Cut green and red tape to drive more growth in farming sector

The release of the new Productivity Commission draft report into the regulation of agriculture confirms that Tasmanian farmers are shackled by costly and unnecessary red tape.

The report covered many issues — from the growth of strict environmental laws and rules inhibiting foreign investment to regulation of shipping — and should be used as a ready guide for where governments should direct their attention.

While Tasmania contributes nearly $1.5 billion in agricultural commodity production each year, it is held back by governments ignoring regulatory design principles.

The idea the benefits of regulation must outweigh the costs is trumped by special interests and bureaucracy.

Every day Australian farmers compete in a global market — about two thirds of Australia's agricultural produce is exported — which makes them highly sensitive to the costs of regulation.

Farmers cannot afford to waste time filling in permits and approvals rather than remaining competitive.

A 2013 report by Stenning and Associates found that in the Tasmanian agriculture, forestry and fishing industries, those businesses that employ staff spend a remarkable 19.9 hours per week on meeting regulatory requirements.

That is a huge cost.

My recent research estimated that across all sectors red tape costs Australia $176 billion a year in foregone economic output.

Red tape costs us more each year than we pay in income tax.

Many concerns are covered in the report that deserve swift attention:  relaxing foreign investment restrictions in line with other industries, holding back the continual creep of environmental regulations, and anti-competitive coastal shipping regulation.

As the report recommends, the threshold for foreign investment review should be increased in line with other industries — including telecommunications, transport and defence — to $252 million.

The Australian economy is small, open, and heavily reliant on investment to fund the shortfall in national savings — we simply cannot afford to stymie international investor interest.

Preventing voluntary investment is an attack on the fundamental right of farmers to sell their own private land to whom they wish, for the highest price they can achieve.

Many criticisms rallied against this change are unfounded.  For instance, when foreigners purchase Australian land they do not bring with them their own laws — Australian laws and regulations, including labour laws, still apply.

Another long-running issue for farmers has been environmental legislation, especially its capture by the growing political sentiment that no harm in the environment can be tolerated.

Native vegetation clearing rules cause unnecessary headaches for farmers, especially the widespread inconsistencies between different levels of government — what is approved at one level of government may be rejected by another.

Regulatory uncertainty makes it difficult for farmers to manage their land.

Rather than government heaping more stringent rules on landowners with little concern for the cost, the PC report recommends governments develop market-based solutions.

That includes the possibility for governments to buy environmental services from existing landholders — a vital change not only for native vegetation but more broadly for regulatory design.

When governments must pay for their policy objectives this will slow down new red tape.  This would be welcome recognition that government restrictions on land clearing are an assault on property rights, which must be adequately compensated.

Anti-competitive coastal shipping legislation — where foreign ships face government-backed barriers to entry — is particularly costly for Tasmania.

For instance, the Tasmanian Farmers and Graziers Association claims that the route across the Bass Strait is the most expensive route in the world.

With 99 per cent of freight volume in and out of Tasmania occurring over sea, this is an enormous cost.

No wonder the PC recommends winding back the coastal shipping laws by 2018 to breathe competition back into the shipping industry.

These regulatory hurdles will not be solved overnight.  It will require a systematic approach and cross-department collaboration.

If Tasmania wants growth in agriculture, it should take this PC report as a guide and cut red tape.

Learning when to catch blackfish

The NSW draft curriculum released last week glosses over thousands of years of western development and progress, in favour of teaching students about climate change in mathematics class.

The NSW Board of Studies, slavishly following the National Curriculum, has adopted three so-called cross-curriculum priorities:  Aboriginal and Torres Strait Islander histories and cultures, Asia and Australia's engagement with Asia, and sustainability.  Each of these may well be worthy topics of investigation, however there is no apparent need, or explanation for why, they must be taught across all subjects.

The concept of sustainability is relevant to environmental studies, but it is certainly not core to ancient history.  Aboriginal culture should be taught in a modern history course, however it is not a key element of chemistry.  While Australia's engagement with Asia is a worthy subject in a politics class, it makes little sense to discuss the issue in creative arts.

The decision to prioritise certain elements of Australian society above others lays bare a clear ideological and political bent, an unacceptable attempt to privilege select perspectives above others in the students' minds.  It is simply assumed, built into the worldview of the curriculum writers, that these priorities are more important than, let's say, the power of economic freedom to deliver human prosperity, the foundations of Western civilisation, and the development of liberal democracy and free speech.

Having conceded the cross-curriculum priorities might be considered "lefty progressive issues", NSW Board of Studies president Tom Alegounarias justified their inclusion on the basis that the curriculum is not entirely devoid of more traditional subjects such as the Enlightenment, as well as "conservative views of how we developed".

Firstly, there was nothing particularly conservative about the Enlightenment.  This was a period of dramatic intellectual, social and political upheaval;  superstition and dogmatism were replaced with rationalism, materialism, deism and naturalism.  The Industrial Revolution changed the nature of work forever, improving our standard of living and propelling us into a new age of modernity.

Secondly, the history and ideas of our Western heritage are buried deep within the history curriculum, and only appear as optional case studies.

One series of case studies within the history curriculum is entitled "The Western and Islamic World", which bizarrely combines two distinctive areas of historic inquiry into one.  Within this series, students will be taught about one of the following:  Vikings, medieval Europe, the Ottoman Empire or Renaissance Italy.

Similarly, within the "Making a Better World?" case studies, teachers are instructed to explore just one of the following:  the Industrial Revolution, movement of peoples or progressive ideas and movements.  The best case scenario is that students will be exposed to a very small subset of our heritage.  They will receive a disconnected and limited understanding of the foundations of western civilisation and why they live in a peaceful, free and democratic society.

The curriculum fails to mention the Magna Carta, the Glorious Revolution, the Reformation or the Counter-Reformation.  Human rights are taught as a post-1945 creation of the UN.  There is no discussion of ancient thinkers such as Aristotle and Plato.  And the influence of Christianity barely scrapes a mention, placed as an afterthought to the Roman Empire.  In fact, the curriculum mentions Islam more than it does Christianity.

The worst case scenario is that, considering many of the elements of Western history are optional, students will not be exposed to any of them at all.  In contrast, the "lefty progressive issues" must be taught in every subject, no matter how tenuous the links.  The mathematics curriculum includes the "concept of chance using Asian games", and discussion of "alternative energy with solar cells and wind turbines" and "climate change".  The English curriculum teaches students about Aboriginal language, Asian authors, and the skills required to "communicate information" about social and environmental sustainability.  Students are being taught how to be activists in English class.

The science curriculum, rather than focussing on agile and innovative modern technology, spends time exploring "black wattle flowering signalling that it is time to catch blackfish".  The study of "spear throwers" is preferred to ballistics or propulsion, and an examination of "message sticks" to, say, the foundations of the modern digital communications through TCP/IP internet protocols.

Every moment spent talking about these ideologically driven priorities is time not spent on developing fundamental skills.  This at a time when our education system is increasingly failing to teach even basic literacy and numeracy skills.  According to the OECD, at the age of 15, fourteen per cent of Australian students are functionally illiterate, and would not understand the instructions on a packet of headache tablets.  Twenty per cent of Australian youth lack basic arithmetic skills, and would fail to determine how much petrol is left in a tank by looking at a gauge.  Meanwhile, Australia has fallen behind Singapore, Hong Kong, South Korea, Japan and Taiwan in international maths and science testing.

Our school curriculums have been captured by ideologues who are more interested in teaching students what to think, rather than skills they will need.

Soon after the 2013 election, the Abbott Government commissioned a review into the National Curriculum which found the cross-curriculum priorities add unnecessary complexity and were never educationally justified.  They recommended abolishing the cross-curriculum priorities, and instead embedding the themes into subjects where relevant.

The government formally supported this recommendation in their response to the review, however both Abbott and Turnbull have failed to act.  Now the Baird Government is following their lead.

Instead, they should immediately redraft the curriculum, and delay its implementation until these issues are addressed.  The unexplained, unjustified, and politically motivated cross-curriculum priorities must be dropped.  Western civilization should be taught to all students, not left as an afterthought.  Most importantly, the overall focus must be on skills, not on ideology and indoctrination.

The crumbling of political process

An America four years down the track in which the pop star Kanye West is the Democratic Party nominee for president, and Phil Robertson is the Republican nominee, might be difficult to envisage.  But as political analyst Jonathan Rauch writes in a seminal article, What's Ailing American Politics, in this month's edition of The Atlantic, such an outcome would simply be a linear extrapolation of what's currently happening in America.  Phil Robertson features in the reality TV show Duck Dynasty, about a family who hunt ducks.

