Policy Series. 

Australia is currently facing a challenging situation in which the economy needs to transform from one very largely driven by investments in the minerals and energy sector to one which has a wider spread of investment drivers. The overall economic growth rate, while still reasonably strong by OECD standards, is below the long term rate of about 3 to 3 and one half per cent per annum. 

The famous three Ps – productivity, population and participation – all need to play their part if Australia is to get back to its long term growth path. 

Arguably rather too much attention is focused on lifting productivity by the usual list of microeconomic reforms, including greater labour market flexibility. While these matters deserve a place in a comprehensive strategy, they need to be complemented by action designed to improve Australia’s innovation performance and in particular its performance in terms of technological innovation. Raising the rate of technological change is central to competitiveness and long term economic growth. 

At the outset it should be said that innovation is not just about stimulating knowledge flows. In order to create new business opportunities and lift economic performance there must be economic actors who can exploit new knowledge. The importance of individuals and the innovation system as a whole is sometimes overlooked by central agencies of government who tend to think in terms of more macroeconomic frameworks. They are also too willing on occasions to trade off good long term policy for short term budgetary savings. 

How has Australia Performed? 

The optimistic view expressed in some parts of the Australian innovation literature is that we have done remarkably well over the course of last 200 years in terms of adding value to our latent minerals and primary resources. It is not hard to identify major innovations that enabled mineral resources and primary products to be taken to world markets. 

Beyond mining and primary production, there are also some outstanding examples of innovation in the medical and telecommunications fields which have gone global. 

The pessimistic view is based on the reality that with a small, developed country most of the innovations that set the framework of our daily lives tend to come from elsewhere. Australia’s performance as an exporter of high value added products and services is modest at best. 

Of greater concern is the fact that many Australian innovators have had to move to the United States and elsewhere to tap the capital and complementary resources they need for global success. 

Moving from the anecdotal to a more evidence-based approach to measuring the effectiveness of the Australian innovation system, the Global Innovation Index finds that Australia is placed 17^th but well behind the top 10 (which include countries like Singapore, Switzerland, Sweden, Denmark and the Netherlands). Australia is more a tail light rather than a leading light among the top group. We should and must do rather better if we want higher living standards in a much more challenging world for commodity prices. 

One of the data points that gives real cause for concern is the relatively low level of collaboration between researchers in Australia’s universities and publicly funded research agencies and business. Given the relatively large investment of public funds involved improving this situation offers real potential for improving the impact of our research and innovation system. 

Given the importance of small to medium sized enterprises (SMEs) in the Australian economy – it is from this group the future Hidden Champions will emerge, lifting collaboration will of necessity mean improving the connectivity between Australia’s SMEs and the research community. This is no small thing. 

Key Requirements for Innovation Success 

The literature suggests that there are four dominant requirements that must be present for sustained and widespread innovation success. 

The first requirement is the presence of a highly educated and skilled workforce. The world leading sources of innovation all have strong school and university systems. They all place a strong emphasis on so-called STEM skills (science, technology, engineering and mathematics). 

The second requirement is the capital available to support innovation. This is not just a question of the availability of financial capital but just as importantly the availability of what might be called “smart” capital, ie, entities and individuals who understand innovation and markets and the likely time horizons for success. 

The third requirement is a high degree of connectivity between university and publicly funded research entities and business. World class research by itself is no guarantee of successful innovation. The successful innovation nations have all found ways of strengthening connectivity between researchers and business. 

The fourth requirement and in some ways the most challenging is to encourage the development of supportive eco-systems generally focused on particular emerging technologies. Silicon Valley is the parade example in the IT field but there are many other examples in the US and elsewhere of clusters of excellence centred on a range of fields. 

How does Australia Rate? 

Australia does well on the first requirement. We possess a highly educated and skilled workforce. Depending upon the measure used, six to eight universities in the global top 100 speaks for itself for a nation Australia’s size. We cannot rest on what has been achieved to date. The bar is being raised all the time. 

The Chief Scientist has rightly identified STEM skills as being highly important and an area where Australia needs to do better. Fundamentally we need to at least maintain our global position and if possible improve it. 

The other positive sign is that Australia has thought leaders in at least some of the fields from which disruptive technologies with great potential impact are emerging. 

Australia’s performance in terms of the availability of capital for innovation is something of a mixed bag. The global mining companies have demonstrated over long periods that they are able to marshal the capital to support innovation in their businesses. Capital has also been forthcoming for innovations related to the provision of new internet enabled services provision businesses. Sometimes these have come from wealthy individuals with a strong understanding of the potential of these businesses or multinational companies. 

Where performance has been less impressive is for innovations outside these areas where there is a lack of “smart” investors with deep pockets. This either puts pressure on Australian innovators to go offshore or to proceed to early to an IPO to tap equity capital markets. Efforts have been made to kick start a venture capital sector in Australia but it is clear more needs to be done. AVCAL points out that Australia only invests a small amount in new businesses compared to the US and Israel. 

As pointed out in many studies on Australia’s innovation system, Australia rates poorly in terms of research collaboration involving both research entities and business. Efforts have been made to address this weakness, most notably through the long running Co-operative Research Centres program, and gains have been made in some areas but much more needs to be done. 

