The state we're in: redrawing Australia

The Force from the North, Bob Katter, doesn't do anything by halves.

His independent compatriot Rob Oakeshott has spent the last week pushing out ideas about parliamentary reform, a new politics of consensus, and Team of Rivals-style cabinet government.

Katter's contribution has been a little more out of the box.  On Thursday he proposed a wholesale redrawing of Australia's state boundaries.

The plan is as follows:

Queensland gets neatly split in two, from about Rockhampton.  South Queensland gets everything from Byron Bay to Bundaberg.  North Queensland gets the rest, including, of course, Katter's own electorate of Kennedy.

The Northern Territory loses a fair chunk of its south to an engorged South Australia, but its western border gets pushed out all the way to the ocean, taking the Kimberley and Broome from Western Australia.  The new state -- it'd be a state -- would be renamed North-Western Australia, leaving Australia with an embarrassingly unimaginative bunch of state names.

Katter reckons new states would allow the country to better exploit the resources of the north, to become a food bowl, and accommodate 100,000 extra people.

Perhaps I'm taking Katter's plan more seriously than anybody should.  But you know what?  It's not a bad idea.

In 2010, it's extremely refreshing to see a politician stand up for the very existence of states.  From all sides of politics we're far more likely to hear states are anachronistic relics of the 19th century -- frustrating barriers to good policy.  Not everybody goes so as far as arguing states should be eliminated entirely, but most are eager for the federal government to intrude further and further into state areas of responsibility.

One of Katter's arguments for his plan is more important than it first seems.  "I don't know of anywhere else in the world where people are governed by a government thousands of kilometres away," he told the Northern Territory News.

Indeed, one of the key ideas behind a federal system is that the nearer a government is to the people it governs, the more likely it will govern in their interests.  The needs and desires of citizens in Victoria and the Northern Territory sharply diverge.  Katter is arguing the needs of those in Coolangatta and those in Mount Isa, nearly 2,000 kilometres away, can be just as different.  There is little reason to doubt it.

So when Katter talks about living in a "North Queensland paradigm" instead of an "Australia paradigm", it actually makes a bit of sense.  Many in his electorate no doubt agree;  Katter's two candidate preferred result was a massive 69 per cent.

Katter's antipathy towards free trade and the economic reform of the last few decades has become very well-known over the last week.

Not only can states tailor their policies to the needs of their electorate, they act as policy incubators.  Policies can be tested in an individual state before being adopted elsewhere.  If policies don't work, well, at least the damage is limited.

So more states, more experimentation.

If Katter wants North Queensland to get back into the state intervention game, then that's North Queensland's prerogative.

Across the border, the expanded and empowered Northern Territory could be a low tax, low regulation zone.  We'll see which state does best.

Reconfiguring the federation would be complicated, sure.

But we have a habit of believing our existing political arrangements are fixed and therefore eternal.  The Australian federation is only just over a century old.  And while our constitution has barely changed, the Commonwealth is doing things that would have astonished its authors.

Western Australian secessionism keeps raising its head, and will likely get louder as the rest of the country tries to expropriate the gains from mining in that state.

The boundaries of Australia are not written in stone.  Nor should they be.  Giving Bob Katter a pen to redraw the borders is radical, but not revolutionary.

Rob Oakeshott's proposal for "consensus" government has been given serious attention, even though the corollary to his idea -- having no opposition -- is patently absurd.  Well, maybe it's not a bad idea if you're engaged in total war against the Hun and the Empire of Japan, but it hardly seems appropriate in 2010.

At the same time Oakeshott is calling for consensus, he's calling for the adoption of ideas from the Henry Tax Review and the Garnaut Climate Change Review.  In other words, the most divisive reform proposals in the last few years.

Bob Katter's plan for new states has the opposite problem.  His plan seems absurd upon first glance -- the NT News titled their article about his plan as "'Cut snake' Katter eyes Top End slice".

But it makes a lot more sense than some of the other proposals being canvassed as we wait for a government to form.

ADVERTISEMENT

Replace this partisan Treasury with an independent budget office

The independents have asked for Treasury briefings and advice on ALP and Coalition policy as part of their decision-making process.  At face value this would seem prudent, even sensible.

Unfortunately there are some stumbling blocks that prevent this from being wise.

In the first instance, as the Coalition has made clear, Treasury has already leaked Coalition policy costings.  This is an act of extraordinary bad faith and reflects poorly on what should be the premier policy department in the commonwealth public service.

But that is just the tip of the iceberg.  Treasury has become partisan.  We've known this since Ken Henry was highly critical of Coalition policy in a leaked speech before the 2007 election.  Matters were made worse during the Kevin Rudd prime ministership when cabinet was bypassed and Treasury seemingly elevated to decision-making status.

Lenore Taylor and David Uren's excellent account of the Rudd era, Shitstorm:  Inside Labor's Darkest Days, tells how Treasury was involved in managing Australia's response to the global financial crisis;  in particular, how Treasury had abandoned longstanding economic principles and decided it would be the first to recommend fiscal intervention in the event of an economic slowdown.  Then there was its strong endorsement of pink batts and the ''Rudd bank'', and the not-so-small matter of the mining tax.

That last ill-fated proposal was dreamed up in Treasury and foisted on an unsuspecting public.  To make matters worse, Treasury made several factual mistakes during the process, arguing, for example, that Australian mining companies paid about 17 per cent in tax and quoting an academic US working paper to that effect when, in fact, the effective rate of tax mining companies pay when you add in all taxes and royalties is about 41 per cent.  Not to mention the kerfuffle over the amount of revenue the Resource Super-Profits Tax would raise relative to the minerals resource rent tax.  Would the RSPT have raised $12 billion or $24bn?  Was the revenue cost of the change to the MRRT $1.5bn or $6bn?

These are large numbers to be throwing around and the differences suggest the government and Treasury were just making it up as they went along.

Adding to its problems, Treasury published a graph in the budget papers arguing that early aggressive fiscal intervention had reduced the effect of the GFC in some economies.  It turned out the data supporting that argument had been cherry-picked.  All up, Treasury has just not had a good time recently.

It is one thing to claim Treasury is partisan and that it has made a large number of avoidable errors in the recent past.  It is quite another to claim it is negligent.

Yet that is what the caretaker Gillard government expects us to believe.  Treasury would have been extraordinarily negligent if it had not undertaken a cost-benefit analysis of the national broadband network or even a business plan.

This means somewhere in the bowels of Canberra there is an NBN cost-benefit analysis that should be released to the public and, more importantly, to the independents for discussion.  Government hypocrisy on this issue should be exposed.  As award-winning internet entrepreneur Bevan Slattery has argued, the chief executive of NBN has admitted it will never be commercially viable and, as a result, it should not be an off-budget expenditure item.

This kind of Enronesque behaviour makes a mockery of public finance.  It also undermines claims that the budget will be returned to surplus in 2013.  The problem with the NBN is there are so few tech-heads who really understand the issues.  Meanwhile, the government has a $43bn boondoggle with which to bamboozle the electorate.

Senior Treasury officials must know they will be facing some tough scrutiny in the event of a Coalition government.

The ALP economic record has been designed and implemented by Treasury beyond simply providing technical advice.  It would be judging its own performance.

One of the great lessons of the Rudd era is that Westminster institutions can be subverted.  The notion of an independent, non-partisan public service has served us well for a long time.  Yet it is clear Australians can no longer rely on that convention.

Treasury simply cannot brief the independents on ALP and Coalition policy.  Everything it could say should have been said in the pre-election fiscal and economic outlook.  For Treasury to do further work on Coalition costings would be a breach of both the caretaker conventions and the charter of budget honesty.

This leaves us with a problem.  In the short term, the independents want some economic advice;  but the Coalition can't trust Treasury.

There is no shortage of economic expertise in Australia;  the Productivity Commission, for example, could undertake the costings;  or any one of the large accounting firms or economic consultancies has the necessary expertise.

But there is a need for long-term solutions, too.

Former opposition leader Malcolm Turnbull's idea of a parliamentary budget office that would be beyond government control and report directly to the parliament should be implemented in the next term of government.  The present Treasury department should be gutted to create the new parliamentary office, with the existing Treasury becoming a political adviser to government and being acknowledged as such.

Before the next election, which is likely to be sooner rather than later, all parties should be obliged to submit their policies for costing.

An additional reform that should be considered is a functional audit of all government departments and statutory bodies.  Right now financial audits occur.  But the problem isn't whether public servants are running off with the petty cash.  The far greater problem is whether appropriate decisions are being made.  For example, an audit of the Reserve Bank could ask why it was raising interest rates in early 2008 as the GFC unfolded.  Similarly, why have Treasury revenue forecasts been so poor for such a long time?  An independent budget office would undertake a public a cost-benefit analysis of the NBN.

In other words, there is a lot of work to be done.  The work is important and wouldn't be cheap.  Creating an independent economic advisory service in Canberra would not be cost-neutral, but it would provide better, independent information and advice than the Treasury has been able to do.

ADVERTISEMENT

Informal ballots: blame compulsory voting

Don't blame Mark Latham's 60 Minutes spot for the increase in informal ballots last Saturday.

Blame compulsory voting.

The 2010 election saw the highest number of informal votes cast in more than 25 years.  In seven separate seats the informal votes were higher than 10 per cent of the total -- all in New South Wales.

Latham's muckraking reflected the general sense of disillusionment with the political choice in 2010.  He was not the cause of it.  If his spot was broadcast during, say, the 2007 election, Latham would have simply been dismissed as a posturing clown.

Well, more of a posturing clown.

Those who deliberately spoil their ballot are indicating they are not simply frustrated with the choices, but are frustrated they are compelled to choose.  The informal vote is as much an indictment of the system as a protest against this campaign.

Sure, many informal votes are only accidentally informal.  Most people want to place a valid vote, even if they don't have enough interest to figure out how to do so.

Yet that should be damning enough.

In 1924, a Labor Senator said that the ''the opinions of the negligent and apathetic section of the electors are not worth obtaining''.  A bit harsh.  But certainly it seems counterproductive to force the negligent and apathetic to give an opinion on something they are not interested in.

Many voters themselves feel they are not well-informed enough to make a choice.  The extremely high number of undecided voters up to polling day is a clear sign the parties completely failed to engage many voters.

Indeed, much dissatisfaction with Election 2010 can be traced back to our compulsory voting system.

In 2005, RMIT Professor Sinclair Davidson and two other RMIT academics, Derek Chong and Tim Fry, examined the political consequences of voluntary voting.  (They may have telegraphed their punch in the title:  ''It's an evil thing to oblige people to vote''.)

Davidson and Co. found the biggest losers from compulsory voting are the minor parties.

In the four federal elections the authors looked at (2004, 2001, 1998 and 1996), the Democrats and the Greens could have had a substantially higher vote share, if voting wasn't compulsory.  Certainly in the Senate, but often in the House of Representatives as well.

In 1998 the Democrats could have received more than 15 per cent of the Senate vote share, compared to the 8 per cent they actually did get.  In the 2004 election, the House Greens vote could have jumped from 6.8 per cent to 9 per cent, and in the Senate from 7.4 per cent to 10 or even 14 per cent.

The academics also argued a voluntary voting system might slightly favour the Coalition.

Nevertheless, we should take their conclusions with a grain of salt.  The parties prepare their election strategies with the quirks and consequences of compulsory voting firmly in mind.  You go to election with the system you have.

The obsessive focus on marginal electorates is arguably a consequence of our ballot system.

The major parties by and large favour compulsory voting because it is more efficient for them.  Marginal electorate campaigns are the electoral equivalent of Roman divide-and-rule.

In a voluntary voting system, they'd have to work to energise not just marginal voters, but their base as well.  You cannot expect unthinking loyalty from your supporters to get you into government.  Your supporters might stay at home.

At the very least, all parties would be forced to rethink their strategies -- and policies -- to suit.

There's another important argument against compulsory voting -- we ought to have the freedom not to vote.  In one of this country's few libertarian classics, Rip van Australia, John Singleton claimed it is the ''ultimate contradiction for a supposedly free and democratic society to be founding on a system of compulsory voting''.  But Australia is a very utilitarian country.  Arguments about rights and liberties don't get very far here.

Many people claim that compulsory voting gives elected governments legitimacy.

Put aside for a moment the implicit belief that the majority of democratic governments overseas are therefore somewhat illegitimate.  If legitimacy is what we're seeking, then why not compel citizens to take turns running for parliament (like jury duty for Canberra) or insist they join a political party?

