Friday, May 8, 2009

Don’t Expect Surprises On Budget Night

Editorial Friday 08.05.09.
As the Federal Budget looms closer, a flood of leaks has washed into the headlines alerting us to a range of measures to expect on Tuesday night. Among them are changes to significant components of health policy. The first is the move to restrict access to the Medicare safety net which provides additional rebates to patients who exceed a threshold figure in any given year. Rather than subject the safety net program to a means test, it appears that the government will simply remove support for certain services, including IVF treatment, which might be considered by some to be a non-essential medical service. The second item is the plan to introduce a means test for the private health insurance premium rebate. Both of these measures, if implemented would be a clear breach of election promises.

The argument will be that circumstances have changed, and that the extreme conditions of the Global Great Recession have made it impossible to conduct business as usual, and that reneging on these promises is the economically responsible thing to do. We will be told that these are tough times that demand tough action, but although there is considerable truth to that assertion, it remains open to debate whether these are the right choices. For example, cutting off all IVF from the safety net payments could easily be seen as producing a situation where only the well off can afford to have children in the case of infertility. That doesn’t seem to be consistent with a Labor Party social democrat philosophy now does it? There is concern that introducing a means test would have been contrary to the principle of the universality of Medicare, but to simply remove the benefit altogether obviously has the greatest impact on those who can least afford to pay full price themselves.

There is no such principle of universality involved with private health insurance, so the proposal to introduce a means test for the rebate is easy to understand. Despite the fact that it represents a blatant reversal of an election promise, it is far less contentious. The means test will only affect people who can afford to pay for their own private health insurance anyway. Lower income earners will still get the rebate if they choose private health insurance. Already people with higher incomes are charged an extra fee for Medicare if they do not have private insurance, which incidentally is also set to be increased in this budget, so means testing the rebate is consistent with the established principle of expecting higher income people to pay their own way.

The only problem with removing any, or all, of the private health insurance rebate is the concern that people may choose to drop their insurance rather than pay the full premium. If significant numbers do so it will place greater pressure on the health funds to push the price of premiums up for their remaining members, including those less well off people who make sacrifices and depend on the rebate to keep their membership current. If prices are pushed up sufficiently it could lead to a spiral effect which sees more people leave the funds in a vicious circle of rising costs and falling membership.

The trouble with that argument is that it pre-supposes that people affected by the means test will drop out. Some might, but if significant numbers do, surely that is an indication that private health insurance does not represent good value for money. If private insurance offers a good deal, and provides benefits that serve the needs of their customers, surely everyone who can afford to keep their membership will do so. Why wouldn’t they? I believe that if there is a significant exodus from private health funds after the introduction of a means test it will be a reflection of their performance as service providers rather than purely the price.

Of course it remains to be seen if the reported budget leaks are all accurate, but the tradition for federal budgets is to get all the bad news out in the press in the week prior, possible even have some of it exaggerated, so that on Tuesday night when the Treasurer makes his speech, the only surprises are pleasant ones. Given the economic circumstances, that part of the tradition might be difficult to deliver.

Thursday, May 7, 2009

Laws Won’t Stop Idiots Being Idiots

There is no doubt that alcohol related violence is a problem. Even if most people are quite capable of having a night out without starting a fight or damaging property, on the occasions when trouble does occur it can become very ugly very quickly. When it does, it becomes headline news, and it’s quite natural to expect the authorities to do something about the threat to public safety. Information and education campaigns don’t seem to have stopped the problem, and recent attempts to target specific venues labeled as trouble spots didn’t really make any difference either. Now, the New South Wales government wants to give police greater powers to direct people who appear to be drunk to move on, even if they haven’t actually done anything wrong.

While it might be admirable to try to head off trouble before it occurs, this approach effectively either treats people as guilty before the fact, or worse makes it illegal to appear drunk. It has been suggested that under such laws it would be possible to get into trouble for simply slurring your speech. If you are a little tipsy, a pleasant evening out could become very unpleasant, even though you have done no wrong. Even worse, a person with a speech impediment, or perhaps a stroke victim, could be wrongly accused of being inebriated, something which has already led to tragedy in the past.

What next? Arresting people for walking funny? Arresting people for being a smart alec, or having a whacky sense of humour? Arresting people for wearing funny clothes? Where do you draw the line? By these standards, New South Wales Police ought to issue an arrest warrant for Karl Stefanovic, the Channel 9 presenter who made embarrassing headlines by appearing on television in what we in the industry refer to as a “tired and emotional state”. Good heavens, I stumble over my words every day… am I next?

Of course, I am exaggerating the situation to make the point, but it is an important point. This proposal comes perilously close to making it illegal to enjoy a drink. It suggests that everyone who has a few drinks is about to explode into violence, and it simply isn’t true. The people who become obnoxious and violent are generally already obnoxious and violent… the alcohol just makes it worse. But that doesn’t mean that everybody should be punished. That doesn’t mean that everybody should be treated like idiots.

