Category: Politics

  • Sebastian Rosenberg. Mental health changes.

    Announcing the federal government’s response to the National Mental Health Commission’s review of mental health services today, Prime Minister Malcolm Turnbull emphasised the concept of patient choice.

    The commission’s review was the latest in a long line of reports showing that for many Australians needing mental health care, their current choice is between getting no care or getting poor care.

    The reforms announced today have the potential to change this appalling situation. But ultimately they should be judged on the outcomes they achieve for patients.

    Poor access to care

    Mental health is the third-biggest chronic disease in Australia behind cancer and heart disease, affecting 4-5 million people each year.

    Access rates to care are low. And once a person has seen their general practitioner or psychologist, if their condition deteriorates, they have few options but to seek care from their local hospital emergency department.

    Following deinstitutionalisation 30 years ago, which overturned the practice of sending people with severe mental illness to asylums, Australia largely failed to invest in a genuine system of community mental health care.

    The bar for entry into the state-run hospital system rose, so you must be sicker and sicker to qualify for care. Rates of access to state and territory mental health services have not changed in some years. Yet spending has increased by more than 50%.

    We are, in fact, over-reliant on hospitalisation and there is waste. An unpublished survey by state governments indicated that more than 40% of all hospital mental health beds were occupied by people who would be better off in other settings if there was anywhere to send them.

    Mental illness also has a colossal impact on productivity and economic participation. The OECD estimates the average overall cost of mental health to developed countries is about 4% of GDP. In Australia, this would equate to more than A$60 billion or about A$4,000 a year per individual taxpayer.

    Tailored responses

    The federal government’s announcements have the potential to address these problems by presenting two key structural changes.

    The first is the decision to use the new Primary Health Networks (PHNs) to keep people with mental health problems out of hospital, by building new, integrated and stepped approaches to primary and community mental health care. Under the Abbott government, PHNs replaced Medicare Locals. PHNs’ role is to both plan and commission (fund) primary and community care.

    This means having the capacity to respond to all the problems a person might have, including not just their mental illness, but drug and alcohol issues, physical problems, homelessness and other problems. It also means having a range of services available to match the intensity of the person’s needs.

    PHNs will be tasked with properly planning to meet the mental health needs of the regions they serve.

    Given the size of the PHNs, some may require multiple plans to ensure they understand and can respond to locals’ needs. One of the PHNs in Western Australia covers an area the size of much of Western Europe, so plans will need to cater for diversity within regions.

    The second key structural change offered under these reforms is to end the dependency on simplistic fee-based services. The government has recognised that just sending people off for a set number of psychology sessions is an inadequate response, particularly for people with more complex conditions.

    The suggestion is that people with less complex problems should access evidence-based mental health therapies and services online.

    For others, a continuation of the Better Access program, which subsidises ten sessions with a psychologist or psychiatrist, may be entirely suitable.

    For people with more complex problems, however, the government has flagged its intention to permit PHNs to cash out some of their Medicare Benefits Schedule payments into new pooled funding arrangements to meet locally identified needs. PHNs would have the capacity, for instance, to build further on successful programs such as headspace or the Mental Health Nurse Incentive Program.

    These reforms suggest that better understanding individual needs can lead the PHN to more intelligently plan individual responses, bringing together clinical care and social supports such as living skills, vocational training and education.

    Overcoming barriers

    The government’s changes to mental health are not without challenges. It’s unclear whether PHNs will be up to the job, and what support they need to make the scheme work.

    The changes don’t appear to be supported with any new funding, yet we know the mental health system is under-funded. Mental illness accounts for 13% of the burden of disease but receives only around 6% of the total health budget. It should be noted that the “cashing out” arrangements are uncapped, opening up the potential for new funding under Medicare.

    Most importantly, we need to ensure these changes marry up to commensurate reforms by the states and territories. The fifth national mental health planning process now underway has proven ineffective in joining up mental health approaches between governments. The Commonwealth has pledged new leadership and it is here that it is needed most.

    Finally, the Commonwealth must establish a new and robust approach to accountability. Regionalism cannot mean we let myriad programs start and go unevaluated. Instead we need strong and consistent approaches to data collection, providing real information about things that matter.

    Rather than reporting on bed numbers, these processes need to reveal the extent to which PHNs are actually working to help people with a mental illness stay out of hospital, recover from their illness, complete their education, resume employment, avoid homelessness and become healthy and productive members of the community. None of this information is currently available.

    Prime Minister Turnbull stated that these changes were about trying to make the most of Australia’s mental wealth and human capital. His goal is laudable. But the work starts now.

    Sebastian Rosenberg is Senior Lecturer, Brain and Mind Centre, University of Sydney. This article first appeared in The Conversation on 26 November, 2015.

  • Travers McLeod. Unusual suspects challenging usual thinking on climate change.

    “The greatest trick the devil ever pulled was convincing the world he didn’t exist.”

    Twenty years ago Kevin Spacey uttered this famous line about his alter ego, Keyser Söz, in The Usual Suspects. Keyser Söz isn’t climate change, but he might as well be.

    Since the film was released an inordinate amount of money has been spent to trick the world that human-induced climate change doesn’t exist.

    Recent data from the CSIRO suggests the ‘trick’ is yet to be completely foiled in Australia. Although almost 80 percent of people believe climate change is occurring, every second person routinely changes their mind and there is considerable divergence on whether human activity is a causal factor.

    Thankfully, someone who requires no more convincing is Mark Carney, the Canadian Governor of the Bank of England.

    “There is a growing international consensus that climate change is unequivocal,” Carney said in September.

    “Human drivers are judged extremely likely to have been the dominant cause of global warming since the mid-20th century.”

    Carney, like his Chief Economist, Andy Haldane, is what I call an unusual suspect, someone who looks beyond the parapet and leads on an issue when we don’t expect them to.

    Think doctors and nurses on children in detention and sporting heroes like David Pocock on marriage equality.

    Although we might deem these interventions ‘unusual’ given their infrequency, they can be perfectly natural for the individual speaking out. Often they are based on experience or expertise.

    This makes unusual suspects particularly insightful, and especially powerful.

    Carney’s incursion into the climate change debate shouldn’t be taken lightly. He also heads up the global Financial Stability Board, established after the Global Financial Crisis.

    It was no coincidence Carney gave his speech at Lloyd’s of London.

    Insurers know full well the rising cost of weather-related events, aggravated by climate change, from around $10 billion per year in the 1980s to $50 billion today. These losses, Carney conceded, will “pale in significance” to those on the horizon when we consider “broader global impacts on property, migration and political stability, as well as food and water security”.

    Carney and Haldane argue the physical, liability and transition risks posed by climate change threaten financial stability.

    They are progressives amongst a hitherto conservative central banking set.

    Haldane in particular has bemoaned “quarterly capitalism”, which sees public companies over-discounting future income streams by 5-10 percent per year.

    He believes “shareholder short-termism may have had material costs for the economy, as well as for individual companies, by constraining investment”.

    Haldane is not alone. Larry Fink, Chairman and CEO of BlackRock, wrote to S&P 500 CEOs in April, accusing them of prioritising actions to deliver immediate returns and “underinvesting in innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth”.

    Where are Australia’s unusual suspects in business and finance?

    One would find it difficult to locate seminal speeches on climate change and quarterly capitalism by our central bankers or the Business Council of Australia

    Much has been made of our tepid growth outlook. Reserve Bank Governor Glenn Stevens challenged the National Reform Summit to ask: “how do we generate more growth? Not temporary, flash in-the-pan growth, but sustainable growth”.

    The adjective — sustainable — is key. Focusing on growth at all costs risks missing the wood for the trees. To engineer sustainable growth, one requires a sustainable economy. And that is what Australia lacks most of all.

    It is a shame, because sustainability is in Australia’s DNA.

    In fact, in 2011, then Treasury Secretary Martin Parkinson told us “the theme of sustainability will need to shape the approach to policy development of this generation”.

    Parkinson was and remains spot on: his focus was on how each generation could bequeath to the next a productive base for sustainable wellbeing at least as large as the stock of capital inherited.

    How shortsighted it was for one of our best unusual suspects to be dumped by the Abbott government.

    His likely reemergence as head of the Department of Prime Minister and Cabinet is timely.

    At his alma mater, Princeton, in September, Parkinson echoed Carney by saying company boards and financial market regulators give scant attention to climate change risks. Equally absent was examination of the “knock-on effects to macroeconomic stability of falling demand for carbon-intensive exports”.

    Accelerating Australia’s transition to a sustainable economy will require those in business, finance, government and civil society to embrace unusual suspects on climate change and sustainability as the new normal, not the exception. If anyone can do this knitting, it’s Parkinson. Welcome back.

    Travers McLeod is Chief Executive of the Centre for Policy Development. This article was first published in the Huffington Post on 26 November 2015.

  • Bullying and bugging in East Timor.

    The bugging by Australian Security Intelligence Service (ASIS) of an East Timorese cabinet meeting in 2004 will not go away. The event was so outrageous it is not surprising that it continues to resurface. Only a Royal Commission or a Judicial Review can redress some of the damage that has been done to Australia’s reputation, our intelligence agencies and most importantly of all, in our relations with our near neighbour, East Timor.

    There have been new revelations and continual cover-ups. As Senator Nick Xenophon has said on the ABC ‘This is a massive scandal”.

    I continue to be concerned about the competence of our intelligence services and the inability of all Australian governments to effectively supervise their secret operations. The supervising agency is too small to be effective. My experience is also that the supervisors including parliamentary committees, become part of the ‘intelligence club’. Journalists and so called academics ‘experts’ who report on our intelligence services are also invariably part of the same club.

    Our intelligence agencies have greatly expanded resources and powers but it is very hard to assess their competence. The bugging in East Timor, even though eleven years ago, remains a blight.

    See link below to ABC interview with Emma Alberici and Senator Nick Xenophon.

     

    http://www.abc.net.au/lateline/content/2015/s4361657.htm

  • John Thompson. The costly abolition of Medicare Locals

    Despite promising to keep Medicare Locals, the Abbott government abolished the fledgling organisations after it took office.

    Even when it had no clear policies or plans to replace them, the Abbott government seemed determined to undo many of the initiatives of the previous Labor government. This was certainly the case in relation to primary health care.

    In 2008, the then Labor government established the National Health and Hospital Reform Commission(link is external) (NHHRC) to conduct a comprehensive review of Australia’s health system. The review provided the basis for the National Health Reform Agreement (NHRA) signed by the Australian government and the states and territories in August 2011. The reforms set out in the NHRA had three main objectives:

    1. Reforming the fundamentals of our health and hospital system, including funding and governance, to provide a sustainable foundation for providing better services now and in the future.
    2. Changing the way health services are delivered, through better access to high quality integrated care designed around the needs of patients, and a greater focus on prevention, early intervention and the provision of care outside of hospitals.
    3. Providing better care and better access to services for patients, through increased investments to provide better hospitals, improved infrastructure, and more doctors and nurses.

    The establishment of 61 Medicare Locals across Australia was one of the key initiatives taken to address these objectives.These regional structures aimed to strengthen the primary care system (and thereby relieve pressure on hospitals and other acute providers) by integrating Commonwealth and state government health planning and service delivery and access.

    Medicare Locals were non-profit companies selected after a competitive application process and funded largely by the Commonwealth with $1.8 billion for the period 2011–12 to 2015–16. While the Commonwealth funding deed specified program schedules and reporting requirements, Medicare Locals were provided with considerable scope to arrange their structure, operations and relationships to reflect their local health environment.

    To provide this focus on primary care, Medicare Locals were required “to work with the full spectrum of general practice, allied health and community health care providers and improve access to care and drive integration between services.” They established collaboration with health care services and other community organisations in their region to develop strategies to meet the overall primary health care needs of their communities. Considerable effort was made to ensure that general practice had a central role in the work of Medicare Locals – with varying effectiveness.

    Medicare Locals worked at a regional level with state and local government in the planning of primary health care services and in the linking of these services with Local Hospital Networks and aged care programs to deliver improved integration and effective transitions for patients across the entire health care system.

    The Medicare Locals program was a contentious one, not just because it was a Labor government initiative, but many GPs saw it as a threat to their primacy in their local primary care market and saw the regional health planning activities of the Medicare Locals as an unnecessary additional layer of bureaucracy. This negative view was reinforced by the AMA, the doctors’ union, that lobbied the Coalition Opposition on the basis of the perceived threat to the GP small businesses. For this reason, the Coalition went to the 2013 election with a health policy that included brief mention of Medicare Locals as follows: “We will also review the Medicare Locals structure to ensure that funding is being spent as effectively as possible to support frontline services rather than administration.” However, the then Opposition Leader, Tony Abbott, made a promise that no Medicare Locals would be closed should the Coalition form government.

    About a month after coming into office, the new Minister for Health, Peter Dutton, announced a review(link is external) of Medicare Locals to be conducted by Professor John Horvath. The review was aimed at “reducing waste and spending on administration and bureaucracy, so that greater investment can be made in services that directly benefit patients and support health professionals who deliver those services to patients.” Comments from selected “stakeholders” were invited.

    Professor Horvath, previously Chief Medical Officer, was assisted in the review by two consulting firms: Ernst & Young provided advice on the current operations of Medicare Locals and future structure and governance options, and Deloitte Touche Tohmatsu (Deloitte), conducted an assessment of their financial performance and compliance to their Deed.

    The conduct of the review attracted substantial criticism, particularly for its lack of transparency. A Senate committee subsequently reported(link is external) that it had not been able to obtain much definitive information about the process and methodology used to conduct the review.

    More than 270 submissions were received, indicating a high level of interest in the review, but none was made available by the Department of Health or as supporting documents with the review as is the usual case. Horvath advised that he “personally conducted” interviews with key stakeholders but did not identify who they were. A small number of Medicare Locals were asked for input to the review but were restricted in the amount of information they could provide.

    It is understood that the Deloitte audit involved what the Department of Health called “a basic review” of the 2012–13 operations of the Medicare Locals functioning at that time, with a more considered audit of six of the 61 Medicare Locals. As most Medicare Locals had only just begun operating (setting up structures, employing staff, developing IT systems, etc.), it is not surprising that their audited financial and other achievements were not substantial, and the auditors were not interested in the future plans of the Medicare Locals.

    The review was completed in March 2014 and was highly critical of the performance of the Medicare Locals. Itrecommended(link is external) that the recently established Medicare Local system (one third of the Medicare Locals were only established as from July 2012) be replaced with a system comprising a smaller number of regional organisations called Primary Health Organisations.

    The Senate committee referred to above reported: “With limited information available publicly, and no detailed discussion of methodology in the Review report, it is difficult to understand the Review’s recommendations. Similarly, without the transparency that would have been achieved by the publication of the consultancy reports and the 270 submissions, the Review’s assertions that the Medicare Locals are ‘flawed’ cannot be tested.” The Senate Committee also stated that it could not reconcile the positive evidence it heard of the progress and achievements of Medicare Locals with the highly critical and negative findings of Horvath’s review of the work of the Medicare Locals.

    Notwithstandinga clear public statement by Tony Abbott that no Medicare Locals would be closed should the Coalition form government, when his government brought down the 2014-15 Budget in May 2014 it was announced that all Medicare Locals would cease operation on 30 June 2015 and a new network of Primary Health Networks(link is external) (PHNs) would be established.

    There have been substantial costs incurred in the closure of the 61newly established Medicare Locals, both financial and in terms of disruption or termination of valuable health services. In a relatively short time, boards had been established, staff had been recruited, premises and operating resources were acquired, relationships and collaborations established with local health organisations, and services and programs initiated. On the basis of government commitments, the Medicare Locals had entered into contracts, leases and employment obligations.

    The costs of winding up the Medicare Locals have been estimated at between $112 million to $200 million. The Health Department admitted that closing Medicare Locals would cost $112 million but refused a Freedom of Information request for details of this estimate claiming it would not be in the public interest to release these figures because it could jeopardise “its good relationship with Medicare Locals.” However, many Medicare Locals showed no reluctance to publicly announce their wind up costs at the Senate Committee hearing. The Barwon Medicare Local estimated their costs at $2 million; the North Adelaide Medicare Local’s estimated costs were $2.2 million.

    Skilled, and often very scarce, staff were lost as they became aware of the uncertainty of their future employment. These staff losses were felt most keenly in non-metropolitan areas where health workers are often difficult to find.

    Perhaps more crucially, many highly needed health services that had been recently begun were terminated.Although in their early stage of operation, Medicare Locals had established or funded a range of vital services, made important advances in population health, identified and filled key gaps in services, and begun the critical task of integrating primary care with hospital services. This momentum was lost and many communities lost the gains made. Furthermore, key health staff were lost, a particularly important factor in rural and remote areas.

    The Department of Health then announced that the new PHNs would be selected on the basis of a public tender process so that the new organisations could begin operations on 1 July 2015. This tender process was very poorly managed by the Department.

    The notice of tender for the PHN Program was issued on 28 November 2014, almost a month after the previously advised scheduled release date. The tender period was very short and conducted over the Christmas–New Year period with tenders to be submitted by 28 January 2015.This was an absurdly short time for major organisational relationships to be established and business structures and financial decisions to be made, particularly as the minister encouraged new private sector interests to participate.

    Although broad guidelines were provided to potential tenderers at the start of the process, major decisions and criteria such as the geographic boundaries of the proposed PHNs were drip fed to interested tenderers as the tenders were being prepared.

    State government officials advised that there was very little consultation with the key state health agencies to recognise and capitalise on existing health planning and coordination bodies.

    Information meetings for prospective tenderers were conducted in each state by Department of Health officials but the information provided was no more than that which already available on the Department’s website. The Department even refused to provide notes of the meetings or lists of attendees (which would have been of assistance to facilitate collaboration in the preparation of tenders).

    Horvarth’s review criticised Medicare Locals for focussing too much on service delivery, not entirely coincidentally a concern of GPs and other providers. His report recommended that PHNs “should only provide services where there is demonstrable market failure, significant economies of scale or absence of services”. However, he did not define “market failure” and the Department clearly had difficulty in providing potential tenderers any reasonable clarity on this matter. This certainly made the preparation of submissions very difficult, especially for tenderers in rural and regional areas where Medicare Locals had provided services to meet significant gaps in services.

    In summary, the tender process was very deficient. The Senate Committee noted the confusion surrounding the tender process and considered “flaws in the government’s PHN tender process raises doubts regarding any outcome of the tender process.”

    It is not surprising that about this time a poll of more than 1100 doctors across Australia conducted by the AMA declared the Minister for Health, Peter Dutton MP, the worst Minister for Health for 35 years.

