Policy Series

In January 2013, as she launched her government’s National Security Strategy, then Prime Minister Julia Gillard proclaimed that Australia’s decade of terrorism was over. Her argument was that al Qaeda had failed to regenerate after being degraded in the aftermath of the September 11 attacks, and that there were other more conventional security issues, such as the rise of new Asian great powers, that would dominate the forward security agenda. 

It was a bold call; and in the close aftermath of attacks in Paris, Ottawa, Montreal, Copenhagen, Sydney and Belgium, clearly a mistaken one. But one can admire her intent: to make clear calls, establish clear priorities, and place the management of national security within a clear, predictable framework. Gillard’s intent has not only been mugged by reality; it’s been overwhelmed by an inexorable muddying and politicization of the national security space that should be of concern to all Australians. 

It’s easy to be seduced by the parochialism of the present, but in recent decades our security policy has become tangled in a proliferation of security vectors and actors. Once security referred to defence from attack from without and subversion from within; now security can refer to a broad and widening array of concerns: pandemics, climate change, natural disasters, asylum seekers, water shortages. The acme of this process was Kevin Rudd’s national security statement to Parliament of 2008, which adopted a truly all-hazards approach to keeping Australians safe. 

The problem with applying the concept of “security” to everything is that eventually it will signify nothing at all. We have long realized how bureaucratically potent the word “security” is: a security threat is by definition existential, and therefore trumps all other policy concerns in the battle for cash, staff and bureaucratic priority. The result is a proliferation of people and government agencies responsible for national security and governments that lurch from one security preoccupation to another. Casualties along the way are an increasingly febrile media and a public that is both cynical and defensive. 

Of course our politicians have not missed the powerful political capital that national security can build. John Howard showed all his successors just how potent a well-played national security hand can be. The result has been a national security politics that is at the same time supine and pointlessly partisan. On the one hand, oppositions are petrified of criticizing the national security posturing of the government in the wrong way at the wrong time and being forever labeled “soft” on national security. On the other, they wait like coiled snakes for the slightest whiff of government gaffes or mismanagement of the national security space. The result is a national political debate that is utterly incapable of holding governments to account on the vital substance of national security policy, but poisonously partisan and divisive at the edges, where it doesn’t really matter. 

Meanwhile, in the tangled thicket that has become the national security space it is almost impossible to develop a clear sense of proportion and set of priorities. Quite simply everything slightly menacing or tragic becomes framed in a national security logic, with screaming headlines, solemn pundits and instant intelligence briefings. Governments that have played the “strong on security” card can’t afford to look slow or cautious in their responses. In a world where everything is of the highest priority, governments are finding it harder and harder to set priorities and make hard choices. How does a government plan a defence budget when Islamic State and China’s assertiveness and asylum seekers are of the very highest priority? How does it design a legislative regime when cyber crime, homegrown radicalization, Chinese espionage, foreign fighters, transnational crime, and opposition to the death penalty are all non-negotiable issues for the government? 

In this frantic atmosphere government and community seem to have lost sight of exactly what it is that national security policy is designed to keep safe. Speeches and policy documents stolidly set out what our core national values are – safety, prosperity, independence, freedoms, cohesion – but there is little sense in the day to day waging of national security that there is much awareness of the careful balance that needs to be struck between security and the fundamental values it is meant to be keeping safe. When for example the government discusses the stripping of citizenship from Australians who fight in Syria and Iraq, who is asking the questions about the effect of this on community cohesion and on Australia’s international role in playing its part in dealing with the transnational phenomenon of radicalization? 

One shouldn’t think that all of this is having no impact on public attitudes and opinions. Indeed there is a remarkable bifurcation developing, between the educated elite that is increasingly cynical about national security, and partial to hysterical conspiracy theories; and the majority that is demanding a tougher and tougher government response by the day. The result is small-mindedness among both groups: an unwillingness to contemplate different opinions among the former; a defensive xenophobia and intolerance of difference among the latter. Along the way, observe yet another paradox: despite the fevered security consciousness of the public, governments of both sides that seem unable to adequately explain national security measures and build public support behind what really does need to be done. 

Finally, national security is changing the very structure of our Westminster system of government. It is hard to have watched the past two decades of national security policy and to deny that there has been a steady “presidentialisation” of our government, mainly under the impetus of national security. The Prime Minister’s Department has grown inexorably, as has the office personnel. There are very few issues even vaguely with a security tinge that the PM is not centrally involved in. He or she has direct personal relationships with the heads of all of the national security, policing and intelligence agencies. Apart from growing power and personnel, the presidential prime ministership demonstrates its sway by structuring and restructuring national security agencies: creating, spinning off, merging and co-ordinating in a dizzying display of apparent urgency. There is no one to think about and caution over the effects of this on the logic and effectiveness of these changes to a presidential prime minister. 

It is hard to watch all this and be comforted that we are safer, more cohesive, and secure in our values as a result of these trends. One wonders whether it is any longer politically feasible to put an end to this bipartisan rush for the national security mantle. If anyone is, here’s a few pointers. First, security is not an all-hazards policy space, it is about existential threats. Other issues are important, but they are not security issues and should never be framed with that logic. Second, security is a powerful but dangerous logic. Any discussion of security must include strong and reasoned debate about the balance between security and the values it is seeking to keep safe. Third, acknowledge that the national security structures and agencies have kept us safe for half a century: leave them alone and let them do their jobs. Fourth, the PM’s office and department have a legitimate role in national security, but it should never be a central, directing role. And fifth, nothing is more security-eroding than a sense of constant panic; and nothing more security-building than a sense of calm resolve. 

Real leadership, on both sides of politics, must begin with an acknowledgement that national security policy is important and potent, but ultimately dangerous to the values it seeks to protect, if not handled in a considered, calm and non-partisan way. 

Michael Wesley is the Director of ANU’s Coral Bell School of Asia Pacific Affairs

 

Policy Series

It is unlikely that at any time since 1788 a sample of Indigenous Australians would agree they have enjoyed fairness opportunity and security.

It is similarly unlikely that any Minister responsible for Indigenous Affairs, past or present, would claim as much progress in achieving those objectives as hoped for. The now obligatory annual report card delivered in Parliament by the Prime Minister of the day confirms the slow and irregular progress in closing the gaps in economic and social circumstances.

Any snapshot of the circumstances of indigenous Australians at any time post settlement will reveal our failures. But a longer view, a 50 year perspective, suggests dramatic changes and progress. Post 1788 saw dispossession and dispersal, denial of property and other rights, attitudes and policies forged in an age of overt racial discrimination, effective exclusion from citizenship and participation in social and economic life.

The history is well known enough not to need repeating here. What is relevant to this series is the direction of travel over the last 50 years or so and the efficacy or potential efficacy of current policy settings.

The direction of travel is positive. Until 1960 Australia was a segregated country. What are some of the markers of our direction of travel as a country over that time?

• Voting rights legislated for in 1962;
• the unprecedented level of support for the 1967 referendum which afforded Indigenous Australians the dignity of being counted in the census;
• the Gove land rights case 1971 which, while denying recognition of native title, set the intellectual framework for recognition of Land Rights;
• the Woodward reports on the implementation of land rights in the Northern Territory in 1973 and 1974 supported across the Parliamentary divide;
• all party support for the Racial Discrimination Act 1975;
• all-party support for the establishment of Land Rights in the Northern Territory culminating in the Land Rights (NT) Act 1976,
• the subsequent establishment of Land Rights regimes in the majority of Australian states during the 1970s and 80s;
• the establishment of the Council for Aboriginal Reconciliation in 1991;
• the High Court’s Mabo judgement in 1992;
• Keating’s Redfern speech in the same year;
• the Native Title Act 1993;
• the bridge walks for reconciliation in 2000
• the establishment of Reconciliation Australia in 2001;
• Prime Minister Rudd’s national apology in 2008; and
• All party support for constitutional recognition.

To this list can be added endless expressions of good intentions over that period by governments of all stripes, Commonwealth and State.

Of these changes the High Court Mabo judgement is the most significant. What the High Court did in Mabo was to give Common Law recognition to the connection between Indigenous people and their land as established through their own law and custom. For the first time since 1788 Indigenous people come to the table with governments and industry as people with rights rather than as supplicants. This was the most significant shift in the balance of power between the settler society and indigenous society since settlement. The major agreements made and being made with native title groups, Indigenous collectives defined by Indigenous law and culture, by governments and corporations reflect a new legal reality, the continuing legal economic as well as cultural relevance of Australia’s first nations.

From a policy perspective we are more conscious of what is wrong than what is right. Rates of Indigenous imprisonment alone are a reminder of the intractability of disadvantage. But the past is a foreign country. Today Indigenous people enjoy full de jure citizenship. The civil and political rights that were denied are available to them. More Australians than ever before are lining up to support Aboriginal endeavours to achieve social and economic equality.

There is widespread community support and engagement with Aboriginal and Islander people and their issues. There are around 600 reconciliation action plans involving the majority of the great companies in Australia, with another 400 in the pipeline, with countless individual and community initiatives in education health employment sport and culture, Aboriginal people have never had more allies.

These significant events do not plot a straight-line graph of progress. Over the same period there are numerous markers of the old attitudes and of resistance to the recognition of Indigenous interests. None of the gains were easily won.   Land rights were bitterly contested in some States. The current all party support for constitutional recognition does not mask the strong negative influences which will contest any proposal which is not assimilationist and which envisages continuing Indigenous collectives as part of the national fabric. Each gain was the product of intense and, usually, contested effort.

Now, after years of political attention and concerns about the continuing social, economic, and legal status deficits, there is a degree of public bewilderment about inadequate progress. Why do the gaps persist in the face of significant public expenditure and apparent government goodwill?

This is not a new question. Over the period of positive effort there has been a considerable degree of experimentation with different policy approaches. Assimilation was replaced by self-determination which became self management and spawned Aboriginal controlled bodies like the Aboriginal Development Commission and then ATSIC and the funding of thousands of Indigenous organisations. Too often a start again approach was adopted when an iterative approach might have been more productive.

What have we learned over 50 years?

There is a lot of common ground about what works among academics, bureaucrats, and the Productivity Commission. But the past suggests that the failure of funding agencies, whether they are an ATSIC or a line department, to apply what has been learned is a consistent issue. How to do it is written down but governments have not acted in accordance with what is written down.

As Westbury and Dillon pointed out in 2007, “What has not been recognised (at least within government) has been the extent to which government funding arrangements have reinforced community and organisational dysfunction” (Beyond Humbug P 191)

The Productivity Commission sets out in its reports what are the preconditions for success:

• Cooperative approaches between Indigenous people and government – often with the non-profit and private sectors as well.
• Community involvement in program design and decision making – a ‘bottom up’ rather than ‘top down’ approach.
• Good governance – at organisation, community and government levels.
• Ongoing government support – including human, financial and physical resources.

It observes that the lack of these factors can often contribute to program failures.

There are few if any authorities which would challenge that analysis. With wicked problems, multi factoral problems affecting the disadvantaged such as health education and employment, solutions require the involvement and participation of those for whom the program is established. But few if any Indigenous communities or individuals would claim that their experience of dealing with government has been in line with those preconditions.

The Commonwealth has acknowledged in the past the interconnectedness of the problems it seeks to address and concluded whole of government approaches are required. Two Management Advisory Committees (made up of heads of departments) have described the changes in organisation and processes that were essential if whole-of-government was to work. This included five basic imperatives:

• Substantial initial cross-agency/stakeholder agreement about the broad purposes to be pursued;
• Use of the outcomes budget framework to pool resources and to create appropriate accountability frameworks;
• Lead-agency staff empowered with sufficient authority to manage whole-of-government settings and to lead the engagement of local stakeholders;
• Empowering these same managers to engage with relevant individuals and interests;
• And finally ensure the individuals engaged in these latter roles have the appropriate networking, collaboration and entrepreneurial skills. 

This is an internal high level Commonwealth assessment not some external critic, these are the people with administrative skin in the game. It seems that these imperatives have never been met in the past and are still not being met.

In the 2014 budget the Government announced a new Indigenous investment strategy to begin on 1 July 2014 as follows:

“Under the strategy, more than 150 individual programmes and activities currently being managed by the Department of the Prime Minister and Cabinet are being replaced with five simple, streamlined programs worth $4.8 billion over four years. They will focus on achieving results in the government’s key priority areas in indigenous affairs of getting children to school and adults to work and making communities safer.

• Jobs, Land and Economy: this will support adults into work, foster Indigenous business and assist Indigenous people to generate economic and social benefits from effective use of their land, particularly in remote areas;
• Children and Schooling: this will focus on getting children into school, improving education outcomes and supporting families to give children a good start in life.
• Safety and Wellbeing: this programme is about ensuring the ordinary law of the land applies in Indigenous communities, and that Indigenous people enjoy similar levels of physical, emotional and social well-being enjoyed by other Australians;
• Culture and Capability: this will support Indigenous Australians to maintain their culture, participate equally in the economic and social life of the nation and it sure that organisations are capable of delivering quality services to their clients; and
• Remote Australia Strategies: this program will support flexible solutions based on community and government priorities and support remote housing strategies.

This came with a promise to end unnecessary red tape and remove duplication so that reductions in expenditure can be made without reducing impact on the ground. This last point is contested by many of the organisations affected by reductions in expenditure and is very optimistic.

