The Disappearing Australian Working Man

INTRODUCTION

In Men Without Work:  America's Invisible Crisis, American Enterprise Institute fellow Nicholas Eberstadt takes a close look at the rapidly growing cohort of American men who are out of work.

Eberstadt argues that the overemphasis of economists and policy-makers on the official unemployment rate is hiding the true state of joblessness in America.  This is because the unemployment rate measures only the proportion of the labour force that is out of work.  It does not account for the growing number of Americans who are leaving the labour force altogether and therefore do not figure in unemployment data.

The shrinking American work force is a problem that particularly affects men, a trend that has worsened for decades with no end in sight:

In the half century between 1965 and 2015, work rates for the American male spiralled relentlessly downward, and an ominous migration commenced:  a "flight from work", in which ever-growing numbers of working-age men exited the labor force altogether.  America is now home to an immense array of jobless men no longer even looking for work ... ⁽¹⁾

The most startling aspect of the male exodus from work is how little attention it has received, Eberstadt argues:

The collapse of work in America's men is arguably a crisis for our nation — but it is a largely invisible crisis ... Somehow, we as a nation have managed to ignore this problem for decades, even as it has steadily worsened. ⁽²⁾

This phenomenon is not, unfortunately, unique to the US.  Australia, it seems, has its own silent crisis in male employment.

Australia's shrinking male work force

As in the US, discussion of joblessness in Australia focuses largely on the official unemployment rate:  the percentage of people looking for work within the overall labour force.  On that measure, the Australian labour market is performing relatively strongly, both among men and overall.  Unemployment rates remain relatively low, at least compared with the historical "peaks" during the recessions of the 1980s and 1990s (see figure 1). ⁽³⁾

Figure 1 Unemployment rate of men (dark blue) and the general population (red)

Source:  Australian Bureau of Statistics

However, as discussed in the previous section, the unemployment rate only measures the proportion of the work force without employment — that is, those who are out of work but looking for a job.

To gauge the overall level of joblessness in Australia, we must look at the work-to-population ratio:  the rate of employment as a percentage of the population as a whole.  On this measure, the rate of employment among "prime age" men (ages 20 to 54) has been in steep decline over the past few decades. ⁽⁴⁾

Figure 2 Work-to-population ratio, males aged 20-54.

Source:  Australian Bureau of Statistics.

As figure 2 demonstrates, around 95 per cent of prime aged men were in paid employment up until the mid-1960s.  The work-to-population ratio fell sharply throughout the following decades and reached its low point after the 1990s recession.  Critically, however, it has basically remained at that low level ever since, despite Australia's considerable economic recovery.

The disconnect between the cyclical nature of the unemployment rate and the continual decline in the overall rate of male employment can be explained by an increase in the not-in-labour-force (NILF) rate — men who are neither working nor looking for work.  Figure 3 shows that, unlike the unemployment rate, the NILF rate among prime age men has been rising steadily since the Australian Bureau of Statistics started measuring it in the late 1970s. ⁽⁵⁾

Figure 3 Males aged 20-54, unemployed (blue line) and not-in-labour-force (red line).  Parts shaded pink are quarters in which negative economic growth was recorded.

Source:  Australian Bureau of Statistics.

Both the unemployment rate and, to a lesser extent, the NILF rate are driven by the economic cycle.  However, only the unemployment rate eases when the economy is performing well.  While sluggish economic performance does tend to trigger or accelerate growth in the NILF rate, there has never been a commensurate decrease when times are good.  Once Australian men leave the workforce, they do not come back.

In fact, there are several points at which the NILF rate and the unemployment rate have had an inverse relationship.  As unemployment eased after "peaking" in the early-1980s, mid-1990s and late-2000s respectively, the NILF rate edged upwards.  This suggests a "discouraged worker" effect:  While some men do find work as the economy recovers, others give up and "disappear" from the workforce altogether.

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MEET THE NON-WORKING MAN

In his extensive demographic analysis, Eberstadt concludes that in the US, there are three traits most common in prime age NILF men.  These factors also strongly influence the likelihood of being a NILF male in Australia.

Marital status

Firstly, NILF men are much more likely to be unmarried.  Of the almost 600,000 prime age men outside the labour force, less than one third are married.  Also, as figure 4 indicates, unmarried men are almost four times more likely to be NILFs. ⁽⁶⁾  Eberstadt attributes the similar pattern among US men to the difference in married men's "motivations, aspirations, priorities, values, and other intangibles that do so much to explain real-world human achievements". ⁽⁷⁾

Figure 4 Proportion of married (shown in blue) and unmarried (shown in red) men not in the labour force, by age group.

Source:  Australian Bureau of Statistics

Migration status

Men outside the labour force are more likely to be native-born Australians than migrants, with the former comprising almost two thirds of the male NILF population. ⁽⁸⁾  This corresponds with work rates among migrants overall, who record NILF rates of about half the general population. ⁽⁹⁾  Figure 5 breaks down the NILF rate and median income of a sample of migrants, compared with the general population.

Table 1 — NILF rate and median annual earnings of migrants in selected visa categories, surveyed after six months of arrival in Australia.

Source:  Department of Immigration and Border Protection

Not only do migrants surveyed have an average NILF rate of less than half the general population, median incomes across all migration categories — including skilled migrants — are lower.  This suggests an "aspirational" quality among migrants and a greater willingness than native-born Australians to take lower-paid jobs.

Criminal history

The third trait Eberstadt identifies that affects the likelihood of being a NILF male is criminal history.  The escalation of incarceration rates starting in the 1960s, Eberstadt argues, has been a strong driver of the accelerating NILF rate among American males since that time, as more and more men re-enter law-abiding society with diminished prospects.

We can assume that criminality is somewhat less of a factor in Australia's overall increase in the male NILF population, given that our incarceration rates are substantially lower than those in the US. ⁽¹⁰⁾  However, it still appears that criminal history may increase the likelihood of individual men leaving the workforce.  Data on former prisoners is limited, but one study estimates that as few as 20 per cent of prisoners on parole have paid employment. ⁽¹¹⁾  Another indicates that almost two thirds of prisoners are unemployed six months after their release. ⁽¹²⁾

Other demographic factors

Aside from the three traits identified by Eberstadt, there are few clear demographic factors common to NILF men.  Recent data from the Australian Bureau of Statistics indicates that:

1. the NILF rate does not vary widely between states, though it was slightly higher in states with weaker recent economic performance, such as South Australia (32 per cent) and Tasmania (35 per cent); ⁽¹³⁾
2. prime age men outside capital cities are only slightly more likely to be outside the labour force, with a NILF rate of 33 per cent compared to 27 per cent in metropolitan areas; ⁽¹⁴⁾  and
3. NILF men are not necessarily mostly unskilled, with a relatively even spread among "white collar" and "blue collar" workers, in relation to men who have previously held paid employment (see figure 6). ⁽¹⁵⁾

Figure 5 NILF men (all ages) who were previously employed, by previous occupation.

Source:  Australian Bureau of Statistics

In short, the male flight from work is not limited to men of any particular socio-economic group, region or even professional background.

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WHY ARE FEWER MEN WORKING?

The exodus of Australian men from the workforce appears to be the result of a combination of changes to the labour market that have caused them to leave paid work ("push" factors) and welfare entitlements that have allowed them to stay out ("pull" factors).  However, there is a much closer relationship between falling male work rates and pull factors.

Economic changes

Labour market changes may partly explain the growing NILF rate among men, but this is limited.  On the one hand, it is true that many traditionally "male" jobs — such as factory workers — have disappeared, while the number of traditionally "female" jobs in the services sector — such as nurses — have grown.  However, as figure 7 demonstrates, there has been recent growth in other "male" industries, such as construction and mining, as seen in hours worked across various industries. ⁽¹⁶⁾

Figure 6 Hours worked index by industry, 1986-2016.

Source:  Australian Bureau of Statistics

Accordingly, while it may be one factor, economic change alone is unlikely to account for the substantial decline in male work rates.

Social changes

A partial explanation may also lie in societal factors.  Three long-term trends in particular are relevant:

• increasing work rates among women;
• an increasing number of "house husbands" doing unpaid domestic work;  and
• the expansion of tertiary education.

