The economics of debating

Economists will tell you that they practise a science in a similar way to chemists, biologists and physicists. If certain inputs are made to solve an economic problem, there will be a certain result. Other scientists also use the same process, a chemist will tell you if you add certain quantities of two chemicals together, it might change colour, smoke or (everyone’s favourite) create an explosion. Others who are less enamoured with economics will suggest that if you put 100 economists in a room and give them a problem, they will come up with a solution. When the solution doesn’t work (because it usually won’t), the same economists will give you 150 reasons why it didn’t.

Really, economists get a bad rap. There will be those of us who remember the time years ago when weather forecasters plied their trade only to receive general hilarity from the rest of the country. The science has improved and, while weather forecasters don’t get it right 100% of the time in your particular bit of Australia, on a regional level they are usually pretty close to the mark. Economists believe that the market will always react rationally. The problem is that people are by nature irrational; their personal beliefs or circumstances will normally overrule ‘rational’ decision-making.

For example, most people who find $500 on the ground at a shopping centre would hand it in to the centre management or police, rationalising that $500 is a substantial sum of money to have lost. Only a minority would pick it up and keep on walking, rationalising that their need was more important (without obviously knowing the needs of the person who lost the money). Most would at least consider the circumstances around pocketing the money before acting rationally. The temptation of the minority to take the money would overrule the ‘rational’ decision-making process.

A similar behaviour pattern can be shown in the current election campaign. Let’s assume for a minute that there are 24 million people living in Australia. If you didn’t watch the ‘Leaders Debate’ last Sunday night, you’re in good company. Something like 23.5 million of us didn’t. Maybe it demonstrates the economists’ argument that people generally make rational decisions.

Surely a large majority of voters would like to hear the plans and aspirations of each leader for the future of Australia? The ‘Debate’ would be a perfect opportunity for some statements and (well) debate about our collective future. To put it into the basest of terms — why does Turnbull or Shorten think his side better than the other side? The ‘Debate’ didn’t include the Greens and Nick Xenophon. It would be fair to say they have a reasonable probability of influencing the way the ALP or Coalition govern from July 3 until hopefully sometime in 2019, so surely their views should be considered as well.

If those who watched the ‘Debate’ thought there was going to be a common interest in explaining policies and principles across the political parties in Australia they would have been sorely disappointed last Sunday night. Most of the media called the ‘Debate’ a draw. The Conversation’s Michelle Grattan called the ‘Debate’ a disappointment where ‘both men did a disservice by resorting to scares and simplistic attacks during their encounter’ while Fairfax’s Mark Kenny wrote ‘Sunday night's election debate did little to animate a fresh image for Australia nor even to lift a surprisingly formulaic election campaign from its desultory torpor’. Other media outlets were similarly damning in their assessment.

Those who chose to watch a vision actually being fleshed out were probably viewing Channel 7’s House Rules. Other choices included a show where people are supposed to recite their lines — The Voice on Channel 9. Probably the most ironic show on television last Sunday night at the time of the Debate was Seconds from Disaster which was on ABC2. Despite Seconds from Disaster being on a ‘digital’ channel with a smaller audience than the ‘Debate’, it was probably the better choice — at least they were investigating why a disaster happened, rather than watching one happen in front of their eyes on ABC’s main channel.

It is a sad reflection on Australian political parties that they are so gun shy of a bad headline that they won’t let their potential leaders debate who is the better option to run the country. The Guardian’s Lenore Taylor discussed the format, which was agreed prior to the debate occurring:
The format — no interruptions by the questioners or the other prime ministerial candidate — meant that despite the best efforts of the panel, even those voters not lured back to the more dramatic Sunday night offerings on the commercial television stations would have finished the hour-long debate not much the wiser.

Neither leader really won the encounter, because it wasn’t really a contest, but rather an opportunity to deliver speaking notes in stereo.
It seems that the personality of people like former PM Hawke is a foreign concept to today’s politicians. Prime Minister Hawke and his Treasurer, Paul Keating, over a period of a decade, completely restructured the Australian economy. It was their work that allowed Howard and his Treasurer Costello to be able to introduce a significant amount of middle class welfare while ‘banking’ surpluses. Certainly the mining boom helped prime the economy, but Hawke and Keating gave them the tools to collect and manage the income they received.

While Hawke was prime minister, his exploits were well known and in comparison to today’s ‘perfect’ role models. Hawke had an ‘interesting life of beer, women and song. A considerable section of the population really didn’t approve of Hawke’s ‘private’ life prior to politics but most admitted that he had some personality. Turnbull and Shorten may be seen on the nightly news with a beer sitting in front of them but it is infrequent to see them actually drink any of it and that’s about as risqué as it gets. Personality is limited to the standard stump speech with daily variations to demonstrate that the prime ministerial contender is actually where the television footage seems to place him at the time rather than standing in front of a ‘green screen’ at a studio in one of our large cities.

So we have a number of planes (and buses) running all over the country doling out a few dollars here and there to demonstrate to people that those allegedly running the joint haven’t forgotten about them. For example, on the day this article was written, Turnbull (if re-elected) was going to allocate $20million to some Sydney researchers to enable them to identify earlier cancer in children. Worthwhile? — certainly: however, it could be suggested that this would have happened anyway regardless who was in government at the time.

At the same time Shorten was ‘slumming it’ in Cairns announcing (if he is elected) funding for protection of the Great Barrier Reef. Again, highly worthwhile but almost certain to happen anyway.

In both cases, as they both ‘believe’ in the effects of climate change you’d have to ask how much carbon was released and dollars were expended in getting everyone to a pretty backdrop (either a research lab or out on the reef) to make the announcement. Why are we force fed these thematic announcements that somehow are supposed to demonstrate that Turnbull cares about research to a greater level than Shorten — and conversely Shorten cares more about the reef.

The ongoing theme of this election so far has been the size of the ‘black holes’ that various funding announcements have created in the country’s budget. In reality, the ‘black holes’ don’t matter. We started off talking about economists and how their predictions usually are incorrect because circumstances change. Without disparaging the work of the ‘beancounters’ in the Treasury and Finance Departments, the real surplus or deficit for the financial year is announced some months after the event. What it’s going to look like next year is anyone’s guess, let alone ten years’ time.

To paraphrase a former onion eating Prime Minister, stuff happens. Financially the ‘stuff’ has an effect on the economic plan (or Budget) announced usually in May to the fascination of some and the snores of others. To expect a political party (even with help from Treasury and Finance) to understand all the variables in a policy or program that hasn’t been implemented is fantasy. Furthermore, to expect considerable accuracy around what is going to occur in ten years’ time is lunacy. To bring this back to your household economy: you have calculated that in two years you’ll be able to take the kids to Disneyland and figure you need $10,000 to do it. So things are plodding along nicely until the fridge blows up three months into your plan and then a further six months on the transmission in your car fails. The funds you are saving now pay for a new fridge and car and Disneyland is now three or more years away. Yes, the numbers are bigger in the Australian economy, but so are the inputs.

If the polling is correct, the election will be a close run thing. The reality of the 2016 election is that neither of the presumptive prime ministers is likely to obtain a large majority in both houses of parliament, accordingly they will have to convince another political group to work with them to pass legislation and provide certainty in matters of supply and confidence. Various minority governments around Australia have demonstrated they are much more efficient and consultative than Abbott/Turnbull’s parliament has been to date. A minority government (or one with a third group having the balance of power in the Senate) really isn’t a bad outcome and hopefully stops the excesses of absolute political power such as ‘Workchoices’ or sections of the 2014 budget becoming law.

Having said that, both Turnbull and Shorten have to convince others they can win and win both houses of parliament. It seems that the way they are doing this is by playing ‘me too’, by making large announcements over miniscule funding issues (Australia’s GDP is around $1.5 trillion so announcements that commit millions really aren’t that ‘big’) and flying around the country to be seen in areas their party machine think are liable to be gained or lost.

There is a lot of cost (hiring a 100 seat jet for each party isn’t cheap), lots of happy snaps but no actual benefit. You can’t help but wonder if one of the leaders stopped the set piece daily round of flying into some poor unsuspecting location with their entourage, making the announcement, doing the pre-planned ‘doorstop’, possibly walking around the local business area and repeating ad nausem, they might actually contribute something to the discussion. Then there might be some interest and substance instead of what is fast becoming Malcolm and Bill’s respective road trips.

Another common saying is that if you’re not making mistakes, you’re not trying hard enough. On that basis, there is clear evidence that neither leader is really trying. As a result, most electors are acting rationally and going along with their lives, to the detriment of this country in the future.

What do you think?
Let us know in comments below.

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2353NM, 31 May 2016
Charles Dickens wrote a book called Oliver Twist. It is undoubtedly a classic. The book has been the subject of numerous reviews, movies and is frequently a subject for study in English Literature classes. Perhaps the best known section of the book is where young Oliver asks the Master of the Workhouse for ‘more’.

The poor, disabled and incapable who were unfortunate enough to live in what is now the United Kingdom from the 1700s …
It’s all their fault
2353NM, 1 June 2016
Have you ever noticed that politicians in general have a great ability to blame others? As an example, here Labor is blaming Prime Minister Turnbull (as he was the former communications minister) for a $15 billion cost blowout in the construction of the NBN. Here’s Turnbull in 2013 accusing Labor of the same thing (only the value is $12 billion in this case). Let’s put this simply — they both can’t be right!

The two major political parties have a number …
What economic plan?
Ken Wolff, 3 June 2016
Prime Minister Malcolm Turnbull declared that GDP growth of 3.1%, reported by the ABS on 1 June, showed that his plan for the economy was on track:
You cannot succeed without a clear economic plan. Everything we have is encouraging companies to invest, to employ.


It’s all their fault

Have you ever noticed that politicians in general have a great ability to blame others? As an example, here Labor is blaming Prime Minister Turnbull (as he was the former communications minister) for a $15 billion cost blowout in the construction of the NBN. Here’s Turnbull in 2013 accusing Labor of the same thing (only the value is $12 billion in this case). Let’s put this simply — they both can’t be right!

The two major political parties have a number of differences in their policies, history and generally their philosophy on life. For the purpose of this discussion, it’s probably valid to suggest that parts of each party’s policy on any specific issue are genuinely useful but other parts of the policy look after the history and philosophy of the party rather than the common good.

Recently I took my kids to see Zootopia at the cinema. It is what you would expect to see from a kids’ movie from Disney, really well done animation, a reasonable story line, some ‘humour’ for the parents as well as the kids and, of course, a moral to the tale. Without giving away the plot completely, in a world where animals live in a civilisation like ours there are of course little tensions: in this case between the predators (lions, tigers etc) and the prey (sheep, rabbits and so on). The first rabbit to try and join the Police Department, which is predominately staffed by predators, is met with some difficulties and finally overcomes them through hard work and a lot of perseverance. Sure, the rabbit has self-doubt and at times seemingly insurmountable problems, but she finds a way to overcome the difficulties and eventually rises to the top. Hence the moral, if you work really hard and take the opportunities that are presented to you, you will achieve your aims.

Back in real life, people pay small and large fortunes to try and improve their lifestyle: it could be to make themselves fitter, improve their mind, improve their financial position or even to try to find a ‘soul mate’. To meet the demand there are a multitude of people and organisations that are prepared to ‘help’ you achieve your aims, usually at some cost and sacrifice to your time, wallet and current usual routine. While there is an element of dodgy behaviour by some in these industries, a lot of suppliers are good at what they do and do produce the results they claim to be capable of.

If we talk about making you fitter (the implication being that you would also be healthier, live longer and so on), gyms seem to be the current fashion. Gyms in general promote that if the participant works to their individually designed program, which over time encourages increases to the time exercising as well as the effort expended (heavier weight or more repetition), the participant’s goal of being a better person is achieved and they can then move mountains (probably not literally but you get the point). Weightwatchers and similar organisations work using the same methods, weekly motivational events with a somewhat competitive process around actual weight loss since the last meeting attendance — those who lose what is considered to be a healthy amount each week are congratulated for their work while those who fail are given time for self-reflection.

Self-help classes and literature are a dime a dozen. The premise here is that the participant is not a worthless person but does add value to not only their life, but the lives of those around them. It is usually a gradual process where the participant is exposed to literature, lectures or ‘one on one’ meetings that promote the concept that each person (including the participant) is a valuable member of the community and can overcome whatever their immediate problem is. Of course if a person has been told for years that they are not worthwhile, the self-help process may take years but still, if the program is followed, the participant should believe they are capable, productive and valued at the end of the process.

There are thousands of avenues available to potentially increase personal wealth and surprisingly a lot of them are legal. While this isn’t the place to discuss them, negative gearing and the use of tax havens (if you already have a lot of wealth) are popular conversation topics at present. There are also schemes that involved multi-level marketing, working a second job, as well as the usual range of books, lectures and methods promoted on line, through the real estate industry, share brokers, and so on. Again each of them has a plan that if a participant strives to complete the program and maybe foregoes that annual trip overseas to put the money into an investment, you will end up wealthier than when you start.

Everyone has probably seen the advertising for companies such as eHarmony, RSVP and so on: they all promise that you will meet your ‘soul mate’ provided you play by their rules (and pay the money of course). Generally, there is a listing of people who ‘match’ the participant’s personality profile and through communicating with the suggested matched people, a strong and long lasting partnership will develop. However, participants are expected to complete a personality profile and actively manage their membership to achieve success.

Regardless of the perceived improvement need, there are two recurring themes here. The first is that there is some work to be done. If someone going to a gym for six months can now lift an additional 40 kilos repetitively, it’s progress towards an objective. In a similar way, if a person with issues regarding their self-worth starts to work out why they loathe themselves, it really is progress.

The second issue is the sacrifice needed to get the results. They person going to the gym is probably not eating and drinking the same ‘comfort’ items that they used to consume over and above the continuing gym membership fees, while the person with self-worth issues is probably being assisted to process a lot of hurt and anger from issues that occurred in their past.

There is a point to this article — and here it is. If we teach our kids that they can achieve anything they want provided they put the work in, and there are probably millions of groups that will assist you and me to rectify some perceived issue that we have, why on earth do we accept the argument that the fault for [insert problem here] is solely the result of the ‘other’ side of politics?

Think about it. Zootopia tells our kids that they can be like Judy Hopp, the rabbit that wants to become a Police Officer; Weightwatchers (and similar programs) can show people how safely to take 60kg from their weight (with the resulting physical and mental good that come from that); people can be taught to treat themselves as a worthwhile member of the community; there are financial strategies that will increase your wealth to an extent provided you stay within the rules laid down by the authorities; and yes, eHarmony and RSVP do produce partnerships that last until ‘death do they part’.

Yet we started this article with an example of both of the major political parties blaming the other for an adverse outcome in a program that was seen to be in the public good. Labor’s NBN and the Coalition’s NBN are really two different animals. The Labor plan was to connect most Australian dwellings directly to a fibre-optic cable that at the moment could be used for fast internet and phone communications (and who knows what else in the future). The Coalition plan is for partly fibre optic cable to junction boxes on street corners, then existing copper cable to the dwelling; other parts of the system would use upgraded existing cable-television cable generally strung from power poles or in the same pits as the power cables in newer areas. It is slower and potentially cheaper (as there is less new work involved) but the maintenance costs are higher as the junction boxes need electricity to operate and the copper/cable TV cable is not new (with a greater potential to fail due to age). So they are not directly comparable in any case.

To be fair, Labor started the NBN journey and in all likelihood decided to make the ‘headline’ cost of the work the option where not much goes wrong – it makes sense, that’s the cheapest option. However, as we all know, Murphy was an optimist and things do go wrong; the hoped for cheapest option inevitably doesn’t happen. When the Coalition came to power in 2013, part of their platform was that the country could not afford Labor’s NBN, so they ‘reviewed’ it and changed it. Regardless of the benefits of each party’s plan and the cost differences, it is pretty unlikely that the Communications Minister has any more input to the day to day construction operations of NBNCo than initial policy setting and reviewing a budget — to claim that ‘the other side’ were the reason the estimate was ‘out’ is gilding the lily to some extent. Both sides have been in power for considerably more than the time needed to develop realistic estimates and discuss with the public the difference between an estimate and a guaranteed price. Clearly they both chose not to.

