s view of their writing ability. Those that write professionally (and amateurs like me) will tell you that, while there is considerable thought put into each piece of persuasive writing, each reader will approach the writing differently, taking a different message from the text.

    So do teachers teach what the student will need in real life or do they teach for the test? While you would like to hope that the NAPLAN was used in the way it was intended, evidence would suggest that some believe it is the be all and end all of education in Australia. The government body that oversees NAPLAN does have some practice papers on the website but will not release past papers (claiming copyright). There are however plenty of others that will step into the breach when there is a perceived need in the market, as this discussion on the Whirlpool Internet forum shows.

    While schools can use the NAPLAN data to improve teaching practices for their students, parents have the right to withdraw their children from NAPLAN testing. The ACT Education Directorate is concerned about the high number of parents doing so in the ACT (they claim it is due to a philosophical objection). The ABC however suggests there could be other factors at play here. The High School Principal’s association has called for the removal of NAPLAN data from the Myschool website to reduce the possibility of the NAPLAN results being used as the sole determinant of future schooling by some parents.

    Perhaps the Year 3 teachers at St Paul’s Primary School in Gracemere, Queensland, have the right approach. It has been reported widely that they gave their students the following note:

    The NAPLAN Letter

    To our dearest students from Year 3,

    Next week you will sit your first Naplan test. Before you take this test there is something very important for you to know.

    This test does not assess all of what makes each of you exceptional and unique.

    The people that score these tests don't know that some of you love to sing, are good at drawing or can teach others how to use a computer program. They have not seen the way that some of you can dance with grace or speak confidently to a large group. They do not know that your friends count on you to be there for them when they are sad. They do not know that you participate in sports, help your mum and dad or that you play with your little brother, sister or cousins. They do not know that you are caring, thoughtful and that everyday you do your best. Because these attributes cannot be tested.

    The scores you get from this test will tell you how you did on that day, but they will not tell you everything. They can't tell you that you have improved on something that you once found difficult. They can't tell you that you brighten up your teacher's day. They can't tell you how amazingly special you are. So come to school ready to do your best for the Naplan test and remember there is no one way to 'test' all of the wonderful things that make you, YOU!

    Kind regards,

    Mrs Egan, Mrs Schluter and Miss Bailey
    While the note is alleged to be based on a similar item some years ago that originated in the USA, it is a sharp reminder that all the million or so students that recently sat the NAPLAN program in 2015 do have talents, skills and the right to the education they need to be their best. We can’t all be rocket scientists (or statisticians); not all of us have the skills or the desire. We all do have the skills and abilities to be an effective member of our community and wider society. Testing is probably a part of the process. Isn’t it better for well trained professional teachers to assess the capabilities of each student in their charge and implement strategies based on the individual teacher and/or their colleagues’ experience to bring out each students best?

    What do you think?
    While NAPLAN has become an integral part of our education system, is 2353 right in suggesting we are misusing it? Did the government make a mistake when it included the NAPLAN data on the Myschool website? Let us know what you think about NAPLAN.

    Next week Ken looks at the Greek debt crisis and sees embedded in it a battle between capitalism and democracy in his piece, ‘The unhappy marriage of democracy and capitalism’.

    Government budget trickery


    I would like to state upfront that I already had the word ‘trickery’ in this title before Bill Shorten used it in his Budget Reply speech. I could say he stole it from me but I suspect he thought of it himself. It is such an appropriate word for this budget.

    One thing Bill Shorten didn’t mention was the blatant strategy adopted by Abbott and his minions in the lead-up to the budget. First there was the approach that the budget would be ‘dull’ and ‘boring’: the government basically trying to tell us ‘nothing to see here’, forget about it and just go about your normal business. They were initially telling us that, after last year, this year’s budget would be a do nothing budget that we could ignore.

    Then there was an apparent change. They had three new words: that the budget would be ‘reasonable, measured and fair’, that it wasn’t quite something to ignore but nothing to worry about, something that would not raise our hackles. And after the reaction to the previous year’s budget, this one would be ‘fair’. (I will come back to that word.)

    Then came the final stage in their three-part plan. (Why do they have a fixation on ‘three’?) As you are aware the government began making announcements about budget measures prior to budget night but they were the ‘positives’: such as the child-care package and the benefits of the changes to the pension, including dropping the previous idea of linking pension increases to CPI rather than growth of the average wage. At that time they weren’t saying very much about how the new measures would be paid for — although they occasionally mentioned, when pressed, that there would be off-setting savings, there wasn’t much in the way of detail regarding those savings.

