Workers lose in Beazley scheme

Kim Beazley's commitment to eliminate Australian workplace agreements (AWAs) threatens the essence of workplace reform over the past two decades.  And common law agreements will not take the place of AWAs, as Beazley suggests.

The advantages of individual employers and employees having power over wages and conditions depend on their having the right to strike a mutually beneficial bargain in which conditions are traded off for things to which the parties attach greater value.

Employees might trade off penalty rates and overtime for a regular salary;  travel entitlements for a car allowance;  daily breaks for a finishing time that allows them to pick up children from school, or rostered days off for more annual leave.  Or they might accept less than award wages to get training and experience in a first job.

Beazley's position is that workers can "trade up but not trade off".  This threatens the very idea of individual agreements.  Why would employers offer more than the award base if workers cannot give up conditions to which they attach little or no importance but which make the business uncompetitive?

The Labor position is not just antagonistic to AWAs -- it would make awards and collective agreements superior to all individual agreements.  His policy would require retention of the whole system of awards or legislation to establish his chosen base conditions.  It would entrench the award system, and the power of unions and arbitrators in that system, at the expense of workers losing power over their working lives.

This would threaten many common law agreements because:

Awards override common law agreements, so employees are legally entitled to the highest combination of the benefits of any applicable award plus the benefits of their common law agreement, even if they purport to agree to a trade-off.

There would be two classes of workers.  Many covered by common law agreements are award-free but, in most industries, common rule awards apply to clerical and administrative employees, IT professionals, transport workers, sales personnel and other classes.

Certainty.  AWAs give both parties certainty about terms of employment, enable a "package deal" approach, provide a single source of rights and obligations and minimise the risk of either breaching the law unknowingly.  Parties who rely on common law agreements are still bound by awards, even if they don't know the award exists.

Flexibility/ productivity.  Because AWAs prevail over awards, the parties can replace restrictive award provisions with flexible work practices and personal incentives.  AWAs can include performance measures and rewards particular to an employee.  Awards cannot.  Common law agreements can, and often do, include incentive provisions but they cannot effectively overcome restrictive award conditions that apply in addition to agreed terms.

No industrial action.  Employees who sign AWAs are not permitted to take industrial action during the life of the AWA.  This gives employers significant protection from industrial action and can protect employees from unwanted union intervention.

Reduced union involvement.  Where all employees in a workplace have signed AWAs, union officials now have no right of entry unless an employee asks one to attend.  Common law agreements do not have this effect.

In the past decade there has been growth in individual agreements, a decline in union membership, less coercion in the workplace and increased authority of workers and employers over workplace regulation.  Although not due to workplace reform alone, these developments have coincided with increased employment, higher real wages, lower working hours, historic growth in productivity and a strongly growing economy.

While awards continue in force, we cannot rely on common law agreements to deliver another decade of these benefits.  The transitional provisions in the federal legislation mean that awards continue to apply for up to the next five years -- the Beazley policy would make them permanent.

AWAs give workers and employers power over their own workplaces.  Beazley's reactionary policy would deny many workers the opportunity to secure the income and work conditions that best serve the interests of their families by removing their right to trade away conditions that restrict their employer's business for terms workers see as more valuable for themselves.

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Less salt, but a lot less groundwater, too

The Murray-Darling Basin Commission (MDBC) recently awarded its National Salinity Prize to the Pyramid Creek salt interception and harvesting scheme, which evaporates groundwater and sells the remaining salt.

There have been quite a few salt interception schemes built along the Murray River over the last 20 years to reduce river salinity levels and they appear to have been very successful.

At the key site of Morgan, just upstream from the offshoots for Adelaide's water supply, salt levels have halved.

There is also a special federal Budget allocation of $500 million for more salt interception schemes.

But hang-on!  How much lower do we want to push Murray River salt levels and what's the trade-off in terms of lost groundwater?  There is concern that irrigators are over-pumping groundwater and must give up some of their allocation, yet the MDBC is worrying about rising groundwater.  No sense there.

A recent CSIRO report on "risks to the shared water resources" published by the MDBC included a section entitled "groundwater extraction" which stated that "groundwater stores are declining at alarming rates".  Read on, it refers to high levels of groundwater extraction in the Shepparton-Katunga region (where the Pyramid Hill Scheme was built) contributing to salinity mitigation.

The report concluded that clearing of native vegetation and irrigation had raised water levels in many parts of the basin, forcing saline groundwater into the streams.  That might have been the case 20 years ago, but not now when we have salt interception schemes and across most of the Basin the problem is declining, not rising, groundwater levels.

Indeed, since the late 1990s groundwater levels have been falling in the Murray, Murrumbidgee and Coleambally irrigation areas -- regions once considered most at risk from rising groundwater.

In 2004, the CSIRO said the falling water levels were due to improved land and water management practices, a drier climate, deeper groundwater pumping and more leakage from shallow to deeper aquifers.

So when will it be realised the real issue is disappearing groundwater and it is likely to be exacerbated by the next salt interception scheme?  The MDBC's next national salinity prize should perhaps look to schemes that work out how to get rid of the salt, while saving the water.

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Market the massage, not media moguls

The release of submissions to Communications Minister Helen Coonan's media reform proposals merely confirm a few truisms about the debate over media ownership in Australia:  The public is deeply ambivalent about the spectre of ownership concentration.  And few commentators and organisations are willing to break the cycle of protectionism and regulation that has characterised the sector for the past century.

Much of the debate about the removal of cross-media ownership rules, and their proposed replacement -- a minimum number of owners in each market -- has missed the point.  Competition law, rightly or wrongly, governs the sector to protect against monopolistic practices.  But ownership regulations relating to broadcasting go beyond that to encourage structural diversity.

Why do we fear, as Senator Coonan's media reform paper put it, "excessive ownership concentration"?  An aim of the broadcasting law is the promotion of opinion diversity.

Access to this is one of the foremost assumptions of a democratic society.  It is widely believed that to ensure people are adequately informed about their choices in a democracy, they require a wide range of information.

Given the large influence the media has on our democratic process, legislators fear a media mogul could unduly manipulate public opinion for their personal ends.  With ownership limits, the Government tries to encourage "diversity".

Unfortunately, we have not come far from the views of Robert Menzies who feared that "the most intimate form of propaganda known to modern science" could be controlled by "people who do not belong to this country".

Senator Coonan has his spirit.  Menzies was no lover of the free market and his Toryism is still reflected in the backward attitudes of the Liberal Party to media ownership.

The Government's media changes will probably remove restrictions on foreign investment and ease cross-media ownership restrictions.  While these changes go a small way to liberalising the industry, they do not challenge the widely held belief that moguls manipulate public opinion, to the detriment of Australia's democracy.

Compare our relatively objective media with the highly partisan media of the 19th century and before.

Objectivity has not arisen because of ownership restrictions or the best efforts of legislators.  Instead, it is a response to market demands through changing technology.

In the early 20th century, many media proprietors realised there was a greater market for a news media without overt partisanship.  Technology in this period, from cheaper printing presses to radio and television, enabled them to capture that market.  The notion of journalistic objectivity has been the result of these changes and consumer demand.

More recent changes in market structure could be pushing our broadcast media the other way.  We often desire objectivity in reporting, but also enjoy reading highly partisan blogs or opinionated columnists.

Today's proprietors face an explosion of technologies.  Some are well appreciated, such as blogs on the internet.  But some are not often recognised for how significantly they have changed viewing habits, such as the video recorder.