Apart from the notable eco-systems that exist around Australia’s leading minerals and primary production industries, it is much harder to detect the presence of effective eco-systems in other areas of potential strength to the Australian economy. A lot of effort has been directed to building the conditions for strong clusters to emerge but for the most part they have not been notably successful. 

Building eco-systems remains important to future innovation and competitiveness and has recently received serious attention from the Commonwealth Government. 

What is to be done? 

For the optimists and the commentators who believe that innovation is purely a matter for the private sector, the answer is either nothing or at most identifying and removing regulatory barriers. 

For the less ideologically driven amongst us, there are a number of things that need to be done by governments, research and education organisations and businesses if the full potential of Australia’s innovation system is to be realised. Some of these matters are now being addressed, but there are others which need to be given attention. 

The Industry Innovation and Competitiveness Agenda announced by the Commonwealth Government in October last year represents an important step forward in encouraging innovation and improving the national innovation system. The main measure is designed to establish five industry growth centres in:

Food and agribusiness;

Mining equipment, technology and services;

Oil, gas and energy resources;

Medical technologies and pharmaceuticals; and

Advanced manufacturing sectors. 

$188.5 million has been provided to fund these industry-led centres which are expected to foster better use by industry of Australia’s world class researchers so that the community sees stronger commercial returns from the $9.2 billion annual Commonwealth investment in research. 

The industry growth centres are expected to be in operation by the second half of this year. Chairs of the five industry growth centres have already been announced. These bodies have the potential to contribute to both building the relevant eco-systems and strengthening collaboration between researchers and business. 

The Industry Innovation and Competitiveness Agenda also announced measures to encourage employee share ownership and to promote STEM skills in schools.

Subsequently, it has been announced the Ministers for Industry and Education will look into ways of tweaking University block grants to strengthen university researchers incentives to connect with business. Better aligning researcher incentives with business is a key to strengthening Australia’s innovation system. 

The other important announcement of the Commonwealth Government concerns the response to the Miles Report on the future of the Co-operative Research Centres program. This important program is to be continued but with reforms to ensure it is in fact industry-led and subject to a streamlined system of administration. Clarity around the relationship between the CRCs and the industry growth centres has been achieved which should ensure they work together in a complementary manner. 

The industry Minister announced on 26 May this year funding of $74 million over 7 years for two industry-led Cooperative Research Centres, namely, the CRC for Optimising Resource Extraction and the Innovative Manufacturing CRC. Both have clear links to a number of the Industry growth centres. 

While all these measures are welcome and are pointing in the right direction, the main criticism of them is that they don’t go far enough and leave some important areas untouched. 

The explicit aspiration to obtain a better return on the $9.2 billion annual Commonwealth investment in research is certainly right but the suspicion is that the measures announced to date fall short of what is needed to achieve nationally significant impact. 

This reality becomes all to palpable when regard is had to the size of the resources countries in Asia Pacific are devoting to boosting their innovation systems and competitiveness. We need look no further than Singapore to see the efforts being made by the Island State. While every nation has their own place and structures to deal with, there do seem to be some consistent threads to the strategies adopted by the winners. We need to be prepared to learn from others where we can. The Miles Report does point to the German Fraunhofer Institutes as an example Australia could do well to learn from. Other examples in Asia Pacific readily spring to mind. 

When push turns to shove effective innovation systems turn on education/skills and finance. At this stage Australia’s efforts in relation to providing “smart” capital for start ups and businesses with the potential for global growth are not really world class. 

We need to bring to the development of innovation policy the sort of mindset that is crucial to successful innovation more generally, ie, a willingness to experiment and to shake up old ways and institutions. But at the same time a degree of certainty for planning purposes is needed with long running innovation policy measures. Bipartisanship is therefore important. 

A point that should be made is that to this stage the focus has really been on supply-side policies for innovation. The literature in Europe and the really innovative countries in Asia strongly suggests that demand-side policies also need to be considered. These are particularly relevant when it is necessary to create space in the market for new technologies which provide high external benefits and the promise of game changing reductions in costs over time. 

It is virtually impossible to think about innovation without recognizing the debt we all owe to Joseph Schumpeter. He put innovation at the centre of economic growth and recognized the crucial role played by the entrepreneur – the person that recognizes the market potential of emerging technologies. Part of the challenge to raising Australia’s innovation performance is to strengthen innovation entrepreneurship. This is a task that has more to do with our management education institutions than its does with Government policy. But as in most things, to raise Australia’s innovation performance to world leading we need a balanced portfolio of mutually reinforcing actions by governments, business and our research and education institutions. 

The pay-off from getting things right can be very large indeed. We are facing a situation characterized by the emergence of potentially disruptive technologies in fields as diverse as 3D printing, robotics, energy technologies, genomics and large scale data analysis systems. Exploiting these technologies for business and health applications offers huge possibilities for Australia. 

David Charles was the Chair of the Advanced Manufacturing CRC and will be a Director of the recently announced Innovative Manufacturing CRC. He is a Director of Insight Economics Pty Ltd.

 Policy Series

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

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

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

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

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

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

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

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

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

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

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

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

Policy Series

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

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

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

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

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

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

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

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

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

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

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

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

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

What have we learned over 50 years?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

On all fronts Indigenous Affairs is a work in progress.

