John Menadue

  • 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.

     

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

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

    In this article in the Melbourne Age, Hugh White comments

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

    See link to full article below:

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

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

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

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

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

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

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

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

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

    Four stars

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • What a godsend politicians and journalists are to ISIS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    This article was recently published in East Asia Forum.

  • Evan Williams. ‘The Daughter’ film review

    The ads for the new Australian film The Daughter are proudly informing us that the film comes from the same producer who gave us The Piano and Lantana. And that’s some pedigree. Lantana and The Piano were both distinguished Australian films (though the Kiwis shared some credit for The Piano), but what’s this about the “producer”? With all due respect to Jan Chapman, the producer of The Daughter, producers don’t make films. They raise the money for them, hire the main players, acquire all the rights and turn up to collect any best-picture gongs on Oscar night, but they don’t make the movie. Sam Goldwyn was one of the great Hollywood producers, but he didn’t make The Best Years of Our Lives (that was left to William Wyler), and who remembers Goldwyn anyway for Roseanne McCoy or The Adventures of Marco Polo?

    I make this rather obvious point to make the equally obvious point that whatever we may think of The Daughter, credit or blame for the finished film must lie with Simon Stone, the director (who also wrote the screenplay). It’s a visually stunning work , finely acted by a remarkable cast, and set in an unidentified region of rural Australia. So full marks to the cinematographer, Andrew Commis, and actors of the calibre of Sam Neill (who starred in The Piano) and Geoffrey Rush (who starred in Lantana). Stone’s screenplay was “inspired” by Henrik Ibsen’s play The Wild Duck, which Stone adapted for a production at Sydney’s Belvoir St Theatre in 2011. Based on my dim memories of that occasion, the stage production departed freely from Ibsen’s play and the film version departs from it even further – which pretty much absolves Ibsen from any responsibility for the movie.

    There are some resemblances, of course. Put crudely, this is a film about a daughter and a duck, in which both have prominent roles and can be seen as complementary elements in the fabric of the story. The daughter is 16-year-old Hedwig (Odessa Young), whose mother Charlotte (Miranda Otto) teaches at the local school. The duck, which we meet in the opening scene, has been wounded by a bullet fired by Geoffrey Rush’s character, Henry, who owns the local timber mill and is about to marry his much younger bride and former housekeeper (Anna Torv). Everyone is gathering for a fancy wedding. The duck, meanwhile, is rescued and nursed back to health by Walter (Sam Neill), the father of Oliver (Ewen Leslie), who is married to Charlotte.

    I confess that the details of these relationships eluded me at first (narrative lucidity isn’t the film’s most obvious virtue), but we are left in no doubt that Walter is a nice guy. He lives in a splendid mansion that looks more like a colonial palace than a country homestead, and runs a sanctuary for wounded animals – a sort of “unofficial RSPCA”, as he calls it. (I doubt if Ibsen would have thought of that.) Hedwig, incidentally, is the only character whose name remains unchanged from Ibsen’s play, though I suppose it would seem odd if the horny-handed, bush-dwelling Aussies in the story went around with names Knut, Lars or Thor.

    Without trying to summarise all the film’s emotional conflicts, it’s fair to say that nearly everyone is miserable for one reason or another. The plot is replete with disappointments, infidelities, thwarted passions, buried secrets and skeletons in closets. All good, steamy stuff, well matched by the gloom of the surroundings. A mood of desperation is established early on when the timber mill is closed and hundreds of workers find themselves out of a job (timely echoes of recent events in Queensland, though Sam Neill comes across as a more sympathetic boss than Clive Palmer).

    Stone made his cinema debut with a miniature piece called Reunion, one of a compilation of 17 short films – or fragments of short films – that made up The Turning, based on a book of stories by Tim Winton. Written by Andrew Upton, Reunion was about a Christmas Day family gathering that gets absurdly out of hand. Praising it at the time, I called it one of the best pieces in The Turning and the only one of the 17 stories with a touch of light-heartedness. And how I longed for a touch of light-heartedness in The Daughter. Stone’s colour palette is unrelievedly dark, his cameras dwelling on rows of deserted shops, empty streets and grim forests of brooding trees, with more than one scene shot in a derelict factory.

    The acting honours must go to Odessa Young, who gives a performance of lacerating honesty and pain as the daughter. As for the duck, who is given the name Lucky, I think she shows great promise, and there is no more moving moment in The Daughter when she soars into the sky at the end, as if eager to escape the cauldron of misery and confusion engulfing the rest of the cast. A lucky duck indeed.

    Three stars.

    The Daughter, rated M, is in national release.

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

     

     

     

     

  • Jonathan Karnon. No-one should get dud hospital care.

