John Menadue

  • China and North Korea: the long goodbye.

    Jonathan D. Pollack from The Brookings Institution quotes Ambassador Wu Dawei, Japan’s long-time leading negotiator on the Korean nuclear issue, who expressed mounting frustration that North Korea lets China’s advice ‘go through one ear and out the other ear’.  Ambassador Wu suggests that North Korea ‘ had signed its own death warrant’.  For link to Pollack article, see below.

    http://www.brookings.edu/blogs/order-from-chaos/posts/2016/03/28-china-north-korea-sanctions-pollack#.Vv2jy9wxlqc.email

  • John Menadue. Health reform and cooperative federalism. Part 2

    In part 1 of this series, I set out why I was attracted to the development of an option set out in a COAG paper on health reform which suggested the establishment of a commonwealth hospital benefit which would replace the PHI subsidy. 

    Regional Purchasing Agencies to address the’ blame game’ in health.

    In part 2, I examine another option in the federalism discussion paper which is for ‘The commonwealth and the states and territories to share responsibility for all health care through Regional Purchasing Agencies.’

    The discussion paper outlines the proposal as follows:

    Option 4: The Commonwealth and the States and Territories share responsibility for all health care through Regional Purchasing Agencies

    The Commonwealth and the States and Territories would jointly establish regional purchasing agencies. These agencies would purchase a range of health services for individuals in their catchment, defined by a minimum service obligation including primary and specialist care, hospital (both public and private), and allied health services. Agencies could be accountable to the Commonwealth and the State and Territories, or just one level of government.

    The Commonwealth and the States and Territories would pool funding to make payments to the purchasing agencies based on demographic and health characteristics of catchment populations and the mix of services covered by the minimum service obligation. Agencies would then be responsible for managing the purchase of health services from within this fixed budget.

    Catchments for regional purchasing agencies could be based on existing structures, such as Primary Health Networks and Local Hospital Networks, or their equivalent State or Territory health service authorities.

    High level health policy, including setting minimum standards of care and quality, and funding roles would be shared between the Commonwealth and the States and Territories. Regional purchasing agencies would be responsible for funding and commissioning primary care and the MBS would no longer operate in the same way—for example, it could be cashed out to help fund the regional purchasing agencies. The impact on other roles would need to be considered.

    Various options could be considered for the establishment of regional purchasing agencies. They could be government or semi-autonomous government bodies, they could be managed by private organisations, selected through a competitive tender process, or there could be a mixture of different approaches. One option would be for the role of the Commonwealth to be limited to funding and setting minimum standards of care and quality, with the States and Territories taking responsibility for governance and system management.

    The Commonwealth and the States and Territories would agree to jointly fund regional purchasing agencies from existing health funding.

    This option would increase areas of shared responsibility between the Commonwealth and the States and Territories. It could seek to build on existing governance arrangements.

    Responsibility for service delivery and the commissioning of services would lie with the purchasing agencies. This would allow for greater competition in the market for services.

    This option would address system fragmentation and may also better respond to local circumstances. This is consistent with the principle of subsidiarity and should result in better services for patients, so long as adequate arrangements are in place to ensure provision of quality services in remote and disadvantaged regions.

    Pooled funding arrangements would need to be established in a way that would reduce incentives for cost shifting between governments. This approach should also increase incentives for investment in prevention and early intervention. There would be an incentive to ensure services were provided cost-effectively within allocated funding to avoid unnecessary (and costly) hospitalisations.

    This option would include many of the benefits of individualised care packages … It would need to be supported by well-designed and clearly defined roles to minimise the risk of blurred accountability and blame-shifting, resulting in service gaps.

    This option involves large-scale reform. It would present particular challenges for rural and remote areas where there are fewer existing services. Consideration would need to be given to the size of purchasing agency regions, to ensure they cover a large enough population to manage risk, realise economies of scale, and ensure availability of suitably skilled staff. This could be an issue for smaller States and Territories.

    Consideration would also need to be given to the role of private health insurers.

    Once implemented, this option would be durable as the health system would contain incentives to provide people with the care they need in a cost-effective manner as agencies operate from a fixed budget. It would take some time to implement and would require a significant up-front investment, in addition to ongoing operational costs.

    This option is a variation of a proposal I have been making for some time, that the commonwealth and the states establish a Joint Commonwealth State Health Commission in any state that would agree. In effect the Commission suggested would be a joint state wide purchasing agency. See link https://publish.pearlsandirritations.com/blog/?p=3810.

    This commission that I have proposed would pool all commonwealth and state health funds in that state, develop an agreed health plan in that state and purchase services from existing agencies, both public and private. The Regional Purchasing Agencies proposal in the draft federalism paper is a more modest approach, being regional and not state-wide, but it may be a more practical way to proceed. Perhaps establishing regional pilots would be a useful first step. A pilot project involving the whole of Tasmania would also be a useful first step given the small size of Tasmania.

    To address the blame game and improve health efficiency and equity, it is necessary that there is effective coordination of all health services, particularly those delivered by hospitals and non-hospital agencies. The great inefficiency in our present health arrangements stems from the fact that the commonwealth government has responsibility for primary care but the states operate the hospitals. A Regional Purchasing Agency could be a very useful way to start resolving the blame game.

    A major aim of a good health policy for Australia must be to keep people out of expensive hospitals. The division of responsibilities between the commonwealth and the states makes that very difficult.

     

     

  • Klaas Woldring-electoral reform,who are the reformers?

     

    Electoral reform in Australia is extremely important. The self-interest of the parties should not dominate it. I believe an entirely Independent Inquiry should be held about Australia’s electoral systems altogether, similar to the Royal Commission in NZ in the 1980s. There are also very major problems with the single-member-electoral district system, problems that have much wider ramifications than the voting system alone. The resulting two-party system has become an absolute negative in itself. Consequences for other governance systems are particularly disturbing and wasteful, e.g. amending the archaic Constitution has become almost impossible and is clearly avoided by the major parties for fear of failure or being “just too difficult”. Replacing the expensive, dysfunctional Federation, where the major parties are frequently in double adversarial contests, has equally become virtually impossible. Economic development frequently follows the path of development in marginal seats to boost electoral outcomes. If there is to be innovation in Australia it should first be in governance systems.

    The current Senate reform will fix the gaming fraud, a positive feature of it, a major step in the right direction. But clearly this gaming fraud is a direct consequence of the Hare Clark system of proportional representation, which originated in the mid-19th century UK prior to the emergence of mass parties. It is definitely NOT suitable for large, complex societies in which mass political parties are principal operators. Australia’s obsession with preferencing is a hindrance to reforms. It is clearly not desired by the voters.

    Since 1984 voters have consistently avoided using it. In the Senate voters regularly voted over 95% above the line leaving the possibility of gaming the system through the Group Voting Tickets. In the NSW Legislative Council a reform of this kind was introduced in 1999. The federal Joint Standing Committee for Electoral Matters (JSCEM) used it as a model in the May 2014 proposal for the Senate. However, the Optional Preferential Above The Line system in NSW still resulted in voters mostly voting above the line (about 80%) and still voting just for one party (also 80%) in one study by Green of the 2003 election. We should realise that the quota required in the NSW is about 4.5% (21 MLAs to be elected). In the Senate the quota is 14.3% (six to be elected). The Greens’ claim that the Senate Reform is similar is therefore incorrect. Minor parties and Independents in the Senate are clearly at a disadvantage now even though there could be much voter sympathy for the eight Cross Bench Senators. In a Double Dissolution several of them could actually be re-elected on account of voter sympathy and the half quota as 12 have to be re-elected, not six.

    Those who argue that the current Constitution (Clause 7) requires Senate candidates to be directly elected, rather than by parties, will have to admit, again, that the Constitution is still a 19th century document that should be tested. However, a PR Open Party List System clearly favours the public choice for preferred candidates of their preferred PARTY. One could easily argue that this does not really offend the spirit of Clause 7!

    Proportional Representation System –

    Open Party List

    European P. R. systems are much simpler than STV – Hare‐Clark as they are based on Open Party Lists. The task of the voter there is easy and effective: to mark his/her preferred party and, at the same time, a preferred candidate on its list of candidates, with just ONE mark. Candidates need to achieve a quota to be elected. Parties usually require achieving an entry threshold to counter too great a diversity. The system results in multiple party parliaments and, often but not always, coalition government. This is mostly a good thing! Flexible majorities are the result. The proportional system is cooperative in nature instead of adversarial, and ensures diverse and democratic representation. There are no by‐elections, no pork barreling and no horse‐trading on preferencing that the voters would know very little about. Counting votes is fast. Its simplicity is the very opposite of what is experienced here often with the Senate: a very strong rejection of preferential voting on account of complexity. Sadly one has to say that the persistent advocacy of P. R. (Hare‐Clark system) in Australia, instead of the Party List systems, has actually done the P. R. cause harm. Surprisingly, the Proportional Representation Society of Australia was found unwilling to broaden their range of P. R. systems to include Party List. Hare-Clark is simply not suitable for any society that aims to operate an indirect democratic system through political parties – common in most Western countries for at least a century. In Europe, 21 of 28 countries use proportional representation (party list), including Austria, Belgium, Cyprus, Denmark, Finland, Germany, Greece, Ireland, Luxembourg, Malta, the Netherlands, Norway, Portugal, Spain, Sweden, Italy and Switzerland. Altogether 90 countries in the world use a proportional system based on parties, either as the main system or in some provinces or for upper houses. Only Italy has abolished it once only to reintroduce it five years later.

    Where new constitutions were introduced in the past few decades proportional representation was mostly adopted and often enshrined in the constitutions such as in Portugal (1974), South Africa (1996), almost all of Eastern Europe (1991), and our neighbours New Zealand with over 80 per cent of these systems being ‘‘party list’’.

    Introducing proportional representation can simply be done by changing the Commonwealth Electoral Act 1918. No constitutional amendment is required.

    Lower Houses

    As for the House of Representatives and most state legislatures Proportional representation – Open Party List equally has much to offer as a replacement. The prevailing Single-Member-electoral District System, combined with compulsory voting and compulsory preferencing, has resulted in what could best be described as a two-party tyranny that is thoroughly distrusted by the voters. I will follow up with an explanation.

    Dr. Klaas Woldring is a former Associate Professor of Southern Cross University and Secretary of the Australian Employee Ownership Association. He is th convenor of republican group, Republic Now.

     

  • Institute for Public Affairs: the think tank with arms everywhere.

    In this blog on 1 April 2016, Greg Bailey wrote about the close relationship between the Liberal Party and the Institute for Public Affairs. https://publish.pearlsandirritations.com/blog/?p=6023

    In the SMH on April 7, Elizabeth Farrelly also wrote about the Institute for Public Affairs ‘The think tank with arms everywhere’.  See link below:

    http://www.smh.com.au/comment/institute-for-public-affairs-the-think-tank-with-arms-everywhere-20160406-gnzlhq.html

  • John Menadue. The health insurance lobby at work at the expense of the public interest.

    For many years, Ian McAuley and I have been highlighting the damage to our health system and the Australian economy as a result of the $11 b. p.a. subsidy to the private health insurance industry.  We have highlighted the following and never has there been a rebuttal by these vested interests.

    • The subsidy favours high income groups. Taxpayers money is being used to help the more wealthy jump the hospital queue
    • Through gap insurance PHI has underwritten enormous increases in specialist fees.
    • Despite the claims PHI has not taken pressure off public hospitals. It has made it worse by attracting salaried staff from public hospitals to private hospitals with much higher remuneration.
    • PHI discriminates against country people who have limited access to private hospitals. Yet the National Party supports the subsidy.
    • Premium increases for PHI over the last 15 years have been at more than double the CPI rate.
    • PHI has administrative costs three times those of Medicare.It aggressively conducts pointless advertising campaigns and sponsors organisations such as  the Public Health Association of Australia and the most surprising of all the Grattan Institute.
    • The PHI industry talks about the high cost of health care but weakens Medicare’s ability to control costs.
    • PHI takes us down the disastrous US private health insurance path. Which Warren Buffett has described as the tape worm in the US health system?

    Despite what I think is an overwhelming case against taxpayer funding of PHI I have not seen a serious response from the PHI industry…ever. I can only conclude that it has no confidence to defend its position, and if it attempted to do so it would open up a debate that it wants to avoid at all costs.

    Instead of joining in a public debate to justify $11 b. p.a. government subsidy, it relies on lobbying directly and secretly on the federal government, both ministers and officials.

    In 2007 Kevin Rudd made a secret deal with the PHI industry that a Rudd Government would maintain the taxpayer subsidy. We only learnt about it years later.

    Now CEDA’s Balanced Budget Commission has suggested revenue measures which the government should consider to achieve a balanced budget.  One revenue measure it suggests is ‘removing the private health insurance rebate exemption’. The CEDA Commission also suggests ‘cutting the private health insurance rebate’. This CEDA report is professional and supported by a cross-section of very senior academics and public officials including four former heads of PM & C. But once again I expect the PHI lobbyists will try to close down the ‘debate’ as quickly as they can.

    In so many areas of public life in Australia, vested interests are abusing their power and influence on government. It is a public scandal what the PHI industry has been doing at the expense of the Australian taxpayer and good health policy.  But it is not just health policy that is being corrupted; it is our democracy where vested interests exercise enormous and secret power.

     

     

  • Lara Moroko & Sarah Duffy. Thrashing the brand: ANZ and CBA could pay a high price for choosing profit over people.

    The recent CBA and ANZ scandals show that the big banks fail to understand the long-term pay off from investing in their relationships with people over short-term profit.

    ANZ stands accused of unconscionable conduct and manipulating the bank bill swap rate(known as the BBSW) in its favour, short changing its customers and generating illicit profits. In the same vein, it has been reported that employees of CommInsure, CBA’s insurance arm, have deliberately, and in some cases illegally, removed medical details or taken action to avoid or delay the payment of claims.

    If these allegations are true, these practices will prove damaging for CBA and ANZ stakeholders and undermine the credibility of both brands and the sector.

