John Menadue

  • Adrian Bauman & William Bellew. Does a spoonful of sugar help the medicine go down?

    “A spoonful of sugar helps the medicine go down”, according to Mary Poppins. Many more spoonfuls of sugar currently pervade our lifestyles and unconscious food choices. The recent media focus on sugar has been remarkable, but the media frenzy has sought a single solution, a quick fix, to what is in reality a complex problem: childhood and adult obesity. Rapid increases in obesity rates have occurred since the late 1980s in Australia and in many other countries, and even if starting to plateau, still leaves 63% of adult Australians overweight or obese.

    Sugar is pervasive, not only (as we might expect) in fizzy drinks and sport drinks, but also added to a surprisingly wide range of foods. These include tomato or chilli sauces, muesli bars, as well as many “low fat” marketed foods (some yoghurts for example) which are high in added sugar. But is sugar the culprit? or is it just a marker of a trend towards increased processed food, increased consumption of convenience foods, and acculturation of our taste towards increased salt, increased sugar and increased fat ? All of these contribute to the “wicked problem” of weight gain, exacerbated by decreased physical activity at work and play, and through increased car use to get to or from places.

    But how does all this relate to sugar? A recent commentary in the Sydney Morning Herald (Peter Martin, April 2) called for soft drink taxes to be introduced [i]. The idea is that we all have to eat something, but some foods contain almost exclusively sugar, and soft drinks and so-called sport drinks contain almost nothing else (what nutritionists call “empty calories” as they lack any of the nutrients, vitamins or fibre that other high sugar foods, such as fruit may offer). High levels of consumption of empty calories from sugar sweetened beverages is a clear and independent contributor to weight gain in many epidemiological studies[ii].

    Many arguments are raised against efforts to curb sugar consumption. Firstly beverage manufacturers assure us it is part of a healthy and “balanced” diet. It seems un-balanced if it’s just adding to our total energy intake, and yet corporate marketing portray empty calories as contributors to a glowing lifestyle image and as a metaphor of well-being. One must be cautious of the motivations of the food industry according to Dr Margaret Chan, Director-General of the World Health Organisation. At the 8th Global Cnference of Health Promotion in Helsinki (2013)[iii] she said “it is not just Big Tobacco anymore. Public health must also contend with Big Food, Big Soda, and Big Alcohol. All of these industries fear regulation, and protect themselves by using the same tactics (of) lobbies, promises of self-regulation, lawsuits, and industry-funded research that confuses the evidence and keeps the public in doubt”. They also contribute to the polarised argument between individual choice to consume unhealthy foods, compared to structural, societal and cultural factors that contribute to us doing so. If we accept that we are mired in advertising and cultural depictions promoting unhealthy foods, in sponsorships of major sporting events and of the Olympics, then our cultural milieu is defined by these products. Governments that choose to address the problem this way are accused of “nanny state interventionism”, but it does require complex counter marketing against unhealthy products, facilitating access to affordable healthy choices, and mandating external industry regulation (as the food industry does not self-regulate well, as demonstrated when self-regulation was tried in restricting advertising of unhealthy foods to young children).

    One strategy, suggested by Peter Martin is the introduction of a sugar tax. This will be a differential tax, with the greatest impost on food items with the most sugar, and lesser taxation imposed on foods with less added sugar. This approach has been implemented in Mexico where a 10% tax has resulted in a 12% decline in the consumption of sugar[iv] sweetened beverages. Such taxes have community support and are evidence based[v]. Free-market advocates claim this is unfairly “taxing the poor”, but from a public health perspective targeting those at social disadvantage and targeting children and adolescents are exactly the groups who consume the most sugar sweetened beverages. An even stronger rationale for a sugar tax is that it will generate revenue, just as tobacco taxation has done for several decades. This can fund the substantial government investment required for comprehensive obesity prevention, extending well beyond simply reducing sugar. This could be used to support comprehensive obesity prevention efforts, and are supported by the majority in the community. This is our only chance to build the infrastructure for a healthier community and a healthier food environment in Australia. Thus preventing obesity just won’t happen with any single strategy, and a sugar tax is but one financial mechanism for funding the complex solutions required.

    Finally the problem is not only sugar. The Hippocratic maxim of exercise and diet in moderation still holds, and while the media in faddist fashions present us with new single solutions and quick fixes, a prudent approach would be to eat less overall, eat less fat and less sugar, consume mainly fresh produce and mostly plant-based foods. Diets like the Mediterranean diet show such balance, and combined with more active daily lifestyles (and non-smoking) are the only way to make real improvements to population health.

    Adrian Bauman, School of Public Health and Charles Perkins Centre, Sydney University

    William Bellew is Adjunct Professor, School of Public Health, Sydney University.

    [i] http://www.smh.com.au/comment/obesity-its-time-to-tax-soft-drinks-20160330-gnum4b.html

    [ii] Malik VS et al. American Journal of Clinical Nutrition. 2013;1;98(4):1084-102

    [iii] http://www.who.int/dg/speeches/2013/health_promotion_20130610/en/

    [iv] Colchero MA et al British Medical Journal 2016 Jan 6;352:h6704.

    [v] Escobar MA et al. BMC Public Health. 2013 Nov 13;13(1):1.

     

  • Geoffrey Harcourt and Peter Kriesler . The case for taxation.

    We were happy to sign the Australian Institute letter on taxation cuts in the Sydney Morning Herald (12/04/2016).We now would like to set out the general philosophy that lay behind our support.

    We have always argued that taxes have two main functions: first, the relative structure of taxation types and rates should reflect philosophical views on equity as between different groups in society. Secondly, the total tax take should impact on the need to achieve high levels of employment and activity, after taking into account the other main sources of overall demand at any moment of time — expected expenditures on consumption and investment, current and capital government expenditures, and net exports. Meeting these two criteria implies that sometimes the government will be in deficit, sometimes in surplus, so that neither achieving a deficit or a surplus or a balance at a moment in time or over time should be the criterion of fiscal policy, but the residual outcome of attempting to achieve these other fundamental aims.

    The corollaries of this view are, first, that hypothecation — matching particular expenditures with particular sources of finance — is a fallacy. Secondly, that achieving high levels of activity also usually implies agreeable rates of growth over time. This in turn means that even if sustained deficits result in rising debt-to-income ratios, these will not blow out for ever but will usually approach liveable-with debt-to-income ratios. That the budget be required to balance ‘over the cycle’ implies that the economy is a stationary state, i.e., on average the economy neither grows nor declines.

    Thirdly, implicit in this approach is that the total amount of capital expenditure by the government should reflect the longer-term needs of the society, especially the creation of green-friendly infrastructure, and that only in very special circumstances should government capital formation be used to achieve high levels of activity — usually it should be the second function of taxation noted above that should do this. May we add that government expenditure on the disabled, schools and teaching generally, and hospitals and medical care may be viewed as investments which result both in a more agreeable society and a more productive one?

    Finally, a distinction should be made between domestic debt raised in our economy, and overseas debt. Domestic debt requires a transfer between bond holders and taxpayers (of course, they can be overlapping sets) so that the impact on the economy is a secondary one, depending on whether there are great differences at the margin between the saving and consumption behaviour of interest recipients and taxpayers.

    There is a real burden associated with overseas debt — exports will have to be that much higher than they otherwise would have been in order to allow interest and loan repayments to be met. Nevertheless, if the borrowed funds are used wisely to finance productivity-enhancing expenditures, the level of activity would be higher than otherwise would have been the case, so that even after meeting the real burden, society will be better off than it would have been otherwise.

    All these important considerations have been forgotten in the political and other debates over taxation and spending in the last decades.

     

  • Brian Lawrence. Bracket creep and income tax priorities in the May 2016 Budget

    The May 2016 Budget will frame a political narrative about rising average incomes over recent years and the budgetary measures that will ensure that the trend will continue in the next year and beyond. This will occur despite the impact of cuts in Government expenditure over a range of services and cash benefits.

    There are two past Budget documents that summarise this kind of narrative in average living standards over the past two decades:

    • The last Budget of the previous Coalition Government in May 2007 provided a summary of the actual and projected improvements in real disposable incomes over the period 1996-97 to 2007-08, which was the period of Coalition Government. For the single person on Average Weekly Ordinary Time Earnings (AWOTE), the figure was 25.6%; see 2007-08 Budget Overview, Appendix A, Higher household incomes. In effect, this was the claim for the Coalition years.
    • The last Labor Budget in May 2013 provided a summary of the actual and projected increase in real disposable incomes over the period 2007-08 to 2013-14. For the single person on AWOTE, the figure was 11.8%; see 2013-14 Commonwealth Budget Overview, Appendix C, Helping households with the cost of living. In effect, this was the claim for the Labor years.

    What these figures hide, and the 2016 Budget narrative will also most likely hide, are the respective contributions that wages and the tax system have made to the improvement in the living standards of middle income earners; and the position of those who have fallen behind in these periods of national economic growth. They also hide substantial increases in income inequality affecting large pockets of the population; and they fail to disclose the impact that the tax system is having on income inequality after tax rates are taken into account.

    In the fifteen years since the commencement of the new tax scales which accompanied the introduction of the GST in 2000, AWOTE increased from $798.80 to $1,499.30 per week (November 2000 to November 2015), a very healthy 87.7%; and a figure well in advance of the CPI increase of 48.3% (December 2000 to December 2015).

    That figure of 87.7% is a key figure for the understanding of the current debate about bracket creep.

    Bracket creep has happened when you find that you are paying a higher proportion of your income in income tax, even when your income has moved by the same percentage as other taxpayers. Bracket creep helps the Federal Budget when the percentage collected from income tax on wages rises faster than average wages.

    The period January 2001 to January 2016 has seen some major changes in the income tax system. A comparison between the two dates allows us to compare the impacts of those changes on different income groups; and to consider who has benefited most from a period which has produced claims of structural imbalances in our tax system.