Piece by piece, laws are being introduced which are undermining our freedom to speak, to assemble together, to move about, perhaps even to think for ourselves. This new proposal won’t stop idiots being idiots, but it will provide police with the kind of power which can easily lead to unnecessary confrontations and abuses. It is already against the law to be violent. It is already against the law to be abusive and offensive. We don’t need more laws, we need more respect for the laws we already have, and more police to uphold them.

Wednesday, May 6, 2009

Do The Right Thing For Our Great Australian Tradition

Is there no end to the disasters that are unfolding around us? Global warming, climate change, global financial crisis, recession, boat people, swine flu, Silvio Berlusconi’s marital troubles… we are being swamped by crisis after crisis, heaped one upon the other. It has reached the point were it might be easier to roll up into a ball and wait for it all to go away. But now, the latest calamity has been revealed, and I have to tell you it beats all the others hands down. A study prepared for the OECD, comparing the use of leisure time in different countries has revealed that the Great Aussie Barbeque has passed away.

How can this be true? Australians have been barbequeing since that Jolly Swagman called Andy roasted a Jumbuck over his campfire by the billabong. It’s more than a tradition, it’s a way of life, and every Sunday backyards right around the nation are filled with the sound and smell of sizzling sausages, steaks, and even the odd shrimp…. Er sorry, prawn. But no, apparently we have been deceiving ourselves because the OECD reports that Australians devote only 3% of their leisure time to entertaining friends, as compared to our brothers and sisters in Turkey who invite the neighbourhood around for kebabs a whopping 43% of the time. Apparently, Australians are wasting 41% of our leisure time on watching TV or listening to radio.

This is a national tragedy, not to mention a terrible embarrassment. If there is any substance at all to this devastating news, then it is time to reclaim our heritage, stoke up the Webber, and slaughter the sacrificial sheep. There might not be many things Australians can do in the face of the economic downturn, but one thing we can do is burn the snags and singe the steaks, probably while enjoying a couple of cold ones. That should help boost the economy for Australia’s meat producers, as well as the Japanese brewery that makes a big slab of our beer now, after the Kirin takeover.

While we’re at it, we should take the trouble to invite the neighbours, as well as anyone new in town so that we can all get to know each other. And as for those boat people, why not invite them too? Think of the opportunity! We could be welcoming immigrants and introducing them to the Great Australian Way Of Life at the same time. In fact, why not hire out one of those barbeque pontoon boats and sail it up to Christmas Island and throw a Barbie up there to welcome all of the new arrivals. After all, it doesn’t appear as if the Government is serious about stopping them, so the least we can do is show them how to fit in to proper Australian society.

Yes it’s true, we could pretty much solve most of the world’s problems by having a good old fashioned Aussie barbeque, as we all gather together and chew the fat… although probably not from pork chops because we might still be worried about the swine flu. As we all sit facing the Webber, stubbie of Kirin Ichiban in our hand, we could all come to a new understanding of each other, while at the same time rescuing the Great Australian Barbeque. Yes, indeed I believe that the reports of the death of this fine Australian institution have been greatly exaggerated.

Although I could be wrong. Maybe Australians have stopped barbequing as part of their efforts to stop global warming. After all, Aussies are always doing their best to “do the right thing”.

Tuesday, May 5, 2009

We Know What The Opposition Opposes, But What Does It Support?

Last Thursday I told you not to be surprised to see the Federal Government agree to postpone the introduction of its Carbon Pollution Reduction Scheme. Yesterday, that’s exactly what the Government did. In an effort to have the legislation pass through the Senate, the government has made concessions which are significant enough to draw accusations of having performed a backflip. It has also been described as a broken election promise, but of course it was a promise that was impossible to fulfill without the support of either the Greens or the Opposition in the Senate. Confronted with the reality that any prospect of sticking to the original start date had utterly disappeared, the only possible choice was to accommodate the calls for a delay.

There have also been other changes: to decrease the initial price level of carbon and increase the number of free permits to be granted to trade exposed industries, along with the increase to the upper end of the range of possible emissions targets to 25% by 2020, conditional on global agreement. All of these alterations are adjustments of scale, not structure, so the emissions trading scheme is essentially unchanged, while attempting to overcome the objections of its critics. In that sense it’s not so much a backflip, as a long jump. Even so, it has failed to attract the required support from either the Opposition or the Greens.

While there is still room for negotiation, it would seem that the Government is becoming frustrated with the Opposition, calling upon it to outline its position and specify exactly what measures it would support. That’s understandable because the opposition was calling for a delay and an increase to industry support, and now that the Government has offered exactly that the opposition says it still isn’t good enough. But the Government has a point. It is not possible to negotiate with someone who doesn’t have a position, and at this stage it appears that the opposition does not have a clear policy on how the emission trading scheme should be designed. Instead, all it is doing is just opposing everything. Surely it is time to say what they will support.