However, as with economic factors, the relationship between these social trends and rising male NILF rates is complex.

On the one hand, there does appear to be a clear correlation between falling work rates among men and the post-war explosion of women entering the workforce.  Figure 7 shows that as the male work-to-population ratio fell from 93 per cent to 79 per cent between 1947 and 2011, the equivalent ratio for females soared from 23 per cent to 69 per cent in the same period. ⁽¹⁷⁾

Figure 7 Work-to-population of males (shown in blue) versus females (shown in red), 1947-2011.

Source:  Australian Bureau of Statistics

However, as women enter the workforce in greater numbers, there is little evidence of a "swap" in which men have assumed more traditionally "female" responsibilities, such as unpaid domestic work.  Nor do falling work rates among men seem to be the result of greater engagement with tertiary education.

Time use surveys by the Australian Bureau of Statistics suggest that NILF men spend little, if any, additional time on study or domestic work than men who work.  In fact, as figure 8 demonstrates, NILF men spend, on average, less time on education than part-time workers, and less time on child care than any men in the work force. ⁽¹⁸⁾

Figure 8 Average minutes spent per day on various activities by NILF men, compared to males in full-time and part-time employment.

Source:  Australian Bureau of Statistics.

Admittedly, these figures are somewhat distorted by the inclusion of all NILF men, including retirees, rather than just prime-aged men.  However, even among parents without employment (included as a subset of data in the same time use survey), differences in time spent by fathers and mothers further discounts the "house husband" theory (see figure 9). ⁽¹⁹⁾

Figure 9 Average minutes spent per day on various activities by fathers (shown in blue) and mothers (shown in red) without paid employment.

Source:  Australian Bureau of Statistics

A more recent study of NILF Australians in general confirms that prime age men outside the labour force spend significantly less time than their female counterparts on domestic work and childcare, as shown in figure 10. ⁽²⁰⁾

Figure 10 Main activity when not in labour force, men (shown in blue) and women (shown in red) aged 25-54

Source:  Australian Bureau of Statistics

In short, societal changes do not, by and large, explain why there are so many men out of work.

Welfare spending

If "push factors" like economic and social trends have a limited impact, we see stronger evidence of "pull factors", specifically the growth of the welfare state that has subsidised the male flight from work.

However, jobless men are not necessarily subsisting from ordinary benefits such as the Newstart Allowance.  Instead, it appears that disability payments are contributing to the high NILF rate.  As figures 11 and 12 demonstrate, payments for "incapacity" have grown steadily in recent decades — unlike those for unemployment — and in close correlation with the NILF rate. ⁽²¹⁾

Figure 11 Payments for incapacity (shown in red) and unemployment (shown in blue) as a percentage of federal government spending.

Source:  OECD

Figure 12 Male Disability Support Pension recipients (shown in red) and male NILFs aged 20-54 (shown in blue), both in absolute terms (solid lines) and as a percentage of the total male population (dotted lines).

Source:  Department of Social Services;  Australian Bureau of Statistics.

The soaring number of men receiving disability payments corresponds with ABS data showing that almost 40 per cent of prime age NILF men give disability or illness as their "main activity" (see figure 13). ⁽²²⁾

Figure 13 Stated "main activity" of NILF men aged 25-54.

Source:  Australian Bureau of Statistics

To be sure, it is unlikely that many men are deciding to quit their jobs to live off disability payments.  However, it appears that the Australian welfare state is enabling and even encouraging them to stay out of work.

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WHY DOES IT MATTER?

Soaring NILF rates in the prime age male population brings substantial consequences, both for Australia in general and for jobless men themselves.

Poorer living standards

The economic consequences of this growing army of men without work are largely self-evident.  As more men disappear from the workforce, a greater number of taxpayers — and women — will be needed to support them.

Arguably, however, it is the out-of-work men who will suffer the most.  For one thing, subsistence on welfare payments will obviously mean a lower income and poorer living standards.  As figure 14 indicates, even the relatively high Disability Support Pension is lower than the minimum wage and far lower than what is earned by the average worker. ⁽²³⁾

Figure 14 — Weekly government payments compared with wage levels.

Sources:  Department of Social Services;  Australian Bureau of Statistics;  Fair Work Commission

Poorer health outcomes

The consequences of long-term unemployment, however, are greater than just financial and economic costs.  Studies increasingly demonstrate a number of non-economic benefits to people from paid employment, such as greater happiness from "earned success", more social interaction and substantial improvements in mental and even physical health.

One of the most significant contributions to this body of research is a 2011 consensus statement led by the Royal Australasian College of Physicians (RACP).  Signatories include medical research organisations, health insurance funds and key industry and employer groups.  (Curiously, Australian trade unions are absent from the statement's list of signatories, though a number of New Zealand unions are represented.) ⁽²⁴⁾

The RACP cites numerous studies showing significant health consequences of unemployment, including:

• poorer mental health, including higher rates of depression, anxiety and low self-esteem;
• poorer physical health, including higher rates of cardiovascular disease and respiratory infections;
• higher rates of medical consultation and hospital admission;  and
• increased mortality rates, including a higher likelihood of suicide. ⁽²⁵⁾

Relevantly — and importantly — the RACP states that "[t]he health effects of work and unemployment are generally most marked in middle working-aged men". ⁽²⁶⁾  In other words, all jobless people experience poorer health outcomes, but it is prime age men who are the most susceptible.

Where NILF men have dependent children, the consequences are particularly serious.  A study by the Department of Social Services found that children without a working parent are more likely to suffer from lower levels of cognitive ability, including in areas like receptive vocabulary and non-verbal intelligence, and higher rates of social and emotional difficulties. ⁽²⁷⁾  The RACP has also found that parental joblessness may result in poorer outcomes in physical health among children, including "a higher likelihood of chronic illness, psychosomatic symptoms and lower wellbeing". ⁽²⁸⁾

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CONCLUSION

The decline in Australia's working male population is a constant and serious trend that, unfortunately, is rarely discussed.  Yet this silent crisis brings significant consequences for Australia, for the rapidly growing cohort of jobless men themselves and for their families and children.

Worst of all, evidence suggests that children without a working parent are much more likely to experience joblessness themselves in adulthood. ⁽²⁹⁾  The effects of joblessness in prime age men therefore risk becoming intergenerational, resulting in a permanent underclass of Australians with lower living standards, health outcomes and future prospects.

Policy-makers must take urgent action to reverse the exodus of men from paid work.  Structural barriers in our industrial relations system must be removed to allow the long-term unemployed to re-enter the labour force.  The welfare benefits that are keeping men out of work should be pared back.

If we as a country do not undertake these vital reforms, we will condemn more and more men to life on the margins of society, hidden from view.

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REFERENCES

Cases

2016-17 Annual Wage Review [2017] FWCFB 3500

Reports

Australian Institute of Family Studies, The Longitudinal study of Australian Children — Annual statistical report 2012, accessed 21 July 2017, 55.

Cutcher, Degenhardt, Alati and Kinner, 'Poor health and social outcomes for ex-prisoners with a history of mental disorder: a longitudinal study', Australian and New Zealand Journal of Public Health, Vol. 38 No. 5 (2014)

Department of Immigration and Border Protection, Continuous Survey of Australia's Migrants: Cohort 2 Report — Change in Outcomes 2015 (2016), accessed 8 June 2017.

Department of Social Services, Characteristics of Disability Support Pension Recipients (June 2013), accessed 25 June 2017.

Department of Social Services, Occasional Paper No. 48 — Parental joblessness, financial disadvantage and the wellbeing of parents and children (2012), accessed 21 July 2017, 46-47

Emma Ogilvie, Post-release: The current predicament and the potential strategies (Criminology Research Grants: 2001), accessed 12 June 2017.

Royal Australasian College of Physicians, Consensus Statement on the Health Benefits at Work, accessed 21 July 2014.

Books

Nicholas Eberstadt, Men Without Work: America's Invisible Crisis (Philadelphia: Templeton Press, 2016)

Statistics

Australian Bureau of Statistics, 1947, Census of the Commonwealth of Australia, cat. no. 2109.0, accessed 15 June 2017.

