Category: Politics

  • John Tulloh. Erdogan leads Turkey back to the Ottoman era.

         It is the time of the year when we have our annual bout of sentimental reflection on the heroics of the Anzac forces at Gallipoli a century ago. One of the Turkish military commanders whose resistance wore down the Anzacs and other allies was Kemal Ataturk, who went on to be the founder of modern Turkey in 1923. His name remains so revered in Turkey for modernising his country and transforming it into a secular state that insulting his memory is a criminal act.

    Ataturk would be startled at what is happening to his country today. His vision has gone into reverse. The U.S. conservative Breitbart news website has this to say about the man in his footsteps, President Recep Tayyip Erdogan:

    He has been ‘using his political clout, both as prime minister and now as president, to reverse the country’s direction. He seeks to undo the miracle Ataturk created in Turkey, returning it to its old Islamic ways. Clearly, Erdogan hopes this redirection will eventually place him in the seat of power abandoned by the last Ottoman sultan. Just as Ataturk was a catalyst in Turkey’s independence movement, Erdogan has proven to be a catalyst in its Islamic movement’.

    The Turkish leader is certainly a man of the moment. His country, a NATO member, is no longer the democratic example the West hoped it would represent to its Arab neighbours. Nor is it the dependable bulwark for Western interests against threats from the neighbourhood. Turkey is beset by terrorism, most of it blamed on Kurds, who make up 20% of the population. They are more restless than ever in their quest for autonomy. Erdogan is more active than ever in cracking down on them. For him, the Daesh activity just across the border in Syria is a secondary matter. Indeed his critics accuse him of supporting it. Then there is tension with Russia after the downing of one its jets. Moscow has imposed sanctions which have hit Turkish business and tourism. Ankara hoped the lifting of sanctions against Iran would lead to more business and tourism except Tehran has cosied up to Erdogan’s enemy in Damascus. Many liken Erdogan to Vladimir Putin. Both are bullies, says Daniel Pipes, of the Middle East Forum.

    Yet Erdogan has given shelter to 2,500,000 Syrian refugees, more than any Arab nation, adding 3% to Turkey’s population and causing domestic disquiet. He has agreed to take back asylum-seekers who head to Greece seeking refuge within the EU in return for the EU to take an equal number of refugees off his hands. EU members were so relieved to remove the threat of being overrun again that they wasted no time in agreeing to Erdogan’s excessive financial demands. Not once did they clear their throats and mention their saviour’s increasing crackdown on long-established freedoms, especially concerning the media and judiciary. Erdogan was now Europe’s best friend, said Der Spiegel.

    Erdogan is a wily figure. As a member of an Islamist party, he was elected Mayor of Istanbul in 1994. He gave an inkling of his attitude in 1998 when he read a religious poem that said of Islam:

    ‘The mosques are our barracks, the domes our helmets, the minarets our bayonets and the faithful our soldiers’. 

         It was provocative enough to put him in prison for a spell. But when he became Prime Minister in 2003, he impressed Western allies with his Ataturk-like vision. He brought about an economic recovery, expanded universities and urged more women to be admitted, oversaw investments in infrastructure which created new roads, airports and a high-speed train network and reached an accord with the Kurds. Even the unworldly President George W.Bush was impressed.

    However, he later neutralised the military which in the past has intervened when political matters got out of hand. Slowly he imposed a growing Islamic influence on daily life and his guiding hand turned into a clenched fist. Hijabs became a common sight. Bar-tending classes and alcohol advertising were banned. So was smoking in public places. Court decisions were ignored. The constitution which stipulated the president must be above politics was disregarded. Journalists reporting government corruption were locked up, tv stations closed down and newspapers questioning his authoritarian rule taken over by government acolytes. Insulting Erdogan is now a criminal offence even in your own home.

    Unsurprisingly, Erdogan has grandiose visions for his own role as Turkey’s leader or, as is becoming increasingly apparent, dictator. As president, he took over a palace meant for the prime minister on land donated by Ataturk in Ankara for public use. It’s for the Turkish people, he declared. The fact it consisted of at least a thousand rooms was not enough for Erdogan. He is said to be adding another 300 for his own use with an elaborate security bunker.

    Erdogan greeted one visiting leader at the palace with guards dressed in Ottoman-style uniforms. ‘We were born and raised on the land that was the Ottoman Empire and its six centuries of rule’, Erdogan likes to say. He has directed schools to teach the old Ottoman version of Turkish written in Arabic script, according to Canada’s National Post. It was Ataturk who introduced Latin script. Erdogan’s critics accused him of wanting to become a ruler in the style of the Ottoman sultans. Or could it be even a caliph? The last caliphate was the Ottoman one which Ataturk wasted no time in abolishing.

    Despite the asylum-seeker agreement, Erdogan remains a bogeyman to EU leaders. Under it, provided Ankara complies with certain conditions, Turkey’s 79 million population will be granted visa-free travel throughout the EU as early as June. The Spectator, almost shuddering at the prospect and noting the number of fake Syrian passports in the hands of non-Syrian asylum-seekers, foresees fake Turkish passports to allow non-Turks also to roam continental EU at will. The spectre of jihadists among them will unnerve many Europeans.

    As the first would-be migrants were returned from Greece to Turkey this week, Erdogan took the opportunity for taking a jab at Europe for not letting ‘these people into their countries’ by putting up razor wire fences. He asked: “Did we turn Syrians back? No, we didn’t, but they did’. It was a none too subtle reminder that, despite the EU’s desperation to appease Turkey, Erdogan now regarded himself as the good guy and Brussels had better not forget it.

    The outlook all round is ominous. ’Once-dependable Turkey seems in danger of implosion’, reported the Guardian. ‘Under Erdogan, Turkey is the West’s disintegrating ally and Europe’s imaginary friend’. Daniel Pipes quotes a Turkish journalist, Burak Bekdil, saying: ‘Modern Turkey has never been this galactically distant from the core values enshrined by the European civilisation and its institutions’, which Ataturk admired. Gokhan Bacik, a professor at Ipek University in Ankara, goes further: ‘Turkey is facing a multi-faceted catastrophe (the scale of which) is beyond Turkey’s capacity for digestion’.

    One would imagine that Ataturk today would still see Turkey’s future to the west in Europe with its relative stability and economic power. Erdogan disagrees. The Guardian reported that he ‘often mocks and berates the EU, once calling it an Islamophobic Christian club’. As Breitbart noted, ‘We will recognise Erdogan’s confidence that Turkey is well on the path to Islamism when maligning Ataturk’s memory is no longer tantamount to maligning Erdogan himself’.

    ‘If Iran today is the Middle East’s greatest danger’, says Pipes, ‘Turkey is tomorrow’s’.

    FOOTNOTE. Australians heading to Gallipoli and feeling thirsty should bear in mind that, under laws introduced by Erdogan, the sale of alcohol in shops is banned between 10pm and 6am and at any time near schools and mosques. Bottles now carry warnings of the dangers of drinking alcohol. Taxes on alcohol are the toughest in Turkey’s history.

    John Tulloh had a 40-year career in foreign news.

     

  • Negative gearing has created empty houses and artificial scarcity.

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

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

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

    See full article in link below.  John Menadue.

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

  • John Dwyer. Structural reforms to healthcare – two major reforms.

    Does the government understand the structural reforms to health care needed by modern Australia?

     Political pre-election posturing at the moment has involved many debating the question that asks ’Do we have a spending or a revenue problem in Australia?” Certainly when it comes to our health system we should first be asking what structural reforms would make that question less important. 

    While the idea that States could tax their citizens to pay for hospital care vanished in a flash, there is a distressing significance to the idea ever having been floated in the first place. It means that the Coalition still does not understand the components of the structural reforms needed to improve both the health outcomes and cost effectiveness of our health system. Implemented, the proposal would have further entrenched the inefficiencies in a fractured health system.

    Equitable, cost-effective health care in modern Australia requires two major reforms.

    Informed opinion, generated by world-wide evidence, suggests that the first major reform requires us to appreciate that the funding for the total spectrum of health care, which includes hospital, community and the primary care funded by Medicare, needs to be pooled so that these services can be integrated. Funding flexibility is a crucial issue, as this would allow differential spending on various components of the system depending on regional need. For example, rural primary care is more problematic than rural hospital care. Sadly this imperative is obviously not in the conscious mind of a government that would enshrine a separation of hospital and primary care funding as demonstrated by their State tax proposal.

    The concept of regional funding is very important as different regions with very variable demographics and health priorities are readily demonstrated in our huge country. In our present system we have Local Hospital Districts and Primary Health Networks (PHNs) within a State boundary. While the latter are meant to improve the quality of Primary Care and better integrate individuals care and provider availability there geographical boundaries make this impossible. There is only one PHN for Tasmania and only one for the whole of Western Australia outside of Perth! New Zealand has 80 such organisations.

    If one agency held all the health dollars available for health care and logical health districts were established without reference to State boundaries a resource distribution based on local needs not just population density would markedly improve health outcomes and cost-effectiveness. Regional fund holding in the UK sees “Commissioning Agents” able to seek providers for that regions health needs. This was to be the approach taken by the short-lived “Health Care Commission”, established by the Whitlam government.

    Federation has failed our health system as it has prevented it being operated as one system in which three components are fully integrated (Primary, Community and Hospital care). This is our unique disadvantage within the OECD. Now, 40 years after the idea was first suggested there remains an urgent need for COAG to pool all our health dollars and establish a State/Federal “Health Commission” to disperse the funds. The COAG meeting of health ministers later this week should commit to a reform journey with this initiative as the destination.

    Currently our States are responsible for funding our public hospitals with a variable, oft insecure, contribution from Canberra. Hospital admissions continue to increase steadily and the growth in hospital spending far exceeds any increase in Medicare spending. Because of the responsibility/funding divide, States are at the mercy of the success or otherwise of Primary/Community care to reduce the number of people requiring hospital care. They have no levers to pull to control demand. Figures from the Australian Institute of Health and Welfare suggest that 600.000 admissions to public hospitals each year could be avoided by a better-resourced Primary Care system. It is clear that a future featuring affordable and excellent hospital care is dependent on reducing the demand for hospital care.

    So a second major reform is long overdue. We need a major structural reform to change our outdated hospital, doctor and sickness centric system to one that focuses on the prevention of chronic illness, the reduction of hospital admissions and “team medicine”. A multidisciplinary team working in the one practice integrating all the care needed by enrolled patients. In much of the world this proven approach to better health care is referred to as the “Medical Home” model. It provides the needed components for modern primary care. Patients enrol in a practice populated by a team of health professionals from different disciplines to Improve patient’s health literacy and maintenance of a healthy lifestyle. Continuity of care allows for early recognition of problems that if not treated could become serious and chronic. The range of services needed by patients with established chronic diseases are provided in their “one stop shop” and the practice is resourced to extend care into the home/community to minimise the need for hospital admission.