According to Rauch both Donald Trump and Bernie Sanders are products of the breakdown of the American party system.  "The political parties no longer have either intelligible boundaries or enforceable norms, and, as a result, renegade political behaviour pays."  It's difficult to call Trump a Republican — he's been registered as a Republican, then an independent, then a Democrat, and again as a Republican.

Jeb Bush claimed Trump would be the "chaos candidate, and he'd be the chaos president".  What Bush didn't appreciate is that's precisely why so many people voted for Trump in the primaries.  For Rauch, though, "Trump, however, didn't cause the chaos.  The chaos caused Trump".

Rauch argues a number of developments have eroded the ability of Republicans and Democrats to compromise with each other.  So for example, campaign finance reforms have made it more difficult for political parties to raise funds for themselves and instead money has flowed to third parties beyond the control of party officials.  Likewise, measures reducing the financial "pork" delivered to electoral districts through budget bills have made it harder to buy off political opposition.  Laws aimed at improving the transparency of the legislative process make it difficult to negotiate.  "Smoke-filled rooms, whatever their disadvantages, were good for brokering complex compromises in which nothing was settled until everything was settled;  once gone, they turned out to be difficult to replace."

Such changes affecting the practice of politics, when combined with the rise of more overtly ideological actors within the Republican and Democratic parties, have produced the seeming chaos of the presidential primaries.  Either Donald Trump or Hillary Clinton could be the next US president.  Indeed the doyen of pollsters, Nate Silver, reckons if the election were held today Trump would win.

Some of what Rauch says about American politics applies to Australia.  We have our own version of congressional deadlock.  It's called the Senate.  The paradox is that the more independent senators block the legislative initiatives of the major parties, the more the public's frustration with the political process grows — and this in turn increases support for non-major-party senators — which then only further increases the chances of initiatives being blocked in the Senate.

In both the United States and Australia, as lawmakers witness an ever-diminishing chance of their legislative proposals ever passing into law, their ambitions for change wither and eventually die.  This happened in America with budget reform.

In Australia it's happened with industrial relations reform.  The close-to-zero prospect of getting through the Senate even minimal changes to the Fair Work Act means there's a risk that eventually, the Coalition will stop bothering to think about industrial relations and will simply accept the status quo.  The consequence of not even contemplating reform is that any change is ruled out forever.  Eventually, political parties end up losing the capacity to mount an argument for change.  Increasingly, even if a politician does propose change, they will be making an argument for merely a change they believe can get passed into law, rather than a change they actually believe in.

Which is what's occurring to the Turnbull government as it pursues its plan for higher taxes on self-funded retirees with a passion and zeal the Coalition is applying to no other policy area.

The Coalition knows the ALP and Greens won't support cutting government spending — but they will support higher taxes.

The problem is that when political parties and their leaders seek to achieve not what is desirable, but only what they think is feasible, they lose their followers.

As John Boehner, the former speaker of the US House of Representatives reflected:  "A leader without followers is simply a man taking a walk."

Let's get fine defaulters out of our jails

Reporting of Andrew Leigh's reappointment as shadow assistant treasurer has been dominated by the strange decision of the Labor Party to reduce his salary by $40,000.  This is particularly a shame because Leigh is the author of a policy where Labor and a free market thinker like myself can rightly see eye to eye.

During the election campaign, Leigh announced a Labor government would allow fines for administrative and criminal violations to be paid off via an income-contingent fine recovery process.  This makes great economic and moral sense.  It should be welcomed by both sides of politics.

As it stands, people who do not pay fines can be sentenced to serve short prison sentences.

Leigh's sensible alternative is that states and territories should be able to collect unpaid fines through garnishing offenders' incomes and reducing their government benefits.  This would be done with the co-operation of the Commonwealth.

The tax and transfer system is already used to collect payment of university loans and unpaid child support, so this would simply be an extension of an existing practice.

This reform could lead to a range of savings.  We could avoid incarcerating some people unnecessarily, ensure that those who have been fined actually have to pay their debts, and free up police and prison resources for more effective uses.

Putting someone in prison is expensive.  Although fine defaulters typically only go to prison for short stints, the cost of their incarceration can be as high as $770 per day in some jurisdictions.  So instead of collecting payment from those who break the law, taxpayers instead foot the bill for them to go to prison.  This might be acceptable if there were reason to think that fine defaulters are a risk to the community.  In reality though, most people incarcerated for defaulting were fined for traffic offences.

And states are currently out of pocket because many fines are going uncollected.  For example, a recent Western Australian government report found that there was up to $55 million in unpaid fines in that state alone.

Once this proposed mechanism is in place it can be used to broaden the use of fines as an alternative to incarceration.  This won't just help the budget — it is in the interest of victims too.  The rights and interests of victims are too often forgotten in our criminal justice system.  Restitution orders can be used to simultaneously punish offenders while repairing some or all of the damage suffered by victims.

Australia's criminal justice system is bloated and inefficient.  Australia's prison population has grown almost 40 per cent in the last decade, and spending on prisons now tops $3.6 billion per year.  The worst offence committed by 47 per cent of Australian prisoners was a non-violent offence, and 59 per cent of prisoners have been incarcerated before.  Altogether, this means that we are spending more and more every year to lock up people who pose little threat to the community while doing nothing to disrupt criminal careerism.

Monday's Four Corners report on abuse in juvenile detention has started a much-needed national conversation about criminal justice reform.

Similar issues have confronted the US, where in recent years conservatives have forged a path towards a criminal justice system that is fairer and more effective — and has helped keep the public safe.  Several American states have passed reforms increasing the use of alternative punishments, improving probation services and re-entry pathways, eliminating criminal offences from the books, and limiting the use of strict and absolute liability.  The insights from the US are readily adaptable to the Australian context.

But one lesson from the US stands out above all others:  criminal justice reform is only achieved when conservatives take the lead.  It is great that Labor and Andrew Leigh are talking about criminal justice issues.  But if we are going to improve Australia's criminal justice system, and achieve better results for victims, released offenders, and budgets, then the Liberal and National parties need to show some leadership as well.  Criminal justice reform is a huge opportunity for whoever has the courage to take it on.

Drive productivity through innovation

When digesting the Productivity Commission report into the regulation of agriculture, policy makers should redouble efforts to drive productivity growth through innovation.

Specifically, reform efforts should centre on cutting red tape holding back new technologies.

Agribusiness is fundamentally a global game.

Every year in Australia some 275,000 employees export around two-thirds of their produce to the world.

For farmers, what is critical is maintaining production of internationally competitive and high quality output.

But many threats to farmers remain.

For instance, the Australian agricultural sector is in the midst of a long-term downward trend in the price farmers receive, compared to their cost of inputs.

This trend should be a signal of the importance of productivity enhancements.

And as economists have now long agreed, the key to productivity growth is innovation.

Innovation is a contemporary political cliché.

But the idea that technology is central to agricultural productivity is in no doubt.

There are continuing suggestions that agriculture may well be sitting on the cusp of a technological revolution — from virtual fencing to robots to drones — that was unimaginable even a few decades ago.

To discover precisely how these technologies are commercialised into cost effective market applications, however, requires experimentation.  The market process — through trial and error learning — is the only way to discover these uses.

But there is one fundamental friction in this market process:  the shackles of unnecessary red tape.

Red tape is the low quality regulations that do little in the public interest, fail to reach their objectives, and are generally slow to change.

There are two ways such red tape stymies the innovative progress.

First, it explicitly prevents farmers discovering new uses and applications.  And second, the burden of red tape shifts farmers' gaze from entrepreneurship to compliance.

Let's take one recent example of cutting red tape on technology:  unmanned aerial vehicle (UAV) technology, often known as drones.

The potential cost reductions from this technology are remarkable.

And if the burgeoning hype is to believed, drones will outnumber tractors in the near future.

The relationship between regulation and technology have always been in tension.

This is inevitable when regulation is static and back-ward looking, while innovation is dynamic and novel.

And the treatment of drones by regulators has not escaped this problem.

This is especially due to the catalysing effect of widespread cautionary calls in the light of privacy, insurance and interactions with passenger aircraft.

Back in 2002 Australia was the first in the world to regulate UAVs.

But as is often the case, as the technology got faster, lighter and cheaper, regulation struggled to keep up.

Some recent changes by the Civil Aviation Safety Authority for instance, relaxing the exemption of UAVs under 2kg from various licences — were desperately needed and are welcome.

The changes do keep some strict boundaries.  For instance, you still can't fly with 5km of an airport, but also understand the trade-off between safety and growth.

Indeed, Australia should be optimistic that business people, not bureaucrats, hold the local knowledge to make informed decisions about applying new technology.

The most obvious cost of red tape is the time and money spent finding, understanding and complying with all the permits, licences and approvals imposed by governments.

