Labor's wrong direction on reform

Julia Gillard told us last week why it is imperative to get the legislative program started.  Unfortunately, absent from this was the need to put Parliament to work removing the crushing regulatory and tax burdens the government imposes.  Instead, she promised us new and expanded quangos, with their collateral damage of an increased public service staffed by people attracted away from productive activities.

Gillard's legislative agenda foreshadowed one new bureaucracy to set national safety and quality standards for Australia's hospitals and health services.  Another is to improve access to services and representation for university students.  And there's to be a body for ''national preventive health''.

Her plans also include more bureaucratic controls over the ozone layer, a danger that seemed to have been downgraded.  Also in the mix is water efficiency labelling, and more powers for bureaucracies regulating therapeutic goods and fighting corporate crime.  The government wants parliamentary legislation to be required to take into account the many ''human rights'' that international agencies invent at the drop of a handkerchief.

The Prime Minister calls this a reform agenda, and adds, ''this legislation ... step by step ... will make a difference to the lives of families across Australia''.  As Ricky Gervais's Andy Burnham might say, ''Is she having a laugh?''  Sadly not.

By reform, Gillard means adding to the 7000 pages of regulations comprising hundreds of thousands of ways the federal government interferes with the decisions of businesses and individuals.

It may be that in the present Parliament she will find it easy enough to resist embarking on the big-ticket programs favoured by her Greens allies and most of the Labor Party.  A Gillard government on a knife edge is unlikely to court needless risks by promoting contentious matters.

The stage is set for procrastination in the introduction of one of the many versions of a carbon tax on the agenda.  Lots of pictures of beaming ministers, Greens and independents, a newly forged quadruped of ALP-favoured advisers, and something to rehash for the under-occupied Climate Change Department.

Wheel-spinning inaction is also likely on the proposed new minerals tax.  At least those parts of it that involve net tax increases will be subjected to endless reviews now the agenda is under the control of Martin Ferguson and the ALP commonsense Wing.

Similarly, notwithstanding her previous support, Gillard is unlikely to want to court the contention inevitable in a euthanasia bill.

But the carbon tax and minerals tax will remain as a sword of Damocles over business investment, and the waste of the national broadband implementation will sap resources for productive investment.  And the new voices in the Parliament will seek further raids on the community to finance their preferred interventions and boondoggles for constituents.

One bright spot has been the stated determination of new Finance and Deregulation Minister Penny Wong to return the budget to surplus.  The Finance Ministry's role as the guardian of unnecessary spending and regulation would seem to be admirably suited to Wong's personality.  But expressions of determination have to be followed through.

For all her bluster, Wong has not sought any tips for handling the job from Peter Walsh, the finance minister who did much to keep the Hawke government's accounts in shape.

The government that Kevin Rudd built, though shorn of its Messianic fervour, remains intact.

''Reform'' has been redefined to mean any change that increases the ability of the government to shift the economy and society in its preferred directions.  Compared with the Hawke/Howard years, doubles peak has transformed reform's meaning from removing government from decision making to more securely ensconcing it.

Lip service is paid to the need for parsimony in government spending but the education minister who was responsible for the greatest spending excesses is now the Prime Minister and the climate change minister who sought to preside over a vast increase in taxation and regulation is now the Finance and Deregulation Minister.

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Carbon price makes no policy sense

Gillard will need a big policy win this term.  Even better if it's a win on the policy that sank her predecessor.

So it was hardly surprising that the call by Marius Kloppers of BHP Billiton for a carbon tax was quickly affirmed by the new climate minister Greg Combet.

Julia Gillard announced the makeup of the oddly secretive climate change committee yesterday.  She's getting all her ducks in a row for a price on carbon of some description.

But domestic politics isn't the main climate game.  International politics is.  And right now, the prospects for a global agreement on climate change couldn't be lower.

Diplomats are pouring as much cold water as they can on hopes for securing an agreement in Cancun in December.  ''The likelihood of a continued deadlock remains significant'', said the director of the UN Framework Convention on Climate Change last week.  George Monbiot wrote in The Guardian, ''The closer it comes, the worse it looks.''