    Such a model necessarily increases practice expenses, as the multidisciplinary team the patient needs has to be funded. However, doing so will reduce hospital admissions and so for the whole system is cost effective. The program will need more commonwealth expenditure and that should also include funding for prevention strategies. Having more water bombers available for the fire season would be welcomed but their availability should not mean that hazard reduction during winter is not prioritised. We can do a better job of coordinating care for patients with advanced, incurable chronic diseases but in focussing almost entirely on this priority we are doing little to turn off the tsunami of Australians who continue down the path to chronic avoidable illness.

    The tentative step towards introducing the “Medical Home “ model into Australia announced last week is welcomed conceptually but it is focussed entirely on the management of established disease not strategies for minimising the current flood of Australians developing chronic disease and the “Healthcare Home” as envisaged is a pale reflection of the fully developed model described earlier. A detailed plan needs to be presented before any judgement can be made on the likely success of this first step. The plan, as announced, would aim to provide patients with “multiple chronic illnesses”, who stick with one GP for their care, benefit from better-integrated care. A participating GP practice would receive fixed amounts quarterly for providing the enhanced care. While moving away from a fee for service model for the care of chronic illness and appreciation of the need to integrate a range of needed services is welcomed it is not clear how the GP conducting the orchestra will be able to fund the additional players needed. For a scheme said to involve 200 GP practices and 65,000 patients the suggested cost of $21 million seems totally inadequate and anyway, what does it mean when we hear the scheme is to be cost neutral?

    As usual, the devil is in the detail. How much will the practices be paid for the integrated service? Will this payment (capitation) vary depending on the number of chronic problems suffered by a patient? What level of morbidity will set the threshold for entrance into the scheme? How will the trial’s outcomes be measured? Who will determine the additional staff requirements and the skills they need as well as the financial compensation they will be offered in the scheme? Etc.

    All these questions can be addressed and have been elsewhere, but how much better would be this initiative be if it were to establish thirty or more fully resourced Medical Homes to prove their worth in the Australian context? We need to continue to advocate for that suggestion.

    John Dwyer is Emeritus Professor of Medicine at the UNSW.

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

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

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

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

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

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

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

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

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

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

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

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

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

    But what about good government?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • John Menadue. The fake discussion about state taxes.

    Malcolm Turnbull’s ruse is obvious. He wants us to forget all about deficits and debt and the need for budget repair. To avoid these issues, he now tells us that if we want improved health and education services, we cannot have them because the states have refused his offer on state taxes and he will not increase commonwealth taxes.

    But we know that large increases in commonwealth government revenue are possible without any increase in income tax rates.

    There are numerous proposals on ways to increase revenue without increasing tax rates. The most recent was from the Committee for Economic Development of Australia (CEDA). That Committee suggested various ways in which revenue could be increased without increasing income tax rates.

    • Reducing the superannuation concessions.
    • Reducing the capital gains discount
    • Halving the fuel tax subsidy scheme.
    • Removing negative gearing.
    • Removing the private health insurance rebate exemption.
    • Reducing industry tax concessions.
    • Reducing work-related deductions.

    The other obvious way to increase revenue is to ensure that large multinational companies, private companies in Australia and trusts pay their fair share of tax. Many don’t pay any tax at all.

    None of this involves increasing tax rates. But these proposals would not be welcomed by the wealthy vested interests that support the Liberal Party.

    There is probably $20 b. to $30 b. of increased revenue per annum by addressing the issues above.

    All public surveys that I have seen suggest that Australians are prepared to pay increased tax, even increased rates of tax, if they believe that the tax system is fair and the money is spent efficiently.

    I have posted blogs earlier about the remarkable successes of the Nordic countries – Denmark, Sweden and Norway. These countries have some of the most successful economies and societies in the world yet they have very high rates of taxation. The Nordic countries have a basic trust in government. They broadly believe that the tax system is fair and services are efficiently delivered.

    It is something badly lacking in Australia.

    See links to two earlier articles on the Nordic successes – Postcard from Denmark on the Nordic success (17/1/2015);  Why are the Nordics so successful? (18/1/2015).

     

     

  • Cavan Hogue. Malcolm Turnbull, COAG and media confusion.

    Turnbull knew what he was doing.
    The media has turned on Malcolm Turnbull who is accused of ignorance. Media views seem to change even more often than political promises.  However,surely the PM knew why he called the meeting with the states. He knew they would reject it which is what he want​ed ​them to do. He now claims the moral high ground in denying their requests for money. Opinions will differ on whether this was a good decision but only time will tell if it worked -​whatever the media seesaw comes up with next.
    Politics has always been a rough business because only people with strong egos go into it so we should not be surprised at the jealousy and infighting that goes on. The electoral mob is fickle but so it would seem is the press and it remains to be seen whose judgment is better.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Part 2 tomorrow: Disaffected electorates/ Dysfunctional political systems?

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

     

  • Paul Barratt and Chris Barrie. The case for building the future submarine in Australia

    When charting a trajectory to a desired end point it is as important to have an accurate fix on the starting point as it is to know where one wants to end up. So it is with SEA 1000, the Future Submarine (FSM) project.

    Much of the commentary is based on a politically inspired perception that the Collins Class submarine project (‘Beazley’s subs’) was a disaster characterised by cost over-runs, delayed delivery, intractable technical problems, and chronic unreliability once introduced into service.

    The facts are that the submarines were built to within 3-4 per cent of the original contract price after allowing for inflation, that the average delay in delivering the submarine compares well with other major projects, and that the overwhelming consensus among military insiders is that the submarine project was a great success, with regular claims being made that the Collins Class submarines were the finest conventional submarines in the world[1]. Certainly they are highly regarded by the US Navy.

    Furthermore, in 2000 the Government acquired all of the shares in the Australian Submarine Corporation (ASC – now ASC Pty Ltd) so it began the new century in possession of a highly capable submarine builder and maintainer, with associated facilities and skilled workforce.

    Some of these painfully acquired advantages were compromised in the first decade of the 21st century by the fact that the submarines were introduced into service without a validated strategy for sustainment throughout the life of the class[2], and without an adequate inventory management system[3]. This in turn compromised availability, with flow-on consequences for crew training and inevitability the availability of trained crew. These situations have largely been rectified.

    Our industrial advantages were further compromised by the fact that from the moment the Howard Government acquired the outstanding shares in ASC, it saw ASC as something it was preparing for sale. This got in the way of Governments reaching the simple and obvious conclusion that the successor to Collins should be built onshore by the successful submarine builder it already owned, with the focus of attention being on the required characteristics of the replacement submarine and which overseas submarine builder should become our design partner for the FSM project.

    This ambivalence towards ASC, and the feeling that there might be someone out there who would give us an off-the-shelf solution or a bespoke submarine, has led to a succession of governments spinning their wheels for so long that we are now committed to a multi-billion dollar life extension of the obsolescent Collins submarine as well as the cost of FSM, so any potential savings have long since vanished.

    To compound this error, there is strong circumstantial evidence that former Prime Minister Tony Abbott did a handshake deal with Japanese Prime Minister Abe to acquire Soryu submarines from the Japanese – a deal he walked away from on the eve of the first challenge to his leadership. In walking away from the deal he set up a ‘competitive evaluation’ (whatever that might be) of potential partners, a process which over time seems thankfully to have drifted back in the direction of being a thoroughgoing evaluation of potential partners.

    Is there a military off-the-shelf (MOTS) solution out there? Many of those who see proposals to build a purpose-designed submarine in Australia as an indulgence and/or a branch of industry policy rather than defence policy would assert that there is. The Abbott Government seems to have thought so, based perhaps on advice in 2010 to then Opposition Defence Spokesman David Johnston by Vice-Admiral Robert Thomas, Commander of the U.S. Seventh Fleet: ‘you want to find the finest diesel-electric submarine made on the planet – it’s made at Kobe works in Japan’[4]. “Finest submarine for what?”, one might ask.

    Those who think the Japanese Soryu submarine is the solution would do well to read Option J for FSM – a Japanese solution?, Rear Admiral (Retd.) Peter Briggs’s comparison of the Soryu with the Collins Class published by the Australian Strategic Policy Institute.

    We would contend that there is no off-the-shelf solution, and this is the testimony that a range of expert witnesses gave in 2014 to the Senate Economics References Committee inquiry into naval shipbuilding, leading the Committee to recommend that

    • the Government formally and publically rule out a MOTS option for Australia’s future submarines
    • the Government focus its efforts on the ‘new design’ or ‘son-of-Collins’ options for Australia’s future submarines and suspend all investigations for acquiring a MOTS submarine, including the current Japanese Soryu-class[5].

    Having heard a range of evidence on the advantages of a local build, the Committee concluded:

    Given the weight of the evidence about the strategic, military, national security and economic benefits, the committee recommends that the government require tenderers for the future submarine project to build, maintain, and sustain Australia’s future submarines in Australia.

    When selecting its preferred tenderer the government must give priority to:

    • Australian content in the future submarines; and
    • proposals that would achieve a high degree of self-reliance in maintaining, sustaining and upgrading the future submarines in Australia for the entirety of their lifecycle[6].

    We agree with this conclusion, based upon the evidence presented to the Committee. We note in particular the evidence of Rear Admiral Briggs that the ability to build, sustain and evolve in country puts us in a much better position to manage the cost of ownership[7], and the evidence of Commander Frank Owen of the Submarine Institute of Australia regarding the experience with sustainment of the Oberon Class:

    We were second cousin, twice removed of the logistics support capability surrounding that submarine. When the host nation stopped operating them, the supplies dried up and we had occasions [where] submarines were unable to sail because of vital components and spare parts that were unavailable[8].

    We also agree with Rear Admiral Briggs that there is no point in buying a submarine that does not do the job:

    There is no point spending any money on a submarine that does not do what you need it to do. You have to modify and extend to get a new Collins-like capability. Buying an off-the-shelf submarine with a 6,000-mile range would be worse than a waste of money; it would be an illusion. You will think you have submarine capability and the day you want to use it you will find that it cannot get there or stay there and do the job[9].

    Finally, there are some important geo-political considerations to be brought to account. Former Prime Minister Tony Abbott commented in Tokyo in February that “for Japan this submarine deal is strategic: for the others, it’s commercial”. That seems to us a good reason to stay away from the Japan option, not only for the reasons cited by Hugh White and many others, but because our interests would be better served by a partnership with an experienced exporter that values its commercial reputation. Japan’s main interest would be served the day the contract is signed; for the Germans and the French, to protect their commercial reputation, the objective is successful, timely delivery of the project.