Despite their well-publicised views on political issues, the moguls, including Rupert Murdoch, have comparatively little influence compared with the all-powerful newspaper tycoons such as William Randolph Hearst and Lord Beaverbrook, who operated without substantial competition.  Murdoch is no Citizen Kane.

Radical change over the past 30 years has inundated media companies with competition.  The high capital costs that encouraged the media to package objectivity are being replaced by the extraordinarily low costs of cheap printing and the internet.

As any first-year marketing student will predict, media companies, big and small, are attempting to respond to this highly competitive environment by differentiating their product from competitors.

One effective way is the careful, studied introduction of political viewpoints.

Any assessment or assertion of bias in a media organisation has to take into account this fact -- more often than not, bias is an intentional technique to attract and retain an audience.

The internet gives people interested in political ideas more viewpoints than they would be able consume in a lifetime.

We live in an age of information and opinion abundance, rather than one where we need to be wary of the undue influence of media tycoons.

The reality is that no ownership regulation is going to prevent media organisations from chasing markets they consider to be profitable.  Legislators should treat the media no differently than any other industry -- neutral and respectful of the services they offer consumers.

It is unfortunate the Government, and many of the contributors to the media reform consultations, do not believe that.

Outcomes Based Education: Dumbed Down and Politically Correct

Occasional Paper

State unions are very different beasts

With the Federal Government pushing for a single, national industrial relations system, it's worth considering the different industrial relations cultures in each state.  Understanding these cultures explains a lot about how business is done in Australia.  There's quite a difference between the states.

The most critical point is that there's still a lot of "big picture" deal-making involving unions, state governments and businesses.  This deal-making contradicts the public's perception that unions and employers are mostly natural enemies.

But deal-making is often dysfunctional.  It fractures and fails.

The Federal Government's industrial relations changes are altering deal-making processes.  This is beginning to impact on how business is done.

Industrial relations deal-making at state level can be strong because it links with planning approval processes.  If someone wants approval for a project, they'll find swifter government sanctioning if working relationships have been created with designated unions.

It works like this.  A company will seek to expand or develop a factory or perhaps bid for government road construction jobs.  The approval process is multi-layered.  It usually involves establishing union worksite agreements, during and after construction.  Executives sit on industry consultative committees with union officials.  Personal connections are made that smooth approvals.

Industry associations play a central role.  They guide companies through the personal connection process.  In return, the associations secure membership and government funding for training and other activities.

The states and federal industrial relations commissions largely have a rubber-stamping role.  They give the appearance of legal authority to deals pre-hatched between company executives and senior union officials.  The commissions also discipline wayward companies.

It's not as simple as this but the general picture is true.

NSW is the strongest deal-making state.  For a long time politicians, union officials and top business people have worked together in tight harmony.  People who are "inside" the deal tents have done well.  Deals are negotiated hard.  But when deals are struck, they last.  The NSW IRC gives legal force to the deals.  Over the past few years it has become incredibly powerful by extending its reach to override normal commercial laws.  The IRC has become a super-authority, sanctioning deals involving every aspect of how NSW operates, particularly in Sydney.

But lately this NSW deal-making has corroded.  The web of deals has become so complex that it's strangling the NSW economy.  Everything from transport, schools and hospitals to housing and even work safety is affected.  The Government has largely lost control of its budget because public service wages are controlled by the NSW IRC.

Infrastructure reform has failed because of countervailing deals.  These have stopped electricity privatisation, for example, and created dysfunctional management of railways.

Victoria is totally different.  The deals culture has always been haphazard due to passionate ideologies dominating the union movement.  Grand social ideas matter more to unions than practical business.  The relationship between Victorian governments and unions has always been strained.  The biggest bully usually wins.  Business executives often look on, like blinking teddy bears, hoping to get their projects through but not sure how.

The demise of the Victorian IRC nearly a decade ago broke down deal processes even further.  But oddly, Victoria has benefited.  The web of integrated deals now stifling NSW is not present in Victoria.  Projects can and do get approved and move ahead.  However, huge cost overruns and delays are endemic, particularly in construction, because every day seems to involve renegotiation of demands.  It's a great challenge for any Victorian government.  It badly affected Commonwealth Games projects, costing hundreds of millions of dollars.

Queensland is in a league of its own.  The difference is that a down-to-earth "frontier" spirit is alive.  People tend to ignore ideology and seek to look after themselves.  The Australian Workers Union dominates Queensland.  But because Queensland workers have a real "get-up-and-go" attitude, the AWU has always had to be more practical than in other states.  Deals tend not to be interlinked because players and projects are spread across a vast geographical area.  The Queensland IRC has some importance but nowhere near that of NSW.

South Australia's long history of tight and stable family connections means that deals are not as dependent on industrial relations.  SA has a small number of large, dominant projects, particularly mining, which everyone is desperate to support.  There's a keenness to assist these projects.  The SA IRC plays a role, sometimes heavily, but family and personal connections cut through.  Outsiders looking to do business in SA need to take time and to partner with locals.

Tasmania has turned around spectacularly in the past few years.  It was rapidly becoming a retirement village for romantic green dreamers.  However, smart elements in the local construction union became fed up and decided that the state needed business.  They moved into government with a strong pro-business attitude.  They are working closely with local businesses in a Tasmanian rejuvenating exercise.  The local IRC plays a role, but it is limited when compared with NSW, for example.  Outsiders with ideas are encouraged, but have difficulty locating new investment opportunities.

The mining boom in Western Australia is so massive that industrial relations deal-making is minimal.  Mining companies have developed top-quality, direct relationships with workers without unions, and pay big money to workers.  They have to because the largest issue is the labour shortage.

The WA Government is being dragged along by the boom, responding to developments rather than creating them.  The biggest problem is a dysfunctional Perth-based construction sector dominated by a crazed construction union.  Rationality does not exist.  The WA Government is inert on the issue.  Robust entrepreneurs have responded by building integrated non-union supply chains to manage their projects.

The federal push for a unified industrial relations system will change these state-based deal environments.  The impact will vary from state to state.  NSW is set to witness large and fundamental change quickly.  It is why the NSW Government is the chief advocate of constitutional challenge to the federal legislation.  Change in the other states will be more medium to long-term.

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Too early to damn Work Choices

Is the Howard government's model of individual work contracts immoral?  Many say yes.  They believe that individual work arrangements destroy the collective and damage "community".

This argument was best explained by the Archbishop of Sydney, Peter Jensen, who in his 2005 ABC Boyer lecture series attacked what has been branded as the cult of individualism.

Jensen defines individualism as "the liberal view of ever-expanding choice" but says it is in fact "selfishness masquerading under the grand name of liberalism".

Jensen asserts that individualism causes the decay of unions, clubs, voluntary associations and churches, presenting "as great a danger to our true humanity as the collectivist spirit of Marxism proved to be".

This is the same moral mantra that unions and others use against Work Choices.  They allege it's part of this anti-community liberal view because it moves away from the idea of the labour collective.

The common analysis is that as individuals make free choices in free markets, we mentally and spiritually retreat into self-centred egoism.  Care and passion for others is stripped from our consciousness.  We may become wealthy but material satisfaction equates to barren souls.  We lose the spiritual glue that binds humans.

In this context, the workplace has become a cultural battleground between the opposing forces of community and individualism.

But these ideas are wrong.  They reflect blindness to how community grows from individuality.

