Category: Politics

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

     

  • David Peetz. Having a say at work.

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

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

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

    Having a say at work

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    All this reflects a major shift in power.

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

    Giving workers a voice

    So, what should be done about it?

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

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

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

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

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

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

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

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

    There are also questions about what public policy should do.

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

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

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

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

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

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

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

  • Mark Beeson. Australia still hasn’t had the debate on why we even need new submarines.

    Australia is about to make its biggest-ever investment in military hardware. Although we don’t know yet whether Germany, France or Japan will be awarded the contract to build our 12 new submarines, it is possible to make a few confident predictions.

    What to expect

    First, the actual cost of the submarines when completed will be much higher than the figure that is proposed now.

    If cost were the only consideration, it would actually make more sense to let the successful bidder build them in their own country. But the construction is now seen as a de-facto industry policy for South Australia, a politically important state that has haemorrhaged manufacturing jobs of late.

    There are good arguments for maintaining a manufacturing capacity in Australia – even on national security grounds. But given the cost blowouts in the construction and maintenance of the troubled Collins-class submarines, it’s not unreasonable to ask whether building submarines is really our collective strong suit.

    Second, it’s a pretty safe bet that Japan will awarded the contract to build the submarines. This has nothing to do with the debates about the boats’ technical capacities, however. The principal reason Japan is likely to get the contract is that it will consolidate the relationship between America’s regional alliance partners and the collective effort to discourage Chinese aggression.

    There may be much to be said for such efforts. Plainly, China has become more aggressive in its pursuit of highly implausible-looking territorial claims in the South China Sea. This is something Australians might collectively feel alarmed about.

    But if Australia is trying to influence China’s behaviour, a sternly worded diplomatic note is likely to have as much effect and would be rather cheaper, too. The reality is that Australia can do very little to influence the outcome of the growing tensions in the South China Sea, with or without the new submarines.

    The third point to make about the submarines is that they will almost certainly never be used in anger.

    It is worth asking what the world would look like if we were ever in a situation where we did have to use them. The strategic – not to say economic – circumstances would be so apocalyptic that having the enduring capacity to destroy part of a notional enemy might be the least of our worries.

    In reality, the subs are supposed to “deter” our notional foe. The idea is that simply by possessing these sorts of weapons, the likes of China will be discouraged from acting aggressively. But if China is not deterred by the prospect of nuclear annihilation at the hands of the US, why should we imagine that our 12 submarines would do the trick?

    Will the subs deter other rising regional powers, such as Indonesia or Vietnam, from having hostile intentions toward us? It is quite possible that we may risk “invasion” from Indonesia – as we did from Vietnam many years ago – but this is likely to take the form of political, economic and environmental refugees in fishing boats, not the Indonesian army’s rather underwhelming might.

    The submarines could certainly deter asylum seekers, but this could probably be achieved in more cost-effective ways. It might not do much for Australia’s rather battered international reputation either.

    The flow-on effects

    China rightly points out that, unlike the US and Australia, it has not been involved in a war worthy of the name since the 1970s, when it received a humiliating bloody nose at the hands of Vietnam.

    Australia, however, has fought in Iraq (twice), Afghanistan and Syria in recent times.

    Given Australia’s enthusiasm for foreign military adventures, no matter how remote the conflict, our neighbours may feel understandably alarmed at both the submarine purchase and the relative diminishing of their security as a consequence.

    This is a classic “security dilemma” in which each side feels less secure because of the actions of the other. The all-too-predictable response is to increase spending on national defence in a futile effort to enhance security.

    History suggests that arms races end badly. The first world war had complex causes, but the simultaneous ramping-up of national defence spending by the potential belligerents didn’t help. When war did break out, the modernised, more lethal weapons systems were put to astoundingly effective use.

    The principal consequence of the inevitable but little-debated decision to acquire these boats is to contribute to a rapidly escalating regional arms race.

    This would be a ruinously expensive, dangerous and ultimately futile exercise at the best of times. But in a part of the world where there are still much better uses for public money, despite remarkable improvements in economic development, such expenditures seem entirely unjustifiable.

    At the very least, political leaders and strategic thinkers ought to be compelled to give a much more plausible and specific account of the new submarines’ real benefits and demonstrated deterrent effects.

    Being secure is undoubtedly a desirable thing. Quite what it means and how it is best achieved ought not to be left entirely to the pointy-heads in the defence establishment, though.

    Mark Beeson is Professor of International Politics, University of Western Australia. This article first appeared in The Conversation on 18 April 2016.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • Laurie Patton. Generalists and specialists in the Australian public service.

    Why the ‘theory of empty spaces’ hurts public sector performance 

    The other day I was talking to a friend who recently retired from the public service. After a career lifetime of studied discretion he now wears as a badge of honour his entitlement to express independent views. Many of these are critical of the processes that played a pivotal part in his rise to a very senior posting. I have a number of colleagues who are now “ex-job”, having also held extremely high level public service roles. I enjoy hearing about their work experiences more now that they are unencumbered by ambition than was ever possible as they climbed the greasy pole.

    When I left university I briefly worked in the public service, before leaving to pursue a career that my friends euphemistically describe as ‘eclectic’. However, in a number of roles over the years I have had the opportunity to observe close-hand how public sector management operates.