Australian Bureau of Statistics, 1954, Census of the Commonwealth of Australia, cat. no. 2108.0, accessed 15 June 2017.

Australian Bureau of Statistics, 1961, Census of the Commonwealth of Australia, cat. no. 2107.0, accessed 15 June 2017.

Australian Bureau of Statistics, 1966, Census of Population and Housing, cat. no. 2106.0, accessed 15 June 2017.

Australian Bureau of Statistics, 1971, Census of Population and Housing, cat. no. 2105.0, accessed 15 June 2017.

Australian Bureau of Statistics, 1976, Census of Population and Housing, cat. no. 2104.0, accessed 15 June 2017.

Australian Bureau of Statistics, 1981, Census of Population and Housing, cat. no. 2103.0, accessed 15 June 2017.

Australian Bureau of Statistics, 1986, Census of Population and Housing, cat. no. 2102.0, accessed 15 June 2017.

Australian Bureau of Statistics, 1991, Census of Population and Housing, cat. no. 2101.0, accessed 15 June 2017.

Australian Bureau of Statistics, 1996, Census of Population and Housing, cat. no. 2017.0, accessed 15 June 2017.

Australian Bureau of Statistics, 2001, Census of Population and Housing, cat. no. 2001.0, accessed 15 June 2017.

Australian Bureau of Statistics, 2006, Census of Population and Housing, cat. no. 2001.0, accessed 15 June 2017.

Australian Bureau of Statistics, 2006, How Australians Use Their Time, cat. no. 4153.0, accessed 15 July 2017.

Australian Bureau of Statistics, 2011, Census of Population and Housing, cat. no. 2001.0, accessed 15 June 2017.

Australian Bureau of Statistics, 2014, Persons Not In the Labour Force, Underemployed Workers and Job Experience, Australia, cat. no. 6226.0.55.001, accessed 1 July 2017.

Australian Bureau of Statistics, 2015-16, Australian System of National Accounts, cat. no. 5204.0, accessed 2 July 2017.

Australian Bureau of Statistics, 2017, Labour Force, Australia, Detailed — Electronic Delivery, May 2017, cat. no. 6291.0.55.001, accessed 25 June 2017.

Australian Bureau of Statistics, 2017, Labour Force, Australia, June 2017, cat. no. 6202.0, accessed 25 June 2017.

Australian Bureau of Statistics, Average Weekly Earnings, Australia, November 2016, cat. no. 6302.0, accessed 20 July 2017.

Organisation for Economic Cooperation and Development, 'Social Expenditure — Detailed data', accessed 20 July 2017.

Statistica, 'Incarceration rates among OECD countries as of 2017', accessed 12 June 2017.

Department of Human Services, 'Disability Support Pension', accessed 20 July 2017.

Department of Human Services, 'Newstart Allowance', accessed 20 July 2017.

Royal Australian College of Physicians, 'Health Benefits of Good Work', accessed 21 July 2017.

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ENDNOTES

1. Nicholas Eberstadt, Men Without Work: America's Invisible Crisis (Philadelphia: Templeton Press, 2016), 3.

2. Ibid.

3. Australian Bureau of Statistics, 2017, Labour Force, Australia, June 2017, cat. no. 6202.0, accessed 25 June 2017.

4. Australian Bureau of Statistics, Census data 1947-2011.

5. Australian Bureau of Statistics, above n 3.

6. Australian Bureau of Statistics, 2017, Labour Force, Australia, Detailed — Electronic Delivery, May 2017, cat. no. 6291.0.55.001, accessed 25 June 2017.

7. Eberstadt, above n 1.

8. Australian Bureau of Statistics, 2014, Persons Not In the Labour Force, Underemployed Workers and Job Experience, Australia, cat. no. 6226.0.55.001, accessed 1 July 2017.

9. Department of Immigration and Border Protection, Continuous Survey of Australia's Migrants: Cohort 2 Report — Change in Outcomes 2015 (2016), accessed 8 June 2017, 10.

10. See Statistica, 'Incarceration rates among OECD countries as of 2017', accessed 12 June 2017.

11. Emma Ogilvie, Post-release: The current predicament and the potential strategies (Criminology Research Grants: 2001), accessed 12 June 2017.

12. Cutcher, Degenhardt, Alati and Kinner, 'Poor health and social outcomes for ex-prisoners with a history of mental disorder: a longitudinal study', Australian and New Zealand Journal of Public Health, Vol. 38 No. 5 (2014), 424-429, 427.

13. Australian Bureau of Statistics, above n 6.

14. Australian Bureau of Statistics, above n 6.

15. Australian Bureau of Statistics, above n 8.

16. Australian Bureau of Statistics, 2015-16, Australian System of National Accounts, cat. no. 5204.0, accessed 2 July 2017.

17. Australian Bureau of Statistics, above n 4.

18. Australian Bureau of Statistics, 2006, How Australians Use Their Time, cat. no. 4153.0, accessed 15 July 2017.

19. Australian Bureau of Statistics, above n 18.

20. Australian Bureau of Statistics, above n 8.

21.

• Organisation for Economic Cooperation and Development, 'Social Expenditure — Detailed data', accessed 20 July 2017;
• Department of Social Services, Characteristics of Disability Support Pension Recipients (June 2013), accessed 25 June 2017, 8;
• Australian Bureau of Statistics, above n 3.

22. Australian Bureau of Statistics, above n 8.

23.

• Department of Human Services, 'Newstart Allowance', accessed 20 July 2017;
• Department of Human Services, 'Disability Support Pension', accessed 20 July 2017;
• 2016-17 Annual Wage Review [2017] FWCFB 3500;
• Australian Bureau of Statistics, Average Weekly Earnings, Australia, November 2016, cat. no. 6302.0, accessed 20 July 2017.

24. See Royal Australian College of Physicians, 'Health Benefits of Good Work', accessed 21 July 2017.

25. Royal Australasian College of Physicians, Consensus Statement on the Health Benefits at Work, accessed 21 July 2014, 12-13.

26. Ibid, 13.

27. Department of Social Services, Occasional Paper No. 48 — Parental joblessness, financial disadvantage and the wellbeing of parents and children (2012), accessed 21 July 2017, 46-47.

28. Royal Australasian College of Physicians, above n10, 14.

29. See, for example, Australian Institute of Family Studies, The Longitudinal study of Australian Children — Annual statistical report 2012, accessed 21 July 2017, 55.

Timor's Prosperity Lies In Its Best Assets: Its Beaches And People

East Timor holds a special place in the Australian psyche.  It is our newest neighbour, and we played a critical role in supporting its road to independence in 2002 through the Australian-led INTERFET peacekeeping mission.

Australian troops also kept the peace after the bloody Indonesian withdrawal in the aftermath of Timor's 1999 independence referendum.

A half-century earlier, Australian troops were in East Timor fighting against the Japanese enemy in World War II.  Many Timorese sacrificed their lives to help the Australian soldiers during the year-long guerilla campaign in 1942, providing food, water and shelter, and carting equipment and supplies.  When Australia pulled out of Timor, the Japanese sought revenge on those Timorese who had assisted our troops, executing them in their thousands.

So what should Australia make now of its newest and youngest neighbour nation-state?

Like so many postcolonial states, East Timor's long journey to independence and democracy has been bloody and violent.  As a post-conflict nation, East Timor more or less had to build its democratic institutions and governance systems from scratch.

In the 15 years since gaining independence from Indonesia in 2002, East Timor — with the help of Australia and many others in the international community — has made good progress.  But there is more to be done.

As an international observer at East Timor's general election on July 22, I was impressed by a generally successful democratic process.  This was the first election administered without the UN's assistance.  The contrast in the conduct and outcome of the election in nearby neighbour Papua New Guinea with East Timor couldn't be more stark.  The PNG elections have been marred by intimidation and violence, attempted kidnap­pings and burning buildings.  In one electorate, the third-ranked candidate was declared the winner, while in another two candidates were declared to have won.

In East Timor, the formal month-long election campaign was calm and orderly.  In many respects, the campaign mirrored what we see in Australia, with slick party billboards calling for fairness and equality, better investment in roads, health and education, while candidates appeared on televised debates, held political rallies and used social media to disseminate their messages.