At the same time the strategy is to be supported by the establishment of a new remote community advancement network which will move to a regional model of administration rather than the current State and Territory based management arrangements “so decisions can be made closer to the people and communities they affect.” Additionally the Government announced that “staff in the remote community advancement network will spend more time engaging with communities to negotiate and implement tailored local solutions designed to achieve results against government priorities”.

The ideas behind this restructuring reflect the lessons drawn from past efforts. Whole of Government approaches, local solution brokering, the possibility of pooled funding are positive. But the administrative complexity of what the Government has undertaken and the management of it is a challenge not met so far. It was supremely optimistic to take 150 existing programs which involve some 1400 organisations and redirect expenditure into five broad streams while at the same time changing the geographic and hence jurisdictional basis of the administrative framework in the space of a year. An additional challenge was to develop the skills required to carry out the admirable intentions, to engage with communities to negotiate and implement tailored local solutions, providing opportunities for communities to contribute to the design and delivery of local solutions to local issues. The skills required for this difficult work are largely absent from the APS and there is no training program to learn those skills.

An additional challenge is that State and Territory Governments are essential players in all of the priority areas, so it is incumbent on those implementing the new arrangements to work not only with the local communities but with those other governments which are so central to service delivery.

There is a considerable risk of unintended consequences as tectonic shifts in administration are in train. The risk of value destruction in the course of implementing new approaches is real. The current challenge for Government is whether it can construct the capacity to deliver on its large and complex agenda and avoid the further disillusion flowing from yet more top down changes.

The proposal to recognise indigenous Australians in the Constitution remains a work in progress. Parliament has yet to decide on what particular proposition should be put to the electorate. Whether the all party support for recognition will persist in the face of any particular proposal is yet to be seen. There are at least three critical factors at play. Broad indigenous support for the proposition will be essential to success. What the proposition should be is still a matter of debate and discussion among significant Indigenous participants in the process. The absence of a determined and respectable opposition to the proposal is also vital, and the content of the proposal will determine whether significant opposition will emerge. The third factor will be the standing of the Government. At the time of the referendum an unpopular government may be seen as fiddling while Rome burns if it is pursuing a constitutional change which is not relevant to the core concerns of the broad community.

What is generally agreed is that a failed referendum would be a very large setback. A guarantee of success is difficult to achieve.

On all fronts Indigenous Affairs is a work in progress.

Fred Chaney AO was former Deputy Leader of the Liberal Party, Member of the Federal Parliament for the seat of Pearce, Minister for Aboriginal Affairs 1978-80. Until April 2007 he held the position of Deputy Chair of the Australian Native Title Tribunal. He is on the Board of Directors of Reconciliation Australia.

Policy Series

Wentworth Group of Concerned Scientists[*]

When faced with significant environmental challenges in the past, Australian governments, businesses, communities and individuals have shown their capacity for responding creatively and energetically to environmental challenges, with positive outcomes for the health of the environment and economic productivity. While there are thousands of examples across Australia every day where individuals, communities and businesses strive to live sustainably, too often, despite best intentions, we place short-term interests over long term benefits.

The consequence is that as a nation, we are taking more from our environment than can be replenished, and that by any definition is unsustainable. The destruction of native vegetation, over-extraction of water, degradation of agricultural soils, and poorly planned urban and industrial development are driving the continued, long-term degradation of the Australian landscape.

As our population and incomes continue to grow, these assets will come under even more pressure. Climate change will exacerbate many existing challenges. The continent will continue to get hotter and experience changes in rainfall patterns, more droughts, and higher bushfire risks. Agricultural productivity is likely to be diminished by decreased rainfall and soil water availability, and urban and coastal assets will be at increasing risk from more intense storms, sea level rise and floods.^1,2

The problem is the narrative: jobs or the environment.

In recent times, national policy has been plagued by short-term vested interests striving to shift the public dialogue to a position that we must sacrifice the environment to pursue a growing economy. We have witnessed the winding back of national water reform; the repeal of the emissions trading scheme; constant attacks on the Renewable Energy Target; the approval of thousands of coal seam gas bores across the landscape without proper assessments of their cumulative impacts on water resources, agricultural land or native vegetation; the Commonwealth seeking to give away responsibility to protect matters of national environmental significance; and very significant cuts to scientific research and national environmental programs.

This myopic attitude flies in the face of both good science and it flies in the face of good economics because, in the long run, we cannot have a prosperous society if we continue to pollute our environment and degrade our natural capital.

Conservation of natural capital is a universal human value that should underpin all political philosophy. The great Republican President Theodore Roosevelt once said: “Of all the questions which can come before this nation, short of the actual preservation of its existence in a great war, there is none which compares in importance with the great central task of leaving this land even a better land for our descendants than it is for us.”³

Generations of Australians have overwhelmingly supported this philosophy. For the past three decades, The Australian newspaper has commissioned Newspoll to survey the issues that Australians consider important in Federal politics. In every opinion poll conducted since 1993, the majority of Australians have said they considered the environment as a very important public policy issue.⁴

A sustainable economy

Productivity is the key to long-term economic growth. It is also a pillar of sustainability, because people can create greater value using less materials and less energy, with less impact on the environment.

If more people are to benefit from industrialisation, the world will need to produce more energy. How this energy is produced will be critical to achieving a sustainable economy, because the world needs to reduce greenhouse emissions by at least 50 per cent within the next 40 years to avoid the most dangerous consequences of climate change.⁵ This will require developed countries such as Australia to reduce net greenhouse emissions by more than 95 per cent over the next 35 years.⁶

If Australia chooses to act now in our own long-term self-interest, we can achieve that target without fundamental changes to the economy, through a combination of energy efficiency, low carbon electricity generation, and carbon farming.⁷ Carbon farming is particularly important because not only does it provide an economic mechanism to help offset Australia’s existing greenhouse gas emissions, it also provides an economic foundation for the restoration of degraded land across the continent.⁸ This is because natural landscapes and healthy agricultural systems store vast quantities of carbon.

Federation and the role of science in public policy

The health of the natural environment matters because it affects the wellbeing of people. The Australian Treasury defines wellbeing in terms of the total stock of capital – human physical, social and natural – that is maintained or enhanced for current and future generations.⁹ If we are to improve the stock of natural capital to enhance the wellbeing of current and future generations, we need to ensure that sustainability principles are embedded across all sectors of the economy, and for this we need science.

Australia’s Federation has by any measure been an extraordinary story. It has underpinned the development of one of the most successful and stable democracies in the world, which now sees us enjoying a remarkable 24 years of uninterrupted economic growth. This history has also positioned us to take advantage of the rise of the Asian century, creating a vast array of new economic opportunities.¹⁰

The conservation of natural capital however, did not factor prominently in the creation of our Federation or our constitution – and herein lies our problem. We built our political and economic institutions at a time when the natural world seemed endless – where land clearing was part of a heroic vision to develop the nation – where fresh water flowing to the sea was thought to be wasted – and where coal was the great new energy source that would power the industrial revolution.

With a new century come new challenges – challenges that our founding fathers could not have dreamed of. Today’s challenges of climate change, food security, the increasing scarcity of fresh water resources, the loss of biodiversity, and the increasing cost of natural disasters,¹¹ are the defining issues of our age that will increasingly challenge our notion of progress.

These challenges require a new set of skills and institutions built on an understanding not only of market economics and social sciences, but also the natural processes that drive our ecosystems, such as the water cycle and the carbon cycle, and through maintaining the capacity of ecosystems to provide the goods and services that underpin our society and our economy.

The challenge and the opportunity

The challenge we all face is that the economic transformations needed are far beyond the ability of any individual or company to address on their own. The current government’s intentions to reform both Federation and the tax system present a golden opportunity for us to put in place practical, forward-looking reforms that embed sustainability throughout the economy, so that everyday actions also lead to the conservation of our natural capital.¹²

So how do we bring the economy and the environment together? The Wentworth Group of Concerned Scientists, in consultation with experts in economics, land use planning and land and water management, has put forward what we believe are five interconnected, long-term economic and institutional reforms that will lead to a healthier environment and a more productive economy:¹³

1.  Modernising Australia’s reactive land and water use planning systems  

Ineffective land use and infrastructure planning is not only a drag on economic growth – delays, uncertainty in development approvals, congestion, and damage from extreme weather events – it is also the driver of long-term environmental degradation because it fails to take into account the cumulative impact of development on the long-term health of environmental assets. It also causes significant economic costs. According to a report by Deloitte Economics, ineffective planning currently costs the Australian economy over $6 billion a year to repair damage from floods and storms, and without substantial reform, these costs are forecast to increase to over $2 billion per annum over the next 35 years.^14,15

Australia sits on the edge of the most rapid economic expansion in human history.¹⁰ This will create a vast array of new economic opportunities. Such an expansion in combination with an expected 60 percent growth in Australia’s population in coming decades also means that competition for and conflict over land and water resources will continue to grow.

Major public investment in a new generation of land use and infrastructure plans will not only help manage these pressures, they will improve the livability of our towns and cities and because they are more efficient, will also help secure Australia’s economic prosperity long into the future.

2. Using markets to finance conservation.

Many market activities damage the environment, but this is often not reflected in the market price of the goods or services these activities produce.¹⁶ For example, industries will continue to emit excessive greenhouse gases if there is no market value placed on a stable climate system, and farming may cause land degradation if there is no market value placed on the ecosystem services they provide to society.

Often these problems arise because many aspects of the environment have public good values – that is, because no individual or company owns them, these values are not priced by the market, and are often used without regard to the costs that may be imposed on others. It is therefore in the public interest for governments to create the economic conditions for these impacts to be incorporated into the cost of doing business.¹⁷

Our proposition is a simple, but fundamentally important one: remove subsidies from activities that pollute the environment and create economic incentives for business and consumers to restore and maintain environmental assets that have been degraded in the past.

One way of doing this is to put a price on carbon and use carbon offset markets for the reasons described earlier: healthy landscapes store vast quantities of carbon. Another way is to eliminate fossil fuel subsidies and tax expenditures that are costing the economy in the order of $8 billion a year[†], and use some of these savings though an equitable, broad-based land tax to pay farmers, indigenous communities and other landholders to restore degraded environmental assets.

As a package these measures in combination with a price on carbon, would go a long way to restoring and maintaining the nation’s natural capital long into the future.¹⁸

3.  Conserving Australia’s natural capital.

On our watch,[‡]¹⁹ the clearing of native vegetation, pollution of rives and estuaries, over extraction of water, introduction of weeds and feral animals, and inappropriate fire management, has resulted in the listing of over 1,600 species of native plants and animals as threatened with extinction.²⁰

We can turn around this systemic decline in Australia’s natural capital by: closing the gaps in our public and private reserves; connecting these across the landscape; and committing to a long-term plan to conserve our native plants, animals and ecosystems. In doing so, we will also create wealth and employment opportunities for more people, because access to nature in an increasingly congested world will be valued more highly by Australians and attract growing numbers of international visitors.

4. Regionalising management of Australia’s natural resources

In recent decades Australia has adopted a regional model for identifying investments in natural resource management.²¹ We are not proposing a fourth tier of government. What we are advocating is that all three levels of governments work more effectively with Australia’s existing regional natural resource management bodies, so that public and private investments lead to more effective management the Australian environment.[§]

The benefit of a regional model is that investment decisions are underpinned by an understanding of how landscapes function. It is also an effective mechanism for aligning government policies with peoples’ expectations and values.²² It is able to do this because it operates at a scale large enough to manage the pressures on our landscapes, yet small enough to use local knowledge to tailor solutions that suit those landscapes.  

5. National environmental accounts.  

At its most fundamental level, many of our environmental problems arise because we only measure half the ledger. We have sophisticated economic accounts that measure benefits of economic growth, but we do not account for the depletion of natural capital.

It is not possible to manage our economy without economic accounts. Neither is it possible to manage the environment without accounts that measure the condition our natural capital.

If Australia is to become a sustainable society – one that creates wealth without degrading its natural capital – a most fundamental reform is to create a system of environmental accounts that measure the condition of environmental assets (such as rivers, soil, native vegetation, fauna, and estuaries) appropriate to the scales at which economic and policy decisions are made.²³ When we do it will change the way we manage Australia.

We all have a role …

The twenty first century goal of promoting economic growth has for too long been framed as a trade-off between the economy and the environment. We must move on from this phase of our industrial history.

We live in an extraordinary country. Our natural heritage is truly breathtaking. We enjoy one of the highest living standards of any nation – ever, and our prospects for the future seem endless.  

There is no reason why the Australia of today cannot grow the economy, create jobs and maintain a healthy environment. But to do so, we have to stop kidding ourselves that the short term decision-making that is pervading public policy today is not having a negative long term impact on our environment and our economy. And we have to stop kidding ourselves that the small handful of people who are responsible for managing Australia’s vast land and water resources have anything like the resources to do it without financial support from the rest of the community.

If we want to leave our world in a better condition than the one we inherited, it is incumbent on each of us, no matter where we live, to participate actively in public processes to plan for these long-term outcomes, and then take action so that they take us on a pathway where a healthy environment becomes a natural by-product of our economy – a partner to economic growth, rather than a competitor.

With land use plans that promote development and protect the environment, long-term emissions reduction targets to address climate change, the elimination of fossil fuel subsidies that cause pollution and their replacement with a tax system that finances conservation, it is possible to have a productive economy and a healthy environment.

