Treasuring impartiality

Treasury Secretary Ken Henry has offered support to the Government on climate change and water allocations.  His Malthusian theme is that we are depleting our resources, a course that we cannot reverse because of "free riders".

The political nature of his comments illustrates the partisan nature of the Treasury today.  The Prime Minister's departmental head, Terry Moran, is seeking innovative policy advice with the launch of his blueprint for the "world's best public service".  But that is anchored in the Westminster tradition, which leaves the adoption and the promotion of policy advice to the elected government.  Should he wish to take part in the political campaign he favours, Mr Henry's appropriate route is to seek representational office as a Labor or Greens Party member.

Aside from the role of providing "frank and fearless" advice on policy approaches to ministers, the second role of public servants involves service delivery -- carrying out the government's policies.  In terms of numbers and expenditures, the latter role has long been vastly more significant.

Hard-core political advice has traditionally been confined to Ministerial staffs.  These and the Opposition's staff are, like the public service, also paid for by the taxpayer.

Over recent decades ministerial staff numbers have quadrupled.  Moreover, we have seen a progressive fracturing of the advice provision and policy propagation walls.

Nobody nowadays bats an eyelid when the Victorian Government environment department puts out soothing ads promoting its desalination plant.  Lost is the irony that the ads seek to persuade the people paying for them about the merits of the expenditures the government has incurred, ostensibly on their behalf.  Few even delve into their message which promotes a project that provides water at five times what it would cost from a new dam and involves a wasteful $3.5 billion investment.

The address by Treasury Secretary Ken Henry shows another dimension of the descent into the corrupt use of the taxpayer's money.  Public servants are now out there promoting the agenda of the government.  Ken Henry's activities in this direction are in fact dwarfed by those of public servants in other agencies like those of the one-dimensional Department of Climate Change.

But Ken Henry's foray into politics highlight the degraded nature of Treasury, which was once a rock of impartiality, but is now removing itself from the "frank, impartial and non-partisan" which are the bedrock qualities according to the Blueprint for Reform of Australian Government Administration.  The Treasury has already been a willing participant in conjuring numbers that hide the costs of the government's carbon reduction program.  And in that same process it has sought to obscure the triviality of the economic effects of global warming even if it is taking place.

Perhaps epitomising the Commonwealth Treasury's fall from grace was its job advertisement for a speechwriter with a remuneration of $157,505 per annum.  That's not a bad salary for writing some flowery language to tell 'We the People' how astute government is at spending the money it takes from us.

This raises the issue of just what do public servants contribute.  Mark Steyn has commented that, "The new class war in the Western world is between 'public servants' and the rest of us."  The struggle is between those who earn income from supplying goods and services which people will willingly pay for, and those whose income depends on revenues forcibly extracted from taxpayers.

Unfortunately the electorate is unaware of this struggle.  Thus, in the Rudd/Abbott health debate Mr. Rudd's favourability soared whenever he said the government will work to fix the health problem and used homespun phrases like "little one" or "mums and dads want practical action now".  It mattered little that Mr Rudd's proposals simply mean shuffling the funding from state to Commonwealth bureaucrats and in the process further duplicating areas of bureaucracy.

Though few people want to interest themselves in politics they believe that government can fix problems nagging at them.  Even the recent pink batts and school buildings fiascos have not persuaded them of the innate inefficiency of politically and bureaucratically operated activities.

If governments are to have such roles, this elevates the role of the impartial administratively competent bureaucrat.

Unfortunately, not only do we have bureaucrats camping on the political turf but that's become the path to advancement.  Those heading up most agencies now largely come from the central agencies of Treasury, Finance and Prime Ministers and are appointed because of their policy acumen and political reliability.  Those same people are seldom well-equipped to manage service delivery.  Hence, not only are "we the people" paying for bureaucrats as well as politicians to propagate their views to us, but the process paves the way to an undermining of administrative efficiency.

There's the future challenge for the Australian Public Service.

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Liberal leadership aftershocks

The resignation of Nick Minchin last week is a reminder that the aftershocks of the late November leadership mania are still reverberating around the Liberal Party.

It was Nick Minchin's role in the revolt against Malcolm Turnbull which sparked off the debacle that gave Tony Abbott the leadership.  And the two men's views on climate change are very similar.

But climate change isn't the only issue in Australian politics.

The near fatal accident of Nick Minchin's son was the trigger for his resignation.

But right now there is an underlying tension within the party over Tony Abbott's paid parental leave scheme.  And there is some speculation that Minchin, as one of the Party's most stalwart Dries, was deeply unhappy with the abrupt change in the Coalition's stance on the issue.

The paid parental leave scheme -- funded by a tax levied only on Australia's most profitable businesses -- is anathema to the free marketeers within the party.  It's just not very "neo-liberal".

Indeed, on the day the parental leave policy was announced one senior Liberal told The Australian's Samantha Maiden, that such a scheme resembles "a typical 1930s socialist impost on big business".  This was before the senior Liberal learnt that it was Abbott who proposed it.

When Abbott said that parental leave would be instituted "over this government's dead body" he wasn't speaking for himself, but for the government.  Abbott has different views.  But opposition to parental leave was the view -- still is the view -- of much of the federal parliamentary Liberal Party.

So it might seem odd, but Abbott and the leader he overthrew are quite similar.

Like Malcolm Turnbull, Tony Abbott has a firm idea of the direction he wants to take the Liberal Party and the conservative movement.  And as Malcolm Turnbull discovered before him, this may not be a direction the party wants to be taken.

The direction Abbott would like to take the Liberal Party is all set out in his book, Battlelines, point by point.

Nevertheless, in November, as the shadow cabinet faced an escalating series of resignations, no-one was pulling Battlelines down off the shelves to fully consider the pros and cons of Abbott's philosophy of government.

Abbott's book is a quirky mixture of policy, philosophy and personal chronicle -- more fun than Peter Costello's memoirs, but nowhere near as fun as The Latham Diaries.

It was seen as a curiosity at best.

Nobody in the party room was under any illusions about Abbott's personal views, but neither did many expect him as leader to pursue each and every policy set out in his manifesto.

The alliance between free marketeers and the conservatives who supported (very un-free market) middle class welfare and family tax benefits was stable under John Howard -- he spent his career traversing both the radical dry wing of the Liberal party and its conservative wing.

Certainly, Howard favoured one side more than the other.  George Brandis said in his Deakin lecture last year that "For Howard, it was as much a conservative party as a liberal party;  indeed, with the passage of time, rather more the former than the latter".

But having been in the public eye for decades, Liberal free marketeers could still believe that Howard was one of them.

Unlike Howard, Abbott doesn't want to straddle these two Liberal camps.  Abbott, as "keeper of the conservative conscience" within the parliamentary party, sees government's job to protect society from the bleakness of the market economy.

And instead of letting society flourish independently, as free marketeers would argue, Abbott believes government should actively build society in its preferred image.

As he told The Australian in March:

"You can't run a decent society without a strong economic base ... while I think it is important that the national government promote and develop a strong economy, it's by no means the only or even, at every point, the main task of government."

Abbott's distinctly conservative approach is at odds with the other philosophical objective of the many in theLiberal Party -- the primacy of the individual and importance of individual liberty.  Launching Battlelines last year, Abbott made this explicit:  "Individuals are only realised in a social context".

So an Abbott government is not likely to be a small government.

If Tony Abbott personifies the conservative social-democrat side of John Howard's legacy, then Nick Minchin personifies the radical free market side.  Certainly, Minchin is big on "family values", but for free marketeers, family values complement dry economic policies like low taxes and small government.  For Abbott, family values trump those policies.

As many others have noted, Abbott's vision of renewed conservatism with the Liberal Party is informed by fairly deep reading and reflection.

It is not, however, a vision uniformly shared within the party he leads.

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Opposition should bank on flexibility

With the devastation of the 2007 election defeat having receded and the appetite for a real contest later this year intensifying, it seems the coalition has come to accept that while industrial relations will not be the principal front on which the election will be fought, it is neither possible nor credible to avoid the subject.  On the contrary, its prospects demand a posture that exhibits confidence without arrogance and balance without timidity.

One area where the coalition can press forward in a way which highlights one of the emerging failures of the new industrial relations system the government has introduced is, surprisingly enough, flexibility in agreement-making between employers and employees.

Throughout much of the last government's term, the then opposition was very effective at seizing on Australian workplace agreements (AWAs), in particular, to depict the Howard government's workplace relations system as a pernicious, Dickensian throw-back.

So it's hard at first to think that individual agreement making might afford the opposition an opportunity to demonstrate real initiative without courting a fierce counterattack from the government that it is attempting to restore the previous system.

There is a way the opposition can craft a policy on more flexible agreement-making that addresses a major problem of rigidity facing businesses, large and small alike, while protecting itself from attacks.

The first point to note is that the Rudd government bas a system of individual statutory contracts, however much it might characterise these agreements otherwise.  They can be made under either modern awards or enterprise agreements.

Take modem awards.  Every modem award must contain a flexibility term allowing the employer and an employee, if they both wish, to agree to terms varying the effect of the modem award if it is done to meet their genuine needs.