You don't have to be a climate change sceptic, denier, pessimist, realist, optimist or scientist to recognise dealing with real or potential consequences of greenhouse gas emissions is the ultimate collective action problem.

As it's a problem of collective action, it makes little sense for countries to ''go it alone'' -- particularly nations like Australia, who would easily see their carbon emissions move to jurisdictions which aren't playing along.

The government implicitly agrees.  It's why we have two proposed emissions reduction targets -- an unconditional 5 per cent for now, and 15-25 per cent if there is a binding global agreement to do so.  The difference between these two targets is an admission that reduction is substantially less meaningful without international action.

Treasury agrees too.  Their modelling of the Rudd government's Carbon Pollution Reduction Scheme in October 2008 assumed all countries around the world would implement the same scheme at the same time.

There's a precedent for international policy action:  the sixty year long quest for multilateral free trade agreements.  Like emissions reduction, trade has been the subject of numerous international conferences and diplomacy.

But unlike emissions reduction, free trade is unambiguously in the self-interest of every nation.  This is true even if other nations do not open their markets.  In a world of high tariffs and subsidies, a country which unilaterally lowers trade barriers -- as Australia did -- is still better off.

Despite this, the fight for freer trade through global agreements is excruciatingly slow and now seems to be stagnating.

Those failures say nothing of the worthiness of the free trade project.  Just that international politics is an ineffective and frustrating mechanism to pursue policy goals.

That's not a good omen for a global treaty on emissions reduction, where countries can benefit by avoiding their emissions reduction obligations.  Unlike free trade, it's in their self-interest to cheat.

Recognising that is not being a sceptic about climate science, but a realist about politics.

Certainly, many countries are doing little bits of climate change mitigation here and there.  We've had a national Mandatory Renewable Energy Target for nearly a decade now, and countless subsidies and programs.

We're hardly alone.  Even China is talking about imposing a domestic carbon trading scheme.  And on Friday last week, a senior Chinese climate negotiator declared his country would seek a binding climate treaty by the end of next year.

Sounds definitive, but there's more to that declaration than a headline may suggest.  The Chinese blame the Americans for wrecking Copenhagen:  ''The biggest obstacle comes from the United States'', according to their negotiator.  But after China's calculated theatrics at the Copenhagen summit, it's hard to take them at their word.  Chinese statecraft is increasingly cantankerous and contrarian.  Big statements have to be seen through that prism.

Yes, China is cleaning up its coal-fired power stations -- as they should -- but their average efficiency is still well below those in the developed world.

And the country has generous subsidies for renewable energy.  There's more to those than the headlines suggest too:  a report in the South China Morning Post last week pointed out they badly underperform.  Wind turbines turn for an average of 75 days a year, compared to 110 days in England.  Few wind turbines and solar plants are even connected to the electricity grid.

In Australia, the Green Loans scheme was exploited by opportunists looking to make a subsidised buck, with negligible environmental benefit.  In China, those green subsidies are much larger, in a much larger country, and embedded in a much more corrupt and opaque political system.

Yet as business writers keep pointing out, China has an ''advantage'' in the climate game.  It's a dictatorship.  It only has to justify its policies so far.

The rest of the world will be even harder.

The International Energy Agency said last week energy poverty in the developing world is a big reason it doesn't look like we're going to achieve the Millennium Development Goals.

1.4 billion people lack access to energy.  Most of those are concentrated in Africa and on the Indian subcontinent.  The health and wellbeing consequences are substantial.  Those nations -- 1 billion people in Africa, 1.1 billion in India -- will be unlikely to go along with any policy that would restrain development.  When you live below the poverty line, a ''small'' price on carbon is not trivial.

China's public relations blitz notwithstanding, the chances of a binding and meaningful agreement have diminished since Copenhagen, not increased.  The European Union's climate action commissioner Connie Hedegaard said last month ''These negotiations have if anything gone backwards.''

The Stern Review said ''no country can take effective action to control the risks that they face alone''.

And it's now clear we can't rely on international action.

It makes political sense for Gillard to jump into a comprehensive carbon price this term.  But it still it makes little policy sense.

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Sum of all fears for non-government school system

The new Labor-Green dominated Government has magnified the deep uncertainties already being felt by Australia's non-government schools over funding.