Absurd, of course, but the legitimacy argument is too vague to be useful.

The independents say the result of this election reflects a desire in the community for parliamentary reform.  And the Greens claim the preferential system conceals their party's electoral support.

They might all want to rethink compulsory voting.

ADVERTISEMENT

Power struggle leaves mining tax in flux

With a hung parliament delivering rounds of political horse-trading between the two major parties and independents over the next days and weeks, the recent uncertainties affecting the mining sector are set to continue.

At the centre of this uncertainty is whether or not a federal mining tax will now be imposed in the first place, let alone at what rate and structure it will be set.

It is well-known that Julia Gillard and Labor are proposing a Mineral Resources Rent Tax of 30 per cent on iron ore and coal miners.  The existing offshore Petroleum Resource Rent Tax will also be extended to onshore oil and gas projects.

These new arrangements will increase the effective tax on mining and so diminish the international competitiveness of some of our large export earners, driving potential new ventures offshore.

It is widely understood that the Liberal-Nationals Coalition under Tony Abbott will not progress with a dedicated federal tax on mining activity.

That the Coalition won a swag of seats in the resources state of Queensland, and performed strongly in Western Australia, provides some evidence in support of its anti-mining tax stance during the campaign.

It appears that a number of independents in the Lower House, including Bob Katter in Kennedy and the independent WA National Tony Crook in O'Connor, are staunchly against the MRRT.

Others, such as independent Andrew Wilkie and perhaps Tony Windsor, might support Labor's mining tax policy.

Given that the Greens have now assumed balance of power status in the Senate, it is necessary to also considertheir stance on the mining tax as a possible price for the formation of a minority government.

In early April, Greens leader Bob Brown called for a 50 per cent ''resource rent tax'' on mining company profits.

Revenue from this super-tax would be funnelled into a ''national resources fund'' for a range of pet projects ostensibly determined by political priorities.

The Greens have already indicated a desire for revenues from their mining super-tax to finance a high-speed rail link on the eastern seaboard.

This is despite two decades of feasibility studies showing such a scheme to be unviable, particularly against high-speed, low-cost aviation.

During the election campaign, Brown maintained his push for heavier taxes on mining boasting that the million-plus expected votes for the Greens nationally would represent a mandate for ''a bigger return from the big miners''.

What happens next on mining taxation crucially depends on which major party happens to fall over the line of minority government.

If the Abbott-led Coalition secures sufficient support on the Lower House floor, the mining tax immediately disappears from the forward estimates of the budget papers.

If Gillard scrapes over the line, a mining tax will either stay or go.

The mining tax would stay if Labor chooses to engage with the Greens in the Senate.  A clear risk is that the Greens might demand their preferred higher mining tax in exchange for giving Labor support for its legislative program.

As has been noted by recent international investment surveys, it is entirely possible that higher mining taxes could lead enterprises to redirect more of their money, time and energies away from Australia towards more hospitable mining tax locations around the globe.

This could imply either that currently exploited ore bodies in Australia will be mined less intensively than otherwise would be the case, or some deposits including those with lower-grade ore will not be extracted at all.  Local mining investment, employment and export sales would all be adversely affected under this scenario.

On the other hand, if Labor decides to sideline the Greens and seek co-operation with the Coalition in the Senate then the mining tax may well be the first casualty of such an deal.

In this case Treasurer Wayne Swan will need to explore additional expenditure reduction options to balance the budget by 2012-13.

Nothing less than Australia's position as a leading mining investment destination will hinge on the outcome of the political horse-trading now in train.

ADVERTISEMENT

Moving forward mantra Gillard's biggest mistake

In retrospect, Julia Gillard's big mistake wasn't calling the election so quickly, or negotiating with the miners, or even announcing the climate assembly.

It was using the phrase ''moving forward'' 20 times at her election announcement.

The sense that Gillard is stage-managed and unreal has lasted almost through to polling day.  You can tell the Labor Party is still concerned about it, and the Coalition is convinced Gillard's public image makes Tony Abbott look very good.

It accounts for -- although does not really explain -- Labor's bizarre decision to pretend Gillard's campaign launch speech was off-the-cuff.  That backfired when the press cunningly took a photograph of her typed speech on the lectern.

Off-the-cuff-Gate is completely inconsequential.  But the fact that, as late in the campaign as the campaign launch, the ALP thought it had to deceive for Gillard to be seen as passionate shows just how damaging this initial impression was.

After all, it had been a good two weeks since ''real Julia'' took over.

If Abbott initially struggled because the Liberal Party had spent the last twelve months preparing to defeat Kevin Rudd, Gillard suffered because it appeared ALP strategy consisted of the phrase ''moving forward'' underlined twice on the back of an envelope.

Perhaps as a consequence, the Labor policies announced in the first few weeks were gimmicky and easily ridiculed.  Not just the climate assembly -- an insult to the national intelligence, even considering the carnival atmosphere of the global warming debate -- but also the $2,000 trade-in payment for gas-guzzling cars, which comes with its own derogatory nickname, cash-for-clunkers.

That's not to say there haven't been strong ideas from the Labor side.

Gillard's education proposals are easily the biggest and most substantial of the campaign.  It helps that they're actually good too.  Performance pay for teachers, devolving greater budget and hiring powers to principals, bonus funding for schools showing the greatest improvement -- these are policies which push us closer to a dynamic and competitive education system.  And, dare I say, a bit of a ''market'' one as well.

You get the impression Gillard is genuinely energised by education policy.

That, and WorkChoices was bad.

For a short time last year the causes and consequences of the Global Financial Crisis sparked a passionate ideological debate in Australia.  But the sparring between Malcolm Turnbull and Kevin Rudd over the role of the government in the economy is a distant memory.

Abbott and Gillard were barely participants in the debate over the stimulus.

The two current leaders' views about government aren't that different.  On many issues they converge.  Abbott is a big government conservative.  Gillard is a market-leaning social democrat.

The attempts during this campaign to revive the stimulus debate have seemed hollow.  Abbott, for his part, is much more comfortable talking about pink batts and school halls than Keynesian fiscal policy.

And Gillard has struggled to fully adopt Kevin Rudd's policies as her own.  Moving forward provides little opportunity to look back.  Not only the stimulus:  we've heard very little about Labor's expansive health reform plan.

One notable side issue of this campaign has been gay marriage.

Neither major party has altered its position at all, of course.  But the consistency with which gay marriage has been pushed at the candidates at every stop shows it is now a mainstream question.

Both Gillard and Abbott have had to fall back on reminding listeners that their governments have made substantial progress removing lots of other discriminatory policies against gay people and gay couples.  They're right, but marriage has gained almost totemic status in this campaign.

It's hard not to see Election 2010 as a turning point.  The case against same-sex marriage is looking weaker and weaker, and opposition to it looking more like stubbornness than principle.  International experience suggests that gay marriage can be legalised without complete social and moral disintegration -- after all, doing so makes it legal, not mandatory.

Gay marriage is unlikely to swing many votes.  But Julia Gillard's atheism makes her hostility to altering the Marriage Act look somewhat insincere -- a bit too politician-like, a bit too focus-grouped.

For better or worse, that's not a charge you could level at Tony Abbott.

Abbott is a self-described weather vane, sure.  But when he changes his mind on policy, even for purely political reasons, he's the first to tell you about it.  Abbott has always treated his political career as an opportunity to share his feelings and grow.  It's very odd.  But it's disarming.

All year, the Liberals had been planning to depict Kevin Rudd as a poser who was more interested in polls than effective governing.  Abbott was to be the opposite:  the more-real-than-real candidate.

Who'd have thought that plan would work just as well against Julia Gillard?

ADVERTISEMENT

Surely the election can afford debate on housing

As a concern among the electorate, housing affordability ranks above industrial relations, interest rates and asylum seekers.  But until yesterday, housing affordability was missing from the election debate.

In Victoria, housing policy is dominated by the government's extension of the urban growth boundary (UGB).  This will allow an additional 26,000 hectares to be developed for housing.  The enlargement is equivalent to one-thousandth of the state's land area.

The land newly earmarked for housing incurs a $95,000 per hectare ''Growth Areas Infrastructure Tax''.

Planning Minister Justin Madden claims this revenue is ''to pay for new schools, roads, community facilities and services, public transport and healthcare''.

New areas require no greater government services costs than existing areas.  The government recognises this, which is why new developments in Geelong, Bendigo and other regional centres don't have special levies.

Government planning policies cause a scarcity of housing land, which inflates land values.  Hence the $95,000 per hectare tax is simply state revenue's share of the excessive prices new home buyers must pay as a result of planning restrictions.

Rather than allowing increased land supply, the State Government prefers a share of the price increase its policies create.

Planning restraints cause the price of farm land on the city edge to increase from a few thousand dollars per hectare to half a million dollars per hectare once it has the necessary housing development approvals.

In this respect, placing land within the UGB is only the first stage of a process that can take 20 years before building can commence.

Delays and requirements for land set-asides add further costs to getting a block of land ready for a house to be built.

The impact on new housing land in Melbourne amounts to about $70,000 a house.  This accounts for about a third of a $210,000 house, bumping a ''starter'' home to $280,000.

Young people find it difficult to get a foot on to the housing ladder because it is they, the housing have-nots, who pay for the costs of land-use restraints.

In spite of the issue's importance, it has not been prominent in the federal election campaign.

Labor's policies are confined to social housing.

The Greens discuss housing policy at length.  They proclaim ''affordable housing is a human right''.  But their proposals would further restrain land use and inflate land prices.

The Greens' plans to require higher spending on insulation and bicycle paths would further increase house prices.

Family First explicitly calls on state and federal governments to ''release more land suitable for housing''.

The Liberals, in a last-minute policy announcement, propose measures to promote such outcomes.  They would use federal funding to make the states increase the supply of housing land and reform their planning and approval systems.

Housing affordability has been politically backseated for a number of reasons.  Many voters have concerns that urban expansion means additional costs or loss of farmland.  Neither of these fears is warranted.

Unless land-use regulation is relaxed, many younger Australians will continue to find home ownership an impossible dream.

ADVERTISEMENT

Keep ambitions modest

If Julia Gillard wins the election tomorrow you can only hope she'll lead a better administration than Kevin Rudd.

If Tony Abbott wins you can only hope he doesn't run his government the same way he's run his campaign.  Being safe and conservative for the last month might end up making him prime minister, but it won't be enough to make him a good PM.  He'll need to be a bit brave.

If somehow Abbott wins the election and then doesn't tackle tax reform and industrial relations, is time in office runs the risk of being viewed in much the same way as some regard the last terms of Malcolm Fraser and John Howard -- pointless.

There have been two overwhelming impressions from the campaign..  The first is that Labor and the Coalition are basically the same.  Which isn't true.  On fiscal policy, climate change, and education to name just a few issues there are significant differences between the parties.  Supposedly the parties agree on industrial relations, but that's only because the Coalition has decided that for the moment at least it isn't worth the fight.

It's a mystery why so many people want to believe Labor and the Coalition are similar.  Maybe it's because in Australia these days it's trendy to be cynical about politics and politicians.  The claim that it doesn't matter who you vote for because all politicians and their policies are identical is a manifestation of this cynicism.  Sometimes the cynicism is understandable.  Look at the way Labor governments in NSW have treated the state and its voters.

At this election Gillard promised to build a $2.6 billion rail link to overcome traffic congestion in western Sydney.  This is the same link that as promised by the NSW government a decade ago.  The Greens NSW Senate candidate Lee Rhiannon put it nicely:  ''Western Sydney has been promised the Epping to Parramatta Rail link for so long, they're more likely to believe in the tooth fairy than the project being delivered''.

Apathy that transforms into cynicism is the sort of attitude that's needed to tolerate a system of government that at least in NSW is impervious to change.  And the more cynical people become the more they tolerate failure.  If you expect bad government, you'll get bad government.

The second impression of the 2010 campaign is that it's been without any great ideas, grand plans or sweeping visions.  That's true.  However, people speak as if that's a bad thing.  For a change, at this election we haven't had politicians telling us how they'll remake the nation and how they'll rearrange society.  This is something we should celebrate, not complain about.

Admittedly this new-found restraint from Gillard and Abbott is more an accident than the product of a realisation that there's a limit to what government can and should do, but nonetheless, it's better than nothing.  When Abbott was asked why people should vote for him, he replied he'd provide a ''competent, steady government that respects the taxpayer's dollar and which treats the Australian public with consideration''.  If only all politicians were as modest.