The Fair Work Act makes it clear that these individual contracts are taken to be terms of the modem award likewise, all enterprise agreements must contain flexibility terms.  If they don't, they are taken to include a model flexibility clause.

As with flexibility agreements made under modem awards, a flexibility arrangement made under an enterprise agreement is taken to be a term of the enterprise agreement.  Here's the main technical and political point:  individual flexibility agreements under the government's system require no third party review or approval.

All flexibility agreements, whether made under a modern award or enterprise agreement, must provide that the employee will be better off overall, but that's of little or no relevance unless either parry initiates a dispute about whether the flexibility agreement satisfies this condition or the Office of the Fair Work Ombudsman inspects the agreement of its own volition.

For business, in particular, the scope of individual flexibility arrangements under the government's system depends on what the relevant modem award or enterprise agreement permits.  In practice, this means that the range of matters over which employees and their employers can agree upon will be limited to the matters that Fair Work Australia has prescribed in the modern award, or which the employer and unions involved in bargaining have agreed to prescribe in an enterprise agreement

So while the Fair Work Act provides that individual flexibility agreements under modem awards and enterprise agreements cannot be expressed to require, in effect, union approval, this provision is quite disingenuous.  The flexibility clauses in modern awards and enterprise agreements have already been severely curtailed before they are available to be utilised directly by employees and their employers.

The evidence for this?  The standard modern award flexibility clause limits the range of matters over which employees and their employers can directly agree upon to just live matters.  Under enterprise agreements, the range is usually limited to the same matters unless the parties have agreed to expand or contract those matters.

For the opposition, this means that in formulating a more flexible system of agreement-making it can look at a policy option which primarily does two things.

First, it unhinges the ability of individual employees and their employers to enter into flexibility arrangements from the very limited range of matters that modern awards and enterprise agreements prescribe while retaining the better off overall test.

Secondly, and in order to ensure that protections are properly in place, the coalition should consider third parry review before individual flexibility agreements can operate, unlike now.  Ultimately, the coalition can give business the greater flexibility it needs while giving employees protections they deserve.

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NSW: nice and mediocre

At the rate it's going, NSW will end up like Europe.  A nice place to go for a holiday, but you wouldn't want to live there.  Or start a business there.  As amusing as it is to contemplate a voting system in Tasmania that no one understands, and an election campaign in South Australia that centred on the status of the personal relationships of the premier, state elections are no laughing matter.  State governments are not unimportant.

The decisions of state governments can have an impact across the national economy.  Take, for example, Victoria and its water crisis.  Successive Labor governments have refused to build new dams for Melbourne's growing population.  This policy, when combined with the effects of a drought, produced what in hindsight was always going to be inevitable -- a water crisis.

As a state election is to be held in November this year, the government needed to be seen to be doing something.  So it is that Victoria will have the country's largest desalination plant.

The problem is that to get the plant completed by the end of next year, the Brumby government has been forced to sign a contract that will make the builders pay workers the highest construction wages in the country.  Already the estimated cost of the plant has gone from $3.1 billion three years ago to $3.5 billion today.

Carpenters on the site will earn at least $200,000, which is 30 per cent above the industry standard.  A worker lucky enough to be employed on the Victorian desalination plant could earn up to 40 per cent more than someone doing the same job on the Sydney desalination plant.

These wage rates have set the standard for infrastructure projects across the country.  The desalination plant was a political priority for John Brumby.  He is willing to allow the contractors to pay a premium of 30 per cent to the union movement to guarantee industrial peace and to have the project delivered on time.

There's no reason to believe that Kevin Rudd will act any differently if the national broadband network is ever built -- a project 10 times the cost of Brumby's desalination plant.

Thanks to Victoria, workers on the broadband network will have a new industry standard against which to make their wage demands.

Next week will be the 15-year anniversary of Labor coming to power in NSW and the next NSW state election will be held on March 26, 2011 -- in exactly one year.

The state is in desperate need of regime change, yet the Liberals' Barry O'Farrell is no certainty to beat premier Kristina Keneally.  As O'Farrell recently pointed out, since 1995 the gross state product of NSW has increased by 46 per cent.

The comparable figure for Queensland is 90 per cent and for Western Australia, 80 per cent.  But because of those states' natural resources, perhaps they are an unfair comparison.  Compared with Victoria, NSW has lagged -- Victoria's gross state product has grown 65 per cent.

But the shocking thing (at least for anyone who still believes Sydney is the capital of the "premier state" is that even South Australia and Tasmania have outperformed NSW.  South Australia's gross state product has increased in the past decade and a half by 51 per cent, and that of Tasmania by 48 per cent.

Maybe the Olympics are to blame.  Premiers were so intent on making Sydney an "international city" and showing it off to the rest of the world, they thought making the trains run on time was beneath them.

If the Commonwealth did somehow succeed in gaining responsibility for the nation's health system, it couldn't do a worse job than NSW health ministers at running the state's hospitals.

On the conservative side of politics it's no wonder the Liberals have all but abandoned a commitment to federalism.  Their last four leaders -- Howard, Nelson, Turnbull, and now Abbott -- have all come from a city where nothing ever seems to work.

Fifteen uninterrupted years of Labor government in NSW has bred a political culture of mediocrity.  In the same ways, mediocrity is worse than corruption.  You can send people to jail for corruption.  But what do you do about mediocre policy, mediocre politicians, and a mediocre system of public administration.

In NSW, the government, public service, and union movement comprise a triumvirate that has long lost any sense of the public good.

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Follow the leader

Are you confused by the state of centre-right politics in this country?  Probably never more so than this fortnight.

Tony Abbott staked his claim in the climate change debate with a vocal dislike of great big new taxes.  But now he's proposed his own.  The opposition can't coherently claim that an emissions trading scheme is nothing more than a giant burden on business while at the same time imposing a different giant burden on business in the form of a big-business-financed parental leave scheme.

Perplexed?  You're not alone.

In his March Quarterly Essay, "What's Right?  The Future of Conservatism in Australia," lawyer and academic Waleed Aly distinguishes between liberals, conservatives, neo-liberals and neo-conservatives.  For Aly, the latter two aren't American-style "nuke Iran for freedom" neo-cons but a cross between social conservatives and free marketeers.

Then Aly finds liberal conservatives, cultural fundamentalists and neo-liberal neo-conservatives -- which I think are the bad bits of all of the above.  Clearly, a broad church is a complicated church.

I guess this bewildering catalogue of ideologies is some progress.  For a lot of people, "conservative" seems to be used to describe anyone critical of the Labor Party, with the exception of Bob Brown.

To Aly, all this confusion is because there aren't any real conservatives left in Australia.

Conservatives value older institutions -- such as the family and common law -- not because they're old fuddy-duddies but because those institutions are the end product of centuries of trial and error.  Sticking with what we know works is better than following the plan to reorganise society that you sketched on a pub coaster at 3am in the Elephant and Wheelbarrow last night.  Even if you're really smart.

But Aly claims that the conservative temperament of hesitant, evolutionary change has been hijacked by crazy neo-liberals with their crazy free-market ideas.

If only.

The fanatically neo-liberal, deregulation-obsessed Howard government actually passed more pages of law than any previous government.  Government is no smaller, no lower taxing, no more conducive to individual liberty than it was a decade ago.  On many measures, it's worse.

There is no party in the Federal Parliament pushing anything near what has come to be called neo-liberalism -- the potent combination of social liberalism and economic liberalism.  There is no party explicitly arguing that government should stay out of both the boardroom and the bedroom.

Neo-liberals only like the free market because it allows individuals to pursue their own goals -- just as other voluntary relationships, such as communities and clubs, do.

But the truth is there's very little ideology in Australian politics.  Australia's political culture has always been somewhat apprehensive about obviously high-minded philosophies of government.

Australia's political institutions were formed in the mid-19th century, when utilitarianism was the height of ideological fashion.

Utilitarianism is an intensely practical political philosophy that says the purpose of government should be simply to seek the greatest good for the greatest number.  No more, no less.

You might get fancy things such as individual liberty or social equality out of that.  But, then again, you might not.

The contrast with the United States couldn't be stronger.  America was founded at the height of the revolutionary period, when kings were killed for fanciful ideals.

Take the American Tea Party movement -- a genuine, grassroots manifestation of deeply held political beliefs.  Certainly, it's an uncomfortable coalition between serious right-of-centre activists and crazed conspiracy theorists pretty sure that President Barack Obama is a dastardly Muslim, but could you imagine any remotely similar movement in Australia?

The ideological passion -- whether coherent or weird and manic -- just isn't here.  Even Australia's most aggressive public controversies are banally practical.

The boat-people controversy is just a debate about the most efficient way to process asylum seekers, not a debate about immigration or open borders.

Australia joined the Coalition of the Willing in Iraq because it was seen as a nice way to reinforce our bond with the US, not because of a dream for liberty in the Middle East.

The history and culture wars seem deeply ideological, but take this week's dispute over whether official events should be led by an acknowledgment of traditional Aboriginal owners.  It's hardly a timeless philosophical struggle between value systems -- just an inanely repetitive discussion about how "proud" we should be of the founding of the country.