    In April 2015 the Commonwealth government announced that 31 PHNs would be funded as from 1 July 2015. They would be required to establish Clinical Councils involving GPs, and Consumer Advisory Committees. Announcing the successful bidders, the Minister of Health, Sussan Ley, said the new PHNs would replace “Labor’s flawed Medicare Local system,” yet almost all PHNs selected (24 of the 28 PHNs) are either consortia of former Medicare Locals or have a Medicare Local as the lead applicant.

    The new PHNs will be responsible for populations and geographic areas that are much larger than those of the Medicare Locals. (For example, one PHN will now be responsible for all of Western Australia except the Perth metropolitan area.) Medicare Locals had an average population of 355,000; PHNs will service an average population of 738,000. Six PHNs will service populations of more than one million. Many health experts doubt the effectiveness and efficiency of such very large organisations, citing the failure of the NSW government’s establishment of mega health services.

    The substantial costs of establishing these new organisations are not known and it will be interesting to discover their operating costs when their first financial reports are made.

    The concerns of the Senate Committee that the inadequate Horvarth review and the Department’s inept tender process could lead to a poor result appear to be justified. Now, several months after the PHNs were formally established, there has been little progress in developing any useful operations. Many in the health system are of the view that the whole exercise is a very expensive ideological move that, despite very substantial financial resources and lengthy disruption and dislocation, may not achieve the results that the fledgling Medicare Locals were beginning to realise.

    John Thompson is an economist with experience in primary health. This article was first published in Australian Policy Online on 23 November 2015.

  • Spencer Zifcak. UN Human Rights Council Weighs in on Australia

    On 21st of March 2000, an Australian delegation appeared before the UN Committee on the Elimination of all Forms of Racial Discrimination (CERD) in Geneva. The Hon Philip Ruddock, then Minister for Immigration in the Howard Government, led the delegation. The meeting did not go well.

    Confronted by exceptionally well-informed and assertive questioning by the Committee’s rapporteur, the Minister became condescending and defensive. His justifications for Australian policies, particularly in relation to Australia’s indigenous peoples, fell apart.

    Their health, education and social disadvantages, he implied, were the result of lifestyle choices. Nothing could be done about mandatory sentencing and its disproportionately adverse impact on black Australians because that was the responsibility of the States. As to the position of women, Ruddock replied that ‘if you knew some of the women around me, by blood and other, you would know the empowerment of women is a very significant issue!’ This was hopeless.

    The result was that CERD responded with a highly critical evaluation of Australia’s racial discrimination record. It expressed grave concern regarding high rates of indigenous incarceration. It noted the disproportionately discriminatory effect of mandatory sentencing. It remained concerned about dramatic levels of inequality in indigenous peoples’ access to health, education and housing. It was highly critical of the Government’s failure to respond seriously to the Australian Human Rights Commission’s report on the Stolen Generations.[1]

    The Government responded by savaging the messenger. It stated that that the Committee’s report was ‘an unbalanced and a wide-ranging attack that intrudes unreasonably into Australia’s domestic affairs’. In his finest diplomatic language, then Foreign Minister, Alexander Downer said that ‘if a UN Committee wants to play politics here in Australia then it will end up with a bloody nose’.
    Things do not seem to have improved very much. Reflecting upon Australia’s shellacking before the UN Human Rights Council on November 9th this year, the current Minister for Immigration, Peter Dutton, described the process as ‘a farce’. So, what happened?

     

    Australia was in Geneva for the UN Human Rights Council’s second review of its human rights record, a process known as Universal Periodic Review (UPR). With the agreement of all UN member states, every country submits its human rights performance for review once every four years. Interestingly, given his somewhat dire performance previously, Mr. Ruddock was back again as a member of the Australian delegation. He was more circumspect this time.

    Over four hours, more than 100 nations took the opportunity to question and criticise many different aspects of Australia’s performance in protecting human rights. These criticisms were largely consistent with the UN High Commission for Human Rights’ (OHCHR) own analysis of Australia’s actions in responding to the reports of UN Human Rights Treaty Committees in the four years since the last UPR. The Council also benefitted from a fine background document prepared by the Human Rights Law Centre on behalf of more than 200 Australian human rights NGOs.

    The OCHCR report contained several very positive comments concerning Australia’s recent record. It warmly welcomed the Parliament’s commitment to recommend a constitutional amendment that recognized Australia’s first peoples. It praised Australia’s concerted efforts to combat people trafficking and trafficking related exploitation. It applauded the introduction of the National Disability Insurance Scheme. It commended Australia’s advocacy for the abolition of the death penalty globally and new legislation that had introduced an offence of torture into the Australian Criminal Code.

    Nevertheless, the report noted that UN Treaty Bodies had recommended consistently that the Australian Government do much more to close the inequality gap between Australia’s indigenous and non-indigenous peoples. It reflected concern commonly expressed about the health disparities of children living in rural and remote areas, children in out-of-home care, children with disabilities and in particular about the gap in health status between indigenous and non-indigenous children. It expressed alarm at the levels of violence against women and the sexual abuse of children.

    Its principal reservation, however, related to Australia’s treatment of people seeking asylum. The report’s introductory paragraph on the issue read:

    The response of Australia to migrant arrivals had set a poor benchmark for its neighbours in the region. The authorities had also engaged in the ‘turn around’ and ‘push-back’ of boats in international waters. Asylum seekers were incarcerated in centres in third countries where they faced conditions that the Special Rapporteur on Torture had reported as amounting to cruel, inhuman and degrading treatment…and which also violated the Convention on the Rights of the Child. Even recognised refugees in urgent need of protection were not permitted to enter Australia which had set up relocation arrangements with countries that might be ill-prepared to offer those refugees any durable solution. Such policies should not be considered a model by any country.”

    In the review before the Human Rights Council, the vast majority of countries picked up on the same issues. Mr Dutton was right to criticise North Korea’s intervention which was hypocritical and wayward in the extreme. But one outlier in a hundred does not constitute a farcical dialogue.

    France recommended that Australia strengthen measures to eliminate discrimination against indigenous populations. The USA urged Australia to consult indigenous peoples when considering the viability of remote communities. New Zealand asked that Australia address inequalities affecting health, education, employment and income that disproportionately affect indigenous peoples and other minorities. Hungary suggested that Australia should develop, in partnership with indigenous communities, a national strategy to implement the UN Declaration on the Rights of Indigenous Peoples.

    Germany strongly condemned Australian refugee policy saying that children, families and other individuals at risk, in particular survivors of torture and trauma, should be removed from immigration detention centres. Sweden urged Australia to ensure that relevant measures should conform fully with international law and human rights, including the principle of non-refoulement and the detention of asylum seekers should only occur when absolutely necessary and for a minimal time.

    The USA told Australia to closely monitor the processing of refugees and asylum seekers in offshore detention centres to ensure that their fundamental human rights are respected. Norway insisted that independent judicial review of detention and its conditions should be ensured. Iceland recommended that Australia fully incorporate its international human rights obligations in domestic law by introducing a comprehensive, judicially enforceable Human Rights Act.

    There is nothing too farcical here. In fact there was next to nothing in the criticisms made by more than half the nations of the globe that has not previously been identified as deeply problematic by Australia’s Human Rights Commission.

    There is no chance of Australia winning a seat on the UN Human Rights Council in 2018-2020 – unless we listen and act.

    ******************

    [1] Readers who wish to follow the history of Australia’s relationship with the UN Human Rights Treaty Body System may wish to have a look at my book Mr Ruddock Goes to Geneva, UNSW Press, 2003.

    Spencer Zifcak is Allen Myers Professor of Law and Director of Research at the Academy of Law, Australian Catholic University. He is Immediate Past President of Liberty, Victoria.

     

  • Victoria Rollison. Couples counselling for Labor and Unions

    When I saw the news that the Electrical Trades Union invited the Greens’ Adam Bandt to address their National Officers conference, and didn’t invite a speaker from the Labor Party, the lyrics of Gloria Gaynor’s “I Will Survive” came to mind: ‘I’m not that chained up little person still in love with you, and so you felt like dropping in and just expect me to be free, and now I’m saving all my loving for someone who’s loving me’. This is not a lovers’ spat. The ETU has felt unloved by the Labor Party for a long time. In 2010, the union’s members made their displeasure official through a public, conscious uncoupling. As explained on the ETU website ‘our-history’ page: ‘The mood of the ETU membership towards the Labor Party has changed. The members no longer have faith in the Labor Party to listen to and act in the best interests of workers. The argument put forward is that political parties only listen to swinging voters. To that end, in 2010 the ETU membership voted to step away from its affiliation with the ALP and support whichever voice in the Parliament speaks genuinely for the workers’.

    Such a statement barely skims the surface of the complicated relationship between the Labor Party and the Australian trade union movement. Whereas some unions are un-affiliated, others are loved up and as cosy as ever, and continue to provide a well-trodden path into the federal Labor caucus. As pointed out by Professor Ray Markey: ‘Only 11 unions account for all federal Labor parliamentarians with union backgrounds, nine of which are affiliated to the party. Almost half of these 39 MPs come from three affiliates: the Shop Distributive and Allied Industries Union (eight), Transport Workers’ Union (five) and Australian Services Union (five)’. And of course, Labor leader Bill Shorten has a well-known union background in the Australian Workers Union.

    The question for both Labor and Australian unions is, are they good for each other? Will their relationship continue to be mutually beneficial to both parties, or should they go their separate ways?

    There is no simple answer to this question. In recent years, there have been triumphs for the relationship, and inevitable tensions. The triumphs include the union’s campaign against WorkChoices which contributed to Labor’s election win in Kevin-07. Union campaigns were also influential in the election of Queensland Premier, Labor’s Annastacia Palaszczuk. As explained in this interview with Peter Simpson, Queensland state secretary of the ETU union, the ETU, though not an affiliated union, mobilised a grassroots ‘Not 4 Sale’ campaign against public asset sales. Many other unions helped not just with campaign funds, but also with on-the-ground activities such as door knocking and phone calls. In her victory speech, Palaszczuk shared the love by saying: ‘Can I thank the union movement … Because it is the union movement that stands up each and every day and fights for better conditions for workers across this state.’

    Still, whereas the good times are good, the bad times are terrible. In working towards Party reform, Labor has slowly been unpicking their strong – some consider stifling – union links. For instance, in an effort to increase the accessibility to the party and the diversity of Labor rank-and-file membership, it is no longer compulsory for applicants to be a member of a trade union. Senator John Faulkner campaigned to reduce union representation at state conferences from half to 20%. Labor’s National President and Shadow Climate Change Minister, Mark Butler, is also pushing to increase rank-and-file decision making and reduce unions’ disproportionate voting rights. Since 2010, Labor has implied they are happy to date other people by describing their relationship with unions as ‘links’ amongst ‘other community organisations’. This is a far more casual relationship than 2002 when Labor described their union relationship status as a ‘partnership’.

    Any end to the relationship would be costly for Labor. John Warhurst says Labor ‘depends hugely upon the unions financially, not just through the regular flow of money for daily administration, but for election campaign expenditure and broader pre-election political campaigns…’ But with this money comes an expectation of influence, an influence many non-union Labor rank and file members and supporters see as ‘authoritarian, anti-democratic, sometimes corrupt and with power held by factions and “faceless men”’.

    Policy disagreements are also an unavoidable source of tension between Labor and unions. A recent example is the disappointment felt by unions about Labor’s deal with Turnbull’s government accepting the China Free Trade Agreement, albeit with some amendments. ACTU President Ged Kearney was quoted as saying ‘companies would still be able to source workers from overseas without offering jobs to local citizens and residents’ and ‘While we appreciate the efforts of Penny Wong and Bill Shorten to fix a bad deal, the proposed changes simply do not go far enough’.

    All of these complications inside Labor and unions’ relationship are amplified by the Liberal Party’s ideological war against unions, and by association, Labor. Speaking about his Royal Commission into Trade Union Governance and Corruption in Parliament on 8 September 2015, former Liberal Prime Minister Tony Abbott claimed the commission was set up ‘because it was absolutely necessary to get to the bottom of rorts, rackets and rip-offs, of corruption and of criminality inside the trade union movement’. This depiction of unions as corrupt and criminal is regularly repeated in news stories, particularly in right-wing partisan press, framing any Labor MP with links to unions as untrustworthy. Overcoming such attacks, and defending their public reputation, is a crucial activity Labor and unions must cooperate in.

    If Labor and unions are to remain together, they need to be honest about how each has changed since they first met, and agree to compromise, as any couple who have a long history must do. Unions are operating in a vastly different economy and with a shifting and declining membership base, with ever-changing IR policy challenges to contend with. Labor is often stuck between a positive reform agenda rock and a populist electorally viable hard place, so won’t always be able to accommodate all unions all the time. Of course everyone must acknowledge that Labor can’t be progressively productive, and defend against the right’s attacks on IR policy, without winning elections.

    There is so much good about the relationship, I’m sure it’s not something either want to destroy completely. And even if the unlikely decision is made for Labor and unions to cut ties and file for divorce, I would hope they can agree to be cordial for the benefit of the children; for the benefit of everyone who relies on unions and the Labor Party to defend the rights of workers, to deliver socially progressive policies and to maintain economically equitable and sustainable economic growth.

    Victoria Rollison is a political blogger. She works in marketing and communications and is researching political narrative at the University of South Australia. She is a member of the ALP in Adelaide.

     

  • Arja Keski-Nummi   Andaman Disaster – Regional Cooperation on Refugees

    Too often in Australia we go cap in hand to the region when we have an asylum seeker or refugee problem. When our problems pass, we lose interest in regional cooperation. No wonder the region often see us as fair-weather friends.

    But our region faces refugee problems alongside ours. As a good neighbour we should help with the common problems we face. It is in our interest to do so as well as in the interest of regional countries.

    On 13 November 2015, the Huffington Post carried a story that “Myanmar’s Rohingya could be the world’s next major refugee crisis”.  The story commented

    ‘After months of monsoon rains, it is sailing season again in the South Seas of Myanmar. Six months ago, the plight of Myanmar’s Rohingya minority briefly garnered international attention when they were among thousands of starving refugees and migrants abandoned in the Andaman Sea and the Bay of Bengal. Human Rights groups now say a new refugee crisis looms, as members of the Rohingya minority are excluded from the dramatic reforms taking place in their country. Amnesty International recently warned that thousands more people could set sail in the coming months, risking a repeat of the May crisis.’

    John Menadue.

    See below a post by Arja Keski-Nummi on the earlier Andaman disaster.

    The crisis in the Andaman Sea provides an opportunity for the Australian Government through our Foreign Minister Julie Bishop as Co-chair of the Bali Process on People Smuggling, Trafficking and Related Transnational Crime to give the process some teeth and credibility in the region. This is a good opportunity for us to help others just as they have helped us in the past with regard to people movements.

    Five countries that are part of the Bali Process are facing a crisis that is drawing negatively the attention of the international community on the region; unprecedented since the Indo Chinese outflows of three decades ago.

    Australia should be approaching the other Co-chair, Indonesia, to work with affected countries in examining what can be done to both tackle the people smuggling/trafficking ventures that are preying on vulnerable people in Bangladesh and Myanmar and how best to ensure the safety and security of people who have been affected by such predatory behaviour.  In its 2013 communiqué ministers “underscored the importance of addressing humanitarian and protection needs in managing irregular movement”.

    Now is the time to enliven the April 2013 communiqué of the Bali Process Ministerial meeting in which in its penultimate paragraph:

    “Ministers recognised that the root cause of irregular movements in the region were complex and multidimensional and encouraged members to continue to work with countries of origin, including through development cooperation, to address where possible underlying factors which made people vulnerable to irregular movement.” 

    This communiqué called for greater regional cooperation and work on:

    • People smuggling and trafficking. From the reporting we have seen on this latest humanitarian disaster a people smuggling venture has quickly turned into trafficking.
    • Development of a “protection-sensitive regional approach” – the aspirations of which are to have consistent assessment processes for asylum seekers, and where appropriate and possible harmonised arrangements or the establishment of regional assessment arrangements.
    • Identifying in the region the perceived increase of labour trafficking and how this might be tackled by working with civil society groups and business.
    • Working with countries to address the root causes of such movements

    All of these concerns are present in the current situation of the people on the boats in the Andaman Sea.

    We should with our Co-chair seek to convene a special high-level ad-hoc group under the Bali Process banner to pull together a practical cooperative action plan that would provide assurances to affected destination countries that the burden is not theirs alone.  This group could comprise the five affected countries, Australia as co-chair and the three international agencies UNHCR, IOM and UNODC.

    Such assistance could include:

    In Destination Countries:

    • Assistance with initial screening and identification of people with protection concerns or who are victims of trafficking. A multinational task force (comprising nationals of destination countries as well as other Bali Process countries such as Australia and new Zealand) led by UNHCR to undertake that initial screening,
    • Flying in emergency assistance for shelter and medical support with the agreement of affected countries
    • Creation of safe havens pending final determinations –where the burden of costs is shared.
    • Assistance with local integration in certain circumstances through regional social investment projects in housing, health and education services that benefit the indigenous communities as well as new arrivals.
    • Commitments to resettlement of recognised refugees over a period of time.
    • Greater support for return through assistance in innovative new labour creation projects through social investment projects and micro financing schemes.

    In Source Countries:

    For the Rohingya the solution lies with Myanmar conforming to international norms in relation to the treatment of its citizens.  While Myanmar does not recognize the citizenship of a segment of its population and actively discriminates against them through property, education, movement and marriage laws this situation will continue.  The solutions have to lie in policy changes with the Myanmar government. As Myanmar emerges out of its self-imposed isolation regional institutions such as ASEAN have the opportunity to provide a constructive environment within which Myanmar can address the policy problems of this issue.  Complementary to this an ad hoc group as proposed above could provide practical assistance to ASEAN in mapping out strategies for supporting Myanmar in improving the conditions of Rohingya in Myanmar.

    Bangladesh has been a source of labour migration for decades.   Traffickers prey on the vulnerabilities of people desperate for work where there is none. Overpopulation, corruption, lack of opportunities, international demand for cheap labour all play into the hands of traffickers.  There is no easy solution to this cocktail of misery compounded by a lack of political stability in Bangladesh. While the Bangladesh Government has created a legal and administrative infrastructure to combat trafficking – “The Human Trafficking Deterrence and Suppression Act 2012” and the “National Plan of Action for Combating Human Trafficking for 2012 – 2014” and coming out of these instruments established a number of different strategies covering training, awareness and education as well as greater law enforcement measures, the problem remains overwhelming. According to the 2014 US Department of State Trafficking in Person Report, of 215 cases initiated for prosecution in 2013, a total of fourteen people were convicted of trafficking.  There are no reliable figures on how many people were trafficked in this time but conservative estimates put it in the tens of thousands. Given these most recent developments, a Bali ad-hoc group with Bangladesh as an active participant can continue a process of working with Bangladesh in strengthening the strategies it has in place and working with civil society in the country in providing protections and safe haven for people at risk of being trafficked.

