Dismissal ruling isn't fair

"Pity the bosses" was the first reaction to the decision of Fair Work Australia a few weeks ago in the case of Paul L. Quinlivan v Norske Skog Paper Mills (Australia) Ltd.

On September 2 last year, Paul Quinlivan was cleaning a tank in the paper recycling warehouse at the Norske Skog paper mill in Albury.

On a number of occasions he was told to wear safety glasses.  He refused.  Quinlivan was later sacked and he claimed he'd been unfairly dismissed.

Although FWA (the body the Rudd government set up to replace the Australian Industrial Relations Commission) found the company had a valid reason for the sacking, it nonetheless concluded the dismissal was "harsh" and therefore it qualified as an unfair dismissal.  Norske was ordered to reinstate Quinlivan and pay him lost wages.

According to FWA, some of the reasons why the sacking was harsh included the employee being 44 years of age and having worked at the mill for nearly 20 years;  he did not finish secondary school and had been unable to find work in another full-time job since his dismissal;  he was married with two daughters aged nine and 11;  he has a mortgage of about $70,000;  and his wife suffered depression.

Not surprisingly, the decision dismayed employers.  They are in a no-win situation.

At the same time as they're subjected to ever tighter occupational health and safety standards, employers have been told they can't use the ultimate sanction -- dismissal -- when employees deliberately breach safety regulations.

The acknowledgment from FWA that "it was entirely proper for the respondent [Norske] to treat seriously the misconduct constituted by repeated failure to wear safety glasses" is little consolation to companies facing such situations.  A precedent has been set.

FWA said:  "Other employees of this respondent should not interpret this decision as in any way endorsing a disdainful or careless approach to safety or the respondent's safety policies.

"If the applicant had substantially lesser services, had not been a middle-aged man with very poor employment prospects for whom the dismissal has such serious personal and economic consequences ... I would not have concluded that the dismissal was harsh."

This sounds suspiciously like one rule for middle-aged men with low educations qualifications and another rule for everyone else.

Employees who have behaved in exactly the same way in the workplace will be subject to different rules for unfair dismissal according to factors such as their gender, age and whether they have a mortgage.

The problem for employers is FWA has signalled that, when deciding unfair dismissal cases, it will take into account factors not connected to either the employee's job performance or the manner of their dismissal.

In Quinlivan, the dismissal was deemed harsh because of factors over which the company had no control.

What's worse is that FWA concluded a sacking could be harsh because of something that happened after the sacking and because of something that had nothing to do with the company, namely that Quinlivan had been unable to find full-time work.

A fundamental principle of the rule of law is that individuals affected by legislation should be able to form some sort of conclusion about how the legislation is applied.  But it seems employers no longer have that luxury.

There's no way employers facing unfair dismissal claims will be able to anticipate which of an employee's personal issues FWA will take into account when deciding whether a dismissal was harsh.

If an employer did try to find out about an employee's personal life, the employer would risk any number of anti-discrimination and privacy law suits.

To be fair, the principles FWA applied in Quinlivan are not new.  The Howard government's Work Choices legislation had similar provisions.

The difference is that, under the coalition, small business was not subjected to thoese sorts of unfair dismissal rules.

Under the Rudd government, small business has been drawn into the labyrinth of such rules.

The risk is that employers will decide it is all just too hard.  Many small businesses may conclude it would be easier to employ a contractor or, easier still, not to employee anyone.

That would be a pity for bosses and workers.

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Our Ted Heath

For more than a decade, Malcolm Fraser has won plaudits from everyone:  everyone except those who respect John Howard, that is, which is to say a clear majority of Australians.  Whether it's Tampa, or Iraq, or the republic, or Pauline Hanson, or Aboriginal affairs, or detention centres, or the US alliance, or David Hicks, or anti-terror laws, Fraser has stood side by side with those Labor icons Gough Whitlam and Paul Keating in condemning his fellow Liberal.  And the Fourth Estate has egged him on.  Just this week on the ABC1's 7.30 Report, former Whitlam adviser Kerry O'Brien could not help but encourage the sophisticates' former bogeyman to pour scorn on his former treasurer.

But Fraser's criticisms have in many respects backfired, antagonising and alienating his Liberal brethren.  "How is it that the tough conservative of 1975 has become such a trendy," asks former Fraser minister Neil Brown.  He's "a geriatric grenade-lobber" who should be expelled from the party, cries a Young Liberal national conference leader.  He's a "frothing-at-the-mouth lefty", guilty of "nauseating acts of political sycophancy" and "hypocrisy", laments federal Liberal frontbencher Sophie Mirabella.  In British parlance, Fraser is our Ted Heath:  a paternalistic Tory, a bitter and twisted critic of his more successful successor who has promoted a bewildering array of politically correct causes that do not register with mainstream society.

In fairness, the charge that Fraser has oscillated from hard man on the Right in the 1970s to the darling of the Left more recently is a tad implausible.  As Fraser highlights in his memoirs, co-authored with Margaret Simons, he has not changed so much as the nation has changed.  Indeed, look at his record in government from 1975 to 1983 -- SBS, apartheid, Vietnamese refugees, multiculturalism, the Third World, family allowances, Aboriginal land rights, import tariffs -- and you will detect a remarkably consistent, at times admirable, record of small-l liberal governance.  True, in recent times, he's flip-flopped on the monarchy, the Vietnam War and US alliance.  Still, as prime minister, Fraser represented the progressive spirit of the times:  he remains a creature of his culture.  Conservatives should bear this in mind before they slam their former hero for his alleged road-to-Damascus conversion to every dripping wet cause favoured by the inner-city elite.

John Gorton and John Kerr are unfairly attacked in the book, but the chief villain remains one John Winston Howard.  In Fraser's telling, Howard is a boo-word, shorthand for racist, traitor and do-nothing treasurer.

Start with race.  "For the first time since Billy Hughes," he says, "Australia had a prime minister who was prepared to use issues of ethnicity and religion for political advantage."  Fraser pinpoints the root cause of Howard's attitudes towards immigration, Hansonism and multiculturalism to an incident that allegedly took place after a cabinet meeting over the fate of the Vietnamese refugees in May 1977.  According to Fraser, Howard "sidled up to me afterwards in the corridor and said 'We're not going to take too many of these people, are we?'".  Howard denies the story:  he was not even in cabinet at the time.  There is, moreover, plenty of evidence to indicate that Howard strongly supported Fraser's decision to accommodate the Vietnamese refugees after the fall of anti-communist Saigon.  In arguably his greatest parliamentary performance, for example, in August 1984 Howard attacked Gough Whitlam and Bob Hawke over their hostility to boat people in 1977.  "It was the Liberal administration under Malcolm Fraser which introduced and conducted the humanitarian refugee program whereby Australia took on a per capita basis a larger number of refugees from war-afflicted Indo-China than any other country in the world," he told the House.  "With those kind of credentials, what earthly right has any member of the Australian Labor Party, with its record and the contradictions that lie in its historic past, to come into this House and lecture us about racism?"

