Friday, December 19, 2008

Merry Christmas

I can’t believe it’s the end of the year already. It sounds clich├ęd, but it’s true. At this time of year it’s fairly normal to both look back and to look ahead. 2008 will go down in history as the year of the Global Financial Crisis, and it’s fair to assume that the fallout from that will continue to have a significant impact on the year to come.

Despite the brave optimism of the Federal Government, nobody seriously believes that it will be possible for Australia to stave off a recession while at the same time avoiding a budget deficit. It might just be possible to do one or the other, but almost certainly not both. In fact, after the recent spate of Federal spending there really isn’t a great deal of surplus left. It won’t take much more to tip the balance.

The important thing is to realize is that deficit is not the dirty word that Peter Costello made it out to be. It certainly would have been if we had been running a deficit during the boom times, but that was not the case. However, times have changed, and like a tropical storm the economic downturn has arrived suddenly and dramatically. It is the right and appropriate thing for the government to do to use a budget deficit to stimulate the economy, and most importantly protect jobs.

Employment is the key. As much as we might be told to go out and spend to keep the economy going, nobody is going to do that if they are worried about their jobs. The lack of spending reduces company revenue, leading to job cuts, leading to further reductions in consumer spending, and the whole thing becomes a vicious circle. Anything the government can do to create employment is not only desirable, it is essential.

So how bad will it get? That’s hard to say, but as long as the government is in a position to continue spending money, Australians will be sheltered from the worst of it. In the meantime, we’ve all earned a break from the doom and gloom, so regardless of the economy it is time to appreciate the good things in our lives and to remember that even if we can’t afford to spend very much, at least we can spend some time with our families and friends, in the best part of the world.

Until next year, Merry Christmas, and look after yourself, but more importantly, let’s remember to look after each other… after all, each other is all we ever really have.

Thursday, December 18, 2008

Piece Of Paper Is Not Enough

It would be far too easy to say that the death of Melissa Cook is a tragedy that should not have happened. As more details of her appalling relationship with her husband have been revealed it is obvious that there were plenty of warning signs to the authorities that the risk was real. John Kudrytch had a documented history of assaulting his wife and, on at least one occasion, threatening her with a gun held at her head. He was known to be a former member of the notorious Commanchero bikie gang. He was known to be a violent man.

The Apprehended Violence Order against him was supposed to protect Melissa. As a legal instrument such orders are useless when those who pose the greatest threat have no trouble treating them with complete disregard. There’s nothing wrong with the principle of an AVO, but in practice the protection they are supposed to provide is undermined by a number of factors. The most crucial is the difficulty in enforcing the order.

In this case, the existence of an AVO was no hindrance at all. John Kudrytch just ignored it. And yet, when Melissa and her family reported breaches to the Police, little if anything was done. It’s not that Police don’t want to help, but the problem is that even when Police can find the time to investigate a complaint about the breach of an AVO, the culprit in many cases simply goes to court, gets listed for a hearing and is released again.

In addition to that, the sheer numbers of AVOs that are issued creates a massive workload, and while many AVOs are issued for very good reason, there are also too many which are not. Too often AVO’s are sought and awarded over relatively trivial matters, or even worse used as a tactic in Family Law proceedings, or to deny a spouse access to a matrimonial home. When Apprehended Violence Orders are issued for relatively trivial matters, it should be no surprise that sometimes breaches of those orders are also treated as less than urgent. It’s a state of affairs which obviously courts the risk of misreading a situation.

Even so, any breach of any AVO should be taken seriously. And when there is clear evidence of the threat of serious violence, then the response must be more robust, both in its swiftness and its effectiveness. That’s not a criticism of the Police, but an observation of the way the system is designed. Sadly, the truth is that when an individual has murderous intent, no piece of paper will stop him. That’s why the piece of paper must be backed by a more workable system.

Wednesday, December 17, 2008

At Last, Some Good News!

I have spent a considerable amount of time in recent years criticizing the New South Wales Government. God knows there has been plenty to criticize. Even now it’s difficult to resist the temptation to begin listing all the failures that continue to plague the state. Even today, it has emerged that rather than increase the number of acute care hospital beds, the government wants to reduce the number of patients admitted. It’s a great idea really, and it will work… eventually enough people will die so that the demand will ease off. But I digress.

Really, I wanted to say something positive. Having spent so much time bagging the government it’s only fair that when they do something right I should mention it. As much as it might seem out of character to praise the government, it’s the least I can do, especially as this decision delivers a measure that I have argued for many times. I refuse to be distracted by the sideshow that has been staged by the Premier trying to tell us all that an increase in rail and bus fares is actually good news and that we should all be pleased as punch.

I mean really, how could we be so ungrateful? The cost of using an overcrowded unreliable public transport system is about to go up, despite the reported study which shows that the capacity of the system to cope with demand is at breaking point, and we are expected to welcome the increase because it’s not as big as it might have been. And we are supposed to feel reassured that the increased fares will go towards the provision of better service, when all of the evidence of the past would suggest that carving pumpkins into carriages would be more plausible!

No, I wouldn’t want to be distracted by such pettiness, because the government has actually done something right. Following much pressure from lobby groups and commentators, the extortionate developer charges and levies are to be cut. Taxes which add almost $100 000 to the cost of a home will be reduced substantially in an effort to kickstart the housing sector and boost the economy of the state.

Although the levies won’t all disappear entirely, and perhaps that would be too much to hope for, it does represent a massive epiphany on the road to Damascus. The net effect of the various changes would see almost $100 000 of levies cut to about $30 000, which is a significant difference in anybody’s language. It is overdue, and it is welcome. And at last, I get to say something nice about the New South Wales government.

I wonder if that will ever happen again…

Tuesday, December 16, 2008

Giving With One Hand…

From January first, the price that pensioners must pay for their prescriptions will increase from $5.00 to $5.30. Although thirty cents doesn’t sound like much, it represents a jump of 6%, well above the inflation rate which has been at 5%. Many pensioners find themselves dependent upon several different medications, in some cases as many as ten. Even if each needs to be renewed only once a month that is still 120 scripts per year. Thankfully, there is a threshold beyond which pensioners will get their medications for free.

But wait a minute! Adding injury to insult, that threshold is set to increase from 58 to 60 prescriptions in the course of a year. Presumably somebody somewhere thought that the pensioners wouldn’t mind if the figure was increased to make it a nice round number. Whatever the reason, it simply adds just a little more to the cost burden to be born by the pensioner. The individual amounts may be small but they add up to a death by a thousand cuts.

It is particularly ironic that this follows not only the debate about the inadequacy of the base rate of the aged pension, but also the dramatic round of cash bonuses delivered this month. While telling us all that the cash bonuses will be good for the economy and that pensioners deserve a bit of a boost, it turns out that pensioners might be better off saving up their bonus money to pay for the increased cost of their medications. It’s a classic example of the government giving with one hand and taking away with the other.

The Federal Government has responded to concerns by pointing to the review of pensions which will be completed in February. The health minister has stated that the review includes an investigation of the effectiveness of benefits such as the pharmaceutical subsidy. So while the price goes up in January, the inference which is encouraged is that relief will be delivered after the review is completed. Presumably, whatever reforms or adjustments are finally adopted will be delivered in July after the next budget.

Once again, the government has deflected concerns about pensioners by indicating that those concerns will be addressed in the outcome of the review. It has actively raised expectations in the community that pensioners will get a better deal. If that is to be genuine, it must include not only pharmaceutical benefits, but the entire range of benefits and concessions available to seniors, and it must leave pensioners tangibly better off than they are now. Anything less would be seen as simply more of the same old double dealing.

The government has been very careful not to make specific promises, but that won’t prevent a massive backlash if the people are left feeling that they have been dudded again.

Monday, December 15, 2008

The Soft Option

In attempting to pursue a sensible course in its white paper on Climate Change, the Australian Government has apparently delivered a compromise position which will please very few. At the centre of the announcement is the setting of an emissions reduction target for 2020, as part of the Carbon Pollution Reduction Scheme which will see a trading system commence in July 2010. While many in industry were calling upon the government to delay the introduction of carbon trading, the government has confirmed the 2010 start date in the interests of providing certainty for the business community. What is less certain is the targets themselves.

Rather than identifying a hard number as the emissions reduction target, the Government has committed to an unconditional reduction of 5%, and a reduction of up to 15% on the condition of a strong global agreement. Even if the rest of the world should miraculously agree to more aggressive cuts, the Australian target is capped at 15%. Again, this cap is supposed to provide certainty, but the fact is that the target has a range of between 5% and 15% and is by definition less than certain.

Despite that, it is likely that business will breathe a sigh of relief as the targets are smaller than anticipated, while the compensation measures remain quite substantial. On the other hand, environmentalists will be bitterly disappointed. Scientific opinion has favoured much deeper cuts ranging from at least 25%, up to 40%, as a minimum to avert damaging climate change. It would seem to be logical to argue that smaller targets are worse than a waste of time because they will cause massive economic disruption without any discernible benefit for the environment. If you believe the scientific advice, there is no soft option.

When the trading scheme commences emissions will be priced at $25 per tonne of carbon dioxide, disappointing those who were pressing for a zero price to provide a soft start. The scheme is expected to generate $12 billion a year, and the bulk of that will be redirected to compensation, not only for families and individuals, but also for industry. The problem with that though is that very little of it will be directed to energy efficiency measures or the development of alternative energy sources. While it is important that pensioners and families are given assistance to accommodate higher electricity prices, there is an element of the dog chasing its own tail here.

