Overhaul needed as Melbourne's cabs taxi to a halt

If you think Melbourne's taxis are providing a poor service, you are not alone.

The latest patronage and satisfaction figures show general dissatisfaction and make it clear that the only real solution to the taxi industry's malaise is deregulation.

Between 2001 and 2006, the proportion of people using taxis to get to work in Melbourne fell from 0.31% to 0.27%.

This compares very badly with the strong patronage growth on the privatised public transport system, which increased from 9.3% to 10.2%.

Taxi user satisfaction fell from 64.5% to 62% last year, placing it below the average for public transport.

Long-suffering taxi users in Melbourne will therefore be pleased to learn that the State Government's Essential Services Commission is reviewing the taxi industry.

While the explicit focus is the setting of regulated fares, its comprehensive discussion paper raises more fundamental questions about how the taxi industry is run.

The basic problem with Melbourne's taxis is that the number of licences has hardly increased since the mid-1970s.

The number of conventional taxi licences almost doubled in the 20 years to 1975, but has increased by less than 10% in more than 30 years since.

The time-honoured policy of restricting access to licences has meant that the number of taxis has become less and less appropriate for a city of Melbourne's growing stature.

Population growth, increasing disposable incomes, more travel needs, changed attitudes to drink-driving and increased tourism should all point to more cab users, not fewer.

Not surprisingly, the limitation of licences has resulted in a dramatic increase in licence values.

In 1989, the average licence value was $123,267.  By last year it had reached $449,241 -- an average increase of 7.4% a year, well above the inflation rate for that period.

Successive state governments, through restricting licences, have effectively increased the wealth of a small section of the community at the expense of everyone else.

To make matters worse, taxi fares have also increased at a higher rate than the consumer price index.

Those who rely on taxis, such as the elderly and disabled, carry a particularly heavy burden.  Several studies have underlined the costs of regulation.  A KPMG study in 1999 estimated that restrictive licensing cost Melbourne taxi customers $72 million a year in the form of higher fares.  Almost a decade later, that cost is much higher.

While there have been some welcome measures such as the introduction of peak-period cabs and leasing some extra licences, what is actually required is deregulation.

The Government should issue licences to anyone who wants one, subject to suitability checks and a modest administrative fee.

This would not only benefit consumers, but would be of huge help to drivers, particularly those seeking to become owners.  They would no longer need to take out a huge loan to fund a plate.  Many more drivers would have a chance to be self-employed.

Deregulating taxi industries has been shown to have enormous benefits for consumers.  It has been done in many cities, in countries as diverse as the US, Britain, New Zealand, Japan, South Korea, Netherlands, Sweden and Ireland.

The results were invariably more taxis, less waiting, lower fares and improved standards.

While the desirability of the deregulation outcome is clear, reaching that ideal position is not simple.

Two extreme positions could be adopted -- full compensation to current licence holders, or no compensation.

In Victoria, buying back licences at their full current value would mean expenditure of well more than $1 billion, an unreasonable imposition on taxpayers.

On the other hand, a decision to deregulate without compensation, while delivering a much better result for taxpayers, would clearly impose significant hardship on many taxi licence investors who would feel that they had invested in good faith.

Probably the most equitable solution would be a phased scheme to issue extra licences -- and therefore to reduce their individual value -- over several years.

If Melbourne's taxis were delivering an outstanding service, one could understand there would be an argument against changing current policy.

But when the service is poor, there seems little argument against trying a different approach.

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Power price spike scorches companies

AGL Energy has found a silver lining in the hot weather Adelaide has faced this year.  The company is reported to have made an extra $60 million in one two-week period alone.

Although about 20 electricity generators compete in the national market, transmission shortages can isolate state-based markets.  This can leave one company in a position to increase prices when demand surges, and South Australia is particularly vulnerable.

During the past few months, South Australia has experienced high temperatures and record electricity demand.  At the same time, its reserves have deteriorated.  The main link with Victoria has been downgraded because the network owner considers it susceptible to breakdown if it operates at its nominal capacity of 500 megawatts (enough to supply 35% of the South Australian baseload market).  This decreases the amount of electricity available in the state.

In addition, a big increase in wind power in South Australia means it requires fast-start generation when the wind stops blowing.  This tends to be when it is hot -- the very time, given the air-conditioning load, that more power is needed.

The two big electricity retailers are Origin Energy and AGL.  They have solid coverage in forward contracts so they are relatively indifferent to the daily spot price for supplies.

But AGL, following asset swaps with TRUenergy, is now ''overweight'' in generation and has most of the state's fast-start gas-fired plant.  It has therefore been bidding into the market in ways that maximise its generation revenue by raising the daily price.

Usually such tactics backfire as rival suppliers move to take advantage of an impending price spike.  This suppresses the spike and leaves the company engaging in such bidding with lost markets.  But in South Australia, AGL has benefited from high temperatures, reduced Victorian supplies and its own surplus capacity.

This year, to date, the average spot price during peak periods in South Australia has been $350 a megawatt hour compared with $55 for Victoria.  Normally, South Australian and Victorian prices are similar.

The effect is limited to those retailers and individual businesses that do not hold adequate futures contracts.  All domestic users are automatically contracted because they buy from a retailer.  Grumbles are coming from those businesses that have copped a hiding because they found themselves inadequately covered for their forward needs in South Australia.  The Australian Energy Regulator is, as required, examining the actions of generators and transmission suppliers to determine whether they are flouting market rules.  This is unlikely and any intervention would almost certainly do more harm than good.

The episode illustrates that the market structure (other than the regulatory encouragement of wind power) is working well.  Those companies that gamble on the prices being lower than those being offered at contract can lose.  For the market as a whole, the high prices in South Australia are leading several companies to dust off their previous plans for additional generation.

The cavalry, in the form of new supplies, is therefore on the way but until it arrives, those electricity users with inadequate contract cover can only pray for cooler weather.

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State can't afford a home affordability crisis

From the Gold Coast to Cairns, local elections have delivered office to people whose platform was aimed at controlling (read "preventing") further development in their communities.

Not only does this deliver a bitter blow to those who want to buy affordable houses but it threatens the state's economy.

Modern Queensland owes much to the tourist and retirement industry developments, which from the 1980s plugged a gap created in the state's economy by relatively subdued activity in resources and agriculture.

As a result the state has transformed from a backwater to a cosmopolitan must-visit place that became a magnet for people in the southern states.  All this was made possible by low-cost housing.  Land price increases in recent years threaten that.

In real terms the cost of building houses and apartments in Queensland has not changed -- it is just as cheap as it was in the 1970s.  With increased levels of incomes, housing should be more affordable but the opposite is true.  This is because land prices in real terms have risen threefold and now comprise a larger proportion of the house and land package than the house itself.

The impact of this on house affordability has been severe.  In June 2007, average loan repayments were $432.70 a week.  This meant 37 per cent of median weekly income was going in housing loan repayments (and interest rates have made it worse since then).

Such a level of repayment indicates major financial pressures.  The Australian Housing and Urban Research Institute defines housing stress as households with housing costs at least 30 per cent of gross household income.

The Sunshine Coast typifies what is taking place in regional Queensland.  Home prices have escalated markedly and a recently released study of housing affordability by Demographia placed the region as the seventh least affordable area of the 227 markets analysed worldwide.

As a result of planning restraints on land, the prices on the Sunshine Coast rose rapidly after 2001 -- in Maroochy from about $90,000 to about $230,000.  Only 2 per cent of the area is urbanised and it is surrounded by undeveloped land.  Yet planning restricts the supply of raw land and if land is approved for housing development its value is increased one hundredfold.  Farmland worth $5000 a hectare becomes worth half a million dollars once a stroke of a pen means it is approved for dwellings.

The State Government also stings new developments for about $14,000 in infrastructure charges.  But it is the development restraint that is damaging the Queensland housing market.

And the local elections show widespread voter support for such measures.  The openness of development that created buzzing holiday resorts in the Gold Coast, Cairns and the Sunshine Coast is reversing.  Those that have got in are building walls around their cities and preventing any development outside those walls.

They are doubtless aware that this will raise the value of their own properties but this imposes a heavy penalty on newcomers, including those without their own home.

We must roll back regulations that prevent people buying, selling or developing their own properties.  There is a legitimate role for withholding permission for proposals that would harm existing properties.  But it should not be permissible for regulations to create scarcity thereby raising incumbents' property values.