    We must be careful, however, to exclude the effect of the increase in the Medicare Levy on 1 July 2014, from 1.5% to 2.0%, to fund the National Disability Insurance Scheme. The following figures exclude the Medicare Levy.

    Over the past 15 years the net income from the AWOTE wage has fallen from 78.7% to 78.3% as a result of changes in tax rates and thresholds. This represents a loss of $5.92 per week.

    How have higher income groups fared under the successive tax changes of the last 15 years?

    Consider the position of the taxpayer now on $150,000 per year (almost double AWOTE) who has also received the same 87.7% increase received by the AWOTE employee.   This taxpayer is now paying 30.0% of his or her income in income tax, down from 31.2% in 2001. This represents a tax cut of $64.26 per week.

    For the taxpayer on $300,000 per year who has had the same increases as AWOTE over the past 15 years, the percentage of tax paid has fallen from 39.1% in 2001 to 38.3% in 2016, even after the imposition of the Budget Repair Levy of 2.0% of taxable income in excess of $180,000 per year. This is a tax cut of $46.82 per week.

    The Budget Repair Levy is a temporary measure introduced by the Tax Laws Amendment (Temporary Budget Repair Levy) Act 2014 and associated legislation, and applies in the financial years 2014-15, 2015-16 and 2016-17.

    Without the Budget Repair Levy (of $6,000 per year) the taxpayer on $300,000 per year has had a tax cut of $161.81 per week.

    These high income earners, who have been paying the top marginal rate right through the last 15 years, have benefited from tax threshold changes and tax rate changes for lower incomes, but they have also had the benefit of a fall in the top marginal rate from 47% to 45% during these 15 years. Once the Budget Repair Levy is removed, from 2017-18, the tax cuts for the taxpayer on $300,000 per year will return to $161.81 per week. For every $100,000 above that figure, the tax cut will be $2000 per year or $38.33 per week.

    Higher income earners have done rather better than the average increase in AWOTE. For example, the Fair Work Commission has estimated that, over the decade 2004-14, the real earnings of full time adult non-managerial workers at the 90th percentile increased by more than 10 percentage points over the real increase in the mean earnings of full time adult non-managerial workers; see Chart 8.2, Statistical Report, 18 March 2014.

    At the other end of the income scale is the worker who depends on the National Minimum Wage (NMW) of $656.90 per week. Over the past 15 years the successive wage tribunals have increased the NMW by 64.1%, well short of AWOTE.  Tax cuts at the lower income levels have offset some of this loss. For the NMW worker, the percentage of income tax paid has fallen from 12.7% to 8.9%, which is amounts to a tax cut of $24.89 per week.

    There is an economic case in support of the reduction in income tax on NMW workers: income tax on the NMW effectively raises the costs of employment and, to the extent that wage levels impact on employment, amounts to a tax on employment. There is good reason for the progressive reduction of income tax to zero at the NMW level. Australia has moved in the right direction, but more is needed.

    Even with this tax cut, the NMW worker is still a long way behind the average worker. The NMW and other minimum wage rates have failed to keep up with average wage increases. In 2001 the net wage of the NMW worker was 56.3 % of the net wage of the AWOTE worker. In 2016 the net wage of the NMW worker had fallen to 51.0% of the AWOTE worker, illustrating the increasing inequality of the Australian workforce over the past 15 years. The position is worse for a worker on the base minimum rate set for a trade-qualified worker. That rate (commonly referred to as the C10 rate) has fallen from 65.9% to 58.6%. The Fair Work Commission needs to address the gap between award wages and community wages.

    Since the tax scales were last adjusted for the 2012-13 year, the proportion of tax paid by NMW workers has increased from 8.1% to 8.9%. To eliminate this bracket creep, a tax cut of $5.33 per week is needed.

    The May 2016 Budget should give priority to relieving the bracket creep which has been suffered by low and middle income workers. Compensation for bracket creep is not a real tax cut. There will be no real tax cuts unless bracket creep is removed and the failure to do so will amount to a tax increase. In bringing about a fair outcome, it is clear that the very advantageous position of high income earners, even with the Budget Repair Levy, should be taken into account in the May 2016 Budget and, furthermore, unless and until the bracket creep suffered by low and middle income earners is remedied, there is a case for continuing the Budget Repair Levy on higher income earners beyond 2016-17.

    Wage increases and changing taxation rates

    January 2001 – January 2016

    Lawrence_bracket

    Notes: The Medicare Levy is not included. The figures are calculated on 52.18 weeks per year.

    Tax rates 2000–01

    Taxable income Tax on this income
    $1–$6,000 Nil
    $6,001–$20,000 17 cents for each $1 over $6,000
    $20,001–$50,000 $2,380 plus 30 cents for each $1 over $20,000
    $50,001–$60,000 $11,380 plus 42 cents for each $1 over $50,000
    $60,001 and over $15,580 plus 47 cents for each $1 over $60,000

    Average Weekly Ordinary Time Earnings, $41,681 per year: tax, $8884.30

    $79,914 per year: tax, $24,939.58

    $159,829 per year: tax, $62,499.63

    Federal Minimum Wage (now the National Minimum Wage) $20,893 per year: tax, $2,647.90

     

    Tax rates 2015–16

    Taxable income Tax on this income
    0 – $18,200 Nil
    $18,201 – $37,000 19c for each $1 over $18,200
    $37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
    $80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000
    $180,001 and over $54,547 plus 45c for each $1 over $180,000

    Average Weekly Ordinary Time Earnings, $78,233 per year: tax, $16,972.72

    $150,000 per year: tax, $43,447

    $300,000 per year: tax, $108,547.00, plus Budget Repair Levy, $6,000.00

    National Minimum Wage, $34,277 per year: tax, $3,054.63

    Since 2003, Brian Lawrence has been drafting submissions for the National Wage Reviews on behalf of an agency of the Australian Catholic Bishops Conference, the Australian Catholic Council for Employment Relations. He is an editor of an e-book, Working Australia, 2016;  Wages, Families and Poverty.

     

  • Mark Gregory. What the government doesn’t want you to know about the NBN

    The Coalition’s National Broadband Network (NBN) plan is in trouble and the Prime Minister Malcolm Turnbull should heed the mounting calls for Coalition NBN plan to be dropped before the nation’s digital future is harmed irreparably.

    In June it will be three years since Turnbull, as Minister for Communications, launched the Coalition’s NBN plan, extolled its benefits and introduced the slick, catchy and ultimately misleading slogan “Fast, Affordable and Sooner”.

    Whilst the government’s commitment may appear to have been laudable at the time, the rationale behind the decision to shift away from building a network that would connect 93 per cent of premises to the NBN by fibre was flawed.

    A recent advertising campaign by the giant US telecommunications company Verizon has highlighted why fibre is cheaper and performs far better than copper based technologies like Hybrid Fibre Coax (HFC).

    The Coalition’s decision in late 2013 to change NBN technologies mid-rollout caused delays and huge cost blowouts and the hodgepodge of obsolete copper technologies that Turnbull introduced is having a detrimental effect on Australia’s international broadband ranking.

    In the latest State of the Internet report by the US content delivery network provided Akamai, Australia has fallen from 30th to 60th over the past couple of years in the global rankings for average peak internet speed, which is an important measure of broadband performance.

    Australia’s opportunity to be a leader in the global digital economy is rapidly losing steam and Turnbull is yet to answer his critics other than by restating the platitude that the government is committed to building the NBN cheaper and faster.

    What Turnbull fails to address is the rapid adoption of all fibre access networks by Australia’s major competitors in the global digital economy and if Australia continues to rollout an obsolete second rate NBN the end result will be Australia sinking like a stone in the race to become a nation of digital innovators.

    On the 8 April 2014 Turnbull and the Minister for Finance Mathias Cormann wrote to NBN Co and described the government’s commitment to “ensuring all Australians have access to very fast broadband as soon as possible, at affordable prices, and at least cost to taxpayers.”

    “NBN Co will determine which technologies are utilised on an area-by-area basis so as to minimise peak funding, optimise economic returns and enhance the Company’s viability.”

    So having determined that there would a public equity limit of $29.5 billion, the Coalition’s plan goes on to stipulate that the NBN provide “download data rates (and proportionate upload rates) of at least 25 megabits per second to all premises and at least 50 megabits per second to 90 per cent of fixed line premises as soon as possible.”

    The Coalition plan is therefore, to rollout the cheapest NBN possible utilising obsolete second rate copper based technologies that will provide Australians with download speeds of at least 50 megabits per second, which is half the target download speed set for Labor’s NBN in 2010. And as has happened in the UK, NBN Co is unlikely to meet this target connection speed to many homes due to distance from nodes and old infrastructure.

    Over time, the cost of operating a copper based NBN will be between 40-60 per cent more than the cost of operating an all fibre access network for the 93 per cent of fixed line premises based on international experience. What this means for Australia is that about seven years after a home is connected to the NBN the extra cost of installing an all fibre connection versus a copper based connection would have been paid off and every year after this the copper based fixed access network will continue to be 40-60 per cent more expensive to operate than the all fibre access network.

    The life-time of an all fibre fixed access network is about 50 years, with upgrades amounting to minor construction work and replacing the boxes at each end of the fibre. The copper based technologies being rolled out by NBN Co don’t have an effective life-time as they’re now obsolete and an upgrade involves major construction work, replacing the boxes at each end of the copper and replacing other equipment in the network.

    The cost of upgrading the copper based fixed access network to either all fibre or a more recent copper based technology will add another $10 billion or more to the cost of the NBN and it appears the government intends to complete the NBN rollout by 2020, sell off NBN Co and leave the problem of upgrading the network to the new owner.

    And if this is not bad enough, Turnbull is well aware that NBN Co could be rolling out an all-fibre fixed access network utilising NG-PON2, which is the latest revision of the Passive Optical Network (PON) fibre access technology adopted by NBN Co in 2010. NG-PON2 is cheaper to rollout than the earlier GPON being rolled out now by NBN Co and can provide connections of either 1 Gbps or 10 Gbps to homes over distances of up to 40 km.