    Smugglers and Traffickers – the raison d’etre of the Bali Process is to combat People Smuggling and Trafficking. Despite many countries in the region enacting laws against people smuggling and trafficking and the imposition of ever-greater penalties for smuggling and trafficking it remains one of the more lucrative and risk free ventures in the region.  Tackling this through laws and awareness campaigns while important is not enough. These loose coalitions of interest groups and syndicates are like a many-headed hydra quickly adapting and changing techniques and operations to prevailing conditions. Again the issue must be tackled at its source – in this instance most likely Bangladesh. The proposed ad hoc group could start the development of a strategy to support Bangladesh and other countries named in the US State Department TIP reports to strengthen its approaches against traffickers and recruiters and the victim of smugglers and traffickers.

    This is a global problem, which will only increase, and we cannot isolate ourselves from it. While for the time being Australia may have stopped the boats – this policy is not sustainable into the longer term. It is in our national and regional security interests to help stabilize populations and to play our part in the region. 

    Arja Keski-Nummi was formerly First Assistant Secretary in charge of refugees in the Department of Immigration and Citizenship.

  • Victoria Rollison. The Future of Australia’s Trade Unions

    A strong trade union movement is crucial to combating growing wealth inequality in the Australian economy.

    When asked in 2014 what Australia ‘had done right’ to defend the economy against the chronic wealth inequality experienced in the US, Nobel Prize winning economist Joseph Stiglitz answered: ‘unions’. He explained that Australia has ‘been able to maintain stronger trade unions than the United States. The absence of any protection for workers, any bargaining power, has had adverse effects in the United States. You [Australia] have a minimum wage of around $15 an hour. We [the US] have a minimum wage of $8 an hour. That pulls down our entire wage structure’.

    Regardless of their comparative strength to unions in the US, Australian unions cannot afford to be complacent about their long term survival.

    Recent data from the Australian Bureau of Statistics, as analysed in The Guardian by Greg Jericho, paint a worrying picture for the Australian trade union movement. Jericho reports that ‘trade union membership in the private sector is now almost one in 10… And in a sign of further strife for the union movement, just one in 20 young workers are in a trade union’. The public sector (39.5%) and education (34.38%) industries have the highest percentage of trade union membership, but as the number of workers in traditionally strong union industries such as manufacturing decline, so too does union membership, particularly amongst male workers. In fact, Jericho points out, whereas men used to be more likely to be union members, women now make up a higher percentage of union members, with 15.9% of female workers members of a union as compared to 14.4% of men. The total percentage of trade union members in the Australian workforce is now 15.1%, and only 13.8% if you include workers in unincorporated enterprises. This compares to 40.5% in 1990.

    Commenting on these figures, former ACTU official, Tim Lyons    , says ‘Australian unions have only a few years to change or die’. Lyons is reported as blaming the ‘historic collapse in union membership’ on ‘an outdated approach that does not work across large parts of the workforce’, and admits the blame is shared by him as a ‘former senior ACTU officer’. He says that too often, unions are seen as only being concerned with their position in the political sphere and that ‘Political campaigning can’t ever be an excuse for not organising’. He goes on to argue that ‘The need for new models of membership and worker participation is long overdue’. Offering a potential way forward, Lyons suggests; ‘Strong, growing unions are ones that help give workers some power over their work and therefore their lives. There are no shortage of workplace issues to organise around, with penalty rates being only the most obvious’. Lyons sees unions’ futures in re-evaluating their value to workers and helping workers organise to help themselves, with less emphasis on political campaigning.

    Amongst their assessments of the declining membership of Australian unions, Jericho and Lyons comment on some more positive news for unions by citing polling released recently in Essential Media’s Essential Report, October 27 2015. The poll asked ‘How important are unions for Australian working people today?’ and found ‘The majority of respondents regarded unions to be important for Australian working people today (62%), whilst 28% believe that they were not important’.

    Ged Kearney, President of the ACTU, responded to the ABS’s declining union membership figures by pointing out that ‘while union membership density is hovering around 15% of workers, more than 60% of Australian workers are employed under conditions that were collectively bargained for’ and ‘Even for workers not covered by collective agreements, they still directly benefit from their broad acceptance. The ubiquitousness of such agreements has led to them becoming the de facto base rate across much of the workforce, rather than the relevant award’.

    The challenge for Australian unions is to translate the belief amongst workers of the importance of the role of unions, and the reality of unions’ benefit to wage growth, into a belief that union membership is a valuable investment for workers’ individual job conditions. A strong, united workers’ trade union movement is the best line of defence, as pointed out by Stiglitz, to defend against growing economic wealth inequality.

    Victoria Rollison is a political blogger, working in marketing and communications. This article first appeared in ‘Equality, a journal of Australian Fabians’.

  • Cavan Hogue. Turkey shoots down Russian aircraft.

    Russia supports the (Shia) Assad regime backed by Iran and others while Turkey supports the Sunni backed bySaudi Arabia, the USA and others. The Turks claim the Shia are terrorists while Russia supports them as allies of the Shia, (i.e. Assad) who support Russian strategic interests.. This is an oversimplified picture but it is relevant to the shooting down of a Russian fighter. The Turks claims it was in Turkish airspace which the Russians deny. Turkey probably overreacted but it is perfectly possible that Russians were attacking anti-Assad forces within Turkey or strayed over the border in pursuit of such forces. Either way the Russians are going to deny that they were to blame and the Turks are going to say it was all Russia’s fault.

    If left to themselves, Russia and Turkey will almost certainly sort it out with much rhetoric and ittle action but the danger is that NATO will get into the act either by itself or at the urging of Turkey. This would not be a good idea. All this does, however, highlight a basic problem in the whole situation. It is not just the bad guys, ISIS, versus the good guys, everyone else. It is a host of conflicting factions and interests which overlap and vary like the bits of a kaleidascope. The more the parties involved insist on a goodies and baddies analysis the less likely it is that a solution will be found.

    Everyone has an interest in opposing ISIS but how do you do this? As has been wisely said, ISIS is not an army or a state but an Ideal. Western countries find it hard to accept that local people see the West as the baddies although a brief foray into history might show them why.

    This situation is unlikely to lead to wider conflict.  US increased training of Ukrainians to “combat Russian aggression” is a greater threat. The behaviour of both Russia and the US takes us back to the Cold War but more accurately should be seen as a contest for influence between two great powers. It has nothing to do with morals or political systems. The common fight against ISIS in particular and terrorism in general creates a bond which puts pressure on all parties to work together at least against ISIS. The question is, what happens next? The Coaition of the Willing opened Pandora’s box. Who will put the lid back on it?

    Cavan Hogue is former Australian Ambassador to USSR and Russia.

  • Rob Nicholls. Ziggy’s stardust: The NBN, net neutrality and competitive neutrality

    The sound of an incumbent lobbying has the grating element of petulant mewling. When the incumbent is a state owned enterprise that is evoking arguments about net neutrality, then it’s time to ask the “cui bono?” or “to whose profit?” question. After all, the term “network neutrality” can be best summed up as a line of argument use by large businesses in their lobbying.

    In this case, it was the chair of the National Broadband Network Company, a business that likes to be known by its lower case initials nbn, that was flying the net neutrality kite. Ziggy Switkowski argued that it might be time to think about who should bear the cost of transporting streaming video from companies such as Netflix, Presto and Stan. Specifically, should the internet service provider (ISP) be able to charge Netflix and others for some of the carriage costs that it incurs? Ziggy also mentioned that access to nbn’s network might be more expensive to smaller ISPs.

    This might be a reasonable question to ask. The speech was on 16 November and attracted comments from the electronic trade press on the day and was covered by Fairfax on 23 November. Of itself, this suggests that nbn wants the question asked. However, the issue has much less to do with net neutrality that it does with the Chair of nbn seeking to change the scope of the company’s business. nbn is constrained by the shareholder ministers’ wishes expressed in a Statement of Expectations and its regulatory constraints which are imposed by law and nbn’s own Special Access Undertaking, that it gave to the ACCC. These assume that retail providers connect to nbn’s network at one or more of the 121 points of interconnection to nbn’s network. In doing so, the retail provider pays a two part tariff reflecting both the connection bit rate and the volume. The volume component is the Connectivity Virtual Circuit (CVC). This is a pure pricing construct, as there is no underlying cost for the CVC.

    The problem for Ziggy is that Australian internet users, in common with internet users all over the world, want to download more content. In doing so, they make the interconnection to nbn’s network look increasingly expensive at no additional cost to nbn. However, Ziggy’s argument on network neutrality harks back to an older era. For a start, each of the major providers of content pay for their own carriage across the Pacific. ISPs can interconnect with Netflix, Google (for YouTube) and Facebook in Sydney or Melbourne. Second, there are extensive content distribution networks to deliver the content closer to the points of interconnection and the use of these networks is paid for by the content providers. Netflix also offers ISPs the option of a no cost cache if they generate a great deal of traffic to a particular area. This Netflix Open Connect Appliance could logically sit at each of nbn’s points of interconnection (on the customer side of the CVC toll point) and Ziggy’s network neutrality issue would be resolved.

    But nbn actually wants to change its operating environment by competing with existing infrastructure providers. The argument that the smallest ISPs cannot afford to connect at every interconnection point sounds like a problem. It is not. The large infrastructure providers offer carriage services to the ISPs on a wholesale basis. However, the effect of this is also to magnify the nbn’s odd CVC pricing arrangements. Instead of letting private sector competitors provide services, the state owned enterprise would rather provide the carriage itself. This has the convenient effect of masking the CVC problem and the inconvenient consequence of lessening competition among private sector actors.

    The concept of competitive neutrality, with its origins in NSW state policy of the late eighties, its codification as a consequence of the Hilmer Review in 1993 and its role as the centrepiece of the proposals of the Harper Review last year, is a critical part of competition policy in Australia. If a state owned enterprise in another country argued that consumer demand was driving its actions in contradiction to the principles of competitive neutrality, Australian businesses would rightly complain. Using the the thin veil of network neutrality to try to justify breaching the principle when the solution to the problem is for nbn to change its pricing approach is not easily forgivable. Perhaps, like the album by David Bowie’s alter ego “Ziggy Stardust”, this line of argument should be released once and not be repeated.

    Dr Rob Nicholls is Lecturer, School of Taxation and Business Law, UNSW Business School.

  • An Open Letter to the Minister for Health concerning Private Health Insurance.

    19 November 2015 

    Hon Sussan Ley M.P.,
    Minister for Health,
    Parliament House,
    ACT 2600

    Dear Minister

    (I have signed this letter on my behalf and also on behalf of the people listed below. I will be posting this ‘open letter’ on my blog early next week.)

    We are pleased to see that you are canvassing community and expert views on private health insurance.

    In discussing the community survey, recently on the ABC Breakfast Program, you said “We support the public system for those who can’t afford private health”.

    That is a long way from the idea of universal mutual support that has underpinned Medicare and public hospital arrangements. It assumes, incorrectly, that private health insurance, and the associated subsidised access to private hospitals, is something Australians see as desirable if only they could afford it.

    As you know, about half of Australians do not hold private health insurance. Many are driven to hold it by the Medicare Levy Surcharge – a coercive instrument that has little to do with choice. You would also be aware that 200 000 taxpayers pay the surcharge, rather than holding private insurance, even though almost all of them would be financially better off taking the cheapest hospital cover.

    For many, the main attraction of public hospitals is not that they are “free”, but rather that they offer a high standard of care. Most importantly the funding system for public hospitals, unlike the funding for private hospitals, does not carry an incentive for over-servicing. There is growing community awareness of the risks of over-diagnosis and of over-servicing.

    Some others, particularly older wealthy people whose income is below the MLS threshold, do the sums and work out that their best bet is to draw on their savings to finance any needed private hospitalisation, secure in the knowledge that if they need acute care they are served by public hospitals. In doing this they miss out on the subsidies, the benefits of which are go to pay for high administrative costs and the cross-subsidies associated with adverse selection. Thanks in part to superannuation, households with people in the 65-74 age range, have on average $500 000 in financial assets.

    It is ironic that, in spite of your Party’s commitment to self-reliance, those who pay for their own private hospitalisation, or who pay their own dental bills, receive no support, while those who hand over responsibility to insurance corporations receive a 30 per cent subsidy or a generous tax incentive in the form of exemption from the MLS.

    Then there are those community-minded people who value the idea of sharing their health care expenses with other Australians. They are morally repulsed by the idea of being corralled into the “gated community” of private health insurance. Also some people, aware of the way “charity” systems inevitably degenerate, see it as important that people with means who hold political influence have a stake in using and maintaining a high standard public hospital system.

    You, and your fellow health ministers in the states and territories, fund and operate an excellent public hospital system. We hope you take pride in a public service that serves all Australians so well, and do not let it degenerate into a charity system.  A way to prevent such degeneration would be to remove private hospitals’ de facto dependence on private insurance, and to bring them into the same funding arrangements as public hospitals, thus allowing them to provide the same high-standard of integrated care as public hospitals, allowing for remuneration models other than individual fee-for-service, and abolishing any suggestion that Australia has two health care systems – one for the affluent and one for those who are less fortunate.

    Yours sincerely,

    John Menadue

    Kerry Goulston, Emeritus Professor, Medicine, USyd
    Ian McAuley, Adjunct Lecturer, Canberra University
    Jennifer Doggett, Health Consultant,
    Stephen Leeder, Emeritus Professor of Public Health and Community Medicine, USyd.
    Karen Willis, Associate Dean, Learning & Teaching, Faculty of Health Sciences, ACU
    Arthur Chesterfield-Evans, Medical Practitioner and anti-tobacco activist
    Sebastian Rosenberg, Senior Lecturer, Brain and Mind Centre, USYD
    Jill White, Professor of Nursing and Midwifery, USYD
    John Dwyer, Emeritus Professor of Medicine, UNSW
    Fiona Armstrong, Executive Director, Climate and Health Alliance
    Tony McBride, President, Australian Health Care Reform Alliance
    Tim Woodruff, Vice President, Doctors’ Reform Society

  • John Menadue. Minimising IS will take a while.

    We have had a lot of apocalyptic talk about IS – we are at war, it is a death cult, it threatens civilisation. Unfortunately these exaggerations don’t help a measured and holistic response. These exaggerations play into the hands of terrorists who hope for our over-reaction and the promotion of fear.

    We know from experience that terrorism ebbs and flows over the years in intensity. We must be ready for the long haul.

    There is no doubt that IS is a threat but we need to consider carefully some important facts and to put the matter in perspective.

    One important fact is that climate change is really an existential threat and vastly more serious than the terrorist threat.

    Many politicians seize opportunities to exploit fear. It is noteworthy that those who decry government spending in so many areas are the first to propose substantial increases in spending for intelligence and police agencies. Terrorism is good politics for conservative politicians although Malcolm Turnbull seems more sensible than most.

    The Paris attack was one of many. A larger number of people were killed in the IS bombing of a Russian aircraft over Sinai. Only a few days before the Paris attacks, there were large numbers killed in Lebanon. The most violent of all is probably Boko Haram which has conducted mass abductions and killed over 17,000 people since 2009 in Africa. Columnist David Brooks, reports in the New York Times that since 1984 an estimated 1.5 million Christians have been killed by Islamic terrorists in Sudan. There is also not much doubt that in the birthplace of Christianity, the future of Christian communities is extremely bleak.

    As an important news hub, Paris attracts a great deal of media attention, but the atrocities have been much worse elsewhere. We do have a ‘white man’s media’ in Australia. Just recall the almost never-ending coverage of the bombings of the Boston marathon.

    It is also no consolation to remind ourselves that the threat of terrorism in Australia is small compared with the other threats we face in daily life.

    The IS threat has grown out of centuries of Western involvement and humiliation of the people of the Middle East. That involvement was accelerated by the collapse of the Ottoman Empire after WWI. From that time on Western countries have occupied, plundered and exploited the resources and the people of the Middle East. The most recent calamity was the invasion of Iraq by the US, the UK and ourselves. That invasion has cost trillions of dollars and hundreds of thousands of lives. Our intervention, which our media choses to forget, sowed the seeds of the bitter harvest that we are now reaping.

    With a history of ethnic, sectarian and political conflict, our participation in the invasion of Iraq triggered so much of the catastrophe we face today.

    And we are so unfamiliar with the determination of IS fighters. They see themselves as martyrs and the more they sacrifice and die, the more they feel justified and rewarded. Dying is seen as desirable.

    There must be a political settlement and hopefully the US and Russia can support a transitional government that will reflect the interests of all the people in the region and most importantly of all, reconcile Shia and Sunni antagonists. The Iraq war effectively disenfranchised tens of millions of Sunnis in the region. We may be called to support a peace-keeping operation. We should be willing to do that in the right circumstances.

    The powers of the regional patrons, Saudi Arabia and Iran, must be encouraged to find an accommodation and a cease-fire.

    It is also unlikely that there can be peace in the Middle East without a settlement between the Israelis and the Palestinians.

    On the domestic front, we need more proactive domestic programs to focus young Muslims away from terrorist possibilities. Muslim leaders and elders are essential in this process. They have not done well.

    Clearly, our intelligence and police agencies are keys in helping to keep us safe. They have received large increases in funding. Their powers have been increased. But what we saw in the Lindt Café siege points to the need for much improved performance and supervision.

    We will have to learn to live with terrorism for a while. Picking soft targets is in the view of terrorists a legitimate and necessary response to overwhelming military power. Too often IS and other terrorists succeed in provoking an over-reaction which helps the terrorist cause. The French reaction to the attacks by dramatically increasing bombing in Syria is likely to be counter-productive. In frustration the French took the IS bait.

    Our response needs to be holistic and the most important response must be political, backed possibly by some UN military intervention, improved performance by our intelligence agencies and police, and active participation by the elders and leaders in our Muslim community.

     

  • Royal Commissions for some.

    The Abbott government established a Royal Commission to harass trade unions and in the process to damage the ALP. But what we are hearing in this Royal Commission is really small beer by some union hacks. It is small scale compared with the massive tax avoidance by multinational companies in Australia that is being revealed.

    Yet the government has refused to establish a Royal Commission to examine the activities of these multinationals who are depriving Australia of billions of dollars of tax revenue. A Royal Commission would be very useful to flush out this very serious national problem.

