Memo to Indonesia: clear the red tape

Despite decades of reform, Indonesia's potential as a strong growth economy fuelled by investment won't be realised until all levels of government learn to get out of the way.

Like a lot of countries throughout south-east Asia, Indonesia came through the global financial crisis relatively well.

Working from a low base, its growth has been consistently around 5 and 6 per cent annually and it had low exposure to American and European markets in comparison with the growth markets on this side of the Pacific Ocean.

Despite continuing uncertainty, in the first quarter of this year the growth rate was 6.5 per cent, according to official government statistics, and Australia has been part of the charge.

Australia is one of the few countries that has been increasing foreign direct investment in the archipelago since dips resulting from the global financial crisis.  While Australian investment has plateaued in some sectors, considerable capital has flowed into the construction industry over the past three years.  And direct investment makes up more than half of all capital invested.  The trend should hardly come as a surprise.

Since the mid-1980s, the national government has staggered liberalisation of investment laws and regulations to make Indonesia a more attractive destination.

The impetus for doing so has been the dramatic need to tackle poverty alleviation, the realisation that international companies are needed for their skills and expertise to build industries, and to compete with other countries in the region.

Major investment reforms passed in 2007 were a watershed, affording foreigners the same treatment as domestic investors and removing opaque regulations about industries open to investment.  Instead, the government introduced a transparent ''negative'' list that made it clear which sectors were out of bounds.

Coupled with other reforms, the market has rewarded reforms and Indonesia's international investment reputation has improved.

But the challenge isn't over.  Faced with international capital constraint as developed markets pull themselves out of recession, Indonesia now needs to act to keep itself internationally competitive.

And the challenge is more urgent because of the investment risks now being posed by the country's mass-democratisation.

Recent examples show local governments are becoming the source of unnecessary investment risk resulting from petty bureaucracy, inconsistent local regulations and conflicts with the national government.

It's a reality now being faced by international mining company Newmont, and its investment on the island of Sumbawa.

The company's investments are being squeezed in a fight over a divested 7 per cent ownership share in its Sumbawa gold and copper mine that both the national and local government wants.

With the national government making the acquisition, the local government, with the support of politicians in the national House of Representatives, is threatening to revoke the mining licences altogether.  In retaliation, the House of Representatives is even considering sacking the Finance Minister.

Examples of investors being caught in between political struggles are hardly new.  But for a country in a fragile state of economic development, political struggles undermine Indonesia's capacity to soften perceptions of risk when it is already known for corruption and weak governance.

These risks go well beyond Sumbawa, with a Standard & Poor's report concluding that recent investment reforms provide greater investor clarity.

In the latest Organisation for Economic Co-operation and Development index, Indonesia ranks as one of the most restrictive investment destinations among the countries surveyed.

Combined, the consequences of investor experiences and poor international ratings may already be playing out in investor's minds, with some sectors not attracting the same level of investment before the global financial crisis.  Faced with a capital-constrained world, Indonesia will need to be both an attractive as well as competitive destination for investment.  To do so, further reform is now needed.

Instead of managing the problems of politics, the government should be removing the remaining investment restrictions by extending the principles of transparency and certainty that underpinned the 2007 reforms.

Reformers should look at liberalising mandated government ownership that will only heighten the perceptions and realities of risk from all levels of government in an immature democracy.

The Indonesian national and sub-national governments have a right to secure appropriate income from developing natural resources, but that can be secured through well-designed licences and contracts.

Sophisticated contracts are even more important since the government is looking to utilise public-private partnerships to attract investment finance to tackle under-investment in infrastructure that is also holding back the country's attractiveness as an investment destination.

Liberalisation should also seek to reduce the number of sectors on its negative list, particularly in utilities, considering national infrastructure priorities.

The investment dividend that could flow from further reforms would help Indonesia build the industries needed to further harness opportunities during the next round of the region's economic growth.

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Free economies will choose money over the gun

We live in an age of world peace.  To be more specific:  a ''neoliberal'' age of world peace.  Certainly it doesn't seem like it.  The 21st century opened with a terror attack that sparked wars in Iraq and Afghanistan.  The latter seems to be getting more violent.

But the data is unambiguous.  The world is fighting fewer wars.  And the wars that are being fought are less deadly than at any time in living memory.

A Canadian non-profit, the Human Security Report Project, has been tracking the number and intensity of conflicts in the past 50 years.  Between 1950 and 1959, there was an average of 6½ international conflicts per year -- the vast bulk of them fought between states.  In our decade, the average has been less than one, almost all civil wars.

Sure, after the fall of communism, internal conflicts sharply spiked, as a decaying Russia and disengaging United States withdrew support for many petty tyrannies in the Third World.  But the number of conflicts has since resumed its long-term decline.

War is also becoming less deadly.  In the 1950s, the average international conflict killed 20,000 people per year.  The average conflict in the 2000s killed a 10th of that.  You'd think this would be widely recognised and celebrated.  But it's entirely at odds with the impression of escalating global violence we get from the nightly news.

So, war is now rare.  Take a moment to celebrate.  Then think of the simple ideological narratives these observations upset.

Anti-capitalist intellectuals from Lenin to Naomi Klein have associated competition in the marketplace with competition on the battlefield.  Yet while the world is more commercial and more globalised than at any time in history, it's more peaceful too.

Foreign policy realists long claimed the post-Cold War world -- without two superpowers holding the globe together under a threat of mutual nuclear destruction -- could be unstable.  But if anything conflict has declined faster in the past two decades.

So what accounts for all this world peace?  If we want war to be even less common, we'd better figure out what's causing its demise.  Many people would credit democracy -- if citizens are given a chance to vote, they'll elect pacifists.  But as American political scientist Patrick J. McDonald pointed out in his 2009 book The Invisible Hand of Peace, democracy is not immune to war mania.

McDonald finds that during the 19th century democratic states were more likely to go to war than autocratic ones.

This is not an academic question.  If we want Middle East peace, focusing on democracy at the expense of everything else won't succeed.  And we shouldn't pin our hopes for the peaceful rise of China solely on elections.

The other big theory on the causes of peace focuses on commerce.  Nations that trade with each other don't fight.  War is bad for business.  But this theory doesn't quite work either.  What about World War I?  European commerce was booming early in the 20th century, but 37 million people still died.

McDonald argues it isn't the volume of commerce or the extent of globalisation that creates peace.  It's the domestic institutions that promote commerce -- that is, the ''neoliberal'' policies of low trade barriers, limited government ownership, and private property -- which eliminate the incentives for war.

By studying hundreds of interstate conflicts over the past two centuries, McDonald finds that only economic freedom is closely correlated with peace.

That's because regulatory barriers to trade spark international political conflict, not co-operation.  And businesses that enjoy trade protection like military conquests.  It's how they expand their markets.

These are general rules and it's a messy world.  America's free markets and democracy did not stop it invading Iraq.

Yet a 2005 study by the Cato Institute, an American think tank, found ''economic freedom is about 50 times more effective than democracy in diminishing violent conflict''.  If we want the age of world peace to last, that's what we need to focus on.

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Malaysia solution puts politics before people

The United Nations can't seem to decide whether the Gillard Government's refugee swap arrangement with Malaysia is legitimate or illegitimate.

The UN High Commissioner for Human Rights has warned that the deal might violate international law.  But then the UN High Commission on Refugees thinks that any problems will be minor and easily resolved.  Go figure.

Yet you can hardly blame the UN for its multiple policy personality disorder when Julia Gillard herself has been all over the map.  Literally -- from East Timor to Manus Island and now to Malaysia.

Julia Gillard first rode into public notice on the back of the refugee issue as the Labor opposition's immigration spokesperson from 2001 to 2003.  She was savage in her criticism of the Coalition's border protection policy at the time, dismissing it as ''punitive'' and ''cruel''.

And when Kevin Rudd led federal Labor into power after the its election victory of 2007, his government was determined to set things right.  On July 29, 2008, then-immigration minister Senator Chris Evans announced the Rudd government's ''New Directions in Detention''.  Basking in the glow self-righteous purity, Evans  proclaimed a ''more humane'' policy that included the cancellation of Temporary Protection Visas and the abolition of the so-called ''Pacific Solution''.

In other words, the Rudd government softened the Coalition's strong deterrent policies against illegal immigration.  And as a result, there was an immediate and sustained surge in the number of unauthorised refugees arriving by sea.

The figures really speak for themselves.  During the final year that the Howard government's policies were in place -- 2007/08 -- a total of 25 illegal immigrants came by sea in three boats.

But during 2008-09, the number of unauthorised arrivals climbed to 1,033 people in 23 boats.  Over the 2009/10 year, it skyrocketed to 5,614 people in 117 boats.  And so far this financial year -- 2010/11 -- we've seen 4,595 people show up in 82 boats.

The Rudd and Gillard governments initially tried to explain away this explosion in boat people numbers by attributing it to world events;  those so-called ''push factors'.  Of course it has always beggared belief that this sharp upsurge in illegal arrivals by sea somehow miraculously coincided with Labor's change of border protection policy.