    The first piece of valuable advice I was given as a junior public servant what “keep moving”. Never stay too long in the one role, even if you love what you are doing. Upward progress requires continuous lateral movement. Apart from avoiding or evading responsibility when, from time to time, things inevitably go wrong constant movement allows you to gain a broad range of policy development skills. Policy skills generally outweigh any other consideration in the minds of selection panels for senior appointment I’ve since learned.

    Someone once described life in the public sector as akin to a game of checkers. In checkers the aim is to get your ‘piece’ to the other side of the board as fast as possible. In the public service it is to move ever upwards towards the top, again as fast as is logistically practical.

    In checkers the shortest route is straight ahead. However, the quickest route usually involves sideways movement. Waiting for the space ahead to become vacant, like waiting to assume the role held currently by your ‘one-up’ is not a viable strategy.

    Constant movement from division to division, from department to department provides public servants with a wide exposure to issues and the ability to refine their policy making skills. More importantly, it enables them to maximise career progression. What is also does, sadly, is deliver an executive structure full of generalist. People who having never stayed anywhere long enough to become experts in any particular field themselves, invariably have limited respect for those with deep subject matter expertise.

    I remain perplexed about the so-called ‘pink bats’ episode, where tragically a number of people died because they were allowed to operate unsafe working practices. Apparently nobody in the relevant department thought to ensure that OH&S regulations were followed by the companies they were funding to undertake what was widely seen a clever and worthwhile project. The first thing to note is that OH&S is largely a state responsibility anyway. But more to the point, how is an accomplished musician-turned-politician supposed to know to inquire about something as basic as workplace safety? Surely Peter Garrett was entitled to assume that this was under control and in someone’s eyesight? Someone with direct and relevant experience.

    But the real flaw in the process, in my opinion, was presuming that anyone in a department that was otherwise primarily concerned with lofty issues like climate change and the like would necessarily  have had any experience in industrial relations. Where was the subject matter expertise on which the minster was surely entitled to rely?

    The impetus for this essay was the recent news that the federal public service has apparently enlisted the assistance of senior Telstra executives to help improve management performance. Having worked at Telstra along the way I found this mildly amusing. Telstra, like a certain university with which I had a close association a while back, seems to have pretty much ignored the last twenty years of public sector reform.

    The public sector has undergone significant restructuring and re-assessed its management practices in recent years. It is arguably much leaner and more efficient at senior levels than it once was. But until the theory of empty spaces is no longer a viable career plan there’s a limit to how much better things can get.

    In conversation with my erstwhile mandarin friend the other day I posed this question. Is it a given that a public sector organisation can never be as efficiently run as a comparable private business? We both refused to accept that this was the case. No more empty spaces please.

     

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

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

    The History:

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

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

    The Issues:

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

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

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

    Steps to Solutions?

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

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

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

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

    UNSW Conjoint Professor of Geriatric Medicine

     

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

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

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

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

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

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

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

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

     

     

  • Bill Carmichael. Overblown rhetoric about Free Trade Agreements.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    A longer version of this paper is available here.

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

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

     

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

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

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

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

     

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

     

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

  • Luke Fraser. Grattan in the transport pantomime: ‘You’re getting colder … ‘

    Earlier this month the Grattan Institute made its first major report into transport, producing Roads to Riches: better transport spending[i].

    The 70-page report is replete with interesting-enough statistics, but it misses the mark on the major problems and where solutions might most reliably be found. Its core conclusions could perpetuate expensive mistakes (more of that in a moment).

    The Grattan is one of our brightest and most respected think-tanks; its CEO is talented and speaks truth to power. So if even Grattan can miss the mark in transport, it bodes ill indeed for the national debate.   Transport matters: at current spending levels, just two years of national road funds would pay for Australia’s entire $50 billion dollar submarine program. A 15% per cent efficiency gain in road spending would yield almost $4 billion to almost meet the Gonski education funding reform shortfalls.

    Grattan’s report points out transport spending reached astronomical proportions even before former PM Abbott’s ‘I want to be remembered as a road builder’ speech. Grattan is also right to conclude that too many such projects have been wastes of money (some appalling examples are cited) But the report then walks into a dead-end by looking for solutions in new and improved bureaucratic and parliamentary process -such as more project cost-benefit analysis – as the saviour.

    More rigorous project selection and stronger powers to compel politicians to be transparent about choices will, it is argued, create superior outcomes. Fine, but a particularly big failing of cost-benefit in transport is that when applied to travel savings, the methodology does not distinguish between leisure time savings and more assuredly economic benefits, like getting to work quicker. The former doesn’t deliver a healthier economy. Witness the recent Pacific Highway upgrades which cost billions: the vaunted travel time savings which underpin much of the project’s positive benefit-cost case appear made up in part of the fact that people can simply get to their central coast fishing spot from Western Sydney quicker than previously.

    Or was the Pacific all about safety dividends? If so, why is the Grafton leg – the site of the most horrific bus crash in Australian history – still not fully upgraded? This business case was scrutinised and approved by Infrastructure Australia. So much for paper.