If the revenue from what amounts to a new tax is paid out as compensation to those most affected by the imposition of that tax, why impose the tax in the first place? If the problem is the impact of pollution from traditional sources of energy, shouldn’t more of this money go into developing alternatives? Yes, there is investment in renewable energy sources, but the point here is that, like so many other aspects of the plan, the compromise delivers a diluted result. As long as the existing energy sources are propped up with compensation, the incentive to develop alternatives is undermined.

And that’s the big failure from this plan. You will hear a great deal from the government about getting the balance right, but the truth is that this is a compromise which will please no one. Now that might be OK in politics, but when it comes to science, that just doesn’t work.

Friday, December 12, 2008

Market Meltdown Worse Than 1930

It’s a sobering piece of news to hear that the financial market collapse for the calendar year is set to go down in history as the worst ever. That’s right, the fall in Australian Sharemarket values has now exceeded the decline in 1930 as the Great Depression took hold. With only two and bit weeks until the end of the year, it’s pretty safe to say that any rally in the market big enough to prevent that result would be nothing short of a miracle. So the obvious question is: does this mean that we can expect the coming economic slowdown to also reach record proportions?

First, all of the warm and fuzzy advice we have been getting about Australia being better placed than most is actually true. The Federal Government is in a sound budgetary position, the big banks are solid despite having to write off some bad investments, and the balance of trade is actually improving because of the lower dollar and stronger exports. While we are not immune from the effects of the Global Financial Crisis, we are in a position to cope with it far better than most.

Second, while many people are working hard to reassure us all about the strength of the Australian economy, it is also important that they are working even harder to boost the economy in practical ways. One of the reasons that the Great Depression lasted as long as it did in the United States was a reluctance to intervene until Franklin Rooseveldt turned the tide with the package of nation building policies he called the “New Deal”. Barack Obama won’t be sworn in until next month, but all the indications are that he is keenly aware of the lessons of history.

While it remains to be seen just exactly what the new United States President will do after he takes office next year, here in Australia our government is already acting to intervene in the real economy with its economic stimulus package and now the new nation building plan. Other governments around the world also seem to be far more aware of the need for intervention now than was the case during the Great Depression. The same is also true for the various central banks, all of which have been aggressively cutting interest rates to help encourage economic activity.

Having said that, there are no guarantees. As unemployment rises, consumer spending will fall, dragging the economy into a negative spiral. That’s why employment is the key, and why the infrastructure programs being rolled out by the government are important not just to build capacity but to create jobs. If it works, any recession will be relatively mild. Of course, if the global crisis is sufficiently damaging it may turn out that the measures taken by the Australian government are not enough to head off recession. Even so, in a worst case scenario, the efforts of the Government and the Reserve Bank to ameliorate the effects should mean that the downturn will not be as severe as the Great Depression was.

Either way, there’s no escaping we are in for a bumpy ride.

Thursday, December 11, 2008

Sitting On The Fence Gives You Splinters

The debate over proposed carbon pollution emissions targets is becoming hotter than global warming itself. While Federal Climate Change Minister Penny Wong is representing Australia at talks in Poznan in Poland, pressure is mounting from both directions. Although Australia has not yet announced its targets for 2020, it is believed that a 25% reduction on 1990 levels is on the table subject to broader international agreement. In the absence of such agreement it appears that the Government is likely to commit to a much less ambitious target of 5% to 15%.

Both the Opposition and some sectors of Industry are pushing for any targets to be subject to international agreement, as well as calling for the planned 2010 starting date for an Emissions Trading Scheme to be delayed. And they’re not alone. Unions are also concerned about the impact on jobs if industries such as mining and construction are made to bear the brunt of emissions trading without a genuine international agreement.

The heat of the debate is such that Paul Howes of the Australian Workers Union has described Australia’s banks as hypocritical for their stand in favour of deep emissions cuts. He says that the banks, having participated in the global “stuff-up” of our financial system, are now seeking to create new sources of revenue from carbon trading markets. He’s right about that. Bankers and Lawyers have the most to gain out of any carbon trading scheme, whereas heavy industries such as mining have the most to lose.

Of course, the government is maintaining its line on the 2010 start date, insisting that business needs certainty. And while the government is yet to announce its emissions targets, that is also a decision which has almost certainly already been made and is unlikely to change. But while the Government is holding back that announcement until next Monday, the door is kept ever so slightly open for a last minute change of heart.

It has been reported that heavy pressure is being placed on Kevin Rudd by the likes of British Prime Minister Gordon Brown and former U.S. Vice President Al Gore to commit to the more ambitious 25% reduction target. The suggestion is that for Australia to make that commitment now at Poznan will help to propel those negotiations to a successful conclusion. It’s all part of the negotiating process, but it does seem a little paradoxical that Kevin Rudd and Labor were elected amidst a blast of environmentalist fervor, ratifying the Kyoto protocol within minutes of being sworn in, only to go soft now.

More to the point, if the threat of Climate change is real, and the vast consensus now is that it is, then compromise positions are simply not going to cut the mustard. Why bother with a 5% or 15% target when all the expert opinion says that only targets of 25% or more have any hope of achieving the desired environmental outcome? Either the world must commit to a serious effort to achieve change, or there is no real point.

Settling for a compromise position will result in half measures which dramatically disrupt the economy for no real benefit, at the same time as failing to adequately address the climate change problem. But if the view is taken that the climate change problem is not so serious that it demands such drastic action, then the whole thing would seem to be a waste of time. Surely it is time to go hard, or go home.

The only thing you are likely to get from sitting on the fence is the risk of being skewered up the backside by a paling.

Wednesday, December 10, 2008

Bill Of Rights, Or Villains' Charter?

As the world observes the 60th anniversary of the United Nations Universal Declaration On Human Rights, Australians are considering the question of whether or not we need a Bill of Rights. In some respects, it is odd that we don’t already have one, given the central role Australia played in the creation of the Declaration in 1948. And yet, many of the freedoms that we take for granted are not actually guaranteed in our own laws. Instead, our freedom depends upon the democratic process which has thus far actually worked rather well.

Some critics of the idea of enacting a Bill of Rights suggest that rather than safeguarding freedom, a Bill of Rights might conceivably limit those freedoms. The suggestion is that anything not specifically guaranteed in the Bill could come to be viewed as not a right at all. There is also the concern that a Bill of Rights could also be misused to protect criminals and terrorists from efforts to end their activities. Indeed, there is actually some frustration with this very effect in the United Kingdom where a Bill of Rights was introduced ten years ago.

In Britain it has been referred to as a “villains’ charter”, and the man who introduced the Bill, former Home Secretary Jack Straw, has said that he has become greatly frustrated with the interpretation of the Courts. This highlights the concern that many people have that a Bill of Rights both constrains the power of the Parliament to make laws, and increases the power of the Judiciary in ruling on those laws.

Of course, many of those effects can be seen as the result of defects in the drafting of the Bill in the first place. A bill which guarantees a range of vaguely defined rights without also requiring recognition of responsibilities and observance of the law is a recipe for creating problems. But that doesn’t mean those problems are inherent in the idea of a Bill of Rights. Proponents of such a Bill in Australia insist that it should be drawn up in such a way that remains subject to the sovereignty of the parliament.

There is also the question of just what rights ought to be enshrined in a Bill of Rights. The obvious fundamentals are the rights to freedom of movement, freedom of association and freedom of expression. Also on the list of obvious choices are the right to a fair trial, the right to religious freedom, and the right to political freedom. There might be others, such as the right to profit from free enterprise, and such things will no doubt arise in the debate.

But the real challenge would be to define those rights in such a way as to not limit them, and at the same time, not provide shelter to the very people, such as terrorists and criminals, who would seek to attack our rights, or bring us harm.

Tuesday, December 9, 2008

What Do They Know That We Don’t?

Spend! Spend! Spend! It sounds like the sale of a lifetime, rather than serious advice to the community from our political leaders. And yet that is exactly the catchcry from Kevin Rudd and Wayne Swan. You can be sure that the message is not just for the recipients of this month’s welfare bonuses too. While the aged pensioners, the parents and the carers will all no doubt find useful purposes for their money, the Government is hellbent on telling us all that blowing the cash is in the national interest to help prop up the economy. If others in the community also get inspired by the call to spend and open up their purses too, well then so much the better for the economy.

Or is it?

Malcolm Turnbull has pointed out that economic boost is like a “sugar hit” and can be expected to have no lasting benefit. National Party Senator Barnaby Joyce is on the same wavelength, suggesting that the government ministers sound like “spruikers at a bargain basement sale”. Senator Joyce says that instead of long term employment on infrastructure projects we will have imported plasma TVs. Both Mr. Turnbull and Senator Joyce make an important point.

It’s not wrong to give a helping hand to struggling pensioners in an economic downturn, but to urge them to “spend, spend, spend,” isn’t of itself going to save the economy. Like any one-off windfall, once it is spent it is gone. What happens next week, next month, next year? Even if the whole $8.7 billion dollars worth of bonus money gets spent back into the economy, where is the long term investment in jobs? And equally important, where is the long term solution for pensioners existing below the poverty line?