And now the Prime Minister has all but conceded the fact that her own Government's policies were enticing asylum seekers to cough up thousands of dollars for places on leaky boats.  Earlier this month in Parliament, Julia Gillard promised that her new ''Malaysian-solution'' would send an unequivocal message to those seeking to try their luck:

''If you risk your life and spend your money on getting on a boat trying to come to Australia, you risk being taken to Malaysia and being put to the back of the queue.''

Funny thing, that.  Julia Gillard's partners in government, the Greens, have been denying all the while that there's even such a thing as a queue.

Then there's the issue of human rights in Malaysia, or rather the lack thereof.  The NGO Amnesty International warns that Malaysis is the replete with:

''State-sanctioned vigilante groups whose job it is to round up foreigners and detain them, and where we know there are people dying in detention camps through diseases spread by rat urine.''

Amnesty also reports that up to 6,000 refugees each year in Malaysia are subjected to the brutal corporal punishment of caning.

The US State Department 2010 report on human trafficking also noted that ''refugees were particularly vulnerable to trafficking'' in Malaysia.  Corrupt local officials often forcibly confine trafficking victims within warehouses or brothels, coercing them into unpaid labour or prostitution.

This is the level to which Julia Gillard has sunk.  This is where the Prime Minister's ''more humane'' refugee policies have brought us.

The Prime Minister herself admits that the Rudd/Gillard border protection reforms have lured people into risking their lives in cockleshell boats on the high seas.  Untold numbers running into the hundreds, at least, have drowned.

And with her backbenchers telling her that the illegal immigration issue is undermining her already sagging political fortunes, Julia Gillard is desperate for a way out.  If she has to sacrifice boat people to the none-too-tender mercies of Malaysia's refugee centres, so be it.

The Prime Minister's ruthless cynicism is made even worse by the fact that a far superior alternative exists.  The 2010 US State Department Human Rights Report gives the Republic of Nauru a glowing stamp of approval.  The Republic of Nauru gets high marks on those issues that really matter -- freedom from arbitrary arrest, a fair and open judicial system and representative democracy.

Nauru might not be our idea of paradise.  But it does provide a ready-made solution to Julia Gillard's self-inflicted refugee trials and asylum seeker tribulations.  It will allow Australia to reinstitute a strong deterrent against illegal immigration boats, while simultaneously ensuring decent treatment for their passengers.

The only stigma attached to reopening Australian refugee processing centres on Nauru is political.  They were first established by the Howard government and were harshly criticised at the time by our current Prime Minister.

But Julia Gillard needs to swallow her political pride, eat some crow, and put the best interests of refugees above her own political self-interest.

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Refugee crime wave nothing but hogwash

Australia's large migrant, and refugee, intake is controversial.

Advocates of a ''small-Australia'' point to congestion in our cities as one reason why numbers should be limited.  Another argument seems to be emerging; migrants and refugees in particular could be adding to crime rates.

The question of whether Australia is importing crime by accepting a large number of migrants and refugees is important.  For those who wish to promote greater migration to Australia this is an issue that needs to be tackled head on.

There can be no doubt that televised scenes of detention centres in flames do not promote the argument for greater refugee intakes.  Those images probably also raise the perception that higher levels of crime may be associated with new arrivals.

Relative to the Australian-born population the number of new arrivals is quite large.  If new arrivals have a greater propensity for criminality than the existing Australian population then the costs they impose on the community could quickly outweigh the benefits of a larger population.

It is reasonable to ask whether all those new arrivals add more to the community than they take.

As an advocate of a larger migrant intake I was recently confronted with a series of claims.

First, that there had been ''a strong criminal element in recent waves of refugees''.

Second, there was a strong criminal element amongst some migrants from the Pacific islands.

Third, that Australia ''should cut the refugee intake to zero and abolish the ability of re-settled refugees to sponsor their relatives under the family program''.

Presumably the purpose of that draconian policy would be to reduce crime within Australia.

The person making the claims had undertaken an analysis of Australian Bureau of Statistics data for the 2009 prison population and 2007 population statistics by country of birth.  He segmented the Australian-born sample into indigenous and non-indigenous groups.  He then created a crime rate (per offence) per 100,000 of population, set the non-indigenous Australian-born population equal to one and then calculated the crime rate per offence per country of origin relative to the non-indigenous Australian-born population.

On that basis the claim was made, for example, that Sudanese born individuals were 4.5 times more likely than non-indigenous Australian born individuals to be convicted of homicide.

Fortunately that interpretation is wrong.

The overwhelming majority of all individuals, irrespective of birthplace, are unlikely to be convicted of any crime.

The better way to understand the analysis is that a randomly selected Sudanese born prisoner is, everything else being equal, 4.5 times more likely to have been convicted of homicide than a randomly selected non-indigenous Australian-born prisoner given the relative population share of those groups in the general Australian population.

That's quite a mouthful -- but really quite meaningless.

There were actually just 11 Sudanese-born individuals in Australian prisons in 2009 convicted of homicide or a related offence, compared to 1,682 Australian born prisoners convicted of those same offences.  In total there were 77 Sudanese born prisoners out of a total prison population of 29,300 individuals.  The total Sudanese born population was only 23,100.  Yes -- the total prison population was greater than the entire Sudanese born population.

The ABS data don't reveal whether the foreign born prisoners were refugees or not.  On that basis the entire analysis simply did not support any claims about ''strong criminal elements amongst recent waves of refugees''.

The blunt reality is that the overwhelming majority of convicted criminals in Australian prisons are Australian born.  This is not surprising.  In the first instance migrants to Australia have to pass a character test -- they are less likely than the general population to commit offences.  Clearly that test isn't always successful.

A careful statistical analysis of the propensity to commit crimes would have to take into account a whole host of demographic, economic, and sociological considerations.

Consider age, for example; the migrant population on average is likely to be younger than the Australian population and we know that younger individuals are more likely to commit crimes than older individuals.

Similarly individuals with lower income or lower employment opportunities are more likely to commit crimes than are those with higher income or employment opportunities, and so on.  An analysis of criminality across different population groups must compare like with like.

It is very unlikely that country of birth would emerge as an indicator of criminality once other factors are accounted for.

At first glance, it does appear that some small foreign born groups are over-represented in the Australian prison population -- but that is likely to be a statistical artefact and not an indicator of criminality.

On the other hand some larger groups are over-represented in Australian prisons, notably indigenous Australians.

To be sure, Australians should concern themselves with law and order issues and insist that migrants -- and everyone else too -- obey the laws of the land.

Right now, however, I haven't seen any evidence to support the argument that migration, or the refugee intake, be reduced due to an enhanced criminality of new-comers.

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Ad ban on junk food no solution

A RECENT report from the Obesity Policy Coalition called for draconian restrictions on advertising so-called ''junk food'' on television at any time children might be watching.

They are asking that junk food advertising be treated like explicit adults-only television, which can only be broadcast on free-to-air networks after the children have gone to bed.

But while the television bans have generated the most headlines so far, that is not where the proposals end.  The OPC has a much more ambitious agenda.

It argues for a legislative ban on advertising that is either directed at ''or which children are likely to be exposed'' to and that it should also include all forms of advertising, including radio, the internet, print publications, billboards and point-of-sale marketing.

Let's consider potentially how widespread these bans could be.

Want to market a new burger at your fast-food outlet to adults?  No billboards for you, because children might see them.

Planning to advertise your new line of chocolate on news.com.au?  Forget it -- kids might see it.

Don't even think about marketing the virtues of your mint-fresh chewing gum at the supermarket checkout -- what if little Johnny or Jenny sees it when shopping with Mum?

The report also argues for regulation to extend to ''characters and personalities''.  Humphrey B. Bear might have to hit the treadmill before his next show, lest his ample proportions suggest to children that anything other than a trim physique is tolerable.  Sesame Street's Cookie Monster doesn't exactly encourage children to live a healthy lifestyle.  He might have to undergo a modern ''rebranding'', although ''Vegetable Monster'' doesn't quite have the same ring to it.

And how would we define what constitutes junk food and is therefore banned from advertising?  Chocolate and hamburgers are easy; they would obviously be treated as pariah goods like cigarettes.  But what about cereal that contains lots of sugar?  Again, you might think this is easy -- no Coco Pops.  But what about ''healthy'' cereals such as Sultana Bran, which contains only marginally less sugar than Coco Pops?

Even assuming it is easy to define what constitutes junk food, that doesn't necessarily mean what ends up in kids' mouths is healthy.  Weet-Bix contains practically no sugar.  Yet we all know what most children do before eating it is add copious amounts of honey.

What's to stop this from happening?  Parents.  At the end of the day, a child's diet is controlled by Mum and Dad, not by advertisers or promotional campaigns.

Until children are able to drive to the supermarket on the weekend and purchase the week's groceries, only parents can control what their children eat, and how much they eat.

The fact that parents control how much and what they and their children eat is too often overlooked by the preventative health lobby in their quest to control what we put in our mouths.

For all the inconvenience and unintended consequences, there is no evidence oppressive advertising or other bans actually combat obesity.  No one will lose weight or eat more healthily unless they want to.