Some elements of the election process were odd.  Notably, there was a lack of criticism of other parties or political leadership.  This is still a new and fragile democracy, and there is a nervousness that negative or scare campaigns could incite violence.

The two major parties, Fretilin and CNRT, came out on top and are likely to form a national unity government once again.

The challenge for Timor's government and democracy now is to move beyond a tussle for support for the charismatic leaders of the independence movement, and to focus on the serious policy and development issues facing the country.  In a country where 40 per cent of its 1.2 million people still live below the poverty line, Timor's leaders must focus on its prosperity and development.

Understandably, during the past 15 years political leaders in East Timor have been focused on keeping the peace and stabilising a country still traumatised by a bloody independence movement in which more than 200,000 people died.  For Australia, a peaceful East Timor is of paramount importance.  We do not want to see a return to the violent clashes of 2006 when the country was on the precipice of civil war and Australia had to send troops in to keep the peace.

So far, Timor's budget expenditure has been sustained by dipping into the capital of its $16 billion petroleum sovereign wealth fund.  This year it accounted for 78 per cent of the budget.  This is unsustainable and the fund is expected to be depleted within the decade.

It would be folly to pin Timor's hopes of future prosperity on a favourable outcome to the present conciliation with Australia on the maritime boundary.  Economic development needs to move beyond oil and gas to other industries such as agriculture and tourism.  This is important for the 60 per cent unemployed Timorese youth who are yearning for jobs and opportunities.

As a tourist destination, it is clear that East Timor has considerable potential.  It offers beau­tiful beaches, friendly people, delicious locally grown coffee and a Portuguese-infused cuisine.  But so far the investment has failed to come.

Investment will come to East Timor only with a transparent and internationally competitive tax system, and a stable government without sovereign risk.  Ease of doing business in Timor is one of the worst in the world — it is ranked at 175 out of 190 countries.  While the country's tax regime looks relatively benign on paper, the local law requirement to have a local partner and inability of overseas investors to own private property has so far discouraged inbound investment.  Sovereign risk also casts a shadow over the economy.

A variety of local and international left-wing ideologues agitate for East Timor to tear up maritime boundaries and undermine major oil and gas investments.  This only undermines business confidence further.

With a new government and president, Timor has an opportunity to put itself on course for growth and prosperity.

The decisions made now are critical and will set up Timor for success or failure.  Let's hope it's the former.

Big Government's War On Young Australians

The major parties, unions and the bureaucracy have declared economic war on young people which threatens to create an invisible underclass locked out of economic participation.

In March, the Brotherhood of St Laurence reported that labour force underutilisation (underemployment plus unemployment) of people aged between 15 and 24 was at its lowest point since the ABS started measuring it in 1978.

That's lower than the recession of the early 90s and the GFC.  It should be the biggest issue in Australian politics but the report went virtually unnoticed.

It's little wonder that employment for young people remains in such an appalling state given the flavour of the debate following the Fair Work Commission's decision to cut weekend penalty rates earlier this year.

The CFMEU claimed that the penalty rate reductions were a "war on battlers" and a "war on the fair go".  That's a pretty hysterical description of a decision that, among other things, reduced the Sunday rates of a fraction of hospitality workers from 175 per cent of Saturday rates to 150 per cent.

In fact, the CFMEU and others like it and are masking the true moral crisis in our industrial relations system — that it keeps people out of work.  Exorbitant penalty rates prevent businesses from opening, let alone hiring new staff.

There is no union for the unemployed.  The industrial relations system rewards the powerful at the expense of the powerless.  That's how, after 25 years without recession, labour force underutilisation of young people is at its highest rate in four decades (at least).

Another economic injustice wreaked against young people is public debt.  As noted in The Australian in February, Australia's gross public debt will reach $600 Billion in the next three years.  That is $23,500 per person and more than $90,000 per person under the age of 18.

The fact that children are born in this country owing the government tens of thousands of dollars should be a source of shame for all Australians.  It's pretty galling for young people to be lectured on the discipline and sacrifice needed to buy a house by older generations when they are indulgently spending in the short term and expecting people that aren't born yet to foot the bill.

Which brings me to another major area of disadvantage for young people — the property market.  Earlier this year, Australia's house prices growth surged to a seven year high.  According to the latest survey by international housing affordability think tank Demographia, Australia has the third most unaffordable property market in the world.  Sydney is the second most unaffordable city in the world and Melbourne is sixth.

Sure, no one has a birthright to enter the property market and, as flagged above, for most people buying a house requires discipline and sacrifice.  And attacks on negative gearing are certainly ill-advised.  However, the fact that housing is so expensive in a country with as much space as Australia is absurd.  Fundamentally, this is due to land zoning and planning red tape.  New entrants — often young people — bear the brunt of these retrograde policies.

Many like to claim that this is an attitudinal issue — that the reason young people can't find work or enter the property market is because they have a sense of entitlement and aren't prepared to "have a crack".

This is untrue.  In my survey of 16-25 year olds last year, 60 per cent of respondents indicated they hoped to open their own business one day.  Two-thirds said cutting government spending would help the economy.  Young people don't want a free ride, they just want opportunity.

Social and cultural disconnect between elites and the rest, combined with economic cleavage, has instigated the rise of non-mainstream politics globally.  Australia is yet to fully experience that economic cleavage but it is coming.  If the major parties want to ensure their own survival, they must remove the barriers that prevent young people from participating.

But that's hardly the point.  Economic participation and personal fulfilment go hand in hand.  By placing obstacles in the path of young people entering the economy, we are denying vast swathes of the population lives of value, meaning and dignity.

The Expensive Problem With Our Prisons: Why Spending More Doesn't Make Us Feel Safer

Australia spends more on criminal justice than most other developed countries, but gets worse results.  In world terms, we spend a lot on prisons and police but despite this, Australians consistently report feeling less safe than people in similar countries.

These are the findings of my latest report, and they underline the need for criminal justice reform around Australia.

Australia's prison population is expanding at an unprecedented rate.  At 208 per 100,000 adults, our incarceration rate is at its highest point since Federation.  Nationally, the number of prisoners has grown by 39 per cent in the past 10 years.

Between 2009 and 2014, Australia's prison population grew faster than all but five other OECD countries.  Comparable common law countries New Zealand, Canada, the United Kingdom, and the United States all reduced their prison populations in this period.

For this reason, Australia's prison expenditure is increasing rapidly:  more than 25 per cent between 2010 and 2015.

On a per-prisoner basis, Australian prisons are the world's fourth most expensive.  It costs $110,000 to imprison someone for a year in this country.  The OECD average is less than $65,000.  The other common law countries all spend considerably less than Australia.

By contrast, Sweden, Norway, and the Netherlands spend considerably more than Australia.  In Sweden, one year of incarceration costs $186,000.  It is often argued Australia should follow the example of these countries, but rarely is it noted that to do so would result in a massive increase in prison spending, unless prisoner numbers were radically reduced.

The truth is that Australia is already in the top bracket for prison spending, with generous provision of resources for rehabilitation.

We are also spending more on police.  In 2015, Australian governments spent $427 per person on police services, well above the OECD average of $367.  Australia ranks in the top 10 on this measure.

This increased spending has been a result of growing police numbers, with the number of police per capita increasing more than 18 per cent between 2007 and 2015.  Australia has a higher level of policing than all common law countries except Ireland and much higher than the Nordic countries and Japan and Korea.

Additional spending on prisons and police has not yet led to any improvement in Australians' feeling of safety.

Australia ranked in the bottom third of OECD countries for residents reporting feeling safe at night in four OECD polls between 2007 and 2014.  And while international crime comparisons are unreliable (because of different reporting standards) a 2005 OECD crime victimisation survey placed Australia in the middle band of developed countries.  The number of offenders per 100,000 adults in Australia increased 14.5 per cent between 2009 and 2015, however, so it is possible Australia would now rank lower.

When you consider Australia has a high level of reoffending, with more than half of released prisoners returning to corrections within two years, it is clear that our increased criminal justice spending is not yielding the results we might rightly expect.

Addressing this underperformance should begin with punishment reform for non-violent, low-risk offenders.  Violent criminals must be imprisoned to keep the community safe.  But for other offenders, measures like home detention and community service — properly supervised of course — can achieve both retribution and better rehabilitation outcomes.