When we do these things, we will create a truly sustainable society, because the market will direct investments that grow the economy and protect the environment.

 

The Wentworth Group of Concerned Scientists is an independent group of Australian scientists, economists and business people whose objective is to help policy makers identify solutions to the long-term conservation of Australia’s land, water and biodiversity assets.

Current Members of the Group are Mr Peter Cosier, Dr Richard Davis, Professor Tim Flannery FAA, Dr Ronnie Harding, Dr Terry Hillman AM, Professor Lesley Hughes, Professor David Karoly, Professor Hugh Possingham FAA, Mr Robert Purves AM, Dr Denis Saunders AM, Professor Bruce Thom AM FTSE, Dr John Williams FTSE.

 

References

1. CSIRO and BoM, Climate change in Australia: projections for Australia’s NRM regions. 2015, Australia Government. p. 218.
2. Department of Climate Change, Climate change risks to Australia’s coast: A first pass national assessment. 2009: Canberra.
3. Slack, M. From the archives: President Teddy Roosevelt’s new nationalism speech. The White House Blog, 2011.
4. Newspoll Political issues and trends: Importance of federal issues. 2015.
5. Meinshausen, M., et al., The RCP greenhouse gas concentrations and their extensions from 1765 to 2300. Climatic Change, 2011. 109(1-2): p. 213-241.
6. Wentworth Group of Concerned Scientists, Submission to Garnaut Climate Change Review: Science based emissions targets will require far deeper cuts. 2008.
7. Denis, A., et al., Pathways to decarbonisation in 2050. Initial Project Report. 2014, ClimateWorks Australia: Melbourne, Victoria.
8. Wentworth Group of Concerned Scientists, Optimising Carbon in the Australian Landscape. 2009, www.wentworthgroup.org/wp-content/uploads/2013/10/Optimising-Carbon-in-the-Australian-Landscape.pdf.
9. Australian Treasury, Australia to 2050: Future challenges. 2010, Australian Government: Canberra.
10. Australian Government, Australia in the Asian Century: White Paper. 2012: Canberra.
11. Productivity Commission, Natural Disaster Funding Arrangements. Inquiry Report No. 74. 2014.
12. Institute of Chartered Accountants Australia, An economic policy platform for the next term of government. 2013, www.charteredaccountants.com.au/futureinc.
13. Wentworth Group of Concerned Scientists, Blueprint for a Healthy Environment and a Productive Economy. 2014.
14. Productivity Commission, Barriers to Effective Climate Change Adaptation. 2012, Report No. 59, Final Inquiry Report: Canberra.
15. Deloitte Access Economics, Building our Nation’s Resilience to Natural Disasters. 2013, Australian Business Roundtable for Disaster Resilience and Safer Communities.
16. Australian Treasury, Australia’s future tax system: Report to the Treasurer. Part Two, Volume 2: Detailed Analysis. 2010: Canberra, ACT.
17. Australian Treasury, Australia’s future tax system: Report to the Treasurer. Part One: Overview. 2010: Canberra, ACT.
18. Australian Treasury, Australia’s future tax system: Report to the Treasurer. 2010: Canberra, ACT.
19. McGraw Hill, McGraw-Hill Dictionary of American Idioms and Phrasal Verbs. 2002, The McGraw-Hill Companies, Inc.
20. State of the Environment 2011 Committee, Australia state of the environment 2011. Independent report to the Australian Government Minister for Sustainability, Environment, Water, Population and Communities. 2011, DSEWPaC: Canberra.
21. DEWHA and DAFF, Regional Delivery Model for the Natural Heritage Trust and the National Action Plan for Salinity and Water Quality. Audit report No. 21. 2007, Department of the Environment, Water, Heritage and the Arts and Department of Agriculture, Fisheries and Forestry: Canberra. p. 130.
22. Natural Resources Commission NSW, Progress Towards Healthy and Resilient Landscapes: Implementing the Standard, Targets and Catchment Action Plans. 2010.
23. Wentworth Group of Concerned Scientists, Accounting for Nature: A Model for Building the National Environmental Accounts of Australia. 2008: www.wentworthgroup.org/blueprints/accounting-for-nature.

 

[*] This paper is based on the Blueprint for a Healthy Environment a Productive Economy produced by the Wentworth Group of Concerned Scientists in association with Dr Guy Fitzhardinge AM, Prof Quentin Grafton FASSA, Dr Ken Henry AC, FASSA, Mr Max Kitchell, Prof Darryl Low Choy AM, MBE, RFD, FEIANZ, Ms Ilona Millar, Dr Jamie Pittock, The Hon Paul Stein AM, QC, and Mr Martijn Wilder AM.

[†] Primarily from exemptions provided to some industry sectors through fuel tax credits and reductions to the Commonwealth fuel excise, accelerated depreciation for fossil fuel assets, and the failure to index fuel excise for inflation since 2001.

[‡] ‘On our watch’ is an expression that means while someone is on duty; while someone is supposed to be in charge of a situation.

[§] There are 54 Regional Natural Resource Management bodies across Australia that work with governments, farmers, indigenous communities, and community groups who have a passion for public land conservation.

Policy Series

Knowledge capital is the real wealth of nations. If you stop to think about it, what matters more for opportunity, fairness and security than the skills, talents and ideas of the people? Yes, other things matter, but in the long haul they are way back in second place. And, yes, we do a lot already to foster our abilities, but we could be even smarter in this endeavour.

Education Structures

In Australia, growing our knowledge capital starts at the beginning. Child development is the foundation. It is well established that getting early childhood development right makes a lot else work well in later life. Nobel Laureate James Heckman established some time ago that the real rate of return could average 60% for early childhood investment programs. When many other investments are lucky to clear reasonable hurdle rates of 5-10%, this is, or should be, a no-brainer. Of course such quantification demeans the intrinsic worth of the endeavour, but it is interesting how readily an early childhood advocate adopts the trappings of an economist when he or she learns of such reality.

In terms of the cycle of life, the work accomplished in pre-school and child care is next sharpened by schooling. In Australia recently we have had some healthy debate about how that is best accomplished. Our unusual mix of private and public secondary schooling sharpens that debate here and points to the distinctive “Australian Way” of combining government and private provision. This model is also to be found in child care and in tertiary education, especially in vocational education and training. It is not unique to education either, as it operates in everything from superannuation to health and from electricity provision to imprisonment.

Whether the mix is optimal or not is a big debate and getting the balance right is not easy. For example, the Lomax-Smith Base Funding Review of 2011 struggled long and hard to define the right mix of private benefit and public good emerging from higher education but, given the difficulties of quantifying the public good component, ended up with rules of thumb. However, putting aside the precise metrics, it remains true that it is this principle of blending that has allowed Australia to enjoy one of the lower government outlay shares for industrial countries, despite the protestations of classical libertarians who would wish it lower still.

The great Australian statistician, Colin Clark, who pioneered notions of national income, once suggested that detriment would follow when government share of GDP exceeded 25%. Although this has happened, Australia has become one of the world’s most wealthy nations, sitting closely alongside the Scandinavians who breach the Clark rule in spades.

With public expenditure share at around a third of GDP Down-under (as opposed to Scandinavian models of over 50%), there is scope for correction, including through a greater public outlay share if we have got the balance wrong in our public-private partnership model in specific areas of provision. This applies in much of Australian education these days, and advocates of a free, fairer and more prosperous Australia should not step back from saying so until that is recognised.

Indeed, contrary to much conventional political wisdom, it is clear from studies that seek to ascertain willingness to pay for policy reform that the public is amenable to seeing more go to education and to paying for that through taxes if necessary. This includes higher education, often seen in politics as not carrying votes, even though such learning is central to the future for young people and appreciated as such not only by them, but also by their parents and grandparents.

In addition to increased undergraduate enrolment, the growth of postgraduate courses and executive programs is a major transformation of the modern university – further engaging many mainstream voters. Opinion surveys show that higher education can sway votes, particularly given the growth of the non-aligned voter phenomenon.

The “Australian way” of public-private partnership in schooling was at the core of the so-called “Gonski process”. The examination of what base-level provision was essential and who should pay for it involved the investigation of arrangements for this, the one major component of the education sector where overall and public funding meets or exceeds OECD averages (which is not so for earlier childhood funding nor for tertiary outlays, at least as regards the formalised sectors).

Beyond the formal government accreditation systems, there is much that goes on in professional and personal development on the education side and in external research and development on the innovation side. This includes family, corporate and community activity of a kind not normally pursued through ongoing official data collection. How Australia fares here is accordingly less clear.

In such matters we are at one with the drunk who looked for lost keys under the streetlight, not because that is where they were dropped but because the light was better. More could be done to learn of such things beyond the current focus that occupies most analysis and data. But in the funding battle between Big Science* (and indeed STEM** overall) and other research, such modest projects in the humanities and social sciences seem to get somewhat marginalised.

To the economist this is passing strange since value for dollar, including for producing simple citation metrics, is often greater for the cheaper projects. Indeed in terms of the discipline rankings Australia is at the top of its game globally in such fields as philosophy and international relations, and they cost peanuts, relatively speaking. But in academic matters value for money is often subordinated to other cultural and power forces when total subvention is artificially constrained.

The resultant research battle is bizarre, given the opportunities for good, productive research across the spectrum. Only 15-20% of current well-attested projects receive funding under nationally competitive grants schemes (with many more accordingly discouraged) when the real rate of return from such research is estimated to be on average 20% or more. This return exceeds most commercial business project outcomes, and yet we continue to restrict support which costs under half of the return. Both STEM** and HASS*** research support can be enhanced. Cultural explanation of public decision-making must be sought as to why this does not happen, not rational economic and business understanding.

Higher Education

In the most recent public debates in Australia, higher education reform has been at the forefront of debate in this broad field of knowledge capital. Though the Abbott government had flagged that its approach to universities was intended to be one of “masterly inactivity” with a more general policy philosophy of “no surprises”, the 2014 Budget encapsulated some rather dramatic and therefore largely unanticipated reform proposals for that sector.

The so-called “Pyne reforms” sought the following as their original ambition:

• Expansion of the system through demand-driven funding for sub-bachelor degrees;
• Restructuring of the pattern of funding by field of study and for infrastructure;
• Deregulation of undergraduate degree fees and lighter touch quality regulation;
• Introduction of greater competition from non-university higher education provider access to subsidies; and
• Increased private financing through reduced per-student grants, new doctoral fees and reduced grant indexation.

Amongst the cut and thrust of privatisation and competition, the irony of a new mandated scholarship scheme to come from deregulated university fees and paid to lower socio-equity students, was lost.

Most attention has focussed on the deregulation of undergraduate fees, the $100,000 degree possibility and the “threat” to fiscal consolidation of the greater provision of demand-driven places. Less attention has been placed on the slow undermining of educational quality from reduced per student funding, reduced indexation of grants and the diversion or diminution of infrastructure funding. The gradual rise of student-staff ratios in depreciating facilities and what this means for quality of learning and the learning experience, is ignored. And our decision-makers wonder why our nation’s productivity is declining!

There may be greater awareness if, as is now happening, other international student competitor nations start to take higher shares of the global market as our student experience deteriorates relative to theirs. But for now the bounce-back from the disastrous Indian student crisis, caused by poor migration regulation and poor community integration for international students, hides any such problems.

The way to square the circle on this is to understand the aspirations of voters and respond to that by a commitment to a narrative of investing in our future and ensuring that in higher education we aspire to an equal and shared partnership between public and private funding. The benefit to the economy, let alone beyond that, would more than pay for the cost.

A proper restructuring of government Budgets to distinguish recurrent from investment outlays would allow the public and the politicians to appreciate this payoff. As indicated, aspirational votes are there to be tapped. If, however, short-term “deficit fetishism” still prevails, some leadership on tackling the long list of well-known rorts in capital gains taxation, asset exemptions from means-testing, negative gearing, family trusts, GST exemptions, and more, would manage the transition well.

Taking the public into your confidence can work wonders as the micro-economic reform era indicated to governments of both persuasions,. More recently, Premier Mike Baird in NSW has turned around resolute opposition to privatisation and won handsomely.

Vocational Education

A big elephant in the room remains in the form of vocational education and training. It is not far-fetched to say it is in crisis. It suffers from divided responsibilities across governments of a kind that begs for federalism reform in Australia. Popular attention focuses on how this produces variant approaches to policy across jurisdictions, but probably the biggest consequence is the under-funding that results. The Commonwealth controls the nation’s public finances. It can – and does – under-fund the States and territories for their functions. It can – and does – opportunistically engage or withdraw from those areas through the specific purpose payments mechanism.

A classic case in point is the 2014 Coalition budget reduction in previously anticipated health and education spending from the Commonwealth to states and territories of $80 billion over the decade to 2025. It is precisely this withdrawal, plus bracket creep in income tax, that allows the Government to claim it is addressing the deficit – for the Commonwealth!

One crucial consequence of such legerdemain has been slow growth in public funding of vocational education and training. VET is the true Cinderella of education with substantial restriction on per student funding. One device for dealing with that, in turn, was for states and territories to open up training subsidies to a cheaper private sector and, as elsewhere in education, use some public subsidy to encourage wider private provision alongside basic public provision.

However the implementation process has been fraught. National regulation has proven to be flawed, particularly its very mechanical “tick a box” process focus and limited examination of education and training outcomes. States and territories’ funding regimes have been problematic. Most recently in 2015, for example, South Australia announced an intention to significantly reduce private provider access to publicly funded places, reserving most for TAFE, a move objected to by the Commonwealth government.