    If the government fails to heed the growing criticism of its broadband policy, Australia is likely to fall 10 or more years behind most other nations and this means that our Akamai average peak speed ranking could fall towards 100 or lower.

    Possibly Turnbull thinks that the government’s failure to admit that its broadband policy is a dud won’t be a major election issue and if this is the case the government will have thrown away an opportunity to do the right thing by admitting a mistake has been made and to set about building an internationally competitive broadband network that will promote jobs, innovation and ensure that Australians gain access to improved service delivery.

    Mark Gregory is Senior Lecturer, School of Engineering, RMIT and Managing Editor, Australian Journal of Telecommunications and the Digital Economy.

     

     

  • David Peetz. Having a say at work.

    There’s a phrase you sometimes hear about the workplace: “leave your brains at the gate”.

    Workers use it to summarise the dismissive view their bosses have about the contribution employees can make – and about how much say workers have in what they do at work.

    Not all bosses are like that. But it seems most employees want more say at work – sometimes called “voice” or “participation in decision-making” or even “workplace democracy”.

    Having a say at work

    Two trends have affected employees’ ability to have more say at work.

    The first is the decline in union membership over the past three decades. It has fallen from over 40% of employees in 1988 to 16% in 2014.

    Unions were the workers’ “voice” at work. At times they forced managers to take account of, or even accede to, what workers wanted.

    Lower union membership and lower union power mean less worker say at work. Internationally, higher rates of union membership had been linked to lower inequality and union bargaining to better gender equity practices.

    The second trend is how managers have changed their handling of employees. Some are seen by employees as tightening their grip over them. Barcode measurement of workers’ task times in warehouses, their scan rates in supermarkets, how many seconds they take between calls in a call centre, are all illustrations of that.

    But some bosses are seen as giving workers more say. It’s hard to tell, but the latter group seems to outnumber the former.

    Quality circles, “open-door” policies, consultative committees and the like promote that perception. Sometimes it’s for real. Sometimes employers do it to discourage workers from joining a union.

    Often, though, it is a mirage, and lasts only until the next round of redundancies. Starbucks called its employees “partners” until it sacked 685 of them. Wal-Mart calls its employees “associates” unless they start using words like “grievance” or “seniority”; that could make them ex-“associates”.

    You can try to stop employees thinking about their rights as employees by calling them “members” or something else, but that doesn’t make much difference when the pink slips go around.

    And therein lies the problem with management-driven initiatives to give employees more say at work. What the boss giveth, the boss can take away.

    The problem runs even deeper than this. Within the workplace, there are major concerns about working hours, work intensity, work-life balance, pressures on women, “overemployment” and underemployment, demands on employees for flexibility, job insecurity, micro-management of time and managerial efforts to control “culture”. This wouldn’t be happening if power was shifting towards workers.

    Since the 1980s, Australia, like many other advanced industrialised countries, has experienced rising inequality and a growing concentration of income, wealth and power in a small group sometimes referred to as “the 1%” or, more accurately, “the 0.1%”.

    Before the global financial crisis, members of the financial elite even spoke of the rise of “plutonomy”, an economy “powered by the wealthy”.

    The physical climate is changing because those who financially benefit from carbon pollution have externalised the costs onto the rest of society, and are now resisting change with all their resources.

    All this reflects a major shift in power.

    Whatever employers have done voluntarily about employee voice, there is little doubt that the underlying trend is towards less worker power in the workplace. And less power for the multitude means less democracy.

    Giving workers a voice

    So, what should be done about it?

    At one level, laws encouraging or mandating specific mechanisms to increase employee say at work would help. In parts of Europe, and for large firms across Europe, laws require the establishment of “works councils” that give employees some say on defined workplace matters.

    It’s a good idea and Australian unions were rather short-sighted when they ran cold on it some decades ago. But as worker power has declined in Europe, so too has the incidence of works councils.

    Workers need ways to increase the reality of power at the workplace, not just the formal appearance of it.

    In the end, that means increasing the influence of worker organisations, which in Australia has mostly been unions.

    That’s not the same as increasing the power of union officials. Unions themselves need to become more democratic — not just because democracy is a good thing in itself, but also because union democracy seems likely to enhance the power of workers at work.

    You can’t have power in the workplace if you don’t first have power in the union.

    A lot of this is up to unions themselves to fix. I’ve written elsewhere about that, and won’t repeat it here.

    They’re not likely to do this on their own. There are many organisations or movements, constituting what’s sometimes referred to as “civil society”, representing various groups that are disadvantaged or disenfranchised — even the environment. In a world where wealthy interests dominate politics, if these parts of civil society act individually they won’t get far, but acting together would be a potential game changer.

    There are also questions about what public policy should do.

    Changes in policy have had no small part in union decline – in particular, by making it easier for employers to avoid or displace unions – and in the redistribution of power to a small group.

    Industrial relations laws that made it more difficult for employers to avoid unions, and simpler for employees to unionise, would therefore be a worthwhile step.

    So, too, would laws that genuinely facilitated democracy and prevented corruption within trade unions and other bodies. That’s the opposite of what the government proposes in reintroducing the Australian Building and Construction Commission. This has nothing to do with corruption (except in government rhetoric) and would instead reduce workers’ ability to unionise.

    The “other bodies” part is very important. A lot of attention has been given to union law-breaking or corruption of late, but many other examples have emerged of law-breaking or corruption in banking, insurance, financial advice, politics and administration in NSW, Victoria and Tasmania, the oil industry, franchising, agriculture, international business and politics and many other areas. It seems odd that a royal commission focused on just one area.

    Democracy requires that all areas of law-breaking and corruption be addressed. It also means placing constraints on the ability of those in positions of power to draw upon all the resources they might have to influence policy and policymakers.

    So fixing up the problem of declining democracy at work means action both within and outside the workplace. The former without the latter would have minimal effect.

    David Peetz is Professor of Employment Relations, Griffith University.  This article was first published in The Conversation on 18 April 2016.

  • Editors, East Asia Forum. Australia’s fraught decision on submarines

    The submarine deal would fundamentally change the Australia-Japan security relationship.

    Australia is about to embark on its single biggest ever military acquisition. The Future Submarine Program (SEA1000) will see Australia purchase 12 submarines to replace its ageing Collins-class fleet.

    The SEA1000 has been a source of ongoing controversy with criticism over the lack of transparency of the process, debate about its strategic implications amidst the shifting regional geopolitical landscape, and questions about Australian economic interests and the creation of jobs in the local shipbuilding industry.

    The Australian government under prime minister Tony Abbott initially ruled out a tender process. As Yuki Tatsumi explains in our lead this week, Abbott ‘clearly preferred Japan’s Soryu-class submarines regardless of the amount of workshare or technology transfer to Australia’, ostensibly prioritising capability and cost factors ahead of Australia’s shipbuilding industry.

    Abbott was not the first to look to Japan — Labor Defence Minister Stephen Smith also considered Japanese submarine technology as a way of minimising the cost blowouts and sustainment problems that have mired Australia’s existing Collins-class submarines.

    But Abbott’s decision, in reality, was driven by the conception of a United States–Japan–Australia quasi-alliance framework.

    There was little regard for canvassing alternatives publicly. As the pressure of a looming leadership spill came to bear, Tatsumi notes: ‘Abbott reversed his government’s initial position’ and installed a competitive tender process which has delivered bids from France and Germany as well as Japan. France’s state-controlled naval contractor is offering a conventional-powered version of the nuclear-powered Barracuda-class submarine and Germany’s ThyssenKrupp Marine Systems (TKMS) are proposing a Type 216 Class submarine, an up-sized version of the popular Type 214 submarine. The Japanese government has a proposal based on the existing Soryu class.

    Japan is still considered the frontrunner because of the gathering security relationship. ‘Without doubt’, David Envall reckons, the Australia–Japan ‘relationship has deepened substantially since the historic 2007 Joint Declaration “affirming” the partnership…upgraded, first to a “comprehensive” partnership in 2008 and then to a “special” partnership in 2014’.

    Some in the United States, notably hard-line Japan defence-analyst Mike Green, as well as ex-prime minister Abbott and his former national security advisor, Andrew Shearer, are pushing the Japan option. They argue the US Navy is unwilling to provide its most advanced combat systems to Australian submarines if they are built by France or Germany, although the existing close Australian technology partnership with the United States suggests otherwise.

    Abbott penned an essay lauding Japan for building ‘the world’s best large conventional submarine’. And Shearer, in a paper for CSIS, explicitly invokes the case ‘for significantly deeper trilateral maritime cooperation between Australia, Japan, and the United States’ to respond to ‘the evolving threat environment in Asia and the Pacific, including increasing Chinese assertiveness in the South China Sea and East China Sea’.

    There are hazardous strategic implications in a potential deal with Japan. On the one hand, Hugh White argues that partnering with Japan would incur a strategic as well as financial cost. ‘Tokyo expects that in return for its help to build [Australian] submarines, it would receive … clear understandings that Australia will support Japan politically, strategically and even militarily against China’. On the other hand, a minor swarm of commentators have rushed to counter White. Stephan Fruehling argues that ‘[h]istorically, defence acquisition has done little to support strategic relationships, so cost and capability considerations should remain central [to Australia’s submarine choice]’.

    Unlike other arms transactions, the SEA1000 will have a 40 year lifespan and ongoing service requirements; this fact alone makes it a relational deal not a transactional deal. In a project of this dimension and longevity, each of the potential vendors stakes a claim of some sort in Australia’s security territory.