While it is true that Howard, by his own admission, was wrong to call for reduced Asian immigration in 1988, his response to Hanson and Tampa was justified.  To have demonised the Queensland populist, who merely represented a backlash against decades of dramatic socio-economic change, would have inflamed One Nation's supporters.  And to have lost control of the nation's borders to a people-smuggling racket would have reduced public confidence in a large-scale non-discriminatory immigration policy.  Fraser "was deeply disturbed at seeing the Howard government take so many backward steps" on immigration and refugee policy.  But he forgets that Howard doubled the annual migration intake from 1996 to 2007 while maintaining an orderly refugee program, which on a per capita basis meant Australia took a larger number of asylum-seekers under the UN humanitarian program than most nations.

Fraser also says he was "shocked" by Howard's "naked evidence of disloyalty" to then Liberal leader Andrew Peacock.  In early 1985, Howard allegedly told a New York businessman that "my people will get rid of him before the end of the year".  Fraser says:  "I told [Howard] I thought Peacock had done well enough against Hawke to deserve loyalty and another go."  This is the same Fraser who told Howard only a few months earlier that Howard must challenge Peacock.  The same Fraser who undermined not only Liberal leader Bill Snedden in 1974-75, but also Liberal prime minister John Gorton in 1971.  The same Fraser who has no qualms about other ambitious politicians -- Turnbull, Rudd, Hawke, McMahon and so on -- doing the very thing that he accuses Howard of doing:  namely, wanting the top job.

In perhaps the most astonishing charge, Fraser says he was the real free marketeer and that Howard dragged his feet in the economic reform push in 1981-83.  Never mind that Howard, as treasurer, established the Campbell Committee for financial deregulation, approved the entry of foreign banks, removed all controls on bank deposit rates, liberalised foreign investment guidelines and relaxed foreign exchange controls and banking regulations.  Never mind that John Hewson, no friend of Howard, has acknowledged that "most of the credit for financial sector deregulation in this country must go to [Howard].  It was [Howard] who fought the vested interests in the middle 1970s that were so strongly in favour of a continuation of regulation.  It was [Howard who] took the task to Cabinet."  Indeed, when Labor floated the dollar, Fraser, by then out of the arena, opposed it, whereas Howard, as shadow treasurer, strongly supported it.

All of this is a shame.  As former National party leader and deputy prime minister Doug Anthony said of his old friend and leader at the release of the 1971 Cabinet documents:  "Party loyalty:  he certainly hasn't shown that in recent times to John Howard and I'm very sad about that.  I wish he'd mend his ways."  Alas, eight years later, Fraser's memoirs suggest he has far from mended his ways.

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Terror laid bare

Flying is awful -- and it looks like it's only going to get worse.  The actual "flying" part can be all right if you get one of those exotic personal entertainment systems with a trillion movies and every kind of Tetris rip-off imaginable.

Modern airlines come in two types:  those that pride themselves on their hospitality, and those that pride themselves on abusing the goodwill of passengers to keep costs down.  Either way, commercial airlines aim to please in some fashion.

But not even George Clooney in Up in the Air was able to make traversing the government's airport security checkpoints look elegant.

Sociologists of the future will describe this as the "ritual" of travel:  lists of what you can and cannot take into the plane;  convenient check-in machines complemented by impossibly long baggage lines;  the security barriers;  making sure you remove your laptop;  taking off your belt;  and being swabbed for bomb residue.

Hop on a plane to the US and it's worse.  Since the underpants bomber failed to blow up his underpants on Christmas Day last year, airport security frisks passengers so intimately they can not only detect bombs in jocks, but can detonate them by hand.

Kevin Rudd has announced an extra $200 million for airport security.  "It may," said the Prime Minister in his best leadership voice, "mean it takes longer for passengers to pass through security, but the government believes that this inconvenience is a small price to pay for increased security."  (Incidentally, the prime ministerial jet was renovated in 2007, at a cost of $100,000.)

We'll be paying this "small price" because the Prime Minister has decided to install full body scanners in Australian airports, scanners that can see through clothing to get almost naked images of passengers.

No surprise that some people worry about the privacy implications.  In Britain, there is even serious concern that body scanners breach child porn laws.  It's illegal to create indecent images of children, and that's what happens when children go through body scanners designed to look under clothing.

Privacy issues aside, what's the point?  Body scanners will be just another ceremony added to the elaborate ritual of travel -- prime examples of "security theatre".  We might feel safer, but we're not actually safer.

After all, how much safer could we possibly be?  The risk of terrorism is infinitesimally small.

In the United States, there is an average of just one terrorist incident every 16.5 million flights, according to the US Bureau of Transportation Statistics.

In Australia, there are half a million domestic flights per year.  Every day more than 100,000 people fly from one Australian city to another;  50,000 more either leave or enter the country.

But when in 2003 a parliamentary committee asked a witness from the Department of Transport whether there had ever been a terrorist incident on an aircraft in Australia, nobody could think of one.  (There had been an unsuccessful hijacking attempt of a flight between Melbourne and Launceston in May that year, but the hijacker was suffering from severe paranoid schizophrenia.  Hardly a professional jihadist.)

So even if full body scanners in every airport in the country halved the risk of terrorism, half of bugger-all is still bugger-all.

Human beings are terrible at assessing risk.  In the past 12 months, there have been more than 1500 deaths on Australian roads.  By contrast, over the past decade, 469 airline passengers died from bombings, hijackings or pilot shootings in the entire world.  More than half of those fatalities occurred on September 11.  The noughties were the second-safest decade for air travel since the 1950s, and there are a lot more passenger flights now.

Perhaps it's all that security that makes flying so safe.  But security specialist Bruce Schneier argues that there are just two truly effective protections against terrorism on airlines.  The first is reinforced cockpit doors -- without access to the cockpit, it's hard to turn a plane into a flying missile.  Since 2001, pilots do not open that door.

The second is us.  Right now, the strongest defence we have against airplane hijackings or bombings isn't terrorist no-fly lists or body scanners.  It's the passengers who now know they shouldn't passively comply with the demands of terrorists, and who know the guy doing chemistry in the bathroom should not be left in peace.

The Christmas underpants bomber was scary, but security worked exactly as it should have.  He couldn't get a "good" bomb on board, so he tried to detonate a bomb so awkward it required 20 minutes of preparation in the toilet.  And he couldn't get it to work.  He was quickly subdued by passengers when his pants caught on fire.

The Australian attempted hijacking was also defeated by passengers.