For the adopters of UAVs, for instance, some estimate that the new UAV regulations will save farmers will save up to six months and thousands of dollars in bureaucratic licensing requirements.

Complex regulations imposed across multiple regulators means less entrepreneurship.

Every minute farmers spend wading through red tape is time they don't spend finding new innovative applications for technologies.

Australian industries, and thereby consumers, face a growing red tape problem.

My recent research estimates the economic costs of red tape at approximately $176 billion every year.

That means red tape is the equivalent of 11 per cent of GDP.

That figure estimates the lost economic output from poor quality regulation and policy — the cost of businesses never started and the employees that were never hired because of red tape.

Cutting red tape on agricultural technologies will not only yield huge economic benefits in the long term but should be a simple initiative for regulators because it means doing less, not more.

If our globally-competitive agricultural industry is to increase productivity through new technologies — regulators must free farmers to make their own decisions.

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Tape tangle

CUTTING red-tape by adding red-tape:  failed ecological central planning continues as the NSW government changes its native vegetation laws.  Under proposed changes agricultural land would be demarcated according to risk to biodiversity.  Development would be allowed in "lower-risk" areas, but bound up in "higher-risk" areas.

Development on higher-risk areas would need to be offset by allocating other parts of that land for biodiversity purposes or paying into a biodiversity fund.

Many are rightly concerned about this proposal’s uncertainty.  There is no guarantee future governments would not further restrict farmers.  This uncertainty discourages investment.  A more fundamental issue is the deeply flawed belief bureaucrats can centrally plan society.

Centrally planning the environment fails for the same reasons as central economic planning.  Actions of individuals, combined with the environment’s dynamism cannot be forecast, measured or calculated.

We need a different approach to regulation — one that uses the environmental stewardship of farmers by protecting their property rights, promoting competition and facilitating economic growth.  Property rights give owners incentive to look after what they own.  Farmers know their livelihood depends on environmentally sustainable practice.

Competition fostered by free markets provides powerful incentive for land-users to economise land use and develop more efficient and environmentally friendly technology.  In the last century land used for agriculture has decreased, yet output has skyrocketed.

Discouraging productive land use will hamper growth, resulting in a worse environment.  The government’s proposed changes still rely on technocratic tinkering.  We are over-regulated.

I recently revealed red-tape costs our economy $176 billion annually.  These changes will not make a dent to this figure.  Policy-makers should think big and embrace reform that aligns commercial incentives with conservation interests.

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Why the Productivity Commission is on the money

Australia must reduce its farming sector red tape to better position itself as the food bowl of Asia.

Australian farming businesses want consistent and common-sense rules empowering them to manage land and other scarce resources in such ways to appropriately project a clean, green image for food and other commodities they market both domestically and internationally.

The desire for minimally effective government regulation is sound in theory but, as is sadly all too common in practice, excessive red tape gets in the way of farmers being able to become even more efficient and more innovative as market opportunities change.  The recent draft report by the Productivity Commission on agricultural regulation chronicles numerous instances whereby poor-quality regulation imposes unnecessary red tape on the farm sector.

Mountains of red tape upon agriculturalists is especially problematic for the many small-scale producers, who lack the time and financial resources to effectively comply with the many rules imposed by all governments.

The breadth of red tape and lax regulatory governance outlined by the Commission is extensive, and should serve as a wake-up call for all sides of politics to push a new red tape repeal agenda.

What is also significant about the Commission agricultural regulation draft report is that Queensland, with over 75 Acts and 17,590 pages of regulations on agriculture alone, is identified as an epicentre of numerous regulatory problems.

The state's sugar industry has long served as effectively a bottomless pit of corporate welfare and other forms of discriminatory assistance, with the recent move to partially re-regulate the Queensland sugar market heavily criticised by the Commission.

The push by the LNP state opposition, with the support of the Katter Party and independents, to re-regulate the international marketing of sugar has been found by the Commission to likely "reduce the productivity and profitability of the industry".

The Commission assessed that repealing the December 2015 state legislation "could enable consolidation and productivity gains which would enhance the international competitiveness of the sugar industry".

Transport red tape affecting farming businesses throughout Qld was also identified as a major impediment to getting food and fibre to markets in the cheapest and most seamless ways possible.

A producer provided testimony to the Commission about the time delays and other burdens surrounding obtaining permits from different levels of government simply for the privilege of moving an oversized agricultural machine between farms along 25km of a public road.  Other information was supplied about the effect of heavy vehicle restrictions in Qld, which led, in one instance, to a transport cost premium of almost 40 per cent for delivering cattle to abattoirs.

The excessive red tape burdens associated with managing native vegetation on farming properties was also raised as an important issue for local farmers, given the extensive uncertainties due to policy changes in recent years.

Other matters, such as inefficient biofuel mandates, restrictive animal welfare conditions, and increasingly prescriptive foreign investment rules, were also cited by the Commission as major concerns for producers in Queensland.

The Productivity Commission has made it clear that the build-up of red tape is holding Queensland producers back, with the onus squarely on governments to eliminate restrictions against farmers using common-sense approaches to get food on plates and fibre on backs.

If this report helps to recharge an agenda to cut farming red tape, then Queensland and Australia will benefit enormously in the years and decades to come.

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What is the meaning of Andrew Leigh's pay cut?

Word is that all Labor MPs have to be a member of a trade union.  It is surprising then that Andrew Leigh's union haven't been knocking on Bill Shorten's door.  Perhaps they are planning a picket for the first day of parliament.

Andrew Leigh has just had to accept a $40,000 pay cut while remaining in the Labor shadow cabinet — he has also had his portfolio responsibilities increased.  Any other employer increasing an employee's workload while cutting wages would quickly find themselves victims of an orchestrated outrage campaign.  Yet the usual suspects are all lauding Leigh for "not being in it for the money".

Well, yes.  Good for him.  But this instance illustrates more than a politician "doing the right thing" or being "committed to public service".

Bill Shorten's predicament — wanting to employ Leigh but only able to afford him at a lower salary — is a problem many employers face every day.  Similarly Leigh's predicament — wanting to work in a particular job, but having to take a pay cut to do so — is a problem many unemployed workers face every day.  Inflexible labour laws — advocated and legislated by the Labor party — prevent potential employers and employees from making precisely the deal Bill Shorten and Andrew Leigh have made.

This is not just a charge of hypocrisy against political elites.  The fact is that we're better off having Andrew Leigh on the Labor front bench.  Shorten knows this — and Leigh wants to do the work.  Some might argue that this simply demonstrates that all politicians are overpaid.  But there are deeper lessons to be learned.

Greater prosperity

We are all better off when more people work.  The late James Buchanan, the 1986 economics laureate, argued that work generates positive externalities leading to a bigger economy and greater prosperity for all.  To be sure many people would generally prefer to work less and they are induced to work more by money.

In our society we also have people who would like to work but are priced out of the market by government regulation or perhaps they are excluded by various societal prejudices.  Labour market regulation prevents these groups of individuals from taking a pay cut in order to work.  The moral choice to exclude some people from employment has both an economic cost and a human cost.  If Leigh is genuinely happy to work at a lower wage who are we to deny that privilege to anyone else?

Ironically Andrew Leigh is the Australian expert on labour market discrimination.  Having had to take a pay cut to keep his job, simply because he isn't a member of any Labor faction, is exactly the sort of labour market discrimination he researched as an academic, and publicised in these pages as a columnist.

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Red tape strangling opportunity

Australia is supposed to be the land of the fair go.  When someone wants to take on a new challenge, most of us cheer them on.  This spirit is one of the things that makes Australia so great.

But the decision by the Baird government on Wednesday to retain red-tape barriers to becoming a hairdresser is the latest example of how unnecessary regulation deprives far too many Australians of the economic opportunity and fair go they deserve.

To legally operate as a hairdresser in NSW you need at least a Certificate III from TAFE (unless you are an apprentice).  The only other Australian state that has similar requirements is South Australia.

And getting this qualification isn't a walk in the park.  It can take years and cost thousands, making it out of reach for many on who are on a low income.

A discussion paper released by the government that looked into the issue floated two options:  retain and update or repeal the certification requirement.  All signs pointed toward repeal.

But unfortunately the Baird government decided against this and went with a third option:  leave things as they are.  No one would be happier with this decision than unions and industry lobby groups.

Premier Baird certainly understands the cost of red tape.  My research found red tape costs the economy $176 billion a year in lost economic output.  It is unfortunate the NSW government didn't take on an opportunity to get this number down.  But perhaps even more important than the economic costs are the disastrous effects this red tape, and others like it, have on some of the poorest in society, who need job opportunities the most.