    A submarine deal would fundamentally change the Australia-Japan security relationship. Even a casual examination of Japanese thinking behind their bid reveals that, in the Japan defence establishment, the deal now has deep strategic undertones, even though it initially reluctantly came to the idea of selling submarines to Australia. As Tatsumi explains ‘the bid for SEA1000 is important for Japan in the overall context of deepening security ties with Australia’. Japan’s ‘2013 National Security Strategy identified Australia as an important security partner not only as a fellow US ally, but also as a regional partner that shares Japan’s key strategic interest in upholding an international order based on the fundamental norms that have underpinned the post-WWII world. Such norms include the rule of law, freedom of navigation and the non-use of coercive measures to assert diplomatic positions’.

    The Japanese Ministry of Foreign Affairs placed the deal within the context of the elevated status of the Japan-Australia ‘Special Strategic Partnership for the 21st Century’ noting it would: strengthen Japan-Australia bilateral maritime security cooperation in the Asia Pacific, deepen US-Japan-Australia trilateral cooperation, as well as contribute to Japan’s own security by improving its domestic submarine capabilities.

    A critical question for Australia is whether it can or should sign up to the current Japanese administration’s defence aspirations and its particular expectations of the partnership with it.

    These strategic questions put Australia at the centre of a seismic contest of political forces in Japan.

    The fallout from and outcome of this contest is highly uncertain. The submarine deal could represent a tipping point in its outcome.

    On one side of the fault-line there is the Abe government’s desire to take defence reforms further, with a formal revision of the constitution. The security-related bills passed in September 2015 were the tortured result of the Abe government’s ambition to expand the roles and missions of the Self-Defence Force, to strengthen its alliance relations with the United States, and to build new security partnerships with other US allies and partners. But they were tempered by a deep domestic discomfort and distrust of Abe’s intentions towards the Article 9 peace clause of Japan’s constitution.

    On the other side, most Japanese are still, quite correctly, concerned about what removal of the anchor of the peace clause in their constitution might do to attenuate, not strengthen, regional security circumstances.

    Then there is the US ambition to elevate Japan’s defence role, around the realistic assessment that Americans are less and less willing to finance a pivot to anywhere (including Asia), while keeping Japan locked tightly down to prevent military adventures. Linking Japan with trusted alliance partner Australia through the submarine purchase is seen as a useful tool to achieve this goal. But what is Australia’s interest in being the midwife to this arrangement?

    Germany and France also have long-term skin in Australia’s security space, but it’s very different from that of Japan — less complicated and potentially more complementary to the economics of Australian interests in the submarine deal. They have hinted at the potential to develop Australia as a hub for submarine building to serve other clients in the wider Asia Pacific region, an incentive for the long-term production base in Australia to which Japan cannot pretend.

    With the Turnbull government poised to announce the winner of the competitive evaluation process in the coming months, the Australian government faces a major dilemma. If the Japan bid is chosen, a clear articulation of the future strategic relationship with Japan and where it might be taken will be demanded in Australia but also by China, among others. If the German or French bid is chosen, Australia’s partnership with Japan and its surrogate role in the US alliance framework will be under a shadow.

    It will require careful management to clean up the mess that Abbott has left on the submarine deal — a lose-lose game in which none of Australia’s key partners will end up happy. It need not have been thus. And the Japan bid, succeed or fail — despite Tatsumi’s brave hopes otherwise in this week’s lead essay — will vastly complicate Australia’s otherwise benign and well-established enmeshment with Japan.

  • Tony Broe. Coordinating Community Aged Care & Hospital Aged Health Care

    Getting Australian Health Services right depends on delivering both Aged Care & Health Care effectively for frail ‘high risk’ older-old people. Reducing inappropriate hospital admissions, shortening length of stay, returning frail people to their homes rather than Residential Care, all depend on accessible, locally based, Community Aged Care assessment support and management systems. For around 30 years a simple, geographically based, Australian system – State Geriatric Medicine Teams with Commonwealth Aged Care Assessment Teams (ACATs) – provided local access for many frail older people and up-to-date information on the complexities of local Aged Care services. This system is being dismantled – but what is replacing it?

    The History:

    In 1982 the Commonwealth put out the persuasive McLeay Report “In a Home or At Home”. From the mid-1980s Commonwealth Health, together with State based Geriatric Services, set up local district Aged Care Teams (combining state funded Geriatric Services with Commonwealth funded ACATs) working with Community Services (HACC), Residential Care and GPs on common local boundaries. In NSW 22 District Geriatric Teams were developed for metropolitan populations of ~250,000 (18 in Sydney, 2 in Illawarra, 2 in Newcastle); 9 Regional Teams served variable rural populations. This process was duplicated across all States with ~170 local ACATs covering Australia (~66% being funded to provide ‘extended’ care)*. ACATs & Geriatric Teams were famed world-wide as an inclusive, equitable, innovative approach to Aged Care & Health Care for frail older-old people. It was far from perfect; had variable penetration; was variably effective for local reasons (e.g., Queensland Health was then un-regionalised) – but generally worked at a local level.

    In April 2012 a new 10 year Commonwealth aged care reform program “Living Longer Living Better” was released, with its emphasis on “consumer-directed care”. Stated aims included: more support at home; better access to residential care; increased recognition of carers; more support for people with dementia; better access to information; utilising the market; encouraging businesses to invest and grow*. The changes commenced in 2013-2014 with: new Home Care Packages; My Aged Care – a centralised entry point contactable only by phone or internet; then a tender process for new Regional Assessment Services. The final implementation phase of a new system was set for 2017 to 2022.

    The Issues:

    In terms of access equity & coordination, the pre-existing Aged Care system has been fragmented & not effectively remodelled for the future. Components are put to three year tender for multiple operators to pursue on fragmented and changing geographic bases. Replacing the 1980s models would not be a problem if alternate solutions were effective, or more equitable, or financially intelligible, or even easier to access & use for less advantaged older-old Australians and their family carers. They are not.

    The new system fails the vulnerable older-old in most need – the ‘cognitively frail’ with less capacity for self-management, less computer literate, less well off. It is devised for ‘young-old’ people & more switched on carers, but even they are finding it difficult to access & understand the complexities and interfaces. Individual local services (Community Nursing, Home Care, Transitional Care, Hospital-in-the-Home, Ambulatory Care) are intact, even proliferating, but form a fractured uncoordinated mess for the ‘at risk’ old. Assessment – by Regional Assessment Services (valuable but locally divided); ‘My Aged Care’ (centralised, internet and phone accessible); residual ACATs; private or not-for-profit Assessment Services – is not reasonably accessible for older-old people in most need. Communication is poor across fragmented assessment services for those whose job it is to assist at a local level – family carers, community nurses, social workers, GPs, Geriatric Teams, or discharge planners.

    The motivation was good – equity, innovation, flexibility of access for “person-centred care”. However, the new system embodies unproven or dated concepts of ageing: a mistaken belief that ageing per se causes disability; a belief that public aged care systems are less efficient or innovative than private systems – hence weakening public responsibility for Aged Care; three yearly tender, on theoretical grounds of the value of competition over continuity of care; an acceptance of “market forces” (which do not operate effectively or efficiently in Aged Care) hence privatising without clear evidence of benefit. The result is a growing but fractured system, good for healthy competent older people – but increasingly inoperable for frail ‘older-old’ and disadvantaged carers, resulting in a poorly accessible, complex, headless beast of a system.

    Steps to Solutions?

    “You should turn the clock back if it is telling the wrong time”  John Kay Economist – ‘Other Peoples’ Money’ 2015.

    We may not need to turn the clock back; but – to mix metaphors – we should not throw the babies out with the bathwater.

    • Essentially we need to keep the benefits of new approaches to Community Aged Care that are valued by independent older people. At the same time, we need to restructure an accessible local district public interface between Community Aged Care, Primary Care and Hospital Care for the ‘at risk’ older-old. Commonwealth coordination of community Aged Care with State Health Care worked for 30 years. It will be even more essential as the baby boomer population reaches ‘older-old’ ages in the 2020s to 2030s.
    • The ‘young-old’ (60 to 75 years) – 90% active, mobile, cognitively competent –need better chronic disease interventions, but not usually complex Aged Care Systems across local Community and Hospital Interfaces*. Aged Care solutions are mainly for the ‘older-old’ (75 to 100+) who, like old wines, do not travel well. Their rising needs are driven, primarily, by the corollary of current ‘healthy ageing’ and compression of morbidity to late-life – cognitive frailty, cognitive decline, dementia – with reduced capacity for decision making*.
    • Primary care, community aged care, residential care, hospital care – can’t work in isolation or by pushing individual barrows. A combined Commonwealth State approach to coordinating community Aged Care interfaces with Aged Health Care has worked in the past. It will be essential as the baby boomer population reaches ‘older-old’ ages in coming decades.

    Professor Tony Broe AM, BA, MB;BS (Hons), FRACP, FACRM

    UNSW Conjoint Professor of Geriatric Medicine

     

  • Tony Wood. The $50 b. submarine project.

    Jon Stanford’s papers on the submarine project make an important contribution and deserve widespread circulation particularly among our decision makers. The replacement submarine decision has profound implications for all Australians. Its intention is to provide a deterrent to “potential adversaries”, but also to offer to the young members of our defence force weapons at least comparable with those they might face in opposition. To achieve this it is proposed we spend more on this project than we have ever spent before on military equipment.

    The Stanford papers make a fair case that the present proposal will result in failure on all counts except the last one, expenditure. Exceeding predicted expenditure on military weapons appears to be one of our specialities. The project did not start well when a previous government arbitrarily determined that the nuclear option would not even be considered and the present government followed this view. Here was an example of bipartisan politics, but was it for better or worse? We will never know because the public who has to live with and pay for the decision has never heard the arguments put.