    Will more transparency make it much better? The irrational political power of big and sexy transport projects should not be underestimated – even when the facts are in plain sight: last year Victoria’s government published the full East-West Link business case revealing that the multi-billion dollar road would return only 45 cents in the dollar, yet many Victorians still swear the project should have been built. More paperwork doesn’t prevent such waste – common sense and an experienced grasp of practical transport operations does. Transport agencies appear increasingly denuded of this talent: how else to explain a project like North-West Rail in Sydney, which appears to break a cardinal rule of rail building: whatever new piece you add, make certain it is fully interoperable with the existing network. Billions of dollars can depend on simple, informed choices at early stages in a project.

    Beyond this, what are the really big problems and solutions confronting transport? First and foremost, the lack of pricing reform. Unlike all the other economic utilities, transport continues to resist it. But without seeing prices, users can’t influence a more rational pattern of infrastructure provision and we must all instead place our faith in bureaucratic paperwork and process to deliver ‘value’. Where is the evidence that road pricing works? Look at every failed or under-performing commercial toll road project over the last 15 years[ii]. Australian motorists will soon tell you their view on which roads they don’t want – they do it by not using them and avoiding their tolls. Prices are already proving they can shape the network.

    Grattan argues transport assets are mostly planned and funded by governments because they represent a public good – a market failure. This view is overstated. The advent of cheap GPS tracking and the explosion of deft smartphone apps mean that major roads are now ‘excludable at point of use’: in theory, we can indeed give people a say in what roads they want at a given price, so that they don’t have to pay if they don’t want to use.

    If you spice this with the prospect of large fuel tax and registration rebates being paid back to motorists who enter commercial road arrangements on, for instance, major highways (so they aren’t paying twice for the road), debate might start to turn in favour of the hip pocket.

    The national rail network is equally a government asset with no market failure in sight. The United States reformed its hidebound government rail nearly 40 years ago. It has gone from strength to strength since that decision[iii].

    The Grattan mentions it will turn attention to pricing in a subsequent report. But pricing is the main game. Pricing will not work for every road in Australia. Nor does it need to. The policy priority should be to implement pricing reforms to staunch the biggest and most wasteful politicised road spends first. This means major highways and motorways, and this appears to be in prospect, given some smart and patient effort.

    The elephant in the room is the role of the Commonwealth – specifically, whether it’s useful, or even constitutionally legitimate. Grattan’s report rightly points out that the Commonwealth plays a significant role in transport. Since Whitlam, Canberra has assumed all planning and funding responsibility for the major highways and other ‘nationally-significant’ infrastructure, but it has left the building and maintenance (and most of the opprobrium) to the States, in a textbook case of fracture between control and accountability. We see the results regardless of which party is in power – Canberra lecturing States over what transport project must be built with ‘Federal’ money. This practice only dilutes accountability to voters and scares potential market investors away.

    Under current arrangements, transport is one of the biggest and least certain commitments of Australian tax revenue. But there is hope to do better. One first step would see the Prime Minister commit to placing transport squarely on the agendum for Federation reform. It has been left off it to date.

    A final matter: in Williams v Commonwealth and Williams v Commonwealth 2 (the National School Chaplaincy cases), Australia’s High Court held that Commonwealth payments to State schools were invalid, in that they were beyond the authority of the Commonwealth to make. This has potential ramifications for many of Canberra’s payments to States, including roads and possibly some other transport projects[iv].

    Williams therefore signals not only the possibility of reform but perhaps the need for it. Williams might also hint to students of Commonwealth governments past that when it has most displayed leadership, Canberra has not been about spending money and shaming and lecturing the States: at its best, it assists the sovereign members of the Australian Federation to reform into something better.

    Luke Fraser is the founder and principal of a transport policy and investment advisory. In 2012 he was appointed to the board of the Prime Minister and Premiers Road Reform Project. Prior to this he was a national freight industry chief executive. Most recently he oversaw a new approach to heavy vehicle pricing and fuel rebates for the South Australian transport minister – a reform project which is partnered by the Commonwealth government. The views expressed here are his own.

    [i] http://grattan.edu.au/report/roads-to-riches/

    [ii] Better still, consult the excellent chart in Dr Robert Bain’s analysis of same: http://www.robbain.com/Toll%20Roads.pdf

    [iii] https://publish.pearlsandirritations.com/blog/?p=4475

    [iv]http://www.claytonutz.com/publications/news/201406/20/after_the_school_chaplains_case_where_to_now_for_commonwealth_funded_programs.page

  • Evan Williams. The seven sacred cows of Australian politics

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

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

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

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

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

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

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

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

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

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

     

     

     

     

     

     

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

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

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

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

    There are three main reasons for focusing on on SSBs:

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

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

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

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

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

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

     

     

    References

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

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

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

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

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

    Harris1

    Notes:

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

     

    Source: AIHW 2012, ABS 2013.

     

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

    Harris2

     

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

     

     

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

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

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

  • China and North Korea: the long goodbye.

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

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

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

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

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

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

    The discussion paper outlines the proposal as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

     

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

     

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

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

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

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

    Proportional Representation System –

    Open Party List

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

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

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

    Lower Houses

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

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

     

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

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

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

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

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

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

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

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

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

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

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

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

     

     

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

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

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

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

    Brands as a promise

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

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

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

    When actions drown out a positive brand promise

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

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

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

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

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

    Making amends – intention and timing is critical

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

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

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

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

    Brands are an important investment in social and cultural value

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

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

  • David Stephens. Bill Shorten’s Royal Commission proposal.