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

Policy Series

Wentworth Group of Concerned Scientists[*]

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

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

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

The problem is the narrative: jobs or the environment.

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

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

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

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

A sustainable economy

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

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

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

Federation and the role of science in public policy

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

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

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

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

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

The challenge and the opportunity

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

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

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

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

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

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

2. Using markets to finance conservation.

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

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

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

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

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

3.  Conserving Australia’s natural capital.

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

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

4. Regionalising management of Australia’s natural resources

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

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

5. National environmental accounts.  

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

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

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

We all have a role …

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

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

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

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

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

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

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

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

References

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

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

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

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

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

Policy Series

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

Education Structures

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

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

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

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

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

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

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

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

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

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

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

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

Higher Education

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

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

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

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

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

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

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

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

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

Vocational Education

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

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

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

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

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

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

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

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

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

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

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

Conclusion

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

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

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

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

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

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

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

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

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

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

We will keep you posted.

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

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

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

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

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

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

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

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

Technology

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

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

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

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

History

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

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

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

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

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

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

The policy challenges

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

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

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

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

Solutions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

References Cited

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

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

Policy Series 

I have been giving presentations recently in which I have exhorted the creative community to accept responsibility for: –

1. Writing refreshed meaningful arts policies for federal political parties to inform a renewed approach for support and activity;
2. Forming renewed priorities and objectives for national arts training and other tertiary institutions which address evident misdirection and negative trends; and
3. Advocating coherent and well-formed detail in school curriculums of our primary and secondary systems which are devoted to the arts generally and music specifically as fundamental rights for all Australian students so as to improve the national capacity to think, concentrate, learn and appreciate creativity.

Our society is increasingly governed by several sustained characteristics, which are profoundly unhelpful to clear direction in national policy construction and commentary equally. These trends have manifest impact on the process of policy formulation and are seen particularly in:

• Politicians and their bureaucracies increasingly debasing, through neglect and disengagement, creativity and intellect as the vital crucibles of the national future;
• The broad commentariat often being disconnected from informing debate (often from rigid ideology or old fashioned ranting) about creativity, imagination and innovation as being central, indeed vital, to a national future which is confident and meaningful;
• Money being treated as the measure of value in all things rather than as one of many measures; and
• Our society adopting a perilous course to celebrate the anti-intellectual and what I would describe as the triumph of general ignorance where dogmatic assertion is preferred over considered respectful discussion which aims to test ideas and assumptions from informed knowledge based study, so as to arrive at evidence supported approaches focussed at all times on real outcomes.

It is time to stop the marked, steep and growing decline in the policy content and resourcing of creative arts endeavour; in training institutions; and to address the primary need for schools to be transformed in according arts education (with specialist teachers) as important a priority as reading, maths and science.

For too long the creative community of practitioners and critics in the performing and visual arts, literature, cinema and television production and their many extensions across the digital domain, have tolerated the rise of simple-minded empty policy to rule the day, absent coherent analysis and objective focus on outcomes. We have all stood back for the last two decades and more, watching virtually helplessly as the erosion of standards and of resource commitment allied with the corrosion of language and policy process has marched on relentlessly. It has been essentially unchallenged as we have become too accepting of the second best, of poor execution and timid feedback.

Two decades is a long time in a connected world, especially one where the internet and digital technology generally has changed forever the nature of information access, exchange and the direction of society through politics, commerce, creativity, education and communication. Continuing fragmentation is guaranteed – the ferocity of attack and the velocity of change will only grow. Merit, ingenuity, speed, flexibility and performance increasingly rule the digital day. Australia is losing out in this process because of national policy failure as reflected in depleted institutions and moribund approaches. It is time for reinvention and positive connected action.

The urgency of public policy renewal in education and the arts is impossible to over emphasise because the old models don’t work any longer. We need to think and behave differently. In an era where the settings change daily and where ‘the internet of things’ will see over 75 billion connected devices by 2020, it is an immediate necessity that a considered comprehensive review of policy and settings takes place to recalibrate for this century and beyond. Creativity and imagination are core elements in the skillsets needed broadly for the nation to win through before we focus more closely on creative ‘cultural’ production and its many standalone merits.

We are a small country at ‘the bottom of the world’ (notwithstanding the internet) and condemned to irrelevance if we do not arrest the current trends. We have many parochial pillars which whilst ‘cheerful’ to some, are venomous to national ambition and achievement. After all a nation of 24 million which speaks English is either profoundly advantaged or potentially disabled as a result almost entirely of its public policy settings and the outcomes they achieve and reflect.

Examining arts policy specifically, the ALP has an arts policy which tries to accommodate all comers. As a result it has little durable essence or meaning other than providing a recital of modern clichés. The federal Coalition has no published arts policy at all. None. The Greens offer a telegrammatic set of populist, disconnected ‘thought bubbles’.

It is essential that we honour our duty of intergenerational care and accept the need for national ground up policy (and allied resourcing) review to ensure a healthy, dynamic creative landscape which is innovative, connected and ambitious on the one hand and appropriately trained, resourced and critiqued on the other. A meaningful wholesale review of the policy and commercial settings on that which comprises the creative landscape is way overdue with a clear eye on the future and its myriad creative, technology, commercial and behavioural change challenges in the sort of way we all recognise as necessary in the connected cross border universe we now live in – one where dramatic disruption rules.