Back in 2005, then immigration minister Amanda Vanstone was candid about the absurdity of airline security.  With obvious enthusiasm, she posed this hypothetical to a private audience:  "If I was able to get on a plane with an HB pencil -- which you are able to -- and stabbed the HB pencil into your eyeball and wiggled it around down to your brain area, do you think you'd be focusing?"

Most terrorist plots are discovered through quiet investigative work, and foiled long before they are anywhere near ready, although we still haven't dealt with the "Amanda Vanstone driving an HB pencil into your eyeball" threat.  So the risk of airline terrorism will never be zero.  But let's try not to panic.

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Drivers deserve and need better roads

A leaked version of Melbourne's latest draft transport plan placed its focus on "congestion-busting".

One suggestion was to reduce congestion by building fewer roads.  Another was to discourage drivers from shopping trips during the day by reducing speed limits.

The apparent strategy is to make road use sufficiently unattractive so that people will give up using their cars and wander over or cycle to the local shops and "activity centres".

The leaked draft plan follows an all-too familiar theme.  It panders to noisy anti-car groups who want to force a greater use of public transport, plus more cycling and walking.

But cars (and commercial vehicles) are basic to Melbourne's liveability because modern cities have highly dispersed destinations.  Even the most efficient public transport struggles to serve the nine-tenths of trips that don't radiate to the city centre.  As a result, trains, trams and buses account for only 10 per cent of our trips.

Cycling features prominently in government transport plans though it represents only 0.6 per cent of trips.

Cycling also attracts a disproportionate level of funding -- before Christmas, Federal Transport Minister Anthony Albanese, as part of the "infrastructure stimulus", announced funding for more than two dozen new bicycle paths.

But, unlike heavily taxed motor vehicle users, cyclists pay no direct costs.

Even excluding general taxes on motor vehicles, specific road use taxes in Australia (mainly fuel excise and licensing) collect far more revenue than is spent on roads.  Car use is milked by governments to bankroll other spending.

Siphoning off revenues raised by the motor vehicle user eventually impacts on road speeds and travel times.  And getting around the city, especially in the journey to work, is taking longer.

In 2006 people spent 40 per cent more time travelling to work than 15 years earlier.  Travel speeds for Melbourne car trips have not improved since 2003 while trips have become longer.  Nor have public transport speeds improved -- we have faster trains but trams have become slower.

It's a cliche that time is money but cities exist and prosper precisely because they allow fast personal and commercial interaction.  Where travel times increase, cities work less well and decline in relative and sometimes absolute terms.

Road capacity therefore needs to keep pace with users' needs.  The consumer/taxpayer is demonstrating a willingness to finance more and better roads, including within urban areas, with their outlays in fuel excise, licence fees and tolls.

Rather than using this revenue on road expansion, the Victorian Government may be preparing us for additional road use taxes masquerading as "congestion charges".

Aside from the fact that motorists already overpay for roads, the problem with a congestion tax is the government monopoly over roads.  This gives governments an incentive to skimp on new building in order to increase its revenues.

Instead of penalising car use, governments should deliver road users the services their taxes are paying for.  Failure to do so not only robs the car and truck user but also undermines the efficiency of the city and its wealth-promoting abilities.

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Climate target is foolhardy

As a face-saver to December's collapse of the world climate negotiations, governments agreed to the Copenhagen Accord.  This had vague provisions to pursue measures to limit global temperature increases to 2ºC.

The accord offered no guidance as to how this might be achieved but did say it would involve deep cuts in emissions of carbon dioxide and other greenhouse gases.  Accordingly, developed country governments agreed to lodge quantified measures they would adopt to reduce their emissions by 2020.

Australia has made an unconditional commitment to reduce emissions by 5 per cent on 2000 levels, agreeing to increase this to 15-25 per cent, conditional on an international agreement.  By comparison, Canada has agreed to a conditional reduction of 17 per cent on 2005 levels;  the EU a conditional 20-30 per cent on 1990 levels;  Japan a conditional 25 per cent on 1990 levels;  New Zealand a conditional 10-20 per cent on 1990 levels;  Norway a conditional 40 per cent on 1990 levels;  Russia a conditional 15-25 per cent on 1990 levels;  and the US a conditional 17 per cent on 1995 levels.

Australia is the only jurisdiction to have offered an unconditional reduction in emissions by 2020.  This commitment has problems.

The first is that it is based on proposals that have been voted down by parliament and which, though being re-submitted, seem certain once again to be rejected.  Hence, not only has the Rudd government uniquely offered to deliver something unconditionally but parliament has denied it the offer it has made.

It may be argued this doesn't matter as there is bipartisan agreement for a 5 per cent cut in emissions by 2020.  At the end of January, the Coalition announced similar goals to those of the government in its climate policy.

However, this is invalid for two reasons.  First, the government lodged its commitment before it knew of the Coalition's plans.  Second, the government has maintained the Coalition's policy will not achieve the goal it has set.

It may be argued the global warming negotiation system is a meaningless farce and everybody is merely posturing.  But no other country has offered an international commitment it cannot keep.  Instead, they have ensured they would not be held to account for missing any 2020 targets they might set themselves.  Their submissions were accompanied by conditions.  Japan's offer is "premised on the establishment of a fair and effective international framework in which all major economies participate".  Canada's commitment was, "to be aligned with the final economy-wide emissions target of the US in enacted legislation".  Even the EU stipulates "that other developed countries commit themselves to comparable emission reductions and that developing countries contribute adequately".

In contrast, the Australian government has chosen to offer a firm commitment that is quixotic.

Gesture diplomacy of this nature must have repercussions on our credibility.

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Activist left's global agenda

The great divergence between classical liberals and their philosophical opponents has always been the primacy placed on freedom in people's lives and enterprise over the coercive hand of government.

Classical liberals argue government's role should be limited to creating the framework for a market economy rooted in property rights to deliver prosperity, and a free society that respects choice and empowers individuals to unleash their maximum potential.

Conversely, the Left has always seen freedom as dispensable in pursuit of goals of equality and social justice.

And having failed to convince people across the world that higher taxes and more regulation are good for them, it has developed a seemingly pro-choice agenda to achieve the same objectives, calling it "libertarian paternalism".

Libertarian paternalism seeks to nudge individuals toward the government's preferred behavioural choices by taxing, regulating or depriving consumers of the goods and services they would choose with free will.

Nudge theory argues that rather than banning McDonald's Big Macs the government should tax them higher than other foods, regulate their maximum salt content and restrict them being advertised.

Then if a consumer ignores government nudges and buys a KFC chicken wing, a Krispy Kreme doughnut or a can of Coca-Cola, they were always determined to do so irrespective of the consequences.

There's nothing libertarian about old-fashioned nanny-state paternalism but it hasn't stopped nudge policies being including in the Rudd government's National Preventative Health Taskforce report.