    Labor and the banks go way, way back

    Bill Shorten’s proposal to have a Royal Commission into the banking system is not just good politics. It also taps into a long Labor tradition: banking Royal Commissions – and banking policy generally – occupy a special corner in Labor’s history.

    We need to see terms of reference for the proposed Royal Commission. The emphasis so far, though, has been on illegal and unethical banking behaviour in the absence of adequate regulation, together leading to damage to consumers of financial advice, loans and life insurance. (The Australian Bankers’ Association believes a Royal Commission was unnecessary though it conceded that ‘in the past …. banks have not always lived up to their own standards, let alone those of their customers’.)

    The Royal Commission’s brief should range widely to look at the banks’ market power as this is intimately linked to the quality of their service to their clientele. Wobbly banks in Western economies have sometimes been seen as ‘too big to fail’. In other words, their collapse would bring down the economy. Banks can also be ‘too powerful to tangle with’, especially if their power is concentrated and they operate as cartels. The fewer banks there are the easier it is for them to work together and resist government regulatory power. Having few banks, working as a cartel, also limits consumer choice. Consumers escaping one shark in a suit may be gobbled up by another.

    Evan Jones, writing in Fairfax, gave a history of partial reviews of Australian banking. He saw the most recent review, Murray 2014, as emphasising capital adequacy requirements (a hedge against failure) but avoiding other symptoms of a ‘seriously broken’ system.

    The de facto cartel competes aggressively in misleading advertising, but declines to compete where it matters – competence and integrity in customer relations. In particular, the typical loan facilities for small business and farmers are not fit for purpose. Who cares? The strategy: take security on customer and guarantor assets and default at will … The finance sector is now a societal monolith, and with parasitical tendencies. 
    The Murray Report had tried to corral the issues when it concluded that

    the focus of financial system policy should be primarily on the degree of efficiency, resilience and fairness the system achieves in facilitating economic activity, rather than on its size or direct contribution (such as through wages and profits) to the economy.

    In reality, these attributes and effects run in all directions; Murray’s distinction is unsustainable. The ‘efficiency’ of the cartel delivers profits for the financial sector but may also hamper ‘economic activity’ by reducing competition and ‘fairness’ by denying service to viable customers or giving it to unviable ones.

    The clearest ‘contribution … to the economy’ is within the sector itself. Jones points out that the finance sector’s share of total business income – banks dominate the sector but it also includes building societies and credit unions – grew from three per cent in 1980-81 to 17.1 per cent last year. APRA figures show the ‘big four’ banks, ANZ, the Commonwealth, the National Australia Bank and Westpac, achieved profits in the year ended December 2014 of $30 billion out of total banking profits of $34 billion.

    According to the International Monetary Fund in 2012, Australia’s banking system is the most concentrated in the world. Our big four banks have a bigger share of banking business (around 80 per cent of total banking assets, with residential mortgages the largest component) than the biggest four banks in any other economy. This sounds like ‘too big to fail’ but it also raises the questions: how did this come about and what has Bill Shorten’s party done about it previously?

    The power of the banks has been a continuous theme for Labor. When the Fisher Government founded the Commonwealth Bank in 1911 as ‘the people’s bank’ it disappointed the radical Labor member, Frank Anstey, who complained the new bank ‘possesses no more power than any ordinary trading bank’.

    Thus [Anstey said] the Labor Government ignored the felonious bank history of all countries – “one of the frauds by which Capitalism bleeds the people”… It gave a Commonwealth Bank, but it left it stripped of those prerogatives specified in the [Labor] platform; prerogatives that would have made it the supreme banking power in the Nation, that would have made all other banks (while they existed) subject to its will.[1]

    The Great Depression of 1929-33 led to demands for banking reform, following what was seen as the banks’ contribution to the crisis – essentially, excessive lending during the 1920s followed by restrictive policies after the crash of 1929 – which harmed many ordinary Australians. While the product emphasis may have changed – more unwise loans in the 1920s, more dodgy financial advice today – the common and ageless threads over the long run of banking history are, first, shoddy service to customers and, secondly, profits.

    In 1937, the then former Labor member of federal parliament, Ben Chifley, used his minority report from the Royal Commission on the Monetary and Banking Systems to propose fundamental change. His fresh memories of the then recent depression added to his recollections of the impact of the 1890s depression, when thirteen banks closed in two months in 1893.

    Banking differs from any other form of business [Chifley said] because any action – good or bad – by a banking system affects almost every phase of national life … In my opinion the best service to the community can be given only by a banking system from which the profit motive is absent, and, thus, in practice only by a system entirely under national control.[2]

    The Royal Commission’s majority proposed far less sweeping reforms than Chifley preferred but even these were not followed up, due to opposition from the banks and then the onset of war. After World War II, the Curtin and Chifley Governments turned their attention to banking reform, largely in response to memories of earlier depressions and fears that a new one would occur.

    During the war, banking had been controlled under defence regulations. Labor’s 1945 banking legislation attempted to permanently regulate the trading banks through licensing, lodging of a part of bank deposits with the Commonwealth Bank and control by the Commonwealth of advances policy and interest rates. The legislation also expanded the Commonwealth’s role into that of a central bank, though it was to be subject to the government in any policy dispute. These reforms were along the lines of the wartime system and the majority recommendations of the 1930s Royal Commission.

    When the High Court knocked out the 1945 legislation[3], Chifley responded on 16 August 1947.