It's a paradox of modern Australian politics that the more things politicians muck up, the more we want them to do.  In Australia we've turned the biblical parable of the talents upside down.  In the parable the two servants who invest their master's money at a profit are rewarded and given responsibility over larger amounts.  The servant who lost the master's money is admonished and cast out of the household.  But that's not what happens in this country.  A government that has mismanaged a $2 billion scheme to install home insulation is then entrusted to build a $43 billion broadband network.

Australians prefer to have their government do their thinking for them.  It's easier.  And if something goes wrong you just blame the government.  Or ask the government for a handout.

Over the years we've got so used to Gough Whitlam, Paul Keating, and Kevin Rudd lecturing us we've almost lost the capacity to think for ourselves.  We've allowed the politicians to take it upon themselves to define the national character.  When politicians aren't lecturing us we feel uncomfortable.

And so it is at this election.  Somehow, we've come to think that because Gillard and Abbott haven't told us what their ambition for the nation is, that therefore the nation is without ambition.  In fact a nation's ambition is the product of its citizens, not its politicians.

ADVERTISEMENT

NBN: Crippling government regulation to blame

At the Labor Party launch on Monday, Julia Gillard made the National Broadband Network central to her pitch for reelection.

And if you were introduced to the broadband debate this year, you'd be forgiven for thinking there wasn't really an alternative to the government's plan.

Communications Minister Stephen Conroy described the opposition's broadband plan as a ''failure of imagination''.  The fact that this seems like a powerful critique shows how stilted the debate over broadband has become -- apparently the problem with the Coalition's broadband proposal is it doesn't soar with the eagles.

But think back:  just a few years ago Telstra was begging the government for permission to build its own super-fast broadband network.  At no cost to taxpayers.  Completely free of government subsidy.  If the previous government or the Australian Competition and Consumer Commission had allowed it, there's a good chance the private sector could have been building the broadband network already.

After Tony Abbott's performance on the 7:30 Report last week, you bet he regrets the previous government didn't take broadband policy off the political table.

There was a stickler of course.  Telstra was asking for a regulatory holiday -- that is, to exempt its new fibre investment, for a time, from the requirement to share it with its competitors.  Failing that Telstra wanted the ACCC to nominate the price that the company would be compelled to share its new network, before they built it.  After all, telecommunications networks cost a lot of money.  The ACCC sets the price competitors pay to access Telstra's network, and Telstra wanted some assurance it would be able to charge a price sufficient to recoup its investment.

The ACCC refused to do so.  The Howard government wouldn't make any legislative changes.  Telstra ramped up its rhetoric, attacking both the government and the ACCC chairman, Graeme Samuel.

Into this bitter quagmire stepped the Labor Party and Kevin Rudd's open chequebook.

NBN boosters like to say there is a ''market failure'' in telecommunications.  But the government's regulatory framework is the problem.  It's not the marketplace which has failed to deliver broadband.  Government failure has.

The NBN plan tries to sidestep the regulatory failure, by having the government assume responsibility for telecommunications investment now and into the future.  That's exactly what Telstra's privatisation, way back in the 1990s, was supposed to leave to the market.

So Australia is still struggling to break away from a century of nationalised communications.  And doing so will mean making peace with an independent Telstra.

There is widespread anti-Telstra sentiment -- not only from the Labor Party, but also from rural Liberals and the National Party, who imagine the high cost of providing telecommunications services in the bush is just thinly disguised anti-country bigotry.

On the other hand, many Liberals are understandably reluctant to be brutal to Telstra because the Howard government encouraged everybody to dump their life savings in Telstra shares.

The Labor Party has taken to presenting broadband as if it is simply a giant present from government to its people, and anybody who objects to the NBN must hate the internet.  And the opposition, afraid of looking too close to Telstra, is trying to ape Labor's approach without completely surrendering its debt and deficits attack on the government.

At least it'll be cheaper, I guess.

Here the absence of a cost benefit analysis for the National Broadband Network is telling.  Does anyone doubt the government wouldn't like such an analysis (if it was flattering) to help defend their policy?  Or NBNCo?  Or the many firms which will get some of the huge amount of money the government is about to dump into the telecommunications sector?

As the tech publisher Grahame Lynch said in The Australian last week, it is ''astonishing that not one ... has mustered the modest resources required to prepare a credible cost-benefit analysis that attempts to measure the claimed externalities for the NBN in areas such as telecommuting, e-learning and telemedicine that are bandied about ad nauseam.''

It seems certain at the very least Treasury would have made some effort to look at the costs of the NBN relative to its benefits.

If it truly hasn't happened -- if Treasury really haven't bothered to investigate whether this investment is worth the money -- then the government is extraordinary negligent.  Let's give them the benefit of the doubt, and say they're not, and the results just haven't been released.

So the absence of the cost benefit analysis in the public sphere is a very strong hint the government's broadband spend doesn't really have much of an intellectual case.  Julia Gillard and Stephen Conroy can talk all they want about how broadband will boost e-health, productivity, education, and things we haven't imagined yet.

But if only the government had dealt with its crippling telecommunications regulations, the market could have been boosting all that already.

ADVERTISEMENT

Green protectionist folly

Under environmental disguises, industry and labor unions are running parallel campaigns with environmentalists seeking to roll back free trade.  For years, ''green'' groups have been pushing for environmental trade restrictions in developed countries such as the United States.  Carbon tariffs, forestry import bans and certification requirements on the origin of products have become regular fixtures of environmentalists' demands.

Now their cause is being adopted increasingly by labor unions, which have found environmentalism a back door for protecting their members' jobs from competition, and by industry, which has found them a way to cut import competition to help make a buck.

A regular player is the Blue Green Alliance:  a collusion of labor unions -- from steelworkers to service-sector employees -- and green groups such as the Sierra Club.  They're pushing for government support to create ''green'' jobs by stopping forestry imports.  They're also becoming particularly activist.  This week, Blue Green launched a 17-state tour from California, arguing ''The Job's Not Done'' to push for the greater adoption of renewable-products and climate-change legislation.  But the snag is that the groups also want carbon tariffs introduced.

Regardless of progress with government, green groups are pushing their agenda down the business supply chain.  They pushed the office-supply retailer Staples to introduce a ''sustainable paper'' procurement policy that highlights the campaigns of the World Wildlife Fund and the Rainforest Alliance and sets tight restrictions on where paper products can be sourced and on certification requirements.  Office Max has signed on as a member of green groups such as Greenpeace and the Rainforest Alliance and also requires certification of its paper products.

Not that industry's hands are clean.

Despite protests on the impact of imports from China on its industry, the paper giant Kimberly-Clark ''has announced that they will expand their manufacturing facilities in China,'' according to a briefing paper from the Washington, D.C.-based Economic Policy Institute, ''No Paper Tiger''.  Yet in Australia, Kimberly-Clark's subsidiary KCA has taken the Australian government to court to force the introduction of green-trade restrictions on imports from Indonesia and China.

They're trying to have it both ways.

There is a reason to believe the greens, labor unions and industry converted to the green cause are starting to get the ears of lawmakers.  In 2008, campaigns to amend the Lacey Act, requiring obligations on importers to identify the source of wood products, succeeded.  Since then, the Obama administration has shown sympathy for going further.

Now the Australian equivalents are working in tandem to replicate U.S. groups' Lacey Act success through the Labor government.  Before the last federal election, the forestry union donated $25,000 to the Labor Party around the same time the party committed to ''greater policing and enforcement of an effective national ban on the sale of illegally logged timber imports.''

The Labor government is seeking re-election, and the minister for forestry, Tony Burke, announced this week that he would implement trade bans and heavy regulation on timber imports if re-elected.  Following his announcement, industry, unions and green groups all rushed in with applause and called for the minority Liberal Party to announce the same commitment.

ADVERTISEMENT

Budget honesty charter corrupted

It's that time in the election campaign when it disintegrates into arguments about which party has been most careless ensuring their budget numbers add up.

The Charter of Budget Honesty, introduced by the Howard government, allows the opposition to give Treasury its election promises to check the policy costs are correct.  If they don't, the government clobbers them for avoiding scrutiny.

But this week Treasury analysis of the opposition's promises was leaked to the press by someone in Treasury or Wayne Swan's office.  Swan has played down the leak's importance.  The Treasurer claims he just wants the opposition to submit its policies for his bureaucrats to dissect.  That's because he knows this part of the charter overwhelmingly favours incumbent governments.

The government has had three years to consult with Treasury's nearly 1000 staff about future policies, test policy assumptions, and get Treasury's recommendations.  Much government policy is formulated by Treasury in the first place.

By comparison, an opposition is just a few people in a room thinking up ideas.

As Ross Gittins wrote in 2004, when it was Peter Costello savaging the Labor opposition over its policy arithmetic:  ''The government is largely feeding back to the bureaucrats their own costings, whereas the opposition runs a high risk of slipping up somehow and being monstered by the Treasurer.''

From government, Labor is playing the same game against the Coalition that, for a decade, the Coalition played against Labor.

Swan knows it well.  In 2007, he too waited to the last minute to submit his policies.

But this isn't just about policy costing.  The integrity of Treasury is in question.

Secretary of the Treasury Ken Henry masterminded the government's controversial response to the financial crisis.  Treasury's role formulating the stimulus package has been highly political.  It even had to release a statement admitting a graph in the 2010-11 budget, which the government claimed showed the success of the stimulus, was misleading.

The Coalition has accused Henry of partisanship for years.  In May, Joe Hockey refused to say whether Henry would keep his job under the Coalition.  Henry and his subordinates are political players now.  Their fortunes are coupled to the fortunes of the Labor government.  Shadow finance minister Andrew Robb said Treasury was compromised by a ''political agenda''.

The leak seems to confirm this.  Sure, the opposition's figures would have been released eventually (that's the point), but it's likely someone in Treasury is openly batting for Labor.

It's concrete evidence of the corruption of the charter.

Hockey should commit to sacking Henry if he wins government, and leave Coalition policies to be scrutinised by the press and public.

Without the incumbent's resources, opposition is hard enough.  The Charter of Budget Honesty is a trap, cynically laid by the Howard government and now being embraced by the Gillard team.  Hockey is right to refuse to walk further into it.

ADVERTISEMENT

''Small Australia'' advocates are too pessimistic

Immigration is a great issue for sorting the optimists from the pessimists.

Supporters of high immigration levels tend to believe that any problems caused by increasing Australia's population can be overcome and we can have prosperous futures in vibrant big cities.  In contrast, those advocating lower immigration argue that the problems are insurmountable and paint a bleak picture of waterless, congested cities.

Of course, using lack of infrastructure as an argument against immigration has not always been the first option for immigration opponents.  Opposition used to be either economic (migrants will take our jobs) or cultural (migrants are too different).

Recent history has tended to discredit both of these.  The massive expansion of the immigration program under the Howard Government coincided with unemployment falling to a 30 year low of 4 per cent, so it was hard to maintain the argument that migrants were taking jobs from those of us already here.

In fact, the traditional economic argument against immigration has now become so discredited that one of the nation's leading anti-immigration figures, former NSW Premier Bob Carr, now argues the reverse, citing the fact that ''immigration adds more to the demand for Labour than it contributes to the supply'' as a reason to curtail it.

And as for the cultural argument, most Australians in the big growing cities have now had sufficient contact with Asian immigrants to have got over any Hansonite concern about being ''swamped by Asians'', although occasionally Africans now cop this argument, with one commentator asserting that they will not ''fit in'', because they come from ''such violence-prone places as Somalia, Sudan and many west African states''.

So, if you are an instinctive pessimistic ''Small Australia'' advocate, what arguments can you now use?  The answer seems to be the environmental (migrants will stop us meeting our greenhouse targets), or related to infrastructure (migrants will further clog up the roads), or a combination of the two (migrants will use water we could either drink or use to rejuvenate the Murray-Darling).

Of course, the environmental argument is laughable.  Global warming is, as the name implies, a global problem.  It hardly seems like much of a win for the environment if we meet greenhouse targets in Australia, by making sure people stay in other countries and help stop those countries meeting theirs.  Of course, there are some particularly hard-hearted environmentalists who argue that because per capita emissions are lower in the third world we should do all we can to keep people in those lower carbon economies.  Talk about loving humanity and hating humans.

