Friday, December 11, 2009

Power To The People

The push to introduce recall elections in New South Wales is gaining momentum, in part propelled by the Sydney Morning Herald running a petition, but mostly because people are increasingly fed up with the frustration of being lumbered with a government they see as incompetent and introspective. The idea was put forward by opposition leader Barry O’Farrell early this year and he has been promoting it at every opportunity since. Of course, if we already had such an option available he would be the beneficiary because on current opinion poll figures he would win any such election.

Currently, there are very few options for getting rid of a poorly performing government. The governor really cannot do anything unless the government does something which is illegal or unconstitutional. That leaves the parliament itself to pass a no confidence motion in the lower house which would require the governor to then dissolve the parliament and open the way for an election. Since the government has rock solid control of the lower house that would amount to sacking themselves, and that is just not going to happen. It is because of this state of affairs that a recall election seems like such an appealing idea.

It is a process which already exists in other parts of the world, most famously in California where it was a recall election which saw Arnold Schwartzenegger take office in 2003. It also exists in the Canadian province of British Columbia, which has a similar system of government to our own. A recall election process simply allows ordinary citizens to sign a petition for an election on the grounds that the government is not meeting performance standards. If enough signatures are collected, an election is called. It’s power to the people in the most direct and democratic manner.

Of course, it is important how performance standards are defined, and how many signatures are required, so that we are not running off to elections at the drop of a hat, but the overseas experience shows that the system can work well. While our experiment with fixed four year terms has been disappointing, a recall election mechanism would provide an escape clause which would help to ensure that governments maintain standards throughout their term. It doesn’t mean that the fixed terms would be superseded, just made to work better.

Barry O’Farrell is promising to call the required referendum to introduce recall elections should he become Premier in 2011. Ironically, that means that while the current government will stubbornly serve out its fixed four year term, Mr. O’Farrell would himself be subject to the provisions of any such recall election law. It would mean that his government, and all successive governments, will be subject to a higher level of accountability and that can only be a good thing. It is more power to the people, and that is something that politicians very rarely give away.

Thursday, December 10, 2009

Westpac’s Banana Republic

Interest rates are rising, unemployment is falling and the Westpac Bank is apparently selling banana smoothies. Today’s unemployment figures have unexpectedly shown an increase in fulltime jobs and a fall in overall unemployment, down from 5.8% to 5.7%. Yes, it is only a modest fall, but the crystal ball gazers were expecting any movement to be up not down. Even more significantly, this is the second time this year that the number has fallen against expectations. After peaking at 5.9% in July, the rate fell to 5.8% in August where it has remained steady until now, despite predictions of a peak around 6.5%.

So what happened to all the doom and gloom and predictions of unemployment reaching 8.5% or even higher? Does this second fall mean that the peak has passed and the recovery from the Global Financial Crisis is powering ahead? At the very least it is a positive sign for the Australian economy, and at the best it could well mean that we are actually on the way out of the woods that everybody seems to be so fond of talking about. Of course the risk of further international instability still means that we shouldn’t count chickens which have not yet hatched. What we can count on however is that we are likely to see more interest rate increases as a result.

Meanwhile, the happy folk at Westpac have been busy explaining themselves after increasing mortgage rates by 20 basis points more than the official rate increase. Princess Gail Kelly seems to think it has something to do with the price of bananas, although how the price of bananas can affect interest rates is something I haven’t quite figured out yet. Perhaps it has something to do with the banana republic economy Paul Keating warned us about years ago, or perhaps Westpac executives just think of their customers as monkeys.

Either way, this will not be the end of it. As the recovery continues, official rates will rise further and banks including Westpac will continue to increase their rates too. Never mind that rates are still considerably lower than they were before the crisis hit, there will still be complaints every time they go up over the next twelve months. But given the severity of the public backlash against Westpac this time, I wonder if they will be quite so enthusiastic about leading the way to higher rates next time around.