    Second, the submarine arm of the US Navy has demonstrated a high regard for the capability of our purpose-designed submarines, and for working with us in relation to submarine training, exercising and operations. If we simply became the operators of Australian-crewed Japanese submarines, would they sustain that interest?

    Our conclusion is that the Government should proceed with all due diligence in accordance with the November 2014 recommendations of the bipartisan Senate References Committee, and not be distracted by the siren-songs of those who would argue that there is a cheaper, lower risk, “adequate” option to be found elsewhere.

    Paul Barratt AO, Former Secretary, Department of Defence

    ADM (Retd.) Chris Barrie AC, Former Chief of the Australian Defence Force.

     

     

    [1] Yule, P. and Woolner, D., Steel, Spies and Spin: The Collins Class Submarine Story, Cambridge University Press, 2008, pp. 325-6.

    [2] Australian National Audit Office, 2008-09, Management of the Collins-class Operations Sustainment, paragraph 3, at

    http://www.anao.gov.au/Publications/Audit-Reports/2008-2009/Management-of-the-Collins-class-Operations-Sustainment/Audit-brochure

    [3] Ibid., paragraph 11.

    [4] Bloomberg 2014, ‘Australia Mulls Japan Submarines Under China’s Cautious Gaze’, Bloomberg Business, 18 December, at http://www.bloomberg.com/news/articles/2014-12-17/australia-mulls-japan-submarines-under-china-s-apprehensive-gaze.

    [5] Senate Economics References Committee, Part II: Future of Australia’s Naval Shipbuilding Industry: Future Submarines, page 38.

    [6] Ibid., p. 21.

    [7] Ibid., p. 29

    [8] Ibid., p. 31

    [9] Ibid., p. 61

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

  • Chris Bonnor. Malcolm abandons the middle in schooling

    Two plus years of conservative government has given oxygen to a number of strange solutions to ill-defined problems. Malcolm Turnbull’s proposal to have the States alone fund government schools, leaving the Commonwealth to look after private schools, is the latest.

    As a serious suggestion it has been widely condemned, but it would be premature to dismiss it as a piece of spontaneous kite flying. Conservatives have been playing in this space for some time. In April 2014 the Centre for Independent Studies (CIS) flagged having wealthy parents paying fees for public education. Around the same time Tony Abbott commissioned another Tony (Shepherd) to come up with ideas, including about funding for schooling. Most of his suggestions were wisely ignored – but issues arising from having schools funded by two levels of government struck a nerve.

    Then in June last year the Abbot government’s green paper on federation reform contained a proposal for the Commonwealth to abandon funding of public schools. It was one of four options – but it seems Turnbull’s current proposal has won the day. Malcolm has lurched to the right again. That emotional attachment of the Coalition to private schools, once declared by Christopher Pyne, won’t be shaken.

    It’s not that having two levels of government play around with schools isn’t a problem. It certainly is – and it helps explain why our current framework of schools is largely unsustainable. It’s just that sensible solutions to date have been placed in the too hard basket – or modified out of contention after lobbying by sectional interests.

    The best example is Gonski’s recommendation that a Commonwealth/State schools resourcing body be established to help restructure school funding to reflect student needs, regardless of sector. Both levels of government would contribute, but the allocation of funding would be well outside the political sphere and arguably manageable across levels of government.

    The fact that it didn’t happen is regrettable – because the Prime Minister’s current proposal is going to open a pandora’s box of new problems, while failing to resolve longstanding ones. In their most generous moments there will be few observers who would believe that a Coalition government will slow down galloping funding increases to private schools.

    Even leaving aside the school sector trench warfare that would be renewed, shifting all funding of public schools to the states, in the absence of any overarching equity monitoring, risks cementing the inexplicable variations between the states in the way they currently fund schools.

    There are many examples, best illustrated by comparing recurrent funding for secondary schools with an average level of socio-educational advantage (ICSEA 950-1050). On average the state and territory governments across Australia fund each student in these schools at around $10,260 (2013 figures from My School). Location alone suggests that there will be noticeable differences between the states/territories: Students in the Northern Territory, for example, are funded at $16,400, well above the national average.

    But secondary students in Victoria are funded at around 60% of the level of students in the ACT. In fact Victorian public school students are funded by their state government at levels well below those in other states. If you want to be a well-resourced public secondary student, don’t attend high school in Victoria, or for that matter in Tasmania. Aside from the two territories, the best funding per student comes from the state governments of South Australia and Western Australia.

    It’s not as if current Commonwealth funding solves any of these problems. The average federal recurrent funding to state public secondary school students was $2000 three years ago. Victoria, Tasmania and especially Queensland are well below this figure. There may be a good explanation for these variations but I’ve missed it.

    The patterns of capital expenditure on schools by the states…just don’t seem to form any pattern at all. The last time I checked (two years ago) annual capital expenditure per government school student in NSW and Victoria averaged around $500, but had generally declined over four years. In contrast, capital expenditure per student in Queensland government schools almost trebled, to around $1700 per student in 2012. Capital expenditure increased in South Australia. It also increased in Tasmania to 2011, yet all but disappeared in 2012. Western Australia showed a three year decline followed by a substantial boost in 2012.

    In the light of all this it is instructive to read the following in Matthew Knott’s SMH report. He showed how last year’s green paper warned that the option now adopted by Turnbull

    “could, however, lead to very different funding models being applied across the states and territories and between the government and non-government sectors, leading to differences in the level of public funding for schools with similar population characteristics.”

    Too late, that’s already happening – and on a large and inexplicable scale. Left to their own devices – especially the political ones – governments at both levels won’t get it right. We have to get back to Gonski’s recommendation to set up a schools resourcing body, funding schools on need with the money coming from both levels of government. Yes, where the money comes from is important, but where it goes, and who is checking, is critical.

    In the meantime and while he is licking his COAG wounds, the Prime Minister could do worse than read Jessice Irvine’s piece in the Fairfax media. Why would a canny investor like Malcolm Turnbull ignore the big dividends which would come from investing in schools?

    “Kids from low socioeconomic backgrounds are our greatest untapped source of potential growth. They are our most undervalued stock…..Investing in our most vulnerable kids remains the best social investment strategy around. Only a foolish investor would turn his back on it.”

    Chris Bonnor is a Fellow of the Centre for Policy Development and a Director of Big Picture Education Australia.

  • Michael Keating. The Turnbull Proposal for State Income Taxes

    Prime Minister Turnbull says his proposal for the States to levy their own income tax ‘is the most fundamental reform to the Federation in generations’. Well maybe. It certainly would be a significant change, but reform? Furthermore, even if this proposal were ever implemented, it is hardly new. For example, the Fraser Government actually legislated to allow the States to raise their own income taxes, but none took up the opportunity.

    In principal I agree that governments would be more accountable, and possibly more responsible, if they raised all or most of the revenue needed to fund their expenditures. Consequently, I accept that a move towards reducing the present degree of vertical fiscal imbalance and better match revenue and expenditure responsibilities should be seriously considered.

    At this stage, however, Prime Minster Turnbull is only proposing to transfer 2 percentage points of the income tax rate to the States; effectively an annual transfer between the Commonwealth and the States of about $14 billion. This compares with the $8 billion a year that the Abbott Government took away in the notorious 2014 Budget, and if nothing else changed this extra $14 billion would be quite a carrot to induce the States to agree.

    The Turnbull Government, however, is indicating that it is prepared to restore around $3 billion of these cuts to State payments, and so allowing the States to raise $14 billion in income tax revenue would leave the Australian Government Budget a net $9 billion down. Further savings would therefore be necessary, either from the Commonwealth’s own programs or from payments to the States. In this context it is not surprising that the Treasurer has floated the idea that another $6 billion could be clawed back by the Commonwealth ceasing its funding of State schools as part of the $14 billion package.

    But apart from this fiscal problem, realistically much more would be needed to realise the Prime Minister’s vision of the States taking over full responsibility for a variety of functions and thus ending the ‘blame game’. Indeed, the $14 billion a year that has so far been floated would not even cover the cost of the Commonwealth contribution to hospitals as well as schools.

    Most importantly, in this context, is that $14 billion is well short of the total of $50 billion paid each year to the States to cover all presently tied grants. For the States to be fully responsible for funding all their services would therefore require a far larger share of the income tax than has so far been mentioned, or alternatively allowing them much more freedom and capacity to increase income tax rates.

    But until the States get the taxable capacity to raise all or most of this annual $50 billion does anyone seriously believe that this relatively small change to give them a 2 percentage point income tax rate would make the States much more accountable and responsible?

    In my opinion there is some further scope to rationalise the respective roles and responsibilities of the Commonwealth and the States. For example, if Mr. Turnbull is fair dinkum why doesn’t he offer to return to the arrangements established by the Keating Government under which the Commonwealth was totally responsible for funding national highways, while the States and local government had total responsibility for all other roads. This arrangement was a sensible separation of responsibilities, but it fell foul of the pork-barrelling National Party, and so the Howard Government reversed it.

    As both John Menadue and I have emphasised, however, for many joint government programs there are good reasons why we have adopted our present shared funding arrangements (see my earlier article on Federalism, reposted on 31 March, and John Menadue’s post on the same day).

    Most importantly, in many cases the Australian Government has responsibilities that cannot be separated from those of the States. For example, education and training is vital for the future of innovation, productivity, employment participation, and economic growth, all of which are key Commonwealth responsibilities. While health necessarily involves both levels of government, as the Australian Government responsibilities for Medicare and aged care necessarily interact with the State Government responsibilities for hospital care.

    Indeed, the Turnbull Government seems to be prepared to acknowledge that separating the roles and responsibilities of the two levels of government presents a particular problem. According to some media reports the Australian Government may not withdraw from health funding, but it could withdraw totally from having any responsibility for Schools. Certainly the Australian Government has less at stake in schools, where its intervention has never achieved a great deal in the past. But in that case, maybe the Australian Government should take over total funding responsibility for vocational education and training which is necessarily closely related to the needs of industry, and where most of the funding is increasingly being provided to both private and public providers using a competitive model.

    Perhaps the most important Australian Government responsibility that would be compromised by the States setting their own tax rates would be the potential impact on fiscal policy. In the immediate future this is not expected to be a problem as the proposal envisages that the States would initially only be getting what would effectively be a share of the income tax, and the change would be revenue neutral. But once the States start setting their own income tax rates then this would compromise the necessary independence of the Australian Government to determine fiscal policy for the nation. Indeed, time is of the essence with fiscal policy and we cannot afford to have it run by some sort of Federal-State Committee. While on the other hand if governments set tax rates independently of one another, there is a risk that any time the Australian Government lowers its tax rates, then the States would seize the opportunity to take advantage of the extra taxation capacity available, and raise their own State income tax rates.