A more credible concern is the infrastructure one.  There is no doubt that in key ways the infrastructure in our major cities has failed to keep pace with population growth.  In some cases systems were not only badly placed to cope with surging demand, but had also failed to maintain existing assets in a workable manner.

The most often cited infrastructure problem is water, but in reality there are plenty of ways that more water can be supplied (desalination plants, recycling etc.), provided we accept that it is a resource for which we need to pay a realistic price.

Then there is transport and congestion.  In order to defend his record, Carr lists a string of infrastructure projects his government completed and claims that these would have been adequate if only federal governments had not been simultaneously ramping up immigration.  The only problem with this analysis is that for much of the period he is discussing, due to his policies, Sydney was hardly growing.  At the same time, Melbourne's population was increasing far more quickly, yet despite this, or more likely because of it, that city's services were performing much better.

Train patronage in Melbourne has almost doubled in the past decade and, while this has undoubtedly created problems, in the longer term users of public transport should benefit as the increased demand will help build the economic case for major new pieces of infrastructure.  As a general rule, bigger cities have better public transport than small ones.

Perhaps there is a case for the Commonwealth providing some funding to the states for infrastructure needs created by high immigration, but there is an even stronger case for states reining in their own recurrent spending which in almost every jurisdiction has seen large increases in both programs and bureaucrats, and in many cases a failure to continue with the sort of competition reforms begun in the 1990s.

With better infrastructure, there would be less fear of bigger cities and perhaps more focus on the benefits of big cities and why so many people choose to live there -- more diverse employment, educational and leisure opportunities.  Those who choose outer suburbs of big cities, even if it entails long commutes, have clearly decided it provides a better quality of life than the oft suggested alternative of regional towns.

There is no doubt that public opinion is against growing the nation's population but, if governments had polled those already in Australia in 1788, 1851 or 1945, there would have been majorities against the waves of immigration that were about to start.  As most of us have ancestors who came in one of those past immigration booms, we tend to think they were a net benefit to the country.

So if you are a ''Small Australia'' pessimist, maybe it is worth considering whether the optimists may end up being right again.

ADVERTISEMENT

Telling it like it is

Who knows, perhaps deposing your leader, saying your government had lost its way, then rushing to an election, wasn't the great idea it seemed at the time?

All the criticism of the campaign and the media during the campaign -- justified and unjustified -- has its origin in this bizarre plan.

So don't blame the press.  Blame the ALP soap-opera they are covering.

This weekend saw an intensification of the criticism of the media that has been a constant feature of this campaign.  A Julia Gillard press conference on Saturday, where she offered $4,000 training entitlements for older workers -- to compete with Tony Abbott's employment subsidies offered earlier in the week -- and new regulation on reverse mortgages.

None of the press's questions after were about the policy.  Only one was about any policy at all.

But could the Prime Minister really have expected anything less?

Gillard had just returned from a meeting with the man she deposed a few short weeks ago.  All that was provided to the media was brief footage of the two awkwardly pointing at a map.  It would be a fair guess that more things were discussed between the two than the topographical features of the Australian coastline.

And, to add to the carnival atmosphere, Mark Latham was skulking around in the back of the press conference, exclusively for 60 Minutes.

The Labor Party seems determined to eat itself.  It's sucked all the air out of its campaign from the first day.

Latham has clearly imagined himself to be a journalist for some time, regularly divulging conversations which he had with the current Labor team in his pieces -- obviously without their consent.  Mark Latham's columns in The Australian Financial Review are witty and entertaining, but are rarely little more than bomb-throwing.

The campaign opened with a spat between Bob Hawke and Paul Keating.  Blanche D'Alpuget couldn't have timed her new book better.

The contrast with former Liberal leaders couldn't be stronger.

John Hewson pops up on Gruen Nation comfortable in his role as the kindly old uncle with an amusing backstory for the rest of the panel to tell jokes about.  Apart from a few sly and embarrassed jokes at Tony Abbott's expense, it's hard to see how Hewson could ever be portrayed as undermining the opposition leader's cause.

Malcolm Fraser has that weird, peculiarly Tory sense of honour -- try your best not to talk about religion, politics, or the fact that you no longer vote for the party which you led to victory three times.

It took nearly six months for Fraser to reveal he had left the Liberal Party late last year.  When asked on ABC radio last week why he believed that the Coalition was not ready to govern, instead of explaining, Fraser told the interviewer to read his book.  Gruff, sure, but not damaging.

And Malcolm Turnbull has managed an extraordinary balancing act during this campaign.  He's simultaneously not a threat to Tony Abbott and supportive of his election, while being open and comfortable with the fact that he (a) opposes one of Abbott's major policy planks and (b) has all the intentions in the world to be the future leader of the Liberal Party.

Turnbull is even campaigning with candidates around the country -- he's a full blown leader in exile -- but hasn't yet impacted Abbott's election strategy one bit.

It would be quite funny if 60 Minutes sponsored Brendan Nelson or Peter Costello to follow Tony Abbott around the campaign trail hurling abuse.  But that isn't going to happen.

Doing so is a peculiarly Labor thing, evidentially.

Here's a further clue that the vacuousness of the campaign isn't the fault of the press:  not even the standard campaign gotchas are getting much traction.  There's no laughing about how some candidate doesn't know the price of milk.  Or that a senior candidate can't explain the ''Non-Accelerating Inflation Rate of Unemployment'' in a concise sentence.  Or that some policy hasn't been costed perfectly.

In less dysfunctional times, these are the sorts of flufferies that distract from the bigger picture.

It's not that this campaign lacks the material:  there's much silly policy error this year.  The government's cash for clunkers program assumed, for some unfathomable reason, that the program would be undersubscribed.  Of the 200,000 maximum buy-outs the program was to allow, the government assumed that only 180,000 would actually occur.  This assumption seems to have been premised on the belief that Australians don't like free money.

And it leaves cash for clunkers badly undercosted.

Similarly, there are serious questions about Abbott's spending and savings commitments.

But the destructive personal relationships between Labor's celebrities won't even give enough space for either party to seriously pursue these sorts of failures.

Labor's factional kings seem to think that eliminating a piece from the political chessboard means eliminating them from the political arena.  Clearly, they're wrong about that.

A rule of thumb in Australian politics is that every former leader, Labor or Liberal, eventually gets a weekly column, or a regular commenting gig.

But Labor's internal culture means that when they do, they are so bitter and angry they are a major liability.

ADVERTISEMENT

The New Green Protectionism

Export-dependent jobs in Asia are under threat by vested interests including unions and industry in developed countries advocating for trade barriers disguised as environmentalism.

Advocating trade barriers under the banner of environmentalism is nothing new.  European countries support the introduction of carbon tariffs to offset the economic damage from their self-imposed climate change policies.

In the United States, political campaigns led by industry and unions have successfully introduced the Lacey Act that imposes extra regulation on imported wood and wood products to certify their origin and make them less competitive.

And now the green protectionist disease appears to have been caught on in Australia.

For years Australian green groups have claimed mass deforestation and illegal logging are occurring in the developing world.  They've advocated for forestry products in the developing world to be certified against developed world standards of environmental management.  And if they do not meet those standards their solution is to impose restrictions on imports.

Currently the campaigns are particularly focused on illegal wood and wood products from Asia, especially China and Indonesia.  But these campaigns are based on false foundations.

A recent report commissioned by the Australian government identified the insignificance of the problems with imports from Asia representing only 0.32% of illegally logged material.

But that hasn't stopped Greenpeace co-ordinating other green groups and religious groups to campaign for trade barriers to eliminate "illegal forest products" from Asia.

Trade unions representing forestry workers have backed these green campaigns.  The Forestry Union has a history of working with green groups to push for self-interested public policy using green excuses.  It has previously supported campaigns to encourage consumers to protest against supermarket chains selling tissue products supplied by Asia Pulp and Paper on environmental grounds.

But digging deeper the union was actually pushing for consumers to buy Australian-made paper products "[so] thousands of Australian workers [are] paid properly [and] more of your money stays in Australia."

Before the last Australian election the union made donations of about 825,000 baht to political parties that committed to "greater policing and enforcement of an effective national ban on the sale of illegally logged timber imports".

Industry is not far behind.

Major tissue product manufacturers, KCA and SCA, have a history of working with green groups to improve their market position.  Both parent companies are members of the World Wide Fund for Nature's Global Forest and Trade Network.  SCA has reportedly paid $10 million to WWF to use its logo on their products.

Both have previously sought anti-dumping measures on toilet tissue from China and Indonesia on environmental grounds.  However, an Australian Customs Service inquiry concluded that extra competition from domestic companies was as much to blame for their declining market position as cheap imports.

Both companies are facing stiff competition from competitors without unionised labour.

Unhappy with the decision of Customs manufacturers are now taking the government to court to try and get green protectionism reinstated.

In taking action industry, unions and green groups are all starting to develop consistent messages.

And their motivations are entirely self interested.  Forestry unions don't like imports because they make the market more competitive which makes it harder to demand higher wages and more jobs for their workers.

Industry doesn't like competition because it means pressure on prices favours consumers and not their bottom lines.

Australian Customs concluded that the downward pressure from Indonesian and Chinese products could be between 5% and 42% of a product's price.  Such downward pressure isn't good for companies seeking fat profits.

But what is being ignored is the impact on jobs and investment in the developing world.

Australians may be able to afford high-quality, thick toilet tissue to go straight down the drain.  But if green trade barriers are erected, the same cannot be said for Asian workers and communities that lose their jobs and livelihoods from being able to export less.

For countries like Thailand the problems could become particularly acute because of the potential impact on poor agriculture exporters who are vulnerable to protectionist political winds.

And if the United States and Europe continue on their same track, the potential for green protectionism could be broadened much further risking investment and jobs in Asian developing economies.

Climate change almost invisible in the election campaign

Having been feted as the Great Moral Challenge and been the key factor behind the demise of Malcolm Turnbull, climate change policies are nearly invisible in the present election campaign.  Aside from the ''cash for clunkers'' gimmick, both major parties have so far steered clear of giving the matter prominence.

Differences are however present.  The Government has said ''Putting a price on carbon'' is essential to efficiently reduce carbon emissions.  A ''price on carbon'' is code for a carbon tax.  The repetition of its claimed requirement is already creating financial risk for new investment in electricity generation, inevitably bringing dearer power irrespective of any price actually imposed.

Many voices advocating putting a price on carbon lament that the great majority of economists favour that approach but, because they are divided on its detailed execution, the majority position fails.

It is a moot point whether economists are so united.  Activists who sign petitions tend to exaggerate both their own influence and the ability of price signals to bring about the goal they favour without simultaneously generating adverse side effects.

Supporters of imposing a price on carbon point to economic modelling that estimates a benign overall effect of a carbon tax.  But this felicitous outcome is driven by two assumptions that embody great uncertainties.  The first is technological forecasts, about which economists are inexpert.  In addition, the modelling extrapolates business and consumer responses to minor price shocks in energy to fundamental cost increases bringing epochal changes in the structure of the economy and the intensity of energy use.

There are two fundamental means of forcing people to reduce their consumption of carbon based energy.  The first is the use of economic instruments -- the price signal.  The second is to target particular uses and reduce their emissions by employing regulatory measures.  Almost all economists would argue in favour of the economic instruments approach.

The forms of economic instrument are a cap-and-trade quantitative measure and a straight out tax.  These are really only different sides of the same coin.  Cap-and-trade sets quantity limits to emissions based on estimates of what the price outcome would be.  A tax is set to produce a price sufficient to bring about the targeted emission levels.

Though a tax is claimed to be superior in allowing for rebates of exports, this presents administrative difficulties no less complex than those of its cap-and-trade counterpart.  Garnaut's version of cap-and-trade involved allocations of free permits for exporters and a government agency estimating the carbon content of imports from areas not imposing a tax and placing countervailing import duties on them.

The Liberals and Labor have the same target emission reductions -- 5 per cent by 2020 (which is a 40 per cent cut in business-as-usual levels).

The Liberal Party's goal is however stigmatised as relying on a regulatory approach.  Its design follows work that consultants have undertaken showing costs of different approaches (cropland nutrient measures, waste recycling, nuclear, hybrid cars etc.) allowing a curve to be fitted from low cost (often said to be negative cost) to high cost.

Economists may agree that such findings offer indications where the best bang per buck lies.  But even those convinced of the need for early abatement action usually oppose the regulatory approach.  This is because circumstances are so dissimilar that one place's low cost approach may be exorbitantly expensive in another.