By making it harder for outsiders to get a job, red tape on working bolsters the wages of workers who already have a job and props up industry profits.  It's little wonder that unions and industry groups were the most vocal in opposition to the changes.  But what is so shameful is that these higher wages come as a direct result of keeping others out of a job.

It is precisely those who don't have a job — or want a better one — who are in desperate need of opportunity and a fair go.  In the main they have lower incomes and are less educated than those who are certified.  And they are less likely to be able to afford education, or take time off work or from carers duties to find the time to study.

This red tape is disastrous for them.

Some claim this deprivation of economic opportunity serves a much more noble purpose.  The lobby groups tell us this red tape is for our own good — a necessary evil to uphold quality and safety.  This red tape is needed to save us from ourselves, they say.  But people are pretty discerning.  We know when we've had a bad haircut (and so does everyone else).  If you end up looking like Boris Johnson for a week you won't go back to that hairdresser.

But a large and growing body of research shows certification and licensing does nothing to improve quality and safety.  In fact, some studies show it actually worsens it.  Why?  Because red tape stunts competition, which is vital to keeping quality high and consumers safe.  No, this concern about quality, health and safety is just a masquerade put on by lobby groups whose members privately benefit from suffocating everyone else with red tape.

It is disappointing the Baird government didn't push ahead with these very sensible changes.

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Now not the time to retreat from health reform

The politically effective Mediscare campaign is a powerful reminder of Australia's growing reluctance to pursue health sector reform.

With the 2016 federal election result favouring the Turnbull government, the policy wonks are now busily absorbing the ramifications of a long, exhausting campaign for political supremacy.

But one thing was made crystal clear even before election night:  reforming healthcare is difficult, because a well-organised scare campaign can frighten off even the bravest of political souls from a desire to effect change.

And an effective health scare campaign can even nullify the most basic reform suggestion, such as investigating options to outsource Medicare payment administration.

Consider the fact that the modern public sector routinely engages the private sector to perform administration and other tasks, of varying degrees of complexity, associated with the provision of government services.

Given the highly specific nature of tasks performed, the extent to which scale economies exist in service delivery, and other considerations, there is, in reality, a rich assortment of organisational and institutional "ecologies" characterising the ways in which governments involve the private sector.

The management of information technology systems within various government agencies has been outsourced to private entities, or there is allowance for some degree of private involvement, together with protocols concerning the privacy of personal information.

Public transit systems in some Australian cities are operated under time-limited "franchising" arrangements organised between government departments and private service deliverers, and firms are involved in financing, designing, constructing and operating other infrastructure facilities.

Even the national disability scheme, a policy legacy of Julia Gillard and Bill Shorten, involves extensive for-profit and not-for-profit sectoral involvement in most aspects of service delivery.

It would be a tall order to claim perfection in every instance of private sector engagement with traditionally public sector services provision, but there generally doesn't appear to be widespread public fear and loathing about leveraging private finances and knowledge for better outcomes.

As mentioned over a decade ago by Australian public sector-reform expert Gary Sturgess, "as long as issues of quality, affordability and accountability are addressed, the public doesn't much care who delivers public services".

But, of course, the proviso added by Sturgess is that "the results seem to turn heavily on how the proposition is put".

The Bill Shorten-led Labor Party framed a very modest proposal being investigated by the Coalition, to potentially outsource Medicare's payments system, as a much greater proposition to transfer ownership of control over Medicare entirely to corporates.

Exit polls suggest this argument resonated with the many Australians who nominated healthcare as a major issue motivating their voting decision, but astonishingly the Liberal and National parties seemingly did barely anything to actually make the case for administrative change in Medicare.

Back-end Medicare and similar payment systems handle over $42 billion in payments, and process more than 600 million transactions, but there does appear to be ample room for improvement.

Recently published government documents obtained under Freedom of Information provisions noted, "the IT systems that support ... claims and payments are old, overly complicated, expensive to operate and change, and are in need of redevelopment".

Margaret Faux, in an impassioned defence of the Medicare payments status quo, conceded that Department of Human Services staff "struggle with their computer systems because they are old" while legislative provisions and billing rules become ever more complex.

As implicitly conceded by government itself, given the onset of online and other electronic mechanisms for processing Medicare rebates, the payment architecture and administrative processes can't stand still in light of technological and other changes.

Wanting to preserve the status quo on Medicare may have possibly motivated some voters to not choose the Coalition parties, but those same voters happen to be taxpayers and consumers who, in every ordinary circumstance, might want and expect better service delivery through the latest technologies.

Speaking more generally, the former head of the National Health and Hospitals Reform Commission, Christine Bennett, argued for modernisation of the health system because "health care is changing and we need our financing and policy systems to move with it".

What wasn't canvassed during the eight-week election marathon was the fact the current opposition, when in government, expressed an open attitude to the idea of reforming payment and information delivery systems.

A September 2009 discussion paper released by then human services minister, Chris Bowen, referred to "solutions sourced from the most efficient and effective means whether it be government and/or industry" as an enabling principle for reform.

The accompanying media release for the discussion paper indicated the discussion elicited by the former government aimed "to promote collaboration with industry on government payment and information delivery systems".

But rather than explain the need for a more technologically agile payments system, the Prime Minister said midway through the campaign that "every aspect of Medicare that is delivered by government today will continue to be delivered by government in the future".

There is arguably no more important area where a retreat from reform is so consequential, indeed so problematic, than in health care services delivery, given the demographic and fiscal pressures to maintain affordable, quality outcomes for all Australians over the years to come.

Affording the opposition a free kick on the question of how to manage the Medicare payment system, the government has unwittingly bowed to the health bureaucracy and provider interests intent on keeping Medicare encased in amber.

This follows the back-down from very modest reform proposals outlined during the previous term of government, such as introducing co-pays for general practitioner services.

The political consensus is that voters have given Medicare outsourcing the thumbs down for now, even if that judgment was based on political spin.

By the same token, voters also reserve the right to change their minds and, so, it is incumbent upon government to keep pressing the case for reform.

The government should point out the advantages of participation in public services provision by for-profit and not-for-profit entities, as already illustrated, for example, by the extensive role of private hospitals in the medical treatment of millions of Australians.

The Turnbull government should also impress upon voters that when it comes to public services provision "what matters is what works" in the end, even if that necessitates some form of private sector engagement.

If the Turnbull government can do this with conviction it should find the tables turned upon its political adversaries, who must bear the fatigues of defending the status quo of rising health costs, antiquated administration, and less-than-satisfactory outcomes.

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Potential Rorting A Warning For PaTH Program

Allegations of potential rorting of the Victorian Labor government’s ‘Back to Work’ scheme is a warning shot across the bow of the re-elected Federal Coalition government’s own wage subsidy program.  Getting people into work is a laudable aim, but governments of all persuasions need to be careful of rent-seekers lining up to line their own pockets.

The announcement of a “new and ambitious” employment program in this year’s federal budget sounded oddly familiar.  It seemed that the Turnbull government had discovered Victorian Labor’s 2014 election platform.

A promise to create 100,000 jobs over two years was at the centre of Labor’s pitch to make Daniel Andrews the next Victorian premier.  The flagship ‘Back to Work’ announcement included a $100 million fund for wage subsidies of up to $1000 for business that hire unemployed youth, long-term unemployed or retrenched workers.

Similarly, the Coalition’s Youth Jobs PaTH (Prepare, Trial, Hire) program aims to help 120,000 young people take advantage of employment opportunities — a key policy conforming to their election mantra of “jobs and growth”.  The $751.7 million package includes upfront payments of $1,000 to businesses that take on interns, and wage subsidies of between $6,500 and $10,000 to businesses that hire those interns on a permanent basis.

There is no doubt that youth unemployment is a major problem.  According to the ABS, the national youth unemployment rate for May 2016 was 12.4 per cent — more than double the national adult rate of 5.7 per cent.

We need new ideas to tackle this problem.  However, the Victorian Labor government’s strategy of wage subsidies simply hasn’t worked.

Figures from Victoria’s State Revenue Office revealed that only 164 claims were made under the ‘Back to Work’ scheme between July and September 2015.  In response to the slow start, the Victorian government increased payments to up to $12,000.  Fast forward to July 2016 and the scheme is apparently “fully subscribed”.  This is curious given that only about $40 million of the $100 million fund has been spent, and 12,000 jobs had been supported by the wage subsidies — making Victorian Treasurer Tim Pallas’ “stretch target” of 100,000 jobs look like quite a stretch indeed.

Where has all the money gone?  Time will tell, with the Victorian Shadow Treasurer Michael O’Brien alleging rorting, and has written to the Victorian Auditor-General requesting a full investigation.  Allegations that the scheme has been rorted are not surprising.  Rent-seeking is much easier than running a profitable business.  Besides, the subsidy offer provides a powerful incentive for businesses to fudge the paperwork to fit the eligibility requirements, particularly when combined with a government desperate to make its policy a success.