There are many indicators pointing to the possibility of the Global Financial Crisis becoming worse next year, not better. The government has openly stated that another economic stimulus package may be necessary next year. But how much more can be splashed up against the wall of consumer spending without greater investment in productive infrastructure? Is pouring money into the economy likely to be enough without also reforming the structure of the economy so that it is more suited to the new financial landscape?

As for Kevin Rudd and Wayne Swan urging all and sundry to “Spend! Spend! Spend!”, well it has a sound of hysteria about it. Really, as far as the welfare bonuses are concerned, people would have been likely to spend that money anyway. That’s just the way people behave. The government has maintained that the Australian economy is sound and is forecast to continue growing, but to hear the spruikers bellowing at the top of their lungs has me wonder just how desperate they must be. Is the outlook for Australian economy really so bad that we have to rely on the pensioners spending every last cent of their bonuses to keep afloat?

What does the government know that the rest of us don’t?

Monday, December 8, 2008

Gun Tragedy Opens Debate

The tragic death of fourteen year old Josef Cruickshank has propelled the gun control issue back into the spotlight once again. At this time it is not clear exactly what happened. What we do know is that Josef was staying at his friend’s house for a sleep over. He was shot in the face and neck, and ambulance officers were unable to save him. His friend, who is also 14 years old, has been arrested. On legal advice, the friend has not made a statement to police, who have subsequently laid a charge of murder, and he has been released on bail. What we don’t know are such things as the circumstances around the event, or who owns the shotgun involved. It has been reported that the mother of the victim considers it an accident and is pleading with police to drop the charges.

While the police are yet to complete their investigation and the matter will be dealt with by the court, there are a number of questions which immediately spring to mind. How is it that a pair of fourteen year old boys came to be handling a shot gun? Were they under any supervision? And most importantly, who is the adult responsible for the security and safe storage of the gun?

Guns are a fact of life. In rural areas in particular they are just a part of everyday existence. Many people have perfectly valid reasons to own guns, and most are perfectly responsible. But it is events such as this which highlight the reasons for having sensible and practical laws and regulations for how we handle guns, and for their safe storage. Those laws exist to prevent exactly the kind of tragedy which has now unfolded. For that reason, it is only right to ask if those laws and regulations are adequate and appropriate. It’s also reasonable to ask if any of those laws have been ignored. Whether or not that is the case will presumably emerge in due course, but either way, these are questions that need to be asked.

It is often claimed by the gun lobby that guns don’t kill people, people kill people. Aside from the glib tone associated with that claim, it is actually the perfect argument why some people should not be allowed to have a gun. That in turn means that adequate gun control measures are essential for responsible gun ownership. And even in the case of an accidental shooting, surely it must be obvious even to idiots that without the gun, the accident would not have happened.

Friday, December 5, 2008

Singing From The Same Song Sheet.

There is very little which is more divisive than the suggestion that Muslims in Australia are subverting Australian values. It’s a suggestion which is pushed at every opportunity by those who object to the growing presence and influence of Muslims in our community. It doesn’t take much for the idea to take hold and to inflame otherwise reasonable and tolerant Australians into a fit of fear and distrust. The problem is that so often some members of the Muslim community appear to be doing everything they can to provoke such sentiments.

The front page story in Brisbane’s Courier Mail reports that the Australian International Islamic College has banned the singing of the Australian National Anthem because it has been deemed to be contrary to the “Islamic view and ethos”. The paper claims to have possession of a memo instructing that the “singing of the Anthem will be put on hold”, and that one teacher has been sacked for asking to have the Anthem performed by students. The school denies there is a ban, but it appears that at least one other teacher has confirmed the story.

Consequently, and understandably, there is a great deal of negative feeling in the wider community, with concerns that the school is promoting segregation and is actively promoting anti-Australian views. But this is where things become complicated. Australia is a free society. That means we enjoy the freedom of religion, the freedom of speech, the freedom of association, and the freedom of dissent. Those are among the benefits of living in our free society. They also mean that we as Australians are also free to have no religion, free to keep silent, free to choose not to associate.

It is not compulsory for schools to sing the National Anthem. It is not compulsory for Muslims to associate with non-Muslims. It is not compulsory for Muslims to approve of so called Western standards of behavior. But there is a crucially important distinction to be made here, and it is this. While Muslims, and everybody else for that matter, are free to believe whatever they like, that freedom is subject to the limitation which prevents them from imposing those beliefs upon others and more importantly denying the rights of others to hold differing beliefs.

In our efforts to be an inclusive, fair and tolerant society, the great risk is to fall into the trap of tolerating the intolerant. Most Muslims want nothing more than to peacefully go about their lives, and many have enthusiastically embraced the Australian way of life. But there remains a number of others who reject the freedoms which Australia embodies, and who seek to change the nature of our society. There are those of extreme views who may be free to hold those views, but who should be made to realize that the rest of us are free to reject them.

When it appears that a Muslim school is propagating such views, it becomes a matter of concern to all who believe in a free and open society. Now that should include those many Muslims who claim to also believe in Australian values. In fact, it is most important that they are the ones who reject any such activities by Muslim schools, or by Muslim clerics, or anyone else purporting to represent the Muslim faith. If they don’t, then they are only fueling the flames of distrust themselves and cannot claim to be innocent victims of misrepresentation.

Thursday, December 4, 2008

Not A Recession, But It Might As Well Be

The release of the latest national accounts figures confirm the worst fears of many. That is, Australia is on the precipice of a recession. Of course, the glass half full view would be that economic growth remains positive, although only just. The official growth figure for the September quarter has come in at 0.1%, so close to zero that for all intents and purposes it is fair to say that the economy has come to a sudden halt. The only thing that prevented a negative growth figure being recorded was an improvement in the farming sector.

Some are still clinging to the hope that an actual recession can be avoided, and that may well be possible. The widely used definition of recession is two successive quarters of negative growth, and so far we haven’t even had one. However, the slowdown has been dramatic, and reflects the earlier evidence of retail figures. Today, there is even more evidence with car sales figures plunging a startling 22% last month. Even more startling is that despite official interest rates falling, the cost of car finance is actually rising.

This reflects a wider phenomenon which has seen interest rates on business loans fail to fall in line with mortgages. Credit card rates also remain high. One of the reasons for this is the risk weighting of the price of such loans, but the problem is that it adds to the drag on the economy, and almost becomes a vicious circle as cheaper finance becomes harder to obtain at the very time when it is needed most.

It’s not just consumers and businesses that are finding credit difficult to obtain. One of the unintended results of the Federal Government bank deposit guarantee has been to make it harder for State governments to attract finance. As a result, the Federal government is reported to be considering acting as an investment banker to the states, borrowing funds, and relending them to the States. The opposition leader, Malcolm Turnbull, is drawing comparisons with the Khemlani Loans affair of the 1970’s which helped to destroy the Whitlam government.

While the government is holding fast to its forecast of 2% growth, it is a prediction which is looking more and more like wishful thinking. Despite the fact that Australia’s position is much more robust than many other countries, we cannot completely insulate ourselves from the impact of what is happening around the world. The truth is that if there is a further shock to come from international markets it could well push our country into recession.

To some extent, that is not really the great cause for concern that some people see it to be. Whether Australia’s economic growth dips a little below zero or stays a little above it, the real damage has already been done. Either way the Australian economy has been hit with a sledgehammer and arguing over whether or not we are in a recession isn’t going to change that. What is important is for our government to use our relative strength to help shield the vulnerable from the storm in the short term, and more importantly to invest in the capacity to create future prosperity in the long term.

Part of that depends on the ability of the State governments to obtain funding to continue investing in infrastructure. That’s why the idea of the Federal Government borrowing to provide finance to the States for infrastructure programs is not the reckless idea that the opposition pretends it to be. Sometimes it’s hard not to get the impression that Malcolm Turnbull would rather that the government did nothing about the Great Financial Crisis.

Wednesday, December 3, 2008

Hospitals Full, Go To Queensland.

The story of a badly injured road accident victim being airlifted to Queensland for treatment is the most graphic indication yet that the New South Wales public hospital system is at the point of collapse. In fact, this is a level of failure which would seem to indicate that it has already collapsed. Either the New South Wales health system can treat its own citizens, or it can’t. And in this case it didn’t.

It has been reported that 56 year old Georgie Batterson waited at Kempsey for two hours in pain while the trauma doctor from the Westpac Helicopter Rescue Service desperately rang hospitals in Sydney and Newcastle. He was told that there was not one single intensive care bed available. Not anywhere. So the decision was made to take her to Southport in Queensland.

There is no excuse for this to happen in a major industrialized nation in the 21st century. It is the result of two decades of flawed policy, bad management, and denial. For too long, successive governments believed the misguided arguments that modern medicine meant shorter hospital stays and fewer beds. They believed that efficiency meant that getting patients out of hospital was more important than getting them well. But worst of all, when it became obvious that the policies were wrong, they still continued to close down hospital beds in the name of cutting costs.

It’s not just that hospitals are underfunded. In fact, massive amounts of money are spent on hospitals and health, but the problem is that too much of it is badly spent. There is too much bureaucracy, and the massive Area Health Services don’t deliver better outcomes, only more paper work. Emergency departments are under stress not because there are too many patients, but because patients who are seen can’t be admitted to hospital beds.