A potentially productive model in the Australian tradition has been compromised by poor implementation, and by failure to negotiate politically bi-partisan commitments to longer-term arrangements. Changes of government have changed the settings dramatically.

Such policy shifts and uncertainty over future settings, combined with basic underfunding of the public benefits from this education, even apart from equity and access issues, have been a recipe for a growing degradation of what is actually a jewel in the Australian crown.

Alongside Germany, Australia has actually been a global standard setter in technical education. Countries in our region have looked to adopting our ways and seeking our advice, and thereby allowing us to lock in major trading advantage and influence. This achievement is under threat.

Australian higher education was revitalised and put on sound foundations by the 2008 Review of Australian Higher Education. The further reforms contemplated today still build on that. Such a review for vocational education nation-wide, more than most reviews that we could think of, would help set a better path for a smarter Australia.

Within such a review the relationship with higher education would be an issue that could at last be systematically examined as part of the process. Various governments have had ambitions to tackle this, but they have largely fallen foul of the federal-state divide and not proceeded.

The mutual responsibility issue for employers has largely gone through to the keeper. Industry advice is sought and indeed privileged, but business support and facilitation of training is sometimes less forthcoming. One result has been a rigid rather backward looking conception of skills, when a more flexible future oriented approach is needed.

To go back to basics and see what type of vocational education and training we need for the future, how it should be funded and how it should be provided, is a long overdue exercise, made even more necessary by the short-sighted abolition of the Australian Workforce and Productivity Agency by the incoming Abbott Government. Perhaps the Council for the Australian Federation or an independent think tank such as the Grattan Institute could begin such a process.

Conclusion

The case is strong for ongoing investment in our future through a fair balance of public and private funding plus ongoing reform of the structures for delivery.

Seeking Budget economies by reducing investment in a smarter Australia is a false saving. The government and the private sector, and possibly the community sector too, are under-investing.

Greater deliberation over the systems for education and training delivery is also essential to guide future investment, including how to better build resilient, adaptive skilling for the future.

* ‘Big Science’ is a term used by scientists and historians of science to describe a series of changes in science which occurred in industrial nations during and after WWII, as scientific progress increasingly came to rely on large-scale projects usually funded by national governments or groups of governments.

** STEM refers to the disciplines of Science, Technology, Engineering and Mathematics.

*** HASS refers to the Humanities, Arts and Social Sciences.

 

Glenn Withers is an honorary Professor at the Australian National University and Tongji University Shanghai and President-Elect of the Academy of the Social Sciences in Australia. He is also Advisory Board Chair of Blended Learning International and was previously the founding Chief Executive Officer of Universities Australia.

Fairness, Opportunity and Security.
Policy Series edited by Michael Keating and John Menadue.

With many other people, we are concerned about the policy vacuum and the poor level of public debate on important policy issues. We began a series of articles on policy issues in Pearls and Irritations on 11 May. They have now all been posted.  There are forty-nine articles on fifteen policy areas from over thirty contributors. They are linked to the contributor’s name (below).

This now completes the series. In August, we plan to publish these articles in a book in order to continue the debate for better public policies for Australia. 

We will keep you posted.

To all the contributors – thank you very much for your excellent contributions. John Menadue, Michael Keating.

Introduction.
Ken Henry. ‘I can’t recall a poorer quality public debate, on almost any issue, that we have had in recent times in Australia.
Democratic Renewal
.  Vested interests (John Menadue 2), ‘Vested interests represent a growing and serious corruption of good governance and the development of sound public policy’
.  Loss of trust (John Menadue 1), ‘We need political reform to restore trust in our political system and our polity.’
.  Post majoritarian future. (Ian Marsh 1), ‘It is unlikely that in the future Australian governments will have majorities in both Houses of Parliament’.
.  Policy-making practice. (Ian Marsh 2) ‘Policy reform may well depend on reforms to our political system and decision-making processes.’
The Role of Government
.  The importance of values. (John Menadue), ‘Good government must be based on some broadly shared values that inspire and enthuse us.’
.  Role and responsibilities of government. (Michael Keating), ‘In practice, the responsibilities of governments have changed little in the last thirty years.’
.  Role of government. Ian McAuley) ‘Australia and similar democracies have done well because economic progress has been a shared venture between the public and private sectors.’
Foreign Policy
.  Security in the region. (Stephen FitzGerald), It is remarkable the headway that Paul Keating and Gareth Evans made in South East Asia … in gaining acceptance of Australia as one of them.
.  Australian foreign policy (Cavan Hogue), ‘Countries don’t have friends, only interests. The United States has always remained fiercely independent and has followed policies which served its own interests first.’
.  An independent Australian foreign policy. (Richard Butler), By relying on ‘great and powerful friends’ we have acted in a way that has ‘substantially compromised our independence and … exposed ourselves to increasing danger.’
.  What Australia’s foreign policy should look like. (Stuart Harris), We must be careful to avoid ‘a choice between the political and economic relationships with the US and China.’
.  Australia, the US and Asia. John McCarthy. In recent years Australia has superceded both Japan and the UK as the US states’ closest ally.
The Economy
.  Fixing the budget (Michael Keating 1)  ‘Why did the government break so many promises and insist that the unfair cuts in last year’s budget were absolutely necessary and any opposition was irresponsible.’, Michael Keating 2) The government’s plan to balance the budget by 2019-20 is not credible.
.  Taxation Reform (Michael Keating) ‘Encouraging unrealistic expectations of tax cuts is only making government more difficult.’
.  Federalism (Michael Keating) ‘It will be necessary to continue the reforms started by the Hawke-Keating governments.’  (John Menadue) One way to make federalism work better in the health field is to pool commonwealth and state funding and agree to a state-wide health plan in any state that is prepared to cooperation with the commonwealth.’
.  Job Creation and Participation  (Michael Keating) The best way to promote greater employment participation is to increase the investment in education and training to improve the skill base and employability of disadvantaged people.
.  Productivity (Michael Keating) Most important is the creation of an innovative culture through support of research and development, education and skills and forging close links between the scientific community and industry.
.  Innovation (David Charles) We need to transform from an economy largely driven by investments in the minerals and energy sector to one which has a wider spread of investment drivers.
.  Transport and Infrastructure (Michael Keating and Luke Fraser) Australia is racking up very substantial debts to finance unreformed infrastructure. It is scandalous that infrastructure investment escapes proper scrutiny.
Retirement incomes
.  A fair, effective and sustainable system. (Andrew Podger) We need to draw together all the threads of the retirement system, particularly pensions and superannuation.
Population/migration/refugees (Peter Hughes, Arja Keski-Nummi, John Menadue),  .  Immigration Part 1, Australia has a great record in nation-building, but benefits achieved cannot be taken for granted in the future.
.  Refugees Part 2,  How to move from toxic politics to a humanitarian policy once again.
.  Settlement Part 3 Successful nation-building needs good settlement services to support new arrivals.
Communications and the Arts
.  Cultural Identity (Julianne Schultz) We need to draw together diverse cultural policies to better serve our national interests.
.  Arts. (Kim Williams) We have eroded the standards and reduced public support for the arts.
.  Media Regulation in Internet World (Terry Flew) How media convergence is driving the need for regulatory and policy change.
.  NBN. (Rob Nicholls) We need to target the NBN rollout in line with what our major trading partners are doing,
Security – internal and Human Rights (Spencer Zifcak) We have draconian laws but inadequate safeguards. (Susan Ryan) We need to revive the Human Rights Act campaign of the 1980s.
Security, both military and soft power
.  (Michael Wesley) The politicalisation of security is endangering our safety.
Health
.  Part 1 Problems (John Menadue) Medicare was established forty years ago but is badly in need of reform. 
.  Part 2 Health reform opponents (John Menadue) ‘Health ministers may be in office, but seldom in power.’
.  Part 3 Health solutions (John Menadue) We need new processes, governance and policy directions to move us beyond the present inertia, incrementalism and tinkering.
.  Health workforce (Jim McGinty) The emphasis in health workforce reform must mainly be about nurses.
.  Co-payments (Jennifer Doggett) We have amongst the highest out-of-pocket health costs in the world. They lack logic, efficiency and equity.
Development of our human capital in the fields of education, science, innovation, research and development
.  Knowledge capital. (Glenn Withers) Knowledge capital is the real wealth of nations.
.  Eroding Human capital. (Chris Bonnor) Differences in education outcomes seem to be increasingly the result of differences in wealth, income, power or possessions. Let’s hear it for Gonski and My School.
Environment and climate change
.  (Ross Garnaut) It would be wise to supplement an emissions trading scheme linked to Europe with regulatory action. 
.  (Peter Cosier) Ways to combine a productive economy with a healthy environment.
.  (Jon Stanford) Will Australia rise to the occasion in the Climate Change Conference in Paris in December. 
.  (Brendan Mackey) Reconfiguring human endeavour to live within the boundaries of a finite planet.
Indigenous affairs
.  (Fred Chaney), Some progress in closing the gap – but a long way to go.
.  (Michael Gracey) Indigenous health requires a much broader definition of the meaning of ‘health’ and local empowerment.
Welfare and families
.  (Andrew Podger) Current arrangements are overly complicated, inconsistent and incoherent, overly means-tested, and without sufficient regard for efficiency.
Inequality and the Australian welfare system
.  (Andrew Podger, Peter Whiteford), In reducing inequality, priority should be given to promoting employment and addressing specific weaknesses in the tax and transfer system.
.  (Ian McAuley) The conservative slogan that a ‘rising tide lifts all boats’ is not working for the poor.

Media enquiries. johnmenadue@staging-johnmenadue.kinsta.cloud.

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Policy Series

In Part 1 of this series I described the areas in our health sector that need reform. In Part 2 I spoke of the obstacles, particularly those imposed by vested interests in the health sector to protect their own interests by delaying or stopping reform. In this article, I will be suggesting ways in which we can overcome these obstacles to health reform. But make.

Don’t rush the process

The political process encourages parties seeking election or re-election to address problems with high political salience – waiting lists in public hospitals, needs among certain groups with chronic illness, and identified funding gaps. The political response is to develop specific proposals, usually involving carefully calculated budgetary costs.

Such a process, while providing short-term solutions to proximate problems, fails to address the structural problems identified in Part 1 – the fragmented nature of our health care arrangements, inequities, gaps in services, such as dental care, the allocation of resources towards high-cost hospital interventions at the expense of promotion, prevention and primary care, and the distortions associated with private health insurance.

It also privileges those vested interests outlined in Part 2, who can mobilize resources to block all but the most minor reforms.

System-wide reform takes time. And it takes open minds. Governments need to realize that even when they can set aside their own financial or professional interests, “insiders” find it hard to imagine any significant departures from existing arrangements. That was a major shortcoming of the Rudd Government’s Health and Hospital Reform Commission. Outside perspectives are essential.

In order to lift the process beyond immediate concerns, those pursuing reforms need to set out basic principles, and, in a well-managed consultation process, inform the community of options, and invite the community to discuss and agree or amend these principles. Such a path to reform contrasts with the quick-and-dirty proposals which emerge from processes such as the Abbott Government’s Commission of Audit. Rather, reform can draw on the tradition of white paper – green paper policy development and the reform process pursued by the Hawke-Keating Government. The Senate Committee system should also be utilised.

Guiding principles

As in any public policy the basic principle should be pursuit of efficiency and equity. Contrary to some simplistic notions, there is not necessarily a trade-off between these principles. An inefficient system is a high-cost system, and a high-cost system generally tilts the balance towards those who have most ability to pay. That is the basic failure of the United States system.

Economic considerations should extend beyond governments’ own fiscal costs. Rather they should take into account costs and benefits throughout the community. There is no benefit in saving people $1.00 in taxes through Medicare if the result is that they have to pay $1.25 for the same or inferior services in private markets through PHI.

In efficiency we fall well short as a result of the $10 b p.a. taxpayer subsidy to high cost PHI which makes it more difficult for Medicare to control costs; the perverse incentives in FFS which reward doctors when they treat sick people rather than keeping people healthy; a health workforce which is riddled with restrictive work practices and demarcations and an MBS and PBS which are not rigorously and regularly reviewed. Clinicians are broadly agreed that there are more than 150 services in the MBS which are of doubtful value. There is a rigorous process for getting drugs onto the PBS but little attention to getting some drugs off the PBS. We also need an independent pricing authority like in NZ to reduce the high price for generic drugs and the inefficiencies of drug pricing generally.

Equity should be concerned with ensuring that income, wealth or personal influence does not give individuals preference in treatment, displacing those with greater needs but lesser means. In equity, we fall short as a result of out of pocket expenses that are amongst the highest in the world; a $10 b. subsidy for PHI which goes mainly to higher income people who can then jump the hospital queue; the plight of people with mental health problems, indigenous people and country people. Dental /oral health care is excluded from Medicare.

A related principle should be one of solidarity or social inclusion. In social inclusion we are falling short by steadily moving towards a two-tier health system with Medicare becoming a safety net for the poor. We have a two-tier legal system with a safety net called the Legal Aid Service. But that service is not as good as the top tier private offering. Just as a two-tier legal system does not serve the poor adequately, neither will a two-tier health service .All should have access to the same high-quality services. We should resist most strongly the conservative notion that Medicare should be reduced to a safety net for the poor. The same high quality service should be available for all .While people with different means may make different payments, they should all be using the same services. The present “two tier” arrangements, where those with means are more likely to use subsidised private hospitals, violate this principle.