Perhaps unsurprisingly, this isn’t the first article on The Political Sword that questions the wisdom of short term expediency versus the long term good of various policies (by all sides of the political fence) for the country and those who live here. Ad Astra wrote ‘The curse of adversarial politics’ in December 2008 and I commented about the problems with ‘absolutely’ ruling something in or out in ‘You reap what you sow’ in July 2014. Ironically, Ad Astra also asked in December 2008 Why does Malcolm Turnbull make so many mistakes. It seems that the more things change …

There is still a considerable percentage of the public who accept the argument that because the red team said this or the blue team said that, they should vote for the side making the accusation. There could be a million and one reasons why this is the case — although a lot of it is probably that people are just not interested, precisely because of the standard of debate and discussion in this country. Those that ‘don’t care’ are the real bunnies here. The first thing any ‘self-improvement’ program, like the ones we talked about above, will tell you is you have to do the work and make the sacrifice — which means that you have to stop blaming others for your problem and take responsibility for changing something that you can’t accept.

Regardless of how the Coalition would have run government between 2007 and 2013 (when Labor was in power), the fact is they weren’t and need to accept that we are at a certain point with the NBN, taxation, industrial relations or any one of a number of other functions of government. Should the current government want to change or improve on where we are, how about doing the work and making the sacrifice rather than suggesting it’s all the other side’s fault. After all, they were handed the keys to the prime minister’s office over two years ago.

And rather than blame the previous guy, perhaps next time they are in power, the ALP should comment that while they might have done it differently, the current position is what it is. Immediately following is an acknowledgement that they are in charge, they are prepared to do the work and sacrifice to make it better, and this is what is proposed.

What do you think?
Let us know in comments below.

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Turnbull's Australia Tax
2353NM, 27 May 2016
You may have heard of “the Australia Tax”. The term comes from the apparent difference in the price of a seemingly identical product sold apparently cheaper in another country than the retail price in Australia. Computer software and Apple products are frequently mentioned as being subject to this tax and while it really isn’t that simple, the impression that you pay more because you live in Australia is certainly there.

The problem in the …
How the Liberals are destroying Australia
Ken Wolff, 29 May 2016
The image above shows rich and poor alongside each other in Mexico. Is this Australia’s future under the Liberals?

Australia has a long history of egalitarianism. Between the gold rushes and the 1890s Australia was considered a ‘working man’s paradise’. The depression of the 1890s changed that somewhat but also fostered the growth of unionism and the birth of the Labor party to represent workers’ interests.
* T & Cs apply
2353NM, 31 May 2016
Charles Dickens wrote a book called Oliver Twist. It is undoubtedly a classic. The book has been the subject of numerous reviews, movies and is frequently a subject for study in English Literature classes. Perhaps the best known section of the book is where young Oliver asks the Master of the Workhouse for ‘more’.

The poor, disabled and incapable who were unfortunate enough to live in what is now the United Kingdom from the 1700s …

How the Liberals are destroying Australia

The image above shows rich and poor alongside each other in Mexico. Is this Australia’s future under the Liberals?

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

It was not a rigid system that enforced the same conditions on everyone but a system based on the ‘fair go’. It was built on the concept that we are all inherently equal and, therefore, the differences between us should not be great if we each have a ‘fair go’ — in modern parlance, it was equality of opportunity. We were also very good at cutting down the ‘tall poppies’ when the differences exceeded what we thought acceptable.

Now much of that has changed and the Liberals have contributed mightily by their actions and also by their underlying philosophy.

What drives the Liberals’ actions is their belief in the individual, based on the John Stuart Mill maxim on freedom when he wrote in On Liberty in 1859:
The only freedom which deserves the name is that of 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.
The Liberals aim towards the first part of that statement but tend to ignore the provisos in the second part. Despite what the Liberals may think, the condition Mill imposes on individual freedom is consistent with the Australian value of the ‘fair go’: as an individual, I give others a ‘fair go’ by not depriving them of their freedom nor impeding their efforts to attain it. It shows that although the ‘fair go’ can be said to be founded on the individual, it includes a social responsibility to give others a ‘fair go’, just as Mill envisaged. In that sense, the ‘fair go’ is the true inheritor of Mill’s legacy, not the Liberals’ approach.

When the Liberals emphasise the individual they are undermining society. They sometimes speak of community spirit, such as when we pull together during times of bushfire and flood, but they do nothing to support it. Generally they believe only in the individual and the family, and community and society do not get a look in. That also provides a green light for individuals to ignore their social responsibilities and look only after themselves if that is their want — it is a green light to reject the ‘fair go’ and a green light for individual greed.

The economic emphasis on the individual is leading to rising inequality in our society. The gap between the richest and the poorest has increased significantly. The gap between the pay of a worker and the CEO of the company for which she or he works has increased dramatically in recent decades. Whereas once it was the equivalent of 2‒4 years of the worker’s wage, now it can exceed 15 or 20 years. The ‘tall poppies’ are now protected under the Liberals’ approach and are viewed by them as essential for economic success.

In Australia, based on taxation records, the top 10% of taxpayers had 25% of total national income between 1974 and 1985 but that grew to 31% in 2010. For the top 1% their share was about 4.5% between 1976 and 1984 and in 2010 was 9.2%, after reaching a peak of 10.1% in 2006 before the GFC.

In 2013, a Productivity Commission paper also showed that since 1998‒99, even just among those employed, wages had been increasing faster for high income earners than for low income earners.

Such inequality impacts equality of opportunity and this was recognised by the OECD as early as 2005:
... children of poor parents have less chance of succeeding in life than children of rich parents: a widening inequality of income risks leading to a widening inequality of opportunity. Because of these factors, a failure to tackle the poverty facing millions of families and their children is not only socially reprehensible, it will also weigh heavily on our capacity to sustain economic growth for years to come.
Given the last statement in that quotation, is rising inequality also contributing to current sluggish economic growth worldwide, not just the GFC hangover? That’s one for the Liberals to ponder, if they dare!

Australia survived the GFC thanks largely to a return to Keynesian economics by the then Rudd government (on the advice of then Treasury Secretary Ken Henry). Even now our economy has been growing at 2½‒3% a year, below our long term average but still a moderate rate of growth. So why do people feel financially insecure?

Wages growth is currently the slowest it has been in 20 years so that certainly doesn’t help but another aspect mentioned by a number of writers, including in relation to the middle class in the USA, is cuts to government services. People feel they have less social support as government services disappear, that such services will not be there when they need them. Also any increase in their wages may go in paying for services previously provided by government — their situation, at best, is not improving or is going backwards.

In Australia, the Liberals cut government services because they believe in the neoliberal economic philosophy (still based on John Stuart Mill) that the individual should be free to use, that is buy, only those services they require. That, by economic demand, the market will meet the need for those services. Government providing services for all, that many may not use, is an inefficient use of resources! The Liberals will continue to emphasise low taxes because this puts money back into the pockets of the individual to buy the services they want and government can withdraw from that provision. That presumes, however, that everyone is earning enough to buy those services which is not the case under the Liberals’ approach.

We are also seeing a rise in what is termed ‘precarious’ employment — casual and part-time work, and short-term individual work contracts. The April employment figures this year showed that 20,200 part-time jobs were created but 9,300 full-time jobs were lost (there had been no increase in full-time employment in the previous three months). Continued work is not guaranteed in such situations, leaving workers unsure of their future: they need to be earning very large amounts, as with some of the FIFO mining contractors, to make them feel such uncertainty is worthwhile. But in many cases these approaches are used to reduce wages and working conditions. As the number of full-time positions diminishes that situation worsens. The Liberals have long supported this approach, no more so than when Howard introduced WorkChoices. Unions are sometimes criticised for not paying enough attention to part-time and casual workers but that is because they tend to focus on keeping, and creating more, full-time positions as it is only a full-time position that provides economic security. There are some studies in Australia suggesting that for a family to lift out of poverty at least one member of the family has to have a full-time job — even having a number of members of the family working casual or part-time doesn’t help because they are unable to invest in a better future as their work, and income, can stop at any time with little or no notice.

So the Liberal approach to employment is also increasing economic insecurity no matter how well the economy may or may not be going.

The current Liberal (Turnbull) government is focusing on business, and small business in particular, at least to start with. A focus on small business is to some extent consistent with the ‘fair go’ but not when large businesses and multi-nationals are included, and not when increases in productivity are being pocketed as profits, not improvements in wages.

In a 2013 report for the ACTU it was found that in the 1990s there was a stability between productivity and wages — both productivity and real wages grew at 2.1% each year.
Wages decoupled from productivity in the 2000s. Between 2000 and 2012, productivity rose by an average 1.3% per year, while real hourly labour income rose by only 0.6% per year on average. This meant that labour’s share of national income fell over the decade, and fell quite sharply. In 2000, the labour share was 65.6% — this had fallen to 59.7% by 2012.
Again, this is a global phenomenon:
In developed countries, the share of labour income declined, falling by 5 percentage points or more between 1980 and 2006-07 — just before the global financial crisis — in Australia, Belgium, Finland, France, the Netherlands, Norway, Sweden, the United Kingdom and the United States, and by 10 points or more in Austria, Germany, Ireland, New Zealand and Portugal.
It is global because so many governments are following the same neoliberal economic philosophy.

If workers do not benefit from increased productivity that is not a ‘fair go’. As the ACTU report suggests, a ‘fair go’ involves profits and wages increasing at about the same rate as productivity, not one outpacing the other by a wide margin. Now, to return to a fair distribution of national income, the profit share needs to reduce, which is not going to happen under this government. So if people turn against Turnbull’s approach it will be obvious why.

The approach is justified by the ‘trickle down’ (or supply-side) theory in economics (see Ad Astra’s recent article here for an explanation), that claims supporting business, including big business, improves the overall economy — a rising tide for all. At least that’s the theory. As so much evidence shows, however, it does not work.

On matters like education and health, the Liberals prefer to follow their economic path focused on the individual and are only held in check to some extent by outcries from the Australian public that their approach is unfair. Their obvious preferred model is for privatised health and education based on the premise that the value people put on these is shown by the price they are willing to pay. They are undermining Medicare. They are reducing funding for hospitals and schools (a recent increase does not match proposed cuts already built into the budget). Yet they continue to spend $6 billion a year on a rebate for private health insurance.

Almost everything the Liberals are doing is undermining Australian communities and Australian society as a cohesive unit. Their philosophy, so centred on the individual and ignoring community support, social responsibility and the common good, is anathema to the ‘fair go’. Their focus allows them to ignore inequality because that is simply some individuals doing better than the rest. In their approach, it supposedly provides an incentive, a goal for those lower down to aspire to. They believe that aspiration will inspire people to work harder. Aspiration may have been valid when Australia had a more egalitarian range of incomes: if the CEO was only earning the equivalent of a few years’ wages of the worker, then aspiring to a similar lifestyle was an achievable goal but not when that gap can be 20 years or more, effectively requiring a lifetime's work just to come closer to the aspiration without being likely to achieve it. When an aspiration becomes unachievable or unrealistic it no longer has value but the Liberals don’t seem to recognise that.

The Liberals cannot honestly call on our community spirit when they are the ones undermining it.

In 2014, the Centre for Policy Development released a book Pushing our luck: ideas for Australian progress. Lindy Evans wrote in it of the need for a new Australian narrative. She asked for more emphasis on Australia’s democratic history: the radical path we trod in the late 1800s and early 1900s, giving women the vote and allowing ordinary people, not just an elite, to be elected to parliament. She related the story of an early member of the Australian parliament making a speech with holes in his suit pants because it was the only suit he had. The fact that Australia had the world’s first Labo(u)r government was no accident but a result of our founders ensuring that ordinary people were drawn into the political process.
The idea that human societies are not chained to repeating history and that we can create a better world runs deep in the Australian tradition. In recent years we have lost sight of how rare that philosophy was, and still is.
She called her approach ‘egalitarian nationalism’ and presented it as an alternative but inclusive national narrative to that of multiculturalism. But if the Liberals continue their destructive path, our chances of ever achieving that sort of uniting narrative, emphasising our egalitarian democratic values, diminishes by the day.

What do you think?
Can Australia retain the ‘fair go’ if the Liberals continue running the country?

What happened to Tony’s ‘Team Australia’?

Do readers have any suggestions for the post July 2 government that may help return Australia to a more egalitarian footing?

Let us know in comments below.

Recent Posts
Behind the NBN raids: hypothetically speaking
Ken Wolff, 25 May 2016
On Thursday 19 May the AFP raided the parliamentary offices of Stephen Conroy in Melbourne and the home of a political staffer as regards leaks from NBNCo. Next morning the AFP Commissioner maintained that there had been no political influence on the investigation, nor the timing of the raids, and that the relevant minister, the leader of the opposition, and even Conroy himself, had only been advised of the ‘investigation’ …
What happened to us?
Ken Wolff, 26 May 2016
Tony Abbott liked to scare us with tales of violent terrorists coming to attack us and, therefore, requiring more and more security to protect us. Even if we thought he was crazy or going too far, at least he was addressing us. Think about Turnbull’s approach and ask where are the policies, even the broad approaches, that address us, the people and communities of Australia, and our needs.

Almost every decision is based on economic or fiscal policy …
Turnbull's Australia Tax
2353NM, 27 May 2016
You may have heard of “the Australia Tax”. The term comes from the apparent difference in the price of a seemingly identical product sold apparently cheaper in another country than the retail price in Australia. Computer software and Apple products are frequently mentioned as being subject to this tax and while it really isn’t that simple, the impression that you pay more because you live in Australia is certainly there.

The problem in the …

What happened to us?

Tony Abbott liked to scare us with tales of violent terrorists coming to attack us and, therefore, requiring more and more security to protect us. Even if we thought he was crazy or going too far, at least he was addressing us. Think about Turnbull’s approach and ask where are the policies, even the broad approaches, that address us, the people and communities of Australia, and our needs.

Almost every decision is based on economic or fiscal policy and every approach is predicated on supporting business. Funding for social areas of policy has been left at the levels of the Abbott government, cut again, or given only minor increases that do not match the previous cuts.

The one significant social announcement by Turnbull occurred soon after he became prime minister when he announced a funding package addressing domestic violence. That, however, was so soon after he became prime minister that it had obviously been in the making for some time previously, so he cannot be given any credit for it. Otherwise, there have been no announcements on social policy, no education policy, no health policy, no social welfare policy: each of these areas have only been considered in budget terms to address fiscal policy.

Turnbull’s major policy announcement was the National Innovation and Science Agenda in December last year. At the launch of the policy he did say:
It is believing in our human capital and remembering that the best assets we have, the most important assets we have in this country are not to be found under the ground, but walking around on top of it is the 24 million Australians, the men and women of Australia, these and their ideas are what secures our future. And this package will incentivise, dynamise [sic], energise that enormous opportunity.
Pyne, also at the launch, made clear, however, that this was ‘the centrepiece of the Government’s domestic economic policy agenda’. Despite recognising that people are central to economic activity, the innovation agenda remains an economic policy, not a social policy.

The government sees its role as supporting innovation:
… by investing in enablers such as education, science and research, and infrastructure; incentivising business investment; and removing regulatory obstacles such as restrictions around employee share ownership or access to crowd-sourced equity funding.
An emphasis on STEM education could be seen as having some social elements (Shorten had also spoken about that seven months earlier in his 2015 budget reply speech) but it is only as an adjunct to economic policy. Turnbull sees it as necessary for the jobs of the future but, as some have pointed out, there will be students who may need some, but not high levels, of those STEM skills, who wish to be plumbers, bricklayers and similar tradespeople. We will certainly still need such tradespeople into the future. Not everyone will be an entrepreneur or be starting high-tech companies. Turnbull just doesn’t seem to see that side of life. He sees such tradespeople only as small-business people and, while that may be true for a significant number, there are also many others who are employees of both small and large businesses. Where do they fit in Turnbull’s vision? Does he recognise that we actually have a shortage of skilled tradespeople as reported by the Department of Employment in February? Why don’t we also have a focus on training more people for the trades rather than his continual focus on high-tech start-ups? His only approach to the trades is the re-introduction of the Australian Building and Construction Commission!

A major focus of the innovation agenda is changes to the business environment by such measures as a tax off-set for early stage venture capital, changes to the ‘same business test’ for tax losses and reforming insolvency laws. The idea is to encourage investment in risky undertakings and encourage risk taking and entrepreneurial activity — a cultural shift as he termed it. Turnbull said:
This is not just a list of measures and incentives and the levers that government pull, this package is designed to inspire. It is designed to lead. It is designed to encourage every single business, large or small to be more innovative, to be more prepared to have a go at something new because in the world of the 21st-century, in 2015, that is how you prosper.
Although the Abbott government had cut research funding, the innovation agenda returns some of that money but places a greater emphasis on research collaboration between businesses and universities and scientific bodies for that funding. It is creating a $200 million innovation fund within the CSIRO but the government is providing only $75 million of that (and providing only $5 million a year) and the balance is to come from the CSIRO’s WLAN licence fees and private sector support. Pure scientific research is taking a lower priority and yet it is such research that sometimes makes the breakthrough that leads to other developments that can then be utilised for commercial purposes.