Of course, everybody wants to come out looking like the winner, so it’s unlikely that one side or the other will simply agree to whatever’s on the table without some more haggling. Both sides are saying that they are still open to discussion, so presumably there will be further compromise by the time agreement is reached. But what if agreement is not reached? What if the opposition simply will not agree to the Government’s legislation? In the absence of support from the Greens, that leaves the prospect of another potential trigger for a double dissolution election.

While such a course of action is not the Government’s first choice, I believe that it is a door they would like to keep ajar. If they are constantly frustrated by having their agenda blocked in the Senate, a double dissolution provides an opportunity to break that impasse. It also has some added benefits. Firstly, the indications are that the economy will continue to become worse before it gets any better, and the timing of that is such that an early election could see the government going to the people before the worst of the recession erodes their popularity. Today's Newspoll figures would seem to indicate that such erosion has already begun. Secondly, there is still the prospect of Peter Costello being called up from the backbench to take over from Malcolm Turnbull before the next election. Going to the polls early would head off any such move before it happens.

In that case, the opposition would have no choice but to actually come up with a clear policy on emissions trading, something which so far they haven’t bothered to do.

Monday, May 4, 2009

State Budget Woes Not All self Inflicted

The Institute of Public Affairs describes itself as an independent free market think tank, and claims to have no formal affiliation with any political party, but really it has always been linked to the Liberal Party, and with what is generally considered to be right wing politics. That being the case, it is no real surprise that the Institute has produced research which it says indicates that the budgetary difficulties of State Governments in Australia are caused by their own excessive spending, rather than any fallout from the Global Financial Crisis. The Institute argues that State Governments around the nation squandered the revenue bonanza of the boom years on recurrent spending with nothing to show for it. Now that the good times are over, the States are in poor shape to handle the downturn. Obviously, with all the state governments under Labor Party control up until the recent change of government in Western Australia, there is some temptation to throw darts at an ideological enemy. But is it a valid criticism?

After a dozen years of conservative government at the Federal level, no such criticism has been leveled at the Commonwealth, despite the Howard Government spending at unprecedented levels. Now that there is a Labor Federal Government it is perhaps still to soon to blame them for the economic disaster now unfolding, although the groundwork for that is being laid with every warning about the future tax increases which will supposedly be needed to repay the debt accrued by the current stimulatory spending policy. Nevertheless, the Institute has not criticized the former Federal Government for its record spending during the boom years. So what’s different?

While it is true that the Federal Government clocked up year after year of budget surpluses, paid off all government debt, and put money aside for future needs, it also enjoyed the benefit of controlling the bulk of all tax revenue. While the States also enjoyed buoyant revenue during the good times, it was nowhere near as bountiful as the money flowing into the Commonwealth, which collects more than 80% of all tax. Although the GST is returned to the States, even that is fiddled with by a formula which deprives some States to subsidize others. At the same time the expectations of the public for services provided by the States, especially health, education and transport, have continued to grow beyond the ability of the States to keep up.

Now that the good times have come to a screeching halt, revenue is falling for all Governments. The Commonwealth has already identified a decline of $115 billion since the last budget, and next week is expected to revise that figure to show an even greater decline. For the Institute of Public Affairs to simply accuse the States of causing their own budgetary difficulties by spending too much completely overlooks the obvious fact that all revenue is plummeting, whether State or Federal. Yes, it would have been more prudent to have bigger surpluses, but in the current circumstances it would have made very little difference. Blaming the States for the current economic turmoil is a bit like telling tsunami victims that they should have built bigger levee banks. But just because the Institute is only telling half the story doesn’t mean they are completely wrong either.

It is true that State Governments, desperate to make ends meet, have spend windfall gains on recurrent expenses. It is true that State Governments have failed to adequately invest in infrastructure creation, or even in the maintenance of existing infrastructure. It is true that in the face of the downturn, State Governments are less than well equipped to deal with the fall out. It is also true that as any government goes into debt, there will be an increased cost added to the budget bottom line to service that debt, which in turn will create a need for higher revenue to come from somewhere, and the most likely source is from higher taxes. It is true that those higher taxes do add a drag to the economy, and will have an effect in slowing or delaying the recovery.

But that is the choice we are making now at both the State and the Federal level. We are borrowing from the future to help get us through the present, which is not in itself the wrong thing to do. The real question is just how much are we prepared to borrow to ease the pain now, without creating an impossible burden for the future. While State Budgets are important, it is the Federal Budget next week which is central to that question. That’s where the real decisions will be made about how long we will be paying off the credit card bill when all this is behind us.