    In addition, although the Australian Tax Office would continue to be responsible for administering the tax system, and each taxpayer would continue to file only a single return, there would be a number of administrative problems with the Prime Ministers’ proposal that would not be easy to resolve. Thus, unlike the GST revenue, which has a common tax rate and can therefore be distributed on a per capita basis, this per capita distribution makes no sense for income tax revenue if rates of taxation differ among States. Accordingly, companies are already demanding that the states should not have a share of company tax because of this sort of complication. Many individuals, however, also derive income in more than one state, and it still remains to be worked out how their income tax payments can be distributed between two or more States where the rates of taxation vary.

    As John Menadue points out in his accompanying post, given its many problems and lack of clarity, this proposal by the Prime Minister is essentially a diversion from what is or should be the major concern of the Council of Australian Governments (COAG). The most critical challenge, which all Australian governments are facing, is first to repair the substantial Budget deficit, and in the longer-run to reconcile the demands for public services that are presently projected to run well ahead of likely government revenues.

    What COAG should therefore be discussing is how to raise more revenue and/or reduce the demand for services or improve their efficiency. Personally, and as I have argued in other postings, I think it will prove to be impossible to meet reasonable demands for future services without at least some increase in overall taxation in the decades ahead (see, for example, my recent article posted 28 March).

    In this regard the response by the Labor leader, Bill Shorten, to any suggestion that income tax might rise sometime in the future was most unhelpful. Mr. Shorten has already ensured that the possibility of raising the necessary extra revenue by increasing the GST was taken off the table, and now he seems to be intent on doing the same to any possible increase in the income tax in the decades ahead. One wonders how Labor could deliver its vision of society, and what it has supported, without increasing the overall tax take in the future – certainly Mr. Shorten has so far not told us.

    By contrast, allowing the States to determine their own tax rates raises the risk that at worst the States may enter a new race to the bottom. This is what happened after payroll tax was handed over to them by the McMahon Government in 1971. The States have since dropped the payroll tax rate and increased the tax threshold and exemptions. Ostensibly this was in response to tax competition generated by a perceived need to attract new firms, but most of the changes did little to attract industry because they mainly helped small business which is not geographically mobile.

    On the other hand, this time the Australian Government may force States to raise taxes by further squeezing their remaining tied grants. In that case the Australian Government would continue to solve its own fiscal problems by short-changing the States so that they are forced to raise taxes and thus take the blame for solving a problem of the Australian Government’s own making.

    A better alternative would be to adopt the proposal by SA and NSW that the States all get a fixed share of the income tax. This hypothecated share of the income tax could then be increased if all governments agreed to raise the rates for this purpose. Furthermore, by thus achieving an agreed increase in the overall level of taxation nationally, it would help to resolve Australia’s most important longer-run fiscal problem.

     

  • Cameron Douglas. Thailand and the military junta – an update.

    Thailand’s military government got almost all it wanted in the country’s draft constitution, which will now be put to the people in a referendum on August 7.

    The next four months, however, will be a rough time for Thailand: the release of the draft was accompanied by a warning from Prime Minister Prayut Chan-o-cha that critics of the government could be detained for one-month for re-education.

    Despite the tougher government line, the draft attracted criticism from the Pheu Thai party, the political grouping backed by ousted prime minister Thaksin Shinawatra. It issued a formal statement calling on people to reject the document.

    The draft would give the military junta veto power over the government formed following the return to elections, at this stage scheduled for July next year.

    This effective control would be for five years after the formation of a new government and would be exercised through the Senate.

    The Constitutional Drafting Committee decided, at the behest of the military junta, that the Senate should be appointed. Essentially, the by the National Council for Peace and Order – the military junta – would select the 250-member upper house.

    Six members of the top brass would be ex officio members.

    The draft also leaves open the possibility, as the military suggested, that a future prime minister might be an outsider – someone not elected by the people.

    It requires that political parties submit the names of three people as candidates for the top position before the elections are held. The House of Representatives would select the prime minister after the poll.

    If the House could not agree on a candidate the way would be opened to choose an outsider.

    The House would choose the prime minister. The Senate, however, would join in the vote on whether to reject the parties’ nominees and appoint someone else.

    In a sign that the junta is determined to that the draft should pass the referendum, it stepped up the pressure on critics this week.

    Until now, critics have been detained for several days for what the military calls attitude adjustment. Two Pheu Thai members who spoke out against the constitutional draft were detained over the weekend.

    This week, army commander General Teerachai Nakwanich said the detentions were a warm up for the re-education sessions. Troublesome elements must be dealt with, he said.

    General Prayut claimed credit for the “training course” proposal. “I initiated the idea myself,” he said. “In the past they [critics] were summoned to undergo ‘understanding’ but when they went back their behavior was unchanged.”

    The result in the August 7 referendum will depend on whether the junta or its opponents can get out the vote.

    The military government will dominate the debate between now and then. It has easy access to media – it instructs TV stations to provide the airtime – and is using soldiers to spread the message at community level.

    Gatherings of more than five people are still banned. And the government will have the threat of detention to control critics.

    The struggle over the constitution – and the future shape of governance in Thailand – will be less than equal.

    Cameron Douglas is a businessman who travels to Bangkok frequently.

     

     

     

     

  • Greg Bailey. The Liberal Party and the Institute of Public Affairs. Who is Whose?

    Arguably the most influential think tank in Australia over the last decade, the   Melbourne based Institute of Public Affairs, serves good beer at its functions, so I have been told. Whilst it has always been significant in pushing right wing, neo-liberal agendas, it is only in the last decade, and really during the last period of Liberal government, since October 2013, that it has emerged from the dim shadows into the brightness of political life. Previously it functioned mainly as a pressure group that would provide some kind of ‘intellectual’ substance to the economic and lobbying interests of the large mining companies and banks that provided most of its financial support. Yet already it had honed its lobbying skills with high success when Jeff Kennett privatised the electricity industry in Victoria in 1993. Now in 2016 whilst it continues to make many submissions to parliamentary inquiries, its influence on the political functioning of the country has become more direct.

    Two main reasons can be adduced for this success. Firstly, is the IPA’s skill in insinuating itself into the media at all levels. In their 2015 annual report they boast of 81 mentions in federal parliament, 762 appearances in the print media, 411 appearances on radio and 184 appearances on TV. My untested feeling is that only the Grattan Institute, The Sydney Institute, the Australia Institute and the Lowy Institute would have comparable numbers. The IPA’s executive director John Roskam appears almost every Wednesday at 10am on the John Faine program, Chris Berg is a regular columnist for the Sunday Age, and the IPA is, not unexpectedly, well represented in the Murdoch Press. Others have appeared on the Drum and Q&A. Occasional media appearances might be understandable but their continuing presence, especially on the ABC, suggests they have successfully mainstreamed themselves. This insinuates a sleight-of-hand away from the extreme free-market thrust of many of their policies– such as the seventy-five item manifesto published in March 2013 that provided a radical platform of very detailed proposals that if fully implemented would have laid the foundation for an Australia of the likes we have never seen before–towards a more general acceptance by a relatively large audience of informed listeners on the ABC, readers of the Age, and a more popular audience of radio 3 AW. On these appearances their extreme views are usually toned down, to the extent that one could mistakenly consider the IPA a group of modest free marketeers.

    The second reason is the very strong historical connection of the IPA with the Liberal Party both in and out of government. Whereas most other think tanks operate by canvassing ideas and putting in submissions to parliamentary inquiries, the IPA have their own members in parliament, and most of their board members are either members of, or closely associated, with the Liberal Party. What this means is that there is a direct interaction between both groups, with the IPA arguably developing policy and the Liberal government implementing it. In the Senate Family First member Bob Day is a member of the IPA, as is David Leyonhjelm of the Liberal democrats. Several IPA members also hold seats in different state parliaments. No other think tank has this level of direct representation in parliament, and nor should they.

    Only in the last few weeks two prominent members of the IPA have been placed into positions where they will be members of parliament. James Paterson, former deputy executive director, has been elevated to fill a casual senate vacancy and Tim Wilson, former Human Rights Commissioner and Policy Director at the IPA, has won pre-selection for the safe Victorian Liberal seat of Goldstein. Both men are young and will likely be in parliament for a long time, thus providing extra pressure long term from IPA sources. On his elevation to the senate Paterson emailed a letter to all IPA members in which he said, “I want you to know that I’m going to the Senate to fight for exactly the same things I have in my time at the IPA. I know if I ever fail to do so that IPA members will be the first to let me know where I have gone wrong!” I mistakenly thought he would be representing his state of Victoria, not the IPA.

    A second telling example concerns the response to the refusal in August 2014 to repeal race hate laws. As reported by Latika Burke in the Age (6/8/14) John Roskam said the IPA had “been contacted by many IPA members who are also Liberal Party members who have said they will resign their membership from the Liberal Party over this broken promise from the government,…” It was also reported that Tony Abbott had phoned Andrew Bolt and John Roskam to inform them of the government’s decision. So Liberal party members apparently go to the IPA before protesting to their own MPs.

    The IPA exerts much more influence on the present government than any other think tank or pressure group. Their interests do coincide with those of the large business and consultancy groups, yet their concerns are more pragmatic and short-term whereas those of the IPA are long term and strongly ideological. For about six months before the Abbott government was elected there was considerable speculation in the press about whether the 75 items requested by the IPA would be implemented. It was assumed that because of the extreme neo-liberal tenor of these items and the close connexions of most members of the IPA with the Liberal Party, many having membership of both, that the influence on the government would be intense. This has proven to be true. However when Malcolm Turnbull became PM in October 2015 many people expected the government would begin to veer to the centre from the right. This would suggest the influence of groups like the IPA would diminish. In fact, the opposite has occurred. And whilst their existence is scarcely known by the broader electorate, their influence far outweighs what it should in a purportedly democratic country.

    Dr Greg Bailey is Associate Professor, Program Coordinator (Asian Studies), College of Arts, Social Sciences and Commerce, Latrobe University.

     

  • Ian McAuley. Labor’s policies.

    Amid all the political chatter about tensions between Turnbull and Morrison, a possible early election, and the laundering of donations to the Liberal Party, Labor has released a substantial policy document –Growing together: Labor’s agenda for tackling inequality.

    With a gathering of Labor luminaries – Jenny Macklin (who has main carriage of the policy), Bill Shorten, Chris Bowen, Andrew Leigh – it was hardly surprising that the media had a strong presence at its launch at ANU late last month.