The taskforce's report recommends government use a range of backdoor measures to indirectly regulate what Australians put in their mouths.

And to push forward its nanny-state agenda, Health Minister Nicola Roxon has introduced legislation establishing a National Preventative Health Agency to implement proposals from the taskforce.

Once established, this nanny-state bureaucracy will outlive governments and exist solely to recommend how government should regulate businesses and people's lives to achieve paternalism.

Politically, nudge threatens to be the New Deal of the 21st century, granting its supporters the licence to scold opponents as indifferent to the overweight, binge-drinkers and smokers.  And the nanny state is being driven by the second battleground of the Left -- international institutions used to drive policies into domestic public debate.

UN institutions and their policy recommendations are grossly under-scrutinised because international institutions don't attract the same permanent opposition developed through parliamentary systems.

And because the permanent bureaucracies of these institutions have progressively been infiltrated by Left activists, their role has shifted from neutral administrators into policy advocacy bodies lecturing governments about what and how they should govern.

It's simply inconceivable that without UN institutions driving the debate about climate change the Australian public would be debating how to introduce huge non-revenue neutral taxes and regulations that will harm our global competitiveness.

And at the Copenhagen climate conference, 30,000 of the 45,000 registered delegates were Green-Left activists pushing for a UN treaty that sought to haul capitalism into a regulatory framework based on environmental principles.

But UN institutions aren't just driving the climate change debate.

Many of the Preventative Health Taskforce report's recommendations replicate the World Health Organisation's strategies to limit the retail sale and advertising of processed foods, and alcohol and tobacco products.

And academics and activists dismayed at the WHO's lack of binding power over governments are pushing for the formation of a framework convention on global health.

The framework would seek to bind countries on how they deliver health services and regulate food consumption to tackle obesity and binge-drinking, and further marginalise smokers.

But because the public under-appreciates the politicisation of international institutions, activists regularly cite UN recommendations to support the curtailing of freedom.

And because classical liberals have barely bothered to engage in international institutions, the Left has been given a free ride.

But drawing a line between the dots of UN proposals, there is a clear trend of incremental government encroachment on free enterprise and individual liberty that would make Fabians proud.

The challenge now for classical liberals in a world where the Left has found its messages and its battleground is how to respond.  But to date few have identified how the Left has developed new vehicles to repackage and drive its previously rejected ideological agendas.

Until classical liberals become familiar with their new battlegrounds, nanny-state paternalism will be directed by political UN bodies in Geneva and supported by libertarian paternalism foot soldiers in Australia.

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Easier zoning would deflate home prices

Australia has 11 of the world's 25 least affordable cities for housing.  The American consultancy Demographia this month released data of 272 urban areas around the world, and Sydney, the Gold Coast, and the Sunshine Coast were three of the four least affordable.  Melbourne was seventh.

The reason for Australia's high prices is extreme zoning measures, which prevent new housing developments.  Other places with similar restraints include Vancouver -- the least affordable city -- and California, Florida and Britain.

Recent data from Australian Property Monitors on house price trends across capital cities showed that, despite already being extraordinarily high, prices rose a further 12 per cent last year.  Apartment prices rose 10 per cent.

Sydney, Australia's most expensive housing market, recorded increases at about the national average.  Melbourne prices rose more than 18 per cent.

Compared with median house prices of $596,000 in Sydney and $518,000 in Melbourne, the median in similar cities, Dallas and Atlanta, was $US150,000 ($169,000) and $US129,000 respectively.

Another way of evaluating prices is to examine median prices as a multiple of median incomes.  On this measure, to buy the average house in Sydney last year required nine times average annual earnings.  In Melbourne, it was eight times annual earnings.

By contrast the average Atlanta house cost just 2.1 times the region's average annual income;  for Dallas the cost was 2.7 times the average annual income there.

For a median-priced house in Sydney and Melbourne, the standard monthly mortgage payment is estimated at $2988 and $2521 respectively.  In Dallas and Atlanta the payments are $US790 and $US680.  In terms of proportion of income, mortgages cost between 13 and 17 per cent of gross income in the two US cities, compared with more than 50 per cent for Sydney and Melbourne.

Some claim land availability limits housing options for Australian cities.  This is incorrect.  Far less of Australia is urbanised compared with other countries.  Sydney has enough developable land on the Cumberland Plain to expand the city size by 50 per cent, without even examining other possibilities.  Melbourne, like other Australian cities, has no land constraints.

The NSW Premier, Kristina Keneally, responded to the Demographia data by questioning its reliability, but there is no doubt about the accuracy of the estimates.  She claimed infrastructure costs for development outside established areas would be exorbitant, and that the energy usage accompanying such development would be excessive.  On neither count is she right.

Infrastructure costs of new developments on the urban periphery are generally lower than those involving redevelopment of so-called brown-field sites within the city's existing area.

As far as energy consumption is concerned, the Premier's view is contradicted by an unlikely source.  The Australian Conservation Foundation documents greenhouse gas emissions by suburb, which is a proxy for energy use.  In inner Sydney there were 37 tonnes of greenhouse gas per capita.  In inner-west Burwood it was 22 tonnes, in outer-west Parramatta 20 tonnes and on the fringe at Campbelltown 16.68 tonnes.

Similarly in Melbourne, central Port Phillip had 27 tonnes per capita, inner Darebin had 23 tonnes and outer Melton 18 tonnes.  The reasons behind such differences are many, but include increased energy spent on clothes drying and heating, and lifts and lighting in apartment blocks.  Contrary to many misconceptions, few people in the outer areas take long energy-intensive daily commutes by car to the central business district.

Those areas in the US where punitive zoning is not in place have been dubbed "flatland" by the economist Paul Krugman.  He recognised the housing boom and the bust last year were confined to that half of the US with highly restrictive land use regulations.  The prices in these land-restrained places collapsed as a result of the US recession.  However prices showed little movement in Texas, the Carolinas and other areas where re-zoning is readily approved.

Houses in Australian cities have seen price rises similar to those US areas where strict zoning approvals are in place, but because Australia has had only a mild recession, property prices have remained relatively stable.

These matters aside, the planning regimes throughout Australia disadvantage new homebuyers.  While our land preparation and house building industries are as cheap as anywhere in the world, the planning and zoning stranglehold on land releases pushes up prices to astronomical levels.

Experience reveals the thicket of regulations impeding planning approvals is impenetrable even to provisions explicitly designed to override them.  And homebuyers suffer.

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In for a penny, in for a pound and the splurge goes on

The Federal Government's fiscal response to last year's global financial crisis reveals the problems posed by adopting outmoded approaches to economic policy.  In the teeth of what was described by Prime Minister Kevin Rudd as an "economic cyclone", the Government made a host of decisions in an effort to stimulate economic activity.