The Rudd-Gillard Labor government maintained a holding pattern on school funding in its first term, providing a degree of stability in recurrent public funding for the growing Catholic and independent school sectors.

It adopted the SES model introduced by the Howard Coalition government in 2001, and guaranteed that no non-government school would be made financially worse off during the current funding agreement term.

The current agreement will now expire in 2013, with Julia Gillard committing during the election campaign to maintaining the existing system for an additional year beyond that.

Despite this, in April this year Gillard announced a review of school funding arrangements to apply beyond the current school funding agreement.

The terms of reference for the review, headed by David Gonski, contains provisions which may signal an end to current nongovernment school funding arrangements which have served Australian education well.

In particular, the review is to consider the role of private contributions and other income sources when recommending a model for allocating funds across schools.  This suggests replacing the existing SES with something resembling the former Education Resources Index, which withheld funds from schools with greater private income sources.

Similarly, there have been concerns expressed by non-government school representatives that public funding to Catholic and independent schools will not be maintained in real terms.  This would imply that fees would need to be increased in order to cover the rising costs of teacher wages and educational supplies.

In late July, former education minister Simon Crean stated that non-government schools should not necessarily assume the maintenance of a funding guarantee, since indexation arrangements could change as a result of the review.

The newly sworn-in Minister for School Education, Peter Garrett, has not refuted this statement in his short tenure in the job.

To fuel further uncertainty into the funding outlook for non-government schooling, enter the Greens.  In their election manifesto released before the election, Greens leader Bob Brown and his education spokesperson Sarah Hanson-Young called for an almost immediate overhaul of school funding.

Under their policy the existing SES model was to be abolished at the end of this year, with a replacement funding arrangement that accounts for the resource levels and funding capacity of non-government schools.

Schools that charge higher tuition fees or receive greater donations from their local communities would have their public funding substantially reduced under the Greens' plan.  This resource-based funding arrangement is strikingly reminiscent of the ''hit list'' that was devised by Labor during its ill-fated 2004 federal election campaign.

The existing funding indexation arrangement, which ties funding growth to non-government schools on the basis on recurrent costs of government schools, would also be abolished.

Presumably, given their stated objective of redistributing funds to government schools, the Greens would want to replace the existing indexation with a framework that provides Catholic and independent schools with far lower growth in public funding.

The overall objective of Green education policy is to see the reduction in total federal funding to non-government schools back to 2003-04 levels.

This change would effectively reduce public funding by $1000 for each student enrolled in Catholic and independent schools.

In response to this enforced funding restriction, schools would be forced either to raise fees even further or reduce the level of educational service provision to students.

If the Greens wield their new-found political muscle to push school funding policy in their preferred direction, such a scenario would be highly detrimental to the broader interests of Australian education.

Catholic and independent schools provide a quality, values based education that is highly responsive to the educational needs of students and parental choices.

Reducing public funding by the amount envisaged by the Greens would restrict the choice of non-government schooling to all but the wealthiest Australian parents.

It should also be understood that the federal and state governments have a limited fiscal capacity to enrol at least an additional 30 per cent of currently enrolled students into the government school system.

Cost-effective public funding to non-government schools ensure that the taxpaying public are better off, as students in Catholic and independent schools alleviate the fiscal pressure off states and the Commonwealth to fund the same students in expensive government schools.

The continuing funding uncertainty in Australian school education partly reflects a lack of appreciation of the significant contribution that non-government schools play in helping to ensure that this country maintains a world class standard of education.

Any funding change that dilutes this contribution will do little but harm the economic and social interests of future generations.

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Bankrolling Oprah: the new tourist strategy

Fifty per cent of all advertising is wasted, says the marketing cliché.  The problem is figuring out which fifty per cent.

Last week we had a rare burst of honesty about the usefulness of the money governments spend on high profile tourism campaigns.  The former Tourism Minister John Brown admitted, ''We spent hundreds of millions of dollars over 30 years without much effect, I must say that honestly.''

Brown was a minister in the Hawke government when he commissioned and oversaw the famous Paul Hogan ''Throw another shrimp on the barbie'' ads during the 1980s.  That Hogan campaign is constantly held up as the greatest success story of Australian tourism.  It's the yardstick by which all other campaigns are measured.