Sure, our lack of ideological fervour sounds like a recipe for harmony.  But without any philosophical beliefs about what government should -- and, perhaps more importantly, shouldn't -- do, Australian political parties tend to drift aimlessly.  Especially in opposition.

Right now it seems the federal opposition has tried to substitute political philosophy with an incoherent populism.

To be fair, this is a problem that some in the Liberal Party seem to be aware of.  Late last year, Queensland senator George Brandis made a speech championing the Liberal Party's small "l" liberal tradition, and shadow treasurer Joe Hockey felt moved this month to title a speech "In defence of liberty".

The conservatives, too, are trying to stake their claim.  Tony Abbott's book, Battlelines, was supposed to be a definitive statement of conservative philosophy as it can be applied to Australia.

But in Abbott's tenure as Opposition Leader so far, Coalition policies have swung wildly between extremes.  They're implacably opposed to carbon emissions trading -- that would be an odious tax -- but keenly supportive of carbon emissions regulation and subsidies, which, they seem to imagine, will be almost cost-free and of no economic consequence.

This policy incoherence isn't because they are blinded by a firmly held ideology.  It's because they're blind without one.

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Heading backwards with power generation

Thirteen years ago the Kennett government's sale of Victoria's generators raised $10 billion (about $14 billion in today's money).  Now, the NSW Government is desperate to raise funds by selling assets.

NSW generators, like Victoria's, are overwhelmingly coal-fired.

The Federal Government's climate-change policy has vastly devalued coal-fired generators anywhere in Australia.

Capital-intensive businesses such as electricity generators can be valued on two different bases.

The first uses multiples of their annual profits.  The other takes initial investment outlays and adjusts these for improvements and writedowns.

In principle, the two methods should give the same answer if appropriate adjustments are made.

This is clearly not the case with coal-based electricity generators.  The value of these generators has been written down in anticipation of extra charges if the carbon tax is brought in.

Thus, Loy Yang A in the Latrobe Valley has an equity value of only $500 million placed on it by part-owner AGL.  Added to its debt, this values the firm at about $3.5 billion.

On privatisation Loy Yang A raised $4.8 billion (about $6.7 billion in today's dollars).

It is an asset with a life of many decades, has been well-maintained and has had its capacity increased.

The prospective carbon tax has devalued Loy Yang A's worth and this also would apply to the NSW generators.

A prospective carbon tax makes selling coal-based power stations extremely difficult because today's profit is no guide to future prospects.

The intended tax also makes it too risky to build new generators.

As demand increases, this lack of new supply means higher prices.

These are already showing up in company profits.

There is no real substitute for coal-based electricity -- wind and solar can only be bit-players, while gas is expensive and also will eventually incur carbon charges.

Hence, the regulatory risk from the prospective carbon tax is suffocating the normal market processes whereby high profits attract new plant building.  Unless new coal-fired generator capacity is built, electricity prices will rise.

The regulatory risk that prevents private firms from building new power stations has another dimension.  It means that in future the government itself will have to underwrite the investment risk entailed in building new capacity.

This means new electricity generation will be dictated less by market needs and more by government agendas.  Unfortunately, that returns us to the bad old days before the Kennett-Stockdale privatisation reforms forged the existing low-cost and efficient Victorian electricity industry.

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It's time misguided land starvation was stopped

With boom times returning to WA, the housing market is once again overheating.  The median house price in Perth is now $512,000, according to the December quarter figures from Australian Property Monitors, putting it beyond the reach of any new homeowner without substantial savings or parental support.

Even in the new suburbs, prices have left all but the most affluent with no foot on the home-ownership ladder.

Typical of these is Ballajura, where the average house costs almost $400,000.  That's up 60 per cent from $260,000 five years ago.  The suburb's average house price increase has massively outpaced prices in general, which are up only 15 per cent.  And more importantly for the prospective buyer, house prices have far outpaced average earnings.

It is not difficult to pinpoint the cause of this price escalation.

During the second half of last year, new lots approved for building in Perth and Peel were running at an annual rate of under 9000.  This is extraordinarily low.  Even in the mid 2000s, when supply was being far outpaced by demand, annual new lot releases were running at more than 15,000.

Last year in my report, The Great Lock Out, I reported how, over the past two decades, Perth had been transformed from one of the most affordable housing markets in Australia to having the unenviable reputation of rivalling Sydney as the least affordable.

The reasons for this were shown to lie squarely with the Government's land-starvation policy.  The Government just won't allow enough blocks to be developed for housing, thereby preventing competition from driving down prices.

This has stemmed from unfounded fears of the high cost of providing new infrastructure, a mania for central planning and groundless opposition to urban sprawl in a State that has more natural bush and farmland than anywhere else in the world.

Government resistance to allowing land to be used for housing has also been abetted by ministerial dreams of creating a compact city with teeming inner suburbs populated by bohemian theatregoers and by downright contempt for new-homebuyers' preference for McMansions on individual lots.

With a new Government in WA we might have expected to see a reappraisal of the restrictive land release policy.  Instead, the figures show Perth going backwards in new housing development permits.  This is particularly unfortunate with population growth at 3 per cent a year and every expectation of a strong renewal of resource based development.

Rather than tightening the vice over new development approvals, now is the time for energetic action to remove restraints on land availability.  Predictably, the upshot of the intensified squeeze on land availability has been skyrocketing prices.  Land, as with any other product, will see prices rise if supply is rationed.

Land around Perth is particularly suitable for home building.  It is flat and sandy.  On the city edge, the land is overwhelmingly used for farming and is worth at most $20,000 a hectare.  Even with allocations of the land to common space, each hectare can accommodate at least 10 decent-sized blocks.  Developing the land grading, roads, water, sewerage and so on costs at most $65,000 a block, so we should be seeing lots ready for building on at under $70,000 all around Perth.

Instead, because supply is rationed by the Government we see lot prices at $200,000.  In other words, Government policy is inflating land values by around $130,000 a lot.  That's terrific if you're a landowner who has got development approval but it is a cruel injustice on the people who don't have a house of their own.  Forcing those without a home of their own younger and less affluent people to pay an additional $130,000 means a monthly mortgage bill of more than $1000.

A liberalisation of Perth's highly restrictive planning policies would see three- bedroom, two-garage houses on an average sized block at $250,000.  And unlike most other policies, bringing about such a benefit costs the taxpayer nothing.  The excess prices are the result of Government policies giving windfall gains to landowners and developers who win the right to convert raw land into land for housing.

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The ghost of Liberals past

Could the historical Robert Menzies be anywhere near as good as the Robert Menzies that exists in everybody's minds?

Last week, Tony Abbott told a Sydney Liberal branch that the Liberals could win power if they embraced Menzies' lessons -- small government, and free markets.

This was, of course, a few days before he announced the super parental leave scheme, which will impose a substantial special tax on Australia's most profitable businesses, in order to fund the middle class welfare policy to end all middle class welfare policies.

The Sydney Morning Herald's political editor quickly damned the Abbott scheme, claiming that the opposition leader should have at the same time "apologised to the spirit of ... Robert Menzies", for abandoning his free enterprise ideals.  To which The Australian quickly replied that Menzies was himself a big supporter of the welfare state.

During the Howard years there was an endless stream of columns claiming that John Howard had "betrayed the Menzies vision".  Or "abandoned his legacy", as if Menzies would have crossed the floor against Howard, if only the passage of time had given him a chance.

Menzies is either a stick to be wielded against the modern Liberal Party, or a divining rod for seeking its future direction.  But like a divining rod, those who use Menzies' legacy are revealing more about themselves than about Menzies.

Nevertheless, when Bob Brown states on Twitter that "Tony Abbott's new front bench makes Sir Robert Menzies look pink", it's a fair point.  Menzies does look a little pink these days.

The post-war Menzies government was centralist enough to be a blank slate upon which anybody can impose their ideal vision of the past.  Well, at least it was centralist by the standards of the time.  With the hindsight of half a century, the Menzies government was a protectionist government, supportive of high levels of regulation, restrictive industrial laws, and, most damningly, the White Australia Policy.

So if Menzies really was a free marketeer, he certainly hid it well.  The Australian economy in the middle of last century had levels of interference that would make the Greens blush.

The Menzies government was better than its predecessor, which tried to outright nationalise the banking system.  But the conservative victory in 1949 was no breakthrough for free-enterprise, despite the subsequent myth making.

Trade policy is an obvious indicator of a government's philosophical beliefs.  And on free trade, Menzies looks very bad.  With the possible exception of 1950 and 1951, when import controls were temporarily lifted in response to American demand, Australia's markets were tightly regulated by the federal government, with import licensing and quota restrictions meant to protect industry from dastardly foreign competition.

After more than a decade of conservative government, those import restrictions were lifted in 1960, and the work of micromanaging the economy was left to tariffs.  But it was Gough Whitlam, of all people, who started the real work of opening the Australian economy to the world, when he cut tariffs 25 per cent across the board.

We have a habit of thinking that being right equates with success, and being wrong equates with failure.