    Cabinet today authorized the Attorney-General (Dr. Evatt) and myself to prepare legislation for submission to the Federal Parliamentary Labor Party for the Nationalisation of banking, other than State banks, with proper protection for shareholders, depositors, borrowers and staff of private banks.[4]

    What followed over the next two years has been described as the most torrid political battle in Australia since the conscription referenda of 1916-17. Chifley put the case for nationalisation:

    We have only to cast our minds back to other days, when tens of thousands of people were deprived of the necessities of life. Even as a small child, I can remember the depression of the nineties, and the farmers near where I lived who were desolated and grief stricken at the closing of the banks …

    We move on then to the 1930s, and there is not one man, be he an economist or not, who will now defend the economic policy which was applied in 1930. We have seen people crowded at factory gates in their thousands trying to get one job; we have seen people at police stations to collect the dole of 5s. 9d. or 8s. 6d. a week.

    We do not say that the depression could have been avoided by monetary action. What we do know is that the misery and suffering of hundreds and thousands of men, women and children in this country could have been mitigated to a large degree had proper monetary action been taken …

    We do not want the conditions of the depression to recur … [W]e want to ensure that the government of the country shall be in a position to apply through its agent, the Commonwealth Bank, the financial and monetary policy that will prevent, as far as monetary policy can prevent, the sort of thing that happened in the days of the depression.[5]

    Trade unions strongly supported nationalisation. On the other side, a vigorous coalition of bank officers and their supporters allied with the Liberal and Country parties and much of the metropolitan press to attack Labor. The argument against bank nationalisation turned into a wide-ranging attack on what Opposition Leader Menzies called Labor’s desire ‘to put the lives and affairs of ordinary citizens into bondage’. Dramatised advertising starring ‘Bob Freeland’ and ‘John Henry Austral’ put the anti-Labor case as the government was accused of socialism, communism, nazism and fascism – and sometimes all of these at once.[6]

    Ultimately, the High Court and the Privy Council disallowed the 1947 banking legislation.[7] The attempt to nationalise the banks, along with discontent over petrol rationing, governmental restrictions persisting too long after the war, and other dissatisfaction, led to Labor’s defeat in 1949. A host of reasons then kept Labor out of office for 23 years.

    Looking just at banking policy, however, it seems clear that the concentration of banking power today in private hands is not all that different from what would have occurred had bank nationalisation succeeded. Just after the nationalisation announcement, the Sydney Morning Herald claimed that the plan meant that the Commonwealth Bank would control £800 million in deposits and shareholders’ funds in the biggest nine banks and be the largest banking monopoly in the world.

    As noted above, the big four Australian banks today control more of our banking business than the top four banks in any other country. We avoided monopoly but copped oligopoly; we denied Chifley’s ideal of banking in the public interest but now endure the profit motive in spades.

    Customers can judge the impacts of this history in areas like financial planning, insurance and interest rates. Banks still, in Chifley’s words of 1937, affect ‘almost every phase of national life’. Chifley’s remarks about the balance between banking profits and service to the community also remain extremely apposite.

    Chifley-style nationalisation is presumably off the agenda but if anyone wanted to make a case for a tax on bank profits or for breaking up the large banks, evidence like that presented here would bolster their arguments. Perhaps recommendations in that direction might come out of a Royal Commission – if one ever happens – which might bring a chuckle of satisfaction from the ghost of a former Labor Treasurer from Bathurst.

    David Stephens is secretary of the Honest History coalition and editor of its website (www.honesthistory.net.au). The views in this article are not necessarily those of all supporters of Honest History.

    [1] Frank Anstey, The Money Power, Fraser & Jenkinson, Melbourne, 1921, p. 73.

    [2] Australia. Parliament, Report of the Royal Commission appointed to Inquire into the Monetary and Banking Systems: Parliamentary Papers, Session 1937, No. 74, Vol. V, General and Finance, ‘Dissent, reservation and addenda by Mr. Chifley’.

    [3] Melbourne Corporation v Commonwealth (1947) 74 CLR 31; [1947] HCA 26.

    [4] LF Crisp, Ben Chifley:  A Political Biography, Longmans, London, 1961, pp 327-28.

    [5] Australia. Parliament. House of Representatives, Official Hansard, 11 November 1947, pp. 1927-28.

    [6] For the 1949 campaign, Freeland and Austral, see Robert Crawford, ‘Supporting banks, Liberals and the “Australian Way”: the Freelands and the 1949 election’, History Australia, 2, 3, 2005, downloadable from Monash University e-press; David Stephens, ‘Political theory, history and the Australian Labor Governments, 1941-49’ (MA thesis, Monash University, 1974), available on microfiche at the National Library of Australia; David Stephens, ‘The effect of the Great Depression on the Federal Labor Governments, 1941-49’, Australian Journal of Politics and History, XXII, 2, August 1976, pp. 258-70.

    [7] Bank of New South Wales v The Commonwealth (1948) 76 CLR 1; Commonwealth v Bank of New South Wales (1949) 79 CLR 497, [1950] AC 235.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

    David James is the managing editor of businessadvantagepng.com

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

     

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • David Stephens. Invading our smugness: thoughts on a diversity toolkit

    Wednesday, 30 March, must have been a slow news day at the Daily Telegraph. It is difficult to find any other reasonable explanation for the fuss the Telegraph made about the ‘diversity toolkit’ it discovered on the website of the University of New South Wales. What followed, however, spoke volumes about how careless some in the mainstream media have become about evidence and, more importantly, how easy it is for ‘hot button’ issues to provoke massively disproportionate reactions.