The merits of uncritically applying particular estimated costs and benefits to general policy approaches is illustrated by the Australian experience with a subsidised retrofit of pink batts.  Drawing off theoretical calculations, this was originally estimated to make CO₂ savings at a cost of $50 per tonne.  In fact, on top of deaths and house fires, the CO₂ savings are now estimated to be bought at a price of some $200 per tonne.

Unfortunately, those economists most vocal in urging a carbon price be adopted, seldom castigate governments for the plethora of regulatory measures in place -- subsidies for certain installations, requirement for wind generation, ''5 Star energy requirements'' on new houses and so on.

These regulatory measures constitute naked winner-picking and seriously undermine the ''elegance'' of a carbon price.  Any of their supporters who also promote a carbon price either misunderstand the issues or are promoting the dual program approach for reasons other than seeking emission reductions.

Collectively government outlays on the measures in place today come to over $3 billion a year.

Other regulatory measures come on top of this.  Thus, the ''20 per cent renewable'' target by 2020 will bring a 45,000 GWh annual increase in renewables.  The cost of these is at least $60 per MWh, adding $12 per MWh to the average electricity price.

The cap-and-trade proposals would increase this further.  The lowest of the Government's many price estimates is a highly optimistic $23 per tonne of CO₂, or about $30 per MWh.

At $42 per MWh, these two measures would double the wholesale price of electricity, presently $37 per MWh, increasing domestic consumers' bills by 50 per cent.  Other regulatory measures and the dearth of capital investment already evident will actually raise the wholesale price higher.  The overall effect of prices and subsidies would be an effective doubling of the cost of households' bills.

Doubling electricity bills means $1000 a year to the average household.  In a survey we undertook in April of this year, only six per cent of respondents said they would be willing to pay that much in increased utility charges.

Politics aside, this gives economists a further dilemma since at the heart of all taxes developed for the greater good is the notion of willingness-to-pay.  If people are unwilling to pay it means they do not see the value of doing so.  This removes the veneer of legitimacy behind which a tax can be formulated.

ADVERTISEMENT

Greens find growing up is hard to do

It's pretty certain the Greens will hold the balance of power in the Senate.

But the prime position the Greens are about to hold in our democracy will be a big change for the party.  It's going to be a very steep learning curve.  The Greens are still a niche party, with niche party idiosyncrasies.

They're about more than climate change and fast trains.  Niche parties are easily captured by interests within their membership that insist their peculiar obsessions get aired and adopted.

So the Greens are the only party with an ''animals'' policy.  With 24 points, it includes things like a plan to ''foster community education about the needs of animals and our responsibilities to them''.  Not even the Nationals have an animals policy, and you'd think they know a little more about animals than the Greens do.

Nevertheless, the Greens' policy approaches have matured a lot from even a few years ago.  Take information technology.  In 2004, they were calling for ''democratic, egalitarian operation'' of the internet -- as if a citizens' assembly should determine the internet's architecture -- but in 2010 they merely want the government to renationalise telecommunications.

They've been burnt in the past.  The Greens are now quick to argue they don't support drug legalisation.  But the case for drug legalisation is a lot more sensible than the case for, say, putting a tax on global currency transactions, or abandoning free trade agreements, or forcing corporate boards to be more ''diverse'', or reducing foreign investment in Australia.

It's always going to be messy when a party with a lot of members with radical views tries to refine itself for mainstream consumption.

Many commentators have said that with the balance of power, the Greens could fall into the Democrats' trap -- haggling over legislative process undermines niche party brands.  But that has already happened.

The Greens' brand was seriously devalued when its parliamentarians voted against emissions trading.  We have heard their reasoning:  the government's plan was ineffective.  Of course it was.  Any Australian plan would be ineffective without global action.

Yet there is no question that the emissions trading scheme, if implemented, would have evolved.  Subsidies to polluters could have been phased out over time and emissions reduction targets could have increased.

Now the Greens are, quite rightly, blamed for blocking any climate change action.  Sceptics like Barnaby Joyce couldn't have been more effective than the Greens.

ADVERTISEMENT

Clunky approach to carbon reduction policies

Labor's wasteful and tokenistic ''cash for clunkers'' subsidy to scrap old cars is one of the few carbon emission reduction policy announcements this election campaign.

This is notwithstanding the priority on ''climate change'' carbon reduction measures that both parties have said is a priority.

The Liberals and Labor have the same medium-term target reduction goals for CO₂ -- 5 per cent below year 2000 levels by 2020 (which is a 40 per cent cut in ''business-as-usual'' emissions).  Julia Gillard says we must ''put a price'' on carbon to meet this goal.

''Putting a price on carbon'' is code for a carbon tax.  As a mantra, it is already creating financial risk for new investment in electricity generation, bringing dearer power irrespective of any price that may be actually imposed.

The Liberals' goal is stigmatised as relying on a regulatory approach.  This involves choosing the areas for emission reduction which offer the best bang per buck.

But the regulatory approach is flawed because circumstances are so dissimilar that a low-cost approach in one place may be exorbitantly expensive in another.

The pink batts ceiling insulation program illustrates this.  Originally estimated to make savings at a cost of $50 per tonne of CO₂, the savings are now estimated to cost some $200 per tonne of CO₂.

The Government has, highly optimistically, estimated that the carbon tax ''price on carbon'' necessary to bring about its policy would be only $23 per tonne of CO₂.  Hence, the outcome of the pink batts program meant its CO₂ savings were eight-fold the cost that the Government had said would generally be required.

As this demonstrates, both the main political parties actually support regulatory approaches.  Aside from the now discontinued pink batts subsidies, regulatory measures already in place include direct subsidies for certain low-carbon power producers, requirements on electricity suppliers to use wind and solar generation and ''five-star energy requirements'' on new houses.

Direct carbon reduction subsidies from the Commonwealth budget come to more than $3 billion per year.

Regulatory measures on top of this include a requirement for ''20 per cent renewable energy'' by 2020.  Renewable energy essentially means wind and solar power and the requirement will add around 12 per cent to the average household's electricity price.

The Government's ''carbon price'' proposals would increase this by at least a further 25 per cent.

These and other regulatory measures compound the effects of an absence of new capital investment in commercial power stations.

Altogether, carbon reduction measures will be equivalent to doubling the electricity bills households actually pay.

This means $1000 a year to the average household.

Ominously, in a survey we undertook this year, only 6 per cent of respondents said they would willingly pay $1000 a year to reduce carbon emissions.

Electoral issues aside, this presents a public policy dilemma since the test of any tax's legitimacy is taxpayers' willingness to pay.

ADVERTISEMENT

Free trade infected by ''green protectionism''

Unions and industry that want to roll back the progress of free trade increasingly are using environmental causes as a disguise.

For years Australian green groups have claimed mass deforestation and illegal logging is occurring in Asia.  In response, Greenpeace and the World Wildlife Fund have advocated for burdensome regulation and trade bans, including on toilet paper.

Seeing a market opportunity, the toilet paper industry and unions have started voicing similar concerns and solutions.  And there's no surprise why.  An Australian Customs Service report calculated that the potential downward pressure of imports could be as high as 42 percent of the price.

But the evidence supporting the need for trade restrictions is weak.  A recent report commissioned by the Australian government identified the insignificance of the problem, with imports from Asia incorporating 0.32 percent of illegally logged material.

Despite that fact, industry and unions now are running campaigns of their own.  The forestry union was a significant financial contributor to the ''Wake Up Woolworths'' campaign to pressure the major Australian supermarket chain Woolworths to stop using imported toilet tissue.

But digging deeper reveals that they actually were pushing for consumers to buy ''Australian-made paper products ... [so] thousands of Australian workers [are] paid properly ... [and] more of your money stays in Australia.''

Both unions and industry have a history of working with green groups at the expense of consumers.  Major toilet-tissue product manufacturers KCA and SCA are members of the World Wildlife Fund's Global Forest and Trade Network.  And SCA has reportedly paid £10 million to WWF to use its logo on their products.

Similarly, the Forestry Union previously has worked with the World Wildlife Fund on climate-change policies.

Sadly these campaigns appear to be part of a spreading green protectionist disease, where industry, unions and green groups work together.  In the United States the disease was brought to life by the Lacey Act, which imposes extra regulation on imported wood and wood products to certify their origin and make them less competitive.

Hopefully the green protectionist disease won't spread further.

ADVERTISEMENT

Policy differences exist

Apparently this is the most insipid federal election in living memory.  So say journalists, commentators and academics.  The election is ''pretty dull, boring, issue-less'', according to John Keane, professor of politics at Sydney University and author of The Life and Death of Democracy.

On the ABC's PM program last week he called it the ''K-Mart election''.  The theory is that the parties want to minimise whatever difference there is between them.  Both want to be K-Mart.

Keane says ''apolitical politics'' has replaced policy and politics.

It's easy and fashionable to describe this election as dull, boring, and issueless -- but it would be wrong.

Even at its most superficial level the campaign is enthralling.  The effort of ALP insiders to sink Julia Gillard via a series of audacious leaks against her is the most flagrant effort to derail a campaign since Joh-for-Canberra.  But this time it's worse.  Joh Bjelke-Petersen and John Howard were in different parties, and Howard was in opposition.

In this campaign the finger is being pointed at a former prime minister to whom Gillard was deputy, and someone she has promised will be in her cabinet if she's re-elected.

And now we have the PM admitting that up until a few days ago she'd allowed herself to be presented as a fake, and from now on she'll be ''real''.  There's nothing boring about that.

Some of the policy differences are stark.  Supposedly there's no bigger issue than climate change.  The ALP is committed to imposing a price on carbon.  The Coalition has said it won't.

That's a pretty fundamental difference on what we're told will be the defining policy issue of the next few decades.

Similarly the ALP is committed to raising taxes on mining companies.  The Coalition opposes the tax.  And then there's the story of the largest and most costly infrastructure project in the nation's history.  The ALP wants to build a national broadband network.  The Coalition says it will abandon it.

On population policy there's a large measure of agreement between the parties.  And while you can argue about the merits of the parties' policies, nonetheless they each actually do have a position on the issue.  What's more, there are many policies that are not getting the attention they deserve.

There's superannuation, for example.  Labor wants to increase the level of compulsory superannuation.  The Coalition is uncommitted.

There's also the debate about the direction of education policy.  Chris Pyne, Coalition spokesman on education, wants to allow parents to claim a tax rebate of up to $1000 on the fees they pay to government and non-government schools.  It's a major reform and another step towards introducing vouchers, which would give parents a real choice between schools.  Vouchers are controversial and will be bitterly opposed by the teachers' union.

This week Gillard announced a program to give principals in government schools more autonomy.  Again it's a contentious policy, and while it doesn't go far enough because it doesn't give principals the right to hire and fire teachers, it's nonetheless a positive development.  Pyne and Gillard's announcements are important and both contain a fair chunk of policy and politics.  Their policies are hardly symptoms of ''apolitical politics''.

It's true that political campaigns in Australia usually don't have the grand visions and sweeping rhetoric of United States campaigns.  Americans get ''Yes We Can''.  We get ''Moving Forward''.  At this election we're forced to choose Gillard or Tony Abbott for prime minister.  Americans got to pick from Barack Obama and a war hero for president.  Australians get the substance, and Americans get the glamour.  Fortunately Australia isn't America, and luckily neither Gillard nor Abbott are Obama.

This is far from an ''issue-less'' election.  If you can't find the issues of this campaign, you're not looking very hard.  Many of the big issues of this campaign have something in common -- they're about economics and finance.  Which is why people think the campaign is boring.

To most journalists economics issues are worthy, but dull.  To most, delving into the minutiae of the uplift factor for tax losses for resource companies isn't as interesting as debating whether Australia should be a republic.

It might just be that the people who think this election dull and boring are the same people who think economics boring.  The problem with the 2010 federal election campaign might not be the campaign itself, it might be with the people who are writing about it.

ADVERTISEMENT

A speech for Tony Abbott

Kevin Rudd had happier times.

The former prime minister used to have great fun claiming that the Coalition was a crazed group of neo-liberal ideologues who would love nothing more than to ban the union movement, destroy the social safety net, and build leaky nuclear power plants in Western Sydney.

Rudd argued the Coalition, and 400 years of liberal and conservative thinkers, have sought to undermine the great institutions of community and society.