But just because some certain political leader was successful -- and Menzies certainly was successful, if measured simply by years on the job -- doesn't mean they are an idol against which we should measure our values.  If right-of-centre Australians want to evoke the spirit of their philosophical ancestors, they'd do better to remember their glorious failures.

Take the nineteenth century politician Bruce Smith, Australia's answer to the great British liberals Richard Cobden and John Bright.

Smith wrote Liberty and Liberalism, a manifesto of free trade and small government, which the Australian Dictionary of Biography helpfully describes as "anachronistic" because he believed in limiting state interference in the economy.  (Economic liberty is so just so ... old-fashioned.)

Smith fervently opposed the White Australian Policy, arguing that the "foundation of the [Immigration Restriction] bill was undoubtedly racial prejudice".  Smith's liberalism was remarkably modern:  "I venture to say that a large part of the scare is founded upon a desire to make political capital by appealing to some of the worst instincts of the more credulous of the people." He should have just said "dog-whistle".

Smith was a big supporter of business.  He helped found and direct the Victorian Employers Union in 1885 and the New South Wales Employers' Union in 1888, as a response of business to the growing trade unions.

Or we could consider George Reid, who was the first and only Free Trade Party Prime Minister.  Or Bert Kelly, the "modest member" who was a dedicated supporter of free trade within Menzies' government, and anticipated the liberalisations of the 1980s and 1990s.

Modern political parties are welcome to celebrate the achievements of their former leaders.  But if they need philosophical inspiration -- and they do -- they'll have to look elsewhere.

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Choosing their villains

State premiers and big business have a lot in common these days.  Neither is much liked at the moment.  State governments, especially Labor ones (which is all of them except Western Australia), are regarded as incompetent.  Big business isn't believed to be incompetent -- just selfish.  For most people, "big business" means either the Big Four banks that price gouge their customers, or mining companies that have got lucky on the China boom.

Anyone foolish enough to try to defend state governments or big business has a hard time of it.  Of course Kristina Keneally and Anna Bligh will say they're doing a good job running their hospitals.  And of course chief executives will say their companies should not be regulated or taxed more than they already are.

The Prime Minister wants to take control of public hospitals from the states and the Opposition Leader wants to increase taxes on big business to fund a paid parental leave scheme.

Although their proposals are quite different in their nature and scope, they bear a striking similarity.  Each is a policy in search of a villain.  It looks as though Kevin Rudd and Tony Abbott started by calculating who it was they wanted to criticise and then made up a policy to justify their attack.

The evidence for such a suspicion isn't hard to find, at least as it applies to Rudd.  Since his health announcement, he has spent at least as much time complaining about how badly state governments run their hospitals as he has explaining the virtues of his alternative.

In addition to the Labor and coalition plans being aimed at soft targets, both Rudd and Abbott are taking on those who, in normal circumstances, would be thought of as their allies.

Early in his term, Rudd made much of "a new era in co-operative federal-state relations".  It was an era lasting all of 18 months.  Attacking the premiers from his own side shows the PM is willing to put the health of the nation ahead of Labor Party politics.  If voters in NSW and Queensland are frustrated that they can't change their state governments because the next state elections are too distant, Rudd will do the next best thing.  He'll take power over hospitals away from the premiers and give it to Canberra.

For Abbott, forcing big business to pay more taxes to fund a seemingly popular policy would have appeared an attractive move politically.  It shows that the coalition is not in thrall to big business lobby groups.  And it satisfies the call for revenge from a number of coalition members of parliament in the wake of the perception that too many business leaders are in lockstep with the Labor government on industrial relations, emissions trading and the stimulus package.

Another similarity between the plans is that both leaders have made promises they claim taxpayers won't have to pay for.  According to Rudd, the problems in national health policy will be fixed by having Canberra bureaucrats instead of state government bureaucrats manage hospital budgets.  Apparently health reform can be achieved without pain to the taxpayer.

And Abbott suggests parents will get the benefit of paid parental leave without taxpayers footing the bill.  Instead, big business will cover the costs of the scheme.

If the Rudd and Abbott plans sound too easy, that's because they are.

Additional taxes on business -- regardless of the size of the business -- are ultimately paid for by employees and consumers.  Contrary to popular belief, not all the profits made by big business go to paying million-dollar bonuses to executives.

In the absence of structural reform that gives incentives for individuals to manage their own health care, rearranging the funding arrangements for hospitals will amount to little more than changing who it is that fills in the paperwork.

Perhaps the most positive thing to say about it is that at least a federal takeover of hospitals is consistent with Labor policy.  Centralising practically every function of state governments is an ambition of Labor prime ministers that long predates Rudd.  In 1944, John Curtin lost a referendum to give the commonwealth control over health.  It's no coincidence that Rudd's health announcement came in the same week that he revealed his national schools curriculum.

There aren't many easier targets than state premiers and big business.  Which is part of the reason why Rudd went after one last week, and Abbott after the other this week.

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Healthcare: bang for buck

There seems to be some "confusion" about recent health spending.  Kevin Rudd told a Q & A audience that the previous government "took a billion dollars out of the public hospital system".

While Chris Uhlmann, on Insiders, claimed that the Howard government had cut spending on public hospitals.  This is an extraordinary claim.  In Uhlmann's defence it looks like he has misinterpreted some statistics put out by the Australian Institute of Health and Welfare.

Paul Sheehan, writing in The Sydney Morning Herald, has called the "Howard cut health spending" meme a big lie and declared that anyone repeating this mantra is lying.  That is a big call -- it is also correct.  Of the many criticisms we can make of the Howard government, not spending isn't one of them.  Indeed, Kevin Rudd came to power promising that "this reckless spending must stop".

The Australian Bureau of Statistics (ABS) report that total Health expenditure by the Commonwealth increased from $21.8 billion in 1998-99 to $39.9 billion in 2006-07 -- the last full financial year of the Howard government.  Equivalent data for the states are from $19.7 billion in 1998-99 to $37.2 billion in 2006-07.  There is no evidence the Howard government stripped money out of health in general.  But what about public hospitals?

The ABS doesn't report down to that level of detail, but the Australian Institute of Health and Welfare does.  Commonwealth funding of public Hospitals rose from $5.9 billion in 1997-98 to $10.7 billion in 2006-07, while state funding of public hospitals rose from just under $7 billion to $14.8 billion over the same period.  There is no evidence to support Kevin Rudd's claim that the Howard government stripped money from public hospitals.  The amount of funding increased in every year and did so by more than GDP growth.

What happened, as Joe Hockey indicated on Insiders, is that the states have dramatically increased their funding of hospitals.  After all, public hospitals are a state responsibility.  That increase is particularly noticeable after the introduction of the GST in 2000.  In other words a Commonwealth tax passed onto the states in full is partly responsible for an increase in state funding to hospitals.  It is that funding that the Commonwealth now wants to take off the states and earmark for health spending.  It that sounds like a bit of a merry-go-round, that's because it is.

It is understandable that the current government wants to differentiate itself from its predecessor.  It is not clear that it should do so by out-spending the Howard government.  Ironically Howard has a reputation of being somewhat hard-hearted;  yet the empirical record is very different.  Andrew Norton of the Centre for Independent Studies has shown that Howard government spending on issues such as Health and Education rose faster than under the previous Keating government.  He has labelled Howard a conservative social democrat.

All governments like to think that increasing the amount of money thrown at problems will solve that problem.  But, as we now know from the Rudd government stimulus package, the quality of spend can be more important than the quantity of spending.  So too with health -- I have shown that the number of back-office bureaucrats has been increasing, while the number of hospital beds per 1000 population has declined.  In the spending we have had over the past fifteen years, the bang for buck has declined.

The bottom line is this;  billions of dollars from both the Commonwealth and states are poured into health and hospitals each year.  The overwhelming bulk of that funding comes from the Commonwealth.  More than 50 per cent of the health dollar comes directly from the Commonwealth through its own budget and another large proportion of it comes indirectly through the GST.  It might be possible to show that the Commonwealth share of public hospital funding declined but only if we think of the GST as a state tax (as the Howard government did) and not, correctly, as a Commonwealth tax (as the Rudd government does).

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Schools should be free to teach what they want

Most people seem to have missed the point about the national curriculum.

The opposition certainly has.  If the national curriculum is as bad as Nationals senator Ron Boswell says -- it "reads like a Marxist learner ... to prepare our young for the anti-capitalist class struggle" -- in a way, that's the (decidedly not Marxist) Howard government's fault.

Taking control of the curriculum out of the hands of the states and into the loving arms of the federal government didn't begin when Kevin Rudd won the 2007 election.

In a speech in 2006, Julie Bishop, the then education minister, argued Canberra needed to grab the school curriculum "out of the hands of ideologues in the state and territory education bureaucracies and give it to, say, a national board of studies".

But last week, after having seen the national curriculum in its proposed glory, Christopher Pyne, the coalition's education spokesman, claimed it imposed "a particular black armband view of our history".  Obviously Bishop's plan didn't work.

There's a lesson here.  Whether we get an Abbott government after this election, a Turnbull government in 2013, or a Joyce-Tuckey government in 2016, that government will need to realise any new powers they grant themselves won't be theirs forever.