Hazelwood decision is a victory for common sense

THE Commonwealth Government is flooding the media with climate change and carbon tax reports from taxpayer-financed scientists and other propagandists.

This ensures the continued prominence of its agenda for business decisions.

In Victoria, the Government has sensibly overturned departmental advice to start closing the coal-fired Hazelwood power station in order to reduce carbon dioxide emissions.

Hazelwood supplies 15 per cent of the state's electricity and Mr Brumby's plans to start closing it would have sent electricity prices soaring and threatened reliability.

Energy Minister Michael O'Brien saw the dangers of junking the plant's cheap electricity and replacing it with costly and unreliable wind farms or even by gas.

Unfortunately, feeling the need to brandish some green credentials, he also announced a wasteful.

$41 million increase in subsidies for the ''Energy Technology Innovation Strategy'' (ETIS).  ETIS is code for low-value technologies that cannot attract commercial funding.

The Hazelwood decision is only a respite for Victorian industry and consumers.  The Gillard Government's desperation to introduce a carbon tax creates palpable risks for the state.

A carbon tax would severely reduce the value of the brown coal power stations that supply 90 per cent of our electricity.

In reducing the value of these generators this prevents any significant new investment which, short of an economic downturn, will be needed in the next few years.

Even more seriously, it undermines the credit ratings of the state's four key electricity generators, opening up a real prospect of one or more going into receivership.

Things need not have turned out like this for Labor.  At Copenhagen in December 2009 the world's leaders failed to reach agreement on carbon dioxide emission cuts.

Kevin Rudd had been hyperactive in the lead-up and could have claimed to have failed with honour and announced he was now taking a back seat and awaiting a world agreement.

Julia Gillard could have taken the same approach after the failure of subsequent climate talkfests.

That might, indeed, have been her intent when she promised before the last election that a Labor government would not introduce a carbon tax.

But it was not to be.

Instead, the Government hand-picked advisers to proclaim that carbon dioxide emissions are leading to a warmer world and that a tax would not harm us.

MANY of the most eminent scientists consider carbon emission induced warming would be negligible and the better economics studies suggest any costs would be miniscule.

But most importantly, Australia is a global minnow.  If we act alone this has no effect except in impoverishing us.

And, outside the European Union, no nation is taking action that will reduce carbon fuels' usage to levels that will lower global emissions.

Australia's emissions per head of population are similar to those of other wealthy countries once our net exports are included.

But our raw material wealth and the low-cost coal-based energy leaves us especially vulnerable to a carbon tax, which would undermine business costs and slug household budgets.

If a near unanimity of nations were to introduce carbon taxes, so must Australia.  But global action is unlikely.

Backwoods policy making

Released on the Friday after the federal budget, the Government's Sustainable Population Strategy is for the most part just 88 pages of promotional guff and colour photos.

But it isn't entirely meaningless.

Seemingly minor policies in the population strategy suggest a larger plan by federal and state governments to shift population growth and employment away from cities and to the regions.

You've probably heard about the migration changes already.  As Julia Gillard said, ''I don't want the first port of call for migrants to our country to always be the growing suburbs of Sydney and Melbourne''.  That's the payoff of the 2010 election's small Australia rhetoric.  Skilled immigrants will be directed towards regions rather than urban areas.

But it's not only about migrants -- governments want existing urban residents to move to the regions too.  The Promoting Regional Living Program funds rural areas to promote themselves to city dwellers.

And on top of these federal initiatives are the existing state incentives for people to move away from the big smoke.  A number of states -- Victoria and Queensland, for example -- boost their first home owners grant if purchasers buy away from urban areas.

You can understand why governments want to take pressure off city growth.  Trains and trams seem packed.  Infrastructure has not kept up with demand -- or, if it has, no voters seem to believe it.

Yet policy makers shouldn't forget the basic reasons many people want to live and work in dense urban areas when they haven't been induced to do otherwise.

The Harvard economist Edward Glaeser has described the city as humanity's ''greatest invention''.  Policies which try to divert growth away from cities -- shift activity and population away from where they would otherwise prefer to go -- could create more problems than they solve.

After all, an urban population is a richer population.  In his new book, Triumph of the City:  How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier, Glaeser describes the ''near-perfect correlation'' between urbanisation and prosperity.

City dwellers aren't only richer -- they're happier too.  The more urban a nation, the higher that nation's reported happiness, even after you factor in the happiness-boosting effect of income and education.

Successful cities, Glaeser uncontroversially says, are those which attract smart and creative people, and allow those people to interact in close proximity to each other.

That interaction sparks aggregate economic growth and individual economic opportunity for creative and non-creative alike.

And, of course, cities have amenities.  It's easier to provide services to dense communities, and provide a greater array of those services.

None of these benefits of city living are novel to anyone, of course.  They're why cities exist in the first place.

Tree and sea changes may be appealing, but regional and remote areas offer fewer ways to earn money -- and fewer ways to spend it.  A report in the Sunday Age in 2009 found a substantial proportion of people moving to quieter parts of the country regretted it -- 90 per cent planned to leave within the next five years.

As one academic said at the time, ''People bought the dream about the idealistic country life, then they moved there and were confronted by the reality:  poor health care, poor road quality, fewer work opportunities, expensive food, lack of entertainment, obesity, lack of ethnic diversity, difficulty making friends, conservatism and narrow-mindedness.  They expected to find an enjoyable life with less work and less traffic.  But they found a lack of stability, lower pay and longer commutes.''

We're all familiar with the cliché that small towns have a sense of community.  But cities have networks of communities.  Not only are there are more people in a city with whom relationships can be formed, but the greater diversity of interests allows niche communities to develop.

Each to their own, obviously.

But the well-known advantages of urban living should make you wonder about the wisdom of deliberately encouraging people to move away.

Do we really want migrants to settle outside the capital cities, where formal and informal support networks are smaller or absent?  Migrants choose cities for the same reason everybody else does -- services, employment, and social opportunity.

And do we really want to be subsidising first home buyers -- people early in their career and family life -- to move to areas with more limited prospects for personal and job development?

Sure, if people choose to move away from cities and to regional areas, that's their business.  But it's a problem if government policy deliberately induces people to do so -- to buy houses and find their feet in areas which, all else being equal, have fewer opportunities, fewer essential services and offer a potentially lower standard of living.

Public policy should not favour cities, certainly.  But neither should it encourage people to leave them.

Simon Chapman is blowing smoke on smoking

The public debate about smoking in a free society has reached fever-pitch since the federal government announced its plan for olive green plain packets for cigarettes and other tobacco products.

Last week British American Tobacco launched a high profile campaign raising what they see as issues arising from the policy announcement.

This includes an infringement of private property rights inherent in trademarks, and the potential for the Australian taxpayer to foot the bill for compensating tobacco companies for loss of intellectual property.

With the prospect of a legal challenge to the government's push for plain packaging, the Federal Health Minister has continued to talk tough about her plan and has expressed confidence that the legality of the policy will be upheld.

Yet some of the government's key allies, such as the public health lobby, are already hedging their bets on a potentially successful challenge by tobacco companies in the High Court.

This is why over the weekend anti‑tobacco campaigner and University of Sydney academic Simon Chapman turned up the heat with a new proposal to make smoking history, through creating a consumer license to smoke.

Under the proposal, a license would give the smoker a right to a limited quota of tobacco supply, say 10 cigarettes a day or 20 cigarettes a day and so on.  There is a fee payable to government to give the consumer the right to use tobacco.  The more tobacco the license holder pre‑commits to smoke, the higher the license fee involved.

Under the licensing plan consumers would be asked to pass a test, ''not dissimilar to a driving test'' Chapman stated, to qualify for a right to receive a license to legally purchase tobacco.

The public health lobby say that there are precedents to limiting supply of tobacco for paying consumers.  As Chapman suggests, prescription medicines are rationed by pharmacists while hoteliers can be prosecuted for selling alcohol to intoxicated patrons.

Drawing on similar behavioural economic proposals to structure, or nudge, consumer choices, the underlying default assumption for the tobacco license idea is that individuals are blithely unaware of the health effects of smoking.

Based on the questionable notion that smokers lack an awareness of at least three decades of heavily publicised research about health problems that smoking causes, the government would see itself fit to decide for the smoker the amount of cigarettes he or she is allowed to smoke.

This proposal would effectively undercut many years of government‑funded marketing campaigns that have sought to raise awareness of smoking's health consequences but based on the respectful premise of letting adults who smoke decide for themselves.

It couldn't be ruled out, either, that quotas of allowable tobacco consumption would be reduced if the government establishes a license renewal regime.  Think of it as an ETS for cigarettes, with private choices laid to waste by an increasingly intolerant objective to consign smoking as a habit of the past.  Then there is the question of the test that smokers will be forced to undertake to qualify for a license.

What would this involve?  Would it constitute numerous hours of lecturing potential smokers in a Soviet‑style re‑education campaign urging them not to smoke before they even get started?  How much would taxpayers have to pay to fund the so‑called smoking qualification test?

