Friday, July 31, 2009

Who Said Good News Doesn’t Make Headlines?

Just in case you didn’t see the front page of the Telegraph, apparently the Global Financial Crisis is over, having been killed by unbridled optimism. While it is difficult to deny the optimism of the headline, others are not quite so sure. Is it possible that the Great Recession is turning around? Is it possible that this is the Recession That We Didn’t Even Have, because so far Australia has not recorded a “technical” recession at all? Or has the Telegraph jumped the gun in its enthusiasm to be the first to declare in print that happy days are here again?

The report stems in part from observations made by the United States President Barack Obama that the volatility of financial markets had largely settled down. He said, “We have stopped the freefall. The market is up and the financial system is no longer on the verge of collapse... so there's no doubt that things have gotten better. We may be seeing the beginning of the end of the recession.” And it is true that much of the volatility has disappeared, and that the stockmarket has been picking up strongly. But that’s not all there is to the story and the President didn’t actually say that the crisis is over.

For the Americans, unemployment is still rising, credit is still in short supply, and the nation faces an enormous debt along with a monstrous budget deficit. The United States economy is still very much in recession with the next Gross Domestic Product figures expected to show a further contraction. It is true that here in Australia we are in much better shape, for a number of reasons. Two principle reasons are that the previous government built up a health budget surplus and cash reserve, and the current government acted swiftly to boost the economy and prevent the damage from being worse than it has been.

At the same time, Australia still confronts the prospect of rising unemployment, and weak business investment. There are still many uncertainties in the international market place which may affect our economy. And now there are new concerns about a possible housing price bubble expressed by the Reserve Bank Governor Glenn Stevens this week, along with the first hints of a return of the threat of inflation. That’s why so many people from the Treasurer through the Finance Minister and on to a range of economic commentators are rolling out that well worn cliché: “we are not out of the woods yet.”

While interest rates are low, there is already talk of when they might be expected to go up again. While housing prices fell for a while, now they are rising, and the challenge of housing affordability is no closer to having been solved. In fact, for low income earners who were awarded no pay rise in this year’s Fair Pay Commission decision it is becoming worse. Access Economics has reported that the construction sector is in desperate straits and will be for quite some time. So all in all, it is a bold call to declare the Global Financial Crisis to be “over”.

At the same time, it is not a bad thing to see some optimism on the front page of the newspaper.

Thursday, July 30, 2009

Four Wheel Drive Enthusiasts To Become Outlaws

It’s not a story on the front pages of the newspapers, and you probably won’t see it on the six o’clock news, but people around New South Wales are pretty annoyed about changes to the regulations for vehicle modifications. Earlier this month, the roads minister Michael Daley announced that from the 1st of August new rules would apply to the raising and lowering of vehicles, a measure which he said was intended to target “hoons” and improve safety. But the fact is that “hoons” are not the only people affected.

Until now, the law has allowed car owners to raise or lower their vehicles by up to 5 centimetres without engineering approval, and up to 15 centimetres with certification from an authorized engineer. From the 1st of August however, all such suspension modifications will be restricted to a maximum of 5 centimetres, and all such modifications will require an engineer’s certificate. What this means, as far as I can determine, is that law abiding people who have made such modifications under the existing rules, in good faith, are now about to be made into outlaws overnight.

The minister, in his press release, said, “I don’t want to see young hoons putting their lives or the lives of others at risk, just because they think their car looks better 15 centimetres closer to the ground.” Of course, no sensible person wants to see lives put at risk by “young hoons” or anyone else, but that statement is completely at odds with the current requirement for engineering approval for modifications between 5 and 15 centimetres. No engineer who values his reputation is going to approve any modification which is not safe, and yet with the stroke of a ministerial pen something which was officially safe one day will become unsafe the next.

Of course, the use of the word “hoon” gives us a clue of what the intent of the minister must be, especially when his discussion has focused on people who lower their cars because they think it makes them look good. He would seem to be talking about the “Tokyo Drift” crowd who like to drive modified Japanese turbo sports cars and get involved in street racing. While hoons and street racers do indeed pose a risk to public safety, it is their driving behavior and their disregard for the law which pose the greatest risk, not the modifications to their cars.

The problem is that a law which seems to have been intended for antisocial troublemakers is also impacting on sensible law abiding people who are car enthusiasts, as well as rural people who have four wheel drive vehicles which have been raised for increased ground clearance in the bush, but also need to be driven on the road. It would appear that the minister has given absolutely no consideration to the idea that there might be people who have legitimate reasons for their modifications and who are not hoons, road racers, or villains.