Nevertheless, Boswell and Pyne are wrong.  The proposed curriculum is hardly the vanguard of the international socialist movement.  But it does have its peculiarities.

The science curriculum's insistence that science should be taught as a cultural endeavour -- with Asian and Aboriginal perspectives such as the Dreamtime -- seems more like cultural studies.  Worthy in their own right perhaps, but teaching myths in science class is a bit odd.

And its emphasis on "the human responsibility to contribute to sustainability" seems just a touch ideologically loaded.

The history curriculum in year 10 investigates "struggles for freedom and rights", which is great.  But it starts its investigation with the United Nations, as if the concept of human rights just popped up in 1945.

And perhaps having kids learn about "Sorry Day" is laudable.  But it seems a bit much for the apology -- which is a distinctly political achievement of the Rudd government -- to be given curriculum status so soon.

Nevertheless, it's probably not an awful curriculum.  Unfortunately, "not awful" is the best we're going to get from a curriculum designed to be imposed across the country.  It is supposed to equally serve the needs of students attending both Camberwell South Primary School, with 496 relatively well-off students, to Gochin Jiny Jirra School, a remote school in the NT with just 25.

The professed reason for the national curriculum is that there are 80,000 students who move interstate each year.  But there are 3 million students all up.  So the curriculum is being imposed for the convenience of just 2.3 per cent of the student population.

Still, if we know anything about our Kevin Rudd, we know he loves to be in charge of stuff.  A national curriculum is right up his alley, even without John Howard's beat-back-the-leftie-historians agenda.

The federal government seems to believe a national curriculum will be inherently better than state curriculums.  But "national" is not a synonym for "awesome".

If we really wanted a revolution in education, we'd give schools flexibility to tailor the curriculum to the needs and profile of their student body.

At the very least, the study of history, which can be subject to many more interpretations than mathematics, could be left to the discretion of schools.  After all, most of the bitterness over the history wars was about ideological control over the curriculum.

If some parents wanted their children to be taught that capitalism has brought misery and oppression and darkness, they could choose that.  If other parents wanted their children to understand how market relationships lead to mutual gain, and free trade alleviates poverty, they could choose that too.

Until the government gives control of the curriculum back to schools, parents and students will always be somewhat unsatisfied with what Australian children are taught.

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Price of a new house could be so much cheaper

A misdirected email from Justin Madden's office showed the Brumby Government at its manipulative worst.

Following a planning review into the iconic Windsor Hotel redevelopment, the government intended to set up a counterfeit protest group.  Then, having "listened to the community", it would reject the redevelopment recommendation.

But planning laws can wreak even greater damage than this.  By restricting urban development they make houses unaffordable, and we are already seeing Melbourne's house prices increase.

This can only be exacerbated by the Victorian Upper House last week rejecting the Brumby Government proposals for an expansion of Melbourne's urban growth boundary.

The Greens opposed the boundary extension because they disagree with all development other than bicycle paths and inner city wine bars.

The coalition objected to an increase in the Growth Areas Infrastructure Contribution (GAIC) accompanying the proposed extension.  This would have raised to $95,000 the existing $80,000 per hectare fee levied by the government on the sale of land permitted to be developed for housing.

The GAIC is not actually required to fund infrastructure, though few MPs understood this.  In new developments, most infrastructure -- including for roads, drainage, and parkland -- is funded by the developer.  Other infrastructure -- including electricity, water and sewerage -- is supplied commercially.

Either way, the new home owner, not the government, incurs the costs.

The only two major infrastructure categories the government provides are trunk roads and schools.

But trunk roads have to be built anyway and motorists already over-finance them in petrol and vehicle licensing taxes.  Suburban trunk roads also are much cheaper to build than those in the inner city.

With regard to schools, these are needed no matter where children live and again are cheaper to provide in areas on the urban fringe than in the inner suburbs.

The GAIC therefore is simply a tax.

However, it does not add to development costs.  This is because GAIC is imposed on land that has been inflated in value due to government land-use restraints.

Melbourne's edge largely comprises farmland worth about $10,000 a hectare.  But once it is freed from regulations that prevent it being used for housing the land becomes worth $300,000 a hectare.

This inflated cost gets factored into the price of houses and the new home owner cops it.

With the GAIC, the government is trying to get a share of the excess costs its regulations on land use have created.  But it is the scarcity of housing land caused by regulation that raises costs and prices, not the GAIC.

A significant relaxation of the restrictions on land use therefore would reduce the price of developable land and of housing.

Politicians should shift their focus from the GAIC, to permitting more of our vast land resources to be developed for housing.  This would drive down the costs of land, reducing new house prices by more than $50,000.  Such action also would put welcome downward pressure on house prices generally.

Land is like everything else.  Its price responds to demand and supply.  Restraining the use of land for housing creates a scarcity that inflates prices.  That simple lesson seems to be lost on our politicians.

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Triumph of the iconoclast who sparked the history wars

"In his desire to restore the balance between white man and black man and to make up for our scandalous neglect of the Aboriginal heritage, he has at times swung too far the other way."

That is a reviewer for the The Sydney Morning Herald criticising Geoffrey Blainey for being too sympathetic to Australia's indigenous population.  Yes, you read that correctly:  a reviewer criticising Blainey for being too sympathetic to Aboriginal Australians.  Now, it should be pointed that these words were published in 1975 and were contained in a review of Blainey's landmark work, Triumph of the Nomads.

In the early 1970s, Blainey had been the first academic historian in the country to include Aboriginal history in a general Australian history subject.  Blainey had come to the then unusual view that Australia's history before European settlement was worth studying.

Triumph of the Nomads brought this radical premise to a much wider audience.  An integral part of Blainey's argument was rejecting the assumption that Aboriginal society had been static.  Blainey also believed that previous writers had underestimated Aboriginal economic success.

Blainey suggested that "by the standards of the year 1800 ... the Aboriginals' material life could be compared favourably with many parts of Europe".

For some, he went too far in redressing the historical imbalance, but most welcomed the fact radical thinking was a leading feature of the book.

As well as many positive aspects of pre-1788 Aboriginal life, Blainey also drew attention to some of the less pleasant characteristics of their society, such as infanticide and inter-tribal wars.

These aspects of his work were seized on by certain critics; however, a lot of this seizing did not occur until after March 17, 1984.  This was the day when, at the height of his prestige and influence, Blainey's life changed.  He concluded a talk to a Rotary conference in Warrnambool, Victoria, with some comments about Asian immigration, which sparked a furore.

Blainey had been involved in controversies before, but debates about whether flax and pine were factors in the British decision to colonise Australia, or whether the Literature Board head office should be based in Sydney or Melbourne, were hardly adequate preparation for this conflagration.

One does not have to have shared Blainey's position on Asian immigration to lament the vitriol that was poured on him.  Not content with just debating the actual issue of Asian immigration, many historians went back through Blainey's opus to find examples of poor practice they could use to undermine his authority.

It presaged a new era in the national discourse, one in which someone with a view with which one disagreed was not just wrong on that issue but was a bad person.

The attacks on Blainey probably mark the beginning of the so-called history wars in Australia, wars in which ideological correctness became more important than any other factor in assessing a historian's worth.

Apart from Blainey, the other key victim of the history wars was Manning Clark who, while obviously disagreeing with many of Blainey's views, nonetheless decried the attempts to silence him.

Perhaps it is now safer to discuss such matters following the official ending of Australia's history wars by prime ministerial edict on August 27 last year.  Given Kevin Rudd's attempts to rewrite modern political and economic history in a partisan manner, one may doubt his sincerity, but there is at least something appropriate in him making his declaration at the launch of Tom Keneally's book Australians:  Origins to Eureka.

This is because, at the height of the controversies of the 1980s, Keneally wrote to Blainey:  "I regret very much the impulse of some people to attempt to discredit your history in the simple-minded and intellectually fascist belief that this would somehow undermine your social and political arguments.  I don't care whether you accept this or not, but you are for me one of the very finest Australian writers and historians.  As for the rest, our disagreements are a matter of record."

There is much to be said for ending the history wars.  While history should be debated and interpreted in a multitude of ways, these discussions should be able to be conducted without every issue being used in a contemporary political debate.  And ending the wars may also provide an opportunity to evaluate Blainey's career in a more balanced manner.

By any measure it has been a remarkably productive career.  Blainey has written almost 40 books, been a highly regarded teacher and university administrator, a chairman of important government committees and a participant in some of the big debates of recent decades.  And he invented the perpetually busy phrase "the tyranny of distance".

Blainey will turn 80 on Wednesday next week, which also marks the 60th anniversary of his public debut as a historian.  It was in 1950 that Historical Studies published an article by the undergraduate Blainey dissecting the work of a well-known authority on Federation, R.S. Parker.

Blainey found that Parker's assertions about the economic interests of particular voters were not matched by the evidence.  As one observer put it, "Here was this young undergraduate applying departmental research techniques to confound an authority ... it was quite remarkable."

However, this was not the only example of the 20-year-old Blainey's preparedness to challenge authority and conventional wisdom.  He found theory and method of history classes at the University of Melbourne so abstract that he declined to participate and negotiated with the lecturer an alternative reading program.