    The government has also refused to establish a Royal Commission into large-scale financial advising scandals by the Commonwealth Bank and other financial institutions.

    In the SMH on November 18, Michael West has drawn attention to the government’s attempts to prevent exposure of activities by high income earners. Michael West said

    ‘last week, when two amendments proposed by the Senate to the government’s multinational tax reform bill were unceremoniously dumped by the government the next day. … So determined was the government to help billionaires and multinationals conceal their tax affairs that it killed its own bill. The first amendment, forcing multinationals to file proper (General Purpose) financial statements was to have thrown some light on their inter-company loans and other dealings with offshore associates designed to rip millions out before tax could be paid. The second was the preposterous “kidnapping” amendment which would have ensured greater transparency by billionaires. Both thrown out;  the whole bill nixed, presumably after some 11th hour desperate lobbying by powerful vested interests.’

    John Menadue.

    For Michael West’s full article see link below:

    http://www.smh.com.au/business/comment-and-analysis/the-multinationals-rhetoric-isnt-reassuring-on-tricky-tax-affairs-20151118-gl25c3.html

  • Lesley Russell   Too high: the impact of specialists’ fees on patients’ health

    In today’s health care debates around the centrality of primary care, moving towards patient-centred medical homes, improving care coordination for people with chronic illnesses and whether private health insurance provides value for money, there is one element that is almost always missing – the role and the costs of specialist services.

    In 2014 over 28 million specialist services were billed to Medicare and 21 million of these were for out-of-hospital services. Only 30% of these services were bulk billed, and the average out-of-pocket cost for the remaining 70% of services was $70.89. However gaps of several hundred dollars are not uncommon.

    Specialist fees are the main driver of Medicare out-of-pocket costs and the main reason why people access the various Medicare safety nets (Extended Medicare Safety Net, the Original Medicare Safety Net and the Greatest Permissible Gap measure).

    The Government has moved to make changes to the Medicare safety nets in the name of ‘simplification’ and the Health Insurance Amendment (Safety Net) Bill 2015 is currently before the Senate where it has been sent to the Community Affairs Committee for review.

    Reforms to the Medicare safety nets are long overdue. There is considerable evidence that the current arrangements are inequitable, do not benefit those with the greatest need, and continue to be inflationary, despite legislative tweeks. This has led to increasing economic pressures on patients from their out-of-pocket costs with consequences for their health outcomes and quality of life. There are also pressures on hospital budgets from preventable admissions that can result when patients skip specialist appointments and fail to comply with treatment regimes because of cost.

    As federal parliament considers the new safety net legislation, it is crucial to ensure that this does not have the unintended consequences that were inherent in the Extended Medicare Safety Net (EMSN). One such consequence was that the EMSN actually increased the ability of specialists to charge higher fees, particularly in areas such as obstetrics and assisted-reproductive technology services. In 2009 it was estimated that for every dollar the government spent on the safety net, only 57 cents went towards reducing patients’ costs and the remainder went towards increased doctor fees.

    Preventing such problems will require an informed study of the impact of specialist fees and how specialists are likely to respond to efforts to limit reimbursements to patients of fees that are in excess of the Medicare Benefits Schedule (MBS). As it stands there is very little publicly available information in this area. Considerable work was done on a relative value study in the 1990s (regrettably with no outcomes) and the specialist medical colleges presumably have data from their members, but the Department of Health has shown no inclination to analyse their data or to make it available to academic centres for such work.

    Medicare data for the June quarter 2015 show the following:

    • The average bilk billing rate for specialists (for services in and out of hospital) is 30.2% although this varies dramatically by speciality.
    • The average fee observance for out of hospital services is slightly higher at 43.4%.
    • The average patient contribution for services that are provided out of hospital and are not bulk billed is $70.89. This varies considerably by state and territory – it is lowest in South Australia ($53.94) and highest in the Northern Territory ($89.38).

    Over the past decade there have been some interesting changes in these figures that tell a story of policy and community pressures and influences.

    Although the average bulk billing rate for specialist services delivered out of hospital has barely changed, the average out-of-pocket cost has more than doubled (from $32.66 to $70.89). For individual specialties there have been some dramatic changes. For example, the bulk billing rate for obstetrics, currently 51.5%, was only 21.8% in the June quarter of 2005. We can assume that the increase in bulk billing is due to the increases in Medicare reimbursements that were made as part of an effort to tackling the inappropriate use of the ESMN. But the bad news is that those obstetricians who don’t bulk bill have continued to increase their fees and the patient’s average contribution has risen from $51.75 in 2005 to $247.79 today. Moreover, my previous work on Medicare obstetric costs highlights that when loophole is closed, obstetricians look to shift their costs around between capped and uncapped and outpatient and inpatient billing items.

    Specialists who work in radiotherapy and nuclear medicine have also changed their billing behaviours over the past decade. While bulk billing rates have increased impressively from 13.3% in 2005 to 68.5 % in June 2015, presumably in response to government agreements and legislation, average out-of-pocket costs for patients who are not bulk billed have more than doubled, from $16.33 to $38.74.

    It’s important to think what the growing costs to see a specialist mean for patients such as older Australian with multiple chronic illnesses. A recent study shows 27% of older Australian reported having at least three chronic diseases, with high blood pressure, arthritis and cancer as the most prevalent diseases. Such patients may have a very competent bulk-billing GP coordinating their care, but in addition to the cost of specialist consultations there will be costs for diagnostic tests and monitoring, prescription medicines, over-the-counter medicines, and supplies for conditions such as diabetes, colostomies and incontinence.

    National Seniors Australia found that older Australians with five or more chronic conditions spend $3528 per year on out-of-pocket health care costs. Small wonder then that approximately 10% of adults referred to a specialist delay or do not keep their appointment because of cost. This proportion rises to over 12% in the most socioeconomically disadvantaged fifth of the population. The current freeze on Medicare rebates to doctors will only aggravate the growth in gap fees. The gap between what Medicare pays and the AMA-recommended fee for MBS item 104 (initial referral to a specialist) is now $97.72; the new safety net will ignore $40 of this.

    There are no Medicare incentives to encourage specialists to bulk bill. Because poorer Australians can’t afford to pay the gap fees to reach the safety net thresholds, less than 4% of EMSN benefits go to the most socioeconomically disadvantaged 20% of the population while over 50% of benefits go to the most advantaged 20% of Australians. This exemplifies the inverse care law – and poor public policy – as it is the poor who are most likely to suffer ill health, who have the lowest discretionary income, and who are most in need of protection from out-of-pocket costs.

    The government’s “simplification” of safety net arrangements, eliminates the confusion of multiple Medicare safety nets and caps on reimbursement for selected items and ostensibly will make it easier for people to qualify for support if they have high out-of-pocket expenses. But this comes at a cost for patients – the new safety net actually provides patients with less financial protection against high out-of-pocket costs – and a saving for government.

    It is estimated that new threshold levels will mean an additional 60,000 people will qualify each year for the Medicare safety net. The big question is whether the reforms will lead to a change in the type of people who qualify for safety net benefits and that is not easily answered. In testimony to the Senate Community Affairs Committee, Dr Kees Van Gool indicated that the answer depends on how many concession card families experience annual costs between $400 and $638 how many general families have out-of-pocket costs between $1,000 and $2,000 because these are the people who stand to benefit under the new arrangements. However he noted that concession card status is a poor proxy for household income. Capping the amount of out-of-pocket costs that contribute to the safety net threshold will have further implications for how many and what type of families qualify for the new benefits.

    This reform may invoke a number of behavioural changes by both doctors and patients seeking to derive maximum benefits from the safety net. There are clearly greater incentives for patients to seek out doctors who charge less than 150% of the MBS fee and this, in turn, may invoke price competition amongst doctors. Doctors may act to redistribute their fees across an episode of are, as obstetricians have done, or increase the volume of services they offer. The Minister for Health has indicated that she wants to prevent the inappropriate provision of complicated medical services outside of hospitals, although it is not clear how the safety net legislation will address this.

    In an era of budget restraint, what can be done to address the impact of rising specialists’ fees on the federal and individuals’ budgets in ways that do not undermine the business needs of the medical profession? In a paper written earlier this year, Jennifer Doggett and I proposed greater transparency around specialists’ outpatient fees and the out-of-pocket costs to the patient. This approach was also put forward by Dr van Gool in his testimony to the Senate Community Affairs Committee.

    Anecdotal evidence indicates a wide range of fees charged, with some specialists charging dramatically more than the Australian Medical Association recommended fee (which is itself higher than the MBS reimbursement). However there is no evidence that specialists charging the highest fees deliver the best outcomes and patients and referring GPs might make different choices about specialist care if they knew the costs involved. At the very least the major outliers should be named and shamed. It is also important that consumers are provided with comprehensive information about their health care choices and are made aware of options, such as public outpatient clinics, where they can receive specialist services at no (or lower) cost.

    There has been some support for this approach from the medical profession, perhaps driven to action by the fact that a few greedy colleagues are making life difficult for those doctors who bulk bill or have only a small gap fee. In July 2014, the Royal Australasian College of Surgeons spoke out against excessive fees, saying that the College “is highly concerned at the amount of reported out-of-pocket costs being incurred by patients in the health-care sector“ and further stating that the College “believes that extortionate fees, where they are manifestly excessive and bear little if any relationship to utilisation of skills, time or resources, are exploitative and unethical. As such, they are in breach of the College’s Code of Conduct and will be dealt with by the College”.

    An information sheet on the College website strongly supports full disclosure and transparency of fees as early as possible in the patient-doctor relationship, advocates that patients understand all available treatment options, and encourages concerned patients to seek second opinions on recommended treatments and the fees to be charged.

    Just recently, the Urological Society of Australia and New Zealand has been prompted by a study showing that out-of-pocket costs for prostate cancer can be in excess of $30,000 (this includes not just specialists fees but private hospital services, medicines and other costs) to talk to its members about the perils of extortionist fees and of not telling men about public health options for treatment.

    Most importantly, the issue of out-of-pocket costs for patients and the impact these have on health outcomes and costs elsewhere in the health care system and the federal budget needs to be addressed across a range of issues currently under consideration – not just Medicare safety nets, but the Medicare Benefits Schedule review, the mental health and primary care reforms, and welfare supports. Many people will predictably always have trouble meeting their health care costs, and the solutions will not always lie within the purview of the Health portfolio.

    There are branches within the Department of Health that deal with the medical profession, the pharmaceutical industry, and private health insurers; it’s time for a branch with specific responsibilities for consumers’ and patients’ needs. It’s an important part of the effective, efficient and equitable delivery of health care services.

    Dr Lesley Russell is an Adjunct Associate Professor at the Menzies Centre for Health Policy, University of Sydney.

     

     

  • Prince Charles and John Kerr – an odd pair

    Prince Charles has been mobbed by regal enthusiasts in his recent visit to Australia.

    Opinion polls tell us a different story. The latest poll conducted by Essential Research tells us that if Prince Charles became King Charles, 51% would prefer a republic. Only 27% would support King Charles being our head of state.

    There seems to be a wide acceptance that the accession of King Charles to the British throne will give a real boost to republicanism in Australia.

    Prince Charles has some form in intervening in Australian public affairs. Professor Jenny Hocking, in her recent book ‘The Dismissal Dossier’ reveals some worrying features of his earlier relationship with John Kerr in the dismissal of Gough Whitlam in 1975. Both John Kerr and Prince Charles were obviously worried about their future job prospects.

    In her book, Jenny Hocking says

    “Kerr had spoken to Prince Charles personally on more than one occasion, as early as August 1975 canvassing the dismissal of Whitlam. … (In his own papers). Kerr recounts Prince Charles’ solicitous response to the Governor General’s concern for his own possible recall by Whitlam, should Whitlam hear that Kerr was even contemplating this: ‘but surely Sir John, the Queen should not have to accept advice that you should be recalled at the very time should this happen when you were considering having to dismiss the government.’ 

    What a meddler!

    Jenny Hocking writes further ‘In the heat of early spring 1975 in the New Guinea highlands, the Governor General, Sir John Kerr sidled up to Prince Charles and suggested a quiet chat. Their topic? The possible dismissal of the Prime Minister whose guest at the Papua New Guinea Independence Day celebrations they both were. Kerr’s prime concern in confiding this exceptional matter of state to the Prince was, as ever, his own job security. … In Kerr’s own mind he and Prince Charles went way back – to at least the previous year when Kerr had been blessed with a startlingly frank discussion about the Prince’s endless wait to ascend to the throne. His royal ennui, a sort of privileged loose end that the Governor General had been only too willing to help tie up. … John Kerr also discussed with Prince Charles the suggestion that he might one day come to Australia as Governor General.’ 

    Gough Whitlam knew nothing about this secret discussion concerning his own dismissal but John Kerr did suggest to him that he thought it would be a good idea if the Commonwealth Government purchased a large rural holding with appropriate homestead, servants, upkeep and furnishings, to encourage the Prince of Wales to make more regular and longer trips to Australia. The poor fellow did not have enough to do to keep himself occupied. Gough Whitlam rejected the suggestion.

    Prince Charles seemed only too pleased to let John Kerr ingratiate himself. The reason was clear; John Kerr was looking for friendship and support wherever he could. Prince Charles allowed himself to be drawn into the collaboration to bring down an Australian Government.

    This odd pair was both worried about their own future employment prospects.

    Prince Charles was in this country at our expense for several days, but no journalist bothered to ask him about his role in the dismissal forty years ago.

    We still doff our cap to our betters in London.

  • John Tulloh. Europe: The political impact of a dead Syrian.

    Ahmed al Mohammad may have a greater impact on Europe than his evil terrorist deeds did in Paris last week. It appears he was a Syrian asylum-seeker who, according to Greek records, passed through Greece last month and made his way through the Balkans to join his cohorts in France. He satisfied whatever checks there were and was sent on his way with tens of thousands of others. We will never know what happened after then because he died in the mayhem.

    With the number of asylum-seekers pouring into Europe numbering 7000 a day, many will be wondering how many other fifth columnists like Al Mohammad are in their midst. It will ‘fuel an emerging pan-European backlash against the influx of hundreds of thousands of refugees from Syria, Iraq, Afghanistan and elsewhere, many of them military-age Moslem males’, says David Kilcullen, the counter-insurgency and intelligence specialist.

    It also will be further fodder for European countries wanting to justify closing their borders or putting up razor wire or simply refusing to take in refugees. They will find willing allies in the form of the growing influence of right-wing parties which have prospered with their anti-immigration rhetoric.

    Across the Atlantic, the new Speaker of the U.S. House of Representatives, Paul Ryan, has called for a total suspension of the program to accept Syrian refugees.

    U.S. officials quoted by the Wall Street Journal said the Paris attacks ‘could reinforce perceptions of many Europeans that the refugee flows are bringing in terrorists. It is going to feed a backlash, it is going to feed into concerns people have over refugees’. Even the alleged leader of the attacks boasted in the Islamic State’s journal last February of having travelled through Europe unnoticed.

    A recent international Gallup poll quoted by the Washington Post said 52% of Europeans wanted immigration decreased. That was more than any other region in the world and twice as much as Australia. Understandably, this has become a matter of growing concern among the European electorate. Photos of hundreds of strangers from the Middle East and beyond snaking their way across European fields must cause alarm for their very anonymity.

    While the majority will be refugees and others will be economic opportunists, the law of averages says jihadists will have melted in among the throng. The refugees also will include young men who, failing to find the prosperity they think awaits them, will become disaffected and become easy prey for Islamic extremists just as the Brussels-based terrorists who brought carnage to Paris last week were.

    For genuine refugees, their plight has become even harder with the inevitable growing suspicion of anyone connected with Islam. The new Polish government has reneged on its predecessor’s EU promise to take in asylum-seekers. Others in East Europe are beginning to say ‘not in our back yard’. Scandinavia, a long-time welcome mat for people in distress, has seen a rise of anti-immigration electoral sentiment in all four of its countries. Even in Switzerland, which is barely affected, voters gave a bigger tick than usual to right-wing candidates.

    Europe faces a huge dilemma. Firstly, how to absorb the current wave of asylum-seekers and how to weed out potential jihadists. Secondly, whether to revoke the Schengen Agreement allowing free movement within EU members. Thirdly, how to handle the anticipated next wave of tens of thousands of asylum-seekers and refugees seeking refuge, safety and prosperity.

    A few days ago EU leaders gathered in Malta to discuss financial incentives to African countries in return for curbing the exodus of their citizens to attempt the Mediterranean crossing to Europe. The talks ended in disarray. The EU wants Turkey to do more to stop the flow through there. But Turkey in return wants more than the EU is prepared to concede. The U.S. and Russia are scrambling to set up negotiations early in the new year to reach a political settlement in Syria, the source of the majority of the refugees. Given the disparate nature of the different Syrian parties involved and the obduracy of the Assad regime, the chances of success must be remote.

    Even Islamic State is trying to help with a propaganda blitz to discourage refugees fleeing to Europe, warning of the debauched hell which awaits them. It is really concerned about the exodus of professionals who are desperately needed to help the self-styled caliphate survive.

    If anything, EU complacency has much to answer for. Its border controls have been almost non-existent. The EU partnership has amounted to little when it counts the most with many members willingly pushing refugees into other countries instead of processing them. Intelligence has been deficient. Some of its members are running for cover rather than sharing the burden of the mass movement of the greatest number of people in the EU’s history. It is as if EU members regarded it all as another member’s problem.

    For refugees, there is hope. Europe’s birth rate is shrinking dramatically. This and the flight of young people from countries with high unemployment mean immigrants are wanted like never before. According to the Guardian, Europe desperately needs more young people to run its health services, populate its rural areas and look after its elderly because, increasingly, its societies are no longer self-sustaining.

    Whatever happens, the social make-up of Europe is irrevocably changed.

    FOOTNOTE. France is no stranger to terrorism and bloodshed. Back in the early ‘60s, French settlers opposed to Algerian independence inflicted a wave of bombings, assassinations – including several attempts on President de Gaulle’s life – and even derailed a high-speed express train, killing 28. A pro-independence organisation was just as active with its bombings. When 30,000 supporters demonstrated on the streets of Paris, the police opened fire and, officially, 40 people were killed whereas estimates have put the figure as high as 200.

     

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

     

     

     

     

     

     

     

  • Bruce Wearne. Politics for Government or Politics for Politics?

    At the election of December 1975, the Australian electorate confirmed the sacking of the Whitlam Government. It was an implicit “thumbs up!” to Malcolm Fraser and those on his “side” of politics. Whatever the actual cause of the constitutional crisis that engulfed Australian politics, the result of that election meant an implicit electoral endorsement of the conduct of Malcolm Fraser and his “side” in that crisis. These were the parliamentarians who were elected to get us beyond the political instability they had engineered.