    In 2013-14, Australian governments spent A$105 billion on health; A$44 billion of that was on public hospitals.

    The Commonwealth government is increasingly concerned with the size of the health budget and has acted to reduce the inappropriate use of Medicare benefits. But the Commonwealth government has less influence on public hospitals because the state and territory governments control their expenditure.

    State governments are facing tighter budgets as demand for heath care increases due to an ageing population, greater rates of chronic disease and more service use generally.

    The collection and analysis of data on the performance of our health-care system can be used to improve the quality of health services and maybe also reduce costs.

    At a national level, the clinician-led Choosing Wisely campaign is developing lists of specific tests, treatments and procedures that may be unnecessary and sometimes harmful for individual patients. Recommendations include reducing use of CT scans in the emergency department and not ordering x-rays for patients with uncomplicated acute bronchitis.

    But while improving the decisions made by individual doctors is important, there remain other causes of substantial variation in the safety and quality of care provided in Australian hospitals. This needs to be addressed.

    Varied quality and safety

    Efforts to improve the quality of care in hospitals have traditionally been left to individual hospitals and their managers. But we now have the data to compare different hospitals. We can identify the best and worst performers and, most importantly, determine how to boost the performance of the stragglers.

    Identifying and intervening to improve low-quality care requires financial investment. But there are significant potential long-term savings, due to improved efficiency and better patient outcomes.

    In New South Wales, the Bureau of Health Information has developed and tested methods for comparing the death rates within 30 days of treatment for heart attacks, strokes, pneumonia and hip fracture surgery.

    For stroke patients, ten hospitals had noticeably higher-than-expected death rates for these conditions. An additional 16 deaths were observed in every 100 patients treated at a low-performing hospital compared to a high-performing hospital.

    Clinical auditors and review panels should investigate differences in the care provided at the high- and low-performing hospitals and approaches to improve care quality.

    Other data show the costs of treating similar conditions varies dramatically. A Grattan Institute analysis shows the average cost of performing a hip replacement at different hospitals ranges from under A$10,000 to more than A$30,000.

    Further investigation may find the higher costs are due to the use of more expensive prostheses and to keeping patients in hospital for longer after surgery. Assessments can then be made about whether more expensive prostheses or extended lengths of stay produce better patient outcomes, which justify the additional costs.

    We have analysed hospital data to compare costs, outcomes and the care pathways of patients treated for similar conditions at the main public hospitals in South Australia.

    After adjusting for differences in the types of patients presenting at emergency departments with chest pain, seven in every 100 patients presenting at a particular hospital were readmitted or died within 12 months. This compared to four to five patients at the other hospitals.

    The same hospital spent up to A$669 more on each patient than the other hospitals. Over one year, these additional costs amount to almost A$1 million.

    Analysis of the care pathways showed that the hospital with the highest rates of re-admission, premature death and costs, discharged more patients from the emergency department. This hospital also kept patients who were admitted to an inpatient bed in hospital for longer than the other hospitals.

    This suggests some patients may have been inappropriately discharged home from the emergency department, while other patients could have been discharged earlier.

    Further investigation might look more closely at how and why decisions are made to admit patients from the emergency department and at what might be causing admitted patients to stay longer in hospital.

    Investing in improvement

    State governments are increasingly interested in improving quality. The Queensland government has set up an Integrated Care Innovation Fund to invest in initiatives to improve efficiency and value. NSW set up a similar Translational Research Grants Scheme. In South Australia, the Transforming Health initiative aims to improve the quality and consistency of health care across all metropolitan public hospitals.

    But while individual efforts to improve quality may have some effect, it is more likely that co-ordinated, systematic approaches will have a greater impact.

    Data should be analysed across hospitals on an ongoing basis to identify areas of clinical activity with the greatest potential for improvement, such as the examples above. Findings that quality could be improved should be fed back directly to hospitals.

    Specialist teams should be set up to work with hospitals to further investigate areas of concern and to develop and implement improvement strategies.

    Rather than going back to the drawing board on health reform, governments need to improve what we’ve already got and bring the poor performing hospitals and departments in line with their better performing peers.

    Jonathan Karnon is Professor of Health Economics, University of Adelaide.  This article first appeared in the Conversation on 21 March 2016.

  • Greg Barton. Out of the ashes of Afghanistan and Iraq: the rise and rise of Islamic State.

    Since announcing its arrival as a global force in June 2014 with the declaration of a caliphate on territory captured in Iraq and Syria, the jihadist group Islamic State has shocked the world with its brutality.