Within such a shared system, there should be scope for users to exercise autonomy and choice, so long as these do not impose costs on other users. Financial incentives on providers and users should not detract from the principles of personal responsibility.

Health care services need to be perceived as components of a set of policies promoting good health. In this regard, the community’s health should be seen as an asset worthy of attention in all government policies – taxation, urban design, trade agreements (patents), labour relations and wages policy, social security, environmental protection, sport etc. Public health should be of concern across all portfolios. Health ministers, state and federal, should have the same standing as Treasurers. Unfortunately we are more concerned about health services than health. An obvious example is our failure to address the enormous damage that alcohol, sweet drinks and junk food is inflicting on the health of Australians.

The government should consider alternatives to fee-for-service remuneration for primary care and other services. The New Zealand Government, for example, pays episodic care by doctors on a fee-for service basis but chronic care is paid on an annualized basis.

Health programs should have a user focus, rather than a provider focus. The user drawing on different services should not have to confront multiple institutions with their own funding arrangements, records and protocols of care. Policies should aim to integrate and not merely coordinate medical services, pharmaceutical care, hospital care and rehabilitation. Instead of a user focus, successive governments and DHA have failed to break the grip of providers. Our health service is structured to serve the convenience and interests of providers not users.

Such flexibility should be guided by the principle of subsidiarity. That is, services should be managed at the most feasible local level, provided such autonomy does not conflict with needs for central standards in important areas. We fall short in subsidiarity by neglecting primary and general practice care which is close to the patient. Instead we favour the clamour of the hospital sector.

Funding needs to be based on a judicious balance between individual (“out-of-pocket”) payments and pooled payments. While a lack of means should never present a barrier to those who need care, there is no reason why those with means should not make personal contributions. The balance between individual and collective funding is one which needs community consultation. There are arguments for a completely free, tax-funded system, and there are arguments for more individual payments where price signals play a role. But the choice needs to be put to the community in a way that explains the costs and the benefits of each method of payment. Most probably the community, presented with an informed choice, will opt for some balance.

One option to consider is the Nordic model whereby, subject to means tests, all people pay for their healthcare up to a certain amount before their universal system or Medicare in our case, kicks in. The Nordic health systems are effective in balancing individual responsibility wherever possible with patients with high needs and limited means. The very high and unfair costs of out of pocket expenses in Australia must be addressed.

For that proportion of costs the community chooses to share, this sharing should be through a single national insurer, with the capacity to use its purchasing power to keep costs under control, and guided by principles of ensuring access for those with limited means and covering all against high expenses. As with other high-cost and heavily-subsidised industries, such as clothing and footwear, the $10b plus per annum subsidy to PHI should be steadily phased out. If people want private health insurance that is their right but there is no reason for the taxpayer to provide a subsidy.

While the government should take responsibility for pooled funding, provision of health services should allow for both government and private involvement. In regulated markets private providers should be assured of reasonable returns on their investments (including their investment in human capital), but they should not be permitted to take advantage of any privileged position in the market.

All systems of remuneration, to private or public providers, should be subject to full accountability, and all services should be subject to the general principles of competition policy but without promoting competition where it serves no public purpose, such as a proliferation of look-alike high-cost private insurers. Accounting systems should expose all instances of cost-shifting – from Commonwealth to state governments, from governments to individuals, and from present outlays to future outlays. While there may be reasons for costs to be reallocated between different parties, such reallocations should be for reasons of equity or efficiency, and not for budgetary impression management.

All health care services should be subject to professional governance and accountability, with clear charters of responsibility but at arm’s length from executive government. We really don’t know much about how well doctors perform in private practise. We hear about occasional mal practise but very little about general performance and competence. We fall short because Medicare data which would show, for example, under and over servicing by local government areas, is not available. Such localised data would show areas of unfairness and sometimes abuse. Just as we are now developing a My School data base, we should develop the same for ‘My Hospital’ or ‘My GP Clinic’. Subject to some confidentiality issues, ‘open data’ should be publicly available on incomes and performance across the health sector.

The related issue of Commonwealth-state relations-the blame game- needs resolution. One possibility is for health services to be administered by joint Commonwealth-state commissions in each state, with pooled Commonwealth and state funding. Tasmania with its small and comparatively aged population could provide the basis for a trial.  This issue is canvassed further in my article Making the Federation work better which was posted on 20 May 2015.

An efficient national and integrated electronic health system would also significantly contribute to a national health service. It would maintain an up to date health record for every person and make unnecessary so many repeat referrals and examinations. It would improve the quality of care and reduce costs. DHA has failed in this field as in so many others.

The role of institutions

Health reform is too important to be left to health departments particularly DHA and bodies with superficial mandates such as the recent Commission of Audit.

Fortunately the Commonwealth has bodies such as the Productivity Commission, an organisation with not only technical expertise to analyse policy proposals, but also with the capacity to sound out those with policy interests. Most important, it can bring an “outside” view to public policy, addressing questions and options that may be beyond the imagination of “insiders”.

While the Productivity Commission can bring forth practical recommendations, the questions in health reform are so basic; however, that they require a wider and continuing process before specific issues can be addressed. Questions such as how costs are shared, and how scarce resources should be allocated, particularly for high-cost interventions with minor benefits, involve moral considerations.

One possibility is to establish a Health Reform Commission composed of independent and professional people to inform and lead public discussion and advise on important health reform issues. Clinicians should be included, but none of the vested interests. The Law Reform Commission established by the Whitlam Government in 1975 is an example of how enquiries and consultations can be conducted with the community in order to make recommendations to government that are well-informed. The Law Reform Commission estimates that over 85% of its reports have been either substantially or partially implemented making it an effective and influential agent for reform. The Reserve Bank is another example of how a respected, professional and independent body can be a leader in public discussion of important issues. A major objective of a Health Reform Commission would be to outflank the vested interests and carry an informed discussion with the community, particularly of the key principles that should drive health care. Ahead of establishing such a commission in government it would be useful to establish an interim group of professional and independent people who can facilitate informed public discussion and provide advice.

A general remit to the HRC would be to encourage service cost discovery, price discovery and quality discovery, integrity (fraud and abuse) and fairness (access to care regardless of means or location)

In addition to these general responsibilities there could be specific referrals to the HRC or the interim body, e.g.

• Ways to phase out PHI and introduce a dental/oral health scheme within Medicare.
• How to establish ‘medical homes’ in primary care which include both private and public clinics that provide a range of services.
• Remove perverse incentives for the remuneration of doctors.
• Reshape the health workforce to the needs of the 21^st

There are various ways to deal with public participation but the basic approach and method is that communities should be consulted to find what they want, and in successive rounds experts should analyse and report back on the costs and consequences of their proposals. For example, explaining that a completely free system would involve higher taxes and may involve greater waiting times.

One other model is the “citizen jury” – so named because the citizens to be consulted are selected on a random basis, and are informed by professional and independent experts. They could be asked to provide their advice back to government on such key issues as: to what extent do we want to share the costs of healthcare and how co-payments should be reformed. End of life issues could also be canvassed as well as many expensive interventions that have limited effectiveness. These citizens’ juries in health could be important vehicles for an informed national conversation on health, a conversation that we do not have at present.

I see parts 1,2and 3 on Health Policy Reform as outlined as, hopefully, the means to put the debate on health reform onto a more constructive and pragmatic path. Unless we get our processes working more effectively and particularly how to bypass vested interests, reform will continue to be very difficult. When we improve our processes we can be more confident of addressing the particular policy issues outlined in these three papers.

Unless we address the issue of power and how and who exercises that power in the health sector we will not achieve worthwhile reform. Power is in the hands of providers. It is not really in the hands of the community, patients or even governments. That is the key issue. We need leadership, institutions and processes to focus on how we overcome this central issue.

Ministers of Health may be in office but they are seldom in power.

John Menadue chaired the NSW Health Council 2000 and the SA Generational Health Review 2003.

Policy Series.

In Part 1 on health policy reform I outlined the main areas where health reform is necessary. In Part 2 I examine the reasons why I think health reform is so hard. In part 3 I will consider ways in which the necessary path of health reform can be quickened.

The major barrier to health reform is the power of providers or at least their assumed power. The most recent budget showed that yet again.

A succession of Australian health ministers may have been in office but they have not been in power.

Aneurin Bevan who launched in the 1940’s in my view the best health service in the world knew a few things about health but more importantly he knew much more about political power and how to exercise it in the public interest. He drew on the strong support of the community, a minority of doctors and the majority of nurses. He won the day and not surprisingly the UK National Health Service was the centre piece at the London Olympic opening ceremony in 2012.

The power of insiders – or the faintheartedness of politicians

Reform disrupts established arrangements. In general, the longer those arrangements have persisted, the greater becomes the pent-up need for reform, meaning that reform is going to be disruptive to existing interests. By the same token, as arrangements become more entrenched, the more do those who benefit from them feel threatened, and the more political clout they develop to resist reform.

That resistance is often based on financial self-interest, but it also aligns with a general fear of change and professional conservatism. It is difficult for those who are “inside” a system – be they administrators, professionals or policymakers – to conceive of other ways of delivering services. Institutional inertia is a strong force. And in health care it is easy to lose sight of the fact that delivering services is not, in itself, the objective. That objective surely is serving the community by helping to keep the population healthy.

One group with a stake in maintaining current arrangements are those who administer health services. Health is a highly technical, large and complex field that is difficult for outsiders to come to grips with. This gives disproportionate power to health administrators on the inside to manipulate ministers.

“Joined at the hip” with these administrators are much the same vested interests (rent seekers) that batten on the health service and dominate the public debate. These are much the same vested interests who so selfishly and ferociously led the opposition to Medibank in 1974. They are still with us today but in a different guise. The AMA has a long and dubious history in opposing key health reforms going back to its opposition to the Pharmaceutical Benefits Scheme In 1942.

These vested interests include the AMA, the Australian Pharmacy Guild, the private health insurance funds, Medicines Australia and the state and territory health department bureaucracies. In addition, there is a general “pro-business” push to open up all aspects of health care more to the private sector, particularly pathology and radiology.

Where possible, financial incentives should encourage practitioners to keep people healthy, rather than to deliver services to the sick. The perverse incentives in FFS come to play particularly strongly when health care takes on a corporate structure, where business objectives such as return on shareholders’ funds displace professional service objectives traditionally associated with medical practices. Businesses operate on the basis of expanding their markets, not on the basis of telling customers they may be over-using their services. The AMA, however, is turning a blind eye to the growing corporate takeover of general practise and the associated vertical integration into radiology and pathology.

The Pharmacy Guild strongly defends the privileged position pharmacists have gained through political influence. On the one hand the Guild strongly defends the many restrictions on competition enjoyed by pharmacists – prohibition on pharmacies in supermarkets, prohibition on price advertising, restrictions on location and ownership of pharmacies and exclusive rights to sell many non-prescription medications. On the other hand it does little to encourage integration of pharmacy with general practice.

It is not only in retail pharmacy that Australians are overpaying. Governments are also generous with taxpayers’ money for the mainly foreign pharmaceutical firms who are able to exploit their power in patents. Medicines Australia, the body representing manufacturers and distributors of drugs, has successfully lobbied the Commonwealth to pay high prices for prescription pharmaceuticals. Australia pays top prices: for pharmaceuticals. We pay $2 billion per annum more than New Zealanders pay for equivalent drugs. The last budget failed to properly address this overcharging.

The private health insurance companies are expensive financial intermediaries, receiving a $10b annual taxpayer subsidy through the rebate, and additional support in the form of the Medicare Levy Surcharge, which subsidises those with high incomes to hold PHI. Not even at the height of manufacturing industry protection were people actually given cash subsidies to buy Holdens and Falcons.

Private insurers don’t deliver any health services; they are simply high-cost financial intermediaries taking commissions. As I outlined in Part 1, PHI benefits the wealthy and most importantly weakens the power of Medicare to control prices. Now the private insurers are edging their way into general practice. The Managing Director of Medibank Private also reportedly told doctors that private health insurance policy holders should have priority in public emergency departments.

Government subsidized private insurance is a major threat to health care in Australia. At first sight it may appear to relieve public budgets and to take pressure off public hospitals, but that’s not the way it plays out. It actually sucks resources out of the public hospitals. The remuneration of most specialists in private hospitals is multiples of the remuneration of specialists in public hospitals. And as PHI pushes up costs, governments, still left with funding a large part of health services, find that they become passive players, accepting prices set by private service providers and insurers.

Yet in spite of this economic danger, and the example of the clearly dysfunctional American system, governments in this country – Coalition and Labor – have been reluctant to take on the PHI industry. Before the 2007 election Kevin Rudd wrote to the industry assuring it that their taxpayer subsidies would continue. The industry never publicly defends its $10 b pa subsidy. It is too ashamed. Instead it lobbies in private.

In an economy where many traditional industries, from manufacturing through to print media, are facing huge competitive pressure and disruption, health care is seen as one last remaining growth sector, offering easy picking for business.

Those are the private vested interests. We also have eight state and territory health department bureaucracies supported by their ministers. In a nation where state governments feel that more and more financial and political power is accruing to the Commonwealth, it is natural that they defend their shrinking turf. Such considerations override any concern to see an integrated national system. In response, the Commonwealth is reluctant to stare down the parochialism of the states.