There is no value in these programs if they displace jobseekers that would have been hired without a subsidy, or if employment ceases as soon as the subsidy ends.  For example, a departmental review of an existing Commonwealth program in 2012 found that “81 per cent of employers reported they originally intended to keep employees indefinitely, in practice only 57 per cent intended to retain the employees at the time of the survey”.

There are fundamental questions for the Commonwealth government to confront.  How can the Federal government’s scheme succeed where the Victorian government’s failed?  What safeguards will be put in place?

On budget night Treasurer Scott Morrison said “we must do better than this.  We must try new approaches, not just keep doing the same old thing”.  The problem with the PaTH program is that wage subsidies have been tried, and the problem of youth unemployment has persisted.

The Turnbull government could use its second term to champion a new approach to employment policy by opening up uncompetitive labour markets.  It will be far more difficult than throwing money at the problem.  But it would be in stark contrast to their opponents in Labor and The Greens who would prefer to retain an out-of-date regime that continues to lock young people out of work.

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Malcolm Turnbull Is Set On Making Super Another ETS Moment For Himself

In 2009 as the leader of the opposition Malcolm Turnbull supported the introduction of an emissions trading scheme.  He maintained his support for an ETS in the face of overwhelming opposition from the grassroots members of his own party, and against the grave concerns of many of his parliamentary colleagues.  It did not end well for Turnbull.

Seven years later, superannuation does not need to be, and should not be, another ETS-like moment for the Prime Minister.  If he’s as determined as he says he is to increase taxes on superannuation and throw into disarray the retirement plans of hundreds of thousands of Australians, the least he can do is make a commitment to listen to their concerns.

The Coalition’s superannuation changes were made in the rush of a budget and an election campaign.  Prior to budget night Coalition MPs, and for that matter the public, had no inkling the PM and his Treasurer were planning to break the Coalition’s 2013 election promise not to make any adverse changes to superannuation.  It was a promise the Treasurer repeated almost up until the time he announced he was going to break it.

The Coalition has convinced itself superannuation played no role in the government’s near demise at the election — but three different polls and surveys say something different.

During the election campaign Turnbull was hamstrung from attacking Labor’s higher taxes on capital gains because he was proposing tax increases of his own.

There’s absolutely no reason why any final decision on the Coalition’s superannuation policies must be reached at Monday’s meeting of Coalition MPs.  Given the PM has promised he won’t make any more changes to superannuation after these current changes, if the government is deciding on policy settings it hopes will last for years to come, the details of the policy should be the result of more than a five-minute discussion.

It is bizarre the Coalition is attempting to portray its imposition of higher taxes as “reform” and that a Liberal Party Prime Minister appears to want to make his desire to increase taxes a test of his authority as leader.

The government says higher taxes on superannuation are “broadly accepted by all sections of the community”.  That’s debatable.  In any case the policy elites of Greece, Italy and Spain all think higher taxes are a good idea too.

The government also claims its changes are necessary to repair the budget.  But any administration that really wanted to achieve budget repair would focus on government spending.

Over the next four years, Commonwealth government revenue from taxes and other receipts will increase from 23.5 per cent of GDP to 25.1 per cent of GDP.

Meanwhile spending will only fall from 25.8 per cent of GDP to 25.2 per cent of GDP.  No one can call that “budget repair”.  And even if this small reduction in government spending is achieved, the government will still be substantially larger than it was prior to the GFC.  The truth, which the government won’t admit, is that what little budget repair there is, will be accomplished by raising taxes, not cutting the size of government.

To get an indication of what real budget repair looks like we can go to the United Kingdom.  In 2009 UK government spending as a share of GDP was 49.6 per cent.  Last year that figure was 43.2 per cent.

Beyond the issue of superannuation, there’s a much bigger question — and it goes to trust.

When politicians break their promises they lose the trust of the public.  First there was Julia Gillard’s carbon tax promise, then there was Tony Abbott’s “no cuts to education and health” promise.  Now there’s superannuation.

Ian McAllister, a professor of political science at the Australian National University who operates an extensive program of surveys of voters, has argued convincingly that the electorate’s trust in politicians is collapsing.  One manifestation of that collapsing trust is the growing vote for non-traditional political parties.

Labor’s claims during the election campaign about what Turnbull would do to Medicare were outrageous and wrong.  But unfortunately they fell on fertile ground.  The PM was asking the public to believe the Coalition’s promise on Medicare even though the Coalition had just broken its promise on superannuation.

As McAllister has said “Voters don’t forget these things.  Labor’s success with the ‘Mediscare’ campaign has to be seen in context.  People saw a history of broken promises.”

Broken trust risks feeding into a cynicism about the processes of democracy itself.  Forty per cent of Australians think it makes no difference which party wins the federal election, and nearly half believe their vote doesn’t matter.

For reform to succeed there needs to be trust between the politicians and the people who elect them.

Reform inevitably takes the public into the unknown because reform is change.  If you’re going to follow someone into the unknown you need to trust them.

If the Coalition goes ahead with its proposed tax increases on superannuation it risks destroying for a generation the opportunity for any real economic reform.

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Britain’s First Post-Brexit PM Theresa May Will Be Tested

Theresa May is Britain’s new prime minister.  Should we “Keep Calm and Carry On” or hit the panic button?

The initial reaction from markets and the British political establishment has been a collective sigh of relief.  Markets and institutions value certainty of political leadership and they reacted positively when May became PM.  May triumphed when the other candidate for the premiership, the relatively unknown Andrea Leadsom, pulled out of the race on Monday.

Under May’s leadership, Britain will undergo its most significant period of change since World War II.

So what can we expect of May, up until now the UK’s longest serving Home Secretary of the modern era?

No-nonsense, loyal and tough are words used to describe her by supporters.  Cold, aloof, a micromanager and risk-averse say her detractors.

May is clearly resilient and hard working.  She survived six years at the helm of the notoriously tricky Home Office (immigration) portfolio, which had been a career death spiral for many predecessors.  She developed a reputation for toughness on counter terrorism and countering violent extremism.

May earned her stripes with the public for her tough stance against hate preachers in the UK, personally negotiating an extradition agreement with the Jordanian government to rid the UK of Osama bin Laden’s deputy in Europe, Abu Qatada.

But she failed in her promise to limit immigration to the UK;  there was nothing she could do about EU migration to the UK under the EU’s freedom of movement requirement.  In 2015, 270,000 EU migrants decided to call the UK home.  Given border control was such a galvanising issue in the Brexit referendum, May will need to deliver a much better result for the UK in its exit negotiations with the EU.

Efforts to compare May with Britain’s only other female prime minister, Margaret Thatcher, may be misplaced.  Gender aside, May and Thatcher are on opposite ends of the Tory ideological spectrum.  Thatcher’s New Right championed free markets and the aggressive pursuit of British interests, while May is a Tory moderniser or One Nation Conservative.  In 2002 May called for the Conservative Party to distance itself from its Thatcher-era reputation as the “nasty party”.  Rather, May, like former PM David Cameron, favours compassionate conservatism, social justice and consensus-building.

Early indications are that May will be less free market and more interventionist than Cameron’s government.  She has called for caps on executive salaries and the appointment of employee representatives on company boards.  Those policies play into a populist anti-big business agenda and presumably are designed to set May up for the General Election in 2020.  But they will terrify those voted Leave to free Britain of the EU’s anti-competitive, red tape-heavy and big government agenda.

Critically, May did not support the Leave campaign in last month’s referendum.  She was a Remainer, although not vocal enough to rule herself out of the prime ministership.  In her campaign pitch for the leadership, however, May was unequivocal about her commitment to Brexit.  She needed to do that to be a credible candidate.

But her former position on Brexit does beg the question:  will the 17.4 million Britons who voted for Brexit have confidence in a leader who didn’t support their side?

Key to May’s success will be healing the internal rifts in the Conservative Party.  That means including prominent Brexit campaigners like Boris Johnson in her Cabinet.  Those who supported Brexit will expect nothing less, as many are devastated by Johnson’s failed attempt to secure the top job.

An important appointment will be the minister responsible for the Brexit negotiations.  Again, Brexit supporters will expect a Leave campaigner to get the job:  surely only someone who deeply believes in Brexit should spearhead these negotiations.

It will be critical for May to have a clear plan for what sort of relationship Britain wants with the EU, and the rest of the world, before invoking Article 50 and starting the two-year countdown for the exit negotiations.  That includes what sort of trade relationship Britain will seek with the EU, including the nature of its access to the single market, especially in the services area which forms the bedrock of the UK economy.