The local elections in regional Queensland have presented the State Government with a headache.  It has to protect the rights of those who do not currently own a home or want to buy a new one against those who want to shut them out or impose a high price on them.  Failure to do so will not only exacerbate the state's housing crisis but it will also slow the development of the tourist-based industries.

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Mixed messages on foreign policy

If the priority the Rudd Government attaches to an issue can be determined by the number of media releases about it, then halting Japanese whaling is more important than stopping Chinese repression in Tibet.

In the weeks after its election, the Labor Government dispatched surveillance aircraft and ships to the Southern Ocean, announced the appointment of a special envoy on whale conservation, lodged a formal protest with the Japanese Government, and threatened legal action in international tribunals.

When it comes to Tibet, so far there's been nothing more than a quiet plea for "calm and restraint by all parties".  Relations between Australia and China are business as usual.  When the Prime Minister was asked whether he would mention Tibet on his visit to Beijing, he refused to answer.  He also refused to respond when asked whether he would urge China to allow international observers into Tibet.

The forthcoming Olympic Games don't make the situation any easier.  Between now and August there will be daily pressure on Rudd and his ministers to explain their position on everything from air pollution in China to investment by the Chinese Government in Australian resource companies.  The protest of a few days ago as the Olympic torch was lit in Greece will be the first of many.

Discussion about a possible boycott of the Olympics has highlighted the changing moral certitude of our past and present politicians.  Malcolm Fraser advocated sporting sanctions against South Africa and a boycott of the Moscow Olympics, but now believes that the Beijing Olympics should proceed uninterrupted.  The International Olympic Committee, after years of studiously avoiding the issue of politics and sport, has finally acknowledged that China is not a liberal democracy.  Rudd might be hoping that Tibet will go away as an issue, but it won't.  And the broader question of how Australia should handle its relations with China won't go away either.

The difference in the way Labor has managed its dealings with Japan over whaling and China over human rights is stark.  The impression that the Australian public is left with, and the impression communicated to the Japanese and Chinese governments, is that the Labor Government is happy to be symbolic -- just as long as it doesn't entail too much effort.  It's interesting to speculate what would happen if a small proportion of the effort the Australian Government allocated to getting publicity for its opposition to whaling was instead devoted to encouraging China to strengthen the political rights of its citizens.

Certainly the situation of Tibet is complicated because both the Coalition and Labor accept Chinese sovereignty over the province.  There's little doubt that Australia has more chance of stopping whaling than it has of getting China to change its human rights practices.  Further, there's a good argument that our foreign policy efforts should be concentrated on influencing the things that we can influence rather than the things that we can't.  From the way he has behaved so far, there's every indication that this is the maxim that Rudd is following.  The problem is that he promised to be different. While he didn't quite commit to pursuing an "ethical" foreign policy, he loudly proclaimed that Australia would do more to uphold international standards of human rights, and we wouldn't acquiesce so easily to alleged human rights violations committed in the pursuit of the war on terror.

As Tony Parkinson, former foreign policy adviser to Alexander Downer, writes the "yawning disparity in the Rudd Government's approach to the two major powers in East Asia has not been a good look, serving only to compound the worst fears in Tokyo about Rudd's decision to include China, but exclude Japan, as a destination for his first major overseas trip as Prime Minister".  The question that follows is whether this signals that Labor has made up its mind about how it sees Australia's future in Asia -- and whether that is a future closer to communist China than to democratic Japan.

Rudd has as much as admitted that nothing Australia does will change the situation in Tibet.  He's not even willing to do the most basic symbolic act, which is to raise the subject.  Given that the Prime Minister makes so much of his special relationship with the Chinese Government, it would have been thought that the Chinese would have at least listened to him, even if they ignored what he said.

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Nanny state ad bans won't stop kids liking junk food

It used to be that if the government didn't like something, it would ban it.  Now, if the government disapproves of a product, it just bans it from being advertised.

A Senate committee is currently examining the feasibility of restricting advertisements for alcohol, and Kevin Rudd has expressed interest in making such a measure part of his binge drinking campaign.

Similarly, the Australian Medical Association wants to ban junk food advertising during children's TV shows.  Advertising restrictions are the new coolest thing for paternalistic policy-makers and their nanny state.

But are we that easily manipulated by brand managers and advertising firms?  Does the Government have to step in to protect us, and our children, from harmful ads?  Advertising is, at its core, just the simple delivery of information.  Those who oppose it are essentially arguing that this information is too challenging for individuals to process safely;  that, if told the wrong thing, they will be unable to resist self-harm.

The anti-capitalist Naomi Klein famously took this argument one step further when she decried the psychological power of corporate brands -- we are all, apparently, oppressed by tyrannical graphic designers.  Mining would be finally recognised as the environmental catastrophe it is if only everybody wasn't so disorientated by BHP's trendy looking bubble logo.

This view does not just reduce us to the level of dumb automatons, passively waiting for advertising executives to beam their instructions directly into our brains, it also creates a profound dilemma for democratic politics.  If we don't have free will in the shopping centre, we certainly don't have free will in the voting booth.  And figuring out which political party would be better for interest rates is far more complex than figuring out which brand of shampoo to buy.

Nevertheless, most people acknowledge that adults are sensibly sceptical about marketing claims.  What is surprising is just how advertising savvy children are.

Minors are depicted by policy-makers as unable to defend themselves against a well-planned onslaught of marketing.  However, as the new book Prohibitions published by Britain's Institute of Economic Affairs shows, children as young as five form preferences about their favourite TV programs.  And by the age of 11, children demonstrate a pronounced scepticism about claims made in ads.

During the federal election campaign, anti-advertising rhetoric took a decidedly surreal turn.  In response to the Labor Party's dislike of Shrek-themed merchandising, the Howard government promised to fund a new ABC channel for children completely free of junk food ads.  It was a bizarre train of thought that led Liberal policy-makers to think that the best way to combat childhood obesity was to make sitting on the couch and watching TV more appealing.

The belief that an individual's free will is crushed under the jackboot of catchy advertising jingles is, of course, nonsense.  We have just as much autonomy over our personal decisions as we did before an ad break.

So what, then, is advertising for?  It informs us that new products are available in the marketplace.  We may, after having watched an ad, have a different idea of what our next purchase may be.  But that isn't because we have been manipulated by a ruthless marketing department.

An ad that informs us that McDonald's now sells salad only interests those people who would probably like to buy a salad from McDonald's.  If the preference for salad doesn't already exist, then no ad, no matter how brilliant, is going to be effective.

This logic is fairly obvious.  What child is going to abandon chocolates and lollies when their ads disappear off television?  Kids will always like junk food.  Any parents who think that a government ban will make walking up the chocolate aisle less stressful are deceiving themselves.  And anybody who thinks that teenagers will refuse the next "alcopop" just because they are no longer being specifically marketed to under-25s has forgotten a lot about their youth.

Politicians and activists are attracted to the theory that advertising manipulates consumers.  It gives them yet another reason to regulate the media, and a way to appear to be doing something about the latest health scare.  But they won't change our behaviour.  Instead, politicians should face the hideous truth -- people are smarter than advertisements.

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Juggling politics and costs over water

I released a report into Melbourne's water supply options this week.

One of its findings was that, per kilolitre of water, the cost from the proposed Wonthaggi desalination plant would be six times the costs from a new dam in Gippsland.

The Government's Wonthaggi plan seeks to avoid green activists' opposition to new dams.

But the desalination plant has brought its own environmental opposition.  Protesters hate its visual intrusion.

And, noting its energy intensity, they don't believe government assurances that its power will come from renewable sources.

Unfortunately, senior figures within the Liberal Party are also rooting for the desalination plant.

Philip Davis, the Member for Gippsland, wants no more Gippsland water to go to Melbourne.  This is notwithstanding the benefits of a new dam in giving Gippsland farmers better water-supply security and preventing some of the all too frequent floodings in Gippsland.

The Government claims that the variable Victorian rainfall means we need desalination as a permanent water supply source to supplement natural supplies.

But we build massive storage capacities precisely because of that variability of rainfall.  And in spite of a 10-year drought and higher demand as a result of population growth, Melbourne's dams remain 33 per cent full.

Had we started a new dam 10 years ago, as was planned, we would now be at a comfortable 50-60 per cent.

The Government's water policy has seen departures from its 2004 edicts which were centred on ''no new dams for Melbourne'' and ''water cannot be traded between Melbourne and northern Victoria''.

Once it recognised that the demand reduction focus of its policies was failing, the Government cast about for alternatives.

Options like recycling water from the Eastern Treatment Plant have been examined and quietly dropped.  The costs were four to five times the cost of water from a new dam.