    Well may we remember “It’s time!” Those events of 40 years ago continue to resonate today. The Liberal-Country Party’s theme for that poll was: “Turn on the lights!”? But recent publications indicate that the country been kept in the dark about what went on. There is at least one other “dark secret” that needs to be brought into the light. It concerns the character of the Liberal Party itself.

    By electing Malcolm Fraser’s Coalition Government we were supposedly responding to the bright light that was to be shone on all the dark dealings of Labor’s many-sided economic incompetence. But since then responsibility for Parliamentary budget deficits and fiscal blow-outs have been shared on both sides. And the alert historian of Australian politics will also ask: how can you blame a Government for fiscal mismanagement when they have to live with persistent threats to block supply bills?

    But what was this “other crisis” of those years? After December 1972, Labor controlled the lower house Treasury Benches for the first time in 23 years. We might have expected a “crisis” of sorts among the Labor parliamentarians who must have been used to being in Opposition. Even so, we did not expect that their time in Government would end as it did.

    The Australian people voted for a Whitlam Labor Government not just once (December 1972) but twice (May 1974). After 23 years in Government the members of the Liberal-Country Party coalition were plunged into a deep crisis of their own. They knew how to apply their own party rules and governing principles to their political vocation as Her Majesty’s Government but how were they to conduct themselves as Her Loyal Opposition? It is sad to say the Liberal Party has never really learned to do so. Since losing in 1972 they have persistently seen public government in terms of their side of politics “winning”. When they are Opposition they are “losers”. Bypassing the view of parliamentary democracy enshrined in their own party constitution, they have, like Lemmings, continued to miss the opportunity to form a new style of Opposition, an Opposition for the sake of Government. Such a contribution could have been of great benefit to our parliamentary democracy. But sadly it has never emerged.

    The bumper stickers of the time said of Whitlam “He’s had his chance and he’s stuffed it!” But in truth they come back to stick it on the Liberal-Country Party coalition that failed then, and has continued to do so. Under Snedden and Fraser they reduced their parliamentary task to one political end: winning the election next time. Opposition then meant pragmatic strategic obstructionism.

    There were senior Liberals like John Grey Gorton and Don Chipp who were disgusted with the direction that the parliamentary party had usurped in the party, quite in opposition to what was implied in their party’s constitution. That then was the other “crisis”, the one that was not examined by “turning on the lights”. This is the other persistent crisis that the Australian electorate needs to hear about and discuss.

    The December 1975 election meant that the Australian people effectively endorsed this change in the Liberal Party’s conception of itself. Why should we worry? And those remaining “loyal” to the now “winning is grinning Liberal Party” also thought they need not worry and so they continued on. It would henceforth be a party in which the accountability of its parliamentary wing to the membership would be measured in terms of whether the party was winning elections. No longer was it an accountability to the party’s constitution concerning the way in which Parliamentary democracy requires principled politics, in their case the politics of Liberal principles. No. Now it was not so much a matter of publicly debating policies based on the party’s principles; victory in policy debates could only make sense if the party was either retaining its hold on the Treasury Benches, or moving towards doing so at the next election.

    And this change in the Liberal “side’s” view of its parliamentary contribution has been a decisive factor ever since in our form of parliamentary democracy. It tumbled out with the threat to block supply in May 1974. Since then the rest, as they say, is history, public relations history. The Liberal Party is a political firm for its elected candidates; the idea that it is a party in which elected members are accountable to its rank-and-file to articulate and promote a comprehensive view of public governance according to its constitution’s principles has long gone. This is the pragmatic liberalism that the country has had to endure since 1974.

    Recently we have read of the efforts of the new Prime Minister, Malcolm Turnbull, to hasten publication of the private letters of Sir John Kerr to the Queen. What is his concern? Does this canny politician have some new development in mind for his side of politics? Recent disclosures about the deceitful, if not seditious, manoeuvring of powerful politicians and jurists in bringing about the downfall of the Labor Government could not have escaped his notice.

    But then, Mr. Turnbull has also distanced himself from the actions of Malcolm Fraser in 1975. Could he have concluded that something in the underlying ethical foundations of the Liberal Party has cracked beyond repair, something that the artificial party unity he has long supported simply cannot overcome? Is his attempt to have Sir John Kerr’s correspondence with the Queen made public his attempt to stay ahead of the game?

    So the recent published revelations about the 1975 “crisis” can also help us see how the internal crisis in the Liberal Party in the 1974-1975 years was only seemingly resolved by the election of the Fraser Government. The subsequent 40 years have continued this revolution in the Liberal Party and, as well, we do have a Federal Parliament that is now dominated by contending pragmatic political machines and their aligned public relations firms, and barely a genuine political party is left.

    Obviously there is much more to discuss about restoring political parties to our parliamentary democracy. The question is not just a question for the PM. It is this: is it going to be politics for government or politics for politics? I cannot believe that such a conundrum has not at some point crossed Mr. Turnbull’s wide-ranging Liberal mind. Could he be about to embark upon a “New Liberal Party”, in order to return his side of politics to the ranks of genuine political parties rather than these self-perpetuating electoral machines? Are we going to see Mr. Turnbull try further, from his “side” of politics, to avoid complicity in the substantial political disgrace that occurred with the sacking of the Whitlam Government on November 11th 1975?

     

     

    Bruce Wearne, a PhD in sociology (LaTrobe 1987), lives quietly at Point Lonsdale, in order to contribute to political debate, while also advising students and conversing with the people he meets while walking along the coast.

  • John Menadue. Why Cayman Islands?

    I must confess I was surprised to learn that Malcolm Turnbull uses a hedge fund domiciled in the Cayman Islands. The story has come and gone without much examination.

    Conflicts of interest

    In the SMH of 24/25 October 2015, the veteran journalist Alan Ramsey highlighted what Malcolm Turnbull told the parliament about his hedge fund in the Cayman Islands. Malcolm Turnbull had said

    “In order to avoid conflicts of interest [in Australia] almost all of my and my wife’s investments – and they’re all disclosed – are in overseas managed funds, which means that I and Lucy have no say in which individual companies those funds invest it.” 

    Alan Ramsey went on to comment

    “Nothing Turnbull said in his defence … tells us why it is not possible for any minister, state or federal, any premier, or any prime minister, to make personal or family investments in Australian projects, companies or developments of any kind for fear of breaching conflict of interest issues. Yet surely, you’d think, this would not be beyond the wit of lawyers and financial advisers, even parliamentarians to overcome.”

    Deferring tax

    In this blog on 12 November “Vexed issues of ethics”, Professor John Taylor, Head of School of Taxation in Business Law in the Australian School of Business at UNSW, examines the legal and ethical questions of investing in hedge funds in tax havens. He says

    “In the case of an investment via a tax transparent US hedge fund, the capital gain will be subject to Australian tax as soon as the investments are sold. But in the case of the investment via the Cayman Islands hedge fund, the capital gain would only be taxed in Australia when the fund makes a distribution. The time value on the money will mean the real cost of the tax the investor pays on the capital gain falls as long as the fund defers distribution to the investor. Over time in real terms, less Australian tax will be paid. Admittedly the investor will not have benefited from receiving the distribution in that time and will not have control of the time of distribution. But an investor can use the appreciation in value of the investment as security against other financial transactions. … So deferring Australian tax through the use of foreign hedge funds is currently not caught under Australian law. … 

    “If everyone did this, there would be seriously adverse revenue consequences for Australia. But of course, not everyone can. Investing in Cayman Islands hedge funds is largely the preserve of the financially astute or those with the resources to seek advice from the financially astute.” 

    There is still a great deal unexplained about this Cayman Islands episode. Just imagine the media blitz that we would have seen if Kevin Rudd, Julia Gillard or Bill Shorten used a hedge fund domiciled in the Cayman Islands.

  • Jon Stanford. The Pathway to Two Degrees: Should we ban New Coal Mines?

    Leading up to this month’s major climate change conference in Paris, there has been a welcome increase worldwide in the commitment to address climate change generally and, in particular, to restrict global warming to two degrees Celsius. Although they are still insufficient to meet the two degree target, the initial national commitments to be taken to the conference are, perhaps, more ambitious than might have been expected a couple of years ago.

    One of the side effects of this increased ambition has been a growing focus on the role of coal in increasing carbon emissions. In particular, there has been a developing sentiment in favour of banning investment in new and expanded coalmines in Australia. The “keep it in the ground” campaign started mainly as a green activist movement, although supported by respected media outlets such as The Guardian. Yet the campaign appeared to be more ideological and emotional than one that would attract the support of rational policy analysts. More recently, however, the campaign has been endorsed in an open letter to world leaders by 60 eminent Australians, including two highly regarded economists, Bernie Fraser, a former Secretary of the Treasury and Governor of the Reserve Bank, and Professor John Quiggin of the University of Queensland.

    In this article, I address the following issues:

    • The main findings of the recently published World Energy Outlook by the International Energy Agency (IEA), including the projected use of coal in generating electricity out to 2040 and how this would change if the world was on a two degree pathway
    • In this context, whether prohibiting new coal mines would be an efficient or effective means of reducing carbon emissions globally so as to meet climate change objectives.

    IEA’s World Energy Outlook, 2015[1] 

    In its latest projection of global energy use, the IEA has reduced its previous estimates of the role that coal is likely to play in future electricity generation.[2] Its main scenario is based on an assumption that the world will take action along the lines of the national commitments for the Paris summit. It has been suggested that this would put the world on a pathway to stabilising the global temperature increase at around 2.7 degrees Celsius. While this outcome would fail to meet the two-degree target by a significant margin, this outcome remains perhaps the most reasonable assumption at this stage.

    In analysing pathways to meeting emissions targets, it needs to be appreciated at the outset that we are not dealing with a slow growing market. The IEA estimates that global demand for electricity will increase by 70 per cent between 2013 and 2040.

    The IEA’s main scenario takes account of the Paris commitments to counter climate change. While negotiations at the summit may produce a slightly more ambitious result in terms of pledges, on the other side of the coin it is likely that over time some countries will fall short of meeting their commitments. On that basis, it seems likely that this scenario is based on assumptions that are realistic and may be closest to the eventual outcome.

    Under this scenario, fossil fuels would still supply over half of the world’s electricity in 2040, with the main fuel type shares being:

    • Coal – 30%
    • Gas – 23%
    • Nuclear – 12%
    • Hydro – 16%
    • Wind and Solar PV – <10%

    While coal’s global share of the power generation market would fall substantially under this scenario from 41 per cent in 2013, its use in absolute terms would increase by nearly 25 per cent in a much larger market. ‘Conventional’ fuels capable of providing continuous power (coal, gas, nuclear and hydro) would account for over 80 per cent of supply. Under this scenario, the two technologies much favoured by some green groups, wind and solar PV, together would account for less than ten per cent of global power supply in 2040.

    The IEA also produced a more optimistic scenario of fuel shares in electricity generation in 2040 should the world follow a pathway consistent with achieving the two-degree target. This would result in the following fuel shares in power generation in 2040:

    • Coal – 12%
    • Gas – 16%
    • Nuclear – 18%
    • Hydro – 20%
    • Wind and Solar PV – >30%

    Depending on which scenario you believe, therefore, coal is still likely to play a considerab;e role in power generation in 2040. Much of the coal combustion is projected to occur in Asia, particularly in India. Of course, much depends on technological changes and their relative costs, which are extremely difficult to predict. If there were a breakthrough in the commercial applicability of carbon capture and storage (CCS), for example, coal could claim a much greater share of future carbon budgets. The same argument applies to renewables, where the development of practical long-term storage solutions is perhaps potentially greater than a CCS breakthrough. Also, the potential of small modular nuclear reactors appears promising, with considerable development work occurring in both the US and China.

    An important conclusion from the IEA’s analysis is that even under the optimistic outcome of the nations of the world agreeing to take actions to limit global warming to two degrees, coal could still play a significant role in power generation in 2040. If the outcome falls short of this, as seems likely, coal’s future role will be commensurately greater.

    Would banning new coal mines provide an efficient policy approach?

    The proposal to ban investment in new and expanded coalmines signifies that substantial public costs, or negative externalities, are associated with the use of coal. There is little doubt that the combustion of coal to produce electricity has made the greatest contribution to increasing carbon concentrations in the atmosphere. Therefore, the most prominent miscreant in bringing about climate change is clear and, except for a few deniers and “sceptics”, overwhelmingly accepted by policy makers globally. Unless the resulting emissions can be captured and stored, there is a substantial negative externality associated with the combustion of coal.

    In light of this clear conclusion, the question addressed in this section is how the issue should be addressed in policy terms so as to bring about the most efficient outcome. One widely canvassed approach in recent times is to ban investment in new coalmines and in expansions of existing mines.

    Fundamentally, this is a resource allocation issue and is, therefore, more a question for economists than scientists or engineers. Most economists would agree that the most efficient way to deal with negative externalities is to impose a tax on the externality and then allow the market to determine the optimal allocation of resources. For example, if coal-fired power generation threatens the environment in terms of climate change, the most efficient way to deal with this is to tax the resulting emissions of carbon dioxide. Applied over all forms of power generation by means of a carbon tax or an equivalent emissions trading system (ETS), this application of a cost on carbon would help to ensure that carbon emissions from power generation were reduced by means of a strong market signal to investors in the electricity generation market. A carbon tax or ETS would provide a disincentive to invest in coal and other fossil fuel power generation plant and an incentive to invest in low or zero emissions technologies.

    Banning new coalmines would reflect an arbitrary approach to reducing emissions. On what basis should various fuels be permitted or banned? Why is coal to be singled out but other fuels with significant emissions such as oil and gas are not? There is also a problem in that many of the interest groups that want to prohibit coal mining would also like to ban other fuels as well. Not only are some environmentalists ideologically opposed to all fossil fuels, including gas, but they also object to competitive zero emissions power generation technologies such as nuclear power and hydro-electricity. Banning coalmines may well be the thin end of the wedge. Some groups would also like to ban uranium mining and the construction of new dams. Then, of course, on the right of the political spectrum, there are groups who are vigorously opposed to wind farms on the grounds of their visual pollution. Once the size of the physical footprint of solar thermal generation is understood and the massive land resource required, some groups would probably be opposed to that technology as well. What would we then be left with?

    Restricting the supply of coal by banning new mines would be contradictory to the more efficient approach to climate change of taxing carbon emissions and thereby allowing the market to determine what technologies are adopted to generate electricity. It would give a clear advantage to existing mines, which may be near the end of their economic lives and are often less efficient than new mines. It would also benefit other fossil fuels with a significant carbon footprint, such as oil and gas. The strong market signal arising from the ban would also inhibit, perhaps totally, any incentive to work on more greenhouse friendly ways to utilise the earth’s vast reserves of coal through technologies such as CCS.

    Were it to be widely adopted, such a policy would also eventually raise the price of coal in developing countries, such as India, where a large proportion of the nation’s population is struggling to emerge from poverty and where currently there are very many households that have no electricity supply. In my view, it ill behoves people in countries like Australia, where their high standards of living have been built, in part, on the foundation of a secure, relatively cheap, coal-based electricity supply, to attempt to force people striving to emerge from poverty in other countries to renounce coal and pay much more for an interrupted electricity supply via renewables. For this reason, among others, nations need to think long and hard before denying natural resources to other countries that may not be so fortunate in terms of their resource endowments.

    Would banning new coal mines provide an effective policy approach?

    Abstracting from efficiency considerations, if the Australian government prohibited the development of new coal mines, would this be an effective approach to reducing the global use of coal for power generation?

    It is difficult to see how this could be an effective policy in the absence of an agreement between all of the major coal-producing countries to restrict supply. Such an agreement would be very unlikely. There are abundant resources of coal worldwide and, hence, many alternative sources of supply to Australian mines. As may be seen from the tables below, many of the countries with abundant coal reserves are less wealthy than Australia and are most unlikely to agree to prohibit investment in their coal industries.

    While the Australian coal industry is a very efficient producer, it does not dominate the global market and could not be said to possess any significant market power. Data produced by the US Energy Information Administration, for example, suggest that while Australia’s coal endowments are extensive, they amount to less than nine per cent of global reserves.[3] In 2013, Australia ranked fifth in overall coal production (metallurgical and thermal coal), accounting for less than six per cent of the global total.[4]

    Exhibit 1: Major Thermal Coal Producing Countries (2013)

    Country Production (Mt)
    China 3,034
    USA 756
    India 526
    Indonesia 486
    South Africa 255
    AUSTRALIA 239
    Russia 201
    Kazakhstan 103
    Colombia 81
    Poland 65

    Source: World Coal Association, ‘Coal Statistics’, < http://www.worldcoal.org/resources/coal-statistics/>

    In terms of the world’s largest producers of thermal (steaming) coal used for power generation, however, Australia is not ranked in the top five (Exhibit 1). In 2013, China’s production of thermal coal was over 12 times as great as Australia’s. The production of thermal coal in the USA and India was also far higher than in Australia, while Indonesia’s thermal coal production was over twice as great. Importantly, India now has a policy objective of being self-sufficient in coal by the early 2020s. This will require massive new investment in coal production.

    Until recently, Australia was ranked first in terms of coal exports. Of Australia’s total coal exports of 336 Mt in 2013, 182 Mt were thermal coal. But in recent years, Indonesia has recorded a very rapid growth in exports (overwhelmingly in thermal coal) and has overtaken Australia. Coal exports from Indonesia more than doubled between 2008 and 2013, compared with a 33 per cent increase from Australia (Exhibit 2).

    Exhibit 2: Major Coal Exporting Countries by Volume

    Country Exports, 2013(Mt) Exports, 2008(Mt) Growth

    2008-13(%)
    Indonesia 426 203 110
    AUSTRALIA 336 252 33
    Russia 141 101 40
    USA 107 74 45
    Colombia 74 74 0
    South Africa 72 62 16

    Source: World Coal Association, ‘Coal Statistics’, < http://www.worldcoal.org/resources/coal-statistics/>

    Both Indonesia and Mongolia have the capacity to increase their exports substantially. Russia, South Africa and Kazakhstan are also potential rivals. In none of these countries, as far as I am aware, is there any significant questioning of the legitimacy or acceptability of the coal industry or any support for prohibiting new investment in the industry. Indeed, investment in these industries is generally keenly sought. Also, these countries generally have less rigorous approvals processes for new projects, less of an emphasis on environmental protection and lower labour costs than Australia.