But unfortunately from the 1st of August they will be outlaws.

Wednesday, July 29, 2009

Bank Stuns The Nation By Actually Doing The Right Thing!!!

I have lost count of the number of times I have lambasted banks in general for the various fees they charge their customers. I have repeatedly pointed out that there is no justification for charging the customer for things which rightly should be overheads. Account keeping fees? Well if banks did not keep account, no one would deposit any money with them and what would they do then? ATM fees? But we were told that ATMs were cheaper than providing over the counter service and would save us money, not cost money. Application fees? I’m sorry, but do you really want to charge me a fee for filling out your forms and offering myself as a customer who will add to your profits? I should be charging you! In fact, once upon a time I might have actually earned interest on the money I deposited with you for you to invest in lending to other people at a profit! Well good luck with that these days when the transaction fees take out far more than interest paid will ever cover! And of course, the so called exception fees, when you charge me a whopping great penalty for having insufficient funds even when it is not my fault that I was not paid on time.

It really is a crime that the banks have been allowed to get away with this nonsense for so long. These days, the bank robbers are the executives sitting behind their polished mahogany desks, high in their headquarters high rise offices, beyond the reach of ordinary people like you and me. The great irony is that for years I have pointed out that if banks really want to attract more customers, all they have to do is to actually deliver the friendly personal service that they all spend millions of dollars on advertising. It was also I who pointed out that instead of closing branches, banks should be opening them because having an extensive branch network is the point of difference which gives them an enormous competitive advantage over their cheaper non-bank rivals.

So it comes today as a wonderfully pleasant surprise to see the news that the National Australia Bank has decided to follow my advice, or at least part of it. The NAB has decided to drop the very nasty $30 exception fee for overdrawn accounts. This is the fee which has been slapped onto customers who have been the victim of a mistimed automatic payment or a delayed paycheque, and which results in the ridiculous outcome where a $10 overdraught becomes a $40 overdraught simply because the bank has the ability to reach its cold boney fingers into your bank account any time it damn well pleases. Well, ten out of ten to the National Bank for recognizing reality that it is far better to reward its customers than it is to punish them.

It has been suggested that the bank could go further in cutting back fees and charges, and that’s true, but it is a decision which should be applauded in its own right. Not only will it remove a draconian injustice from the bank’s fee structure, it will set the standard for other banks to follow, and they are almost certain to do exactly that. If they don’t, surely customers will be enticed to drop them and move their business to the NAB. This is exactly how good competition policy is supposed to work, and it vindicates my point of view that the best form of advertising and promotion for any business is to actually deliver the service that suits the needs of the customer.

So, well done to the National Australia Bank. But let’s not stop at that. Now, let’s get to work on abolishing all those other fees too.

Tuesday, July 28, 2009

Nuclear Energy Back On The Agenda

Just when you thought it was safe to lock up the fallout shelter, it seems that there are some who are determined to revive the nuclear energy debate. Despite the fact that the current government has firmly indicated that it has no interest in establishing a nuclear power generating industry in Australia, others have resumed pounding the drum. Last week former Howard government industry minister Ian McFarlane called for consideration for a nuclear industry to be put back on the table. Today, his National Party colleague John Cobb has made a similar call, suggesting that if we accept that the dangers of climate change are serious we would be foolish to ignore the nuclear option.

Mr. Cobb claims that if we accept the urgency of the climate change situation then it is obvious that we should stop burning coal which is one of the primary sources of carbon dioxide emissions, and replace it with uranium which produces no such emissions. It is a blunt argument which uses equally blunt logic. What it sidesteps is the number of unresolved issues which surround the safety of nuclear power and the disposal of the toxic waste that it produces. Nevertheless, Mr. Cobb and Mr. McFarlane are correct to suggest that the issue should be examined and debated.

In a world where the prevailing scientific opinion is that man made carbon dioxide emissions are damaging the climate, the sensible thing to do is to reduce those emissions as dramatically and as quickly as possible. That inevitably means finding a way to generate electricity without the carbon dioxide emissions, by whatever means is most effective, efficient, attainable and sustainable. The candidates are renewable power such as solar, wind, tidal and geothermal, along with consumable power such as clean coal and nuclear. Despite the obvious attraction of renewable energy, the technology is unlikely to be able to deliver sufficient output in the near term. Clean coal also sounds good, but it too remains a technology yet to be proven. That leaves nuclear energy, a technology already in use.