So his admission it's all been an enormous waste of cash is unlikely to feature prominently in Tourism Australia's next annual report.

Brown was helping announce Oprah's visit to Australia.  Her visit is being heavily subsidised by Australian taxpayers:  Queensland is chipping in $400,000, New South Wales between $1 and $2 million, and the federal government $1.5 million.

Oprah is personally worth an estimated US$2.5 billion, so clearly she doesn't need the money.

But Brown doesn't want us to be ''cynical about the cost''.  The current tourism minister, Martin Ferguson, is sure it is ''money well spent''.

Special Oprah-in-Australia episodes will go to air next January alongside Tourism Australia's G'Day USA campaign.  And, the government hopes, American dollars will flood in.

Maybe millions for Oprah will succeed after millions for ''Where the bloody hell are you?'', the Baz Lurhmann Australia tie-in campaign, and 2004's ''Australia:  A Different Light'' with Delta Goodrem and Richie Benaud, failed.

The Oprah effect can turn a book into a bestseller just by being featured on her program.  Our tourism bureaucrats are hoping that scales to continents.

But I don't want to dwell too much on the specifics of the Oprah visit.

The federal government's thinking about tourism has always been woolly.  Tourism promotion has been a swamp in to which the government has poured cash and consultants for decades.

In Crikey in June, Noel Turnbull pointed out the government is running two simultaneous marketing campaigns, with contradictory messages.  The first is a branding campaign which suggests there's more to Australia than people think.  The second is a tourism campaign which suggests there isn't;  that we're all about glossy surfaces and pretty landscapes.

One wonders how many marketing and public relations consultants are going to feed on the Oprah campaign.

But why are governments doing tourist promotion at all?

The overwhelming beneficiaries of tourism dollars are private industry:  hotels, restaurants, transport, souvenir shops, pubs, cafes, barbecue manufacturers and shrimp farms.  Tourism promotion does their marketing for them -- the government spends millions of dollars trying find customers.

Certainly, the government gains a small amount of money from the GST levied on things tourists might buy.  But the same holds true for all Australian industries selling products to Australian nationals -- the government gains a little from every sale.  So such logic would suggest the entire advertising industry should be subsidised by government.

If the benefits of promotion are so enormous, the tourism industry should be paying for it themselves.  There's no reason they can't band together in another of their many peak bodies to sponsor international marketing campaigns.  Let industry discover which half of advertising works and which half doesn't.

Government policies designed to promote tourism almost always end in disappointment, as John Brown recognised.

But we don't only push out ads.  We also spend vast sums on events to try to lure in overseas crowds.

The major events strategies of Commonwealth and state governments are predicated on a belief that big sporting contests translate into big touristy payoffs.

This month is the 10th anniversary of the Sydney Olympics.  We ran a good event.  But we got a bad Olympic hangover.  Visitor numbers to New South Wales actually declined relative to other Australian states.  It's not our fault:  Beijing and Athens had the Olympic hangover too.

The Sydney Olympics was a bigger deal than Oprah's tour ever could be.  We earned a great deal of international goodwill and publicity in those few weeks in 2000.  But tourism went backwards.

In Victoria, the Grand Prix -- the pride and joy of the Victorian tourism lobby -- isn't even paying for itself anymore.  It posted a $49.2 million loss this year, and was promptly bailed out by the state government.

Here's hoping Australia doesn't win the privilege of hosting the World Cup.

There's good reason to be sceptical that Oprah is the tourism spend to buck the trend.  The former tourism minister may be optimistic about Oprah's visit but history tells us we shouldn't be.

Savaging a popular policy a tricky task for Turnbull

Malcolm Turnbull's elevation to the shadow communications portfolio may be just what the debate over the national broadband network needs.  It could be just what the Liberal Party needs, too.  But Turnbull has a hell of a job:  to persuade the electorate that a gigantic, government-subsidised gift of a super-fast internet is a bad idea.  An Essential Report poll late last year found 65 per cent of Australians thought it was important the NBN was built.  Sixty per cent of Coalition supporters did, too.  As a general rule, Australians like free stuff even if eventually they have to pay for it through tax.