In October 2008, an "economic security strategy" was implemented, at a cost of $10.4 billion.  This was followed in February 2009 by a "nation building and jobs plan", a $42 billion spending catalogue of shock-and-awe proportions.

A year on from the final component of its stimulus strategy, the Government is now crediting itself with ensuring that Australia avoided a technical recession and securing a lower than expected unemployment rate.

It is clearly impossible to ascertain the economic impact of a more restrained approach, with the Government having made its fiscal choice for substantial spending.

However, detailed analysis of the stimulus packages by a number of Australian economists suggest that the Government's fiscal strategy in its current form may have caused more long-term economic harm than good.  It is inconceivable that the stimulus would sustainably boost national income, or that the multiplier effect of Government spending is greater than one, given that the expenditures are financed by taxes or public sector borrowings (implying higher future tax burdens).

In other words, the Government stimulus is merely of a redistributive nature, with a handful of economic activities preferred by policymakers undertaken at the expense of taxed non-beneficiaries spread across the rest of the community.

According to the latest report from the Commonwealth Coordinator-General, the stimulus packages have supported 200,000 jobs.  Taking the Government's estimates at face value, this represents an average cost to taxpayers of at least $262,000 a job.

With more than 10 million Australians in employment, there were effectively many who missed out on the Rudd Government's fiscal game of pass the parcel.

The Government recently highlighted the need for improved market productivity to meet the economic challenges of an ageing population.  However, it is doubtful that stimulus measures such as subsidies for insulation batts, funds for duplicated school halls or $900 pre-Christmas cash giveaways would rate highly in any self-respecting economist's list of productivity enhancing initiatives.  Indeed, it is estimated that only 14 per cent of the $42 billion stimulus is being directed to economic infrastructure, such as road and rail.  Even so, no cost-benefit analysis of such projects has been published to facilitate external scrutiny of their economic impact.

The Keynesian stimulus approach adopted by the Government has also bitten off more than it can chew when it comes to fiscal sustainability.

Discretionary spending has played a role in plunging the budget into an expected $54 billion deficit this year, together with a $200 billion net debt that will not be repaid until 2021-22.

Some economists argue that such fiscal outcomes do not matter.  We can simply wait for the cavalry of economic growth to arrive, driving up revenue collections to convert a budget deficit back into surplus.

Public debt is immaterial because we owe it to ourselves.

These claims do not stand the test of scrutiny.  Budget deficits matter to the extent that they affect the efficient allocation of resources in the real economy.  Higher revenues would be collected from some individual or business that may be less inclined to invest, save or work longer.

The higher level of spending facilitated by a budget deficit could be allocated to inefficient ventures, and the size of government also increases with adverse consequences for long-term growth and productivity outcomes.

It is also well known that persistent budget deficits tend to crowd out private sector investment, as the public and private sectors increasingly compete for loanable funds in constrained credit markets.

The consequent higher interest rates would tend to facilitate an exchange rate appreciation, in turn reducing Australia's net exports.

Public sector debt has similar economic consequences to recurrent budget deficits, with the added penalty that future workers who did not politically consent to the borrowings have to shoulder the burden of repaying the principal and interest on the debt.

With the recent assessment by US think tank the Heritage Foundation that Australia is the most economically free nation on earth, aside from the Hong Kong and Singaporean city states, it is appropriate to consider what role supply-side reforms since the early 1980s have had to play in driving current economic outcomes.

For a start, the depreciation of the floating Australian dollar through the second half of 2008 buffeted exporters from the worst of the global economic downturn.  However, this beneficial impact did not last as subsequent interest rate increases led to a more subdued export performance in recent months.

There has also been much anecdotal evidence that employees and employers had taken advantage of a more deregulated labour market to revise working conditions in the face of a subdued economy.  This allowed more workers to keep their jobs, in turn enabling more businesses to keep their doors open, than would otherwise have been the case.

However, the industrial relations policies of the Rudd Government will increasingly weaken the effectiveness of the labour market to flexibly respond to economic changes, at least without creating fresh inflationary pressures throughout the economy.

Industrial strife afflicting Western Australia's mining industry is a warning signal of the potential pressures ahead.

Twelve months on it remains essential to ask why did the Government pursue Keynesian fiscal policies, a prescription to macro-economic management repudiated by the 1970s stagflationary episode?

The key to answering this question perhaps lies in observations made after the cessation of the Cold War by James Buchanan, founder of the public choice school of economics.

Buchanan pointed out that while the fervour for socialism in the economic realm had faded, there has been an unwillingness to fully embrace alternative market approaches.

According to Buchanan, "politics will not work, but there is no generalised willingness to leave things alone".

To put it simply, reflexive political intervention in economic markets remains alive and well.  This provides a breeding ground to implement "go early, go hard and go household" policy exhortations, not only at the expense of taxpayers but the long-term productive fitness of Australia's market-based economy.

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Folly of focusing on Joyce

The Canberra press gallery has peculiar priorities.  This week we've found out that the national broadband network hired a Labor mate to a $450,000 a year job without advertising the position and without interviewing any other candidates.

We have also discovered that a federal government scheme to subsidise household solar panels, estimated to cost $150 million over five years, has in fact cost $1 billion in 18 months.  That's a budget blowout of more than 600 per cent.

This comes on top of the deaths of four people while working on a government scheme to install insulation in homes.

Then to cap it off, the Prime Minister goes on the ABC's Q&A program on Monday night and comes up with lines such as unemployment in Australia is "the second lowest of all the major advanced economies in the world".  Which is not true.  Japan, South Korea, the Netherlands and Austria, for example, have lower unemployment rates.  The PM also claimed:  "My predecessor ripped a billion dollars out of the public hospital system."  In fact over the life of the Howard government, funding to public hospitals doubled.

But who does the Canberra press gallery want sacked?  Barnaby Joyce.  Why?  Because a few days ago Joyce, as shadow finance minister, raised the possibility of Australia defaulting on its sovereign debt.

"Foolish", "farcical", "crazy", and "dangerous" are some of the media's descriptions of Joyce's comments.  There's no doubt that Joyce's remarks were foolish.  And naive.  And the attention they generated distracted the focus from a more legitimate argument about the effect of government borrowing on interest rates.

Joyce's mistake was to construct a thought bubble in public.  And he's got form.  Restricting foreign investment, and breaking up the Big Four banks have been the subject of some of Joyce's other thought bubbles.  To a certain extent the problem is not so much that he's willing to engage in contemplation of this kind, but that he's pondering ideas that are quite contrary to what coalition policy should be.

The irony is that on some issues Joyce is excellent.  He's one of the few MPs willing to speak out on how environmental regulations are eroding landowners' property rights.  And to declare himself sceptical about the science of climate change.