    In terms of effectiveness, therefore, the question is what environmental benefit would accrue from banning new coal mines in Australia and what would be the costs? It is difficult to see any possible benefits in terms of reducing global emissions, because, as the Prime Minister has pointed out, the investment in new coalmines displaced from Australia would merely take place in other countries. As demonstrated above, Australia lacks any monopoly or even oligopoly power in this market. If Australia took a position based on ideology and emotion, it would be very unlikely to have any impact on the demand for coal globally, but at the same time would provide an opportunity for other countries to step in and capture some of the market previously supplied by Australia. It would be a classic case of carbon leakage, where, in return for no tangible benefit, Australian investment and jobs migrated to other countries. People who depended for their livelihoods on the coal industry would be sacrificed without any offsetting tangible benefit in terms of climate change.

    Conclusions

    It appears that the governments of the world are likely to step up to the plate and commit to taking substantial action to counter climate change at the Paris summit commencing at the end of November 2015. This is most welcome. Under most plausible scenarios of emissions reductions, however, the forecasts by the IEA suggest that the combustion of coal will continue to generate a significant proportion of the world’s electricity supply until at least 2040.

    Proposals to ban investment in new coalmines or expansions, either unilaterally or globally, would be neither an efficient or effective approach to addressing climate change.

    First, it would not be an efficient approach because it would be arbitrary and selective and would fly in the face of the more efficient policy of taxing the negative externalities produced by burning coal and other fossil fuels more generally. It would, therefore, provide disproportionately favourable treatment to other fossil fuels such as oil and natural gas. In addition, it would provide a boost to other low emissions base load technologies such as nuclear and hydro, which may also be in the black books of some of the groups that want to ban coal.

    Secondly, it would not be an effective approach. Australia has less than 10 per cent of the world’s coal reserves and is not in the top five countries that export thermal coal. Other countries would be happy to step in to fill the gap in coal exports left by Australia. This would be a classic case of carbon leakage. Investment and jobs would be exported from Australia with no tangible benefit in terms of climate change.

    There are equity issues here as well, both in terms of people in other countries currently living in poverty who seek access to the cheapest electricity and also those Australians whose livelihoods depend on the coal industry. The people who advocate banning new coal mines would generally not suffer any tangible adverse consequences if their proposal were adopted.

    Finally, in the absence of commercial clean technologies such as CCS, those who believe that substantial action needs to be taken to counter climate change will accept and even welcome the longer-term decline of the coal industry. Global action to counter climate change suggests that coal is a declining asset that, in the medium to long term, may well become stranded. Yet the dismal scientist in us also recognises that Australia’s endowments of coal represent a significant asset on our national balance sheet. The industry has given rise to well remunerated employment opportunities as well as very substantial royalty income to the benefit of the Australian community as a whole. In a declining market for coal, therefore, rather than banning new investment in the industry, the rational approach for Australia would be to seek to ensure that as much as possible of the declining future demand for coal is supplied from Australian mines. This is not inconsistent with a policy stance that encompasses strong action to address climate change and achieve the two degree target.

    Jon Stanford is a Director of Insight Economics and previously worked in a senior role in the Department of the Prime Minister and Cabinet. He has acted as an expert witness in a number of court cases involving proposals to develop new coal mines.

    [1] In reporting this summary of the recent IEA report, I am much indebted to Keith Orchison’s analysis in his This is Power blog and his articles in the Business Spectator.

    [2] International Energy Agency, World Energy Outlook 2015, http://www.iea.org/publications/freepublications/publication/WEB_WorldEnergyOutlook2015ExecutiveSummaryEnglishFinal.pdf

    [3] US Energy Information Administration, ‘International Energy Statistics’, <http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=1&pid=7&aid=6>

    [4] World Coal Association, http://www.worldcoal.org/resources/coal-statistics/

  • John Dwyer. Wasting precious health dollars.

     

    In the last eighteen months our coalition government has repeatedly warned that the rate at which we are increasing health related expenditure is unsustainable. The attempt to extract a co-payment from Australians visiting their GP was justified using this concern. However it is the better use of the currently available health dollars that should be given priority rather than asking Australians pay more for a health system that no longer adequately meets contemporary need. It is true that a considerable amount of the cost ineffective expenditure on health is generated by members of my profession with low value and sometimes no value tests and procedures wasting at least 10 billion dollar a year. While there are vested interests hampering necessary reforms, progress is being made as critical pathways, generated from the best available evidence by independent and expert clinicians, are developed centrally for application locally. The Institute for Clinical Excellence in NSW is one organisation facilitating this type of reform which should improve the standardization of evidence based clinical decision making.

    Looking more broadly at the inefficient use of precious health dollars we could discuss the 600,000 or so avoidable and expensive admissions to public hospitals each year and the billions of dollars wasted as 24 million people are served by nine Departments of Health. However there are two other examples of cost ineffective expenditure that are in the news and worthy of further comment; the Private Health Insurance rebate and the subsidy tax-payers pay to the private heath industry as they pay for a raft of useless pseudo-scientific modalities. Both of these have been addressed recently and unsatisfactorily by health minister Sussan Lay.

    Interviewed on the 7.30 report Minister Lay defended the need for government to use six billion dollars of our money to reduce the cost of Private Health Insurance claiming it was needed to relieve the pressure on the demand for public hospital services. She has no doubt been told and believes that this is so. It is not.

    The Howard government introduced the taxpayer-funded rebate at a time when private health insurance rates were falling. In the ensuing twelve months private health insurance rates increased by only 2% and there was an almost negligible decrease in admission to public hospitals. After that year there was no noticeable effect even though additional strategies did significantly increase the uptake of private insurance. Making insurance more expensive as one aged and demanding a significant levy be paid by wealthier Australians who did not have private insurance, did have the desired effect on participation rates but not on helping public hospitals.

    Private and public hospitals operate in different health care universes. Both by and large offer excellent services but one has a fixed budget and an average annual increase of 3% in the demand for admission that is fiscally intolerable. The other makes more money when more patients are admitted. More than 70 % of the patients in public hospitals have serious and often chronic medical conditions while more than 70% of patients seeking private hospital care need day only procedures or surgery. As cash strapped public hospitals were forced to close beds without being able to escape the demands from sick medical patients, elective surgery became increasingly difficult to deliver in a reliable and timely matter and much surgery (and the surgeons needed for that surgery) moved to the private sector.

    Had the six billion dollars worth of subsidies been available to public hospitals many could have continued to offer more of the surgery required by patients who reluctantly paid for private insurance to get their operations in a timely manner. With the public sector increasingly unable to compete, volume wise, with the private sector surgical fees have skyrocketed contributing significantly to the 29 billion dollars of out-of-pocket expenses Australians fork out each year for their health care.

    A number of health insurers, responding, they say, to consumer demand, will pay for treatment from a range of “Alternative” practitioners. The Labor government concerned, at the growth in such payments, asked the Chief Health Officer and the NH&MRC to examine some 18 modalities to see if there was “credible scientific evidence for their clinical effectiveness”. The committee assembled looked at practices such as Iridology, Reflexology, Homeopathy, Reiki etc. and reported to the current government that there was no evidence that any of them offered clinical benefit. The government was urged to stop public subsidies for these pseudo-sciences and, in so doing send a message to the public emphasising the need to enquire about the evidence base for any care they receive. The report is “lying on the Minister’s table”. For decades I have been depressed by the influence the “Alternative” industry has on governments so I was not that surprised at the response when, at her Press Club presentation, reporter Sue Dunleavy asked her the following question.

    “Every year health insurers are paying $180 million for natural therapies for which there is no evidence,” she said.

    “You already have the review of the worth of those therapies conducted by the chief medical officer on your desk.

    Can you tell us what that report said and what you are doing about it?”

    The nonsensical and depressing response was “…the issue of complementary therapies is an issue of great interest to Australian patients and certainly to private health insurers and those concerns about the budgetary implications of which you speak.

    But I don’t propose to take any piece in isolation out of the complex mix of interests, stakeholders (for want of a better word) and, of course patients and taxpayers, when we look at the important issue of private health insurance.

    To pick up one report commissioned by a previous government (not that necessarily has to be an issue in itself) and make it something that this government has to respond to almost at the micro level, without regard to the intersecting policies issues and interests, I don’t believe is sensible public policy.”

    Many contributors to “Pearls and Irritations” have noted that for a cost effective sustainable health system providing better health care, we, as is the case in much of the developed world, must invest in Primary care that emphasises prevention, in house team management of chronic diseases and the ability to care for many in the community currently sent to hospital. Quality hospital care is totally dependent on our reducing the need for so much hospital care. The currently wasted dollars, if applied to fund needed reforms could provide us with the excellence we need without increasing the % of GDP we spend on health. Such reforms should be a major issue for the coming election.

     

     

  • Richard Butler. After Paris

     

    The attacks in Paris were textbook in terms of the philosophy of terrorism: hit publicly, indiscriminately, affecting as large a group of innocent people as possible, attract maximum publicity, generate widespread fear. They also represented a continuation of terrorist actions within metropolitan Europe: Madrid 2004, 191 dead; London 2005, 56 dead; Paris January 2015, 17 dead; and now November 2015 128 dead and still counting. Naturally, statements characterizing this latest outrage have been flowing. It has been described as “France’s September 11”, and according to President Hollande, as constituting a declaration of war on France. IS has claimed responsibility for the attacks and it seems there is now independent evidence that it directed them.

    Clearly military action against IS will be increased. Indeed, French bombing of IS headquarters in Raqaa, Syria, were significantly increased, beginning 2 days after the attacks.

    King Abdullah of Jordan has described the actions of IS as constituting the conduct of “ a global war, a third world war, by other means”. Pope Francis has agreed, describing the existence of a “piecemeal” third world war.

    It is beyond any doubt that the idea that citizens going about their ordinary, even banal business; attending a concert, a football match, eating in a cafe should be arbitrarily blown away is monstrous.

    Equally, it is certain that citizens expect that arrangements in their community, policing etc., will deter or prevent such action. Politicians know this and routinely pledge it, but it is now clear in so many countries, that this promise can’t, reliably, be kept.

    It must also be accepted that the continuing series of atrocities being committed across the middle east by a variety of parties far exceeds what has happened in metropolitan Europe, and holds the prospect of further massive destruction, beyond what has already occurred, particularly in Syria.

    Thus, there is no alternative but to dig deeper into where this has come from and on that basis craft both an effective defense and a more elemental, hopefully enduring, solution.

    There are a number of identifiable sources of the present situation, stretching back to the settlement at the end of the First World War and the dissolution of the Ottoman Empire. But, the continuous threads are western intervention, which has never been benign, and ethno-confessional disputes, mainly between Sunni and Shia, which the west routinely ignored, misunderstood, or sought to exploit.

    Today, that disgraceful history is now assaulting the west. The invasion of Iraq, by the US, UK, and Australia in 2003 was: contrary to international law, mounted on the basis of fabricated intelligence, and in Australia’s case without parliamentary or constitutionally sound authorization. The number of dead it yielded, on all sides, the massive cost, were dwarfed only by the completeness of its failure as a concept ( to bring democracy to the middle east) and its fuelling of the enduring internal political and confessional conflicts within the region.

    It’s major achievement was that it brought IS into existence, and if King Abdullah is right, a developing third world war. He sees IS as representing “a global franchise”, incorporating branches around the world responsive to directives from headquarters but more than prepared to do their own thing in situ, ranging from recruitment to training to executing attacks. George W Bush, Tony Blair, and John Howard, have so far avoided serious public recognition of their responsibility, although Blair might face a problem when the Chillcott report is issued.

    What has been said above with respect to Iraq and Syria, is also similarly true of Libya.

    Clearly, we will now face an indefinite period of yet further surveillance and security checks in a wider number of aspects of our domestic lives. We must insist that they be effective without vitiating the elemental constructs of our rule of law and human rights based society. Were the latter not to be the case then, ironically, the enemy would have won. Also, with respect to the latter, Australia needs a Charter of Human Rights

    On the external sources, the roots of the problem, there are two key areas which now must be addressed in an entirely more committed way: the civil war in Syria; the situation in Palestine.

    On Syria, the permanent members of the UN Security Council, in particular the US and Russia, must craft a joint policy and set of actions to bring about and end to the fighting, and a political settlement in Syria. It seems that this was in fact set in motion, last week, in Vienna.

    The success of this seems to be the last hope for Syria and, if it moves ahead, should then enable other permanent members, particularly, France and Britain, to join with Russia and the US in mounting a serious effort to remove IS from Syria and Iraq.

    Given the terms of the UN Charter, this is precisely the sort of action for which permanent membership of the Council was established and has been so shockingly neglected in the period since the end of the Cold War.

    Russia’s recent unilateral entry into the fighting in Syria, for which it seems to have paid the price of one of its civilian aircraft being bombed out of the sky, seems to have opened up some willingness on its part to act in concert with the US.

    On the problem of Palestine, there must be an end to both: US and Israeli insistence that the Palestine question has nothing to do with support for IS and other anti western political attitudes and actions; and, the continuing failure of the US to deploy all of its self-evident ability to insist to Israel on the conclusion of a two State solution.

    Australia has a role to play in the international consideration of and development of actions to strengthen overall security, as well as its own. Our governments have tended to see this largely in terms of supporting the Americans, and participating in military actions, largely determined by the US. In what he has said, so far, Prime Minister Turnbull has shown a more sophisticated awareness, than his predecessor, of what is at issue in our foreign relations and the challenges revealed by the Paris events, including in Australia domestically.

    Australia can contribute usefully in intelligence sharing, and should make diplomatic action the central contribution it can make as a new international response to IS, is developed. Its current military contribution to the coalition should not be renewed, or perhaps as Canada is doing, be withdrawn. It achieves very little, not because it is incapable, but because of the flawed nature of the US operation. (1). It does serve to expose us to an increased possibility of terrorist action within Australia. We could legitimately consider a military contribution, when an international plan of action, authorized by the Security Council is adopted.

    (1) See, Patrick Coburn: “Too weak, Too strong”. London Review of Books. 5 November 2015

    Richard Butler AC, is former Ambassador to the United Nations and Head of the United Nation Special Commission to disarm Iraq (UNSCOM).

  • Greg Smith- Tax Reform and Change Leadership

    If we look at the tax reforms of the past we can observe a few clear problems that are accumulating from design compromises.

    1. We replaced narrow indirect taxes with a broader GST, but the GST base is narrower than consumption and the trend over the past 15 years is for a relative decline in GST revenues. This has been partly offset for the States by higher mining royalty revenues, but these are now weakening.
    2. Other indirect taxes imposed on narrow bases have declined even more dramatically than the GST. These are structural weaknesses that will not be overcome by future economic changes.
    3. The reformed personal tax scale was not indexed and has undergone a series of changes based both on bracket creep and on ad hoc politically based changes. Forward estimates are based on an assumed increase in average personal income tax burdens.
    4. The income base is a complex compromise between a wide range of competing principles – for example between the comprehensive income and expenditure tax principles, the realisation and accrual principles, the asymmetric treatment of gains and losses, different concepts of source and residence, and different approaches to entities and income assignment. Progressivity is also pursued in a highly imperfect and incomplete way.
    5. Secondary tax layers – that is additional taxes and charges imposed on top of the broadly based taxes such as payroll taxes and stamp duties – continue to be relied upon but without clear rationales or efficient design principles.

    So here we are again. Once again we confront the problems of a compromised tax system and seek to achieve reforms that will at least for a further time set us on a more robust and effective path. We confront another change leadership task which would set us on a substantially new course, rather than one that takes us along an old and well-worn path. Can we do it?

    In 2013 I set out my thoughts on change leadership for public policy in a chapter of the CEDA study called Setting Public Policy. For this I compared what I thought were the key ingredients with those of John Kotter in his work on organisational change.

    Let me revisit the 5 main steps towards leading public policy change which I then suggested based on a part of Kotter’s model, and make some observations on where we stand today with the tax reform debate.

    It is within that framework that the main political economy issues affecting tax reform can be seen to arise.

    Change Leadership tasks

    1. Establishing a sense of urgency
      1. The version of this most common in public service circles is that a crisis is need to deliver change. The issue is whether there really is a basis for any actual or perceived sense of urgency
      2. Unfortunately, it is difficult to create a sense of crisis after 24 years of continuous economic growth. Crying wolf is also a problem, and there has been a cost of the overstatement of crisis that we experienced surrounding Australia’s levels of debt and deficit. We now probably have a more economically wary electorate than ever.
      3. So rebuilding a sense of urgency is now a great challenge for government. It needs to be based on a clear and consistent message about how, and specifically in what ways, the economy’s trajectory is now taking us away from critical goals.
      4. I think we have started on that task – but there is quite a way to go. The coming MYEFO and the other promised government initiatives in tax, the federation and perhaps innovation and cities provides a chance to reboot the required messaging. But at the moment, if anything, we have a problem of “over narration” where many stories have been begun but have not been finished nor have they been brought together in a coherent way. There is even a risk of adding more layers to the narrative confusion, with agendas like innovation or cities, before we get to sort out what has already been launched.
    2. Forming a powerful coalition
      1. The Prime Minister appears to be acutely aware of this element. He has taken immediate initiatives in calling in the classical trio – business, unions and welfare – for discussion of goals. The states are also being engaged.
      2. But the coalition required on tax reform is not yet formed. The coalition is one of many leaders agreeing on the imperative of reform but they are following many agendas and directions rather than forming a coalition sharing the same understanding.
    3. Developing a change vision
      1. Right now I do not know where we are going with tax reform or the federation. There are very mixed signals. I do not expect the answers – that is actually premature. But the principles – not at a high level but at a concrete level should be starting to form by now. There is little sign yet that this is happening or even that the Government seeks to do this before it commits to actual policies. Hopefully 2016 will change that.
    4. Communicating the change vision
      1. The government now appears to be better placed on this than before, and there is a strong sense of hope in the community that we are now facing in the right direction at least. Of course, a change vision is not the same as a political vision. It is a much more demanding thing. The key is to get beyond slogans and beyond the sort of superficial rubbish that in recent years has been commissioned from a group of issue managers, advertisers and political advisers that have repeatedly failed to cut through to the community. They have not been incompetent in playing attack or defence politics – but they have been incompetent in communicating a change vision when clearly there is some community appetite for genuine solutions. This has been a palpable advisory failure on both sides of politics.
      2. When it comes to taking a substantially new path the communication rules of oppositional politics do not work. More is being asked of the public and so the understandable public demand is for a lot more meaning and substance in the communication offering. This understanding seems to have been missing in recent years.
    5. Empowering others to act
      1. One of the reasons for opening government to wider participation and engagement during reform processes is that many change programs actually unfold over a period of years and these implementation years require a lot of heavy lifting by those affected by change.
      2. When the Government charts its course, it should be ready to facilitate the empowerment of others to act, whether that be tax professionals, state governments, the ATO or potentially a host of others.