Both the government and the opposition have lined up their new portfolios in time for the next sitting of Parliament.

The election is over and Labor wants change, not continuity.  Julia Gillard has tried to eliminate all traces of the embarrassing Kevin Rudd era.

On the other side, the Coalition did astonishingly well at the election.  So, Tony Abbott's thinking goes, why fix what's working?  Turnbull's move to communications is the only significant change.

The Coalition's broadband message was an unmitigated disaster during the election -- the biggest problem with an otherwise robust campaign.

It's possible that Abbott is laying a cunning trap for his rival.  From now on, the debate over the broadband is going to be intimately linked with Liberal Party leadership questions.  And who would want to be saddled with the job of opposing one of Labor's most popular policies?

But Abbott needs Turnbull to do well.  Ever since he took over in November 2009, Abbott's leadership has burnt fast and hot.  His strategy was to barge into The Lodge.  Now it seems likely the Coalition faces a full term in opposition.  Abbott has to turn off his fast burn and apply slow, indirect heat to the Gillard government.  He will need his shadow ministers to break down government policies bit by bit, not try to blow them up as quickly as possible.  In other words, Abbott is relying on Turnbull to make the broadband network look like insulation, not the mining tax.  Turnbull may be able to do so.

Since 2007, the government's Communications Minister, Stephen Conroy, has successfully portrayed any Coalition critic of his broadband plan as a Luddite, as if they were opposed to the very idea of the internet and just a sledgehammer away from machine breaking.  Conroy won't be able to play that card now.  You couldn't parody Turnbull's love of technology.  He was not just the chairman of Ozemail;  he recently released an iPhone application dedicated to all things Malcolm.

The Coalition can't stop the broadband network, but it will be able to show how poorly thought through the project has been.  After all, the network the government is building is not the network it took to the 2007 election.  That first plan failed.

On a now infamous flight between Canberra and Sydney in April last year, Conroy used the time he could get with Kevin Rudd to explain their $4.7 billion scheme wouldn't work.  The two men sketched the $43 billion scheme we're getting now.

If we've learnt anything about the internet, it's that we always find new uses for it and we always want more speed.  But that doesn't mean this specific network at this specific price, built in this specific style is the best way to get it.  And it doesn't mean the network has to be built by government.  Before the 2007 election, Telstra was desperate to roll out high-speed broadband itself.  Had the Howard government made some regulatory changes, we would already have the network at no cost to the taxpayer.

There's a catalogue of problems with the NBN.  A decade after Telstra's privatisation, the government has taken responsibility for telecommunications.

Unfortunately, the Coalition's alternative policy does little to resolve the deep regulatory issues that have held back Australian broadband.  But right now, the burden of proof is on the government to show its NBN is worth the price tag.

The Liberals need their old, discarded leader to knock serious holes in the national broadband network.

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Tea Party conservatives are brewing up a storm

It was hardly needed, but the Tea Party confirmed this week it's a big deal in American politics.  It's a big deal for conservative politics internationally.  New technology is giving conservative activists the power to form the sort of genuine grassroots movements the left has been for decades.

On Tuesday, the Tea Party scored a huge win when Christine O'Donnell beat Mike Castle in a Republican Senate primary in Delaware.  Castle is the embodiment of an establishment Republican.  He's enjoyed a nine-term run in the House of Representatives.  He was Delaware's governor for seven years.  He's a great-great-great-great-great grandson of Ben Franklin.  He's very, very moderate.

He lost to the deeply conservative Christine O'Donnell, who carried a Sarah Palin endorsement.  Defeating Castle scored her one of the biggest victories of the Tea Party so far.

Few overseas political movements are less clearly understood in Australia than the Tea Party.  That's no surprise.  Sometimes not even the Tea Party is entirely sure what it stands for.

Take a questionnaire for Republican and independent candidates, written by a small, obscure Tea Party group in Erie County, Ohio.  They call themselves the Freedom Institute.  To get its approval you must believe marriage is solely between a man and a woman, gays should be kept out of the military, tariffs should be increased, the Federal Reserve should be abolished, and ''the regulation of carbon dioxide in our atmosphere should be left to God and not government''.