Reform is possible

Australian governments have a strong record in economic reform. In the 1980s the Hawke-Keating Government took on vested interests, and negotiated a wide-ranging set of reforms in the manufacturing, transport and financial services industries. Earlier, in the mid-1970s, the Whitlam Government, when it introduced Medibank, successfully stared down the AMA and the health insurers. Although the Fraser Government unwound many of these reforms, the Hawke Government successfully resurrected universal public insurance in the form of Medicare.

But there has been no significant reform of the health sector since then. In 1997 the Productivity Commission recommended a comprehensive inquiry into health financing, but no government has initiated such an inquiry. Corporate interests have become more involved in health care, and PHI has become embedded once again.

Governments generally over-estimate the power of lobby groups. They can make a lot of noise – particularly when, as a result of successful rent-seeking in the past, they have accumulated large funds to spend on scare campaigns .But the capacity to make noise does not equate to a capacity to influence voters. Opinion polls consistently show that the public believe Coalition governments are too much influenced by big business, which means reforming governments should be able to gain electoral advantage from standing up to rent-seekers.

The problem is not just about financial self-interest, however. It is also about the inertia of established practices, and an incapacity of those on the “inside” to imagine any significant variation on current arrangements. Practices such as the separation of pharmacies from medical services, fee-for-service funding, the dependence of private hospitals on private insurance, the separation of medical from hospital services in private hospitals, and so on, have become entrenched in the thinking of policymakers, politicians and many journalists. There is a deficit of imagination, an incapacity to think beyond the present.

A part of the problem lies in the Commonwealth bureaucracy. Commonwealth Ministers for Health are very dependent on the Department of Health and Ageing, particularly, as is often the case, when ministers are not across the issues and don’t have a clear policy program themselves. Aneurin Bevan showed how important political leadership is.

DHA is ill-equipped for policy reform. Rather, its objective seems to be to keep the peace with provider lobbies, and to keep the minister out of any public brawl or argument.

The Department is structured in ways that reflects the interests of providers such as doctors and pharmacists, rather than on the basis of community interests, such as acute care, chronic care or demography. It has expertise in administering existing programs but it has little economic expertise. Fiscal concerns tend to crowd out any consideration of economics.

In fact the Department doesn’t even effectively integrate the Commonwealth’s own major programs, let alone make any real progress in bridging the Commonwealth and state divide.

Late last year in its Capability Review of DHA, the Australian Public Service Commission said that the Department ‘is hierarchical and siloed, … the Department does not have a high level strategic policy framework … policy discussions are largely constrained within work silos … there is reluctance from the Department to consider new and changed policy directions’.

The Australian National Audit Office has also just reviewed the Fifth Community Pharmacy Agreement. It reported ‘Six broad principles and objectives were included in [this agreement] … The Department is not well positioned to assess whether the Commonwealth is receiving value for money from the agreement overall “               

The Ministerial/Departmental model in health has failed. It is incapable of contesting the power of the rent seekers. The community is effectively excluded.

Unless the health debate is taken to “outsiders”, away from the insiders – the rent seekers and vested interests– we are unlikely to see significant progress in health reform. The vested interests invariably win out over the public interest.

Political struggles between the public and rent-seekers are not uncommon, but there are reasons why in health care the public interest has a hard time securing a voice. Most of the public most of the time have little contact with health services. The intense users tend to be the chronically ill (who are reasonably active but do not constitute a majority) and those who are nearing the end of their lives and are not in a position to exert political influence. It is unlike services we all experience such as education or transport, where strong public lobby groups naturally arise. Also, health lobby groups are able to exploit the public’s trust in health care provider’s services – a trust which is well-justified on the grounds of professional competence, but which should not logically extend to trust on financial or political matters.

With a few exceptions the media does not really understand health issues. Press releases from pharmaceutical firms, pathologists and health insurers and other rent-seekers provide easy material for under-resourced journalists. It is easy for governments and so-called “business interests” to rise scare campaigns about the affordability and performance of government health services.

The power of vested interests in health must be strongly contested.

In Part 3 I will address governance and issues of process which are necessary to break through the inertia and counter the power of the vested interests that batten on the health system.

John Menadue chaired the NSW Health Council 2000 and chaired the SA Generational Health Review 2003. 

Policy Series

I will be posting three articles on health policy.

This article outlines the priority areas where reform is necessary.

Part 2 will explain why reform is so difficult but not impossible.

Part 3 will be about processes and governance issues that are necessary to move us beyond the present inertia, incrementalism and tinkering, with suggestions for policy directions. I will not be proposing specific policies.

The Rudd-Gillard Government – lost opportunities

Traditionally, in Australia and elsewhere, Labor and similar governments have been the initiators of health reform. Conservative governments, in general, have opposed or wound back health reform.

In Australia the Labor Party, guided by principles of universalism, equity and economic efficiency, gave us publicly-funded health insurance – initially through Medibank and then through Medicare.

In spite of high expectations in health reform, however, in its 2007-2013 period in government Labor really did little more than muddle through. The Rudd Government established a National Hospital and Health Reform Commission (NHHRC), but it was composed largely of health insiders who seemed to be incapable of seeing health policy from a broad perspective and who failed to grasp the basic economics of health care.

To its credit the Rudd and Gillard Governments had one major policy achievement – plain-packaging of cigarettes, and before it lost office was making progress on other aspects of prevention and public health.

Indigenous, mental and rural health all remain in a parlous state. Health programs operate in isolation from one another. The funding of health care through multiple public, corporate and private channels results in serious inequities. And, in general, there are administrative inefficiencies and a poor allocation of scarce resources.

Since 2013 the situation has worsened. The Abbott Government has abolished the Australian National Preventive Health Agency and Medicare Locals, has foreshadowed deep cuts in funding for state hospitals, and put up ill-considered proposals for GP co-payments. The new Minister for Health fiddles around the edges.

Getting the most from what we have

In considering health reform, we need to start with an appreciation that we have one of the best health services in the world in both efficiency and equity, thanks to Medicare. But Medicare was established over 40 years ago. There is little coherence or consistency in what we have at the moment. Our health care arrangements could not be called a ‘system’. They have no clear and underlying principles or philosophy.

As a result of that lack of coherence and fragmentation there is waste in our health care arrangements. When we discuss health care we discuss parts of it, medical services, pharmaceuticals, hospital and mental health. But seldom do we discuss the ‘system’.

Nurses, doctors, paramedics and others are all working hard and professionally, but they work in silos. I have estimated that reforms would result in a saving of at least ten per cent of our health bill or about $15b to $20b in today’s costs. Abolition of the taxpayer subsidy of over $10b per annum to private health insurance would represent about half of these savings. See my blog of 17 March 2015 on PHI and funding a Medicare dental scheme.    

But a big waste is in misallocation of scarce resources-a $10b Private Health Insurance subsidy and serious underfunding of mental and indigenous funding. Governments seek savings in public health and primary care – savings which are more than offset by higher needs for hospitalisation and high cost specialist care.

Seldom do we stand back and ask the central issue: what do we need and expect from a health system? That question should be a starting point for reform.

The concerns of health policy – a system approach

Reform needs to cut across programs, and concerned with the following six issues.

1. Primary care. Primary care has been largely ignored in health reform. It should be the starting point. Early interventions and health check-ups can head off costly and debilitating illnesses. But unfortunately the financial incentives are against primary care and in favour of expensive specialists.

We have an obsession with hospitals. But hospitals should be the last resort rather than the first. Countries such as the United Kingdom and New Zealand have high quality care, in part because of the philosophy underlying their systems, but also because those systems are grounded in primary care, which is the most efficient and equitable way to deliver health services for all regardless of income. It is where care is best integrated.

Fee for service (FFS) remuneration in primary care has encouraged “turnstile medicine”, excessive treatment and increasingly the corporatisation of general practice. FFS is a major barrier to reform in primary care. FFS may be appropriate for episodic or occasional care for walk-in patients but it is not appropriate for chronic and long term care, particularly mental and indigenous health care. Our governments have failed in this key area. Increasingly physicians in Europe and elsewhere are taking salaried positions where they are supported in practice medicine in a collegiate environment where the time for team review of patient management is a routine part of care, not something that is seen as an irritating waste of time with poor remuneration. FFS encourages over-investigation and over-treatment. Doctors respond to financial incentives just as other people do and this is not always in the interests of patients.

A major barrier of course to improved health services through primary care is that the Commonwealth funds GPs and other medical services, other than those in public hospitals, while the states operate public hospitals. There are substantial savings in keeping patients out of hospitals but with different funding steams there are few incentives to do so. In fact, when the Commonwealth is more concerned with its fiscal balance than with sound economics, it has every temptation to skimp on primary care, essentially imposing higher costs on the states and poorer health outcomes on the community. The Commonwealth’s fiscal obsession has outweighed any sense of economic responsibility.

The trends in General Practise are disturbing. In 1999 45 % of doctors were GP’s it is now less than 38%.The earnings of GP’s are substantially less than specialists. It is more attractive financially for medical graduate to become specialists

In this blog, John Dwyer (See ‘Commentary Part 1‘ and ‘Health Policy Reform Part 2‘) argued persuasively for an integrated primary care system in Australia. It would provide a ‘medical home’ for a wide range of patients with diverse health problems.

2.  Workforce. Health is the largest and fastest growing sector of the Australian economy. Its structure and workforce are riddled with 19th Century demarcations and restrictive work practices. For example there are several hundred nurse practitioners in Australia when there should be thousands. About 10 per cent of normal births in Australia are delivered by midwives: in New Zealand that figure is over 90 per cent.

We don’t have a shortage of doctors so much as a misallocation of doctors. Nurses, allied health workers and ambulance staff are denied opportunities to upgrade and realise their professional potential and improve services.

Pharmacies should be providing more basic health services for the community and should be active partners with doctors in primary care.

As Minister for Health, Nicola Roxon enabled some nurse practitioners and midwives to access the Medical Benefit Scheme but the access was quite minor. The MBS can be the lever for major workforce renewal.

It is quite remarkable that we have endless talk about the need for workforce reform everywhere but in the health sector. The restrictive work practices and demarcations in the health sector are a disgrace. Jim McGinty will be writing further on health workforce reform in this policy series.

3. Program structures. If we go to a garage to service our car we expect the garage to take responsibility for the whole car. But not in health. We have to go to different professions for different services, suppliers and interest groups all with their separate billing and regulations. Health services are structured and funded around providers – medical services by doctors, pharmaceuticals through big Pharma and the Pharmacy Guild, and hospitals through state governments and private agencies. The Department of Health and Ageing reflects this provider focus rather than a focus on consumers.

Such a provider-based structure, rather than a user- or customer-based structure, is reminiscent of corporate structures abandoned in the private sector a half-century ago, and is inconsistent with the “outcomes” focus of public sector reforms of the 1980s. Yet it survives in the health sector with the only institutional recognition of consumers is through the Health Consumers Forum of Australia, a body funded by the Commonwealth and which seems more like a marketing arm of DHA than a group representative of consumer interests. Patients are invariably last in the queue.

We need to progressively change the focus of health programs to serve the community rather than providers. One possible structure would be around types of users – acute, chronic and occasional. It would help reduce the competition between different provider areas for limited resources. DHA shows little interest in consumers but together with the Minister always seems to have an open door for the rent seekers such as the Pharmacy Guild and the AMA.

4. Funding. Funding of health services is a mess, resulting in serious inequities, high administrative costs, and misallocation of scarce resources. Some services, financed either through private health insurance or Medicare, are free at the point of delivery, while others can leave consumers with massive out-of-pocket expenses.

We have some of the highest co-payments in the developed world. They also lack rhyme or reason. ” with the level of government subsidies varying enormously. Some co-payment arrangements work on a safety-net basis, while others, such as for psychologists, leave the consumer bearing open-ended risks. The Abbott Government’s “reforms”, if implemented, would make the situation worse. Medical and pharmaceutical co-payments have little in common, and dental services are much more poorly funded than medical services. The safety nets are unfair and lead to abuse.

Persons on high incomes should pay more for health services through efficient and defensible co-payments. A “universal” service does not necessarily mean it should be free. Subject to a means test, there needs to be more discipline by consumers in their use of health services. There is no sign that the Commonwealth is concerned about the problem however, even though most other countries have better models to emulate. The Nordic countries, for example, insist on a single public funder and universality but with efficient and equitable co-payments. Jennifer Doggett will be writing further about co-payments in this policy series.

The other great funding distortion in Australian health care arrangements is private health insurance (PHI) – essentially a high-cost mechanism which allows some, particularly those with high incomes, to jump the queue for hospital services, thus worsening waiting times in public hospitals by diverting resources to private hospitals, contrary to the claim that it takes pressure off public hospitals. PHI penalises country people because there are few private hospitals in the bush. Australia’s arrangements also mean that private and public hospitals operate on different funding streams and with little integration of services.

The government, through means testing rebates for PHI, has removed some inequities, but PHI remains a costly and inequitable way to do what the tax system and Medicare do much better. Also, PHI is administratively inefficient with bureaucratic costs including profits about three times higher than Medicare.

Private gap insurance promoted by PHI has facilitated enormous increases in specialist fees. Most importantly, the expansion of PHI progressively weakens the ability of Medicare to control costs. The evidence world-wide is clear that countries with significant PHI have high costs without any better health outcomes.

