Friday, August 15, 2008

The Minister For Closing Things Down

The New South Wales government has apparently embarked upon a charm offensive. The idea was to take advantage of the Olympic lull in political activity and send members and ministers into the community to improve the Government’s P.R. Unfortunately, when Treasurer Michael Costa got the memo he missed the “charm” part.

Confronted with angry firefighters in Wollongong, the Treasurer insisted that New South Wales firefighters are the highest paid in the nation. The ten year old daughter of one of the Union representatives politely pointed out that even she knew it was a lie. Some reports suggest that Mr. Costa sneered at the young girl as he replied “That’s a good line your father has taught you.”

Whether he sneered or not, the Fire Brigade Employees Union insist that New South Wales firefighters are in fact the fifth best paid in Australia. Firefighters have every right to be angry with the Treasurer’s decision to restrict their pay increase to 2.5%, well below inflation. As a former union official himself you might expect Mr. Costa to have some sympathy for the firefighters. But no, apparently not, with suggestions this week that fire stations could be closed down, and staff numbers cut back.

It’s never good form to attack the man rather than attack the policies, but in my view there is a pattern here. Throughout Michael Costa’s ministerial career it has become evident that he is a destroyer not a creator. As Transport Minister he closed down rail services. As Police Minister he left suburban police stations unmanned. As Treasurer he has found it necessary to impose cost cuts across the board, which ultimately translate into reductions in services.

Many politicians are remembered with plaques commemorating the opening of bridges or buildings… Michael Costa will be remembered as the Minister For Closing Things Down.

Thursday, August 14, 2008

Profit, or Profiteering?

It’s all very well for the Prime Minister to tell the banks that they ought to pass on any interest rate reductions to their customers. Unfortunately it is meaningless hot air. It is quite simply a matter of a politician saying the right words to placate the voting public, and the banks now it. All along, a number of banks have maintained that circumstances might lead them not to pass on the full extent of any cut announced by the Reserve Bank of Australia. Those circumstances are supposed to be the increased cost of providing funds brought on by the United States credit crunch.

Of course the Prime Minister was responding to the news that the Commonwealth Bank has just announced a record profit. Again. He, like the rest of us, is probably wondering if times are so tough for the banks where did this magic profit result come from? Quite obviously times are not quite as tough as some are making out. In fact, the evidence suggests that banks are taking the opportunity to profiteer from the current economic climate.

Banks, like any other business, exist to produce a profit for the benefit of their owners. There’s nothing wrong with that. In fact, if they weren’t profitable then we’d all be in trouble. But it does seem to be somewhat arrogant when record profits are squeezed out of a difficult market by ensuring that everybody else, including your customers, suffer all the pain, rather than wearing some of it yourself.

Once again, we see that the results of deregulation are not always what we were promised. Rather than increased competition delivering better service and better value, deregulation means that the banks can simply ignore the advice of the Prime Minister, safe in the knowledge that he will absolutely nothing about it.

The catch is that banks, like oil companies, provide an essential product which impacts all other businesses. If they go too far, politicians might just be left with no choice but to actually do something. It’s part of a cycle where deregulation leads to arrogance which leads to excess, which leads to political fallout, which leads to re-regulation. That’s why it is just possible that a return to tighter regulation might be put back onto the agenda.

Wednesday, August 13, 2008

Fuelwatch Fizzles… What now?

Before it has even made it out of the starting blocks, it appears that Fuelwatch has fizzled. Always controversial, the plan to require petrol outlets to list their prices 24 hours in advance was apparently the best that the Federal Government could do to help ease the petrol price pain. According to the study by the A.C.C.C., it would have led to savings of almost two cents a litre. Hardly a massive saving, but perhaps it would have been worth it just to annoy the oil companies.

Unfortunately, there has also been evidence to suggest that those modest savings might prove to be illusory, and that the scheme might actually help to push prices up, not down. Worse than that, it has also been suggested that it could undermine competition by unfairly disadvantaging small independent operators. If they go out of business, then of course the way is clear for the big boys to put their prices up as much as they want.

