Funding health: part 2


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Funding health: part 1


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Doin’ the GST-a-rosy rag


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Winter winds, wind farms and hot air


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

That election of members of Parliament ought to be free.

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

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

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

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

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

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

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

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

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

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

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

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

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

Then came Australia …

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


Where will we be in 50 years?


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


    A failure of the Left


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



    Where does Abbott really stand on national security?


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


    The politics of marriage


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

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

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

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

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

    On Wednesday, Mr Shorten obliged.

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

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

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

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

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

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

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

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

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

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

    Mr Abbott said the Senate was not sitting.

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

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

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

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

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

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

    She spoke to James Glenday.

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

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

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

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

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

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

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

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

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


    The $19,990 special

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


    The unhappy marriage of democracy and capitalism


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


    NAPLAN — a guide or a competition


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    The NAPLAN Letter

    To our dearest students from Year 3,

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

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

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

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

    Kind regards,

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

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

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

    Government budget trickery


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Hope for the homeless


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

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

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

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

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

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

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

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

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

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

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

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

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

    Are budgets worth the paper they’re written on?


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    The saga of Billy Gordon


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    There are two questions here.

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

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

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

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

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

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

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


    Beware, there is a plan


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

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

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

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

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

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

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

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

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

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

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

    The existence of VFI is not necessarily a problem in itself, but a high degree of VFI creates perverse incentives for both levels of government. It allows the Commonwealth to act in ways which can compromise the autonomy of States and Territories in their own sphere, thus creating confusion about democratic accountability. A high degree of VFI also creates incentives for the States and Territories to blame the level of Commonwealth funding for problems in State-delivered services, rather than to make the case to their own electorates for raising more funding from their own revenue sources. [emphasis added]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    What do you think?

    About Ken

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

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



    Instant Experts


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    What do you think?

    About 2353

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

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



    How the economic rationalists tried to steal our hearts and minds


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    What do you think?

    About Ken

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

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