Pearls and Irritations

John Menadue

  • John Menadue. An enormous financial heist is underway.

    We saw the enormous power of the mining sector when the foreign-owned mining companies forced the Rudd government to ignominiously back down on its super profits tax. For less than $20 million in an advertising and public relations campaign the miners secured for themselves tax savings of over $60 billion. The public interest was surrendered to the mining lobby. Now the banking lobby is well on the way to pushing aside the public interest again.

    After a lengthy public enquiry and public discussion, the Gillard Government passed the Future of Financial Advice legislation (FOFA). That legislation was designed to legislate against the conflict of interest in the financial advising sector. The Coalition Government is now well down the track to restoring the privileged position that the financial advising sector held before FOFA. As Peter Martin in the SMH on 18 March put it ‘The government is removing the catch all requirement for financial advisers to act in the client’s best interest.’ The watering down of FOFA ‘will also re-allow sales commissions and other forms of conflicted remuneration where advice is general in nature.’

    This is a dramatic wind-back of FOFA. It is done in the name of ‘reducing red tape’ but it will ensure a bonanza for the financial advising industry which the previous government set out to curb. The so called “red tape” is often where the public interest is expressed.

    The growth of the Australian superannuation industry has become a honey pot which can now be more easily plundered. Last year the financial advisory industry pulled in funds of $21 billion from the super pool. With compulsory superannuation the super pool is growing rapidly. Last year it grew by $300 billion. Now Arthur Sinodinos, Assistant Treasurer and a former banker, is setting up the financial advising sector and the banks in particular to do even better in future.

    Under FOFA the Gillard Government made substantial changes.

    • Future commissions and other ‘conflicted’ payments were banned. (The Coalition will now allow commissions and allow conflicted payments on most products).
    • A legal obligation was placed on financial planners to act in the client’s best interest. (The Coalition will allow this legal obligation to be narrowed.)
    • A financial adviser who charges a continuing fee must obtain permission of the client every two years for the arrangement to continue. (The Coalition will remove this need for the client’s permission every two years.)
    • The client must receive an annual disclosure of fees. (The Coalition will limit this to new clients only.)

    The banks will be the major beneficiaries to these changes. They are finding the industry funds with their lower fees too competitive and bank profits and executive salaries clearly need boosting! Not surprisingly the bank public relations machines have been telling us every day in the media about the need to wind back FOFA and reduce red tape.

    As Daniel Brammall pointed out in this blog on February 25, there are 18,000 financial planners in Australia and four out of five of these are owned by a bank or an insurance company. He said ‘The big end of town … has influenced the new government to the extent that the issue of conflicts has been quietly brushed under the carpet. Last week the Assistant Treasurer said “The current ban on conflicted remuneration captures a far wider range of circumstances than was originally intended and has resulted in significant compliance costs for industry. Here’s the point … many thousands of Australians collectively lost hundreds of millions of dollars – some of them their life savings – in collapses like Westpoint. Conflicts of interest were primarily behind it and the intention of FOFA was to avoid this ever happening again. However, the new government is dismantling the reforms because industry has convinced it that they cost too much. In doing so, industry has successfully transferred the cost to the consumer because without reforms that squarely address conflicts of interest, Westpoint will most certainly happen again.’

    FOFA was designed to legislate against conflicts of interest in an industry riddled with conflict. FOFA is now being unwound.

    It is reported that the government is planning to unwind FOFA by regulation rather than by legislation. It is suggested that the new regulations will be put to the Governor General and Executive Council on March 28, the day after parliament rises for a six weeks break. This means that parliament would not be able to disallow the regulations for at least six weeks.

    This is a deplorable story of rent-seeking by lazy, but powerful vested interests. What a shoddy performance it has become. This heist may turn out to be even bigger than the miners’ heist a few years ago.

    Public life and the public interest are being corrupted by the power of vested interests with their lobbying power. As Ross Garnaut puts it, this power has become a “diabolical problem”. One after another these powerful interests are corrupting public debate and putting their snouts deeply into the public trough… the gaming industry, the alcohol and hotel industries the polluters and the miners. The finance lobby now looks likely to become the most powerful and dangerous of all

  • John Menadue. Gina Rinehart and the age of entitlement.

    It is a bit rich for Gina Rinehart, with the enormous privileges she has inherited, to be telling us that we all need to work harder, cut taxes and curb wasteful government spending. Born on third base, as baseball enthusiasts would understand, does give a very jaundiced view of yourself and others.

    There is a quite dishonest campaign being run about the need to cut spending and reduce taxes. It looks as if we are being softened up to help the “deserving rich”.

    The facts are clear however that Australian taxes are very low by world standards. At 28% of GDP our taxes are well below the OECD average of 34% of GDP and much lower than the taxes in some northern European countries that have very successful economies and where taxes reach about 45% of GDP.

    It is our tax system that needs attention as Ken Henry keeps reminding us, including could I suggest a stiff inheritance tax that would bring some people back at least to second base!

    One of the reasons why we have such lower tax revenue is because of ‘tax expenditures’ as economists call them. These “tax expenditures” cost our tax revenue $115 billion in 2012-13. “Tax expenditures” are government revenue foregone as the result of differential or preferential deductions and treatment of particular sectors and taxpayers. Deductions for superannuation are the most blatant of these rip offs. Ross Gittins calls those that benefit so much the “super fat cats.”

    In a working paper in January this year the IMF showed that Australia has one of the highest “tax expenditures” in the world. . We topped the list of 16 countries with “tax expenditures” as a percentage of GDP at 8.5%. For big spenders like Italy, it was 8%; for the US  7.5%; UK 6%; France 4%; Canada 2%; Germany 1% and South Korea 1%.

    The Australian Parliamentary Library in its report on January 28 this year was headed “Australia tops the charts in tax deductions”

    In Australia the “tax expenditures” that put us at the top of world ranking are in key areas  that benefit high income earners — superannuation, retirement incomes, health insurance, capital gains on short-term investment, housing (both owner occupied and investment), family trusts and the absence of inheritance taxes. These generous concessions have been designed to preserve the incomes of the wealthy and the middle class which both political parties have tried to keep onside. Such concessions have also favoured older Australians, to the disadvantage of the young, who have faced increases in university fees and more expensive housing and have been cajoled into private health insurance to pay for the healthcare of the aged.

    The IMF Working Paper highlighted the problems that high levels of “tax expenditures” cause.

    • They compromise fairness. The report says ‘Tax expenditures can be a poor way of pursuing equity objectives in a progressive tax system. For instance any policy that reduces taxable income will benefit most those in the highest marginal tax bracket and convey no benefit to those out of the tax system.’ It is surely unfair and unsustainable that if we are over 60 and regardless of the level of our income, we do not have to pay any tax on our superannuation income.
    • They can be inefficient and poorly targeted. ‘ … the current deduction of mortgage interest for instance may encourage leveraged housing finance’.
    • They are vulnerable to lobbying. ‘Special interest groups may find it easier to argue for tax breaks than for explicit spending support. Tax expenditures often bypass the scrutiny according to spending in the regular budget. … This lack of transparency may explain some of the appeal they hold … ‘

    In short, “tax expenditures” are unfair, inefficient and provide wonderful opportunities for rent seekers like the superannuation and the private health insurance industries in Australia to secretly lobby for concessions.

    If we reduced these tax expenditures by 50% we would be well on the way to meeting the $60 billion long-term structural budget deficit that we face.

    The problem is not in our spending or support for persons with handicaps or low incomes. The problem is in our taxes and particularly the system of “tax expenditures” that benefits the wealthy. But we don’t want to know about it. We complain about electricity prices and the carbon tax but they are small beer compared with the enormous rip offs by the wealthy in superannuation and aged pensions.

    The previous government made a few changes like means-testing the private health insurance rebate but it ignored the general thrust of the Henry Report for tax reform.

    Gina Rinehart and the deserving rich want to defend and expand middle-class concessions like “tax expenditures”. It is galling that people born on third base think that everyone else is wasteful and lazy.

     

     

  • John Menadue. The lesser royals are on the move again.

    Prince William, his wife Kate and son George are to visit Australia next month. What joy awaits us. The weather should be good for a holiday and adulation from Tony Abbott and his monarchist friends.

    Seeing such a visit, the leaders in our region will again scratch their heads. In this ‘Asian Century’ why is Australia inviting a British royal to a country that says that its future is in Asia. The visit may give a short-term lift to tourism, but it will again put us on the wrong side of history.

    The royal entourage will visit Sydney, Melbourne, Brisbane and Canberra plus Uluru and the Blue Mountains. The all-up cost, based on previous royal tours, will be about $2 million, another dent in Joe Hockey’s plans to reduce our budget deficit.

