Friday, August 21, 2009

Line Items On A Balance Sheet

The penalties handed down by the Supreme Court yesterday to ten former directors and executives of James Hardy Industries have been branded as “peanuts” and “a slap on the wrist”. The court disqualified the ten from managing a company for periods ranging from five to fifteen years, and also imposed fines ranging form $30 000 to $350 000. It was the former CEO Peter McDonald who copped the stiffest penalty, being disqualified for fifteen years and fined $350 000. The others were let off much more lightly with the former Hardies lawyer Peter Shafron disqualified for seven years and the others for five years. Mr. Shafron was fined $75 000, while the former chief financial officer Philip Morley was fined $35 000, and the remaining former directors were fined $30 000.

The immediate reaction from asbestos victims and unions has been of disappointment. It is not just the fact that a $30 000 fine is almost nothing to individuals who are very well off. It is not just the fact that banning them from running companies won’t even interfere with the international careers of some of these people. It’s not even the fact that the fines will most likely be paid for them by James Hardy or its insurers. It is the fact that this appears to be the value which has been placed on the lives of the thousands of asbestos victims who have suffered and died in the name of the company bottom line.

In all of the television coverage of the proceedings, one image that stuck in my mind was a protester’s placard which read “Fat cats lie while workers die”. That is a phrase which really does sum up the injustice that has been done. The former directors have been found guilty of knowingly misleading their shareholders, their workers, and the public by claiming that the Medical Compensation & Research Fund was fully funded. As we all know now, it was short by almost $2 billion.

What is most upsetting for many people is the way it seems that the wealthy former directors and executives of the company can apparently walk through the world of ordinary people and be completely untouched by anything. It is a stark illustration of the truth that there is a glass wall between the reality of ordinary everyday people, and the existence of those who run the world for their own benefit, regardless of the cost to others. We can see them through that wall, and they can see us, but nothing is ever able to touch them.

As tempting as it is to call for vengeance and retribution, all that the victims of James Hardy Industries truly desire is justice in the form of meaningful compensation, along with something, anything to show that those responsible share their humanity and have been touched by it. It is a simple recognition which is beyond monetary value. But perhaps that is the one thing of which they are not capable. After all, according to Paul Bastian of the Australian Manufacturing Workers Union, the Hardies executives only ever saw victims as “a line item on a balance sheet.”

Perhaps money is the only thing they understand, and perhaps they simply do not recognize human emotions, in much the same way that a colour blind person cannot recognize the colour red. Perhaps they are literally incapable of having any empathy for their victims in any way that you and I can understand. Either way, it means that the most appropriate way of educating them would have been to impose financial penalties that would actually make them think about what they have done.

Thursday, August 20, 2009

Tax Review By Tax Officials Equals More Taxes

When the federal treasurer Wayne Swan announced his plans to review taxation he promised a “root and branch” review, leaving no stone unturned, no cranny unexplored. Now, as Treasury Secretary Ken Henry prepares his final report, there has been increasing speculation around its contents. It is clear that a wide range of ideas and suggestions have been put forward for consideration, and that is the whole point of having the review. However, some of the ideas which have been canvassed in the media could be seen as potentially alarming.

The International Monetary Fund has recommended that Australia extend its capital gains tax to the family home, something which is tantamount to being sacrilegious in this country, while at the same time making interest payments on mortgages tax deductable. It is unlikely in the extreme that such a proposal would be adopted by any government in this country, but the fact that it has been suggested is enough to send shivers down the spine.

First of all, home ownership is primarily about accommodation, not investment and income, and should not be treated in purely financial terms. Home ownership, as well as being an Australian tradition and ideal, provides family and community stability and cohesion. The purpose of tax is not just to raise revenue for the government, but to provide a policy tool for the government by which it can encourage certain activities by reducing tax, and discourage others by increasing tax. In that context it is appropriate to encourage home ownership, for the benefit of the community, by not subjecting it to punitive taxes. In fact there are already too many taxes which affect housing, and which should be reduced.