The stand-out example of PHI causing high costs and poor outcomes is the United States. President Obama may have substantially achieved universal coverage, but PHI with its lack of cost control will ultimately cripple and finally destroy his reforms. Warren Buffett has described PHI companies as the “tape worm” in the US health sector.

The Commonwealth already has a sound model of a single payer operated through the Department of Veterans Affairs – a model which retains the strong control of a single payer accountable to the community whilst allowing private practise involvement in service delivery.

The Commonwealth has failed to understand the damage that PHI is already doing in Australia. PHI is a Damocles sword hanging over Medicare. We must assert the key importance of a single public funder.

The $10b plus per annum taxpayer subsidy to PHI is more than would be required to fund a Medicare dental/oral health scheme and significantly improve the funding of mental, indigenous and rural health

This subsidy of $10b is the most critical issue in health care. The nettle must be grasped!

5. Defining Medicare. This great Labor monument needs a review. Medicare has become a passive but efficient funding mechanism, providing a partial subsidy for certain health expenses, rather than the public insurer it was intended to be. After all, it is still called the “health insurance commission”, but it is nothing of the sort, and it is not even within the health portfolio.

Medicare has a remarkable database which should be used to highlight and inform policy concerning over and underutilisation of services across the country. Why for example do rates of caesarean section vary enormously across the country and why are Australian rates very high in world rankings? There are many other large variations in clinical procedures that must be made public and explained. Medical services should be subject to the same rigorous cost-benefit examination as pharmaceutical services. Medicare is not doing it.

Even more potential lies in the use of that database for research into efficacy of treatments. This was an intention of Medicare’s designers, who envisioned the day when computing power could extract clinical information from that database. That day has arrived, but the government, although willing to invest billions in some areas of medical research, shows no interest in using this valuable resource, or in the integration of MBS and PBS data which would provide rigorous pharmaceutical evaluation at a tiny fraction of the cost of clinical trials.

6. Cost and blame shifting. Governments, more concerned with their fiscal balances than with economic efficiency, try to shift costs on to other governments, Commonwealth to state and vice versa, on to individuals, or on to future generations for example in neglect of public health. Attempts to resolve the Commonwealth/state blame and cost shifting have been largely unsuccessful and certainly expensive with the Commonwealth succumbing to state political pressure without fixing the lack of integration.

In Part 2 I will be looking at the major obstacles to health reform, including the influence of the vested interests who are concerned to protect their own territory rather than serve the public interest.

John Menadue chaired the Report of the NSW Health Council 2000 and the SA Generational Health Review in 2003. 

Fairness, Opportunity and Security
Policy series edited by Michael Keating and John Menadue.

The policy rationale behind a national broadband network would appear to be a simple one. The objective would be to part subsidise the construction of a national network that ensures two policy elements would be achieved. The first is a broadband infrastructure that ensures that Australian homes and businesses have broadband at a level that does not limit the national competitiveness compared to its trading partners. The second is to ensure that this broadband service is universal.

The policy challenge is that this was never the original policy rationale and that current policy positions in the national broadband network are inconsistent with a deregulatory stance.

The policies associated with the national broadband network are trying to solve a very broad range of problems and moist of these do not fit in with delivering a telecommunications network. Even the title of the policy is misleading. The term “national” is associated with universality. However, the national broadband network is actually a set of access networks and the connectivity between these access networks is provided by commercial players.

It’s worth looking at how we go to the current situation. To do this, there is an overview of technology and then a look back at the start of national broadband network planning as an outcome of the 2007 election.

Technology

One of the problems with policy clarity is that there are technology debates which can cloud matters. There are two ways in which broadband services can be delivered. These are fixed line and wireless. In the wireless space, delivery can either use a territorial system, in the same way that mobile broadband is delivered or via satellite. Fixed line delivery uses a combination of optical fibres and (optionally) copper wire of some type. Current ADSL (which is a mercifully short acronym for asymmetric digital subscriber line) uses the copper pairs that historically delivered telephone services. The closer the fibre is to the premises, the higher the bit rate that will be able to be delivered. This is a result of the fact that copper pairs are not good at supporting big bit rate services. Coaxial cable is much better at delivering services over longer distances.

These issues lead to a set of acronyms and the need for standardisation. The existing Telstra copper network has two segments. The first is between the exchange building and the pillar in the street. The pillar typically provides about 300 copper pairs for about 150 premises. These premises are the “distribution area” (DA). The copper between the exchange and the DA is usually in very good condition as the cables are kept pressurised with compressed air to prevent water ingress. The copper in the DA may well have moisture issues and these can limit the data rates that can be delivered. When the fibre runs all the way to the premises, the technology is called “fibre to the premises” or FTTP. If the fibre runs to a new box of electronics serving a DA, this is “fibre to the node” or FTTN. If the last part is coaxial, using the cable which can deliver cable television, then this is a hybrid of fibre and coaxial or HFC.

A FTTP network uses one fibre that feeds a splitter which provides service to up to 32 premises and is normally designed to deliver to half that number. As a practical matter, co-locating ten splitters per DA – usually in the pavement near the pillar is a practical solution.

The FTTN solution requires power to be delivered to the electronics in the node. This is awkward as there is rarely a meter available.

History

The original approach for national broadband network planning sometimes known as NBM Mark I was for a limited government subsidy of a broadband network that would provide 12 Mbps downstream and 1 Mbps upstream. The requirement was set out in a tender process in 2008. The likely (and assumed) technology was fibre to the node, which is described below. The government offer was $4.7 billion and the tender process was designed to be in the form of a least-cost subsidy auction. That is, the winner would provide “best bang for the buck” without the government paying for the whole of the network.

The bids were expected to be a mixture of a little FTTP, mainly for new construction areas (greenfield sites) and FTTN in established neighbourhoods (brownfield sites). In practice, Telstra’s bid was only 12 pages long and was knocked out because it did not have the required industry plan. Telstra’s more detailed proposal was not submitted as Telstra was seeking assurances that there would be no structural remedies (specifically, structural separation) applied. Other bidders put in bids which were conditional on access to elements of Telstra’s network. This NBN Mark I process led to a report to the Minister in January 2009 that none of the other bids was appropriate.

In April 2009, the government announced that it would form a government business enterprise (now NBN Co) and invest $43 billion to roll out an FTTP network to 90% of homes and businesses, with the balance receiving broadband services using wireless technologies. The investment was critical to making sure that the project was “off balance sheet” for budgetary purposes. Over subsequent years, and specifically in a Shareholder Ministers’ Statement of Expectations in December 2010, the technology mix was changed to 93% FTTP, 4% terrestrial wireless and 3% satellite wireless.[1] There was also a policy requirement that there should be uniform national wholesale pricing. That is, the price should not be determined by the cost. This is important when NBN Co planned a $3.5 billion capital expenditure to deliver wireless services to 200,000 homes. Its subsequent review realised that this plan underestimated demand and costs meaning that the cost per premises will fall but the absolute costs will rise.[2]

The effect of the policy was that NBN Co was mandated to cross-subsidise regional and remote services from the lower costs in metropolitan areas.

There was also a concurrent policy which gave Telstra the choice between voluntary structural separation and legislated functional separation. However, it was barely a choice as the consequences for failing to “volunteer” included preventing Telstra from accessing spectrum, the lifeblood of mobile services and requiring it to divest its interest in box Foxtel and the HFC over which some viewers receive subscription television.

The reviews after the 2013 election have changed the fixed line technology to a mix of FTTP (26%), FTTN (44%) and HFC (30%).[3] Seven per cent of premises will still be served by wireless. This is the current government’s multiple technology mix.

The policy challenges

The most major policy challenge is the fact that deploying a different technology mix in response to a new government’s Statement of Expectations[4] is not a rapid process. The agreements between NBN Co, the government and Telstra, which took more than a year first time around, were more complicated given that each of Telstra and Optus were selling their HFC networks to NBN Co. The previous deal had provided a “disconnect fee” when customers were moved from HFC to the national broadband network.

Another issue is that technology marches on. This aspect of productive efficiency has three implications. The first is that the expectations of consumers change. When NBN Mark I was released, the iPhone 3GS was months away and the iPad had not been launched. The consumer expectation of multiple devices using fixed and mobile networks was in its infancy. Now consumers expect to get 25 Mbps from their 4G mobile devices and for this to remain a target for fixed broadband seems odd. After all the US Federal Communications Commission has raised the minimum bit rate in their definition of broadband to 25 Mbps.[5] The second problem is that the best technology is always the next one. NBN Co is proposing to use a standard called DOCSIS 3.1 for HFC services and this will deliver near fibre bit rates. However, it requires significant expenditure on “node splitting” in the deployed cable network and will only work when there are commercial quantities of DOCSIS 3.1 modems. In an irritating twist, this will be after the election that is most likely to take place in 2016.[6] The third effect of productive efficiency is that it is not a government monopoly. When TPG decided to use its a lower cost technology to extend its network to blocks of units using a variant of FTTN called fibre to the basement (inevitably, FTTB), the Minister for Communications imposed a new licence condition on fixed line carriers requiring that they offer wholesale services for FTTB to try and dissuade TPG from competing with NBN Co.[7] This is an odd course of action for a government that favours free markets. However, it reflects the continuing policy of implicit cross-subsidisation from the metropolitan areas to the bush.

Form an economic perspective, there is no real rationale as to why this subsidy should come from telecommunications users, rather than consolidated revenue. If there needs to be a policy to provide telecommunications services into remote areas, and this type of universal service policy is widely adopted on a global basis, then there is no reason why the subsidy could not be explicit (a line item on a bill) if it is not to come from Treasury. The newly established Bureau of Communications Research at the Department of Communications will be looking at this issue.[8] However, there is a technological matter which will change the economics.

When the first Shareholder Ministers’ Statement of Expectations was issued, this mandated NBN Co not to bid for spectrum in the 700 MHz band. We now have a situation where NBN Co is in the process of building 1,400 base station sites using 2.3 GHz spectrum which is not optimised for coverage. There are two parameters in designing a fixed wireless network, coverage and capacity. Coverage determines who will receive a service and capacity is based on how many people use that service concurrently. For most applications, spectrum below 1 GHz is best for coverage and above 1 GHz for capacity. The reason that the 700 MHz spectrum was not made available to NBN Co was that its value (in terms of budget estimates) was too great. In practice, there is spectrum that was unsold at auction which could be used to provide NBN Co services, Public Safety Mobile Broadband services and still have value for its use in supplying consumer mobile broadband services.

Solutions

It’s clear that trying to solve universal service policy matters at the same time as limiting the competitive effect of Telstra and rolling out a network whose design parameters are constantly falling behind the Pareto curve established by productive efficiency is problematic. There are areas where there is poor or no broadband. This is not tolerable in an advanced economy, ever. Solutions that simply transfer consumer wealth to incumbent operators are not the solution. Perhaps it’s time to take another look at what government intervention (financial or regulatory) is required to deliver a tightly specified outcome. This might mean making some subsidies explicit and it might also mean that spectrum which holds a valuation set by the previous government is reassessed for use in delivering that outcome.

At the end of March 2015, there were 389,000 premises actually connected to the national broadband network.[9] That’s not a lot to show for a process that started seven years earlier.

There are a few approaches that the parliament could take which actually reflect the rapid changes in technology and the cross-subsidisation issues. The first is that the Statement of Expectations should not be based on bit rates in election years. Far better to follow the approach pioneered by David Murray in the Financial Systems Inquiry and have a target which moves with either the OECD or, and this is a much tougher ask, in line with our major trading partners. The target should be a basket of service (expressed as an average bit rate served and amount of data served, a set of service levels and retail price). In line with the final recommendation, meeting this target need only be subsidised in the areas where commercial offerings have not kept up. The second is a rationalisation of universal service. It does not make sense to mandate that NBN Co should be the wholesaler of last resort in remote areas and Telstra is the retailer of last resort and then to require that both use different delivery technologies. The third is to provide those subsidies that are needed for the rationalised universal service from consolidated revenue, rather than in the form of cross-subsidies from metropolitan areas. Once this is done, the final approach is logically to target government subsidies at the under-served suburban and regional areas where current broadband access is poor. In this environment, it will not matter that TPG has a better fibre to the basement solution than NBN Co; there will be no need for special licence conditions. Instead, just let the market do its job. If this means that we end up with FTTP networks deployed by Telstra and others because people want to watch more than one Netflix ultra-high definition streaming service, then intervention by government will be fruitless.

Dr. Rob Nicholls is a Research Fellow at each of Swinburne University of Technology and the Centre for International Finance and Regulation. He is a visiting fellow at UTS Sydney Law. He is the Independent Telecommunications Adjudicator in a regime established to deal with wholesale disputes arising over both legacy services and migration to the NBN.