It seems that when it comes to Joyce, the media hold him to a higher standard than his government counterparts.  If Joyce had made any of the sort of the factual errors that Rudd committed on Q&A, the pressure on Tony Abbott to sack him would have been irresistible.

Joyce is branded as incompetent because he confused billions and trillions.  Meanwhile his opposite number, Lindsay Tanner, is happy to wave through the largest infrastructure project in the nation's history, the national broadband network, without any sort of cost/benefit analysis whatsoever.  Surely Tanner's job as Finance Minister is to do exactly what he doesn't appear to be doing.  Peter Garrett as Environment Minister is getting the blame for the cost overruns of his green loans scheme, but the question has to be asked, what was the Department of Finance and Deregulation doing while the Department of the Environment, Water, Heritage and the Arts was going $850 million over budget?

In December last year, when Joyce contemplated requiring the major four banks to divest their assets to promote competition, Financial Services Minister Chris Bowen went on ABC radio's AM program complaining of Joyce's "irresponsible thought bubbles".  Bowen accused Joyce of thinking "that it's fine for Australian governments to go in and break up existing businesses.  We [the Labor government] have a different view".  Bowen is right.

However, the interviewer failed to ask Bowen why he was outraged by Joyce's suggestion that the banks be broken up to generate competition in the financial sector, yet he seemed completely comfortable with a Labor government doing exactly the same thing to Telstra.

However ill-considered Joyce's words about Australia defaulting were, the man's in opposition.  He can't actually do much.  Consider what's worse.  The shadow finance minister engaging in idle speculation on the country going broke, or the real Finance Minister allowing his cabinet colleagues to run amok?

Of course the Canberra press gallery should scrutinise what opposition MPs say and do, but there's also a government they should be reporting on.

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The wisdom of the ages

The release of the latest Intergenerational Report shows in detail why the Federal Government's policies are in desperate need of an overhaul.

Despite the natural increase of the population and steady migration contributing to a total Australian population of 36 million by 2050, it is forecast that the proportion of Australians aged 65 and over is expected to almost double to 23 per cent by the middle of the century.

This demographic ageing implies that the numbers of working-age people to fiscally support the aged will decline significantly.

Today there are five people aged between 15 and 64 to each person aged 65 and over.  By the middle of this century, there will be just 2.7 people of working age for each older Australian, the report says.

Already the messages from the Government about the appropriate policy responses to address the economic and fiscal challenges of population ageing have been mixed.

Prime Minister Kevin Rudd has talked promisingly about the need to boost productivity and engage in micro-economic reform.  The Intergenerational Report says Australia's economy could be 15 per cent larger by 2049-50 if productivity growth rose to 2 per cent a year.

But the potency of the prime-ministerial rhetoric is dulled when it becomes apparent that the Government's productivity strategy rests on spending other people's money on unproductive infrastructure, such as the national broadband network, and more corporate welfare including R&D grants.

Compounding the issue is the gap between words and deeds on the economic policy front that has already emerged, constraining our capacity to deal with long-term challenges.

For example, our ability to enhance productivity at the workplace level has been stymied by back-to-the-future industrial relations changes that have reduced flexibility and reasserted union power.  Major elements of federal stimulus spending, including $900 cash splashes, subsidies for insulation batts, duplicated school halls and ornamental local government projects, were informed by the need to spend taxpayers' money quickly rather than finding the best-value proposition.

Meanwhile, the Rudd experiment in co-operative federalism including regulation reform is failing under the weight of COAG's reform inertia.  The Government has also trotted out its advisers to test the electoral waters regarding other ways to respond to the economics of ageing challenge.

Treasury Secretary Ken Henry recently said the tax system needed to be prepared for the probability that revenue needs would grow strongly in the longer term to finance the government-provided goods and services demanded by the community.

This attempt at softening up the electorate for extra tax hits ignores the fact that the very same electorate is likely to express its displeasure against rising taxes, including through the ballot box.

The community uproar against the Emissions Trading Scheme, with the cascading revenue effect of cap and trade licences potentially raising the prices of every conceivable good and service in the country, is a case in point.

Henry's plea for additional money also ignores the global reality of labour and capital movements constraining the revenue appetites of governments.  Push taxes up too much, and people (including those of working age) and industries will either move away or not relocate to Australia in the first place.

More fundamentally, the proposition to increase taxes into the future will harm Australia's quest to improve its productivity performance.  This is because taxation distorts the economic activities of businesses and individuals, reducing the potential to reallocate scarce resources to the highest-valued uses.

Meanwhile, the Government has been fiscally preying on future generations -- that dwindling share of workers in our demographic mix of tomorrow -- by backsliding towards a fiscal regime of Budget deficits and public debt.

Young Australians yet to enter the world of work will have to shoulder the burden of repaying the principal and interest on government debt for at least another decade, if not longer.

These fiscal outcomes in response to the global financial crisis have put Australia further behind in its attempts to address demographic ageing.  The latest mid-year economic and fiscal outlook statement shows the Commonwealth expects an accrual budget deficit of $54.4 billion, or 4.3 per cent of GDP.

At the time of the second Intergenerational Report, the former Howard Government estimated the Budget would be in surplus this year to the tune of $13 billion, equivalent to 1.1 per cent of GDP.

The Treasury estimates that the fiscal gap between expenditure and revenue will approach 2.75 per cent by midcentury.  This is contingent on the Rudd Government's assumption of a return to Budget surplus by 2015-16, a highly optimistic one given the Government's propensity to spend a fiscal inheritance rather than implement deep spending cuts.

The worsening long-term fiscal outlook presented by the Intergenerational Report shows why policy actions befitting economic conservatives, in the form of lower taxes, strict limits on government spending and economic deregulation, will become increasingly vital to head off the impending fiscal crunch of ageing.

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Take the politics out of commerce, not vice versa

Last week the Australian Electoral Commission published its latest donation figures for political parties.  Donations are down from last year.  Nevertheless, these figures were accompanied by the standard appeals to "clean up" the political process and get corporate influence out of politics.

But it was also the week that the federal government introduced its emissions trading scheme into Parliament for the third time.  In the government's words, if passed, the emissions trading scheme "will change the things we produce, the way we produce them, and the things we buy".  When the government has this sort of ambition, is it really any surprise businesses are trying to influence the political process?

The problem with political donations isn't that corporations are unduly trying to manipulate laws and regulations to their benefit.  It's that politicians are trying to shape an Australia where businesses have to involve themselves in the political system or they just might go broke.

The government plans to give out billions of dollars worth of free emissions permits as part of its emissions trading scheme.  And the Coalition's policy includes an "emissions reduction fund" of about $1.2 billion per year for some companies that reduce their emissions.

So if you had an aluminium smelter, and you didn't take any politicians out to dinner in 2009, you've neglected your business responsibilities.  Your competitors will be wining and dining any backbencher they can grasp.