    But it turns out that the journalists were more interested in a photo shoot than in public policy, because the document got little media coverage. Those who believe in an anti-Labor media conspiracy would not be surprised, but my view is that the journalists were looking for “deliverables” in the form of specific proposals (they found a few tidbits), but they weren’t equipped to do justice to a document outlining a major shift in policy emphasis.

    The document has two strong policy messages. First is its focus on inequality. Not welfare transfers or redistribution, but inequality. Second is its dismissal of any idea that there is a tradeoff between “economic” and “social” objectives.

    To understand how far these messages are out of sync with our present thinking, imagine Christian Porter, Alan Tudge, Scott Morrison and Mathias Cormann on one platform giving unscripted statements on the economic importance of dealing with inequality?

    These policy principles should really be no-brainers. Who would not say inequality is a major problem? And who would not believe that good economic policy and good social policy are inseparable?

    Unfortunately, they are not obvious.

    While most people may understand the moral case against rising inequality, they do not necessarily grasp the fact that inequality has bad economic consequences. High and persistent inequality destroys incentives, creates an “underclass” dependent on social security transfers, deprives people of the opportunity to develop and use their capabilities, and in the long run undermines the political legitimacy of the economic system. It’s no surprise that worldwide we are seeing the emergence of populist politicians with simplistic prescriptions for complex problems.

    And to suggest that we must sacrifice social objectives for the sake of “the economy” makes no more sense than the (probably apocryphal) story out of the Vietnam War: “we had to destroy the village in order to save it”.  As the philosopher Karl Polanyi stressed, we live in a society, not in a market: markets are, or should be, subservient to society, and should be subject to society’s norms. There is no superior entity called “the economy” to which we must pay homage. Economic policy that goes against our desire for a fair and just society is just plain bad economics.

    Yet that’s not the way the public see it. Poll after poll gives Labor a strong lead over the Coalition in “social policy”, while giving the Coalition a strong lead in “economic policy”.  Such a contradiction could be sustained only if the idea of a tradeoff is ingrained in people’s minds.

    So while Labor is on the right track in bringing together economic and social policy, it has a lot of convincing to do. Some of that work has to be directed at the public in general, some at journalists who have difficulty in understanding public policy, and some has to be directed at enthusiasts on the “left” who are too ready to dismiss economics, and who abandon the quest to find ways of overcoming inequality and social exclusion that are based on sound economic principles.

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

    In this article in the Melbourne Age, Hugh White comments

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

    See link to full article below:

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

  • Geoff Miller. Japan, ’embedding’ and a world not of pure reason.

    “The Australian” of 29 March reported Murray McLean, former Ambassador to Japan, as defending the Japanese submarine bid against criticism that it would amount to a “virtual alliance” that would ultimately thrust us into conflict with China. He reportedly said that “Australia should choose a submarine based on the best technology and the best price”, taking the right decision without “thinking if some other country is concerned about it or otherwise”.

    This issue has recently been ventilated both in the press and online, with articles by people including Prof. Hugh White of the ANU. His point has been not so much that China would be concerned about us buying Japanese submarines, but rather that Japan would use a successful submarine bid to enlist us on its side in its on-going rivalry with China, conceivably ending up in armed conflict.

    The Japanese submarine issue also came up for discussion at an on the record conference on Indo-Pacific Maritime Security, held last month by the National Security College of the ANU. At that conference a number of Australian speakers said that “of course” the purchase of Japanese submarines would not compromise our ability to make our own decisions on involvement or not should tensions increase to the point of hostilities between Japan and China.

    In my view, while in a world of pure reason they might be right, in the real world habits of close consultation and working intimately together in such a vital area of defence would certainly make disassociation difficult should a crisis arise. I think similar factors would already have this effect in regard to the US should that country decide that it had to use military force in the Asia-Pacific and sought our support.

    Given the ANZUS Treaty (even though this requires us only to consult), the Marines in Darwin, the enormous amount of US defence equipment used by our armed forces, the amount of intelligence sharing, joint exercises, the secondment of Australian defence units to larger American formations, the doctrine of inter-operability, and the amount of personnel exchanges and “embedding”, including at very high levels, I find it very hard to imagine an Australian Government—particularly given the Defence advice it would most probably be receiving—bold enough to decline a US request for military support and involvement in a future Asia-Pacific “emergency”.

    Indeed, a “The Times” article carried in “The Australian” of 30 March quotes an Obama administration official as saying that “Australian leaders are the easiest allies to manage—our allies all give us headaches, except for Australia. You can always count on Australia”.

    (Also in “The Australian” of 30 March Paul Kelly quotes Defence Secretary Dennis Richardson as saying that “what comes out of this (Defence) Department (on the submarine project) will be based on a hard-headed assessment of capabilities”, but he concludes his article by noting that “Cabinet, of course, is supreme (and) can decide whatever it wants”.)

    According to press reports (“The Australian”, 9 March) the Commander of US Pacific Air Forces, General Lori Robinson, has said that negotiations are under way about rotating USAF bombers and tankers through RAAF bases at Tindall and Darwin. Press reports put this proposal squarely in the context of the South China Sea and China, and speak of the very advanced B1 bombers being involved.

    If we eventually decide to purchase the Japanese “Soryu” submarine we will perhaps be getting a very good submarine, but we will also be becoming “embedded” with yet another country deeply suspicious of China. In an article in The Lowy Institute’s “Interpreter” of 30 March the experienced Asia specialist Malcolm Cook cites two recent political statements by the Japanese Government as reflecting “how deep, even neuralgic, Japan’s sense of rivalry with China is”. He goes on to say that “The Japan-China rivalry is deeper and broader than the US-China one, and it is driving deep Japanese policy changes across a wide spectrum”. Indeed many senior people in Japan are keen to build anti-China coalitions, in which they see Australia taking part, together with the US, India and Japan itself.

    Our armed forces are already deeply embedded with those of the United States. This brings with it many advantages. A close defence relationship with Japan would also bring advantages. But we need to be very aware that because of this actual and potential embedding we could end up in the extraordinary position of having to join in the use of military force against our largest trading partner, and a country with which we have a Strategic Partnership.

    Geoff Miller was formerly Australian Ambassador to the Republic of Korea and Australian Ambassador to Japan.  He was also Director General of the Office of National Assessments.

     

     

     

  • John Menadue. State income taxes – another political diversion?

    Malcolm Turnbull’s suggestion of states entering the income tax field may please ‘state rightists’ in the Liberal party, but it will damage our national aspirations and our national society and economy.

    In the repost below, Michael Keating, almost two years ago emphasised the importance of the commonwealth government’s domination of income taxes since 1942. This commonwealth government supremacy has been a key factor in building our successful national economy and society. Or as Paul Keating has said, the commonwealth’s income tax monopoly ‘is the glue that holds us together’.

    We federated to overcome the confusion of six different state tariff regimes. Do we now want eight different incomes tax regimes?

    The commonwealth’s supremacy in income tax is critical for economic management across the country. Do we want to weaken that national leadership and responsibility?

    We have national markets in every field and with a very mobile workforce. Do we now want to put up state barriers to this?

    Malcolm Turnbull’s proposal would put pressure on the states to reduce their own tax rates. Perhaps this is what his ‘state rightist’ supporters would like. We saw that in the 1970s when Queensland reduced state taxes and abolished death duties. All other states followed and we are now much worse off as a result. If states decided to introduce their own income taxes, we could see another race to the bottom.

    What Malcolm Turnbull is trying to do was tried forty years ago by Malcolm Fraser. The details may be different, but the Fraser proposal went nowhere.

    The Turnbull government has become very agile in diversionary tactics. The Abbott government spoke of a debt and deficit disaster but the Turnbull government wants to divert attention elsewhere. A GST was deliberately floated but then our attention was directed elsewhere. One critical issue above all else is budget repair. The Committee for Economic Development in Australia (CEDA) and others have suggested options for overcoming our persistent budget deficit, including increases in revenue. But the government doesn’t want to hear about that, so our attention is diverted to state income tax.

    I believe that strong national economic and social leadership is essential for the commonwealth government in the 21st Century, particularly in the global world economy in which we live. That globalisation will continue to grow. Why should we handicap ourselves in meeting such a challenge?

    I have always believed that ‘cooperative federalism’ although less sexy and requiring hard work, is the much better way to proceed. In the health field where states spend up to 30%of their budgets, I have proposed for many years a joint commonwealth-state health commission in any state that will agree. Perhaps a joint commonwealth-state health purchasing agency in regions would be a more practical way to start. I will be writing more about cooperative federalism in the health field.

    Tony Abbott has left us with many unfortunate legacies. He abolished the COAG Reform Council which had been trying to lead an informed debate on ways that the commonwealth, state and territory governments could cooperate to harmonise their responsibilities. One task of that Reform Council was to build a ‘seamless national economy’.

    Malcolm Turnbull seems to want to pull the seams apart.

    Michael Keating will be writing further on this subject.

  • Michael Keating. Federalism (repost)

    The Government’s Commission of Audit, which preceded this Budget, recommended that policy and service delivery should as far as practicable be the responsibility of the level of government closest to the people receiving those services, and that each level of government should be sovereign in its own sphere, with minimal duplication between the Commonwealth and the States. The Government for its part has insisted that it does not run schools or hospitals and that the States are ultimately responsible for them and what happens to them.

    This conception of the Australian Federation with its emphasis on States’ rights and separate roles and responsibilities is of course not new. Malcolm Fraser enunciated it before he became Prime Minister, and its supporters insist that it was what the framers of our Constitution intended.

    Furthermore, there is considerable intellectual attraction in separate roles and responsibilities for each sovereign government. It should enhance democratic accountability and help improve efficiency if the buck can no longer be passed backwards and forwards between the two levels of government. But why then has our Federation evolved in favour of greater national involvement in the provision of services that were originally the sole responsibilities of the States? The Commission of Audit seems to believe that centralism can and should be reversed, but I will argue below that there are good reasons why the national government has become more engaged in what were originally the prerogatives of the States.  Consequently, although there is probably some modest scope for redefining governments’ respective roles and responsibilities and reducing duplication, we will be best served by preserving the core features of our national system.

    In my view there are three key reasons for the pre-eminence of the national government. First, a fundamental reason why the States agreed to federate was to remove tariffs as a first step towards the creation of a national market. But now that we have a national market and indeed are facing global competition, businesses want common standards and licensing across a wide variety of fields; for example, everything from rail gauges, regulation of heavy road transport, company law and national competition, to food standards and the recognition of qualifications.