    They had learned the lesson from the previous year when their mantras of ‘debt and deficit disaster’ and ‘Labor’s mess’ had failed to convince people that the draconian cuts were necessary. This time they were trying to influence our mind-set going into the budget: rather than focusing on a negative, they wanted us to see the positives that would be announced and were making sure we noticed by announcing or leaking them in advance. We were being softened up and, to my mind, it was so obvious and contrived (partly because it was such a stark contrast to last year) that it was almost laughable. You could see that it was planned, that ministers were still being given their daily messages, the lines they needed to follow at ‘door stops’ and interviews: first, ignore the budget; then don’t worry about it, it will be measured; and finally, ‘gee whiz’, look at this, look at the offer we have for you. Do they really think the voters are so stupid as not to see through that?

    After last year when their budget was widely lambasted as unfair, this year they decided to come out fighting and try to control the debate around that word ‘fair’. Now they were claiming that everything about this budget was ‘fair’. Again they were trying to shape our mind-set to their interpretation of the word and not let it be controlled by the Opposition and the media. Rather than being a word that could be used to attack their budget, this time they were trying to attach it in our thinking to what was to come on budget night.

    While it may have been ‘fair’ to reduce the asset limit for the part-pension, they took fairness too far when they claimed that women receiving both government-paid and employer-provided parental leave were ‘rorting’ the system. Hockey even refused to rule out that it could be ‘fraud’ when Laurie Oakes used that word. At the very least, it was ‘double dipping’. The new proposal was that the stay-at-home parent (they seemed to have forgotten that men can also claim parental leave) could access only one form of parental leave and that this was ‘fair’ because we all know that double dipping is unfair (unless, of course, you are a board member of four or five companies and government authorities/inquiries/businesses). As others have pointed out, when the current government system (based on the minimum wage) was introduced by Labor it was designed to operate with employer-provided schemes to allow people to top up their income or to extend their period of leave: in other words, it was a compromise proposal to support parental leave without becoming too expensive for government (as Abbott’s gold-plated version would have been — which was one reason it was abandoned; the other being that he was asking big business to fund it with an extra 1.5% tax).

    To further undermine their argument, it turned out that some Liberal ministers’ wives had used both. They tried to justify it by saying that the current system allowed it — but was that ‘fair’? It was double dipping! They told us so. If they already knew it was double dipping, why didn’t they act on principle and refuse the additional support?

    On budget night, they finally made clear that their new child care package would be funded by major changes to Family Tax Benefit Part B. This was something left over from the previous budget that had not passed the Senate but now it was being ‘sugar coated’. While people may like the new child-care package, they won’t get it unless the savings measure is passed by the Senate — in plain language, a bribe. Of course, it is also tied to the change to parental leave entitlements. People will be forced to accept the new child-care package because they will be forced back to work earlier if they can only receive the minimum wage for a maximum of 18 weeks.

    These approaches are justified by the government (by Scott Morrison) in terms of being ‘workforce’ measures. They are not about supporting people (welfare) but only supporting people who are in work or seeking work. They are aimed solely at improving workforce participation.

    That fits with the government’s philosophic approach that focuses on individuals and families and their role in the economy — ‘communities’ do not exist (it was the same under the Howard government). In Hockey’s budget speech the word ‘community’ (or communities) is used in only three contexts: ‘regional communities’ (probably The Nationals’ influence), assisting jobseekers where ‘community workers’ are mentioned, and in relation to terrorist threats to ‘our communities’. Families are mentioned 11 times. For the Liberals, a community cannot exist in its own right but only as an agglomeration of families and individuals. There is no such thing as ‘community spirit’ because that is counter to the spirit of ‘individual self-interest’ that is the basis of their philosophy and, they believe, of economic growth. You will rarely, if ever, see a Liberal government of recent ilk providing funding for ‘community’ services — only services for individuals and families (even if they are delivered by ‘community’ organisations).