But some of the biggest donors this year weren't energy firms.  The banks handed over a few lazy hundred thousand dollars to the major parties.  Even while smarting from the financial crisis, the banks were self-aware enough to recognise the government's guaranteeing of their bank deposits at taxpayer expense was a great deal for their shareholders.

And they'll want a say in what comes next:  like the Senate inquiry announced last week into small business access to finance.  And whatever the government does with executive pay reform.  And the results of Treasury secretary Ken Henry's tax review.  My point isn't that we should feel sorry for the banks;  they're as protected by the government as they are regulated by the government.

But when Kevin Rudd says Westpac should have a "long hard look at itself", or when Tony Abbott hints that if he makes it to the Lodge he'll impose more banking regulation in response to the interest rate rise, what do we expect these firms to do?  Just sit back and cop whatever regulation the government deems?  Or, worse, whatever regulation their competitors convince the government to impose?

If firms aren't donating, they're lobbying.  The government's register records nearly 300 lobbying firms.  More than 1800 Australian organisations paid these lobbyists to saunter around the corridors of Parliament.  Even The Big Issue apparently feels the need for professional representation in Canberra -- the magazine is listed as a client of two of Australia's biggest lobbyists, Hawker Britton and Enhance Corporate.

It's strange that we seem to blame the companies who donate money to political parties for the corruption of our democracy, rather than the politicians who take that money and change the law to suit.  A US study last year found that for every dollar US companies spent lobbying Congress, they received $220 in tax benefits.  What firm wouldn't want that sort of return on investment?

The solution isn't to regulate political donations, or crack down on lobbyists.  We could try.  But the stakes are far too high for any limit on corporate influence to be effective.  A company that feels its entire raison d'etre could be eliminated with the stroke of a legislative pen will find a way to influence politicians, whether we like it or not.

We've gotten into this situation because of a bipartisan belief that there are no limits to what government should do -- there are almost no areas of the economy the government shouldn't oversee, regulate or direct.

So do we want commerce out of politics?  We'll have to get politics out of commerce first.

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Flexibility a key in emission reduction policy

This week in Canberra the Government and Opposition issued rival plans for handling emissions of greenhouse gases.

The policies from both sides are targeted at reducing emissions by 5 per cent by 2020.  This really means a reduction of 27 per cent in 2020 emissions per head, because the target base is the year 2000.  And if worldwide emissions are to be reduced to a level the Government believes necessary to prevent global warming, Australia's reduction will have to be 80 per cent.

Mr Rudd thinks global warming is the greatest moral challenge of our time.  He went to the Copenhagen conference on climate change last December determined to use his skills to ensure a meaningful agreement on carbon reduction.  The conference collapsed when China, now the largest emitter of greenhouse gases, refused to cut its emissions.  China recognised that such measures would undermine its economic growth.

Oblivious to these international developments, the Government is sticking to its Carbon Pollution Reduction Scheme (CPRS).  Central to this is the emissions trading system, a form of tax on the carbon component of energy.

There are different assessments of what this tax entails.  One Treasury estimate puts it as raising $16 billion a year in tax by 2020.  Treasury's modelling for the Government's Garnaut Climate Change Review put the required tax by 2020 at $53 per tonne of carbon dioxide.  This doubles the cost of electricity, taking $30 billion a year from people's pockets.  In today's money that's $1200 per person -- largely in increased electricity charges.

This is in addition to existing measures.  These include energy ratings on new houses and the requirement that forces electricity retailers to provide 20 per cent of their supplies from renewable sources.

Renewable energy is three times the cost of conventional sources.  Such measures and the various subsidies, like taxpayer-supported rooftop panels, together already amount to a $3 billion a year slug on the taxpayer and energy consumer.

The Coalition's plan adds to the multitude of programs aimed at reducing emissions but rejects the carbon tax component, which it sees as a scattergun approach.

Instead it intends to combat emissions by a series of rifle shots, costing only one-twelfth the Government's CPRS price tag.

Predictably, the Government claims the Coalition's plan would not deliver the claimed reduction in emissions.  It is probably right, but Mr Abbott's proposals have the great merit of avoiding locking in a vast new tax and bureaucratic control system that Labor's CPRS entails.

The Coalition plan provides a sort of insurance policy that can be intensified or abandoned depending on future circumstances.  This is important because Australia's emission reduction measures are irrelevant unless all countries adopt similar plans.  And the failure of the Copenhagen Conference probably rules out any prospects of an international treaty.

Moreover, almost every day brings fresh revelations discrediting the science behind global warming projections.  These have falsified forecasts about the imminent demise of Himalayan glaciers, disputed predictions of the disappearance of the Amazons rainforests and have started to question the historical data which forms the basis for any action.

All of this counsels against Mr Rudd's CPRS, which stores up irrevocable future costs.

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Our Nixonian PM

"At one time or another, he had espoused almost every worthy principle, often repeatedly," Newsweek once observed of Richard Nixon.  "But in practice he violated enough of them to make all of his protestations suspect."

Could the same thing be said about Kevin Rudd?  In Question Time this week, the rattled Prime Minister berated several Liberal MPs for changing their position on his emissions trading scheme:  "Where lies consistency?" he cried.  Never mind that Copenhagen went up in smoke and that none of the world's major polluters will cut back on the greenhouse gases that the increasingly discredited Intergovernmental Panel on Climate Change says cause global warming.  The point here is that Rudd is an opportunist of such proportions that the only thing that exceeds his reach is his grasp.

This is a man who defined himself during the 2007 election campaign as an "economic conservative", committed to low public debt, fiscal rectitude and free-market reform, but who now represents the reincarnation of Whitlamism and a big-spending, big-union, big-government, debt-ridden agenda that caused so much economic angst in the 1970s.  A man who derides the "neo-liberal" legacy of John Howard and Peter Costello, but who, like Tony Blair, has been the economic beneficiary of the conservative government that preceded him.

A man who appealed to the metropolitan sophisticates by weakening Howard's border protection controls, but who now panders to Howard's battlers by preaching a "hardline" policy against "evil" and "vile" people-smugglers.  A man who insisted before the election he'd turn back the boats, but who, a year later, laid out the red carpet to thousands of unlawful arrivals.

A man who claimed climate change was "the great moral challenge of our time", but who now, in a changing (political) climate, jettisons the evangelical language and hardly raises the subject in stump speeches.  A man who pledged to lead the globe on man-made warming, but who now tells us we will "do no more, no less than the rest of the world" -- which means doing nothing, since hopes for any verifiable, enforceable and legally binding global agreement are a chimera.