On the other hand, out of the $1.1 billion for the innovation agenda, most of it ($814 million) is actually for existing projects that would likely have received ongoing funding in any case — the Australian Synchrotron and the Square-Kilometre Array. So even Turnbull’s commitment to the innovation agenda is a little misleading.

The innovation agenda also gave birth to the jobs and growth mantra: ‘innovation for jobs and growth’.

Just prior to the election announcement Treasurer Scott Morrison presented the budget but said it was not a budget but ‘an economic plan’. He went on to state:
Australians know that our future depends on how well we continue to grow and shape our economy as we transition from the unprecedented mining investment boom to a stronger, more diverse, new economy.

They know that their future, their jobs and those of their children and grandchildren depend on it. This is a very sensitive time.

Australians have clearly said we must have an economic plan to make this economic transition a success.

This economic plan is the foundation on which we can build a brighter, more secure future, in a stronger, new economy with more jobs.
No mention of social issues.

The focus of the budget is on business: its key initiative is the ten-year reduction of company tax rates (at a cost of $48 billion). Like the innovation package, it is meant to support ‘jobs and growth’ but will also ‘increase real wages’ according to Morrison. The argument used by the government, and supported by many business groups, is that a tax cut will encourage re-investment in and expansion of businesses, leading to additional jobs. Although businesses continually argue this, it is not supported by history. Company tax for small businesses has already been reduced from 30 cents to 28.5 cents in the dollar from 1 July 2015. Historically, company tax has come down from 46 cents in the dollar in 1980. But we are now (again) suffering high unemployment and slow job growth, so why will an additional cut change anything?

The one announcement that may have a social aspect was:
… a new initiative to help more than 100,000 vulnerable young people into jobs, to be part of our growing economy by giving them real work experience with real employers that lead to real jobs.
But as that statement implies, it is all about economics, not the assistance those ‘vulnerable’ young people may actually need. Some may require health and social support before being ready for employment but that does not enter Turnbull’s nor Morrison’s thinking.

Some additional money was provided in the budget for hospitals and schools but it did not make up for previously foreshadowed cuts and was addressed primarily within the fiscal policy of the budget. The government had earlier announced that it would not meet the final years’ funding for education under the Gonski funding model: that model focused additional funding towards the most disadvantaged schools and students. ‘Gonski’ was clearly a social policy (with economic benefits from a more educated population) but the government’s approach shows that it is not interested in social policy — only economic and fiscal policy.

The same can be said of the government’s approach to health: it is primarily based on fiscal policy (and ideology favouring private health providers). There have been continual cuts to Medicare, through freezing the indexation of rebates, and to hospital funding — on 23 May Health Minister Sussan Ley revealed that it was, indeed, the Treasury and Finance Departments not ‘allowing’ her to end the freeze on Medicare rebates. While the government emphasises economic policy, its approach to health ignores that a healthy workforce is also essential to economic activity.

Turnbull and Morrison claim they are providing record levels of funding for health and education but, given inflation and the fact that government revenue usually increases each year (only the rate of increase varies dependent on the health of the economy), such a statement is no better than stating they are providing more funding than in 1960.

In announcing the election Turnbull continued to ignore social policy:
At this election Australians will have a very clear choice; to keep the course, maintain the commitment to our national economic plan for growth and jobs, or go back to Labor, with its higher taxing, higher spending, debt and deficit agenda, which will stop our nation’s transition to the new economy dead in its tracks.
In Turnbull’s mind there is obviously no room for Labor’s spending on social issues. Such spending will undermine his grand vision of an agile and innovative economy. He went on:
We have an economic plan for growth and jobs. Every single element of it is designed, is calculated, determined, to deliver stronger economic growth and more jobs for Australians. On the other hand, our opponents are promising to increase income tax, they are opposing a tax cut for Australian businesses.
Of course he fails to mention that, after ten years, his business tax cuts will apply to all businesses, including the 6,000 odd large businesses in Australia and the multi-nationals operating here. He fails to consider that some of the $48 billion it will cost could have been used for hospitals and schools. Simply improving business conditions and encouraging business growth does not support people who need the welfare and other services provided by government.

Even his attack on Labor’s negative gearing policy included that it was ‘blocking the road to entrepreneurship’. As a former entrepreneur himself, Turnbull seems to see that as the height of human achievement.

I was surprised that it actually took Barnaby Joyce, in his brief election launch following Turnbull, to add a human dimension to the LNP’s approach. He actually spoke about people and about politicians as people:
“We see the future of our nation through the regional towns and making sure that the problems in their lives, the concerns of their lives, are dealt with in a way that truly reflects the dignity of the people and how seriously we hold the job that they do. We have proven ourselves but we are merely at the start.”

He says he is looking forward to voicing the concerns of the Australian people in a sometimes fun, unscripted way.

“Making sure that we walk humbly with our people, not in a way that doesn’t let us have fun, not in a way that doesn’t mean that we are not, you know, turn(ed) into some peculiar creature that is completely scripted.”
What Turnbull is missing by his single-minded focus on the economy and business is that a strong economy is supported and underpinned by strong social policies: an education and training system that provides skilled workers and skills for young people entering the workforce (for all levels of jobs); a health system that keeps the workforce healthy and productive; a welfare support system that gives people the resources to be able to re-enter the workforce if they are able. Other social issues also have economic effects such as when people leave the workforce to care for aged parents or sick children and social policies should be in place that recognise this.

Even the concept of ‘healthy’ communities is important. If our communities are falling apart from lack of amenities, or even social dislocation, then that will also impact the economy. If communities are not willing, or are unable to work together, we will not even have a functioning society.

In other words, everything is intertwined. We need good social policies for what they deliver and achieve in their own right but, even in Turnbull’s terms, we need them to support the type of economic policy he is advocating. Why doesn’t he understand that?

Given Turnbull’s approach, Labor’s policy catch-cry, ‘putting people first’, may have some resonance. At least it is recognising ‘us’.

What do you think?
Will Turnbull’s blindness as regards social policy come back to bite him?

Is Labor enhancing its electoral chances by focusing on people?

Let us know in comments below.

Recent Posts
Dead cats and reset buttons
23535NM, 23 May 2016
Let’s not give further oxygen to Immigration Minister Peter Dutton’s nonsensical, bigoted and racist comment the other day regarding refugees coming to this country, taking our jobs and adding to our unemployment queues. Apart from the obvious flaw in the argument (if you lower yourself enough to call it that) how can people that are taking our jobs add to our unemployment statistics at the same time? Dutton’s outburst is factually wrong on so many levels
Hordes of illiterates
Ad Astra, 24 May 2016
If you had to pick a minister to deliver a nasty message, you would not go past Peter Dutton, master of cruel comments, replete with his trademark po-face and matching body language. Last week, on Sky News, responding to the suggestion by the Greens that we should up our refugee intake to 50,000, his comment was: “They won’t be numerate or literate in their own language, let alone English. These people would be taking Australian jobs, there’s no question about that.
Behind the NBN raids: hypothetically speaking
Ken Wolff, 25 May 2016
On Thursday 19 May the AFP raided the parliamentary offices of Stephen Conroy in Melbourne and the home of a political staffer as regards leaks from NBNCo. Next morning the AFP Commissioner maintained that there had been no political influence on the investigation, nor the timing of the raids, and that the relevant minister, the leader of the opposition, and even Conroy himself, had only been advised of the ‘investigation’ …

Hordes of illiterates

If you had to pick a minister to deliver a nasty message, you would not go past Peter Dutton, master of cruel comments, replete with his trademark po-face and matching body language. Last week, on Sky News, responding to the suggestion by the Greens that we should up our refugee intake to 50,000, his comment was: “They won’t be numerate or literate in their own language, let alone English. These people would be taking Australian jobs, there’s no question about that. For many of them that would be unemployed, they would languish in unemployment queues and on Medicare and the rest of it, so there would be huge cost and there’s no sense in sugar-coating that, that’s the scenario. To be clear: they’ll take all our jobs and also they won’t get jobs.”

Framing the Greens’ and Labor’s asylum seeker policy
Dutton’s outlandish claims are untrue, and he knows it. So what was he up to? The most obvious conclusion is that he was trying to wedge the Greens for advocating an extra refugee intake, and Labor, whom he insisted are seriously divided on asylum seeker policy. This framing was embellished by drawing attention to the association of Labor and the Greens. It was a triple whammy that only Dutton, redolent with all his innate nastiness and vindictiveness, could deliver.

But was it just another instance of Dutton spewing his venom all over his enemies and those loathsome asylum seekers that cause him so much angst? Commentators were quick to assert that his mouthing-off was not just same-old Dutton, but a well-planned Coalition strategy to frame the progressive parties as soft on border control, keen to bring in even more asylum seekers, who, despite being illiterate, would take jobs away from Australians, would join the queue of the unemployed, would thereby be a burden on our social security network, and would cost taxpayers a fortune. How they would both take away our jobs and yet be unemployed was not explained.

The fact that Julie Bishop and later Malcolm Turnbull quickly supported his remarks suggests powerfully that they, and the LNP machine, were not just backing Dutton, but had thrust him out there to do his dirty work. When Turnbull said “Peter Dutton is an outstanding Immigration Minister” he was confirming that the Dutton ‘outburst’ was a deliberate strategy to re-focus attention on the always-successful-for-the-Coalition boat people theme.

A day later Turnbull might have been having second thoughts about his unequivocal endorsement of Dutton when he described Australia as an ‘immigration nation’, a subtle variation on his ‘innovation nation’, and again when he wrote an opinion piece in Fairfax media attempting to justify the Coalition’s attitude to immigration. To add insult to injury, Turnbull then self-righteously accused Shorten of demonizing Dutton! Such bizarre political rhetoric seems to have no bounds.

Some have labeled the Dutton episode as an example of the ‘dead cat’ strategy. Attributed to Lynton Crosby, who used it in the UK elections when he was assisting David Cameron, it goes like this: You throw out an outrageous proposition to distract the media and say, to use Crosby’s words, “Jeez, mate, there’s a dead cat on the table!” Journalists will then talk about the dead cat, and will stop talking about issues that have been causing grief, or issues that favour one’s opponents. 2353NM has written extensively about this in Dead cats and reset buttons.

Dutton’s mouthing-off is a classic example of the LNP’s vindictive framing of both Labor and the Greens. Coalition members will ignore the indignant calls for an apology from Dutton, because what he did was under instructions from his party, who knew nobody could do it with more venom than could Dutton.

There is no doubt that PM Turnbull and his Coalition colleagues will use the asylum seeker issue relentlessly to frame progressives, especially those who would prefer a more humanitarian approach. They will be framed as soft, unwilling to strictly protect our borders, unwilling to protect Australian jobs, indeed unwilling to protect our way of life, which Dutton asserts is now threatened by hordes of illiterates, and that their approach is hugely expensive and a threat to our treasured multiculturalism.

Bill Shorten did hit back, but rather mildly with: “Mr Dutton’s comments are comments Pauline Hanson would be proud to make, and if this is the best the Liberal party can do, it is not very good at all.

The Coalition’s framing, indeed its xenophobic dog-whistling, will resonate with many voters, especially those in the marginal seats of Western Sydney, but as an insult to all refugees, and, as Lenore Taylor says, to Australians generally, it may not be as potent as it might have been.

How well Shorten’s rebuttal resonates with them, time will tell. But the Greens’ framing of Labor as indifferent to the suffering of those in offshore detention will blunt Shorten’s attempts to take a firm but humanitarian line on asylum seekers that might appeal to moderate voters.

The last piece on this subject on The Political Sword: Top hats versus hard hats outlined a number of instances of framing used by the main political parties; this piece builds on it, so let’s look at some more.

Framing the Green/Labor alliance
Another powerful LNP framing strategy will be to play on the possibility of an alliance between Labor and the Greens, something the latter have canvassed openly, from which Labor has speedily run away. The LNP will characterize such an alliance as a reprise of the Julia Gillard/Bob Brown alliance, the public signing of which we are now being reminded. Painted by the LNP as a catastrophe to be avoided like the plague, this alliance, with the support of the rural independents, resulted in one of the most productive periods ever in federal politics with around six hundred pieces of legislation passed, some of it epochal.

But the Coalition continues to portray it as a disaster never to be repeated. Facts are irrelevant; the perception of chaos and disunity in Labor that Tony Abbott and the Coalition exploited prior to the 2013 election was a prime reason why Labor lost. You will have noticed how quickly Turnbull and his ministers jumped on Richard di Natale’s desire to form an alliance with Labor as an opportunity to wedge Labor.

Framing health – a Labor strength
Labor has always been strong on health. So when Shorten announced, on World Family Doctor Day, that Labor would defend Medicare, would protect bulk billing, and would unfreeze the indexation of Medicare benefits, frozen by the Coalition until 2020, and inject $12.2 billion into this over a decade, family doctors and Brian Owler, president of the AMA, applauded, pointing out that this would reduce the cost to the patient of a GP visit by around $20, halting the imposition by stealth of the dreaded GP co-payment, already rejected by the Senate. Shorten made the telling point that the Coalition can find almost $50 billion to give tax cuts to businesses and multinationals ahead of funding Medicare - powerful framing!

Reflexly, Coalition spokespersons labeled the move as ‘same old Labor’. Scott Morrison said: “Every time you see Bill Shorten’s lips moving in this campaign, he’s spending more money that he doesn’t have.” ‘Same old Morrison’! So the old, old framing of Labor as profligate spenders racking up more debt and deficit continues, and will do so until Election Day.

Global warming a rich area for framing
Surprisingly, there has not been much emphasis yet on climate change, but that will change as we approach the election. Both Labor and the Greens have set carbon mitigation targets much more ambitious than has the Coalition, and will frame the Coalition as wedded to fossil fuels and those who own them, endorsing more coal mines even as the threat of global warming increases month after month. April was the hottest April on record for the globe, and we are heading for 2016 being the hottest year on record! They will frame the Coalition as short-sighted denialists, environmental vandals, and in the pocket of the coal lobby. It beats me why the don’t ask them: “Where is Abbott’s much-vaunted ‘Green Army?’, which was so central a plank in his carbon mitigation platform.

The Coalition, via their loquacious spokesman, Greg Hunt, will ignore the facts (always ‘with great respect’), will continue to assert that they are on track and will easily ‘meet and beat’ their emissions targets, will deny that emissions are actually increasing, will boast that Australia has higher targets and is making better progress than comparable nations, and that nothing more needs to be done but to implement their ‘Direct Action Plan’, which environmentalists and economists alike ridicule. Although forced to acknowledge the damage being inflicted on the Great Barrier Reef, Hunt was able to make light of it, make upbeat prognostications about its future health, and insist that he is devoted to improving water quality in the vicinity, as if that’s all that is necessary to preserve this iconic natural wonder and tourist bonanza.

Already Hunt is re-stoking scaremongering about Bill Shorten's ‘massive new electricity tax’, insisting that both Labor’s and the Greens’ emissions targets and their intention to re-introduce a carbon pricing mechanism to reduce carbon pollution “couldn't have a worse impact in terms of electricity prices”, which he insists will skyrocket for us all. He likes to emphasize its impact on the less well off, for whom he shows pseudo concern. Again it’s the ‘same old, same old’ carbon tax argument that served the Coalition so well under Abbott.

Out of touch Turnbull
By framing Turnbull as a man in a top hat in a harbour side mansion who is out of touch with ordinary people and the travails of Struggle Street, Labor and the Greens have attached a label to him that will stick. It contrasts with Labor’s framing of itself: Putting people first.

For his part, Turnbull has tried to negate this by travelling often on public transport, always ready to take ‘selfies’ for his Facebook and Twitter accounts. He doesn’t try to disguise his wealth, attempting instead to represent it as a result of enterprise and hard work, two attributes he values in others, and indeed wishes upon the whole nation.

How well Shorten’s ‘out of touch’ frame will dominate Turnbull’s frames: ‘jobs and growth’ and ‘enterprise and hard work’, is one of the intriguing questions that the long election campaign eventually will answer.

Framing the NBN
Events of last week highlighted the importance of the framing of the NBN. The AFP raid on Senator Conroy’s office and the home of one of his staffers in pursuit of the source of leaks from NBN Co. Limited, underscores how sensitive an issue this is for both parties. When, in a fit of pique at Labor’s fibre-to-the-premises NBN initiative, Tony Abbott instructed Malcolm Turnbull to ‘demolish the NBN’, tech-head Turnbull decided that instead of killing it he would create a hybrid mixed-technology system using fibre-to-the-node (FTTN), with Telstra's ageing copper wire from a box on the street corner connecting it to the premises. It ended up being second-class, soon attracting the tag ‘Fraudband’. Not only is it poor technically, it is slower, behind in its rollout, and increasingly costly, possibly eventually costing more than Labor’s FTTP version. In short, it is a flop. This is what the leak is said to expose.