May’s government must also prioritise fast-tracking trade deals with the United States, Australia and the Asian powerhouses such as China.

A sticking point for May will surely be immigration.  The referendum result made clear that Britons want to decide who comes to their country and the circumstances in which they come.  May cannot countenance completely free migration from EU countries to the UK as it would be a betrayal of the British public.

Working all this out will take time and patience and every bit of negotiating nous in the face of the strong urge among many in the EU to punish Britain for leaving.  That is a childish approach as common sense would dictate that EU leaders should seek the best deal for the bloc, rather than carry out petty vendettas.

But it’s a real risk when one considers the EU’s leadership of ideologues lacks the accountability and democratic sensitivities that one expects of Western leadership.  And that’s another reason the UK will be better off Out.

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A Pokemon in the eye for nanny state

A new app is doing what years of nanny state programs and millions of wasted taxpayer dollars failed to do — get people outside, on their feet and living healthier lifestyles.

Pokemon GO was released only last Wednesday and is already the most popular mobile application on iPhone and Android.

The game puts players in augmented reality, based on real world maps, where they can search for and discover Pokemon.  Players can also collect items and battle each other.

Here is the catch:  you cannot stand still.  The game requires players to get active, to leave their homes and walk the streets to find additional ­Pokemon and gyms (where you battle other players).

Traditionally, the wowsers told us that video games make us fat, now the opposite is coming true.

According to the Australian Bureau of Statistics, 44 per cent of Australian adults do not get sufficient physical ­activity, and 63 per cent are overweight or obese.  Despite rising expenditure on public health efforts, the obesity rate has not changed in the past five years, and has increased from 56 per cent in 1995.

The nanny state ­response has been to propose paternalistic, ­illiberal, and largely ­­ineffective means to force change in human ­behaviour.  It has sought taxes on soft drinks, bans on junk-food advertising, graphic warning labels for unhealthy food and subsidies for gym memberships.

All these efforts pale in comparison with the impact ­Pokemon GO has had in just the past week.

Players are walking kilometres they would otherwise not have done, playing the game for hours and hours at a time.

Thousands of Australians are getting active, thanks to an ingenious new mobile application, not some grand government scheme.

Users have also reported the fun and excitement of the game is also helping their mental health.

Pokemon GO is the perfect case of the market satisfying both a personal need — entertainment — with an added social benefit, that is encouraging a more healthy lifestyle.

This is not the first time the market has helped address health issues.

Fitbits count steps and encourage wearers to set targets, with the added enticement of competition among friends.

Supermarkets now have special health food sections, providing customers with more options than ever before to improve their lifestyles.

We also have gyms dotted throughout our cities and suburbs to help people exercise.

The market produces countless individual and wider benefits, helping make the world a better place.

The USB flash drive is not just a helpful file transfer tool, it has saved more trees than Greenpeace.

E-cigarettes provide a substantially healthier alternative to traditional ­tobacco products, helping people quit the old habit.

And in the not-too-distant future self-driving cars have the potential to help reduce road fatalities to near zero.

Rather than focusing on how a ­government program can help address a social problem, we should think about the power of private initiatives to help humanity.

The market has extraordinary ­capacity to deliver us not only the goods and services we want and need today, but to encourage innovation and entrepreneurship that makes the world a better place.

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Populism is not a dirty word

The political news right now is Malcolm Turnbull's tenuous hold on government.

But tight elections aren't unusual.  The real significance of the 2016 election is how it reveals the growing dissatisfaction with the political class and mainstream parties.

This is a thread that links the support for Nick Xenophon and Pauline Hanson in Australia with the support for Donald Trump and Bernie Sanders in the United States and for Jeremy Corbyn and Brexit in the United Kingdom.

It's easy to dismiss these movements as "populist".  That word has already been spat out hundreds of times on panel shows and through the quality media since last weekend's election results began to come in.

But "populist" is a strange insult in a democracy.  Democracy is a system by which we come to agree as a group about how we live together.  It has lots of flaws.  The idea that the conclusions it comes to are too popular — too widely accepted — surely aren't one of them.

To call a politician or political movement populist is a dodge.  A comforting, revealing dodge.  An admission that the speaker sees the consent of the governed as a frustrating hurdle, rather than the reason parliament exists in the first place.

But even more than that, it's deeply condescending.  Yes, they're less polished.  They're less refined.  But those apparently dangerous and unacceptable populists deploy much the same arguments and same rhetoric as the major parties.

Consider their approach to foreign investment.  Nick Xenophon and Pauline Hanson both want to "take back the farm" and make it harder for foreigners to buy Australian assets.  This could have catastrophic economic consequences.  Australia needs international capital.

But then again the major parties have been telling us that foreign investment is risky, even dangerous, for years.

The Coalition government has been running a crackdown on foreign investment in housing.  It prevented the sale of the cattle station Kidman & Co to a Chinese company.  It blocked the American firm Archer Daniels Midland from buying GrainCorp.  Kevin Rudd made foreign investment scepticism a key plank of Labor's 2013 election bid.

So if it is agreed by all parties that foreign investment is a bit of a problem, why would anyone vote for a major party whose concern for this issue seems only skin deep?  Why not support a minor party that takes the concerns more seriously?  The majors make the argument, and the minor parties increasingly grab the votes.

Likewise free trade.  The Coalition government signed some important free trade agreements that are important for the future of the Australian economy.  The Labor Party professes support for trade as well.

But too often those free trade agreements are presented by the political class as extracting concessions from foreign countries for Australian exporters, rather than allowing us to import goods cheaper and thereby raise our living standards.

The Labor Party used the Trans-Pacific Partnership for a scare campaign about Chinese workers being brought into the country.  When Qantas moved its operations into Asia a few years back, the Transport Workers Union screamed that the company was being "Asianised".  Who does that sound like?

The Nick Xenophon Team wants the next government to directly support struggling companies — particularly the Arrium steelworks in Whyalla.  On the one hand this flies in the face of every basic principle of sound economics, representing a transfer of wealth from taxpayers to public companies.  On the other hand the major parties do that sort of stuff all the time.  The Napthine government handed money to SPC Ardmona after the Abbott government refused.  The only jobs plan either major party has for South Australia is to pay South Australians to build submarines.

In other words, no major political party has been making the argument for free trade, foreign investment and market competition.  Yet now they blame the voters for being anti-market.

Major party strategists will tell you quietly that they have no choice but to take "populist" positions.  Only the impotent are pure and all that.  If the voters want protectionism the parties need to deliver it.

But this belief confuses policy means with policy ends.  Do voters want higher tariff schedules, or do they want jobs and a sense of economic security?  Do voters want lower immigration quotas or employment opportunities for their children?

The Australian public cannot be expected to know every detail of every policy, or the voluminous literature on trade and migration.  They have families and businesses to worry about.  But the protectionist and interventionist economic policies attracting people to the minor parties won't protect jobs.  They will hurt jobs by slowing the economy.

Basic economics can be counter-intuitive.  It needs to be argued for.  No major party is making that argument.  They're fudging and hedging, trying to be all things to all people, never committing, constantly doing one thing and saying another.  No wonder people are voting for something else.

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A treaty with first Australians is divisive and dangerous

The concept of a treaty with Aboriginal and Torres Strait Islander peoples is illogical and divisive.  The current push for such a document is misguided, and should be abandoned.

It's difficult to think of another policy idea that has taken hold with so many people with so little thought.

Bill Shorten backed the idea on national television.  University academics have endorsed a treaty.  Newspapers have editorialised welcoming the concept.  The striking thing about the discussion is that there's so much of it but so little actual engagement with what it means that it has failed to grasp the fact that the most basic requirements for a treaty simply do not exist.

This is symbolism over substance at its absolute worst.  Promising better prospects for some of Australia's least well off without having any evidence that this proposal could achieve such a future is wicked.  But the idea of a treaty does not just hold out false hope.  It is also a highly divisive and dangerous idea.

You do not have to be an expert on the Vienna Convention on the Law of Treaties to understand that a government entering into a treaty with a group of its own citizens is legally nonsensical.  Treaties are legal documents entered into by two or more sovereign states.

Individuals or groups of individuals simply do not have capacity to enter into this form of legal arrangement.  Capacity is a legal term that many will be familiar with in the context of contract law.  It is the legal concept which dictates that children are unable to sign a valid contract.

But capacity also has application in the area of treaty law because only sovereign states can enter into treaties.  An individual may sign a treaty but only on behalf of a sovereign entity.

In the context of a potential treaty with Aboriginal and Torres Strait Islanders, there is no second sovereign state.  We are all Australians — indigenous and non-indigenous.

The only way the concept of a treaty makes any sense is if it is coupled with secession.  Although this part of the equation is not often talked about it was hinted at by an audience member when the Opposition Leader was on ABC's Q&A before the election.