Wednesday, December 9, 2009

Magic Pudding Policy

Tony Abbott’s choices for his new shadow cabinet line up have been described as a triumph for climate skeptics. Obviously, hard line climate doubters such as Nick Minchin and Barnaby Joyce have come out as winners, being given important frontline portfolios. Senator Minchin has been made shadow minister for energy and resources, while Senator Joyce has been made shadow minister for finance. Both of these portfolios have a direct and significant impact on climate change policy. But the choices made by Tony Abbott have much wider implications than climate change policy alone.

The new line up has also been described as a sharp turn back to the political right, a return to the Howard era, and a signal that industrial relations reform is back on the table. The mere fact that the reshuffle has seen the return of significant figures from what might be described as the old guard, is in itself enough to inspire comparisons to the Howard era. But it’s not just the personalities that are significant, but the policy ideas that are seen to represent. For example, Kevin Andrews was a central figure in the design of Work Choices, as well as the immigration minister who presided over the Haneef affair. Now he has been given the shadow portfolio of families and community services. Does this mean he has the opportunity to show his more compassionate side, or does it mean we can expect harsher policies for welfare recipients?

On several fronts the new line up could be seen as a throw back to a bygone era with former ministers back on the front bench, more right wing policies, and a more skeptical position on climate change, but it can also be seen in a different light. It can be seen as a return to core Liberal Party principles and a move to make a clear differentiation from the centrist Labor government. And if the support for the Liberal candidates at last weekend’s two by-elections is anything to go by it’s a gamble that might seem to be working. Tony Abbott himself has said that if he wins the next election his front bench choices will seem to be an act of genius, but if he loses he is likely to become political roadkill.

If nothing else, Tony Abbott is a realist in that respect. That’s because he knows the political game as well as or better than anyone else. In the end however, that is also the weakness. Tony Abbott’s choices are more a reflection of politics than of policy. In fact, at the moment there is no policy, just a promise to develop a policy which will appeal to the populist instincts of the electorate. From a political point of view that can be a winning strategy, just so long as nobody has the hide to stand up and reveal that the emperor is wearing no clothes, and that’s only a matter of time.

Right now it appears as if peace has broken out within the coalition parties. But beneath the surface, divisions remain. Tony Abbott’s plan depends upon being able to please both the climate change believers and the skeptics in his own party with a yet to be devised policy which cuts emissions without affecting the economy. Whether you call it a paradox or a magic pudding, it is an illusion which cannot be sustained for any length of time, which is why Tony Abbott may be more likely to go down in history as political roadkill than as a genius.

Tuesday, December 8, 2009

Agreement To Make An Agreement Delays Health Reform

Two years ago, Kevin Rudd and the Labor Party were elected to government after a campaign which promised two major reforms. One was the end of Work Choices. The other was health and hospitals. Specifically, Kevin Rudd promised that he would end the so called “blame game” and that the buck would stop with him. He promised that the States would be held accountable and that if they failed to deliver improved health care he would bring about a federal takeover of the hospital system. He set a clear deadline for that to happen. That deadline came and went on the 30th of June this year.

Progress has been made, with increased funding arrangements and the landmark inquiry by the National Health and Hospitals Reform Commission, but so far there has been no attempt to address the structural reform needed to make the system fair, efficient and sustainable. In the light of that election promise two years ago, expectations were high that yesterday’s Council Of Australian Governments meeting would result in a significant step forward towards that reform. Instead, what we got from that meeting was an agreement to make an agreement next year.

This has led to widespread condemnation form doctors, nurses, and the community. Why the wait? Don’t we have the Reform Commission recommendations? Haven’t the politicians had enough time to formulate a plan? The opposition has accused him of being a bureaucrat who makes promises, establishes inquiries and committees, but never actually does anything. It certainly seems as if Kevin Rudd is a politician who is very good at delivering the grand symbolic gesture, signing the redundant Kyoto Protocol, and making the apologies to the stolen generations and the forgotten Australians, but it seems actually doing something is a bit more of a challenge.