To counter this embarrassment, and Labor’s framing of Fraudband for what it is, an inferior system, the AFP raids were a distraction welcomed by the Coalition. Turnbull angrily framed Labor’s protest about the raids as politicisation of the NBN initiative, labelling it a shameful slur on the integrity of the AFP, even putting our national security at risk! No one has yet explained how the AFP, supposedly free of political bias, chose the second week of the election campaign to add these raids to its six-month long investigation, how Sky News was there to report and film it, and how an NBN employee was allowed to photograph seized documents (subsequently ordered to be destroyed).

These recent developments have blunted the Coalition’s framing of Labor’s version of the NBN as grossly expensive, indeed unaffordable; Labor has countered by labelling the Coalition version as a dud, and an expensive one at that.

Framing ‘Jobs and Growth’ versus ‘Putting People First’
It seems appropriate to end this rather long piece with ‘Jobs and growth’, the Coalition’s most frequently used three-word slogan. The LNP has tacitly assumed that voters will interpret ‘Jobs’ as ‘jobs for you’, and that ‘Growth’ will be interpreted as a ‘growing, prosperous economy’. They have assumed also that these two concepts will be an object of admiration for voters, who will therefore vote for the party that espouses them.

What they never explain is how they will achieve jobs and growth, except to hint that if tax breaks are given to businesses they will invest more, expand their scope, boost the economy, and of course employ more. Their belief is that reducing company tax to 25% over a long period will provide the stimulus that will bring about ‘Jobs and Growth’. This is based on the old and long-discredited concept of ‘trickle down’ economics, which has been dealt with extensively in Trickle down thinking breeds inequality, published on The Political Sword on 11 May.  

Apparently, the Coalition is hoping that framing ‘Jobs and Growth’ as the centrepiece of its election pitch will win the day without having to explain what it means in explicit terms, and how it will work; indeed whether it can work at all!

In pursuit of his goal of fairness for all, Bill Shorten is framing his campaign messages under his three-word slogan: ‘Putting People First’. His object is to cast Labor as personally concerned about individual people rather than being wedded to the inanimate concept of 'Jobs and Growth'. He embellishes that framing by asking voters: “What sort of country do you want to live in?” His implication is that Labor seeks to provide a country that is fair to all, one that gives educational and job opportunities to every individual who can benefit.

Every time Shorten makes a promise to fund an initiative, Turnbull frames him as being on a 'spendathon', digging a bigger and bigger black hole of deficit.

Time will tell which framing, the Coalition’s economic one, or Labor’s personal one, will prevail.

As the election campaign continues, you will recognize many other instances of framing. Whatever messages politicians seek to transmit, they will place each of them in a frame that embellishes and enhances the message, that gives it deep meaning for voters, and that appeals to voters’ sentiments, and at times voters’ self-interest. They will seek to frame their opponents' messages and policies as ill-conceived, poorly thought through (thought bubbles), unworkable, extravagant, unfunded, and sometimes, ideologically driven.

As voters, we need to recognize the framings that politicians are using so that we can analyse and appraise their inherent merit, their feasibility, and their validity for each of us and for the nation as a whole. I hope this and the previous essay about framing: Top hats versus hard hats will assist you to do this.

What do you think?
Are you picking up the framing that all sides are using?

Have you seen other examples of framing and counter-framing?

Let us know in your comments below.
Recent Posts
Dead cats and reset buttons
2353NM, 23 May 2016
Let’s not give further oxygen to Immigration Minister Peter Dutton’s nonsensical, bigoted and racist comment the other day regarding refugees coming to this country, taking our jobs and adding to our unemployment queues. Apart from the obvious flaw in the argument (if you lower yourself enough to call it that) how can people that are taking our jobs add to our unemployment statistics at the same time? Dutton’s outburst is factually wrong on so many levels.
Top hats versus hard hats
Ad Astra, 22 May 2016
Now that the official election campaign has entered its second week, it’s time to assess how each of the major political parties is framing its narratives.

You will recall that earlier this year there were three pieces on The Political Sword on framing: Framing the political debate – the key to winning, …
The barbie bigot is back: on Turnbull
Ken Wolff, 22 May 2016
I previously took Brandis’s advice that we have a right to be a bigot an’ had a go at our last PM, pommy Tones, an’ said I was willing to refund his £10 to send him back to pommy-land, ‘specially if we could spare an orange life boat for him. Now I wanna ‘ave a word or two about the new PM, this Mal bloke. First, what did they think they …

Top hats versus hard hats

Now that the official election campaign has entered its second week, it’s time to assess how each of the major political parties is framing its narratives.

You will recall that earlier this year there were three pieces on The Political Sword on framing: Framing the political debate – the key to winning, More on framing the political debate – the key to winning, and Still more on framing the political debate – the key to winning.

The series began by asserting that the most plausible explanation of why Tony Abbott did well as an opposition leader but was an awful failure as prime minister was that in opposition he had the uncanny ability to frame the political debate in his favour, but in government that ability deserted him.

Abbott is gone but his voice has not. He still talks of the ‘legacy of the Abbott government’, or more pointedly, the ‘Abbott/Turnbull government’. What’s more, the guru who directed him all through his period at the top, Peta Credlin, has reappeared as an ‘election commentator’ on Sky News to offer her sage remarks.

Perhaps unintentionally, when Credlin labeled Malcolm Turnbull “Mr Harbourside Mansion”, she reinforced Bill Shorten’s early attempts at framing the political debate with his catchy phrase: “Top hats versus hard hats”. Shorten will try to frame the contest between the Coalition and Labor as one of the toffs versus the workers. Derived from British slang, a ‘toff’ is a derogatory stereotype for someone with an aristocratic background or belonging to the landed gentry, particularly someone who has an air of superiority, who is often caricatured as wearing a top hat, a monocle and a bow tie. Although Turnbull does not fit this stereotype precisely, we have already seen him characterized in this way in the mainstream media, particularly by cartoonists.

Top hats and hard hats are easily recognized icons that people in the street will intuitively apply to the top end of town and the workers toiling in uncongenial labour.

This framing will enable the electorate to give concrete meaning to the blight of inequality in our society, which will be a hot button election issue. While some might find the notion of inequality difficult to visualize, its real world manifestation, top hats and hard hats, will be visible to all.

This imagery captures the real meaning of Labor’s campaign slogan: "Putting people first”, which is code for "putting ‘ordinary’ people first".

Expect Shorten's ‘top hats and hard hats’ framing to be prominent throughout Labor’s campaign, and expect Turnbull and the Coalition to try to negate it. We saw this played out after Turnbull’s name was found in the Panama Papers. Although there was no hint of impropriety by Turnbull as a company director, a point the media and Shorten himself acknowledged, the mere mention of Turnbull in the Papers ‘raised eyebrows’ because of the now infamous connection in the Papers between individuals and companies and shady offshore manoeuvres to avoid paying tax. Turnbull seems completely innocent, and has said so, yet the association will remain throughout the campaign with the help of reminders from Shorten like “To be fair to Mr Turnbull, he should be given the chance to fully explain himself”. Expect more of this because the Panama connection reinforces Shorten’s framing of Turnbull as a toff in a top hat.

The ‘top hats versus hard hats’ framing will be strengthened every time Turnbull attacks trade unions, every time he insists that the Australian Building and Construction Commission must be reinstated to counter “lawlessness and thuggery in the construction industry”; indeed he will remind us that this is so important to the economy that the double dissolution election we are about to have was called because of the Senate’s refusal to reinstate the ABCC.

Top hat versus hard hat framing will also be reinforced every time Shorten points to the unethical, and at times fraudulent behaviour of the big banks, and how this has impacted on the ordinary man in the street, some of whom have lost their life’s savings or have been denied legitimate insurance claims, all because of the banks’ system of paying personal bonuses to executives who make or save the bank money. Shorten will continue to press for a Royal Commission into banking (which has wide appeal in the electorate); while Turnbull will insist this is overkill and that the Coalition has the banking problem in hand. What’s more, he’s given them a stern lecture!

This framing is now set in concrete and will be restated and reinforced by Labor every single time instances emerge of the little man at the bottom of the pile being done over by the big man at the top. Shorten will see to that.

There are countless examples of the well off receiving advantages that are denied to the less well off; the budget provided still more. Newly announced Coalition policies will do so again and again as it embeds its trickle down philosophy into its economic plans for “jobs and growth”, which is another version of Bill Clinton’s “It’s the economy, stupid”. For ages, the Coalition has portrayed itself as the ‘adult’ party best suited to manage the economy, and Labor as kids without a clue. By focusing on “jobs and growth” the Coalition is reinforcing this framing.

Whenever the well off seem to be gaining another benefit under the Coalition, and Labor objects and points to inequality, the Coalition will try to counter this framing with its ‘class warfare’ and ‘politics of envy’ catchphrases, which it trots out every time criticism is directed towards those at the top being given special advantages. It’s a slogan that resonates with the electorate; few people regard envy as a desirable attribute, so to be accused of envy is uncomfortable. Shorten needs to rebuff this characterization. I thought David Marr’s rebuttal on Insiders was clever. He hinted that ‘the politics of greed’ might be used to counter ‘the politics of envy’.

Let’s look at some other attempts at framing.

In the last few days, as several Labor parliamentarians and candidates have expressed discomfort at the punitive approach this country is taking towards asylum seekers, Coalition members: the Deputy Liberal Leader, the Immigration Minister, the Treasurer and his sidekicks, and any Liberal handy to a microphone, have lambasted Shorten and Labor for being 'soft on border protection'. They have been vigorously framing Labor as being disunited on border protection, even keeping an account of the numbers who seem to be at variance with Labor policy. Their framing has already extended to painting Labor as so soft on border protection that should Labor win government the people smugglers would soon be back in business, with boat arrivals starting up again in earnest, complete with all the horrible consequences: more drowning at sea, hordes of arrivals, long periods of detention, untold expense for the taxpayer, and a reversion to the ‘awful period under Kevin Rudd’.

This is powerful framing. Generally speaking, the electorate embraces the tough, albeit ruthless approach to ‘border protection’ the Coalition has in place, and in Western Sydney, where there are many marginal electorates, voters would react strongly against any relaxation of the Coalition’s measures. Abbott created this animosity to asylum seekers as soon as he called them ‘illegals’, stoked up his ‘Stop the Boats’ slogan, and implemented his harsh and unbending approach to what he liked to label ‘border protection’, as if we were facing an enemy invasion. Scott Morrison was ready to do his bidding, and now Peter Dutton seems to relish being Mr Tough Guy.

Peta Credlin too is onto the power of this framing and says so in an article in the Sunday Telegraph: Bill Shorten’s boats plan is sinking fast, reproduced in the Herald Sun:
We’ve seen this week that it isn’t just the senior Labor leaders who lack ticker on boats. At last count, 16 MPs or candidates have openly defied Bill Shorten. If they’re prepared to go rogue before an election, there’s every chance the boats will start again if Labor is put back in charge of our borders… It was a humanitarian catastrophe, a national security disaster and a budget calamity. But that doesn’t mean it won’t happen again.
This framing of Labor can be expected to exacerbate, especially if more Labor people abandon party unity and speak out against Labor’s established asylum seeker policy. Shorten must pull these dissidents into line. We understand and respect their feelings, but they need to decide whether they want Labor to succeed at the election. Although social media gives expression to many who endorse the dissidents’ views, such views are electoral poison to a hard-nosed electorate that Abbott has indoctrinated to be tough on asylum seekers and is averse to any hint of softness on border protection.

Some Labor people feel it would be better to spend another term in opposition than go along with the Coalition’s harsh policy, which by the way Turnbull has faithfully and forcefully reiterated with a gun at his head and hard line conservatives ready to pull the trigger. Who knows whether he believes his hard-line rhetoric? But be certain it will continue. Some Labor dissidents might prefer to be in opposition, but do their views coincide with their constituencies?

Here are some more contemporary examples of attempts at framing.

Malcolm Turnbull has vehemently condemned Labor’s proposed changes to negative gearing and capital gains tax, painting them as irresponsibly ‘smashing the housing market’, depreciating the value of many people’s largest asset – the family home, and pushing up rents. That most economists, many commentators, and the RBA itself disagree has not softened his attack. Obviously, he sees this framing as advantageous, taking, as he insists it does, wealth from families whom he asserts will lose out as their home loses value. He knows that taking away wealth or advantage always creates anger and resentment.

Typically, Abbott’s framing of Labor’s proposal as “a housing tax” was much more brutal!

Predictably, the real estate industry has come out against Labor’s proposed changes, and is threatening a campaign similar to that of the miners against the mining tax. Self-interest always trumps the common good.

For his part, Shorten has framed negative gearing as a taxpayer subsidy to enable the wealthy to buy their “second, third or tenth home”. Again, the toffs will do well while first home-buyers are left bereft, outbid by wealthy investors. Shorten’s line is appealing to young couples seeking to enter the housing market, and to their parents too.

How well these contrasting frames will play out, only time will tell.

The Coalition has had difficulties selling its planned changes to superannuation. It has framed this policy as hitting only the very wealthy (which it believes will appeal to most of the electorate) and that it is fair and is definitely not retrospective. Retrospectivity is an attribute voters hate. It is fascinating to hear well-informed economists and commentators disagree so strongly on the issue of this policy’s retrospectivity. I’m not going to canvass here one side of this debate, or the other. Read though what Peta Credlin had to say on this subject: 
"There are two problems with the Coalition’s changes to superannuation. First, every candidate has to be able to explain them and super is notoriously complicated at the best of times. Second, the government looks like it is using our savings to solve its Budget problems. Why should people trust a government that raids their personal, private savings whenever it needs money? We put our money into our super so we can look after ourselves. Claiming that the changes are not really retrospective, when they take into account contributions starting from 2007, makes the government look devious as well as unprincipled.”
Clearly she doesn’t think highly of the Coalition’s framing!

As if criticizing the Coalition’s superannuation policy was not enough, Credlin took a shot at Turnbull’s abandonment of his ‘Penrith walk’: “Added to this, cancelling a planned walk through a Penrith shopping centre was a bad look for the Prime Minister. I warned here last week that Labor would try to paint him as out of touch and he played straight into their hands.” Then, in an apparent attempt to soften her labeling of Turnbull, she added “Yes, he is “Mr Harbourside Mansion”, but he and Lucy bought their home after many years of hard work. He has an inspirational self-made background and he has to disable Labor’s attack by telling his story rather than let them define him.”

There it is, right out of the horse’s mouth! Being ‘out of touch’ is another frame Labor is attempting to put around Turnbull. Credlin can see this plainly.

And of course the old, old stereotypical framing of Labor as the profligate spenders, and the Coalition as the party that looks after the top end of town but says ‘No’ to spending on the less well off, will continue.

This piece is already long enough. The campaign has just begun. Many frames have surfaced, too many to discuss now, and many more attempts at framing will emerge. The Greens are vigourously framing themselves, Labor and the Coalition to suit their agenda. I will deal with all this next time around.

So until the next piece on framing, what do you think?
Are you picking up the framing that all sides are using?

Have you seen other examples of framing and counter-framing?

Let us know in your comments below.
Recent Posts
Jobs and growth but what jobs?
Ken Wolff, 11 May 2016
There are two key aspects to the government’s ‘jobs and growth’ mantra: one that it has been successful in creating 300,000 jobs and that its cut to company tax for small businesses will encourage business expansion (growth) and create more. Both assertions, however, are a bit rubbery to say the least.
Trickle down thinking breeds inequality
Ad astra, 11 May 2016
In a piece published on 13 April, I predicted that inequality would be a hot button issue in the upcoming election. Now that we have had both Scott Morrison’s budget speech and Bill Shorten’s speech in reply, we can see how this issue will play out in the election. Although the word ‘inequality’ has not assumed the repetitive status of the ‘jobs and growth’ mantra, it is subtly pervading the political discourse.
The mythical $80,000
2353NM, 15 May 2016
Some reading this would be able to remember the days when the urban dream was the quarter acre block in a ‘nice’ suburb, with a Holden, Falcon or, if you were a real radical, a Valiant parked in the driveway. If you’re younger, you’ve probably seen the concept on any one of a number of Australian history television shows over the years.