    Aside from the changes to Family Tax Benefit Part B, there are other measures in this budget that are left over from the previous budget. The government didn’t mention them but Bill Shorten, state premiers and media commentators did. The big one is the reduction in funding ($80 billion) to the states for schools and hospitals over the next decade. Although the premiers will be meeting with Abbott at a ‘COAG retreat’ in July to discuss that, the savings from the measure are built into the forward estimates. That is one of a number of matters that make a mockery of Hockey’s claim that the government has established a ‘trajectory’ to a surplus. If the government has to find at least some of that money to meet state demands, surplus projections move ever further into the future.

    A future surplus is now almost entirely dependent on real GDP growth and the commentators have suggested that the estimates contained in the budget are optimistic: they are higher than the current estimates of GDP growth by the Reserve Bank. There is nothing inherently wrong with allowing for GDP growth except when it is optimistic and future revenue does not match the forecasts based on that optimism (see my piece ‘Are budgets worth the paper they’re written on?’).

    The other aspect that will contribute to better future revenue for the government is ‘bracket creep’, when pay-as-you-go wage earners move into higher tax brackets as their wages rise. Talk of reducing taxes to overcome the effect of bracket creep has disappeared for now in favour of achieving a surplus.

    Neither of those was spoken about by the government and yet they underlie its future projections. They could possibly have gotten away with that if they hadn’t made such a hue and cry about the ‘debt and deficit disaster’ the previous year. Last year the government had to fix ‘Labor’s mess’ — which, they said, comprised high spending and growing debt. This year that doesn’t seem to matter. No wonder people are left wondering which is true — one budget must be based on a lie but which one? Or are they both based on lies, just different lies!

    Associated with that, they again rolled out, when interviewed after the budget, that they had inherited a $48 billion deficit (as I recall, it was $46 billion — I am not sure where the extra $2 billion has come from, other than the rubbery figures of Hockey-nomics). That figure has been disproven previously. The actual deficit at the time was $30 billion: the additional $18 billion (or a major 60% increase in the deficit) came from decisions made by the Abbott government after it came to office and before it issued the 2013 MYEFO. Their decisions also added to future deficits and debt by abandoning Labor’s revenue measures (see ‘Abbott continues to tell porkies’).

    I will concede that on the ‘plus’ side, the government realised at last that the economy was faltering badly (that it wasn’t just Wayne Swan’s fault) and it needed to do something to stimulate it — hence the tax reduction and accelerated depreciation for small business. Unless the economy grows, and business invests and wages rise, the government’s revenue will remain in the doldrums. So on this side of the equation they have their new catch-cry: ‘have a go’. It should be noted, however, that one of the measures it had previously removed was Labor’s accelerated depreciation scheme: it wasn’t quite as generous as the current proposal but it was built into the system whereas Abbott and Hockey’s proposal is only for two years — what happens after that we don’t yet know. Might I suggest, however, that the $5 billion now for small business will become the same $5 billion for the child care package when it is introduced in two years’ time — that’s a neat trick if they can pull it off!

    Now just a few figures (after all we are talking about a budget). First it is interesting that the main income figures are ‘cash accounting’ but the main spending figures are ‘accrual accounting’: there are tables that allow one to match the systems but why the main figures are done in two different ways I don’t know. (A clue to the two accounting methods in the budget documents is contained in the words: if it refers to ‘revenue’ and ‘expenses’, then it is accrual accounting, but if it refers to ‘receipts’ and ‘spending’ or ‘payments’, it is cash accounting.) Following my piece, ‘Are budgets worth the paper they’re written on?’, I will, for consistency, stick with accrual accounting figures.

    For 2015-16 they are estimating revenue of $405.4 billion which is more than $21 billion above the estimate for this year: this year’s estimate has come down from $411.6 estimated in 2013-14, to $391.3 billion estimated in the original budget, to 385.9 billion in the MYEFO and now $384.1 billion. Revenue has come in below the budget night estimate every year since 2010-11, so why should revenue now jump by 5.5%? There is no apparent answer other than the government hoping it will based on a few ‘green shoots’ as Hockey called them. This positive approach seems to be a result of the government finally coming to the realisation that continued negativity, although perhaps good politics, was having an adverse impact on business and consumer confidence and thus also impacting the economy — so from a false sense of doom and gloom they have moved to a false sense of optimism after successfully creating doom and gloom.

    Government expenditure for 2014-15 has also increased above the original budget night estimate: from $414.8 billion to $420.3 billion. No doubt that can be blamed on the Senate not passing all of their ‘savings’! Expenditure for 2015-16 increases to $434.5 billion, an increase greater than just the concessions for small business but in the budget they claim:

    … new spending measures will be more than offset by reductions in spending elsewhere within the budget …
    The final expenditure figure does not seem to justify that claim.

