Cronyism buys into wheat sales

Australian wheat marketing arrangements are a monument to why trade policy and politics don't mix.

A Federal Court decision last week was a victory for cronyism and vested interests at the expense of the public interest.  The Federal Court ruled on a case between niche wheat and grain exporter OzEpulse and the Minister for Agriculture, Fisheries and Forestry, Peter McGauran.

Under current wheat marketing arrangements, the veto for wheat exports, previously held by AWB, is held by the minister to exercise in the "public interest".

OzEpulse appealed against the procedural fairness of the minister's decision rejecting its applications.

The minister took advice from AWB and did not define the "public interest" test before OzEpulse's application.  The judge decided the minister followed due process in rejecting the applications.

One of the three applications was to amend an existing licence to export 10,000 tonnes of wheat to Italy in containers.  OzEpulse wanted to export it in bulk because it reduced costs and boosted profits.

It is inconsistent with the minister's obligation to act in the public interest to oppose exports simply because of the mode of delivery.  The minister's decision is only the latest in Australia's sad wheat export tale.

Current wheat marketing policy was developed post-war to secure income for growers.  The Hawke/Keating and Howard governments made reforms to liberalise the sector.  But their efforts are still a long way from achieving the national interest -- a free market in wheat exports.

Recognising the political potency of wheat politics, particularly in Western Australia, the ALP has committed to deregulate.  Its policy proposes a single desk that would accredit exporters to maintain standards, but otherwise allow for a free market.

Considering Kevin Rudd's me-tooism, wheat is likely to be one of the few stark areas of policy difference between the ALP and the coalition.

The coalition's policy is one step forward, two steps back.  Driven by the Nationals, a new self-appointed organisation, the Wheat Export Marketing Alliance (WEMA), looks set to be gifted the single desk and its veto.

Raising finance for WEMA has been slow, but Nationals leader Mark Vaile has already provided financial assistance for a business plan and is spruiking more.

Not surprisingly the most vocal supporters are the wheat growers in the eastern wheat belt that bears a strikingly similar footprint to the Nationals' heartland.  Meanwhile WA growers are forced to accept lower payments and cannot target premium markets.

Current arrangements are a testament to the Nationals' claim that they represent the interests of farmers in government, but they come at the expense of wheat farmers outside Nationals' electorates, and the public interest.

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Oldies' windfall at nation's expense

Election campaigns involve political parties competing to disburse money to the voters.  That disbursement is selective.  Ostensibly intended to promote equity it is actually designed to appeal to some voters, while blindsiding others to the fact that the money was stolen from them in taxes.

In recent years, the Coalition has been targeting the pensioner vote.  It has announced an election package which it values at almost $4 billion over four years to benefit older Australians.  Bob Brown, who will never be outspent by any political party, has urged Labor to surpass this.  Labor is yet to counter the bid but it too is always willing to outspend the Coalition:  doubtless its response will be competitive.

The additional $4 billion promised to older Australians comes on top of existing subsidies.  It includes an increase in the utilities allowance to $500 a year to defray electricity and other costs.  This is to be extended to all those on a disability allowance.  A carer payment of $1000 is assuming a status of annual financial assistance.

Pensioners are also given special prices for pharmaceuticals and other health care and this assistance level is to double to $500 per year.  There is also a commitment to return to pensioners some of the proceeds that the Government will garner from its planned new carbon tax.

Hardly anyone wants to take issue with helping the elderly and the infirm.  But two issues need to be borne in mind.

First, the assistance is not due to the compassion of government.  Rather it is government forcing one set of taxpayers to give support to others.  Second, there is no end of worthy targets for such support.  The elderly are benefiting because they are growing in voting power but why should they be any more eligible than the young, the newlyweds, the middle aged and so on?

Moreover, there is already a vast set of regulatory-tax measures that redirect income to the elderly and those in late middle age.  These include the ability of the over 55s to put up to $100,000 in superannuation funds that provide tax-free income.  Instead of the normal 46.5 per cent income tax, the "salary sacrifice" allocation from income attracts a rate of only 15 per cent.  The superannuant can then withdraw pension funds tax-free for living expenses.  While there is a case for placing a lower tax on savings, this shouldn't be selective to favour one set of taxpayers over another.

Income tax concessions are compounded by other benefits.  The most significant of these is housing.  Since today's pensioner commenced home ownership, say in 1973, the real value of their housing asset has doubled.  And it has done so largely because government regulation -- this time state government regulation -- has rationed land and forced up its price.  This is not a costless benefit.  The advantage to older Australians of supercharged house prices is paid for by younger people who have to pay twice the underlying economic cost for a new house.

In addition, there are many other regulatory distortions benefiting older Australians.  Among these are the laws covering health insurance, which in defiance of conventional insurance practice do not permit charges to be related to risk.  As a result younger, healthier people are being forced to provide subsidies.

Other advantages accruing to older Australians include free public transport and rate concessions.

There is a legitimate role for government in devising safety nets to prevent distress to our most unfortunate citizens and a role to ensure funding for such things as education which fuel future incomes for all people.

However, concentrating subsidies on a large segment of the population is likely to have adverse effects.  It will encourage people to change their expenditure patterns to take advantage of the windfalls offered and to position themselves better to do so.  And it will encourage those being obligated to pay the subsidies to move or to rearrange their affairs in ways that are disadvantageous for the nation as a whole so that they avoid the imposts.

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While you weren't looking, freedom went up in smoke

ARE we freer today than we were half a century ago?  That question is surprisingly hard to answer.  The state control over the economy that characterised Australia in the 20th century is quickly being replaced with nanny state controls.

Barriers to trade have been mostly eliminated, and state monopolies eradicated.  But accompanying that has been explosive growth in social and environmental regulations.  There are now more pages of Commonwealth legislation introduced every year than were passed in the first 40 years of federation.

In our social lives, freedom has both advanced and retreated.  For example, restrictions on the sale of alcohol have eased.  But they have been replaced by nanny state measures such as smoking bans.  In the future, cigar bars will be as distant a memory as the six o'clock swill.

Since smoking bans were enacted this year in Victoria and NSW, sales growth in pubs has dropped significantly.  Hotel patronage may return to former levels -- international experience seems to indicate that it will -- but when smokers return to the pub, they will be less free than they were in October last year.

Unquestionably, advocates of individual liberty and personal responsibility have lost the battle on smoking.  That's not surprising -- smoking is reviled by everybody who doesn't enjoy it.  In a liberal state, that disagreement would be sorted out by negotiation;  before the bans, many restaurants and hotels already enforced non-smoking areas or disallowed it entirely.  But in a nanny state, such negotiations are replaced by force of law.

Similar sentiments lie behind restrictions on poker machines.  The gaming industry is a political football to be kicked around at every state election, while individuals who value their freedom to enjoy the pokies are ignored.

In a nanny state, the government morphs into an over-eager insurance company, assuming the role of risk-manager for its citizens.  Any risky or unhealthy endeavour has to be eliminated -- individuals cannot be trusted to assess the risks themselves.

The next target is food.  Numerous proposals are on the table to tackle our expanding waistlines, including banning certain types of fats, banning junk food advertising, and even taxing fatty food.

Earlier this year, the Labor Party hinted that it was considering banning the use of licensed characters such as Shrek in junk-food advertising, should it win government.  Last week, the Cancer Council of Australia came out in support of a general ban on junk food ads aimed at children.

However, there is little evidence that such bans work.  Both Quebec and Sweden have tried them, but neither have seen any reduction in childhood obesity.  There are twice as many overweight children in Sweden as there were 15 years ago, even though the Scandinavian country has had a ban on all advertising aimed at children since 1991.

Furthermore, politicians hurrying to make political capital out of medical problems such as obesity and lung cancer rarely think through the unintended consequences of their policies.

Swedish advertising bans have not reduced obesity, but they have had other results.  Losing the revenue from the highest-paying advertising has reduced the quality and quantity of children's television programs.  Similarly, restricting the advertising market has raised the cost of toys in Sweden to 50 per cent above the average European level.

The Australian Government's hard line on tobacco has had similar consequences.  Smokeless tobacco products have been swept up as the nanny state tries to purge society of everything that meets its disapproval.

It is unfortunate that Australia lacks a strong intellectual history emphasising individual liberty and personal responsibility.  Our "she'll be right mate" attitude is easily swamped by our calls for government to intervene in personal decisions.

Laws are passed with little reference to how they will affect our freedom.  As a result, individual liberty in Australia is slowly being eroded by neglect.

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Nuclear power the main point of party difference

When it comes to the environment as a federal election issue there are few differences between the major political parties.  Energy, and in particular nuclear energy, may emerge as the only real point of different between the major political parties.

After all, both the Coalition and Labor have agreed to allow a pulp mill to be built in Tasmania, both are hell-bent on buying back water licences from irrigators in the Murray-Darling Basin and both are ignoring the difficult issue of tree-clearing in our rangelands.

So, there is no heated debate on the logging of old-growth forest or how much water is needed to save the Murray River -- issues that so dominated the last federal election campaign.

The focus has changed and is now about climate change and how we power our cities while reducing carbon emissions.

The Coalition is suggesting we meet the energy challenge and the threat of climate change through an emissions trading scheme and developing low emissions technologies including solar power, clean coal and even nuclear power.

The ALP is dealing with climate change and water supply as one issue, promising to sign the Kyoto Protocol, provide rebates for rainwater tanks, loans to working-families that invest in solar energy and to prevent nuclear reactors being built.

Apart from the issue of Kyoto -- which is almost a non-issue given the Coalition plans to endorse an emissions trading scheme -- nuclear seems to be the standout defining environmental issue this federal election.

So what are the implications for rural and regional Australia?

Well, nuclear power is the only proven and reliable form of base-load energy that is greenhouse neutral.

It is also likely to be much cheaper than wind and solar -- other greenhouse neutral forms of energy.

Should the Coalition be returned at the federal election, several nuclear power stations could be built beside the sea in regions where Australia's population is concentrated and where there is water for cooling the reactors.

So, at least theoretically, there might be less interest in wind farms and new coal mines which could be good news for farmers in windy places and on coal seams like the Liverpool Plains.

To achieve the necessary economies of scale, the nuclear power stations are likely to produce a lot of energy.  For example, if a nuclear power station was built for Adelaide there would probably also be enough energy to power a desalination plant.  This could relieve pressure on the Murray River which is currently a major source of water for that city.