    A visit by a lesser royal reminds me of Gough Whitlam’s comments to Queen Elizabeth at a Commonwealth Heads of Government Meeting in Jamaica in 1974. He had been concerned for some time about the lesser royals ingratiating themselves with state premiers to have an expenses free trip to Australia. Inevitably Gough Whitlam would receive a letter from Sir Jo Bjelke-Peterson or Sir Charles Court that it would be nice if a member of the extended royal family could visit Australia. Gough Whitlam was faced with the political problem of being seen publicly to be unfriendly to the royals. So he was cornered and the visit by the lesser royals went ahead.

    But at CHOGM in 1974, Gough Whitlam told the Queen that she and Prince Phillip were welcome – but could she please discourage other members of the family ingratiating themselves with state premiers to get a visit to Australia.

    So I was not surprised when the Queen told Australian officials on board Britannia at a reception ‘Your Prime Minister was very kind to Phillip and me. But he was a bit rude to the rest of my family.’  Importantly the message had been conveyed and she understood. She is a smart person. If only her children and grandchildren were half as smart.

    In Japan in 1979 I had the privilege of calling on Shigeo Nagano to tell him that the Fraser Government wanted to confer on him an honorary award of Companion in the Order of Australia. Shigeo Nagano had been a major contributor to the development of trade and particularly minerals trade between Australia and Japan. He had been Chairman of Nippon Steel and in 1979 was Chair of Japan’s Chamber of Commerce. He was a very nice man.

    After I described the award and its significance, the first question Nagano san asked me was ‘When can I go to London to receive the award from the Queen’. I had to let him down gently and explain that it was an Australian award and it could be presented to him either in Japan by me or he could go to Australia and receive it from the Governor General. He chose the former and a reception was held later in Tokyo for the investiture together with many of his business colleagues.

    It was just another illustration of the confusion in our region that comes from our quaint association with the British royal family.

    When will we mature and become an independent country with our own Head of State. We can do with fewer visits from lesser royals or any royals for that matter.

  • John Menadue. Conservatives, conventions and traditions.

    Conservatives extoll the importance of conventions, traditions, and respect for established institutions. But it seems to be only when it suits them.

    They lecture us and others about democracy, free elections, the separation of powers and the independence of the judiciary. Colloquially they sum it up ‘If it is not broken, don’t try to fix it’.

    There is an important convention on Cabinet papers. But the Abbott Government has decided breach that convention and hand over Cabinet papers concerning pink batts to a Royal Commission examining that issue. This is despite the clear Westminster convention as set out in my blog of February 10. The Cabinet Handbook is quite explicit.

    ‘The convention is that Cabinet documents are confidential to the government that created them and not the property of the sponsoring minister or department. Access to them by succeeding governments is not granted without the approval of the current parliamentary leader of the appropriate political party.’ (PM & C website – Cabinet Handbook, paras 17 to 19).

    It is clear that the Abbott Government has wilfully breached this long-held convention. The Prime Minister presumably instructed the Secretary of the Department of Prime Minister and Cabinet who has official responsibility in this matter, to hand over the Cabinet documents relating to pink batts to the Attorney General’s Department. This department then handed them to the Australian Government Solicitor. A PM&C official told the Legal and Constitutional Affairs Committee of the Senate on Monday February 24 “Documents were provided by the Department of the Prime Minister and Cabinet to Attorney General’s Department, who is co-ordinating compliance, in conjunction with the Australian Government Solicitor on the 31st [of January].’  PM & C cannot absolve itself of its responsibilities in this matter by passing the buck to the Attorney General’s Department or the Australian Government Solicitor.

    I have not seen any suggestion that Bill Shorten has agreed  to this handover as the Convention requires.

    Vilification of the ALP has not been enough for the Abbott Government in pursuing the pink batts issue. It has torn up a long-standing Westminster convention that Cabinet documents are the property of the government of the time.

    There are sound reasons for this Cabinet convention. Cabinet ministers should in confidence be able without fear or favour to discuss and decide important public issues. That is why the Cabinet convention stipulates that Cabinet documents are not to be released for 20 or 30 years.. Well-tried and valuable conventions should not be set aside for political point-scoring. Only in exceptional circumstances should conventions be set aside. This is not an exceptional circumstance.

    Our Westminster conventions are being breached by Conservatives who give lip service to our institutions, conventions and traditions but act quite differently.

    Malcolm Fraser broke the Westminster convention that was fought over for centuries in England that governments are made and broken only in the lower house, the people’s house.

    During the loans crisis, Sir Garfield Barwick, our Chief Justice, broke the convention of the separation of powers by briefing and politically fortifying John Kerr.

    We have also now recently learnt that High Court Judge Mason had clandestine meetings with John Kerr to support him in the dismissal of the Whitlam Government. He trashed the convention of the independence of the judiciary.

    Now Tony Abbott has trashed the convention of the confidentiality of Cabinet documents. This is no trivial matter.

    I hope the ALP can avoid the temptation of pay-back when it is next in government. There is a lot at stake.

     

  • John Menadue. The war on asylum seekers

    For political purposes the government has deliberately embarked on a policy and a language to militarise the asylum seeker issue in the same way the Howard Government did in the “war on terror”. It is designed to highlight the government’s resolve, to play to our fears about a threat and to lessen our rights to be informed. Failure to disclose is justified because we are ‘at war’.

    But the ‘war on terror’ and the so-called ‘war on asylum seekers’ would in fact be much better conducted by police, customs and our intelligence services.

    In this misuse of the military and language for political purposes we should not be surprised if a two-star military general is drawn into the political fray. Neither should he or his colleagues be surprised if they also get caught in political flack.  If they are in the kitchen, they can’t complain about the heat!  The military has crossed the line before. General Cosgrave showed that he was an enthusiastic supporter of the Howard Government in forcing Tampa to transfer the asylum seekers on board. He will now be our Governor General.

    Senator Conroy has been criticised for saying that General Angus Campbell, the Head of Operation Sovereign Borders, has participated in a ‘political cover-up’. In my view that is precisely what the Government and General Campbell have done. The military has been manoeuvred by the government into a role in the coordination of government agencies, most of them civil agencies like immigration and customs. To avoid public examination, the Minister Scott Morrison and General Campbell keep hiding behind the parroted phrase ‘on-water matters’. This is a political cover-up in which the military has become involved. That cover-up should be called as such.

    The Coalition has been quite clear in its language that it is at war with asylum seekers and people smugglers. Scott Morrison has described Operation Sovereign Borders as ‘a military led border security operation’. Tony Abbott has spoken of a war against people smugglers. In the first week of parliament Scott Morrison said that ‘The battle [against people smugglers] is being fought using the full arsenal of measures’.

    In war situations, the withholding of information can be justified. But surely we are not at war against unarmed people in rickety boats.

    Just consider what we heard last week in Senate Estimates about Operation Sovereign Borders and the cover ups.

    • Under the charade of ‘operational security’ the Defence Force Chief, General David Hurley would not confirm that orange lifeboats had been used. He replied ‘That is an on-water issue’. Yet we have all seen the orange boats on TV time and time again.
    • Asked if the lifeboats were Australian-flagged, Hurley responded ‘We can’t comment on on-water issues’.
    • Asked if the lifeboats were navy assets, Hurley replied ‘They are an on-water issue’.
    • Asked if there was general training for navy personnel in the handling of the lifeboats, the Chief of the Navy, Ray Griggs, said ‘If I talk about training then I would be going to “on-water matters”’.
    • How at least six Australian navy vessels intruded into Indonesian waters was a matter of ‘on-water operations’. Undoubtedly the crew of the navy vessels will be censured, but not General Angus Campbell who is in charge of OSB. That would be politically embarrassing because he has become the point man in the government’s cruel policies and the cover up.

    When public policy becomes militarised like this, no-one, including the military, can hide behind trumped up excuses, time and time again about ‘on-water issues’.

    How out of proportion this has all become. The plight of vulnerable people has become a highly politicised and military issue. This is a humanitarian issue which must be handled with firmness, but that does not mean that the military should be leading it. We also need the truth rather than senior officers and military leaders using lame excuses. We have seen too many other instances where the performance of the military, particularly at the Australian Defence Force Academy leaves a lot to be desired.

    Senator Conroy was much closer to the truth than his critics in the Canberra press gallery who so often see parliamentary events through a party political prism only and seems oblivious to the wider and more important issues of policy and principle.

  • John Menadue. The Carbon Tax and Flat-Earthers.

    Despite all the political rhetoric and hysteria, the evidence is mounting almost daily that the carbon tax is largely working as planned and that its impact on electricity prices is quite small, particularly compared with the ‘network costs’, the poles and wires, which have been the main drivers of increased electricity prices.

    But the flat-earthers in the government and News Ltd refuse to face the facts. They have run one dishonest campaign after another on the carbon tax, then pink batts and then the education revolution. We are paying an extraordinarily heavy price for the abuse of power by the Murdoch media in the dishonest and partisan campaigns they run. Are they all as ignorant as Rupert Murdoch’s favourite editor Rebekah Brooks who told a London court this week that she didn’t know that phone tapping was illegal!

