A Hidden Trap in the Politics of Power

Victorian Energy Minister, Theo Theophanous, has called for the Commonwealth Government to show greater leadership in promoting low-carbon fuels and carbon sequestration.  Such policies aim to reduce carbon dioxide releases into the atmosphere and combat the risk of global warming.

Claiming that Victoria wants to promote more "community" debate on the issue, he said that his Government was funding non-government organisations to assist this.  Using public money to promote a particular view -- and the Victorian Government is most unlikely to direct funding to bodies opposing its beliefs on these matters -- begs questions about the appropriate role for government.  Is it the "servant of the people" or is it the master and guide of the people?

Mr Theophanous's call for greater Commonwealth leadership is also more than a head-butt at a political opponent.  The Commonwealth's primary responsibility for greenhouse policy allows State Governments to grandstand without suffering criticism for the higher electricity prices that their proposals cause.

The Commonwealth already has a Mandatory Renewable Energy Target.  This is forcing an increase of $350 million per year in electricity prices.  Aware of the importance of cheap electricity to Australia and the need to compete at a national level, Canberra is resisting calls for further such cost imposts.

In NSW, the Carr Government actually supplements the national scheme with an additional consumer impost.  Victoria, however, conscious of its precarious competitive position against other states in attracting new investment, has declined to follow that lead.  The Victorian Government is also aware that, unlike NSW, the state will require new base-load electricity plant in the next few years, investment that will be discouraged if it foists additional costs on the industry.

Events in Western Australia last week drew attention to the impact of inadequate electricity capacity.  Extensive black outs led the government to sack the Chairman and CEO of its state-owned electricity monopoly.  Western Australia's misfortune demonstrated how the need for additional plant can suddenly creep up.  Delays in commissioning it can have unexpected, catastrophic effects as well as price increases resulting from a need for less efficient plant to be brought on line.

Although the Victorian Government has rejected the NSW approach of a supplementary consumer tax on high carbon emitting electricity sources, another of its policy approaches will have a similar effect.  The Government is demanding additional carbon dioxide emission targets for the Hazelwood power station as a condition of new planning approvals.  These would reportedly cost Hazelwood's owners some $250 million.  Because prospective investors will also be focused on these requirements, any such cost increases will reduce the viability of new investment and, at the very least, delay new plant.  As Western Australia is now discovering, this can bring a bitter harvest some years ahead.

The Bracks Government has aspirations to occupy the Ministerial offices far into the future.  It should be wary that what seems in 2004 like low-risk policy of requiring an established investment, like Hazelwood, to carry additional costs, may return to haunt it.

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NGO Protocols

Next month, the Australian government will be presented with my report, "The Protocol:  Managing Relations with NGOs", which will argue for the establishment of a protocol between the Australian government and all non-government organisations with whom it deals.  NGOs are defined as non-government non-profit groups that mobilise resources, provide information, and advocate for changes in certain areas.  The protocol is an agreement to publish details of the standing of each NGO that has access to, and receives resources from, government.  Its aim is to inform the electorate of the relationship between the two groups -- elected representatives and civil society activists -- who purport to speak on their behalf.

The genesis of this report is work I undertook on the rise and influence of NGOs on government policy.  The protocol is the suggested policy response and is based on three arguments.  First, NGOs should be as free as any citizen to lobby government.  Second, NGOs undertake valuable work in aggregating public opinion and advancing policy.  Third, NGOs should not have a privileged relationship with a government, without a justification and without disclosure of their credentials.

NGOs "represent" only some public opinion.  The collection of all possible NGOs does not constitute public opinion.  To some extent, politics is a contest between organised and unorganised public opinion, between particular interests and the public interest.  More recently, many NGOs purport to represent universal interests, which they argue, represent the public interest, for example, human rights and the environment.  NGOs give "voice" to the public, which in liberal democracies in an age of extraordinary ease of public communication is not a difficult task.  The hard task is to decide who is right and who is wrong.  When laws are to be framed and public funds allocated, only politicians should make such judgements.  Moreover, politicians need to make these decisions in a way that does not expand the universe of government by "buying off" of all interests with taxpayer largesse.

A close relationship between government and NGOs, in the European context, the "social partners" -- now a much broader group than organised labour and organised capital -- and the European Commission is not necessarily in the public interest.  Only elected representatives, elected at large, can formally determine the public interest.  There is some tension between two conceptions of democracy -- representative and participatory -- at work in all of this.  Representative democracy is thought to be a crude version of the latter.  It is allegedly inadequate because it relies on the infrequent input of the "median" voter at general elections.  Participatory democracy is thought to allow and indeed encourage many citizens to take an active part in their governance.

What if the citizens do not want to play politics?  What if they would rather delegate that task to those whom they elect, just as they delegate a thousand other tasks to specialists in their daily lives?  The citizen at large is not represented by NGOs;  NGOs do not fill the vacuum created in the alleged absence of the "active citizen".  Only political activists rush into the vacuum in representative democracy.  Almost by definition, and certainly in my experience, such activists do not share the same views or values of many other citizens.

The activist "fallacy of representation" is exaggerated in the EU, because the EU, as hard as it tries, is not a federation of peoples.  It is barely a federation of states.  Only nation-states after some considerable period of settlement, in a political and geographic sense can achieve -- in a beautiful phrase -- the "daily plebiscite" between citizens and representatives.  The EU is a construct where there is no daily plebiscite at work.

Hence, the difficulty of allowing NGOs privileged access to a forum, where the citizen is more than usually displaced.  Elected representatives who vote to fund NGOs and vote to have NGOs sit on committees of considerable influence are giving power away and betraying their constituencies.  "A voice yes, a vote no" is a favoured line of the NGO lobby.  It seeks to underplay their influence by denying their desire to have more than a say in proceedings.  But at what point is the voice so readily incorporated, that the vote is a mere rubber stamp?

In most legislatures, the need to hear from "the people" is great, and the desire to consult is genuine.  How then to resolve the tension between activism as an aid to decision-making, and activism as privileging the activist?  The answer lies in ensuring that the elected representatives inform the public at large about those with whom they deal.  Relevant questions about the process of how NGOs gain that status are:

• was there public advertisement of the opportunity to gain such status?
• what were the qualifications required to gain such status?
• what was the basis of selection of those NGOs that did gain such status?

Relevant questions about the benefits provided to NGOs by such status are:

• what are the benefits gained by NGOs?
• what is required of NGOs in return for the benefits?  are the benefits disclosed?

Relevant questions about the NGOs themselves that have such status are:

• what information about the NGOs is disclosed?
• how do the NGOs account for their benefits?

Just as in a court of law where witnesses are asked to prove their standing, so too should NGOs be asked to prove theirs at the EU.  The data can be easily gathered and presented in a form that the electorate can access and interrogate.  In this way, the tension between representative democracy and participatory democracy may be managed in favour of the electorate.

Paperburden Costs of Economic Regulation of the Gas and Electricity Supply Industry

Submission to the Productivity Commission

THE AMBIT OF THIS SUBMISSION

GENERAL TRENDS IN THE GROWTH OF REGULATION

Regulation can lead to considerable cost increases if it results in market distortion;  its costs are small if the regulators chance on a price and service mix that corresponds to that which the market would deliver.  US studies have rigorously documented the costs of regulation across all industries and have shown the outcomes of regulatory intervention vary markedly between industries and by type of regulation. ⁽¹⁾

In October 1977, the US Commission on Federal Paperwork concluded that the total cost of Federal paperwork involved a paperburden on the private sector of about half of that spent by government bodies themselves.  This paper's analysis focuses on these paperburden costs of regulation rather than the potentially much greater costs stemming from regulations distorting business decisions.

The number of regulations and the paperburden costs they impose have steadily risen over the years.  The following chart shows the trend of estimated paperburden hours on the private sector in the US.

Chart 1

Although Australia has no data which tracks these trends systematically, it is unlikely that this country has avoided similar growth in the regulatory burden.