    Its seemingly sudden prominence has led to much speculation about the group’s origins: how do we account for forces and events that paved the way for the emergence of Islamic State? In the final article of our series examining this question, Greg Barton shows the role recent Western intervention in the Middle East played in the group’s inexorable rise.

    Despite precious little certainty in the “what ifs” of history, it’s clear the rise of Islamic State (IS) wouldn’t have been possible without the 2003 invasion and occupation of Iraq. Without these Western interventions, al-Qaeda would never have gained the foothold it did, and IS would not have emerged to take charge of northern Iraq.

    Whether or not the Arab Spring, and the consequent civil war in Syria, would still have occurred is much less clear.

    But even if war hadn’t broken out in Syria, it’s unlikely an al-Qaeda spin-off such as IS would have become such a decisive actor without launching an insurgency in Iraq. For an opportunistic infection to take hold so comprehensively, as IS clearly has, requires a severely weakened body politic and a profoundly compromised immune system.

    Such were the conditions in Goodluck Jonathan’s Nigeria from 2010 to 2015 and in conflict-riven Somalia after the fall of the Barre regime in 1991. And it was so in Afghanistan for the four decades after conflict broke out in 1978 and in Pakistan after General Zia-ul-Haq declared martial law in 1977.

    Sadly, but even more clearly, such are the circumstances in Iraq and Syria today. And that’s the reason around 80% of all deaths due to terrorist attacks in recent years have occurred in five of the six countries discussed here, where such conditions still prevail.

    An unique opportunity

    The myth of modern international terrorist movements, and particularly of al-Qaeda and its outgrowths such as IS (which really is a third-generation al-Qaeda movement), is that they’re inherently potent and have a natural power of attraction.

    The reality is that while modern terrorist groups can and do operate all around the globe to the point where no country can consider itself completely safe, they can only build a base when local issues attract on-the-ground support.

    Consider al-Qaeda, which is in the business of global struggle. It wants to unite a transnational ummah to take on far-off enemies. But it has only ever really enjoyed substantial success when it has happened across conducive local circumstances.

    The Soviet occupation of Afghanistan in the 1980s provided an opportunity uniquely suited to the rise of al-Qaeda and associated movements. It provided plausible justification for a defensive jihad – a just war – that garnered broad international support and allowed the group to coalesce in 1989 out of the Arab fighters who had rallied to support the Afghans in their fight against the Soviets.

    Further opportunities emerged in the Northern Caucasus, where local ethno-national grievances were eventually transformed into the basis for a more global struggle.

    The declaration of independence by Chechnya in 1991 led to all-out war with the Soviet military between 1994 and 1996, when tens of thousands were killed. After a short, uneasy peace, a decade-long second civil war started in 1999 following the invasion of neighbouring Dagestan by the International Islamic Brigade.

    The second civil war began with an intense campaign to seize control of the Chechen capital, Grozny. But it became dominated by years of fighting jihadi and other insurgents in the Caucus mountains and dealing with related terrorist attacks in Russia.

    In Nigeria and Somalia, Boko Haram and al-Shabaab now share many of the key attributes of al-Qaeda, with whom they have forged nascent links. But they too emerged primarily because of the failure of governance and the persistence of deep-seated local grievances.

    Even in Afghanistan, al-Qaeda struggled to transform itself into a convincing champion of local interests in the 1990s. After becoming increasingly isolated following the September 11 attacks on the US, it failed to gain support from the Afghan Taliban for its global struggle.

    But something new happened in Iraq beginning in 2003. The Jordanian street thug Musab al-Zarqawi correctly intuited that the impending Western invasion and occupation of Iraq would provide the perfect conditions for the emergence of insurgencies.

    Al-Zarqawi positioned himself in Iraq ahead of the invasion and deftly rode a wave of anger and despair to initiate and grow an insurgency that in time came to dominate the broken nation.

    Initially, al-Zarqawi was only one of many insurgent leaders intent on destabilising Iraq. But, in October 2004, after years of uneasy relations with the al-Qaeda leader during two tours in Afghanistan, he finally yielded to Osama bin Laden’s request that he swear on oath of loyalty (bayat) to him. And so al-Zarqawi’s notorious network of insurgents became known as al-Qaeda in Iraq (AQI).

    From the ashes

    Iraq’s de-Ba’athification process of May 2003 to June 2004, during which senior technocrats and military officers linked to the Ba’ath party (the vehicle of the Saddam Hussein regime) were removed from office, set the stage for many to join counter-occupation insurgent groups – including AQI.

    Without the sacking of a large portion of Iraq’s military and security leaders, its technocrats and productive middle-class professionals, it’s not clear whether this group would have come to dominate so comprehensively. These alienated Sunni professionals gave AQI, as well as IS, much of its core military and strategic competency.