More significantly, Blainey rejected the example of other successful history undergraduates by exhibiting no interest in pursuing postgraduate study at Oxford.

Instead, Blainey headed off to the isolated west coast of Tasmania to write the history of the Mt Lyell Mining & Railway Company, the start of an initial 10-year career as a freelance historian, making a living from writing books.

From late 1961 onwards, Blainey did follow the more conventional path for a historian of working in a university.  However, his early departure from Melbourne University, after the controversies of the 80s, means that he has spent a slight majority of his 60-year history-writing career outside the academy.

Blainey's work has clearly derived benefits from his time spent inside and outside the academic tent.  On becoming an academic in the early 60s, he learned a lot from students, their interests and questions, and more than one book began life as part of a subject he taught to undergraduates.

Between 1966 and 1980, he produced three works, sometimes considered a trilogy, that took his reputation to a new plane.

The Tyranny of Distance, Triumph of the Nomads and A Land Half Won took Blainey from being a writer in the niche of economic, business and mining history to a contributor with a distinctive vision of the important themes in Australia's history.

All three books challenged conventional views about their subjects and, by coining the phrase "tyranny of distance", Blainey contributed -- along with Donald Horne's "lucky country" and A.A. Phillips' "the cultural cringe" -- one of the three best-known, and often misunderstood, phrases of modern Australia.

The breadth of Blainey's work has been remarkable, but not everyone approves.  Perhaps the strangest criticism of Blainey's broadness came after the publication of A Short History of the World, when one critic decried a generalist having a shot at a task that, in his view, should be left to specialist world historians.

Just as the breadth of Blainey's work is remarkable, so is the longevity of his career.  Both are the product of his insatiable curiosity to find out about the past and to explain it to others by writing about it in beguiling prose.

Blainey shows few signs of slowing down.  Highlighting the continuing interest in his views, he was quoted in the Melbourne Herald Sun on the first day of the new year on whether we were likely to call this year "two thousand and ten" or "twenty-ten".  Based on historical precedent he favoured the latter.  At present he is writing a history of Christianity.

In each of the past six decades, Blainey has produced works of great interest and importance.  Odds are that the twenty-tens will be no different.

Let's hope they can be read on their merits and not through the prism of the history wars.

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Financially green behind the ears

With the latest state polls revealing a surge in Green support, it is appropriate to subject their election promises to analysis befitting of the major parties.

Since November last year, the Tasmanian Greens have announced a multitude of spending promises totalling almost $460 million.

The latest mid-year financial report released by the State Treasury projects a cumulative fiscal deficit of $242 million over four years.

For a State Government living beyond its means, the only feasible courses of repairing the Budget while maintaining business competitiveness are to reduce spending and sell assets.

Yet the Greens' spending promises, at almost double the four-year cumulative deficit, and lack of detail on offsetting Budget savings represents an attempt to defy financial gravity that would only worsen the budgetary outlook.

Many of the policies also appear hastily cobbled together, judging by the spelling errors in media releases such as the healthy school lunches policy (no, "nutricius" is not the name of a long-forgotten Roman emperor, either).

Smarting from the disastrous 2004 federal election campaign, Greens Leader Nick McKim has tried to paint the current suite of Tasmanian Green policies as a benign mix designed to deliver hope and opportunity to the Apple Isle.

However, the syrupy, feel-good political spin of delivering a new future for Tasmania overshadows the real damage likely to be caused by the implementation of Green policies, particularly on the economic front.

Positioning the state public sector as a catalysing agent to oversee the development of clean, green and clever industries would entail a significant, most likely unaffordable, expansion of government control over the economy.

Its plan for net zero greenhouse gas emissions as soon as is feasible, with a minimum of a 40 per cent reduction on the state's 1990 emissions levels in 10 years, implies a bevy of future regulations, levies and charges that would devastate Tasmania's existing industry bases.

In so doing, it would accelerate the migration of the state's most precious resource -- young people -- to job centres on the mainland.

Similarly, the Greens intend on the one hand to reverse energy demand growth through demand management practices (read: price hikes), while on the other subsidise renewable energies that presently lack the capacity to provide sufficient base load power.

The intent to pick energy winners includes a solar panel installation scheme for 10,000 homes and businesses that have all the markings of the failed Rudd-Garrett insulation batts subsidy.

To add to the energy policy confusion, the party's policy platform stresses the need to lower electricity and other utility bills for ordinary Tasmanians.

The Tasmanian Greens have also announced a hotchpotch of regulations that will raise business costs, in turn impairing economic growth and innovation in the long run.

For example, a proposal to introduce minimum energy performance standards for buildings will significantly increase home construction costs and therefore reduce housing affordability.

Proposed changes to occupational health and safety laws, including an industrial manslaughter criminal code, would take Tasmania down the disastrous and costly New South Wales approach in this area.

Meanwhile, a policy plan to convert farmers into price-setters is likely to violate existing intergovernmental agreements to promote open and competitive markets.

Many of the policies already announced by McKim and the Greens would merely expand a State Government bureaucracy already afflicted by lax cost controls.

The Greens plan to encourage the growth of small businesses by appointing a small business commissioner functionary, create new regulatory units within the EPA, and permanently appoint seven full-time equivalent public servants to cart food about primary and secondary schools.

An escalation of the climate change bureaucracy is firmly within the Greens' sights, with plans for a new ministry overseeing all legislation.

The Greens want their new climate change department to word all relevant legislation in a way that prepares citizens for the impact of climate change.  In other words, scare ordinary Tasmanians into climate change belief by a liberal use of flowery language such as "catastrophic", "dangerous", "runaway" and the like.

The next state government may also have to placate Green demands to enshrine bureaucratic pay parity with mainland public services.  Such a policy would dramatically escalate public sector employee costs, at the expense of taxpayers working in the private sector.

Tasmanians may also have to contend with a post-modern Treasury and finance policy, as the Greens seek to move away from a reliance on crude numerical growth indicators of economic success.

While enshrining Bhutan-style gross national happiness measures might give some a warm inner glow, they would remain a poor substitute for meaningful indicators such as gross state product, investment, employment and exports where Tasmania needs to improve.

A number of Green policies verge on exotic, if not downright bizarre.  These include public sector cheesemaking training centres, support for the craft industry, protection of skylines and hillsides, and creating a progressive traffic fine system encouraging low income earners to transgress on the states roads.

McKim has attempted to portray his party as a centrist and sensible outfit.  However, an assessment of their policies suggests the potential for great economic, social and fiscal damage if implemented.

With the state election date fast approaching, it is incumbent upon Tasmanians to choose carefully at the ballot box.

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GST sure to rise under Rudd's health takeover

Do we really want some Canberra bureaucrat determining how much should be spent on our wellbeing?

While Kevin Rudd acknowledged the "long-suffering Australian taxpayer" in his healthcare policy announcement at the National Press Club in Canberra yesterday, there was much more to dislike than like in his speech.

He is proposing that the commonwealth provide dominant funding of the health system, increasing its share from 35 per cent of the cost to 60 per cent.  The devil is in that detail.

There are, of course, aspects of the policy that are good.  Published performance standards should be welcomed.  Ideally they would be at a sufficient level of detail so league tables can be established, something yet to happen in education.  The pledge of "no net increase in bureaucracy" also should be welcomed, although I cannot see this being met.

At the least federal and state governments will have to establish a hospital inspectorate and auditors to ensure the national standards are being met.  Otherwise doctors and nurses will spend more time filling out forms for Canberra than treating patients.  Just look at the administrivia drowning universities.

The financing and governance aspects of the announcement are troubling;  on that basis it is poor policy.  Separating decision-making and financing creates what economists call "agency costs".  In this policy, decision-making is far removed from financing.

Rudd tells us that his plan will eliminate waste and duplication, but greater agency costs imply greater waste and duplication, not less.  It is difficult to see how clinical decisions will drive the system when the dominant funder will be dealing with a large number of small hospital networks.  This is the typical Canberra strategy of "divide and conquer".  It is cold comfort that an "independent umpire" will determine "efficient prices" for procedures.

Do we really want some Canberra bureaucrat (note the "no net increase in bureaucrats" promise) determining how much should be spent on our health?  Do we really want to have health spending allocated on the same basis that the Commonwealth Grants Commission divvies up the GST?

This policy is to be financed by one-third of the GST revenue.  People may think that to be sensible, but hang on to your wallets.  Rudd promised further ostensible reform.  He identified that the gap between expected GST revenue and demands on the health system is expected to increase.

That's code for a future increase in the GST rate.  No doubt, through time the commonwealth will find that it needs to spend more and more on health.  "GST up" will become the new perennial budget headline.

Unlike many other countries with a GST-type consumption tax, the 10 per cent rate has been very stable.  The long-suffering Australian taxpayer has been fairly confident that the rate wouldn't escalate to very high levels.  That was the genius of the Howard government's implementation.  The commonwealth bore all the political costs of the GST while deriving none of the benefit.

Once the commonwealth starts to derive benefit from the GST, we can expect the rate to escalate fairly quickly to European Union-type levels.  In the context of revenue-neutral tax cuts elsewhere in the system, that may be a valid policy choice.  Rudd, however, has spending plans.