Also abandoned was the idea of harvesting stormwater from the local rivers around Melbourne (though harvesting stormwater from new housing developments might have merit).

Proper analysis was compelling in causing the abandonment of these projects, but the even more expensive desalination plant retains a heartbeat.

The Sugarloaf pipeline, which will bring water to Melbourne from the state's northern irrigation area, is only marginally less wasteful of public money.

Aside from abandoning the pledge not to take water from north of the great divide, its costs weigh in at three times the cost of sourcing water from a new Gippsland dam.

The Government intends this irrigation area water to be ''created'' by engineering works but many irrigators want greater assurances that it will not erode their security of supply.

Water policies in Victoria typify the tensions between economics and politics.

The Government wants to avoid conflict with a vocal set of environmental interests.  To do so, it is willing to impose much higher costs on consumers and businesses, gambling that this will cause it less pain.

But good government is also about leadership and persuasion, and ensuring infrastructure is available at the lowest cost.

In the case of water, not only does this mean lower consumer prices, but it also means more competitive businesses.

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UK domestic power prices show a fall

Mr Theophanous claims (13/3) that "during the UK privatisation process" there were significant increases in UK electricity prices when they should have been falling.  He appears to be referring to the 1988-1991 period.

However, figures just supplied to me by the UK Treasury show that real domestic electricity prices in the UK in the third quarter of 1994 were 9.4 per cent lower than the average for 1991-92 and 2.9 per cent lower than the trough reached in the 1980s.  These are from the series published by the UK Department of Trade and Industry, which goes back to 1979-80.

It is correct that real UK electricity prices should have fallen by more.  However, to suggest that consumers were "cheated" is nonsense.

Apart from the fall in real prices, the average lost supply-time per customer has been more than halved and disconnections of customers for non-payment of electricity bills have fallen to a fraction of the pre-privatisation level.

Beyond that, both taxpayers and shareholders (who include a substantial proportion of "consumers") have benefited from the enormous increases in productivity as a result of the elimination of excess staffing and improved work practices.

Rapid changes are now occurring in the structure of the electricity industry worldwide which involve increasing exposure to private sector competition.  Those who oppose privatisation are acting contrary to the public interest and to the welfare of the community generally.

This is the reason for concern at the opposition expressed by some sections of the Victorian religious community.  Few would oppose the right of religious spokesmen to express a view:  but it behooves those who do so to understand the implications of their views.

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Opinions Clash at Climate Conference

The International Conference on Climate Change was held recently in New York.  The 500 delegates came from a great diversity of professions meteorologist, geologists, biologists and astrophysicists.

Most are so-called global warming sceptics -- none of them sceptical of climate change, but rather the extent to which carbon dioxide drives warming -- and perhaps appropriately, the first day of the conference was unusually cold even for New York.

There was diversity of opinion among delegates as to the causes of global warming and also little consensus regarding the future of fossil fuels.

Benny Peiser from Liverpool University in the UK acknowledged that governments worldwide had no real solutions to rising emission levels but that solutions would come through geo-engineering and the development of solar energy.

In contrast, Michael Economides from the University of Houston in the US suggested this was a pie in the sky fantasy.  He said the world was likely to continue to source most of its energy from fossil fuels for the foreseeable future.

President of the Czech Republic, Vaclav Klaus, said "the dream" to reduce emissions in the European Union by 70 per cent in the next 30 years could only be achieved if there was a dramatic de-industrialisation of Europe 00 likely associated with a dramatic drop in gross domestic product, a drop in population, or a technological revolution.

President Klaus went on to suggest that the imposition of carbon rationing through emissions trading was reminiscent of communist era European politics where radical economic change was imposed from above.

A highlight of the conference was polar bear expert, Mitch Taylor, who told about his work in the Arctic field sampling using mark-recapture techniques.

These studies indicated at least two subpopulations of polar bears in the Arctic had a constant population size, that two were increasing in number and that two were in decline -- one from over hunting and another from climate change, in particular a reduction in the amount of sea ice in Hudson Bay.

Given the success of the first conference, the plan is to hold an annual conference of sceptics with the next conference likely to be in London.

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Water Supply Options for Melbourne

Occasional Paper

Melbourne's water supply is suffering from a combination of drought and a failure to build new storage facilities of the past 23 years when the population has increased by over 30 per cent.

Traditional types of supply remain the most economical and reliable.  Reliability of supply is a particularly important consideration for Victoria given the state's fluctuating rainfall and history of long droughts.

Available in PDF

Conflict and co-operative federalism

Federal systems work best when there are clear delineations of responsibilities between the different tiers of government.  Unfortunately, in 21st century Australia they seem to be becoming more and more blurred.

In the not too distant past in Australia, a citizen with a gripe about a state government policy would lobby the government to change the policy or, failing that, to change the government.  Now it seems that the instinctive response in almost any policy area is to forget those two actions and instead call for the federal government to intervene.

While for many decades there had been an increasing Commonwealth role in many areas of traditional state responsibility, this trend certainly speeded up under the Howard Government.  Thus far, there are no indications that it will slow under the Rudd Government.

At least one influential labour figure sees the Howard Government's centralism as having presented Labor with a gift.  In the aftermath of the election, former ACTU Secretary, Bill Kelty, observed:

There will be one lasting contribution of the Coalition government and that is to provide unambiguous national power in dealing with the key issues of water, industrial relations, indigenous health and ultimately, public hospitals.  Future governments can now use that power constructively and consensually.

It is easy to see why Kelty would think like this.  John Howard was unapologetic about the federal government taking action when he believed it was required, commenting that he had ''little time for state parochialism''.  The trouble was that in many areas the issue was not state parochialism, but state responsibility.

It is true that the states and territories squandered large chunks of the GST revenue through big spending on public service wages and recurrent programs, while neglecting to invest properly in renewing infrastructure.  As critics pointed out the failings of State Labor Governments, the Federal Coalition decided not to leave it to their state colleagues to build a case for a change of state government, but instead decided to directly intervene.

The trend towards opportunistic intervention in state issues (''opportunistic federalism'' as it has been dubbed) grew apace, perhaps exhibited at its worst in last year's Commonwealth takeover of the Mersey Hospital in Devonport.  While the people of Devonport were understandably upset by the loss of services at the local hospital, it certainly appears as if the decision of the Tasmanian Government to rationalise health services in north western Tasmania was a logical one, given the availability of medical professionals and funds.

Around the nation, at a local level, federal MPs increasingly focused on local problems in areas of state responsibility such as schools and policing.  Huge increases in MPs' printing and postage budgets exacerbated this tendency.  It was realised that specific local material in newsletters and brochures was more likely to be read than general policy information, so the simple need for local content often took precedence over respect for constitutional boundaries between tiers of government.

By its piecemeal involvement in a variety of state issues, the Howard Government achieved the counter-productive outcome of making people feel that the Commonwealth was equally culpable for the failings of the state governments in areas like hospitals, roads and ports.  This was backed up by research on the 2006 Queensland State Election which showed that a significant number of voters blamed the Federal Government for failing to fix the state's hospitals apparently ''believing that there are enough funds at a federal level to fix everything''.  By the time last November's federal election came around one commentator observed that ''almost the entire election has been fought out on state government turf''.

After 100 days it is too early to be definitive about how the Rudd Government will impact on the Federation, however the signs are that it will follow the approach advocated by Kelty.

Anyone who believed that having all governments of the same political persuasion would solve the nation's problems has already had the Victorian Government's on-going refusal to sign up to the national water plan to add to the many historical examples of unco-operative federalism.

In 2005, Kevin Rudd delivered a paper entitled The Case for Cooperative Federalism, a sentiment that seems to have been maintained in most of his public utterances.  The promotion of the concept of co-operation continued in the early days of the new government when it was claimed that the Commonwealth providing an additional $150 million to the states to cut hospital waiting lists was some sort of federalist break-through.  It was, of course, nothing of the sort.  Providing some extra money was hardly likely to meet opposition.

What undoubtedly would arouse controversy is Rudd's statement that he will take over running all the country's 750 public hospitals if state and territory governments have not agreed to a national reform plan by the middle of 2009.  He has said that such a move would be designed to ''end the blame game between Canberra and the states on health and hospitals''.  This is hardly what most would consider ''co-operative federalism''.

Outside health, the federalism issue that received the most publicity in the new Government's first 100 days has been its intervention in the delivery of infrastructure.  It has been reported that the Prime Minister recently told his Cabinet colleagues that the setting up of Infrastructure Australia ''could be the most important move in commonwealth-state relations since Federation''.  If accurate, this comment reflects both hyperbole and over-optimism.