He said that ''neo-liberals'' idolised a world where individuals are self-sufficient and shorn of any personal connection to each other -- at least outside the shopping centre.  He called this a ''Brutopia''.

But eventually Rudd dropped that overbearing rhetoric, just like he dropped so many of his other policy brainwaves.

Who knows?  Maybe he realised he got it all wrong.

Peter Costello once said that he wanted to see Australia be everything it could possibly be.

I too have a vision of a diverse, pluralistic, Australia.

And I believe only the principled liberal conservatism of the Coalition -- rather than the make-it-up-as-they-go technocracy of the Rudd/Gillard Labor Government -- can deliver that.

The great conservative thinker Edmund Burke spoke of society being formed out of ''little platoons'' -- families, clubs, sporting associations, non-profit organisations, political parties.  And -- yes -- even churches.

These institutions build the trust necessary for a healthy, plural society.

Without a thriving non-government sector and community organisations, we will not be able to adapt to the changes of the future -- the cultural and social changes brought about by technology and the global marketplace.

In the last few decades, political scientists have been calling this social capital.  It's the value that is created by our interactions in voluntary organisations -- from the family to the sporting club to the church.  Political scientists been pointing out that this social capital has been disappearing rapidly the Western world.  We no longer join bowling clubs.  Our sporting clubs are in decline.  Our political parties are no longer representative -- not enough Australians want to join them.

Social capital theory is a popular area of scholarship right now.

But liberals and conservatives have understood the idea behind social capital for centuries.

Kevin Rudd was wrong.  We're not becoming a less cohesive, less familiar, less networked, more individualistic society because of ''neo-liberalism''.

We're becoming a less cohesive, familiar and networked society because of ever-growing government.

The Coalition recognises that big government isn't just bad because of debt and deficits.

Red tape, bureaucracy, and the nanny state are eroding away the institutions of civil society that have made Australia great.

Across Australia we have amateur sporting clubs which are dying because bureaucrats have told them they can't serve spectators beer.

Volunteers with the Red Cross can't help make lunches for volunteer firefighters, because they might breach the rigid and extensive food handling codes imposed by governments.

Jam can't be sold at fetes without labels detailing every ingredient.  Lemonade can no longer be sold by children on the side of the road.

Street parties are so over-regulated that they have virtually disappeared.

And no wonder.  To host a street party you have to go through a mass of bureaucratic hoops.  There is paperwork to be filled out, emergency plans to be coordinated, supervisors to be nominated, acoustic engineers to be hired to monitor the decibels of stereo systems, and qualified electrical engineers needed to plug the stereo in.

The Australian government needs to take a good hard look at itself.

That's what a Coalition government will do.

There's too much acceptance that every problem should be fixed by a new law or a new regulation.  But those laws are stifling the development of the Australian community.

They're preventing social capital from building.  They're forcing the little platoons to disband.

The Coalition will challenge this trend.

And, of course, we'll act.

One of the first tasks of an Abbott government will be to commit to removing as many of these unnecessary, harmful and counterproductive laws and regulations which have built up over the last century.  And we will work with state and local governments to help them do the same.

More than that, we reject the paternalism of the nanny state.  We reject the plethora of health bureaucrats and activists who seek to limit individual choices, and erode individual responsibility.

A Coalition government will respect your right to individual choice.

I don't believe Commonwealth bureaucrats know what's best for you -- the Coalition doesn't believe how many slices of cake you eat is anybody's business, but your own.  We don't want government bureaucrats leaning over you as you decide how many chips to eat with your fried barramundi.

I understand this is a controversial view.

We live in a world where trusting people to make decisions themselves about their own health, their own lifestyle, is controversial.  Even radical.

Politicians of previous generations faced great challenges.  They had to figure out how to jettison 100 years of protectionism.  They had to figure out how to open their markets to the world -- even as an army of special interests opposed it.  They had to privatise and deregulate.

But our challenges are different to the challenges faced by Margaret Thatcher, Ronald Reagan, Bob Hawke and John Howard.

The government no longer owns the great state owned enterprises of yesterday.  Nor does it want to.

But instead it tries to manage them -- to regulate, to manage, and to oversee every aspect of the economy and community.

We have to get the boot of government off the neck of society.  We have to allow individuals to make decisions about their own lives free of government interference.

We have to get government out of the way.  A Coalition government will let Australia's little platoons flourish.

ADVERTISEMENT

Climate of emissions trading cools

We all know both Labor and the Coalition have jettisoned plans to implement an emissions trading scheme to tame climate change.  But Australia is not alone in failing to put a price on carbon.  Global warming fatigue is setting in all over the world.

Canada's cap-and-trade legislation is going nowhere.  Japan's weak and divided government has temporarily shelved its ETS in parliament.  French President Nicolas Sarkozy's carbon tax is blocked by the Constitutional Council.  Public opinion polls show higher climate scepticism in Britain than in western Europe, North America and the Antipodes.  Even when an ETS has been implemented, as in the case of the European Union, the policy has been a debacle:  a collapsed carbon price, higher energy prices, and increased emissions during the first three years in operation.

China's leaders, far from leading the world to a low-carbon future, won't sign a legally binding global deal because they want to grow their economy and reduce poverty on the back of the cheapest form of (carbon) energy.

Senior Indian politicians, meanwhile, criticise US officials when they push for Delhi to adopt binding emissions targets.

Nowhere is the changing climate more evident than in the US.  Last month, congress could not even agree to a climate bill to debate on the Senate floor before a vote.  Nor was it simply conservative Republicans who opposed what is called ''cap and tax''.  Democrats from states heavily dependent on coal, oil and manufacturing are overwhelmingly opposed to Al Gore's agenda.  When the House passed a climate bill a year ago, one in five Democrats opposed the legislation.

Meanwhile, even prominent global warming believers have come out against the ETS.  US environmental lobby groups Greenpeace and Friends of the Earth;  the ETS intellectual architect Thomas Crocker;  NASA climate scientist James Hansen, among others, have repudiated the concept of cap and trade, saying it protects the big polluters while doing virtually nothing to reduce greenhouse gas emissions.

Washington's failure to act this year represents a missed opportunity.  If the US, where liberal Democrats control the White House and have super majorities in the House and Senate, can't legislate a tiny 4 per cent cut to emissions of 1990 levels by 2020 (with loads of loopholes and pork to industry), what are the chances of comprehensive climate reform when Republicans make likely gains in the House and Senate in November's mid-term elections?

All is not lost.  The Environmental Protection Agency could use the 1990 Clean Air Act to regulate emissions, but such action would probably get bogged down in litigation for years.  Beijing has also announced it will introduce domestic carbon trading programs and it has invested heavily in renewable energy, but any efforts to reduce emissions are outweighed by China's meeting the demands of its rapidly industrialising economy.

The Kyoto protocol expires in 2012.  But the global momentum towards a genuine international agreement to reduce greenhouse gas emissions in Mexico later this year is rapidly slowing.  Get ready for another Copenhagen.

ADVERTISEMENT

Green Excuses: Collusion to promote protectionism?

i. EXECUTIVE SUMMARY

For years environmental groups have claimed there is mass deforestation and illegal logging occurring in the developing world.  In response they've advocated for forestry products to be certified against their own standards and to impose trade restrictions in the developed world against products that don't meet those standards.

Using environmental justifications to propose trade restrictions is now commonplace.  Carbon tariffs have been proposed internationally to offset the cost of climate change policies.  Now industry and unions, cloaked behind environmental language appear to be colluding with the messages of green groups to advocate for green protectionism from imports.

Green groups want less forestry in the developing world.  Industry wants green protectionism to cut the volume of competitive imports.  Unions want green protectionism to stop imports to ensure they can keep workers in high-paying jobs.

There is plenty of evidence overseas of industry, unions and green groups colluding to push protectionist causes.  Two major manufacturers, Kimberly-Clark Australia (KCA) and SCA Hygiene are part of the World Wildlife Fund's Global Forest and Trade Network and SCA Hygiene has reportedly paid £10 million to WWF to use their logo.

There is now emerging evidence that the collusion may be occurring in Australia.  And they are increasingly pursuing political and legal avenues.

In early 2008 both KCA and SCA complained that Chinese and Indonesian toilet tissue paper manufacturers were "dumping" products into the Australian market and temporarily succeeded in getting trade restrictions imposed by the Australian Customs Service.

But the restrictions were overturned following a Customs report that concluded competition from domestic providers was among a series of contributing factors causing market pressure.

Now KCA and SCA have appealed the decision to the Federal Court supported by the CFMEU.

Meanwhile an independent report commissioned by the government concluded environmental grounds for restricting imports was weak and would have no affect to improve the environment in the developing world.

In addition to the legal path, the CFMEU may also be pursuing a political path to secure industry protection.

The CFMEU, which is at the centre of anti-imports activities, donated $28,000 to the South Australian Division of the Australian Labor Party around the same time the Party announced it would commit to banning certain timber imports.

The CFMEU were also primary funders to the Wake Up Woolworths! campaign that succeeded in getting Woolworths to stop using Asia Pulp & Paper imports in its Select private brand tissue products.  In doing so the CFMEU has made it harder for Woolworths to compete on price.

But the real cost of the push for green protectionism will fall onto consumers.  New trade restrictions will cut competition and increase the cost of products adding further upward pressure on the cost-of-living and may add up to 42 per cent onto the price of toilet paper.

---

ii. ABBREVIATIONS

A3P	Australian Plantation Products & Paper Industry Council
ACBPS	Australian Customs and Border Protection Service
ACS	Australian Customs Service
ALP	Australian Labor Party
APP	Asia Pulp and Paper
CFMEU	Construction, Forestry, Mining and Energy Union
FOE	Friends of the Earth
FSC	Forest Stewardship Council
KCA	Kimberly Clark Australia Kt Kilo tonnes
NGOs	Non-Government Organisations
PEFC	Program for the Endorsement of Forest Certification
SCA	Svenska Celulosa Aktiebolaget
WTO	World Trade Organisation
WUW!	Wake Up Woolworths!
WWF	World Wildlife Fund

---

1.0 INTRODUCTION

The trade of forestry products on international markets is becoming increasingly controversial.  For years environmental groups have been claiming that there is mass deforestation and illegal logging occurring in the developing world to create products for developed world consumers.  In response environmental groups have sought certification of forestry products based on their expectations of environmental management.

But increasingly industry and unions are now doing the same.  Cloaked behind environmental language industry and trade unions appear to now be colluding with the messages of green groups to advocate for green protectionism.

Green groups want less forestry in the developing world.  Industry wants green protectionism to cut the volume of competitive imports.  Unions want green protectionism to stop imports to ensure they can keep workers in high-paying jobs.

But many aspects of these campaigns are deceptive.  The real cost will flow through to the final price of retail products, hit the hip pocket of consumers and increase the cost-of-living for Australians.  This is particularly true in the Australian toilet tissue market where green groups, unions and industry are now seeking trade restrictions.

This report will critically analyse the role of unions, industry and green groups and assess the legitimacy and impact of their campaigns.

---

2.0 INDUSTRY PROSPECTS

The Australian tissue paper industry is facing significant challenges.  As an industry the tissue paper industry has traditionally been dominated by two major manufacturers.

Kimberly Clark Australia (KCA) is a subsidiary of the Kimberly Clark Corporation based in the United States and has operated in Australia for more than 50 years.  Its principle tissue manufacturing facility is in Millicent and its pulp mill is in Tantanoola.  Both are located in the South East of South Australia.  Figure 1 outlines the market share for different tissue manufacturers retailing in the Australian market.

Figure 1 | Tissue production market share in Australia 2006-07, by Kt

Source:  Industry Edge, 2007, "Pulp & Paper Strategic Review 2007:  A comprehensive analysis of the Australian and New Zealand Pulp & Paper Industry", Hobart, Australia

The other traditional major player is the Australian arm of Swedish company, Svenska Celulosa Aktiebolaget (SCA).  SCA Hygiene has operated in Australia since 2004 with its primary tissue manufacturing in Box Hill, Victoria.  Table 1 outlines the major brands of both KCA and SCA Hygiene.

Table 1 | Select popular Kimberly Clark Australia and Svenska Celulosa Aktiebolaget brands

Source:  Kimberly-Clark Australia, 2009, "Our products".