Simon Chapman and his colleagues aspire to make smoking history within 10 to 15 years, and the tobacco license they claim will be just the trick to achieve this objective.

However the reality is likely to be that a smokeless Australia will be for appearances sake only.

For a start many existing smokers will resent having to seek a license to exercise personal choice, with license fees set on top of already significant federal excises that are well in excess of the costs of medical treatment for tobacco‑related illness.

In the last financial year alone the Australian Customs Service seized 68 million counterfeit cigarettes, with an active black market for tobacco likely to increase substantially if consumer tobacco licensing is introduced.

Then there would be the issue of growing Customs and federal and state police enforcement costs, all funded by the taxpayer, to crack down on the sale of tobacco products that manage to escape the consumer licensing net.

This would be quite ironic in the sense that many who favour a reduction in tobacco smoking also urge an end to the costly ''war on drugs'', including against marijuana, being waged by government.

While consumer licensing governing tobacco use might sound reasonable to non‑smokers who don't blink an eye to the fiscal and regulatory persecution of users of a legal, if unhealthy, product, the proposal looks like being all too clever by half.

Audience on their feet for a fraud who called bin Laden his brother

David Hicks appeared at the Sydney Writers' Festival to discuss his autobiography Guantanamo:  My Journey.  And along for the ride was an audience of 900 credulous fools, who gave him a standing ovation and queued at a book signing afterwards.

During his rare public presentation, Hicks proclaimed the purity of his intentions.  The festival program provided no opportunity for challenges that might test the plausibility of his claims.  To cap it off, the session was chaired in the finest echo-chamber style by none other than former Iraq War human shield Donna Mulhearn.  The organisers couldn't have put together a more ideologically slanted event if they tried.

For those who have an interest in the facts rather than a self-serving rewrite of history, a quick reprise of Hicks's past is in order.

His latter day effort to portray himself as some sort of harmless, hapless dilettante is belied by letters written in his own hand.  In these missives he talks of undergoing weapons training that included ''anti-aircraft and anti-tank rockets, rapid-fire heavy and light machineguns, pistols, AK47s, mines and explosives''.  His words, not mine.

Hicks's hamfisted dishonesty is on full display when his autobiography presents a bowdlerised version of a foray to the front line between India and Pakistan.  Hicks travelled to Kashmir courtesy of the al-Qaeda-affiliated Islamic terrorist group Lashkar-e-Taiba.  In his book, he declares:  ''We did not fire upon Indian soldiers or any other people.  We only participated in the symbolic exchange of fire.''

But in a letter written in August 2000, Hicks described his Kashmiri experience in more robust terms.  ''I got to fire hundreds of bullets,'' he crowed.  ''Most Muslim countries impose hanging for civilians arming themselves for conflict.  There are not many countries in the world where a tourist, according to his visa, can go to stay with the army and shoot across the border at its enemy, legally.''

During his festival appearance at the weekend, Hicks claimed the first time he ever heard the name al-Qaeda was ''from the lips of an interrogator in Guantanamo Bay''.  But once again, he is busted by those pesky notes he penned to his family.

In a May 2001 missive he wrote:  ''By the way I have met Osama bin Laden 20 times now, lovely brother, everything for the cause of Islam.  The only reason the West calls him the most wanted Muslim is because he's got the money to take action.''

And of course, Hicks's epistolary boastfulness comports with the view held by the Australian intelligence community.  During Senate estimates hearings in May 2002, the former ASIO director Dennis Richardson said that ''certainly Mr Hicks has received extensive al-Qaeda training''.

It is easy to establish that David Hicks is a fraud.  Far more perplexing is why purportedly intelligent people have become so morally unhinged that they see him as worthy of applause.

Equally puzzling is why any of the festival's sponsors would want to be associated with such an event.  One would think that the Plain English Foundation would be repulsed by his doublespeak and deceit.

And then there are the NSW and Australian governments, which misused taxpayer dollars to provide a platform for it.

This is not about freedom of speech.  I will defend Hicks's right to stand on whatever street corner he chooses to tell whatever lies he wishes, but I don't want my tax dollars to pay for it.

Some audience members may take the view that whatever Hicks's crimes, being held for so long without charge in Guantanamo Bay was unjustifiable.  But this is a war, and in wartime it is entirely justifiable to detain enemy combatants until the conclusion of hostilities.  We're not even talking about legitimate POWs, but rather illegal combatants who don't enjoy the protection of the laws of war because they themselves routinely violate them.

What the writers' festival audience seemed to ignore is that al-Qaeda would just as soon cut off their heads as look at them.  The novelist Martin Amis put it well on BBC TV's Q&A when he described the phenomenon of Western lefties making common cause with Muslim radicals:  ''People of liberal sympathies, stupefied by relativism, have become the apologists for a creedal wave that is racist, misogynist, homophobic, imperialist, and genocidal.  To put it another way, they are up the arse of those that want them dead.''

The eagerness of this naive crowd to excuse the jihadi transgressions of David Hicks is, quite simply, masochism in the service of sadism.

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Indonesia needs reform to remain an attractive investment destination

The feisty debate between the House of Representatives and the finance minister over purchasing a stake in miner Newmont Nusa Tenggara points to broader issues facing Indonesian investment laws.

Considering Indonesia's continued economic resilience during and following the global financial crisis that has plagued the economic growth of many countries, the economic outlook for the archipelago should be rosy.

Recent data from the government's statistics agency showed economic growth in the first quarter of this year of 6.5 percent, and there's no indication that it will slow.

Similarly investment has generally provided a good news story.  Despite some sectors plateauing in attracting new foreign direct investment, Bank Indonesia data show strong growth in the retail and manufacturing sectors in recent years.

Such an outcome is hardly surprising.  Coupled with limited export exposure to American and European markets in favor of Asean nations and China, Indonesia saw relative investment stability throughout the global financial crisis.

The contribution of foreign direct investment to economic growth is clear because it provides countries with the necessary finance to build infrastructure and grow industries that employ workers and pay taxes.  It also frees up domestic savings to finance other activities and increase overall economic welfare.

However, with other countries slowly pulling themselves out of recession the environment for accessing investment finance is going to become increasingly constrained and governments are going to need to continue reform to make them a safe and attractive destination.

And Indonesia's recent history provides good foundations that should be built on.  Since the mid-1980s successive governments have progressively liberalized government restrictions to make it a more attractive destination for foreign investment.

While some seem like easy options today, such as the 1987 reforms that allowed foreign investors to be on the stock exchange, more recent examples required significantly greater political and policy muscle.

The 2007 investment reforms that granted national treatment for foreign investors and established a transparent ''negative'' list for out-of-bounds investment sectors were considered a watershed in Indonesia's economic strategy.

Despite ranking highly on the OECD's latest investment restrictiveness index, investment liberalization efforts have improved Indonesia's international reputation, especially after the political instability and capital flight of the 1997 Asian currency crisis.

But the job is not done and by-products of Indonesia's spectacular decentralized democratization are now risks.

Concurrent with pro-investment regulation reform nationally, immature local governments are increasing investment burdens, often through opaque measures, that are posing perceptions of risk.

And these perceptions are being exacerbated by politics.

The recent challenges faced by mining giant Newmont surrounding its gold and copper mining on Sumbawa Island are a perfect example of how the perception of investors being squeezed between national and local regulation is occurring.

The national government has signaled its intent to purchase a 7 percent ownership share in the Newmont mining venture, despite protests of three local governments organized collaboratively who also wanted the investment opportunity.

In response to the national government's action, the local administrations who want the stake for themselves are threatening to revoke mining licenses placing the investment in doubt and with it Indonesia's reputation.

These perceptions couldn't come at a worse time and are being confirmed by international ratings agencies.

Earlier this month, Standard & Poor's released a report looking into 2009 investment reforms concluding subsequent regulations provide ''greater clarity'' toward a negative impact on the mining sector because of the consequences of decentralized decision making which could hit bottom lines.

Without improvements, these perceptions of investment risk could make it significantly harder for attracting private investment.  But it could also flow through to projects of government priority.

Outlined in the OECD's latest Indonesian investment review are the incredible infrastructure challenges widely recognized as a barrier to further economic growth the national government needs to raise considerable finance in the next five years.

With national plans outlining that the government is expecting 64 percent of all capital for infrastructure projects to come from the private sector it is going to need to look at innovative financing and ownership structures such as public-private partnerships.

Having legislative and regulatory requirements for shares of government ownership naturally lends itself to sovereign risk when the priorities of governments and foreign investors collide.  The situation is made worse when local and national authorities are also fighting.

And with ongoing cases like those faced by Newmont, the chances of investors going into business with the government appear risky, especially outside of Jakarta.

Instead of trying to manage these priorities the government should be looking toward further investment law reforms that consider the benefits of removing government ownership investment requirements all together.

Liberalizing investment ownership laws doesn't preclude the government securing their share of the dividend of exploiting Indonesia's scarce natural resources which can still be secured through well-designed licensing agreements.