REGULATION OF THE AUSTRALIAN GAS INDUSTRY

In the case of the Australian gas industry, there is the potential for considerable misallocation of resources as a result of artificially low prices being required.  The most controversial current issues concern gas transmission where, for Dampier supplied Perth and Moomba supplied Sydney, the regulatory authorities set prices that the infrastructure owners consider to be some 20 per cent below those required for an adequate return on the resources dedicated to the activities.  The Commonwealth Minister appears to have overridden the regulator's price stipulation for the Moomba to Sydney Pipeline by removing most of the pipeline from regulatory coverage.

Incorrect estimates of the appropriate price by regulatory authorities can bring severe adverse repercussions on future investment and industry health.  We have submitted our views on how best to avoid such losses in the future. ⁽²⁾  These involve the authorities exiting the regulatory arena wherever rival pipelines have emerged and not to engage in regulation where the market is not presently supplied (the "Greenfield" situation).  The Commonwealth Minister appears to have come to a similar view with regard to the Moomba to Sydney Pipeline, which is supplying a market subject to workable competition in view of the Duke Pipeline from the Bass Strait.

Removing regulation from distribution is more difficult since this an industry segment is likely to remain predominantly a "natural monopoly" and to be more or less permanently subject to regulatory oversight.  A less intrusive regulatory approach, more akin to the CPI-X reference price regulation originally envisaged, would be helpful in this respect.  Regulated businesses have already had excess cost-padding removed, having been subject to considerable "building block" cost assessment in previous regulatory rounds.  Shifting to price setting on the basis of economy-wide price changes would reduce the regulatory costs of both firms and the authorities.

For the other parts of the industry -- gas well-head supply or (in the case of electricity) generation and retail activity -- there is no regulation.  As price and service in these sectors is determined by supply and demand, regulation would bring supply failure risks by restraining prices and hence investment.

This paper gathers together the costs of energy providers' responding to the requirements of "economic" regulation.  Because gas and electricity industries are increasingly converging, the findings encompass both industries.

Not only do the costs this paper estimates exclude the wider cost repercussions involved in investment and other activity changes stemming from regulation but also excludes paperburden costs from other regulatory controls.  These include those specific to the industry, like gas safety and tree clearing, and those that have a wider application like occupational health, environmental issues, welfare and planning.  The present submission therefore complements our earlier submission and rounds off material previously provided to the Commission (and appended as Attachment 1 to this submission) on the government-incurred costs of regulatory resources.

APPROACH TO ESTIMATING THE INDUSTRY'S PAPERBURDEN COSTS

We obtained the cooperation of the ESAA and the AGA to circulate a questionnaire to the member firms of these two associations.  Information was sought on:

• The number and cost of employees (including overhead) involved in the specified type of regulation
• The allocation of those employees' time between different activities including wholesale and retail markets, and generation, transmission and distribution/retail
• The consultants and other external resources that were engaged over the previous year
• Costs involved in licence fees

Questionnaires were sent to some 60 different firms within the gas and electricity industries.  Twenty firms responded.  In terms of the size of the firms, compared to the aggregate size of the industries the firms covered

• 34 per cent of generation capacity
• 10 per cent of transmission
• 58 per cent of distribution/retailing

The sample size therefore covered some 40 per cent of the gas and electricity industries.  The respondents also comprised a reasonable spread of large and small entities and we feel comfortable in extrapolating the results to the sector at large.

However we would place caveats on the numbers we have estimated.

• We are uncertain about whether firms have included all resources in their responses.  Regulation for some sectors looms so large as a determinant of profits -- even survival -- that its administration sometimes pervades the whole organisation.  Respondents may be understating the roles of "line" departments in their estimates of aggregate resources within the firm.
• It is seldom possible to obtain material that covers a typical year.  That sought in our questionnaire covered the past 12 months.  For the most part, this was a period between reviews, especially for the distribution businesses and may not reflect the position in other years.

SURVEY FINDINGS

ELECTRICITY AND GAS SUPPLYING FIRMS' REGULATORY COMPLIANCE COSTS

Overall Administrative Costs

Adjusted for the size of the sample the total annual direct cost of regulation in terms of employees and consultants for the generation, distribution and transmission sectors is estimated to be over $88 million.  A little over half the costs were incurred by firms inhouse with the rest due to consultants.

Chart 2

Placed in the perspective of aggregate industry expenditures, the $88 million annual paperburden costs of the suppliers to the Australian gas and electricity markets is around 0.5 per cent of the sector's total expenditure of $18 billion.

Employee Costs

The in-house costs of $48.5 million cover wages and overhead expenses for an estimated 259 direct company employees who are involved in regulatory activities.  The 259 regulatory compliance personnel directly employed is a little over half of the estimated 462 people employed in regulatory activities in government (See attached report). ⁽³⁾

Perhaps coincidentally, this proportion of regulatees to regulators is consistent with the sort of proportion of economy-wide regulatory personnel to regulators estimated by the 1977 Commission on Federal Paperwork which drew upon information assembled by the US Office of Management and Budget.

External Advisors

The outside consultants firms hire include legal, economic, and financial advisors.  These cost around $38,928,000 in the survey year.  Legal advisors, who are hired by 89 per cent of companies, are the most common type of expertise used with economic consultants close behind.

Below are the percentages of firms hiring each type of outside advisor:

Legal advisors	89%
Economic consultants	84%
Accounting/financial advisors	53%
Other	47%

COMPARING THE DIFFERENT SECTORS WITHIN THE ENERGY INDUSTRY

Relative Importance of Regulatory Expenditures by Sector

The distribution and retail sectors employ the greatest number of regulatory compliance personnel at 158 people while the generation and transmission industries employ 45 and 55 people respectively.

Adding the in-house and external expenditures together, almost 50 per cent of the money spent on regulation costs in the energy industry is accounted for by the distribution and retail sector.  Distribution and retail companies spend around $41 million, with transmission companies at $34 million and generation companies at $13 million.

Internal vs. External Spending Patterns

The three sectors had different spending patterns between internal and external costs.

Generation companies incurred the lowest regulation costs, with only 14 per cent of the total expenditures of the market on regulation.  This compares to their share in total revenues of about 45 per cent.  These companies devoted about an equal amount to internal and external costs.

Transmission companies, which account for about 8 per cent of market revenues, accounted for 39 per cent of spending on regulation.  They also allocated almost three times as much money to external advisors as to internal support.  This pattern and magnitude of spending was doubtless influenced by the regulatory reviews underway.

Distribution companies incurred the highest expenditure on regulatory matters, although their spending level is not significantly higher than their share of the industry revenues.  Most of the firms are not facing regulatory reviews in the current year and, reflecting this, their external expenditures at only about 20 per cent of total expenditures are relatively low.

COST OF LICENSE vs. THE COST OF MAINTAINING THE LICENSE

Not all the respondents supplied information on their license costs and only tentative conclusions can be drawn in relating these costs to other regulatory spending.

On average, energy companies reporting their licensing costs tend to spend four times as much complying with the regulatory conditions of their licenses than they actually spent obtaining the license.  Although a few companies are able to keep the direct costs of meeting the regulatory requirements of the license below the original cost of obtaining it, some companies spend well over ten times the original licensing cost to comply with the regulations surrounding the license.

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ENDNOTES

1.  The US Office of Management and Budget has not offered recent overall costs of regulatory compliance.  A comprehensive GAO report issued in 1998 also did not provide a total cost, (see http://www.gao.gov/archive/1997/gg97002.pdf.  In his 1978 article "On Estimating Regulatory Costs," (Regulation, May/June 1978), Murray Weidenbaum estimated that the private sector incurs costs that average twentyfold on-budget regulatory cost.  The compliance costs incurred on "social" regulation, like environmental protection, were far greater than those of "economic" regulation of price, market entry etc.

2.  See Submission Number 2.

3.  If the external employee costs were similar to the costs of actual employees, there would be the equivalent of 472 people involved in the regulatory paperburden.  There is however no basis for assuming a similar employee cost of external resources.  Even if the costs were similar, the 472 people cannot be compared to the 462 directly employed by the regulators themselves since they too hire external resources.