Everyone, including Jensen, has a right to promote their moral and spiritual values.  This is good for community.  However the community now has a wide choice of value sets.  These include the value set of the labour collective, which is competing with the idea of individual labour choice.

This competition for ideas is similar to the free market for goods and services.

The consumer in free markets is always each and every individual.  The legitimate and necessary task of leaders is to convince individuals of the value of ideas and to have individuals take those ideas as their own.  The strongest churches, institutions and communities emerge when individuals exercise free choice and adopt moral, spiritual and economic positions because of the power of the ideas.

But when anyone appeals to politicians to apply even subtle policies that limit or manipulate the choices of individuals, they commit a common human folly.

In any market, people will try to create their own patch of monopoly.  Business people will try to block competitors.  Unions will seek to control labour.  Religions will want favour for their morals.  In competitive markets of choice this is natural.  But when any entity looks to government to limit individual choice by promoting one view over another, this is a corrupting of community.

It corrupts because "community" defined by government decree is always a community controlled by government-sanctioned elite individuals.  It distorts community.  The problem with the collective is that it is controlled by elite individuals.

In creating truly strong communities, government must be above appeals for special favour.  Government must give priority to maximising the will of individuals.

Individuals must have maximum freedom to set their own pathways and follow their own roads.  Government sets the frameworks within which we can travel without bumping into each other.  The desires of individuals for personal patches of monopoly must be allowed but monopoly achievement must be frustrated.

These rules of good government are the rules for strong community.  They apply in all matters -- including economic, moral and spiritual.  They contribute to making strong families.  Work Choices presumably targets this objective on employment matters.

But it's no easy outcome to achieve.  Governments are run by humans who suffer from normal human follies and will be seduced by appeals for special favour.

This does not mean that government is or should be value-blind -- quite the opposite.  However the highest value must be placed on maximising the right of individuals to choose.

In many respects, Work Choices is an experiment in enabling individual choice in employment.  Unions claim the choice will happen only for employers.  However the truth is that it's too early to assess whether Work Choices genuinely empowers employee choice.

But the moral basis of Work Choices and individual work contracts is sound.  Community is built from individuality.  This should include choice on work issues.

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ACCC undermines its case

Australian Competition and Consumer Commission chairman Graeme Samuel is telegraphing a greater willingness to allow mergers to proceed providing the parties offer undertakings that they will not act anti-competitively.

This makes a great deal of sense for a number of reasons.  Not the least of these is that the genuine monopolies that are unchallenged by competition are quite rare.

But the change in the ACCC's approach is coming all too slowly.  The regulator continues to campaign for increased powers and to retain controls even when competition has eroded the case for this.

The ACCC's naivety on mergers was demonstrated in its contesting the Loy Yang takeover by an AGL-led consortium.  Its knee-jerk opposition was to an acquisition strategy designed to reduce business risk, which would have no effect on competitive provision.

As that case illustrates, competitive processes are far more sophisticated than the "perfect competition" model of a homogenous good with many suppliers and many customers.

It is that simplistic market model that has for too long conditioned the ACCC's assessment approach.  And it is an approach that has fostered deficient analyses in other areas.

In the case of the two gas pipelines serving Sydney, from Bass Strait and Moomba, the ACCC holds the view that both are monopolies;  it even commissioned "research" to demonstrate that, notwithstanding the apparent rivalry, the prices were higher than the marginal cost-based levels it considered should prevail.

The current case to prevent Alinta controlling two competing pipelines has substantial merit.  However, if both pipelines are monopolies, as the ACCC has maintained, then nothing is changed by them being merged and there is no greater need for them to be regulated.  In this respect, by detecting a monopolist under every bed, the ACCC undermines its credentials in cases more worthy of regulatory attention.

The view implicit in the ACCC's indications of dissent to Alinta controlling both Sydney pipelines means it now accepts there is genuine commercial rivalry between the two facilities.  This in turn means it acknowledges its earlier estimates of the genuine market price for carriage on the two facilities to be off the mark.

The ACCC's erroneous insistence that it, not commercial providers, can best establish the appropriate market price damages confidence in the agency in its stoushes with Telstra.

Telstra is refusing to build its new fibre network until it has assurances it will not have its profits squeezed after it has disbursed shareholders' funds.  Its refusal to accept the regulator's "trust me" invocations is founded on its experiences of price determinations on the copper wire network.  Telstra, rightly or wrongly, sees the ACCC's decisions as underpricing the services on that facility.

Because it must "smear" costs, rather than charge cost-reflective prices, it says its rivals should incur similar cross-subsidies, to avoid them cherry-picking the best markets -- leaving Telstra carrying excess baggage.

The ACCC is demanding a lower price.  Worryingly, one of the grounds it states is that Telstra's proposed price would not increase competition -- a view that seems to value competition per se rather than as a means to improving consumer value.

A greater concern from the national perspective is the regulatory position on the prospective fibre network.  The ACCC's telecoms commissioner, Ed Willett, argues that there are many alternatives to the Telstra fibre network and that the ACCC is looking to ensure the fibre broadband launch promises "better offerings for consumers than the likely alternative".

This places the ACCC as the love-child of the "picking winners" approach that governments themselves now acknowledge to have been misplaced.

Regulating facilities established under government control and protection is one thing.  Hence, though the ACCC may incorrectly price the copper network, the network's owners must accept regulation -- at least until technology and other changes enfeeble their monopoly powers.

But seeking to regulate new facilities before they have been built is another.

The ACCC continues to campaign against regulatory holidays for greenfield gas and telecommunications facilities.  This can bring only suboptimal investment and deterioration in infrastructure services.

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The wrong way to change the culture

Keith Windschuttle's appointment to the ABC board is not the final victory of the conservatives in the culture wars.  It is not, despite the faux outrage displayed by left-wing pundits and the Friends of the ABC, the final victory by conservatives in the culture wars.

Instead, it is an admission of defeat.  Having him on the board of the national broadcasting will do little to redress the bias of the ABC's coverage of news and opinion.

By stacking the board full of conservatives -- a board that has little influence to change the broadcaster's day-to-day policy -- advocates of reform can wash their hands, thinking the job has been done.

After 10 years in government, the Coalition has not managed to budge the ABC's culture one bit.  Assuming that we will continue to have a government-owned broadcaster funded by taxpayers, it is clear by now that the only way to improve the ABC is a massive change -- ommercialisation, a cull of the middle management, and the genuine embrace of a diversity of opinions.  At the moment, the opinions expressed on the ABC range from soft pink, to hard red, to deep green.  While there are some notable exceptions, the point is they are exceptions.

Those who most vigorously pursue the cause of the "independence" of the ABC can't appreciate that most of the time the ABC only ever gives coverage to one side of politics.  If government is truly to be "held to account", why is it that the ABC only attacks governments (Labor and Liberal) from a left-wing perspective?

The claim that commercial broadcasters are "right-wing" and therefore a "left-wing" ABC is required for "balance" misses the point.  The national broadcaster must be balanced -- it is not its mandate to undertake some self-appointed role of addressing bias in the media.

Why, if the Government truly wants to reform the ABC, does it restrict itself to board appointments?  As Windschuttle himself has argued, the ABC has "built a house culture that even the appointment of a board now dominated by conservatives has been unable to displace".  It is unclear what the addition of one more conservative would accomplish.

There is every indication that Mark Scott, the incoming ABC managing director, will do a good job.  A government intent on supporting him could have contemplated board appointments that will support him.