The campaign bus

So who’s enjoying the current federal election campaign?

The television stations certainly are as they are boosting their revenue by the second through showing the election advertising for the various political parties and lobby groups. The newspapers are also getting their share of additional advertising revenue. There are probably some people who are also enjoying rather than enduring the media reporting of the election campaign. At the speed that the election has fallen from top billing on the nightly news, it’s probably fair to suggest that most Australians are, to coin a phrase, gritting their teeth and thinking of the mother country.

We at The Political Sword would probably find root canal surgery preferable to any inclination to get on a media bus following either the prime minister or opposition leader around. As we’re not part of the ‘inner circle’, we can take a potentially more objective look at the media coverage of the process both leaders and their parties are taking to ensure they are the next prime minister.

Those who travel for work will tell you that really it is no fun. On top of having to ‘do your job’, there is the problem of finding services that you expect at home, as well as the lack of ability to choose what to eat, go for a walk without getting lost, different routines and different sleeping arrangements. In the case of those who choose (or are chosen) to follow the political leader around the country, there is also the inability to know where you are going or what you are doing from one day to the next.

Probably wisely, some media managers are questioning the value of assigning reporters to follow the politician around on a set-piece tour where there has to be some expectation of favourable reporting due to the position within the ‘inner circle’. This article in The Australian from 2010 discusses some of the issues.

The Newsroom is a HBO television series that never made it to ‘free to air’ television in Australia. It was the brainchild of Aaron Sorkin who also was behind The West Wing and some other ‘doco-dramas’. Like The West Wing, The Newsroom inserts some fictional characters into real events, such as the 2011 US Republican primaries, the capture of Osama Bin Laden and so on. While the events are fictional, Sorkin’s ‘doco-dramas’ have some input from those with real life experience who are credited at the end of each show. The premise of the show is the ‘back of house’ operations of a fictional cable news television show called Newsnight. At one point in the story, a senior member of the Newsnight staff volunteers to join the Mitt Romney campaign bus in the early stages of the 2012 US election. While a picture says a thousand words, some may find one or two of the words in this clip offensive.

This article written at the time of the 2015 NSW State Election seems to be a justification of the practice of being on the campaign bus. The main talking point seems to be avoiding the bus rented by the other side and the process of attempting to keep the reporters ‘on message’. It could be suggested that there is an element of Stockholm Syndrome — the psychological condition whereby the hostages bond with the captors — becoming apparent, although the reporter does write some nice things about Walter, the driver of the ‘other’ bus.

According to most maps, Queanbeyan, Katoomba and the Nepean Hospital are all pretty close to, if not in major population centres. Why do we need literally a bus load of journalists following the leaders of two political parties around the state (or country in 2016) to report something that in the normal course would be handled by a crew that worked for the media outlet in the local region? Could it be that the story from the reporter on the bus is more insightful? The clip from The Newsroom would suggest not; there is no real insight except getting a copy of each days ‘line up’ a bit earlier than others.

So at the end of the first week into the campaign, the on-line headlines were on one topic — the ‘Debate’ that was held the previous night. The Fairfax contribution was this, The Guardian came up with this, News Corp ran with this while the ABC ran with something completely different, written by Barrie Cassidy (who probably was nowhere near the Windsor RSL on the night). Cassidy’s piece finishes with:
The Shorten bus is a good idea and so was the decision to concentrate on a single region — north Queensland — and a single issue — education — for the best part of the first week. That's the sort of thing that you can do when you have eight weeks to play with.

Turnbull's plus was his demeanour and focus. It delivered few immediate rewards because of the cross winds, but that will come over the long haul if he can keep it up.

And it is a long haul — so long that the first debate of the campaign will come and go with most people unaware it even happened.

A town hall forum at 6pm on a Friday night broadcast on SKY will be lucky to draw 100,000 viewers. Yet both leaders — under the cover of political darkness — signed up. That tells you all you need to know about how edgy the parties and the politicians are about the set pieces they just can't avoid.
Given the stage management and set pieces of election campaigns in general, it’s no real surprise that the stuff-ups and ‘unscheduled’ events surrounding the campaign get a lot of airtime. From the first week of the current campaign there are two examples of molehills turned into mountains. In no particular order, there was Melinda in Adelaide who questioned Turnbull on education and single parent support. On the face of it she has a good point: if she can’t afford the costs of ‘necessary’ school equipment, how can her son have the same career options as his peers who can access the equipment? Don’t forget that up until a year or so ago, the federal government was supplying a laptop for most secondary school students — now it’s user pays. As those who have supported children through secondary school in the past ten years would attest, it is completely different (and much more research focused) than ‘back in the day’. A computer and reasonable internet connection is essential as class resources are on the internet along with the peer reviewed literature that a student needs to achieve a university entrance (or vocational education) score.

Then we had Duncan who didn’t have to see a political leader but took the enormously brave step of discussing his personal circumstances on Q&A on the first Monday of the campaign. Duncan’s question related to the budget where one of the higher tax thresholds was increased, rather than the lowest one. His point, eloquently made, was that the $87,000 per annum taxpayer would spend the extra $7 or thereabouts a week on a coffee — if he was given the same opportunity, he could do something for his entire family. Q&A panellist, and Assistant Treasurer in Turnbull’s government, Kerry O’Dwyer —
. . .talked stiffly of “growing the pie”, of small business tax cuts allowing cafes to buy new $6,000 toasters.

“Duncan, I’ll be harsh in my message,” said another panellist, Innes Wilcox, the head of Australia’s business lobby.

“If you’re on the minimum wage and with a family, you would not pay much tax, if any at all, would you? You would not pay much tax.”
Those running the Coalition campaign, detailed in this link, must have been having conniptions. O’Dwyer came across as an uncaring automaton who had to stick to the party line. It seems there are 100 people working around the clock to avoid incidents like O’Dwyer, and later Turnbull, being accused of being out of touch.

If the sole purpose of the campaign offices is to convince you to vote for the blue or red team, surely there are far greater uses for the time, effort and money that really would make Australia a better place to live. Who knows, maybe we could give those in a similar situation to Duncan a tax break rather than respond with a story about trying to draw the conclusion that businesses buying $6,000 toasters are good for those on minimum wages or income support. The listing of resources in the article above also demonstrates why it is so hard for alternative political parties and ideas to float to the surface in our two-party state.

By the weekend following Duncan appearing on Q&A, News Corp papers had delved into Duncan’s life to the extent that on Friday, the ABC’s Jon Faine told Damon Johnson, the editor of the Herald Sun (as reported in The Guardian):
“I query your paper’s value system,” he said.

“It’s as blunt and profound as that. Twice this week you’ve taken people with obvious mental issues ... people who dare question people in power and positions of authority, and they get ground into dirt. What a way to conduct yourselves.”

Johnson shrugged it off. “If you’re going to be on the national stage in the middle of an election campaign, it’s equally legitimate to have your own past looked at, and that’s what we’ve done.”

Threaded through News Corp stories are similar attempts to justify its coverage. It appears to hang on a tweet from a Q&A producer, Amanda Collinge, who described Storrar on Tuesday as “a new national hero”.

“The ABC presented him as a ‘new national hero’ and a low-paid Aussie battler, but Duncan Storrar’s son, Aztec Major, paints a very different picture of his father,” the Australian’s Thursday story said.

“ABC hero to villain,” ran the Herald Sun’s Friday front page.

Four words – now deleted – but enough to turn Storrar, like Zaky Mallah before him, into an abstraction, fodder for a culture war between a media empire and the public broadcaster.
The media has shown that it can research and investigate should it decide to do so. News Corp chose to investigate the person who asked the question, rather than the issue raised. Regardless of the past sins of a person with the courage to challenge the orthodoxy, they deserve a response to the question, not a character assassination. In fact, you could suggest the real answer to the question is ‘you’re right — it’s unfair’. However, actually helping those less well-off would be slaughtering a number of sacred cows held dear by the Coalition and fellow travellers in this land.

At the end of the day, we are not being served well by most of the media reporting on the 2016 election campaign. Doco-dramas such as The Newsroom can research and develop stinging denunciations of the US Tea Party (which is an influence in the Coalition party room) calling them the ‘American Taliban’, and locally Charlie Pickering’s self-described ‘news comedy’ The Weekly discussed the reasons for the double dissolution election with far more logic than News Corp exercised when they decided to attack Duncan.

If a ‘docu-drama’ and a ‘news comedy’ can research and make salient points on the political landscape as they see it, why can’t the professionals who boast that they will give you the information you need to make a rounded decision? Currently Melinda and Duncan are both showing them up. Isn’t it time the media companies got off the political bus and challenged the orthodoxy as well?

What do you think?
Let us know in comments below.

Recent Posts
The mythical $80,000
23535NM, 15 May 2016
Some reading this would be able to remember the days when the urban dream was the quarter acre block in a ‘nice’ suburb, with a Holden, Falcon or, if you were a real radical, a Valiant parked in the driveway. If you’re younger, you’ve probably seen the concept on any one of a number of Australian history television shows over the years.
Jobs and growth but what jobs?
Ken Wolff, 11 May 2016
There are two key aspects to the government’s ‘jobs and growth’ mantra: one that it has been successful in creating 300,000 jobs and that its cut to company tax for small businesses will encourage business expansion (growth) and create more. Both assertions, however, are a bit rubbery to say the least.
Trickle down thinking breeds inequality
Ad astra, 11 May 2016
In a piece published on 13 April, I predicted that inequality would be a hot button issue in the upcoming election. Now that we have had both Scott Morrison’s budget speech and Bill Shorten’s speech in reply, we can see how this issue will play out in the election. Although the word ‘inequality’ has not assumed the repetitive status of the ‘jobs and growth’ mantra, it is subtly pervading the political discourse.

The mythical $80,000

Some reading this would be able to remember the days when the urban dream was the quarter acre block in a ‘nice’ suburb, with a Holden, Falcon or, if you were a real radical, a Valiant parked in the driveway. If you’re younger, you’ve probably seen the concept on any one of a number of Australian history television shows over the years.

The reality is that for a lot of Australians, the dream was actuality. A lot of the now ‘middle ring’ suburbs around our larger cities were constructed during a post war housing boom and people didn’t have to be in receipt of a large income to support the lifestyle depicted in what are now grainy black and white images that pop up occasionally, sometimes accompanied by images of ‘that nice Mr Menzies’ giving a fatherly address to the nation from behind an imposing desk probably in Canberra.

In 2016, we substitute the government formed by Tony Abbott — until he was unceremoniously booted by his own colleagues — and Malcolm Turnbull for that of Bob Menzies and if either of them tried to do a fatherly address from behind a desk, the laughter and ridicule would be audible from the moon.

Turnbull really isn’t travelling that well. For a number of years, he has been seen as the moderate face of the Liberal Party in Canberra. In fact, Abbott originally became Opposition Leader after he rolled Turnbull, who was (amongst other things) going to allow Rudd to legislate a carbon pollution reduction strategy.

In September 2015, Turnbull returned the favour as Abbott was seen as being electoral poison. In the words of pollsters, ‘if an election was to be held’ towards the end of 2015 the ALP would have won convincingly. Turnbull became leader and the polls reverted to the Coalition government being streets ahead of the ALP. It didn’t last. At the time of writing, Roy Morgan has the ALP ahead at 51% to 49%.

Traditionally, if a political party isn’t travelling that well, it uses an element of surprise in calling an election and the timeframe for the election is the shortest period possible. The belief is that if the party machine is ready, it can be framing the election debate while the other side is still scrambling to nominate candidates, get the policies together and the advertising booked. Turnbull’s government (with the stratospheric popularity ratings in October last year) is falling to the ground fast. So Turnbull follows Gillard’s strategy of advising when the election is going to be months ahead of the actual timing and chooses to run a long campaign. Good luck with that — it’s worked well in the past!

Shorten and the ALP have also chosen an interesting strategy coming into this election by releasing policy for scrutiny and attempting to steer the political debate away from the 30 second sound bite. The polling numbers would suggest they have been reasonably successful and in a lot of cases the Coalition government has had to play catch up by either attempting to divert the discussion or releasing a ‘me too’ policy to counter the ALP’s demonstrated leadership in the particular area.

Turnbull’s centrepiece is the ‘jobs and growth’ budget. He is claiming that the 2016 budget frames what his government will do for the next 10 years. So let’s look at some of the initiatives included in the Turnbull/Morrison budget.

If we go back to February, Noel Whittaker (an author of personal finance publications) wrote an article for Fairfax discussing ‘Why bracket creep is no big deal’. Whittaker points out that ‘back in the day’, there was a serious issue with the income levels that triggered higher income tax payments; namely the levels were comparatively much lower and closer together and the tax rates were higher. Way back when (all of 15 years ago), the 43% tax rate cut in at $38,000 and the 47% rate cut in at $50,000. If you are fortunate enough in 2016 to earn $80,001 per annum, you have to get to $180,000 per annum to hit the top rate — and if you earn $180,001 or above you are paying the top rate — so how much extra you earn really doesn’t matter. So what would Whittaker know? His name is still used by a personal investment consultancy firm after selling his interest to Bankwest in 2007 and he has sold a considerable number of books on creating personal wealth.

Remember the Coalition discussions over the past few months putting various taxation options on the table and then withdrawing them soon after when some special interest group complained. At the end of the day, all Morrison really did was fiddle with the levels where income tax rate changes applied. The way the income tax system is structured taxpayers only pay a higher rate of tax on the value over the threshold rather than the perceived higher amount on all their income. For example, if you earn $84,000, you are paying the higher (37%) rate of tax on $4000, not the whole lot.

The real issue here is that Turnbull and Morrison are claiming that changing the effective taxation rates of those that earn over $80,000 affects those on average incomes. Well they are wrong. Peter Martin, writing for Fairfax, claims:
The average wage is $60,000. Most Australians don't get close to $80,000 and only around one quarter of them earn more than it. Put another way, the overwhelming majority of Australians, including those on average wages, won't be getting his reported tax cuts.

There's a logic to cutting tax for the highest-earning 25 per cent of Australians and not for the other 75 per cent. It's that $80,000 is where the second highest tax rate comes in.
When The Political Sword discussed negative gearing a month or so ago, the number of $80,000 as the claimed average income popped up again. Mathematically, an average is the ‘central’ value for a set of numbers. Martin points out that only a quarter of wage/salary earners receive over $80,000 per annum so if the full time employee average wage is $80,000 as Morrison suggests, there are some people earning considerably in excess of the chosen value — simply because three quarters of the population live on an income below the average.

Despite the framing, those who earn enough to be taxed at the highest and second highest tax rates are not ‘average’: they earn considerably more than the rest of us. The change to the tax thresholds is purely cosmetic as it really only affects the tax rates on a few thousand dollars around the new threshold points.

The Coalition has also taken the opportunity in the 2016 budget to restore some funding to the Australian Securities and Investments Commission (ASIC) that was ripped from it in the Coalition’s ‘famed’ 2014 budget. In 2014, $120 million was to be cut from the funding over the next five years under the justification of ‘repairing the budget’. Questioners at the time were advised that the government was of the impression that the banks could ‘self-regulate’. Either the restoration of funding demonstrates the government no longer believes the finance industry can regulate itself, or it is window dressing.

While the ALP is promising a Royal Commission into the banking and finance industry if it gains power, the government claims that ASIC already has the powers to investigate and prosecute to a greater level than any royal commission. While this is probably correct, the ability of ASIC to investigate and prosecute is largely determined by funding. As the Coalition government has made perfectly clear up until now, they are of the opinion that the banks can self-regulate and ASIC can exist on a significant funding reduction.

Turnbull was recently interviewed by the ABC’s Jon Faine on Melbourne Local Radio. Faine was attempting to discuss the real issue of young people trying to get sufficient funds to pay rent while saving for a deposit to enter the housing market — the point being the housing market is distorted by the number of investors taking advantage of the current negative gearing/capital gains taxation rules. Faine was using his own kids as an example.
“Well, are your kids locked out of the housing market, Jon?” the Prime Minister responded.
“Yes,” Mr Faine said.
“Well, you should shell out for them. You should support them, a wealthy man like you,” Mr Turnbull said.
While it was initially seen as a joke, the ALP argued that Turnbull was out of touch and the Coalition accused the ALP of a lack of aspiration for ‘hardworking Australians’, the reality is that Turnbull’s comment seems to suggest that he sees nothing wrong with people whose parents can afford to ‘contribute’ to a house for their kids doing so. It begs the question of how those kids whose parents can’t contribute achieve the same aim in what is supposed to be an egalitarian society. Disregarding the worth of the parents and the talk of aspiration, this is creating a class system within our society.