Rather than setting benchmarks, meeting targets, cutting costs, and delivering efficiency dividends, the real business of Public Hospitals is supposed to be about treating patients. To do that they need to have beds. There is no shortcut for that. And yet after all this it appears that the New South Wales Government still doesn’t get the point. After all this, they are still closing wards and cutting beds.

The dedicated and hardworking doctors and nurses in our public hospitals are doing the very best they can while working within a system which is letting them down. It is only through their heroic efforts that the system works at all. But the truth is that they are expected to meet those benchmarks and reach those targets without being given the tools to do so. That amounts to a form of torture which is both cruel to them, and unfair to the patients who depend on them.

Tuesday, December 2, 2008

No Substitute For Supervision

There is no greater tragedy for any family than the loss of a child. No parent who has survived such a thing is ever the same again. While sometimes there is simply nothing that might have been done to change things, it is deeply sad to know that in so many cases the tragedy might have been avoided. Time after time we hear about young children who have drowned in backyard swimming pools. In the past week three have died, prompting calls for new measures to improve pool safety.

While pool fences have been compulsory for more than a decade, there are still many older pools which were exempted from the rules, and many more which are simply not compliant. There are now calls to require older pools to be made compliant when properties are bought and sold, along with suggestions of compulsory safety inspections to be carried out at regular intervals. Both these suggestions are reasonable and could help to make a difference, but of themselves are not enough.

There is also a call for pool owners to learn resuscitation techniques. It is astounding to know that despite the number of pools in the community, only about 2% of adults take basic first aid courses each year. One suggestion is that all pool owners should be licenced, requiring a first aid certificate in order to qualify. Another suggestion is to include CPR lessons in ante-natal classes. Either way, knowledge of CPR can be crucial in saving a child’s life, and although you might think that would be enough to motivate more people to learn, it might well be a good idea to make it compulsory in some way.

Of course, no amount of legislation or regulation will abolish stupidity. There will always be someone who simply doesn’t grasp the importance of simple and effective safety measures. Regardless of how high the fence around the pool, or of how many first aid courses parents might take, some kids will always find a way to get themselves into trouble. And there is one factor which must not be overlooked. Parental supervision.

Even with all the safety measures parents can imagine and all the laws that legislators can dream up, things can still go terribly wrong in a frightening short space of time. By all means, let’s look at the regulations to see if they can be made more effective, but in the end the most effective safety measure of all is to make sure children are properly supervised. When it comes to swimming pool safety there is no substitute for supervision.

Monday, December 1, 2008

A Great Australian Hero

A great Australian hero has passed away, and he wasn’t even an Australian. In fact, he hadn’t even set foot in Australia since his controversial departure in 1966. And yet his legacy will continue to help define our national identity for generations to come. Joern Utzon, the Danish architect who created the Sydney Opera House passed away at the weekend at the age of 90. Some believe he was always bitter about his experience with Australia, but others, including his family, say that is not the case.

The story of how the Opera House came to be is an epic saga, and perhaps it could be an opera itself. History remembers the selection of Utzon’s design as the winning entry in an international competition, the arrival of Utzon to oversee the project, and the controversy which followed. The opera house construction project ran years overschedule, and ten times over budget. The political skullduggery saw a shortsighted government virtually sabotage the project by stopping payments to Utzon’s company. The headlines at the time said that he quit, but really he was left unable to pay his staff or keep his office open. He had no choice but to leave.

As a result, the task was completed by others, famously described as “a conspiracy of nobodies”, leading to the now iconic form of the Opera House containing an interior nothing like the one originally intended. Today, work continues to refurbish and revitalize the building, but now it is being done in keeping with design principles drawn up by Utzon himself, and supervised by his son.

The story of the Opera House is more than epic history. It is also a lesson for the 21st Century. At a time when the world is reeling under the influence of the Global Financial Crisis, where bottom line thinking has driven us to the edge of disaster, the Sydney Opera House stands as a symbol of greatness. It has become a unique icon of our nation, a national treasure beyond value. Regardless of the extraordinary cost, and the political acrimony at the time, the investment has turned out to be not only worthwhile, but absolutely priceless. The Opera House should serve to remind us all that life is about more than just money. It is about achievement against adversity, the transcendence of beauty, and the importance of integrity.

Joern Utzon may have lived in Australia for only three years, but his legacy has made a greater contribution to our national identity than any of the petty minded politicians who treated him so badly all those years ago. That makes him a great Australian hero, regardless of his citizenship.

Friday, November 28, 2008

Hospitals Need Reform Now.

The release of the much anticipated Garling Report may have been pushed off the front pages by the dramatic events overseas, but it is a matter of the greatest importance to the future of public hospitals in New South Wales. The 1100 page report delivers 139 recommendations, and begins with an observation which should not need to be made. Peter Garling writes: “A new culture needs to take root which sees the patient’s needs as the paramount central concern of the system and not the convenience of clinicians and administrators.” The mere fact that this needs to be said shows just how far off the rails the system has run.

Some of the recommendations seem at first glance to be counter-productive. In particular, the proposal to close down Emergency Departments at some hospitals so that resources can be concentrated at others could be seen as a retrograde step. I would have thought that Emergency Medicine should be part of the core business of every public hospital. Isn’t that what a hospital is there for? The same can be said for Maternity Services. Shouldn’t every hospital have the capacity to deliver babies, so that families don’t have to travel any further than necessary when a baby is on the way?

Of course, I am not the one who has visited 61 hospitals, read through 1200 written submissions and listened to 628 witnesses. Mr. Garling has, and he is in a position to have considered the matter thoroughly. His report also reflects the reality that there is a shortage of both doctors and nurses. Any Emergency Department can only operate effectively if it is adequately staffed, and with the shortage of medical professionals it might simply be impossible for every hospital to have a fully functioning Emergency Department. In that context, Mr. Garling’s recommendation may well be the most appropriate solution, at least until such time as more doctors and nurses can be trained.

The Garling report addresses not only the nuts and bolts of the Hospital System, but also the broader issues. Most notably, it addresses the culture of bullying which has been identified by previous investigations. Many of the problems emanate from the sheer pressure that exists to deliver an acceptable standard of service in an environment of limited resources and tight budgets. As the stress increases so does the likelihood of frustration and shortened tempers. In such an environment is it really any surprise that the report says bullying has become “endemic” in the system.

Mr. Garling has delivered a list of specific recommendations to address the shortcomings of our hospital system, and a timetable for them to be introduced. Now the ball is in the court of the New South Wales Minister for Health John Della Bosca, who has indicated that the government will formulate a response by March next year. The only trouble with that is that some of Mr. Garling’s reforms have been recommended to be implemented well before then.

As an initial response from government, that’s hardly encouraging.

Thursday, November 27, 2008

Some Things Should Not Be Left To Private Enterprise.

Up until the onset of the Global Financial Crisis, the champions of Economic Rationalism were winning the debate over the benefits of Private Enterprise involvement in almost every aspect of our economy. For many, there was no question that private enterprise is always more efficient, more productive and better equipped to deliver the services we depend upon. The related concept of “user pays” became a mantra which was supposed to ensure economic efficiency and better outcomes. However there was always an undercurrent of public opinion which held that there are some things which should not be left to private enterprise.

One of the results of the Global Financial Crisis is that a shift of opinion has occurred, with the growing realisation that “bottom line thinking” doesn’t always deliver the best outcomes. Economic Rationalism has made the system more important than the people it is supposed to serve. We can see the evidence for this in customers waiting in queues, either in person or on the phone, because it is more “efficient”. Efficient for whom? The system! Not the customer, who undoubtedly has much better things to do with his time than wait in queues. That’s just one minor example, but I’m sure you see what I mean.

Some areas which many people believe should never be left to private enterprise include the operation of public infrastructure, public transport, defence and national security, essential services such as power and water, health services and education. There are many other examples, but those are areas about which many people hold concerns. They are also all areas which to some extent or other have seen increased involvement of private enterprise. In many cases the debate about the value of private sector involvement will be ongoing, but when it comes to childcare it seems that very serious questions are now being asked in the wake of the ABC Learning corporate disaster.

There are now increasing calls for child care to be returned to the community non-profit and local government sectors. The argument against the corporatization of childcare is now gathering a great deal of momentum, and rightly so. Now that it has emerged that almost 400 ABC Centres are likely to close, it’s easy to see the impact on the community from the disruption to this essential service. It’s also a valid argument to point out that, as a society, we do not allow the corporatization of any other part of our education system to such an extent. The only things which come close are the rare private university, and some trades and professional training institutions. The big difference is that they are adult education, not child development. Neither do they have the same status as an essential service in a working economy.

While our private enterprise economy is and should remain the source of our prosperity, it remains the role of government to manage our community for the benefit of all its members. That should include appropriate management of our essential community infrastructure and services, especially when it comes to something as important as childcare, because our kids are more important than the bank balance of some corporate buccaneer.

Wednesday, November 26, 2008

No Recession… Yet.

Despite all the continuing doom and gloom around the world, Australia can still expect to weather the storm better than most. So we have been told by our government, our opposition, our business leaders, and our economic experts. We have also been told by the O.E.C.D. that while the rest of the world is slipping into recession, Australia will continue to experience economic growth at around 1.7%. That’s not quite as good as our own Treasury forecast of 2%, but still good news.