None of this is to say that, personally or professionally, Windschuttle is unsuited to being on the ABC board.  His record as a journalist, media commentator and media academic is formidable.  He has been a working journalist, and a frequent contributor to newspapers and magazines around Australia and the world.  He has written a series of books on media and communication.

Windschuttle's contribution to Aboriginal history has been controversial, but it is not, as his critics allege, divisive.  Windschuttle's scholarship is not in dispute.  Instead, what has been attacked are the conclusions that he draws from the evidence.  By uncovering failures in the academic discipline of history he has done the field a service.  Others are free to contest his interpretation;  however, to denigrate his role as a leading scholar denies his importance.

The real culture wars are far more subtle than the popularised issues of saying "sorry", the republic, and the treatment of asylum seekers.  At stake are bigger questions about our history, who we want to be, and the role of government.

The ABC board has little to no effect on the everyday lives of Australians.

The real culture wars are not ones that can be placed on a pithy bumper sticker.  The culture wars are about the values that exist in our education system, our universities, our courts and our public institutions.  Increasingly, conservatives are being marginalised in debates on these values.

For example, in Victoria, the Bracks Government's proposed charter of rights would allow unelected judges, not the parliament as the representative of the people, to make decisions about our laws.  This is a major challenge to our democratic heritage and yet it has hardly been discussed.

Most of the teaching of Australian history in our classrooms and lecture halls either ignores or is positively hostile to the contribution that Europeans have made to this country since 1788.  And the arguments about Keith Windschuttle's history are evidence of the fact that few people are willing to examine both sides to the story of our history.

There's no reason Keith Windschuttle shouldn't be on the ABC board.  The fear is that his appointment is a distraction from the much bigger issues that are really at stake in our culture wars.

Renewed interest in the nuclear family

The Prime Minister introduced a new dimension to energy policy by re-opening the debate on nuclear energy.

Energy policy is increasingly being considered within the context of possible global warming from carbon dioxide emissions.

Nuclear energy is the cheapest source of electricity for many countries throughout the world.  This is not the case with Victoria where new coal-based plants can be built at less than $40 per MWh while nuclear would be at least $60.

On these grounds, Energy Minister Theo Theophanous has rejected nuclear power for Victoria.

However, a form of carbon tax to discourage power stations using fossil fuel would change the relative levels.

The form of tax in place in the European Union would raise costs of brown coal by more than $30 per MWh.  If applied here this would make nuclear (which has no carbon emissions) cheaper than coal for new Victorian power stations.

The $30 level of tax would, however, need to be doubled to sharply reduce fossil fuel usage.

With a tax equivalent to $60 per MWh on coal, even wind would be competitive.

Though wind's irregularity means it can be only a minor source of electricity, with a high enough tax on alternative supplies, it could conceivably contribute a 5-10 per cent share.  However, wind and other exotic renewables will always be far more costly than nuclear.

The Victorian Government has said it is committed to having 10 per cent of Victoria's energy supplied through renewable sources.

This is ostensibly aimed partly at forcing Victorians to "do our bit" towards saving the world and also at subsidising the development of a local renewables industry and promoting regional investment.

To estimate the costs, the Energy Users of Association of Australia commissioned Access Economics to examine the Government's proposals using their economic model.  This estimated the costs to Victorians at $830 million.

That's more than the Government's 25-year spend on regional roads or on the Monash-West Gate and it all comes out of the same pockets.

Moreover, because the proposal targets reduced greenhouse gases as well as industry development it achieves neither efficiently.  In fact, far from increasing employment, it would actually cost more than 1100 jobs.

In releasing the Access Economics report, EUAA executive director Roman Domanski pointed to the increases the Government's proposals would bring in electricity prices.

He estimated these at 5 per cent for businesses and 3 per cent for households.

He argued that requiring 10 per cent of energy be provided by renewables would bring net job losses to rural Victoria in spite of the policy supposedly seeking to increase regional jobs.

This is because the proposals would reduce competitiveness in the many regionally based industries that are energy reliant.

Although greenhouse policy is firmly in the Federal Government's bailiwick, the Bracks Government seems bent on adding a state based scheme to existing subsidies to renewables.

This would bring major costs to Victorians.  Moreover, the measures' effects in reducing emission levels would be undermined because Victoria's higher energy prices would simply encourage firms to move offshore or interstate.

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Work safety injustice

Recently the NSW government announced proposals to changes to their work safety laws.  They have made the correct move of eliminating presumption of guilt and lining up with the rest of Australia.  Now everyone in the workplace will be responsible for safety according to what each person can reasonably control.

Presumption of guilt in work place accident prosecutions has been a significant reason why businesses have been deserting NSW.  Company managers have been prosecuted for genuine accidents over which they had no reasonable control.  This has applied to small and large businesses.

The fact is that it has been impossible to prove innocence.  Effectively it has meant that guilt applied as soon as an injury occurred, regardless of the cause.

The government has finally recognised that this is unfair.  People, who under normal justice process would have been found innocent, have been wrongly convicted.  Injustices have been done to ordinary people in the workforce.

But the government has however failed to take the next logical step.  Surely it would make sense that, having accepted that the law is flawed, prosecutions currently in the pipeline should be frozen.  If the law is bad it would be wrong to proceed with existing prosecutions.

NSW conducts more that 450 prosecutions a year, which is a larger figure that all other states combined.  Victoria for example has well under 200 a year.  This must suggest that there could be around 250 people in NSW currently facing prosecution who should not be facing prosecution under the proposed NSW changes.

This is large scale injustice that must be stopped.

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Building bullies and Beazley beware

The union fear campaign being run against the Howard Government's workplace changes is recognised as highly successful.

It's apparently hurting the Government's electoral support.

Politics is important, but what also needs to be assessed is the impact of the program "on the ground".  The changes will be successful if they lead to a better business environment resulting in more economic activity, more jobs, higher worker pay and sustained business profits.  If this occurs, there could be a political swing favouring the changes.

WorkChoices has only just come into force.  It is not yet possible to assess its impact.

But the commercial construction sector reforms have been operating for nearly nine months.  An assessment can be made.  What's emerging is a behavioural change on a scale and speed much larger and faster than could have been predicted.

Commercial construction in Australia is a multibillion-dollar industry.  It includes construction of skyscrapers, factories, roads and so on.  One third of the work is government-funded, and this is where much of the profit is made.

About four years ago, the Federal Government had an inquiry into the industry.  The Cole Royal Commission found that the sector was being harmed by corruption, illegality, tax fraud, intimidation and violence.  The behaviour of the construction union, the CFMEU, was found to be a major cause of the problems.

Last year the Federal Government was able to fully implement the inquiry recommendations to clean up the industry.

First the Federal Government decided that it would not give construction work to building companies that break a new code of practice.  The code said, for example, that construction business and unions are not allowed to force subcontractors to have union agreements.  Workers must not be forced to be union members.  Union agreements and membership must be voluntary.

Further, companies must not breach the code on any private work and all subcontractors must also comply.  This means the code effectively applies to all construction work.

Second, the Federal Government created a "super policeman" for the industry.  The Australian Building and Construction Commission has enormous powers to investigate problems and to prosecute.  It enforces the code of practice.  It can jail people who refuse to attend confidential interviews and answer questions.  It can even prosecute a union that has caused commercial losses to a company and obtain compensation from the union for the company.

Several successful prosecutions have already occurred.