All in all, the development of a nuclear power industry is worth considering -- it's a pity the ALP didn't copy this Coalition policy too.

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Basics lacking in education debate

Kevin Rudd's tax rebate for parents to buy computers is gesture politics at its most meaningless.  The reason that 15 per cent of students finish their schooling unable to adequately read or write is not because they don't have broadband at home.  A new laptop is not much use to a child being taught by ineffective teachers in a dilapidated classroom.

The Labor leader has spoken of the education "gap between the haves and the have-nots".  His policy does little to rectify that gap.  The students most in need of a better education are unlikely to have parents who will now buy a computer because they'll be receiving a rebate of a few hundred dollars.

The families of more than 2 million schoolchildren will be eligible for the rebate.  The announcement provided a good photo opportunity with the Labor leader brandishing a laptop as "the 21st-century toolbox".  What the ALP hasn't yet been asked to explain is whether tax rebates for computers are the best way to spend $2.3 billion.

There's no evidence that the barrier to every household having a computer is cost.  Seventy-five per cent of Australians already have a computer at home.  International research overwhelmingly shows that attitude is a bigger barrier to learning than is the price of an internet connection.  Parents who themselves have minimal education levels are less likely to make a financial investment in their children's education.  If Labor had really wanted to target the students who didn't have access to technology, it could simply propose buying the computers and then giving them away free of charge.  Instead it is likely that the families taking advantage of the rebate will be those who already have computers.

The Prime Minister lost Sunday night's debate.  However he made one point to which Rudd doesn't have an answer.  It might be old-fashioned but John Howard was correct when he spoke about the importance of students gaining literacy and numeracy skills.  Parents would prefer that, instead of government inventing an ever-increasing array of initiatives, it concentrated on making sure schools first got the basics right.

A tax rebate for computer purchases is attractive to politicians because it's easy.  It satisfies Labor's desire to appear modern.  There's nothing more forward-looking than talking about technology.  But the policy doesn't actually improve the quality of education.

Talking about attracting the best candidates into teaching doesn't attract the same media attention as do announcements about cash for computers.  And anyway, the public has heard it all before.  It is precisely because politicians prefer the symbolic to the necessary when it comes to education that we are still debating the question of how to attract and retain good teachers in our schools.

To be fair, the tendency to the trendy is not restricted to the Opposition.  The Federal Government requires any school receiving Commonwealth funds to have a functioning flagpole flying the Australian flag.  Under the "Flagpole Funding Initiative", schools can receive $1500 to install, replace or repair a flagpole.  A flagpole is nice to have, but maybe there are more pressing issues facing the Australian school system.

The tokenism of Labor's policy is demonstrated by considering the other sorts of education expenses on which parents will not be allowed to claim a rebate.  For example, school uniforms are an unavoidable expense.  It's unclear why the federal government should assist parents to purchase educational software but not uniforms.  The cost of school excursions is a problem for many parents.  For them, a higher priority than a computer at home is ensuring that their child is not missing out on something that every other child in the class is receiving.

If Labor was truly interested in an "education revolution", it would extend the principle it has established beyond tax rebates for computer purchases.  There's no reason why tax rebates should not be available to parents who make a direct and immediate investment in their child's education.  And of course the way parents do this is by paying school fees.

In an ideal world, tax rebates for school fees would be available to all parents, regardless of family income and regardless of whether the child attends a government or non-government school.  For the moment, at least, such a policy is too radical for any of the parties.

Something more realistic in the foreseeable future would be to limit tax rebates for school fees to families on low incomes.  Not only would this ease the financial burden of education borne by parents;  more importantly, by reducing the cost of schooling, whether in the government or non-government system, it would give parents a greater capacity to choose the most appropriate school for their child.

That is the best way of reducing the gap between the haves and the have-nots.

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The Morality of Workplace Reform

Contribution to Quadrant discussion evening
held on 10 October 2007

Some months back a parishioner approached me after Sunday church service with a dodger attacking the Government's Work Choices legislation.  "It's not personal," he said, "but what you are doing on workplace relations is unconscionable".

As someone frequently regarded as "too Christian" on an issue such as abortion, it was more than a little galling to be "not Christian enough" on workplace relations.  And my fellow parishioner was not saying that the Government's policy was unwise, imprudent or counterproductive, observations that might have prompted a discussion of its relative merits.

He was making the extraordinarily confronting claim that it was immoral.  This was a dialogue-stopper.  It could not have been anything other than a personal attack, because it was an accusation not of poor judgment but of bad faith.

Still, that has been the tenor of commentary on Work Choices, even from Christians pledged to understanding and goodwill.  The leading critic, Parramatta Bishop Kevin Manning, has described Work Choices as "spectacularly inadequate when tested against the principles of Catholic social teaching".

His charge was not that Work Choices would cause wages to fall and unemployment to rise and was therefore immoral.  It was that Work Choices was intrinsically immoral, even though it has been accompanied by wage rises and jobs growth.  There have been no published second thoughts from Manning or his supporters despite 417,000 extra jobs since Work Choices' introduction and a 2.9 per cent real wage increase.

If an act is intrinsically immoral, consequences don't matter.  The vast majority of political decisions, however, do not involve questions of fundamental right or wrong but matters for prudential judgment.  Such decisions are right or wrong according to their consequences, not according to their intrinsic nature.

If Work Choices had banned unions or had allowed the removal of all conditions without any trade-offs it would indeed have been wrong (although not necessarily immoral, had it been spectacularly successful in creating employment).

In fact, Work Choices committed neither of these errors.  Unions have every right to sign up members and to seek collective bargains.  It's just that legislated minimum conditions rather than union-negotiated awards are the foundation of employment contracts.

Agreements can trade off conditions such as overtime but not minimum hourly rates or essentials such as holidays and sick leave, and only with fair compensation.  The social gospel lobby's position boils down to this:  that no one can (justly) be left worse off in order to leave others better off.  This is quite an odd proposition.  Why shouldn't sacrifices sometimes be required for the common good?  If it could be just to take one coat from someone with two coats so that someone with no coat should at least have one (a proposition church activists would surely applaud), why could it not also be just to remove some conditions from one worker so that an unemployed person might gain a job?

But even this regrettable trade-off is not, as things turn out, what the Howard Government's workplace reforms have actually meant.  Wages have increased and employment has increased because of the elimination of anachronistic conditions and disincentives to employment such as the unfair dismissal laws.

The problem for the social gospel lobby is explaining how 10.9 per cent unemployment under a more regulated labour market is fairer than 4.3 per cent unemployment under the policies of the Howard Government.  Their problem is that there is no parable to the effect that there is more rejoicing in the kingdom of heaven over one man keeping his conditions than over 99 finding jobs.  If anything, the opposite would be the better lesson to draw from the gospel.

It should not be necessary, the social gospel lobby would claim, to sacrifice hard-won conditions in order to drive unemployment down.  In a perfect world that would be right.  But as things stand, no amount of wishful thinking can alter the fact that the evidence is against them.  The social gospel case for a reregulated labour market would not pass muster from an undergraduate student of moral philosophy.  It is not improved simply because it comes from a Catholic bishop.

To believers, the priesthood gives men the power to change bread and wine into the body and blood of Christ.  It does not give priests any unique power to convert a poor argument into a good one.

I am usually on my guard whenever the concept of social justice is invoked, including by churchmen.  On examination, what's called social justice usually turns out to be socialism masquerading as justice.  Certainly there is no commandment:  "Thou shalt not conduct wage negotiations without a union", and any churchman who pretends otherwise has, even if only temporarily, forgotten his calling.

B.A. Santamaria was my first political mentor.  My school teachers and the priests whose advice I value to this day have been steeped in the tradition of Christian social teaching.  Unions certainly played an important role in civilising capitalism but the world has changed.  Today's workers are much more capable of standing up for themselves.  In this respect, at least, the world has moved on but the church has not.

In any event, the church's infallibility when making certain pronouncements on faith and morals does not extend to judgments about politics.  Preachiness does not turn a dubious political argument into a compelling moral one.  I am not saying that bishops should stay out of politics, just that their political judgments should be capable of withstanding scrutiny.  There are many who regard bishops' statements on the way we live now as an impertinence.  That the church's traditional social teaching is harder than ever to live by certainly does not make it irrelevant.  Still, I suspect the church would be taken more seriously if it were more concerned to encourage virtue in people and less to demand virtue from governments.  Indeed, what could be heroic virtue in people (such as turning the other cheek to one's enemies) might be the height of folly for a government.

As the great British Labour leader Tony Blair famously said, fairness begins with the chance of a job.  The fact that the workplace relations policies of the Blair Labour government and the Howard Liberal Government closely resembled each other suggests that, whatever faults they might have, immorality is not among them.  It's very hard to see a moral case against trading away overtime for 2c an hour in the case of Spotlight but not a moral case against surrendering overtime for 45c an hour in the case of Work Directions (owned by Kevin Rudd's wife Therese Rein).  This is especially true now that there is a fairness test for Australian Workplace Agreements that the Government's critics are not proposing for common law contracts.

In the absence of equally fervent attacks on the Opposition's policy, the social gospel lobby's moral outrage looks suspiciously selective.

# # #

One of the great heroes of our time must be the Somali Muslim woman Hirsi Ali.  Ali lives under constant risk of assassination from Muslim fundamentalists because, in her writings and speeches, she dared to expose the oppression of women under Islam.  But her message is not anti-Muslim.  It is anti-tribalism -- something that she describes as an obsessive, blinkered adherence to a creed in which only believers are valued, outsiders are hated and must be destroyed, and in which those caught inside the tribe's circle are to be coerced into compliance.

The problem of tribalism, of oppressive compliance to conformity and hatred of outsiders, is a common theme in the human struggle to become truly civilized.

It is this central theme which explains why workplace reform must move forward in Australian society.  Workplace reform is currently at the cutting edge of our own struggle to find what it means to be a civilized society, so that we can overcome our own brand of institutionalized tribalism which we ourselves wove into our national fabric over one hundred years ago.

Workplace reform is not, at its heart, an economic quest.  It is instead a searching for a change in the very nature of our relationships -- both at work and in our broader social and civic life.

Let me be specific.

Shortly after we became a nation, our parliament decided that we were so immature as a people that we were incapable of managing our own working relationships.  They established for us a structure that truly came from the text of Plato's Republic.  Decisions about relationships at work were transferred from the common person to an elitist judiciary, the industrial relations commission.  This national institutional arrangement inculcated a psychology of class division at work and non-communication between classes.