At the same time, the O.E.C.D. is still warning Australia of the risk of a further decline in house prices. Such declines have already hit the United States, Britain and Europe fairly hard, and there are reasons to believe similar falls could happen here. The most significant indicator in this regard is the ratio between average house prices and average incomes. Here in Australia, the relative price of housing is the fourth highest in the O.E.C.D.

This is a measure of the housing affordability crisis which until recently was receiving a great deal of attention. Now that the larger Global Financial Crisis is commanding most of the attention, housing affordability has receded a little from the spotlight but it still remains an unresolved issue for Australia. Where other countries have experienced relatively rapid falls in house values, other factors are at play to prevent that here in Australia.

Unlike the United States and Britain, Australia has a significant undersupply of housing along with continued growth in demand. While that is the case, prices will continue to be propped up by those conditions. It is more likely that prices will remain relatively flat for a protracted period while the rest of the economy, that is wages and prices, catch up to restore the balance. This is what all the experts are talking about when they mention a soft landing.

Of course, no crystal ball gazing can come with a guarantee. So far, all the experts have failed to correctly predict the onset of the financial crisis, the collapse of banks, the rout on the share market, that collapse of commodities prices, and the impact of global conditions on Australia. It’s always possible that they can be wrong again, and our soft landing could turn bumpy.

The key factor which will determine this is unemployment. While official forecasts are still predicting a relatively mild increase in unemployment, any increase will feed into the risk of recession. The higher the unemployment, the slower the economy will become, and the more people will default on their mortgages. If that spiral takes hold it will precipitate a more dramatic fall in house prices as mortgagee sales become more common, and the more likely a recession becomes.

Once again, it is crucial that our government remains prepared to step in to support the most vulnerable in our community, providing the twin benefit helping ordinary families at the same time as helping the economy. It’s also a good reason for the government to stop pretending that a budget deficit would be a bad thing.

Tuesday, November 25, 2008

DOCS Reform Must Include Adequate Resources

The much anticipated Wood report into child protection services in New South Wales has been delivered to the government, outlining a program of reform to relieve the overwhelming pressure on the Department of Community Services. This pressure is manifested by the sheer number of cases which are referred to DOCS each year, with last year’s total reaching more than 300 000. This has been, in part, the result of a mandatory reporting regime which has a very low threshold, resulting in a “better safe than sorry” approach which has resulted in even very minor cases being referred to DOCS. The trouble is that the avalanche of reports simply can’t be effectively addressed.

The report recommends that a new set of agencies and services should be set up to divert minor and non urgent cases, allowing DOCS to focus on the more serious cases more effectively. Instead of Police, for example, reporting every child they encounter, the Police Force would have its own dedicated child protection unit which would be the first port of call. This unit would then make the initial assessment, and subsequently refer the case on to DOCS if appropriate, but otherwise on to another service, most likely in the non-government sector. In the same way, other government bodies such as the Department of Education, and the Area Health Services would all have such internal agencies, acting as filters determining whether or not a case should be referred to DOCS. This process has been described as a form of triage for child protection, and effectively reassigns early intervention from DOCS to other agencies.

The report has also recommended that the management of foster care should be reassigned to the community sector. Together, these two structural changes should leave DOCS better able to concentrate on dealing with the more serious cases. However, there are some concerns. Firstly, while such a restructure would certainly relieve the pressure on DOCS, its success will depend on adequately resourcing the new agencies which would assume the triage and support roles. At the same time there is the risk that an enthusiastic bean counter might also cut the DOCS budget in the belief that they now have less to do.

Further, there is the question of communication. If responsibilities for child protection services are divided up among a number of agencies, there is the risk that the chains of communication could become stretched. In fact, there is already evidence that interdepartmental communication failures have contributed to child protection failures in the past. If there are more agencies involved, then that risk increases. Everything depends on the detail of how the reforms are implemented, and whether they are adequately resourced, and any such process must be done with a view to actually improving the lines of communication.

One thing is certain. Reform is needed, because the present arrangements are not functioning as well as they should. A great deal of effort has been put into producing the Wood report, and many hopes have been placed upon it. The question now is whether or not the New South Wales government is capable of delivering on its promises to fix the system, and that means ensuring that all agencies involved are given the resources they need.

Monday, November 24, 2008

A Matter Of Trust

It’s hard to believe that it has been a year already since the election of the Rudd Labor Government. It seems like just the other day, and there is still a “fresh and new” aura about the government, even though one third of the allotted term has now elapsed. So, after the first twelve months, how is the government faring? Has it lived up to expectations, or has it failed to deliver on its promise?

If the opinion polls are anything to judge by, the gloss of the new government is largely unblemished. In fact, by some measures Kevin Rudd is more popular now than he was a year ago. Some of this might have something to do with his apparent predilection for the big symbolic gesture. His first act after being sworn in was to ratify the Kyoto Protocol. The official apology to the stolen generation made a powerful statement. The 2020 summit was another grand gesture which could be seen as more an exercise in PR than in delivering actual policy outcomes.

But there must be more to it than that. After all, if all the government had to offer was symbolism the gloss would soon begin to wear thin. People would quickly see through the veneer to the truth that despite all the big talk, not much was actually being done. So how has the Prime Minister managed to not only maintain his popularity, but to improve on it?

Many of the big promises made by the government prior to being elected are either yet to be delivered or slowly moving through the pipeline of inquiries and reviews and committees which the government has initiated. It would not be unreasonable to be asking now “where is the education revolution?” and “when will public hospitals begin to turn around?” and even “how much longer before Work Choices is completely dismantled?” For whatever reason, the majority of voters are prepared to accept that these promises will not be delivered overnight.

Of course, the one big issue which has dominated the headlines in recent months has been the Global Financial Crisis. On this, the government has been acknowledged for its quick and decisive action in delivering a fiscal stimulus package. Amazingly, even when the unlimited bank deposit guarantee unleashed the damaging flight of capital out of unsecured investments resulting in retirees having their funds frozen, the Rudd government has been judged kindly by the electorate. It seems the public approves of the government’s handling of the matter sufficiently so as to forgive the occasional error of judgment.

I could be wrong, but I think the reason for this is that people generally have the impression that the Prime Minister is being straight with us and is telling us like it is. The government has kept the faith on the promised tax cuts in this year’s budget, and has so far adhered to its schedule for change to industrial relations, education and health. At this point the government still enjoys a level of trust which is unusual in politics.

It is for that reason that the government should be honest about the prospect of a budget deficit. A wide range of responsible economists and observers, along with the Reserve Bank Governor have all indicated that a deficit may be not only inevitable, but also a good thing. It is highly likely that there will be a need for more fiscal stimulation in the months ahead in order to keep the Australian economy moving. Should that prove to be the case the choice then will be to keep the budget in surplus and let the economy stall, or let the budget fall into deficit and keep the economy alive and thus provide some relief for ordinary Australians who would otherwise suffer the most.

Despite this, Wayne Swan and Kevin Rudd are still insisting that there is no need for a deficit. It might sound reassuring now, but the problem is that they stand a very good chance of having to eat humble pie next year. If that happens, it could well be enough to destroy the trust that they currently enjoy.

Friday, November 21, 2008

If We Don’t Have Each Other, We Have Nothing.

The respected and widely admired self-made billionaire Gerry Harvey has been quoted making some confronting remarks about charity. Interviewed for a book called “Master CEOs”, Mr. Harvey was asked about the role that he and his company, Harvey Norman, have played in community service activities. His response is shocking.

He said: “You could go out and give a million dollars to a charity tomorrow to help the homeless. You could argue that it is just wasted. They are not putting anything back into the community. It might be a callous way of putting it but what are they doing? You are helping a whole heap of no-hopers to survive for no good reason. They are just a drag on the whole community. So did that million you gave them help? It helped to keep them alive but did it help society? No. Society might have been better off without them but we are supposed to look after the disadvantaged and so we do it. But it doesn’t help the society.”

Now to be fair, that is not everything he said and he went on to talk about the value of helping people to reach their potential, and the fact that he and his company have made significant contributions to community and charity work, including for the homeless. But the stark nature of his initial remarks is shocking. So is he right? Is donating to charity a waste of time if it only serves to keep social parasites alive?

The truth is that there is no way to know just who might eventually go on to make a positive contribution to society. And it doesn’t have to be anything huge like a cure for cancer either. Even a smile or a kind word has the power and the possibility to cause change in the world by its impact on the person who receives it. Every single human has the capacity to do something good, no matter how small, but there is no way to know just who will make a difference in the world.

More importantly, doesn’t the salvation of even one individual provide sufficient return on investment for any charitable work? That million dollars for the homeless that Mr. Harvey spoke about might keep thousands of so called no-hopers alive, but if even one of them goes on to lead a powerful and fulfilling life which contributes meaningfully to the community, isn’t that a worthwhile result? And it is all random, so you can’t know just who and how many might take that opportunity and turn it into such an outcome.

In fact, the very process of charity itself makes the community and the world a better place. It offers hope to the hopeless, shelter to the vulnerable, kindness to the suffering, and opportunity for the lost to be found. More than that, it allows all of us as humans to be better humans, and the comfort of knowing that should we ever be in need of such support it will be there for us because we belong to a compassionate and caring community.

Isn’t that what being alive is all about? If we don’t have each other, we have nothing.