For example, in early May this year, the CFMEU was fined $13,500 and a union official $450.  The ABCC conducted the prosecution.  The CFMEU had breached the new laws when they stopped a worker from a soil testing company doing work in Footscray, because the company did not have a union agreement.

This successful prosecution, and others like it, have sent signals to construction workers and businesses that bullying by the CFMEU and others can be stopped.  There's now evidence that when the CFMEU tries illegal bullying tactics, workers and subcontractors are lodging complaints to the ABCC.  The rule of law is beginning to apply in the construction sector.

The ABCC has even warned the recently formed Victorian Building Industry Disputes Panel that some of its decisions may have breached Federal laws.

This new environment is affecting large construction firms.  If firms want to win government tenders they must comply with the new code of practice.

The current round of tendering for work across Australia is massively different from nine months ago.  Companies are doing deals with their workers that remove prohibited union demands.  Higher pay can be offered because greater efficiencies are achievable.

Construction firms are undergoing significant change.  Businesses that once secured big profits by using union agreements to restrict their competitors are facing new competition.

The current crop of construction projects under union agreements will soon finish.  New projects with the new rules are starting up.  The industry is set for sudden, dramatic change.  Everyone from the bricklayer to the largest firm are needing to do business differently.  The intimidation that has been normal is now being suppressed by the ABCC.

It's still early days.  The ABCC has yet to come up to full operational strength and effectiveness.  But there are early signals of rapid change.

If the change locks in, few people in the industry would want a return to the old days.  Fear of the old would create support for the new.  If this occurs, then the workplace reforms in the construction sector could become a political positive for the Howard Government.

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Opportunistic opposition

Randolph Churchill, the father of Winston, had a simple rule about how political parties out of power should operate.  He said, "the duty of the opposition is to oppose".  It seems that Kim Beazley, not having had much success proposing any new policies, has reverted to this dictum.

Before the Labor leader goes too far in following the advice of 19th century politicians he might consider the course of Randolph Churchill's fortunes.  He had a meteoric rise and by the age of 37 was both leader of the Conservative Party in the House of Commons and Chancellor of the Exchequer.  In a matter of months, he lost both positions and his political career petered out, ending in ignominy.  According to the leading historian of the British Conservatives, Churchill's colleagues quickly saw through him and they recognised his single biggest failing -- which was that "Churchill had no real policy".

Whether the Australian electorate will see through Beazley's promise to scrap Australian workplace agreements (AWAs) and realise it is the policy Labor has when it can't think of an alternative, is one of the key political questions of the year.

At face value, the ALP's new position not just to abolish the AWAs but to place the entire industrial relations system in thrall to the ACTU might appear to be bad policy but good politics.  On a moment's reflection, though, it becomes obvious that Labor's stance is both bad policy and bad politics.

It's true that the public is yet to be convinced about the merits of Work Choices -- it is confused by it, and the coalition hasn't done a brilliant job of selling its benefits.  When combined with effective union advertisements against the legislation, and the blanket publicity given to the supposedly extreme actions of a few employers, it is no surprise that there is widespread unease about industrial relations.

By saying he will eliminate AWAs, Beazley might feel that at one stroke he has exploited the community's disquiet, appeased a restless union movement and kept himself in a job.

If only it were that simple.  But there is one problem:  Labor hasn't taken account of the intelligence of Australian voters.

Australian voters understand that an unemployment rate of 4.9 per cent is not an accident -- it is the product of a more flexible labour market.  They also know the accuracy of what the head of the International Monetary Fund said in Canberra on Wednesday, "... the labour laws of not only the 1970s, but even the 1990s, are probably not the ones we need in the 21st century".

Of course, voters are not above appeals to self-interest and the ever-growing demands of welfare for the middle class are the proof of this.  However, the ultimate objective of the electorate is to ensure the country's future prosperity and it appreciates that sometimes the interests of the 11 million voters who are not members of a trade union outweigh those of the less than two million voters who are.

Until 1998, it was an article of faith in Australian politics that no party proposing a new tax could win a federal election.  Voters didn't necessarily like the concept of the GST, they didn't understand it, and many felt that they themselves or others might be worse off under it.  But this didn't stop them voting for it anyway.  They knew it was in their long-term interests to improve the country's tax system.

The argument about Work Choices and AWAs is not very different from the GST debate.  Nearly a decade ago, Beazley's grab for votes put him on the wrong side of good policy -- and politically he was punished for it.  He risks making the same mistake again.

The GST was an important issue not just because of what it actually did, but also because of what it represented.  One political party supported reform and the modernisation of the economy, and the other didn't.

Likewise with AWAs.  That a relatively small proportion of workers are employed under them is irrelevant.  AWAs symbolise the ability of employers and employees to negotiate for flexibility and higher wages.  The fact that there aren't more AWAs is evidence that industrial relations in this country has yet to adapt to the new realities of the international marketplace for labour, goods and services.

In a moment of candour, Randolph Churchill once revealed the primary motivation behind his biggest political decisions.  He admitted it was "mostly opportunism".  Right now, it looks like the same thing is motivating Beazley.

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Why Going Nuclear Looks Good

A recent poll of Australians indicates that 60 percent of Labor voters and nearly 40 percent of Coalition voters are against building a nuclear power station in Australia.

But the Prime Minister, John Howard, has just commissioned a report on the issue and asked for a national "debate".

Nuclear energy is not on the political agenda because Australia is short of energy.  We have huge reserves of coal.  But nuclear energy is greenhouse neutral, while coal and other fossil fuels produce huge volumes of carbon dioxide that are thought to be contributing to global warming.

Certainly, atmospheric levels of carbon dioxide have increased dramatically over the last 100 years.

There are possible advantages for rural and regional Australia in supporting nuclear power.

It could mean fewer wind farms.

While green groups claim the government should look to wind and solar -- not nuclear -- as a way of reducing greenhouse gas emissions, even one time NSW Premier Bob Carr recognises the limitations of wind power.

In June last year, he said:  "You could have a wind farm across all of outback NSW.  It'd kill every kookaburra but it wouldn't provide the base-load power we need".

Federal Environment Minister, Ian Campbell, recently blocked a $220 million wind farm at Gippsland's Bald Hill on the basis that the 52 turbines posed a risk to orange-bellied parrots.

I reckon one nuclear reactor just north or south of Sydney would be much better than lots of dead kookaburras or orange-bellied parrots for that matter.

Foreign Minister, Alexander Downer, has suggested Adelaide could make its own water from the sea with a nuclear-powered water desalination plant.

Adelaide currently pipes water over 100 kilometres from the Murray so this could mean more water for the river, without taking water from irrigators.

Former National MP and now independent, Bob Katter, has said publicly he would like a nuclear reactor to be build in his rural Queensland electorate of Kennedy should nuclear power ever become economically viable in Australia.

Nuclear energy, given current technologies, would cost about the same as wind power at $60-80 per megawatt hour.  This makes it almost twice as expensive as coal at $35.

A problem for solar energy is that it is about twice as expensive as wind and nuclear.

By raising nuclear energy as an issue the PM has given The Australian Greens a big emotive issue from which to campaign in the led up to the next federal election.

This could take the focus off our forests, fisheries and farms.

Indeed, both Labor and the Coalition traditionally promise to lock up more old growth forest, close down a fishery or take some water from irrigators around election time.