    Brands as a promise

    Annually, companies invest dizzying amounts to sculpt their corporate brands. The investment is made in the hope of creating positive and unique associations that collectively reflect the firm’s values and communicate who they are and what they stand for. For the past two decades, it has been increasingly understood that brands act as a promise – one that extends beyond customers to employees, investors, communities, partners and other stakeholders. Like any promise, evidence of a contravention can seriously damage relations with those relying on it in good faith.

    The association that stakeholders – including customers and employees – have with a brand takes significant time and investment to cultivate, but may be eroded rapidly. The CBA website claims they have a “range of conduct codes to ensure we provide a high level of service to our customers”. Similarly, ANZ champion a “deep understanding of customer needs”.

    Any disconnect between the carefully crafted formal messages and the less-than-upstanding action creates a dissonance in the minds of stakeholders. Last year’s Volkswagen scandal is a prime example of how quickly, once trust is betrayed, a much-loved brand can fall from grace. As a consequence of untoward behaviour, the shared values and beliefs are undermined destroying employer brand equity.

    When actions drown out a positive brand promise

    The employer brand promise is created both formally and informally. Typically, employers promise working conditions and remuneration contractually, but also make more tacit promises through the values espoused internally through practice and culture. Consequently, the employer brand of any organisation is not a static, immovable concept, it is continually being created through the interaction of both the firm and the employees.

    The employer brand directly impacts on an employees’ employment experience, which has consequences for performance and overall job satisfaction. There are particular conditions that will corrode employer brand success. Both the CBA and ANZ scandals touch on at least two of these conditions; disconnect between the promised and actual employment experience and divergence between the espoused and actual values. By wearing down employee trust, these firms have actively undermined the investments they have made in attracting and retaining talent.

    Recent research conducted at Google shows how trust, employee performance and engagement are related. In their long-term quest to understanding the secret of successful teams, Google found that teams who feel “psychologically safe” perform better.

    That is, a feeling of stability and safety combined with clear goals and a culture of dependability were the essential ingredients for a team’s superior performance. For now, it’s unlikely that the day-to-day employment experience of most employees at ANZ or CBA has changed significantly, however the psychological feeling of safety is likely to be marred by the recent scandals, detracting from optimal performance, job satisfaction and productivity.

    Their ability to attract and retain staff who can best deliver on a superior customer brand experience has also been diminished.

    Making amends – intention and timing is critical

    ANZ and CBA have approached restitution with their stakeholders differently. CBA has apologised, chief executive Ian Narev issued a statement in the wake of the controversy, taking ownership and pledging direct contact with victims.

    In contrast, ANZ intends to defend against the claims. How these opposing strategies will play out for each institution remains to be seen.

    The Volkswagen debacle involved years of public deception; however once the irrefutable truth of its actions was exposed, the CEO resigned and 6.5 billion euros were allocated to cover the amends. The Volkswagen scandal is perhaps still too fresh for us to be able to determine the consequences for the brand, however it has been over five years since BP’s Gulf of Mexico disaster in April 2010. It was found that the disaster was preventable and similar to Volkswagen, the CEO resigned and significant funds have been allocated to restitution. BP has continued to produce “corporate responsibility” reports and herald its position on sustainability.

    However, a protest in 2014 by climate activists against BP’s contributions to the Tate Modern show that the public has not forgiven or forgotten the Gulf of Mexico disaster.

    Brands are an important investment in social and cultural value

    An important question is: what can business, irrespective of industry, learn from this? Cautionary tales like this urge leadership to think beyond the bottom line: to value and cultivate a culture of trust, psychological safety and dependability to enable their employees to thrive in optimal environments. Economic value from profitable business units keeps the lights on, but social and cultural value from staff and customers keep the growth engine firing.

    Lara Moroko is Lecturer in Management at Macquarie Graduate School of Management.  Sarah Duffy is Lecturer, School of Business, Western Sydney University.  This article first appeared in The Conversation on March 16, 2016.

  • Evan Williams. Rams. Film Review

     

    Rams is a strange and beautiful film from Iceland. And we don’t hear much about Iceland these days. As a child, I pictured a place of endless glaciers and permanently frozen lakes, and was surprised to discover that it was also a place of gentle hills and verdant summer grasslands, with streets and houses and a capital city whose name I could never remember. Iceland was in the news the other day when their prime minister, Sigmundur Gumlauigsson, was revealed to have hidden large stacks of money in an overseas tax haven and forced to resign. I was reminded of another prime minister in a similar predicament – attacked in parliament for investing a chunk of his personal wealth in a tax-free haven in the Cayman Islands. His name escapes me, but I’m pretty sure he hasn’t resigned.

    As its title would suggest, Rams is a film about sheep. And that’s another surprise. Sheep have never figured much in movies. We’ve seen any number of films about dogs, cats, horses, lions, birds and fish; even the humble pig landed a starring role in Babe. But Rams must be the first film in which sheep have made it to the big screen. With their mild little faces and general air of ungainliness, they must have rated too low on the Disney cuteness scale to clinch a spot in Fantasia or The Jungle Book or Snow White and Seven Dwarfs. Yet sheep have a sacred place in western culture. When we remember the Good Shepherd, the Lamb of God, the parable of the lost sheep and many other biblical allusions, it’s surprising that Hollywood hasn’t given us a suitably reverential epic in honour of the humble bleater.

    Rams was written and directed by Grimur Hakonarson, and more than one reviewer has described it as a comedy. It’s a “charmingly understated comedy” according to Variety, and “a marvel of deadpan comedy” in the opinion of the Wall Street Journal. I agree that its comic elements are understated, since I was never remotely aware of them while watching the film. But if Rams is a comedy, so is Romeo and Juliet. For me it’s one of the saddest films in a long time – delicate, poignant, profoundly humane, and immaculately photographed in some weather-beaten Icelandic outpost where blizzards, bleak skies and occasional bursts of sunshine mirror the moods of the characters.

    It’s the story of two brothers – a pair of stout, rugged, well-bearded old codgers who look so alike that I had difficulty telling them apart. This proved a little confusing at first, but the underlying message of the film is so transcendentally simple that after a while it hardly seems to matter which brother is which. Gummi (Sigurour Sigurjonsson) and Kiddi (Theodor Juliusson) – and no more of these funny Icelandic names, I promise – are sheep farmers, living a stone’s throw from each other in separate houses. Both are unmarried – where are the women, we wonder? – and as a result of some long-standing family feud they haven’t spoken to each other for 40 years. If communication is unavoidable, Kiddi’s dog carries a handwritten note from one brother to the other. (And that, come to think of it, is rather a funny idea, so Rams may have some comic elements after all.)

    When a deadly sheep disease is identified in the valley, the local authorities order that all sheep must be slaughtered, threatening financial ruin for the farmers. Gummi, the more tender-hearted of the brothers, is reluctant to comply. He treats his sheep as pets, giving them names and fondling and cuddling them as others would a much-loved dog or cat. Under pressure from his neighbours and a no-nonsense local vet, he comes up with a plan of his own.

    I’m making it sound like a bit of a tearjerker, but Hakonarson steers clear of sentimentality. Aided by two finely nuanced performances and a strong supporting cast, he delivers a rich moral fable of love and redemption, illuminated by a warm eye for the beauty and grandeur of the natural world. I liked the scene when Gummi rescues his comatose brother from the ravages of a snow storm and transports him to the nearest hospital in the scoop of an earth-moving tractor. (Another understated comic touch? Just possibly.) It’s hardly a surprise when the brothers are finally reconciled – we sense that from the beginning. The surprise is that Hakonarson’s film, with its odd mixture of realism and improbability, works with such effortless grace. Rams has won many awards, including a major prize at last year’s Cannes festival. All sheep – and countless filmgoers – have cause for celebration.

    Four stars

    Rams, rated M, is in limited release.

    Evan Williams reviewed films in The Australian newspaper for 33 years. He is a Life Member of the Film Critics’ Circle of Australia for services to film criticism and the film industry.In 2015 he received the Geraldine Pascal Lifetime Achievement Award for critical writing.

  • David James. CommInsure expose proves spin doesn’t always win.

    One of the challenges facing business journalists in Australia is the wall of spin they face whenever they are trying to uncover an uncomfortable truth. The spin ranges from outright lying to being highly selective with the facts. Most journalists either struggle to get beyond the wall, decide it is to their benefit not to attempt to scale it, or are simply too busy to even contemplate its existence.

    Consequently the spin, by and large, wins. Journalists always need sources to create stories — it is essential to their careers — and so are readily drawn into trade-offs: access to important sources in return for adhering to a certain line in the story.

    Or, as is increasingly the case with younger journalists because of the thinning of the ranks in the media industry, they dutifully copy out the media release, a practice known as ‘churnalism’.

    That is why any reader of business news should always ask: cui bono? Who profits from the story running?

    Most spin doctors are either former journalists, who have personal experience in how the industry works, or they are extremely well schooled in its dynamics. If a story appears in the media, it is more often than not because some spin merchants want it to be there.

    Happily, there are exceptions. Gold Walkley winner Adele Ferguson did a brilliant expose of the insurance industry for Four Corners and Fairfax that was definitely not on any spin doctor’s agenda. Indeed it was a demonstration that the craft of spin has its limitations if the journalist is skilled enough to get beyond the wall. And in recent years no Australian journalist has been better at it than Ferguson.

    Ferguson’s examination of the Commonwealth Bank’s insurance arm, CommInsure, uncovered many instances of unscrupulous practices, including refusals to pay out to victims of heart attacks, multiple sclerosis, cancer and mental illness. She uncovered instances where insurers looked for additional medical opinions in order to avoid payment.

    Her interview with Ian Narev, chief executive of Commonwealth Bank, was a semi-comic exposure of how the art of spin works.

    Narev seemed to have been advised to mention the word ‘customers’ as often as possible. A cynic might suggest that it was spin doctor trick number one: reposition the discussion by talking about victims of the bank’s outrageous insurance practices as ‘customers’. The intention seemed to be to muddy the waters: are these people really victims, or just dissatisfied customers?

    It was also designed to make it look like the bank is always acting in the interests of its shareholders. Thus we had statements like: ‘The long term risk here is that satisfied customers are good for shareholders as well.’ This comment, somewhere between deflection and banality, seems intended to draw attention away from the specific issue in order to consider the ‘wider context’.

    The next step, which that cynic might suggest was spin doctor trick number two, was to claim that the news story was just an unfortunate exception: ‘Being ethical is not the same as being perfect,’ a suitably humble sounding Narev admitted. ‘We need to realise we will make mistakes … one test of how ethical we are is how we respond to those mistakes.’

    In other words, ‘Trust us, we mean well.’ It is a technique partly designed to tap into suspicion that journalists only pick out the sensationalist exceptions. The problem in this instance, however, was that, thanks to Ferguson’s incisive investigation and the moral courage of Dr Koh, CommInsure’s chief medical officer, it was clear that the mistreatment was not an aberration; it was business as usual.

    Device number three was to introduce vagueness — more deflection. Narev insisted that the ‘culture’ of the bank is ethical. ‘Culture’ is a management buzzword that is sufficiently vague to remove any threat that someone might be held accountable. At the same time it gives the impression that management is in control. What exactly such verbiage really means is anyone’s guess, but that is probably the point.

    Ferguson insisted on talking about the ‘human beings’ affected in an attempt to push Narev beyond his corporate-speak and towards a more human response, such as shame or regret or horror, about what had been done to the sick and dying by the bloodless operatives in the company’s insurance arm.

    It left one wondering what it must be like to spend one’s days being cruel and indifferent towards people in extreme distress. Presumably, in order to deal with it psychologically, these insurance bureaucrats find ways to de-personalise everything.

    Ferguson did not succeed in eliciting a human response, but she did expose the spin. Narev started to come out with sentences like: ‘The reason to do the right thing by customers is because we are here to do the right thing by customers.’ Hard to argue with that. And there’s that word ‘customers’ again.

    The Commonwealth Bank chief executive unswervingly stuck to the script. The result was not edifying. It is to be hoped that when his media advisers submit their fees, they give him a discount. This time the spin definitely did not work.

     

    David James is the managing editor of businessadvantagepng.com

    This article was first published in Eureka Street on 15 March 2016.

     

  • John Menadue. Bad apples, corporate culture and leadership.

    The recent scandals at CBA,ANZ  and now Wespac have focused us on business culture. But the CEOs  keep telling us that there is no business culture problem but only a few bad apples. If only that were true. The issues are more systemic than they would suggest and the problem covers a wide range of companies and not just the banks – massive tax avoidance by large multinational and private companies, the Seven/Eleven franchise, labor hire companies, child care and vocational education and training.

    The ANZ  and Wespac are accused of manipulating the bank swap rate (BBSW) in its favour to disadvantage customers and generate illegal profits. The CBA doesn’t seem able to put its house in order with abuse first by financial planners and more recently by Comminsure, threatening customers, by removing medical details and delays in payments.

    Now the Chairman of the Australian Securities and Investment Commission, Greg Metcalf, has been joined by the Australian Prudential Regulation Authority, Wayne Byers, in demanding the finance industry fix its corporate culture. Metcalf said ‘Time and time again we have seen firms blaming behaviour on a few bad apples driving bad outcomes for consumers, rather than taking responsibility by looking more closely at their organisation and implementing the necessary changes to address the cause of the problem. … At the end of the day, you need to have a culture that your customers can believe in.’ I would have added also the importance of staff belief in the culture of the organisation.

    Malcolm Turnbull has said ‘banks do not just operate under a banking licence,they operate under a social licence and that is underwritten by public confidence and trust’

    We have a serious problem but I am not persuaded that the loss of moral compass is any worse today than in years past. But the scale of our economy and the consequences are much greater than ever before. We are unprepared for the challenges we face. We have seen wealth generation in the last 50 years that probably exceeds the wealth generation of the last 2,000 years. Growing wealth and the permissive attitude to it is raising more and more problems.

    The Protestant Reformation from the 16th Century broke the grip of the church on economic and business life, and released those individualistic energies that have driven so much of capitalist enterprise over the last 400 years. The new religious climate following the Reformation with its more individualistic and less communal values set the scene for capitalist development. This transformation broke the power of the church over business activity and set the scene for unprecedented expansion and wealth alongside unemployment, business shortcuts and inequality in a pluralist society. We have been in catch-up ever since.