The Freedom Institute wants tax cuts and government workers to be exposed to ''the free-market system''.  But they also want to impose trade barriers to keep jobs in the country.  They want their politicians to be conservatives, but populist conservatives with some eccentric and jumbled views.

But compare the Freedom Institute's list with a similar one supported by FreedomWorks, a large non-profit organisation with headquarters in Washington.  They sum up the Tea Party's central tenets as:  start fundamental tax reform, stop the tax hikes, end runaway government spending, and protect the constitution.  In other words, limited government, low taxes, and an end to government waste.

Few of those policy positions would be opposed by conservative, small-government Republicans.  In Australia, they'd easily recognised as free-market liberalism.  But for the international press, the Erie County list is far more interesting.  The revolt against the Republican establishment is as much a revolt against big spending, big taxing George Bush as it is against the Obama administration.

Bush's Republican administration instigated the rolling program of Wall Street bailouts which have plunged the US into debt.  The US government deficit this year will be $1.3 trillion.  That's larger than our entire economy.

A Bloomberg poll found overwhelmingly the thread which ties the Tea Party together is a belief the US has lost its way in the past few years.  Eighty per cent agreed the recent expansion of government was a threat to liberty.

A CBS/New York Times poll found Tea Party supporters tend to be more educated than the general public.  And they're not bad judges of character.  The majority believe Sarah Palin is unqualified for the presidency.  Bear that in mind when you next hear the Tea Party dismissed as a crazy fringe.

The political class isn't sure what to make of the Tea Party.  It comes from outside the polished environs of Washington.  Few members have been involved in politics before.

They're all simply plugged into networks of blogs and mailing lists.  That makes the Tea Party sometimes confused, often naive, and easily led astray.  It also makes its members powerful.

In Australia, we just saw how potent a conservative grassroots can be.  The implosion of the parliamentary Liberal Party late last year over climate change was driven by a membership which saw Malcolm Turnbull's support of the emissions trading scheme as unacceptable.

Thousands of emails were sent by party members and others calling for the position to change.  In the end, they had to change leaders.  Hopes for bipartisan climate action disappeared, and Kevin Rudd's prime ministership died in the Liberal party room.  A conservative grassroots destroyed a Labor prime minister.

Compare the attention that movement got to the praise heaped upon the even tiniest left-wing movement.  Poor old GetUp! wishes it was half as effective as the Liberal membership last November.

Technological change has given conservative popular movements the power to challenge their establishment in the same way left-wing movements have for half a century.  That's the real story of the Tea Party.

It may get sucked into the Republican mainstream.  Or its candidates may fail at election time.  But the Tea Party isn't wrong.  America has serious problems.  Those problems have energised the conservative base.

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Shoppers better off if building red tape is cut

Planning Minister Justin Madden, on the advice of a committee he had established, rejected Woolworths' application to build a new hardware store in north Geelong.

The committee's advice was in line with regulators' policies in all states to concentrate shops in ''activity centres'' which integrate economic, social and environmental goals.  Clustering shops together is said to promote competition.

But some stores obliged to locate in those centres would incur costs that they think their customers don't value -- costs like bus stops and special ramps.  Moreover, forcing unwanted locational decisions on retailers is likely to mean diminished convenience for shoppers.

One outcome of the Australian regulatory approach is that our cities are not as well served with shops as less-regulated US cities.

In the north Geelong case, arguments concerning the merits of the development were heard from a rival hardware business.  Naturally that business opposed more competition.

This was a factor in the ministerial committee's decision, which acknowledged that such considerations ''would partially mute the strong community benefits as articulated by the proponent''.

Planning reviews are important in assessing conflicting rights people have regarding their properties.

But these reviews should not be forums for evaluating the disadvantages that a new competitor would bring for existing businesses.

When government bodies become such forums they start arbitrating what products people should buy and where they should buy them.

At the very least this brings bureaucratic costs as well as expenses to businesses seeking the go-ahead for their proposals.

More importantly, having committees make such decisions promotes the wrong business incentives.

If a company can get a bureaucratic verdict that impedes its competitor it can be far more lucrative than offering consumers better value.