    Second, the responsibilities of government have grown. At the time of Federation pensions did not exist, but the Australian government now has constitutional responsibility for income support, including subsidising critical needs such as medical services, pharmaceuticals, and rental housing. Equally since World War II the Australian government has been expected to manage the macro-economy to ensure full employment and reasonable price stability.  Allied to this the Australian government also has responsibility for population policy, especially through migration, and for the growth in productivity and workforce participation which together determine the overall growth of the economy.

    However, these various national functions and responsibilities are not self contained. Today the various functions of government are heavily inter-related in a way that was much less true one hundred years ago, when we were all much less closely connected. For example, productivity is heavily dependent on the skills of the workforce, but these skills are in turn dependent on the quality of the education and training systems of the States. It is simply not possible for the Australian government to meet its responsibilities while being unconcerned about the effectiveness of various State government services.

    The third and final reason for national government pre-eminence is of course the national government’s domination of taxation, widely described as ‘vertical fiscal imbalance’ or VFI. Paul Keating called VFI the glue that holds our nation together, but for the States and the champions of States’ Rights, VFI is regularly trotted out as the root cause of centraliam. In the past the national government has passed payroll tax back to the States, and more recently they receive all the proceeds of the GST, but it seems unlikely that either of these taxes will ever be changed by so much as to make the States financially self-sufficient.

    In that case the removal of VFI would require that the States have access to the income tax. Legally there is nothing to stop them doing that now, but they have never taken up the opportunity, and indeed there are very important efficiency gains in only one government being responsible for administering any particular tax.  So the alternative is for the Australian government to raise the income tax and then to share the proceeds with the States. But why would sharing a tax result in clearer lines of responsibility than sharing responsibility for other functions of government which require expenditures? There would still be the same arguments about who should get how much and whether the States have adequate revenue. Alternatively if the States were allowed to add a surcharge to the Commonwealth tax, then there is the risk that the Commonwealth’s independent use of taxation policy for macro-economic policy would be compromised.

    In short it is not surprising that proposals to return to the past and increase State rights have got nowhere over a very long time. The truth is that a form of power sharing which we call ‘cooperative federalism’ is the only realistic way of managing inter-governmental relations. In Australia, for good or for ill, we have these two levels of government (plus local government), and power will inevitably need to be shared for a variety of functions where both have a legitimate interest. By contrast one cannot help being suspicious about the Commission of Audit proposals and whether their real intention is to provide a fig-leaf for the Commission’s smaller government agenda, with little or no concern for the impact on the availability and quality of publicly funded services.

    Instead a more productive discussion, than endless repetition of State’s Rights, would be to formulate better arrangements to guide the necessary future power sharing between the Australian Government and the States. To their credit that was what the Hawke, Keating and Rudd Governments were attempting to do with some success through COAG.

     

  • Geoff Miller. Managing or containing China.

    Australia, China, the South China Sea – and the uses of language.

    Recent reports published in both Australia and the US—including most notably in our case the Defence White Paper—and a series of visitors to Australia from China, the US and Japan, have increased the already high degree of interest and concern over future strategic dispositions in the Pacific and Indian Oceans, and over the present state of affairs in the South China Sea.

    In a recent post Cavan Hogue made important points about one piece of language frequently used in discussion of these matters, namely the need to uphold the “rules-based international order”. He noted that the phrase is commonly used to refer to the current set of international arrangements essentially created by the West—but with one very important exception: the US, unlike China, has not ratified the UN Convention on the Law of the Sea (UNCLOS).

    Another piece of language much used at a recent conference at the ANU three weeks ago was the injunction that, in the interests of maintaining this rules-based order, “we” must manage China’s rise. This was said in particular by a number of Japanese speakers at the conference, which was on the record, on the Indo-Pacific maritime Security, and held by the ANU’s National Security College. “We” were described as the “liberal, open-minded, free market democracies”, notably including the US, Japan, India and Australia. This of course describes the group of countries frequently suspected of trying to “contain” China, rather than “manage its rise”.

    But that concept of “managing China’s rise”, with its connotations of from on high to below, also invites some scepticism. Given the size of China’s economy and of its foreign exchange reserves, its importance to its economic partners (which include all of the possible “managers” or “containers”) and its policy vitality as shown in the Asian Infrastructure Investment Bank and “One Belt One Road” initiatives, it is hard to see China’s rise being “managed” by anyone.

    It may not be too big to fail but it’s too big to manage!

    Indeed, according to press reports (“The Australian”, 17 February) China’s Foreign Minister Wang said during Foreign Minister Bishop’s visit to Beijing that he did not see Australia’s possible purchase of Japanese submarines as a deliberate tactic to contain the rise of China because “no country in the world can stop that”.

    A recent Chinese visitor to Australia said something akin to that: he did not see the US as the main obstacle to China’s rise: “if there is to be any obstacle it will be ourselves”.

    So if China isn’t to be contained or managed what are we to do about it or with it? “Live with it, engage with it, influence it if possible, oppose it if necessary” would seem to be the practical answer. One of the recommendations made by Dr Elsina Wainwright in her recent US Studies Centre paper on the ANZUS alliance was to seek to involve and engage China to the maximum extent possible.

    Once again language comes into play. It’s very common to read or hear of Australia’s US-China choices or dilemma spoken of as a choice between Australia’s major strategic ally and its biggest trading partner. But both the US and China are very big countries, both can “walk and chew gum at the same time”. The US is very important to Australia economically as well as strategically. And it is important for Australians to remember that our relationship with China is not only about trade and investment, but also represents a long-standing, major and successful policy, pursued on a bipartisan basis by both major Australian political parties, to encourage and support the entry of China into the international community as a successful and engaged participant, rather than remain as a feared external “other”. China has done and is doing this in so many ways, and we should, and do, welcome that. Indeed in 2013 Australia and China expanded their relationship to become a “Strategic Partnership”, with regular talks at the highest levels between the two governments.

    Of course things have not remained as they were, and some changes have been very difficult for some to accept. Japan is no longer the pre-eminent Asian power, for example, and that has not been welcomed by many patriotic Japanese. But, in my view, to seek to counter or reverse this by constructing an anti-China coalition is not a constructive course.

    Needless to say this does not mean that points of difference or difficulty don’t arise, and Chinese actions in regard to contested – or formerly non-existent! – territories in the South China Sea are a case in point. There are various possible reasons for China’s behaviour, some more justifiable or presentable than others. Once again language comes into play. The United States’ Naval passages or over-flights aimed at challenging China’s position are designated as “Freedom of Navigation” operations, and various Australian commentators, including Opposition Defence spokesman Senator Conroy have called on Australia to conduct similar operations, and to proclaim them publicly.

    But in this regard it is worth noting that at the ANU’s Maritime Security Conference Emeritus Professor Carl Thayer, of the Australian Defence Force Academy, said that there were many areas of at least verbal agreement among all parties, including freedom for maritime commerce. (He also noted that China has not announced baselines or promulgated zones; and that much “militarization” can be dual use, and could usefully be defined.) A recent senior Chinese visitor to Australia also gave guarantees about the freedom of trade through the South China Sea.

    If we are concerned about freedom of navigation in the South China Sea our concern at this stage should not be about freedom of sea-borne trade. Indeed, if commercial shipping through the South China Sea is of concern to us it must of even more concern to China, the destination of the largest share of our exports, and dependent on its East Coast ports for energy and other raw material imports and for its enormous export trade.

    What is going on? One thing that is going on is a contest between the United States, the established dominant maritime power in the Western Pacific, and China, which in 2012 announced its intention of increasing its maritime role and presence both in its own region and beyond.

    The rise of China as a Naval power, even though its capacities will for many years remain far below those of the United States, has of course created competition with the US, and with the US Navy. US Pacific Fleet Commandeer Admiral Swift spoke strongly against Chinese activities in the South China Sea at the ANU Conference, though he went on to speak of good Navy-to-Navy relations, and good relations which he has personally with senior Chinese naval officers.

    We don’t know how the clash between these two great powers will be resolved. But I believe we can conclude that it’s not a matter for or against freedom of trade, but rather a struggle for position between a super-power and its regional challenger, taking place near the challenger’s homeland. It’s not in our interest to become involved in such a clash, particularly militarily, and particularly when our relations with both contenders are both very good and very important.

    However it is impossible to overlook the fact that other things are going on as well, namely the construction by China of air and naval facilities on real or constructed islands in the South China Sea, and the pressure it is exerting on other claimant states in regard to real – fisheries – and potential – oil – resources. The clash some days ago between an Indonesian patrol boat and Chinese fishing and coastguard vessels indicates that even more countries, including Indonesia, the largest ASEAN country, could become involved in the South China Sea dispute.

    This raises the crucial and tantalising question, “why is China behaving like this, in particular in regard to the other claimant states?”.   Our Prime Minister has called its behaviour counter-productive, and it’s hard to argue with that description in regard to its regional and international reputation, whatever the immediate imperatives or perceived benefits may be.

    At the ANU conference on Maritime Security the distinguished Japanese strategist Masashi Nishihara said that the “basic question” is whether we “can expect an eventual partnership with China, or increasing tensions?” That is indeed a basic question, and China’s recent behaviour has been concerning.

    Some time ago the respected Sinologist Linda Jakobson presented a picture essentially of disaggregated Chinese decision-making in regard to the South China Sea, with the military and agencies to do with oil and fisheries playing a large part in deciding what happens, rather than simply following an established central policy line. But this seems hard to reconcile with the current Chinese emphasis on central control, and Xi Jin Ping as the “core” of authority and policy-making.

    There are indeed many possible reasons for, or factors contributing to, China’s stance in the South China Sea. To an outside lay observer they include:–

    • the Chinese Government actually fully believes in China’s historical claim, and is simply prosecuting it
    • China seeks to strengthen its naval position against Unites States Naval and air activities near its coast, including the possibility of an attempted US blockade of its trade routes, which has been advocated as a possible strategy by some US academics
    • it seeks the potential to interdict the trade routes of its North Asian neighbours
    • it seeks to ensure access to South China Sea resources, notably oil and fish
    • the forward policy in the South China Sea is essentially domestic in its drivers:-
      • It appeals to nationalism as a counter to slackening of and troubles in the economy; and
      • It is a sap to, and ensures the support to the government of, the PLA.

    Some of these possible drivers are of more concern than other, but together they add up to a potentially alarming picture, particularly given uncertainty over how much weight to ascribe to each factor, and the potential of missteps and escalation. US Defense Secretary Ash Carter has said that specific Chinese actions in the South China Sea will be met by specific US responses: and Chinese spokesmen are reported as saying much the same thing.