    But even with the windfall opportunity presented to al-Zarqawi by the wilful frustration of Sunni interests by Nouri al-Maliki’s Shia-dominated government from 2006 to 2014, which deprived them of any immediate hope for the future and confidence in protecting their families and communities, AQI was almost totally destroyed after the Sunni awakening began in 2006.

    The Sunni awakening forces, or “Sons of Iraq”, began with tribal leaders in Anbar province forming an alliance with the US military. For almost three years, tens of thousands of Sunni tribesmen were paid directly to fight AQI, but the Maliki government refused to incorporate them into the regular Iraqi Security Force. And, after October 2008 – when management of these forces was handed over by the US military – he refused to support them.

    The death of al-Zarqawi in June 2006 contributed to the profound weakening of the strongest of all post-invasion insurgent groups. AQI’s force strength was reduced to several hundred fighters and it lost the capacity to dominate the insurgency.

    Then, in 2010 and 2011, circumstances combined to blow oxygen onto the smouldering coals.

    In 2010, the greatly underestimated Abu Bakr al-Baghdadi, a local Iraqi cleric with serious religious scholarly credentials, took charge of AQI and began working to a sophisticated long-term plan.

    Elements of the strategy went by the name “breaking the walls”. In the 12 months to July 2013, this entailed the movement literally breaking down the prison walls in compounds around Baghdad that held hundreds of hardcore al-Qaeda fighters.

    Islamic State, as the group now called itself, also benefited from the inflow of former Iraqi intelligence officers and senior military leaders. This had begun with de-Ba’athification in 2003 and continued after the collapse of the Sunni awakening and the increasingly overt sectarianism of the Maliki government.

    Together, they developed tactics based on vehicle-borne improvised explosive devices and the strategic use of suicide bombers. These were deployed not in the passionate but often undirected fashion of al-Qaeda but much more like smart bombs in the hands of a modern army.

    And the US military withdrawal from Iraq in late 2011, well telegraphed ahead of time, provided an excellent opportunity for the struggling insurgency to rebuild. As did the outbreak of civil war in Syria.

    A helping hand

    Al-Baghdadi initially dispatched his trusted Syrian lieutenant, Abu Mohammad al-Julani, to form a separate organisation in Syria: the al-Nusra front.

    Jabhat al-Nusra quickly established itself in northern Syria. But when al-Julani refused to fold his organisation in under his command, al-Baghdadi rebranded AQI (or Islamic State in Iraq) Islamic State in Iraq and al-Sham/the Levant (ISIS/ISIL).

    Then, a series of events turned IS from an insurgency employing terrorist methods to becoming a nascent rogue state. These included the occupation of Raqqa on the Syrian Euphrates in December 2013; the taking of Ramadi a month later; consolidation of IS control throughout Iraq’s western Anbar province; and, finally, a sudden surge down the river Tigris in June 2014 that took Mosul and most of the towns and cities along the river north of Baghdad within less than a week.

    IS’s declaration of the caliphate on June 29, 2014, was a watershed moment that is only now being properly understood.

    In its ground operations, including the governing of aggrieved Sunni communities, IS moved well beyond being simply a terrorist movement. It came to function as a nascent rogue state ruling over around 5 million people in the northern cities of the Euphrates and the Tigris, and defending its territory through conventional military means.

    At the same time, it skilfully exploited the internet and social media in ways the old al-Qaeda could not do – and that its second-generation offshoot, al-Qaeda in Arabian Peninsula (AQAP), had only partially achieved.

    This allowed IS to draw in tens of thousands of foreign fighters. Most came from the Middle East and Northern Africa, but as many as 5000 came from Europe, with thousands more from the Caucusus and from Asia.

    Unlike the case in Afghanistan in the 1980s, these foreign fighters have played a key role in providing sufficient strength to take and hold territory while also building a global network of support.

    But without the perfect-storm conditions of post-invasion insurgency, this most potent expression of al-Qaedaism yet would never have risen to dominate both the region and the world in the way that it does.

    Even in its wildest dreams, al-Qaeda could never have imagined that Western miscalculations post-9/11 could have led to such foolhardy engagements – not just in Afghanistan but also in Iraq.

    Were it not for these miscalculations, 9/11 might well have precipitated the decline of al-Qaeda. Instead, with our help, it spawned a global jihadi movement with a territorial base far more powerful than al-Qaeda ever had.

    Greg Barton is Chair in Global Islamic Politics, Alfred Deakin Institute for Citizenship and Globalisation; Co-Director, Australian Intervention Support Hub, Deakin University. This article first appeared in The Conversation on 3 March, 2016.