An Aboriginal sovereign state is not an idea that will gain much traction in Australia.  Part of the reason for this is that Australians recognise that many of the problems faced by Aboriginal and Torres Strait Islanders have been caused by treating Australia's indigenous population as separate from the rest of us.  Rather than addressing Aboriginals as individuals, many policies have lumped them together and tried to apply one-size-fits-all solutions.  No idea is more offensive to our egalitarian instincts than dividing Australia according to race or ethnicity.

Even setting aside the sovereignty question for the sake of the argument gets us no closer to resolving all the problems associated with this ill-considered proposal.  Who speaks on behalf of Aboriginal people?  Even if such a person or a group of people could be identified it is still unclear whether a single treaty covering all indigenous Australians would be sufficient.

Before European settlement in Australia there were a large number of Aboriginal nations — perhaps as many as 700 — that occupied the land mass now known as Australia.  A not unreasonable question is whether separate treaties are required for each nation still in existence today.

These are the initial hurdles proponents must clear before we get to the central question at issue with any treaty:  what goes in it?

Much of the discussion about the content of a potential treaty has involved a ramping up of existing indigenous policy areas — land rights, self-determination, and language and cultural issues.  Apart from lacking any creativity, this approach fails to recognise that past policies have not achieved the outcomes they set out to.

Moreover, every policy area proposed as content to any treaty will be debated just as passionately as indigenous policies are debated today.  A treaty doesn't circumvent the democratic process.

Advocates for a treaty are attempting to solve a complex conceptual problem with an even more complex conceptual mechanism.  It's a recipe for failure.

As demonstrated here, a treaty makes no conceptual sense.  The very idea is legally unsound.  But there is an even more fundamental reason for abandoning the pursuit of a treaty:  it seeks to divide Australia.

Both a treaty and constitutional recognition of Aboriginal and Torres Strait Islanders will be rejected for the same reason:  they would entrench division, rather than seeking to unify us.  Policies that separate one group of Australians from another are not ideas that represent the country that Australia is and should continue to aspire to be.

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Protectionists do Australia no favours

The federal Parliament is now stacked with politicians peddling anti-globalisation agendas contrary to Australia's interests.

The underlying motivations for the Turnbull government to call the 2016 election, refilling the upper house with compliant legislators but maintaining a stable working majority in the lower house, have backfired spectacularly.

At the time of writing the government believes it will scrape back into office with a wafer-thin house majority, but this outcome is contingent on pre-poll and postal vote counting for marginal seats still under way.

But it is clear the Coalition's political strategy to shake out the Senate minor parties has utterly failed, with the upper house still very much resembling a Tatooine bar scene.

At the head table in the Senate bar of the politically wild and wonderful sits independent Nick Xenophon and his new South Australian colleagues, who will be most determined to flex their legislative muscle over the next three years.

And of even greater concern is that the deeply xenophobic Pauline Hanson has returned to the federal political scene, thanks to much-reduced quota threshold for election to the Senate this year.

Of course, economic nationalism has a long habit for making strange bedfellows given that the sizeable Greens bloc in the Senate join with Hanson and Xenophon in opposing additional flows of goods and capital across political borders.

When it comes to the House of Representatives it is difficult to overlook the potential influence of the virulent protectionist from North Queensland, Bob Katter, as well as Nick Xenophon Team's new MP Rebekha Sharkie.

Election campaigns often set the tone for the subsequent term of government and its policy agenda, and the reality is most of the political debutants want to roll back globalisation as a basis for Australia's future economic success.

One can only imagine what potential investors based in London, New York or Shanghai might think about their future prospects for doing lucrative business in Australia, given the scrum of politicians so blatantly against the very concept of freedom of trade and investment.

Anti-globalisation crept into the election campaign through the expression of a political desire to protect certain domestic industries from import competition, irrespective of the cost to capital-importing industries and consumers alike.

Much of the protectionist push was centred upon a concern to bolster South Australia's flagging steel production, with suggestions during the campaign to prop it up with subsidies, local content regulatory requirements, and other unwarranted favours.

The campaign promise by major and minor parties alike to build a submarine fleet here can also be interpreted as a protectionist measure, and not just for the sake of politically shoring up the Coalition in marginal South Australian seats.

After all, building submarines domestically means that more efficient and more cost-effective alternatives, built overseas, are not contemplated as part of a sound defence policy.

Going even further, Nick Xenophon has previously warned he may use his numbers to withdraw Australia from the Trans-Pacific Partnership Agreement, look to review recent free-trade deals with China and Japan, and look for more punitive approaches against cheap imports.

Returning to protectionism will wreak great economic harm to Australia as an island-trading nation whose costs could be magnified if Xenophon and the other anti-globalisers dissuade the Turnbull government from pursuing freer trade with a Brexiting United Kingdom.

Another player in the new Senate, Pauline Hanson, has enunciated throwback economic policies that would artificially expand the relative size of the Australian manufacturing sector at the expense of other industries and at the risk of suppressing domestic competition.

Her policies include the reintroduction of tariffs, prescriptive product-labelling regulations, and vague, but surely expensive, commitments to strengthen "public, financial and other institutions in order to protect and stimulate industrial development".

But for a modern nation built upon the influx of people from all corners of the Earth, and with embodied human capital representing a major driver of economic growth, it is even more tragic that Hanson seeks to radically reduce Australia's immigration intake to a trickle.

In the coming months and years it is likely to become increasingly important to ask from whence do these retrograde ideas come.

It seems some segments of the voting population feel their interests are not advanced by cross-border trading and investing relations, which is most ironic considering the huge extent to which Australian consumers have particularly benefited from globalisation.

A related aspect of anti-globalisation sentiment is that some residents feel discomfort with even the innocuous notion that people originating from other parts of the world just might perceive Australia to be an attractive place to want to live and work in.

More fundamentally, there remain erroneous attitudes to the effect that globalisation is a zero-sum situation in which some win, some lose, and most often in the sense that freeing up trade or immigration somehow leads to job losses.

Regardless of the sources of the anti-globalisation strains of thought, what is concerning is that heightened levels of discontent against global flows of capital, goods and people are being manufactured by the political class at a time when it is least afforded.

And the major parties are certainly not off the hook here, given their penchant in recent years for foreign investment restrictions on state-owned enterprises, foreign investor land registrars and special taxes on international property investors, discriminatory procurement regimes, and anti-dumping bureaucracies.

The reality is the Xenophons, Hansons and the Greens of this world seek to advantage themselves by fomenting anti-global sentiments, and even the major parties have indulged in such conduct when politically convenient.

But such political conduct borders on the unconscionable, given the harmful effects of trade, investment and labour barriers in holding back wealth and prosperity for ordinary people.

The price of economic liberty is eternal vigilance, and so sensible economic reformers in the Australian Parliament must partake in fresh efforts to counter the ill-feelings and resentments whipped up against globalisation.

Those amenable to globalisation can point to the empirical benefits of freer trade, investment and immigration, and refer to powerful case studies showing how average Australians gain in a globalising world.

It will also be important to demonstrate that Xenophon, Hanson and company arrogantly presume to know best about who their constituents should economically engage with, and where they ought to come from.

But do the pro-globalist economic reformers left standing in Parliament in the wake of the 2016 election have the courage and nous to win the argument?

For Australia's sake, let us hope so.

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Where did it go wrong for Turnbull? The budget

How did it all go wrong for Malcolm Turnbull?

The Coalition may be returned to government yet, either as a minority or a majority.  But it's hard to deny that what we saw on Saturday night was partly the result of a strategic miscalculation.

The eight week campaign was held at the time of the Prime Minister's own choosing.  The Government had to make some almighty efforts to do it.  Senate voting reform had to be passed.  Double dissolution triggers had to be lined up.  Parliament had to be prorogued.  The budget day had to be moved.  Scott Morrison had to write a budget that both served as a steward of the Government's finances and a political campaign document.

Almost none of this worked as planned.  The campaign — particularly its slow, strange, uncertain first month — only reinforced the impression that the Turnbull Government was dithering rather than driving.

The Senate reform was supposed to clear up the supposedly feral crossbench.  Now it looks to be delivering at least as diverse an upper house as the previous term, but one that might be more hostile to the Coalition than what it replaced.  Already it is clear that a joint sitting is unlikely to pass the double dissolution triggers.

But the biggest problem with this plan was the budget.  Some of that was about timing.  The Coalition found itself in a messy argument with its own supporters about its retrospective superannuation changes at the very same time it ought to have been energising the centre-right to defeat Labor.