    We have not really addressed the social question that John Curtin spoke of, that the economy is to serve social norms and not the other way around. We could add to that, confusion of ends and means by noting the rise of economic fundamentalism which has promoted deregulation and privatisation with its claimed benefits to the community. ‘Rational people’ in the market are expected to put their private interests ahead of the public interest.

    Without morality in public life, we have only rules and laws to fall back on. But we all know that laws are not sufficient. We cannot legislate for good behaviour. A society that is based on laws alone can go down many slippery paths.

    Neither are the so-called codes of conduct that we hear about from business all that helpful. Codes are usually applied from the top down and seldom are they grounded in the attitudes of customers and staff. Codes and rules are usually external and have the effect of detracting from personal responsibility. Codes also have a problem in that they can never cover all situations which we face in a complex and diverse world. So often, these codes become ‘fig leaves’ for leaders and a business opportunity for lawyers who have colonised this field. Lawyers may be good at law, but I am not sure that they have any more to offer than other people on corporate culture and business morality.

    Two factors today seriously inhibit a socially-based corporate culture. The first is the lack of trust which is so essential in all parts of our lives. How can a CEO expect to have the trust of staff and customers if his or her salary is 100 times that of the average staff member? The conclusion that almost all staff members will draw from excessive executive salaries is that self-interest is paramount. Public relations and spin will never change that. And when trust is broken there is an inevitable high price to pay. It is no coincidence that the banks with their very high executive salaries are facing problems with their corporate culture.

    The second problem that inhibits a healthy business culture is when so-called private values are not reflected in public behaviour. Tax avoidance on a massive scale by major corporations can only persuade staff and customers that the corporation is not serious about public behaviour and responsibility. Staff and customers of large corporations are expected to pay, and do pay in most situations, their fair share of tax. They rightly believe that executives of many public companies talk about public morality but their behaviour is quite different. Not surprisingly again, staff and consumers get the message that if it’s OK for the boss to look his own interest to avoid tax why shouldn’t I cut some corners if necessary.

    Cultural and social values in a business must be derived from customers and staff. The ‘leader’ can assist in this process. As Lao Tsu put it ‘As for the best leaders, people do not notice their existence. … When the best leaders’ work is done, the people say “we did it ourselves”.’

    The attitude and values of staff and customers is critical in reflecting the way corporations should behave. They understand the ‘pub test’ better than many leaders.

    A good leader knows that power is always abused even by himself or herself. Many CEOs have great authority and status. But authentic leadership and understanding what a moral compass is, is quite another thing. Do leaders have principles that guide their public life-like personal coscience, transparency, loyalty to my principles as against my organisation and reciprocity-the golden rule?

    Leadership by example is more important than direction from the top and public relations.

  • Bryce Barker. Of course Australia was invaded – massacres happened here less than 90 years ago.

    Much has been made in the last few days of the University of New South Wales’ “diversity toolkit” offering teachers guidelines on Indigenous terminology.

    The most controversial directive was a line about using the term “invasion” to describe Captain Cook’s arrival here:

    Australia was not settled peacefully, it was invaded, occupied and colonised. Describing the arrival of the Europeans as a “settlement” attempts to view Australian history from the shores of England rather than the shores of Australia.

    This story made the front page of the Daily Telegraph. Radio personality Kyle Sandilands quickly condemned it as an attempt to “rewrite history”.

    But detailed historical research on the colonial frontier unequivocally supports the idea that Aboriginal people were subject to attack, assault, incursion, conquest and subjugation: all synonyms for the term “invasion”.

    This was particularly the case in Queensland, where the actions of the Native Mounted Police were designed to subjugate Aboriginal resistance to European “settlers” on their traditional lands, and to protect pastoralists, miners and others from Aboriginal aggression.

    The UNSW guidelines are not “rewriting” history – they are simply highlighting a history that has never been adequately told in the first place. This history is one that certain sections of Australian society are determined to deny, led by conservative media commentators who recently whipped up an indignant storm about how a university chooses to educate their students.

    It is telling that Sandilands suggested people “get over it – it’s 200 years ago” when we so revere the notion of Lest We Forget when remembering our role in a foreign war (WW1) 100 years ago.

    It is also worth remembering in this context that large scale massacres of Aboriginal people were still being carried out through the 1920s and early 1930s in some parts of Australia.

    A newly begun project focusing on the archaeology of the Queensland Native Mounted Police and Indigenous oral histories will look at the physical evidence of frontier conflict, including the range of activities undertaken by the Queensland Mounted Police, and the effects of their presence on both Aboriginal and non-Aboriginal people.

    The first step will be to listen. As Jangga Elder Colin McLennan, from Central Queensland, said in a recent project meeting:

    this subject has been left idling too long. Aboriginal people are very sensitive about what happened. We need to investigate these places and we need to talk about them openly and honestly … I’ve kept a lot of this knowledge in my head about Aboriginal people being slaughtered and the locations of the killing fields in my country. It’s like an open wound that needs to be healed and it needs to be dealt with. This history belongs to all of us. We need to share it with each other.

    In a way, Sandilands isn’t trying to deny the scale of frontier conflict (although many do) – he just wants us to forget about it. But who we, as Australians, choose to remember and what events we commemorate are inherently entwined with how we view ourselves and how we want the world to see us as a nation.

    Official records of the Coniston massacre, which took place in the Northern Territory in 1928, admit to 31 Walpiri, Anmatyerre and Kaytetye men, women and children being killed by Constable William Murray and his men. Is not an event on this scale – which happened just 88 years ago – worth remembering? Is not a Walpiri man’s death defending his way of life just as worthy of remembrance as a World War I digger’s ten years earlier?

    Why are we as a nation so reluctant to face up to this part of our past? Inconvenient truths that risk tainting the white “pioneer/settler” narrative are, it seems, not to be commemorated but forgotten.

    Although the historical record documenting frontier conflict is a powerful and unequivocal record of our colonial past, it is mostly limited to written records that largely exclude Indigenous voices.

    Yet the magnitude, persistence and near-universality of Aboriginal oral narratives of frontier violence are surely telling.

    Combining the material evidence for frontier conflict through archaeology with written records and Aboriginal oral tradition and memory, might be the one way to track events and their repercussions more clearly.

    Along with oral tradition, monuments and sites are powerful tools in remembering. They are physical markers on the landscape of events that happened.

    For many Indigenous communities, the physical evidence of frontier conflict in Queensland in the form of Native Mounted Police camps and locations where people were killed are — just like Gallipoli — important places of remembrance that should never be forgotten.

    Hopefully one day non-Indigenous people will be able to visit these sites and reflect on our collective history, rather than being threatened by it.

    Professor Bryce Barker is Professor and Acting Head of School of Arts and Communications, University of Southern Queensland. This article was first published in The Conversation on March 31, 2016.

  • David Peetz. Productivity in the Construction Industry: Did it surge under the Coalition’s Reforms?

    On 7.30 recently  the Prime Minister dismissed the Productivity Commission’s findings on productivity growth in the construction industry in favour of those from a small consultancy firm.  He used it to support a claim that the previous Coalition government’s legislative reforms in that industry had led to a 20% increase in construction productivity, which had ‘flatlined’ under Labor.

    Actually, though, things were a bit different.  To see how we know it didn’t, and why he said it did, we look at (i) what’s it all about—what reforms are we measuring; (ii) what the official data show about productivity in that industry; (iii) why the Productivity Commission and a consultancy firm differed on the issue; and (iv) why the Prime Minister wanted to prefer the consultant’s version of events.

    What’s is all about—what reforms are we measuring?

    The debate is all about special laws on industrial relations in the construction sector.  The Howard government passed laws in 2005 that created the Australian Building and Construction Commission (ABCC).  The legislation provided for six months jail for anyone refusing to cooperate with ABCC inquiries, or speaking about them to anyone, and increased penalties for other breaches of industrial law.  It didn’t just apply to construction workers—an passerby (an academic, in fact) on a street near a building site was interrogated for hours and threatened with jail if he spoke about it.

    But even more important than the legislation itself was how it was administered.

    In September 2010 the term of the Howard government’s appointee to the top job, John Lloyd, expired and he was replaced by a Gillard appointee, Leigh Johns.  Gillard in 2009 had already imposed some restrictions on Lloyd’s activities.  During most of Lloyd’s term, the coercive powers mentioned above were extensively used.  Johns adopted a very different approach.  He was much less antagonistic to unions.  The use of compulsory interrogations dropped by nine tenths in 2010.  Johns was criticised by Lloyd for pursuing sham contracting by companies—he labelled it a ‘trendy’ issue—at the expense of prosecuting unprotected strikers.

    In June 2012 the legislation establishing the ABCC was repealed and new legislation, retaining some coercive powers but with more safeguards, took its place.  The ABCC was replaced by the Fair Work Building Industry Inspectorate (which goes by the acronym FWBC).  Johns moved across to head that body.  As the ABCC under Johns had not been using its full powers, not so much changed with the new legislation in place.  

    In October 2013, after the election of the Abbott government, Minister Abetz put Nigel Hadgkiss into the top position, replacing Leigh Johns, who had resigned.  Hadgkiss was Lloyd’s deputy in the Howard years.  Hadgkiss accused Johns of having struck ‘deals’ with the construction union.  Hadgkiss was described as ‘tough’ and the ‘right man to restore rule of law in construction’ by mining employers and as a ‘well known union basher’ by former union official Brian Boyd.  The mining employer body considered that ‘appointing the right person…is just as important as implementing the appropriate institutional and legal arrangements’.

    So there are really three distinctive periods in Commonwealth oversight of the construction industry since 2005, corresponding to the ABCC under Lloyd (2005-2010), the years of the Labor appointee, Johns (2010-2013), and the Hadgkiss years in charge of FWBC (2013-2015).  The first and the third of these corresponded to ‘tough’ regulation, the second less so (though there were still coercive powers available).

    What do the official data show about productivity in that industry?

    The chart below shows labour productivity from 2005 onwards, in the construction industry and nationally, according to the ABS National Accounts.

    What immediately strikes you on looking at this is how labour productivity in construction moved in tandem with national level productivity until 2011.  There is no discernible effect from the ABCC legislation and the Lloyd years.  

    Peetz_Chart1

    Then, in 2012 and 2013, there were large improvements in construction productivity that were not matched by the rest of the economy.  Yet these were years when Labor’s appointee, Leigh Johns, was in charge of the ABCC and the FWBC, and coercive powers were rarely used.

    Through 2014 and 2015 productivity growth in construction wound back (it ‘flat-lined’) while other industries started to catch up.  This was the period when the ‘right person’ (or the ‘union basher’) Nigel Hadgkiss was back in charge of FWBC.  Hadgkiss’ years corresponded to the poorest two years of construction productivity growth since 2005.

    The second chart makes this pattern slightly clearer.  It shows the average annual growth rates over the three periods.

    Peetz_Chart2

    Across the economy as a whole, the average annual growth rate did not vary much between these periods.  But productivity in construction did: in the Lloyd/ABCC period, at 1.6% per annum, it was fairly similar to growth in the economy as a whole; in the Johns period, at 5.1 per cent per annum, it was well above national growth; and in the Hadgkiss period, at -0.5% per year, it was well below it.  (If you want to split the Johns period into the ABCC and FWBC sub-periods, the numbers were 5.7% and 3.9% respectively, both well above the rates achieved under the more aggressive regimes.)

    In short, the evidence suggested that productivity in construction was best when coercive approaches were not followed.  

    Why did the Productivity Commission and a consultancy firm differ on the issue?

    The consultancy firm the Prime Minister referred to—originally called Econtech, then KPMG Econtech, then Independent Economics—had been commissioned by the ABCC, and later by a construction employer body, to try to prove a point (that the ABCC had done a great job).  It published and republished largely similar reports, mostly updates using the same assumptions as the previous version.

    At the core of the original Econtech analysis was a spreadsheet error, which some colleagues and I identified.  Econtech eventually admitted this, but never changed the estimated productivity gains it claimed arose from the ABCC.  Instead it made selective (and contradictory) use of start and end dates and questionable techniques to try to maintain the original finding.

    The Productivity Commission obtained the original data we and Econtech had used, and found no error in our analysis.  It concluded that ‘it cannot be maintained that the data show — even in an indicative sense — that aggregate productivity improved because of the BIT/ABCC’ (p786).

    Why did the Prime Minister want to prefer the consultant’s version of events?

    The government seeks to re-enact legislation re-introducing the ABCC.  It has claimed that this is to deal with corruption in the industry, as identified by the Royal Commission on Trade Union Governance and Corruption, but there are three big problems with this. 

    First, the content of the ABCC legislation does not deal with corruption.  That is why it cannot be extended into a ‘federal ICAC’ as sought by some: ICAC deals with corruption, ABCC deals with strikers.

    Second, it was never the intention of the ABCC legislation that it deal with corruption.  It is not mentioned once in the Ministers’ second reading speeches in either 2005 or 2013.

    Third, re-establishing the ABCC was not a specific recommendation of the Royal Commission.

    So, another rationale is necessary.  Productivity has long been used, spuriously, as the rationale for the ABCC.  The Productivity Commission, never seen as a friend of unions, has dismissed the rationale, but the consultant’s report, paid for by the ABCC and employer bodies, naturally supported it.  So the Prime Minister has chosen to make use of the only report that endorsed the preferred course of action, regardless of its origin.

    What does it all mean?

    All this is not to say that productivity would be enhanced by a more liberal regulatory regime or regulator.  

    Rather, the whole idea that the regulatory regime or the regulator determine productivity growth in construction is a furphy.

    Productivity growth in the industry (and indeed, nationally) is influenced by a range of matters.  It goes up and down from one year to the next.

    In construction one of the biggest influences is simply how much work is going on.   So the biggest fall in construction productivity in the past three decades occurred after the construction boom leading to the 2000 Sydney Olympics came to an end.  It’s the downturn in the industry, not Nigel Hadgkiss himself, that has led to the current downturn in productivity.  

    But politicians and advocates will try to use productivity figures to prove a spurious point, carefully choosing the start and end dates to do so.  If it gives the right answer, they’ll broadcast it; if it gives the wrong answer, they’ll ignore it. 