It was for these reasons that independent Senator Nick Xenophon of South Australia decided to oppose Fuelwatch. Without his vote, it will not happen. The door is still open for the Government to make modifications to the scheme addressing his concerns, but it has to be asked if it is really worth it. The end result is that the government is left with nothing on the table to fight fuel costs, which was after all one of their election promises.

Meanwhile, the opposition plan to cut 5 cents a litre from the tax on fuel is not much better. That would save the average motorist less than $2 a week. Big deal. The only thing that has any hope of reigning in the price of petrol is opening up the wholesale market to wider competition and breaking up the so called “comfortable oligopoly” of the oil companies. After all, that’s just a polite way of saying cartel.

Failing that, the only other recourse is to impose greater market regulation, something which is heresy to today’s economists. But with the way things are going, with a significant downturn, and the first hints of a discussion of “new protectionism”, I wouldn’t be completely surprised if regulation ended up back on the table.

Tuesday, August 12, 2008

Privacy Law And Freedom Of The Press

The Australian Law Reform Commission has released its report into the Privacy Act, making 295 recommendations for changes to the law. The report runs to 2700 pages and canvasses a wide range of issues. According to Commissioner Les McCrimmon, the most significant recommendation is that Privacy Law should be simplified and streamlined, and while that would be desirable, the report covers much more than that.

Among the more vocal critics of the report is a group calling itself the “Right To Know Coalition”, a collection of powerful media companies led by News Ltd, who are concerned about the possible impact that the proposed changes would have on journalism. In particular, it is suggested that investigative journalism would become much more difficult, and that journalists and their publishers could be subject to new forms of legal action.

While it is important to protect the freedom of the press, and freedom of speech itself, I wonder if the Coalition is more worried about the massive revenue derived from tabloid reporting of the private lives of celebrities. Genuine investigative reporting will continue to be protected because of the public benefit. However, what passes for investigative reporting these days often amounts to Today Tonight or A Current Affair pursuing nickel and dime panhandlers and trailer trash welfare cheats and making a spectacle, rather than tackling serious issues with broader significance.

There seems to be an unhealthy obsession with the private lives of movie actors and pop stars driving a massive celebrity trivia industry. If these so called news outlets really want to do something about preserving the freedom of the press it would be a good idea if they did something a little more worthwhile with that freedom.

Monday, August 11, 2008

Pensioners Condemned To Poverty

As the Federal Government considers its “root and branch” review of tax, welfare, and retirement incomes, it has emerged that the aged pension for singles is well behind international standards. The comparison is made of the ratio between single and couple rates of pension, which is about 59% in Australia as opposed to around 66% in other OECD countries. The sad reality is that this is only part of the story.

While it can be useful to make comparisons with overseas countries, it can also be a distraction from the simple reality that the aged pension in Australia is simply inadequate. There are many indicators available showing this to be the case. Let’s start with the poverty line.

The Henderson Poverty Line was instituted after an inquiry in the early seventies. It has been updated quarterly ever since, and shows a dollar amount for family groups in different circumstances. The most recent Henderson Poverty Line figure for a single person not in the workforce is $306.57 a week. For someone in the workforce it is $378.08, although why somebody without a job needs so much less money is not clear to me. Either way, the single rate of pension is well below water at $273.40 per week. In other words, our aged pension is designed to keep elderly Australians submerged in the depths of poverty.

Another useful benchmark is the Federal Minimum Wage, which is currently set at $543.78. This figure has been determined to be the minimum fair wage for a full time employee to provide for an adequate standard of living. Now if that’s the case, why should an aged pensioner be expected to survive on so much less?

The single pension is currently set at 25% of male average total weekly earnings, and while that means that as incomes increase so does the pension, the truth is that 25% is simply not enough. A more reasonable formula would be to make the couples’ pension equivalent to the minimum wage, and the single rate should be at least 66% of that, which on today’s figures would work out to $358.89 per week.

Of course, the cost of doing so would be several billions of dollars, which is all the more reason why the only real long term solution is to get serious about fixing superannuation policy.