That psychology dwells at the root of our management and union thought processes.  Many, it is true, have broken from the mould, but the dominant orthodoxy remains intact.  This institutional arrangement facilitated a national management culture of under-performance and lack of accountability.  It lives and breeds around us.  And at its core lies a fear of direct human relationships.

This meant that by the time the 20th century closed, we had not only lost the capacity for civility in direct relationships at work, but were not even aware that civility at work could be achieved.  This is the heritage of the industrial relations system.

It lives today.  I can walk into any one of a number of major factories in our nation and find managers who refuse to walk onto the shop floor and engage in the simple and civil exercise of saying good morning to a shop floor worker.  Human communication in these instances is administratively and culturally directed through a committee or union.  Australia's first parliamentarians would find that, in terms of the way we behave today, we are not any more mature and adult than they assumed we were one hundred years ago.

About a decade ago, we did reach a point where we realized that these institutionalized structures were impeding our productive capacity as a people.  On purely economic and competitive grounds, we re-jigged the system's focus towards engagement at the enterprise level instead of engagement at the purely industry and national levels.  Thank you Mr Keating.  But we could not do away with the idea that an elite judiciary must still exercise fundamental control.  In other words, we created a hybrid.

Only recently have we taken the greater plunge of turning the focus on engagement and communication away from the collective and on to the individual level.  Yes, the new focus has been messy, badly designed, badly implemented and done with little attempt to articulate the reasons for its introduction.  But perhaps we are emulating what I understand Churchill had to say about America.  He claimed that the USA would always do the right thing on the world stage -- after trying everything else!

But if WorkChoices is a marketing and political train wreck for its designers, it must nonetheless be recognised as an attempt to enable individuals at work to communicate one to one, to break down the institutionalized class divide, and to give us the space to learn to be civil at work.

Wherever similar changes in work arrangements have been tried across the globe, the UK and New Zealand for instance, the experience has been that the shift in management culture needed to create the new work civility follows the legislative change by about 2 to 3 years.  WorkChoices is too young for the management culture to have made the change in Australia.  But while we wait for management to change, the enemies of individuality snap.

They claim that individuality is evil.

In his 2005 Boyer Lecture, the Anglican Archbishop of Sydney, Peter Jensen, asserted that individualism causes the decay of unions, clubs, voluntary associations and churches.  He said that individualism was "as great a danger to our true humanity as the collectivist spirit of Marxism proved to be".

The official publication of the Catholic Bishops of Australia on WorkChoices proclaims their concerns about workplace reform "...because it emphasises the rights of the individual without their accompanying duty to act in solidarity..."  The bishops claim that the social justice principles of the Catholic Church demand adherence to the collective over the individual.  They say that, without unions as the institutional controllers of the worker collective, social justice is wrecked.  They say that workers have a duty to put aside their individuality and bargain collectively.

They say these things because they believe that the act of work always involves class-based inequality of bargaining power.  They believe this, one can only suppose, because they subscribe to the view that when humans acquire the legal or managerial status of employer, they become at best morally neutered and at worst morally perverted.  I will explain this further shortly.

But it is on the basis of this fundamental belief about inequality of bargaining power that labour law in Australia had been institutionally converted from law into an excuse for tribalism.  There is no greater example of this than here in NSW.

NSW is run as a tribal state.  It is a disciplined system of insider believers who connect through a vast network of political, academic, legal, union and commercial power bases.  Their co-ordination is highly developed, but by and large hidden from general public view.  Those inside the tribe are nurtured if thought smart, intimidated if thought dumb and ejected if found defiant.  Outsiders are attacked and oppressed if they challenge the tribe.  It extracts its finances from the state itself and from anyone who seeks to do business within the tribe's sphere of influence.  Its moral mask is painted by its academic, theological and legal partnerships.  It sneers at the ineptitude of its alleged political replacement.  It is morally corrupt, but manages corruption by creating law that turns immorality into legality.  It's tied together by the State's industrial relations system which has legal reach into almost any aspect of NSW life it chooses.  And it does this with impunity, unrestrained by the normal rule of law.

Forgive me for describing this picture of New South Wales in excessively broad terms but, as a tribal outsider and tribal critic, to do otherwise is to invite tribal attack through litigation.

But it is possible to look inside the tribe's collective mind by conducting a case study of the NSW Occupational Health and Safety legislation which, by its very design, is a truly immoral piece of legislation.

OHS prosecutions are criminal in nature.  Yet the NSW OHS Act denies the people it prosecutes access to criminal justice.  And it does this selectively, based on tribal considerations.

The central tenet of the tribal creed is as I described it before:  if you are an employer or a manager, then you have no normal ethical sensibilities and you behave without moral principle.  You do so, allegedly, because you are supposedly obligated to pursue profit and nothing but profit.  Like all quasi-religious tenets, this is an article of faith, not a proposition that should be subjected to empirical validation.

How this cashes out can be seen in the realm of work safety.  In NSW, the tribe believes that, because of the profit motive, managers have no interest in safety and must be made to fear the State to ensure that they are intimidated into behaving safely.

Consequently, the NSW OHS Act legislatively targets the manager/employer and by the very fact of an OHS incident occurring, imposes guilt on the manager/employer.  Presumption of innocence is denied.  Yet an employee who may have done something that actually caused the incident is presumed innocent.  Remember -- these are criminal prosecutions with jail a possible sanction under the Act.

The Act quite deliberately imposes fundamentally opposite criminal standards based on nothing more than the legal class into which a person happens to be at a given point in time.  The potentially innocent are said to be guilty and the potentially guilty said to be innocent.

To me, this amounts to an extraordinary and deliberate attack upon a core feature of criminal justice which sits at the foundation of civilized society.  Yet the tribal players in NSW find this perfectly acceptable.  I have discussed it with them.  Academics and lawyers see nothing wrong with it.  Unionists allege that I am an enemy for criticizing it.  But I think they have, quite dangerously, suspended their own common sense and moral judgement.  They are blinded by their obsession.

Their obsession takes them even further.  The NSW OHS Act is used to conduct criminal prosecutions of managers / employers but without access to a jury, without trial in a criminal court and without rights of appeal to proper criminal jurisdictions.  Further, unions (who are enforcers of the tribe's operations) conduct prosecutions and receive up to half of the fines imposed, as well as having their legal fees paid by the employer.  It is a system designed to deny justice -- and it does.

And like any system which has institutionalized immorality along tribal lines, it feels confident in breaking its own laws.  I have written about the failure of NSW WorkCover either to investigate or prosecute a union-owned labour hire company which was the employer of three miners who died in the tragic Gretley incident.  The same failure to prosecute occurred with a NSW government-owned mining company.  Just recently, Transport Worker Union officials have alleged that they were instructed not to prosecute companies who were paying money to a secret TWU slush fund.  These are not odd or unusual occurrences.  These are examples of how the system operates.  NSW's OHS laws do not operate on the normal basis of evidence and fairness, but on membership or non-membership of the tribe.

As I stated before, what holds this tribal edifice together is a central and obsessive belief in the creed.  This creed is the same creed which the Catholic Church says underpins its social justice principles.  Normally it is expressed by saying that employment always involves unequal bargaining power and that this alleged inequality justifies giving power to instruments of the state:  that is, to unions and industrial commissions.

But when studied more deeply, the inequality of bargaining power proposition is, in fact, the claim that managers/employers are morally neutered and are only motivated by greed.

One academic explained it this way in relation to OHS, "...there is no reason to send the message that company officers can go back to their old ways and ignore the safety of employees, contractors and others in favour of increasing profits".  And the Catholic Church explains it as an aspect of its broader social teaching which requires solidarity.  It says "...what is hindering full development [of solidarity] is that desire for profit and that thirst for power..."  It categorises this as "attitudes and structures of sin".

Yet, the facts of human existence tell us that this is a lie.

The truth of human behaviour is that every person has the capacity within them to be moral, amoral, immoral or criminal.  The legal or financial status a person holds, or the job type they fill, does not determine morality or immorality.  There is no difference in the capacity of people in this regard, whether they are an employee, employer, manager, union official, bishop, priest or whatever.  But what is immoral is to argue that morality is predetermined by status.  What is profoundly dangerous is to use that view as the basis for creating law and institutions for the purposes of enforcing that same view.  This contorts human behaviour, prevents civility and assaults civilized society.

This is the legacy of our uniquely Australian industrial relations system.  Rather than creating fairness, the system has institutionalized unfairness within our workplaces and denied us the capacity to learn workplace civility.  Its other great workplace legacy is the constriction of management capacity.  In NSW, in particular, it acts to oppress.

It is within this legacy that that our traditional system of workplace law must be considered.

And there are many sub-themes with a moral flavour under this central legacy.

For example, it is immoral to have "unfair" dismissal laws applied to small businesses.  People who operate small businesses are no different from employees other for the fact that they normally have their house mortgaged to fund the business.  When the state allows an employee to take an unfair dismissal action against a small business person, the state is, in effect, sanctioning theft by one person against another -- and does so entirely on the basis of legal status.

And another example!  It is immoral for the state to impose collective bargaining on either employers or employees or to write into law a predetermined role for unions.  This is state-created tribalism which imposes the tyranny of the collective over the rights of the individual.  The only basis upon which workplace collective bargaining can be morally justified is through the voluntary participation of each individual, including voluntary employer participation.

Within this context, the Howard Government's workplace reforms can be seen in a different light.  For all their troubles, they are an attempt to undo the immorality of the traditional system.  The reforms have confronted the creed of the tribe.  The reforms have not stood up well against the tribe's counter-attacks.  The reforms are battered and bruised and may well contribute to a change of government.

But the reforms are, at their core, moral.  The shift of emphasis to the individual in workplace relations is of great moral significance because it is the only pathway to civility in workplace relations and in our broader social and political undertakings.

Heed magic formula on wages explosion

Imagine it's November 25 and, if the polls are accurate, we can assume that Kevin Rudd is prime minister-elect . We can surmise what will be foremost in his mind.  After more than a decade in opposition, the central focus will be how to win the 2010 election.  This will guide every action of the Labor Party under Rudd.

Labor knows that the greatest risk to a second term is an uncontrollable wages explosion.  They remember that wage induced inflation destroyed the Whitlam government.  Fraser tried to tame the wages beast but it beat him, too.  Hawke implemented the Accord as his cornerstone policy plank to contain wages and was largely successful.  Keating was caught because the Accord model had run its course and massive interest rates were needed to keep inflation in check.