Reducing reoffending is the best way to reduce incarceration spending and crime.  Unemployment is a known correlate of crime, and the ample resources of our prisons should be directed towards job training and literacy and numeracy.  Policing has also been shown to be effective in reducing crime, but merely increasing police numbers is not enough.  Police resources must be carefully targeted to known sources of crime.

Criminal justice reform can and must be achieved without abandoning our traditional principles of personal responsibility and fair punishment.

In our society, individuals must be held to account for their actions;  they cannot pass the blame onto factors beyond their own agency.

By enforcing this principle, prison and police play a vital role in preserving our system of ordered liberty.  Pathologising crime and rolling criminal justice into the welfare state detracts from individual agency and, thereby, human dignity.

And dignity, ultimately, is what criminal justice is about.  We need to keep our communities safe so that people can go about their lives, raise their families, and prosper in their work.  And we need to effectively correct the behaviour of criminals while delivering justice to victims.

A principled criminal justice system is a vital part of civilised society, and making sure our criminal justice system is working should be a concern for all sides of politics.

Especially since, right now, international data shows criminal justice in Australia could be doing much better.

The Republican Suicide Squad

When Bill Shorten gave the keynote address the Australian Republican Movement annual dinner last month, Peter Fitzsimons gushed at how impressive was;  blissfully unaware he had just killed any hope for momentum on a republic.

The anti-British rhetoric coming from both the ARM and the Labor Party is astonishing.  It is like they're purposely trying their best to kill any chance of Australia becoming a republic.

Shorten's plan is to have a hat-trick of people's votes on a republic.  Starting with a compulsory plebiscite in his first term with one question "do you support an Australian republic with an Australian head of state?"

Following this Shorten has proposed there will be another compulsory plebiscite to decide on the model, and lastly by a compulsory referendum at some point in the future.

Given Shorten already wants to go to a referendum to enshrine racial division in the constitution and on terms, the first term of a Labor government seems overly crowded with peoples votes.

The Labor Party's ideological obsession with a republic, and their success in hijacking its direction and narrative, is destroying any hope of it ever occurring.

It is widely known among political circles that the condolence prize for missing out on positions in Young Labor and the Labor Party more broadly is a convenor position with the Australian Republican Movement.

As highlighted after their national committee elections last year, almost all committee members have a connection to the Labor Party.

A republic will never, ever eventuate as long as it is a Labor obsession.  You're not exactly going to win over conservatives by proclaiming that David Morrison, the bloke who says we should stop using the term "guys" in the workplace, would make an excellent president of an Australian republic.

Australians have deep links to the United Kingdom and its history.  British institutions dating back to the Chartist movement that gave us the right to vote that railed against taxation without representation as tyranny have made Australia the great country it is today.

Australia's British heritage that gave us the freedoms we cherish today should be celebrated, rather than resented;  this is where the ARM loses its battle.

Do not get me wrong.  I want a republic.  But if we are to achieve a republic, the movement has to be led by someone of the centre-right.  Naturally, Labor and the Greens will follow any debate that moves in the direction of a republic.

I believe Australia should become a republic because I value the ideas of sovereignty and independence.  I do not want a republic because I hate Australia, I want a republic because I love Australia — its history and its traditions, and believe it would be a pathway to strengthening them.

As I have written here before, I used to be a member of the Australian Republican Movement.  I later quit because there is really no direction and no acceptance of views of the centre right.

For the momentum on a republic to be achieved, the debate must be framed around sovereignty and patriotism, which comes naturally as ideals of conservatives and those on the centre-right.

This is not achieved through disdain for Australian culture and its history.  The most recent advertisement for the ARM suggests constitutional ties to the monarchy are out of touch with contemporary, multicultural Australia.

The portrayal of a republic by the left as a way to wipe the slate clean of all of our country's supposed sins is as sickening as it is depressing.

Even their slogan "declare your independence" strikes the wrong tone.  Australia is independent.  Somewhere between federation, the Statute of Westminster and the Australia Acts of 1986, Australia did become completely independent.  In any case, independence doesn't necessarily imply a republic — a domestic-based monarch would also be independent.

And tactically, the fact that the ARM and Labor think that an Australian republic can be achieved before the Queen's reign ends is frankly bizarre.

Moving to a republic is just as much about the Australian national identity as it is a change of our system of government.  On both of these fronts, the ARM and Labor are completely clueless.

Equity Debate We Have To Have

A debate about inequality in Australia is long overdue.  But we shouldn't be talking about it the way the left and the Labor Party want to.  A discussion only about economic inequality misses the point.  A person's income or wealth is the endpoint of a process that starts with the opportunities individuals are presented with throughout their life.  Inequality of opportunity, the social mobility of individuals and families, and intergenerational equity are the things we should be arguing about.  However, because these are big and difficult issues it's easier for politicians to just demand higher taxes.

If Scott Farquhar moved from Sydney to live instead in San Francisco the left would get what it wants — economic inequality in Australia would be reduced.  Farquhar is the 37-year-old billionaire co-founder of Atlassian who's just purchased John B Fairfax's "Elaine" estate at Point Piper for a reputed $75 million.  Farquhar living in the United States wouldn't make a single Australian wealthier but the left would be satisfied because the country would be more equal.

It's easy to cherry-pick arbitrary data points to prove or disprove claims about economic inequality.  On the one hand, Andrew Leigh, Labor's shadow assistant treasurer is right.  Since 1980 the income share of the richest 1 per cent of Australians has doubled.  (And that increased income is taxed by the government at nearly 50 per cent.)  But on the other hand the most comprehensive survey of Australian families' income and wealth from the University of Melbourne reveals that economic inequality has remained largely unchanged for the last decade and if anything has probably declined.

The Global Wealth Databook compiled by Credit Suisse is the most authoritative analysis on global household wealth.  It's 2016 edition said this about Australia:  "Wealth inequality is relatively low in Australia ... Only 11 per cent of Australians have net worth below $US10,000.  This compares to 22 per cent in the UK and 35 per cent in the US ... The proportion of those with wealth above $US100,000, at 55.8 per cent, is the fifth highest of any country, and almost seven times the world average."  Put another way, by any standard the vast majority of Australians are very well off.

While opponents of inequality are quick to complain, they're slow to say how much more equal they'd like to force society to become.  Poor countries are more equal than rich countries.  In India 96 per cent of adults have a net worth less than $US10,000 ($12,572).  The quickest way to make Australia more economically equal would be to have a recession.

The current discussion about inequality reveals how politicians no longer talk of growing the nation's wealth — what they want to do is redistribute it.  No mainstream MP would dare say Australia should aspire to have more 37-year-old billionaires.

If the left ever wanted to move beyond it's yearning for ever-more punitive taxation, there's scope for a constructive conversation about evidence such as the reality that in rich developed countries the poor are most likely to be young, unmarried, unemployed, and with low educational achievement.  Those are the people that government should be concentrating on helping, but in Australia it's an entire cohort of people largely ignored by public policy because both the ALP and Coalition think young people will usually vote Labor or Green.

The role for government in reducing inequality is obvious.  Everything possible has to be done to make it easier for the unemployed to get a job and for bosses to employ the unemployed.  Labor's employment spokesman Brendan O'Connor gave the game away this week when talking about the income gap between "the very rich" and "middle and working class families".  Families with no work don't rate a mention.  The sort of inequality that erodes the fabric of communities can't be measured in dollars.  The starkest and most damaging kind of inequality is between someone who experiences the dignity and fulfilment of a job and someone who doesn't.  The real sort of inequality we should be talking about is between the 12 million Australians in work and the 726,000 Australians who want employment but can't get it.

The Left's Exotic Venezuelan Romance Meets Reality

In London's posh South Kensington ‪on Sunday afternoon I witnessed anti and pro-Venezuelan government protests form outside the Venezuelan embassy.  On the pro-government side stood British socialists living in a fairyland defending Venezuela's slide to totalitarianism.  On the anti-government side, Venezuelans whose family members are literally starving.

British leftists have a long history of supporting the Venezuelan regime.  Labour leader Jeremy Corbyn once declared socialist revolutionary Hugo Chavez "showed us that there is a different and a better way of doing things".