    The claims about productivity in the construction industry follow that pattern.

    David Peetz is Professor of Employment Relations, Griffith Business School, Griffith University, Brisbane.

  • Ian Marsh. What’s wrong with Australian politics? Part 3.

    Here’s a puzzle. Over the past decade or so Australian politics has veered from one crisis to another. In that same period New Zealand has enjoyed effective and constructive government. What’s the difference? Let’s start with the different records.

    First Australia. Here is a rough summary. Five prime ministers in five dysfunctional years. Internecine party warfare. Gridlocked policy. Chronic leadership and factional rivalries. Intractable internal ideological conflicts. These factors in various combinations have stymied both Coalition and Labor governments.

    Then there are failed public consultations. They meander meaninglessly as in the Turnbull/Morrison approach to tax and the Rudd government’s 2020 Summit. Or they present choices which, for political reasons, government’s fear to take up – the Henry Tax Review. Or they founder on internal divisions of opinion within both major parties – Climate Change, Marriage Equality.

    It is salutatory that the only new items to successfully pass the Australian parliament in the last decade have attracted bipartisan support – plain cigarette packaging, NDIS, and (shamefully) a refugee strategy shaped primarily by political advantage.

    Contrast this with the New Zealand record. In the past decade or so the GST has been increased (to 15%), the top tax rate has been progressively cut (by 6% to 33%), a tax deductibility boondoggle was closed off (making losses incurred by qualifying companies deductible), an ETS passed, and the minimum wage increased from $12 to $14.25. Refugees have been offered sanctuary. Further, an (advisory) citizen initiated referendum indicated 64% were opposed to further privatisation. The government has therefore commercialised rather than privatised a number of public enterprises.

    Over this period John Key has remained prime minister. Like Julia Gillard, he has led minority governments. His party gained support from 45% of New Zealanders at the 2008 election and 47% at the 2011 and 2014 election. In no case did he score sufficient seats to win a majority in his own right. He was one seat short in 2014 but shortly thereafter lost a by-election.

    Other parties in the New Zealand parliament include the Labor opposition and a variety of minor parties: ACT (free market), United Future (socially conservative), Maori, Greens and New Zealand First (populist). Their role is underwritten by the New Zealand’s proportional voting system which, provided certain threshold conditions are fulfilled, guarantees seats to minorities. This ensures expression of minority views in the public conversation, but in constructive ways.

    Finally, unlike Australia, New Zealand is a unitary political system – only one powerful House.

    John Key has deliberately opted for minority government. How has he succeeded despite an Italian style melange of parties. A threshold condition is no doubt a mature democratic electorate. Thereafter Key uses party differences creatively. He governs from the centre-right. When contentious measures arise, he reaches out to left parties on social measures and to right parties on economic measures. This was the governing formula pioneered with great success by his Labor predecessor, Helen Clark.

    What does it tell us? First, that in these more pluralised times, great party blocs that try to aggregate too many diverse forces are dysfunctional. They are like unwieldy conglomerates, behemoths left over from the collectivist era. Look no further than the disabling factions that now thwart coherent government action for Turnbull.

    In truth there is much common ground between the major parties at the centre of the political system. But you would never know. On one side, the sniff of electoral advantage seemingly trumps any possibility of sane debate (go no further than the current imbroglio on negative gearing). On the other, internal cultural differences and rivalries thwart common action (marriage equality).

    Second, adversarial incentives dominate debate. The resulting public conversation more often than not thwarts public understanding of complex challenges. Paradoxically this is at a time when the backwash of globalisation creates an even greater imperative for prudent public discussion (e.g. refugees, global banking system fragility, the continuing advantages of free trade). Far from advancing this outcome, the parliamentary conversation is corrupting – it enhances public cynicism and, for immediate political advantage, forecloses options.

    In a nutshell, we have a political system that cannot lead us into the twenty-first century. This system was formed in 1909 when the present two major parties consolidated around different domestic responses to the capitalist economy. This debate was partially seen off by Gough Whitlam and finally put to bed by the Labor government in 1983.

    You have only to look at the recent agenda of issues to see how far we have come from that earlier era.

    Climate change is an environmental issue, a cause that first gained a place on the political agenda in the 1970s. Live animal exports reflect new concerns about animal rights and the decent treatment of non-human life. Gay marriage concerns the equal rights of citizens whose identities are other than or supplemental to social class. Not that class and gay identities or environmental or animal rights (or women’s, ethnic or Indigenous rights) are mutually exclusive. Rather citizen identities have multiplied and differentiated in a way that the older class-based structuring of politics does not recognise and has trouble accommodating.

    What can be done? We cannot mimic New Zealand’s solution. Our political system is too different. But we do have historic experience of how to govern in more pluralised times. This was the situation which the first federal governments faced between 1901 and 1909. This was also one of the most creative periods in domestic Australian political development. It was incidentally the last time in which we had a succession of five prime ministers. But then change worked constructively to advance compromise and the emerging political agenda.

    One important difference concerned the role of the Senate. It functioned then more like its US progenitor. Its committees acted as gate keepers for emerging issues. This largely lifted inquiries above partisanship. They gathered evidence, held hearings around the country, attracted media attention and helped focus the public and political conversation on real choices and options. A multi-party report moderated flagrant adversarialism. It gave governments the opportunity to gauge public opinion and possible supporting coalitions. Crucially, this was before they decided what to do. No expert inquiry could deliver such a result.

    What is the present relevance of this distant period? After a decade characterised largely by policy impasse, perhaps there is now some chance that the ‘problem’ might be parsed correctly. It is much more fundamental than poor communication, inadequate leadership or deficient narrative. The real political challenge is structural and systemic.

    Ian Marsh is a Visiting Professor at the UTS Management School. 

    Ian Marsh and Mike Keating will be writing a follow-up article next week.

  • James Morley. The idea that conservatives are better economic managers simply does not stand up.

    Conventional wisdom holds that conservative politicians are more prudent stewards of the economy. These politicians are often happy to reinforce this view by citing their business acumen and denigrating the experience – or lack thereof – of their opponents.

    Think of Mitt Romney as multi-millionaire businessman versus Barack Obama, former community leader. Donald Trump also highlights his business “experience”, although his track record suggests he’s done far worse at managing his father’s wealth than a monkey throwing darts at The Wall Street Journal.

    In Australia, Prime Minister Malcolm Turnbull has positioned himself as a successful manager of economic transition in advance of the next election.

    But what if we were to take the business metaphor seriously and hold politicians to account with a performance review in terms of “measurable outcomes”? Would there actually be any evidence for the view that conservatives are better managers of the economy?

    KPIs for politicians

    The key performance indicators (KPIs) in this context are economic growth and, possibly, inflation. And you might think it obvious that conservatives outperform their progressive counterparts given their penchant for deregulation and tax cuts. Ronald Reagan’s “Morning in America” after Jimmy Carter’s era of “stagflation” would seem to settle the case.

    Or perhaps the Reagan/Carter example is too carefully selected and the actual role of politicians in guiding the fortunes of the economy is far less significant than they tend to claim. That would have been my guess before looking at the data.

    However, in a new paper, Princeton professors Alan Blinder and Mark Watson have actually looked at the data and they find a striking difference in the performance of the US economy under Democratic and Republican presidents. And the Democrats perform much better than their conservative counterparts.

    Since the second world war, average annualised growth of US real GDP has been 4.33% for Democratic presidents and only 2.54% for Republican presidents. The difference is statistically significant and robust. Inflation has also been lower under Democrats, although the difference is not significant.

    Now, you are probably thinking of a lot of possible explanations for this finding that don’t necessarily imply conservatives are worse managers of the economy. But Blinder and Watson have probably thought of even more possibilities and have addressed them thoroughly in their paper.

    In terms of the KPI analogy, the first objection might be that the executive powers of the US president are more constrained by legislative checks and balances of Congress than a CEO is by a board of directors or shareholders, let alone a prime minister at the head of a loyal party. This is certainly plausible.

    But it turns out that there is no relationship between congressional control and economic growth. Average growth was highest when Democrats controlled both houses at 3.47%, but the difference with growth when Republicans controlled both houses at 3.35% is small and insignificant.

    So, perhaps, US presidents can be held accountable for what happened under their watch.

    Measuring success

    Now you might ask, who really cares about the real GDP? Probably only a few macroeconomists like myself, right?

    But real GDP growth turns out to be correlated with a lot of other stuff that people do care about.

    For example, and probably not surprisingly, the unemployment rate fell under Democrats and rose under Republicans.

    Perhaps more surprisingly, labour productivity and real wages grew faster under Democrats than Republicans, although the statistical significance is mixed.

    Definitely more surprisingly, fiscal conditions in terms of structural budget deficits were worse under Republicans than Democrats, although not significantly so.

    Completely surprisingly, corporate profits (as a share of total income) were significantly higher under Democrats than Republicans. In the words of Blinder and Watson, “Though business votes Republican, it prospers more under Democrats.”

    So, however one sets the KPIs, the Democratic presidents come out on top.

    The secret of failure?

    Why did conservatives do worse? This is the tricky question that Blinder and Watson only partially answer.

    Republicans were in the White House for 41 of the 49 quarters since the second world war in which the US economy was classified as being in recession by the National Bureau of Economic Research.

    So maybe Republican presidents just had to deal with the hangover from the profligate Keynesian policies of their Democratic predecessors.

    But, again, there is no support for this in terms of any indicators of fiscal (or monetary) policy. Meanwhile, Republican presidents actually tended to benefit from more momentum in the economy at the start of their terms.

    Blinder and Watson find that Democratic presidents mostly had the benefit of more benign oil shocks and international economic conditions, which were arguably beyond their direct control.

    In fact, the only Keynesian story that has traction in the data is the fact that consumer confidence was higher when Democrats were elected (perhaps “Happy Days Are Here Again” after all). But, as Blinder and Watson acknowledge, sorting out causality from correlation is particularly difficult with measures of confidence.

    It’s also the politician, stupid

    It has long been thought that economic conditions have a major influence on electoral outcomes. Yet it seems the electoral outcomes can also influence economic conditions, at least with US presidents.

    Looking at the Australian context, the difference in average real GDP growth across Liberal and Labor governments is not statistically significant, although the Liberals’ average has been somewhat higher at 3.58% compared to 3.18% for Labor since 1959 when quarterly data became available.

    But a lack of significance means this could reflect just a few outliers rather than a systematic pattern. Notably, the comparison is even closer since 2008, with 2.43% for Labor in the face of the Global Financial Crisis versus 2.60% for the Liberals at the end of the mining boom.

    No matter how one cuts the data, conservative politicians simply don’t perform so much better than their opponents as they would have us believe. At the same time, the reasons for their left-wing counterparts’ economic successes cannot be easily tied to better policies. Instead, it could simply be a “feelgood factor” that, alas, few of the current US presidential contenders seem to engender.

    As for Turnbull, he might do best to focus less on his economic management skills and more on promoting confidence – or perhaps even chasing rainbows (coincidentally the name of the musical that first featured “Happy Days Are Here Again”).

    Professor of Economics and Associate Dean (Research), UNSW Australia This article was first published in The Conversation on 5 April 2016.

     

     

  • Graeme Hugo, Janet Wall and Margaret Young. Migration between Australia and South East Asia is a two-way process.

    Migration flows between countries of the Association of Southeast Asian Nations (ASEAN) and Australia are generally viewed as going in one direction: toward Australia. In practice, however, data on this migration system reveal a much more complex picture that includes Australian emigration, significant temporary movements in both directions, and close connections between the two regions even after migrants permanently return to their country of origin.

    Australia has experienced significant inflows, particularly in the post-war period; almost half of its population of 23.2 million is either foreign born or has at least one immigrant parent. Unsurprisingly, therefore, it is usually regarded as a traditional destination country, drawing students and skilled workers from around the world and across the ten-member ASEAN region. Australia also sends a significant number of emigrants out from its shores. The last official estimates, back in 2003, put Australia’s diaspora at approximately 750,000. Unpublished Department of Immigration and Border Protection (DIBP) data reveal that for every two people who moved permanently to Australia from the ASEAN region between 1991 and 2013, one person moved in the opposite direction.

    To cast Australia as a destination country and ASEAN members as sending countries thus oversimplifies this regional migration system and fails to recognize the multidirectional movement taking place. Migration flows vary significantly across ASEAN countries, and over time. For example, while flows to Australia from Malaysia and Singapore have remained constant over time, Indochinese refugees dominated flows in the 1970s and 1980s. More recently, migration from the Philippines has increased. Recent trends in part reflect a shift in Australian immigration policy away from encouraging settlement toward drawing skilled (temporary) labor migration. Today most emigration from Australia to ASEAN destinations is to the fastest-growing economies, such as those of Singapore and Malaysia. Return migration to Vietnam is notable, while few are going back to Myanmar or the Philippines.

    Aside from permanent movements, DIBP data reveal significant levels of temporary mobility between Australia and the ASEAN region, in both directions. These include the movements of new settlers, visitors from Southeast Asia, Australian residents with roots in Southeast Asia, and former Australian residents from Southeast Asia who have permanently left Australia. Many ASEAN-born Australian settlers and residents make at least one overseas trip per year; more than half of those who once resided in Australia make at least two trips to Australia per year. The data also record nearly 600,000 nonresident ASEAN nationals traveling repeatedly to Australia, with 78 percent making at least one trip a year. These data on temporary mobility reveal the circular nature of migration flows between Australia and the ASEAN region, and indicate the strong ties that nonresidents, former residents, and current residents maintain simultaneously with both Australia and their country of origin.

    Migration flows between Australia and the ASEAN region are mostly skilled. Most ASEAN residents migrate to Australia as students, or through skilled temporary worker programs. This is reflected in the educational profile of the ASEAN-born population in Australia, compared with the native born: 35 percent of the ASEAN-born population has a tertiary-level degree, compared with around 15 percent of the native-born population. Migration flows in the opposite direction are similarly highly skilled. Of those who permanently move from Australia to the ASEAN region, most work as skilled professionals (38 percent), managers (21 percent), or technicians (13 percent). Given that many ASEAN countries are experiencing skilled labor shortages, policies to engage with diaspora members and encourage skills circulation are crucial.