    Into 2016

    2016 is nearly upon us. It could well be a momentous year. The many processes that have been launched could come to a head. Some sort of coherent framework hopefully can be articulated in which it all comes together.

    Part of that will be a renewed understanding of the fiscal strategy, and the probably very poor economic underpinnings of that. I suspect that it won’t change much but hopefully the implications of what is there can be better explained to people – including for example implications of forward estimates that are based on a large restoration of tax share of GDP.

    All the signs are that this could be a year of global cyclical weakness. That is certainly a widespread market and IMF view. There won’t be much room for policy error, and there may be a need for considerable short term agility.

    This puts a premium in my view on ensuring that the key institutions in Australia are fully focused on their jobs and are sustained to deliver them. There has been inadequate attention to this in recent years, and that has been part of the problem holding back reform capability.

    2016 will also bring an electoral mandate for the next three years at the Commonwealth level. I am not certain about the actual significance of mandates in Australian politics, but hopefully there will be a basis for reform at least as strong as that sought by the Hawke Governments in the 1980s and the Howard Government in 1998.

     

    Greg Smith was a member of the Henry Future Tax Review Panel. He has also been head of the Treasury Tax Policy and Financial Institutions Division and of Treasury Budget and Revenue Groups. He was substantially involved with John Howard in the implementation of the GST. The above are extracts from a speech he delivered to The Melbourne Institute last week.

  • Cavan Hogue. Russian airliner and ISIS.

    The almost gleeful attacks by columnists and cartoonists on Vladimir Putin when the Russian plane went down were in very bad taste. The difference between this and MH17 is clear. MH17 was shot down by accident in Ukrainian territory probably by rebels who thought they were shooting down a warplane from Kiev. It was not a deliberate act by Russians, let alone ordered by Putin. (Russia could however be criticised for not putting more pressure on those who control the crash site to cooperate with the investigators – most likely they know what happened and don’t want to admit it.)
      The Russian airliner was almost certainly blown up deliberately by ISIS because Russian warplanes are in action against ISIS. It could just as easily have been an American or Australian plane for the same reason. One interesting conclusion must be that Russia is in fact targetting ISIS fighters otherwise why would they target a Russian aircraft?
    This is yet another example of the bias and ignorance on the part of mainstream media and politicians in Australia of both Russia and the Middle East. It is interesting to note that the Dutch led report on MH17 specifically criticised the Kiev Government for not closing the relevant air space but did not suggest that this was a deliberate act by Russia. The Australian media played down the Report’s criticisms of Kiev and got stuck into Putin instead.
    Putin has clear aims in Syria. It is in Russian strategic interests to support Assad or anyone who will give them what he gives them just as it is in US interests to ally itself with Saudi Arabia. Neither Syria or Saudi Arabia is a bastion of democracy and human rights. Australia as usual is there on the American coat tails. This is a very complex situation and a solution is hard to find. The US seems to be working with the Kurds but will it support an independent Kurdish homeland against Syria,Turkey and Iran? The whole muddle is not just about ISIS – bad as they undoubtedly are – but also about Kurdish desire for a homeland like Israel, Sunni versus Shia, Iran versus Arabs and all kinds of tribal groups.
    This whole situation is not about different ideologies but about great power rivalry and local conflicts all wrapped up in moral rhetoric.
    Cavan Hogue was former Australian Ambassador to USSR and Russia. 

  • Ian Richards. Australia’s new submarine.

    Jon Stanford’s article ‘Australia’s new submarine: what is its mission?’ is spot on.

    The trouble with Defence planning and White Papers is that they all start off with what in my early days in the Navy was called a “Staff Requirement”.  This thing, this equipment or ship is what we “require”.  The first chapter of a Defence White Paper should be “How much money have we got”!

    The bureaucratic Canberra attitude to money is that it just “comes”.  A very competent technical Admiral once said to me in my days as Deputy Chief “Ian, are you saying we can’t do this just because of money?”

    The 2009 White Paper is off in dreamland.  Structuring Australia’s forces with the objective of the South China Sea as one of our possible areas of major Australia alone defence interest is just nonsense.  For example:

    • Day One.   The “major adversary” is trembling in its shelters!  An Australian conventional submarine is threatening us in the South China Sea!!  And it has conventional cruise missiles!!!
    • Day Two.   Scratch one Australian submarine.
    • Day Three.  Scratch Perth/Fremantle.

    Planners who suggest the ADF is unilaterally going to attack a nuclear-armed adversary in Asia are away with the fairies.

    There are some simple facts.

    1. Australia has never and will never in current lifetimes operate significant military forces beyond the Australian area other than in concert with other (almost certainly more powerful) nations. Examples are WW2 to Korea, Vietnam, Iraq, Afghanistan, Syria.
    2. Australian forces in Syria and the Red Sea are providing the tip of the arrow as political support.  The shaft and the bow belong to others – without them, the arrow tips would be useless.

    Turning to intelligence gathering, I also agree entirely.  If you want to listen to any type of radio transmission, put the receiver into a ship (war or merchant), shore station, embassy or satellite.  The worst place is in a submarine.  If you want a clear picture of something, don’t enlist a blind man and put him in a dark room.

    The intelligence-gathering feature of submarines appeals to The Hunt for Red October fans.  It has a lovely emotional tang about it.  So what is the “Australian contribution to the Five Power intelligence club” if an Australian conventional powered submarine sitting off Shanghai/Vladivostok (which will have been detected by the Chinese/Russians) can tell the US that an SSK (conventional submarine) has left harbour?  The Americans will know that because they saw it on satellite.  Or perhaps our submarine will be operating in the Eastern approaches to Singapore Strait – the South China Sea choke point – where submerged submarines can be seen from the air and sonar ranges are extreme.

    Ian Richards AO was formerly Deputy Chief, Naval Staff when he retired as Rear Admiral in 1984.

     

     

  • Malcolm Turnbull’s NBN is off the rails.

    Paul Budde comments in his BuddeBlog on 6 November 2015

    ‘If you abandon national FttH (fibre to the home) you also undermine the infrastructure required by the new economy. … The MTM [multi technology mix] leads to the Balkanisation of infrastructure in Australia and will favour companies such as Telstra and TPG. … The NBN Co will remain bleak from a financial position. … All of this becomes an even sadder story day by day, as at the same time it becomes clear that the trumped up costs of an FttH-based NBN were wrong. … The second rate roll out is going to cost roughly the same as the original FttH rollout.’

    See link to full article below.

    http://www.businessspectator.com.au/article/2015/11/6/technology/nbn-business-model-rails-0

  • John Taylor. Investing in Hedge Funds in Tax Havens: Legal? Ethical?

    If the aim of Labor’s attack on Prime Minister Malcolm Turnbull and his wife Lucy for using hedge funds domiciled in the Cayman Islands was to damage his credibility with the public, it appears to have missed the political mark.

    This article considers whether investing in hedge funds in tax havens is both legal and ethical.

    Advantages of offshore funds in tax havens

    Investing in US companies via a hedge fund enables Australian individuals and organisations to make investments over a much larger, more diverse, and more frequently changed portfolio than would be possible by directly investing in shares in US companies.

    If an Australian invests in a US-domiciled hedge fund then the Australian investor (under the Australia – US Double Tax Treaty) would be subject to 15% US withholding tax on dividends the fund received from US companies. This is because US domiciled hedge funds are usually established using structures such as partnerships that are transparent for US tax

    The Australian foreign income tax offset system will mean the Australian investor would pay Australian tax on those dividends equal to the excess of their average rate over 15%. The investment would also be subject to Australian capital gains tax on any capital gains the fund made on its US investments when they were sold. The Australia – US Double Tax Treaty will mean that normally no US capital gains tax will be payable..

    The position changes when an Australian investor uses a hedge fund domiciled in a tax haven such as the Cayman Islands.

    Let’s assume the fund invests in US shares. Normally the fund will be organised as a Cayman Islands company. The fund will structure its US share investments so that the investments are not regarded as the conduct of a US trade or business. Hence capital gains the fund makes on realising its US investments will not subject to capital gains tax in the US. This is because the capital gain will not be regarded as being “effectively connected” with a US trade or business.

    Any dividends received by the Cayman Islands hedge fund will be subject to US withholding tax at the US non-treaty rate of 30%. There is no double tax treaty between the US and the Cayman Islands.

    There will be no Cayman islands capital gains tax payable on a realisation of the investment, no Cayman Islands income tax will be payable on dividends received on the shares, and no Cayman Islands withholding tax will be payable on distributions by the fund to the Australian investor.

    Although no Cayman Islands withholding tax will be payable on a distribution by the fund to the Australian investor, a higher level of US withholding tax is payable on the dividend paid by the US company to the fund. So looking at the dividends in isolation there seems to be no advantage in investing via a Cayman Islands hedge fund.

    The real tax advantages Australian investors gain by investing via the Cayman Islands hedge fund rather than via a US domiciled hedge fund, are in terms of the ability to defer tax on capital gains the fund makes on underlying investments.

    In the case of an investment via a tax-transparent US hedge fund, the capital gain will be subject to Australian tax as soon as the investments are sold. But in the case of the investment via the Cayman Islands hedge fund, the capital gain will only be taxed in Australia when the fund makes a distribution.

    The time value on the money will mean the real cost of the tax the investor pays on the capital gain falls for as long as the fund defers distributions to the investor.

    Over time in real terms, less Australian tax will be paid. Admittedly the investor will not have benefited from receiving the distribution in that time and will not have control of the time of distribution. But an investor can use the appreciation in value of the investment as security against other financial transactions.

    Is it legal?

    The legal question is the easiest to answer. Australia used to have rules (the Foreign Investment Fund or FIF rules) which sought to neutralise these and other deferral advantages. Those rules were repealed in 2010. In 2011 the Gillard Government proposed more targeted rules for foreign funds (the Foreign Accumulation Fund or FAF rules) but the Abbott Government in 2013 announced that it would not be proceeding with these and other related changes. So deferring Australian tax through the use of foreign hedge funds is currently not caught under Australian law.

    Is it ethical?

    How about the ethical question? This answer is harder. An investment via a Cayman Islands hedge fund results in more US tax and more Australian tax being payable on dividend distributions than investment via a US domiciled hedge fund organised.

    If we assume an ethical obligation to pay taxes both in the source and residence country, then deriving dividends indirectly via a Cayman Islands hedge fund meets that obligation.

    But the position is different in relation to capital gains the funds make on shares in US companies.

    Neither fund will be paying US tax on the capital gains but, in the case of investment via a US domiciled tax transparent fund, Australian tax will be payable on the capital gain as soon as it is realised, while Australian tax will only be payable on the capital gain derived by the Cayman Islands domiciled fund when that fund distributes it to the Australian investor.

    So back to the ethics of this. If everyone did this, there would be seriously adverse revenue consequences for Australia. But of course, not everyone can. Investing in Cayman Islands hedge funds is largely the preserve of the financially astute or those with the resources to seek advice from the financially astute.

    That could raise another ethical question – is it unethical to use your own financial acumen, or that of others, to derive tax advantages unavailable to those without access to that financial acumen?

    It depends on whether we regard taxes as a payment for the benefits a taxpayer receives from society. If so then it is arguable that those with greater financial resources receive greater benefits from society. They benefit from having their greater resources protected by law and by domestic law enforcement. As they have more assets they benefit more by having them protected by the defence force. They derive greater benefit from infrastructure through which business can be conducted.

    If we regard taxes as a payment for the benefits received from society and if we accept that those with financial benefits receive greater benefits from society then to use your financial resources or financial acumen to pay less tax than is proportionate to the benefits you receive from society can be considered to be unethical. If everyone paid less tax than was proportionate to the benefits they received from society then society would eventually be unsustainable.

    Professor John Taylor is Head of School of Taxation and Business Law, Australian School of Business, UNSW. An earlier version of this article appeared in The Conversation on October 30, 2015.

  • Bob Kinnaird. The high price of Labor’s capitulation on ChAFTA

    Labor’s capitulation in supporting the treaty-status ChAFTA has profound ramifications that go far beyond the China deal.

    Labor’s support for ChAFTA has all but guaranteed the permanent surrender of Australian sovereignty over key parts of our migration program and laws, and the permanent loss of rights of Australian citizens and permanent residents to jobs in Australia.

    The Labor and Coalition leaderships both know this but have not told the Australian people or the Australian Parliament.

    Labor’s decision to pass the treaty-status ChAFTA unchanged effectively ensures the permanent removal of the Australian government and Parliament’s right:

    • To impose any limit on the number of visas granted in the entire standard 457 visa program for skilled workers or the shorter-term 400 visa.
    • To apply labour market testing (LMT) in the entire standard 457 visa program.
    • To apply LMT in the 400 visa program to a whole new foreign worker category in binding FTAs – ‘installers and servicers’ of machinery and equipment. These include for the first time in FTAs sub-trade or semi-skilled workers, and possibly even unskilled workers, as well as skilled workers.
    • To apply other regulatory measures in the 457 and 400 visa programs that remain unspecified and ambiguous, and which the Australian Parliament has not even inquired about. What is covered by Australia’s commitment not to apply ‘economic needs tests or other procedures of similar effect’ to foreign nationals in these visa programs is not even known.
    • To make laws giving preference in redundancy situations to Australian workers over standard 457 visa workers, and likewise over the ‘installers and servicers’ on 400 visas. The ‘national treatment’ provisions of FTAs prohibit such ‘discrimination’ in favour of Australian workers, but the Treaties Committee reports to Parliament on ChAFTA said nothing about this either.

    These binding international obligations in ChAFTA on the 457 and 400 visa programs will now flow on to other countries through the plethora of FTAs the Coalition government is aggressively pursuing. That flow-on has already started, as shown below.

    As well, Labor has guaranteed that all future FTA ‘packages’ with developing countries will allow semi-skilled and other ‘concessional’ 457 visa workers access to the Australian job market under the guise of ChAFTA-style ‘investment facilitation arrangements’ (IFAs).

    Labor approved the IFAs as part of the ChAFTA package with only cosmetic changes to the migration regulations for concessional 457s under these arrangements. These provide no additional ‘safeguards for Australian jobs’, despite Labor pretending they do.

    The MOU on IFAs is not part of the treaty-status FTA, but DFAT says it is nonetheless ‘a serious bilateral agreement’ between the governments of Australia and China. Changes to the MOU require China’s agreement. Labor and the Coalition have therefore succeeded in also reducing the previously unfettered right of the Australian government and Parliament to make laws and policies for concessional 457 visa workers on major projects.

    In October Trade Minister Robb admitted the Coalition is lining up more ChAFTA-style IFAs (India is almost certainly next), saying:

    ‘This has to apply not just to China… – in the case of that issue, these major projects over $150 million – that opportunity is there for every company in every country, so we have to look beyond China; we have to make sure that this doesn’t discriminate against China and that it’s not a one-off provision just for China’ (transcript, Robb media conference on 13 October 2015).

    As well as the loss of Australian sovereignty, all this means greatly increased legal rights for employers to use temporary foreign labour, and to use these workers as industrial relations weapons against Australian workers and unions.

    The ChAFTA flow-on

    The China FTA commits Australia not to apply LMT to all Chinese citizens in the standard 457 visa program – currently around 7 per cent of the total 457 program. That is a ‘point of no return’ moment.

    Until the China FTA, the Coalition had declared that only the nationals of Japan, Korea, Chile, Thailand and NZ had a blanket 457 LMT-exemption due to Australia’s international trade obligations in FTAs. These comprise only a small fraction of the 457 visa program (around 4%) with the largest of these (Korea and Japan) in FTAs concluded by the Abbott government.

    The China FTA will take that LMT-exempt share up to 11 per cent of the 457 visa program when it comes into force before end-2015.

    Once China goes, the rest will follow. By late 2016 nearly half of the entire 457 visa program will probably be exempt from LMT due to Australia’s binding international trade obligations as the China FTA LMT concessions flow through to other new FTAs. It could be more than half.

    Having capitulated on the China FTA, Labor is now unlikely to oppose extending the same blanket 457 LMT-exemption to all the other FTA countries that the Coalition is lining up in short order. Labor will need more resolve than shown so far to resist the claims of ‘discrimination’ that will be heard from every FTA country denied the same privileges as China.

    The most important of these is India, the largest country in the 457 program with 24 per cent of all visas. Concluding the India FTA by the end of 2015 is the Coalition’s next self-imposed deadline. Having waved through the China FTA, Labor will do the same for India. At that point, 35 per cent of the 457 visa program will then be LMT-exempt due to binding international trade obligations.

    In the Trans Pacific Partnership (TPP) announced in October, Australia has committed not to apply LMT in the standard 457 program to all nationals of five TPP countries – Brunei Darussalam, Canada, Malaysia, Vietnam, and Mexico – representing a further 5 per cent of the 457 program.

    Australia has also made a standing offer to do the same for the three other TPP countries without a total 457 LMT exemption (the USA, Peru and Singapore) if they provide access to limited categories of ‘Australian business persons’ down the track – another 7 per cent of 457s.

    The ChAFTA concession not to apply LMT to ‘installers and servicers’ on 400 visas has also been extended to eight TPP countries – Brunei Darussalam , Chile, Japan, New Zealand, Peru, Canada, Malaysia and Mexico -and no doubt shortly India also.

    Waiting in the wings are other FTAs including the Regional Comprehensive Economic Partnership (RCEP), the Trade in Services Agreement (TISA) with 51 WTO members, Indonesia, the Gulf states and now the EU. The RCEP is perhaps the next most important for Australian temporary visa concessions. It includes the ten ASEAN member states and those countries which have existing FTAs with ASEAN – Australia, China, India, Japan, Republic of Korea and New Zealand. 

    Labor’s road to capitulation 

    Labor’s decision to support ChAFTA is a clear breach of commitments given by Opposition Leader Mr Shorten. In the Labor leadership contest in September 2013, Mr Shorten publicly committed to ‘opposing the removal of LMT in bilateral and multilateral trade agreements’ – as did Mr Albanese, the other candidate. (See ALP Leadership Questionnaire http://www.cfmeu.net.au/news/alp-leadership-questionnaire)

    Both candidates also committed to ‘opposing all attempts by the Coalition government to weaken sponsors’ legal obligations to undertake Labour Market Testing (LMT) so that 457 visa nominations may be approved only where a suitable Australian resident is not available to fill the position’.

    Labor failed to honour these commitments at the first test. When the Coalition brought the Korea Australia FTA (KAFTA) before Parliament in September 2014, Labor voted to support the FTA even though it removed Australia’s right to apply LMT to all Korean nationals (and permanent residents) in the standard 457 visa program.