Choosing to focus government interests through contracts rather than ownership is also replicable irrespective of investment type and avoids fostering risk perceptions from the government involving itself where it has little expertise.

The benefits of doing so are also likely to flow throughout the entire economy.

Considering the uncertainty of the international economy and the emerging constraint to attract financial capital, investors are looking for locations to grow their capital -- and that isn't where perceptions of sovereign risk remain.

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Private health accounts may solve looming health crisis

In a society as wealthy as ours it's understandable that Australians support universal access to healthcare.

But accepting this principle and the current one-size-fits-all structure of Medicare are different.

Under the current structure only those who can voluntarily afford to opt out of the system have real choice.  

For the rest of us the government predominantly picks up the tab through wholly taxpayer-funded visits to local GPs and hospitals with restricted choices.

With only some services requiring co-payment most Australians have no real understanding of how much healthcare costs, armed only with anecdotal stories of nightmare scenarios faced by travelers in the United States' messy pseudo-public/private system.

But healthcare in Australia is expensive as well.  And it's going to become more so.

According to the latest Treasury Intergenerational report based on 2009/10 dollars the government's expenditure on total healthcare provision is set to increase three and a half times by the middle of the century.

Considering research consistently finds health expenditure is concentrated in the final months and years of life the looming acute pressure on taxpayers with a dramatically ageing population is quite horrifying.

Today's taxpayers are paying for the managed departure of their grandparents, and there's about to be a lot more of the latter proportionate to the former.

Without reform universal healthcare cannot continue to enjoy funding consistent with current levels of care.  As a consequence individuals will either have to pay more or there will be rationing of services universally enjoyed.

It's essentially the same challenge government faced with the pension resulting in the introduction of compulsory superannuation.

Instead of continuing to provide universal health financing through a top-down government-knows-all-model the government should use the opportunity of this temporary resources boom to restructure our health system toward a bottom-up individual health account system.

Put simply every Australian would have an individual health account that they contribute to on a periodic basis from their income, like superannuation.  That savings account would then be used to pay for healthcare services as required throughout their lifetime.

As outlined earlier, considering the bulk of people's health expenditure occurs at the end of their life people should easily be able to accumulate savings for their final health bill over a lifetime.

The scheme would also need to be complemented with progressive tax cuts as the transfer of the health financing burden shifted from government to individuals.

Healthcare financing accounts for children would need to remain wholly government subsidised since they will not have had the chance to contribute to their own accounts.   

Equalisation subsidies would also be needed for welfare recipients, low-income earners and people with specific diseases to ensure universality and that no one is disadvantaged because of socio-economic status or because they were born with a particular disease.

According to Monash University Academic Just Stoelwinder's research the Dutch system has working equalization subsidies supporting their compulsory health insurance scheme.

While the intent of health accounts is for individual management through appropriately regulated financial products, the scheme could be designed to allow Australians the choice to take up an insurance alternative to increase service access and pool risk.

The benefits of individual of restructuring Medicare around individual health accounts are manifest.

By engaging patients more directly with the management of their health they'll come to appreciate healthcare is expensive and discourage inefficient, costly behaviours like the current problems of people using hospitals for primary care.  Individual accounts would also increase private sector involvement to compete with the public sector and create a generally higher level of competition improving patient value.

In his autobiography A Journey Tony Blair identified the essential challenge that ''health care systems in which there was a mixed public/private provision, of which at least demand some individual commitment and gave some individual choice, did best''.

Choice isn't always the first priority in healthcare delivery, but it can be relevant in non-emergency situations.

Accounts would discourage information asymmetry between the medical profession and patients because the latter is empowered with choice necessitating greater responsiveness from service providers.

Importantly individual accounts would remove the need for a private health rebate which could instead be redirected to helping healthcare provision for the poor.

Individual accounts would also address through ''carrots'' the growth in health costs associated with longer lives and lifestyle diseases by promoting preventative healthcare rather than cures.

As the Federal government's commissioned National Preventative Health Taskforce identified every dollar spent on community-based preventative health delivers a $5.60 ''return on investment'' within five years and is a no brainer for keeping costs down.

But instead of restructuring the design of our health system as part of the solution they proposed nanny state taxes and regulation ''sticks'' to direct consumers away from fast food, alcohol and tobacco consumption.

Under individual health accounts individual choice would be preserved without the need for a nanny state as patients take financial responsibility for the consequences of their behavior.

A well-designed scheme could allow for compulsory contributions to exhaust if an individual's account reached a certain level where it far exceeded a reasonable projection for a lifetime health costs.

Doing so creates tax cuts for those who actively seek healthy lifestyles.

Structural reform toward individual accounts would be expensive initially to ensure everyone continued to have access to healthcare, but it would be coupled with government savings in the long-run.

More importantly it would drive productivity improvements in healthcare by injecting competition and universal choice that benefits patient outcomes.

Medicare needs a shot in the arm

Structural reform of Australian healthcare financing can cut inequity and promote universal choice as well as universal service delivery.

In a society as wealthy as ours it's understandable that Australians support universal access to healthcare.

But accepting this principle and the current one-size-fits-all structure of Medicare are different.  Under the current structure only those who can voluntarily afford to opt out of the system have real choice.

For the rest of us, the government predominantly picks up the tab through wholly taxpayer-funded visits to local GPs and hospitals with restricted choices.

With only some services requiring co-payment most Australians have no real understanding of how much healthcare costs, armed only with anecdotal stories of nightmare scenarios faced by travellers in the United States' messy pseudo-public/private system.

But healthcare in Australia is expensive as well.  And it's going to become more so.

According to the latest Treasury Intergenerational report based on 2009/10 dollars the government's expenditure on total healthcare provision is set to increase three and a half times by the middle of the century.

Considering research consistently finds health expenditure is concentrated in the final months and years of life the looming acute pressure on taxpayers with a dramatically ageing population is quite horrifying.

Today's taxpayers are paying for the managed departure of their grandparents, and there's about to be a lot more of the latter proportionate to the former.

Without reform universal healthcare cannot continue to enjoy funding consistent with current levels of care.  As a consequence individuals will either have to pay more or there will be rationing of services universally enjoyed.

It's essentially the same challenge government faced with the pension resulting in the introduction of compulsory superannuation.

Instead of continuing to provide universal health financing through a top-down government-knows-all-model the government should use the opportunity of this temporary resources boom to restructure our health system toward a bottom-up individual health account system.

Put simply every Australian would have an individual health account that they contribute to on a periodic basis from their income, like superannuation.  That savings account would then be used to pay for healthcare services as required throughout their lifetime.

As outlined earlier, considering the bulk of people's health expenditure occurs at the end of their life people should easily be able to accumulate savings for their final health bill over a lifetime.

The scheme would also need to be complemented with progressive tax cuts as the transfer of the health financing burden shifted from government to individuals.

Healthcare financing accounts for children would need to remain wholly government subsidised since they will not have had the chance to contribute to their own accounts. 

Equalisation subsidies would also be needed for welfare recipients, low-income earners and people with specific diseases to ensure universality and that no one is disadvantaged because of socio-economic status or because they were born with a particular disease.

According to Monash University Academic Just Stoelwinder's research the Dutch system has working equalisation subsidies supporting their compulsory health insurance scheme.

While the intent of health accounts is for individual management through appropriately regulated financial products, the scheme could be designed to allow Australians the choice to take up an insurance alternative to increase service access and pool risk.

The benefits of restructuring Medicare around individual health accounts are manifest.

Tony Abbott? What did he ever do?

It's now approximately 18 months since Tony Abbott's election as Liberal leader, and the federal parliamentary Press Gallery is still grappling with the idea of Abbott as a successful Opposition Leader. 

Try as they might, they can't account for his remarkable performance in the role thus far.

The hostile reception that Abbott's Budget reply received in many sections of the media is a case in point.  Journalists lined up to ridicule Abbott's speech as a ''policy-free zone'' that failed the test of an alternative prime minister.  They noted, derisively, that he only announced one new policy idea -- to tackle business red tape -- and didn't attempt to list the coalition's alternative budget savings.

The ABC's Barrie Cassidy was among the fiercest critics.  Surveying the performance of opposition leaders past and present, the one-time Labor staffer classified Abbott as a member of the ''long list of low achievers'' based on his response to Wayne Swan's fourth budget.  Cassidy castigated Abbott's response as ''populist, contradictory, rhetorical and shallow'' and singled out his defence of middle-class welfare for special attention, describing its use as a tool for ''vote-buying'' that deserved to be cut.

In one sense, Cassidy is right.  Australia's family payments system is overly generous and has been used masterfully in the past for political reasons.  This, along with Abbott's continued embrace of his Rolls-Royce paid parental leave scheme -- which would necessitate an increase in company tax -- continues to give many small-government Liberals major heartburn.

But middle-class welfare is criticised in economic circles mostly because of its inefficiency and the absurdity of taxing income earners only to hand much of it back to them -- after some bureaucratic churn -- in the form of family benefits.  And the government's budget made no attempt to tackle this.  If the government was committed to reforming Australia's tax and transfer system, it would have coupled benefit reductions with tax cuts.  Instead, in its quest for more revenue, it only did the former.