It is unclear what will ensure that the Commonwealth will make wiser infrastructure choices than the individual states.  Whatever the final composition of the body, headed by Sir Rod Eddington, it is hard to see how they are better placed to determine infrastructure priorities than democratically elected state governments.

One can see conflict on various fronts.  The first is debate over how best to deal with a particular infrastructure bottleneck.  In Melbourne, Eddington is currently heading an inquiry into transport options to the north of the CBD and, whatever mix of new roads and new public transport solutions he might propose, the ideological decision that entails can ultimately only be decided by a democratically elected government.

Even when the roads versus public transport ideological dispute is not involved there will be the prospect of many more issues like that of the Goodna bypass where there was conflict between the Commonwealth and the Queensland Government in the dying days of the Howard Government about the best actual solution to a road congestion issue -- surely a decision best decided by a state government.

As well as conflict about how best to address existing problems there will undoubtedly be conflict between the states.  The howls of protest from the Western Australians who felt that the Howard Government did not provide them with a sufficient proportion of Auslink roads funding will only increase as, under the Rudd Government, the Commonwealth determines priorities in an expanded number of infrastructure areas.  Are state governments and state-based chambers of commerce going to meekly accept that the upgrade of their port is not a ''national priority''?

Yet, many of those who one might expect to be critical are actually praising the Rudd Government for its actions.  Some of the same business people expressing concern at the prospect of Kim Carr running a more interventionist industry policy seem perfectly relaxed about his fellow left winger Anthony Albanese running an interventionist infrastructure policy.

Large sections of the business community seem to believe that centralising power in Canberra will not only deliver consistent and less bureaucratic regulation, but also mean more decisive and business-friendly decision making.  It is hard to see what evidence there is of better Commonwealth decision making over the years.  One needs only to compare the success of the purchasing decisions of the Commonwealth Defence Department and your typical state's roads authority to see that the evidence, if anything, supports the contrary view.

If the Australian Federation is to be improved all involved need to appreciate that what is required is not coercion of the states by the Commonwealth, nor is it co-operation with both parties having a finger in every pie.  What is required is a system of cohabitation by equal parties that guarantees the states and territories explicit responsibility for key areas.

In asserting the ongoing value of the role of the states, there is no reason to preclude a reassessment of which areas are the responsibility of which tiers of government.  As part of that reassessment there should also be consideration of whether there are any ways that the world's worst example of vertical fiscal imbalance can be improved.

However, whatever the split up, and however wide the divide between the taxing powers and spending responsibility of different tiers of government, it is crucial that the federal government, accepts that if something is deemed a state area, the Commonwealth cedes any form of interfering or oversight role.

States should be able to make the key decisions about hospitals, schools or infrastructure in their domains.  If they are not, the remedy lies with the voters in the states.

The Commonwealth needs to accept that they have equal partners in the running of the nation and the states need to accept the responsibility that entails.

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Carbon rationing or freedom

Australia has now ratified the Kyoto Protocol and when George Bush's Presidency expires the United States is also likely to join up.  Indeed all counties in the developed world will probably soon become parts of a carbon emissions trading scheme.  But the gap between what is agreed and what is achieved in terms of reducing emissions is likely to be significant.

Speaking at the 2008 International Climate Change Conference in New York last week, the President of the Czech Republic, Vaclav Klaus, described the ''robust relationship between carbon dioxide emissions and economic growth''.  He went on to suggest there are three types of countries in Europe based on their emissions profile and level of economic growth.  He talks about his speech in an article in The Australian (March 12, 2008).

He described the less developed countries of the European Union (EU), including Greece, as trying to catch-up economically and in the process, since the signing of Kyoto, increasing their level of carbon emissions by 53 per cent.  The post communist countries are seeing their heavy industry disappear and are experiencing a decline in GDP and a drop in emissions of on average 33 per cent.  Highly established countries like France and Germany have seen their emissions increase by about 4 per cent since Kyoto was signed.

President Klaus said ''the dream'' to reduce emissions in the EU by 70 per cent in the next 30 years could only be achieved if there was a dramatic de-industrialisation of Europe -- likely associated with a dramatic drop in GDP, a significant drop in population, or a technological revolution.

Klaus questioned the extent to which carbon dioxide, as opposed to natural variability, has driven global warming over the last 100 years.  He sees the imposition of carbon rationing through emissions trading as reminiscent of communist era European politics where radical economic change was imposed from above.

These sorts of views are often labelled as climate change scepticism -- but it is more climate change realism.

Of course there are those who argue that given the imminent catastrophe of global warming we all need to make some sacrifices and if this requires some draconian top down social engineering, so be it.

Also at the conference in New York was Roy Spencer who leads a team analysing temperature and cloud data from NASA's Aqua satellite which was launched in 2002.  This satellite has, for the first time, enabled the collection of detailed data on cloud formation and evolution, and temperature anomalies in the tropics.

Much of the scientific uncertainty about the size of man-made global warming is related to how the climate system responds to some warming.  The climate models suggest a strong positive feedback:  that the warming effects of additional carbon dioxide will be amplified by increasing water vapour.  But data from NASA's Aqua Satellite indicates just the opposite -- that warming has the effect of slightly reducing the total greenhouse effect by adjusting water vapour and cloud amounts, to keep it in proportion to the amount of available sunlight.

These findings published late last year are still being digested by the meteorological community:  if correct it will mean that all current climate models used by the United Nations Intergovernmental Panel on Climate change (IPCC) will require an overhaul.

Dr Spencer's work supports President Klaus' hunch that climate systems are more robust than the models suggest and that natural climate variability has been neglected in much of the research and discussion to date.  The policy implications are considerable if, as Dr Spencer's work seems to indicate, the overhauled climate models eventually show greatly reduced future warming projections.

The conference in New York was attended by 500 so-called climate change sceptics, including meteorologists, geologists, astrophysicists, social anthropologists (studying group dynamics in the climate change community), polar bear specialists and of course lobbyists.

There was diversity of opinion among delegates at the conference as to the causes of global warming in the last 100 years, and also little consensus regarding the future of fossil fuels.

Benny Peiser from Liverpool University in the UK, acknowledged that governments worldwide had no real solutions to rising emission levels but that solutions would come through geo-engineering and the development of solar energy.

In contrast, Michael Economides from the University of Houston in the US suggested this was a pie in the sky fantasy.  Professor Economides said the world was likely to continue to source most of its energy from fossil fuels for the foreseeable future.

Perhaps it all depends on the extent to which governments in developed countries, including Australia, are prepared to risk a fall in their GDP by insisting on a real reduction in carbon emissions before new low emissions technologies are in place.

Such social engineering, President Klaus warned, would be disastrous.

Instead, we perhaps have to restart the discussion about the very nature of government and about the relationship between the individual and society.  Should governments let climate alarmists impose policies designed to limit an individual's access to energy?

We do need to relearn the lessons from the collapse of communism nearly 20 years ago.  It is not just about climatology;  it is also about freedom.

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More land, lower prices -- guaranteed

At the end of last year, the average Australian house sold for $471,000, according to the Real Estate Institute -- a 12% increase on the year before.  Melbourne shared in the increase and the average price for a Melbourne apartment was higher than anywhere else in the country.

Premier John Brumby's decision to unlock land within the urban growth boundary is therefore welcome news to aspiring home buyers.  Announced on March 4, the plan can be a terrific antidote to the latest interest rate rise announced by the Reserve Bank on the same day.  And as a policy response, it is far more helpful to those looking to build a home or buy an existing one than the panoply of subsidies offered by the Commonwealth Government.

It is also encouraging to see the Liberals joining in the call for greater land releases.  Spokesman Mathew Guy said the reform was too long in coming and did not go far enough.  Opposition Leader Ted Baillieu worried about whether there was adequate infrastructure.

In fact, there is no shortage of infrastructure.  Putting in the roads and arranging for water, sewerage, telephone connections and other utilities is what the developer does.  The developer turns a piece of farmland worth $1000 into a housing block worth $60,000.  With the house and taxes, we should see the price of the average new house in the suburbs at $280,000 and freestanding "starter" homes at less than $200,000.

By restricting the availability of land, the Government pushes up the price of the block.  This adds about $50,000 to the cost of a new house and there are knock-on cost increases to existing houses.

The planning restraints that have brought this about have been accumulating for years.  Melbourne 2030 is only the latest incarnation.