    A few months later, Labor did the same with the Japan FTA which included identical provisions to KAFTA, removing Australia’s right to apply LMT to all Japanese nationals in the standard 457 visa program.

    Even after conceding on the first two North Asian FTAs, Labor still had good reasons to draw the line under Japan and Korea, and oppose the China FTA ‘labour mobility’ provisions.

    Labor’s own Treaties Committee Dissenting Report on ChAFTA warned ‘ there is a danger that Australia’s labour mobility commitments in CHAFTA will be used as the new baseline demand by all countries with which Australia is negotiating FTAs and all will expect Australia to offer additional concessions.’

    The 2007-13 Labor governments concluded several FTAs, with Chile, Malaysia, and ASEAN/NZ. But none of Labor’s FTAs removed Australia’s right to apply LMT in the 457 program to all nationals of the FTA parties. This was despite the fact that during this time, Labor did not withdraw the Howard government’s (non-binding) 2005 Doha Round offer in WTO GATS to remove LMT from the entire 457 program, but had actually re-affirmed it. 

    Conclusion

    The sorry truth is that both Labor and the Coalition are prepared to trade away Australian sovereign rights and the work rights of Australian citizens in binding FTAs in return for improved market access for Australian business and investment flows.

    The crude calculus dominant in the major parties and among unelected trade bureaucrats is that Australia has little to offer in trade negotiations with many countries, except greater and ‘guaranteed’ access to the Australian job market. This is because the (mostly unilateral) trade liberalisation already undertaken by Australia has left us with nothing much to offer that our FTA negotiating partners want!

    The major political parties won’t say this openly, especially when both maintain the fiction that Australia’s 457 and other temporary work visa programs are designed to meet ‘shortages’ of Australian workers.

    But DFAT admitted this to the tripartite Skilled Migration Consultative Panel in 2008:

    ‘Australia is now negotiating or planning to negotiate FTAs with a number of large developing countries….Given the degree of trade liberalisation already undertaken in Australia, and the limited ability of persons from some developing countries to take advantage of opportunities at the highly skilled end of the Australian market, temporary entry for semi-skilled and low skilled persons is one of the few areas (along with economic capacity building) where some of Australia’s developing county FTA partners have strong offensive interests. Naturally, Australia’s bargaining power in any trade negotiations with these countries will be significantly enhanced if it is able to respond favourably to their temporary entry interests.

    ’ From a trade policy perspective, therefore, it is in Australia’s national interest to ensure that its approach to temporary entry for work and business purposes is liberal, transparent, flexible and market-driven.’

    (Source: DFAT, Trade commitments and reform of the subclass 457 visa program, Discussion Paper to Skilled Migration Consultative Panel, September 2008).

    The Productivity Commission and others have shown that the alleged economic benefits of FTAs have been grossly overstated. The Commission recently noted that promotion of the benefits of FTAs and the TPP has been “characterised by a lack of transparent and robust analysis, a vacuum consequently filled at times by misleading claims”.

    The costs of FTAs – and indirectly, unilateral reform – have also been understated or ignored. The permanent loss of Australia’s sovereign right to make laws concerning temporary migration, with no public debate, is too high a price to pay for the dubious benefits of FTAs.

    Bob Kinnaird is Research Associate with The Australian Population Research Institute and was National Research Director CFMEU National Office 2009-14.

  • Christmas gift idea – Pearls and Irritations in print

    Orders are now open for Fairness, Opportunity and Security: Filling the Policy Vacuum, edited by John Menadue and Michael Keating, and published by ATF Press.

    coverThe book is a collection of the special policy series of blogs that was published earlier this year.

    At last week’s launch, Fairfax economics columnist Ross Gittins said of series: ‘I hope this project of turning them into a book will make them even more accessible and more widely read. They certainly deserve to be.’

    Topics include Democratic Renewal, the Role of Government, Foreign Policy, the Economy, Retirement Incomes, Population/migration/refugees, Communications and the Arts, Security – internal and Human Rights, Security, Health, Development of Human Capital, Environment, Indigenous affairs, Welfare and Inequality.

    Among the authors are Ken Henry, Ian Marsh, Stephen FitzGerald, Cavan Hogue, Richard Butler, Stuart Harris, John McCarthy, Andrew Podger, Julianne Schultz, Kim Williams, Susan Ryan, Michael Wesley, Jennifer Doggett, Glen Withers, Chris Bonnor and Ian McAuley.

    Gittins described the book’s contribution to robust conversation about policy at this time as unique and indispensable: ‘In view of this policy vacuum needing to be filled, it’s really great to have John providing this new platform and encouraging former bureaucrats to use it. Never has their contribution been more needed. We independent media commentators do our best to evaluate the government’s performance, but there’s nothing like a former bureaucrat to be able to see through the smoke and mirrors and decipher the true position.’

    CLICK HERE to download the flyer and order form. For a limited time, the book is available for $49.95 (paperback) and $69.95 (hardback).

  • Tony Kevin. Time for review of our foreign policy.

    Why Australia need to get its head around great power multipolarity.

    Most Australians think of foreign policy as an esoteric, wonky field. Beyond special-cause activists, few Australians give much thought to our foreign policy choices. One who does is Professor Ramesh Thakur at the Australian National University. He does serious academic work on issues like UN peacekeeping, Security Council powers and responsibilities, the global responsibility to protect human rights , and changing great power balances. His opinion piece written a year ago is pertinent to this essay.

    In 1985-1990, as the defeated and dysfunctional Soviet Union eked out its sad and confused final years under Gorbachev, Western foreign policy theorists were thinking about the looming end of US/Soviet Cold War bipolarity and its replacement with a stable multipolar global system: i.e., a balanced international security system resting on several great powers, not necessarily equal in power, but in which all felt their national security was protected by a UN Security Council-based rules-based international order.

    It turned out we were around 20-30 years too early. With the breakup of the Soviet Union in 1991, the world entered a long unipolar moment of US hegemonic exceptionalism, which ended … but when did it end?

    With the ruthless and wrenching 2001 Al Qaeda terrorist attacks on the US heartland? With the final withdrawal in 2011 of US forces from Iraq after a costly and bloody eight-year military occupation?

    With Russian President Putin’s newfound resolve in 2008, when after eight years of trying to reach a modus vivendi with a triumphant United States, he began to confront US/NATO pressure to project power into Russia’s vulnerable Western borderlands, first in Georgia (2008). And then in Ukraine since 2014?

    With the coming to power in China in 2012 of the vigorous nationalist leader Premier Xi Jinping?

    https://en.wikipedia.org/wiki/Xi_Jinping

    Or now in 2015, with Russia’s so far successful military assistance to the Assad Government in Syria, and with China’s intensification of its fortification of islets and reefs in the South China Sea, despite US anger?

    Thakur (op.cit) notes that it is hard to map great power transitions with confidence while they are occurring, and that there are increased risks to peace during these transitions. We are in such a period now. Whatever the date of the ‘tipping point’, the US unipolar moment is ending and real multipolarity is upon us. Russia, China, the rest of the BRICs (India, Brazil, South Africa) , and Iran are testing new multipolar arrangements for sharing world power – initially in finance and trade, but as we will find in coming years, in international security as well.

    The former ‘indispensable’ power’ of the past 25 years hates and fears these changes, and would prefer to corral everybody – friends and adversaries alike – back into the familiar bipolar camps of the past. We are looking, at worst, at a potential new global bipolarity of the US with its loyal allies or satellites (NATO/ EU, Japan, Canada and Australia, pro-US Sunni Arab states) confronting a new Eastern continental power bloc led by an economically strong China, but with Russia’s revamped military strength providing much of the nuclear deterrent, conventional power projection forces and strategic depth.

    This would be a disaster. The world spent decades trying to escape the risks of nuclear war during the 1948 -1991 Cold War confrontation. Why on earth would Australia ever wish to go back to those risks? And why would Putin or Xi want to, unless US aggressiveness left them no alternative?

    Soviet Communism is dead, and the market-oriented Chinese version is no ideological threat. Both leaders are keen to work within a multipolar and UN Security Council-determined framework of collective global security.

    But a US ‘war party’ , influential in both Republican and Democrat parties, pines for return to a neo-Cold War: by force of habit, and because it is hard to maintain voter support to pay for the world’s leading military capability without an adversary more serious than Al Qaeda or ISIL. The US power structure – never mind the huge challenges of underclass poverty and the environment in the US – needs a big strong enemy.

    Australia doesn’t. Nor do the EU, Canada, and the rest of the world, yearning for peace and united focus on global developmental and environmental challenges. We will all benefit from a stable rules-based multipolar world, and Australian foreign policy under Turnbull or Shorten can help build it. But we are going to have to take a few calculated risks on the way.

    We can’t be a dumbly obedient janissary for the US in its prickly relationship with China. We have to strike our own balances, respecting Chinese great power security concerns in the South China Sea –  not so different to long-held US security concerns in the Caribbean.

    Similarly we have to respect Russia’s security concerns in its adjacent borderlands to the West and South. Neutrality of Ukraine could be made to work, as it works for Finland. Ukraine’s neo-Nazi extremists need to be reined in, not clandestinely encouraged by the West. NATO’s newest members Poland and the Baltic States need to accept Russia’s rights to security. (They have already done well, coming in under the NATO umbrella).

    And the West need to treat Mr Putin with the respect due to the capable leader of a great nation, with huge territory and resources and on the path, despite hiccups, to a middle-class parliamentary democracy. The pointless propaganda war and demonisation of Putin needs to stop. It is only solidifying his huge lead in Russian public opinion polls – now nearing 90% approval – and strengthening Russian suspicion of Western motives.

    Australia needs to welcome the opportunities for us in the world’s growing multipolarity. Hiding behind US skirts will not protect us in the end: we need to contribute good ideas to the ANZUS alliance. Australia needs to move towards a smarter, more adept global diplomacy. There is uncertainty about the next US President and his or her quality of strategic judgement. The US will need wisdom and frankness from its allies, not blind loyalty. The unmourned departures of Abbott and Harper, Canada’s choice of a youthful open-minded Justin Trudeau, and David Cameron’s kow-towing to Xi Jinping during his recent state visit to London, all signal to Australia that it is time for a serious foreign policy audit.

    Multipolarity will be good for Australia’s economy and security if we seize its opportunities for strengthened global and regional peace and security. We are well placed as a rich multicultural nation to contribute and benefit.

    Neither the Coalition, nor Labor, nor the Departments of Defence and Foreign Affairs, nor the assessment agencies, show much sign of beginning to think about these challenges. It is time they did.

  • Ross Gittins. Launch of book by Menadue and Keating.

    Sydney, Thursday, November 5, 2015

     

    Paul Samuelson, the famous American economist, is said to have remarked that the stockmarket has predicted nine of the past five recessions. I thought of that this week and decided the Canberra press gallery could top it: the gallery has predicted nine of the past two early elections. They were at it again last weekend, reporting that, with the Coalition now riding high in the polls, serious thought was being given to calling an election – per force a double dissolution – early next year. It was an unconvincing proposition and, perhaps fearing that election speculation wouldn’t help restore business confidence, Malcolm Turnbull quickly scotched it, saying we could expect the election to be when it was supposed to be, in September or October next year.

    The sub-title of the book whose launch we’re here to celebrate is, Filling the Policy Vacuum. The media have an important part to play in filling that vacuum – and maybe in having helped to create it in the first place. At present, what’s filling the vacuum – that absence of serious and informed discussion about the many policy issues the government should be grappling with – is what’s called “race-calling” – who’s winning, who’s losing, who’s facing leadership rumblings from the backbench and who’s planning to call an early election.

    The gallery loves writing this stuff – it’s much easier and more interesting than discussing policy issues. And the gallery has discovered their editors back at head office love it. It’s reporting politics as though it was a form of sport – my team versus your team, who’s winning on the league table and worries about Plugger’s groin and whether he’ll pull up by Saturday. For most of our lives the newspapers have faced ever-increasing competition, not just from rival purveyors of news – radio, television and now the internet – but, more significantly, from the ever-multiplying ways for us to spend our leisure time rather than sitting down and reading the paper. Perhaps unsurprisingly, the media have reacted to this growing competition from rival forms of entertainment by making their political reporting more entertaining; by more race-calling and less earnest discussion of policy choices.

    I don’t happen to agree with this approach. For one thing, politics as a fifth code of football doesn’t have that many followers. Most of us in this room would be avid followers, but most people out of this room aren’t all that excited by it. It may well be that all the argy-bargy the media focus on actually turns voters off politics.

    Nor do I accept that policy discussion is inevitably on the dry side. Policy can be interesting, provided the journos know enough about the subject, have the confidence to sort the wheat from the chaff and highlight the parts of the policy choice that touch on people’s lives. The real problem is that good policy reporting and discussion requires harder work, not to mention greater specialisation.

    In Ken Henry’s introduction to this book’s collection of 48 short policy discussions by 31 contributors covering as many as 15 policy areas – with all those contributors being well-known and well-respected former bureaucrats or academics (none more so than the book’s two editors and most prolific contributors, John Menadue and Mike Keating) – Ken says he “can’t recall a poorer quality public debate, on almost any issue, than we have had in Australia in recent years”.

    There may have been a worse time in the past but, like Ken, I can’t remember it. In this talk I could try to come to grips with all the pertinent and challenging things those many authors have to offer on those many problems we face at present, but I’ll content myself with saying a little more about how this policy paucity came about and how the vacuum could and is being filled.

    I’ve already acknowledged the part the news media have played in creating the vacuum and filling it with dross. As Michelle Grattan wrote in a piece published on The Conversation website last Saturday (October 31), “if we are talking about improving and enhancing public policy and the debate around that, the media have a significant role to play. They provide prime routes by which information about policy is disseminated; they are also conduits for the ideas being thrown up from these other players”.

    It’s easy – and probably correct – to attribute part of the legacy media’s deterioration in performance to their preoccupation with finding a continuing place in the world of the internet, increasingly accessed by apps on mobile phones.

    But I want to make the point that, from a policy-debate perspective, digital disruption has brought pluses as well as minuses. People interest in finding thoughtful, well-informed, even expert policy discussion no longer have to rely on newspapers and magazines. They can find new sources of quality supply quite readily on the net. Chief among these is the aforementioned The Conversation. I think this is a wonderful development.

    One of the problems with the policy debate has long been the paucity of the contribution to that debate by academics. The universities profess to want to contribute to the debate, but the plain face is their reward system effectively discourages it, overwhelmingly favouring research. Many academics don’t follow the policy debate; they write for publication in journals that aren’t much interested in practical, “applied” matters like policy discussion and, fearing criticism from their peers, they spend months perfecting an article before letting it see the light of day.

    The genius of The Conversation is that it has reframed academic contribution to the policy debate as something the uni authorities smile on (because they fund the site) and as something that, because of the unavoidable time pressures, everyone accepts is quick and dirty, the very opposite to what a journal article is supposed to be. The proprietors of the site must have established for themselves a licence to extensively rewrite the turgid prose most academics have trained themselves to write.

    Of course, The Conversation is just the biggest and most notable new digital contribution to the debate. Various local academics run their own blogs – John Quiggin is the oldest example – or contribute to high quality group blogs, such as Club Troppo and Core Economics.

    Which brings us to blogs by former bureaucrats, the chief among which must surely be our own John Menadue’s Pearls and Irritations. All the pieces in the book are, in fact, invited contributions to the special series John and Mike Keating organised earlier this year on Fairness, Opportunity and Security. The 48 articles are still accessible on John’s blog, but as an oldie who usually prints off internet articles to be read on paper rather than screen, I hope this project of turning them into a book will make them even more accessible and more widely read. They certainly deserve to be.

    In view of this policy vacuum needing to be filled, it’s really great to have John providing this new platform and encouraging former bureaucrats to use it. Never has their contribution been more needed. We independent media commentators do our best to evaluate the government’s performance, but there’s nothing like a former bureaucrat to be able to see through the smoke and mirrors and decipher the true position. I myself have been delighted to take full advantage of Mike’s superior understanding of budgeting and macro and micro-economic policy.

    I should add that the Grattan Institute – itself composed mainly of former academics and bureaucrats – has made a useful contribution to filling the policy gap, as have the many former bureaucrats now kept busy in non-retirement at the ANU’s Crawford School of Public Policy – some of whom have contributed to this volume.

    Since the extraordinary economic and political incompetence demonstrated by the Abbott government’s first budget, I’ve spent a lot of time thinking about who was responsible for its failure and the huge damage this did to the Abbott government’s policy performance in other areas. Was it the econocrats in Treasury and Finance, the people at the top of the spending departments, the government’s youthful private office advisers, the bum steer provided by the strangely constituted commission of audit (which was pretty much contracted out to the Business Council), or just the manifest personal deficiencies of Tony and Joe.

    I’ve come to the conclusion that poor advice from the econocrats and the department heads can’t be absolved from some share of the blame. But this can be traced back to the fault of the politicians – Rudd and Gillard as well as Howard and Abbott. The shiny-bums are an easy target for all politicians and, in the case of the Coalition, a very senior bureaucrat told me that they hold public servants in contempt. I believe that year-upon-year of ever-higher “efficiency dividends” has robbed the econocrats and the spending departments of much of their ability to provide their political masters with good policy advice.

    The new practice of new Coalition governments beginning their terms by arbitrarily sacking a number of department heads must surely be designed to encourage the others not to provide frank and fearless advice. The Liberals’ “revealed preference” seems to be that they don’t want policy advice from bureaucrats. We’ll make the policy, you just implement it.

    I know it’s easy to develop quite unrealistic expectations of what Malcolm Turnbull even wants to change, let alone will see his way clear to. But, even so, I’m sure he must be better than this. He’s too smart not to want good quality and frank advice from his bureaucrats, and I think he’ll want a high quality, intelligent public debate about policy options.

    In Michelle’s Conversation piece that I referred to earlier, she implied that one reason for the gallery’s less than inspiring performance on policy issues is the actions of governments of both colours and over many years in discouraging contact between bureaucrats and journalists. It wasn’t like that in the 1970s when she – and, a little later, I – first went to the gallery.

    Michelle suggests that the gallery’s coverage of policy issues could be much improved – to the advantage of the government of the day – if contact between the gallery and fairly senior bureaucrats was restored. As she stresses, this wouldn’t be about leaks, but about officials with expertise providing journos with the context and detail they have at their fingertips.

    If any politician is able to see the sense in such a proposal, it ought to be Malcolm.

    Ross Gittins, Economics Editor, The Sydney Morning Herald