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ATTACHMENT 1

GOVERNMENT REGULATORS

Defining the Resources

There are many different ways of defining regulatory resources.  One means, perhaps offering the most accurate information of influence, is by estimating the budgets of the agencies concerned.  This would allow for the true resources employed at a time when agencies are increasingly contracting out many of their core functions.  Unfortunately, the detail in most government budgets is insufficient to make satisfactory estimates.  Hence, the estimates below focus on numbers of regulators.

The core regulatory functions are now normally housed within specialised bodies like the ACCC, NECA, IPART and the ESC.  However some clear regulatory functions remain in line departments, like the retail price setting that remains under the purview of the Victorian Department of Natural Resources and Energy.

In addition to these are the "policy" personnel in the mainline departments advising ministers on policy approaches and changes.  The regulatory role of this class of industry oversighters is in the main less direct than the overt price and condition setting bodies and many consider that they should not be designated as having a regulatory role.  However, setting policy frameworks is the heart of the notion of regulation, and just as the regulatory manager is a part of regulatory resources even though the activity is conducted by more junior personnel.

A third tier of regulators are concerned with sustainable energy.  This is a very rapidly growing area of governance and advice.  The Sustainable Energy Authority of Victoria (SEAV) now has some 72 staff involved largely in advising, urging and studying matters concerning greenhouse gas emissions.  In addition, there are other staff, some 10 within the Victorian Department of Primary Industries, concerned with energy and many more across the bureaucracy covering energy saving policy in areas like building control, transport, and local government.

Other states have comparable agencies.  The Commonwealth's Greenhouse Office has a staffing level of 178;  SEDA in NSW, which lists not becoming a bureaucracy as one of its goals, declined to provide information on its own size.  These environmental agencies are involved either in distorting the energy economy, often by a policy of promoting wind and other unconventional power or, more benignly, offering advice to people on how they might save energy.

A fourth tier of regulation concerns energy safety.  The size and responsibilities of these offices varies across the jurisdictions:  Victoria is especially well staffed and Queensland less so.

It is the first two tiers of officials that we focus on to offer estimates of regulatory resources.  The energy saving/environmental/safety functions are sometimes difficult to disentangle from the "economic regulators", particularly where they are embedded within departments.

Numbers of Government Personnel Involved in Regulation

The numbers below do not include those involved in pure research, like ABARE or, indeed, the Productivity Commission.  For the states, only about one third of regulatory resources are in specialised agencies involved in setting prices and conditions.  Although more than half of the Commonwealth personnel are housed in such specialised agencies this reflects the essentially federal nature of the NCC, NECA and the NCC.

In all, there are over 450 staff positions (including an allocation for overhead) estimated to be regulating the industry.  These numbers may not seem large in the context of an electricity industry of about 30,000 employees and a gas industry totalling more than 2,500.  However it must be stressed they are not the sum total of regulatory resources allocated to the industry, only those in mainline economic regulation.  It has already been noted that there are very considerable resources allocated to the "social" regulation of energy through safety regulators, greenhouse offices, sustainable energy agencies and through the various parts of environmental agencies that impact upon and in part control the energy industries.

The resources involved within different jurisdictions' government agencies varies.  One significant factor might be the degree of public ownership, which could account for the relatively low numbers in the policy agencies in Victoria and South Australia.

	Major Energy Policy Agency	Major Regulatory Agency(s)	Other Policy Agencies	Total
Commonwealth	38	65	13	116
ACT	2	3		5
NSW	50	30	6	86
Queensland	70	13	6	89
S. Australia	14	10	6	30
Victoria	21	33	6	60
Western Australia	35	7	15	57
Tasmania	5	14		19
Total	235	175	52	462

Hitching a Ride with India

India is slowly, unevenly and chaotically loosening the grip of the "licence Raj" which has held back its talented people for generations.  This change has the potential to create a new economic powerhouse with huge benefits for the world and for Australia.

A recent study from Goldman Sachs has indicated that even if the Indian economy continues to grow over the next 20 years at just the same pace as it has over the past 10 years (about 5.5 per cent each year), it will become the third largest economy on the planet, after US and China.

If it can match China's growth rate (more than 7 per cent a year) its economy will, within 50 years, exceed China's and be the world's second largest economy.

The scope for a China-style growth rate is very real.  While India has smothered its manufacturing sector with red tape, corruption, and huge tariffs barriers, its service sector is booming.

Indeed, India is becoming the world's supplier of back-office and IT services.

More than 200 of the Fortune 500 firms have, or are planning to, contract out services to Indian operations.

Most major IT, telecommunications, insurance and accounting firms have large operations in India.

Starting from nothing 15 years ago, India now exports $15 billion of IT and business services.  This trade is growing at 14 per cent last year.

While India's low wages and large pool of highly skilled and motivated people (India has more than 15 million university graduates and five million engineers) are important, they are not the only draw.

Indian IT and back-office firms use state-of-the-art technology and have developed unique skills, particularly in the software development area.  They also are extremely nimble in terms of ideas, operations and structure, and they speak English.

Moreover, India is quickly becoming an essential part of the global business chain; if you are in the global business of information processing, you need to have a presence in India.

The key to Indian success in business and IT services has been the absence of Government.  It all started before the deadening hand of the "licence Raj" could stop it.

The industry went to lengths to keep government away, including building its own infrastructure.  By the time the Government caught up with the sector's success, it was too big to stop.

There are signs that some manufacturers, in particularly the car and pharmaceutical sector, are starting to take a cue from the global services firms.

While in the past manufacturers cowered behind huge tariffs wall and government restrictions to produce shoddy products, some firms are now restructuring to focus on global markets.

As a result, the manufacturing sector is growing by 7 per cent a year.  The Indian Government is also getting the message and slowly reducing tariffs and red tape.

India's success will be Australia's and the world's gain.  Australia has a large trade surplus with India (our ninth largest export market).

The challenge for Australia and other wealthy nations is to keep their eyes on the big prize -- a global, wealthy India -- and not succumb to the fears of competition from outsourcing.

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Weeding out the GM Problems

On February 2 the European Union (EU) rejected an application from Bayer CropScience to grow genetically modified (GM) canola in Europe.  The application had been pending since 1996, the same year GM canola was first grown commercially in Canada.

I read the final report and found that the issue was "a loss of biodiversity" as demonstrated in farm-scale evaluation trials in the UK.  This was attributed to "better weed control".  In fact, there was a "3-fold lower weed biomass and a 5-fold lower (weed) seed rain" compared with conventionally managed canola.

I was dumbfounded, because the GM canola was being rejected for the very reason it had been developed -- better weed control.

The history of crop cultivation in Europe dates back 2,000 years.  Many crop weeds are now considered native and valued by conservationists as habitat for insects that are fodder for farmland birds.  The same weeds are a production cost.

If the UK trials had shown the GM canola system did not give improved weed control, no doubt the technology would have been rejected on the basis that it failed in its key objective.  The trials showed cultivation of GM canola provided superior weed control and GM canola was rejected because of the fewer weeds which was interpreted as "a loss of biodiversity".  Clearly the GM companies are in a no-win situation in Europe.

Weeds are estimated to cost Australian agriculture in excess of $4 billion each year.  Because weeds are such a significant cost, herbicide tolerance is the most sought after trait in GM crops and makes up three quarters of total GM plantings worldwide.

In contrast to the EU determination, the Australian federal government recently approved the planting of GM canola on the basis that it is no more harmful to human health or the environment than conventional canola varieties.  However, moratoriums introduced by the NSW and Victorian governments prevent commercial plantings.  Over the next few months the NSW government must decide whether it will approve large scale farm trials.

The trials are to test the potential for "co-existence" between GM and non-GM canola.  Yet successful GM industries including Canadian canola and Australia cotton, while growing a percentage of both GM and non-GM plants, do not segregate the final product because their major export markets are not prepared to pay the additional costs.

We are at a cross roads in Australia, we can either go-the-way of Canada and accept GM canola, or we follow Europe and reject the technology.

The implications are significant.  European agriculture is heavily subsidised and is increasingly as much about the provision of "environmental services" as it is about food production.  In contrast Canada has embraced GM technology and is now the major world exporter.

Seventy-five per cent of Canadian product is genetically modified.  Japan and China are Canada's two main export markets.