    First, on evidence. Despite the Telegraph’s fulminations that students were being directed to say Australia was ‘invaded’ rather than ‘settled’, and to accept various concepts that the Telegraph blamed on ‘nutty professors’, the toolkit was a fairly mild document. A statement from UNSW insisted the toolkit contained nothing mandatory, merely lists of ‘more appropriate’ and ‘less appropriate’ terminology relevant to settler-Indigenous history in Australia.

    The university rejects any notion that a resource for teachers on Indigenous terminology dictates the use of language or that it is designed to be politically correct … The guide does not mandate what language can be used.

    Even Wiradjuri journalist Stan Grant (Guardian Australia) fell for the idea that UNSW was trying to suppress free speech. Those who delved a little deeper also found the UNSW guidelines had been obtained under licence from Flinders University, Adelaide, that there were similar guidelines in place at the Australian National University, Monash University, the Queensland University of Technology, the University of Melbourne and probably other institutions, and that the UNSW Indigenous guidelines were based on material that has been used in New South Wales schools since – wait for it – 1996.

    Secondly, on the reaction. Paul Daley (Guardian Australia) argued that ‘invasion’ was the correct word to use. He attracted more than 2600 comments in two days, both strongly supportive and strongly resentful, and an unusual number ‘deleted by Moderator’. Shock jocks Hadley, Jones and Sandilands frothed although morning television was fairly laid-back. (The Telegraph’s original outrage had found willing support from Keith Windschuttle and the Institute of Public Affairs.) In non-MSM media, Alex McKinnon in Junkee kept a level head. Up in Queensland, Premier Palaszczuk supported QUT’s similar guidelines. Among the exercised, there was some confusion about whether Cook or Phillip was the invasion leader.

    As usually happens, the best analysis arrived a couple of days after the initial explosion.

    [W]hy is this hysterical response so entirely predictable? [asked Waleed Aly in Fairfax] Why is it that the moment the language of invasion appears, we seem so instinctively threatened by it? This isn’t the response of sober historical disagreement. It’s more visceral than that. Elemental even. It’s like any remotely honest appraisal of our history – even one contained in an obscure university guide – has the power to trigger some kind of existential meltdown. What strange insecurity is this?

    Archaeology professor Bryce Barker in The Conversation also provoked trenchant comments pro and con. He made an important connection.

    It is telling that [Kyle] Sandilands suggested people “get over it – it’s 200 years ago” when we so revere the notion of Lest We Forget when remembering our role in a foreign war (WWI) 100 years ago … [W]ho we, as Australians, choose to remember and what events we commemorate are inherently entwined with how we view ourselves and how we want the world to see us as a nation … Is not a Walpiri man’s death defending his way of life [at Coniston, NT, in 1928, when 31 men, women and children were killed by police] just as worthy of remembrance as a World War I digger’s ten years earlier?

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

    You could write a history of Australia around two invasions: Australia from 1788; Gallipoli 1915. You would need to explain, though, why one invasion has attained cult status while the other, for many of us, is euphemised out of mind. Smugness reigns.

    ‘Invasion’ or not? Semantics can lead us up a dry gulch. Not all invasions look like D-Day, the War of the Worlds or the Gallipoli ‘landing’ but none of them end when the last soldier splashes ashore. An invasion, at its simplest, is entering and remaining in a place where you are not welcome.

    If the initial reaction of the Eora to Phillip was more one of puzzlement than hostility this did not remain so for long. The invasion went on to take various forms, from loss of land to poisoning to massacre. Indigenous resistance commenced within months of the First Fleet and persisted, led by warriors like Pemulwuy, Windradyne, Jandamarra and unnamed others.

    According to recent research by Evans and Ørsted-Jensen the invasion of Australia led to more than 65,000 Indigenous deaths (men, women and children) in Queensland alone and perhaps 100,000 across Australia. That’s many more Australian deaths than in World War I and about as many deaths as in all our overseas wars.

    ‘Get over it’, or not?

    You cannot “get over” a colonial past that is still being implemented today [responded Indigenous writer Luke Pearson in Guardian Australia]. You cannot come to terms with a national history that the nation refuses to acknowledge ever happened. We cannot “reconcile” what happened yesterday when we are too busy bracing ourselves for what will inevitably come tomorrow.

    That initial ‘wound in the soul’ has been reopened many times and still festers beneath Indigenous family violence, incarceration and mental and physical illness. The strand of our history that traces from 26 January 1788 has left a mark that many of us cannot fail to see and feel but that many more of us refuse to recognise.

    David Stephens is secretary of the Honest History coalition and editor of its website (honesthistory.net.au). Sources for the article can be found here or by using the search function on the Honest History website. The views in this article are not necessarily those of all supporters of Honest History.

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

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

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

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

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

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

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

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

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

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

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

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

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

    Peetz_Chart1

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

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

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

    Peetz_Chart2

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

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

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

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

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

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

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

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

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

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

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

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

    What does it all mean?