 

[1] At http://www.nbnco.com.au/content/dam/nbnco/documents/statement-of-expectations.pdf accessed 5 May 2015

[2] NBN Co, Fixed Wireless and Satellite Review, NBN Co http://www.nbnco.com.au/content/dam/nbnco/documents/NBNCo_Fixed_Wireless_and_Satellite_Review_07052014.pdf (2014) page 9 accessed 5 May 2015

[3] NBN Co, Strategic Review – 12 December 2013, NBN Co http://www.nbnco.com.au/content/dam/nbnco/documents/NBN-Co-Strategic-Review-Report.pdf (2013) page 19 accessed 5 May 2015

[4] At http://www.communications.gov.au/__data/assets/pdf_file/0014/221162/SOE_Shareholder_Minister_letter.pdf accessed 5 May 2015

[5] At https://www.fcc.gov/document/fcc-finds-us-broadband-deployment-not-keeping-pace accessed 5 May 2015

[6] At http://www.nbnco.com.au/corporate-information/media-centre/media-releases/nbn-co-to-unleash-fibre-speeds-for-cable-customers.html accessed 5 May 2015

[7] The condition is at http://www.comlaw.gov.au/Details/F2014L01699 and the consultation at http://www.communications.gov.au/consultation_and_submissions/consultation_on_draft_carrier_licence_condition accessed 5 May 2015

[8] At http://www.communications.gov.au/the_bureau_of_communications_research accessed 5 May 2015

[9] NBN Co, National Broadband Network – Rollout Information, 23 April 2015, NBN Co http://www.nbnco.com.au/content/dam/nbnco2/documents/nbnco-rollout-metrics-23042015.pdf (2015) page 3 accessed 5 May 2015

Fairness, Opportunity and Security.
Policy series edited by Michael Keating and John Menadue.

In the 2013 Federal election, neither of Australia’s major political parties took forward a detailed media policy. This was surprising as one of the main features of the Gillard and Rudd Labor governments was significant attention being given to reviews of media and communication law and policy, particularly between 2011-2013. The Convergence Review was established in 2011 to ‘review the current policy framework for the production and delivery of media content and communication services’ (Convergence Review Committee, 2012, p. 110), and presented a comprehensive roadmap for media policy reform in April 2012. It was accompanied by a series of other media-related policy inquiries during 2011-2013, including the Finkelstein Review of news media regulation (Finkelstein, 2012), and the Australian Law Reform Commission (ALRC) reviews into the National Classification Scheme (ALRC, 2012) and Copyright and the Digital Economy (ALRC, 2013). These media-related reviews occurred in the context of Labor’s commitments to develop a National Broadband Network (NBN) as an enabling technological infrastructure for wider forms of innovation in the digital economy, in the cultural and creative industries, and in delivery of government services.

There is considerable merit in Labor revisiting these media inquiries as it seeks to develop a comprehensive media policy framework for a future Federal government. In particular, the issues identified by the Convergence Review around the need to develop a regulatory framework sufficiently robust for the next 20 years continue to warrant a response. The Convergence Review argued that ‘many elements of the current regulatory regime are outdated and … other rules are becoming ineffective with the rapid changes in the communication landscape’ (Convergence Review Committee, 2012, p. 1). In particular, it was argued that ‘Australia’s policy and regulatory framework for content services is still focused on the traditional structures of the 1990s—broadcasting and telecommunications. The distinction between these categories is increasingly blurred and these regulatory frameworks have outlived their original purpose’ (Convergence Review Committee, 2012, p. vii).

Similar observations have been made elsewhere about how existing laws, policies and regulations lag behind the technological, economic and socio-cultural changes associated with the Internet and media convergence. The European Commission has observed that ‘lines are blurring quickly between the familiar twentieth-century consumption patterns of linear broadcasting received by TV sets versus on-demand services delivered to computers’, and that ‘if, in a converging world, linear and non-linear provision of similar content were to be treated as being in competition, then the current differences in [regulatory] regimes could clearly distort that relationship’ (EC, 2013, pp. 1, 11). The Media Convergence Review conducted in Singapore in 2012 found that ‘policy and regulatory frameworks which were designed for traditional media platforms and industry structures are no longer able to cope with the characteristics of the converged media environment’ (MDA, 2012, p. 5).

Media convergence has been central to driving the need for regulatory and policy change. Convergence refers to the combination of computing, communications and content around networked digital media platforms. It also refers to the rise of new, digitally based companies such as Google, Apple, Microsoft, Netflix and Amazon, the rapid growth of social media platforms such as Facebook, Twitter and YouTube, the proliferation of user-created content, and multi-screen accessing of media content (e.g. accessing TV programs from tablet computers). Media convergence occurs in parallel with a series of other changes in the global media and communications environment that include:

1. Increased access to, and use of, high-speed broadband Internet;
2. The globalisation of media platforms, content and services, meaning that digital media content can be sourced, distributed and accessed to/from any point in the world;
3. An acceleration of platform and service innovation that makes it increasingly difficult to define the ‘industry’ that major digital companies are operating in (e.g. is Google a media company?);
4. The proliferation of user-created content, and the associated shift of media users from audiences to participants, resulting in the blurring of a once relatively clear distinction between media producers and consumers;
5. The blurring of public-private and age-based distinctions, as all media content is increasingly distributed and consumed online, in environments that are public in terms of their access platforms yet private in terms of their consumption.

How such developments impact upon existing forms of media law and policy are many and varied. The Australian Communication and Media Authority (ACMA) identified a series of what it termed broken concepts, where ‘regulation constructed on the premise that content could (and should) be controlled by how it is delivered is losing its force, both in logic and in practice’ (ACMA, 2011a, p. 6). An example would be the ’75 per cent audience reach rule’ for commercial broadcasters, that seeks to limit the leading players to the capital city markets, and enabling regional ownership of TV stations. Such a rule presumes that we only access television content from television stations, whereas we now access it online, whether from the networks themselves (e.g. ABC iView), from YouTube and like services, or from the IPTV providers such as Netflix, Stan, Presto etc. This is not to say that catering to specific regional markets is no longer important – it is – but rather that the instrument chosen of restrictions based on geographical reach is no longer fit for purpose.

In an environment of dramatic change in the media landscape, what are the enduring concepts that continue to shape regulation? For libertarians such as the Institute for Public Affairs (IPA), there are none: technological change and limitless consumer choice render the need to regulate media content or protect audiences redundant. To that end, the IPA have recommended abolishing the ACMA and the Classification Board, as well as privatising SBS and breaking up the ABC (Roskam et. al., 2012). But no other country in the world is approaching media convergence in that way, and the digital media players themselves expect some form of media regulation to continue in the future. To take one example, Google recognises the importance of Australian content rules for the maintenance and strengthening of a diverse national cultural identity, even if it wishes to debate the best means of achieving such goals (Flynn, 2012).

The ACMA (2015) has identified a set of 16 enduring concepts that continue to provide public interest principles around which regulation of media industries, markets, content and services can be evaluated. They are a mix of traditional media policy goals and principles that have become increasingly important in the digital environment, and include principles pertaining to market standards, social and economic participation, cultural values, and community safeguards. These principles cover: questions of market access and standards, including consumer rights for complaint and redress; social and economic participation, including the equitable provision of digital services, digital literacy, and the need to safeguard content diversity in a pluralist democracy; cultural values, including support for Australian content, community standards provisions, localised services, and media ethics; and safeguards, such as access to emergency services, protection of children from potentially harmful content, and privacy provisions for the management of digital data.

Such core concepts provide the basis for identifying principles-based regulations that can be durable and enhance Australian media and its contribution to citizenship, culture and public life at a time of rapid changes associated with digital convergence. In relation to cultural values, for instance, it is apparent that many of the provisions that have existed to support Australian identity, community values, localism and ethical standards have only applied to the dominant platforms such as broadcasting and, to a lesser extent, print media. Developing policies that would, for instance, support Australian content on IPTV services or the multichannel services of commercial broadcasters, promote local community identity through online media, or ethical standards among bloggers and online-only services, requires new approaches to regulation that are developed in consultation with the community and with the providers themselves. It also requires consideration of what constitutes a “media company” of sufficient audience reach to warrant regulation of its conduct and policies to promote socially desirable forms of media content, and how this is undertaken without inhibiting freedom of personal communication.

In balancing the relationship between competitive markets and community safeguards, the ideal policy setting would be that of platform neutrality, where rules are based on media content rather than upon platforms or delivery technologies. A good example of the risks associated with treating content differently based upon its platform was the long prohibition on R18+ computer games, that was finally overturned in 2013, and which had left Australian games regulations at odds with the rest of the world, as well as creating regulatory anomalies that generated uncertainty in a fast growing industry. This would be applied in a manner that was gradual and not necessarily rigid: the community has greater expectations of the accuracy of content appearing on the ABC web site, for instance, than it does of personal blogs. But principles such as protection from harm and community standards remain important regardless of the delivery platform, or indeed whether the provider is locally based or part of a global platform, and it is appropriate for government to work with the major digital media platform providers to ensure that they meet minimum safeguards.

The positive role of such principles in promoting quality, diversity, Australian content and localism also points to a central role in the 21^st century for public service media. The ABC and SBS have become multiplatform content services, and have been important innovators in the convergent media environment. They will continue to face the challenge of how to provide the content that is central to their Charter obligations (accurate and comprehensive news services, educational content, multicultural content etc.), while also opening up their platforms in order to enable greater community access, diversity of voices and public participation. In order to do this, and to promote digital citizenship in the 21^st century, governments will need to ensure that they are adequately resourced and not artificially inhibited from being innovators in the convergent media environment.

In advancing an agenda for media policy reform, the challenge is that the same media outlets that are affected by legislative change are those who also provide public information about it. The extreme disjuncture this can produce was seen in the previous Labor government, when Senator Conroy’s proposals to amend communications legislation in order to establish a Public Interest Media Advocate to strengthen the requirements on news media outlets to conduct themselves in an ethical manner saw him compared to Joseph Stalin and Kim Jong-Un on the front page of the Sydney Daily Telegraph (Hobbs and McKnight, 2014). Added to this is the propensity for media incumbents to seek policy outcomes that best suit their own interest: News Limited favours a self-regulatory Australian Press Council that it funds itself, rather than a government-supported entity; the commercial TV networks wish to see the three-station rule preserved into the indefinite future; and so on. There is also the long history of Australian media proprietors being close to the conservative political parties, perhaps best seen in recent times with Rupert Murdoch and then Opposition leader Tony Abbott sharing the podium at the 70^th anniversary dinner of the Institute for Public Affairs in April 2013. The lessons for Labor of the period in office from 2007 to 2013 may lead some to view media policy as something that goes in the “too hard” basket: you end up making political enemies for little tangible electoral return.

But important reforms to media legislation have been passed by Labor governments before, and could be again. The Hawke and Keating governments oversaw the creation of a new Broadcasting Services Act in 1993, as well as the Telecommunications Act 1989 and the Classification Act 1995. There is little doubt that the urgent need for change is felt in the relevant industries, in light of the forces associated with next-generation media convergence discussed above. It is also apparent that public expectations about getting better quality media and about ethics and standards in the media remain high, and the Internet and social media have made it much easier for all sections of the community to make their voices heard when they are dissatisfied with the Australian media’s performance. By taking a principles-based approach to amending media legislation, and being committed to open and public consultation rather than a “closed door” approach to consultation, a future Labor government could make lasting and important changes that would have important benefits for a democratic and diverse Australian culture, as well as enabling Australian media to be at the forefront of digital innovation, rather than simply seeking protection from global media platforms.

References Cited

• Australian Communications and Media Authority (2011) Broken Concepts: The Australian Communications Legislative Landscape, Melbourne: ACMA.
• Australian Communications and Media Authority (2015) Evidence Informed Regulatory Practice—An Adaptive Response, 2005-15, Melbourne: ACMA.
• Australian Law Reform Commission (2012) Classification – Content Regulation and Convergent Media, ALRC Report 118, Sydney: ALRC.
• Australian Law Reform Commission (2013) Copyright and the Digital Economy: Final Report, ALRC Report 122, Sydney: ALRC.
• Convergence Review Committee (2012) Convergence Review: Final Report, Canberra: Department of Broadband, Communications and the Digital Economy.
• European Commission (2013) Preparing for a Fully Converged Audiovisual World: Growth, Creation and Values: Green Paper, COM(2013) 231 final, 24 April, Brussels.
• Finkelstein, R. (2012) Report of the Independent Inquiry into the Media and Media Regulation, assisted by M. Ricketson, Canberra: Department of Broadband, Communications and the Digital Economy.
• Flynn, I. (2012) The Convergence Review and Media Policy – The Missed Opportunities. Telecommunications Journal of Australia 62(3): 47.1-47.9.
• Hobbs, M. & McKnight, D. (2014) “Kick This Mob Out”: The Murdoch Media and the Australian Labor Government (2007 to 2013). Global Media Journal – Australian Edition 8(2), http://www.hca.uws.edu.au/gmjau/wp-content/uploads/2014/11/GMJAU_Kick_this_mob_out.pdf, date accessed 3 May 2015.
• Media Development Authority (2012) Media Convergence Review – Final Report. Singapore: MDA.
• Roskam, J., Paterson, J. & Berg, C. (2012) Be Like Gough: 75 Radical Ideas to Transform Australia. IPA Review 64(2): 6-11.

Terry Flew is Professor of Media and Communications at the Queensland University of Technology. He is the author of six books, including The Creative Industries, Culture and Policy (Sage, 2012), Global Creative Industries (Polity, 2013), New Media: An Introduction (Oxford, 2014) and Media Economics (Palgrave, 2015, co-authored with Stuart Cunningham and Adam Swift). He is a member of the Australian Research Council College of Experts, and an International Communications Association (ICA) Executive Board member. In 2011-12 he was seconded to the Australian Law Reform Commission, chairing the National Classification Scheme Review.