Australia currently consumes and exports vegetable oil from both conventional and GM cotton seed but only from conventional canola.  Interestingly the Europeans have approved the importation of GM canola seed for consumption (i.e. they will eat GM, but not grow GM).

Further, the documentation supporting the decision to reject GM canola indicated a key herbicide currently used to control weeds in conventional canola in Australia will be phased out in Europe by April 2005 because of environmental concerns.

If we reject GM canola we will be denying Australian canola growers the production efficiencies their competitors -- Canadian canola growers and Australian cotton growers -- enjoy in new GM varieties.

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Fighting Ignorance with Evidence

Address to the 2004 combined Annual General Meeting and Conference of
Property Rights Australia,
Roma, Saturday 14th February 2004.

"Saints should be presumed guilty until proven innocent."

George Orwell, 1949

INTRODUCTION

A prominent objective in the Property Rights Australia (PRA) Constitution is, "Ensure detailed scrutiny of any scientific basis quoted by government in support of its policy decisions".

At your first Annual General meeting in July last year, I focused on how science is being prostituted to undermine the legitimate property rights of primary producers.  I gave examples illustrating the extent to which environmental campaigns, supported by government scientists, are increasingly appealing to science to force government policy decisions for the protection of the environment -- all the while telling whopping lies.

Thank you for the opportunity to return and address this second annual general meeting of PRA.  Today, I want to consider how it is that environmentalists get away with telling such big lies.  I will begin with the big issue for PRA -- that is, restrictions on tree clearing in western Queensland.  I will then touch on some of the Murray-Darling Basin issues that I have researched over the last six months before considering the nature of environmental fundamentalism.

TREES HAVE BECOME SACRED IN
AUSTRALIA -- LIKE COWS IN INDIA

The way we define a problem will have a powerful effect on the way we think about solutions to that problem.

The Productivity Commission recently released its Draft Report on the Impacts of Native Vegetation and Biodiversity Regulations. ^[1]  The report defined the policy problem thus:  "The problem that prompted this inquiry is that private landholders are perceived as providing too little native vegetation and biodiversity conservation on their land."

If this were the case, the native vegetation regulators across Australia would target those who have no trees on their properties and, for example, suggest that they replant.  The Productivity Commission's definition of the problem side-steps the real issue:  across Australia, landholders with heavily timbered properties are the ones most affected by the regulations because it is the act of clearing that is the real issue.

The bottom line is that trees have become sacred in Australia, like cows in India.  It is the act of cutting down trees that most offends environmental fundamentalists -- it is the ultimate sin.

But environmentalists confuse us, they give the impression that they are all about science and they appeal to the authority of science.  They claim that trees need to be protected to prevent land degradation, protect biodiversity and prevent global warming.

The Productivity Commission's report, reflecting this popular but naïve assessment of the problem, states:  "the reasons for increasing conservation on private land, and the benefits of doing so, will vary by region depending on issues such as how much native vegetation exists, what habitat it provides, and what key objectives the government wants to pursue (for example, salinity, climate change or biodiversity)". ^[2]  Yet the reality is that for any one region the objectives (salinity, greenhouse, runoff, biodiversity) have been promoted at different times depending on what the conservation movement believes will give it most political leverage at that point in time.  For example, in South West Queensland, restrictions were introduced with the Queensland Vegetation Management Act 1999 on the basis that there was a need to conserve biodiversity.  It soon became evident, however, that there was still potential for clearing, so the need to stop clearing to prevent salinisation of the landscape was promoted, culminating in additional restrictions based on flawed salinity hazard maps in July 2002. ^[3]  When it was evident that even with the biodiversity and salinity restrictions there would still be potential for some clearing, there was a push for controls for greenhouse reasons, culminating in the moratorium on new permits introduced in April 2003.

The latest campaign, launched by the Wilderness Society in December 2003, is focused on a series of television advertisements shown, "on the Sunshine Coast and Gold Coast over the busy summer holiday period to bring the problem of land clearing into people's lounge rooms". ^[4]  It ran with the slogan, "Land Clearing -- Turning Queensland into Wasteland".

The Queensland Herbarium recently completed analysis of data from 2001 which showed that 81.3 per cent of Queensland remains covered in what is classified as remnant vegetation. ^[5]  The figure for 1997 was 82.3 per cent and for 1999 is 81.8 per cent.  So while it may seem hard to believe, the reality is that most of Queensland is covered in remnant vegetation -- Queensland is not being turned into a wasteland!

Yet the clear impression from the campaigners, via the media, is that landholders are irresponsibly clearing large areas of native vegetation -- resulting in irreparable damage to the environment.  Even during the height of clearing in 1999-2001, however, the annual clearing rate was only 0.7 per cent of the 81 million hectares of woodland and forest ecosystem in Queensland. ^[6]  Furthermore, the 2001 estimate that forests covered 81 million hectares of Queensland is an increase of 5 million hectares over a 1992 estimate that put forest cover in Queensland at 76 million hectares. ^[7]  The Australia's State of the Forests Report 2003 also suggests an increase, rather than a reduction, in the area of Australia covered in forest.

No-one, however, is reporting the net increase.  The media and even the Australian Bureau of Statistics are only interested in reporting the clearing. ^[8]

The general impression, reinforced by the jargon used in the Queensland Vegetation Management Act (VMA), is that trees don't re-grow.  There is constant reference to the protection of remnant vegetation.  Yet the detail of the legislation accommodates and includes "re-growth" in the definition of "remnant" where re-growth is at least 50 per cent of cover and 70 per cent of the height of what would have been its undisturbed state.  As a consequence, "remnant" can include vegetation less than a decade old.

The general impression, supported by the legislation, is that remnant ecosystems are fixed in time and place and steadily disappearing.  It is assumed that the maintenance of these remnant ecosystems simply involves the exclusion of human activity.  Yet the reality is that the Australian landscape is constantly evolving and changing and has been actively managed for thousands of years -- predating European settlement.  Along the coast, the fire regimes of the Aborigines created open eucalypt woodland where rainforests would have otherwise developed. ^[9]  In the semi-arid rangelands, remove fire and introduce cattle and the tendency in Australia (and other parts of the world) is for woodlands to thicken and acacia thickets to replace once open grasslands. ^[10]  Despite the phenomenon of vegetation thickening being well documented in the scientific literature, its existence as a phenomenon and its potential impacts on farm viability continue to be ignored.

The phenomenon is ignored because the concept of an "Eden" is so important to environmentalism as a religion, along with the idea that because broad-scale tree clearing occurs, Queensland must be turning into a wasteland.  We have cut down trees, therefore we have sinned and therefore everything must be going to hell.  Never mind that trees grow back and never mind the statistics which, on scrutiny, might indicate our grasslands are more at risk than our forests.  Interestingly, Queensland satellite data show that 26 per cent of all clearing in 2000-2001 was of land that had no trees in 1991. ^[11]

PROPAGANDA EVERYWHERE

The Australian Conservation Foundation media release of 19th February, 2003, stated:  "The scale of commitment to landclearing and woodlands protection issues from national state and local (environment) groups has now reached a high level, comparable to the native forest protection campaigns of the eighties and nineties".  In the same way that metropolitan Australia has been led to believe that graziers are turning western Queensland into a "treeless wasteland", environmental fundamentalists have created propaganda about the activities of other resource users -- foresters, fishers and miners.

You may believe that environmental campaigns are justified in southern Australia, where so much environmental harm has allegedly been done.  However, I have just spent the last six months searching for evidence to support the widespread belief that the Murray River is getting saltier, that the area of land affected by dry-land salinity is increasing, that thousands of 300-year-old River Red Gums are dying in southern Australia -- but all I have found is just more propaganda.  Salt levels in the Murray River have actually halved over the last 20 years, the area at risk of irrigation salinity has reduced by over 90 per cent in the NSW section of the Riverina, and I can find no evidence to suggest that the area currently affected by dryland salinity is increasing. ^[12]  Despite claims that River Red Gums forests are dying from lack of water as a result of river regulation and extensive logging, the data actually show that, for example, in the Barmah forest the trend was one of increasing saw log volume and growing stock during the twentieth century.