As that vulnerable little English speaking country there is no future in being bland! We need bold confident national futures which only come from ground plane policy review and the ambition it adopts. It is imperative that stakeholders work together to fashion a fresh positively integrated approach which understands this radically changed environment.

The failure of political agendas in creative life is, I suggest, our collective failure. The absence of fresh, relevant, compelling approaches reflects a failure to renovate thinking where many working settings are frozen in a time capsule – reflecting a failure to renovate thinking over the last 25 years. It is a disturbing example of a vacuum in effective action – in my view sadly embodying Australian complacency. I say so because it would seem to me that many of the working settings we have are from long ago in their policy, regulatory, financial and industrial frameworks. Let alone letting consumers and their changed behaviours into the policy room as a core governing discipline.

The cryogenic policy list is a very long one including such examples as: –

• An Australia Council which has become increasingly an instrument of the bureaucracy and not an independent informed advocate in a robust contemporary way for policy and the rights of creators, distinctive work and audiences.
• There is the equally tortured territory of sacred cows such as peer review which needs re-examination. I would firmly contend peer review is frequently no such thing but rather an instrument for mediocre compromise over petty ‘village sharing’ of ever diminishing spoils.
• And we need to address the descent into mindless managerialism which has encroached into all spaces and now dominates so much of creative policy, decision-making and serving at the altar of process and not of delivered outcomes.
• We have gone backwards in arts education school curricula ever since the 1970s in a process of dumbing down to lowest common denominators where the privileged are cared for separately and all others are now condemned to opportunities being closed off with transformation denied.    
• Copyright laws are inadequate and outdated, unequal to the task in confronting theft and defending the absolute rights of creators to protect their work.
• Content regulation approaches are essentially unchanged in their core fabric and remain disappointingly true to views which drove policy with the precursors to the Australian Communications and Media Authority – most recently the Australian Broadcasting Authority and before that the ABT and the ABCB before that. For many those will be acronyms that are meaningless but they require mention because thinking that informs regulatory formulation hasn’t been revisited in decades.
• Then there is a dysfunctional absence of any minimum enforced criteria about Australian content outcomes on the national broadcasters (whilst there are some minimum public bargain outcomes on commercial broadcasters). This has been allowed to linger for decades on a self-interested, inaccurate but convenient altar of editorial independence, matched with an inevitable plaintive cry as to being poor and under resourced by the ABC for example, voiding the whole issue of identified priorities and choices reflected in expenditure outcomes made by it, while hopelessly antiquated, inefficient structures and practices persist.
• There are too many outmoded forms of industrial and other agreements which limit creative freedom, before we even venture into proposals for media constraint in 2013 which made it clear Australia was to be very much a ‘Je Suis Non Charlie’ jurisdiction.   We should never forget what happened then.

The list is very much larger but serves to show that all too often such inheritances bedevil the possibility of clear thinking, limit and censor fresh options and confine opportunity to innovate and drive better outcomes from strong, flexible frameworks which comprehend our national vulnerabilities. All of which provides an extended example of the need to renovate the policy house.

We in the creative community need to review the core logic that underpins the support on which many rely so that we can aim to make the policy and related resource settings fit for purpose over the longer term. We need to get back to the good elements in how it began in a few decades ago – we did it. Together. It was often messy. It was invariably colourful. But we made it happen.

The political parties have bad policies or no policies because we do not challenge them. We do not write them. We have to get back in the policy process on the ground floor with refreshed standards, better understanding of successful policy principles and objectives built on performance and relevant methods, which will provide fresh directions.

I don’t offer assurance on delivered solutions beyond a strong plea to work together, refashioning directions and priorities built on common recognition that policy travels poorly and demands fundamental change. I do so because it needs to be an effort in creative community commitment to its own future to have durability and a sense of personal and professional responsibility.

We need a dynamic approach which gathers the spectrum of interests necessary to produce invigorated policy capable of application and evolution over the medium to long term, informed by a range of practitioners, creative community organisational leaders and policy hard heads so that it is practically primed for advocacy and implementation.

The review requires a group comprising: a tight range of selected primary creators (chosen by a group of creative elders in the key disciplines – across the performing and visual arts, design, writing and the video production media); the heads of the leading representative bodies in the creative community; allied with experienced recent former policy leaders from such relevant national departments as Treasury and Prime Minister and Cabinet. Clearly any such group needs to take account of gender and indigenous balance to ensure it speaks for modern Australia. It should be led by a senior member of the creative community.

The group should be tasked with the challenge to forge a program for lasting reform which addresses issues holistically and doesn’t repeat the present cycle of tired twentieth century policy recitals condemned to irrelevant Incrementalism mired in an often dogmatic past.