Rudd's biggest first-term risk is a new wages explosion that would ignite inflation.  The Reserve Bank of Australia would seek to pre-empt this by raising interest rates and dampening the economy.  Higher interest rates would trigger a crisis in the mortgage-belt electorates.  As a 2010 election, loomed an emboldened Liberal Party would stare at the electorate saying, "We told you so!"

Adding to the risk is that the economy is primed for a wages explosion like never before.  On the demand side, the figures are breathtaking.

For example, current and planned government and private, non-mining infrastructure spending touches $300 billion.  In mining there is about $30 billion in new mines under development with $110 billion in the planning and approvals stages.  The figures keep expanding.

The mining industry alone predicts it needs 76,000 additional workers to operate 110 new projects and has no labour estimates for 130 projects.  This does not take into account mine construction requirements, which are enormous.  The fastest growth will be over the next four years.

In the past five years the workforce in the housing and construction sector rose to more than 1 million.  Further growth is locked in.  Other sectors tell similar stories.

The labour supply side issue is equally confronting.  Unemployment should drop below 4 per cent.  Last year about 160,000 new entrants came into the labour market.  By 2012 that figure will have dropped to 50,000 and continue to decline.  Over the next five years, Australia will be short 300,000 new job entrants when compared with existing numbers.  In addition the great wave of baby boomer retirements will crunch over the next five years.

Australia is entering a period of totally uncharted economic challenge.  Political vision will determine success or otherwise.

The Howard/Costello team has guided Australia into this situation, which could be described as "economic success on a knife edge".  Over the past 12 years, the building of an economic boom without wages or inflation breakout is the stand-out feature.  But the challenge of the next five years dwarfs the past 12.  There is no room for policy error.

Assuming that PM-elect Rudd has breakfast with his key advisers on November 25, they'll have some fundamentals to contemplate.  During 2007 they've made light of Howard and Costello's economic success, alleging the government has lucked out with the mining boom.  Labor's done that as a political "put down".

Publicly, they refuse to give any reasons for the extended wages and inflation containment.  But if they truly believe their own political spin, they may be sowing the seeds for their potential 2010 election loss.

Howard and Costello have done what Whitlam, Fraser and Keating failed to do, sustaining economic growth without wages or inflation break-outs.  They must have discovered some policy keys to success.  It would be foolish to pretend that rolling labour reform is not central to the success.

The reforms are an integrated package.  They include allowing individual contracts to compete with enterprise arrangements, freeing small business from unfair dismissals, releasing independent contractors from industrial relations, breaking lawless mafia-like behaviour in construction and so on.  They have significantly shifted labour law principles away from the "workers' rights" perspective.  Their alternate vision focuses on the practical realities of labour arrangements in competitive business settings.

But Labor's tradition is to accept the "rights" perspective as a given.  It has traditionally blinded Labor to the negative economic outcomes of labour law that ignores microeconomic fundamentals.  Fraser was equally blinded.  But if Rudd's team rejects the Howard/Costello "magic" formula, they'll need a stunning alternative if they want political longevity.

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Cartel's price fall was one out of the box

Challenging the election campaign for newspaper space this week has been a different form of competition.

This concerned the rivalry between Visy and Amcor for the cardboard box market.

Like the election campaign, it involved desperation, deception and duplicity.

In April 2000, the two firms agreed to carve up the market and restrain price competition.

Such agreements are automatically illegal and Visy's owner, Richard Pratt, has admitted wrongdoing.

He will face a fine following court action by the Australian Competition and Consumer Commission.

The Amcor side is immune from such action because it was they who blew the whistle to the ACCC on the agreement.

Back in 1999 Amcor was desperate.

It had less modern factories than Visy and it was losing market share and facing sluggish earnings.

An agreement with its competitor to raise prices and avoid poaching customers seemed very attractive.  And Visy seemed willing to play.

But what Visy said it would do and what it did were two different things.

Starting with the same market share as Amcor at the time of the agreement, by 2004 Visy had 53 per cent and Amcor was down to 38 per cent.

Visy had also used the agreement to offload some unprofitable customers to Amcor.

By the time Amcor recognised that it was the only partner working for the common cause, Visy's market dominance was secured.

The Amcor people were spitting chips.  They had been conned.

While Dick Pratt was extending his right hand to shake on a deal with former Amcor CEO Russell Jones, in his other hand was a dagger aimed at the back of his hapless rival.

During the course of the price-fixing agreement, Visy's prices, on average and adjusted for inflation, were reduced by 14 per cent.

This real price fall was largely responsible for cardboard container price movements in Australia being more favourable to customers than in markets such as the US and Britain, where there are many more competitors.

If this was the outcome of a cartel perhaps maybe we need more of them!

Although Amcor escaped a penalty in the ACCC action, both firms are now confronting customers who have evidence that they were illegally overcharged in the past.

And class action specialist, Maurice Blackburn Cashman is seeking up to $300 million on behalf of customers from the alleged overcharging.

Amcor is likely to face more difficulties than Visy in this next stage.

This is because it appears to have been sincere in keeping its side of the agreement.

In raising its prices, it is more vulnerable to its customers' claims for financial compensation.

The issue opens up many policy questions.

The law is the law and it says competitors are not allowed to agree to share markets.

The law does not differentiate between a firm making an agreement with the intent of gouging the consumer and an agreement that was intended to deceive a competitor.

In most other aspects of commerce -- and indeed in politics -- misleading your competitor is a legitimate and normal strategy approach.

Perhaps the trade practices law should be re-examined to ensure its consistency with other business behaviour.

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Creating a liveable city: how Perth can capitalise on the resources boom

Occasional Paper

EXECUTIVE SUMMARY This paper discusses five interlinked proposals that will enable Perth's transformation to global knowledge hub, while continuing to offer an enviable lifestyle for all residents. Free up the day to day controls and limitations on people's lives;  examples include deregulating shop trading hours, implementing the deregulation of liquor licensing, doubling the number of taxis. Pay attention to implementing policies that deliver Perth's much vaunted lifestyle to anyone who tries to make a go of it.  Prioritise affordable housing through more land releases and greatly improved infill planning approvals. Create multi-faceted links with China and India that go beyond suppling raw materials.  Direct State Government resources towards increasing the number of overseas tertiary students from China and India by 50,000.  Enact housing and social policies that encourage many of these students to settle permanently in Perth at the completion of their degrees. Use the windfall taxes flowing to State and Local Governments from the mining boom to renew and upgrade infrastructure;  get the macro projects and the micro renewal both right but be careful of wasting money on projects better delivered through commercial or philanthropic means, for example sports stadia and cultural centres. Guard against squandering the dividends of the boom on trying to pick the next big thing.  Of more importance is to build an environment where unexpected things can happen and this requires a broad ranging innovation friendly regulatory environment.

INTRODUCTION -- CHOICE AND LIFESTYLE IN PERTH

The title of this paper begs an obvious question -- surely Perth is already a "liveable city"?  It's friendly like a "big country town", and has a great "laid-back lifestyle".  Not to mention the beaches, beautiful setting, and the Mediterranean climate.  Little wonder many Perth residents regard it as the best city in the world.  Yet the "dullsville" tag is mentioned almost as often as the "laid-back lifestyle".  Many people, both residents and visitors, have noticed Perth would benefit from being more vibrant, more diverse and with greater options.

This paper starts from two powerful ideas:  that people should, as far as possible, be allowed to choose how they live their own lives and that letting them do so will bring additional prosperity to Perth.

Delivering on those ideas could take many forms.  Overwhelmingly the ways that will deliver more freedom and more prosperity fit well with much of the debate already going on around Perth about what a future Perth could look like.  This paper discusses five, interlinked, proposals.  Some ideas, like the freeing up of shop trading hours and the implementation of the new liquor licensing reforms are also high on the agenda of other groups thinking about how Perth can evolve.  Other proposals, such as implementing a target of 50,000 additional tertiary students from China and India are bold new ideas that deserve further discussion and evaluation.

Together, these five proposals are designed to help Perth evolve from "dullsville" to a vibrant, multifaceted city, enmeshed on many levels with the power houses of China and India, yet which continues to provide the famed "laid-back lifestyle" attractive to so many current and future residents.  Delivering that lifestyle must include keeping Perth affordable for ordinary families just as much as it embraces new entertainment options, attracts new industries and people, and upgrades the city centre.  In the midst of prosperity, governments must not get carried away with grandiose building schemes that would be much better delivered by the private sector.  The paralysis and buck passing that has characterised projects such as the Northbridge railway lines and river foreshore should be resolved by private sector involvement.

Perth is abundantly blessed with good fortune.  The current enormous wealth generated from the resources industry offers opportunities not available to almost any other city on the planet.  Because of this wealth Perth could remain prosperous for a long time without enacting much reform at all.  After all, it has a very high standard of living despite all the restrictive rules that every other state has dealt with.  But Perth pays a big price for pandering to the special interest groups that want no change in shopping hours or don't want anyone having a glass of wine after work in their suburb.  There is a large body of research that suggests that diversity of choice and lifestyle are important to attract and retain the sorts of people essential to a city's future.  Specifically, many young, tertiary educated people place a very high importance on being able to find the sorts of shops and restaurants and bars that interest them and to live in the sort of housing they want.  People in highly knowledge intensive industries such as engineering, life sciences, education and computer sciences, as well as the classic creative occupations of the arts, media and design, like lots of choices and they value the very fact the choices exist even if a particular choice is not to their taste.

The research shows that cities which allow choice and diversity in people's day-to-day lives are better at incubating new industries and attracting the highly skilled workers needed to grow the economy in the future.  At the same time, the experience in other Australian states has shown that the broader population also embraces the removal of archaic restrictions.  No government would ever attempt the reintroduction of shop-trading-hour restrictions;  there would be an outcry.

Individual entrepreneurs and companies rather than governments will identify the best opportunities for future profitable growth.  This growth should be from a myriad of industries, probably leveraging off the clear expertise in mining, but paths of growth could travel in unexpected directions.  For this to occur Perth needs the right regulatory environment and the right people.  Becoming the most attractive jurisdiction to do business in, not just in Australia but globally, and attracting the most talented, creative and educated minds are achievable goals.  The current boom offers the clear opportunity to put the house in order:  to repeal unnecessary restrictions on people's lives and businesses, to improve transparency and predictability in government decision making, and to reduce tax and lift the compliance burden.  All these policy actions will be of great advantage to Perth residents, both those already here and those still to be attracted and will ensure "dullsville" is consigned to the history books.