But in recent years their market dominance has come under threat.  The two main competitors to KCA and SCA's dominance has been in-house private brands like Woolworths' Select range and Coles' You'll Love Coles range, as well as ABC Tissue's brands.  To be competitive Woolworths imported tissue sourced from Asia Pulp and Paper (APP) in its Select range.  According to reports most of the toilet paper sourced by Woolworths was from APP's plants in Gold Hong Ye Paper in China and PT Pindo Deli in Indonesia. ⁽¹⁾

ABC Tissue began manufacturing in 1985 in Western Sydney.  Through recent acquisitions of known brands, including Softex, and the use of imported tissue paper, ABC has also emerged as a strong market competitor.  ABC Tissue increased its retail sales of toilet tissue from $101 million worth 15.7 per cent of the market in 2004 to $144.5 million worth 19.9 per cent in 2007. ⁽²⁾  The other key to ABC Tissue's capacity to compete is its non-union workforce.  KCA and SCA employ more than 1,650 ⁽³⁾ and 764 ⁽⁴⁾ people respectively, whereas ABC Tissue employs 500 non-unionised workers. ⁽⁵⁾

Table 2 | Major toilet-tissue brands and suppliers to the Australian market

Source:  Adapted from Australian Customs and Border Protection Service, 2009, "Reinvestigation of findings in Report to the Minister Rep 138, Certain toilet paper exported from the People's Republic of China and the Republic of Indonesia", Trade Measures Branch, Commonwealth of Australia, Canberra, Australia, December.

ABC Tissue's capacity to compete is also a result of importing pulp and finished tissue products enabling them to seek out market opportunities based on the fluctuations of pulp and finished product prices.  By comparison KCA's operations in South Australia are highly integrated from forestry, to pulping to manufacture limiting their flexibility to buy components of their supply chain cheaper and pass on the benefits to consumers.

As Table 2 demonstrates there is significant competition within the marketplace.  Individually the increased competition from private brands and ABC Tissue has impacted on KCA and SCA's market dominance.  Combined they've added strong competitive pressure in the tissue market in the interests of consumers.

Figure 2 outlines the trends in the consumption, production, imports and exports of household and sanitary paper and paperboard products, this includes tissue-based products, over the past fifteen years.  The data shows that while consumption has consistently increased over time, the major beneficiaries have been those importing products. ⁽⁶⁾  And Figure 3 articulates which countries have driven the rise.  Exports to Australia have grown from China, Indonesia and New Zealand, who have all increased their market share dramatically over the timeframe, despite recent declines.

Figure 2 | Australian consumption, production, imports and exports of household and sanitary paper and paperboard products, Kt

Source:  Australian Bureau of Agriculture and Resource Economics, 2010, "Australian forest and wood products:  Statistical tables", Commonwealth of Australia, Canberra, Australia.

Figure 3 | Select Australian import destinations of household and sanitary paper and paperboard products, Kt

Source:  Australian Bureau of Agriculture and Resource Economics, 2010, "Australian forest and wood products:  Statistical tables", Commonwealth of Australia, Canberra, Australia.

According to an Australian Customs Service (ACS) report into the potential impact of "dumped" toilet paper from China and Indonesia the downward pressure from imports was between 5 and 10 per cent for products from China, and 37 and 42 per cent for products from Indonesia. ⁽⁷⁾  By removing this pressure through trade protection is likely to rise.  Table 3 outlines the possible increase on current retail prices if protection was introduced to offset the downward pressure provided by "dumped" Indonesian and Chinese imports.

Table 3 | Range of retail price increases by introducing protection for toilet paper

Note:  Prices sourced from Coles Supermarkets Shopping online.

---

3.0 COLLUSION TO STOP IMPORTS?

It's clear from the data that the Australian tissue manufacturing industry has been under increased competitive pressure.  The impact is directly felt from the two established major tissue manufacturers, KCA and SCA, but also by the relevant union, the Construction, Forestry, Mining and Energy Union (CFMEU).  Representing workers in the forestry sector, the CFMEU's membership base is directly threatened by any decline in the domestic industry.

As a result of the declining commercial position of domestic toilet tissue manufacturers there has been increasing evidence that unions and industry are now colluding with the messages of eternal opponents of the forestry industry, environmental NGOs, to seek trade restrictions.

Despite often being opponents, unions, industry and green groups have a history of collaboration when they have a common goal.  The World Wildlife Fund (WWF) has a history of working with the CFMEU where their interests collide.  In 2008 they worked together to support select carbon mitigation strategies ⁽⁸⁾ and in 2009 they collaborated on a report discussing the future of the coal industry. ⁽⁹⁾

WWF is recognised as a supporter of the Forest Stewardship Council (FSC) certification scheme. ⁽¹⁰⁾  The scheme is designed to enable forestry product producers to have their products certified to standards aligned with WWF's view of environmental management from the initial harvest through the supply chain to retail sales.  Forestry products that have achieved FSC certification are entitled to carry the FSC certification mark which, it is argued, increases the products desirability to consumers.

WWF has worked with forestry product companies in Australia to achieve FSC certification and to establish networks for FSC-certified companies. ⁽¹¹⁾  As part of the Global Forest and Trade Network, the Australian Forest and Trade Network encourages consumers to lobby for FSC certification for forestry products.  However, no Australian toilet tissue manufacturer is FSC certified.

Both KCA's parent company, Kimberly Clark Corporation, and SCA are members of WWF's Global Forest and Trade Network. ⁽¹²⁾  And in 2007 SCA Hygiene entered a commercial relationship with WWF to use their panda logo on their Velvet brand of toilet tissue.  The cost of securing WWF's logo was reported to be £10 million. ⁽¹³⁾

Green groups, especially WWF, have lobbied that forestry products should meet FSC certification standards, or a similar certification scheme, to be imported into Australia.  And the evidence outlined in the next three sections, suggests that a similar position is being taken by unions and industry to create a form of backdoor green protectionism.

In the United States campaigns have emerged along these lines. ⁽¹⁴⁾  The BlueGreen Alliance, the Sierra Club, the United Steel Workers Union, the Rainforest Action Network and the National Resources Defence Council have combined to fight forestry imports.  In a recent report on Indonesian imports the coalition argued that "manufacturers in the US are struggling to compete against imported, illegally-harvested low-priced wood and wood products". ⁽¹⁵⁾

Similar alliances are now emerging in Australia.

Greenpeace coordinated business and business groups, green groups and religious faiths worked together to form a joint statement for "eliminating illegal forest products in Australia". ⁽¹⁶⁾  Among other requirements, the joint statement called for the Australian government to "take a leading role in stopping the importation of illegal forest products into Australia ... (through) regulations that require verification of the legality of forest product imports".

The joint statement was supported by Bunnings, IKEA, the Wilderness Society, Patio, DANKS, the Building Designers Association of Australia, Oxfam, the Woodage, Simmonds Lumber, the Uniting Church in Australia, the Forest Stewardship Council, Lifestyle Furniture, the Australian Conservation Foundation, Fantastic Furniture, the World Wildlife Fund and Greenpeace.

However, there are more specific examples of these groups trying to exercise consumer activism as well as political and legal muscle.

3.1 WAKE UP WOOLWORTHS!

In 2008 a group called Wake Up Woolworths! (WUW!) was formed to target Australia's largest grocer, Woolworths Limited, and stop using imported toilet paper product sourced from Indonesia in its private label, Select.

The principle allegation was that APP was engaged in illegal logging in parts of Indonesia and may be selling illegally logged products.  And by sourcing toilet paper for its Select range Woolworths, and therefore consumers, were support illegal logging.  In substantiating their arguments the WUW! campaign drew heavily on material from WWF and Friends of the Earth (FOE), especially criticisms directed toward APP. ⁽¹⁷⁾

WUW! also attracted support from Greenpeace, with a spokesperson stating "what we're doing is protesting about Woolworths and their unsustainable tissue product, the Select brand paper products ... (because) they're made by Asia Pulp and Paper, one of the least sustainable fibre manufacturers in the world". ⁽¹⁸⁾

But digging deeper into the WUW! campaign the objective appears to have had little to do with improving environmental standards and had more to do with promoting environmentalism as a disguise to argue for protectionism.

In recommending that consumers stop buying Woolworths' Select toilet paper, the campaign discourages consumers purchasing imported paper products to protect local industry. ⁽¹⁹⁾  WUW! encouraged consumers to tell Woolworths stores to withdraw Select paper products, to tell other consumers to stop consuming Select products, and to ask for "Australian made paper products ... (so) thousands of Australian workers (are) paid properly ... (and) more of your money stays in Australia."

WUW! was "primarily funded" by the CFMEU ⁽²⁰⁾ and managed by public relations firm, Fitzpatrick Woods.  Principal consultant of Fitzpatrick Woods, Tim Woods, was a former official with the Pulp and Paper Workers' Branch of the CFMEU in the Forestry and Furnishing Products Division. ⁽²¹⁾

Fitzpatrick Woods has a history of clients in the forestry sector, including the CFMEU, to promote the industry and the worker's interests, including the Australian Paper Industry Association. ⁽²²⁾

And, depending on the interest, the campaign was successful.  Environmental concerns won because Woolworths worked with WWF and adopted their FSC certification standards in their tendering requirements for Select tissue products in 2009.

The union's strategy stumbled because no Australian forestry company had FSC certification.  However, Woolworths broadened the certification requirements to source tissue products from those meeting the Program for the Endorsement of Forest Certification (PEFC) standards. ⁽²³⁾

3.2 POLITICAL ACTION

Facing competitive pressures industry, unions and environmental groups sought to influence the Australian political process.

Prior to the 2007 Federal election then Federal Labor Party Leader, Kevin Rudd MP, announced he would commit his government to "the greater policing and enforcement of an effective national ban on the sale of illegally logged timber imports". ⁽²⁴⁾  This announcement followed significant concerns being voiced by environmental groups, the CFMEU and the Australian Plantation Products and Paper Industry Council (A3P). ⁽²⁵⁾

Table 4 | CFMEU donations to Australian political parties, 2003 – 2008

Source:  Australian Electoral Commission Data.

The extent of the CFMEU's campaign to oppose imports of tissue paper resulted in their endorsement of a candidate for the South Australian seat of MacKillop in the 2010 State Election.  The seat of MacKillop is the centre of many forestry-related jobs in the State and most importantly in the town of Millicent, near the Victoria-South Australia border that is the home of KCA's tissue paper manufacturing.  Despite being unsuccessful, Darren O'Halloran, and his campaign was financially supported by the union. ⁽²⁶⁾

The influence of the CFMEU is particularly important because of its significant financial contributions to the Australian Labor Party (ALP).  As Table 4 outlines since 2004 the CFMEU has donated more than $1.5 million to political parties, of which almost all has been donated to the ALP including a notable $38,000 donation in the 2005/06 financial year from its Forestry and Furnishing Products Division.  Of that amount, the majority, $28,000, was donated from the Forestry and Furnishing Products Division of the CFMEU, which has been at the forefront of the campaign to support trade restrictions, to the South Australian Division of the ALP.

But since being elected to government, the Minister for Agriculture, Fisheries and Forestry, Tony Burke MP, has not implemented the policy commitment given by former Prime Minister, Kevin Rudd.  However, pressure has been placed on the government to implement the ban.  Six United States Senators have written to the government seeking the principles of their Lacey Act to be included in Australian law.  The Lacey Act requires importers to be able to source the origins of plant and animal life products with significant penalties for non-compliance. ⁽²⁷⁾  A coalition of church groups, environmental NGOs, unions and industry groups are also calling for the implementation of the ban.

Figure 4 | Advocates for green protectionism

3.3 LEGAL ACTION

In the absence of political action industry, unions and green groups have now resorted to legal action.  In early 2008 both KCA and SCA claimed Chinese and Indonesian toilet tissue paper manufacturers were "dumping" products into the Australian market for prices cheaper than their value.

In August 2008 KCA lodged an application for the ACS to assess whether dumping was occurring.  By November the ACS concluded dumping was occurring and that it may be causing injury to the Australian industry. ⁽²⁸⁾  In response the ACS recommended the imposition of tariffs against Chinese and Indonesian products to limit the impact on KCA and SCA.