That group needs to have an agreed contemporary Terms of Reference which doesn’t try to restrain and contain thinking so that the task is approached with a wide mandate governed by Barbara Tuchman’s definition of wisdom – applying judgement with access to experience, ample available information and lots of common sense! The group needs to proceed as follows: –

•  First, to run a core diagnostic program resolving the list of key issues;
• Second, to weigh the range of options, debate merits and weaknesses, refining the priorities and outcomes to be targeted so as to have an integrated tough spirited policy model with clarity in its direction which is capable of extended advocacy;
• Third, to conduct representation, research and review with key stakeholders across the spectrum of interests in the creative community, within the diverse elements of the commentariat, the academy and the broader general community (- the citizenry of audience, parents and taxpayers equally); and
• Fourth, having refined the policy framework and priorities commence the arduous task of political representation to the various parties aiming to forge a fresh outcomes based approach informed from evidence as tested by debate in the community.

The task is not without challenge but the policy product is essential to commencing a better approach which draws from the creative community itself agreeing to refashion priorities for long term improvement in actual outcomes engineered for a future with robust standards.

The richest and most energetic societies acknowledge the centrality of creativity to their health and wellbeing and as core to the resilience of their critical culture. It has always been my view that Australians generally do not receive criticism well. Further our inability to receive criticism is matched only by our inability to give criticism – in ways which are professionally focused – thoughtful, caring, constructive and nourishing. Creative work and its health are dependent on a forensic approach to review and judgement. Informed, shared and vigorous opinion matters in this turbulent and unpredictable period.

Creative endeavour has never been more fundamental to developing a modern society. One open to change which is flexible and energetic, reinforcing and celebrating the intellectual capacity, capability and originality of its citizens. From a national commitment to creative endeavour; invention, employment, debate, national confidence and good social values follow. History provides the body of evidence.

In too many areas of Australian policy delivery we have progressively arrived at stultified, formulaic approaches which operate to the detriment of ambition, skill, performance, review and reward. We need to change approaches in order to achieve better focus and delivery.

The cycle of refreshed change in public policy will be with us ever more as long as there is a dependence on regulatory obligations on the one hand and investment from the Commonwealth (and States) in various forms on the other. Too often recently support has been taken as a given, with a governing immature outlook of subsidy or quotas being a ‘right’ which has been countermanded by opposition which has often relied more on prejudice than forensic, fair minded appraisal.

Support in the modern era requires an articulated rationale, allied accountability and periodic review as to benefits from actual outcomes. That approach must lie at the heart of an invigorated approach to creative policy formulation by the participants. Only good work informed from strong thoughtful argument with a focus on results, will go the distance.

No doubt these are confronting times. Volatility, uncertainty, complexity and ambiguity are the bywords for modern world settings. Current times do not allow for the bland. And yet in Australia today there is often a disconnectedness from ideas that produce great, compelling work. Almost all successful creative work has a mainspring from originality and is rooted in a nation’s stories – things of enduring value. They are the products of real risk taking – nothing good ever eventuates from creative caution. There is no point in in the 21st century as a small English speaking population, in a digitally literate world, in being bland.

We must strive for a policy voice that renews the reasons to celebrate creativity and intellectual courage. Reasons to win national respect and political commitment. Reasons to renew many specialist depleted training institutions. Reasons to revitalise curiosity, creative originality and drive innovation fearlessly. Reasons to speak out, making sustainable connection with new and old audiences. We need to back, defend and promote that which is about fresh Australian creative adventure.

We all need to have our feet on the ground and to be utterly realistic in recognising that changes in the world’s operation mean that standing still is not an option. Confronting these potent forces driving dramatic reconfiguration is not easy. Relevant different responses are essential if we are to drive a sustainable future. We must all defend and promote substantial creative policy renewal with conviction because these things really matter!

Kim Williams has had a long involvement in the arts, entertainment and media industries here and overseas and has held various executive leadership positions since the late 1970s including as chief executive at each of News Corp Australia, FOXTEL, Fox Studios Australia, the Australian Film Commission, Southern Star Entertainment and Musica Viva Australia and as a senior executive at the ABC. Melbourne University Press published his first non-fiction book Rules of Engagement in 2014.

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

IT’S TIME TO think much more seriously about culture. For years we bought the Clinton truism, ‘It’s the economy, stupid’, but this simple binary no longer provides sufficient guidance for the future.

Self-evidently, a successful society must have a robust and innovative economy – one that is able to adapt to changing domestic and global circumstances. This process of adaptation and change seems to be one that Australia is ill-equipped to tackle; there is little evidence of big thinking, and a lot of protection of existing interest groups and sectional activities.

The need to redefine the nature of the Australian economy, to search for new areas of comparative advantage, and embrace the emerging ways of measuring the impact of intangible benefits, is more acute than it has been for decades.

In the area of culture, politicians and policy makers seem to be as wilfully blind to the opportunities as they are in other areas of comparative advantage canvassed elsewhere in this series. But there is excellent research being done here by scholars and practitioners, and enormous capacity, as a recent report by Professor Justin O’Connor and Mark Gibson for the Securing Australia’s Future program showed.

A United Nations Conference of Trade and Development report in 2010 showed that even when global trade was declining by 12 percent a year, the cultural sector had had a global growth rate of 14 percent a year between 2002- 2008 and at that time accounted for $592 billion. Not only is it one of the most rapidly growing sectors, but it is as UN, EU, UNESCO and other reports have shown, a sector that now accounts for about a fifth of GDP in most developed countries and is rapidly growing in others.