1. SHOPPING, DRINKING & TAXIS

"It may once have been treasured as an easygoing, overgrown country town, but the reality is that as a 21st century capital, it just doesn't cut it" ⁽¹⁾ was the depressing conclusion of The West Australian editorial.  That "big country town" epithet no longer applies -- Perth has 1.4 million residents, which makes it bigger than Amsterdam, Prague and Stockholm, all of which are international destination cities for both tourists and creative class workers.

This report joins with others that have called for reform of shop trading hours and liquor licensing.  There are clear benefits from shop trade and liquour license reform -- attracting and retaining the sort of workers the city needs now and in to the future are vital.  Furthermoe, there are the benefits to Perth's businesses who will be able to take advantage of the reforms to become more innovative and competitive, to their advantage and their customers.

However, while these reasons are important, this report has a simpler reason for enthusiastically recommending the removal of archaic and restrictive rules.  Liberty to make decisions is important.  Individuals gain by having control of their own lives.  Liberty over small decisions -- "shall I have a drink with friends after work?" or "I'll have lamb tonight, I'll just pick some up on the way home" -- are important everyday exercises of liberty.  While not accorded the import of the great liberties -- like the right to vote, to free expression, and to the rule of law -- for most people, simply being able to do what they want at the micro level is an essential part of liberal society.  It is time Perth's people were allowed these everyday choices.

Delivering on shop trading reform, liquor licensing implementation and taxi deregulation is key to changing Perth into a globally focussed, confident city.  All these policy changes should be as enthusiastically embraced by all political parties as they are by Perth's business and cultural leaders.  By now, given the publicity of so many locals and visitors all saying the same thing, the refusal of the political class to act can only be described as a profound lack of leadership.

Perth needs to change the regulation of shopping, liquor and taxis to be consumer rather than producer focussed.  Making these changes will have the biggest impact on the city and its residents because they are both practical and symbolic barriers to Perth evolving into a global liveable city.  As Deidre Willmott of the Western Australia Chamber of Commerce and Industry (WA CCI) says "It is a real barrier to vibrancy in the city when the government tells business when to open and close". ⁽²⁾

The reforms must go beyond shopping, liquor and taxis to a change in regulatory mindset at the city council and state government.  As Charles Landry astutely notes

when it comes to building regulations, they need to take the emphasis of making sure things meet the minimum standard -- it should be a case of guidelines.  Council officers want to hide behind standards.  We need to get rid of the tick-the-box approach. ⁽³⁾

However now the most important priority is making a start with the highly visible trifecta of shopping hours, liquor licensing and taxi numbers.

While the arguments about deregulation of shop trading hours and the actual delivery of flexible liquor licensing laws are well understood, the deregulation of taxis has to date not been placed in the same category and calls for reform have been more muted.  Yet dissatisfaction is clear in the numerous snippets of complaint regularly appearing in the newspapers.  For example, tourism analyst Alan Boys says "the bad experiences that I am hearing about regularly from corporate guests is just appalling.  It is an absolute disgrace". ⁽⁴⁾

Limited access to taxis inconvenience locals, encourage drink-driving, and hurt tourism.  Unsurprisingly alternatives to taxis such as limousines that operate under a small charter vehicle licence are booming, particularly for time sensitive long trips to the airport.

Figure 1:  People per taxi, Perth, 2006Source:  Richard J. Wood, "Moving in the Right Direction",
Project Western Australia Discussion Paper, July 2007

However these alternatives are very restricted in their use as they must be pre-booked and cannot be hailed or sit on a taxi rank.  Also they are subject to minimum trip charges.

The taxi industry is dominated by individual owners who have paid very high prices to own the right to operate a taxi.  Reform of the industry to make taxis more available will reduce the value of the plates owned by existing owners.  Unsurprisingly current plate owners argue no additional plates should be issued or, failing that, that the government should buy back licenses at the average plate transfer value of the past 12 months. ⁽⁵⁾  Given that figure is $230,873 per plate and would cost the State Government $246 million to achieve, a buy-back is unlikely to occur.  Moreover, to pay out taxi-drivers at a level far above what any plate was originally sold by the government is a very poor use of taxpayers' funds, and delivers windfall gains to a very small group of people who are currently undergoing boom business returns.  Indeed, the head of Swan taxis says "it has never been so viable.  It hasn't been as busy as this since 1973.  They're taking big money". ⁽⁶⁾  The last time Perth sold licences was 1989 and they were sold as interest-free loans at 75 per cent of the then market rate which allowed plate owners to own their plates in about seven years.  It could therefore be argued that those taxi licence plate holders already benefitted from government largess, after all in what other industry does the government advance an interest free loan?

The need for reform is overwhelming.  Perth's ratio of taxis to people is the worst in the nation.  The shortages are particularly acute in Northbridge and Freemantle at night but service quality figures generally are unacceptable.  The chart below underestimates the scale of the problem because it only covers booked taxis.  However, it is difficult, if not impossible, to measure the impact on the city from generally being unable to hail a taxi.  As the supply of taxis tightens locals adjust their behaviour, the spontaneity available in a city like London with plentiful taxis is taken away from Perth residents and probably surprises tourists.

SPECIFIC TAXI REFORM PROGRAM

1. Legislate an extension of the leased licence plate scheme with a five year initial target of matching Brisbane's taxis per person ratio and the further partial deregulation of the industry in a measured and predictable way at the end of five years.  This will result in a gradual diminution of licence plate values and allow current plate holders to make considered judgements.
2. Abolish minimum fares on small charter vehicle and tourist charter licences.
3. Legislate to require booking services (Swan and Black & White) to include leased plated taxis on their networks.

Figure 2:  Western Australia taxis, per centage of passengers not pickedSource:  Richard J. Wood, "Moving in the Right Direction",
Project Western Australia Discussion Paper, July 2007

2. ENHANCING & RETAINING PERTH'S LIFESTYLE

One of the most important things about Perth's great lifestyle is its accessibility.  Everyone can get to the beach easily, the spectacular views from Kings Park are free for all and the Mediterranean climate offers a BBQ and outdoor living lifestyle in backyards and parks.  Similarly, the whole community shares in the safety and cleanliness of Perth.

However, along with these natural and community benefits are the private benefits that have traditionally meant Perth residents could own their own home, enjoy a high standard of living and provide for their families.  "Over long periods of time, and in differing economic conditions, Western Australians have continued to express a strong preference for their own home, often in a new suburb, on a relatively large block of land". ⁽⁷⁾  This has resulted in home ownership rates (including those with mortgages) of 70 per cent. ⁽⁸⁾  Going forward however, those traditionally high home ownership rates are at risk as unaffordable housing becomes an entrenched feature of the city.

HOUSING IS TOO EXPENSIVE

Early in 2007 Perth achieved the dubious honour of the most expensive median house prices in Australia.  Since then Sydney has reclaimed the top spot but Perth is well entrenched at a close number two. ⁽⁹⁾  Perth remains the most expensive unit/flat market.

Numerous enquiries, reports and analyses have concluded that the cause of Perth's unaffordable housing is lack of land supply.  Perhaps the most authoritative commentary is from the Western Australian Department of Treasury and Finance who concluded "land supply is a key factor influencing the housing market.  Limited land supply has led to higher land prices and hence fed through as higher prices of new homes". ⁽¹⁰⁾

Figure 3:  Perth housing prices compared to the rest of AustraliaSource:  ABS 6416.0

Figure 4:  Average price of lots sold, PerthSource:  WA Department of Treasury and Finance which cites UDIA

Table 1:  Median House and Unit

	Houses	Units
Sydney	559,770	407,181
Perth	405,115	460,546
Brisbane	411,491	301,264
Melbourne	402,817	322,470

Source:  RP Data.
Rp Data – Rismark Property Index 3 September 2007

Yet Perth has no shortage of suitable land for building, nor is there a lack of attractive apartment sites closer in.  The problem is that inappropriate planning rules seek to restrict new housing developments and encourage infill, but fail to achieve that additional infill, leading to a general restriction on housing supply.  Edge development is restricted, despite ongoing demand for this sort of housing, but infill doesn't work because existing residents are effective at stopping it.

AFFORDABILITY IS LOW

A well-established method of comparing housing affordability is to divide median housing prices by household income.  Over the decade to 2006 Perth's ratio has risen from 3.7 to 8.0 making Perth number eleven in a global survey of 157 housing markets and rated as severely unaffordable. ⁽¹¹⁾  One result of such high housing prices has been the virtual elimination of first home buyers from the market.  Only 1,590 first home buyers entered the market in August bringing the total for the year to 9,851. ⁽¹²⁾

According to the Preliminary Report by the Western Australia Housing Affordability Taskforce, ⁽¹³⁾ only six years ago Perth housing was the most affordable it had ever been and the most affordable of all Australian capital cities.  Since then Perth has become so unaffordable that it takes an income of $120,000 ⁽¹⁴⁾ to qualify for a loan on an average-priced home.  With average household incomes of $56,420, ⁽¹⁵⁾ the hardest hit are middle and low income households, particularly those reliant on one income.

SOLUTIONS WELL KNOWN BUT NOT IMPLEMENTED

The solution to this problem is increasing the supply of housing.  The crisis cannot be fixed overnight as many people have made decisions based on a continuation of restricted supply/high prices and to suddenly release enough land to bring prices down to an affordable level will mean some households experience negative equity.  However if housing prices are stabilised over the medium term income will catch up and affordability will improve.

The State Government has announced some measures designed to alleviate the problem;  the most important of these is a target of 20,000 new housing lots for the Perth/Peel region.  The announcement of this target is in line with an acknowledgement by government that supply is crucial.  It is therefore vital that this target is met and that further substantial targets are set in coming years.  Other policy announcements have been at best of marginal use.  First home buyer conveyancing fee exemptions are of little use if first home buyers cannot find any properties they can afford and the shared equity scheme adds to demand, when supply is the problem.

Figure 5:  Lot price, lots available and lots soldSource:  WA Department of Treasury and Finance, citing UDIA

In addition to ensuring adequate land on the edge is available for housing, more needs to be done to encourage a variety of infill projects.  While most families with children want detached homes, young people, singles and empty-nester couples are increasingly looking for alternatives.  One reason Perth has the highest cost flats and units in Australia ⁽¹⁶⁾ is their relative scarcity.  (The other is the overall scarcity of housing forcing some people who would prefer a house to live in a less expensive option).