    Just recall the extremist and exaggerated language of Tony Abbott in association with News Ltd on the carbon tax.

    • Whyalla will be wiped off the map.
    • Julia Gillard is trying to close down Gladstone.
    • The carbon tax is socialism masquerading as environmentalism.
    • It is a ‘great new tax on everything’.
    • The impact of the tax will be ‘almost unimaginable’

    It says something about the corruption of public debate that Tony Abbott’s campaign with News Ltd’s backing was successful. It was based on fiction and not fact.

    In October last year, one year after the introduction of the carbon tax, the impact on the CPI was almost undetectable. Treasury had estimated that a $23 per tonne emission tax would result in an increase of $9.90 in the cost of living for an average household. It turned out that the impact was even less than the Treasury has forecast.

    Earlier this week Michael West in the SMH on February 24 drew attention to the work of the Energy, Economics and Management Group at the University of Qld. These researchers found that network costs and retail costs which included the profit margin of energy retailers made up 62% of NSW residential electricity prices in 2013. The carbon tax made up only 10% of prices.

    In comparing increases in electricity prices in NSW and Qld between 2007 and 2013, the University of Qld Group found that price increases per kWh were due to the following.

    • Network costs – +7c
    • Retail costs, including profit margin – +2/3c
    • Green schemes, including carbon tax and renewable energy target, – less than 3C

    Generating costs were relatively stable over the period.

    The main increase in prices has been due to the ‘gold plating’ of the networks and the price-gouging by retailers along with large executive bonuses. Green schemes including the carbon tax have a much smaller impact – about 25% of the total increase in prices.

    Michael West put it this way. ‘Tony Abbott [must recognise] that it is not the carbon tax and renewable energy costs that are primarily responsible for energy hikes. The culprit is network costs and state governments that are making a killing’.

    Last week in Sydney the IMF chief, Christine Lagard, said that ‘environmental degradation’ [carbon pollution] was an external cost to the economy that had to be priced. She said that these ‘externalities’ must have a price. Almost every economist will tell us that a tax on ‘externalities’ like a carbon tax is much preferred to Direct Action that the Abbott Government is adopting.

    Tony Abbott has done enormous damage to good policy making to curb carbon pollution and global warming. The flat-earthers have so far won the day in Australia. But surely it cannot last. Is the Australian public so gullible to put up with these scare campaigns on the carbon tax? The flat-earthers in the coalition and News Ltd have done a great disservice to Australia.

    On top of this Tony Abbott is now hemming himself in with people who reject the overwhelming scientific evidence. The head of Tony Abbott’s business advisory group Maurice Newman and Dick Warburton the head of the review of the Renewable Energy Target both think that climate science is “group think”. Newman goes even further and describes climate science as a “scientific delusion”

    When will all this nonsense stop?

    For the sake of our children and grandchildren the flat-earthers must be strongly opposed

     

  • John Menadue. Patriots and scoundrels.

    Samuel Johnson in 1775 said that ‘patriotism is the last refuge of the scoundrel’. That brings to mind the “patriotic” politics that both PM Abbott and the PM of Japan, Shinzo Abe, are playing. In this Tony Abbott will find more confirmation that “Japan is Australia’s best friend in Asia”, a term that irritates the Chinese.

    I am sure that Samuel Johnson was referring to false patriotism, but that is just what Tony Abbott and Shinzo Abe are appealing to in trying to reshape education and public broadcasting in both countries.

    Teaching children patriotism

    In October last year, Shinzo Abe’s education minister ordered the school board in Taketomi in Okinawa to use a text book that the school board has previously rejected. The school board refused because it included a nationalistic view of WWII history, particularly denial of the Nanjing massacre and comfort women. This order by the Abe Government was the first such order by a national government. It was not surprising that it was rejected in Okinawa which suffered enormously in WWII and continues to hold strong anti-war sentiments.

    Then in December last year, a carefully and politically appointed government committee suggested a change to more ‘patriotic teaching’ in Japan by putting local mayors in charge of their local school districts. Many people believe that this would increase political interference in text books and teaching.

    Shinzo Abe has long attempted to force Japan’s education system to be more patriotic. The word that he and his colleagues use is ‘balance’.

    The view of the Japanese people is clearly against giving more authority to local boards of education and to local Mayors. According to an Asahi poll published on February 18 this year, 59% of Japanese preferred a ‘system that is not dictated’ by local political leaders”. The Japanese people are clearly wary about ‘patriotic education’. Despite the clear view of the Japanese people, Shinzo Abe is continuing his cultural war.

    In Australia, Tony Abbott’s education minister, Christopher Pyne, is on the same track as the Japanese Government in promoting patriotic education. Christopher Pyne has appointed a politically biased curriculum review committee which is clearly designed to shape Australian education in ways that the Coalition Government wishes. Christopher Pyne says

    • Our schools curriculum should have ‘a greater focus on the benefits of Western civilisation’.
    • He wants the curriculum to ‘celebrate Australia’.
    • He would like to see ‘more of a focus on Anzac Day (he would presumably like us to ignore the frontier wars in which  30,000 indigenous  Australians were killed and the fact that Australians and New Zealanders did not first fight at Gallipoli, but in the Maori Wars in New Zealand in the 1850s and 1860s).

    In the name of ‘balance’ Tony Abbott and Christopher Pyne are waging their cultural war in education in favour of a false patriotism in the same way that Shinzo Abe is doing in Japan.

    Public Broadcasting

    Tony Abbott is also following in the footsteps of Shinzo Abe in his attacks on our own public broadcaster, the ABC.

    In my blog of February 12 this year, I pointed out how Shinzo Abe has stacked the board of NHK, Japan’s esteemed public broadcaster. PM Abe has just appointed five new members out of twelve to the NHK board. The new managing director of NHK, Katsuto Momii, and another board member, Naoki Hyakuta, have spelled out the way that NHK should pursue a more patriotic agenda. They have separately

    • Endorsed Shinzo Abe’s visit to Yasukuni Shrine.
    • Described the Tokyo War Crimes Trials as designed to fool the Japanese people.
    • The recruitment of comfort women was not peculiar to Japan.
    • The Nanjing massacre was a fiction.

    Not content with the drooling support of the entire Murdoch media, Tony Abbott complains about our public broadcaster, the ABC. He has said the ABC.

    •  Was ‘unpatriotic’ in the news coverage of the Snowden leaks.
    •  ‘Lacks affection’ for the home team.
    • ‘Instinctively, it takes everyone’s side but not Australia’s’.

    Tony Abbott has not yet had a chance to stack the ABC board but it is only a matter of time. Shinzo Abe has shown him how to do it.

    The public broadcasters in Japan and Australia are greatly admired for their professionalism and independence. The latest Nielsen Poll (17 February 2014) reveals that 59% of Australians do not believe that the ABC is biased. 67% felt that the ABC provided more balanced news and current affairs than commercial TV. Only 15% trusted commercial TV ahead of the ABC. Murdoch’s Daily Telegraph is the least trusted metropolitan newspaper in the country.

    The cultural warriors Shinzo Abe and Tony Abbott are on a unity ticket to try and force more patriotism from our education systems and public broadcasting.

    Neither PM is showing a sense of realism or integrity. They tell those close to them that they are right and much better than the rest of us. They are suggesting that they are patriotic and their opponents are not. They hold to a false and dangerous view of what it is to be a patriot.

    I have one qualification to the above.  I am less concerned about the swing to the right in Australia with its false patriotism baggage than I am about what I see stirring in Japan. In earlier decades the nationalist right was a silly and really harmless fringe parading around Japanese cities in grey vans with loud speakers. The patriotic and nationalist right is now occupying the centre of Japanese political life. The mood is changing after almost two decades of economic stagnation and frustration and now the rise of China. Shinzo Abe is facilitating this upsurge of patriotism and ultra-nationalism. There is a history he is drawing on, a history that brought tragedy to so many, including the Japanese people.

  • John Menadue. Manus and Nauru and Australia’s responsibility in regional processing.

    An asylum seeker who comes to our shores must be protected. We cannot offload that responsibility onto another country. We continue to carry a responsibility for that asylum seeker whatever happens in Manus, Nauru or even Malaysia.

    I have not always held the view that those who come to Australia could be transferred and processed in another country. I changed my mind on that partly because of the rapid increase in boat arrivals after the Agreement with Malaysia fell over in2011. The large number of boat arrivals was reducing public support for a generous and humane refugee program. I came to the view that what was important is that asylum seekers are treated with humanity and that the process is fair and just. The issue of where that processing occurred was a secondary issue.

    I also supported the proposed Malaysian Agreement for two other reasons. I saw it as part of an important building block in regional cooperation. Secondly, the UNHCR was actively supporting the proposed arrangement with Malaysia. The UNHCR does not support the transfers to Manus (PNG) and Nauru and the processing in those countries.