The Australian left similarly has a Chavez love affair.  After a trip to Venezuela in 2008, then-Greens leader Bob Brown wholeheartedly endorsed the regime, lauding their "strengthening democracy".  Naturally, Greens Senator Lee Rhiannon is also a big fan.  "Venezuela is remaking itself as a socially just society with priorities in literacy, health care, housing and land rights," she told NSW parliament in 2006.

The sad reality couldn't be further from the truth.

Venezuela's failed socialist policies have caused a humanitarian and political disaster.

Venezuela faces a serious food crisis.  Nine in 10 homes say they don't have enough money to buy food;  a third eat two or fewer meals a day.  Chronic malnourishment among children is common.  Hospitals are increasingly filled with emaciated infants.  Venezuelans must line up for hours to buy measly quantities of food from almost empty supermarket shelves.  This year many have begun rummaging through garbage.  Shockingly, the government has resisted offers for food and aid from abroad, lest they admit their faults.

Meanwhile, crime has sky-rocketed and morgues are overfilling, power goes off for hours every day, and medicine shortages are dire.  Yesterday a mother took to Twitter desperately seeking a basic antibiotic for her sick nine-month-old baby.

No fear, however, the socialist elite continue to be pampered through their links to the drugs trade and the US$70 billion stolen from public finances last year.

The international media has largely ignored this story, and recent events are being reported as generic anti-government protests.  Horrifying failures of the socialist regime have been ignored.

In 1999, Chávez came to power and began redistributing wealth from oil exports, deficit spending, and price controls.  For a short time Venezuela was Latin America's richest economy, benefiting from the world's largest oil reserves, and a net exporter of food.

However, the past few years have proven Margaret Thatcher's axiom:  the problem with socialism is that eventually you run out of other people's money.

The fall in global oil prices has bought to the fore fundamental issues with the overly regulated, centrally controlled economy.  The lack of foreign currency from exports and growing debt meant the government could no longer provide.  Price controls then caused shortages, mass inflation, and poverty.  Today, the country has the world's highest inflation, to reach 720 per cent this year according to the IMF.  The economy has shrunk 27 per cent since 2013.

Last December the people elected an anti-socialist majority in the National Assembly, their parliament.  However, President Maduro, Chavez's anointed successor, has refused to listen to the opposition and stand-down for fresh presidential elections — instead blaming a foreign conspiracy and evil producers for the country's woes.

This has plummeted the country into political crisis.  In the past four months over 130 people have died in street protests.

On Monday, Maduro held snap elections for a "Constituent Assembly" to rewrite Venezuela's constitution.  The opposition boycotted the sham elections, refusing to endorse an effort to disempower the opposition-controlled National Assembly, solidify Maduro's power, and, according to one government source, instigate a truth commission to prevent dissent.

The official voter turnout claims were unrealistically high, indicating widespread fraud;  and in the latest sign of things to come, heavily armed state police stormed the homes of opposition leaders overnight and dragged them to prison.

Venezuela is turning from weak democracy to a full dictatorship.

The immediate future is bleak.  Venezuela needs fair and free elections, backed up by international monitors.  This scenario, however, is unlikely.  Mass protests, violently combatted by state police, will continue.

The lesson from Venezuela is clear:  socialism does not work.  You cannot plan and redistribute your way to prosperity.  Knowledge is dispersed;  not in the hands of state planners.  The economy functions best, creating extraordinary prosperity, when buyers and sellers can voluntarily trade with limited government intervention.

In an era when state planning is on the rise, be it Donald Trump's protectionism or the Turnbull Government's gas export regulation, economic freedom to buy and sell still matters.

Australia is of course nowhere near the mess that is Venezuela, but we too often walk in the wrong direction.  The more we involve government in our lives the less prosperous, safe, and democratic our society will become.

A Question Of Trust In Greater Opportunity

The Labor Party is proposing another attack on wealth-creating businesses with its planned tax hike on discretionary trusts.

It remains unclear how substantial the tax hit will be.  Labor is claiming the crackdown will confiscate $1.7 billion from 135,000 trusts each year on average for the next 10 years.  However, the devil will be in the detail.  While the extent of the tax grab will depend on implementation, one thing is for sure:  it will add more complexity and red tape to an already highly inefficient tax system.

The precise operation of the tax, including how much revenue it raises, is beside the point.  The planned tax hike is entirely political.  It sits alongside a commitment to undo tax cuts for businesses and raise the top income tax rate from 47 per cent to 49.5 per cent.  The end game for Labor is to convince voters that their stagnant income growth is a result of a rigged system that benefits the wealthy.

We had a taste of how the political rhetoric will shape up over the coming months at the NSW Labor Party conference this past weekend.  In his address to the conference, Bill Shorten said "our system should not be subsidising those who are already wealthy".  But a cursory look at the data demonstrates that it doesn't.  The top 1 per cent of income earners pay more in tax than 50 per cent of the taxpaying population.  That's a funny-looking subsidy.

Unfortunately, the entire debate about inequality got off on the wrong foot.  The data used to claim that inequality is at a 75-year high — a pretext for the trust tax hike — was based on the proportion of pre-tax income earned by the top 1 per cent of income earners.  Pre-tax income is a deficient measure of inequality because it doesn't account for Australia's tax and transfer system.

A more reputable source is the Gini coefficient.  On that measure income inequality in Australia is about the average of comparable OECD nations and, in recent years, has either increased slightly, according to the Australian Bureau of Statistics, or decreased slightly, according to the Household, Income, and Labour Dynamics in Australia (HILDA) Survey.  Besides, not even the Gini coefficient captures all private and public cash and non-cash transfers, so it is impossible to form precise conclusions about income inequality.

However, while it is difficult to reach firm conclusions on inequality of income, inequality of opportunity in Australia is more apparent.  There is inequality between those who have a job and those who don't because of the Fair Work Act;  between those who have a good education and those who don't because of the centralised bureaucratic approach to education policy;  between those who can afford a house and those who can't because of constrained supply;  and between those who can afford to turn the heating on and those who can't because of high cost, unreliable renewable energy subsidisation.

It would be much more productive for policymakers to focus on policies which will expand the opportunity for all Australians to flourish and become socially mobile.  Today's low-income earners are tomorrow's high-income earners.  Any policy which raises the tax burden on the wealthy also discourages upward mobility by penalising life-time success.

This brings us back to the issue of trusts.  The main reason that trusts are so attractive is because Australia has a punitively progressive income tax system, which features a milieu of deductions and a high income tax free threshold.  And of course the top marginal rate is high by international standards.  Reducing and flattening the income tax schedule (ideally to one flat tax rate), eliminating deductions, and reducing the tax-free threshold would make trusts less attractive.  Moreover, thousands of lawyers and accountants would be freed to engage in more productive activities.

A flat income tax schedule has the added advantage of not penalising success or discouraging aspiration.  It means low-income Australians will not be discouraged from taking a higher-paying job or investing in their skills and education to move into a higher paying industry.  It would also send a signal that Australia is a land of opportunity that celebrates and encourages success, rather than looking down upon it.

In these pages yesterday, Craig Emerson wrote that "comprehensive tax reform, based on the principle of broadening the base to lower the rates, will have to wait".  Wait until when?  Tinkering with trusts will just add more complexity and red tape to an already grossly inefficient tax system.  Policymakers should get on to the job of real reform to expand economic opportunity and give all Australians a better chance at success.

The Right Needs To Stop Pandering To The Left

Britain's chattering classes have reached a new consensus:  liberal free market economics is unpopular and a failure.

This is an extraordinary shift.  Just 20 years ago, as the Soviet Union collapsed, the prevailing view — brought to the fore by Francis Fukuyama — was that liberal market ideas would dominate from then on.  Most of Asia was adopting the market model;  Margaret Thatcher and Ronald Reagan had reinvigorated economic liberal ideas;  and their successors from rival political backgrounds, such as Tony Blair and Bill Clinton, largely "me-toed" them.

Today, however, we are seeing the extraordinary success of Jeremy Corbyn in Britain, Donald Trump's protectionism in America, and the rejection of markets by a resurgent European far Right.