The superannuation argument dragged on and on.  This might have been predictable.  Superannuation is a complex policy.  It takes time for the downstream consequences of complex policies to spread, first to be identified by specialists and for their findings to flow through to the mainstream media.  Julie Bishop was tripped up by the "transition to retirement" issue four weeks after the budget.  The ABC ran an explainer on transition to retirement on June 2.

Imagine how frustrated Coalition strategists must have felt as they found themselves debating budget details with their own fundraisers halfway through an election campaign.  As Denis Shanahan pointed out on election night, this issue has been an internal policy issue within the Coalition for eight weeks straight.

Of course superannuation did not swing the election.  But superannuation is a particularly sensitive example of the Turnbull Government's broader economic problem — and speaks to the policy reasons the Government has found itself in such an ambiguous parliamentary spot.

Budgets frame Australian politics.  They are the filter through which policy is conceived and announced.  The 2016 budget failed to give the Turnbull Government's economic story the depth it needed.  The Coalition made a pitch for economic certainty.  They asked voters to "stick to the plan".  What plan?  "Jobs and growth" is as much a catchphrase as anything Tony Abbott ever said, at least without a coherent policy agenda to back it up.

Looking at the budget papers with the benefit of hindsight is revealing.  What is marketed as the National Economic Plan for Jobs and Growth is barely distinguishable from anything a Labor government might propose:  infrastructure spending, trade agreements, wage subsidies, defence spending, and hitting high income earners.  To the extent this constitutes a "plan", then every budget that spruiks minor policy adjustments and boondoggles is a plan.

The real point of difference with the Labor Opposition is barely detectable in the budget glossies.  One of the Coalition's few budget announcements that actually speaks to its jobs and growth mantra is the company tax cut.  But the Government has been embarrassed by it.  During the campaign the Coalition spruiked the small business tax cut more aggressively than their broader, better policy.

Perhaps Turnbull would have liked to talk about the company tax cut more.  There are ideas and concepts that speak to him personally, and they work neatly together:  jobs and growth, innovation, global competitiveness, digital technology, disruption, entrepreneurship.  Turnbull is visibly giddy when inspecting cutting edge technology firms.

But not everybody works for cutting edge technology firms.  Everything he says in this context is correct — the economy is undergoing a major transformation, technological change will define the future of work, we need to be smart, we need to be agile.  But Turnbull has neither been able to translate his genuine enthusiasm into an electoral coalition, nor been able to devise a policy agenda that would suit these changes.

That is a great disappointment.  Political drama, with its narcissism and bloodletting, tends to overshadow everything.  But as the two parties vie for government, the Australian economy faces the same fundamental structural challenges it did eight weeks ago.

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Saying you have a plan isn't enough to win an election

It is not enough to say you have a plan for a strong new economy.  You actually have to have one.  And it has to be simple enough to sell to the average voter.

That means cutting taxes, not increasing them;  cutting government spending, not increasing it.

This is the clear message voters have sent to the Coalition following the weekend's shock result for the incumbent government.

At this stage, it looks as though the Coalition has lost at least 12 seats, with others still too close to call with pre-poll and postal votes yet to be counted.  The Coalition may still hold government in its own right, but with potentially 76 seats out of 150 it is looking like Malcolm Turnbull will remain prime minister by only the slimmest of margins.

So what went so wrong for the Coalition during this election campaign?  There is no doubt the mantra of "jobs and growth" was the key Coalition message of the 2016 federal election campaign.  It's telling that if you ask people what the Labor party's key message was it does not always elicit a clear response.

The Coalition's success in hammering home a message was a strength of its campaign.  But this clarity of messaging disguised an economic policy that was too complex to explain — even in a marathon eight week election campaign.

Simplicity is one of the most underrated aspects of good policy.  When it comes to communication, it's widely accepted simple is best.

Concise messages are more easily digested.  This is the reason why we hear three word slogans from politicians over and over.  But too often in politics simplicity is quarantined in the area of communications.  Too many policy wonks fall into the trap of believing that complexity is a marker of intelligence.  The more nuances you can build into a policy the more sophisticated you'll seem.

It's a trap that Turnbull and the Coalition were unable to avoid in this campaign.  Matching an easily understood policy platform to the elegant simplicity of the jobs and growth tagline should have come as second nature to Liberal politicians.  The values of the party so clearly align with policies that lead to higher growth and more jobs.

Problems arise for the Liberal Party when it strays from the principles on which the party was founded by Robert Menzies in 1944.  State and federal Liberal governments tend to fall when they forget they are a party based on individualism and entrepreneurialism.  This loss was the key factor behind the Victorian Coalition government's loss at the 2014 state election.

In the case of the Coalition government, the economic reform agenda was confused and complicated.  Every policy put forward by the Coalition should be directed at cutting government spending, cutting taxes, and growing the economy.  It is not enough just to pay lip service to economic rationalisation.

Having the right ideas is worthless if you are unable to express those ideas in the form of policy.

The Coalition talks about cutting spending.  But it took countless new spending measures to this election.

The Coalition hopes to increase government spending over the next four years by $57.6 billion.  Of course, the Labor Party is far worse (it made more than $16 billion of new spending commitments during the course of this campaign alone) but the Labor Party doesn't pretend to care about debt or deficits — they are the traditional party of higher spending.

And that is precisely the point.  If you tell voters you are going to cut spending, cut taxes and grow the economy then you better have a policy platform that does those things.  Failing to do that might make you look like a tax and spend government.  And if that's the choice presented to voters don't be surprised when they opt for the experts.

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Election 2016: Super changes bad policy, bad politics

Exit polling from Saturday's election revealed 37 per cent of voters rated the Coalition's superannuation tax increases a "very important" election issue.   It was the fourth most important issue behind Medicare, education and the budget.   Superannuation came ahead of changes to negative gearing, and two issues that were supposedly Coalition policy strengths — building unions and company tax cuts.

The Coalition's superannuation tax increases announced on budget night in May were bad policy and bad politics.   It's now obvious that Malcolm Turnbull and Scott Morrison got superannuation very, very wrong.

At a policy level, the Coalition's proposals could have the effect of in the long term putting more people on to the government age pension.   Individuals will make the entirely rational assessment that if both parties are willing to change well-established rules and levy higher taxes on it, then superannuation is not a safe investment.   This is particularly the case when the rules are changed retrospectively — which is what happened.

The politics of superannuation is what we saw unfold on Saturday night.   The claim by its strategists that the Coalition could raise taxes on superannuation with impunity because only the "rich" were affected has exploded.

Significantly the exit polls show superannuation was regarded as a very important issue by a higher proportion of Labor supporters (38 per cent) than Coalition supporters (36 per cent).   Many more people than just the "4 per cent" of account holders the government was claiming would be affected by its changes were worried about superannuation.   The changes to transition-to-retirement schemes impact on hundreds of thousands of voters, many on incomes less than $100,000 a year — and many of whom live in marginal seats.

The Coalition tried to neutralise the negative politics of its superannuation tax increases by claiming the only people hurt by them were Coalition supporters — the so-called Liberal Party base.   As ham-fisted political strategies go this approach of a political party attacking its own supporters took the cake.   Anecdotal evidence from around the country was that large elements of the "base" declined to donate their time or money to the campaign.

The anecdotal evidence is also that the Coalition succeeded in making a bad situation worse by refusing to listen to the concerns of its supporters and dismissing out of hand any suggestion that the policy should be modified.   When during the campaign the Liberals' deputy leader, Julie Bishop, hinted there could be changes to the policy after she made the sensible (and obvious) comment that the government would listen to "feedback on any unintended consequences" she was slapped down by the PM who categorically ruled out any back-down.   This was despite the fact the PM was quite willing to back down on budget changes to the taxation of backpackers after complaints from regional MPs.

The political symbolism of the Liberals increasing taxes on self-funded retirees was diabolical.   Ever since Menzies founded the Liberal Party, one of its fundamental tenets has been that those that work, and save, and plan for the future should be encouraged.   Anyone who can afford to be a self-funded retiree has most probably been paying the punitive top marginal rate of personal tax for much of their working life.   For the Liberals to burden these people with yet higher taxes on superannuation was regarded by retirees as betraying a lack of understanding of how much tax they've already paid prior to their retirement.

Breaking an election promise and raising taxes on superannuation is not what many Liberal Party members thought Turnbull would do when in September 2015 he challenged Tony Abbott for the party leadership and vowed to give the country "the economic leadership we need".

Many Coalition supporters believe the economic leadership Australia needs requires lower taxes, less red tape, and a smaller government.

After Saturday's result it remains to be seen whether Turnbull is in a position to deliver on any of those things.

We'll never know how much of the record high vote for conservative parties other than the Coalition was the product of the Coalition's superannuation policies.   But it would be foolish to suggest that the Coalition's plans to impose higher taxes on superannuation had no impact on the election outcome.

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