    Unfortunately the agreement with Malaysia was made impossible by the combined support of the Greens and the Coalition in the Senate to block amendments to the Migration Act. The action of the Coalition in the Senate was supported by refugee advocates across Australia. It was quite extraordinary to hear Tony Abbott and Scott Morrison along with refugee advocates criticising human rights abuses in Malaysia. No country is perfect, including Australia in mandatory detention, but the position of asylum seekers in Malaysia would have been a long way ahead of what is now unfolding in Manus and Nauru.

    The collapse of the Malaysian arrangement was the turning point. We have been on a slippery slide ever since. Boat arrivals quadrupled as a result of the High Court decision and the collapse of the Malaysian arrangement. Policies by the Labor Government and the Coalition since then have been punitive and cruel. The result has been Manus and Nauru.

    In my blog of January 14, I pointed out that the UNHCR has a long history of support for the transfer of asylum seekers in appropriate circumstances. Late last year the UNHCR issued a ‘Guidance Note on Bilateral and Multilateral Transfer Arrangements of Asylum Seekers’. It set out clear conditions, including important issues of non-refoulment and protection of the rights and the safety of asylum seekers in the country to which they were to be transferred.

    In the Melbourne Age on 13 December last year, Arja Keski-Nummi and I outlined a system of ‘effective protection’ that should govern any transfers of asylum seekers in our region. We set down several important criteria.

    • All countries should commit to the principle of non-refoulment.
    • Provide asylum seekers with a legal status and access to work and education.
    • Work to help not only displaced people but also host communities.
    • Increase our refugee intake from our region.
    • Work with partners in the region in association with UNHCR to create an atmosphere of safety and trust.
    • Amend the Migration Act to assert the principle of ‘effective protection’ and bind governments to that principle in any transfers of asylum seekers.

    Clearly few of the conditions have been met in the arrangements with PNG and Nauru. Importantly, the UNHCR does not support our arrangements with either country.

    Just as importantly, the Australian Government is failing to accept its responsibilities to asylum seekers that we have transferred to PNG and Nauru. We cannot offshore our responsibilities for ensuring effective protection and safety for asylum seekers. After demonizing asylum seekers for so long I don’t think the Coalition Government cares about the human rights of asylum seekers. Their rights, even their lives are just unfortunate and embarrassing collateral damage

    The horror on Manus is only one part of the havoc that Tony Abbott and Scott Morrison have wrought. They have badly damaged our relations with Indonesia. Their actions have resulted in the collapse of the rule of law in Nauru. And they are responsible for the release of details of 10,000 asylum seekers that will now be eagerly accessed by security agencies in Afghanistan, Iraq, Iran, Pakistan and Sri Lanka. What an opportunity it will be for those security agencies to now hunt down the families of asylum seekers who have fled to Australia from oppressive regimes in those countries.

    How ironic it now is that China is rebuking us for our abuse of the human rights of asylum seekers.

    One thing the ALP in Parliament should do immediately  is move to incorporate the principle of “effective protection ” in the Migration Act. It would clearly express the responsibility we have for persons transferred to another jurisdiction. We could then not shirk our responsibility by  passing the buck to others.

  • John Menadue. Cutting waste and costs in health.

    Last night on lateline, the Minister for Health Peter Dutton called for a public debate on health reform. I therefore have taken the liberty of reposting a blog of February 3 on ‘Cutting waste and costs in health’.

    The Minister for Health, Peter Dutton, has said that we must reduce waste and reduce costs in health. I agree. In 2011/12 total health expenditure in Australia was $140b up from $83b in 2001/2. Costs are rising rapidly, partly due to population increase.

    In a paper in July 2007 I estimated that there was at least $10 billion in possible savings and productivity improvements in health. That represented about 10% of our total health costs in that year. I have spoken and written extensively on the matter. See my web site.

    It is important however that as we work to reduce waste and costs we do it in a way that is fair to all and does not prejudice quality care.

    But to reduce waste and costs requires political will to stare down the powerful interests and rent seekers that are determined to protect their territory and their high costs –e.g.  the AMA, the Private Health Insurance firms, the Pharmacy Guild of Australia and Medicines Australia. In the past no governments has been game to tackle these vested interests.

    The lack of accountability in health

    Despite the rapid increases in costs and escalating demand in the healthcare industry, there is no accountability in any meaningful way for what the health industry produces. Doctors are accountable for malpractice but not for their overall performance particularly in general practise. This is despite the fact that taxpayers pay 80% of doctors’ incomes. Taxpayers have a legitimate reason to ask – ‘Are we getting value for money?’  In a survey a couple of years ago by the Health Council of Canada, 97% of over 1,800 senior respondents said that healthcare providers should be required by law to reach certain service benchmarks in such areas as patient outcomes , the use of preventive strategies like screening and waiting times.

    The Council also asked the group ‘Do you believe healthcare in Canada will improve if the government spends more money on healthcare?’  58% said ‘no’. There is the same lack of accountability in Australia.

    Managing the demand for health services

    The demand for health services is increasing rapidly across all age groups and not just among the old. We are over-diagnosed and over-treated. In 1984-85, medical services per head were 7.1 per annum. In 2007-08 they were 13.1 per annum – about double. The trend continues. We need to address this over servicing particularly by GPs and specialists such as pathologists and radiologists.

    • We must accept that we cannot have all that we want in health and that governments, in consultation with the community, have to set priorities. Can we afford continuing existing levels of funding for IVF and end-of-life treatments at the expense of funding for mental health and indigenous health?
    • We need to rationalise our co-payments to make them efficient and equitable. We all should take more responsibility for the way we use health services, particularly as we are now much wealthier than we were 30 years ago when Medicare was introduced. A universal health scheme does not have to be free. But it must be fair and efficient. But co-payments are a dog’s breakfast! We pay about 18% of health costs out of our own pockets, but there is very little rhyme or reason in how this is done. The $6 GP levy would make the confused situation worse.
    • We need to change the perverse incentives, such as fee-for-service, which is associated with bulk-billing. Clinicians are rewarded by the number of transactions rather than health outcomes. FFS is particularly inappropriate for chronic care like mental health and services with high fixed costs and low variable costs, such as imaging. The government should move away from fee for service and set budgets for general practitioners when they prescribe drugs, order pathology tests or imaging services. We need more doctors on salaries and capitation payments for caring for patients-not on a service by service basis.
    • We need to tackle the wide variations in the incidence of clinical practice across the country, e.g. caesarean sections and cataracts. Medicare should be much more proactive in exposing and limiting very expensive and inexplicable variations in clinical practice.

    Getting costs down

    •  The government should abolish the subsidy for private health insurance which costs all up about $6-7 billion p.a. This subsidy favours the wealthy, is inefficient, has underwritten rising specialist fees through gap insurance, has not taken the pressure off public hospitals and has weakened Medicare’s ability to control costs. The immediate abolition of this subsidy would do more to improve our health system than almost anything else. This is corporate welfare big time-more even the welfare to the motor industry.
    • We need a more productive workforce. Health is the largest and fastest growing sector in the Australian economy. Despite all the talk of improving productivity in Australia no-one has been game to take on the entrenched privileges in the health workforce.Where is the honesty and consistency here? The blue collar workforce is fair game but not doctors and lawyers. We need expanded roles across the board particularly for nurses, pharmacists, allied health workers and ambulance officers. The Productivity Commission in its February 2007 report estimated that a 5% improvement in the productivity of health services would deliver savings of about $3 billion p.a. This is a very conservative estimate. The health sector in Australia is rife with demarcations and restrictive work practices. eg 5 % of normal births in Australia are delivered by mid wives. In the Netherlands it is 70%, in the UK 50% and in NZ 95%. We have a few hundred nurse practitioners when there should be thousands. The work practices at Holden, Toyota and Ardmona are light years ahead of the work practices in the health sector.
    • We could save about $2 billion p.a. in drug costs if we paid drug suppliers the same prices that are paid in NZ. See my blog of January 17.We also pay a high price for the protection of  pharmacists through the 5000 limit on the number of community pharmacies and the restrictions on where new pharmacies can be located. Pharmacies cannot be established in supermarkets.
    • We need to raise productivity in our hospitals. The Productivity Commission suggests that the productivity gap from best practice in public hospitals ranges from 3% to 89%. In private hospitals the range is 22% to 37%.  There is major governance problems in many hospitals with a dis- connect between management and clinical functions. Running hospitals is very difficult with clinicians coming and going from private practise like the cottage industries of old.
    • The Commonwealth/State fragmentation in healthcare results in blame-shifting, the evasion of responsibility and higher costs. If for example the Commonwealth Government or a joint Commonwealth/State body had responsibility for all health care in a state, there would be a clear incentive for focus on treatment in the community and in homes to ensure that the high cost hospitals are really a last resort. They are now often a first resort.
    • The real elephant in the room in health care cost reduction is avoidable mistakes, including deaths. They are euphemistically called “adverse events”. But Ministers, clinicians and managers do their best to avoid the issue. Based on earlier surveys in NSW and SA I estimated, very conservatively the cost of avoidable mistakes in our health sector at $5b pa (see my blog of June14, 2013). Despite a great deal of money and effort there is no sign of improvement. Insiders won’t solve the problem Good people are caught in a bad system

    We need to address waste and cost-cutting in a measured way. We should not panic, but we should get it done.  Australian healthcare costs are 9-10% of GDP. This is not high by world standards. It is below the OECD average. A major reason why we have been able to do better than others is that we have Medicare as a public insurer. One lesson is clear all around the world. The countries that have high levels of private health insurance, like the US, have high costs.