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

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

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

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

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

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

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

  • Paul Budde. NBN company needs support to pursue FTTdp

    In his blog of 5 April, Paul Budde suggests that the NBN company needs support to help it overcome the stumbling block of Malcolm Turnbull who seems unwilling to reconsider the mistake he made on the NBN as Communications Minister in the Abbott government.  See Paul Budde’s article below.  See also link to article  http://www.buddeblog.com.au/frompaulsdesk/nbn-company-needs-support-to-pursue-fttdp/

    With the election campaign starting to kick in, it is only a matter of time before the Opposition starts talking about the NBN again.

    Looking at statements that the Opposition Minister for Communication Jason Clare has made over the last year or so it is clear that Labor will pursue an NBN that will maximise the FttH route. In all reality this will mean deployingFTTdp (also called thin fibre) to people’s doorsteps and then using the copper cable or the last bit of conduit, which is already owned by the NBN company, to provide the last few meters of fibre connection. One could assume that this last bit is left to the home owner in order to make it work financially.

    Obviously there will be a problem with those premises already linked to an FttN system. FttN can indeed provide superior broadband access (100Mb+) so there is no immediate need to upgrade and the obstructing nodes can be eliminated at a later stage. Obviously there will be an issue with writing off the costs of these stranded assets.

    The HFC network is a completely different kettle of fish, and the problems of this infrastructure have been discussed in a recent analysis. It will be more difficult to deploy FTTdp here if the NBN company starts to upgrade the HFC network in order to use the multi-technology mix version of the NBN.

    My bet is that an Opposition NBN policy will work through the situation in the way I have mentioned above.

    What does this mean for the Coalition government? As Bill Morrow has clearly indicated, he likes the FTTdp network, and he also indicated that the ball is in the court of the Prime Minister to decide how to proceed with the NBN.

    Reading between the lines, looking at the body language of the CEO, and taking into account the ongoing stream of leaks that are coming out of the NBN company, it is clear to me that there is a significant force at play in the company, trying to nudge the NBN more and more in the direction of a full fibre network.

    Obviously these good people within the company will need the support of those who can influence the political situation.

    A major stumbling block will be the PM himself, as he has basically put his name on the line for the second-rate multi-technology mix as it is rolled out at the moment; and in his already vulnerable political position it will be very hard for him to backflip on the issue. As mentioned before, I can see a way out, as FTTdp still can be classified as a multi-mix technology but I am not sure is that is enough to persuade the PM to open the door to using FTTdp rather than FttN.

    Of course much of this also depends on how hard the Opposition is going to push on the NBN in its election campaign. If it stays soft on the issue it becomes more difficult for the NBN company to push its FTTdp deployment further into the market.

    Obviously anybody in favour of a better NBN can assist in trying to use the political cycle to promote the use of a full fibre network through their community, industry, political and media connections.

    There is now a chance for us to ensure that Australia will get a much more future-proof NBN and we should not miss the opportunity to at least try and make this happen.

    ——————-

    Paul Smith in the AFR also points to concern by NBN staff and executives about delays in broadband rollout and failure of the government to embrace fibre to the premises.

    See link to article:  http://www.afr.com/technology/web/nbn/fresh-nbn-leaks-showing-fttn-delays-raise-broadband-policy-questions-20160331-gnv0uz

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    KPIs for politicians

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

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

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

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

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

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

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

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

    Measuring success

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

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

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

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

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

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

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

    The secret of failure?

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

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

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

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

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

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

    It’s also the politician, stupid

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

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

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

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

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

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

     

     

  • Richard Butler. Nuclear Security Summit: Washington Finale?

    Seven years ago, President Obama spoke in Prague Square and undertook to “seek the peace and security of a world without nuclear weapons”. He cautioned that this outcome would be immensely difficult to achieve and may not be reached in his own lifetime, but his speech was heard and widely taken as signaling an enhanced US commitment to the elimination of nuclear weapons.

    A year later he called the first meeting of a Nuclear Security Summit, to be attended by Heads of State/Government. It was held in 2010 and then followed, in 2012, 2014, and last week, the 2016 Summit, held in Washington DC, was designated as the last such gathering, at Summit level.

    Australia was represented in Washington by Foreign Minister Bishop, who claimed that no country has done more to ensure nuclear security than Australia. That airy claim aside, what she did do at the Summit was sign a bilateral agreement under which Australia would supply Uranium to Ukraine.

    Even though they interact in critical ways, a distinction needs to be drawn between the goal of the elimination of Nuclear weapons, and the agenda and objectives of the Nuclear Security Summits.

    As was evidenced in the final communiqué, the Summit was focused, virtually exclusively, on preventing nuclear materials from being obtained by non-state groups –terrorists – and criminal groups, in other words, on a particular aspect of non-proliferation.

    Unquestionably, this is a deeply important objective and the mechanisms, and international cooperation that the Summit process has established, are impressive.

    About half of the areas of the world in which relevant nuclear materials have been held or stored have been cleared of them and a low enrichment nuclear fuel bank is being established in Kazakhstan, with IAEA involvement, so that States needing fuel for electricity generation can obtain it from and return it, when spent, to the bank. The point is that spent uranium fuel can be reprocessed into weapons grade plutonium. Sending it back to the bank is designed to prevent this.