Perhaps with the environmental focus on nuclear energy there will be some reprieve for rural Australia, as well as orange-bellied parrots, and if Adelaide gets a nuclear powered desalination plant, it could even be good news for the Murray River.

Claims on wrong track

Brian Buckley (The Age, Business, 7/6) chooses to misunderstand my points on transport.  He claimed 55 per cent of New Yorkers were regular transit system users.

The overall public transport share in the New York conurbation of some 13 million people is 9.6 per cent.  For journeys to work it is 29 per cent.  This share is much higher (55 per cent) if New York is defined as the city itself.

Public transport is essential for high-density cities.  Even in lower-density ones such as Melbourne it provides an irreplaceable service on radial routes.  But it is increasingly deficient where journey patterns are shifting from the radial CBD routes to dispersed cross-town trips.  Few routes, other than those radiating from the centre, can be served by public transport at an acceptable cost.

Mr Buckley says transit's case is strengthened if we consider road injuries, car pollution and alleged tax concessions to the car.  Victoria's road fatalities per million kilometres travelled are less than a quarter of the 1976 level and air pollution has been falling for decades.

The fact is public transport pays -- at best -- 30 per cent of its costs and inner-city dwellers such as Mr Buckley and me are being subsidised to use it by Victorians in general.

By contrast, the tax on the cars is more than twice what is spent on roads and similar facilities.

For Melbourne, about 80 per cent of the transport budget is allocated to public transport, which provides only 10 per cent of trips.  The danger is that in seeking to force higher use of public transport, the Government will reduce spending on roads.  This will start eroding the city's commercial viability and consumer-friendly nature.

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Watchdog barks up Telstra tree on our behalf

Ed Willett, the man in charge of telecommunications company regulation at the Australian Competition and Consumer Commission, at a conference on June 1 said:  "Few great things have emerged from monopolies".  His basic theme was that Telstra must demonstrate to the ACCC that its $3 billion broadband roll-out promises "better offerings for consumers than the likely alternative".

His statements give insights into the ACCC thinking.  They are particularly instructive on the regulator's present refusal to allow Telstra to build a new fibre network and to profit by better meeting consumers' needs.

Monopolies are easily misunderstood.  Every company wants to dominate its market and many do so as a result of providing the best value to the consumer.

These monopolies are in marked contrast to those that are the targets of the competition policy reforms of the 1990s.  Any monopoly that is supported by government in excluding new providers is detrimental to the consumer and is likely to undermine business efficiency and innovation.  The same cannot be said for those monopolies that achieve and retain dominance by simply being efficient:  nobody would argue Microsoft has not continued to bring great things to the consumer.

Manufacturers often talk about building "state of the art" plants that they have for their own exclusive use and that, they hope, will confer on them advantages over competitors.  Sometimes the builders of such facilities allow competitors to make use of their plant but only if they decide they are being sufficiently recompensed.

Telstra's proposals are like that.  The fibre they want to use is not uniquely available to them.  They place no condition on installation that they be protected from all other technologies.  They simply want to take the business risk that the technology they are considering will offer them great advantages.

In seeking to exploit those advantages they will also be providing considerable benefits to their customers.  But the outcome is not assured and, like any other decision taker, they cannot go ahead if the Government forces them to share the upside risk with competitors that share none of the downside risk.

The ACCC recognises that the approach Telstra wants to take is no assured highway to riches.  As the ACCC points out, digital subscriber line access multiplexers (DSLAMs) are being added to the local loop.  It also points out that alternative technologies such as 3G and wireless might be more suitable for some areas.  One consortium has even suggested that wireless would provide superior service for 55 per cent of the population.

On top of all this, Telstra's competitors, led by Optus, are also considering putting in their own fibre-to-the-node network.

These considerations make it unlikely that the ACCC is arguing that it must ensure that Telstra does not, in making its own investment, pre-empt all subsequent ones.  This seems doubtful but it may be that, having encouraged Telstra's rivals to invest in DSLAMs, the ACCC is concerned that an alternative approach will reduce the value of such investments.

A more charitable interpretation is that the ACCC is taking it upon itself to decide what is in the interests of consumers and will rule on the proposal accordingly.  This constitutes a major extension of its role.  It means the ACCC is claiming to be the arbiter of the consumer interest.  Regulatory agencies are ill suited to do this and should concentrate on ensuring that market access remains open.

More reasons for travelling north

The two state budgets yesterday provide further incentives for families to pull up stumps in NSW and go north to warm, welcoming and solvent Queensland.

This is not just an issue about the attractiveness of Queensland.  It is an outcome of the mess left by Bob Carr and the inability of his successors to fix it.

Ever since Morris Iemma drew the short straw and become NSW Premier, he has tried to understand the financial wreckage he inherited.

What he has learned is that the problem lies in large part with systemic policy failure in government.  As the NSW government audit report released this year made clear, the state's fiscal problem arose from its failure to control expenditure, in particular public sector wages.

Each year, as the government was showered with windfall revenue from the housing and consumption booms, it allowed expenditure to blow out.  Each year it promised to hold wage increases to just above inflation rate, but allowed them to grow at more than double that rate.  It did nothing to improve the efficiency of service delivery.

On infrastructure, it accepted the public private partnership elixir offered by the banking millionaires factories and little constructive happened.  In short, apart from the thousands of extra well-paid public servants, NSW has little to show for its $20 billion revenue windfall.

Today's budget was Iemma's big test.  He needed to show not only that he understood the cause of his state's troubles, but that he had a strategy to deal with it.  He and Treasurer Michael Costa have failed.

While the budget gets the diagnosis right, it provides no creditable cure.  It recognises that the problem lies in controlling wages and costs, and simply promises to do so in the future.  It provides no reform agenda.  It provides no changes to wage-setting arrangements.  It promises no forced redundancies and no changes to front line services.  In short, it simply repeats the promises of the past.

So the budget's forecast of a one-off operating deficit of $700 million next year followed by improved surpluses is simply not credible.

The budget does commit to a sizeable increase in infrastructure spending.  However, most of this will be funded by debt and most will be used for non-commercial purposes.  Moreover, the infrastructure spending has all the hallmarks of a pre-election spending splurge.  It is spread widely, presented with scant details and with no analysis.

In contrast, the Queensland budget highlights once again the fiscal strength and attractiveness of that state.  Treasurer Anna Bligh announced another large budget surplus for 2005-06 of $2.8 billion, more than triple the original forecast.  The Queensland government estimates a sharp reduction in the budget surplus in future years.  Judging from past performances, this is likely to be a pessimistic view, in sharp contrast to the unwarranted optimism of the NSW budget projections.

The Queensland budget also pledges increases in infrastructure spending and a return to debt financing for budget sector infrastructure.  However, in comparison with its southern neighbour, Queensland allocates a greater share of the infrastructure spend to commercial assets.  It also commits to needed but controversial projects such as new dams, base-load electricity generating plants and new ports.  All of these things the NSW government has avoided.  Moreover, the level of borrowing by Queensland is smaller in absolute and relative terms than in NSW.

Contrary to the claims of southern states, Queensland's fiscal strength is not due primarily to subsidies from other states.  The Beattie government inherited the best run and the most fiscally sound state government in the country.  It had low taxes, low-cost services, no debt and huge cash surpluses.  Its government, under both Labor and the coalition has always been overtly pro-growth and pro-business.