    The section on time line in Paper 2 should itself have excluded any thought of building the submarines in Australia. In the best case scenario, if the first is built in 2020 and the next 11 follow at yearly intervals and they are projected to last 30 years, the last will not phase out until 2061 and, in the worst case scenario, 2065. The world will be a much different place by 2065 and we will have long since discarded diesel submarines at enormous write down cost. All this for party politics and short term jobs in South Australia now. It would shorten the time line considerably to rent recent diesel submarines or better still nuclear submarines. Don’t laugh at the rental option. India has been renting nuclear submarines from Russia for some time now, as a prelude to building them itself. Maybe the US would rent us, for a few years, nuclear submarines surplus from the cold war, until we could reassess the world political situation. There is historical precedent. Historically our navy frequently used second hand Royal Navy vessels.

    My sympathy goes to the Government officials who are obliged to support the Government decision whatever it is. This can mean finding weasel words to justify the unbelievable. The Defence White Paper states that: “maintaining Australia’s technological edge and capability superiority over potential adversaries is an essential element of our strategic planning.” The claim is that because the diesel submarine is presently quieter than a nuclear submarine then it has, “capability superiority” in the region of the shallow waters of the south China Sea. Technological edge embraces more than avoiding detection. What about getting home safely? If or when our diesel submarine is detected off the China coast, the chances are that the crew will end up in a Chinese jail or worse. This is because upon detection it cannot move because, as Jon Stanford points out, it is too slow to escape and eventually it must come up for air. The parents of the crew members are not likely to thank our politicians when they discover the real risk to the crews and the irony is that the choice was not to save money, but to serve an ideology which cannot be supported by fact.

    The best solution would be to place a hold on this project for a year while all the options are re-examined in an impartial way . Are our submarines there to back diplomacy and if so how serious a threat would diesel submarines offer? If they are to defend our shoreline, how is that defence impacted by the slow transit speed and the high rate of “indiscretion” of the diesel submarine? To those who will argue we must have a home grown product for independence, how much independence do we have now with much of the sophisticated technology of our present submarines, such as the critical command systems, borrowed from the US nuclear submarines?

    Let’s turn our backs on those who want to rush in, the present politico- military situation in our region does not demand it.

    Tony Wood, nuclear engineer 30 years experience on reactor operation and safety for Aust Atomic Energy Comm and ANSTO and some time on Molten Salt Thorium Reactor in US.

     

     

  • Bill Carmichael. Overblown rhetoric about Free Trade Agreements.

    The goal of trade policy is not limited to increasing export opportunities. Nor is it just about improving trade balances. Rather trade policy is about taking opportunities to improve the economy’s productive base. When assessing a nation’s experience with bilateral trade agreements, this is the test that should be applied.

    In each bilateral agreement Australia has completed to date, projections of the potential gains for Australia, based on unimpeded access to all markets of the other country involved, were released prior to negotiations. These studies did not, and could not, project what was actually achieved in the ensuing negotiations. The quite modest outcomes for Australia from those negotiations meant the projected gains conveyed nothing about what was eventually achieved. Yet the projections were still quoted to support the agreements after they were signed, as though they reflected actual outcomes.

    This approach to accounting for the outcome of trade agreements has meant that Australia has missed opportunities for productivity gains. So how, given Australia’s recent experiences, can trade policy and negotiations be better conducted in future?

    Australia cannot change how it negotiated its agreements with the United States, Japan, South Korea and China. But policymakers can refine their approach to future negotiations. Australia’s trade policy should be guided by a model based on its conduct in the Uruguay Round of trade negotiations. The Uruguay Round confirmed that the domestic decisions needed to secure gains from unilateral liberalisation and those required to secure the full gains available from negotiations have converged.

    The negotiations in the Uruguay Round took place at a time when former prime ministers Bob Hawke and Paul Keating were reducing Australia’s barriers to trade unilaterally. Their productivity-enhancing reforms were subsequently offered and accepted in the Uruguay negotiations as Australia’s contribution to global trade reform. Consequently, Australia secured all the gains available from trade negotiations: the major gains in productivity from reducing the barriers protecting less competitive industries, as well as securing greater access to external markets.

    This was the kind of win–win outcome negotiators should seek from all trade agreements. It made a substantial contribution to the prosperity Australia has since enjoyed.

    The opportunity to improve economic performance in this way was missed in all three free trade agreements concluded in 2014. In those negotiations, conducted in secret, Australia’s agenda was simply a market access wish list. The outcome for domestic efficiency was determined by the market access arrangements negotiators happened to agree on, rather than a central objective in deciding which domestic barriers to reduce. And success was measured by whether the outcomes improved access to external markets.

    The agreement with the United States demonstrates the consequences of this approach for domestic efficiency. Australia gained no worthwhile access for beef — an export in which it is world-competitive — for the next 18 years. But it did secure immediate and unrestricted access to the US market for Australian cars — one of the country’s least competitive industries. If countries approach negotiations in ways that avoid adjustment for protected domestic industries, there will be less scope to develop export industries based on real competitive strengths.

    There is no conflict between the need for secrecy during negotiations and a process that provides transparency and a negotiating agenda that secures the productivity gains available. Both requirements can be met by following the model established by Australia in the Uruguay Round.

    In future trade negotiations, the Productivity Commission — Australia’s independent policy review institution — could provide a basis for market-opening offers by conducting a public inquiry and reporting to government before negotiations get underway. This report would be released only when negotiations are complete.

    This process would preserve secrecy during negotiations while providing a basis for market-opening offers. Parliamentary and public scrutiny of the outcomes of negotiations could take place before ratification. This would reflect the transparency arrangements that paved the way for Australia’s reforms of the 1980s and 1990s.

    It may be time for Australia to move responsibility for trade policy away from the Department of Foreign Affairs and Trade (DFAT). In view of the policy impasse that now exists, Australia should consider instead placing ministerial responsibility for trade policy with the treasurer, who is responsible for the Productivity Commission and all other areas of microeconomic policy.

    There are no grounds for suggesting that DFAT is anything other than competent in dealing with issues intrinsic to foreign affairs. But trade policy is not one of those issues.

    Of course, most people have only a passing interest in debates about trade policy. The approach currently undertaken by Australian negotiators enjoys popular acceptance because the competing approach I have outlined is counter-intuitive. Responsibility for introducing and communicating the need for change rests squarely with the political leadership.

    A change of this kind will require preparedness by leadership to embrace — and explain to the public — what is at issue for the economy and community. It is time to allow the community to enter the trade policy debate and, in doing so, make the most of future agreements.

    Bill Carmichael is former chairman of the Industries Assistance Commission.  This article first appeared in the East Asia Forum on 16 April 2016.                             

    A longer version of this paper is available here.

  • Richard Woolcott. A modern Australia for the 21st century.

    Prime Minister Malcolm Turnbull has said it is a great and exciting time for Australia.  Indeed, it is a time of great opportunity for the Australian Government elected later this year to take bold action which will transform Australia into an updated, modern member of the Asian and South West Pacific Region.

     

    After World War II the United States wanted to implement ideals and practices it believed should be applied throughout the world.  The spread of democracy was the overarching goal.  Now, however, the United States, exhausted by unsuccessful wars in Iraq and Afghanistan, now faces the rise of States with greater economic growth rates and rapidly expanding middle classes, such as China, India and Indonesia in our own region, and a more assertive Russia which regards itself as both a Pacific and an Atlantic power, as well as countries such as Brazil and Mexico in South America.

    From 1948 to 2000 will probably be seen as a brief period of history when global order was based on American idealism and traditional concepts of the balance of power.

    America wanted to expand a co-operative international order of countries following common rules which included liberal economic systems, respect for national sovereignty, and the general adoption of democratic systems of governance.
    Western “rules” of world order are no longer  accepted by other major countries as the basis of world order.  United States leaders, with the possible exception of Donald Trump who ,for the wrong reasons, seems reluctant to accommodate the major changes in power now underway.

    The goal for leaders in our region – Asia and the South West Pacific – must be to build a regional community which will reflect the world ahead.

     

    On the basis of more than 60 years of experience, including Special Envoy roles for both Coalition and ALP Prime Ministers, I would strongly recommend that the incoming Government after our General Election demonstrates the agility and forward-looking approach to respond to change.

    Such changes will be resisted by yesterday’s political leaders including, in particular, Abbott, Andrews and others on the far right of the Coalition and even some ALP politicians, including Stephen Conroy, the Shadow Minister for Defence.  To maintain policies rooted in the past, will undermine our ability to determine what Australia’s real national interests are.

    What needs to be done?  The first priority in updating Australian Trade and Security Policy is to focus on the Asia and South West Pacific Region.  In what is now generally called the Asian Century we should focus on our own region.

    The former Indonesian Ambassador to Australia, Sabam Siagian, and now Editor in Chief of the Jakarta Post, wrote last year when Tony Abbott was Prime Minister “Australia is still stuck in the 20th Century mode.  It is a monarchy, with a Head of State in London and its security arrangements are largely Cold War relics … Australia is out of sync with the emerging geopolitical environment of Asia today”.

    Australia needs a fundamental change of our national psyche focussed more on Asia and the South West Pacific than on our well established, traditional links with the US, UK, Canada, NZ, and Europe.  Australia should have much more regular and sustained discussions with our neighbouring counties, including New Zealand.

    Secondly, the Government should look discretely towards the evolution of an Asia Pacific community.  Meanwhile ,we should use existing organisations that do meet at Head of Government level, such as the G20, APEC (although it does not include India), the East Asian Summit (which now includes both the US and Russia), the UN Leaders Week in New York, and the Commonwealth Heads of Government Meetings (although they are a relic of British Colonialism ,some Asian leaders attend and discuss regional issues ).

    Thirdly, the above policy will require an updated and more balanced Australian approach to the relationship between the United States and China.  There is a danger that adversarial attitudes towards China, based on mainly Japanese policies, could become a self-fulfilling prophecy.  The present debate on China seems mainly to assume that Australia has no choice but to support American primacy in Asia against what is perceived as a rising Chinese hegemony.

    This is a simplistic approach which has been challenged by Hawke, Keating, the late Malcolm Fraser and most of our former Ambassadors to China as well as a number of academics.  While China can be expected to resist American hegemony in the Asian region, it does accept a continuing and constructive US role in Asia.