    Evidence on migration flows between Australia and the ASEAN region reveals that many ideas about return migration are outdated. Traditionally, return migration has been thought to primarily comprise retirees returning home after a career working abroad, or “failed” migrants who could not make a success of their time overseas. Data for returning Australian and ASEAN nationals contradict such beliefs. Most migrants returning to Australia are in their 20s, 30s, or early 40s, with return rates falling with the 40-to-44 age group and older cohorts. Most migrants returning from Australia to the ASEAN region, meanwhile, are of working age (the highest return rates are found among the 30-to-49 age group), and are often accompanied by their young children. There is clearly a window of opportunity for expatriates in their 30s and 40s to seriously consider returning to their country of origin.

    Meanwhile, considerable improvements in communications and the reduced cost of international travel mean that expatriates can significantly contribute to their country of origin without having to permanently return. This offers major opportunities for development in the ASEAN region—and improved economic links between Australia and Southeast Asia. A growing number of diaspora engagement policies encourage the temporary or even “virtual” return of expatriates, recognizing the valuable contributions they can make while settled overseas. Policymakers can seek to tap the potential of diasporas in a number of ways, such as by encouraging them to send remittances, providing them with investment opportunities in their homeland, encouraging diaspora trade with (and exports to) destination countries, and facilitating technology and information transfer back to the homeland.

    The Australia-ASEAN migration system offers prime lessons for transatlantic sending nations. Unlike many countries, Australia records the movements of individual migrants in and out of the country, along with their motivations. Such data provide a remarkable opportunity to analyse migration patterns in this region. They show that international migration increasingly consists of temporary and repeat cycles of movement, and is far from a zero-sum game. Contemporary migrants maintain close ties with both sending and destination countries, potentially opening up new economic and development opportunities for both, regardless of where they choose to permanently settle. Rather than viewing emigration through the lens of “brain drain,” and focusing efforts solely on encouraging expatriates to permanently return home, policymakers in sending nations should instead try to better engage diaspora members—wherever they may be—to benefit from their accrued skills, experience, and networks.

    This is excerpted from the Migration Policy Institute (MPI) report, The Southeast Asia-Australia Regional Migration System: Some Insights into the ‘New Emigration’, which can be read in full here.

    This article by Graeme Hugo, Janet Wall and Margaret Young is run as a tribute to Graeme Hugo who died recently after an outstanding contribution to Australia’s understanding of migration.  John Mendue

     

  • Negative gearing has created empty houses and artificial scarcity.

    In the SMH on March 28, 2016, Laurence Troy and Bill Randolph discuss the problem of negative gearing encouraging owners to leave houses empty. In this article they say

    ‘At the last census there were nearly 120,000 empty dwellings in the greater Sydney region alone, representing nearly one fifth of the projected new housing demand to be met by 2031, or equivalent to nearly five years of projected dwelling need.  When this is combined with under-utilised dwellings, such as those let out as short-term accommodation, the total number of dwellings reaches 230,000 in Sydney and 238,00 in Melbourne.’

    Dr Laurence Troy is a research associate and Professor Bill Randolph is director of the City Futures Research Centre at UNSW.

    See full article in link below.  John Menadue.

    http://www.smh.com.au/comment/negative-gearing-has-created-empty-houses-and-artificial-scarcity-20160324-gnqoeb.html

  • Jon Stanford and Michael Keating – Submarines; cost, capability and timelines.

    This article is a response to the article posted yesterday by Paul Barratt and Chris Barrie.  ‘The case for building the future submarines in Australia.’

    Both Paul Barratt and Chris Barrie have served at the highest levels in Defence and their views are clearly worthy of very serious consideration. Indeed, their contention that a military-off-the-shelf (MOTS) solution is impossible because Australia does have a unique role for a submarine and that the future submarine (FSM) should be built in locally, is shared by many people.

    Nevertheless, it is surprising that Mr Barratt and Admiral Barrie do not discuss the capability for the FSM required by the Navy, the cost of providing that capability and the timeline in which the capability needs to be delivered. The authors have not attempted to justify spending $4.2 billion each on a conventional submarine (SSK), the first of which will not be delivered for 17 years, when a MOTS conventional submarine would cost well under $1 billion and even a large, highly capable Virginia class nuclear submarine costs around $3.7 billion. These submarines could be delivered in the early 2020s, or ten years earlier than under the White Paper scenario. This would mean that a costly and highly risky upgrade of the Collins submarines would not be required.

    While the Navy’s requirement for submarine capability is ambitious, it is by no means unique. Its requirement, for example, is similar to that of the UK and French navies. The problem is that its ambitious capability requirement, particularly for force projection in the South China Sea, points to a need for nuclear submarines, which both the other two navies operate. The previous Defence Minister acknowledged this by saying: “ideally we are seeking a comparable capability to a nuclear submarine with diesel-electric motors”.

    Unfortunately this is a fantasy. If Australia is determined to operate its submarines in the South China Sea in support of the Americans, then this could only be achieved with a reasonable margin of safety by a nuclear powered submarine. In that case, Australia should make it clear that its support for the US in forward operations in the South China Sea is contingent on the US agreeing to allow Australia to acquire nuclear submarines.

    On the other hand, if Australia cannot or will not acquire a nuclear submarine, then it should abandon the strategy of force projection in far-off contested waters. In any case, as the Australian Strategic Policy Institute has pointed out, there is no evidence to suggest that the US expects the RAN to undertake this task, which, in reality is a great power role.

    Once the role of force projection in contested waters has been dropped, then contrary to what Mr Barratt and Admiral Barrie suggest, there are several off-the-shelf solutions that would meet Australia’s submarine requirements. These roles include sea denial in the approaches to Australia, together with intelligence gathering and surveillance in our region. Indeed, a small conventional submarine, readily available off-the-shelf, is more appropriate for these tasks than the large boat the Navy wants. We might need six of these submarines, delivered in the early 2020s at a total acquisition cost of less than $6 billion. Combined with the savings from not having to upgrade Collins (an impossible task, according to a former submarine captain), we would be well over $45 billion better off than under the $50 billion proposal contained in the White Paper, which in any case does not allow for the highly risky Collins upgrade.

    Of course, Australian industry participation is a good thing provided it is competitive and does not compromise the defence benefits to be provided by the new assets. If ASC could deliver six SSKs in the early 2020s on a fixed price contract within, say, five per cent of a MOTS price, then by all means go for it provided the risks are managed appropriately. But otherwise, let’s bank the $45 billion or so saved on the submarine acquisition and let ASC content themselves with the $30 billion project to build the nine large frigates they have been promised in the White Paper. They will also be tasked with sustaining the new submarines, at a through life value much higher than the acquisition cost.

    Jon Stanford and Michael Keating  are Directors of Insight Economics and formerly worked together at the Department of the Prime Minister and Cabinet, where Dr Keating was the Secretary.

  • Ian Marsh. Disaffected electorates? Dysfunctional political systems? Part 2 of 3.

    Malcolm Turnbull’s has created the grounds for a July election. This crafty electoral ploy offers short term gains. If the cross bench resist, the election is legitimate. If the cross bench cave in, he will have demonstrated bold leadership. Moreover, he will have attained legislation that is highly prized by his Liberal heartland. Then he can call the scheduled election later in the year.

    But in neither election scenario is he likely to achieve a Senate majority. Further, there is talk of preferencing the Greens. There may also be guile here. This might give him leverage on social issues against the Abbott diehards.

    But what about good government?

    To explore this more important issue, look first at changing voting patterns. In Australia’s case, an astonishing (in historical terms) around 40% of eligible citizens either vote for minor parties, vote informal or don’t register to vote. Hardly a ringing endorsement of the once dominant major parties. The preferential voting system used in the Representatives gives a totally false impression of their   public standing.

    The Senate on the other hand, is elected through a proportional voting system but based on state constituencies. Paradoxically, this yields a distribution of seats much more aligned to the actual distribution of the popular vote. The Senate represents our underlying diversity. So much for the ‘unelected swill’.

    Australia is not alone in these expressions of citizen disaffection. Perhaps the most familiar and egregious examples of disconnect between mainstream parties and voters are in the US and Britain. Trump and Sanders are both leading anti-Establishment insurgencies. In the case of the US, the political structure, the party structure and political culture vary so much from Australia’s that comparison or inference is mostly superficial.

    Britain is more familiar. Jeremy Corbyn reflects disenchantment with the neo-liberal consensus of the Blairite elite. Some say he is unlikely to survive the year although Labour Party rules on leadership elections are ambiguous. Despite his unexpected election victory, David Cameron may also later face a leadership challenge, so bitter are the fractures that the EU referendum has opened up in the Conservative party. Nicola Sturgeon and Scottish nationalism represent yet another fault-line.

    In Europe, elections this year and late last year have disavowed mainstream parties in Germany, Spain, Ireland, Portugal and Slovakia. Spain took three months to form a new semi-stable government after elections in December. Germany does not face a federal election until 2017 – but in recent local elections voters turned from the established Christian Democrats and Social Democrats to Greens, Liberals and the anti-immigrant AfD.

    The story was similar in Ireland with former Prime Minister Kenny’s Fine Gael losing 10 seats in the February election. Kenny remains Taoiseach (prime minister) but supported by an unstable coalition. There are now nine parties and four independents in the 158 seat House.

    In both Sweden and Denmark mainstream parties are hostage to anti-immigrant parties. In France, Marine Le Pen is seen as no longer the candidate of only a mad fringe.

    With 28% of Australians born overseas, it is hardly surprising anti-immigrant sentiment is more muted. Similarly, the financial crisis has not scarred the economy so deeply. But the unwanted consequences of globalisation and social differentiation both introduce new electoral fault lines.

    The end of the mining boom is one uncomfortable expression of globalisation, asylum seekers and refugees another and the off-shoring of the auto industry a third.

    For its part, social pluralisation is everywhere evident, reflected in school sex education controversies, same sex marriage debates, promotion of women, animal rights campaigns, environmental action and so on.

    In summary, a slow-burn crisis of legitimacy would seem to be enveloping politics in many states, not just Australia. This fundamental issue invites a fresh look at basic political structures: do they remain fit for purpose?

    In Australia’s case, the present system was born in 1909. Protectionist and Free Traders then joined to form a united bloc against Labour’s socialism. This adversarial structure has lingered despite the post-83 convergence of Liberal and Labor economic agendas. Yet our society and economy are transfigured.

    If the logic for a wholly adversarial system has diminished, why is it so hard to question the present political structure? One obvious reason is that an alternative is hard to imagine. The way things are is so hallowed by time and habit that it simply does not occur to people to consider that what we have is dysfunctional or that there could be a better way.

    Another explanation perhaps lies in the dominant voices in political discussion. At an expert level, economists enjoy greatest standing and respect. But neither by training nor preoccupation are political processes or structures a legitimate field of interest. In their world view, these matters simply do not figure.

    Then there are the politicians themselves. At first glance you might imagine they would be most disadvantaged by the frustrations of office – the most troubled by neutered legislative achievement. Shouldn’t they be most open to alternatives?

    But the major parties are the formal beneficiaries of current arrangements. They share the spoils of office, they receive most public benefits, and the theatre of parliament maintains the fiction of their representational dominance.

    The Senate remains the House where the newer forces in Australian politics have standing and voice. We might therefore expect the promotion of change to come from them. Surely it’s in their interest to move parliamentary debate from its present negative and reactive style towards more proactive practice? For example, the late Liberal Senator David Hamer proposed that ministerial appointments from the Senate be ended. This would pave the way for the establishment of proactive committees with real standing and a forward looking brief.

    Take the recent CEDA report on fixing the deficit. Endorsed by three former heads of Treasury and PM and C and one current Reserve Bank Board member, this is exactly the kind of document that a Senate Committee should be able to take up – hold hearings around the country – provide a platform for both conservative and liberal economists – and flush out public commitments from the myriad economic and other interests who stand to be affected.

    The committee would no doubt squabble internally about options and trade-offs. This would be transparent. Perhaps limited bipartisanship might be flushed out. A full Senate debate and a motion for the House might follow. All or some of these actions would sustain momentum. It would demonstrate how the theatre of parliament can be used constructively to reach into wider media and public opinion. But for now this is fantasy!

    Until the misalignment between the structure of politics and our newly pluralised society is recognised as a fundamental challenge, dysfunctional government will surely prevail.

    Ian Marsh is a Visiting Professor at the UTS Management School.

  • John Menadue. The fake discussion about state taxes.

    Malcolm Turnbull’s ruse is obvious. He wants us to forget all about deficits and debt and the need for budget repair. To avoid these issues, he now tells us that if we want improved health and education services, we cannot have them because the states have refused his offer on state taxes and he will not increase commonwealth taxes.

    But we know that large increases in commonwealth government revenue are possible without any increase in income tax rates.

    There are numerous proposals on ways to increase revenue without increasing tax rates. The most recent was from the Committee for Economic Development of Australia (CEDA). That Committee suggested various ways in which revenue could be increased without increasing income tax rates.

    • Reducing the superannuation concessions.
    • Reducing the capital gains discount
    • Halving the fuel tax subsidy scheme.
    • Removing negative gearing.
    • Removing the private health insurance rebate exemption.
    • Reducing industry tax concessions.
    • Reducing work-related deductions.

    The other obvious way to increase revenue is to ensure that large multinational companies, private companies in Australia and trusts pay their fair share of tax. Many don’t pay any tax at all.

    None of this involves increasing tax rates. But these proposals would not be welcomed by the wealthy vested interests that support the Liberal Party.

    There is probably $20 b. to $30 b. of increased revenue per annum by addressing the issues above.

    All public surveys that I have seen suggest that Australians are prepared to pay increased tax, even increased rates of tax, if they believe that the tax system is fair and the money is spent efficiently.

    I have posted blogs earlier about the remarkable successes of the Nordic countries – Denmark, Sweden and Norway. These countries have some of the most successful economies and societies in the world yet they have very high rates of taxation. The Nordic countries have a basic trust in government. They broadly believe that the tax system is fair and services are efficiently delivered.

    It is something badly lacking in Australia.