It has been suggested that failing to collect Capital Gains Tax on homes costs the government $25 billion a year. That in itself is a shameful and deceptive statement to make, based on the implied assumption that there is some sort of entitlement for the government to collect that money. Failure to collect a tax does not cost the government a single cent. It is our money, not theirs, and they have no right to consider it as lost revenue. Until our elected representatives choose to impose such a tax they have no right to consider it a cost to allow us to keep our own money in our pockets.

The other idea of allowing interest payments to be claimed as tax deductions sounds appealing, but comes with a hidden downside. Logically, since we are forced to pay interest on any interest we are fortunate enough to earn, you should thing it would be only fair to allow us to claim interest paid as an expense. Unfortunately, this would be likely to have the undesirable effect of encouraging people to increase their debt, and in the case of mortgages, it would then in turn drive the price of houses up even further. In either case, those are undesirable outcomes which are contrary to the community interest.

The important thing for the Henry Review, and indeed for any reform of taxation, is that the entire exercise should be aimed at reducing complexity, and improving efficiency. To that end, it should also be about simplifying compliance, for both business and individuals. That should mean reducing taxes, not introducing new ones. It should also mean taking low income people out of the income tax system altogether. It should mean making everything easier. Unfortunately, there is no guarantee that’s what we’ll get. In fact, there is a real danger that when you ask tax officials to improve the tax system, what you could end up with is more ways to collect more tax, and that’s the last thing we need.

Wednesday, August 19, 2009

You Must Eat Less Than You Burn

There’s only one certain road to riches great,
You must spend less than you earn;
And there’s only one sure way to lose excess weight,
You must eat less than you burn.

The federal government’s Preventative Health Taskforce has been reported to recommend the introduction of regulation for the weight loss industry. It might come as a surprise to learn that at present there is no regulation at all beyond the basic dictates of truth in advertising law. That’s the same law that applies to any business, ranging from used car salesmen right through to real estate developers. There is no body similar to the Theraputic Goods Administration which controls the approval of medicines, and no guarantee that the weight loss program you purchase will actually work.

Of course, we have all been told repeatedly that there is no substitute for eating a sensible balanced diet and getting regular exercise. But still the market for meal replacement programs and other weight loss products is growing at a rapid rate, in fact almost as rapidly as the obesity problem itself. The catch seems to be that many of these products provide a diet regime which is far from balanced, and while they can be successful in reducing weight in the short term, the evidence seems to suggest that in the longer term they do not work. Once people finish the program they simply go back to their previous lifestyle and put the weight back on again. And that’s if they even finish the program because almost one third of people drop out of such programs in the first month.

Because of this tendency to drop out and to revert to old habits, people not only put the weight back on, but in many cases they gain even more weight. For this reason, nutritional experts believe that so called fad diets are actually making the obesity problem worse, not better. What’s worse, genuine weight loss, they say, can only be achieved with genuine lifestyle change, which for many people seems to be an impossible challenge. Even then, a realistic expectation of weight loss should be about half a kilogram a week, and a realistic target is to lose 5% of your body weight. I’m sure many people would hear that advice and wonder if it was even worth the effort.

In the end, although people should be entitled to follow whatever program they believe will work for them, they are also entitled to be fully informed as to the likelihood of success, as well as any other possible health impacts. Better regulation would result in better consumer choice, and hopefully better outcomes. But in the end, if you want to lose weight, there is no escaping the old advice… you must eat less than you burn.

Tuesday, August 18, 2009

Lessons Of The Victorian Bushfires Important For All Australians

The interim report of the Victorian bushfires royal commission has covered many of the issues which emerged in the wake of the tragedy earlier this year. Front and centre is the controversial “stay or go” policy which has been found to have given people a false idea of the safety of selecting the “stay and defend” option. Indeed, the very idea of calling the policy “stay or go” implies that either is a valid choice, and that there is an element of safety attached to the choice to stay. While it might be argued that people should have the right to stay and defend their property, it should be clear that they also have the right to be properly informed as to the real risks of doing so.