In this light, and especially considering the government's upcoming carbon tax, it was hardly surprising that Abbott went for a populist attack.

And why bother laying out detailed policy proposals at least two years out from an election?  Previous opposition leaders have hardly been rewarded for doing so.  Brendan Nelson copped it from all sides for his five cents-a-litre petrol tax cut, and Malcolm Turnbull's plan to increase cigarette taxes only earned him internal party criticism.

Instead, Abbott sensibly used his 30-minute, uninterrupted, nationally televised address to empathise with Australians who feel like they are doing it tough financially.  It was classic Abbott -- well scripted, confidently delivered, laced with humour and audacious claims to Labor's fracturing working-class base.  But virtually no commentator could appreciate Abbott's performance for its political smarts.

Some may still be ruing their failure to anticipate Abbott's rise.

Take Peter Hartcher, the Sydney Morning Herald's political editor.  After Abbott's election as leader, Hartcher derided him as the ''least electable'' of all possible leadership contenders.  Last week, marvelling at the political depths being plumbed by the Gillard government, Hartcher gave Abbott little credit.  Instead, we are told, the government's problems stem from one man:  not Abbott, but media mogul Rupert Murdoch.  According to Hartcher, the Murdoch tabloids have ''declared jihad'' on the government, and Gillard and her ministers are terrified of them.

This is an all-too familiar tune.  Other Fairfax scribes like the Financial Review's Laura Tingle have banged this drum before.

Tingle has written that the Gillard government had a tough time with the media because the Murdoch-owned News Limited papers were disappointed with the election result.

Likewise, Crikey's Bernard Keane -- who predicted that an Abbott leadership would reduce the Liberal party to a  ''reactionary rump'' -- said one of the government's biggest problems was the ''sheer partisanship'' of News Limited papers.

This criticism completely overlooks and disregards Abbott's central role in causing Julia Gillard's political headaches, and is part of a long line of efforts by some members of the Press Gallery to diminish his achievements.

The Age's Michelle Grattan, who wrote in late 2009 that the Liberal party's decision to oppose the emissions trading scheme was ''ill-judged', argued last weekend that Abbott had been ''dealt a favourable hand'' by coming into the Liberal leadership as ''Rudd was weakening'.

Huh?  When Tony Abbott was elected Liberal leader in December 2009, commentators such as Grattan predicted Armageddon for the coalition.  Voters' satisfaction with Kevin Rudd's leadership was then measured at 58 per cent, compared with 32 per cent who were dissatisfied -- numbers Julia Gillard can only dream of.  It was only later, in April 2010 when Rudd abandoned the ETS, that voters began to desert him.  And though few in the Press Gallery are keen to give Abbott his due, it was his ferocious campaigning against the policy that forced the ALP's hand.  Far from being lucky to be elected Liberal leader, Abbott made his own luck.

Not done disparaging Abbott's success as leader as at least partly due to fortune, Grattan then went on to suggest that electing Malcolm Turnbull as Liberal leader today would help the coalition to ''pick up some Labor voters''.  As it happens, we have a great natural experiment to test whether Grattan is right:  Turnbull's disastrous period as Liberal leader.  Recall that the coalition's primary vote fell as low as 34 per cent and its two party preferred to just 41 per cent.  Against this, we have not only Abbott's long string of polling successes -- putting the Liberal party ahead of Labor in two-party preferred terms time and time again -- but also last year's election result, where Abbott generated a swing to the coalition and delivered it more seats than Labor.

Grattan isn't the only journalist to have mused about the prospects of leadership change for the Liberals at the peak of their political performance.  Laurie Oakes, long serving doyen of the Press Gallery by acclamation -- who predicted Abbott as leader would be ''electoral poison'' -- kicked off speculation earlier this year with a column before parliament resumed in February.

In the Daily Telegraph, Oakes erected a false hurdle for the Liberal leader.  ''Abbott's colleagues will be watching the first Newspoll of the year with interest,'' he intoned, ominously, and backed it up with a quote from an anonymous Liberal MP who said questions ''would be asked'' if the Coalition was not leading the ALP in the first poll of the year.  Obviously, that poll and all subsequent polls have been strong, and no moves to replace Abbott have arisen.

If there was any remaining doubt about Abbott's political strategy, it should have been erased by a series of devastating poll results this week.  In short succession, Galaxy, Nielsen and Newspoll delivered more and more bad news about the Budget and for the government.  In the ultimate justification of Abbott's approach, Labor and Gillard now languish on record low two-party preferred, primary and personal approval measures.

It's almost as if these journalists, having being shown up by Abbott's rise and success as Liberal leader, can't bear to give him his credit for his performance so far.

Australian politics is not rocket science.  Voters expect their governments to be stable and predictable.  That's why Julia Gillard's public assassination of Kevin Rudd as prime minister shocked many voters.  Australians don't like increasing taxes, nor do they reward politicians who break heartfelt promises.  That's one reason the proposed carbon tax is wreaking such havoc on Labor's primary vote.  Another reason is that many voters are unconvinced that Australia donning a hairshirt will do much to combat the threat of global warming.  And most Australians expect the government to demonstrate it is in complete control of its immigration system.  Small wonder that the continued people-smuggling crisis is also weighing down Gillard and her team.

If one can grasp these simple truths, it shouldn't be hard to account for Abbott's success.  And perhaps that's just the problem.  Journalists, particularly those who reside in the nation's capital and who socialise only with the like-minded, don't always grasp these facts.  That may explain why they cheered on ''climate action'' in the face of growing public disquiet, and why many sneer at measures that seek to control our borders.  And maybe that's why the explanation for Tony Abbott's success as Liberal leader continues to elude them.

No reality holiday from this population challenge

If long term tourism and population forecasts are to be believed, Melbourne is nowhere near ready to handle the 1.6 million extra tourists and 600,000 new Melburnians heading for our city by 2020.

According to Tourism Victoria, the annual visitor nights spent in Melbourne by international tourists are forecast to rise by 42 per cent from 38 million to 54 million over the next nine years.  This tourist surge comes on top of an ABS growth projection which states Melbourne's population will likely exceed 4.6 million people by the end of the decade.

For most Melburnians, the idea that their city is set for a population increase of this magnitude will be anathema.  Indeed, many would like to see the exact opposite occur.

But despite the political rhetoric to the contrary, no government can stop the powerful forces fuelling this surge.  Put simply, our miners and farmers require extra workers;  our retailers desire additional customers;  and our sick and elderly need more carers.  As much as some would like to see a slowdown in the pace of growth, the socioeconomic costs of doing so far outweigh the benefits.

Consequently, Melburnians will need to get used to the fact that their city will be getting bigger, busier and much more cosmopolitan.

In an effort to help the public adjust, the Federal Government has recently released its National Urban Policy, Our Cities, Our Future, which seeks to address the impact of ''population growth and demographic change'' on Australia's major cities.

Unfortunately, while the document highlights the importance of planning ahead, it avoids any detailed discussion of urban population forecasts.  Moreover, it completely fails to address the complex challenge of managing soaring tourist and foreign student numbers -- two key contributors to urban infrastructure strain.

If Melbourne is going to have any hope of dealing with the growth challenges of the future, we're going to need to do the heavy lifting on our own.

In commencing this task, four strategic reforms should be considered.

First, the State Government must discard the historical model for city planning which overwhelmingly focuses on the needs of the domestic population.  Instead, it should create a planning document which addresses the needs of Victorians, tourists and foreign students.  All of these people use our trains, trams, buses, taxis, roads, restaurants, bars, beaches, sports grounds and accommodation.  Therefore, it only makes sense that we plan our city's development in order to meet their service expectations.

Second, the State Ministry must be restructured to better manage our long term population challenges.  Having six Ministers and multiple departments responsible for compartmentalised population management is a recipe for disaster.  In fact, it is the same recipe used to manage Victorian housing affordability -- not the greatest of success stories!  As an alternative, the Government should appoint a senior Population Minister with whom all lines of responsibility end.  If a Treasurer can be held responsible for the health of a State economy, then a single Minister should be held responsible for Melbourne's rising population.

Third, local councils need to accept that Melbourne's growth has changed the breadth of their planning responsibilities.  With a population of over four million people, our councils need to adopt a city-wide view of planning which fully appreciates the concept of greater Melbourne.  Big cities require consistent planning decisions, efficient transport networks and affordable housing choices.  Most importantly, they require councils which are prepared to look beyond the parochial concerns of their constituents.  If local councils refuse to accept that their role in the planning system has changed, then the State Government should consider taking back their original planning powers.

Finally, Melburnians need to recognise that government alone cannot solve all of our population problems, especially ones relating to urban infrastructure.  The public must keep an open mind towards innovative solutions such toll roads, infrastructure bonds, road privatisation and planning, transport and construction industry deregulation to better manage our long term growth.  By harnessing the natural strengths of the private sector, government will be better placed to leverage the best outcomes on behalf of the community.