So we start the election campaign with the Turnbull/Morrison ‘jobs and growth’ budget which; in their words; promises to power Australia out of the mining economy into one that produces services the world wants. In reality, it helps those who could probably afford to give a bit to make our society as equitable as it seemed to be in the 1950’s, while those that have no chance of earning the average wage (regardless of the value being $60,000 or $80,000) get diddly squat. Greg Jericho, writing for The Guardian” discusses the issues around ‘average’ here using a wonderful interactive map that shows the percentage of people in each federal electorate that actually earn in excess of Morrison’s mythical $80,000 average. Probably not surprisingly, the value is almost always below 50%.

Helping the better off, reducing regulation in the finance industry and a host of other measures we don’t have room to go into here, such as changing the definition of a small business for taxation purposes, reducing funding to education, and freezing the rebate for a doctor’s visit, certainly isn’t helping our society become equal, let alone one where equality is the overarching principal. In fact, it all has a familiar ring to it. Some would call it the rich looking after themselves, others call it Reaganomics and some would suggest that in reality, it is the discredited ‘trickle-down effect’ writ large.

The Saturday Paper on 7 May 2016 reported a sponsored visit to Australia during 2015 by Arthur Laffer, the ‘genius’ who gave the world Reaganomics (the deregulation of large financial institutions under the Reagan Administration almost single-handedly caused the Global Financial Crisis of 2007). While in Australia, Laffer addressed the Australian Chamber of Commerce, IPA and Sydney Institute as well as ‘doing the rounds of government’. A cynic could suggest there is a connection.

What do you think?
Why the government’s obsession with the number 80,000?

How out of touch IS Malcolm Turnbull?

Let us know in comments below.

Recent Posts
Jobs and growth but what jobs?
Ken Wolff, 11 May 2016
There are two key aspects to the government’s ‘jobs and growth’ mantra: one that it has been successful in creating 300,000 jobs and that its cut to company tax for small businesses will encourage business expansion (growth) and create more. Both assertions, however, are a bit rubbery to say the least.
Trickle down thinking breeds inequality
Ad astra, 11 May 2016
In a piece published on 13 April, I predicted that inequality would be a hot button issue in the upcoming election. Now that we have had both Scott Morrison’s budget speech and Bill Shorten’s speech in reply, we can see how this issue will play out in the election. Although the word ‘inequality’ has not assumed the repetitive status of the ‘jobs and growth’ mantra, it is subtly pervading the political discourse.
My innovation is bigger than your innovation
Ken Wolff, 8 May 2016
Malcolm Turnbull launched his ‘National Innovation and Science Agenda’ on 7 December last, three days after Labor had launched its ‘start ups’ policy, ‘Getting Australia Started’.

Trickle down thinking breeds inequality

In a piece published on 13 April, I predicted that inequality would be a hot button issue in the upcoming election. Now that we have had both Scott Morrison’s budget speech and Bill Shorten’s speech in reply, we can see how this issue will play out in the election. Although the word ‘inequality’ has not assumed the repetitive status of the ‘jobs and growth’ mantra, it is subtly pervading the political discourse.

Every time the term ‘fairness’ is used, notions of equality are being canvassed. In his reply speech, Shorten made a point of emphasising equality for women: “championing the march of women to equality, closing the gender pay gap and properly funding childcare”. He spoke of fairness and integrity in superannuation, and asserted that “Australia should never accept the false choice between growth and fairness - each is essential to each other.”

By now most readers of political blogs will be familiar with the term: ‘trickle down economics’, but for those who are not, let me give a short history of this concept. It is not a formal economic theory so much as a catchphrase that captures a concept that permeates the thinking of many politicians, namely that benefits given to those at the top will trickle down to those at the bottom.

The concept goes back a long way. Economist John Kenneth Galbraith noted that ‘trickle-down economics’ had been tried in the United States in the 1890s under the name ‘horse and sparrow theory’: “If you feed the horse enough oats, some will pass through to the road for the sparrows.” Reaganomics was an example, and likewise Margaret Thatcher’s approach to economics.

In his book: Zombie Economics: How dead ideas still walk among us (Princeton University Press, 2010), John Quiggin, Australian Laureate Fellow in Economics at the University of Queensland, described several discredited economic theories that refuse to die, living on as zombies that politicians still use to suit their political purposes. Among the zombies he listed was ‘trickle-down economics’. Although discredited, Quiggin warned that as a zombie that will not die, the concept would still be used: “As long as there have been rich and poor people, or powerful and powerless people, there have been advocates to explain that it’s better for everyone if things stay that way.” This was elaborated upon in an April 2011 piece on The Political Sword: Joe Hockey should read John Quiggin’s Zombie Economics.

While great economists such as Adam Smith, John Stuart Mills and John Maynard Keynes have supported income re-distribution through progressive taxation, and most economists still do today, there are still some who argue that we should let the rich get richer and wait for the benefits to trickle down to the poor. One could be forgiven for thinking that is what Joe Hockey, Scott Morrison, Malcolm Turnbull, and today’s Coalition members believe, as they insist on giving tax relief to the wealthy, but not to the less well off. This trend was starkly portrayed in the 2014 budget, and continues in 2016.

Quiggin gives example after example to demonstrate that the trickle down hypothesis is false, and caps this with a telling graph of household income distribution in the US from 1965 to 2005 that shows that those on the 95th percentile for income steadily improved their position by over fifty percent, while those on the 20th percentile and below were static.

He pointed out that the biggest challenge of the failure of the ‘trickle-down hypothesis’ is to understand why and how inequality increased so much under market liberalism, and how it can be reversed. To Quiggin, restoring progressivity to the tax system is seen as an obvious move.

For the academically inclined, several varieties of inequality are recognized: Wikipedia says:
”Economic inequality is the difference found in various measures of economic well being among individuals in a group, among groups in a population, or among countries. Economic inequality is sometimes called income inequality, wealth inequality, or the wealth gap. Economists generally focus on economic disparity in three metrics: wealth, income, and consumption. The issue of economic inequality is relevant to notions of equity, equality of outcome, and equality of opportunity…There are various numerical indices for measuring economic inequality. A widely used index is the Gini coefficient, but there are also many other methods.

“Some studies show that economic inequality is a social problem; too much inequality can be destructive because it might hinder long-term growth. Others argue that too much income equality is also destructive since it decreases the incentive for productivity and the desire to take-on risks and create wealth”.
The latter is what conservatives believe.

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

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

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

If you need any more evidence to convince you of the fallacy of the ‘trickle down’ concept, read: The embarrassing truth about trickle-down on the New Economics website, NEF, the outlet of a UK think tank promoting social, economic and environmental justice.

The 2014 article by Faiza Shaheen concludes:
”The trickle-down approach has been bad economics. Not only has it failed to deliver on its own terms but also it has actively damaged the health of our economy, society and political system. It has supported growing inequality which, rather than boosting economic performance, has deflated it. The UK grew more when we were a more equal country during the post-war, pre-Thatcher era than after. Its damaging social effects are also mounting. High levels of inequality are increasingly seen as harmful to individual well-being and health, social cohesion and social mobility.

“Obama’s attack on trickle-down economics, echoed by Labour Leader Ed Miliband offered hope that our leaders are finally engaging in the possibility of dethroning this damaging philosophy, but the recent response to a potential increase in income tax shows that the theory still festers. We must continue to counter an approach that has created a tide of inequality that lifts up the yachts while leaving the rest of us paddling harder. By pulling the rug out from under trickle-down economics other damaging myths can be exposed, such as the argument for high executive pay.”
Read too Elizabeth Warren demolishes the myth of “trickle-down”. “That is going to destroy our country, unless we take our country back” in Salon. She is an academic and Democrat senator.

For Liberal skeptics here is the coup de grace in United Fair Economics in an article Trickle-down economics: Four reasons why it just doesn’t work, written in 2003 during the Bush era:
  • Cutting the top tax rate does not lead to economic growth
  • Cutting the top tax rate does not lead to income growth
  • Cutting the top tax rate does not lead to wage growth
  • Cutting the top tax rate does not lead to job creation.
The article supports these assertions with graphic evidence, and concludes:
”Overall, data from the past 50 years strongly refutes any arguments that cutting taxes for the richest Americans will improve the economic standing of the lower and middle classes or the nation as a whole. To be sure, the economic indicators examined in this report are dependent on a variety of factors, not just tax policy.

“However, what this study does show is that any attempt to stimulate economic growth by cutting taxes for the rich will do nothing – it hasn't worked over the past 50 years, so why would it work in the future? To put it simply and bluntly, Bush's top-bracket tax cut is an ineffective attempt at stimulus that will not cause any growth - unless, of course, if you're talking about the size of the deficit.
If we now look at the Coalition’s 2016 budget, much of it is based on the trickle down concept that tax breaks or other economic benefits provided to businesses and upper income levels will inevitably benefit poorer members of society by improving the economy as a whole.

That is what is behind the monotonously repeated ‘jobs and growth’ mantra. Superficially appealing, the Coalition posits that to increase jobs those who employ people must be given tax breaks and other incentives. This is most flagrantly demonstrated by the Coalition’s plan, beginning on 1 July, to reduce company tax progressively from 28.5% now to 25% over the next decade, not just for small and medium businesses with a turnover of less than $2 million, but to extend eligibility to businesses with turnovers of up to $10m, and the lower rate will be gradually phased in for larger businesses until it covers all companies in 2023.

The Liberal manifesto Lowering company tax, boldly asserts:…if you are against cutting company tax, you are against economic growth. If you are against economic growth, then you are against jobs.” In other words, the benefits of cutting company tax will trickle down to the workers at the bottom. Arthur Sinodinos was the first confidently to expound this a few weeks back.

PM Turnbull and Treasurer Morrison were reluctant to admit the cost to revenue of this measure, but Treasurer Secretary John Fraser let the cat out of the bag during a Senate Estimates hearing with the figure of $48.2 billion over ten years. Clearly, the Coalition has such fervent belief in the stimulatory effects to ‘jobs and growth’ of giving a large tax break to businesses, even to multinationals, that it is prepared to forego over $48 billion in revenue!

Another manifestation of preferentially feeding the horses is the Coalition’s push for lower penalty rates on Sundays. Their belief is that if this were to occur, more businesses would open on Sundays, and employ more people. Trickle down again. That those depending on Sunday rates would suffer seems immaterial to them.

There are other instances in the 2016 budget of giving to the rich but not to the poor, such as a tax cut to those earning over $80,000 by raising the marginal tax threshold for this second top bracket from $80,000 to $87,000. But there is no tax break for those earning below this magic figure; indeed they will suffer cuts in entitlements. The horses will get the oats; the sparrows will need to fossick in the manure to get their share.

Progressives: Labor and the Greens, know the trickle down concept is a charade. They believe that to stimulate an economy that is slowing, and thereby drive jobs and growth, stimulatory measures are needed. Time and again, better wages have been shown to increase economic activity because people have more money in their pockets to buy the things other people make or do. Using government funds to support infrastructure development also has been shown to stimulate economic activity and increase jobs. This Keynesian approach has a long track record of success when applied where private economic activity is lagging, but the Coalition doesn’t want to know.

I need go on no further.

Almost every slogan, almost every utterance of the Coalition is premised on an entrenched, unshakeable belief in trickle down economics, despite this concept having been debunked for a century. Zombie-like though it is, the Coalition embraces it with fervour. Why? Because it suits their political purpose: to shore up the top end of town, to please those who fund and support it.

Don’t expect them to ever believe that trickle down thinking breeds inequality, because with all PM Turnbull’s talk of ‘fairness’, ‘equality’ is unimportant to them. They believe that inequality is simply part of the natural order of things, and should remain that way.

What do you think?
We are looking for your comments.

What do you think of the Turnbull/Morrison budget?

Do you see how trickle down thinking has permeated the budget, and how it will lead to more inequality?

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My innovation is bigger than your innovation

Malcolm Turnbull launched his ‘National Innovation and Science Agenda’ on 7 December last, three days after Labor had launched its ‘start ups’ policy, ‘Getting Australia Started’.

The launch dates for the policies mean little as obviously before such a launch there has been considerable background work and consultation — by both parties. So, if they have both done the work beforehand, do they come to the same conclusions and have they found and addressed the real issues facing us in our future ‘innovation economy’? It should be noted, however, that Bill Shorten had raised innovation, STEM, and ‘a nation of ideas’, and outlined some aspects of his innovation policy, in his Budget Reply in 2015, months before Turnbull became prime minister: so there is an argument that Turnbull was playing catch-up and that even the catch-phrase for his policy, ‘The Ideas Boom’, was born in Shorten’s speech.

It wasn’t, however, only the political parties doing the work or engaging in the debate. At Parliament House on 27 November the Australian Council of Learned Academies (ACOLA), which comprises the Australian Academy of the Humanities, the Australian Academy of Science, the Academy of the Social Sciences in Australia, and the Australian Academy of Technological Sciences and Engineering, launched its report, ‘Translating research for economic and social benefit: country comparisons’. Also at Parliament House, six days later — a day before Labor’s policy launch — the Senate Economics References Committee released a report, ‘Australia’s Innovation System.’ So in the space of ten days there was a lot happening about innovation.

The Senate Committee recommended:
  • adopting a target to lift investment in R&D to 3% of GDP
  • establishment of an independent body to administer and coordinate innovation policies and programs
  • measures to enhance collaboration between universities and the private sector
  • the commonwealth and state governments collaborate to support the role of local and regional innovation ecosystems
  • education be a central focus, recognising ‘the central importance of the interplay between the STEM subjects and the humanities, social sciences and creative industries’
Labor has committed to devoting 3% of GDP to R&D by the end of the next decade but I have not been able to find a similar commitment from the Liberals. R&D is central to innovation and adopting the target can help bolster R&D in Australia, particularly given, as shown later, that we are currently overly reliant on public sector research.

The Liberals’ address the second, third and fourth recommendations. Its approach to the fifth is more limited than recommended.

For Labor’s response there is a need to look at both ‘Getting Australia started’ and ‘Powering Innovation’. When both are considered Labor is also addressing the second, third and fourth recommendations and has a greater emphasis on the fifth recommendation, particularly if its approach is read in conjunction with its education policy, the second sentence of which reads:
Improving education is the key to opportunity, to innovation and to the future economic and social prosperity of our nation. [emphasis added]
The differences in detail reflect the differing philosophies of the parties. The Liberal approach basically builds on existing business capabilities it sees in the economy and proposes measures to unlock and leverage those capabilities. Labor’s approach builds from the ground up. That is clearly shown in the approach to start-ups and STEM education.

As regards start-ups, the Liberals offer a 20% tax break for early stage investors and some tax cuts through the existing Small Business and Jobs Package. Otherwise its approach is legislative, to support business through reforms to employee share schemes, removing rules relating to depreciation of non-tangible assets (such as patents), reforming insolvency laws and relaxing the ‘same business test’ for tax losses.

Labor offers a $500 million Smart Investment Fund from which government will co-invest, with venture capital and other investors, up to 50% of start-up capital but otherwise its focus is educational — supporting a ‘start-up’ year of accelerated study or involvement with a university for those involved in start-ups and providing HELP loans for those completing university degrees to undertake an additional business-focused year.

For STEM, the Liberals support reforming the Australian Curriculum to provide more teaching time for science, maths and English and will ensure that primary teachers graduate with a specialisation, with particular support for STEM subjects. It will also support coding and computing in schools.

Labor proposes a National Coding in Schools centre where business and industry can connect with teachers. It will also provide scholarships for 25,000 teachers over five years to be trained in STEM, and for 100,000 graduates in STEM, also over five years, who will have their HECS debt written off on graduation.

In a piece in The Conversation, Anand Kulkarni and Travers McLeod suggest that a ‘beyond STEM’ approach should be taken that recognises:
… the interdependencies of scientific research and non-research forms of innovation such as design and organisational systems, together with the social sciences pivotal role in driving prosperity within innovation ecosystems.
So simply addressing STEM may not be enough, although it is apparent that we do need more people skilled in these areas. In April, Matt Barrie, a tech entrepreneur, pointed out that the number of young Australians involved in the tech industry had fallen dramatically and there had been a reduction of between 40% and 60% in those studying IT in the past decade, yet this at a time of a boom in technology.

The parties have a similar approach to overseas recruitment with both offering new entrepreneurial visas with options of fast tracking permanent residency.

Questions have been raised about the emphasis both parties place on start-ups. ‘Stilgherrian’ writing on ZDnet in September last year asked for:
… a conversation about innovation and the future that isn’t solely about the kind of high-risk fast-growth business models run by youthful technophiles that venture capitalists prefer.
Labor’s Kim Carr, speaking at an engineers’ forum on 20 November last said:
In Germany, the innovation system integrates all sectors of the economy.