Restraints on house building began with planners making alarmist statements that "urban sprawl" was taking over the countryside -- an especially ludicrous claim for Victoria, where urban development takes up less than half a per cent of the state.  Others wanted to create more compact cities to foster a cafe society.  Still others wanted to get denser housing to promote less car use and more public transport.

They even argued that the new home buyer did not want to live in the outer suburbs, but for good measure denied them a choice by restraining the amount of available land.

Unravelling poor policy on development that has evolved over 20 years is never easy.  Brumby has embarked on dismantling a heritage of excessive prices caused by government.

As with any poor decisions of government, shifting direction creates complications.  Extricating an important part of the economy such as housing from the vice of restrained land availability has to be handled carefully.  A sudden abandonment of the policy can lead to price collapses and financial distress to the industry and recent home buyers.

The plan announced by Brumby will release a further 90,000 housing blocks, about three years' supply.

This should reduce prices at a time when interest rate increases are reducing affordability.  And if handled well, it will push prices down without bringing about a price collapse.

But announcing a decision gives no guarantees that it will be followed through.  Brumby has to enforce it with state and local government bureaucracies.  Failure to do so will reduce the decision to being an empty gesture and demonstrate government impotence.

Victoria's decision on housing also puts pressure on other states, providing it can be achieved.  All Australian jurisdictions have been inflicted with the "planning plague".  As a result of restraint on land availability, would-be home buyers in other states have been even less well-served than Victorians.  The outcome has meant the real price of houses across Australia has doubled over the past 20 years.

This has nothing to do with building and land development costs.  These industries are efficient and low cost.

It is purely the result of government-induced land shortages and excessive government taxes and charges in some states.  In Australia, house prices compared with household income levels are on average among the highest in the world.

In seeking to restore house prices to the levels that would be set in a less-regulated environment, Victoria's policy will be a magnet for those priced out of home ownership in other states.  Hopefully, for the sake of new home buyers and the industry alike, governments in the rest of Australia will be forced to follow suit.

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The politics of wheat

Australian farmers need the right to export.

The government must immediately eliminate the single desk.

THE WHEAT INDUSTRY

Australia has about 30,000 wheat growers comprising of 12,700 cropping specialists and the balance in combined grain and sheep enterprises.  Despite the stability of grain grower numbers, productivity improvements have continued to drive increases in crop size.  The Productivity Commission found that over the past three decades the cropping industry has shown the largest productivity gains (3.3 per cent a year) within agriculture.  Productivity gains in cropping have also outstripped the economy wide productivity increases over the past thirty years.

Wheat is the dominant winter crop grown in Australia, on average 13.4 million hectares are planted of wheat compared to 4.5 million hectares for barley and 1.3 million hectares for canola.  On average 75 per cent of the Australian wheat crop is exported.

Western Australia is the largest wheat producing state despite having only 18 per cent of wheat growers.  The WA industry has undergone the largest degree of specialisation and concentration in recent years so that the average wheat growing farm in WA is now 1½ times larger than in NSW and 2½ times larger than in Victoria.

The wheat industry is becoming increasingly concentrated and specialised.  Over the past 15 years the proportion of total wheat receipts received by large farms (those over $400,000 in production value) has doubled from 41 per cent to 83 per cent, even though large wheat growers only make up 38 per cent of total farmers.  Even this may understate the true level of concentration with the Productivity Commission estimating only "10 percent of Australian farm businesses now produce over 50 per cent of output".  At the other end of the scale, small-scale wheat growers, who are particularly concentrated in NSW and Queensland, now only produce four percent of the wheat crop despite comprising one third of all wheat growers.

EXPORTING WHEAT

Wheat continues to be an important export for Australia.  While the two most recent seasons have been seriously affected by drought the future for Australian wheat is very attractive with global prices higher than they have been for many years and planned plantings well up on recent years.  If the drought has indeed broken, returns from cropping can be expected to reach record levels over the next few years.

Australia is the world's second largest wheat exporter.  Major markets include China, Iraq, Indonesia, Japan, Korea and Egypt.  In the last non-drought year, 2004-05, Australian wheat exports earned $3.591 billion.

Source:  Historical ABS, 2008 ABARE

Access Economics estimates 90-95 per cent of the Western Australian wheat crop is exported each year compared to a much higher domestic consumption of eastern seaboard wheat.  Because of the lack of domestic demand in WA, at harvest growers in that state have to date been captive to the single desk price unlike eastern states wheat growers who can choose to sell to the national pool or to a wide variety of domestic buyers.

THE GOVERNMENT'S WHEAT EXPORT POLICY HAS BEEN STEADILY DEREGULATED OVER THE LAST FEW DECADES -- BUT NOT ENOUGH

	the creation of the single desk giving the Australian Wheat Board powers to aquire all wheat produced GONE a home consumption price for wheat GONE guaranteed prices to growers and a stablisation fund GONE compulsary pooling and coordinated marketing of wheat and coarse grains GONE entire supply chain government owned and operated GONE AWB holds right to market all wheat overseas GONE
	domestic feed wheat deregulated (1984) domestic milling wheat deregulated (1989) non-bulk export veto by Australian Wheat Board abolished. elimination of guaranteed minimum prices to growers. AWB control passes to grower elected representatives. AWB financed by two per cent levy on earnings from sales to the pool.
	Australian Wheat Board was corporatised and privatised.  AWB listed on the ASX on 22 August 2001. federal government decreased and eventually eliminated its underwriting of the national wheat crop. bulk handlers (the old state Grain Elevator Boards) were corporatised, privatised and in some cases listed.  Considerable consolidation ensued. coarse grains deregulated in all states except South Australian which deregulated its barley market in 2006. oilseeds and other crops deregulated in both the domestic and export markets.
	bulk export veto temporarily transferred from AWB to the Minister for Agriculture until 30 June 2008. deregulation of container and bag exports with the result of bagged wheat exports jumping seven-fold compared to regulation. without legislative change AWB will regain the single desk bulk export monopoly from 1 July 2008.

WHAT ARE THE ELEMENTS OF THE SINGLE DESK?

Power to export wheat held by the Wheat Export Authority

It is an offence to export wheat without permission of the WEA except for AWB(I) which doesn't need a permit.  This provision of the Wheat Marketing Act, along with a veto which effectively stops the WEA from issuing bulk permits is the core of the single desk.

Bulk export veto

The veto allows AWB to stop the WEA from approving any other bulk wheat exports except by AWB(I).  Until 2007 the veto was held by AWB when, in light of the Cole Enquiry, it was transferred to the Minister for Agriculture.  The veto will revert to AWB(I) on 1 July without legislative change.

Although a few permits for bulk export were issued for this harvest, the vast bulk of the harvest was delivered to AWB for marketing.

Buyer of last resort

The holder of the single desk licence, AWB(I), is required by the Wheat Marketing Act to accept all wheat delivered to it.

It is a common misconception that this wheat receives the average pool price, in fact all wheat is received into the pool into various broad quality bands which receive differing prices and the very low quality wheat accepted under the buyer of last resort provisions is heavily discounted.  Typically "buyer of last resort" wheat comprises less than two percent of the total pool.

National pool

The national pool is the mechanism used to implement the single desk.

Under the single desk all export growers are required to deliver their wheat to AWB which runs a national pool for the purpose.  As a result all growers of similar quality wheat receive the same price.  The grading and pricing is set by AWB and ACIL Tasman found the national pooling system has led to a decrease in the quality of some grades of Australian wheat and an inability to match specialist buyers needs with what Australian growers produce.

The risk to growers from a national pool is that the pool operator gets the hedging wrong and thereby delivers lower returns than would otherwise be available.  With no alternative to the pool growers are very reliant on the skill of the pool operator.  The national pool has been found to contain significant cross subsidisation of costs, essentially in favour of east coast growers at the expense of WA growers.  No analysis of the national pool has concluded grain growers have benefitted from the system.  Most analysis has pointed to excessive costs of running the pool while even a report by ITS Global commissioned by AWB found no price premiums achieved.

Despite some commentary to the contrary, the end of a national pool does not mean the end of all pools.  For example even with the total deregulation of the Victorian barley market it is estimated some 80 per cent is still delivered into pools in some years.  Many growers have only ever delivered their wheat to the national pool and the thought of having to make wheat marketing decisions is causing concern among smaller older farmers.  This is clouding some farmer's views on overall wheat marketing reform.

Over the years the representative structure of the grains industry has fragmented.  A key cause of this fragmentation has been divisions over the single desk.  With the exception of South Australia's Farmer Federation which no longer supports the single desk, the older, larger farmer bodies still advocate retention of a single desk in some form.  However every state now has a pro-deregulation group of farmers.