Murray Cod was listed as a threatened species in July last year on the basis that there had been a 30 per cent decline in numbers over the last 50 years.  However, there are no data supporting such claims.  The most widely quoted source of information on native fish status in the Murray-Darling Basin is a survey undertaken in 1995-96 that did not provide any data from which trends with respect to improvement or deterioration in fish numbers could be determined. ^[13]  The report's principal conclusions include the statement that:  "A telling indication of the condition of rivers in the Murray region was the fact that, despite intensive fishing with the most efficient types of sampling gear for a total of 220 person-days over a two-year period in 20 randomly chosen Murray-region sites, not a single Murray cod or freshwater catfish was caught."

It is evident, however, from fishing magazines and the results of local fishing competitions that Murray cod are present.  The annual Deniliquin Yamaha Fishing Classic, for example, registered a record 48 Murray cod in 2003. ^[14]  A feature in the winter 2003 edition of Freshwater Fishing Australia's titled "Riverina Revival" included comment that, "The mainstay of the Edward River fishery (an anabranch of the Murray) is the Murray cod and numbers at present are high ... the number of juvenile fish of 45-50 cm just short of legal length of 50 cm, can be frustratingly high for anglers looking for a keeper." ^[15]  But perhaps most remarkable is that at the same time, in the same years, that the scientists were undertaking their now much-quoted survey that found no Murray cod, commercial fishermen harvested 26 tonnes of Murray cod from the same region! ^[16]

The local retort to the scientist's declaration that they didn't catch any fish goes something along the lines, "The scientists, although having letters behind their name, spending some $2million on gear, and 2 years trying, evidently still can't fish." ... or perhaps they just didn't want to catch any fish.  I have observed that while environmental fundamentalists, often with scientific qualifications, express great concern over a problem, they also seem very committed to the problem and to its continued existence.

It may seem counter-intuitive, but most statistics show that the condition of the environment in developed countries, including Australia, is actually improving. ^[17]

ENVIRONMENTAL FUNDAMENTALISM

I was emailed an article by Henry I. Miller ^[18] some weeks ago, titled "Applying science by public vote".  It began with a teacher asking her third-grade class, "How can you tell whether a whale is a mammal or a fish?"

"Take a vote," suggested one of the pupils.

"This idea might be amusing coming from a child, but it is a lot less funny when applied by governments to the formulation of complex policies that involve science and technology.  And it's an approach becoming increasingly common around the world," wrote Miller.

Voting is the hallmark of a democratic process -- and democracies are founded on the laudable principles of liberty and equality.  But democracy has nothing to do with the scientific process.  Science is a way of attempting to understand the world in which we live from a rational point of view, based on observation, experiment and tested theory.  History has shown that it is often mavericks, who determinedly ignore the consensus opinion and "swim against the tide" in pursuit of the truth, that have contributed most to our understanding of the natural world.

If we consider the history of humanity, we find that societies that tolerate both the unencumbered pursuit of knowledge and the democratic process are rare.  Humankind has often existed under regimes where religious belief dominates the cultural and political landscape and scientific research is constrained.  Religion is about faith, while science is about observation.  Science requires discipline, but has no respect for authority or consensus.

A new religion has emerged in the West over the last few decades.  Environmentalism has been described as the preferred religion for the urban atheist.  In a speech given in San Francisco last September, Michael Crichton, author of Jurassic Park, said, "Why do I say it's a religion?  Well, just look at the beliefs.  If you look carefully, you see that environmentalism is in fact a perfect 21st century remapping of traditional Judeo-Christian beliefs and myths.

There's an initial Eden, a paradise, a state of grace and unity with nature, there's a fall from grace into a state of pollution as a result of eating from the tree of knowledge, and as a result of our actions there is a judgment day coming for us all.  We are all energy sinners, doomed to die, unless we seek salvation, which is now called sustainability.  Sustainability is salvation in the church of the environment.  Just as organic food is its communion, that pesticide-free wafer that the right people with the right beliefs, imbibe." ^[19]

Although Christians, for the most part, now accept an independent role for science, Environmentalists increasingly appeal to science to give authority to their policies.  This apparent strength is also a significant weakness.  Environmentalism is very vulnerable to the evidence because, unlike many of the "old religions" that invoke faith, environmental fundamentalists claim that science supports their policies -- the same policies that, for the most part, have no basis in observation or tested theory.  So, increasingly, situations arise where the evidence, the facts, contradict the rhetoric and also the plan that is meant to deliver "Ecologically Sustainable Development".

Rather than accepting the evidence and throwing out the policy -- and admitting that the emperor never had any clothes -- governments are increasingly sponsoring committees to find a solution to this dilemma that they can claim represents the consensus view.  Propagandists have long used the notion of consensus to draw the doubting individual into agreement by presenting their view as the unanimous opinion of all right-thinking people. ^[20]

There is a growing awareness, particularly in rural and regional Australia, that science in the context of environment is being abandoned for propaganda.  Propaganda is the antithesis of honest education and information.

There is a need for people to stand up and be counted and point out that the evidence does not support the rhetoric -- that the emperor indeed has no clothes.  This is beginning to happen.  I have met courageous individuals who really do care about the environment and the truth.  They are a diverse group including fishers along the Murray, rice growers from the Riverina, a bush woman from the High Country (who suffered so much during the bushfires last year), graziers in western Queensland and north all the way to the Daintree and Cape York.  Let us, together, fight ignorance with evidence.

Thank you.

---

ENDNOTES

1.  "Impacts of Native Vegetation and Biodiversity Regulations".  Productivity Commission Draft Report.  December 2003.  Page 159.

2.  Ibid, page 160.

3.  The Salinity Management Handbook, Queensland Department of Natural Resources 1997 explains that areas receiving less than 600mm per year in Queensland are not at risk of salinity because insufficient rain falls to satisfy plant demand and recharge ground water -- in southern Australian where most of the rain falls in winter the equivalent situation occurs at around 200mm annual rainfall.

4.  Land clearing -- turning Queensland into wasteland:  TV Ad campaign brings bulldozers into lounge rooms.  Wilderness Society Media Release.  26th December 2003.

5.  Dr Gordon Guymer, Director, Queensland Herbarium, Queensland Environmental Protection Agency, personal communications, 29th January 2004.

6.  Queensland Department of Natural Resources and Mines.  Land Cover Change in Queensland 1999-2001.  Issued January 2003.

7.  Ibid., page 14.

8.  Marohasy, J. 2003.  "How useful are Australia's Official Environmental Statistics?" IPA Review.  55:  8-10.

9.  Neldner V.J., Fensham, R.J., Clarkson, J.R. and Stanton, J.P.  1997.  "The natural grasslands of Cape York Peninsula, Australia.  Description, distribution and conservation status".  Biological Conservation.  81:  121-136

10.  Burrows, B. 1999.  "Tree clearing -- rehabilitation or development on grazing land?" IV International Rangelands Conference.  Townsville, Australia.  Fensham, R.J. & Skull, S.D.  1999.  "Before cattle:  A comparative floristic study of Eucalyptus savanna grazed by macropods and cattle in North Queensland", Australia.  Biotropica 31, 37-47.  Fensham, R.J.  1998.  "The influence of cattle grazing on tree mortality after drought in savanna woodland in North Queensland".  Australian Journal of Ecology 23, 405-407.  Fensham, R.J.  1998 "Resolving biomass fluxes in Queensland woodlands".  Climate Change Newsletter 10, 13-16.

11.  Land Cover Changes in Queensland 1999-2001, Queensland Department of Natural Resources and Mines, January 2003.  (See pg 26.  Table 6.  http://www.nrm.qld.gov.au/slats).

12.  Marohasy, J. 2003.  "Myth & the Murray:  Measuring the Real State of the River Environment".  IPA Backgrounder.  Vol 15/5.

13.  Fish and Rivers in Stress:  The NSW Rivers Survey, J.H. Harris and P.C. Gehrke (eds), CRC for Freshwater Ecology, Canberra, 1997.  (See http:enterprise.canberra.edu.au/WWW/RiverSurvey.nsf)

14.  "Good Cod!  Anglers refute threatened species claim", Deniliquin Pastoral Times, 4th July 2003.