    Fourthly, Australia should not take sides on China/Japan or Vietnamese, Malaysian and Philippine disputes within ASEAN, on rival territorial claims, as the U S has done. Australia’s focus should be on unimpeded passage to China through waters in the South China sea.

    Fifthly ,and Importantly in readjusting the main focus of Australian policies, we should withdraw our forces from Iraq and Syria.  Our presence in the Middle East will not contribute meaningfully to defeating ISIS or to securing stable, democratic, corruption free governments in Iraq and Afghanistan.  Our involvement was in support of the American alliance, although US policies appear to be failing.  The reality is that our participation is peripheral and symbolic.

    We should move out of this very complex, changing kaleidoscope of warring Sunni, Shiite and Kurd religious factions  and involved countries, including Saudi Arabia, Iran , Yemen, Iraq, Turkey and Syria. We should not pretend to ourselves that we can really influence an outcome, which may be years away. The considerable financial savings could be much better used in shaping our next budget, including on defence (submarines),health and education.

    Sixthly, we should remove our remaining troops in Afghanistan. While there were reasons for joining the US led invasion of Afghanistan in 2002, 14 years later, with 40 Australians killed, over $550 billion spent and more than 13,000 Afghan civilians dead, objectives once deemed to be indispensable, such as national building and effective counter insurgency, have been downgraded or abandoned because there are no longer adequate resources, time or a publicly supported US will to achieve them.

    Seventhly, we should avoid, in our references to the ISIS, suggesting that it is a State. It is not a State. It has no air force or navy and even the territory it controls in Iraq and in Syria is relatively limited.  There is a tendency to regard all terrorist activities as being conducted by ISIS. In fact, Al Qaida, the Kurds and other groups ( e g Boku Haram in West Africa ) have been  responsible for a number of recent terrorist activities.The ISIS probably welcomes this insofar as it is Western intervention in the Middle East which it believes leads to an increase in terrorism ,rather than a lessening of it.

    Eighthly, a very important policy priority for Australia is to give a greater priority to Indonesia.  In the long term no bilateral relationship will be more important to Australia than that with Indonesia.  The stability, unity and economic growth, of a peaceful, predominantly moderate Muslim (81 %) nation of 250 million people, stretching across our North, a distance from Broome to Christchurch in New Zealand, is vital to Australia.  The empathy towards Australia evident in the 1980’s and early 1990’s needs to be rebuilt ,especially with the relatively new Indonesian President Joko Widodo.

    Ninth, the elected Australian Government should place the Republic back on the front burner.  An Australian Republic will increase Australia’s international standing as a more independent nation.  Continuing foreign perceptions of Australia as a Constitutional Monarchy whose Head of State is the Queen on England ( quaintly called here the Queen of Australia )and who’s flag is dominated by the Union Jack are anachronisms in the 21st Century.  The establishment of the Republic of Australia will be like Federation – a defining moment in the history of our country.  This is not simply a symbolic issue.  It lies at the core of our national and international identity.

    Tenth, and in the same context, we should call our High Commissioners Ambassadors and our High Commissions Embassies, which is what they really are.

    To conclude, Australian attitudes must reject and suppress religious intolerance, bigotry, latent racism, insularity and self-satisfaction. The Australian Government, to be elected later this year, should seize the opportunity to embrace the changes outlined above – major, and as difficult politically as they will be. If it does, Australia will be a more secure, prosperous and outward-looking modern nation, genuinely more welcomed in our region of the world, and internationally.

    If we do not make these bold policy changes, we may find Australia left behind and wallowing in a bog of lost opportunities.

    Richard Woolcott was Australian Ambassador to Indonesia and the Philippines, and High Commissioner to Malaysia, Ghana and Singapore. He was Australian Ambassador to the UN and President of the UN Security Council. He was Secretary of the Department of Foreign Affairs and Trade from 1988 to 1992.

  • Jon Stanford and Michael Keating. A more efficient submarine solution.

    This week the Melbourne Age, SMH and the Canberra Times carried the following article written by Jon Stanford and Michael Keating on the $50 b. submarine project. This article is based on a three part article written by Jon Stanford and posted in Pearls and irritations. See link to three articles below.  John Menadue

     

     

    The 2016 Defence white paper proposes a substantial increase in expenditure on major assets for the Australian Defence Force. The largest item, and the most costly acquisition ever for the ADF, is the $50 billion project for 12 future submarines.

    This project raises major concerns related to its cost, timelines and the possibility that Australia will be left with no effective submarine capability for a decade or more.

    First, at $4.2 billion for a conventional submarine (SSK), the cost is unacceptably high. The improved Soryu class SSKs now being built in Japan cost about $720 million each. The latest nuclear attack submarines (SSNs) of the Virginia class (US) and Astute class (Britain), much larger and more capable than the FSM, currently cost about $3.85 billion and less than $2 billion each respectively.

    Second, since the white paper  posits a clear strategic need for the capability and the navy’s existing submarines are obsolescent, the delay in acquiring the FSM until the early 2030s seems excessively risky. A submarine purchased on a military off-the-shelf (MOTS) basis could be delivered at least 10 years earlier.

    Third, the delay means that the obsolescent Collins-class submarines will need to be upgraded, with the details, including the cost, yet to be specified. One former captain of the Collins considers it is not feasible to upgrade the class to contemporary standards and that such a project would be “throwing good money after bad”. The risk of an unsuccessful outcome leading to a 10-year gap in effective submarine capability is very high.

    These three substantial problems arise because of Defence’s assumption that Australia has a unique requirement for submarine capability that can be met only by a new design. This is because no current design of SSK would have the range to undertake extended offensive patrols in the South China Sea, regarded by Defence as a key role for the FSM.

    Yet the risks involved in developing a unique platform for the ADF and integrating new leading-edge systems are well known from past experience. The costs of commissioning a unique design for the Collins-class submarines, as well as of sustaining them, have been substantial. Before we go down that high-risk path again, at a vastly higher cost, we need to ensure that a more efficient solution is not available.

    While the navy’s requirement for submarine capability is ambitious, it is by no means unique. Its requirement, for example, is similar to that of the British and French navies. The problem is that its ambitious capability requirement for force projection in contested waters far from home points to a need for nuclear submarines (SSNs), which both the British and French navies have operated for many decades.

    The white paper  states that the FSM will be technologically superior to other submarines in the region. This is not accurate. Other navies in the Asia-Pacific, including those of Russia, China and India, already deploy SSNs and are in the process of acquiring more, of advanced design. China will have up to nine SSNs by 2020 and many more by the early 2030s.

    Although quiet, a SSK can never rival a nuclear submarine in the vital areas of underwater speed and endurance. If an Australian SSK were detected and attacked by a hostile SSN or by surface ships, it would not be capable of the sustained speed required to offer some reasonable chance of escape.

    This is hardly news to the defence community. For example, the Australian Strategic Policy Institute (ASPI), in proposing the operational characteristics required by the FSM, suggested its analysis “pretty much says ‘SSN’, but that’s not going to happen”. Indeed, former defence minister David Johnston belled the cat by saying: “ideally we are seeking a comparable capability to a nuclear submarine with diesel-electric motors”.

    Unfortunately, such a submarine is a fantasy. If the government is determined to operate submarines in the South China Sea in support of the Americans, we should make it clear that Australia’s participation is contingent on the US allowing Australia to acquire nuclear submarines (as agreed for Canada in 1988, although never taken up).

    On the other hand, if Australia cannot or will not acquire nuclear submarines, then it should abandon the ambition of projecting offensive power against a major adversary in far-off contested waters. As ASPI has pointed out, there is no evidence that the US expects the ADF to undertake this task, which, in reality is a great power role.

    Abandoning this force projection mission makes the capability requirement much more straightforward. Other roles include sea denial in the approaches to Australia, together with intelligence gathering and surveillance in our region. Indeed, a smaller SSK, readily available off-the-shelf, is better suited than a large boat to these tasks. We may need six submarines, delivered in the early 2020s at a total acquisition cost of less than $6 billion. Combined with the savings from not upgrading Collins, the budget would be more than $45 billion better off than under the current $50 billion proposal.

    Of course, Australian industry participation is a good thing provided it’s competitive and does not compromise defence requirements. In supporting South Australian jobs, however, it makes no sense to let the car industry go and then replace it with a more highly protected industry with significantly less spillover value. If ASC could deliver six SSKs in the early 2020s on a fixed-price contract within 5 per cent or so of a MOTS price, then by all means go for it provided the risks are managed appropriately. But otherwise, let’s bank the $45 billion or so saved by an overseas acquisition, minimise the risks and let Adelaide be content with the $30 billion project to build nine frigates, as promised in the White Paper. ASC would also be tasked with sustaining the new submarines, at a through life value much higher than the acquisition cost.

    Technology, economics and Australia’s future submarine. Part 1 of 3.

    Technology, economics and Australia’s future submarine. Part 2 of 3.

    Technology, economics and Australia’s future submarine, Part 3 of 3.

    Jon Stanford and Michael Keating are directors of Insight Economics. Previously they worked together in the Prime Minister’s Department, where Dr Keating was Secretary. Longer articles on this topic first appeared on the Pearls and Irritations policy blog.

     

  • Evan Williams. The seven sacred cows of Australian politics

    We are indebted to the Hindu religion for that useful term sacred cow. As every schoolboy knows, Hindus venerate the cow and forbid its slaughter or abuse. Our political landscape abounds in sacred cows – institutions or practices that are considered beyond criticism, immune to scrutiny and supported by politicians of all parties. Some sacred cows are worth having, of course. Perhaps the most sacred is the Parliamentary Remuneration Tribunal – much loved by MPs when it delivers them well-deserved salary rises at regular intervals. Other sacred political cows are harder to account for. Here’s my list of the top seven.