    See links to two earlier articles on the Nordic successes – Postcard from Denmark on the Nordic success (17/1/2015);  Why are the Nordics so successful? (18/1/2015).

     

     

  • Ian Marsh. What wrong with Australia’s political system? Part 1 of 3.

    Most people are familiar with the power of incentives in economic markets. They know that efficient price signals can channel investment into productive assets and these same signals can drain funds from unconstructive pursuits. The same process more or less works at other levels. Both good and bad performance is demonstrated by similar calculations. In turn these calculations draw on a variety of other metrics – prices, volumes, demand, supply, growth estimates and so forth.

    People also know these numbers are reasonably reliable because they come from credible institutions. Thus markets are reasonably ‘free’ and undistorted. The Bureau and Census and Statistics is honest. The Stock Exchange is not manipulated. The judicial system acts according to the rule of law.

    At a tertiary level, a variety of other institutions – the Productivity Commission, APRA, the Reserve Bank – police these secondary systems and reframe them when necessary to ensure that they continue to support wider public interests. This in essence is the familiar economic system.

    Why do so many people then approach the political system with naïve or simplistic assumptions? Why do they not recognise that the political world is also a complex interdependent system where immediate incentives depend on the effective working of more embedded institutions?

    If they did, the reasons for the current impasse in public policy in Australia might be more apparent – perhaps along with the profound nature of the present political challenge.

    But let’s start with a fact. Since 1983, only one major piece of economic reform requiring legislative endorsement has passed in this country without bipartisan support. That was the GST which John Howard successfully navigated into law after winning the 1998 election. But he won that election and lost the popular vote. Hardly an auspicious signal to his successors.

    Every other major measure in Australia since 1983 has required bipartisan support.

    Why, short of a palpable crisis, is bipartisanship so elusive? Look first at immediate incentives. Politicians live in a two party, winner-takes-all world. Conceding common ground can spell disaster for a leader. Look no further than Malcolm Turnbull’s fate as Opposition Leader.

    This adversarial system was conceived to highlight the choice between major parties that differed in their basic policy orientation. In the process, common ground, which was essential to sustain continuity in governance, was deliberately disguised or concealed. The parliamentary theatre was deliberately designed to highlight programmatic differences. The forms and procedures of parliament – question time, the allocation of time, executive prerogatives etc. – work to sustain this divide. The late Bernard Crick captured this perfectly in his depiction of parliamentary routines as ‘tantamount to a continuing election campaign.’

    This political architecture was indeed appropriate and relevant for much of the period from the birth of this system in 1909 until the adoption of a softened neo-liberal programme by the Hawke-Keating government after 1983. Now party differences do not turn on the basic longer term agenda. The market system has more or less won.

    But political leaders still live in a world in which immediate incentives dictate sharp product differentiation. How to respond? Is it surprising that from Tampa on we have seen a turn to populism and worse?

    But you might say – OK, the major parties have converged in their fundamental approach. So why not share this agreement with the public and fight over the detail of measures. Why not make clear we agree that the states need more tax revenue – but we disagree about where this should come from. The blue side says a GST of 15% and the red side says the Medicare levy. Why not play the game that way?

    The old problem of incentives recurs. Earlier we noted the political incentives that, on controversial issues, discourage disclosure of even partial common ground. These are reinforced by executive arrangements. Our present political system makes it impossible to separate debate into longer term and more immediate streams. The political system as it operates in parliament is governed by three basic conventions – ministerial responsibility, collective cabinet responsibility and confidence. Note these are conventions. They are not enshrined in the constitution. They have no wider legal base. They can be changed by votes on the floor of parliament. But they do determine the structure of executive power. They are long established. They distribute many privileges. And these rules of the game are sustained by the power and force of inertia. These conventions make it impossible to separate debate into longer term and more immediate components.

    Then there are the distorting incentives that are associated with the media cycle. This reinforces populism and a short term orientation. Why does this incentive structure now exercise so much power?

    The media cycle exercises its power because it now provides the primary link between political leaders and their publics. Earlier more complex tissue has largely dissolved. Once around 50% of the community had strong or very strong affiliation to one or other of the major parties. Party organisations enrolled activists. Party brands cued public opinion. Party programmes signalled longer term values and ambitions. Each party stood for a clear and distinctive position in the eyes of its supporters.

    Political loyalty then turned primarily on class identification. This was the dominant social fault line. Class remains an important marker. But it no longer predominates. The women’s, gay, environment, consumer, animal rights, Indigenous, ethnic and other movements of the 1970s have busted that simple binary divide. And they have stimulated conservative reactions which have further compounded differentiation. Australian society is now pluralised in a way that would be unrecognisable to Alfred Deakin or Billy Hughes much less to John Curtin and Robert Menzies.

    The major parties try to contain these internal pressures, not surprisingly often not very effectively.

    So if you want to understand why the Australia political system is in trouble look no farther than this catalogue of distorting incentives and hollowed out systems. Has the two party system passed its use-by date? Such a judgment is likely to be hotly contested – not least by those who in one form or another are advantaged by the present structure of power. Or by those whose political imaginations cannot extend beyond the existing architecture.

    Were we to move beyond it, what should count as the central challenge? Surely the primary concern must be to renew the tissue that links the system to the people? In our more fluid and more pluralised society we need capacities for a more informed public conversation. We need to be able to debate single issues and we need capacities to do this initially at the level of strategy. Is this an important issue for our country? What are some options in responding?

    In other words we need an institutional design that can separate the longer term strategic conversation from a more immediate one about responses. Ideally the main parties would campaign fiercely over the latter issue – but some degree of partisan consensus would reinforce public support for the former. By such means, majority coalitions that can underwrite (or prevent) policy action could be constructed.

    How to do this? We do not need wild schemes. This is how the Senate worked from 1901 to 1909. Ministers were drawn largely from the House. The Senate and its committees were custodians of longer term issues.

    But this is a bigger story. We may need new political architecture for a more pluralised twenty-first century. But before there is even a remote possibility of that happening, the distorting incentives and dysfunctional institutions that are causing our present political discontents need to be frankly acknowledged.

    Part 2 tomorrow: Disaffected electorates/ Dysfunctional political systems?

    Ian Marsh is a Visiting Professor at the UTS Management School.

     

  • Mike Steketee. COAG and hospitals: look beyond the funding to fix our health system.

    Before Malcolm Turnbull and the states start haggling over hospital funding, it’s worth looking at why the system costs so much to run. Maybe it’s not just cash, but waste and inefficiencies that need addressing, writes Mike Steketee.

    Why do our hospitals cost so much to run? Like$55 billion a year and rising rapidly?

    It is the question worth asking before Malcolm Turnbull and the premiers start haggling at today’s COAG meeting over how best to pour more money into hospitals. Yes we are an ageing population and the health system is devising ever more clever ways to treat us.

    But that is not all that is going on. If you are 55 or over living in Fairfield in western Sydney, your chances of having knee arthroscopic surgery were 185 per 100,000 people in 2012-13. In Bunbury in Western Australia, the chances were more than seven times greater – 1319 in 100,000.

    Are there that many more dicky knees in Bunbury or at least ones that require hospital surgery? Or is it that many older people in Fairfield have been denied necessary surgery?

    Not likely on either front, according to the Australian Commission on Safety and Quality in Health Care, funded by federal and state governments. As it said in November:

    Despite the evidence that knee arthroscopy is of limited value for people with osteoarthritis and may cause harm, more than 33,000 operations were performed on this age group during 2012-13. Many of these people will have degenerative disease in their knees and will not benefit from this intervention.

    It added that, even if you argue the extremes distort the picture and take out the areas with the highest and lowest rates, hospital admission rates for arthroscopy still varied more than four times between local areas.

    The Commission found an overall variation of more than seven times for cataract surgery, which was performed 160,489 times on those 40 or over in 2012-13. Age differences between areas do not come anywhere near explaining variations of this size.

    For lumbar spine surgery for those 18 and older, the variation was 4.8 times. This included spinal fusion procedures, for which the Commission said there was limited evidence of its effectiveness for painful degenerative back conditions.

    And so on. Carried across a hospital system which saw 9.7 million admissions in 2013-14, this suggests that a great deal of money is spent unnecessarily.

    John Dwyer, emeritus professor of medicine at the University of NSW, has had a stab at estimating the waste generated by doctors across the whole health system and comes up with a figure of at least $10 billion a year. As they say, a billion here and a billion there and soon you’re talking serious money.

    A Productivity Commission research paper last year made a similar point:

    Governments and patients spend a considerable amount of money on health interventions that are irrelevant, duplicative or excessive; provide very low or no benefits; or, in some cases, cause harm.

    Despite all this, the Australian health system delivers some of the best outcomes in the world, other than for Indigenous people. But costs are rising rapidly, in part because of too little control over waste and too much emphasis on hospital treatment.

    Knees seem to be one particular problem. Knee replacement surgery was performed at the rate of 191 per 100,000 population in Australia in 2013-14 – 61 per cent higher than the average in 30 OECD countries.

    Overall, admissions for longer than day surgery in Australian hospitals are lower than some countries such as Germany but higher than those with which we often like to compare ourselves, such as New Zealand, the UK, the US and Canada. The last of these had a rate of admissions half of that in Australia.

    The Productivity Commission paper canvasses some of the weaknesses that apply across the whole health system but often culminate in expensive hospital treatment. It says governments subsidise many health treatments that have not been assessed for clinical and cost effectiveness.

    Often clinicians do not realise they are over-diagnosing patients, providing superfluous or harmful treatments or applying valuable treatments in the wrong way. Clinical guidelines … can be an effective way to promote high value medicine but they are often too complex, out of date, lack credibility or poorly implemented.

    Doctors are often resistant to change, including in acting on the findings of evidence-based medicine, arguing that their training equips them to know best the needs of individual patients. The way they charge – on a fee-for-service basis – is an incentive to provide more services than are necessary.

    The initiative announced by Malcolm Turnbull and Health Minister Sussan Ley on Wednesday to trial a different way of treating chronically ill patients, who often have multiple conditions, is an attempt to address some of these problems. At the moment, they said, such high users of the health system saw up to five different GPs a year, making it more likely they would fall through the cracks and end up in hospital.

    “Half of all potentially avoidable hospital admissions in 2013-14 were attributed to chronic conditions,” they added. Under the two year trial, one GP practice will co-ordinate the care of these patients and receive quarterly payments. This shifts the emphasis to improving the overall health of the patient, rather than charging for individual treatments.

    Turnbull and Ley hailed this as “one of the biggest health system reforms since the introduction of Medicare 30 years ago.” However, we shouldn’t get too carried away: various forms of co-ordinated care, including for chronic illnesses, have been tried for at least the last 20 years, with mixed results. Nevertheless, an increased emphasis on primary care – that is through GPs and including prevention programs – is crucial to keeping people out of hospital.

    These potential savings are before we even start talking about inefficiencies in administering the health system. With both the federal and state governments putting money into public hospitals, there is bureaucratic duplication on a large scale.

    Each level of government blames the other for deficiencies in hospitals. As well as blame shifting, each is constantly manoeuvring to shift costs on to the other. For example, hospitals, which are run by the states, are forced to keep elderly patients in beds costing $1200 a day because there are not enough places costing only $200 a day in nursing homes, which are funded by the federal government.

    Turnbull is right in suggesting this week that if the states raised more of their own revenue – for example, through his proposal to let them levy income tax – it would make them look more carefully at how money was spent. At the moment, it is much easier to beg Canberra for more money than to make voters cough up through taxes.

    It is just that experience suggests that the main effect of Turnbull’s idea would be to put even more pressure on hospitals. In most areas where they already have the power to raise taxes, the states have competed with each other to bid them down, such as through ever more generous exemptions for payroll tax and land tax.

    Of course, if Canberra stood firm on the states solving their own problems, it would force them to tackle some of the waste and inefficiency in their spending – either that or allow hospital and other services to run down and cop the wrath of voters. But then the states would just try to blame it on Canberra.

    Mike Steketee is a freelance journalist. He was formerly a columnist and national affairs editor for The Australian. This article was first published in The Drum 1 April 2016.

     

  • If we strike a deal with Japan, we’re buying more than submarines.

    In this article in the Melbourne Age, Hugh White comments

    ‘So before we decide whether to select the Japanese (submarine) bid, we have to ask if an alliance with Japan is good for Australia.’

    See link to full article below:

    http://www.theage.com.au/comment/if-we-strike-a-deal-with-japan-were-buying-more-than-submarines-20160314-gni3hl.html

  • John Menadue. State income taxes – another political diversion?

    Malcolm Turnbull’s suggestion of states entering the income tax field may please ‘state rightists’ in the Liberal party, but it will damage our national aspirations and our national society and economy.

    In the repost below, Michael Keating, almost two years ago emphasised the importance of the commonwealth government’s domination of income taxes since 1942. This commonwealth government supremacy has been a key factor in building our successful national economy and society. Or as Paul Keating has said, the commonwealth’s income tax monopoly ‘is the glue that holds us together’.

    We federated to overcome the confusion of six different state tariff regimes. Do we now want eight different incomes tax regimes?

    The commonwealth’s supremacy in income tax is critical for economic management across the country. Do we want to weaken that national leadership and responsibility?

    We have national markets in every field and with a very mobile workforce. Do we now want to put up state barriers to this?

    Malcolm Turnbull’s proposal would put pressure on the states to reduce their own tax rates. Perhaps this is what his ‘state rightist’ supporters would like. We saw that in the 1970s when Queensland reduced state taxes and abolished death duties. All other states followed and we are now much worse off as a result. If states decided to introduce their own income taxes, we could see another race to the bottom.

    What Malcolm Turnbull is trying to do was tried forty years ago by Malcolm Fraser. The details may be different, but the Fraser proposal went nowhere.

    The Turnbull government has become very agile in diversionary tactics. The Abbott government spoke of a debt and deficit disaster but the Turnbull government wants to divert attention elsewhere. A GST was deliberately floated but then our attention was directed elsewhere. One critical issue above all else is budget repair. The Committee for Economic Development in Australia (CEDA) and others have suggested options for overcoming our persistent budget deficit, including increases in revenue. But the government doesn’t want to hear about that, so our attention is diverted to state income tax.