Table 2:  Per centage of households living in flats and units

Perth	9%
Brisbane	12%
Melbourne	15%
Sydney	24%

Source:  RP Data.
Rp Data – Rismark Property Index 3 September 2007

The key here is the creation of a variety of housing choices from high density students digs through to multi-million dollar penthouses with spectacular views and amenities.  And the key to achieving that range of housing choices is freeing up the planning process.  Infill is often very contentious as existing homeowners worry that additional housing in their areas will lead to their house being worth less.  If increased infill is the goal of the planning scheme the issue of who can object to a proposed development must be faced head-on.  Those directly affected by new developments such as next door neighbours must continue to have the right to object to being overshadowed or inconvenienced however if the State Government is to achieve its own infill goals the grounds of standing must be narrowed.  As it stands now, with such high land prices in inner and middle suburbs, the risk of getting bogged down in objections and appeals can make infill developments too risky to pursue.

If Perth's famed laid back lifestyle is to be anything more than a slogan, a number of policy changes need to be made.  Housing affordability is central to these changes because the central part housing plays as both shelter and the major investment for most people.

Energising the CBD through residential development Perth lags all mainland capital cities in the number of people who live in the Central Business District (CBD).  Melbourne is the clear leader in the number of apartments and the number of overseas students (using non-Australian citizens as a proxy for overseas students). Table 3:  Residents in the CBDs of Australian cities Living in the CBD Citizens from countries other than Australia Sydney 13,549 10,200 Melbourne 20,359 11,844 Brisbane 13,921 5,800 Perth 6,341 3,613 Adelaide 10,229 5,785 Source:  ABS Census 2006 The high number of residents in Melbourne's CBD did not occur by accident.  In the early 1990's the Melbourne City Council and the Kennett State Government created a program called Postcode 3000 which had the aim of producing 3,000 apartments in the central city by 2000.  This goal was reached early and those initial residents have proved a magnet for a range of new city developments leading to the higher numbers of CBD residents than other states. Melbourne City Council, with some State Government funding developed a number of programs to encourage developers to convert office space to housing.  Later this was expanded to new buildings.  Policy changes included streamlining approvals and changing criteria to make apartment development possible, the reassessment of council rates for the construction period and fee relief from some permits.  Council also undertook some capital works to improve street amenity.  These works included street tree planting and the upgrading of footpaths. At the beginning of this process very few people lived in Melbourne's CBD -- there were no supermarkets and the city was known as a ghost town at night.  Initially neither Optus nor Telstra rolled out residential cable to apartments so residents were forced to use dial-up.  Pay-tv was not available and some areas had very poor reception.  The Postcode 3000 program acted as a focus point to have these services delivered, which in turn made the city a more attractive residential destination. The success of this program was driven by a mindset change rather than money.  Relatively small amounts of funds were used to achieve a significant policy success which has become an integral part of the success of Melbourne's CBD as an interesting destination.

3. EDUCATING CHINA AND INDIA -- PERTH AS GLOBAL KNOWLEDGE HUB

Perth, and Western Australia more broadly, owe much of their current strong economic growth to demand from China and India for raw materials.  While this demand is likely to continue for many years Perth has the opportunity now to deepen and broaden engagement with these two powerhouse economies.  Attracting many more tertiary students from China and India is a key way Perth can enmesh itself in the future growth of the region.

Currently over 150,000 students from India and China are enrolled at Australian universities.  Western Australia has an eight per cent market share, a figure that has been falling in recent years as others States have been more successful in attracting students from the growth markets of China and India.

China is the number one source of overseas students to Australia and India is number two.  Overseas students from China and India comprise about 37 per cent of total overseas student enrolments.  NSW attracts 45per cent of Chinese students and Victoria 54per cent of Indian students.  By contrast, Western Australia enrols four per cent of the Chinese students studying in Australia and only two per cent of Indian students lagging all mainland states in students from these markets. ⁽¹⁷⁾  Despite enrolling a greater total number of overseas students than South Australia, Western Australia even lags SA in the number of students from China and India.

Table 4:  Total overseas students and share by state, September 2007

	Overseas students	% total
New South Wales	159,242	39%
Victoria	121,001	30%
Queensland	59,355	15%
Western Australia	32,353	8%
South Australia	21,595	5%
Tasmania	3,930	1%

Source:  Australian Education International.
Market Indicator Data 2007.
Canberra:  Australian Government, 2007

Figure 6:  Share of overseas students from China and India, September 2007Source:  Australian Education International.
Market Indicator Data 2007.
Canberra:  Australian Government, 2007

A goal over the next decade is for Perth to increase the number of overseas students from China and India by about 50,000 per year.  The benefits to Western Australia will be immense and multifaceted, encompassing economic, social and cultural aspects.  This will put Perth where Victoria is now in terms of students from those countries.  This is the equivalent of building two whole new universities so is an ambitious goal.  To achieve this goal over the next decade, Western Australian universities will need to enrol an additional 5,300 students every year until the total additional 52,000 students is reached in 2018.  The University of Western Australia recently announced an intention to increase student enrolments (domestic and overseas) by 5,000 per year, citing a need to achieve the critical mass required to compete internationally. ⁽¹⁸⁾  This initiative needs to be built on and resourced so that across the sector this growth can be achieved every year.

Achieving this goal need not come at the expense of other states;  China and India remain growth markets for Australian education.  In 2005 the growth in students from India was 33.5 per cent and China also showed strong growth.  Nor is this goal "pie in the sky", increasing Western Australia's overseas student enrolments by 5,000 students per year is a fifteen per cent increase on current total overseas students.  Swinburne University in Melbourne reported a 40 per cent growth in 2006 overseas student commencements as the result of a changed marketing strategy. ⁽¹⁹⁾

Perth has already attempted to brand itself as "Perth Education City" but this longstanding initiative has not delivered at the tertiary level in relation to students from China and India and has not kept up with best practice in areas such as internet marketing (see web case study on page 12).  Whether this consortium remains the appropriate vehicle to deliver such a large lift in student numbers must be questioned.  A more focussed program targeting China and India and incorporating more business input with the university and government sectors may pay dividends.

The infrastructure and human capital demands that such an ambitious program will require additional State government and private sector funds.  The result of this investment will be to develop what the Western Australian Technology and Industry Advisory Council calls a "global knowledge hub" defined as "an integrated cluster of R&D activities, advanced educational programs and knowledge-based business services of sufficient scale and excellence to be recognised as a world leader". ⁽²⁰⁾  Positioning Western Australia as a global knowledge hub through creating tertiary institutions with sufficient scale to be world-leading is an example of the multiple benefits to Western Australia from aggressively increasing overseas student numbers.

Table 5:  Comparison of WA and Victorian Chinese and Indian overseas student numbers & required WA growth

	WA now	Victoria now	WA in 2018	WA increase
China	4,267	38,204	28,000	23,933
India	1,300	29,766	30,000	28,700
Total	5,567	57,970	58,000	52,633

Source:  Australian Education International.
Market Indicator Data 2007.
Canberra:  Australian Government, 2007

Western Australia already has obvious advantages in some disciplines, such as minerals and energy, environmental science and marine science.  Fortuitously, all of these areas are priority areas for either or both of China and India. ⁽²¹⁾  However, which areas are targeted must come from a collaborative effort by the universities, business, government and most particularly the demand from the overseas students themselves.  Although planning and specialisation is required, there seems little point in, for example, targeting biotechnology in competition with Melbourne, Brisbane and Sydney who already have well-developed programs in this area, especially given the overt hostility to agricultural biotechnology adoption by the State Government to date.

Financing the massive expansion of the tertiary sector will require policy action and financial investment in a number of ways.  These include additional housing, university infrastructure, support services, and marketing.  The State Government has a key role to play in enabling this investment to happen.  For example, the additional 50,000 students need to be housed, preferably close to their tertiary institutions, in decent, but cheap, accommodation.  The State Government will need to ensure appropriate sites are zoned for this sort of housing.  Similarly, these additional students will need inexpensive places to eat, to purchase entertainment and to shop, close to where they live or easily accessible by public transport.  The State Government and local councils have a role in ensuring student-friendly hubs can occur, and again this will require town planning acting as an enabler rather than a blocker.

Past acting as an enabling body, the financial cost to Government can be relatively small.  The universities will need seed money to get new programs up and running and perhaps to underwrite additional borrowings for new buildings.  Loans and seed grants for these purposes can quite properly be seen as government investing in the future growth of the State.  There is no virtue in demanding such funding from Canberra as it is unlikely to be forthcoming -- and timeliness rather than procrastination is of the essence.  There are, however, other relatively low-cost actions the Western Australian government can take to gear up Perth to welcome these additional students.

Recent research on the experiences and attitudes of Indian students in Australia ⁽²²⁾ listed nine factors identified by Indian students as important to their choice of university.  While reputation and ranking of the university was given as the most important factor, non academic reasons such as location of the university, the cultural diversity of Australia and financial considerations were also cited as important.  This research also suggests Perth will be more successful in attracting Indian students by increasing the channels of information available to prospective students, via, for example, attending education fairs, supporting dedicated staff in India and sponsoring an effective web presence.

The State Government and the universities are not the only groups important to the success of the goal.  Business, especially businesses currently engaged with China and India, have a clear motive in participating in making this ambitious goal achievable.  Not only will Perth businesses gain additional skilled workers, as many graduates will take up the Federal Government's migration offer, these workers by definition will have the language and cultural knowledge to improve business outcomes in trading with China and India.

And there is much business can do to help.  Initiatives such as industry placement programs designed to fit with the visa and study requirements of students, the creation of scholarships for outstanding but less well-off students, the endowment of professorial chairs, as well as more direct commercial relationships with the universities to build the buildings, house the students etc.

A STUDENT FRIENDLY PERTH

As has been stressed it the introduction to this paper, all the recommendations are designed to work together in making Perth a more vibrant and interesting city that throws off its "dullsville" tag and refashions itself as a broad-based global city.  This recommendation is particularly important in meeting these objectives and for enmeshing the city with its current major trading partners.

In a globally competitive marketplace for overseas students, lifestyle while studying is increasingly important.  Perth has the beaches, the weather, the natural attractions and the scale to be very attractive to students from India and particularly China.  However, students are also looking for affordable housing both as a student in a shared house, and later, if they choose to stay, in a family home.  As section two detailed, Perth is failing to deliver affordable housing to current residents on above average household earnings, many overseas students were priced out of the accommodation market long ago.