15.  "Riverina Revival" by M. Auldist in Freshwater Fishing Australia.  Issue 63, Winter 2003, pg 32.

16.  Reid, DD, JH Harris, DJ Chapman.  "NSW Inland Commercial Fishery Data Analysis", FRDC Project No. 94/027.  December 1997

17.  The Skeptical Environmentalist:  Measuring the Real State of the World.  Bjørn Lomborg.  Cambridge University Press, 2001.

18.  "Applying science by public vote".  Henry I. Miller.  The San Diego Union-Tribune.  2 December 2003.

19.  "Remarks to the Commonwealth Club".  Michael Crichton, San Francisco, 15 September 2003.

20.  Davies, N.  Europe:  A History.  Pimlico.  1997

Sceptics, the Environment Needs You

Last year, on the eve of a visit to Australia by Associate Professor Bjørn Lomborg -- Danish statistician and author of the international best seller The Skeptical Environmentalist -- Clive Hamilton warned us to be skeptical of him because he had been found guilty of scientific dishonesty and because his book was a political polemic, not a work of science (The Age, September 18, 2003).

Lomborg challenged the dishonesty accusation.  Just before Christmas a ruling was handed down by the Danish Ministry of Science, Technology and Innovation strongly repudiating the findings of its own Committee on Scientific Dishonesty and concluded that the original judgment was emotional and contained significant errors.  Lomborg commented, "I am happy that we now have confirmation that freedom of speech extends to the environmental debate".

While many made much of the dishonesty finding, the repudiation has gone largely unreported.

Why is it that a witch-hunt was orchestrated against a mild mannered statistician whose main message was simply that we should, "examine the facts before forming our conclusions"?  Based on an assessment of internationally accepted official statistics, Lomborg showed that key environmental indicators -- including water and air quality and forest cover -- show an improving trend in most developed countries.  In addition Lomborg showed that some problems are not as serious as suggested and that solutions are indeed being found.  That this proposition was greeted with hostility and outrage by many high profile environmentalists is illustrative of the extent to which they are -- while claiming great concern over a problem -- also deeply committed to the continued existence of the problems.

Societies that tolerate the unencumbered pursuit of knowledge are rare.  More often than not religion and ideology dictate their cultural and political landscape, thus constraining scientific research and its reporting.  The process used by the Danish Committee of Scientific Dishonesty to declare Lomborg "dishonest" was more reminiscent of some ancient medieval rite than of a scientific committee.  That Clive Hamilton and others relied so heavily on this shamefully fabricated verdict to discredit Lomborg speaks volumes.  Indeed, environmentalism is emerging as a new and sacred religion, with Greenpeace and the World Wide Fund for Nature representing the new church, complete with charity status and tax exemptions -- for their multi-million dollar earnings.

It was wrong of Clive Hamiton to state that Lomborg believes, "improvements to the natural environment render environmental activism unnecessary".  On the contrary, in his address to the National Press Club last year Lomborg stated, "I think we should be incredibly happy we have Greenpeace.  I think it's incredibly important to say that people don't act in bad faith.  When business organisations go out and say, 'don't worry so much about the environment', they might actually have a point.  We should certainly listen to them.  But they also have an interest, and we should remember that.  Likewise, when Greenpeace go out and say, 'we're all gonna die and we need to act now', they might be right too, and we should certainly listen to them, but they certainly also have an interest.  The problem is that while few people trust business organisations, most people actually believe Greenpeace over and above independent scientists, university scientists and public organisations.  That, I think, is problematic."

During Lomborg's visit to Australia renowned Australian environmentalist Professor Ian Lowe cited the Australian Bureau of Statistic (ABS)'s report Measuring Australia's Progress and specifically land clearing in Queensland as evidence that Lomborg's treatise does not hold true for Australia.  However, if we scrutinise the ABS report in the same way Lomborg scrutinised other official data, we find that the ABS report is actually misleading.  The report only shows clearing rates and does not considering the overall trend with respect to vegetation cover.  When re-growth is taken into account we find that the trend nationally is one of increasing forest cover.  This trend holds true for Queensland where official government estimates showed an increase of 5 million hectares in the extent of woodland and forest ecosystem cover over the last 10 years.  The reader may find it hard to believe that the official statistics show 81 percent of Queensland is still covered in remnant vegetation -- a figure that has remained constant over the last decade.  Just because environmental campaigners ignore the facts, does not mean they go away.

The issue is real for Australia.  Despite the perception that our environment is deteriorating, the reality is that air and water quality are generally improving and there has been a net increase in forest cover over the last decade.  Koalas, once a threatened species, are now so numerous the Victorian government is introducing a hormone contraceptive plan to control numbers.

Given that we have spent much time and billions of dollars on environmental programs, this good news should not really be surprising.  However, as Lomborg would say, this doesn't mean we can't do better.  But let us move forward on the basis of the evidence rather than the failed predictions of our doomsayers.

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A Deal for our Future

With the appropriate last-minute drama, an Australia-US free trade treaty is to go ahead and the Howard Government will be preening itself on cutting a deal that offers Australia major benefits.

The US accounts for a tenth of our goods exports and a fifth of our imports, shares that are markedly higher once trade in services is counted.  With a few notable standouts, tariffs on both exports and imports are low.  Hence achieving spectacular benefits was never likely.  Instead, the objective was to make long term gains by integrating Australia into the world's largest and in many ways most dynamic economy.

Over the past fifty years, the key to the unprecedented rise in world prosperity, in which Australia has participated, has been steady liberalisation of world trade.  Unfortunately, anti-globalisation activists have succeeded in derailing further progress through the World Trade Organisation processes.  And there is a disturbing trend to erecting new trade walls, especially by the European Union.  Hence, though Australia's trade is increasing rapidly with China and other Asian countries, without the treaty with the US, we risked trade stagnation.

The free trade treaty with the US changes that.  It creates a platform on which the Australian domestic market is transformed from one of 20 million affluent people to one of over 350 million.

More than anything else the integration with the US will mean a gradual harmonisation of Australian prices for goods and services with those prevailing in the US.  The vastness of the US market brings keener competition there and lower prices across the range of goods and services.  Australian consumers are the obvious beneficiaries of this merging of markets but the greater competition and the potential for supplying niches will also ensure sharper focussed industries here in Australia.  Also important in this respect is the opening up the $200 billion market for US government purchases.

The reduction of the largely minor tariffs on manufactured goods will also bring benefits.  It must be remembered that with a ten per cent profit margin, even eliminating a tariff as low as 2.5 per cent is a powerful spur to increased sales as it means a 25 per cent profit improvement.

Progress in many agricultural areas was disappointing.

Lack of movement on American sugar tariffs is Australia's main frustration.  That said, the only reason why the US price is so attractive is that the its market is heavily protected -- in other words the US sugar price is artificially high and not one that we should rely on to build a sustainable industry.

Australian producers also remain largely locked out of the US dairy markets.  However most horticultural goods will see barriers removed, as will wine which has showed spectacular growth over recent years.  Some increased openings are also achieved in beef (and in recent years, Australian growers have been keen to sell more than US quotas allow) and sheep meat which has been growing rapidly.

For its own part, Australia gave little away.  The noisy entertainment industry has kept its protectionist local content restraints on imported material, though technology must surely eat away at the effectiveness of this.  Australian negotiators also held the line on pharmaceutical purchasing which gives us prices on most medicines at half of the US domestic levels.

Negotiating the agreement on free trade with the US was relatively easy precisely because trade with our giant ally is already largely free.  This means the short term benefits are hardly likely to be spectacular, but there is also little of the pain that uncompetitive sectors would suffer in the case of, say, free trade treaties with China or Japan.  Moreover, the treaty does not lock us into a discriminatory trade pact -- there are no consequential tariff increases against other countries.

The US is progressively seeking to shore up free trade in an area incorporating Canada, Mexico and other countries in Latin America and Asia.  The collapse of global multilateral trade negotiations, makes it important for Australia to be a part of this and integrating our economy closer that of the US has additional, if less definable, political and military advantages.

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Union Needs Scrutiny

Corruption, or the purchase of special treatment from political parties, is the cancer of democracy.