    Their continued claim to be a low taxing government is also undermined by the fact that taxation revenue in 2013-14 was 21.4% of GDP but has risen to 21.9% in 2014-15, rises to 22.3% in 2015-16 and rises each year to reach 23.4% in 2018-19 (that is only taxation revenue). Total revenue rises from 23.5% of GDP in 2014-15 to 25.2% in 2018-19.

    Overall, as Jonathon Green wrote:
    There is a purity about the play of politics in this budget week. Nothing is, but what I say it is. I can be a big spending, big taxing government — verifiably so — and yet claim that the opposite qualities are in my very marrow.
    It is very much a Humpty Dumpty budget because it does things that they say they do not do and it is tricky because even when they are doing something it is not what it appears.

    What do you think?
    Following the budget, the Fairfax-Ipsos poll put voting intention at 50‒50 although both Newspoll and Galaxy suggested the budget had not made any difference to the government vote. Do you think people have seen through the budget? Should the budget have done more to boost the economy? Or, as many commentators have suggested, was it just a ‘political’ budget?

    Come back next week when 2353 considers the NAPLAN test run in our schools and asks whether it provides a guide to help teachers and schools or creates a competition between schools.

    Hope for the homeless


    Throughout the world there are people who ’sleep rough’ every night. For a few, that is the way they choose to spend their lives; for the majority, however, the habit is not one of choice or desire — the choice is made for them due to circumstances relating to employment or their personal lives. While Australia is not immune to this social problem, generally those in Australia who are sleeping in the park, under the bridge or in their car do not suffer the climatic extremes as those who ‘sleep rough’ in other parts of the world.

    Homelessness or living in cars and so on is not just a problem because it ‘makes the place look untidy’: it is an indicator of how society looks after its members who have usually hit the bottom — and are looking for some help to re-establish their lives — frequently as a result of circumstances the person had no control over. A network of organisations attempts to assist those who are homeless as well as those who through misfortune are likely to become homeless. Most of the organisations that provide this service in Australia are owned and operated by the non-government sector (some of these organisations do receive government support but nowhere near enough and most have suffered cuts since the Abbott government came to power). As you would expect there are organisations in other countries that perform similar activities — some of which use a counterintuitive process with great success thanks to government funding.

    There are a number of practical issues when you are in a position where you don’t have a ‘usual’ address, a bed to sleep on at night and all that is represented by having a roof over your head. Probably the most important one is there is no certainty in your life — you literally don’t know where your next meal is coming from, if you will be safe if you do fall asleep, where you will find a place that is sheltered that evening and what tomorrow will bring. In addition, your family does not know where you are; services such as Centrelink require an address to ‘put you on the books’ and access to a computer to receive correspondence; and employers will react to you far more favourably if you take some care with your personal hygiene (a bit hard if you don’t have access to running water) as well as having conventional contact details. If you do manage to scrape together enough for the bond and rental for a property, the real estate agent, under the guise of looking after the interest of the property owner whom they represent, will generally require a reference from a previous landlord prior to renting you a property to live in — a bit hard if your previous address was the third park bench from the light pole.

    Anglicare recently published its 2015 rental affordability snapshot as a continuation of the process it has followed for at least the last four years. In 2015, the survey looked at 65,614 properties across Australia and measured where a tenant in the bottom 40% of household income distribution would spend greater than 30% of their disposable income to rent a place to live — the definition of ‘housing stress’. The results are frightening. From the 65,614 available properties:

    • 3.4% of properties met the affordability requirements of a couple who relied on the age pension
    • 0.9% (or 600 properties) met the affordability requirements for a single age pensioner
    • 10 out of the 65,614 (that is not a typo) properties would be affordable for a single person on Newstart; and
    • 8 (again not a typo) properties meet the affordability requirements for a single beneficiary of Youth Allowance.
    It doesn’t get much better if you do have a job. Anglicare calculates that around 2.3% of the rental properties available at the time of the 2015 survey would be affordable if you are single and living on the mandated minimum wage; which is slightly over $33,000 per annum. Should you be a part of a young family comprising two adults on the minimum wage and receiving full child support and child care payments for your two children, still only somewhere around 24% of the properties surveyed would be suitable for you.