    I believe that strong national economic and social leadership is essential for the commonwealth government in the 21st Century, particularly in the global world economy in which we live. That globalisation will continue to grow. Why should we handicap ourselves in meeting such a challenge?

    I have always believed that ‘cooperative federalism’ although less sexy and requiring hard work, is the much better way to proceed. In the health field where states spend up to 30%of their budgets, I have proposed for many years a joint commonwealth-state health commission in any state that will agree. Perhaps a joint commonwealth-state health purchasing agency in regions would be a more practical way to start. I will be writing more about cooperative federalism in the health field.

    Tony Abbott has left us with many unfortunate legacies. He abolished the COAG Reform Council which had been trying to lead an informed debate on ways that the commonwealth, state and territory governments could cooperate to harmonise their responsibilities. One task of that Reform Council was to build a ‘seamless national economy’.

    Malcolm Turnbull seems to want to pull the seams apart.

    Michael Keating will be writing further on this subject.

  • Evan Williams. Eye in the Sky. Film review.

    I’d just come home from a screening of Eye in the Sky, Gavin Hood’s fine thriller about a terrorist cell in Kenya, when the news came through that Taliban suicide-bombers had killed more than a hundred people in Pakistan. Timely reminders of the reality of modern warfare and its distinctive horrors aren’t hard to find these days. A couple of weeks earlier we had the ISIS attacks in Brussels; before that it was Paris. Stories abound of Al-Shabah atrocities in North Africa, and the nightmare in Iraq and Syria shows no sign of ending. There’s still plenty of scope for filmmakers.

    But it’s not just its brutal topicality that gives Eye in the Sky such devastating impact. It’s a riveting suspense thriller, impeccably crafted with a clear moral dimension. We are forced to confront some troubling questions: Does individual conscience have a legitimate role in modern warfare? Are we justified in taking innocent lives in pursuit of a just and overriding military objective? Are drones an immoral weapon, as some have argued, because their “pilots” are immune from counter-attack? Hood’s film opens with an on-screen quotation of Aeschylus’s famous line: “The first casualty in war is truth.” But can there be any truthful answers to these questions?

    Eye in the Sky is fiction (the screenplay is by Guy Hibbert), but it’s rooted in real events. More than once in the film we are reminded that Al-Shabah bombers killed 67 people in an attack in Nairobi two years ago. Helen Mirren plays Colonel Katherine Powell, a US intelligence officer in charge of a joint British-American rescue mission aimed at capturing a radicalised British woman who has joined a terrorist cell. The woman has been traced (along with a radicalised American) to a safe house in a Nairobi suburb.  Powell’s orders are “to capture, not kill.” But when she discovers that the safe house shelters three suicide-bombers preparing another attack she convinces her superior officer, General Frank Benson (Alan Rickman), to launch a drone missile and blow the house to bits.

    All is ready to go. The drone hovers overhead, and far away – in some air-conditioned US base deep in Nevada or wherever – a finger is poised on the trigger. But at the last minute the drone’s spy camera detects the presence of nine-year-old Alia, a Kenyan girl selling home-baked bread on the street. Sitting at a little table outside the safe house, she would almost certainly be killed if the missile were launched. (According to the jargon, of which we hear much, it’s a case of “95 percent CDE” – an estimated 95 percent chance of collateral damage, ie, the loss of innocent lives.) Should Alia be sacrificed? The steely-eyed Colonel Powell argues that she should: many more children’s lives will be lost if the suicide bombers are spared. A nervous attorney-general sees no legal objection to the raid, but refers a decision up the line to the foreign secretary (Iain Glen), who has qualms of his own and wants the PM’s approval (not to mention that of the US secretary of state, who is playing ping-pong with Chinese officials in Beijing when the call comes through).

    Indecision and buck-passing are among the film’s main themes, and Hood pokes some gentle fun at the dithering politicos. For a moment I wondered if the PM would refer to the final call to Buckingham Palace, in which case we might once again see Helen Mirren playing Her Majesty (as she did so well in Stephen Frears’s film The Queen). But no such luck! Mirren has a big enough part as it is, and I doubt if she’s ever given a harsher and more intensely focused performance. There’s strong support also from Alan Rickman, whom many will remember as the sinister Severus Snape in the Harry Potter films, or (for those who are old enough) as the Reverend Obadiah Slope in the TV series Barchester Towers. (Rickman died last January and the film is dedicated to his memory.)

    The final moments are brilliantly suspenseful, and audiences may feel a little guilty for desperately hoping (as I’m sure they are meant to) that the deadly attack will be launched. Or is it that, addicted as we are to violent spectacle, we want a climactic big bang to round off the movie? It’s a fine film, but I wish I could say that all its moral issues are resolved. Perhaps they never can be. In 2006 I praised Hood’s film Tsotsi, also set in Africa, for its memorable portrayal of life in the impoverished black townships, the appalling contrast between the lives of the rich and the poor. I felt something similar with Eye in the Sky as I watched those political big-shots, in their elegant, softly-lit, wood-panelled chamber, plan their lethal raid while Kenyans are living in squalor.

    And when it comes to war, how do we compare numbers? Politicians had no qualms about the Allied carpet bombing of German civilians during World War II, when countless children were burnt alive. Nor did anyone lose much sleep at the time over Hiroshima and Nagasaki. But in Eye in the Sky our leaders agonise over the fate of a single child. This may well be a sign of moral progress, but somehow I doubt it.

    Four stars

    Eye in the Sky, rated M, is in national release.

    Evan Williams reviewed films in The Australian newspaper for 33 years. He is a Life Member of the Film Critics’ Circle of Australia for services to film criticism and the film industry.In 2015 he received the Geraldine Pascal Lifetime Achievement Award for critical writing.

  • John Menadue. Budget repair and private health insurance.

    Readers of this blog will be aware that I have been expressing concern about the serious consequences of the government subsidy costing $11 b. p.a. for the private health insurance industry. This subsidy has serious budget consequences:  it is skewed in favour of high income earners; it has not taken pressure off public hospitals; it has underwritten a dramatic increase in private specialist fees; it penalises country people who have very limited access to private hospitals; it weakens Medicare’s ability to control prices; it’s premium increases for over a decade have been at three times the rate of CPI increase and steadily takes us down the disastrous US health path.

    Yesterday, the Balanced Budget Commission of the Committee for Economic Development of Australia (CEDA), outlined various options to increase revenue and to reduce outlays

    . In its options, CEDA suggested ‘removing the private health insurance rebate exemption’. In my blog of 19 November, I estimated that the government loses about $3 b. p.a. as a result of the revenue foregone through exemption from the Medicare levy surcharge.

    CEDA also suggested ‘cutting the private health insurance rebate’. In my blog, I estimated that the cost of that rebate in the last budget was $6.3 b.

    The CEDA Balanced Budget Commission which made these recommendations includes Paul McClintock, former Howard government Secretary of Cabinet; John Edwards, Reserve Bank of Australia board member; Professor Rodney Maddock from Victoria University; Michael Keating, former Secretary, Prime Minister and Cabinet and Finance; Terry Moran former Secretary Prime Minister and Cabinet,Ian Watt,former Secretary Prime Minister and Cabinet and John Langoulant, former WA Under-Treasurer.

  • John Menadue. White man’s media.

    On 26 March I provided a link to an article by Simon Jenkins in The Guardian, who commented

    ‘The atrocities in Brussels happen almost daily in the streets of Baghdad, Aleppo and Damascus. .. A dead Muslim is an unlucky mutt in the wrong place at the wrong time. A dead European is front page news.’

    We have again seen this distortion of the news being played out in the bombings in Lahore. Over 70 people were killed, including many children. A week earlier, 33 died in a terrorist attack in Brussels. Just contrast the media coverage, the response by politicians and the prayers offered by religious leaders over Easter.

    This pattern of biased coverage is a regular event. Just recall the Boston marathon several years ago when we had an avalanche of media coverage over three deaths.

    Why is it that people in the West are more valuable or newsworthy than people elsewhere. Could racism be a part? I expect it is.

    A major factor of course is our ‘white man’s’ media that focuses its resources and its interests on North America and Europe. As a country in Asia, when will we break out of our fixation with the Anglosphere. As I have mentioned many times, a person from Mars reading, listening to or viewing our media would assume that Australia is an island parked off New York or London.

    Consider also the deluge of coverage we now have of Donald Trump and the US primary elections. We haven’t even got to the Presidential election which is six months away. It is all about easy, lazy and under-resourced journalism. And the problem is going to get worse in our mainstream media. I had hoped that the ABC would counter the declining coverage of our region, but it is now headed in the opposite direction – curtailing its staff resources in Asia and the Pacific.

    In all this coverage of the US primary elections, has anything newsworthy been happening in Japan, China and Indonesia? Apparently not.

    The Global Terrorism Index 2015 has analysed results and trends in terrorism in recent years.  The GTI index highlights amongst other things the North Atlantic bias in our media coverage.

    The GTI finds

    • ‘Two groups are responsible for half the deaths from terrorism – Boko Haram and ISIL. 51% of terrorist deaths that are attributed to a terrorist group were by Boko Haram and ISIL. ‘
    • ‘Nigeria has experienced the largest increased in deaths from terrorism in 2014. There were 7,512 fatalities from terrorist attacks in 2014, an increase of over 300%. The country houses two of the five most deadly terrorist groups in 2014, Boko Haram and the Fulani militants.’
    • ‘ISIL inflicts more deaths on the battlefield than through terrorism.’
    • ‘The majority of deaths from terrorism do not occur in the West. Excluding the September 11 attack, only 0.5% of deaths from terrorism have occurred in the West since 2000. Including September 11, the percentage reaches 2.6%.’
    • ‘Loan wolf attackers are the main perpetrators of terrorist activity in the West.’
    • ‘Islamic fundamentalism was not the main cause of terrorism in the West over the last 9 years.’

    The facts are clear, 2.6% of deaths from terrorism, including September 11, did not occur in the West.

    Our media gives a very different account. Our coverage is overwhelmingly about terrorist activity in the West which is very small compared with the tragedy being inflicted on many non-Western countries.

    We are being badly served by our white man’s media.

  • Mike Steketee. Election 2016: Beware the (very) long road to ruin

    The risk with such a long election campaign is that unanticipated events can scuttle a party’s chances. And in the 2016 campaign it’s the Coalition that has everything to lose, writes Mike Steketee.

    Elections can throw up many imponderables and the longer the campaign runs the more likely they are to do so.

    After Bob Hawke won in 1983 against Malcolm Fraser, his personal popularity and that of his party kept rising. The drought broke – although not even Hawke claimed credit for that – and the economy was on the way back up after the worst recession since the Great Depression.

    Hawke called an election for December 1, 1984, only 21 months into his first term. Most prime ministers announce the election date close to the minimum time required by law, which is 33 days.

    But with the polls showing a swing to Labor, Hawke was so confident that he declared the date almost eight weeks before polling day. After all, voters loved him, and his opponent, Andrew Peacock, was a political pygmy whom he would cut down to size further during the campaign.

    Or so it seemed. But it did not turn out that way. Instead of a swing towards the government, there was a swing against it of 1.5 per cent after preferences. Its majority in the lower house was almost halved after taking into account an increase in the size of parliament.

    Hawke was reduced from political messiah to mere mortal. Paul Kelly records in his book The End of Certainty that Peacock started the campaign with a leadership rating of 19 per cent and finished on 54 per cent.

    Labor’s campaign director Bob McMullan said in his election post-mortem, quoted by Kelly, that:

    I believe it would be universally agreed that the election campaign period was too long … the party did not examine the implications of the length of the campaign for its strategy.

    This week Turnbull as good as announced the election almost 15 weeks before polling day, making the campaign nearly twice as long as in 1984. While the formal election period will not start until Parliament is dissolved, on the current assumption that the Senate will fail to pass the Australian Building and Construction Commission bill, Turnbull already has lost one advantage the system gives prime ministers – an element of surprise over the date of the election. With the election so far off but the date known, his opponents can ensure they are fully prepared.

    True, July 2 had been prominent in the speculation because of the mechanics of double dissolution elections. But long campaigns mean there is more time for things to go wrong. When British prime minister Harold Macmillan was famously (or apocryphally) asked the greatest challenge he faced as leader, he replied “events, dear boy, events”.

    Unanticipated events can damage or favour either side but the frontrunner, which is the government, has more to lose. The reason prime ministers generally call an election close to the minimum time required is to maximise the chances of a winning position holding until election day.

    One of the things that went wrong for Labor in 1984 is that the opposition set the agenda and the government spent much of the time on the defensive. Peacock seized on a theme and stuck to it: promising a Coalition government would abolish the assets test on pensions and the tax on lump sum superannuation, both introduced by the Hawke government, and running a scare campaign against a capital gains tax and death and gift duties, which he said Labor would bring in “as certain as night follows day”. (He was proved correct on the first but not on the others).

    Hawke countered with the promise of a tax summit after the election, which left Labor’s options commendably open – today’s political parties please take note – but also gave Peacock more ammunition for his scare campaign.

    Peacock repeated his core lines ad nauseum, to the point where he was ridiculed. But it proved the truth of the saying that once the political cognoscenti were completely sick of hearing the same message, voters were just starting to take notice.

    One consequence of firing the starting gun for an election is to raise the standing of the opposition leader. He or she is, after all, the alternative prime minister and the media provides increased coverage.

    In particular, the traditional leaders’ debate or debates will put Bill Shorten on an equal footing with Turnbull. Given their relative position in the polls, expectations of Shorten’s performance will be low so that, if he comes anywhere close to matching Turnbull, he will have gained.

    Then there are the policies. How will voters possibly be kept engaged over the remaining 14 weeks? Of course the answer is that they won’t. Undecided voters – the ones that election campaigns are all about – are making up their minds later and later – often in the last week or two. That is why in recent times the official election launch, one of the major media events, has been pushed closer and closer to the election date.

    Moreover there are more undecideds than in the past: major parties used to be able to rely on about 40 per cent of voters sticking with them through thick and thin. Now it is closer to 30 per cent, leaving a potential swinging vote of 40 per cent.