    The family home – This venerable institution has been a protected species for generations. Never mind that families are leaving the family home in increasing numbers, and one’s “principal place of residence” is quite likely to be standing empty while its owner decides whether to sell it at a hefty profit in an overheated property market. Since 1985 the “family home” has been exempt from capital gains tax – a concession Treasury estimates will cost the budget around $50 billion in 2015-16. On top of that, people with multi-million-dollar homes at Point Piper or Toorak can still claim the old-age pension. According to Canberra University’s National Centre for Social and Economic Modelling, almost 90 percent of the current GST exemption benefits the top half of income-earners. And neither side of politics wants to know.

    Defence – When was the last time a politician questioned the defence budget or dared suggest possible savings? There has been much argument about whether the Navy’s fleet of 12 new submarines should be built in Australia, but where is the argument about the cost of the subs (around $4 billion a pop) and how many we actually need? The last time an Australian sub fired a torpedo in anger was 1942. Perhaps we could manage with just ten new subs, or eight, even half a dozen. The rule at budget time seems to be that once the military have submitted their shopping lists, no one can question them. Who can argue with the experts about national security? But we pay a big price. According to the Government’s defence white paper, designing and constructing the new subs will cost at least $50 billion up front, with ongoing maintenance on top of that – all part of hefty upgrade of the overall defence budget. You could build a lot of schools, hospitals and very fast trains with that sort of money.

    The car – Motorists love their cars and politicians love motorists. After all, if enough people drive cars governments are saved the expense of building railways and other decent public transport services. I’d better confess that I’m a regular motorist myself, having driven an ancient Honda for the past 22 years and contributed my fair share to traffic congestion, air pollution, global warming and the incidence of obesity. Car manufacturing plants in Australia may be closing down, but that hasn’t stopped us buying cars in record numbers – 1,155,408 new ones last year, up 3.8 percent on the year before – which means more government revenue from petrol taxes, registration fees and the rest. And since the car is a sacred cow, the correct political response is to build more roads for it – bigger, more expensive freeways like Mike Baird’s extravagant West-Connex now hacking its way through Sydney’s western suburbs. The result: more pollution, more congestion, more cars.

    Wealthy private schools – The fathers of Federation laid it down that education in Australia should be free, secular and compulsory. Those were the days! For millions of Australians today, education is expensive and religiously based, and if parents opt for home-schooling, it is no longer compulsory for kids to go to school. So-called “State aid” was a source of deep sectarian bitterness until Gough Whitlam entrenched the principle of needs-based education in the 1960s. Yet many of the wealthiest private schools continue to receive lavish public subsidies. Why have the most privileged schools become a sacred cow? Julia Gillard shares some of the blame for promising that under the Gonski funding reforms no school would see its funding cut. It is now the norm for schools charging parents $30,000 a year to receive generous public funding enabling them to build extra tennis courts, swimming pools with underwater cameras and auditoriums with orchestra pits and state-of-the-art performance facilities. Fairfax media reported recently that five of Sydney’s most expensive schools have received more than $92 million in state and federal funding since 2012. Do politicians object? Not that I’ve heard.

    Development – By development I mean anything built by developers, that revered new breed of public benefactors who give us vast shopping malls, giant office towers and high-raise apartment blocks, often in unsuitable locations, whether we want them or not. Developers also build infrastructure – roads, railways and the like – which used to be called public works and were funded from the public purse, unlike today, when major infrastructure is more likely to be built and run by private operators for their own profit. But then, developers give us growth and jobs and prosperity and other features of the good life, so who can complain? Yet somehow I find it strange that using my seniors’ Opal card I can travel half way around NSW and home again for $2.50, but if I take the privately-run rail service with five stops between the city and Mascot airport (also privately run), it will cost me $19 each way, Is anything wrong?

    Sport – Of course sport is a good thing, but I’m talking here about Big Sport – sponsored professional football, big payouts for exclusive TV coverage, naming rights for multi-million-dollar stadiums funded by the taxpayer. Politicians don’t dare criticise the elite sporting establishment, and no premier or prime minister would dream of turning down an invitation to a footy grand final. Now that Malcolm Turnbull has pronounced AFL the most exciting football code – a brave call – and since this is a most exciting tiome to be an Australia, Aussie Rules must be the game to follow. Bad luck for rugby and soccer fans. The NSW Government is spending $1.6 billion on new sporting stadiums when there’s no shortage of good ones already. Why not spend some of that money on school ovals and local council sports grounds to encourage more people to participate in healthy recreation?

    The flag – The flag may be a sacred symbol, but why should the present design be considered sacred? You don’t have to be a rabid republican to wish for an Australia flag with a more distinctive national character. The Canadians removed the Union Jack from their flag in 1969. New Zealanders stuck with their old flag in a recent referendum, killing any prospect of change in Australia for the foreseeable future, but surely we can do better. Politicians hate talking about the flag because it divides public opinion and upsets the RSL. The same goes for Anzac Day. Rather than celebrate a great military disaster, why not celebrate peace, the end of the Second World War, the most lethal and destructive cataclysm in recorded history? Why not celebrate VP Day, the end of the war with Japan? Paul Keating, in his usual combative style, had this to say: “The Liberals were always soft on the Pacific War. For them it was all about Gallipoli, while our Second World War battles in places closer to home came second. I went to Kokoda to make the point that Gallipoli looked back at Britain, whereas Kokoda looked to our independence.”

    No doubt there are other sacred cows, and a few old ones , like the Monarchy and the Church, that are regularly lampooned these days and are no longer as sacred as they were. So let me round off my list with the cow herself. I don’t mean that Daisy is a sacred creature. I’m talking about the industry to which she belongs – the beef cattle industry, earning an estimated $7.27 billion in export income every year. There are roughly 26 million head of cattle in Australia and politicians love them all. Never mind that many cattlemen treat their animals cruelly, trucking them long distances in confined spaces to be put to death in blood-drenched slaughterhouses, or exporting them live for even more brutal treatment overseas. People have long wondered whether animals feel suffering as we do. I think Shakespeare had the answer, as he often did: “The poor beetle that we tread upon in corporate sufferance feels a pang as great as when a giant dies.” I couldn’t have put it better myself.

    Evan Williams is a former newspaper editor and Walkley Award-winning journalist. He wrote speeches for Prime Minister Gough Whitlam and a succession of NSW premiers. He headed the NSW Government’s cultural sector from 1977 to 2001, and for 33 years wrote regular film reviews for The Australian. He is a Member of the Order of Australia.

     

     

     

     

     

     

  • Mark Harris. Obesity: it is time to tax sugar sweetened beverages?

    Obesity rates are increasing in the Australian population (Figure 1). There is a widening socioeconomic gap with low socioeconomic groups having the highest rates. There is some evidence that obesity rates in children may be levelling off but not in low socioeconomic status children. Overweight and obesity contributes significantly to the burden of disease (about 9% in Australia at present), loss of quality of life and premature mortality (death before completing expected life span) in Australia.

    Obesity is a complex problem requiring complex solutions. There is no magic bullet. Ultimately obesity occurs because of an imbalance in the amount of energy consumed and absorbed in the gut and the amount used up as part of metabolism as well as through physical activity. There are many complex factors influencing this imbalance across the lifecycle (Figure 2). These are in turn influenced by many factors in the social and economic environment. It is easy to think that it is all just too hard at one extreme or that it can be simply address by individual will power at the other extreme.

    At a population level, there are a number of strategies that can achieve improvements. These involve changes in the way we live. While on their own any one strategy is unlikely to solve the problem of obesity, collectively they may contribute to further slowing or reversing the rise in the prevalence of obesity in the Australian community. One such strategy is to reduce sugar sweetened beverages (SSB). In the UK government will apply a levy on SSBs from 2018 joining a number of other countries including France, Belgium, Norway and Sweden.

    There are three main reasons for focusing on on SSBs:

    1. SSBs contribute significantly to the energy intake of Australians.   The Australian Health Survey in 2011-12 found that the reported consumption of sweetened beverages increased with age across childhood, with 61% of teenagers aged 14-18 years reporting drinking it on the previous day. Overall teenagers consumed 6% of their energy from SSBs. Rates are higher in low SES people.
    2. SSBs have no nutritional value (they are so called “empty calories”). Furthermore they tend not to cause satiety (as does food). There is an association between levels of SSB consumption and weight gain among both adults and children. In Australia water is a plentiful, safe and cheap alternative.
    3. Modelling and some experience from other countries suggests that reducing SSBs would have a significant effect weight gain. For example removing SSB from the diet of teenagers would reduce their energy intake by about 10% thus contributing to reduced rates of overweight and obesity in this age group.

    How can a reducing in SSB consumption be achieved? It is not easy. SSB are ubiquitous in the Australian environment. Dispensing machines are located almost everywhere in addition to availability through supermarkets, cafes and restaurants. A number of strategies have been proposed and attempted:

    • Reduce or ban advertising especially for children. Advertising on SSB exceeds $50m per annum in Australia and children are currently not protected from this advertising.
    • Educate the population about the risks of SSB through media campaigns. There is evidence that consumption of SSB has decreased since 1995 especially in children. However this may also contribute to inequities as the change has been greatest among higher SES groups.
    • Remove SSB from school and health service canteens and dispensers. This may be effective for primary school but is less effective for high school especially as children can access SSB outside the school grounds.
    • Reduce the size of SSB containers (eg new smaller soft drink cans).
    • Increase tax on SSB. This has been successful in tobacco control. Modelling suggests that this would need to increase prices by 20% to be effective.

    What are the possible unintended consequences of these actions? It is possible that a tax may economically disadvantage the poor who have higher SSB consumption. This can be partly addressed by education about use of water and could be offset by reduced tax on healthy alternatives such as fresh fruit and vegetables. These efforts may displace consumption onto other energy dense drinks without added sugar (fruit juices, milk drinks). This may have already occurred with fruit juice but there is no evidence for other drinks.