But the lobbying to get that result is detrimental to shoppers' interests.  Choice is overridden and suppliers are encouraged to focus on pleasing regulators rather than customers, thus relegating the importance of cost control and merchandising.

Across Australia, the Federal Government has inadvertently partially undermined state government shopping location plans.

Federal-owned surplus airport land was sold with exemptions from state government planning rules.  This offered openings for new DFO centres to compete with state planners' approved shopping centres but without those centres' unnecessary costs.

The Federal Government recognised that land unconstrained by planning rules was worth a premium.  But this stemmed from avoiding costs that regulations foist on existing shopping centres -- costs that are passed on to the shopper.

The federal land sales infuriated state governments and existing shopping centre owners, who had been forced to endure lengthy approval processes and bureaucratic tinkerings and now faced competition from well-located sites that were cheaper to develop.

But the consumer benefited because costly planning processes and site requirements had been circumvented.

The development of surplus airport land illustrates the community benefits that are obtainable from a stiff dose of planning deregulation.  And far more can be done to better meet the needs of shoppers by reducing government controls.

The Productivity Commission is reviewing planning and zoning rules.  Hopefully this will bring insights on how governments might improve these rules so they better serve consumers' interests.

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Big new tax? Kloppers can't be serious

It was almost as if BHP Billiton's Marius Kloppers had already cleared with the government the speech he delivered in favour of a carbon tax.  The new Climate Change Minister Greg Combet and Energy Minister Martin Ferguson were quick to welcome it.

And, in his opening salvo to undermine the leader who had just reintroduced him to the shadow ministry, Malcolm Turnbull was tweeting the merits of the carbon tax proposal soon after Kloppers released his speech.

In seeking a price on carbon for Australia, Kloppers presumably is not advocating that BHP start to pay it immediately on the 103 million tonnes of coal a year it sells.  If so, even with a tax set as low as $25 a tonne of CO2, he is advocating a payment from his shareholders of $5 billion a year.

That is not much less than the company pays in taxes and royalties each year for all of its Australian operations.

Nor, presumably, is he advocating the tax be placed on coal fuelling the Chinese steel mills that process a great chunk of BHP's annual sales of 125 million tonnes of iron ore.  Last year China added 200 gigawatts of coal-based electricity capacity.  That's almost seven times the entire coal-based electricity capacity of Australia, a capacity that cannot be increased because Australian investors, unlike their Chinese counterparts, are unable to live with the risk of a future carbon tax.

Kloppers, or at least his shareholders, would also not want a carbon tax levied on the energy used in smelting the million tonnes of aluminium that BHP produces each year.

And the company would surely see some downside in a tax on the 158 million barrels of oil equivalent that BHP sells.  At $25 a tonne that would amount to another cool $1bn a year in tax that BHP would pay.  Yet Kloppers sees early action on a tax as important to ensure business has the right incentives to act in ways he considers to be necessary.  And he would surely know that no matter where the carbon dioxide is discharged, its effects, if any, on world emissions are the same.

If, as Kloppers argues, we need to act ahead of others to maintain competitiveness, governments would be doing a great service to BHP by selecting that company as the first candidate for the new tax.

BHP, in supporting the imposition of a ''big new tax'' on carbon, is clearly distancing itself from the Abbott opposition's policy.

Rejecting the Liberal Party's line lends credibility to the ALP government.  This may well pay dividends to BHP in other areas.  Indeed, at the same time as he was advocating a carbon tax, Kloppers urged Julia Gillard to stand by the mining tax he has negotiated alongside Rio and Xstrata..  That version of the proposed mining tax has little adverse impact on BHP's bottom line, though smaller miners expect to be hit by its effects.  BHP also has much to gain from getting a favourable response from the soon-to-be appointed replacement for Graeme Samuel at the Australian Competition and Consumer Commission on its proposed quasi-merger with Rio in the use of the Pilbara rail lines.

Perhaps Kloppers sees some advantage for his firm in favours a grateful government may be able to offer in these directions.  But it is difficult to see what is to be gained if the address was made simply because, as he said, ''BHP Billiton is a globally significant producer, exporter and consumer of energy and we want to make a thoughtful and considered contribution to the debate.''