Sources: Western Australian Farmers Federation, media release, 27 Nov 2007;  Pastoralists & Graziers Association of Western Australia, media release, 6 Feb 2007;  Wheatgrowers Association, media release, 22 May 2007;  South Australian Farmers' Federation, media release, 23 May 2007;  Agforce Grains, key policies:  "AgForce Grains supports the single desk export powers for wheat marketing";  Eastern Wheatgrowers, submission:  "The Eastern Wheat Growers is a grower lobby group representing east coast wheat growers who would like to see the Australian export wheat market opened up to competition";  Victorian Farmers' Federation, media release, 18 Dec 2007;  New South Wales Farmers Association, media release, 12 Oct 2007.

The national peak body for grains is the Grains Council of Australia (GCA).  While nominally pro-single desk, in recent times this body has declined to campaign on the issue, largely because its membership is divided.  In 2007 the Wheat Export Marketing Alliance (WEMA) was formed to attempt to become the new farmer controlled holder of the single desk licence.  WEMA's fundraising efforts were unsuccessful and with the election of the Rudd Government and its policy of partial deregulation WEMA no longer has a purpose.  However it has morphed into an advocacy body for the most virulent single desk supporters.

Furthermore, smaller and semi-retired farmers have had a disproportionate voice in farmer surveys.  These are the farmers most likely to be resistant to change.  Perhaps a better indication of the true views of farmers can be gleaned from the very poor response by wheat growers to a request for money from WEMA to start a new farmer controlled organisation to hold the single desk licence.

THE WHEAT EXPORT MARKETING BILL AND THE FUTURE OF WHEAT

An exposure draft of the Wheat Export Marketing Bill was released by the federal government on 5 March 2008.  The key features of the proposed legislation are a licensing system for exporters and an opening up of bulk grain facilities to competition.

While not the full deregulation found in other grain markets, Labor's policy is a significant step towards full liberalisation of wheat export marketing.  Potential exporters will apply for a license to export from Wheat Exports Australia (WEA).  There will be no single bulk exporter.  As a result there will be no national pool run by AWB because growers will have greater choice to use regional pools and other grain marketing options.  Also there will be no legislated buyer of last resort since all wheat will be sold at a market price.  This new legislation will therefore deliver the higher grain prices to growers forecast in many studies over many years.

The most robust and transparent licensing system is one that operates from a publicly available set of criteria.  Appropriate criteria include financial probity and capacity to finance wheat exporting, export experience of agricultural bulk commodities and high standards of corporate governance.  The proposed legislation requires the WEA to have regard to these sorts of criteria but does not require the WEA to publish specific criteria.  This is a deficiency in the draft legislation and should be rectified so both farmers and exporters are clear what accreditation is based on, especially in relation to capacity to finance wheat exporting.

Despite these shortcomings, the draft legislation is a positive development.  In particular the opening up of the entire supply chain to competition will be most likely to offer farmers the greatest opportunity to benefit from high global wheat prices.

The single desk is outdated and anti-competition.

The federal government needs to eliminate it.

The Coalition ain't broke so why try to fix it with a merger?

Victorian Opposition Leader Ted Baillieu was right when he said on Monday that the reason the Liberal and National parties lost the federal election was not because they weren't a single party.  Similarly, the explanation for the Liberals being in opposition in every state and territory is not because they haven't joined with the Nationals.

In the wake of their election defeat it's inevitable that the Liberal and National parties would contemplate a merger.

Given the Liberals' electoral condition, it's appropriate that all reasonable suggestions for reform be debated.  However, a merger is not the answer to either party's problems.

Merger advocates have suggested that a single party would indicate to the electorate that the Liberals and Nationals have got their house in order and are serious about beating the ALP.  But there could actually be more disorder in a merged party as the number of leadership positions is halved and MPs jostle for privilege and status.  The advantages of a merger are unclear.  But its disadvantages are numerous and obvious.

The problems fall into four categories -- the practical, the philosophical, the electoral and the consequences for democracy.

First, negotiating and then implementing an amalgamation would consume enormous resources of time and money -- resources better spent on developing new policies and recruiting party members.  A merger would be a massive distraction from the real issues confronting the parties.

Second, the philosophies of the Liberal Party and the Nationals are quite different.  The political principles the Liberals embody are a combination of conservatism (in both a political and social sense) and classic liberalism.  These principles are not always practised but they're clear nevertheless.

It is one of the great frauds of Australian political history that the Liberal Party and its precursors have been labelled simply as the "non-Labor" parties, thereby defining the Liberals by what they're against rather than what they're for.  The reality is that the Liberal Party has always been more likely than the ALP to support the rights of individuals.  The debate over WorkChoices sums up these differences.  The Liberals supported the right of individuals to negotiate their own working conditions, Labor did not.

The primary purpose of the Nationals is to defend the interests of farmers and those living in rural and regional areas.  Not too much of the classic liberal tradition there.  Over its history the Nationals have proved just as happy to support the ALP as the Liberals.  Too often the Nationals have been all too willing to justify their "agrarian socialist" label.  For example, the party continues to defend regulations stopping wheat farmers selling their produce on the open market.  At other times the Nationals have played important and responsible roles such as when they supported John Howard's gun laws.  If not for the Nationals, gun law reform would not have been implemented as smoothly as it was.  The Liberals and the Nationals working together in a coalition has provided the best of both worlds.  The parties can co-operate without either losing its identity.

Third, were the Nationals to fold there's every chance that a new rural-based party would emerge to replace them.

The election of independent regional MPs demonstrates what happens when electors feel they are not being represented.  An amalgamation between the parties has the potential to alienate swathes of voters in regional Australia.

Finally, there is the broader issue of whether one big conservative/liberal party is in the best interests of Australian democracy.  Big is not always better.  A multiplicity of parties is healthy for our political system.

In Victoria's upper house, five political parties are represented and the Labor Government doesn't hold a majority.  At the moment Victoria's upper house is probably the country's most successful parliamentary chamber in terms of holding the government to account.  An upper house in which there were only two parties would be nowhere near as effective.

Ultimately elections are decided according to the leadership and policies of the parties.  Given that in any merged party Liberal MPs would comprise a majority, it is likely that only a Liberal would ever become leader.  And where the Liberals and Nationals are in coalition, such as at the federal level and in Victoria and NSW, policy is made on behalf of both parties anyway.

If the leadership and the policies of any new party would not be any different to what currently exists, the question is why bother with a merger?

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Myths on food miles

Last week federal Minister for Agriculture, Fisheries and Forestry, Tony Burke, exposed the ''food miles'' campaign as ''nothing more than protectionism''.  Burke is right, but beneath such transparent protectionism, the food miles emperor is still naked.

Food miles is the latest chic campaign for environmental activists to reduce CO₂ emissions.  But perhaps counter-intuitively, if activists and consumers want to reduce their CO₂ footprint they may want to support their food travelling longer, not shorter, distances.

The principle of the food miles campaign is simple.  There is a significant -- and, activists argue, an unnecessary -- CO₂ footprint associated with transporting produce.  The solution is therefore to avoid these emissions by ''buying local'' and exercising caution when purchasing imports.

Late last year a Melbourne organisation, Community Environment Park, released a report drawing attention to the carbon footprint of food purchased by Melbourne consumers.  The report unsurprisingly outlined the large footprint for much of the food bought in Melbourne's supermarkets, regardless of whether it was produced domestically or internationally.

It may seem logical that the further the distance a product travels, the bigger its CO₂ footprint.  But as Trade Minister, Simon Crean yesterday pointed out, this view is simplistic.

First, only a full life-cycle carbon footprint can accurately measure total emissions.  A life-cycle assessment would require a calculation of the total CO₂ emissions from the seeding of crops and the birth of livestock, to their delivery to the consumer.

Second, the fuel efficiency that comes with bulk transport, and the mode of transport itself, need to be factored in.  Agricultural products from our region transported by sea to England can produce equivalent emissions as comparable products travelling by road to England from southern Europe.

In his address to the trade ministers' meeting held alongside the UN's Bali climate change summit in December last year, director-general of the World Trade Organisation, Pascal Lamy, made this point clear.  Lamy argued that ''90 per cent of internationally traded goods are carried by sea.  And maritime transport is by far the most carbon-efficient mode of transport, with only 14g of CO₂ emissions per tonne-kilometre''.

In many cases, a more accurate life-cycle assessment will show that importing food that travels long distances can be better for the environment than producing it locally.