It is also a sector in which Australia has distinctive advantages, but one in which we are in danger of falling short. The cultural sector is one of the great new engines of influence and economic growth. It is one which plays to many of Australia’s strengths as an educated, globally engaged, outward-looking, multi-lingual democratic state in the same time zone as the world’s most populous and increasingly middle class regions.

The cultural sector has the potential to create high value jobs and reward innovation and to enhance the qualities of citizenship. It accounted in 2008-09 for the employment of between 6 and 9 percent of the workforce, generated between $35 and $67 billion of Gross Value Add, according to a report by the 2013 Creative Industries Innovation Centre, ‘Valuing Australia’s Creative Industries’. The range acknowledges some of the definitional issues, which I will return to later.

But we do know that it includes one of our largest home grown international companies, News Corp, and other publicly listed companies, and then ranges to medium, small and micro enterprises. It also includes activities and institutions that are supported by the state because of their contribution to citizenship, national identity and quality of life. In addition there is a sector made up by micro, small and medium enterprises that attract a small amount of public subsidy.

This is a diverse sector, which is part of its strength and part of the reason it has not been able to mobilise publicly as effectively as sectors which are more narrowly defined.

FOR TOO LONG in Australia the public policy response to culture has been to equate it with the arts. There were once good reasons for this, but the two domains are no longer synomous. And this is an old fashioned false equivalence. It does not work to the advantage of either national institutions, individual artists and the subsidised sector, or the commercial and instrumental parts of the sector. In the jargon of the sector this is called an ecosystem – the links are strong and material, as we see when a project that has received some public or philanthropic support becomes a commercial success.

Limiting cultural policy to an arts policy, when the arts are regarded as baubles, areas of patronage which can be dispensed at whim and not integrated into a bigger strategic approach to national cultural economic development, means that the sector is framed in the wrong way – one which means it is not treated as seriously as other areas that account for comparable amounts of economic activity.

This is deeply entrenched in Australian public policy. In part it is because there is an abiding sense that areas of intangible value are hard or impossible to measure. This is no longer as true as it once was – innovations in impact measurement and innovative refinements in accounting standards are making it possible to evaluate these activities more effectively.

There is a need for a strong and robust arts policy, one which supports the non profit sector and helps it become more sustainable, one which provides our most able and innovative artists with the support that they need to produce great works of art, one that provides pathways for new and emerging artists, one that is sufficiently resourced to make strategic investments in a range of major, middle sized and small organisations, and one that operates with the support of, but not at the behest of, politicians.

Unfortunately, despite the great success of public funding for arts and other key areas, including public broadcasting, film and the cultural institutions, there is a default that seems to reassert itself when funding decisions are being made; that these soft areas are therefore best dispensed as favours, favours which provide attractive ‘announceables’ for politicians. A more robust and effective model would be derived from building on the evidence of past success and finding new ways to make the sector more sustainable, connected and resourceful, while still enabling talented individuals and organisations to produce great works of art. The less well measured payoff is the social benefits that accrue and help to foster innovation and active citizenship.

Although measuring cultural value will to some degree always require a different approach, to simply say it is too hard and therefore an area depending on patronage, sells short the capacity of the people, companies and institutions operating in this domain. While it is true that measuring impact is an inexact science, it is an area that has increased in sophistication in recent years, and is now engaging skilled scholars and researchers, and entrepreneurs interested in the potential of impact investment.

The cultural sector does not have a settled definition, but thanks to several decades of intense policy and intellectual work it is possible to begin to define it in a way that is appropriate for this country. In 2009 UNESCO devised and adopted a statistical framework that was designed to capture the scale of activities and by providing an agreed international definition, make comparisons, and assessments of success more robust. The framework takes the major areas of cultural activity and divides them into six broad cognate groups and two related domains: heritage (which includes archeological, physical, environmental, structural and intangible dimensions), performance (theatre, music, festivals), visual arts (from fine art to photography), audio-visual (film, tv, video), publishing (books, newspapers, magazines, libraries), design (fashion, architecture, graphic design, advertising), tourism, sport.

Each of these domains has activities that have different relationships with the state and the market. They derive value and meaning from relationships with audiences, but they also provide benefits in terms of identity, citizenship and meaning in a way that is not available in many other industries.

All of Australia’s major trading partners are lavishing more and more attention on it in pursuit of trading and branding advantages, and domestic returns. As Thomas Piketty notes, this is an important sector for every nation state because its returns are not solely material.

SO HOW MIGHT this be done in an Australian context? What key decisions might be made which would enable this sector to achieve its potential, to deliver on economic, quality of life and national and social cohesion criteria?

As has been noted, much of this economic activity already occurs with only very limited interaction with the state, beyond a regulatory burden that is shared somewhat unequally depending on activity, scale and location.

Australia became a signatory to the UNESCO Convention on Cultural Diversity a decade ago, but the import of this has not been exercised or realised. This provides a legal rationale for a reorganisation.

The starting point is to aggregate the areas that account for the estimated $6 billion of commonwealth expenditure on cultural agencies and output, to put them into a single portfolio, or one linked by clear lines of accountability.

At the moment this expenditure (which is supplemented by an additional $2billion spent by states and local government) is scattered across many portfolios. Indeed so widespread is this range of activity it is unlikely that the estimated public expenditure accurately captures it.