A man who promised not to means-test the baby bonus and the private health insurance rebate, but who is nonetheless now trying to do so in the Senate.  A man who railed against corporate greed and unfettered capitalism, but who is watering down already modest proposals to weaken the fat cats' ability to pay themselves obscene salaries.  A man who promised the Commonwealth takeover of the public hospitals if their performance did not improve, but who has hardly even raised the issue since he's been ensconced in the Lodge.

The power of this vacillator's U-turns and reverse gear is up to the best international standards.

Now, when I say that Rudd is Nixonian, I do not mean he is guilty of dirty tricks or obstructing justice.  I mean that, like America's 37th president, the Prime Minister has no sense of philosophical identity, conviction and inner core.  A man who commissions hundreds of inquiries and 2020-style summits but who never does anything has no true beliefs.

Looking at Tricky Dick's political career from 1947 to 1974, it is difficult to identify anything in which the disgraced president seemed genuinely to have believed other than his own political success.  One moment, he was a staunch anti-communist who championed a Pax Americana;  the next, he was a realist advocate of detente and international multi-polarity.  One moment, he was a champion of fiscal conservatism and the Jeffersonian ideal of states' rights;  the next, he was an unashamed Keynesian who centralised federal power at a rate that would have made LBJ proud.  One moment, he was Taiwan's best friend and Mao Tse-tung's bête noir;  the next, he went to Red China to sup with the devil himself.  Sure, the friction of playing the role of conviction warrior while being in reality a malleable politician was only one of many frictions that contributed to Nixon's downfall, but it played its part.

Looking at Rudd's political career since 1998, it is also difficult to identify anything he seems genuinely to believe other than his own political success.  How else to explain someone who spent years currying favour with the likes of Greg Sheridan and the Australian's editorial team on the Right as well as Phillip Adams and the Monthly on the Left.  During the past three years in the limelight -- first as opposition leader, then as Prime Minister -- he has executed one stunning U-turn after another.

Say what you like about John Howard, you always knew where he stood and what he was about.  He was an unapologetic nationalist, economic reformer and social conservative.  On several politically unpopular issues -- Iraq, the GST, Telstra privatisation, industrial relations reform -- Howard was never afraid to challenge popular opinion and provoke people into thinking and then arguing about the causes he sincerely believed were in the nation's interest.

When Rudd, on the other hand, assumes the role of tough guy on any given issue -- public spending, people-smugglers, global warming -- there is always an air of detached calculation about his performances, a sense that in different circumstances he could just as happily be arguing the opposing case.

Until recently, he has been subjected to very little media scrutiny.  Alan Jones is unquestionably the most fearsome inquisitor in the nation.  So awesome is his reputation that Rudd has gone to great lengths to avoid being interviewed by him, preferring instead the celebrity-style ambience of FM Radio and the Seven Network's Sunrise crew that helped promote his rise from obscure backbencher in 2001 to alternative prime minister five years later.  But those of us hoping for blood at breakfast last week were not disappointed.  Why?  Not because of anything Mel and Kochie did, but because of probing questions that ordinary Australians were allowed to ask.  Without any warning to the PM, the talkback TV segment included three questions from voters in Sydney, Melbourne and Adelaide.  He badly failed two questions -- one on government allowances and another on incentives for mums to return to work -- and he struggled with another one.

The episode gave the impression that Rudd is manifestly divorced from reality, that without talking points and proper tutoring from his minders he is devoid of substance, and that if probed hard enough all the contradictions and inconsistencies that are part of his political make-up will wash off.

What Adlai Stevenson once said of his old nemesis Richard Nixon could also be said of Kevin Rudd:  "This is a man of many masks.  Who can say they have seen his real face?"

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ABC 24-hour news plan will cripple diversity

The announcement by ABC managing director Mark Scott of a new 24-hour, seven-day-a-week television news channel will harm Australia's media diversity and innovation through the ABC's monopolisation of the market.

Many Australians believe the popular myth that we need ABC television and radio to deliver high-quality news and current affairs because commercial stations will only deliver infomercial-based current affairs and populist news.

The myth is based on the assumption that there is a market failure caused by commercial stations failing to deliver high-quality television news and current affairs programming, and that a taxpayer-funded broadcaster has to fill the gap.

The ABC does currently produce much of Australia's higher-quality Australian news and current affairs programming, but there is no market failure.

A taxpayer-funded ABC doesn't fill a market gap left by commercial networks -- it crowds them out of providing quality news and current affairs.

Commercial stations cannot reasonably compete for the high-quality news and current affairs market because they're playing on an unfair playing field against an ABC that doesn't have to worry about where its next buck is coming from.

The ABC is a tax-financed and tax-exempt organisation occupying the same market space that commercial operators could otherwise occupy if they were able to charge for the services they provide.

The crowding-out potential of the taxpayer-funded ABC is best demonstrated in the one major media market where it is absent -- morning newspapers.

The private sector is completely capable of delivering high-quality state-based and national newspapers at a price the market is prepared to pay.

But if the ABC started giving away high-quality morning newspapers, News Limited, owner of The Australian, and Fairfax would find their newspapers crowded out of the market by a taxpayer-funded alternative.

And by establishing a 24/7 news television station, the ABC is likely to crowd out the current commercial all-news channel, Sky News.

Sky News already provides a high-quality service, so there is no justification for tax dollars to be wasted on a market hole that doesn't need to plugged.  In doing so, the ABC will effectively be engaging in government-sponsored predatory pricing.

By entering the 24/7 news channel market, the ABC will be undercutting the viability of Sky News to attract viewers, and with it the rate and volume of advertising revenue it can collect.  And the cost of the ABC's efforts is that it is likely to cripple innovation in Australia's media market.

The ABC has a patchy record in media market innovation and has only just identified the opportunity to introduce an Australia-specific 24/7 news channel that has been filled by Sky News for years.

Also, despite originally paying lip service to online opinion commentary to complement general news, the ABC has only recently established a dedicated online opinion commentary website.

This new opinion website has been introduced despite at least four other commercial opinion-specific competitors existing in the market.

Both examples demonstrate that a behemoth ABC already moves slowly.  But the most concerning element of Scott's vision is his motivation to establish this new 24/7 news channel.

The ABC's position as a preeminent news provider was threatened following a 2005 decision by Sky News managing director Angelo Frangopoulos to compete against the ABC for the Department of Foreign Affairs and Trade's contract to deliver our soft-power international television network, the Australia Network.

With the looming re-tendering for the $20 million-a-year contract, Sky News has already made it clear it intends to snare the contract from the ABC.

But in November last year, Scott sought to outflank Sky News's capacity to tender, arguing that the Australia Network services should be merged with the ABC's charter-mandated delivery of the Radio Australia international network.  If it did so, the ABC would be locking out competition to tender for the Australia Network contract.

By now announcing a 24/7 news channel, the ABC looks like it is using taxpayer dollars to seek revenge to crowd out Sky News on their own turf.