Nuclear energy has the added appeal that Australia possesses one of the best supplies of uranium in the world. Even though we have a massive coal industry, the uranium industry also has the potential to be a major contributor to the Australian economy. We are already one of the key suppliers of uranium to the world market, and many people feel that there is no reason why we should not exploit a resource that we have in such plentitude. And despite the protestations of the anti nuclear lobby, we also have the massive tracts of wide open spaces to deal with waste disposal.

Of course waste disposal is one of the major concerns that sustain the arguments against nuclear energy. The toxic waste produced by reactors is not only extremely hazardous, it remains so for thousands of years, leaving a toxic legacy for future generations who may one day curse our short sightedness. The other serious concern is that of an accident at a nuclear power facility. All it takes is one accident to create devastating consequences, which also leave a potentially tragic lasting legacy. These are concerns which should never be dismissed lightly.

The fact is that John Cobb and Ian McFarlane are right to suggest that the discussion of nuclear energy hasn’t been concluded. Just because the current government stands against it doesn’t mean that will be the case in ten years or twenty years or fifty years time. In the light of what we know about climate change there is every chance that Australia will one day embrace nuclear energy. At the same time that is why it is equally important to exhaustively study all the other alternatives.

That means fully exploring clean coal, to see if such a thing can be done sustainably. It means fully exploring all forms of renewable energy because the day will come when both coal and uranium will no longer be viable. And it also means committing to research new forms of energy such as fusion energy, quantum energy, and energy sources that have not yet even been discovered. It is possible that Australia may embrace nuclear energy in the years ahead, but it is not the true solution that would be delivered by a genuinely renewable energy supply.

Monday, July 27, 2009

Healing The Health System

The final report from the National Health And Hospitals Reform Commission has stopped short of recommending a complete Commonwealth takeover of public health. Instead it has identified specific areas where the Commonwealth should assume responsibility, such as outpatient services, while providing for a formula to contribute 40% of the cost of in hospital services on a fee for service basis. At the same time the report has left the door open for that figure to increase to 100% over time, so the complete takeover is still a possibility. Of course, the reality is that the Commonwealth does not need to take over 100% of the funding responsibility in order to take control.

The next stage of the process will be for the Commonwealth to consider the report, take public submissions, and go to the Council Of Australian Governments with a proposal for a reform program. There may be scope for negotiation with the states at that point, but the bottom line is that if the Commonwealth is going to be controlling even 40% of the funding for public hospitals on a fee for service basis, it will need to have a consistent national framework in place to administer the delivery of services. The states will have no choice but to come to an agreement, or face a full scale takeover anyway, because the Prime Minister has made it clear that failure to reach agreement will result in a referendum to give full control to the Commonwealth. Either way, the Commonwealth will be in the driver’s seat.

The Commission has also recommended increasing the Medicare levy to pay for a federal dental health scheme, called Denticare. As the name suggests, it would have some similarities to Medicare in the way it works. Although the proposal may be controversial, and already the opposition has indicated that it will not support any increase to the Medicare levy, it addresses an overwhelming shortcoming in the present arrangements for public dental health. In fact, public dental health services are close to non-existent in many parts of Australia, and this has been a serious problem for an embarrassingly long time.

Of course, the opposition is claiming that Kevin Rudd has broken his election promises on health. It’s true that the Prime Minister made bold and unequivocal statements about fixing public hospitals and ending the blame game. But the suggestion that Mr. Rudd has reneged on a promise to “fix public hospitals by mid 2009 or force a federal takeover” is simply misrepresenting what was promised. The promise was that if state governments did not improve health services themselves by mid 2009, then the federal government would begin a process to take over. Isn’t that exactly what has been happening? The Reform Commission has delivered its recommendations, and now the Commonwealth will seek to deliver those reforms through the appropriate mechanism of C.O.A.G.

The template which has been put forward today provides a framework to move towards a new funding model which places the Commonwealth at the head of the table, a new balance of state and federal responsibilities, and a new opportunity for productive co-operation to put an end to the blame shifting of the past. Now it’s up to the states to come to the table and form an agreement which delivers on all the promises to actually provide the health services Australia needs and deserves. Even if they don’t, the way is clear for a referendum to hand control over to the federal government. Either way, it amounts to the Commonwealth calling the shots, and if that’s not a takeover, Malcolm Turnbull was never a merchant banker.