     

  • John Menadue. Opinion and fact on climate change.

    Tony Abbott keeps telling us that climate change is not a factor in the current drought in eastern Australia. Last October he ruled out climate change as a factor in October’s early season bushfires in the Blue Mountains.

    He keeps giving us opinions when the facts, supported by overwhelming scientific research, tell us that Australia is already experiencing more frequent and more intensive heatwaves, and that we can expect the number of hot days to continue to increase. He said that the climate change will not be a factor in the drought aid package he will announce soon. That aid package should take into account climate change and the necessity for marginal farmers on marginal land to find other occupations.

    Tony Abbott’s confusion of opinion and fact reminds me of the comment made by the late Senator Daniel Moynihan that ‘Everyone is entitled to their own opinion, but no-one is entitled to their own facts’.

    Reputable people and reliable organisations are all pointing to the challenge that climate change presents to Australian agriculture.

    CSIRO says ‘forecasts show Australia will have to cope with less rainfall, longer dry periods and struggling crops’. (ABC News 15 January 2013). Mark Howden from CSIRO’s Climate Adaption Flagship Program tells us that ‘Increases in temperature … and decreases in rainfall will increase drought periods and increase dry spells’. (ABC News 3 February 2013). Steve Crimp, a Senior Research Scientist at CSIRO says that southern Australia faces ‘warmer and dryer conditions’. (ABC 3 February 2013).

    The Garnaut Climate Change Review said ‘Climate change is likely to affect agricultural production through changes in water availability, water quality and temperatures. Crop production is likely to be affected directly by changes in average rainfall and temperatures, in distribution of rainfall during the year and in rainfall variability. The productivity of livestock industries will be influenced by the changes in the quantity and quality of available pasture, as well as by the effects of temperature increases on livestock. … A range of studies indicate that grain protein contents are likely to fall in response to combined climate and carbon dioxide changes. There could be substantial protein losses … which would lower prices.’(p129)

    The Department of Environment of the Australian Government reported last year on “Climate Change Impacts in Australia” which included the impact on agriculture.

    • For NSW it said that ‘potential changes in climate may reduce productivity and output in agricultural industries in the medium to long term through higher temperatures, reduced rainfall and extreme weather events.’ It predicts possible falls in agricultural production in NSW by 2030 of 8.4% for wheat, 8.1% for sheep meat and 5.5% for dairy.(p35)
    • In respect of Queensland this report says ‘Future productivity growth in agriculture may be affected by climate change in the medium to long term…’ It mentions that ABARE estimates possible production declines by 2030 of 19% for beef and 12% for sugar (p45).
    • The report says in respect of WA, ‘By 2070 south-west WA is likely to experience yield reductions in wheat. Cropping may become non-viable at the dry margins with strong warming and significant reductions in rainfall.’ The report highlights that wheat production could decline by 9% by 2030 with similar declines for sheep meat.(p34)
    • For SA the report says ‘Since 1997 SA’s agricultural regions have experienced a marked decline in growing season rainfall. This decline is mostly due to a drying trend in autumn and to a lesser extent in winter. … Overall the trend in annual rainfall since 1950 shows a decline across the agricultural region. … Rising temperatures are likely to have a major influence on wine grapes bringing the harvest forward by a month and yielding lower quality grapes. … ‘(p35)

    In 2011 CSIRO published a report by Chris Stokes and Mark Howden on “Adapting agriculture to climate change” They say ‘The Australian climate is already changing and these changes have a measurable impact on primary production as the drying of the Murray Darling basin and the wheat belt bear witness” (p85) They add “ areas of farming that are economically marginal today are among the most vulnerable to climate change; here impacts are most likely to exceed the regions adaptive capacity, stressing their communities, farming systems and natural resources. Such areas include outer wheat belt zones subject to drying, warmer dairying or fruit growing areas, or irrigation communities whose water resources are in decline-all areas where quite small changes in climate can have quite large economic and social consequences”

    Tony Abbott refuses to face these facts.

    At the same time US Secretary of State John Kerry calls climate change “a weapon of mass destruction” and the IMF calls on Australia as the Chair of the G20 to show leadership on the issue

    What is just as remarkable is that the National Party which claims to represent farmers and country people is as quiet as mice in the haystack on climate change. The National Party relies on people like Gina Reinhart for financial support. It ignores the long-term interests of its own farming constituency by following the climate sceptics in the Liberal Party.

    No group in Australia is as vulnerable to climate change as Australian farmers. Historically they have shown themselves very good at adapting to change but they are not helped by the lack of leadership by the National Party.

  • John Menadue. The squandered mining boom.

    We are now paying a heavy price for our failure to manage the mining boom. The consequences are all too clear, particularly in the manufacturing sector. The mining boom drove up our exchange rate and wage costs. A Sovereign Wealth Fund (SWF) and the Resource Super Profits Tax (RSPT) would have minimised the problems. However, few seriously proposed a SWF. The Coalition and the powerful mining companies did everything possible to destroy the RSPT.

    The squandering of the benefits and opportunities of the mining boom is causing major disruption across the economy. What have we really got to show for the national treasure that we have squandered?

    We can take some late remedial action by cutting back on business and middle class welfare which I have written about. We should also increase our very low levels of taxation, particularly to fund our long term infrastructure needs, both physical and human.

    The Norwegians point the way for us in their establishment of a SWF in 1990. It was called the Government Pension Fund Global.

    • Last month each Norwegian became a theoretical millionaire through ownership in the Fund, but they would not have been able to spend the money. It was saved and invested for future generations.
    • The fund was set up to avoid the temptation by governments and the public to splurge the windfall returns following the discovery of oil and gas in the North Sea in 1969.
    • The funds the government receives in oil and gas revenue are invested almost exclusively abroad, rather than in Norway.
    • Exchange rate remained relatively stable and cost rises were checked. Unemployment has been kept low.
    • The Norwegian Finance Minister in January this year said “Many countries have found that temporary large revenues from natural resource exploitation produce relatively short-lived booms that are followed by difficult adjustments”.

    This is not to say that Norway doesn’t have problems but the fund has helped iron out big swings in oil and gas prices, stabilised the economy and allowed Norwegians to invest for the future rather than squandering money in the boom times

    We should have done the same. But at least we can be ready for the next mining boom which will inevitably come. Will it be in gas?

    Our Futures Fund just does not cut it alongside the successful funds established in Norway and elsewhere. Large SWFs operate in Saudi Arabia, UAE, China, Kuwait, Hong Kong, Singapore and many other countries.

    Instead of a SWF, we could have run much larger budget surpluses from 2003 onwards when the China boom kicked in. But there was always a political temptation of the Howard Government followed by the Rudd and Gillard Governments to win political popularity by spending the revenue from the mining boom. An SWF would have made it much easier to persuade Australians that we needed to save for the future and invest in key infrastructure. We showed that in our political support for the Disability Scheme. We were willing to pay the tax levy for the scheme because we agreed with the objectives of the scheme.

    The mining boom produced enormous profits for the mining industry. The industry squandered a great deal of it in foolish investments and wage increases that flowed through to other parts of the economy. The miners acted as if they were playing with monopoly money. Rio Tinto alone had to write off $35 billion in failed investments. Its business management in China was a debacle. With so much money flowing through its hands it lost any sense of rigor and discipline. Just imagine what the Institute of Public Affairs and its bulletin board the Australian Financial Review would say if any government in Australia lost money on such a grand scale.

    In addition to their foolish investments, they paid extremely high wage rates to attract skilled staff to the mining areas. In the five years to June 2013 hourly rates of pay in the mining sector increased by 24%, excluding bonuses. These pace-setting wages dragged up wages in other sectors – manufacturing up 17%, construction up 20% and retail trade up 16%.

    With so much income flushing through the mining companies a Resources Super Profits Tax (RSPT) would have helped average out mining company profits with high taxes in boom times and lower taxes during periods of lower prices. Paul Keating would have called it an automatic stabiliser. It was just what we needed in terms of equity in sharing the benefits of the mining boom, but it was also desirable for good economic management to slow down the boom and force companies to be more realistic about spending “monopoly” money. The RSPT would have better secured our future, bringing the budget into surplus much earlier.  We also know that taxing profits is a better means of raising revenue than through royalties based on production.

    We also know that the Rudd/Gillard Governments made a political mess of the RSPT.And in taking advantage of this mess the Coalition sided with the powerful mining lobby which was very good at engineering and protection of its narrow interests but not very good in prudent investments for the future.