Australia is by most measures one of the least corrupt countries.  In fact, the lack of corruption, and its adjunct -- the impartial rule of law -- is widely considered to be one of Australia's main competitive strengths.

A major potential avenue for corruption is the provision of donations to political parties.

Australia has made significant strides in improving both disclosure and scrutiny of political donations, and thereby reduced the potential for possible corruption.

All political donations of above $1500, whether paid directly to political parties or indirectly through third parties, are disclosed and accessible through the Australian Electoral Commission website.

Both the media and politicians scrutinise this data and are continually on the lookout for special treatment.

For example, the fact that the Manildra Group gave a large donation of just over $300,000 to the Liberal Party, and that this group also received special treatment from the Howard Government for its ethanol operation, was exposed and discussed at length.

There is, however, a relationship that has received little scrutiny:  the relationship between the Construction, Forestry, Mining and Energy Union and the ALP.

The fact that the unions give money to the Labor Party is hardly controversial.  Moreover, the details of this funding are disclosed in detail on the AEC website.

The concern is that some unions, specifically the CFMEU, are demanding and receiving special treatment in exchange for political donations.

At its latest national conference, the ALP passed a resolution that committed a future federal ALP Government to give special preferences to "union friendly (read unionised, and union preferred) firms" in the issue of Government contracts.

This proposal was supported by -- and stands to benefit greatly -- the CFMEU (construction division), which in turn gave $460,000 to the ALP last year, making it the party's second largest donor.

This is not just a hypothetical policy either, as the Bracks Government has already put it into place in respect of some public works projects such as the MCG redevelopment.

Given that the policy violates all basic tendering rules -- increases costs, hinders competition and undermines job creation -- it cannot be rationalised as "in the public interest".

Indeed it looks and smells like "buying influence".  Or, in short, corruption.

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Workers' future debated behind IRC's closed doors

During the last six months of 2003, the Australian Industrial Relations Commission began hearing a case which is likely to have a profound impact on the way Australian business is organised and on the working lives of many Australians.  The "family friendly" case could change the fundamental structure of industrial awards in Australia.

But, so far, this key debate has been kept behind closed doors, secreted away from political or community input.  The closed door approach has occurred by agreement between the players involved in the applications and results from unusual tensions between them.

The family-friendly award proposals were initiated by the Australian Council of Trade Unions which applied for award changes based on a traditional and prescriptive "employee rights" versus "employer obligations" approach.  For example, the ACTU application seeks to allow employees to demand time off if a family member is ill.  The employer would have to agree to the demands and awards would prescribe in detail the process of allocating and managing the time off.

In responding to the ACTU application, the employer bodies could have done the usual and moaned about the cost to employers.  The stage for moral posturing would have been set where unions would say workers need new rights with employer organisations replying that the bosses can't afford it.

But this time something substantially different happened.  The major peak employer bodies responded to the ACTU application with a counter-application that would produce fundamental structural change to awards.  The major employer counter-application states that "if the employer and employee agree", individual employees and employers could vary a wide range of work arrangements without reference to industrial relations institutions.  The only stipulation on process being that an individual employer-employee agreement was genuine.

This individual agreement process sanctioned by awards would apply to things such as accessing part-time and casual work, being able to work "ordinary hours" on weekends, varying hours, days and times of work, accessing time off instead of payment for overtime and penalty rates, and a wide range of other key reforms.

The changes sought are historic and would have far-reaching implications on the mix of lifestyles and working choices formally available to workers.  The impact for businesses on how they could potentially service their clients would be substantial.

But the secrecy of the negotiations so far reflects the fact that the employer application has unsettled normal relationships between the institutions that control these matters.

There are indications of division within the employer ranks.  The Australian Chamber of Commerce and Industry with the National Farmers Federation and smaller employer bodies support the "by agreement" approach.  The Australian Industry Group errs to the more prescriptive model which is aligned to the ACTU's wishes.  The ACTU is prepared to discuss the AIG approach but won't discuss the employer-employee agreement model.

The ACTU is trying to manage deep internal union divisions, particularly between white- and blue-collar factions.  White collar unions are said to be disposed towards the "agreement" approach.  Blue collar unions want process imposed on employees.  The ACTU has sought to buy time by tying up the application with challenges to dozens of procedural matters, including excluding the construction industry from family-friendly consideration.

Of all this, the public to date knows little, has had no direct input -- yet it affects them intimately.

Over the last two decades, Australians' attitude to work and their expectations of it have changed massively.  An ageing but physically and mentally fit population want work options but not full-time.  Younger Australians are bored with the idea of a job for life.  Families need adaptable work.  People simply want income!  Yet "the people" are excluded from the debate and change process.

Australia's industrial award system is stuck in a framework that fails to match these newly emerging social needs of many working people.  The small number of players who have the capacity to change the work regulation system can renew the relevance of the system.  But this will mean a shift in their institutional roles and could prove the main blockage to family friendly and lifestyle reform in 2004.

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Putting Murray River where its Mouth Is

As a cause, Environmentalism has a lot going for it.  Promise to "save" something and you may not only feel righteous superiority but, if you are the leader of the Federal Opposition, it may help you stem the flow of votes from your party to the Greens.  Hence Mark Latham's recent promise to "save the whole Murray River" starting with an allocation of, "450 gigalitres (of water) needed to keep the mouth of the Murray open" (Murray plan a priority, The Land, January 22, pg. 17).

The Australian Conservation Foundation has made the River's mouth a symbol of River health and impressed upon the Australian public the belief that the mouth runs dry because irrigators take too much water from the river.

The reality is much more complex.

Before irrigation, the famed explorer, Charles Sturt, writing in the early 1800s, commented on the nature of Australian rivers, "Falling rapidly from the mountains in which they originate into a level and extremely depressed country;  having weak and inconsiderable sources, and being almost wholly unaided by tributaries of any kind;  they naturally fail before they reach the coast, and exhaust themselves in marshes or lakes;  or reach it so weakened as to be unable to preserve clear or navigable mouths, or to remove the sand banks that the tides throw up before them".

Under natural conditions during drought, the Murray River's main channel would run dry or reduce to a series of saline and stagnant pools.  As a consequence of the dams built over the last 100 years, however, even during the severe drought of the past few years there has been water in the River.

At Wellington the Murray runs into a large lake system.  A series of barrages constructed in the early 1900s at the bottom of Lake Alexandrina stops freshwater flowing out to sea and stops tidal flow into Lake Alexandrina, and the adjoining Lake Albert.

The barrages help maintain this now artificial freshwater system at a more constant water level.  This is considered important for boating and tourism in South Australia.  Evaporation from the lakes is estimated to be in the order of 600 to 1,000 gigalitres per year.

The Murray's mouth could reasonably be considered to be where the River enters the Lakes at Wellington.  However, the official "Murray Mouth" is the narrow, often blocked passage through the coastal sand barrier downstream of the barrages.  Any extra water for "the mouth" must thus pass through the Lakes.

Last year, as a consequence of the "Save the Murray Campaign" the concept of water flowing out the narrow passage downstream of the barrages became a national preoccupation.  Yet all the while water was flowing at Wellington and evaporating from the Lakes.  When it did rain in September, the barrage at Goolwa was lifted and water flowed from Lake Alexandrina out to sea.

In reality, more water for the "Murray Mouth" is likely to be a case of providing more water for evaporation from an artificial lake system at the expense of River Red Gums and Irrigators upstream.  The nonsense is illustrative of how both sides of politics have become too eager to sign up for environmental causes that may deliver no environmental benefit.

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Commonwealth Plays Catch-Up in Aboriginal Affairs

Secondary school age Aboriginal children who live in remote communities are returning to boarding schools in regional centres around Australia.  Like other students, some may want to stay at home.  Some primary school age Aboriginal children who live in remote communities on the other hand, may look forward to returning to the local school, if only to escape the chance of being assaulted at home.

Who has the authority to make the older students attend school?  Who has the authority to protect the younger students?