That is in contrast to, say, the US, where there is great emphasis on ICT start-ups and the provision of venture capital, but where old industries are too often allowed to die out.

Germany, however, aims to renew them through a broad view of innovation.
As is often the case, it seems we are following the US model of start-ups and venture capital when there are other approaches to innovation which may better suit our economy. One can only hope that Kim Carr’s approach has more influence when Labor gains government.

The Liberals’ approach to collaboration seems to put the pressure on universities to play the more active role in joining with businesses. Its policy suggests that it will refocus a greater proportion of block grant research funding to universities to require collaboration with business. The ACOLA report, however, found that in a number of overseas countries the process is reversed with the incentive provided to businesses through specific or additional R&D tax incentives to promote collaboration. It suggests:
The argument for providing incentives to business to seek out translatable university research is that business will apply the disciplines of the market that it hopes to address. This commercial approach to research collaboration provides a ‘reality check’ which is considered important in separating out research outcomes with real commercial prospects …
It is an issue because, as the ACOLA report shows, in Australia only 4.1% of small and medium enterprises (SMEs) collaborate with researchers and only 3.5% of large firms: that compares, for example, with 16.8% of SMEs and 31.3% of large firms in the UK, and 13.9% and 43.2% respectively in Germany.

Eighty percent of Australia’s researchers are in the public sector (universities, CSIRO, etc). That is the highest proportion in the OECD. The next closest are Chile and the UK with 62%.

Australia encourages R&D by businesses primarily through the R&D tax incentive — what is termed an indirect approach. Other countries make greater use of direct support through grants, loans and procurement contracts to encourage business R&D, including loans and grants for SMEs.

In another recent article on TPS, I quoted Tim Mazzarol from the University of Western Australia who noted from a Business Council of Australia forum he attended:
… there was also a recognition that many large firms, particularly foreign owned multinationals, do very little fundamental R&D in Australia. The pipeline for STEM graduates into industry and the willingness of many large firms to serve a “Keystone” role in local business ecosystems is currently missing.
None of those issues, recognised by business itself, are directly addressed in the current innovation policies.

The Liberal government, despite now expressing hope for greater business-research collaboration has, since 2013, overseen significant cuts in public research funding and even cut $1 billion from the business R&D tax incentive. Innovation requires R&D and there is little point espousing one when cutting the other.

If both parties support spending on STEM teaching, they may need to assist industry to create pathways for STEM graduates into businesses — but that has not been addressed, although the parties may claim that their proposed regional innovation hubs will provide a focus and such a pipeline but it is not clear as yet whether that will be enough.

The last point in Mazzarol’s comment is also supported by ACOLA. It reports that overseas experience shows innovation hubs require at least one large firm at their centre.

But that takes us back to Mazzarol’s first point. Does Australia have a problem because many of our largest firms are actually overseas multi-nationals who, as Mazzarol reports, do not undertake significant R&D in Australia and so do not really have a great interest in supporting other Australian businesses? They may have no interest in acting as the focus of an innovation hub because their focus is to return profit to their home country (or a tax haven). Do we have enough large Australian companies to fulfil that role?

Of course, innovation also requires adequate infrastructure. For the digital age, and for start-ups making use of digital technology, one would have thought the NBN would have been a crucial component. The original NBN may have been but not the second rate system now being rolled out: in 2013 Australia’s average peak connection speed placed us 30th in world rankings but by the end of 2015 we had dropped to 60th; our broadband connectivity above 4Mbps ranked us only 45th in 2013 but in 2015 that had also dropped to 56th place.

If Australia is to take advantage of innovations in the digital age then, at some point, there will need to be an upgrading of the NBN and elimination of the copper components that slow the current system. Both the Liberals and Labor mention the NBN in their policies but, as yet, without any details for a future upgrading.

Innovation requires risk taking, not merely by the innovators, but by businesses when they consider adopting the new technology — that does not appear to have been considered in the current policies which focus on high-tech start-ups and fail to provide assistance for other businesses to adopt new technology, other than, perhaps, in the innovation hubs. But surely, as Kim Carr said, genuine innovation should spread across all sectors of the economy, including established industries, if we are to be successful.

Elizabeth Webster on The Conversation, suggests we could learn from the Australian primary industries:
Each major agricultural product group has an R&D corporation, jointly funded by farmers and government. It identifies common industry problems, appoints experts to research these problems, translates their findings into practical solutions and then delivers the message to the farmer. The individual farmer does not have to bear the full risk of the innovation — this is shared by peers with joint problems. By the time a proposed innovation reaches the farmer, much of the risk has been removed.
She does not suggest that this model can automatically apply to other industries but it provides elements that should be considered: ‘The R&D corporation model is constituted under acts of parliament. This means their members can think long term with the (near) certainty that their plans will not be scuppered by a change of government or minister’.

Another writer, Gavin Moodie, however, suggests that we can no longer simply follow the linear ‘supply chain’ model of research leading to development and then application in production. He supports the development of innovation hubs with many businesses gathered together but, like ACOLA, he recognises that ‘almost every successful innovation hub involves the participation of big enterprises as hub champions’.

Elements of both approaches seem warranted but so far we have only a commitment to innovation hubs.

One factor that is raised by a number of writers on this topic is the need for patience and consistency (such as provided by the agricultural R&D corporations). Moodie writes that successful innovation can require public and private sector collaboration over periods of 15 years or more.

There are questions whether the focus by both parties on start-ups and STEM teaching will achieve the intended outcomes without other supporting measures and, against the other issues I have raised, the policies of both parties fall short to differing degrees. Plus, when one takes account of the current government’s funding cuts to scientific research and education and the downgrading of the NBN, we have already set the ‘innovation economy’ back a few steps and need to make up that distance again. Labor at least gives greater recognition to those broader issues.

Finally, there is one key issue raised by Kulkarni and McLeod in their article:
… to be credible, innovation policymaking must be located within a long term vision of the structure of the Australian economy we should aspire to.
Do we yet have a long term plan for the structure of the Australian economy? — I think not. And when governments can undo the changes introduced by previous governments every three years or so, we are a long way from achieving that ultimate vision. Without it, even the best intentions regarding innovation may not achieve their full potential. Or do we just sit back and hope ‘the market’ will get it right.

What do you think?
Will the policies put forward by the parties really achieve an ‘innovation economy’?

Or are the policies only going part of the way and leaving the rest to ‘the market’?

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Let’s face it, the Australian political system is a winner take all arrangement. Either the ALP or the Coalition will win any given state or federal election and then proceed to implement some version of the policy that was voted on by the members of the political party at various conventions.

The winning party will claim that it has a mandate to pursue the policies it published prior to the election. But in the majority of cases the devil is in the detail and usually contained on some obscure page of a policy document or hidden beneath a number of mouse clicks on the party website.

Both parties will decry the ‘meddling’ of minor parties yet rely on their support when it suits them, as the Coalition recently showed us by relying on the Greens’ vote to legislate changes to the method of electing Senators while railing against the Greens over not supporting the ABCC legislation. The amazing thing is that either of the two major political parties can decry and accept the support of a minor party at the same time while nearly sounding logical and rational.

The standard of political debate in Australia is demonstrated by the actions of Tony Abbott over the past six years. First, as Opposition Leader, he opposed most of the government’s agenda for the sake of column inches and media sound bites. This and other blog sites have discussed over the years how Abbott at various times (let’s be nice here) argued passionately for both sides of a particular issue.

Then once Abbott got to form a government there was a single minded determination to implement his version of the platform of the Liberal Party (with considerable influence of ‘lobby’ groups such as the IPA and ACL). The 2014 federal budget is a good example. It should be noted that sections of the 2014 budget have never been voted on and are now being taken down the proverbial dark alley and shot by Abbott’s successor. Abbott’s end came about early last year when leadership positions were spilled, no one ran against Abbott and he still didn’t have the confidence of over 30 of his ‘colleagues’ in the party room. Turnbull finally finished him off in September.

The level of political debate in Australia is at a similar level. We have governments who cannot make rational policy changes because at some point in the past, the leader of the party or the minister responsible at the time opposed the measure. In the past, some allowance was given as quotes from five years ago were forgotten rather than being hidden is some corner of the internet waiting for a search engine to rediscover the item at some inopportune time.

Ironically Turnbull, as the one-time owner of an Internet service provider, is now finding out to his political cost the ability of people to turn up past positions on various issues such as the republic, same sex marriage, refugee policy and so on. Accordingly, Turnbull’s polling is tanking and despite an election being only weeks away, Kevin Andrews, another Liberal Party ‘conservative warrior’, is apparently not talking about mounting a leadership challenge.

Really, parliament is usually not being used as a place where legislation is debated and passed based on the perceived good for the country, rather it is the two major parties’ regular conferences and the wonderfully named ‘think tanks’ that have usurped the role. Then, when the relative party is finally elected to power (for it will eventually happen), the party policy will be rolled out as legislation and there is very little that the ‘average Australian’ can do about it, other that hope the worst excesses are rejected by the ‘feral’ Senate or someone looks at the polling numbers and joins the dots correctly.

Not a great way to run a country is it?

You know, it doesn’t have to be like this. The 2010 to 2013 federal government was, if you believed the commentators at the time, inevitably going to fail as Prime Minister Gillard did not have an absolute majority of the floor of parliament. Gillard relied on the votes of two independents in the event there was a vote on confidence or supply (money). Despite this, Gillard’s government managed to pass legislation on carbon pricing (since repealed but demonstrably more important now than even a few years ago), school funding, and funding for those with a disability. In Queensland, the Palaszczuk ALP government relies on the support of independents for power and despite some rocky patches seems to be more popular now than they were at the last state election. Absolute majorities are clearly not necessary for effective government in Australia.

In a number of ‘western democratic’ countries around the world, the election system is ‘rigged’ (for want of a better word) to actively discourage absolute majorities. To find an example, we only have to sit in a sardine can hurling through the sky at 30,000 feet for about three hours and hop ‘across the ditch’ to New Zealand. Since 1996, the Kiwis have had a voting system known as mixed member proportional (MMP) which replaced a first part the post system that was acknowledged as entrenching the influence of the two major parties — Nationals and Labour. Since 1996, neither of the two major parties have gained an absolute majority of seats in parliament, although John Keys and the National Party fell one seat short at the last election. The New Zealanders have two votes, one for an individual member and another for a party list. The New Zealand government has an explanation here which includes a cute video involving cherries, pears and bananas! While it won’t make you an expert, it clearly explains the concept.

The New Zealand system recognises that political parties have a level of support within the community, so if a party gains 10% support across the country, it is entitled to 10% of the seats in parliament. If the 10% of seats ‘earned’ by the party are not taken by candidates that have been directly elected, the ‘extra’ MPs’ come from the party list. It should also be noted that the candidates that are directly elected only have to get the highest number of ‘first past the post’ votes – not 50% plus 1 as in the Australian system.

To put it into an Australian context, say the ALP received 35% of the vote across the country, the Coalition (in its various forms) 30%, the Greens 10% and others received 25% (three minor parties receiving 8% each, another gets the final 1%). The ALP would gain 35% of the seats in Canberra, the Coalition 30% and so on. As there is a requirement for a party to gain 5% of the vote, the remaining one percent of the seats would go to others rather than the last ‘others’ party unless the last others party won a direct seat. The ALP would win in our example but to form government it would have to have some form of agreement with both the Greens and one of the ‘others’ parties to form a government that could be sure to get legislation through the parliament. Otherwise, the Coalition, Greens and two of the ‘other’ parties could determine that the legislation was to be amended or defeated. It means a government has to negotiate a compromise on occasions and while, potentially, it could make the Parliament less certain, it does eliminate the ‘winner take all’ mentality evident by both major parties in the Australian system, as well as ensuring the ideas of either of the two major parties (or the various lobby groups) that don’t have support outside the party don’t see the light of day.

It is probably worth noting here that provided the government is perceived by the country to be doing a good job, longevity is almost guaranteed. New Zealand has had four prime ministers since the introduction of MMP, rather than the potential six in six years Australia will have had by the end of 2016. Their current prime minister, John Keys, has been leader since 2008, Labour’s Helen Clark sat in the chair from December 1999 to November 2008. MMP is also used in Germany, Scotland and Wales.

If you want to sit in the flying sardine can a while longer, you can go to Iceland. Iceland uses a system of voting where voters in a particular electorate elect 10 or 11 people to their parliament (Althingi). They too have a system whereby people from a party list are elected in accordance with the proportion of the vote the political party receives across the country. Icelandic politics is not a regular talking point in Australia. It has recently been interesting due to the resignation of Prime Minister Gunnlaugsson after he walked out on a television interview while failing to explain satisfactorily his involvement with some companies mentioned in the Panama Papers. On April 13, Lateline’s Tony Jones interviewed one of the possible replacements for the Icelandic prime minister, Birgitta Jonsdottir, who leads the delightfully named Pirate Party. The Pirate Party currently holds three seats in the Althingi. Jonsdottir, who at one time lived in Australia, was also involved with WikiLeaks in a past life and when asked about the Panama Papers commented:
Well, we have only seen the tip of the iceberg. I think it is a very important leak and I really hope that more will come, because I have sort of been following the news about this.

And I think there is actually a question about why we haven't seen anything that is related to the corporate part of these leaks. And I'm hoping that will be coming soon. I know that it is coming in Iceland. So I think this is a very important leak in order to reframe our tax laws so that the tax haven option is out.

But I also want to stress, since I used to be a WikiLeaks volunteer and I'm talking to an Australian media and I have lived in Australia as well, that I feel a little bit surprised how little support Julian Assange has got from the Australian state.
Her Pirate Party is one of six parties holding seats in the Althingi. While they hold three seats, Icelandic polling currently suggests they would receive 43% of the vote ‘if an election was held tomorrow’. From the Interview:
We have been going up in the polls now for a full year, where we have been polling as gradually the biggest party in Iceland. And we've had more support than both the governmental parties put together for quite a while.

And I really don't think that we are going to get 43 per cent in next elections. And frankly, to be honest, I don't think it's healthy for any party to be so big, because it means that the will of the majority is going to be so overwhelming — and I'm a big lobbyist for that we have true democracy, where the will of the parliament is the dominant will, not the majority will. [emphasis added]

But if we get into a position to form a government — in Iceland we always have coalition governments — then we have been very clear about that. We have to implement a new constitution that was written in the wake of the crisis by and for the people of Iceland, in a beautiful process where the nation got to participate in creating this new social agreement on what sort of society we want reflected in the highest law: the constitution.

So that's one of the first things we will do and that will mean a short term. We also want to make sure that before elections it is absolutely clear what compromises the parties that are going to be working together will make if they get into governance.

And I'm the most excited about looking at, you know, who will be a great chairman in different committees in the parliament, rather than looking who will be great ministers. Because if you always look at the executive branch and the administrative body as the absolute power, then we will never change anything.
It is refreshing to see a politician who doesn’t want to grind others into the dust, is prepared to work with her opponents and look towards good government and the sharing of the power across a number of different political outlooks. This kind of thinking restores the power behind the government back to the parliament, rather than to Menzies’ ’36 faceless men’ concept which infects both sides of Australian politics.

Minority governments can and do work in Australia and in reality have to represent the electors better than say the Newman government in Queensland, the last term of the Howard Federal government or the Kennett Victorian government ever did. While the electors finally won the day, in all cases it took longer than it should have for a sense of representation of the community’s interests to be restored.

Power corrupts, and absolute power corrupts absolutely.

What do you think?
Are minority governments a desirable thing for Australia?

Should we be looking at a more representative system for electing our representatives which more closely resembles the electorate’s wishes?

Let us know in comments below.

Recent Posts
Why isn’t the Medicare rebate freeze a major issue?
Ken Wolff, 2 May 2016
Although the former Abbott government dropped its $5 co-payment for Medicare it retained and extended a freeze on Medicare rebates that has the potential to introduce a co-payment by stealth.
Lords and Ladies: the world changes
Ken Wolff, 1 May 2016
My Lords and my Ladies, I beseech your indulgence, here before your magnificent court, to present for your amusement and moral edification the fourth iteration of the tale of Tiny Napoleon O’penmouth and his rival Mal C’od-turn-a-bull. And a new rival emerges but you must await my tale for that revelation — forgive my teasing jest but I am here to tease, entertain and to charm.
Divining the federal budget
Ad astra, 30 April 2016
Some of you may question the purpose of trying to divine what will be in the May 3 federal budget when the Turnbull Ship of State seems to be all at sea, wallowing towards an uncertain destination, facing strong headwinds, its sails flapping, its hull leaking, with a dithering Captain at the helm, a loquacious and at times incoherent First Mate insisting he knows where he’s going, and a motley crew.