    The Summit was characterized as taking place not only in the light of the need to address the special challenges posed by the contemporary phenomenon of actions by non-state groups and criminal organizations, but also the wider need to strengthen the nuclear non-proliferation regime. The cornerstone of that regime is the nuclear non-proliferation treaty (NPT).

    It is essential to recall that NPT, in fact, has two objectives; preventing new acquisition of nuclear weapons, and the elimination of those already held by states, specifically the five states recognized in the treaty as the “Nuclear Weapon States” (NWS): US, Russia, China, France, UK.

    In the past, the NWS have argued that these two objectives are separate and do not rely on each other. This has enabled them to argue that their tardiness in nuclear disarmament in no way reduces the obligation of non-NWS to abstain from acquiring nuclear weapons. Few have agreed with this obviously self-serving argument, not simply because that is evidently its purpose, but also because it contradicts the negotiating history of the NPT. Indeed, it seeks to re-write it.

    During the course of the Summit there was discussion of the increasingly serious matter of North Korea’s nuclear weapons program and there was a side meeting of the five NWS plus EU and the IAEA, on progress in the implementation of the recently concluded agreement with Iran. These were and remain palpable issues in non-proliferation.

    On the other hand, it is not clear what attention was given to the nuclear weapons programs of India, Pakistan and Israel, the three non parties to NPT, each of which have nuclear weapons, have already proliferated. These are critical issues of nuclear arms control and disarmament.

    Of further importance, are the facts that: the US has embarked on an extensive program of modernization of its nuclear arsenal and the development of a new Long Range Stand-off nuclear missile; the Russians are developing new nuclear weapons and longer range missiles and torpedoes; China is developing the DF-41 long range missile, with possibly the longest range of any in existence; UK is planning to renew its massively expensive Trident nuclear force.

    On March 30th, the day before the Summit opened, the Washington Post published an Op-Ed by President Obama in which he claimed that he has “ruled out developing new nuclear warheads”. This attracted responses of incredulity in the US, including from former Defense Secretary William Perry. The fact is, 6 years ago, the President gave an undertaking to Congress to expend some $85 billion on warhead renewal in order to obtain its agreement to the ratification of the New Start Treaty with Russia, which set limits on their deployed nuclear weapons systems, leaving between 1800-2000 each. In fact, the overall planned upgrade of the US arsenal now approved by Obama is expected to cost some $3trillion in the next 30 years. The President may claim that this is not inconsistent with what he stated in his Op-Ed, by arguing that “renewal’ does not involve new weapons, just stockpile maintenance. Such semantics will be lost on others.

    Furthermore, for the first time in the series of Nuclear Security Summits, Russia declined to attend last weeks Washington Summit.

    India and Pakistan’s nuclear weapons developments signal unambiguously that they are engaged in a nuclear arms race.

    And, the US continues to refuse to allow any discussion of Israel’s undeclared, but believed to be substantial, nuclear weapons capability. That refusal has come to threaten the existence of the NPT.

    I have argued on earlier occasions, in Pearls and Irritations, in a number of contexts, that what we are witnessing now, in international politics, is a turning away from a will to live by and implement the key purposes and principles of the UN Charter, the post- World War II compact, and a reversion to the more traditional determinants of action by states; national interests, military power, the threat of use of force. There is possibly no clearer evidence for this claim than the insistence by NWS that their nuclear weapons capability is their right, and that it is legitimate for them to determine who else may or may not hold such weapons.

    While, self evidently, the NWS are able to make such claims, and such muscularity is all too evident in history, including in its disastrous outcomes, the simple historicism which asserts that such behavior has always been the case, especially with strong and competitive States, is deeply flawed and today, unacceptably dangerous, given the horrendous destructive capacity of nuclear weapons.

    In addition, the NWS have given the undertaking in NPT that they will progressively eliminate their nuclear weapons. Whether the NWS care to accept this or not, the undertaking on nuclear disarmament is fundamental to other states continuing to eschew obtaining nuclear weapons. Their current policies violate that undertaking.

    It seems that the Nuclear Security Summit process has established some means to reduce or contain the dangers posed by nuclear materials, but in sidelining the gut issue of reductions in nuclear weapons already in existence and being further sought by those who already have them, it addressed only a portion of the nuclear security task. How much more encouraging it would have been if the Summit had been able to announce that the eight states possessing nuclear weapons had agreed to commence a process of working together to pursue overall reductions in their weapons arsenals.

    The NPT was and is a two- way bargain. It is not being kept.

    It is worth recalling an axiom identified by the Canberra Commission on the Elimination of Nuclear Weapons: as long as nuclear weapons exist they will, one day, be used either by accident or decision, and any use would be a catastrophe.

    This truth was discerned before the emergence of contemporary terrorist groups, the suicide bomber and, the miniaturized, portable nuclear weapon.

    Both in his Op-Ed and in his statement at the Summit, President Obama said that he believed that, as the US is the only state that has used nuclear weapons, it had a moral responsibility to pursue ridding the world of the unacceptable danger they pose. Doubtlessly, his acknowledgement of Hiroshima and Nagasaki would have infuriated many in the US. He deserves credit for that courage, but he would move from the zone of sentiment into reality were he to seek to promote nuclear disarmament amongst holders of those weapons.

     

    Richard Butler AC is former Ambassador to the United Nations and served as Convenor of the Canberra Commission on the Elimination of Nuclear Weapons