So a quick survey of the spread of cultural activities makes the point.  The arts, some of the national cultural institutions, and screen funding agencies are in the ministry for the arts; the public broadcasters and broadcasting regulators are in the communications portfolio; heritage and parks are in environment; archives and copyright in attorney-generals; the crucial cultural dimension of Indigenous affairs in its own department; sport is in health; war memorials in veterans affairs; AIATSIS in education; tourism and creative industries export is in trade; cultural diplomacy (now known as economic diplomacy) is in foreign affairs; citizenship is in border protection and immigration; science and the remnant creative industries in industry and cities, which are home to most Australians and most cultural activity, are represented only as infrastructure.

This failure to aggregate an important area of policy is truly bipartisan.

Neither Coalition nor Labor Governments have grasped the potential that would come from a reallocation of responsibilities into a coherent portfolio. During the Rudd-Gillard-Rudd era arts and heritage were detached and arts was tacked onto five different ministries in almost as many years – with staff numbers falling with each transfer.

By comparison in most comparable countries culture has been aggregated into one portfolio. The titles vary but almost all include culture alone, or with various combinations – and media, and arts, and sport, and creative industries, and religion, and tourism, and science, and education.

This does not mean that governments control and direct culture, this is a long way from the old days of the Cultural Revolution and its ilk. Rather it recognises that if this sector is to achieve its potential for citizens, companies and the national interest, it needs to be taken seriously and that government needs to work on ways to enable a sustainable, innovative and profitable sector.

AT A TIME when global trade has stalled or reduced, trade in cultural and creative products is growing in double digits every year. Australia is active in this domain. Indeed as Nick Bryant has documented there is evidence of Australian businesses and individuals making a disproportionate impact.

But still we have a trade deficit in this sector, thanks to the volume of imported audio-visual material. Being an English speaking country makes Australia an easy destination for the cultural product produced by global leaders. But being an English speaking country in this part of the world, also offers enormous potential advantages to export cultural products and services as has been done so spectacularly with education.

Over the past decade most countries with which Australia likes to compare itself and almost all of our major trading partners, have implemented policies to boost, enhance and enable their cultural sectors.

Britain led the way with its redefinition of the creative industries in the 1990s. Taking those activities and services that had a cultural input and were at a meta level the product of creativity, and reclassifying them as an industry. At a practical political level this was designed to address the collapse in manufacturing and mining, which followed the restructure of the British economy. The point that reputedly convinced New Labour was a report that showed that the British music industry was larger than the steel industry.  The era of creative industries was born.

Similar lessons have been drawn albeit for different reasons by many other states. The South Koreans used investment in cultural and creative industries to super charge the economy. Its electronic manufacturing sector has been supplemented with film, digital, fashion, music and other activities that are creating a buzz, and generating income. Japan has been exporting ‘Cool Japan’ for years. China is now investing heavily in culture, with both a commercial and non commercial remit, building creative precincts in new developments and countless new museums, and investing heavily in soft diplomacy, particularly targeting diasporic communities in every continent. Singapore has invested heavily in design, cultural tourism, digital activities and more. Taiwan is a global leader in interactive digital products and other creative industries. Indonesia places a great emphasis on its cultural uniqueness and is seeking to strengthen this both in education and commerce. New Zealand has been a world leader in ascribing value to environmental assets (100% Pure) and has actively and successful translated this into film, fashion and environmental innovation. Every where you look countries in this region are investing to build capacity in these areas.

‘CREATIVE INDUSTRIES’ WAS a powerful construct but like any new construct one that had problems and internal contradictions. While some Australian state governments are now attracted to this way of framing the sector, it is a caravan that has moved on. A more effective definition revolves around cultural activities.

Over the past two decades the analysis of the success of the creative industries approach has led to new thinking about ways of aggregating this area of activity as the cultural industry or cultural sector – as economists argue it does not really demonstrate the characteristics of an industry.

The creative economy approach was viewed somewhat gingerly by those in the arts whose work could best be judged on its intrinsic value, and who were accustomed to an either/or mode of policy discourse as well as excessively competitive access to public funding.

While those involved in the commercial end of the sector rightly welcomed this approach, more effort was needed to delineate the pathways to success between art created for its intrinsic and instrumental value, and that which could measure success on a commercial balance sheet.

Certainly there is strong evidence of cultural activity in education, health, social welfare and other areas transforming lives and communities, but this has not been as readily embraced as solutions based on law, regulation and economics. The study of the impact of access to early childhood education, exposure to and engagement in creative and artistic pursuits is now overwhelming. It more effectively turns lives around than almost any other form of intervention. Indeed the recent decision by the British Government to extend free early childhood education because of both its personal and social benefits makes the Australian debate about childcare look arcane.

For those most engaged with this project simply collapsing art into a measure of its economic value was never going to be sufficient. We have long been accustomed to the notion that things of intangible value can’t be measured and therefore they are not taken as seriously as they might be. During the development of the Creative Australia policy considerable effort went into ways of defining the activity that could derive from investment in artists. The best analogy was to equate this to the investment in pure scientific research. It may have a commercial and instrumental value, but the research itself is of singular importance.

It is important to understand this history and the unintended consequences of copying a policy framework that has evolved quite rapidly. Simply adding creative industries to a departmental title short-changes the very real potential for policy development with a broader cultural framework, with direct and increasingly measurable tangible and intangible benefits.