    Clearly if you are in any of the situations above, you are probably reading this on a computer you don’t own — as discretionary expenditure such as internet connections, electricity supply, car and contents insurance, car repairs and, possibly at times, even food are all dispensed with so that you can retain that roof over your head. Again according to Anglicare, around 65,000 Australians do not have the financial security to ensure that they will have sufficient food each day.

    The reality is that Australia is certainly not the worst place in the world to be homeless. Our climate in large population areas is rather benign in comparison to some parts of Europe, the USA and Canada, where some major population centres have similar climates to Mt Buller or Perisher. Despite never having been fortunate enough to travel to New York City or London, I am certainly aware of the stories of people that effectively live in subway stations and similar areas as they are (relatively) warm and sheltered — until they are ‘befriended’ by the relevant city’s transport police.

    Like in Australia, various government and non-government organisations attempt to help the homeless across Europe, the US and Canada. Some do it better than others. In addition to trivialities such as food and shelter, in cold climates across the world people are also responsible for heating their homes; the purchase of warm clothes as well as additional food to stay warm. If there is a constant battle to find shelter, clearly other requirements for life take a back seat. As an example, a CBS Television Station in Minnesota (WCCO) highlighted during April 2015 that their state government reported 43 people died during their winter where exposure to cold was either fully or partly responsible for their death. While not all these people were homeless (one died trying to rescue another person from a lake), the link does look at the fate of some homeless people. Apparently this is an improvement on previous years.

    Around 10 years ago in Utah, the Republican Governor was convinced to try a radical plan to reduce homelessness in the state — give them a home. The charmingly named Desert News reports that it saves money!
    In one of the leading examples around the nation of counterintuitive thinking, Utah has been giving away apartments to the homeless. It is a program that has actually saved Utah money. For each homeless person, estimates for emergency medical bills alone are more than $16,000 a year on average. Giving them an apartment costs about $11,000. And it has drastically reduced the need for emergency medical visits.
    Outside of medical, various other costs, including legal and justice system costs are estimated to add another $20,000 to $30,000 dollars a year (depending on the location). Utah’s housing, and support for the individuals once they are residing in a home, cuts those total costs by over half, all-in-all, from about $19,000 a year to under $8,000.
    Utah wasn’t the originator of the idea. Again the Desert News reports:
    Designed by the Utah Department of Workforce Services, the program was modelled after the “Housing First” program pioneered in New York City more than 20 years ago. This approach involves putting housing ahead of all other concerns. When followed, alcohol consumption rates have been found to go down, along with drug usage and public nuisance behaviour. Each year some 10 percent leave the program and become fully independent, and only 6 percent are ejected from the program. The rest continue to work year by year with their caseworker.
    The Washington Post recently discussed the origins, benefits and economics of the program and celebrated its success in one of the USA’s most conservative states (Utah is the home of the Mormons). Other US states such as Florida and Wyoming also operate similar programs, so the experiment is repeatable.

    If a person has a home, they are in a better position to access government services, a job application is easier (as personal hygiene is better and the potential employer has a contact point) and a person can make plans for the future. The Australian Government is in contrast withdrawing money from social service providers. Conservative states in the USA demonstrate that the current Australian Government’s policy is deeply flawed and doesn’t help anyone. At the same time, the Abbott government — to the detriment of our economy — supports processes such as negative gearing, novated leasing and capital gains.

    In Joe Hockey’s world, the homeless are ‘leaners’ as they do not contribute to society. The reality is that those that are ‘sleeping rough’ in Australia are not taking much from society either. It’s a pity some of those that Hockey would define as ‘lifters’ are shifting profits offshore or structuring their affairs so that they make a tax loss (which are all still legal activities). The example to Australia from New York and Utah’s ‘homes for the homeless’ program would seem to suggest that if those who fall to the bottom of society are given some support rather than derision, they become overall contributors to society — at the same time as they are lifting themselves out of poverty, danger and risk. All it takes is someone to give them a chance.

    What do you think?
    As he did in ‘The “trickle-down” effect’, 2353 presents us with an alternative approach that is already being shown to work. Why can’t governments see the benefit of spending money now for longer term benefits — and savings? Should Labor be picking up such approaches and showing the shortcomings in the current approach? Please let us know what you think.

    Next week Ken returns with his view of the government's budget, including the way it began selling it before budget night: 'Government budget trickery'.

    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’.