Peter Beattie has consumed some but not all of his inheritance.  Over the past five years his government has allowed spending to grow at a more rapid rate than any other state and this budget continues the trend;  spending on public sector wages is to grow by over 10 per cent.  Despite this, Queensland retains it fiscal advantage.  Moreover, some of the additional spending by Queensland in recent years has been needed.  It has historically paid lower wages and had much lower staffing levels than other states.  As the public sector job market became more national, it has been forced to pay competitive wages and working conditions.  Also in contrast to NSW, Qld has a rapidly growing population, particular young families, with growing demand for education and health services.

Based on what happened yesterday, more and more of those services are going to be expended on Queensland residents who once lived in NSW.

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Bracks' vision still hooked on debt

The Bracks Government presents itself as a modern Labor government -- fiscally responsible, family focused and reforming.

While its intentions and many of its policies might be modern, its taxing policies are decidedly Old Labor.

Since coming to power, the Bracks Government has concentrated the burden of state taxation on home buyers.  In so doing it has forced up household debt, and used that debt to fund recurrent government expenditure.  A result of this has been higher housing costs and reduced home ownership levels.

The problem lies with the Government's increased reliance on stamp duty or transfer fees on residential conveyances.

In 1999-2000 -- the year the Bracks Government came to power -- transfer fees brought in $1.24 billion, representing 13 per cent of total state tax receipts.  This year the tax is expected to raise a massive $2.5 billion or 22 per cent of total tax collection.

Two factors contributed to the rise in the state's dependence on transfer fees.  In 2000-01 the GST deal led to the gradual elimination of a number of state taxes.  As a result the state became more reliant on remaining taxes including transfer fees.  Also starting in 2000, house prices went into the largest upswing in modern history.

This was fuelled in part by government considerably restricting the amount of land on which new house building is permitted.

However, neither the GST nor the housing boom fully explain the Government's increased reliance on transfer fees.

The Bracks Government explicitly chose to place more weight on the tax.

Despite inheriting the most onerous system of transfer duties in the country, the Bracks Government kept the system in place and unaltered.

It has been willing to cut other taxes including land tax, payroll tax and gambling taxes, but not transfer fees.

Moreover, while rising house prices contributed to rising transfer fee receipts, the main driver was bracket creep.

Like income tax, transfer fees are levied at rates that increase as house values reach higher thresholds.  This is why median house prices since 1999 have increased in Melbourne by 109 per cent while transfer fee receipts rose by 179 per cent.

As a result, the fee for median-priced housing in Melbourne is now nearly $17,000, more than 55 per cent higher than the equivalent fee in Queensland.

Problems with transfer fees go far beyond their narrow base and multiple rates.  The duty is a tax on capital transfers which forces most taxpayers into additional borrowing.

As a result the tax has been a major contributor to rising household indebtedness and has imposed an extra $1 billion a year interest burden on Victorian homeowners.

It also violates the fiscal rule -- adopted by the Bracks Government -- of not using debt to finance recurrent spending.

The tax, in effect, forces households to borrow on behalf the Government, with the funds used to fund the day-to-day expenses of government.  Bracks' high transfer fees have also contributed to the high cost of housing and made it harder for families to own their own homes.

This is decidedly Old Labor and is short sighted.

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Redistribution of power

Karl Marx may have been a communist but he was right about a few things.  He said the political system of a society reflected its economic structures -- and we're now beginning to witness this truth.

The rise and rise of Western Australia and Queensland and the financial consequences of the phenomena are well-documented.  Last month, the Treasury Department in Victoria released a discussion paper arguing that the resources boom, because of its effects on prices and wages, will slow that state's growth.  The paper was called A Tale of Two Economies -- an accurate enough description of what is happening.  Next week's NSW budget will confirm how far that state, which once rejoiced in the title of "premier state", has fallen behind its competitors.

What hasn't yet been considered is what such a transformation might do to policy and the national political mindset.

While the Sydney/ Melbourne axis will obviously remain the most important source of political power, increasingly the influence of that south-east corner of the continent will have to be shared with the country's northern and western extremities.  And until a future federal government decides to relocate its public servants to Karratha and Gladstone, Canberra will also be significant because it houses the commonwealth bureaucracy.

Australia has had mining booms before but none has had the same potential to affect the distribution of political power.  This boom is different.  It is exacerbating the rate of increase of population of Western Australia and Queensland as people are attracted to better climates and living conditions.  It is also taking place at the same time as manufacturing industry, the traditional economic mainstay of Victoria (and South Australia) is declining.  And, it could continue for decades.

What is occurring can be put into some perspective.  Just one energy project, the Gorgon liquefied natural gas venture off the north-west coast of Western Australia, will generate annual export earnings equal to more than 10 per cent of the entire value of manufactured goods exported from Victoria.

The political attitude of Victorians can be characterised as one of complacency.  It is the product of a century of industry protection and the industrial relations club.  NSW, traditionally a free-trade state, is establishing itself as the regional base for one of the most heavily government-regulated sectors of the whole economy -- corporate and financial services.  In both states the search for a solution to a problem usually begins and ends with government.

In Western Australia and Queensland the approach is different.  Because each state is further away from Canberra, and because their regional centres are a greater distance from the states' capitals, there is less of an ideological predisposition to rely on the apparatus of central government.  It's no coincidence that in the 1970s much of the philosophical impetus for the "dries" came from the west (think John Hyde).

Miners and farmers, the National Party notwithstanding, appreciate the limits of what governments can do in the face of the market because their outputs are internationally traded.

Policy elites on the east coast of Australia (at least those that are not rabidly anti-American) are more likely to look across the Pacific to forms of political and economic integration with the United States.  Those on the west and northern coasts are more likely to consider Asia as the source of their economic opportunity.  The distance between Perth and Jakarta is half that between Sydney and Jakarta.

The most obvious political impact of the emergence of Western Australia and Queensland will be in the number of their seats in federal parliament as population follows economic opportunity.  At Federation, the two states had 18 per cent of the representation in parliament.  Now it is 30 per cent and the trend will continue.  Within the next 20 years, the population of Queensland will exceed that of Victoria.

This is one of the subtexts of the seemingly aborted merger between the Liberal and Nationals parties in Queensland.  If Queensland were to be of less importance into the future, the federal coalition might not pay as much attention about what was happening in what until recently was regarded as something of a political backwater.

However, if our potentially second most populous state were to have a single conservative political party the ramifications throughout the country for the Liberal and National parties would be enormous.

One of the things that Marx didn't say was that "demography is destiny".  But there is every indication that both economics and demography will play a big part in Australia's political destiny.

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Middle-class welfare won't build fairer Victoria

The biggest mistake in modern Australian politics is to think that state governments don't matter any more.  With the Federal Government collecting most of the taxes, spending most of the money, and having responsibility for the issue of most concern to voters -- the economy -- it is easy to believe that there's only one level of government that counts.

We've become accustomed to the idea that state politics is parochial, narrow and overwhelmingly boring.  It is in the interests of incumbent state governments to keep state politics boring because then there is less incentive for the electorate to care about who it votes for.  Dull (and safe) are now the prerequisite characteristics to be premier.  The leaders of our two largest states fit the bill perfectly.

Commentators dismiss the task of state governments as only being to "deliver services".  Yet the services state governments deliver -- health and welfare, education, transport, policing and planning -- and how those services are delivered have an enormous impact on people's lives.