The inputs would not simply be limited to transportation costs, but would also consider such items as fertiliser, electricity, feed, tools and housing.

A recent study done by New Zealand's Lincoln University demonstrated this well.  The study looked at the life-cycle carbon footprint of apples, onions and lamb exported to Europe.  For all three items, the total energy input per tonne of output was substantially less if the product was produced in NZ and exported to Europe, than if it was produced locally.  In the case of lamb, the CO₂ emissions were more than four times less.

Third, the food miles campaign ignores the environmental benefits of international trade.

The primary determinant of a product's life-cycle carbon footprint is the level of inputs.  The costs of inputs are not ignored by competitive food producers.  If a producer successfully reduces these inputs, it will be able to bring its product to market at a lower price, with the added benefit of a smaller footprint.  Free markets are environmentally sustainable because they seek the maximum output for the minimum input.

And herein lies the challenge for the Labor Government.  Despite Kevin Rudd's general commitment to the efficiency of free markets, many of his MPs are not so sure.  Among the ranks of Labor's caucus is a number of protectionists who question the environmental benefits of free trade.

Equally Rudd has a number of climate evangelists who actively support reducing CO₂ emissions at all costs.

And following the change of the Senate in July, the Greens are likely to move from the fringe of public policy debate to the centre.  The Australian Greens should follow their NZ counterparts.  In 2006, co-party leader of the NZ Greens highlighted the Greens' opposition to food miles and argued that environmental activists ''need to consider the emissions released during production, not just the transport emissions''.

Despite the evidence not stacking up, too many advocates of food miles ignore the complexity of proper accounting for carbon footprints, and instead rely on anti-trade rhetoric to get their message across.  And even fewer consider the beneficial role international trade and free markets can play in reducing emissions.

Agriculture is a diminishing but still vital component of the Australian economy.  Burke is right to expose the food miles campaign as a front for protectionism and should campaign heavily against it.

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Pedestal to the metal

The car is doomed announced two Melbourne academics in The Age last week.  According to them, carbon emissions targets compel us to reduce automobile travel by 80%.  And the State Government should probably stop building new roads.  We won't need them anyway.

Sure, it's easy to criticise research that is little more than media bait.  But after years of abuse, the humble car still can't catch a break.  And the reasons the car still has a long, healthy life ahead of it highlight the biggest problem in the debate over public transport.  When people choose to drive, they do so because it is more comfortable and more convenient than the alternatives.  No public transport policy is going to change that.

A lot of factors stack up in favour of the car.  As Roads Minister Tim Pallas pointed out on Wednesday, public transport may be convenient for those living in the inner suburbs, where the average distance to a train station is less than a kilometre, but in the outer suburbs that distance expands to 10 kilometres.

A more critical issue is that only a small, declining percentage of journeys are from the suburbs into the city, as workplaces move out of the CBD.  And it is these journeys that are the most suitable for public transport -- when everybody is travelling the same direction it is easy to map out a new train line.

The remaining suburb-to-suburb journeys are exponentially harder to service, not least because the origins and destinations are dispersed.  It is impossible for transport planners to account for the huge variety of journeys taken every day in modern Melbourne.

To put it simply, people like having a car.  For most Australians, owning a car means having the freedom to travel wherever you want, whenever you want -- just ask any giddy teenager with their newly acquired driver's licence.

The urban historian Graeme Davidson describes how the automobile was a major impetus behind postwar gender equality in Australia, as women recognised that the freedom to drive also meant the freedom to do a lot more things.  And, for a young person, owning a car -- or even just being able to borrow their parents' car -- has long represented a degree of personal autonomy.

No matter how many billions the Victorian Government spends on public transport, it will never be able to challenge the independence provided by an automobile.

You don't have to wait for your car to arrive, unlike public transport.  There is ample room to put your bags of shopping or new flat-packed furniture.  Your children can't run wild in your car like they can in public transport -- after all, they're strapped down.  And, unlike a tram, there is no chance that your car will be so full of fellow commuters that you have to hang halfway out the door with someone's armpit in your face while the driver yells indiscriminately over a damaged loudspeaker.

These objections may seem trivial in comparison to the grave importance of saving the planet.  Public transport fantasists -- like all radicals who want to change our behaviour -- dismiss such considerations as minor.  But it is these sorts of minor considerations that inform our everyday transport choices.

In the trade-off between environmental concerns and the importance of the automobile, the Federal Government is trying to have it both ways.

Eager to placate its traditional union support base, but also wanting to be seen as concerned about the environment, Labor is happy to pay $500 million for more cars to be produced in Australia.  But it only wants hybrid cars.  Industry assistance is getting awfully picky.

A similar mixed message greeted the announcement of the Indian Tata Nano, the world's cheapest car.  The chance that personal motorised transport was suddenly within the reach of some of the poorest people in the world was described by one prominent environmental scientist as a nightmare.

In the developed world, the automobile has been one of the most important sources of social freedom in the 20th century.

How can we think of denying such freedom to the developing world?

For some journeys, public transport is indispensable.  Melbourne's experience since privatisation has shown how trains and trams can be better used -- patronage has gone sharply up with the new management.

Similarly, when building new roads, the Government has been aware of the increasing popularity of bicycles.  For nearly a decade now, more bikes have been sold each year than cars.  New dedicated bicycle lanes may have had some influence on this.

But cars continue to sell in increasing numbers.

The Federal Chamber of Automotive Industries reported last week that monthly sales have been up nearly 10% over last year's figures.  Sales of the much-hated SUVs have gone up even more.

Cars have been getting cheaper and cleaner almost since they were first invented.  But the hard reality is that no matter how many train lines or bicycle paths the Government builds, people will continue to use the transport method that they believe best suits their needs.  And for most trips in Melbourne, that will continue to be the car.

A responsible government will therefore continue to spend money building roads and relieving traffic congestion -- just as taxpayers seem to want it to.

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Let's cool it in heat of great debate

Hundreds of prominent scientists this week attended a conference in New York hosted by the US Heartland Institute.

The scientists rejected claims that we are seeing catastrophic human-induced global warming.

They concluded that the earth may be undergoing a period of modest warming but that it and cooling are constant features of the earth's climate.  There was agreement that present global temperatures are not abnormal.

The debate on global warming has displaced the struggle about whether socialism or capitalism was the best approach to running an economy.

Radicals once sought to replace private enterprise with state control.  Now they want the removal of coal, oil and gas to justify a new and more comprehensive form of state control.

As with the march of socialism, even politicians sceptical about the claims of an impending catastrophe are being forced to go along with measures promoted by the radicals.

Taxes and regulations to reduce carbon emissions are being steadily introduced while governments pray that their effect will be minor.

The all-embracing of measures being touted, for example in the Garnaut report, involve everyone in the world being allocated the same amount of carbon dioxide and this being steadily reduced.

For Australia, average emissions would be reduced to a fifth of their existing levels, from around 16 tonnes per person of carbon dioxide equivalent to less than 3 tonnes.

Victorians would be particularly badly placed because of our reliance on the Latrobe Valley's fabulous deposits of brown coal for cheap electricity generation.

Nobody knows how an economy could operate with standards of living like Australia's while adopting the sorts of measures proposed.

Carbon dioxide emissions are the automatic outcome of driving cars, generating electricity, smelting metals, making concrete and just about every other activity.

To reduce carbon dioxide emissions to a fifth of present levels would require, at the very least, replacement of coal by nuclear -- something the present government has refused even to contemplate.

It would require an almost complete ban on car use.

It would certainly be the end of any holidays overseas or on the Gold Coast -- and air-conditioning and central heating too.

Victorians have pioneered the use of low-quality brown coal as feedstock for power stations that produce some of the cheapest electricity in the world.  This has been the backbone of our economy and it is impossible to envisage how we could be competitive with the rest of the world without it.

Not only would the emission control proposals cause a trebling of electricity costs to households -- especially without nuclear -- but Victoria would lose its low-cost energy advantage.

We would see the departure of aluminium smelting, metal production, the chemical industry, and car manufacturing.

Costs of services like retailing would rise considerably.

Before further dangerous excursions into energy-control policies, governments need to take note of the grave doubts of so many of the world's eminent scientists at the Heartland Institute conference.

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Building a tangible policy

We have seen many versions of the "next big thing" during the first 100 days.  There was Labor's education revolution.  Then there was the climate change revolution.  Now there's the infrastructure revolution.  Hardly a day goes by without a federal minister promising that better and more infrastructure is the solution to the nation's economic ills.