Thursday, November 20, 2008

Less Than Lethal

The New South Wales Ombudsman has issued a report calling for a two year moratorium on the roll out of Taser stun guns for the Police Force, pending a further review of their safety. The report refers to an incident in May 2002 in which a mentally ill man, Gary Pearce, died about two weeks after police used a Taser against him. Mr. Pearce was behaving violently, and was threatening police with a frying pan. After being subdued, he was treated in hospital for his mental illness as well as physical injuries. After being discharged, he suffered a heart attack and died.

It must be recognized that Mr. Pearce suffered from long term heart disease, Hepatitus C, and a thyroid condition, as well as being a heavy smoker. There is no conclusive evidence to suggest that the heart attack was linked to the Taser attack. But of course the question remains; did the Taser attack contribute to his death? That’s a question which has not yet been settled to everyone’s satisfaction.

While it may well be reasonable to investigate Taser safety more thoroughly, Police are reported to be incensed by the report, pointing out the benefits of Tasers as a “less than lethal” alternative to using a gun. Police are concerned that their own safety is at risk when they are placed in a situation where they must defend themselves. When given the option of firing a gun or firing a Taser, it would seem to be a simple choice.

At present, every New South Wales Police officer is issued with a gun. But to access a Taser, a request has to be sent to the appropriate senior officer, and then the Taser must be sent to where it is needed. Hardly a split second response to a life threatening situation. Police maintain that under these circumstances more people are likely to die needlessly, when they could have been temporarily disabled by the Taser.

The concern that must be addressed is the perception of the Taser as “less than lethal”. As such it is easy to envisage officers resorting to their use much more readily and frequently than they would a gun. This has serious civil rights implications, and also safety implications. Even if there is a small risk of death from the use of a Taser, it is misleading to consider the weapon to be “less than lethal”.

Under such circumstances, perhaps a better phrase would be “potentially harmful” or even “potentially lethal”, and appropriate protocols can be devised for the use of Tasers. As such, a Taser should be used only as a substitute for a pistol, in similar to circumstances as those which would require a pistol.

Even so, the controversial stun gun is still vastly less likely to be lethal than the alternative. For that reason, it does seem almost insane to withhold Tasers from frontline police and deny them the option of keeping their service pistol in its holster.

Thursday, November 13, 2008

Real Opportunity For Tax Reform

There were a few clues to the forthcoming review of taxation to be found in Treasury Secretary Ken Henry’s address to the National Press Club this week. While not giving too much away, Dr. Henry identified the complexity of our tax and transfer system as one of the major factors under consideration. This complexity presents as both the sheer number of taxes which exist in the system, and the compliance obligations which come with those taxes. He described the complexity itself as acting like another tax in that it provides a drag on the economy, although it does so while making no contribution to revenue.

While much of this complexity impacts upon business, it also applies to individuals with relatively simple tax affairs. It has previously been suggested that personal income tax returns could, in many cases, be dispensed with altogether, with a flat figure work related expenses deduction applied across the board. At the same time, the interaction between tax and welfare payments also suffers from complexity and high effective marginal rates, which mean that for every dollar of extra income an individual loses a high percentage as a combination of taxes and lost welfare payments.

Simplification of personal taxes would save us all a lot of wasted time and the expense of a tax agent, but it’s the arena of business taxes which provides the opportunity to really give a boost to the economy, which in turn would benefit us all. There has been a push to reduce company tax for quite some time, and that may well be on the agenda. But Dr. Henry specifically mentioned the role of tax arrangements in promoting foreign investment, at the same time as discouraging the shifting of profits offshore to avoid taxes.

It has also been reported that, although Dr. Henry did not specifically discuss dividend imputation, there may be a case for removing it. The suggestion is that imputation offers foreign investors no benefit while also discouraging Australian companies from investing offshore as foreign profits do not qualify to be offset against the tax on dividends. It is a complication, but the obstacle is that our entire superannuation system has been built around the mechanism of imputation, not to mention the Mum and Dad shareholders who have built a portfolio with an eye on tax effectiveness.

Dr. Henry made it clear that this “root and branch” review of taxation which has been ordered by the government will not be merely a “pruning and shaping” exercise. It would be safe to assume that when the review is complete, the recommendations will be substantial. It is also reasonable to view the current economic turmoil as an opportunity to rebuild the system virtually from the ground up to make it fairer and more efficient. While we have been promised tax reform in the past, it is reasonable to expect that, this time, we will get genuine reform. From the clues we have so far, it certainly seems that is the intention of Dr. Henry and his review panel.

What remains then is for the government to deliver on its commitment.

Wednesday, November 12, 2008

NSW Mini Budget Offers Pain Without Purpose

The New South Wales mini budget has confirmed once again that the government simply doesn’t understand what it’s doing. Filled with fear at the idea of a billion dollar budget black hole, they have desperately clutched at straws to fill that hole and return the budget to surplus as quickly as possible. The trouble is that it won’t work.

The role of government as a money manager is two fold. First, it must manage its own money responsibly to ensure that it can continue to function and provide the services upon which the community depends. Second, it must manage the economy so that the community can prosper. One is not more important than the other, and both are interconnected.

This mini budget is doomed to fail on the basis that it has been drawn up to address the first responsibility and boost the budget bottom line, at the expense of the second responsibility by increasing taxes and charges while cutting spending and investment. The fundamental flaw in this approach is that the added drag on the economy will serve to undermine the ability of the community to pay those increased taxes and charges.

While the government might seek to blame their circumstances on the Global Financial Crisis, the truth is that they were already in trouble and the global situation has only amplified it. More importantly, the impact of the global situation on the broader community is the very reason why the government should be more focused on boosting the economy than boosting their own revenue. That way, a stronger economy will provide them with stronger revenue anyway.

Instead, we have the exact opposite. At a time when the Federal Government is trying to pump money into the economy to prop it up, the New South Wales Government is trying to suck more money out of the economy to prop itself up. Yes, there are enormous challenges for New South Wales, and the Global Financial Crisis has made it more difficult. But that is the very reason why the State Government should be investing in road and rail infrastructure, public transport, and providing real incentives to the property and construction sector, not with handouts, but with abolishing ridiculous and excessive levies and charges.

The obstacle is that this would require the courage to accept a budget deficit and to take on appropriate debt to provide the infrastructure which would in turn provide the framework to encourage more investment in the state. The Government talks about taking the tough decisions, but that is not what they have done. They have in fact taken the easy way out and dumped the cost on Mum, Dad and the kids.

Tuesday, November 11, 2008

Victims Of Deceit

The modern technology of DNA testing seems to have opened a Pandora’s box when it comes to the question of paternity. Now that it is possible to determine whether or not a man is the biological father of a child that he is told is his, the awful truth has emerged that some men have been deceived and exploited. Further complicating the matter has been the introduction of a legal framework over the years enforcing the payment of child support money, which is only right and proper, but when it turns out to be based on a false claim, then the situation becomes complicated.

It has recently been made legally possible for men to claim back child support money paid for children subsequently proven not to be theirs. So far, 18 men in New South Wales have done so. Hundreds more know they are not the biological father and may also have a claim. It is also likely that thousands more don’t know, and may never know.

Now it seems reasonable for money paid under such false premises to be repaid by the women involved, and that has been the finding of the court in some cases. But this is where it gets complicated. Women’s groups are reported to be outraged, and claim that it is the children who will suffer. Matters are further complicated by the fact that in many cases the children have been brought up thus far believing a particular individual to be their father, and even some of the men themselves have formed a parental bond which carries real emotional significance regardless of the circumstances.

So how do we untangle such a mess?

First, if a government agency has determined that a man should pay, then that agency should carry the liability to reimburse the man. Second, the woman should be liable to the agency for any false claims made. Thirdly, the question of who is responsible for the welfare of such children needs to be made clear.

I suspect that these outraged women who claim that the children will be the ones to suffer, are probably the very same women who proudly assert that a woman’s right to choice is sacrosanct. If we accept that, as our society seems to have done, then it logically follows that women also carry the responsibility. It seems to me that men have been given no right to choice in this matter, until now. If a single woman falls pregnant, our society recognizes her right to choose whether to have the baby or not, but the man has no such choice.

The case of Queenslander Ken Rogers resulted from what was described as a drunken fling. He had no ongoing relationship with the woman, and no contact with the child, and yet paid $71 000 over a decade until he discovered the child is not even his. Now that the court has ordered that he be repaid the money, it might well be true that the child will suffer as a result of the financial impact on his mother, but stop and ask: whose fault is that?

Even if you forgive the mother for making a false claim, whether deliberate or not, it certainly isn’t the fault of Mr. Rogers, the innocent victim of years of deceit.

Monday, November 10, 2008

Last Roll Of The Dice For NSW Government

Twas the night before the New South Wales Mini Budget, and all through the house not a creature was stirring, not even a louse…. Er, I mean politician. Sadly, this is no fairy tale, and the taxpayers of New South Wales ought not expect much from the Government in the way of gifts. This mini budget was announced by a Government with a massive shortfall in its revenue even before the true extent of the Global Financial Crisis became known.

Confronted with the failure of the plan to privatise electricity, there was really no choice but to revise the budget. The problem is that while the economic downturn is depriving the budget of revenue, any commensurate reduction of spending will inevitably contribute to the downward drag on the economy. Even worse than that is the very real prospect that any reduction in spending will also result in a reduction in services.