The Prime Minister insists that it is important for the government to “get it right”. While that’s true, haven’t we already been patient? The inquiry is over, the report has been completed, the doctors and nurses, not to mention the patients, deserve to know what’s going to happen. And while we are all waiting, the system continues to struggle and deteriorate, prompting questions of how much longer it can last without suffering a major failure. Prue Power of the Australian Healthcare and Hospitals Association described the hospital system as being in a holding pattern and said, “If the government is not careful, the plane may run out of fuel before it has a chance to land safely."

One possible explanation for the delay is the timing of elections. The next federal election is due at the end of next year, and some other State elections are also on the way. Could it be that that the Prime Minister and his Labor Premier colleagues are staging this process to deliver a favourable outcome at just the right time to make them look good going into an election campaign? That might appear to be a very cynical question to ask, but it would be far more cynical if the answer turned out to be “yes”.

Monday, December 7, 2009

Climate Change Leaves Abbott On Thin Ice

The change of leadership in the federal Liberal Party seems to have given them a lift in the opinion polls, boosting them from abysmal to simply miserable, with the latest Newspoll showing the Labor government remaining well ahead on the two party preferred figures of 56% to 44%. Nevertheless, Tony Abbott has struck a chord among some voters and his own rating as preferred Prime Minister is now 23% compared to Malcolm Turnbull’s 14% in the previous poll. He appears to have made this difference by establishing a clear distinction between his policy and that of the government by rejecting Mr. Turnbull’s bipartisan support for the amended Emissions Trading Scheme. But don’t for one moment believe that the internal division within the Liberal Party is over. It is not.

Malcolm Turnbull has made a very public and a very scathing assessment of the new leader’s new policy. To be completely blunt he described it as “bullshit”. Mr. Turnbull claims that the Liberal Party is now led by people who believe that climate change does not exist and there is no need to do anything about it. In fact, the new opposition leader doesn’t even have a climate change policy yet. All he has so far is a policy to have a policy, which does not include either an emissions trading scheme or a carbon tax, by the time parliament resumes in February. He has a position driven by politics, not policy, and as a result has left himself and the opposition he now leads at risk of losing any semblance of credibility.

Tony Abbott has indicated that his yet to be devised policy will be based around emissions mitigation measures such as regulatory controls on emitters, land management reform, and bio-sequestration, all without a tax or a trading scheme. All of these proposed measures are good sound ideas and should be included in any climate change program, but relying in these ideas alone ignores, or misrepresents, some important realities. None of these measures can be implemented without some kind of cost, and the Shadow Treasurer Joe Hockey is reported to have estimated the cost at around $50 billion. That money would have to come from somewhere, and if it isn’t from a tax then it will be from higher consumer prices.

The other important matter which is carelessly brushed aside by Tony Abbott’s policy to come up with a policy is the simple fact that he has apparently ignored that research done by his own party. In opposing any form of Emissions Trading Scheme at all, Mr. Abbott has not only overturned the policy of Malcolm Turnbull, but he has ignored everything that went before it. In 2007, the taskforce set up by Prime Minister John Howard came to the conclusion that the most cost effective way to address climate change is a choice between an emissions trading scheme and a carbon tax. And yet, Mr. Abbott has rejected both. Was John Howard wrong?

Malcolm Turnbull has already indicated that he will vote in favour of the government’s emissions trading scheme legislation when it returns to the parliament in February. Don’t forget that he lost the leadership by just one vote in the most volatile circumstances, and that many of his colleagues share his views. The leadership battle might be over, but if Tony Abbott’s promised climate change policy turns out to be anything less than miraculous the internal instability will remain. The ice beneath Mr. Abbott’s feet is already showing cracks… and that really is a direct result of climate change.