Infrastructure has been enlisted in the fight against inflation, global warming and the skills shortage.  In the Prime Minister's glossy brochure celebrating his three months in office, infrastructure is mentioned no less than 24 times.

Infrastructure Minister Anthony Albanese has proclaimed that "nation building" is back in style.  He's committed the Rudd administration to proudly follow in the footsteps of Chifley, Whitlam, Hawke and Keating.  Thankfully he didn't say the Labor government would attempt to nationalise the banks, ransack the commonwealth budget and try to cause a recession.  Rather, he was invoking an altogether more positive Labor tradition that recalled Ben Chifley's Snowy Mountains project, and the urban renewal schemes of the 1970s and 1980s.

But for all of this talk about infrastructure there remains one question.  What exactly are we going to build?

As yet the government has been scant on specifics.  Its infrastructure strategy looks suspiciously like a slogan in search of a policy.  We don't know much beyond the fact that Labor wants to "reduce bottlenecks" and "ease congestion".  We do know that a new committee, Infrastructure Australia, will spend a year undertaking an audit to create an infrastructure priority list.  It's unclear why such an audit would take so long given the myriad reports on the subject over the past decade.

Labor characterises Australia's infrastructure problems as the failure to build enough things.  What Labor doesn't acknowledge is that the regulatory regimes governing the use of infrastructure don't encourage the efficient use of the infrastructure we already have.

And, to a large extent, any lack of investment in infrastructure is the inevitable consequence of those regulatory regimes.  A fibre to the node broadband network could have been built by now if the regulatory environment were different.  A recent Organisation for Economic Co-operation and Development report lists Australia as having one of the most rigid sets of telco regulations in the developed world.

Albanese has cited the examples of the coal export bottlenecks at the Port of Newcastle and Dalrymple Bay.  Those bottlenecks are not the result of any absence of enthusiasm for "nation building" on the part of the previous government -- they are the result of bad regulation.  A minister complaining about bad regulation stifling competitiveness doesn't provide as catchy a headline as does a minster blaming the previous government for a "failure to invest in nation building".

A closer examination of the so-called infrastructure problems cited by Albanese reveals that his examples have less to do with a failure to spend money and more to do with a reluctance by governments to confront vested interests.  Water policy is controlled by Queensland and NSW -- the two states that have resolutely resisted reform.  Telco policy is controlled by the Australian Competition and Consumer Commission.  Schools and hospitals policy is controlled by the producers of education and health services.  And transport policy is the province of state government departments that are either afraid or incapable of making decisions.

A joint federal/state working group on infrastructure met for the first time in January -- a meeting that was hailed by Albanese as a resounding success.  He said everyone knew "that the time for talk is over" because the meeting was scheduled to last for three hours but finished after two.  One interpretation is that the meeting concluded early because the public servants were in heated agreement.  Another is that it finished before time because there was nothing much to discuss and everyone assumed it would be business as usual.

The Rudd government's first 100 days have been replete with symbolism.  A new administration committed to infrastructure reform could have made no better start than to tackle the closed shop which prevents competition on air routes between Australia and the United States.  But when it came to real policy, as opposed to mere symbolism, Labor blinked.  Last month the federal government announced that it would maintain the ban on foreign carriers operating between Australia and the US.  That's not a great start to an infrastructure revolution.

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Cattle versus Ducks down in The Marshes

NSW Water Minister, Nathan Rees, has allocated $400,000 to conduct an audit of water diversion structures in the Macquarie Marshes, north of Warren.

This move follows the release of a report by Professor Richard Kingsford from the University of NSW suggesting the illegal diversion send environmental water in the Macquarie River system to cattle pastures instead of key bird breeding areas.

Some upstream irrigators -- the people most targeted in the publicity of the report's release -- have been trying to draw government attention to this water diversion issue for years.  Their claims were mostly ignored before Professor Kingsford report.

The Macquarie Marshes is a large non-terminal wetland covering about 200,000 hectares.  Most of this area (88 percent) is privately owned and grazed.

There are two publicly-owned nature reserves where cattle are excluded and which are Ramsar-listed, meaning they are considered of international importance for migratory bird species.

It will be good if the issue of levee banks within the Macquarie Marshes depriving the nature reserves of water is tackled.

In the past, a lot of environmental water flow, which should have made it to the northern nature reserve in particular, was instead used to fatten cattle on private land.

I am not opposed to grazing within the marshes, but there needs to be some balance between downstream grazing, upstream irrigation and the protection of important wetlands.

Last year I published a monograph on the ecological history of the Macquarie Marshes.  It explains buying environmental water flow is an expensive option when it comes to saving the marshes and will not solve the problems without the removal of the levee banks and diversions impacting on the nature reserves.

It also outlined the need for the construction of effective erosion control structures and investigations into the salinity problems of the North Marsh.

A lot of public money is already available for wetland conservation including $26.8 million as part of a "Wetland Recovery Program", $105 million under the "Riverbank Program" and $72 million to purchase water.

But of course, all the money in the world will not improve the situation in the marshes if it is wasted on audits, plans and more plans.

I hope it is not too long before a bulldozer or two starts removing some of the levees which currently prevent environmental flow water reaching the nature reserves.

After all, and with the recent good rains, there should be enough water to promote both fat ducks and fat cattle.

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Set traps for rats in the ranks

When Wollongong City Council was sacked late yesterday, it gained the dubious honour of being the eighth council to be dismissed in NSW within the past five years.  This is an embarrassing record for the tier of government that is supposed to be the closest to its constituents.  The federal government in far-away Canberra has been sacked only once.

The Wollongong council scandal has everything:  sex, bribery and an impersonation of a corruption watchdog officer.  But, most of all, Wollongong council has inadvertently highlighted the deep problems with local government administration across the country.  Compared with other levels of government, there is little accountability and scrutiny of local government.  It is no wonder it often makes expensive mistakes and is susceptible to corruption.

Part of the fault lies in the sorts of people who are drawn to council office.  Local government politics tends to attract those excited by the machinations and manipulations of political life but disinterested in public policy.

There is one good thing to be said for politicians motivated by ideological fervour:  at least they want the best for their constituents.

Too many people stand for local government with little interest in responsible governing.

As Wollongong has been virtually a one-party city for the better part of a century, it is little more than a sandpit for Labor's factional warfare.

A main cause of the corruption in local government is the often cited problem of lack of transparency and accountability.  Few media organisations are interested in the day to day goings-on of individual councils, at least until a corruption watchdog puts a councillor in front of a judge.

Free from the close scrutiny that federal and state governments are subject to, councils are free to follow their whims.  It is perhaps indicative that some of the earliest casualties of the sub-prime crisis have been local government investment portfolios.

If the market had not so spectacularly imploded during the past few months, NSW's Wingecarribee Shire Council would never have been asked why it was investing in mortgages in Houston and Orlando.

One possible remedy for this sense that corruption is endemic in councils has been raised by the Queensland Local Government Association:  politicians would be less likely to accept bribes and gifts from property developers if there were more extensive scrutiny of political donations.

This echoes Kevin Rudd's declaration yesterday that the federal Government plans to drastically limit campaign donations in the name of good government.

Limiting political donations creates its own problems, not least that doing so tends to favour incumbent politicians who are able to harness the full resources of their government.

But, more crucially, limiting political donations to local councillors does not tackle the real problem.  Local governments have too much power over questions of property development.

After all, this is virtually the only reason that bribery occurs between councillors and property developers.  Most of the time, local governments are doing little more than imposing petty, nanny state, regulations:  putting up noise restrictions for street parties;  forcing us to use smaller rubbish bins;  ensuring that nobody paints their front door red;  and other similar important things.  But when they deal with the issue of property development, these councillors suddenly hold vast levels of discretionary power, able to approve or reject multimillion-dollar investments with a stroke of a pen.

Furthermore, the approach that many councils take towards property development is also a leading cause of Australia's housing crisis.  Local government tends to resist urban infill, putting extra pressure on our already critical land shortage.  It doesn't take long for councillors to realise that being caught between NIMBY activists and property developers is potentially a lucrative position.

When councillors and their staff have the power to determine town planning restrictions according to their subjective judgment, and the discretionary power to impose heritage restrictions on properties barely a decade old, it is no wonder that developers feel the need to flatter those councillors with friendship, gifts, and brown envelopes full of money.

Corruption exists where there are opportunities for the manipulation of political power for personal gain.  So local governments provide the corrupt-minded with ample opportunities.  If we are to solve the corruption problem, we should remove the discretionary power and regulations that make that corruption so profitable.

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