The commission has found that the policy understated the risk of death associated with attempting to defend homes, leaving people to make such a choice without being fully informed. The commission also found that efforts to alert the public were inadequate, relying solely on ABC radio stations leaving commercial radio listeners in the dark. Indeed, modern technology can be harnessed to broadcast warnings across not only the media but also mobile phones and the internet, but those opportunities have also not been fully explored.

There was also considerable criticism of the co-ordination of the various agencies, and the lack of integration of their operations and their command structures. Such difficulties serve only to add to the confusion in an emergency situation, and to delay an effective response to the disaster. Rather than having a properly integrated command, the commission found that agencies essentially shared the same location without genuine co-ordination of their efforts. The interim report also identifies once again the need for fire refuges or shelters to be created, which is not a new idea, but has never been properly implemented.

The other major issue which was subject to vigorous debate after the fires was the question of fuel load reduction and preventive controlled burning. The commission has yet to deal with those questions, but already there is an expectation that a new approach to this risk management strategy needs to be adopted. The Victorian Premier John Brumby has indicated that, regardless of the final recommendations, a policy of reducing the fuel load along roadsides will be implemented to provide safer escape routes.

While the Victorian bushfires might seem to have been something that happened far away in another state, the reality is that the same threat exists for New South Wales. The same challenges must be confronted, the same issues must be debated and the same dangers must be dealt with. New South Wales has the opportunity to learn from the experience of Victoria without having to go through a similar tragedy. Past bushfires in our state indicate that such a thing can happen here, and the lessons from Victoria are a further warning of what will happen here if action is not taken.

Now is the time to take that action, before it is too late.

Monday, August 17, 2009

Truth And Fiction

The Hollywood movie trailers often seem to say something like, “If you only see one film this year, go and see this one.” I’m tempted to say that about the new docudrama “Balibo” because of the historical importance of the story that it tells. While most of us now know the truth about Balibo and the five Australian journalists who were killed there, the fact is that most Australians were kept in the dark for a very long time about the truth of what occurred, and the truth of our own government’s complicity in what occurred. Balibo, the movie, vividly recreates what was for so long deliberately hidden.

The truth is that Indonesian soldiers, disguised as civilians, attacked Balibo on the 16th of October 1975 and captured the five Australians. Despite the fact that they came forward with their hands up in the universal gesture of surrender, despite the fact that they loudly proclaimed that they were Australian and they were journalists, despite the fact they had painted a crude Australian flag on the house in which they were staying, they were executed within minutes.

For years afterwards, the Indonesian authorities insisted that the journalists had been killed accidentally in crossfire, and successive Australian governments went along with it. The appalling truth is that not only did Australian authorities know and conceal the truth, but the Australian government knew in advance of the invasion and approved it on the basis of maintaining regional stability and a good relationship with Indonesia. These are proven facts and great pains were taken to ensure the historical accuracy of the film. After years of fiction having been presented as the official version of events, now a film presents the truth.

Some people might rail against the idea of being told that they “must” see a movie because it is “important” or even “educational, but the film of Balibo is a powerful retelling of one of the great injustices of the twentieth century. It is certainly not a popcorn movie, and the only happy ending comes from the bookended depiction of the Truth and Reconciliation Commission hearings after the achievement of East Timorese independence in 1999, but it is a very well made film that delivers a genuinely emotional experience. It begins slowly and ominously, building to a gut-wrenching level of intensity.

The innocence and cheerfulness of the young journalists gradually becomes an understanding and an empathy for the people around them, who are fighting simply for the dignity of their own existence. The spirit of the time is captured beautifully by the well chosen cast, and the portrayal of the era is meticulous in every respect. It is a film which not only reminds us of an important part of our history, it also reminds us that governments of every persuasion have no compunction about lying to their own people in the name of the national interest.

That is a message which is important in any century.