The response from much of the centre-Right has been to move to the Left.  When Theresa May talks about "the new centre ground", as she did last year in her keynote address to the Conservative Party Conference, what she really means is a willingness to adopt the Left's ideas — be it more spending, higher taxes or more regulation — because it is thought to be popular.

This won't work economically, and hasn't worked politically.  It doesn't seem genuine or believable.  Indeed, all it does is increasingly lead the electorate to choose those who really do passionately believe in spending, taxing and regulating.

So why are those that support economic freedom losing?  And what can be done about it?

The simple answer is that it is a victim of its own success.

Liberalised markets have pulled over a billion people out of poverty, delivered the lowest level of global inequality since the Industrial Revolution, and made our lives longer and more satisfying.  But by appearing to have won the ideological fight, the Right made a fatal error:  political leaders stopped making the case.

This worked for a little while, when voters had a memory of the heinous stagflation — low growth, high unemployment, and high inflation — of the 1970s.

Today, it doesn't.  The young, who turned out at Britain's general election in higher numbers than at any time in the last two decades, have never had to experience the reality of Corbyn's policies.

The standard explanation is that the youth are attracted to so-called "freebies" — like free university education.  The truth is far more scary:  young people have been genuinely persuaded by socialism, partly because so few people have bothered to debunk the myths that underpin that cause.

This failure to make the case became paramount after the financial crisis — which was falsely blamed on liberal markets rather than a toxic cocktail of bad government policy.

The Conservative election campaign failed to make the case for economic freedom.  May completely lacked the philosophical basis to respond to Corbyn's policies — and it certainly didn't help that her policies, such as an energy price cap, were so ideologically similar.  How can you criticise bigger government when that's what you are proposing as well?

Conservatives like to talk a lot about "compassionate conservatism".  The reality is that the most compassionate policies are those that make everyone better off by making the pie bigger — not just the chosen few by redistributing the pie.

They're the policies that help people experience the dignity of work and give them more choice over their lives.  They're the policies that allow people to start up their own enterprises without the relentless stranglehold of red tape.  They're the policies that let people keep a bit more of their own money through lower taxes.

Recently, the two most successful centre-Right leaders who have made this case are probably John Key, the former prime minister of New Zealand, and the UK's own David Cameron.

Key left on his own terms after lowering taxes, reducing the size of the state, and winning majorities in a proportional system.  Cameron pulled the UK economy out of the dustbin, reduced tax, helped create millions of jobs, reformed welfare, won the first Conservative majority for decades and — perhaps to his own regret — gave the people a democratic choice on the European Union.

The case for prosperity and choice is never easy to make.  But adopting the rhetoric and policies of the Left just won't work either — as May found out last month.  That's why we must be willing to stand steadfast behind what has made the world richer and more successful — namely empowering individuals to succeed, not burdening them with ever more government.

Campaign To Hush Climate Change Debate

Bullying officials and academia are misusing their authority to silence private citizens on global warming.

Climate change policy should be informed by a sober assessment of the data and ultimately determined by the people's representatives, weighing up the costs against the impact any policy is likely to deliver.

That is why it is so disturbing that there is a campaign by the political class, entrenched academia and professional activists to silence scientific debate about climate change.

This is an expression of political power in service of a mythical consensus, the assertion of which threatens the scientific method and the fundamental right to freedom of speech.  At its worst, the campaign against climate change debate is nothing less than an abuse of office.

In the United States and elsewhere, legal officers and elected officials have sought to use the authority of their offices to harass and silence private citizens who disagree with their preferred climate change policies.  In November 2015, for example, New York Attorney-General Eric Schneiderman subpoenaed ExxonMobil, seeking documents that might show the company had downplayed the risk that climate change might pose to future profits, misleading its shareholders.  This action was justified by changes in ExxonMobil's public position on climate change since the 1980s.  The subpoena (and intention to prosecute) indicated that the state of New York considers climate change scepticism to be dishonest, that it is not possible to disagree on climate change in good faith.

This bullying certitude is extended to groups that support the position of resource companies.

As evidence for his accusation of bad faith against those companies, Schneiderman pointed to the work of a number of free-market think tanks, including the American Enterprise Institute and the American Legislative Exchange Council.

At the federal level, in July 2016 Senate Democrats sent letters to 22 think tanks demanding they disclose the identities of their donors because of their "campaign to deceive and mislead about the scientific consensus surrounding climate change".

Cato Institute president John Allison rightly called this action "an obvious attempt to chill research into funding of public policy projects (the senators) don't like".

The message was clear:  how private organisations spend their resources, and how they express and develop their ideas, are matters for the state.  The state does not have any concern for the wellbeing of shareholders who, after all, continue to see good returns on their investments.  Instead, it cares only that a company the size of ExxonMobil has the power to influence the public debate in a way that conflicts with the state's own priorities.

This determination to intimidate dissenters is not a purely American phenomenon.  On September 27, 2006, then-member for Wills, Kelvin Thomson of the Australian Labor Party, sent a letter to a number of companies demanding to know whether they had given financial support to "any other body which spreads misinformation or undermines the scientific consensus concerning global warming" and further demanding that if they had given that support that they cease to do so.

A member of parliament has no more right to know this information, much less to make this demand, than any other citizen.  And yet the demand, outrageous on its face, came under colour of authority.  Arguably this was a worse use of Mr Thomson's letterhead than the reference he wrote for Tony Mokbel.

Depressingly, this campaign of intimidation has been supported by academia and the media.  In September 2015, 20 scientists wrote to President Obama demanding his administration bring anti-corruption charges against "deniers" in the resource industry.  And academics have argued variously that climate change scepticism is "fraud", "criminally negligent" and not a form of free speech because it is "insincere".  One Australian media commentator has argued that it is "epistemologically disingenuous" to always insist on the right of alternative opinions to be heard.

In addition, public platforms are denied to climate change dissenters, no matter their credentials.  In 2015 Danish statistician Bjorn Lomborg agreed to move his research centre to a Western Australian university.  But under pressure from academic staff and student activists, the university's vice-chancellor reneged on the deal.  Subsequent discussions with Flinders University floundered immediately as staff and students reacted angrily to the idea that someone might ever produce research they disagreed with.

The elite cabal of scientists who dominate climate change research have been militant in shunning those with whom they disagree.  Moreover, a lack of respect taints the entire public discussion of climate change.  Proponents of climate change action routinely use the word "denier" to describe climate change sceptics, with the word having been deliberately chosen to invoke a parallel with Holocaust denial.  All of this contributes to a powerful chilling effect that, in concert with the state's campaign of harassment, discourages dissenters from voicing their opinions.

Freedom of speech is not only valuable in and of itself, it has instrumental value as well.  It is only through the contest of ideas that the truth may be apprehended.  In science as in politics and all other fields of human endeavour, dissent has the virtue of testing the prevailing arguments, which either fail and fall or survive yet stronger.

The peremptory shutting down of debate short-circuits this process.  Far from ensuring evidence-based policy prevails, the campaign against climate change free speech endangers scientific research and argument.  It sets a terrifying precedent for the abuse of power to shut down policy debate and should alarm citizens and policymakers alike.

NSW Reforms Point Way To Reducing High Rate Of Indigenous Incarceration

A report from the NSW Bureau of Crime Statistics and Research shows the incarceration of indigenous Australians in that state has increased by 25 per cent since 2013.

The report attributes this rise to more indigenous people being charged with, and imprisoned for, stalking and intimidation ­offences, defendants spending more time on remand and more ­breaches of good behaviour bonds and suspended sentences leading to imprisonment.

Recent reforms announced by the NSW government will help.  In May, the government unveiled plans to abolish suspended sentences and expand the use of ­intensive corrections orders, giving judges more options for ­imposing conditions on low-risk offenders, such as home detention, curfews and movement ­restrictions.

Breaches of these orders will be punished by swift and escalating punishments, including extra restrictions and the loss of privileges.

Fewer offenders will be imprisoned for minor breaches.  The government is also increasing the sentencing discount for early guilty pleas and is changing the way prosecutors manage their cases to reduce the time defendants spend on remand.  While not specifically aimed at reducing ­indigenous incarceration, these changes will go some way to ­addressing the issues identified in the bureau's report.

However, these reforms will probably not address the spike in intimidation and stalking offences, nor should they.