There is no such thing as shop trading hours in China or India.  Shops open to best suit the needs of customers and the idea of restrictions strikes many overseas visitors, not just students, as odd.  However the mindset that continues to restrict shop trading hours (and stops the implementation of reformed liquor licensing laws) is alien to people from bustling, never closed cities.  As section one described, there is considerable research indicating that the young "creative class" expect flexibility so they can eat when they finish work late, or have a couple of drinks with friends without braving a beer barn.  Many of the sort of people Perth should be attracting as overseas students share those attitudes.

Fashion and urban culture As a quirky example of how inviting an additional 50,000 Asian students to Perth will enrich the city and create additional spinoffs, fashion is illustrative and perhaps surprising.  Japan has been ramping up its cultural outputs for some time now and, along with the Hong Kong aesthetic, is becoming pivotal in defining an "Asian style".  This style is recognized by mini-skirts with thigh high socks, bold prints, designer motif handbags and kawaii (cute) accessories.  In cities with large Asian student populations it is becoming more common to see boutiques springing up that stock Japanese street wear;  in turn this aesthetic is picked up by Australians of Asian descent and is also seeping out to the broader community. (23)  Concurrently, the absorption of this ultra-hip Asian aesthetic into a city adds to its global appeal as an interesting place to live and works to help attract and keep the sort of highly skilled creative people all cities are trying to draw. With enough critical mass, Australian based designers are able to create their own Asian-influenced designs and sell them into Asia.  So what begins as a few imported Hello Kitty accessories can end up creating a niche export industry and increasing the attraction of the city as a diverse and interesting destination for both tourists and sought-after workers.

ECONOMIC BENEFITS

A detailed survey of spending by overseas students found that those in Western Australia spent an average of $476 per week on non-fee related spending. ⁽²⁴⁾  On current enrolments, overseas students are therefore spending over $15 million a week on housing, food, and other expenses.  This figure is likely to be conservative given the dramatic increases in housing costs since the survey was undertaken in 2004.  The total direct expenditure by overseas students in Western Australia, including course fees and living expenses is well over $1 billion per year.  The overall contribution to the economy is much greater.

An additional 50,000 overseas students, on the above expenditure figures, and assuming the students are only in Australia for nine months of the year, a conservative assumption, would spend about $1 billion in just living expenses plus at least the same again on tuition fees.  Therefore the direct expenditure in Western Australia would increase by over $2 billion per annum and the indirect value a multiple of this amount.

A RESEARCH HUB

As the Vice Chancellor of the University of Western Australia has commented, universities need sufficient scale to compete in the international research ratings which in turn influence the attractiveness of the university to prospective students and academics. ⁽²⁵⁾  Attracting additional students from India and China should be part of the development of universities of appropriate scale to bring in the world-class researchers needed.  Having a critical mass of excellent university researchers, particularly clustered in academic disciplines that feed into high growth industries, should create a virtuous circle whereby their research is of use to Perth's industries or acts as a hub to attract new industries.  Although the process is never as neat as this model predicts there are global precedents for research-intensive universities being the catalyst for whole industries developing in certain locations rather than others.  Perhaps the most well known example is the proximity of Silicon Valley to Stanford University and the role that university has played in the development of the IT industry. ⁽²⁶⁾

Comparing Perth and Melbourne's overseas student web sites Melbourne, under the auspices of the Department of Education, has developed a comprehensive web presence branded "Study Melbourne" (www.studymelbourne.vic.gov.au).  As part of the "Perth Education City" program Perth has also created a web site (www.doir.wa.gov.au/PEC).  Just the web addresses say something about the differing approaches, Melbourne has created a total branding experience that reaches down even to the URL branding while Perth has buried its site within a government department. The sites look very different;  Melbourne's homepage begins with a welcome and highlights student testimonials and the benefits of living and studying in Melbourne.  It even suggests Melbourne has a great climate!  It is very student driven and the majority of testimonials are from Asian students.  Perth's homepage has an invitation from the Premier who highlights how desirable, affordable and safe Perth is.  Further pages talk about the "Perth Education City" concept rather than focussing on the information prospective students will want.  Perth has a few testimonials too but only two from Asia. Melbourne stresses the multicultural nature of the city, its food, fashion and parks as well as the strengths in science, IT and engineering.  The site provides links to Tourism Victoria and the Melbourne City Council tourism site and focuses on the student experience.  Perth's site attempts to provide this sort of tourism information but seems to fall back in to asserting how inexpensive and cosmopolitan Perth is compared to other Australian cities. Unfortunately Perth's site is badly out of date in some key respects.  The Living Costs page states an overseas student would pay $80 per week for rent and meals.  A quick look at the online student accommodation boards shows advertisements for $125–$210 room only with meals extra.  Similarly the Upcoming Events end at February 2007. Overall Perth's site seems just as much about attracting east-coast students to Perth as it does about luring overseas students due to the constant comparisons with other Australian cities.  Melbourne presents itself as a natural global player, with an edgy yet safe city, perfectly placed to offer international standard education within a community that overseas students will fit into.  By contrast Perth's site is not student focussed, is out of date, and presents Perth as a cheaper destination, rather than a sophisticated, knowledge-based hub.

SOCIAL BENEFITS

Perth has experienced different immigration patterns than Sydney and Melbourne:  more from the UK and South Africa, less from Asia. ⁽²⁷⁾  Some 87 per cent of Perth residents identify as having British or Australian ancestry compared to 70 per cent in Melbourne and 68 per cent in Sydney.  Perth has more than double the proportion of living British migrants than Sydney, Melbourne or Brisbane.

This matters for a number of reasons.  If Perth truly aspires to be a global destination city, diversity is important. ⁽²⁸⁾  For example a consistent message from overseas students in Melbourne is that the fact that Melbourne is a multicultural city was important in their choice of destination. ⁽²⁹⁾  As the global race to attract the best talent continues, young, highly educated workers are consistently demanding places where they feel they are accepted and a visibly multicultural city is part of the filtering process for these very attractive migrants and workers.

While many graduating overseas students will chose to return to their countries of birth, some will choose to settle in Western Australia.  This is particularly true of students from India and China of whom a recent survey found 41 per cent of Indian and 29 per cent of Chinese students responded that they wanted to migrate to Australia at the completion of their studies. ⁽³⁰⁾  Either way, Perth has much to gain from both those who stay and those who return home.  Providing about 20,000 people a year (assuming an average three year course length) with a positive learning and living experience that they can then use to settle in Australia or to return home to a new career can deliver to Perth an army of ambassadors with deep links to the city and to their places of birth.

4. CREATING PARTNERSHIPS FOR INFRASTRUCTURE

What Perth looks like -- both the built environment as well as Perth's natural attractions -- has been the source of much soul searching in the past couple of years.  There is debate about the relative merits of the convention centre, the lack of development on the river foreshore and the Northbridge railway lines.  Many people want to see statement buildings, new arts centres, galleries, museums and new stadiums.  Few agree on what these should look like other than they should be world class and funded by government.  Other people stress commercial solutions, adapting the lessons of Brisbane and Melbourne which reinvigorated their river frontages with largely private sector buildings and excellent urban design overlays from the planners.

Overarching all this is a realisation that Perth's built environment, at least as it refers to the CBD, is unappealing.  Where are the architecturally significant buildings?  Where, even, is the development of a distinctive Perth style?

There are appropriate roles for developers, government, business tenants and philanthropists in making Perth a city more in tune with its place as an aspiring world-class destination city and also with its environment and climate.  Government has a clear role in town planning, in setting the rules for the purpose, scale and quality of precincts such as the foreshore and Northbridge.  Others should have the role of delivering these projects.

The initiatives of FORM, a not for profit cultural association supported by industry, and its executive director Lynda Dorrington, in creating debate and providing a forum to enable discussions continue to be important in changing people's mindsets.  It is clear that there is overwhelming agreement amongst Perth's business and cultural leaders that things need to change.  It is also clear the projects (the river and Northbridge) identified by these leaders as important to Perth's future are just not going anywhere.  It is well overdue that the government handed these projects over to the private sector along with an appropriate planning scheme to deliver a mixed use precinct for dining, shopping, working and living.

Figure 7:  Melbourne recital centre and Melbourne Theatre Company Theatre ProjectSource:  Ashton Raggett McDougall,
Melbourne Recital Centre and MTC Theatre Project

CULTURAL VENUES

The tradition in Australia has been for government to largely fund cultural buildings such as theatres, art galleries and concert halls with philanthropic contributions playing a smaller role than in, for example, the US.  However this is changing as governments look for solutions to the problems of equity raised when spending large amounts of money on venues that will be used by a relatively small and affluent section of the community when other priorities such as health and education remain pressing.

Innovative solutions that augment government funding include the current Victorian construction of a recital hall and small theatre being built with a combination of government money, money in lieu from Crown Casino for not building a theatre it had promised to build, and $21 million from private and other sources.  Significantly, this building, built largely for chamber music, is being deliberately benchmarked against the world's greatest venues of that type.  Aiming at that level is regarded as unremarkable by most people involved in the project.  There is a view that if the city is going to embark on such a project the only option is to build it with world class acoustics and design, anything less would let down Melbourne audiences and would not position Melbourne as a destination for the world's best performers.

Perth should be similarly ambitious in attracting private philanthropy to build outstanding venues which meet the needs of its residents.  Government and council need to be more proactive in offering ways to involve those who are now reaping the rewards of their work in WA's mining industry and are keen to donate part of their wealth to cultural projects.  At present the paralysis over the foreshore and Northbridge developments offers no scope for a budding philanthropist to get involved in a project as there are no projects.

Moreover, the State Government and Perth City Council have clear leadership roles in facilitating public acceptance of new projects.  Great architecture is often controversial.  The Sydney Opera House, Paris's Pompidou Centre and Louvre pyramid and Barcelona's Guggenheim Museum all attracted scathing criticism.  What philanthropist in their right mind would want to offer millions of dollars to help build an iconic building if a good proportion of the political leadership of the city and state pander to the most ill-informed criticism and allow their generosity to be pilloried?  Leadership must include backing others boldness, especially if the outcome is of world class standard.

Figure 8:  Paris street

However the greatest imperative is for action.  The time is well overdue for talking about these projects.  Buck passing from all tiers of government and sniping from opposition of any spark of decision has doomed all previous attempts.