Lords and Ladies: the world changes

The spruiker

My Lords and my Ladies, I beseech your indulgence, here before your magnificent court, as I present for your amusement and moral edification the fourth iteration of the tale of Tiny Napoleon O’penmouth and his rival Mal C’od-turn-a-bull. And a new rival emerges but you must await my tale for that revelation — forgive my teasing jest but I am here to tease, entertain and to charm.

I will, however, refresh your exalted ears and remind you of the rise of Mal C’od-turn-a-bull in my last tale, when the Lords and Ladies of Tiny Napoleon O’penmouth’s kingdom secretly plotted his downfall — he had vastly inflated his own importance which they could not abide. Mal C’od-turn-a-bull was their man, a man who understood their secret gold-making dealings behind the castle walls, as he had engaged in such dealings himself; a man who could calm rebellious peasants with his smile and mellifluous words; who could dupe the peasants into working longer and harder without them discerning a deception. Or so thought the Lords and Ladies of that glorious kingdom.

But, my, how the world changes!

The tale continues: the unedifying fall and improbable resurrection of Mal C’od-turn-a-bull

Mal C’od-turn-a-bull swept upon the kingdom with his smile. He beamed when he spoke to the peasants. He beamed when he spoke in the green great hall — once the bastion of Tiny Napoleon O’penmouth. He beamed when he dined discreetly in the great halls of the Lords and Ladies of the kingdom.

The peasants were beguiled by the smile but less so his endless words. Whereas Tiny Napoleon O’penmouth spoke in three words, Mal C’od-turn-a-bull spoke in three hundred. Peasants were soothed to sleep before he had finished or scurried back to their dank fields and cough-inducing forges rather than await the two hundredth, let alone the three hundredth word. Perhaps Tiny Napoleon O’penmouth’s three-word bombast was easier on the ear, simpler to grasp or ignore as fancy took — at least it was quickly over!

As forewarned at the end of my last tale, Tiny Napoleon O’penmouth and his coterie of goblins did not forsake their taste of power nor their lust to return to it. In gloomy nooks of the green great hall they chatter, they spit, they quietly, and sometimes less than quietly, mock Mal C’od-turn-a-bull, disparage his loquaciousness.

In truth, Mal C’od-turn-a-bull’s verbosity has withered in recent times. He is fortunate if he can stretch his thoughts to one hundred words and even such words as there are seem to bemuse the peasants, no longer pacifying or mollifying them.

‘What have you done?’ they jeer in unison.

Mal C’od-turn-a-bull is no longer confident he has an answer.

Bear with me my Lords and Ladies as I take you back a step. How did it come to this? How did Mal C’od-turn-a-bull lose the brilliant lustre of his sweeping arrival across the kingdom? How did his words lose their ability to calm the peasants? And how long will the Lords and Ladies of his kingdom leave him unfettered if he cannot deliver all that he promised them, all they require of him?

While the unending ebb of words may have left peasants scuttling away in any direction they could, they did glean enough to believe that Mal C’od-turn-a-bull understood their plight. Obscured within those words they thought they heard promises that this land, this kingdom in which they belonged (and despite their fallen state they did believe they belonged), would provide them with riches beyond their current struggles, never as rich as the Lords and Ladies mind, but an easier life, with less struggle, less torment. They believed they heard promises that Mal C’od-turn-a-bull could ease the raging fires, could turn back the rising waters inundating their fields. They thought somewhere in those words were promises that the smoke would lift, that their children would not cough so much, nor die so often. Somewhere between the endless smile and the endless words there seemed to the peasants a new world.

But in the silences now left by Mal C’od-turn-a-bull (in what is the emptiness between the hundredth and three hundredth words), the goblins and Tiny Napoleon O’penmouth slither their forked tongues over the land. Nothing will change, they insinuate. Mal C’od-turn-a-bull is no more than Tiny Napoleon O’penmouth with a broader smile, a few more words but uttering nothing new.

Peasants stop and ponder. Can that be true? At first, they answer no, it cannot be.

Even in the green great hall, from its murky corners, the goblins expectorate their venom. We cannot have wealth and riches, we cannot have labour for the peasants, without the smoke streaming upon the landscape from the forges. The death of a few children is but the price we must pay. We cannot have more ploughs, more axes, more swords or barrel hoops. We cannot have more barrels even for the peasants’ beer (nor the Lords and Ladies’ wine) without felling more trees. Why doesn’t Mal C’od-turn-a-bull tell you this? The words hang in the stillness, in the eddying but silent maelstrom of their denunciation.

The peasants ponder.

The tree monks preach, as they had presaged, that Mal C’od-turn-a-bull is doing naught to stem the rising waters nor the constantly returning fires.

The peasants ponder. They take more heed of Mal C’od-turn-a-bull’s words and of his silences.

With reborn clarity they see Mal C’od-turn-a-bull tarrying longer, secreted in the castles of the Lords and Ladies. When he emerges he carries words of grand new schemes for the kingdom, but schemes whereby the Lords and Ladies can shroud their riches in veils of uncertainty, schemes whereby they can shed their money in far kingdoms.

‘But if the money goes to far kingdoms, what money will we have left here?’ a peasant asks but not a soul answers. The question lingers in their pondering.

Now among themselves, the peasants ask more and ever more questions. Some make their way to the ears of Mal C’od-turn-a-bull but somehow his words, and now his silences, no longer answer them. A smile, the mellifluous flow of his words is no longer enough. His words grow shorter and so too does their meaning.

For the peasants, it seems the world he promised them is drifting away or being swept into a rising tide for the Lords and Ladies: it is their world that seems carried higher by the words and smile of Mal C’od-turn-a-bull, not that of the peasants which they thought had been his promise.

Behind their castle walls, the Lords and Ladies huddle, mutter disconcertingly at the apparent fall from grace of the man they had themselves selected. To topple Tiny Napoleon O’penmouth they resorted to whispers of revolting peasants and now those whispers grow more real with each passing day, with each day in the apparent demise of their man. The peasants grow alarmingly disenchanted with the world as they see it and that alarms the Lords and Ladies.

The paper castle that so long protected Tiny Napoleon O’penmouth rises phoenix-like and its protrusions enfold him. It does not yet lift Tiny Napoleon O’penmouth to renewed grandeur, although it offers enduring glimpses that such a renewal is possible. Despite his own fall, Tiny Napoleon O’penmouth again feels invincible as the paper castle once more cloaks him from harm.

The peasants ponder the news of the criers. They gather under the trees. They gather at their forges, halting their work.

‘What has Mal C’od-turn-a-bull done?’


‘Nothing for us. But the Lords and Ladies are doing all right.’ If such rebellious words reach the Lords and Ladies, their founded fears will heighten, shuddering the tranquility of their nightly feasts.

‘Has he stopped the fires?’ a lurking tree monk interjects.

The heads of the peasants shake in unison.

‘Are we any better off?’

Wise heads shake again.

‘What can we do?’

The faces are puzzled. ‘What can we do?’ they quietly contemplate but cannot uncover an answer. The only beckoning alternative is the return of Tiny Napoleon O’penmouth and none are prepared for that.

‘He has stopped the yeomen riding against us,’ a milder voice intervenes.

A murmured ‘yes’ falters among the group. Yes, there are fewer missing peasants (the matches hidden in their pockets) being spirited away to far, secret dungeons; the yeomen and knights ride less often in the peasants’ villages and that is a good thing they concede.

‘O’penmouth would never have allowed that. Our people would yet be living in fear.’

The heads nod, a muffled yes accompanying the movement. Yes, they understand deep within their beings that the return of Tiny Napoleon O’penmouth would revisit dark days, vengeful nights and dread.

The groups resume cutting the forests, firing up the forges, tilling the muddied fields. What else can they do? Mal C’od-turn-a-bull no longer inspires them, no longer offers a gleaming future. But if the only alternative is O’penmouth, what can they do? What can they do? constantly repeats in peasant minds across the kingdom.

But in the green great hall, among the peasants convened there for the diversion and amusement of the goblins, clowns and jesters, is one called William the Short’un and his name is spreading. Occasionally from the floor of the green great hall, he advocates another way, dares offer a path that involves neither O’penmouth nor C’od-turn-a-bull. His words run like flames between the workplaces and hovels of the peasants. How can that be? the peasants wonder. How can that be? they ask of their neighbours by the dim light of their evening fires.

William the Short’un says he can be master of the green great hall. At first no one believes that someone barely a rung above the peasants can do that but William the Short’un keeps repeating he can, he can do it, he can. Perhaps, they reflect.

Mal C’od-turn-a-bull recoils at the thought: ‘How can such a lowly upstart threaten me. Me!’ he muses. O’penmouth dismisses it: ‘William the Short’un is a man of straw,’ he darkly declares and his goblins splutter and hiss their agreement.

The Lords and Ladies tremble hesitantly beside their fires. Their worst fears are looming nightmare-like. The peasants are revolting but not in a way readily suppressed. There is no destruction, no storming of castle walls but still they affright at the prospect. The peasants are rallying behind William the Short’un, heeding his words, daring believe he can lead them into the green great hall.

Never! the Lords and Ladies think almost as one, from castle to castle across the kingdom. Such a peasant leader is unthinkable!

Emissaries ride between their castles. Lords and Ladies congregate. They dine and wine sumptuously, debating (perhaps slurring) what ought be done, who can be their saviour, and all so slowly and all so reluctantly they come to only one conclusion. Despite his failing glimmer, only Mal C’od-turn-a-bull can repel the affront. Only Mal C’od-turn-a-bull can shield their influence and ensure the Lords and Ladies are left to continue their nefarious business. Like the peasants, they cannot countenance the return of Tiny Napoleon O’penmouth.

Mal C’od-turn-a-bull is summoned. The Ladies depart the great hall. The Lords turn their icy gaze upon him. Before a word is spoken, Mal C’od-turn-a-bull feels the frostiness settling in the vastness of that resplendent space. There is no gain in speaking and he simply awaits the words of the Lords to weigh upon him.

‘You cannot allow William the Short’un to usurp you. You cannot allow Tiny Napoleon O’penmouth to manipulate you or meddle in our … er … your plans. You cannot allow our ventures to be diminished. The kingdom depends upon them, upon us. And now you! Do what you must.’

They say no more and Mal C’od-turn-a-bull, like Tiny Napoleon O’penmouth before him, is summarily dismissed, escorted to the doors by four surly guards. The world is descended on his shoulders. Now he must find a way to vanquish William the Short’un.

In the seclusion of his own grand castle, Mal C’od-turn-a-bull contemplates his future, agitates his ample mind on fulfilling his destiny — how he can bring down the upstart Short’un? As he sips another fine wine from another far kingdom, he glowingly foresees his place back among the Lords and Ladies and realises that can, in a perverse manner, also be his redemption. He will regale the peasants with tales that William the Short’un is dealing with the Lords and Ladies; that William the Short’un is feasting at their tables, drinking their wine and doing their bidding. That he is not the peasants’ man at all but only feigns to be.

And he can also preach the opposite, he smirks contentedly, that William the Short’un will frighten the Lords and Ladies to abandon their benevolence to the peasants toiling on their land, or to abandon their land altogether leaving no work for the peasants. How will you survive then? he will ask of them. He is convinced the peasants have no nose for inconsistency — in his own splendour, he is self-assured they have not the wit to notice, that some will believe one tale and some the other. Yes, his plan is well crafted, mendacious and built upon the peasants’ ignorance. He strides more confidently when he returns to the green great hall, with even a hint of his former smile.

‘Only I, Mal C’od-turn-a-bull, offer the safety and surety of life continuing as normal, no threats of change, no threats of uncertainty. Only I, Mal C’od-turn-a-bull can ensure our kingdom achieves new riches.’ More duplicity that he is positive will elude the dull peasants.

Yes, Mal C’od-turn-a-bull believes again he can win favour with the Lords and Ladies and continue as master of the green great hall just as it should be, just it was ordained.

Who will emerge victorious in the coming jousts? Who will prosper in the clashes between Mal C’od-turn-a-bull, Tiny Napoleon O’penmouth and his goblins, and William the Short’un?

My Lords and Ladies, journey with me when next I come before your glorious court to continue this tale and reveal to you the grand battle and who may be vanquished.

What do you think?
Who will emerge victorious?

Can Mal C’od-turn-a-bull keep Tiny Napoleon O’penmouth and his goblins at bay?

Can William the Short’un convince the peasants there is a place for them in his new world or will Mal C’od-turn-a-bull beguile them with his mendacity that William the Short’un cannot be trusted?

Will the peasants notice Mal C’od-turn-a-bull’s contradictions? Are they really as ignorant as Mal C’od-turn-a-bull believes?

So many questions. Please leave your answers in a comment.

Recent Posts
Divining the federal budget
Ad astra, 30. April 2016
Some of you may question the purpose of trying to divine what will be in the May 3 federal budget when the Turnbull Ship of State seems to be all at sea, wallowing towards an uncertain destination, facing strong headwinds, its sails flapping, its hull leaking, with a dithering Captain at the helm, a loquacious and at times incoherent First Mate insisting he knows where he’s going, and a motley crew.
Policy from behind the scenes
Ken Wolff, 27 April 2016
Any good public servant will tell you that policy is determined by government ministers. In Senate Estimates, and other committees, you will often hear public servants say they cannot comment on policy issues, that such questions should be directed to the minister. That is the way our system works in theory but does it actually operate that way in practice?
Castles in the Air
2353NM, 24 April 2016
One of the points of difference between the Turnbull Government and the Shorten Opposition is negative gearing. We would all still be here next week if the current regime and the proposals were discussed in full, so how about we attempt to do the ‘helicopter’ version. Just keep in mind that this article is general in nature and doesn’t consider your financial situation.

Policy from behind the scenes

[Scott Morrison, Malcolm Turnbull and Martin Parkinson]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Is reform of the federation needed?

Let us know your thoughts in comments below.

Recent Posts
Castles in the air
24 April 2016 - 2353NM
One of the points of difference between the Turnbull Government and the Shorten Opposition is negative gearing. We would all still be here next week if the current regime and the proposals were discussed in full, so how about we attempt to do the ‘helicopter’ version. Just keep in mind that this article is general in nature and doesn’t consider your financial situation.
The shifting risk of superannuation
20 April 2016 - Ken Wolff
Since the 1980s, Australia has changed the way we prepare for our retirement. Rather than depending on an aged pension from the government and some personal savings, greater emphasis has been given to superannuation and building retirement incomes in that way. All three remain in play for retirement but for most employees superannuation has become the major component.
So we do have a revenue problem after all
20 April 2016 - Ad Astra
Who could ever forget Scott Morrison’s astonishing statement when he became our nation’s treasurer: Australia doesn’t have a revenue problem; we have a spending problem! Balanced economists were aghast.

Castles in the Air

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Recent Posts
The shifting risk of superannuation
20 April 2016 - Ken Wolff
Since the 1980s, Australia has changed the way we prepare for our retirement. Rather than depending on an aged pension from the government and some personal savings, greater emphasis has been given to superannuation and building retirement incomes in that way. All three remain in play for retirement but for most employees superannuation has become the major component.
So we do have a revenue problem after all
20 April 2016 - Ad Astra
Who could ever forget Scott Morrison’s astonishing statement when he became our nation’s treasurer: Australia doesn’t have a revenue problem; we have a spending problem! Balanced economists were aghast.
What can we expect in the coming election?
20 April 2016 - Ken Wolff
Apart from the obvious statements, we can also tell there is an election in the air as, after six months of inactivity, the Turnbull government has engaged in a flurry of policy announcements — or in some cases what should be termed policy ‘thought bubbles’. That is not to mention the concomitant increase in television advertising for existing government programs and policies.

The shifting risk of superannuation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Saint Malcolm?]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In other words inequality is steadily increasing.

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

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

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

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

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

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

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

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

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

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

Education will be a hot issue at this election.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We look forward to reading your views and your comments.

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The calamitous Abbott lies in wait

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

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

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

Abbott’s calamitous legacy is everywhere to be seen.

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

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

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

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

Let’s look deeper into budgetary matters.

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

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

And he lies in wait to do so.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Take now his calamitous attitude to climate change.

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

All the time the calamitous Abbott lies in wait.

What do you think?
What are your views about Abbott’s desire to return to the top job?

Will there be a second Abbott government?

We look forward to reading your views and your comments.

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Continuity and change

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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The small government myth

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

It is the ultimate democratic sucker punch.

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