    There is a painful adjustment ahead. We should make sure we learn from the failures of our last squandered mining boom.

     

  • John Menadue-Refugees – the demographic dividend.

    As responsible members of the human family, we have a strong moral case to provide protection for the victims of persecution and violence.

    There is also a strong case in our own self-interest – that refugees almost by definition are risk-takers and entrepreneurial. It can be argued that they are amongst the most highly motivated and determined in the Australian community.

    Most importantly if we want to see economic growth and rising productivity we need young people. Even the hard headed economists know that it is people that matter and not how they have come here. We need to open our minds as well as our hearts.   Let’s look at asylum seekers and refugees from an economic perspective as well as a humanitarian perspective.

    Along with many other developed countries, Australia has a problem with its rapidly ageing population. Treasury and others have pointed out that in the future there will be many more old Australians than there are today. The number of Australians 65 and over is expected to increase rapidly from around 2.5 million in 2002 to 6.2 million in 2042. That is, from around 13% of the population to around 25%. For Australians aged 85 and over, the growth is even more rapid from around 300,000 in 2002 to 1.1 million in 2042. In 2002 there were more than 5 people of working age to support every person aged over 65. By 2042 there will only be 2.5 people of working age supporting each person aged over 65.

    Data published by Professor Graeme Hugo at the University of Adelaide has highlighted the much younger age structure of refugees. Refugees are not only younger than the Australian population, but also younger than migrants. Migrants and refugees will not be a silver bullet. We need to respond in many wages including lifting the retirement age, but refugees can make a significant contribution to slowing down the ageing of the Australian population. In his report published in May 2011, Professor Hugo pointed out the following:

    • ‘An important characteristic of the contemporary refugee/humanitarian intake … is that it is substantially younger than the national Australian population. … The medium age of the refugee/humanitarian intake over the 2003-09 period was 31.8 years compared with the medium age of 42.9 years in the population.’
    • ‘Not only is the refugee intake young when compared to the national resident population, it is very young when compared with the total immigration intake. … Dependent aged children and young adults aged 15-24(from a refugee background) are significantly over-represented compared with all migrants, while the middle and older working aged group (25-49) (of refugees) are significantly under-represented.’
    • ‘Refugee/humanitarian entrants… are disproportionately concentrated in the age groups which contribute towards a demographic dividend.’

    There has been recent comment about the increased number of Iranian asylum seekers. There is a debate whether they are really asylum seekers or economic migrants. There is no doubt however that they are young, well-educated and very determined. Most would make excellent settlers and are a very good example of how young migrants and refugees can lower our age profile. We need to open more migration pathways for young people who face discrimination within their own country but cannot be regarded as refugees as they have not fled their country.

    But an expanded refugee intake would not only deliver us a “demographic dividend”. Refugees make other important contributions as outlined by Professor Hugo

    • They are increasingly settling in regional Australia.
    • They place a high store on education for their children. 48% of second generation people who are Australian born have post-school qualifications. For the total refugee groups, the percentage is much high at 59%, with some refugee groups showing remarkably high levels of post-school qualifications, e.g. Estonia 65%, Latvia 65%, Slovakia 65%, Sri Lanka 61%.
    • Refugees are more likely to demonstrate entrepreneurial and risk-taking attributes than the Australian community as a whole. They have a higher incidence of owning their own businesses than other migrant groups.
    • The second generation of refugee settlers have a much higher level of labour force engagement than the first generation and in many cases, the level is higher than for second generation Australians.

    Their commitment to Australia is also shown in their uptake of citizenship.  A study prepared for OECD by the Department of Immigration and Citizenship (October 2010) reveals that the naturalisation rate by birthplace for all foreign-born is 80%. For significant refugee groups it is much higher – Croatia 97%, Poland 96% and Vietnam 97%. For New Zealand it is 45%, for the United Kingdom 71% and the United States 70%.

    Not surprisingly, refugees in their early years are ‘takers’ of Australian generosity. But year by year they increasingly become great contributors. They pay back many times the generosity they initially receive. They contribute to Australia out of all proportion to their number. It is a great success story for all Australians.

    We can draw inspiration from the very successful refugee programs of the past. Australian business and society generally have been great beneficiaries. It is in our self-interest, as well as for sound moral reasons that we need to break with the stalemate and toxic debate that surrounds refugees. Doing the right thing really pays off.

    Refugees deliver many dividends including a “demographic dividend”. They are much younger than the Australian population and migrants.

  • John Menadue. Pink batts and the Royal Commission – a bridge too far.

    There are good grounds for Kevin Rudd and Julia Gillard to refuse to provide documents to the Royal Commission on Pink Batts. The Royal Commission is a very vindictive act by the Abbott Government. And the government looks like continuing to use other Royal Commissions for political purposes!

    In separate blogs by Michael Keating on January 8, 2014 and by me on July 11, 2013, we have pointed out the following.

    • 1.1 million installations were completed under the Home Insulation Scheme (HIS) – a considerable achievement.
    • The rate of fires during this scheme was three times less than prior to the HIS.
    • The regulation of programs such as this, including safety, is clearly in the hands of state governments, not the Commonwealth.
    • Only 7% of installations had to be rectified – a quite low figure.
    • One fatality was caused by a pre-existing fault; another was caused when an electrical installer was employed by another electrician, and a third death occurred when a contractor elected to work in oppressive heat.

    But beyond these issues which the media and The Australian in particular, ignored, there is an important issue of whether the Royal Commission should have access to Cabinet documents. Media reports suggest that Kevin Rudd and Julia Gillard may refuse to provide Cabinet documents.

    There is an important principle in the Westminster parliamentary tradition that new governments do not rifle through the documents of a previous government. This is set out very clearly in the Cabinet Handbook issued by the Department of Prime Minister and Cabinet in the name of the Australian Government. (7th edition, 2012). Paragraphs 17 to 19 say the following:

    • Cabinet records (files) are held on behalf of a government in the care and control of the Secretary of the Department of the Prime Minister and Cabinet (PM & C) and are issued to ministers and departments on a need-to-know basis. Once a minister or department no longer has any immediate need of them, and, in any event, when the minister vacates office or a change of government occurs, any copies of Cabinet documents must be returned to the Cabinet Secretariat or destroyed.
    • The convention is that Cabinet documents are confidential to the government that created them and not the property of the sponsoring minister or department. Access to them by succeeding governments is not granted without the approval of the current parliamentary leader of the appropriate political party.
    • Cabinet records and cabinet notebooks are accessible to the public through the National Archives of Australia after the expiration of the statutory closed period. The closed period, which for Cabinet documents currently varies between 20 to 30 years, seeks to provide the best balance between the competing priorities of, on the one hand, the need to safeguard privacy, security and confidentiality of the Cabinet, and to use available resources to best effect, on the other hand, maximising public access to records.

    I would expect that the Secretary of PM & C would now be advising the Abbott Government that the Cabinet documents relating to the Home Insulation Scheme (pink batts) should not be released.

    When Malcolm Fraser became Prime Minister at the end of 1975 he was being urged by party colleagues to release documents of the Whitlam Government relating to the ‘loans affair’ – a matter of far greater moment than pink batts. Some members or supporters of the Liberal Party had commenced legal action in the court in Queanbeyan against the former PM and and former senior ministers. Despite the opportunity to make more political mischief, Malcolm Fraser refused to have the documents released.  In my autobiography ‘Things you learn along the way’, page 173, I wrote ‘[Malcolm Fraser] was … persuaded that it was unwise for one government to be raking through the documents of another government and that if the matter came to court the Commonwealth Government should refuse to release them’. I was Secretary of PM & C at the time.

    It is one thing for parties to make political mischief in Opposition. In Government, they need to act more responsibly and with due regard to the established government and parliamentary conventions that have stood the test of time.

    Where there was a good case for a Royal Commission would have been for the Rudd and Gillard Governments to initiate a Royal Commission into how Australia became involved in the disastrous Iraq and Afghanistan wars. Fortunately, neither Kevin Rudd nor Julia Gillard chose a Royal Commission to settle a political score.

     

     

  • John Menadue. Cutting back government spending – does it include middle-class and corporate welfare?

    Tony Abbott told his listeners recently at Davos that small government was the best form of government.

    The Minister for Health, Peter Dutton, has said that waste must be reduced in our health sector.

    The Minister for Social Services, Kevin Andrews, has told us that our welfare system is unsustainable and has appointed Patrick McClure to review welfare in Australia.

    And the Treasurer, Joe Hockey, has established a Commission of Audit to look at ways to reduce ‘big government’ with priority to reducing government outlays. He said that the age of entitlement had to end. But for whom! He said ‘it is .. essential that the Commonwealth government lives within its means and begins to pay down its debt’. We know of course that by any international measure we do not have a debt problem but let us pass on that for the moment.

    Before we look at fair and efficient ways to improve our public finances, there are a few broad issues to be considered.