FOOTPATHS, TREES AND RUBBISH BINS

Perth residents have become so used to working around the oppressiveness of the climate before the Freemantle Doctor rolls in, that often just how unpleasant the city streets are in 40 degree heat is forgotten.  The Hay Street Mall is unbearable for much of the day in summer;  what limited trees there are in the malls remain spindly, isolated attempts to add some much needed shade into a concrete hot box.  Paving is not uniform and many streets still have asphalt, despite its obvious unsuitability for the climate.  Lighting varies from the round balls of the mall to the sort of ugly street lights designed in the 1970s.  Overall the CBD is a bad mismatch of third-rate fixtures and fittings, more at home in a down-at-heel country town than a prosperous city.

This matters.  Great cities pay attention to their infrastructure.  Paris is famous for its sidewalk cafes but underpinning those cafes is a consistency in the streetscape, large format bluestone paving on wide footpaths, a single design for bollards, heritage lighting, and rubbish bins with matching covers.  All these things create the "look" of Paris.  Charles Landry zeroed in on why this matters:

take the fences at car parks, sports facilities or stations.  They represent a miniscule amount in the total budget, but usually they disappoint and make you feel gloomy. ... The fine detail matters.  It is often that last one per cent of expenditure that embellishes, communicates and provides that twist of beauty. ⁽³¹⁾

Perth needs a total overhaul of the CBD look and feel.  The city needs a master plan to remove all asphalt, plant many more trees, standardise lighting, rubbish bins, bollards etc.  With Cathedral Square inching forward (as well as the eventual redevelopment of the foreshore and Northbridge railway lines) getting these micro settings right is timely and of arguably more importance to the general amenity and beauty of Perth than any new iconic building.

5. WHAT'S THE "NEXT BIG THING" & SHOULD ANYONE BE GUESSING?

The export of iron ore was banned when Lang Hancock discovered it in the Pilbara because of a common idea that mineral resources were scarce.  Today it forms a large part of the wealth of Western Australia.

In the 1980's, when compulsory superannuation was introduced, the only policy aim was the provision of retirement savings for workers.  Fast forward 20 years and the unexpected spinoff was the creation of Australia as the fourth biggest funds management industry in the world.

The State Government of Western Australia has identified what it calls pillars for diversification beyond the boom:  biotechnology, information and communications technology, marine and defence and renewable energies.  Western Australia is not alone in attempting to back the next big thing, Queensland and Victoria both trumpet biotechnology, New South Wales and Victoria both back information and communications technology.  The University of Melbourne has just announced the creation of an internationally recognised centre for marine and climate change backed with Federal Government money.  Everyone seems to be behind renewable energy projects.

Identifying trends in export services is not an easy task as the data is grouped in unhelpful ways.  However, the available data indicates Western Australia appears to be ignoring key strengths in engineering and mining services in its attempts to chase IT, biotechnology and renewable energy.  Western Australia's existing strengths do however appear well suited to marine and defence engineering.  Figure 9 displays the breakup of Western Australia's exports of high value-added business services.  Sixty-nine per cent of Western Australia's exports of high value-added services come from engineering, mining and agriculture.  Western Australia has strong Australian market shares in all these categories.  By contrast Western Australia has only a seven per cent share of Australian exports of communications services and a poor two per cent share of computer and information services.  Overall Western Australia has a seven per cent share of business services.

The market shares of the states have been remarkably consistent over time in communications and IT.  These two industries are important export industries totalling some $2 billion in 2006 but Western Australia has a long way to go to match the market leaders of NSW and Victoria.

Western Australia might be successful in developing useful export industries in the four identified areas.  Conversely, it might not.  The lessons of iron ore and superannuation are instructive.  Governments are not known for their business acumen.  There is little historical precedent for government to pick winners successfully and countless examples globally of the opposite.

Table 6:  Share of exports, communications services, 2000-06

	2003	2004	2005	2006
NSW	35%	34%	33%	38%
VIC	24%	25%	24%	23%
QLD	17%	16%	17%	15%
WA	8%	8%	8%	7%

Source:  ABS 5368.0.55.004

Table 7:  Share of exports, computer & information services 2000-06

	2003	2004	2005	2006
NSW	77%	80%	70%	70%
VIC	16%	N/A	20%	21%
QLD	5%	5%	6%	6%
WA	N/A	N/A	1%	2%

Source:  ABS 5368.0.55.004

There are significant risks to getting it wrong.  One risk is lost opportunity -- the lost opportunity of the export driven, competitive industries that would have been developed had not people been focussed on the wrong thing.  However the bigger risk is thinking it should be done at all.  What needs to occur instead is a concerted effort to get the regulatory settings right for all industries, which, in tandem with delivering polices that keep Perth an attractive place to live for the broadest group of people possible, will deliver the innovation culture to drive the development of the "next big thing".

Western Australia is already good at some of the things that can make this happen;  State Government data is superior to many other states, allowing business, researchers, policy makers and government to make better informed decisions.  Expanding availability and streamlining delivery across all departments will further improve the capacity of interested and knowledgeable people to input into the policy making process and to make business decisions grounded in fact.

Regulatory certainty and transparency remain of high importance to both existing and prospective businesses.  Property rights so entrepreneurs can be certain of benefitting financially from their risk taking need to be re-examined.  Furthermore, the delivery of administrative predictability, via known public processes that are consistently applied provides another layer of comfort for those risking capital.  As the Productivity Commission notes "entrenching good process through procedural and institutional means is the key to better regulation". ⁽³²⁾

There are a number of reasons why it is particularly in the interest of Western Australia to drive the next round of the National Reform Agenda.  The most pressing is the capacity of the total package of proposed reforms to make Australia the third richest country measured by GDP per capita. ⁽³³⁾  Any leadership group which has the opportunity to deliver such a core benefit to their constituency is duty bound to embrace it.  Moreover, Western Australia is starting from behind, having failed to implement the lowest per centage of national completion policy reforms of any state.  The chief executive of the WA CCI, John Langoulant described this failure as "successive Western Australian governments are seen to have lacked the ticker to bring in fundamental reforms to shed competition restrictions that are so quaint that nobody really knows why we had them in the first place". ⁽³⁴⁾

Figure 9:  Western Australia export of high value added business services, 2006Source:  ABS Cat. 5368.0.55.004

Beyond the National Reform Agenda there remains much Western Australia can do to best position itself as the place where new and profitable industries can take root.  The current resources boom provides a unique opportunity to engage in some aggressive competitive federalism, cutting taxes, lifting regulatory burdens, increasing the skill base of the workforce and divesting assets better run by the private sector.  All of these actions will have a greater impact on attracting new businesses and building on existing ones than attempting to take market share away from Sydney and Melbourne in existing industries.

There is much to be done to position Western Australia as a likely site for the "next big thing" and to deliver increased and sustainable wealth from existing businesses.  Politicians of all persuasions would be better to focus on getting the settings right than on trying to pick winners.

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ENDNOTES

1.  "Stagnant Perth Needs a Saving Dose of Energy", The West Australian, March 10 2007, 16.

2.  Mark Pownall, "Questions Simplicity Belies", WA Business News, 9 August 2007, 16.

3.  Jennie Fitzhardinge, "Perth Ready for Rebirth", Sunday Times, 22 July 2007.

4.  Janell Macri, "Taxi Shortage a Disgrace", WA Business News, 29 March 2007.

5.  Emily Piesse, "Demand Spike to Test Taxis", WA Business News, 16 November 2006.

6.  Emily Piesse, "Boom Times for Taxi Operators", WA Business News, 16 November 2006.

7.  Richard J. Wood, Fixing the Crisis:  A Fair Deal for Homebuyers (2006), 1.

8.  Australian Bureau of Statistics, "Cat. No. 2068.0 – 2006 Census", (ABS, 2007).

9.  RP Data, Rp Data – Rismark Property Index (3 September 2007, accessed 1 October 2007).

10.  Western Australian Department of Treasury and Finance, Economic Summary (2007), 2007, 2.

11.  Wendell Cox and Hugh Pavletich, 3rd Annual Demographia International Housing Affordability Survey:  2007 (2007).

12.  Australian Bureau of Statistics, Housing Finance, Australia, Aug 2007 (2007), Cat. no., 5609.0.

13.  WA Housing Affordability Taskforce, Western Australia's Housing Affordability Crisis (2007), Preliminary Report.

14.  Housing Industry of Australia and Commonwealth Bank, Affordability Report – March Qtr 2007 (2006).

15.  Australian Bureau of Statistics, "Cat. No. 2068.0 – 2006 Census".

16.  RP Data, as above

17.  Australian Education International, "Year 2007 Market Indicator Data – Extracted September 2007", (Commonwealth of Australia, 2007).

18.  Mark Pownall, "UWA Moves to Increase Its Intake", WA Business News, August 23 2007.

19.  Jeffrey Smart and Melissa Banks, "Prospective Students as the Customer:  Best Practice in Customer Service Delivery", in Australian Interantional Education Conference (Perth Convention Exhibition Centre, Perth:  2006).

20.  WA TIAC, Building on the Western Australian Boom:  The Drivers and Shapers of China's Economic Development in the 21st Century.  Perth (2007).

21.  ibid.

22.  Sameena Ahmad, "International Student Expectations:  The Voice of Indian Students", in Australian International Education Conference (Perth Exhibition Centre, Perth:  2006).

23.  Rachel Wells, "Fashion Follows Fusion", The Age, September 27 2007.

24.  Paul Boreham and Mark Western, Executive Summary from the Final Report of the Survey of International Students" Spending in Australia (2005).

25.  Mark Pownall, "Unis Respond to Change", WA Business News, 23 August 2007.

26.  Richard Florida, The Flight of the Creative Class, (2005).

27.  Australian Bureau of Statistics, "Cat. No. 2068.0 – 2006 Census".

28.  Richard Florida, The Rise of the Creative Class, (2003).

29.  Victorian Department of Education and Early Childhood Development, Study Melbourne (2007), accessed 28 September 2007).

30.  Boreham and Western.

31.  Charles Landry, "Perth Must Ensure Gains from Its Growing Pains", The West Australian, July 14 2007.

32.  Productivity Commission, Annual Report 2005–2006 (2005), Annual Report Series.

33.  ibid.

34.  John Langoulant, "Booming yet Sorely Lacking in Spirit", The Australian Financial Review, 12 October 2006.

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