It has already been revealed that the Government intends to cut $500 million from the health budget, even though the Health Department is already indebt and struggling to pay its bills. Services are already being cut with bed numbers reduced and specialist wards closed to try to make ends meet. Even if $500 million in savings could be found in the bureaucracy of the Health Department, that money would be better spent on boosting actually medical services rather than disappearing back into the budget bottom line.

Equally, the plan to increase property taxes might sound like a Robin Hood measure to tax the wealthy to help the poor (New South Wales Government), but if the disastrous experience of the exit stamp duty experiment is any indication, there’s a good chance that what little property market investment remains will be killed off.

In New South Wales, the construction industry is supposed to be one of the prime economic drivers, and as such should be a prime candidate for a boost. Of course, it is property and transaction taxes which provide a significant percentage of Government revenue, so it might seem like a good idea to increase them to help boost the budget bottom line. But if there are no transactions, there is no revenue. Cutting property and transaction taxes, on the other hand, should help to stimulate the sector, producing increased activity and therefore increased tax revenue.

With GST revenue also falling because of the economic slowdown, there is a valid argument to suggest that the Commonwealth should do something to bolster State revenue. No relief can be expected on that front for two reasons. First, the Commonwealth has its hands full with its own problems. Second, given the record of mismanagement in New South Wales, it is unlikely the Commonwealth would trust them with the money. Right now, the New South Wales Government is on its own.

This is that last roll of the dice for the New South Wales Government. It is their last chance to rescue their political fortunes. Unfortunately the combination of their own mismanagement and the impact of the wider economic crisis has left them ill equipped to do so. Instead, it appears that they will act to prop up the budget bottom line rather than the State’s economy. If that’s the case, it will be another victory for short sighted thinking over the long term prosperity of the State.

Friday, November 7, 2008

As Easy As ABC

The insolvency of ABC Learning Centres is a clear example of the folly of taking a perfectly good business and destroying it by using it as nothing more than a vehicle to generate a short term cash return rather than long term value. The rapid expansion of the business came at the expense of an equally rapid expansion of its debt. As more cash flow was required to feed more debt, more debt was required in turn to generate more cash flow. As we have seen this will work well for a time, as long as the cash flow continues to grow and the credit continues to be cheaply available. In this way it is possible to quickly build an enormous structure, but the problem is that the structure is hollow. Any intrinsic value in the business is counterbalanced by the debt obligations.

ABC is far from alone in this. Already we have seen the so called “financial engineers” such as MFS and Allco fall by the wayside. Merchant bankers Babcock & Brown and even the previously glamourous Macquarie Group have been punished by the market for their indescretions. Macquarie has proven to be more resilient than the others, in part because it had already changed its business structure to ensure it is well capitalized, and partly as a fortunate beneficiary of the Government’s banking guarantee. Even so, Macquarie’s share price is a pale shadow of what it was a year ago.

At a time like this it’s also worth recalling the failed private equity takeover of Qantas. If that had gone ahead, as Geoff Dixon and Margaret Jackson had recommended, the subsequent debt burden placed on the company could well have destroyed it in current circumstances. The point is that such debt funded expansion or acquisition will always carry a high degree of risk compared with equity. While conditions allow, such high risk will often result in high rewards. Now that conditions have changed, the true extent of the risk is becoming apparent.

The important point to all of this is that these practices, labeled as “financial engineering”, have absolutely nothing to do with the actual operation of a business. A business can be perfectly viable on its own terms, but it can be destroyed by having its value hollowed out as more debt is taken on to fund either a change in ownership or a rapid expansion. In the case of ABC, the individual childcare centres are in most cases perfectly good businesses, despite the fact that the corporation which owns them appears to have been pillaged for the purposes of a quick buck.

The Government has now committed to spend $22 million of taxpayers’ money on keeping the operation running. The argument is that childcare has become an essential piece of community infrastructure, integral to the ability of the economy to function. There is plenty of truth to that notion, which then prompts the question: is it wise to allow a single company to acquire so much market share in an essential service without greater prudential regulation?

It seems obvious now that the answer is “no”. At the very least it is to be hoped that the Global Financial Crisis might ultimately lead to a change in the way debt financing is both employed and regulated, especially in the provision of essential services.

Thursday, November 6, 2008

Welcome to the 21st Century

The election of Barack Obama to be the next President of the United States provides a turning point in not only American history, but world history. It’s not just because he has made history as the first black President, although that has attracted a considerable amount of acclaim. Although that landmark is significant, it is the opportunity for genuine change and renewal in the United States, for itself and for its place in the world, which is of greatest importance.

The past eight years of the George W. Bush administration has been in every way a hangover of the 20th Century. His time as president has been marked by the prosecution of a war that had its seeds planted during the Ronald Reagan and George Bush Senior years. That war is in many ways a case of the son taking up the unfinished business of the father. Beyond that, the Bush Presidency has represented the ultimate pinnacle of the influence of the Bush family in American affairs going all the way back to Prescott Bush and his infamous connection to the Nazi party as a Director of the Union Banking Corporation in the 1940s.

The foreign policy of the United States in recent decades has become increasingly interventionist and increasingly unilateral, at a time when the rest of the Western World has been searching for greater unity and stability. The reputation of the United States has suffered because it has turned its back on the United Nations despite having been instrumental in its creation after World War Two for the specific purpose of circumventing war. The United Nations may be far from perfect, but it should be the role of the United States to strengthen that body, not undermine it.

W’s economic policies also owed much to those of Ronald Reagan, and at least in part the fallout from the present Global Financial Crisis can be traced back to those policies. The blind faith in the ability of the markets to self regulate has led to the inevitable result of unfettered greed being punished by those same market forces as the other primal driver, fear, tears apart the house of cards built upon hollow investment vehicles representing assets of no intrinsic value.

The election of Barack Obama is a turning point in world history because it provides the United States of America with an opportunity to restore its reputation as a world leader rather than an international bully. An opportunity to restore its own economy through investment in nation-building at home rather than military destruction abroad. An opportunity to look to the future rather than to be mired in the remnants of an imperfect past. An opportunity to once again truly embody the spirit and ideals of the founding fathers of the world’s greatest democracy, who wrote in their Declaration of Independence of the universal right to “life, liberty and the pursuit of happiness”. An opportunity to once again stand for the ideals of freedom, democracy and justice for all.

This is the moment of endless possibility, the opportunity for national transformation, the real beginning of the 21st Century in American affairs. All that remains is for the new President to actually deliver the change he has repeatedly promised. I wonder if he can.

Wednesday, November 5, 2008

Economic Outlook Still Gloomy Despite Interest Rate Cut

Just As everybody was starting to feel good after the Reserve Bank of Australia delivered a larger than expected interest rate cut, Treasurer Wayne Swan has poured cold water over the party. The RBA announcement yesterday was widely welcomed as good news, with the expectation of relief for homeowners and business operators. Today, the Treasurer has revealed the Mid Year Economic and Fiscal Outlook projections, which don’t inspire quite so much good cheer.

While the interest rate cut is good news for people struggling with loan repayments, it’s a double edged sword. For example, retirees who might have been smart enough to move money out of equities and into cash will now see their returns reduced again. On top of that, the fact that the RBA is repeatedly delivering larger than expected reductions in the official cash rate could be interpreted as indicating that economic conditions are worse than we thought and therefore warrant a more extreme response. Today’s report lends weight to that idea.

Wayne Swan has warned that the Global Financial Crisis has created a $40 billion hole in the Federal Budget. The projections indicate that economic growth will continue to slow, and unemployment will continue to rise. Now, while some optimists are hoping that there will be a turning point in the early part of next year which will see the economic sunshine pouring in once again by 2010, the Mid Year Outlook indicates that unemployment will still be increasing in 2010. If that’s the case, the economic slowdown will be with us for some time yet, rather than somehow miraculously turning around in the next couple of months.

Despite the seriousness of the situation, it remains true that Australia is better placed than almost any other country to survive the crisis. Even if the official forecasts prove to be optimistic and the pessimists who predict recession turn out to be correct, the Government has the capacity to cushion the blow with a combination of welfare and economic stimulation measures. The Government has a budget surplus, a substantial cash reserve, and no net debt.

That’s reassuring because if the doom merchants are right, interest rates, employment rates, property prices, and business profits all have a lot further to fall before the crisis is over.

Tuesday, November 4, 2008

Affordable Housing In The “Too Hard Basket”

The New South Wales greens have introduced a bill into the Legislative Council calling for up to 25% of new multi unit housing developments to be set aside for affordable housing. Under the plan, the housing could be managed by Councils, non profit housing organizations or the Department of Housing. Rents would be kept affordable by fixing them at no more than 30% of the tenants’ income.

Some such schemes already operate successfully abroad, and also on a limited basis in some Council areas here in New South Wales. The obstacle is that under current law Councils need special permission from the State Government to introduce such an arrangement. In the absence of adequate numbers of public housing properties, the need for more affordable housing of any sort is becoming more pressing.

Developers blame the affordability crisis on the undersupply of housing in the market, and in turn blame the undersupply on the tangle of red tape that strangles development, along with the excessive levies and charges that are imposed on new developments. For that reason, they say that the Greens’ scheme amounts to just another tax on development, likely to strangle the market even further and ultimately prove counterproductive in terms of affordability as it could force open market prices up, not down.

