Friday, February 26, 2010

If Only I Could Find My Hairdryer.

Hello, I’m Kevin Rudd and it’s all my fault. Now stop bothering my poor old mate Peter Garrett who has just been the meat in the old sandwich and really deserves a fair shake of the sauce bottle. It’s not his fault that shonky operators have scammed the ceiling insulation scheme. I mean, how could he have been expected to know that dodgy contractors would crawl out of the woodwork just because we offered to give away $1600 of taxpayers’ money to anyone who could show us a Bunnings receipt?

No, Peter is not to blame. He is just the poor patsy left holding the bag because we put him in charge of a plan cooked up by Wayne, Julia, Lindsay and me after a strong cup of tea and a long discussion about merchant bankers and executive salaries. Obviously those people, the ones who really run the economy, had stuffed up and we had to step in and fix up their mess for them. The important thing was to hand out money like confetti so that everybody would think that we were a bunch of cool and groovy party animals who had rescued the economy. You should see Wayne in his John Travolta disco suit.

Never mind about the loss of life, the almost 100 house fires, the 1000 electric roofs, and the 240 000 potentially substandard installations, feel the $2.4 billion party vibe in the economy. The house is rockin’. Or maybe it’s just smouldering, it’s hard to be sure unless I get up into the roof and check for myself. Either way, the buck stops with me. I’m in charge. And if anything goes wrong, I’m here to fix it. My name is Kevin, I’m from Queensland, and I’m here to help.

Now if only I could find my hairdryer.

Thursday, February 25, 2010

Barnaby’s Day Of Reckoning Will Come

Despite repeated calls from the opposition for the Federal Government’s economic stimulus program to be withdrawn, the evidence seems to indicate that any such move would pull the rug out from under the economic recovery. Much of the support has been directed towards the construction industry and the latest figures show that if it wasn’t for government projects the sector would be devastated. The December quarter figures show a significant fall in residential building, both for the quarter itself and compared against the previous year. Meanwhile the non-residential sector grew to $9 billion dollars which only appears healthy until you remember that almost $3 billion of it came from public sector construction. Without the government programs the result would have been a 16% fall instead of an 18% improvement.

Obviously, in terms of the economy and protecting employment, halting the stimulus package now would be a disaster. You only have to look at the impact on the insulation industry when the government was forced to pull the pin on the ceiling insulation program last week with thousands put at risk of unemployment and a $40 million transition package rushed into place yesterday. So, just what is the opposition on about? If they are wrong in their calls to end the economic stimulus, could they also be wrong about other things such as their warnings over budget deficit and government debt?

The short answer is “yes… and no”. Shadow Finance Minister Barnaby Joyce has attracted a considerable amount of criticism for making some apparently outrageous claims along with a couple of embarrassing mistakes. His primary concern seems to be focused on the issue of government debt, and the fear that some day it might become so big that we cannot pay it back. Ongoing budget deficits will only add to that debt, and he is right to point out that at some stage the deficit must be brought under control. If not, Senator Joyce has warned that Australia will eventually face a “day of reckoning”. In basic terms he is absolutely right when he says that “if you do not manage debt, then debt manages you.” Anyone who has ever had a credit card debt get out of hand can readily understand that.

However, the alarmist claims of Senator Joyce are also misleading. Because of the Global Financial Crisis, the federal budget would have swung into deficit no matter what the government did, and no matter who was in government. As the economy slows, tax receipts fall. As the economy recovers they will rise again. The argument against increasing the deficit in order to spend money on stimulating the economy because it would send the country into debt is a flawed one because it fails to recognize the benefits of curtailing recession and supporting the economy as it recovers, delivering growing tax receipts which will reverse the deficit in due course as part of a cyclical process.

The opposition is also guilty of exaggerating the relative size of our debt. Roughly, it’s around 15% of our Gross Domestic Product. That’s like a household with a $100 000 income taking out a $15 000 mortgage. By comparison the United States government debt is around 90% of their GDP, and their budget deficit alone is roughly the size of the entire Australian economy. The truth is that the Australian economy is in good shape, although there is still a considerable risk of being subjected to the ill effects of problems in the rest of the world, and abruptly ending the stimulus package would inflict unnecessary damage with no benefit to anyone.

At the same time, that doesn’t relieve the Government from any responsibility for having poorly managed aspects of the stimulus, such as the roof insulation scheme. It doesn’t protect the Government from criticisms that its school hall building program has been inefficient and poorly targeted. It doesn’t justify the failure of the Government to invest precious taxpayer dollars into long term infrastructure assets which will deliver value for money for generations to come. There can be no doubt that the short term quick fix of the economic stimulus has been highly successful, but the long term legacy may yet turn out to be one of regret at mismanaged programs and missed opportunities.

Wednesday, February 24, 2010

No Need To Import Inferior Beef

The plan to allow beef imports from countries known to have had exposure to BSE or Mad Cow Disease has raised significant fears among both farmers and the community generally. It certainly sounds alarming to hear that such imports will be allowed, and it certainly seems to fly in the face of any kind of common sense. It should be self evident that the best way to eliminate the risk associated with such imports is to simply not allow any imports at all. Despite the reassurances that any such risk is “negligible”, many people feel that “negligible” is in fact an acknowledgement that the risk is not zero. With Australia enjoying the benefits of being an island continent which affords us with a natural quarantine, it would seem foolhardy to simply throw away that advantage.

While some might be concerned about the effects of competition on the local beef industry, that in itself is not enough to halt the imports. Australia is a free trade country and competition is simply part and parcel of the arrangements that allow us to export our produce to the rest of the world. However, one of the things which make our produce so attractive to other parts of the world is the fact that it is clean, green and free of such infections as BSE. Protecting our industry from anything which might threaten that disease free status is perfectly legitimate. So the real questions are just how great is the risk, and is any level of risk acceptable?