Criminal justice reform must always put community safety first.  Alternative punishments have been shown to reduce reoffending, making the community safer.  Similarly, time spent on ­remand is most safely addressed by speeding up the judicial process, not by granting higher-risk ­offenders bail.

Public support for these measures rests on government assurances that the goal of reducing incarceration and its costs is not being pursued at the expense of safety.  Therefore, governments must distinguish between violent and nonviolent offenders.  Violent ­offenders need to be imprisoned and reform efforts should focus on those who are not dangerous to the community.

For policymakers, this is where the effort to reduce the indigenous incarceration becomes more difficult.  In NSW, and nationally, a large number of indigenous ­prisoners are incarcerated for ­violent offences.

Nationally, the most serious ­offence of 61 per cent of indigenous prisoners was a violent ­offence, compared with 51 per cent for non-indigenous prisoners.

The number of indigenous prisoners whose the most serious ­offence was an "act intended to cause injury" was 33 per cent, compared with 17 per cent of non-indigenous prisoners.

In NSW, this gap is narrower — 29 per cent versus 19 per cent — but the pattern holds.

This difference cannot simply be attributed to stalking and ­intimidation offences, which were the most serious offences of just 25 per cent of those indigenous prisoners in the "acts intended to cause injury" category.  And separating out stalking and intimidation is ill-advised anyway.

A further complication is that 74 per cent of indigenous pri­soners nationwide have been ­imprisoned before.  Reoffending indicates an unwillingness to change, so isolation becomes the only way to assure the safety of the public.

The solution to the extra­ordinary level of indigenous incarceration cannot simply be to let violent offenders or recidivists avoid prison.  Nor can it be to criticise the police for enforcing the law, especially where, as in the case of stalking and intimidation, the safety of not just the community but of specific people is at risk.

The causes of this problem are complex but certain principles hold true for all offenders.  Unemployment and low education ­attainment are correlated with crime because they increase the marginal benefit of crime while ­reducing its potential costs.

These factors are particularly acute for indigenous Australians, whose unemployment rate is four times that of other Australians and whose Year 12 retention rates are far lower (which in turn relates to high community levels of drug abuse and family violence).  The criminal justice system cannot by itself resolve these ­issues.  It can play a constructive role by including job training and education in punishments, and by ­securing indigenous communities so that children can complete their education.

There is no short-term way to safely reduce indigenous incarceration.  Clever reforms such as those in NSW should help indigenous ­offenders and defendants.

But building, over the long term, a society open to all Australians based on opportunity, personal responsibility and the dignity of work is the only real ­solution.

Australia Is Not An Unequal Society — And The Politics Of Envy Hurt It

Sigh.  Yet another round of debate on "inequality".  Yesterday Richard Denniss was warning us that even those "lefties" at the IMF thought inequality could be a drag on growth.  Indeed — they do.  In developing countries extreme levels of inequality often lead to political and social unrest.  We in Australia don't have too much to worry about on that front.

Arguments about inequality are always a two-pronged attack on the status quo.  First that inequality is somehow bad, and second that a soak-the-productive will improve inequality by equally impoverishing everyone.  I'm quite certain that North Korea has low levels of inequality.

It is unsurprising that in a dynamic and prosperous country like Australia we'd observe inequality.  Remember — there is a huge difference between inequality and poverty.  Poverty has come to mean households only have two large-screen televisions but still enjoy indoor plumbing and electricity.  The fact is that those people who better satisfy the needs and wants of their fellow Australians in the market will, over time, earn more income than those who do not.  Nobody thinks it is unfair that Kylie Minogue has earned more from her singing career than I have from my singing career.

The counterpoint to this sort of argument is always, but what about nurses and police and teachers and firemen and the like?  Those people who perform extraordinarily valuable tasks yet don't earn very much.  The first obvious point to make is that these functions are invariably supplied by government and their salaries are determined not by a market process but rather by politicians and other public servants.  Mind you, it is people in this income category who really benefit from those "tax rorts" such as negative gearing and novated leases that the ALP are so keen to shut down.

In a country like Australia there is a clear relationship between work and reward.  Those individuals who study hard, work hard, save their money, avoid chemical dependency, don't have more children than they can afford, tend to live happy and comfortable lives.  Not always.  To be sure there is bad luck and misfortune but then we have a generous and means-tested welfare system to provide a hand up.  Welfare was never intended to subsidise the lifestyle choices of the idle.

Yet all that is ignored in a rush to get to the main game:  soak the prosperous, the hard working, the adventurous, all in order to subsidise the idle.

That isn't what the IMF seems to think should be done about inequality.  They advocate things like liberalising labour markets, reducing budget deficits, and open capital markets.  All worthy policy objectives anyway.  The IMF also talks about things such as education and public health.  Then they talk about redistribution.

What the Denniss argument overlooks is that Australia already has a highly redistributive fiscal policy.  The single largest item on the commonwealth budget is welfare.  Some 35 per cent of the budget is allocated to social security and welfare.  If we include education and health that figure rises to nearly 59 per cent of the budget.  All that is financed by high taxes on the few.

In a recent analysis undertaken by the OECD, the ratio of household wealth for the top 5 per cent of households relative to median households in Australia was 9.5 — less than half the average for 18 OECD economies (20.4).  We rank just above "crisis economies";  Italy at 9.3, Spain at 9.0, with Greece at 6.4.  An earlier OECD analysis undertaken by Professor Peter Whiteford, of the Australian National University, found that Australia ranked second in the OECD for the progressivity of its tax system.

Those Australians who do pay income tax are very highly taxed already.  According to the latest data from the ATO the top 5 per cent pay 33.4 per cent of all net income tax.  The ALP and the Australia Institute want them to pay an even greater share.  But rather than say so directly, they speak of tax rorts and loopholes.  To be clear, if people are not paying the tax they are legally obliged to pay the ATO should pursue those individuals through the courts.  But loopholes are not rorts.  Very often those "loopholes" were implemented as part of the tax design to avoid double-taxation or to maintain the ability to pay.  Also many loopholes are negotiated outcomes that allow the tax to be implemented in the first place — think of the fresh food loophole in the GST.

The politics of envy is an ugly thing.  It detracts from efforts to grow the economy and transforms open-ended economic opportunity into a zero-sum game.  It may be the case that inequality is a problem is some parts of the world — but not Australia.  Mind you, the IMF-mandated solutions to inequality such as labour market liberalisation and reduced budget deficits are policies we should adopt.  We already do well in health, education, and especially well on fiscal redistribution.

Too Much Red Tape Could Keep Drones Grounded

From spraying pastures to collecting crop data, drones are set to revolutionise Australian agriculture.  However, despite this enormous potential, calls for more regulation threaten to keep drones firmly on the ground.

The application of drones in agriculture alone is estimated to be worth an enormous $32 billion globally.  How can Australian regulators make sure we embrace this revolution?

No one knows the future of drones and how they will be used.  That's why entrepreneurs must be allowed to experiment and test.  But this entrepreneurial process requires a flexible regulatory system.  What's more, business investors will only be attracted to a regulatory environment that is both certain and stable.

Nevertheless, it appears Australia is about to backflip on last year's decision to relax drone regulations.  For farmers this is a worrying sign because the changes had freed them to fly drones under 25kg for use on private land.

Since the announcement, however, there have been increasing calls to reverse the changes and impose more red tape.  Indeed, we now have a senate inquiry and an upcoming safety review.  This regulatory uncertainty threatens the early stage investments necessary for our domestic drone industry to flourish.

Australia must resist the temptation to stifle development based on fear.  There have been no incidents of collisions with manned aircraft in Australia.  And we still have strict rules preventing drones flying over 120m or within 5km of airports.

It's also unclear why privacy concerns cannot be solved using existing legal principles such as harassment and trespass.

Regulators should cut even more red tape on drones.  They should consider reviewing rules restricting autonomous flight and flying drones beyond visual line of sight.  The agricultural drones of tomorrow may be autonomous ones, flying over vast properties, monitoring crop yields and detecting early plant diseases.

Australia is in a prime position to embrace drone technology.  But this will only happen if we encourage entrepreneurship and investment through flexible and certain drone regulations.