    First, we do have a long term ‘structural deficit’ of about $60 billion p.a. The IMF has told us that the most recent culprits were the Howard/Costello governments that reduced tax rates year after year when we were flush with revenue from the mining boom. The Gillard and Rudd governments did face the GFC and sensibly increased government spending. They made some attempt to reduce middle class welfare, but they failed to grasp the major recommendations of the Henry Review to reform our tax system.

    Second, Australia does not have a growing public sector. As Ian McAuley, Jennifer Doggett and I have set out in our submission to the Senate Select Committee on the Commission of Audit, there is no evidence of any sustained increase in government spending (see my website by clicking on at top left of this blog). In fact, outlays have been trending downwards since the mid-1980s. Andrew Podger, who is Professor of Public Policy at the ANU and former Secretary of the Department of Health and Ageing, said on January 22 in the AFR, ‘The claim that Australia’s welfare system is unsustainable would surprise observers in most other OECD nations which spend a much higher percentage of their GDP on social security payments. Our emphasis on flat rate, means-tested payments rather than earnings-related social insurance has limited the burden on Australian taxpayers.”

    Third, our tax as a percentage of GDP has fallen steadily since 2002 from 30% to 28%, well below the OECD average of 34%.

    Fourth, our health expenditure runs at about 9% to 10% of GDP which is much the same as the OECD average, mainly because of the efficiency of our public insurer, Medicare. We could save substantial amounts in the health sector however if the government would confront the vested interests in health that force up government spending – the AMA, the Private Health Insurance firms, Medicines Australia and the Pharmacy Guild of Australia.

    The issue that stands out is that we need to improve our revenue base. This is where middle class and business welfare is a major problem – the tax-deductions or ‘tax expenditures’ that reduce the effective level of tax and provides disproportionate benefits to the well-off in the community. FlagPost, published by the Australian Parliamentary Library noted on January 29 2014 that Australia has the highest level of tax deductions in the OECD

    • Treasury estimate that the concessions for super contributions and tax-free payments of superannuation to persons over 60 years of age, like me, costs about $32 billion p.a. A phase-in of a 15% tax on superannuation draw-downs would quickly raise $5 billion p.a.
    • The Grattan Institute estimates that property investors get a benefit of about $7 billion p.a. through negative gearing and the capital gains tax discount. These concessions help inflate property prices and push home ownership out of the reach of young people.
    • The Grattan Institute also estimate that the government provides about $36 billion p.a. in benefits to home owners through exempting the principal house of residence from capital gains tax and aged pension entitlements. The aged pension is asset-tested, but that test excludes the principal residence. The Minister for Social Services is not prepared to address this issue. The aged pension is excluded from his review. Yet the aged pension costs $36 billion p.a. and accounts for roughly half of the welfare budget. If the government was serious about winding back welfare it would not exclude the aged pension from any review.
    • The government has also excluded from the McClure Review Tony Abbott’s $5.5 billion pa parental leave scheme in which the baby’s primary carer would receive six months leave on full pay up to a maximum of $75,000 p.a. This is middle class welfare in neon lights.

    There are also large hand-outs to the corporate sector, particularly the finance sector

    • There is a subsidy of $6 billion to $7 billion p.a to the high cost Private Health Insurance companies who keep pushing up their premiums which are really private taxes.
    • If we had blinked just before Christmas, we would have missed the largesse that Assistant Treasurer Sinodinos handed out to the financial services industry. The previous government took action to stop superannuation advisers automatically collecting commissions year after year – trailing commissions. It was estimated by the Industry Super Network that this reform by the previous government in stopping these commissions would add $144 billion to private savings by 2027. But Arthur Sinodinos has announced that the Abbott Government will roll back this reform and give financial advisers a chance to plunder our superannuation savings again. The government has given the all clear to the financial advising industry to re impose a private tax on superannuation contributors. There is also no sign that the government is acting to stop the super funds owned by the big banks funnelling their cash exclusively into their parent banks for relatively low returns. It is a private tax on super contributors. That is surely abuse of power or worse but neither ACCC nor APRA seems concerned!
    • The Abbott Government has announced that it will retain the fringe benefits salary packaging for expensive, mainly foreign cars at a cost of almost $2 over four years.
    • The government shows no interest in saving $2 billion pa in drug costs by being as rigorous as New Zealand in negotiating drug prices with suppliers in Australia.
    • Large polluters will be subsidised by removing the market discipline of a price on the carbon that they emit.

    There are also other ways that the Commonwealth Government could address the structural deficit. It should expand the GST to include food, education, health and financial products. Most countries do not have the exclusions that we have. The extension of the GST would raise about $16 billion this year and $70 billion by 2016-17.

    In short, we need to lift taxation. Taxes in Australia are too low. It is the truth we refuse to name.

    In global terms we don’t have a government expenditure problem, although a great deal of middle class and business welfare should be rolled back.

    We also need to look urgently at areas of real need, particularly the disabled, those in need of special help in social housing, those who receive meagre benefits in Newstart (the dole) and refugees.

    We should all share the pain in getting our budget into shape, even though the problem is nowhere as severe as we were told in the election. My concern is that so-called “dole-bludgers “of talk back fame will be the target and the wealthy and politically powerful will be largely exempt. The government has already cut aid to the poor in developing countries.

    I live in hope but I am not expecting an end to the age of entitlement for the rich and powerful. Just think executive salaries, transfer pricing and tax havens! But maybe Joe Hockey has something up his sleeve!.

    Given the present weakness in the Australian economy it is also  important that the reduction in our structural budget deficit is done carefully and not in the drastic way that brought so many problems in Europe.

  • John Menadue. Sharks and asylum seekers

    Over the weekend we have seen thousands of people crowding onto our beaches on both sides of the country to protest against the culling of sharks in Western Australia.  I happen to think that the protesters are right, that people who swim in dangerous seas know the risks but are prepared to take them. Compared with the carnage on our roads, the number who die from shark attacks is quite minor.

    But the protests made me ask why we do not see the same protests supporting asylum seekers, fellow human beings fleeing terror of a different sort.

    Why are we so exhausted in defending the rights of asylum seekers? Maybe it is because the problem is so large, it’s long-term and seems to be intractable. What can we do to make a difference?

    I think our willingness to “pass by on the other side” is because for over a long period deliberate and successful attempts have been made to anaesthatise our consciences to the plight of asylum seekers and refugees. We have become numb to the tragedy that we have allowed to happen in our name.

    I suggest that there are a string of events and actions that have made us less sensitive.

    • John Howard was the first Prime Minister in Australia since the war to show us the great political benefit in appealing to our fear and our worst instincts. Tony Abbott has followed in the same path.
    • We were told at the time of the ‘children overboard’ event that asylum seekers were so inhuman and degraded that they would even throw their children overboard.
    • Tony Abbott continues to call boat people ‘illegals’, akin to criminals, when they are not. As a colleague of Tony Abbott’s at a Jesuit college put it ‘They are not illegals, they are our brothers and sisters’.
    • Scott Morrison told the Coalition Caucus that most people believe that asylum seekers are Muslims and that that should be exploited.
    • He later told us that asylum seekers bring disease and wads of money.
    • The new Member for Lindsay at the last election told us that asylum seekers are blocking the M4 in Sydney.
    • Eric Abetz in Opposition told us that asylum seekers in the community who offended, even in a trivial way, should be treated like paedophiles.

    The demonization of asylum seekers and refugees continues almost daily. The media is largely silent. Its major interest is the politics of boat arrivals, not the plight of the persecuted. The leadership of our churches, synagogues and mosques is scarcely heard. The Vietnamese community that was given a haven in Australia more than 30 years ago is silent. The Labor Party is largely silent as are many members of the Coalition who I know are privately very concerned about what is happening.

    What is it that sharks have that seems to make their plight more important than that of asylum seekers and refugees? Our consciences have become numb. The demonization of asylum seekers is proving to be a political winner.

    It seems to be worth making the effort to save sharks but not human beings also fleeing terror.

     

  • John Menadue. Alcohol and violence on the streets — the tip of the iceberg.

    In recent weeks public attention has been focused on alcohol fuelled violence in Sydney streets and the very slow response of the NSW government. But the response when it did come really only addressed the ugly tip of the iceberg. the violence on the streets. The government response was superficial – minimum mandatory sentencing, greater powers for the police, special licence conditions and lockouts and closures.

    Very little attention was given to prevention and remedial action – the widespread social and economic cost of alcohol misuse across Australia as revealed in our workplaces, roads, and criminal justice and health systems.

    We focus on cannabis, but compared with alcohol, it is a much less potent and dangerous drug. Only a week or so ago, President Obama said ‘I don’t think that cannabis is more dangerous than alcohol’. He was right.

    The long-term effects of alcohol are well-known as outlined by the University of NSW Drug and Alcohol Research Centre– cancer of the mouth, brain injury, high blood pressure, weakness and loss of muscle tissue, inflamed stomach lining, increased risk of lung infections, severe swelling of the liver, inflamed pancreas, and other dangerous consequences. Street violence in Kings Cross is really only a small part of a much larger problem.