    So what is the way forward?   A range of health groups have recommended social marketing campaigns, restrictions of children’s exposure through marketing and in schools and sporting facilities, reduced availability it workplaces, government institutions, health care facilities and public places and exploration of tax increases. All these are likely to be necessary to reduce SSB consumption sufficiently to reduce obesity rates.

    These measures are, of course, likely to meet resistance from industry groups. They argue that this is a matter for individual choice and not for government regulation. However the socioeconomic gradient in SSB consumption and its effects on weight and the burden of disease both for individuals and the whole community suggest that public health action is warranted.   With its high impact on children, the consequences of inaction are likely to be significant across generations.

     

     

    References

    Australian Bureau of Statistics: 4364.0.55.007 – Australian Health Survey: Nutrition First Results – Foods and Nutrients, 2011-12

    Malik VS, Schulze MB, Hu FB. Intake of sugar-sweetened beverages and weight gain: a systematic review. American Journal of Clinical Nutrition 2006 Aug;84(2):274-88

    Lustig RH, Schmidt LA, Brindis CD. The toxic truth about sugar. Nature 2012; 482: 27-29

    Re-think sugary drink. Consensus Statement on sugar-sweetened beverages. Cancer Council Australia, National Heart Foundation, Diabetes Australia, Nutrition Australia, YMCA, Australian Dental Association, Dental Health Services Victoria, Obesity Policy Coalition. http://www.rethinksugarydrink.org.au/downloads/Consensus_position_statement.pdf

    Figure 1: Overweight or obese, persons aged 18 and over, 1995, 2007–08 and 2011–12

    Harris1

    Notes:

    1. Age-standardised to the 2001 Australian population.
    2. Overweight and obesity classification based on measured height and weight in all 3 surveys.

     

    Source: AIHW 2012, ABS 2013.

     

    Figure 2: Some of the causal factors involved in weight gain.

    Harris2

     

    Professor Mark Harris is from the Centre for Primary Health Care and Equity, UNSW. 

     

     

  • ‘We are the forgotten people’; the anguish of Australia’s invisible asylum seekers.

    Nearly 29,000 asylum seekers are in Australia on temporary ‘bridging visas’. These people may be free from detention but – with many denied education, healthcare and the right to work – they remain locked in desperate poverty and with no idea what their future holds. See link below to an article in The Guardian Australia. The preparation of this article was assisted by the Asylum Seekers Centre in Sydney and other organisations and people across Australia.

    http://www.theguardian.com/australia-news/2016/apr/13/we-are-the-forgotten-people-the-anguish-of-australias-invisible-asylum-seekers

  • Kerry Breen. What ails the national registration scheme for Australia’s 600,000 health professionals?

    In response to one element of a 2005 Productivity Commission report , the Council of Australian Governments (COAG) decided that the state and territory systems of registration of health professionals, some in existence for over 150 years, would be replaced by a single national scheme . The new scheme, based on a “national law” adopted by all jurisdictions, is run by the Australian Health Practitioners Regulation Authority (AHPRA) which commenced operation in July 2010. It now covers 14 health professions and 600,000 health professionals. By the end of 2016, AHPRA will have been subject to two federal parliamentary inquiries (see here and here), one state parliamentary inquiry and an independent inquiry commissioned by the COAG Health Council. Such a record must lead to the question as to what is wrong with the scheme.

    First, it is not truly a “national” scheme as NSW declined to join in, other than to participate in the national register. This has been euphemistically deemed a form of “co-regulation”. Three years later Queensland also opted to become “co-regulated”. The 2012 Victorian Parliamentary inquiry recommended that Victoria follow the same path.

    The interim agency that designed and built the national scheme informed the health professions that the new scheme would bring efficiencies with cost savings and also claimed that the scheme would adopt best practices from the existing state and territory systems. Neither proved to be true as the annual renewal of registration fees for doctors rose by approximately 50% in Victoria in the first year of the system. In its first iteration, the draft national law omitted mention of funding for doctors health programs, an omission only amended after vigorous lobbying. Even now, nearly six years later, AHPRA’s allocation is inadequate to fund the best practice example of the comprehensive Victorian program for distressed doctors.

     

    A recurring theme behind the four inquiries has been dissatisfaction from complainants, state health complaints commissioners and health professionals over the timeliness and fairness of the handling of complaints against health professionals. To quote from the most recent inquiry conducted for the COAG Health Council by Mr Kym Snowball :

    “It was apparent from the outset of the Review that there is widespread concern about the manner in which notifications have been managed under the National Registration and Accreditation Scheme (the National Scheme). These views were repeatedly raised with the Independent Reviewer by members of the public, health practitioners, ombudsmen, jurisdictions and professions.”

    The report then itemised nine separate concerns including:

    “• delays in the preliminary assessment or investigation of concerns raised by notifiers

    • delays in the finalisation of notifications
    • poor communication with both notifiers and practitioners
    • State and Territory Health Complaints Entities are generally not informed about the investigations and outcomes of cases handled by the National Boards and AHPRA
    • perception of inconsistent investigative processes and outcomes among participating jurisdictions.”

     

    It is noteworthy that the CEO of AHPRA has downplayed this strong criticism, as is exemplified in this exchange on Radio National in March this year. The Snowball report also identified the national scheme’s lack of accountability to individual health ministers in the respective states and territories.

    In the absence of any detailed analysis as to why the scheme should be so strongly criticised, I offer the following possible explanations, together with suggestions for improvement. I believe that there are both structural flaws and legislative flaws in the scheme. The key structural flaws are the size of the bureaucracy that has been created and its consequent remoteness from the people it serves, its expensiveness (for little or no additional return) and the lack of direct responsibility to each state and territory health minister. The legislative flaws have been discussed elsewhere and, as they are only peripherally related to the overall problems with the national scheme, they are not detailed here.

    The larger a bureaucracy, the more difficulty the general public and each health professional group will have in accessing its services and in obtaining information. Five years of experience of the mega bureaucracy that is AHPRA bears this out.

    The lack of direct responsibility of each health minister is very evident when one compares the new national scheme with the system it replaced. Under the national scheme, any health minister with concerns must work through the COAG Health Council and AHPRA and then eventually the relevant national board (for doctors it is the Medical Board of Australia) and finally his or her relevant state board. Under the previous system, each state or territory medical board, nursing board and the like reported directly to the local health minister.

    Similarly under the previous system (and focussing now just on medical practitioners), the state medical board employed its own staff to handle the receipt and preliminary assessment of complaints. Those staff, their necessary skills and the quality and timeliness of their work were all directly under the control of the state medical board. Under the national scheme, each state board has no such responsibility and must simply accept whatever staff AHPRA provides. Medical complaints can be sensitive and complex to handle and a high degree of knowledge, experience and skill is required if the system is to work efficiently and sensitively. In my time as President of the Medical Practitioners Board of Victoria, the Board employed both legally qualified and medically qualified investigating officers. While salaries were necessarily higher, the benefits of their skill and knowledge made this a sensible use of resources.

    By comparison, there is a sense that the new system seems to be back to front in the following way. Section 25 of the national law states that a key function of AHPRA is ‘to provide administrative assistance and support to the National Boards and the Boards’ committees in exercising their functions’.   In practice, it appears that AHPRA, via its administrative staff, dictates to the Medical Board and its state Medical Board branches (committees) the work flows and the quality and timeliness of the work done on behalf of the Boards. To gain access to this “administrative assistance and support”, the Medical Board of Australia has to spend resources each year negotiating a “health profession agreement” with AHPRA.

    Fortunately, built into the national scheme is a solution to these structural flaws, namely the New South Wales model of “co-regulation”. Under co-regulation, NSW kept its previous Medical Board, renaming it the Medical Council of NSW. The Council (working in close cooperation with the NSW Health Care Complaints Commission) handles complaints, performance and health/impairment issues, leaving registration and the maintenance of the national register in the hands of AHPRA. Although there would be some short term additional costs, it would be relatively simple for all states and territories to copy NSW and become “co-regulated”. If this were to happen, it is envisaged that the national law would remain in place and with it, the powers for the health ministers as a group to control workforce issues would also remain.

    The experimental national scheme can rightfully claim that it has successfully established a single national register and with it, ready portability of registration across Australia. These key elements must be retained. As NSW has 30% of Australia’s 103,000 doctors and 27% of Australia’s 370,000 nurses, the NSW experience demonstrates that a national register can readily coexist with co-regulation.

    Dr Kerry Breen is a past president of the Medical Council of Australia, a past president of the Medical Practitioners Board of Victoria and a past chair of the Australian Health Ethics Committee of the NHMRC.

  • China and North Korea: the long goodbye.

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

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

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

     

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

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

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

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

    Proportional Representation System –

    Open Party List

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

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

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

    Lower Houses

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

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

     

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

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

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

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

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

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

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

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

    Brands as a promise

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

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

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

    When actions drown out a positive brand promise

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

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

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

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

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

    Making amends – intention and timing is critical

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

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

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

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

    Brands are an important investment in social and cultural value

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

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

  • Evan Williams. Rams. Film Review

     

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

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

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

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

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

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

    Four stars

    Rams, rated M, is in limited release.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

    David James is the managing editor of businessadvantagepng.com

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

     

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Peetz_Chart1

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

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

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

    Peetz_Chart2

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

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

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

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

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

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

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

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

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

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

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

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

    What does it all mean?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    KPIs for politicians

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

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

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

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

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

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

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

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

    Measuring success

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

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

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

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

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

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

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

    The secret of failure?

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

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

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

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

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

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

    It’s also the politician, stupid

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

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

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

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

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

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

     

     

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

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

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

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

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

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

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

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

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

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

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

     

  • Negative gearing has created empty houses and artificial scarcity.

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

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

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

    See full article in link below.  John Menadue.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    But what about good government?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Part 2 tomorrow: Disaffected electorates/ Dysfunctional political systems?

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