However in late 2009 the Australian Customs and Border Protection Service (ACBPS) revisited their assessment and recommended the rescinding of anti-dumping measures.  The assessment cited numerous reasons for doing so including the increased "competition from another industry member (ABC)". ⁽²⁹⁾

While recognizing that some dumping was occurring, the ACBPS broadened their investigation and found that the basis of injury to KCA and SCA was caused by factors other than dumping from China and Indonesia.  The final conclusions, according to the report were "that:

• the goods exported to Australia from China and Indonesia was dumped;  and
• the Australian industry producing like goods suffered injury;  but
• the injury experienced by the Australian industry was caused more by other factors than by the dumping of the goods exported from China and Indonesia;
• injury to the Australian industry caused by dumping of the goods exported from China and Indonesia was not material;  and
• material injury to the Australian industry by the good exported to Australia from China and Indonesia is not foreseeable and imminent". ⁽³⁰⁾

While not explicitly stating what the other factors were, the report outlined possibilities of:

• "appreciation of the Australian dollar against the United States (US) dollar which was argued must have affected the applicants' pricing decisions in 2007;
• the launch of a new product into the premium retail sector;  and
• shifting consumer preference". ⁽³¹⁾

Following the recommendation of the ACBPS the Federal government removed the tariffs delivering a hostile response from vested interests.  The CFMEU argued "exporters from China and Indonesia are hurting the tissue-making industry by selling product at a lower price". ⁽³²⁾  Similarly, A3P stated the government must "ensure Australian domestic manufacturing is not unfairly disadvantaged, and where dumping activities are demonstrably occurring the competitive playing field must be reinstated". ⁽³³⁾

In April KCA and SCA Hygiene took the Federal Attorney-General to the Federal Court to impose anti-dumping measures on paper products imported into Australia.  The CFMEU flagged its support for the KCA and SCA's efforts to stop imported forestry products. ⁽³⁴⁾

---

4.0 THE COST OF COLLUSION AGAINST IMPORTS

The clear objective of the numerous attacks being made by industry, unions and green groups is to establish a level of protectionism that stops the importation of forestry products.  But the benefits of doing so are highly circumspect.

4.1 NO ENVIRONMENTAL BENEFIT

In addition to the ACBPS conclusions, other reports commissioned by the government support that the environmental benefits of stopping imports will be negligible.  A study by the Centre for International Economics (CIE) commissioned by the Commonwealth Department of Agriculture, Fisheries and Forestry concluded that the introduction of trade restrictions on timber in line with the ALP's 2007 policy is ill-advised. ⁽³⁵⁾

The study released in February 2010 concluded that the actual volume of illegal logging internationally appears to be grossly over-estimated and may only be between five and ten per cent.  The study also found that only fifteen per cent of the world's timber is traded and Australia only imports 2.5 per cent, of which only ten per cent may be illegally logged.

In light of the CIE's argument that "Australia's imports account for about 0.034 per cent of global timber production, and 0.34 per cent of products incorporating illegally logged timber" the report recommended not to implement the proposed policy.

The CIE particularly highlighted that the compliance costs for introducing the policy is likely to outweigh the economic benefit of doing so.  Further, because Australia's share of globally imported timber is so low the impact of changing Australia's importing regime is unlikely to then affect decision making within the industry to reform and meet the standards the government would seek.  Instead products restricted from the Australian market are likely to be imported elsewhere.

4.2 PROTECTIONISM HARMS CONSUMERS

Some Australians want products to meet their own expectations of environmental standards through arbitrary regulation.  However, introducing trade restrictions will have a negative impact on Australia's economy.  The history of Australia's liberalisation of tariffs is well known.  Following reforms in the mid-late 1970s, through the 80s and 90s Australia's tariff walls have been dismantled.  The only major remaining tariff barriers exist in the automotive and textile, clothing and footwear industries.

By introducing protections that limit imports the competition faced by Australia's industry will collapse and with it any downward pressure on prices.  As a consequence the average price of tissue products will rise.  Without any environmental benefit trade restrictions will simply increase the cost-of-living pressures already faced by Australian families.

Supermarket chains should also be wary.  Coles and Woolworths have both developed commercial strategies to attract customers by cutting prices.  Protectionism will undermine their commercial strategies and increase the competitive pressure that relatively newer, lower-cost competitors can provide including ALDI and Costco.

---

5.0 CONCLUSIONS

There is a concerning trend emerging of collusion of the messages of industry, unions and green groups to push for self-interest trade restrictions disguised as environmental concerns.

The campaigns to impose trade bans on imported timber and forestry products are a clear example.  Based on independent analysis sought by the Federal government the actual problem is over-stated.  Australia's imports are tiny and Australia's capacity to stop illegally logged timber through its trade policy is non-existent.

Yet the campaigns persist.  And they are now focused on political and legal channels to secure their objectives.

Of particular concern, is the possible link between donations made by the Forestry Division of the CFMEU to the South Australian Division of the ALP in light of their commitment to ban certain timber products.

And the impact of these policies cannot be ignored.  Retailers who depend on low-cost products to compete, such as Coles and Woolworths, will lose their market advantage if they are limited to buying locally-produced goods.  But the real cost will be pushed onto consumers who will face prices of up to 42 per cent higher at the supermarket to help protect the interests of industry and the unions.

---

6.0 REFERENCE LIST

ABC Tissue, 2010, "About us".

Australian Broadcasting Corporation, 2010, "Background Briefing:  Timber Politics", Radio National, May 30.

Australian Bureau of Agriculture and Resource Economics, 2010, "Australian forest and wood product statistics", Commonwealth of Australia, Canberra, Australia, May 25.

Australian Bureau of Agriculture and Resource Economics, 2010, "Australian forest and wood products: Statistical tables", Commonwealth of Australia, Canberra, Australia.

Australian Customs Service, 2008, "Toilet paper exported from the People's Republic of China and the Republic of Indonesia", Canberra, Australia.

Australian Customs and Border Protection Service, 2009, "Reinvestigation of findings in Report to the Minister Rep 138, Certain toilet paper exported from the People's Republic of China and the Republic of Indonesia", Trade Measures Branch, Commonwealth of Australia, Canberra, Australia, December.

Australian Plantation Products & Paper Industry Council, 2007, "Bringing down the axe on illegal logging – a practical approach", Braddon, Australia, January 31.

Australian Plantation Products & Paper Industry Council, 2010, "Dumping injures Australian manufacturing but is allowed to continue", Braddon, Australia, January 15.

BlueGreen Alliance, Sierra Club, United Steel Workers Union, Rainforest Action Network, National Resources Defence Council, 2010, "Illegal logging in Indonesia: The environmental economic and social costs", Washington DC, United States of America, April.

The Centre for International Economics, 2010, "A Final report to inform a regulation impact statement for the proposed new policy on illegally logged timber", Prepared for the Department of Agriculture, Fisheries and Forestry, Canberra, Australia, January.

The Centre for International Economics, 2009, "Proposed new policy on illegally logged timber: issues paper", Sydney, Australia, April.

Construction, Forestry, Mining and Energy Union, 202, "Union backs independent candidate for MacKillop in SA election", February 26.

Fitzpatrick Woods, 2010, "Clients".

Fitzpatrick Woods, 2010, "Our People".

Fundraising.org.uk, 2007, "WWF partners with toilet tissue company", September 17.

Global Forest and Trade Network, 2010, "GFTN Participants list".

Greenpeace, 2009, "Eliminating illegal forest products in Australia", August 24.

Industry Edge, 2007, "Pulp & Paper Strategic Review 2007: A comprehensive analysis of the Australian and New Zealand Pulp & Paper Industry", Hobart, Australia

Kimberly-Clark Australia, 2009, "Who we are".

Kimberly-Clark Australia, 2009, "Our products".

McIlwraith, I, 2009, "Cheap toilet paper imports get flushed", envirocare systems, January 2.

Ninemsn.com.au, 2010, "Cheap toilet roll threatens Aussie jobs, says CFMEU", February 22.

Svenska Celulosa Aktiebolaget, 2010, "Products".

Svenska Celulosa Aktiebolaget, 2009, "SCA Annual Report 2009", Stockholm, Sweden.

World Growth, 2010, "Green protectionism: The new tool against forestry in developing countries", Washington DC, United States of America.

Wake Up Woolworths, 2009, "Woolworths Select Brand Paper Products".

Willingham, R., 2010, "Toilet paper saga rolls on to Federal Court", The Age, April 9.

Woolworths Limited, 2009, "Corporate Responsibility Report", Baulkham Hills, Australia, November 27.

World Wildlife Fund Australia, 2009, "Big coal companies endanger mining jobs", October 12.

World Wildlife Fund Australia, 2007, "'Full house' for FSC Australia launch", March 8.

World Wildlife Fund, 2005, "Partnership to promote sustainable forestry practices", December 5.

World Wildlife Fund Australia, 2008, "WWF welcomes National Low Emission Coal Council", July 28.

---

ENDNOTES

1. McIlwraith, I, 2009, "Cheap toilet paper imports get flushed", envirocare systems, January 2.

2. Industry Edge, 2007, "Pulp & Paper Strategic Review 2007: A comprehensive analysis of the Australian and New Zealand Pulp & Paper Industry", Hobart, Australia.

3. Kimberly-Clark Australia, 2009, "Who we are".

4. Svenska Celulosa Aktiebolaget, 2009, "SCA Annual Report 2009", Stockholm, Sweden.

5. ABC Tissue, 2010, "About us".

6. Australian Bureau of Agriculture and Resource Economics, 2010, "Australian forest and wood product statistics", Commonwealth of Australia, Canberra, Australia, May 25.

7. Australian Customs Service, 2008, "Toilet paper exported from the People's Republic of China and the Republic of Indonesia", Canberra, Australia.

8. World Wildlife Fund Australia, 2008, "WWF welcomes National Low Emission Coal Council", July 28.

9. World Wildlife Fund Australia, 2009, "Big coal companies endanger mining jobs", October 12.

10. World Wildlife Fund Australia, 2007, "'Full house' for FSC Australia launch", March 8.

11. World Wildlife Fund, 2005, "Partnership to promote sustainable forestry practices", December 5.

12. Global Forest and Trade Network, 2010, "GFTN Participants list".

13. Fundraising.org.uk, 2007, "WWF partners with toilet tissue company", September 17.

14. World Growth, 2010, "Green protectionism: The new tool against forestry in developing countries", Washington DC, United States of America.

15. BlueGreen Alliance, Sierra Club, United Steel Workers Union, Rainforest Action Network, National Resources Defence Council, 2010, "Illegal logging in Indonesia: The environmental economic and social costs", Washington DC, United States of America, April.

16. Greenpeace, 2009, "Eliminating illegal forest products in Australia", August 24.

17. Wake Up Woolworths, 2009, "Woolworths Select Brand Paper Products".

18. Australian Broadcasting Corporation, 2010, "Background Briefing: Timber Politics", Radio National, May 30.

19. Wake Up Woolworths, 2009, "Woolworths Select Brand Paper Products".

20. Ibid.

21. Fitzpatrick Woods, 2010, "Our People".

22. Fitzpatrick Woods, 2010, "Clients".

23. Woolworths Limited, 2009, "Corporate Responsibility Report", Baulkham Hills, Australia, November 27.

24. Australian Broadcasting Corporation, 2010, "Background Briefing: Timber Politics", Radio National, May 30.

25. Australian Plantation Products & Paper Industry Council, 2007, "Bringing down the axe on illegal logging – a practical approach", Braddon, Australia, January 31.

26. Construction, Forestry, Mining and Energy Union, 202, "Union backs independent candidate for MacKillop in SA election", February 26.

27. The Centre for International Economics, 2009, "Proposed new policy on illegally logged timber: issues paper", Sydney, Australia, April.

28. Australian Customs Service, 2008, "Toilet paper exported from the People's Republic of China and the Republic of Indonesia", Canberra, Australia.

29. Australian Customs and Border Protection Service, 2009, "Reinvestigation of findings in Report to the Minister Rep 138, Certain toilet paper exported from the People's Republic of China and the Republic of Indonesia", Trade Measures Branch, Commonwealth of Australia, Canberra, Australia, December.

30. Ibid.

31. Ibid.

32. Ninemsn.com.au, 2010, "Cheap toilet roll threatens Aussie jobs, says CFMEU", February 22.

33. Australian Plantation Products & Paper Industry Council, 2010, "Dumping injures Australian manufacturing but is allowed to continue", Braddon, Australia, January 15.

34. Willingham, R., 2010, "Toilet paper saga rolls on to Federal Court", The Age, April 9.

35. The Centre for International Economics, 2010, "A Final report to inform a regulation impact statement for the proposed new policy on illegally logged timber", Prepared for the Department of Agriculture, Fisheries and Forestry, Canberra, Australia, January.