Rudd points to Australia's high vertical fiscal imbalance as being part of the problem in health care.  It is true that the healthcare costs are expected to grow rapidly in future and that the states have poor fiscal bases to meet those costs.  It is not clear that greater centralisation is the solution to this problem.  It is especially unclear whether Canberra is up to the challenge.  The home insulation program was a locally managed, centrally funded program and that just didn't go well.

The solution to high vertical fiscal imbalance is not stripping authority and funding from the states but ensuring that the states have a sound fiscal basis for service delivery.  That means the commonwealth needs to collect less revenue and the states more revenue.  It looks like the Henry tax review won't be making that recommendation.

Effective service delivery requires that decision-making and funding be localised as much as possible.  That means greater powers to the states and less to the commonwealth.

Rudd also spoke of directly funding regional areas and bypassing the states.  That is a recipe for a huge boondoggle.  He will also need a constitutional amendment to do so.  Hopefully the states will refuse to co-operate and force a referendum.

This will be the largest healthcare reform in Australian history.  The electorate deserves an opportunity to express an opinion of this reform separately and over and above considerations that come bundled up at elections.  This policy isn't only about health;  it is about taxation and about the nature of our federation.

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The politics of climate change is changing

When I say the climate is changing, I do not mean, as many commentors to my site do, that anthropogenic global warming is destroying the planet.  I mean that the politics of climate change is changing rapidly across the globe -- most notably in Australia and the United States.

Whereas a few months ago, Ross Garnaut and Al Gore represented the conventional wisdom, today they're dissident voices in Canberra and Washington.  Whereas once Liberals and Republicans were kicking against the trend, today conservatives have stolen the march in both Australia and the US.

And whereas once polls showed high levels of public support for saving the planet, today public support for costly policies to curb greenhouse gas emissions is collapsing on both sides of the Pacific.

What's happening?  Why has the climate changed so dramatically in both nations that legislation to implement an emissions trading scheme -- or, as the Americans call it, cap and trade -- is doomed?

Several obvious reasons exist:  the Climategate and IPCC scandals, which raise more legitimate doubts about the "settled science" of global warming; the Copenhagen fiasco, which showed how the flawed UN-Kyoto process gives more states veto power over collective action to solve global problems; the freezing cold northern winters, which reflect a decade-long trend in the flat-lining of the Earth's surface temperatures; and the EU experience, which has seen carbon emissions rise, the carbon price collapse and the ETS a victim of fraudulent traders.

But I suggest another explanation for the changing climate:  opposition conservative politicians have had the gumption to question the Labor government in Australia and Democrat White House and Congress in the US over their proposals to legislate a flawed ETS.

By making the case against the Rudd and Obama climate agendas and spelling out the costs of a big new tax when rising polluters China and India won't follow our lead to reduce their carbon footprint, several principled Liberals and Republicans have changed the political atmosphere in Canberra and Washington to such an extent they now have a decent chance of making big inroads into Labor and Democrat legislative majorities this year.

Start with Australia.  When the Garnaut Report was released more than 18 months ago, the accepted wisdom was that an ETS was a sure thing.  It was deemed blasphemy for anyone, as my old boss Brendan Nelson quickly found out, to dare question Labor's grand ambitions.  Kevin Rudd claimed that climate change was "the great moral, economic and social challenge of our time" and even indulged in conspiracy theories when he linked "climate change deniers" to "vested interests".

Meanwhile, the Liberals vacillated over the right response.  When they finally established a policy under Malcolm Turnbull to back Labor's scheme, the party faithful revolted and the Liberal base crumbled.  Throughout the process, the Coalition was badly trailing in the polls and heading towards electoral oblivion.

With Tony Abbott's rise three months ago, however, everything has changed.  The new Liberal leader has not only subjected Labor's agenda to impose potentially crushing costs on business and consumers to some much needed scrutiny, he has also spelt out in the most forceful and coherent language the flaws of the ETS.

Today, the Coalition's direct-action strategy is far more popular than Labor's big tax that dare not speak its name, and government ministers are running away from a climate debate faster than Tiger Woods fled last week's press conference.

In early December, most commentators (not to mention Turnbull himself) predicted that Liberal opposition to the ETS would destroy the party at the next election.  Today, without missing a beat, the same commentators say it is Labor that is in trouble over the ETS.

On the eve of the by-elections in Bradfield and Higgins in early December, other pundits predicted big swings against a Liberal party that had just rejected Labor's climate bills.  Never mind that the Liberals had smashing victories in both seats.

The climate has also changed dramatically in the US.

Go back to 2008.  As presidential candidate, Barack Obama pledged to slash carbon emissions to 80 per cent below 1990 levels by 2050.  His position reflected the prevailing wisdom in Washington.  Al Gore's movie had been a box office smash and his book was a best seller.  Top US corporations gave strong financial and moral support to the green cause.

Even Obama's Republican opponent John McCain championed a green agenda.

Today, however, the circumstances are very different.  A climate bill which only caps carbon emissions at four-to-five per cent of 1990 levels by 2020, and with loads of subsidies and loopholes for the so-called big polluters, is stalled in legislative limbo, and there is every reason to believe the Senate will not pass it during this mid-term election year.

Wall Street is getting cold feet:  late last year, the Chamber of Commerce withdrew its support for cap and trade, and this month leading corporations BP America, Conoco Phillips and Caterpillar defected from the US Climate Action Partnership, a pro-green business lobby group.  The American people (and news media), moreover, rate climate change well below other pressing policy priorities, such as Afghanistan, health reform and reducing debt, deficits and double digit unemployment.

Although Obama this week made a last-ditch effort to link his climate agenda to incentives for nuclear power and the coal industry, the bill is dead.  The reason is clear among conservative Republicans (and even many Democrats from states heavily dependent on coal and heavy industry):  an ETS is economic pain for no environmental gain, especially when China and India keep chugging along the smoky path to prosperity.

It is precisely the same argument many conservatives here -- Alan Jones, Andrew Bolt, Miranda Devine, Yours Truly -- have been making over the past 18 months.

American faith in the science of man-made global warming is almost in the minority -- from 71 per cent a year ago to 51 per cent today, according to Gallup.  (Intriguingly, in Australia, no recent credible polling of the science exists, but in Britain, the mood is even more pessimistic:  according to a Guardian/Ipso Mori poll this week, the proportion of adults who believe climate change is a reality dropped by 30 per cent over the last year, from 44 per cent to 31 per cent.)

The point:  like Canberra, Washington will follow the national interest as well as the electoral mood, and it won't be intimidated by the Ross Garnaut's and Al Gore's of the world.

It is clear that Labor and Democrat strategists -- and indeed many political commentators -- naively thought climate change would transform the political landscape.

People assumed that because the issue hurt John Howard in 2007, it would also hurt the Liberals in 2010 because they failed to support Labor's ETS.

But politics is never fixed;  it is always in a state of flux.  The only certainty is that the political climate always changes.  And the wind, far from blowing conservative parties off the electoral map, threatens to turn into a perfect storm for both Kevin Rudd and Barack Obama.

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Libertarians spoke out when state began to meddle

Ross Gittins seems to think libertarians have quietly watched as the Rudd government has bungled its response to the north Atlantic banking crisis and massively, irresponsibly expanded public debt ("Libertarians silent on insulation bungle", Sydney Morning Herald, March 1).  Nothing could be further from the truth.

I gave this evidence to the Senate inquiry into the stimulus package in February last year:  "In my opinion, the package does not contain enough stimulus relative to the spending that it contains, and the spending that it does contain is of poor quality.  This kind of stimulus package has a very poor track record of success, and economically we cannot really expect it to succeed."

I gave evidence again in September:  "We have actually seen a very poorly implemented policy of a substantial amount of taxpayer money that has basically, to a large extent I believe, been wasted."

In December, I told a visiting OECD delegation that, in addition to wasteful spending, three people had died in connection with the insulation program and many houses had burned down due to poor insulation practices.

Individuals do not need the nanny state to look after them, but that does not absolve government from responsibility for its actions.  To ask the question, "And whatever happened to individuals accepting responsibility for their own affairs?" is simply astonishing.  The Rudd government established a policy that was poorly thought out and poorly executed.  Individuals responded to incentives created by that program.  Kevin Rudd has accepted responsibility on behalf of his government.

The claim that libertarians have not warned that the stimulus package was wasteful is simply ignorance.

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A turnaround on climate change

"Public loses faith in climate change" was the headline of a report in Britain's The Guardian newspaper last month.

According to a Mori poll, the proportion of British adults who believe climate change is "definitely" a reality has fallen from 44 to 31 per cent over the past year.  And while only six per cent said climate change was not happening at all, the pollster suggested that because those over 64 were not polled, the survey exaggerates the share of true believers.

In the US, a recent Pew Poll had global warming rating last out of 21 concerns put to respondents.