    But even when voters are not paying much attention, the election space has to be filled and the onus to do so rests more heavily on the government. Leaving a vacuum by having nothing much new to say for days or weeks is dangerous. It provides an opening for your opponents and it robs you of momentum. A government perceived to have run out of ideas can feed into a broader re-evaluation by voters.

    The polls suggest that there is a strong underlying sentiment that it is too early to bring back Labor and that it needs to do much more before voters are prepared to entrust it with managing the economy again.

    It does not even need the increased media attention of an election campaign for that to occur. Labor gained ground recently, at least for a while, by announcing a definite policy on taxation while the Government was dithering, as it still seems to be, over what to do.

    Turnbull has started by campaigning on the need for the building commission to police thuggery and criminal activity. The Heydon royal commission has provided him with plenty of raw meat with which to flail trade unions and Labor.

    But the Liberals have not gained a great deal of traction from union bashing in the past, perhaps because that is what voters expect the Coalition to do. Certainly Turnbull will need more arrows in his quiver to maintain momentum.

    The Government has the advantage of handing down a budget on May 3 – a major opportunity to seize the initiative and sell its wares. No doubt the Government will have a bag of goodies to deliver but how widespread will be their appeal is another matter.

    The latest in a numbing series of changes of thinking on tax policy is that the budget will not have much room for income tax cuts but will include a reduction in company tax as the best way of stimulating economic activity and higher wages. Humphrey Appleby would call that a “courageous” decision. It would be a tough sell, particularly with the stream of revelations about the creative accounting used by businesses to minimise their tax, not to mention screwing their customers.

    Besides, the budget will be two months before the presumed polling day. In election campaigns, that is an eternity.

    Elections can create their own dynamics and sometimes throw up completely unexpected outcomes – most recently the defeat of the first term Newman government in Queensland, despite its record majority, and before that Jeff Kennett’s loss in Victoria in 1999 and Paul Keating’s victory over John Hewson in 1993.

    Nevertheless it is rare for first-term governments to be defeated and in the end, none of the potential hurdles facing Turnbull may amount to much.

    In 1984, Peacock generally was judged to have won the campaign but he still lost the election. Currently, the polls suggest that there is a strong underlying sentiment that it is too early to bring back Labor and that it needs to do much more before voters are prepared to entrust it with managing the economy again.

    Turnbull’s task will be to keep those sentiments predominant in people’s minds.

    Mike Steketee is a freelance journalist. He was formerly a columnist and national affairs editor for The Australian. This article was first posted in The Drum on 25 March 2016.

  • Garry Woodard. Should Australia do more on the South China Sea?

    No. The Prime Minister’s statement in regards to the Middle East that this is not the time for gestures or machismo applies in spades to what we do in the South China Sea. Australia should act prudently and, though some will see this as a contradiction, transparently and after full parliamentary and public debate.

    Australia’s relative propinquity gives us an interest in the outcome of the territorial disputes between countries in the South China Sea, but will our interest in seeing a peaceful resolution be helped or harmed by introducing an Australian naval presence? As Australia already has a naval presence in the North China Sea, and northwest Cape supports intelligence collection there, are we not bound to see the China Sea as a strategic whole? Is this not the strategic perception of the US Seventh Fleet?

    Sir Arthur Tange wrote from close observation of ‘the US Navy’s global view and the nuisance they found in other people’s sovereignty’. If we put ourselves in China’s shoes would we not have the same strategic perception? Do we understand China’s thinking? What if the most recently reported militarisation of Woody Island is defensive, to improve intelligence gathering against a perceived threat, rather like the extensions built northward from the Great Wall to get better forewarning of the threat from the Mongols? If the strategic perception should be of the China Sea as a whole, the core problem is China’s unfinished reunification.

    Nobody who heard Deng Xiaoping on the subject could doubt the emotional pull of seeing Taiwan rejoin the motherland, even if in accordance with Mao’s timetable of 100 years.

    Australia, unlike greater powers, avoided involvement in the Chinese civil war. As Michael Fogarty described in a recent book review in Australian Outlook, had it not been for the skill of Australian diplomats it might have been an Australian warship instead of HMS Amethyst which was fired on in the Yangtze incident. The Chifley Government in 1949, unlike New Zealand, refused to send a warship to Hong Kong when the Chinese Communists took power on the mainland.

    Under Menzies, numerous attempts by the Americans to get Australia to share its residual responsibilities from involvement in the Chinese civil war for the security of Taiwan were deflected. Menzies went to Washington in an unsuccessful attempt to persuade Eisenhower that Taiwan should give up the offshore islands. In 1964 Menzies involved himself in de-escalating a crisis with Indonesia precipitated by the British sending a nuclear-armed carrier task force through the Sunda Straits: diplomatic good sense to precedence over asserting rights of innocent passage. Menzies had the confidence and stature to give Eisenhower a lecture on the danger of governments taking action which risked war without having public opinion behind them. That is not a long bow to draw in the broad context of addressing the current question. As Churchill said, and Hugh White is arguing, ‘better jaw jaw than war war’.

    Garry Woodard, former diplomat and Senior Fellow, University of Melbourne.

    This article was first published by the Australian Institute of International Affairs.

  • What a godsend politicians and journalists are to ISIS.

    In The Guardian, Simon Jenkins writes about the way that the ISIS recruiting officers will be thrilled at how things have gone since their atrocity in Belgium.  He points particularly to the ‘paranoid politicians and sensational journalists’ who have perhaps unwittingly provided great support for ISIS. Jenkins comments

    ‘The atrocities in Brussels happen almost daily on the streets of Baghdad, Aleppo and Damascus. Western missiles and ISIS bombs kill more innocents in a week than die in Europe in a year. The difference is the media response. A dead Muslim is an unlucky mutt in the wrong place at the wrong time. A dead European is front-page news. … Everyone involved in this week’s reaction, from journalist to politicians to security lobbyists, has an interest in terrorism. There is money, big money, to be made – the more terrifying it is presented, the more money.’

    Simon Jenkins is a journalist and author. He writes for The Guardian as well as broadcasting on BBC. He has edited The Times and The London Evening Standard.  See link to his article below.

    http://gu.com/p/4hzgx/sbl

  • John Menadue and CPD. Building a regional framework on refugees and forced-migration.

    For several years a group of us at the Centre for Policy Development (CPD) have been endeavouring to develop a regional framework for the management of refugee issues in our region.  We strongly feel that no country in the region, including Australia, can handle refugee flows on their own. A regional framework based on cooperation and burden-sharing is essential.

    For over two years we have been pursuing the case for a Track II Dialogue in the region.  We have felt that this is necessary to break out of the impasse on refugees that Australia and other countries face in the region.  The Track II Dialogue includes people from the region with an interest and understanding of the issues. It includes members from think-tanks, government officials in a private capacity and people from international agencies.

    The first Track II Dialogue including a diverse group of people from the region was held in Melbourne last year.  The second Track II Dialogue was held in Bangkok in January this year.  That Track II Dialogue in Bangkok was followed by a meeting of officials involved in the Bali Process. That meeting welcomed the suggestions of the Track II Dialogue.  This meeting has now been followed by a ministerial meeting this week.

    The results are very encouraging as set out in the following press release from CPD.  You will also see further on, a link to an article in the SMH of 23 March, headed ‘Indonesia says Bali Process failure on refugee crisis “must not happen again.”  John Menadue.

    MEDIA RELEASE FROM CENTRE FOR POLICY DEVELOPMENT

    *FOR IMMEDIATE RELEASE**

    Bali Process steps up, but action on forced migration will be critical. *

    The Bali Process can now lead a regional approach to forced migration that is effective, dignified and durable. Outcomes agreed at the Bali Process Ministerial Meeting demonstrate governments in the region can do much more on forced migration. The Ministerial Declaration and the new Response Mechanism are promising developments. The challenge now is for Bali Process countries, especially its Co-Chairs, to turn such promise into reality.

    CPD’s CEO, Travers McLeod, said:

    “Outcomes agreed by ministers can enable the Bali Process to be less about process and much more about effective, durable and dignified action on forced migration.”

    “Over 60 million people are now displaced globally, many in the Asia-Pacific region. New stories of the suffering of forced migrants emerge daily. The underlying causes, including conflict, persecution, human trafficking, people smuggling, transnational crime and now climate change, are resulting in escalating numbers. Governments are struggling to respond effectively – unilateral action will not do.”

    “It’s pleasing to see the Bali Process adopt recommendations of the Asia Dialogue on Forced Migration, which CPD convenes with regional policy institutes. A review of limitations of regional responses to the 2015 Andaman Sea crisis and improvements needed, including a new capability for the Bali Process to broker more predictable and effective responses on forced migration (even preventative action), is overdue.”

    “The challenge now is for leaders to deploy this new capability and put it to work, instead of letting short-term thinking dictate counterproductive national responses.”

    CPD fellow, Peter Hughes, a former Deputy Secretary at the Department of Immigration in Australia, also welcomed the announcement:

    “The nature of the Bali Process, with its vast size and diverse membership, means that it has stopped short of direct responses to major incidents of displacement in the past. Its role was very limited in the 2015 Andaman Sea crisis. Member countries have admitted that this is not good enough anymore.”

    “The mechanism announced today provides a vital avenue for the Bali Process to make a difference in responding to mass displacement. Ministers Bishop and Marsudi, as Co-Chairs, should be commended for showing leadership in reinvigorating the Bali Process and driving improvement in national and regional contingency planning. Their task now is to continue to advance more active and resilient regional architecture in the management of mass displacement.”

    More information about Asia Dialogue on Forced Migration at: www.cpd.org.au/intergenerational-wellbeing/asia-dialogue-on-forced-migration/

    LINK TO SYDNEY MORNING HERALD STORY.

    http://www.smh.com.au/world/indonesia-says-bali-process-failure-on-refugee-crisis-must-not-happen-again-20160323-gnpnb6.html

  • Yang Razali Kassim. Will Mahathir and Anwar’s uneasy alliance unseat Najib?

    The unthinkable is happening in Malaysian politics. Former prime minister Mahathir Mohammad and his jailed former deputy Anwar Ibrahim have joined hands in a seemingly impossible alliance to unseat Prime Minister Najib Razak. Never before in Malaysian history have such sworn enemies buried their hatchets for a common cause.

    By launching his rainbow ‘core group’ of concerned citizens of various political stripes and leanings to ‘Save Malaysia’, Mahathir has once again thrust himself into the eye of the political storm. With Anwar still in jail, the disparate forces that opposed Najib over the 1Malaysia Development Berhad (1MDB) investment fund scandal have finally found someone of stature to rally around in a marriage of convenience. It is ironic that the man who crushed the opposition while in power has reinvented himself in retirement as the de facto leader of what in essence is a citizens’ revolt.

    Mahathir himself described this as a ‘very strange group of people’, brought together by a common goal of ousting the scandal-hit prime minister. By calling it a ‘core group’, Mahathir is indicating that this is only the beginning of more moves to come. What could emerge down the road is still hazy. But it is safe to say that a new era in Malaysian politics is unfolding with the key players jostling for a place in the shifting ground.

    Broadly speaking, politics and the people have become polarised into two groups. The first is pro-Najib, anchored around the ruling party — the United Malays National Organisation (UMNO). Opponents within and outside UMNO are being crippled or threatened one-by-one. The second group is basically the rest — the anti-Najib forces comprising of nearly 50 of the country’s public luminaries.

    As expected, Najib’s lieutenants have dismissed Mahathir’s latest strategy as leading nowhere. Some have even belittled Mahathir’s resignation from the UMNO — his second since he forced his successor Abdullah Ahmad Badawi to resign in 2008 — as something of a joke. Deputy Prime Minister Zahid Hamidi has painted Mahathir’s move as unconstitutional. And UMNO Youth have challenged the Mahathir-led movement to become a formal coalition and challenge the UMNO-led ruling coalition Barisan Nasional (BN) in a general election.

    But any misplaced sense of confidence on the part of UMNO could backfire. Mahathir’s second quitting may indeed not amount to much within UMNO, given that Najib has got the party effectively button-holed. But it would be foolhardy to take lightly what the 90-year-old warhorse is now doing. It may well lead to big changes in Malaysian politics. Although the UMNO-led BN won control of parliament in the last general election, it actually lost the popular vote. The people’s confidence has shifted towards the then Anwar-led opposition.

    Given Najib’s current scandals, which have been a lightning rod against UMNO, an election, if held today, could conceivably lead to the defeat of UMNO and the BN ruling coalition it leads. Mahathir’s son, Mukhriz, the deposed chief minister of Kedah state, said as much, noting that ‘the opposition could easily win the next general election’. The opposition says it has thrown its support behind Mahathir in a shared sense of urgency to save the country before more damage is done.

    Mahathir’s ‘core group’ could be variously described as having features of civil disobedience, a people’s power movement, even a de facto ‘new opposition’. Prior to its launch, there had been talk of similar and overlapping moves, such as Zaid Ibrahim’s initiative for a closed-door gathering of like minds on 27 March. There is also the plan by Wan Azizah, leader of the People’s Justice Party and Anwar’s wife, to convene national consensus talks. There is clearly a need for close coordination to avoid competing initiatives. Significantly, the Pan-Malaysian Islamic Party has not formally joined the anti-Najib alliance, although some of its leaders had supported Mahathir.

    So if Mahathir and his citizens’ movement can maintain their current momentum and the opposition recovers from its disunity, UMNO and BN could be in deep trouble in the next election, which is to be called by 2018. Should that happen, pressure would mount leading to two possible outcomes. The first may trigger a nation-wide awakening that could transform into an anti-Najib groundswell. The second is to push UMNO into the excruciating position of having to decide whose survival is more critical — Najib’s or UMNO’s? In that event, a pre-emptive move for a leadership change may become too tempting in order to avoid impending electoral defeat.

    And, if this trajectory holds, UMNO may be forced to explore two other options: vote Najib out, or craft unconventional strategies — such as allowing Najib to step down voluntarily. Face-saving compromises and ‘out-of-the-box’ solutions should not be ruled out, given the wide-ranging repercussions of potential political instability.

    Yang Razali Kassim is a Senior Fellow with the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.

    This article was recently published in East Asia Forum.