Unless the Government suddenly decides to inject more money directly into public housing, and with a budget black hole dominating their finances at the moment that is about as likely as pig farming on the Moon, the proposal by the Greens offers a way to address the shortage of affordable housing that would otherwise be ignored. The success of the scheme would depend upon developers being able to see a viable return from the project. That means those big fees need to go.

The developer levies and charges that currently add as much as $100 000 to the price of a property are the real villains in the affordability equation. They are up front charges for future infrastructure and services for which residents are already paying rates and taxes. If those unjustifiable levies and charges can by cut or at least reduced, then there would be scope for the Greens’ plan to actually provide at least part of the solution to a problem that has spent far too long in the “too hard basket”.

The challenge is for Premier Nathan Rees to keep his promise to empty out that basket, and support this plan.

Monday, November 3, 2008

Picking The Trifecta

Well it’s that time of the year again. Melbourne Cup time; when the real winners are the bookies and the betting agencies as everyday people become punters for a day and plunge millions on the race that reputedly stops a nation. This year of course the big race coincides with the United States Presidential election, which might be a two horse race, but is nonetheless just as difficult to pick. To complete the trifecta, the Reserve bank of Australia will have its monthly meeting and decide whether or not the economy needs another interest rate cut.

Although it seems to be a foregone conclusion that rates will be cut again, there are signs that some uncertainty exists. While the Global Financial Crisis continues to make its influence felt and retail and property figures are still down, it’s not all doom and gloom. The Australian economy is not in recession, the impact of the Federal Government’s $10 billion cash giveaway is about to hit next month, and inflation is still high. These three factors might just be enough to persuade the RBA to hold steady on interest rates. If they do, it would be a mistake. I expect the Reserve will play it safe and drop rates by 0.25%.

Across the Pacific, the United States is contemplating whether to elect a 72 year old war hero as President, or to make history by electing an African American to the post. Despite the best efforts of Hollywood to sell the idea in fiction, it remains to be seen if mainstream America is ready for that leap. It’s not simply a question of race, as only a minority will see that as an obstacle. It’s also a matter of age, experience, divided opinions about the Iraq War, and even the question of the right to own guns. While, the Republican Party deserves to be punished for its economic and foreign policies, conservative values can seem attractive in times of crisis. While the rest of the world might favour a Barack Obama victory, I’m not convinced that the American People will see it that way. I believe it will be tight, and that McCain might just pull it off, even though Obama would likely be the better President.

As for the Melbourne cup, there might be two dozen horses to choose from, but it’s the easiest one of the three to pick. Really, there is only one choice. The cup will be won by Mad Rush. So there you have it… a modest interest rate cut, McCain for President, and Mad Rush to win the Melbourne Cup.

Hang on a minute, I’m still not sure about McCain… That’s just too hard to pick.

Friday, October 31, 2008

Selling The Farm

It’s old news that the New South Wales Government is confronting a budget crisis. Former Treasurer Michael Costa ran from office screaming about a billion dollar black hole after he failed to sell off the electricity industry, somehow suggesting that it wasn’t his fault. Now, it has been reported that if measures are not introduced to address the slide the deficit could crash through the $2 billion mark before the financial year is out. All the indications are that the mini budget to be unveiled within weeks will contain plenty of pain and no sweeteners.

It has been reported that the big ticket $12 billion North West Metro line announced by former Premier Morris Iemma will be axed completely. If that is the case, it will be completely consistent with the track record of the Labor Government over the past 13 years of announcing major rail projects that are never actually delivered. Even the Chatswood to Epping line which is nearing completion, and which is overbudget, overdue, fails to meet noise standards, and is too steep for modern trains, was originally meant to run all the way to Parramatta. Not one major rail project has actually been delivered, as promised.

With the budget black hole continuing to expand, it has been reported that the minibudget will also include plans to sell off more State assets. Yes, there are some left, but probably not for much longer. One of the few remaining assets that could raise a reasonable sum for the Government is New South Wales Lotteries. It is anticipated that the sale of the Lotteries office could raise about $1 Billion, going a long way towards plugging that budget black hole. But what happens after that?

New South Wales Lotteries is not just a valuable asset; it provides the Government with a very healthy source of income. Last year the return to the Government was $340 million. Revenue from lotteries is continuing to grow, even while other streams of revenue are falling due to the economic downturn. Selling the asset now is killing the goose that lays the golden egg. It is slaughtering the family cow for a week’s supply of meat instead of a lifetime supply of milk and cheese.

There is also the social equity argument about the morality of placing even more gambling revenue into the hands of private enterprise. But we’ve already gone so far down that track that it hardly seems to matter.

The real concern is that the Government is attempting to sell assets because it has run out of money. That prompts the big question of what happens when they finally run out of assets?

Thursday, October 30, 2008

A Monkey In A Suit Is Still A Monkey

The allegation against New South Wales Assistant Health Minister Tony Stewart is not just that he touched a staff member on the leg. That makes the story sound tame and almost harmless. It sounds as if it could even be explained as a simple misunderstanding. But that is a misrepresentation of the allegation.

The details of the allegation are that the Minister was unhappy with the content of a speech which had been prepared for him by Tina Sanger. It is alleged that, in front of other guests at a charitable dinner, he expressed his dissatisfaction by forcefully berating her, saying that she was not up to the job, and that he wanted her out of his office. It is further alleged that she was forced to endure this tirade by the Minister placing his hand on her leg under the table and restraining her so that she could not move away.

That’s a whole lot more than simply touching a leg.

Shortly after Mr. Stewart denied the allegations, it was revealed that an anonymous phone call was made to the office of Opposition Leader Barry O’Farrell, purporting to be from the partner of an employee of the minister. That phone call alleged that all of the Minister’s office staff are threatening to resign, and that the woman at the centre of it all has been told to keep quiet and she will be looked after.

Despite the denial by Tony Stewart, and the willingness of the Premier to accept it, the question still hangs in the air: If nothing untoward has occurred, why has Ms. Sanger been removed form Mr. Stewart’s office and reassigned? Of course, it could simply be a matter of removing a staff member whose performance has been in some way unsatisfactory, but even if that is the case the manner in which this appears to have been done is heavy handed and unprofessional. Any admonishment for poor work performance should be saved for the privacy of the office, not dealt with at a dinner table at a public event.

Of course, if there was something wrong with the speech, shouldn’t the Minister have noticed this before then? Shouldn’t he have read and reviewed the material at a much earlier stage? Doesn’t such an incident tell us more about the Minister than it does about his staff member? It would be easy to believe that the Minister has been embarrassed by his own inattention to detail, and then lashed out to blame someone else.

At a time when there are serious problems confronting the State such as the expanding budget deficit, the erosion of services, and the evaporation of public confidence in health and transport, the people of New South Wales deserve better than the distraction of this sort of tawdry episode. Following so soon after the Matt Brown dirty dancing scandal, this is just one more piece of evidence suggesting that despite the expensive suits, New South Wales is still being run by a pack of monkeys.

Wednesday, October 29, 2008

Retired Australians Deserve A Guarantee

More than two weeks after the Prime Minister announced that all bank deposits would be guaranteed by the Government without limit, there is still no real solution to the unintended fallout of frozen investment funds. With no limit to the guarantee, it should have been obvious that money tied up in non-guaranteed investment funds would be pulled out en masse and shifted into bank deposits. This exodus has prompted the freezing of the investments of about 250 000 Australians who can no longer access their own money. Most of them are not in urgent need, but nevertheless feel frustrated and worried about the security of their funds. Some of course may actually have urgent need of the money.

The first response by the Government was to introduce a $1 million threshold on the bank deposit guarantee, above which a fee would be charged. Unfortunately this has proved to be too little too late, as cunning operators are splitting up their money into smaller parcels of less than $1 million in different banks. Even so, it hasn’t done anything to unlock the frozen funds.

Fund managers have been calling for the deposit guarantee to be extended to cover their truest funds as well as bank deposits, but the Government maintains that it is not appropriate to expose taxpayer’s money to market based investment vehicles. And quite right too. So, the Government has come up with another solution… the Mortgage Funds should become banks, and that way they would of course be covered by the guarantee.

It seems so astoundingly simple, it’s amazing nobody thought of it before now. In reality, it’s not simple at all. This proposal is a political solution, not a practical one. Mortgage Trusts and Cash Management Trusts are not the same as banks, and for them to qualify would require capital reserves that they do not have, compliance with regulations which do not currently apply to them, and a significant amount of time to make the necessary changes. Hypothetically it could be done, but it’s just not a practical solution to the immediate problem of retired Australians being unable to access their own money right now.

Realistically, the life savings of older Australians have been placed in these investments as a direct result of almost two decades of Government Policy dictating how superannuation works, and how the proceeds of superannuation should be managed. Retired Australians have diligently played the game according to the rules laid down by the Government. Now, they are being penalized through no fault of their own, and they deserve a better response from the Government.

It is impossible for the Government to guarantee everything, and impractical to guarantee market linked investments, but perhaps a case can be made for devising a special category of guarantee for cash based investments held by individuals up to a practical cap of around $250 000. That’s about the size of the average superannuation payout, and is also the level at which the bank deposit guarantee should have been capped.