As our political leaders contemplate their response to the realities of Melbourne's long term population future, there is one simple fact which they should keep in mind.  Despite what we all may wish for, crowded cities never go on holidays.

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Sorry, but the anti-war left can't have it both ways

In the deep darkness of a November night, a 50-man raiding party clambered down from a brace of submarines and began paddling inflatable boats towards the shore.  The year was 1941 and these elite British commandoes were on a mission of targeted killing.  They were tasked with the extra-judicial execution of the man who commanded the German Afrika Korps -- General Erwin Rommel.

The hit on Rommel failed only because the famed ''Desert Fox'' was absent from his Libyan HQ at the time.

A similar operation launched the following year was much more successful.  The British Special Operations Executive parachuted a team of agents into Czechoslovakia where they took out SS Obergruppenfuhrer Reinhard Heydrich in May 1942.

The United States then got into the assassination business.  The Americans used data from a broken Japanese naval code to organise an aerial ambush that killed Admiral Yamamoto -- the architect of the Pearl Harbor attack.  These days the NATO-led Coalition -- of which Australia is a part -- routinely fires Hellfire missiles from Predator drones to knock off Taliban commanders in Afghanistan and Pakistan.

So you'll excuse me if I abstain from the chorus of outrage that erupted over the fact that Osama bin Laden may have only been reaching for a weapon at the precise moment he was killed.  There's more than ample precedent to justify the deliberate targeting of senior enemy officers in wartime -- armed or not.

It's beyond all reasonable doubt that al-Qaeda and its allies are waging war against the United States.  In his 1998 declaration of ''jihad against the Jews and Crusaders'' bin Laden made no bones about his belligerent intent:  ''in compliance with Allah's order, we issue the following fatwa [edict] to all Muslims:  The ruling to kill the Americans and their allies -- civilians and military -- is an individual duty for every Muslim who can do it in any country in which it is possible to do it.''

Of course, those words have proven to be no mere rhetorical flourish.  Over the past 15 years, jihadi terrorist outrages have claimed innocent victims by their scores of thousands.

Just a fortnight ago another 16 people -- mostly tourists -- were slaughtered by al Qaeda in the bombing of a Moroccan cafe.

Yet the international human rights movement appears incapable of comprehending that the struggle against jihadi Islam is a full-fledged shooting war.

The most vocal critics of the raid on bin Laden are the same people who cry to high heaven when America attacks jihadi terrorist targets through more conventional military means.  If the US conducts air strikes against a Taliban command centre, the naysayers scream about disproportionality and war crimes.  Yet they also pillory the White House with complaints about extra-judicial killing when the world's pre-eminent terrorist is killed in a pinpoint operation that generates almost zero civilian casualties.

Sorry, but the anti-war Left can't have it both ways.

Progressives shouldn't be allowed to get away with their purblind insistence that jihadi terrorism should be addressed as a police problem rather than an issue of national security.

In the wake of the Navy SEAL raid on bin-Laden's hideout, examples of this sort of mushy thinking are legion.  Celebrity international lawyer Geoffrey Robertson described the death of the al Qaeda leader as a ''perversion of natural justice'' The UN chimed in, declaring:  ''the norm should be that terrorists be dealt with as criminals, through legal processes of arrest, trial and judicially decided punishment.''

Back in 2005 I warned that any attempt to apply the rules of the barrister to the realm of the battlefield would be absolute folly.  And as I pointed out, nowhere was this danger better illustrated than on the front-page of The Washington Post.

Just a fortnight after 9/11, the Post reported that Bill Clinton had spurned a 1996 offer by the Sudanese government to deliver bin Laden into American hands.  The article quoted former Clinton aide Sandy Berger, who said:  ''The FBI did not believe we had enough evidence to indict bin Laden at that time, and therefore opposed bringing him to the United States''.

That is the self-righteous madness of politically correct masochism.  Imagine instead what would have happened had Clinton called in a Navy SEAL team rather than a gaggle of Justice Department lawyers.  A couple of skyscrapers in lower Manhattan would likely still be standing and thousands of innocent lives would likely have been saved.

Habitual critics of American foreign policy also like to bang on about their fervent faith in international law as the ultimate arbiter of global affairs.  But the United States has never accepted the proposition that its national sovereignty may be superseded by foreign authority.

Under US constitutional law, a ratified international treaty shares equality of status with normal federal statute.  And like any other law on the books, a treaty obligation can thus be modified or repealed through subsequent action by Congress.

There is nothing controversial about this principle in US jurisprudence.  Case in point -- the 1957 ruling in Reid v Covert that declared:  ''this Court has regularly and uniformly recognised the supremacy of the Constitution over a treaty''.

The Supreme Court judgement in Whitney v Robertson laid out the so-called ''last in time'' rule with crystal clarity:  ''By the Constitution of the United States, a treaty and a statute are placed on the same footing, and if the two are inconsistent, the one last in date will control''.

This well-established US constitutional doctrine means that Washington's adherence to international law is entirely voluntary.  After all, if the US Government can change its mind at will about a previously ratified treaty, by definition international law cannot be not binding upon it.

So the furious debate as to whether the 2003 invasion of Iraq was sanctioned by the UN is nothing more than irrelevant blather.  The United States Congress authorised American military action against Saddam Hussein through the Iraq War Resolution of October 2002.  Thus the overthrow of Saddam Hussein was entirely legal under US law.  And as we've seen, the domestic United States law trumps international law every time.

The same holds true for the raid on bin Laden.  Precisely one week after the 9/11 attacks, Congress passed what became US Public Law 107-40, the Authorisation for the Use of Military Force (AUMF).The AUMF empowered the President of the United States to ''use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorised, committed, or aided the terrorist attacks that occurred on September 11, 2001''.

The passage by Congress of the AUMF negated any contrary commitments the US previously incurred under international treaties, including the UN Charter and the Universal Declaration of Human Rights.  Osama bin Laden became just another enemy combatant commander who was to be treated according the rough rules of war.

The doctrine of US Constitutional superiority over international law has an added dimension.  The authority to sit in judgement over the US Government is solely restricted to constitutional officers of the United States.  No one else -- not the UN, nor human rights lawyers with an inflated sense of their own importance -- may dictate to Washington what is or is not legitimate.

So with all due respect to Geoffrey Robertson all the kvetching about the manner of Osama bin Laden's death is much ado about nothing.

The bottom line is simple:  the killing of Osama bin Laden was an entirely legitimate act of war that has made the world a better place.

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PM's selective hearing

Following his appearance on theABC's Lateline on Wednesday, Malcolm Thrnbull rejoins Marius Kloppers and Ross Garnaut in Julia Gillard's pantheon of supporters of a price on carbon dioxide.

Turnbull came out attacking his party's ''direct action'' policies on climate change.  Yesterday, as to be expected, Finance Minister Penny Wong and Climate Change Minister Greg Combet praised Turnbull fur his analysis and for his honesty.

As satisfying as it might be for Turnbull or Kloppers or Gornaut to believe the government is listening to

Them and valuing their advice, the reality is quite different.

Politicians listen to other politicians, business people and academics when, and only when, it suits them.  Penny Wong endorses Malcolm Turnbull's opinions on climate change, while at the same time the government has ignored Turnbull's criticisms -- in the very same Lateline interview -- of the national broadband network.

It was on Ten's Meet the Press in September last year, just after the federal election, that the Prime Minister gave her explanation for reneging on her ''there will be no carbon tax under the government I lead'' promise.

She gave two reasons.  The first was that ''circumstances have changed''.  By this she meant that she led a minority government;  therefore it was impossible for her to ''just go to the House of Representatives and say here is the government's position and five minutes later it's passed by the House''.

What the PM didn't explain was why the lack of a majority in the lower house was relevant to whether she kept her promise or not.  In effect, Gillard said her promise held if the ALP was in a majority in the House of Representatives and a minority in the Senate, but not if it was in a minority in both houses.

Any ''government position'' on anything that was to be turned into legislation was always going to be the subject of negotiation with the minor parties in the Senate.

The second reason the Prime Minister offered for pursuing a carbon tax was that ''significantly too, we've seen the head of BHP, Marius Kloppers, make a very important speech on arrangements for carbon pricing and the view of a business like BHP about the need for certainty''.

(Kloppers had a few days earlier called on Australia to act on climate change ahead of the rest of the world.)

Contemplate that comment for a moment, and the likely public reaction if John Howard as prime minister had said he was deregulating industrial relations because Marins Kloppers (or any other CEO, for that matter) had called for it.  ''Howard in the pocket of big business'' would have been the cry.

Yet when Gillard follows the line of the world's largest mining company, she's applauded for listening to industry.

Last year, the Prime Minister was happy enough to quote BHP's support for a carbon tax as a reason for her change of heart.  It suited her purposes.  But now that BHP has changed its carbon tax tune somewhat, will the PM likewise follow?  Of course not.

A few weeks ago, Kloppers' boss, BHP Billiton chairman Jac Nasser, said he favoured a ''go-slow approach'' to emissions reduction that provided different treatment of industry sectors.  He also said Australia should investigate nuclear power.  Will the Prime Minister take up either of these suggestions?  No, she won't -- because it doesn't suit her purposes.