    As I said earlier, we can’t “manage” China’s rise. But in regard to the South China Sea we should work diplomatically to calm the situation to the extent possible and to promote both adherence to international law, effective communication between the contending or competing parties and, where possible, an appreciation of others’ positions. Australia is in good standing with all the parties involved and, complex and difficult as it is, we may be able to assist in handling this potentially dangerous situation, and should make attempting to do so a priority.

    Geoff Miller was formerly Australian Ambassador to the Republic of Korea, Australian Ambassador to Japan and Australian High Commissioner to New Zealand. He was also the Director General of the Office of National Assessments.

     

     

     

     

     

  • Ian Verrender. Turnbull will have a tough sell on economic policy

    Malcolm Turnbull is hardly going to win votes by spruiking the economic record of his predecessor. And yet he hasn’t exactly made any headway on his own tax reform or budget repair agenda, writes Ian Verrender.

    History, they say, is written by the victor.

    Try telling that to vanquished former prime minister Tony Abbott, who appears to be taking great delight in reminding us at every opportunity that the Turnbull Government will go to the next election on the record of the Abbott administration.

    When it comes to economic management, however, that’s not really the kind of record likely to win too many votes. For on any reading of the numbers, the Abbott-Hockey era was a bitter disappointment.

    After convincing the electorate in 2013 that we were facing an economic calamity, dubbed the “Debt and Deficit Disaster”, Abbott presided over a budget deterioration during his two years in office that sent government debt soaring.

    From $153 billion when he assumed office, net debt since has ballooned to $279 billion. It has risen from 10 per cent to almost 17 per cent of GDP.

    Curiously, given the scale of the deterioration, there has been an odd silence from the Government about how to rectify the problem. Budget repair quietly has been swept off the agenda and under the carpet.

    That is because it necessarily involves an overhaul of the tax system to lift revenue. Instead, the debate has devolved into a contest between those demanding ever greater tax concessions, which would apply even greater pressure on the budget.

    Missing is any discussion about the broader economic challenges we face or recognition of the opportunities that have been wasted.

    We’ve just emerged from a once-in-history resources boom, with virtually nothing to show for it. For a short period, it boosted our purchasing power – courtesy of a stronger currency – and made us all feel wealthier even as it hollowed out the economy. That period rapidly is coming to an end.

    Unlike farming, services or manufacturing, resources are non-renewable. And the national tragedy is that the vast bulk of the profits from those never-to-be-replaced resources flowed to offshore investors.

    The initial nobbling and eventual abolition of the Minerals Resources Rent Tax was a textbook study as to how an industry, with minimal investment, could shape public policy for maximum private gain.

    As Professor Ross Garnaut correctly postulated at the time, the mining tax debate would mark the end of a brief period when Australian politicians felt empowered to enact economic reform in the national interest. He concluded:

    At this dangerous time for the world and for Australia, it is important that we restore a capacity for Australian governments to implement policy in the public interest, independently of pressures from private interests.

    Six years on and the times are no less dangerous. Nor have the lobbying powers of the various sectional interests abated.

    Tax hikes have always been politically difficult. Now they spell almost certain political death.

    John Howard barely scraped across the line in 1998 with his proposal to introduce the Goods and Services Tax, an experience that Malcolm Turnbull clearly is keen to avoid.

    Having let slip vague hints of a broad overhaul of the tax system shortly after his ascension, involving possible changes to everything from the GST to negative gearing, capital gains tax and superannuation concessions, the prospect now is that if any changes are enacted, they will be minor.

    If that’s the case, the impact on the deficit will be minor. Part of the problem is that Turnbull and his Treasurer, Scott Morrison, have promised that any changes to the tax system would be revenue neutral; that it’s all about improving the efficiency of the system.

    That’s all well and good, but it ignores the fact that we have a structural deficit; our long-term spending is out of whack with our long-term revenue. Fixing it will require spending restraint and raising more revenue, all the while convincing the electorate of the desperate need for change.

    According to the former prime minister, his replacement should abandon any plans of raising new taxes and concentrate instead on spending cuts to get the deficit under control.

    If it were that easy, it would already have been done, perhaps even by Abbott when he was running the country.

    Abbott’s supporters claim that it was all the fault of a hostile Senate that refused his spending cuts, an argument that ignores basic mathematics. Not approving cuts should merely have kept the deficit steady.

    As Scott Morrison explained to the National Press Club earlier this year:

    Over the last two years … we have saved over $80 billion. But we have also had new spending of more than $70 billion.

    Even more damaging to the budget was the decision to axe the carbon and mining taxes. The carbon tax removal alone denuded the coffers of $7.6 billion a year. It was replaced by a subsidy called Direct Action, estimated to cost $1.5 billion over three years.

    Election promises they may have been, but removing such a large whack of revenue has limited any opportunity for tax relief elsewhere. There’s just no more wriggle room.

    When it comes to new taxes, Abbott’s abhorrence appears to be a relatively new phenomenon. It’s worth remembering that Joe Hockey’s first budget contained a temporary levy on higher income earners, a Medicare co-payment for GP visits and an increase in the fuel excise; taxes by another name.

    One of the biggest challenges facing Turnbull on budget night and at the ballot box – whenever an election is called – will be how to keep the nation’s schools and hospitals functioning.

    The Abbott government effectively stripped $80 billion out of health and education, passing on the funding responsibility to the states. That’s money they don’t have and it explains why NSW’s Mike Baird and South Australia’s Jay Weatherill were such strident supporters of an increased GST.

    All these concerns, however, appear to have drifted into the shadows as the new PM pontificates on innovation and confidence.

    The business lobby groups, in the meantime, continue to press the case for tax cuts, even in the face of revelations by the Australian Tax Office that show a third of all public companies and the largest private companies pay no tax at all. If recent statements from senior ministers are anything to go by, it appears they have succeeded.

    The property industry looks to have scored a win too.

    The PM has voiced his staunch opposition to the ALP’s plan to wind back negative gearing, a tax concession that has deployed hundreds of billions of dollars into loss-making assets, has made Australia among the world’s most expensive places to conduct business and transformed the country into a nation of landlords and renters.

    If tax reform or budget repair ever was on a table, it may well have been the marble one that splintered under the weight of a former treasurer the night his boss was dumped.

    Ian Verrender is the ABC’s business editor and writes a weekly column for The Drum.

    This article was originally published on ABC’s The Drum.

  • John Menadue. Budget repair and private health insurance.

    Readers of this blog will be aware that I have been expressing concern about the serious consequences of the government subsidy costing $11 b. p.a. for the private health insurance industry. This subsidy has serious budget consequences:  it is skewed in favour of high income earners; it has not taken pressure off public hospitals; it has underwritten a dramatic increase in private specialist fees; it penalises country people who have very limited access to private hospitals; it weakens Medicare’s ability to control prices; it’s premium increases for over a decade have been at three times the rate of CPI increase and steadily takes us down the disastrous US health path.

    Yesterday, the Balanced Budget Commission of the Committee for Economic Development of Australia (CEDA), outlined various options to increase revenue and to reduce outlays

    . In its options, CEDA suggested ‘removing the private health insurance rebate exemption’. In my blog of 19 November, I estimated that the government loses about $3 b. p.a. as a result of the revenue foregone through exemption from the Medicare levy surcharge.

    CEDA also suggested ‘cutting the private health insurance rebate’. In my blog, I estimated that the cost of that rebate in the last budget was $6.3 b.

    The CEDA Balanced Budget Commission which made these recommendations includes Paul McClintock, former Howard government Secretary of Cabinet; John Edwards, Reserve Bank of Australia board member; Professor Rodney Maddock from Victoria University; Michael Keating, former Secretary, Prime Minister and Cabinet and Finance; Terry Moran former Secretary Prime Minister and Cabinet,Ian Watt,former Secretary Prime Minister and Cabinet and John Langoulant, former WA Under-Treasurer.

  • John Menadue. White man’s media.

    On 26 March I provided a link to an article by Simon Jenkins in The Guardian, who commented

    ‘The atrocities in Brussels happen almost daily in the streets of Baghdad, Aleppo and Damascus. .. A dead Muslim is an unlucky mutt in the wrong place at the wrong time. A dead European is front page news.’

    We have again seen this distortion of the news being played out in the bombings in Lahore. Over 70 people were killed, including many children. A week earlier, 33 died in a terrorist attack in Brussels. Just contrast the media coverage, the response by politicians and the prayers offered by religious leaders over Easter.

    This pattern of biased coverage is a regular event. Just recall the Boston marathon several years ago when we had an avalanche of media coverage over three deaths.

    Why is it that people in the West are more valuable or newsworthy than people elsewhere. Could racism be a part? I expect it is.

    A major factor of course is our ‘white man’s’ media that focuses its resources and its interests on North America and Europe. As a country in Asia, when will we break out of our fixation with the Anglosphere. As I have mentioned many times, a person from Mars reading, listening to or viewing our media would assume that Australia is an island parked off New York or London.

    Consider also the deluge of coverage we now have of Donald Trump and the US primary elections. We haven’t even got to the Presidential election which is six months away. It is all about easy, lazy and under-resourced journalism. And the problem is going to get worse in our mainstream media. I had hoped that the ABC would counter the declining coverage of our region, but it is now headed in the opposite direction – curtailing its staff resources in Asia and the Pacific.

    In all this coverage of the US primary elections, has anything newsworthy been happening in Japan, China and Indonesia? Apparently not.

    The Global Terrorism Index 2015 has analysed results and trends in terrorism in recent years.  The GTI index highlights amongst other things the North Atlantic bias in our media coverage.

    The GTI finds

    • ‘Two groups are responsible for half the deaths from terrorism – Boko Haram and ISIL. 51% of terrorist deaths that are attributed to a terrorist group were by Boko Haram and ISIL. ‘
    • ‘Nigeria has experienced the largest increased in deaths from terrorism in 2014. There were 7,512 fatalities from terrorist attacks in 2014, an increase of over 300%. The country houses two of the five most deadly terrorist groups in 2014, Boko Haram and the Fulani militants.’
    • ‘ISIL inflicts more deaths on the battlefield than through terrorism.’
    • ‘The majority of deaths from terrorism do not occur in the West. Excluding the September 11 attack, only 0.5% of deaths from terrorism have occurred in the West since 2000. Including September 11, the percentage reaches 2.6%.’
    • ‘Loan wolf attackers are the main perpetrators of terrorist activity in the West.’
    • ‘Islamic fundamentalism was not the main cause of terrorism in the West over the last 9 years.’

    The facts are clear, 2.6% of deaths from terrorism, including September 11, did not occur in the West.

    Our media gives a very different account. Our coverage is overwhelmingly about terrorist activity in the West which is very small compared with the tragedy being inflicted on many non-Western countries.