The report commissioned by the government claims that any risk of contamination is negligible, and that may be true, but is even a negligible risk worth taking? If our industry is compromised by a failure in the quarantine protocol it will be a genie that cannot be returned to the bottle. The trouble is that we can’t even be sure just how negligible the risk might be in the absence of a detailed import risk analysis, or details about the regulations and protocols which will be imposed on any imports. Then, even if we do insist on other countries meeting the same stringent standards that we impose upon our own industry, what real assurance is there that those other countries will comply with our standards and just how would we enforce them?

When you think about it, why do we need to consider importing beef from anywhere else anyway? We have the best beef in the world here already, and we have so much of it that we export it all over the world. While we wouldn’t want to treat our trading partners unfairly, I have to wonder why they would want to sell their beef to us when there are so many countries, like Japan for example, which do not have a significant domestic beef industry and who actually have a genuine need for imports. You would think that such countries would be keen to pay a premium for a product that they cannot produce for themselves. Unless of course, they don’t want the beef from those producers because it doesn’t come up to standard.

If that’s the case, then we shouldn’t want it either.

Tuesday, February 23, 2010

Kevin’s Good News

I wonder what it is exactly that prompts politicians to appear on television shows. Not the nightly news, or the serious current affairs programs, but light entertainment and variety programs or even game shows. Politicians from both sides of the divide do it, sometimes even together as Kevin Rudd and Joe Hockey used to do on Sunrise, which might just claim to be a serious news program, but really is bordering light entertainment. Last year we saw Deputy Prime Minister Julia Gillard appearing on “Are You Smarter Than A Fifth Grader?” Perhaps that was seen as appropriate because she is also the education minister. And who can possibly forget that memorable appearance all those years ago by the then Treasurer Peter Costello dancing the Macarena with Kerri Anne Kennerly? Clearly this is not a new phenomenon.

Obviously, there is a view that any publicity is good publicity, and the more we can see our politicians the better for their re-election chances. If that means that we get to see them acting like ordinary human beings then so much the better. The idea presumably is that if we can relate to them and even find them likeable, then we are more likely to vote for them. But is it really true that any publicity is good publicity? Surely, it doesn’t take a great deal of cynicism to see through the phony frivolity of some of the stage managed appearances that are designed to sell us the idea that such and such a politician is a decent chap and a nice guy. Surely, there comes a point when it might actually all backfire and start to show up the shortcomings of our elected representatives.

Apparently not. This week we saw the Prime Minister Kevin Rudd appear on the satirical comedy show “Good News Week” which lampoons current news events. He certainly wasn’t there to make serious policy announcements so the only possible explanation for the appearance is that it was intended to allow the public to see him in a different light. The Prime Minister smiled and laughed a lot, and even managed to crack a few jokes himself. Whether it made him seem endearing or otherwise is a matter of opinion. My own observation was that he had come across as being a bit of a “dork”. For my trouble I was roundly castigated by a caller on my show who told me that he had worked for a series of Prime Ministers between 1954 and 1969 and that he was appalled that I had failed to show the appropriate respect due to the Prime Minister’s position.

Now, “dork” is a slang word which is usually defined as a person who is “quirky, silly, or socially inept, or out of touch with contemporary trends,” and is sometimes confused with the similar terms “geek” and “nerd”. The thing is, most of us are dorks, to some extent. Only a handful of people get to be genuinely considered “cool”. In that respect, perhaps the Prime Minister’s appearance has actually achieved the desired effect and shown him to be a regular person just like the rest of us, even though he is a bit geeky, nerdy, and more intelligent than a room full of Mensa members.

My point, however, was to ask whether appearing on a satirical program and engaging in trivial games was in itself an act which fails to show the appropriate respect for the office which the Prime Minister holds. After all, shouldn’t he have more important things to do with his time?

Monday, February 22, 2010

Ignorance Is No Defense

The decision by Peter Garrett to abruptly abandon the home insulation scheme on Friday may have caught many by surprise, but it is difficult to imagine what else he could have done to address increasing concerns about the program. Even so, it is a decision which only reinforces the idea that things should never have been allowed to reach that point in the first place. In a sense, it represents an admission that the program had been a blunder, even though n o such admission has actually been articulated. The scale of the blunder is such that even in calling the whole thing to a halt there will be collateral damage. Jobs will be lost. Suppliers will go out of business.

It had become the classic catch 22, with almost any option available to the government likely to compound the difficulties, and in those circumstances perhaps the curtailment of the program was the lesser of many evils. Aside from the well documented cost of four lives, 100 house fires, 1000 electrified roofs, and 80 000 or more homes with substandard insulation, there is now the cost of further dislocation to the industry and the people that it employs. Perhaps the fallout had become unavoidable, but this is not the end of the government’s troubles by any stretch.

It has now emerged that the Minter Ellison risk assessment report commissioned by the government, and delivered almost a year ago, warned of the precise outcome which has occurred. That is, an industry thrown open to cowboy operators, substandard installations, house fires, and the loss of lives. What is even more incredible is that the Minister, and the Prime Minister for that matter, has claimed not to be fully informed of the contents of that report. In other words, they have concocted this program, commissioned the risk assessment report, and then not bothered to read it.

Even if they personally did not have the time to read every page, surely whoever did read it should have rung the alarm bells so that the Minister would be aware that there was a serious problem. Given the importance of the report, failing to read it in the first place is just as bad as reading it and then failing to act upon it. Ignorance is no defense. In fact, it is only further damning evidence that the Government has mismanaged this scheme from beginning to end.