The voices politicians hear are the ones they want to hear.  The Prime Minister said she listened to Marius Kloppers on the carbon tax, but she obviously doesn't listen to Andrew Forrest on the mining tax.

Too many business leaders have an elevated sense of their self-importance.  Ministers would no more take no more advice from a CEO on how to write a press release than a CEO would take advice from a minister on how to dig an open-cut mine.  The number of politicians who have become successful corporate bosses, and vice versa, is small, and there's a reason for that.

Most ministers are not stupid.  They understand that company bosses are just as self-interested as they are themselves.

No company boss drawing a salary from their shareholders is going to advocate a policy that would reduce their company's profits.

It's no coincidence that the bosses of the companies that are both large carbon emitters and support a carbon tax are also urging that their specific industry sector get special treatment.

Those bosses are picking and choosing which policies they support in exactly the same way as politicians do.

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Gillard and Swan: meet the fiscal incredibles

Treasurer Wayne Swan claims to have cut some $22 billion out of the federal budget.  Well actually that's not quite right -- he claims to have found savings of some $22 billion.  Over four years.

Then we discover that some of those savings are actually tax increases.  Not to mention the whole heap of new spending initiatives.  No wonder people are confused and the budget hasn't been well received.

To be fair -- a tax increase is a ''saving'' to the Commonwealth budget in some accounting sense but it is not a saving to the taxpayer.  So in the very first instance the Government has a framing problem.  They have framed their budget as an ''us versus the taxpayer'' document and it is no wonder they have been accused of class warfare.  Being proud of their ''Labor budget'' doesn't help either.

The blunt reality is that the Government's spending cuts are simply not credible.  There are actually some good spending cuts proposed in the budget yet good policy doesn't sell itself and this government has proven to be incapable of selling anything.

While strictly speaking not counted as a spending cut the move to ''reform'' the Disability Support Pension highlights the communication problem this government faces.  It is a good idea to get people on the disability pension to work more -- if they can.  But this should not be framed in the context of labour force participation.  Getting disabled people to work is never going to solve any so-called skill shortages.

Rather this should be undertaken as a social inclusion policy.  That means that policy is likely to be expensive.  Ideas here would be to exempt disabled employees from payroll tax -- that means the Commonwealth would have to compensate states -- or to refund their income tax payments to provide them with greater incentive to participate and so on.

The cuts to family payments, designed to save some $2 billion over four years, are incoherent.  That isn't to say they are bad policy.  The economic narrative the Government has pursued in justifying those cuts is incoherent.

The Government have been unable to settle on a sensible description of the economy.  On the one hand, we're told Australian economic growth is the envy of the developed world, our net debt is low, unemployment is below 5 per cent, terms of trade are the highest since whenever, and so on.  Yet, we're also being told about the need for frugality, and the two-speed economy, and how the Government understands that families are doing it tough.

Of course, the Government is simply reflecting the uncertainty of current economic conditions but it hardly surprising that average Australians are experiencing some angst over that uncertainty.  Winding back the social safety net would be difficult at the best of times -- but it is much harder when people feel insecure.

Where the Government is struggling is in defining middle-class and middle-income.  Almost everyone conflates the two definitions, but of course they are very different.  The middle class is much larger than middle-income earners.  Households with an income of $150,000 are not rich but they are well above the middle-income.

Any crack-down on middle-class welfare will require these households to effectively pay more tax or consume fewer public goods.  As yet the Government has made no argument why this should occur, apart from vague references to ''fairness'' and ''labor values''.  True, the prime minister did say on radio recently that ''high-income earners like you and me do get asked to look after ourselves'.  She earns an income far in advance of $150,000 and has few household expenses.

The lack of a coherent narrative isn't the only problem the Government faces.  Some of their cuts are lazy policy.  The efficiency dividend will cut a mere $1 billion over four years.  Sure everybody wants to have an efficient government, but the amount is trivial in the face of deliberate waste on pink batts and economic aid budget increases by almost $2.5 billion over four years.  So while public servants scrimp and scrap to provide Australians with services the Government will be splashing out on foreigners.  Does that make sense to anyone?

To place the ''$22 billion over four years'' spending cuts in perspective, think about the total spend of some $362 billion -- spell that out to three hundred and sixty-two thousand million dollars to get some idea of the magnitude.  Next financial year alone, that amount is some $22.6 billion short of revenue.

Swan's savings over four years are simply not enough.  To make matters worse he is incapable of articulating why the budget needs to be in surplus and how best to achieve that goal.  In an open globalised economy government is going to have less control over revenues and spending control is the only mechanism government has to ensure fiscal responsibility.

In 2007 Kevin Rudd stated, ''this reckless spending must stop''.  He was right then; he would be even more right now.  This budget does have some good ideas in it, but not enough and those good ideas will wither on the vine unless the Government gets out there to articulate why fiscal responsibility sooner rather than later is good economic policy.

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Middle class welfare: not happy Julia

Perhaps families earning $150,000 a year are ''rich''.  Perhaps they're not.

But it's intuitively obvious they shouldn't receive welfare.

That's because, deep down, we're all small-l liberals.  Welfare should be a safety net, not a web in which everybody is tangled.

The Gillard government's reductions in family payments announced as part of last week's federal budget are modest but welcome.

The income test on some payments will be frozen until 2014, as will the size of payments.  Inflation will slowly erode eligibility and value.  The teacup storm about cost of living pressures and what constitutes rich was inevitable.

But the thing is, direct welfare going to middle income earners in Australia is actually quite low, at least compared to the rest of the world.  Our benefits are relatively well means-tested.  The Rudd and Gillard governments have made them even more so -- a much needed corrective to the Howard years.

Commentators rightly condemn the non-means tested benefits which remain.  The tax-welfare churn is extremely inefficient.

But subsidising the middle class isn't a strange perversion of the welfare state.  It's a key characteristic.

For decades we've been told we should emulate the big social democratic welfare states -- it'd be the only progressive thing to do.  Yet their full cradle-to-grave social support offers far more for middle earners than Australia does.

The prototypical Scandinavian welfare models were built on the concept of universalism.  Everybody gets something.  Their political support relies on that universalism.  Middle income earners approve of those welfare states because they're the beneficiaries.

Indeed, the Swedish economist Andreas Bergh has argued that redistribution of income from rich to poor is a relatively minor feature of the Scandinavian model -- the whole system is structured to service the comfortable middle.

So if it is intuitively obvious to Australians that the middle class shouldn't receive income support, that's because we find the social democratic model of the welfare state objectionable.

The Australian conception of the proper role of welfare is a liberal one.  Income support should be only given to those who need it -- to those whose only alternative to Centrelink is poverty.  Not to those who, facing money pressures, could reduce consumption or live in a smaller house or trade in a new car.

Even mainstream Australian social democrats argue against the social democratic model of the welfare state.

In the Weekend Australian, Tim Soutphommasane (of the progressive think tank Per Capita) said ''Any fair and efficient system of welfare ... should be guided by a principle of need.''

The past decade and a half has seen government extend its generosity to middle income earners, breaking the liberal compact.

Unfortunately the Gillard government hasn't pitched its temporary freeze on family payments as a principled shift in welfare policy.  In fact, quite the opposite:  it has stubbornly insisted families deserve whatever they can get.

As Wayne Swan said late last month:  ''Australians who work hard, who get up every day, send their kids to school, come home, cook the tea, get up and do it again, whether they're running a small business or working for wages, are deserving of some support for their children when they're performing that vital role of bringing up the next generation of young Australians.''

This makes welfare less about need, and more like a reward given by the government for being responsible and virtuous.  So it's no surprise that there's outcry when the government reduces that reward.  After all, families haven't stopped working hard -- why is the government suddenly being so miserly?

The Howard government wrapped its middle income support in different rhetoric.  For John Howard, middle class welfare was a deliberate program to achieve a specific social goal.  Each side favours income support for ''working families'', it's just that they put the emphasis on different words.

Speaking to the conservative think tank the American Enterprise Institute after he left office, the former Prime Minister argued that:

''We should maintain a cultural bias in favour of traditional families ... The taxation system should generously recognise the cost of raising children.  This is not middle class welfare.  It is merely a taxation system with some semblance of social vision.''

For Labor, middle class welfare is a reward.  For the Coalition, it's an incentive.

Howard was a conservative social democrat.  Sure, sometimes he looked like a proponent of small government.  More often (much more often) he did not.

The Liberal Prime Minister had a distinct pro-family, pro-procreation philosophy which, in his view, supported the expansion of family payments.  For Howard, income testing those payments would be contrary to the purpose of the policy, and at odds with the philosophy.  You might not agree with that philosophy of government -- free marketeers shouldn't, and didn't -- but it was a coherent one, and one which he often articulated.

By contrast, Labor appears to share Howard's policy preferences, yet it cannot explain why.

Nevertheless, the end result of both approaches has been the development of a middle class entitlement culture -- a culture that's long been endemic in larger universal welfare states, and now seems to be growing in Australia.

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