    The Australian Institute of Criminology, in April 2013, set out the cost of alcohol misuse in 2010.  The costs were estimated at $14.4 billion which is about double the revenue the Commonwealth government receives from alcohol taxes. That estimated $14.4 billion cost four years ago was made up as follows:

    • Criminal justice system- $3 billion, police, courts, prisons, child-protection, etc.
    • Health system – $1.7 billion in hospital, nursing home, ambulance and other areas.
    • Productivity – $6 billion, mainly losses of production through impaired work and imprisonment of large numbers of people.
    • Traffic accidents – $3.7 billion.

    This study commented that its finding of about $14.4 billion of alcohol costs in 2010 was conservative. Furthermore the figure does not include the negative effects of alcohol on others, estimated to be $6.8 billion in 2010.

    There is clearly an enormous problem just below the surface of street violence. We are concentrating our attention on the streets when there are other major problems below the surface.

    The study of the Australian Institute of Criminology points to the need for prevention and diversion strategies. That really means breaking the booze culture.

    I suggest a major diversion strategy should be the review alcohol advertising in association with sport. It is surely an obvious contradiction to be promoting a healthy life style through sport and promoting alcohol at the same time. In my blog of January 4 ‘Cricket – junk food and alcohol’, I drew attention to the saturation advertising of alcohol during the Ashes Tests. It now continues in the One Day Series. It is unremitting. The alcohol advertising is on the scoreboard, the ground, the shirt fronts, the sleeves the caps, boundary fences, stumps and sight-boards. So far the ‘baggy green’ cap does not carry alcohol advertising but surely it won’t be long before it is carrying a beer logo!. With almost all points covered with alcohol advertising how about Carlton Mid tattoos!  The victorious Australian team poured Victorian Bitter all over each other in the dressing room after the series win. The Australian coach and captain, with one arm around each other and holding beers aloft meandered around the Sydney Cricket Ground. It was tacky. It sent a poor message to young people.

    To protect children, the advertising of alcohol on television is banned before 8.30 pm. But because of the power of the alcohol lobby, advertising is on full display almost all day at most of our major sporting events.  To start winding back the enormous cost of alcohol abuse, we should start by prohibiting alcohol advertising on television and radio at all sporting events, just as we did years ago with tobacco advertising. For the sake of young sports fans our major sporting bodies need to break free from the grip of the alcohol lobby.  Our sporting heroes, the role models for the young should also think carefully about filling their pockets with money from the promotion of alcohol. Who will be the first to make a stand? Australian young people would be particularly well served by such leadership.

    Violence in Kings Cross after midnight is just the tip of the iceberg.

  • John Menadue. Our lack of business and political skills in Asia.

    The Business Council of Australia and business executives keep reminding us of the need to increase our productivity by up-skilling and better use of our labour resources. Unfortunately the business sector is spectacularly lagging in equipping itself for opportunities in Asia.

    Last week The Australian Financial Review surveyed the schools and educational backgrounds of the CEOs of our top ASX100 firms. It found that one third of these CEOs went to secondary schools outside Australia. But not one of them had spent their formative schooling years in Asia.

    This confirms the dismal record of Australian business in Asia.

    • I have yet to learn of a single chairperson or CEO of any of our major companies who can fluently speak any of the key Asian languages.
    • A recent survey by the Business Alliance for Asian Literacy, which represents 400,000 businesses in Australia, found that ‘More than half of Australian businesses operating in Asia had little board and senior management experience of Asia and/or Asian skills or languages’.
    • Because of the lack of integration of human resources and business strategy in Australian firms, many executives who are posted to Asia leave within a few years of their return.  They find the culture in the Australian head office quite unsympathetic to Asia and the experience that they have gained.
    • Australian firms do recruit Australian-born citizens of Asian descent, but they are more likely to be recruited for their good grades and work ethic than future leadership potential. It is hard to break into the Anglo clubs that dominate so many of our large companies.

    Equipping ourselves for Asia has been on and off our agenda for many years. In 1989 the Garnaut Report pointed the way that Australia should respond to the North East Asian Ascendancy.  Through the Hawke/Keating Government periods we responded. We opened up our economy. More skilled people began working in the region. The media became more interested in Asia and exchange programs were established.

    And then in the Howard years we went on smoko. We were encouraged to be relaxed and comfortable and not get too excited about equipping ourselves for Asia.

    The Rudd and Gillard Governments slowly tried to get us back on track. Ken Henry reported in 2012 on Australia and the Asian Century, and how we should respond. A few targets were suggested, but little was really done before the September 2013 elections. The Rudd/Gillard Governments were distracted by other issues.

    The Abbott Government shows signs of pushing us off track again with its clumsy handling of our relations with China and Indonesia. Tony Abbott talks about his belief in the “Anglosphere”. It is not clear what he really means but most observers would conclude that it excludes Asia

    Foreign Affairs Minister Julie Bishop is now telling us that ‘our single most important economic partner is in fact the United States’. The blinding and obvious fact is that the two-way trade between Australia and China is $130 billion p.a. compared with $60 billion p.a. between Australia and the US. To bolster her amazing assertion, Julie Bishop adds in US investment in Australia. Where is she getting this US-centric nonsense from?  It is trade flows that traditionally determine economic relationships, not investment. To top it off Julie Bishop then added that the US is our ‘best friend in economic terms’ when clearly it isn’t.  For the second time in three weeks we have gone out of our way to offend China.

    At least the Gillard/Rudd Governments pointed to the direction we had to head – Asia. Now the Abbott Government seems to be suggesting that Asia could be the wrong direction.

    Our business sector seems to be in agreement with the Abbott Government that Asia is not as important to our future as we all thought

  • ‘I was a stranger and you took me in.’

    ‘I was a stranger and you took me in’ (Matthew 25)

     Well not really, according to Scott Morrison.

    In her article in the SMH on 3 November 2012, Jane Cadzow describes Scott Morrison as ‘a devout Christian who worships at Shirelive, an American style Pentecostal Church. The Shirelive website says its members believe the Bible is the ‘accurate authoritative word of God’.

    Formerly, Scott Morrison belonged to Hillsong. In his maiden speech to the House of Representatives in 2008 he said ‘from my faith I derive the values of loving kindness, justice and righteousness’.

    I am confused.

    The Torah, which is a key part of the Jewish/Christian tradition places great store on welcoming the stranger. The Torah repeats its exhortation more than 36 times. ‘Remember the stranger, for you were strangers in Egypt’.  This caring for the stranger is repeated more than any of the other biblical laws, including observance of the Sabbath and dietary requirements…

    As Leviticus 19 puts it, ‘When an alien resides with you in your land, do not molest him. You should treat the alien who resides with you no differently than the native born among you; have the same love for him as for yourself; for you too were aliens in the land of Egypt.’

    The Gospel of Luke asks ‘Who is my neighbour?’ and then tells us the story of the Good Samaritan. Matthew’s Gospel tells us about the Holy Family’s flight from the ‘slaughter of the innocents’ to safety in Egypt. They were indeed fortunate asylum seekers in that the Pharaoh was generous and did not play to public prejudice by calling on his subjects to ‘stop the donkeys’.

    Scott Morrison has been hostile to strangers and demonises asylum seekers and refugees at almost every opportunity.

    • He has said that they bring disease ‘everything from tuberculosis and hepatitis C to chlamidya and syphilis’. This assertion was rejected by an infectious diseases expert, Dr Trent Yarwood.
    • He told 2GB Talkback radio audiences that he had seen asylum seekers bringing in ‘wads of cash …and large displays of jewellery’. Desperate people will bring whatever portable assets they have.
    • According to leaks from the Shadow Cabinet, and according to Jane Cadzow, Scott Morrison suggested that the Coalition ‘ramp up its questioning to … capitalise on anti-Muslim sentiment’. He used the dog-whistling defence that he was only listening to what people are saying ‘we’ve got to listen to what their concerns are’. But please, lend me a megaphone!
    • In early 2011 he complained about the cost of holding funerals in Sydney for asylum seekers who died in a shipwreck off Christmas Island. An eight year old, whose parents had both died in the shipwreck, was one of 21 people flown from the Christmas Island Detention Centre to attend the funeral ceremonies. Scott Morrison said these were ‘government-funded junkets’ and that the relatives would be ‘taking sightseeing trips and those sorts of things’. He later apologised for the timing but not the content of his remarks.
    • Only last month, he called on the government to suspend asylum seekers being released into the community on the basis of a single violent attack. Fairfax Media pointed out that these people were about 45 times less likely to be charged with a crime than a member of the general community.

    Time and time again, Scott Morrison injects hatred towards the ‘stranger’.

    Perhaps he reads a different translation of the Bible.

    That other biblical scholar, Tony Abbott has supported him every step of the way.