This week's Victorian budget demonstrates what happens when governments lose focus on how services are provided and forget any concern about value for money.  It appears that Labor is trying to convince itself and the electorate that the only thing that counts is the size of the budget, not how it is spent.  With the state (and the national) economy booming, there's no incentive for the Bracks Government to consider whether services can be delivered better, or in a cheaper way.  Funds are now flowing to people and projects in a completely ad hoc way, without any principle or rationale.

$300 of taxpayers' money to parents of children starting prep or year 7, without any regard to the wealth of those parents makes a farce of Labor's commitment to a "fairer Victoria".  There's nothing fair about hand-outs like this to millionaires.  The purported justification for the program is that parents incur expenses when their children start primary or secondary school.  That might be true, but the financial strain on wealthy parents is insignificant compared with that on parents living on unemployment benefits.

At least the Government could have attempted to ensure that the $300 was devoted to the education needs of children.  That they haven't done so reveals the hand-out to be the election bribe that it is.  And this explains why both the Premier and Treasurer had so much difficulty justifying it.  For once, the teachers' union is right.  The comment by the union's president that "if it had just been targeted to struggling families it would be something that would have been universally welcomed" is accurate.  The pity is that Labor in this state is now following the lead of the Coalition at the national level in handing out middle-class welfare indiscriminately.

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Little Real Evidence for Salinity Crisis

Six years ago the National Farmers Federation (NFF) and the Australian Conservation Foundation (ACF) joined forces to lobby the federal government for $65 billion dollars on the premise dryland salinity was spreading at an alarming rate.

This campaign was based on a joint report, Repairing the Country, which was published just before the National Land and Water Resources Audit's dryland salinity assessment was released claiming 17 million hectares of farmland would be lost to salt.

Then a few months later, the National Action Plan for Salinity and Water Quality was announced, with the promise of $1.4 billion in funding.

Australian agriculture was making headlines and for all the wrong reasons.

In the last six years the area affected by dryland salinity has contracted and it is now evident that the "rising ground water" model, on which some of the very gloomy predictions were based, has limited application outside of irrigation areas.

It is also apparent that many of the claims, irrespective of the model used, could not be supported by the available evidence.

Channel Nine's Sunday Program featured a story on salinity on May 28 suggesting that millions of dollars have been wasted on dubious claims.

The program repeated the standing joke in western Queensland that the controversial painting in the Australian national gallery called Blue Poles, is about as much use for predicting salinity as the official salinity hazard maps often referred to as "red poles" by local landholders.

As Dr Brian Tunstall, formerly a CSIRO research scientist, explained, over much of the area marked red on the Queensland maps, there's no groundwater for over a hundred metres down, and yet the rising groundwater model was used to produce the red splotches that are purported to indicate salinity hazard.

Dr Wendy Craik headed the NFF when it claimed dryland salinity was spreading.

On Sunday, Dr Craik acknowledged that as a taxpayer, she is pleased all the money she asked for on behalf of the NFF was not provided, and that flawed models were used to talk up the salinity threat.

Dr Craik, now heads the Murray Darling Basin Commission (MDBC), and is still publishing reports based on the flawed rising groundwater model.

For example, just two weeks ago the MDBC published Risks to the Shared Water Resources of the Murray-Darling Basin which includes an assessment that in the lower Murray, salt loads from clearing for dryland agriculture 50-90 years ago are going to manifest as a worsening river salinity problem in 100 years time.

The Sunday program exposed evidence pointing to possible scientific fraud in salinity science and management in Australia.

But which politician or organisation is going to lead the charge for accountability and change?

It would seem that both sides of politics, and both the ACF and NFF have been complicit in the salinity charade so far.

The big loser continues to be Australian agriculture.

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Yet again, Brumby fails to put his best foot forward

The 2006-07 state budget is a typical John Brumby budget.  It is best described as a budget that lives well within very ample financial means.

It positions the Government well for the state election in November, busting the ghost of "the Guilty Party" while pleasing most interest groups.

However, it also retains the flaws of past Brumby budgets, in that it fails to act, as opposed to talk about, for the long term.

While the budget has a lot to say about the need for reform, it does little -- indeed on tax it goes backwards.  Eventually this failure will catch up with Labor and the rest of Victoria.

The budget contains few surprises.  Most initiatives were leaked in detail before the budget or are repeats from previous budgets or policy statements.  While it gives all major interest groups, including the business lobby, enough to keep them happy, it keeps spending growth to a modest 4.5 per cent and the current account in balance.

Although the budget includes increased debt, the increase is modest, debt levels remain low and the debt is being used to fund new infrastructure.

Given that it is a pre-election budget, it is a very modest affair -- something for which taxpayers should be grateful.

The key to this and past Brumby budgets is the receipt of very substantial revenue, and this happened again this year.

Tax revenue, despite the much-heralded nip-and-tuck job done to land tax in last year's budget, came in 4.5 per cent over budget.

This, combined with above-budgeted GST receipts and fee income, gave the Government an extra $570 million, which enabled it to put in place a number of pre-election initiatives and end the year with a pre-election kitty.

Once gain the main source of revenue growth was stamp duty on residential home transfers, which grew by a massive 19 per cent, or $385 million, during the year and generated total revenue of $2.5 billion -- making it the Government's second-largest tax source after payroll tax.

The budget announced a number of initiatives to please business.  These include further adjustments to the land tax system;  cuts to the top payroll tax rate from 5.25 per cent to 5 per cent;  a slight reduction in WorkCover rates;  initiatives to force ministers to reduce red tape, and infrastructure and training projects.

In the context of a tight pre-election budget, these initiatives are substantial and they, along with the commitment to sound fiscal policy, illustrate the extent to which the Bracks Labor Government has embraced the need for responsibility.

The concern with the budget must be with its lack of long-term focus, specifically on its failure to initiate long-term, politically difficult but necessary reforms focused on driving efficiency in service delivery.

The budget does have a lot to say about the challenges facing the state and about the need for reform.

It allocates more money for more highly paid staff, more equipment and improved infrastructure.

While there is a need to augment the capacity of the health, education and training systems, there is also a need to do things differently in search of value from money and, ultimately, better outcomes.  This budget, like past Brumby budgets, avoids doing so.

Eventually, when the housing boom wanes and revenue becomes tight, the failure to push value for money in the delivery of services will come back to haunt the state.

The short-sightedness of the state budget does not only lie in service delivery, but also tax.

This budget continues the policy of narrowing the state's tax base.  It provides further cuts to its only two potentially broad-based taxes -- land tax and payroll tax -- while keeping in place a range of narrow, volatile and highly destructive taxes, such as stamp duty on conveyancing.  This duty not only inhibits the movement of people and assets, but pushes up household debt.

It also locks people out of the housing market.

What is needed is wholesale reform of the state tax system, with a much greater reliance on payroll tax and land tax, albeit at much lower rates, and broader bases and less reliance on stamp duties.  While it is not surprising the Government did not embark on this reform in a pre-election budget, the budget moves in the wrong direction.

Another systemic weakness of the Bracks Government and this budget is its reliance on bureaucratic solutions.  The budget provides a long list of initiatives -- most of which provide expensive bureaucratic solutions rather than rely on personal choice and markets.

Even red tape initiatives will cost $42 million in more bureaucratic oversight and incentives to bureaucrats to act in our interest.  This is why the bureaucracy has increased in size by 29 per cent under the Bracks Government.  The 2006 budget continues this growth.

The budget also continues the Bracks Government strategy of living within its ample means and positions it well for the election.  It also indicates that the real test for Labor lies ahead.

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