    We are being badly served by our white man’s media.

  • Chris Bonnor and Bernie Shepherd (researchers). School Myths Busted.

    What My School really says about our schools. (Text of press release of 28 March 2016)

    In the wake of the latest version of My School two researchers have published a startling account of what the numbers behind the website actually show. Former school principals Chris Bonnor and Bernie Shepherd have revealed new findings which challenge myths about Australia’s schools.

    While reports are frequently about the ‘drift to the private schools’ Bonnor and Shepherd have found that the drift could be equally seen as one from low socio-educational advantage (SEA) schools to higher SEA schools. As recently reported on Lateline, they show that enrolments are increasing in higher SEA government schools, but declining in low SEA government schools.

    Lower SEA schools in all sectors are tending to lose their more advantaged students, while higher SEA schools, again in all sectors, are not only getting bigger but are increasing their enrolment of the most advantaged.

    “The flipside, as Gonski warned, is that disadvantage is being compounded in lower SEA schools”, Chris Bonnor said. “Hence the student achievement gaps between advantaged and disadvantaged schools are widening. My School data shows Australia’s school equity problem is worsening, especially in the secondary school years and in metropolitan areas’.

    The two former principals warn against using rusted-on beliefs, rather than evidence, to decide future directions for Australia’s schools.

    “The current trend is to make public schools more like private schools, in the belief that the latter get better results. We use both NAPLAN and HSC results to show this is a myth.”

    They also found that government recurrent funding (per student) to private schools is increasing at around double the rate of increases to public schools.

    “We are already seeing large numbers of private schools getting more public funding than goes to public schools serving similar students”, Bonnor and Shepherd warn. “The idea that private schools save public funds is at best a half-truth – on the way to becoming a myth.”

    Their analysis also shows that the high spending on students who are already advantaged is not improving measurable student outcomes.

    “The government portion of this overspend is around $1.5 billion each year. It would be a better investment if it was redirected to more needy schools,”.

    Bonnor and Shepherd’s new publication School Daze – what My School really says about our schools, is available for free download at www.edmediawatch.com

    For more information contact Chris Bonnor on 0411048200

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • Richard Broinowski. Australia and the South China Sea

    A tangled web of territorial claims threatens stability in the South China Sea. The figures appear rubbery, but a consensus is that Philippines occupies seven islands and reefs, Malaysia five, China eight and Taiwan one. Vietnam occupies twenty seven. There is also conflict over fishing grounds. Meanwhile, there seems little or no room for compromise, especially between China, Vietnam and Taiwan, all of which claim sovereignty over all of the main chain of islands, the Spratlys.

    In three unusual examples of public diplomacy, both Chinese and Vietnamese officials recently put their conflicting cases to selected Australian audiences. On 1 March, Ouyang Yujing, Director General of Boundary and Ocean Affairs in the Chinese Foreign Ministry, told selected groups of Australians in Canberra and Sydney that China was the first country to name and administer the South Sea islands. Chinese sovereignty was established in the second century BC. He cited more recent treaties and maps from British, French, Chinese and Japanese official sources to reinforce the claims.

    Guo Yezhou, Vice Minister of the International Department of the Communist Party’s Central Committee was less restrained. On 18 March he told Australian participants at a round-table at AIIA in Sydney that all South China Sea islands were part of China. But this, he asserted, was disputed by the United States. While claiming it was not taking sides between conflicting territorial claims, the US was marshalling its considerable military assets in the region, and busily reinforcing military alliances with Japan, Australia and the Philippines, all designed to contain China. Some littoral countries had deployed heavy weapons on islands they occupy, so China had reciprocated on the ones it occupies. Guo said China has the capacity to take back islands occupied by others, but would not do so because this would foment war. China wanted to work together with all concerned countries to reduce tensions. China supports the freedom of navigation, but freedom could be compromised by outside interference.

    The Vietnamese case was put by Dr Lan Anh of Vietnam’s Diplomatic Academy, an offshoot of the Vietnamese Foreign Ministry. In a meeting with AIIA councillors at Glover Cottages on 3 March, she claimed all South Sea islands belonged to Vietnam. In a complex recital, she claimed historical records from France, Britain, China and Japan ‘proved’ Vietnam’s case. Vietnam would continue to defend its claims, by force if necessary. She spoke with a fierce conviction born of painstaking research for a PhD she took at Bristol University.

    At the official level in Canberra, Australia seems to be reflexively following the American lead and sleep-walking into an increasingly dangerous situation. We claim neutrality. We insist that former Prime Minister Howard’s promise to China during the Taiwan crisis in 1996 means that our alliance with the United States is not directed at China, and that his later claim that Australia does not have to choose between China and the US remains true. But these assertions look increasingly shaky. During President Obama’s visit to Australia in 2011 when he announced his ‘pivot’ to Asia, Prime Minister Julia Gillard welcomed US Marines into Darwin, the first enduring deployment of American ground troops since World War II. Australia recently countenanced deployment of USAF B-1 bombers to Darwin, later withdrawn, but not before an adverse Chinese reaction.

    Meanwhile, visiting American officials ramp up the Chinese threat. In March 2016, US commander of the United States Pacific Fleet, Admiral Harry B. Harris Jr, told a naval conference in Canberra that China was building a ‘great wall of sand’ in the South China Sea.

    Danger runs high for Australia in what former Defence Deputy Secretary Hugh White describes as a titanic struggle for regional leadership between China and the US. White suggests only two alternatives – either the US abandons any major role in Asia, or the US and China agree on a new order which accommodates some of China’s ambitions but preserves a major role for the US. While these choices are stark and unrefined, leaving little room for a more nuanced compromise, White is right to suggest the present situation is untenable, because there is little regional support for trying to force China to back down. The leaders of Japan and India have made it plain that they will not carry America’s banner by sending naval units through the Sea to test China’s territorial claims. Neither will South Korea, nor most of the leaders of ASEAN, or Canada, Britain, or New Zealand.

    But Australia? In an article published in November 2015, Bob Carr quotes the American strategist Edward Luttwak saying that Australia ‘fully retains the Anglo-Saxon trait of bellicosity’. But to gallop off wearing our deputy’s badge in Australian ships or aircraft to test China’s resolve to protect the islands it occupies in the South China Sea would be a lonely road. We would be Washington’s only ally pursuing military means. What Australians should agitate for is agreement between Washington and Beijing which allows China space in the South China Sea as befits a great power, the kind of space the United States enjoys in the Caribbean and along its eastern and western seaboards. Can the hawks in Canberra and their advisers be persuaded to support such a plan? We should fervently hope so.

    Richard Broinowski is a former diplomat and Ambassador to Vietnam, Korea and Mexico.

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

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

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

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

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

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

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

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

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

  • What a godsend politicians and journalists are to ISIS.

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

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

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

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

  • John Menadue and CPD. Building a regional framework on refugees and forced-migration.

    For several years a group of us at the Centre for Policy Development (CPD) have been endeavouring to develop a regional framework for the management of refugee issues in our region.  We strongly feel that no country in the region, including Australia, can handle refugee flows on their own. A regional framework based on cooperation and burden-sharing is essential.

    For over two years we have been pursuing the case for a Track II Dialogue in the region.  We have felt that this is necessary to break out of the impasse on refugees that Australia and other countries face in the region.  The Track II Dialogue includes people from the region with an interest and understanding of the issues. It includes members from think-tanks, government officials in a private capacity and people from international agencies.

    The first Track II Dialogue including a diverse group of people from the region was held in Melbourne last year.  The second Track II Dialogue was held in Bangkok in January this year.  That Track II Dialogue in Bangkok was followed by a meeting of officials involved in the Bali Process. That meeting welcomed the suggestions of the Track II Dialogue.  This meeting has now been followed by a ministerial meeting this week.

    The results are very encouraging as set out in the following press release from CPD.  You will also see further on, a link to an article in the SMH of 23 March, headed ‘Indonesia says Bali Process failure on refugee crisis “must not happen again.”  John Menadue.

    MEDIA RELEASE FROM CENTRE FOR POLICY DEVELOPMENT

    *FOR IMMEDIATE RELEASE**

    Bali Process steps up, but action on forced migration will be critical. *

    The Bali Process can now lead a regional approach to forced migration that is effective, dignified and durable. Outcomes agreed at the Bali Process Ministerial Meeting demonstrate governments in the region can do much more on forced migration. The Ministerial Declaration and the new Response Mechanism are promising developments. The challenge now is for Bali Process countries, especially its Co-Chairs, to turn such promise into reality.

    CPD’s CEO, Travers McLeod, said:

    “Outcomes agreed by ministers can enable the Bali Process to be less about process and much more about effective, durable and dignified action on forced migration.”

    “Over 60 million people are now displaced globally, many in the Asia-Pacific region. New stories of the suffering of forced migrants emerge daily. The underlying causes, including conflict, persecution, human trafficking, people smuggling, transnational crime and now climate change, are resulting in escalating numbers. Governments are struggling to respond effectively – unilateral action will not do.”

    “It’s pleasing to see the Bali Process adopt recommendations of the Asia Dialogue on Forced Migration, which CPD convenes with regional policy institutes. A review of limitations of regional responses to the 2015 Andaman Sea crisis and improvements needed, including a new capability for the Bali Process to broker more predictable and effective responses on forced migration (even preventative action), is overdue.”

    “The challenge now is for leaders to deploy this new capability and put it to work, instead of letting short-term thinking dictate counterproductive national responses.”

    CPD fellow, Peter Hughes, a former Deputy Secretary at the Department of Immigration in Australia, also welcomed the announcement:

    “The nature of the Bali Process, with its vast size and diverse membership, means that it has stopped short of direct responses to major incidents of displacement in the past. Its role was very limited in the 2015 Andaman Sea crisis. Member countries have admitted that this is not good enough anymore.”

    “The mechanism announced today provides a vital avenue for the Bali Process to make a difference in responding to mass displacement. Ministers Bishop and Marsudi, as Co-Chairs, should be commended for showing leadership in reinvigorating the Bali Process and driving improvement in national and regional contingency planning. Their task now is to continue to advance more active and resilient regional architecture in the management of mass displacement.”

    More information about Asia Dialogue on Forced Migration at: www.cpd.org.au/intergenerational-wellbeing/asia-dialogue-on-forced-migration/

    LINK TO SYDNEY MORNING HERALD STORY.

    http://www.smh.com.au/world/indonesia-says-bali-process-failure-on-refugee-crisis-must-not-happen-again-20160323-gnpnb6.html

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

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

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

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

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

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

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

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

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

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

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

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

    This article was recently published in East Asia Forum.