Merry Christmas

EDITORIAL FRIDAY 19.12.08.
I can’t believe it’s the end of the year already. It sounds clichéd, 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.

Piece Of Paper Is Not Enough

EDITORIAL THURSDAY 18.12.08.
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.

At Last, Some Good News!

EDITORIAL WEDNESDAY 17.12.08.
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…

Giving With One Hand…

EDITORIAL TUESDAY 16.12.08.
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.

The Soft Option

EDITORIAL MONDAY 15.12.08.
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.

Market Meltdown Worse Than 1930

EDITORIAL FRIDAY 12.12.08.
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.

Sitting On The Fence Gives You Splinters

EDITORIAL THURSDAY 11.12.08.
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.