Ideally, parents should, but unfortunately some lack the requisite authority.  Indeed, when a family member abuses a child, the family is unlikely to provide protection.  In these cases, it is essential that the state intervene.  Until very recently, too many administrators have failed in their duty to Aboriginal children by not enforcing truancy and child protection laws for fear of offending Aboriginal politicians.

Fortunately, times are changing.  In a number of ways, state power is being reintroduced to help Aborigines integrate.

Truancy laws are beginning to be enforced in Queensland, the Northern Territory and Western Australia.  In Western Australia, parents will need to attend counselling or be fined if their children persist in truancy.  Teachers, education administrators and parents are learning that letting children escape schooling does not preserve indigenous culture.

Soon, officers of the Department of Families in Queensland will, for the first time in decades, be based in Aboriginal communities.  Aboriginal children at risk will no longer be placed with an Aboriginal family as a first priority, but with whomever can best care for them.

Aboriginal councils in Queensland will for the first time be elected on a non-racial basis.  For the first time, these councils will be able to levy their residents, to raise funds for house maintenance and other essential services.  Rates have never been an option, as there is no private property.

Aboriginal communities in Queensland have been given the power to control the possession and consumption of alcohol.  These laws, in the hands of Aboriginal people, are producing some startling results in reducing alcohol related offences and alcohol related injuries.

In the Northern Territory, the "cultural" defence by old men having sex with Aboriginal girls "promised" to them is now outlawed.  This hole in the criminal code was a disgrace to both sides of politics.

These changes are significant -- they eschew collective self-determination as an end in itself, although they embrace it where it promotes life chances, most likely to occur in the wider world, beyond Aboriginal-controlled enclaves.

How is the Commonwealth government to respond to these state government initiatives?

Since 1967, the Commonwealth has had the whip hand in Aboriginal policy, but it has squandered too much of its power on symbolism, rhetoric, and ideology.  It has invested too much of taxpayers' money on building remote slums.  It chooses to not use its authority in the few -- though expensive -- tools it has to intervene.  The two major programs -- the Community Development Employment Program and the Community Infrastructure and Housing Program -- come with few obligations.

The Commonwealth will need to decide if it should be propping up outstations and remote communities with CDEP and CHIP, or whether it uses the funds for training to help people leave communities.  Remote Aboriginal communities must come to grips with the need for at least some parts of their population to live and work elsewhere, balanced against the need to maintain connections with country and with kin.  CDEP should be a training program, not a work-for-the dole program.  Non-training unemployment beneficiaries could opt to undertake volunteer activities of the sort presently undertaken by CDEP.

The Commonwealth has been lumbered with big-ticket items like administering Native Title and funding the Indigenous Land Corporation.  The land rights struggle has ensured a particular historical form of Aboriginality, but it will not provide a life to other than a few tour guides and community gatekeepers.

The Commonwealth has also been lumbered with ATSIC.  A political infrastructure designed to create Tammany Hall politics.  ATSIC can act as a national secretariat for the Aboriginal community, and provide advice to the Minister, but that is all.  The Commonwealth should lend support to those with real authority in state government, the police, the teachers, the welfare officers -- many of whom will be Aboriginal -- who can make a difference.

Perhaps one of the most powerful tools in economic development will be the realisation that it is not enough to exist "on country", but to generate an income that can sustain the country.  The key will be to use state powers to ensure that children attend school.  In this regard, the Commonwealth needs to put its shoulder to the wheel.

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The Battle for the Battlers

The Labor Party's big challenge is to win back the battlers -- the many millions of working class people working hard to get ahead and live the good life.

And there is little doubt that Mark Latham is, amongst potential Labor leaders, best suited to the task.  He grew up in a working class family and in a working class neighbourhood.  He is hard working and aspirational.  He is a family man who has experienced a troubled family life.  He is pragmatic, intelligent and keen on experimentation.  Importantly he has a mind and he speaks it.

Part of the problem for Mr Latham and the ALP, is that working class of today is very different to that of the past.  Today's working class is wealthier, better educated and more empowered, than that of previous generation.  Its members are also more likely to be self-employed than work in a unionised factory.  Thus the Party can no longer rely on allegiances based on union membership, distrust of "the boss", the desire for wealth redistribution, ignorance or tradition.  It needs to go out and win its support with values and policies.

Also -- and this does to the heart of the ALP's problems -- there is a growing divide between the values and priorities of the intellectual elites, who have come to dominate the ALP, and the working class.  While the elites remain focused on such issues as reconciliation, refugees and the republic, the wider community remains focused on jobs, education and health.

Mr Latham has done well in refocusing the broad values and policy priorities.

His speech to the National Conference emphasised the need for hard work and for governments to focus on helping people help themselves.  He emphasised the need for personal responsibility.  He praised aspirational values and social mobility.  He took credit on behalf of the Labor Party for the economic reforms of the past two decades as well as the robust economy they produced.  He emphasised the importance of competition and productivity growth in producing jobs and investment.

His speech contained none of the "them vs us" and anti-globalisation rhetoric common in the past.

As for policy priorities, the speech emphasised education, health, families and taxes -- the priorities of the battlers.

The speech avoided comment on reconciliation (and reportedly a pledge to deliver a national apology to Aborigines was dropped).  The speech dwelled only briefly on refugee policy.  And while Mr Latham promised a republic, it is one based on model chosen by the public, including presumably a directly-elected president.

While he has done well with the broad brush, he is struggling with the details.

Mr Latham has quite adroitly focused on the high taxing policies of the Howard Government and on the need to give tax relief.  As Opposition Treasury spokesman he argued for tax cuts even for the higher income groups.  This is logically popular with today's working class -- most of whom are paying over 50 cents of each additional dollar earned in tax.  His proposal, however, upset many in the Party, particularly the powerful public service unions, who see tax cuts as a threat to their members' income and as a threat to their ability to redistribute wealth and to mould society.

Rather than go with his initial across-the-board tax cuts -- which incidentally would greatly reduce the many poverty traps currently in the tax system -- he committed to smaller more limited and as yet unspecified tax cut.  In so doing, he not only lost a chance to attract overtaxed battlers, but wealthier people sick of Howard and Costello's high taxing ways.

While Mr Latham correctly emphasised the need to focus on education, he lost the plot in the detail.  Education is without question on of the most important links in improving social mobility.  There is also little doubt that the existing system, particularly the public system has flaws.  The fact is that thousands of working class families are leaving the public system, at great personal cost, for the private system.  This move is not based on ideology or desire to join an old bays or girls club, but rather by a desire to get the best education for their kids.  The shift is not driven by changes in funding.  Over the last decade, all States have significantly increased funding to public schools with higher salaries, more teachers, more teacher aides and better facilities.  Indeed the expenditure per pupil in the public secondary schools exceeds by a substantial margin the comparable level of expenditure in the Catholic system.  While the Commonwealth Government has increased it support for private schools ( as well as for public schools), private schools fees have continued to rise.

Instead of recognising the need to address the reason for the loss of student to the public system, Mr Latham slipped in the old public vs private debate.  While this might solidify votes from the public school teachers, it will alienate the many working-class families struggling to pay private school fees.

Mr Latham also succumbed to the elites on higher eduction by promising to reduce tuition fees.  In short he agreed increase the tax transfer from medium income earners (who provide the bulk of tax revenue) to the future elite.  Put another way, he agreed to tax truck driver to subsidies doctors.  This is not only inequitable, but starves the universities of funds.

Mr Latham's most serious problems lie with the environment, or rather the pursuit of the urban green vote.  Over the last few decade the ALP steady abandoned it support for resource extraction industries in deference to the whim of urban voters.  This has been most pronounced in native forest industries.  While in the past Mr Latham has been a vocal critic of this process, as the new leader he has embraced it.  He has committed to the ratifying the Kyoto Agreement, which will cost many thousand of jobs and achieve little.  He is considering reneging on the agreement (passed by State and Federal Labor Governments) to continue limited logging of old regrowth forest in Tasmania.  He has committed to taking 20 per cent of irrigators' water entitlements in the Murray-Darling River Basin, potentially without compensation.

Mr Latham is the person to bring the Labor Party back to it roots and to recapture Howard's battlers.  The question is:  will the Party allow him to do so or will it instead become more firmly the party of the chardonnay set?

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