The EU responded to this debate between creative industries advocates and artists, in its 2010 Green Paper by adopting a definition which described cultural industries as those ‘producing and distributing goods or services which…have a specific use or purpose which embodies or conveys cultural expression, irrespective of … commercial value’ and creative industries as those ‘which use culture as an input and have a cultural dimension, although their outputs are mainly functional’. This is necessarily a fluid and shifting domain, something UNESCO recognised by including the creative industries as one of the domains of activity. This is a useful starting point for policy development here.

NONETHELESS THE ECONOMIC value of the cultural sector is significant. It is marred by definitional problems, but these essentially pivot on what to include, and what to leave out. The Australia Council’s recent Arts Nation report uses a methodology that values the sector at 4 percent of GDP and the contribution to national well being at $66 billion a year. Work done by Price Waterhouse Coopers for the Copyright Council includes the copyright industries (with a commercial IP component) and the percentage of GDP jumps to almost 9 percent. The UN suggested that in most advanced economies this sector was worth up to 20 percent of GDP.

Definitions are important, and so is data, which made the decision by the Australian Bureau of Statistics to jettison its short-lived Art and Culture series that captured this data, particularly lamentable.

It is worth noting that two of the world’s leading cultural economists, Professor David Throsby at Macquarie and Professor Justin O’Connor at Monash are in great international demand  But at home they are generally only consulted to bolster sectoral argument, rather than to make the bigger case underpinned by robust economics, international evidence and persuasive case studies. Similarly research concentrations in the creative industries headed by Professor Stuart Cunningham at Queensland University of Technology and the Creative Industries Innovation Centre at the University of Technology, Sydney have built considerable analytical capacity.

In Australia this debate has been stymied by equating culture with arts defined quite narrowly as the non-commercial sector. A more sophisticated way of framing this builds the links between the creation of art of intrinsic value, and the commercialisation of related products and services – rather than considering it as a binary option.

The focus on non-commercial artistic and cultural production has grown hand in glove with various stages of cultural nationalism. The desire to tell uniquely Australian stories has been evident since white settlement, and indisputedly for millennia before. Mechanisms to enable this, despite the relatively small scale of the domestic market to foster a sustainable sector, have evolved ever since. In this market-driven global age, the challenge of imagining, creating, producing and consuming Australian stories is as great as it ever was. Participating in a global English language market presents challenges – but also enormous opportunities.

IN A REPORT for the Australia’s Comparative Advantage study in the Securing Australia’s Future program lead by the Australian Council of Learned Academies and the Prime Minister’s Science, Engineering and Innovation Council, Professor O’Connor and Mark Gibson made a series of recommendations which would go a long way to achieving this repositioning including:

• Recognising that the cultural economy has significant economic importance in direct and indirect employment.
• Developing policy in this area that acknowledges cultural values independent of economic value.
• Framing the cultural sector as a complex service sector involving producer, social and personal services as well as links to manufacture and retail.
• Recognising that the state has a crucial role in the cultural economy despite rising levels of personal consumption and expenditure.
• Considering reorganisation of portfolios to encourage greater integration as has been done in other comparable countries.
• Supplementing the role of the Australia Council with other agencies that can advocate for the full range of genres and industry sub components.
• Reviewing Australia’s under performance in trade in cultural goods and services
• Exploring the opportunities for cultural leadership in the Asia region based on interconnection between the public sphere and cultural production possibly by creating an agency comparable to the British Council.

To this list I would add two more:

• Commissioning a Productivity Commission review of the obstacles to sustainability in the sector, which is inhibited by a regulatory framework that has evolved over time and in response to very different circumstances and a lack of access to investment and capital. As was noted earlier, this is a very diverse sector, and there are many regulatory obstacles only apparent up close. Copyright issues, which are common to many of these genres, are variable in their impact, but a common concern in the digital age. Then there is enormous variation between sectors. Publishing faces different issues to live music which has to contend with local government and insurance regulations.  Even film and television face different regulatory obstacles.
• Requiring a cultural impact statement to accompany new policy proposals using the impact assessment methodologies that have been evolved in recent years. Just as the economic and public importance of the environment has been incorporated into the assessment of policy, there is a need to evaluate the cultural impact, both in terms of the tangible and intangible consequences of such innovations. The example I use in this regard draws on the response of the architects to the Building the Education Revolution projects. A large amount of research has been done that demonstrates the way the educational experience can be enhanced by design. In the rush to build new facilities, this opportunity was not even considered, but could have produced more buildings with a bigger impact than jobs for builders and a roof over the heads of school children.

Aggregating this sector in such a way would ensure that policy advice was of the highest calibre. Lessons could be learnt from the successful operation of areas such as public broadcasting, and the impacts could be regularly assessed.

Unlike many other areas of policy this sector has the potential to impact directly on community wellbeing and cohesion. Government cannot do this, but with the right policy settings it can enable the commercial sector to flourish, and the non-commercial sector to produce even greater benefit for Australian citizens. This is a potentially enormous market;  a source of high quality jobs and national value.

Professor Julianne Schultz AM FAHA is the founding editor of Griffith Review and chaired the reference group for the Creative Australia. These views are her own.