The Obama administration has shifted cap-and-trade legislation into the impossible category.  Meanwhile, the leading Republican on the Senate environment committee, James Inhofe, is seeking a Department of Justice investigation into research misconduct or criminal actions by the scientists including Dr Michael Mann of Pennsylvania State University and Dr James Hansen of Columbia University and the NASA Goddard Institute for Space Studies.

In Australia the latest Nielson Poll still has a majority in favour of an ETS.  But the majority has fallen by 10 percentage points over the past year, with respondents offering contradictory answers to questions on the respective schemes of the government and the Coalition.

And last week the Australian Industry Group whose CEO, Heather Ridout, has long been the chief industry cheerleader for the ETS, announced it was conducting a review of all climate change policy options.  The Business Council of Australia is also reconsidering its support for the government's ETS.

It is clear that in the space of the few months, since all the media attention was focused on green groups' Copenhagen street theatre, we have seen a marked turnaround in opinion.

So what has caused this?

There is certainly no new research into the costs of taking action on emission abatement, or the costs if no action is taken.  There is no new data about climate trends.  There are no new findings about species fragility, ocean levels, the frequency and intensity of hurricanes, or the likelihood of people in rich countries contracting heat induced dengue fever.

What we have seen is a slow drip of news that has punctured the deep faith that climate change is an urgent problem and the conviction, best expressed by alarmists like Professor Garnaut, that the world would arrive at a comprehensive agreement on how to tackle it.

The leaking of emails in October last year from the premier global centre of climatic panic, the Climate Research Unit (CRU) of the University of East Anglia, provided evidence that scientists leading the charge on climate change were keen to avoid scrutiny.  Even their most faithful journalistic mouthpieces at The Guardian and The New York Times could not avoid wagging fingers at their erstwhile sources of inside information.

Much of the rest of the media went on a feeding frenzy.

This was followed by a gradual puncturing of the sanctity of the IPCC data with its supposed endorsement by 3000 of the world's leading scientists.  A series of mistakes and exaggerations have been progressively uncovered.

These started back in 2003, when Canadian researchers McIntyre & McKitrick undertook statistical analysis of Professor Michael Mann's "hockey stick".  Representing a one thousand year temperature trend, the "hockey stick" with its upward trajectory in the 20th century appeared to refute previous thinking that temperature trends were like the zigzags of an extended accordion.

McIntyre & McKitrick deflated the statistics behind the "hockey stick" which had been the poster child of the IPCC third assessment report published in the year 2000.

The IPCC quietly downgraded the "hockey stick" in its 2007 report.

But the Climategate revelations energised a new questioning of the accuracy of the science as presented by the IPCC and even the integrity of the scientists themselves.

What we have seen over the past few months is scientific evidence that refutes or undermines key elements of the 2007 IPCC report on which all the political urgency for action on climate change has rested.

We have seen the evidence of imminent Himalayan glacier retreat refuted in spite of sneering attacks on the questioners by the IPCC head, Rajenda Pachauri.  We have seen evidence that the Amazon rain forests disappearance is exaggerated, that half of the Netherlands is not, after all, facing oceanic inundation, and that hurricanes are not increasing in intensity or frequency.

And those pesky polar bear populations are actually increasing, thereby defying the evocative pictures of marooned creatures drowning in a balmy Arctic Ocean.

Warming itself has appeared to have stopped, perhaps temporarily, a fact that even the defrocked high priest of the rising temperature trend, CRU's Professor Phil Jones, has been forced to concede.

And the IPCC estimated climate trend prior to 1980, which predates accurate satellite based records, is also under a new assault because crucial data has disappeared and many claim records are contaminated by local warming.

Copenhagen itself turned out to be far from the planned meeting, where the EU and US would have forced developing countries to join them in abating emissions.  The developing countries themselves recognised this as economic suicide, and Copenhagen demonstrated a shift in the balance of world power to China, rapidly assuming industrial dominance while at the same time becoming the mortgagee of the US economy.

China's muscle was demonstrated by their refusal to allow German Chancellor Merkel to announce Germany's own targets.

Where to from here?  It seems inconceivable that global warming as a scare will abruptly go the way of Y2K.

This is because the research grants, taxpayer subsidies to renewables, public statements by political leaders and long lags before there can be certainty about the degree of warming that might take place.  At the same time there will be no international emission restraint on the scale necessary to stabilise existing global levels of CO2.

But the vested interests promoting wasteful expenditures are well established.  The impetus created by over a decade of poor policy is too strong to allow the sort of "peace dividend" like that which came with the Fall of the Berlin Wall.

Instead we are likely to see only a gradual reversal of the wasteful abatement expenditures and investment risk measures set in train by the IPCC claims of catastrophic global warming.

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Not another transport plan

Every time New South Wales changes Premiers, it also changes Transport Plans.

The latest one, recently announced by Premier Kristina Keneally, has one key positive -- it kills off the Sydney Metro.

Despite the fact that it has already cost NSW taxpayers a whopping $271 million, and that there will also need to be compensation paid to the now redundant bidders, these are actually small prices to pay for avoiding further expenditure on a metro proposal that was destined to be a multi-billion dollar white elephant.

Of course, that should not in any way excuse NSW Labor from the responsibility for having invested in such a foolhardy plan in the first place.  Stage One of the metro alone had a price tag of $4.8 billion, and yet was largely duplicating other public transport services.

NSW taxpayers will have to cop the wasted expenditure and Sydney commuters will continue to suffer from the diversion of funds to the metro, rather than to funding realistic solutions to Sydney's transport problems.

Of course, there is also collateral damage from constantly changing plans.  In the case of the now abandoned metro it is highlighted by the plight of small business operators in CBD buildings purchased by the Sydney Metro.  Their businesses have already lost most of their customer base, due to office tenants vacating the buildings, but now remain in limbo with the buildings being held in government ownership in case a future government decides to reinstate the metro project.

When it comes to the actual proposals in the Keneally plan, debating their merits is pretty much an academic exercise, as one can safely assume the plan will never be implemented.  It is hard to see too much of it being locked in by the time the State Election comes around in March next year.  That is probably also why, as the State Opposition have pointed out, it is not fully funded.

There is no doubt that an incoming Liberal-National government will have its own plan.  Even in the unlikely event that Labor was re-elected, history tells us that a new plan would not be far away.  Certainly, anyone expecting to use the now reinstated north-west heavy rail link, a project originally announced in 1998, but deferred at least four times, to be delivered by the slated completion date of 2024 must possess an unusually trusting nature.

If scrapping the metro had been the only change to her predecessor, Nathan Rees' transport agenda in Keneally's first three months in the job, she might earn positive marks.  However, three days before Christmas, she seriously blotted her copybook by ditching the previous Rees policy of moving towards privatising Sydney Ferries.  This flip-flop was correctly seen by most observers as caving in to the maritime unions.
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Ferry privatisation was recommended by Bret Walker SC, who conducted an inquiry into Sydney Ferries in 2007.  The need for it was confirmed by a report by the NSW Auditor-General late last year which highlighted a failure to meet eight out of 12 operational and financial targets in the year to June, with on-time running, passenger complaints and sick days per employee all falling below target.  And in a startling admission of failure the latest plan actually predicts an ongoing decline in ferry patronage.

In fact, NSW desperately needs to not only privatise the ferries, but the rail and STA buses services as well.  Throughout the past decade Sydney has seen much lower public transport patronage growth than other Australian cities, in particular, market leader, Melbourne.  A key reason why Melbourne has outperformed Sydney in public transport has been the fact that its trains and trams have been privately operated since 1999.

While the Melbourne system has its share of problems, operators have often been victims of their own success as the patronage boom led to problems such as over-crowding.  The Victorian government was slow to respond to the boom and the biggest problems such as the new ticketing system, myki, have been government initiatives.

While the NSW government has almost moved to a point somewhere beyond ridicule, they are not alone in the constant reissuing of transport plans and changing policies.  Attending conferences of transport professionals in recent years, one would constantly hear the refrain that the city in question needed a comprehensive integrated plan.  The actual problem has not been a lack of plans, but an inability to choose the right elements of plans and to actually deliver them.

There is a tendency to include large sexy projects to capture the imagination of the media and the public.  Metros certainly fit that bill, and have been floated in cities other than Sydney.  There is a metro in the 2008 Victorian Transport Plan, but, thus far, it is considered long-term, attracting nothing other than study at the moment.  Queensland Premier, Anna Bligh, last November raised the concept of a metro for Brisbane saying that "the time to talk about it is now".

There is not much harm in studying and talking, but even that is a distraction from the practical requirements of getting the public transport basics, such as maintenance of existing rolling stock and infrastructure, right.  Hopefully, the scrapping of the Sydney Metro will make the Victorian and Queensland Governments have second thoughts about pursuing them for their capital cities.

So next time you hear about a "visionary" transport plan it is probably best not to get too excited.  The big projects will probably never happen but, before they are scrapped, they will probably eat up lots of resources and divert attention from the real problems.

What transport plans actually need, first and foremost, is the right structural model.  Thus, a decent transport plan for NSW would propose privatisation of ferries, trains and buses.  Beyond that, it needs practical capital projects which provide more capacity where it is most needed in the transport network.  And most of all it needs the political resolve to choose the right plan and to stay the course to actually implement it.

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