That reasoning certainly did not strike a chord with many other business executives, who have said that going it alone would prove harmful to the economy.

Nor, in the end, will his advice be taken by the ALP government.  Government ministers are aware that Australia would need to reduce its carbon dioxide emissions by more that 80 per cent to meet the stabilisation goals sought.  In pursuit of this, a tax far in excess of $50 a tonne of carbon dioxide would be needed.  With existing measures this would mean costs approaching $20 billion a year, or more than $1000 a household.

No government will go to the electorate with such a proposal.

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Abbott needs a to-do list

The federal Liberals are making the same mistakes as the Victorian Liberal Party.  In 1999 after Jeff Kennett narrowly lost the state election, Liberal MPs assumed all they needed to do was wait.  They assumed voters would realise the mistake they had made in voting for Steve Bracks instead of Kennett and would return the Liberals to power at the first opportunity.

The theory was that the electorate would tire of a dysfunctional minority Labor government and that therefore the Liberals should not do anything to get themselves noticed for fear of diverting attention from the government.

We know how well that turned out.

More than a decade later the Victorian Liberals are still waiting.  But there was one thing the Liberals were right about.  The electorate did indeed tire of a minority Labor government.  And so at the 2002 state election a minority Labor government was voted out, and Victorians got a Labor government with a big majority in its own right.  The result was repeated at the 2006 election, and if the outcome of the federal poll is repeated at the state election in November Labor will win easily.

The point of this is that government won't fall into Tony Abbott's lap.  The Liberals can hope all they want that Kevin Rudd will become secretary general of the United Nation and cause a byelection which will somehow give them office, but it's only a hope.

The reality is that it's likely the Gillard government will run its three year term.  Obviously the independents don't want an election because they want to maintain their influence for as long as possible.  And in the case of the country independents they will need the full three years to convince their conservative-inclined electorates why they're supporting a left-leaning government.

Even if there is an election in a few months there's no guarantee Abbott (or whoever is Liberal leader at the time) would win.  Julia Gillard will have the advantage of incumbency.  And if somehow she manages to keep her rainbow coalition together she'll get credit from the media and the public.

Abbott should pick one or two policy areas and get back to basics.

Tax is the first place to start.  This election was the first in recent times when the major parties didn't offer personal income tax cuts.  Instead both parties offered reductions to company tax.  The Liberals have to ask themselves how this was allowed to happen.  The ALP's aversion to cutting personal income tax is genetic, but there was no reason why the Liberals had to automatically follow Labor's lead.

For his tax review, Ken Henry was told by Wayne Swan he was to ensure that the ''review's recommendations should not presume a smaller general government sector''.  It's a mystery why the Liberals were not more sceptical of the entire process of the review given that Henry and his taskforce were prevented from considering the question of whether to cut the size of government.

The whole review proceeded from the basis that the overall level of taxes would either have to be stable or increase.  At the very least the Liberals could have started a debate on the question of the sort of tax cuts we should have.  If we want to improve employment participation rates, personal income tax cuts should take precedence over cuts to company tax.  Then there's the ''productivity'' agenda.  Once upon a time (i.e. in the 1980s) ''productivity'' was about generating competition and providing consumer choice.  State utilities were sold and government monopolies were broken up.  Today when someone says they want to improve ''productivity'' they're usually demanding that government spend billions of dollars on a road or a port or a railway, or national broadband network that hasn't undergone a cost-benefit analysis.

In the United Kingdom the Tories ran an ambitious ''Big Society'' program with the aim of empowering individuals to make the decisions that had formerly been made by bureaucrats.

Given what he confronts, patience is not a virtue for Abbott.  Just saying ''no'' wasn't enough to win him the 2010 federal election and it won't be enough to win him the next one either.  He will need a positive policy agenda.  The idea of a ''positive policy agenda'' might be hackneyed, but it doesn't make it any less necessary.

It's not just the Victorian Liberals that Abbott should learn from.  In 1961 the ALP lost the election to Robert Menzies by one seat.  Labor had to wait another 11 years and another four elections before it formed government.

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No new paradigm

''New paradigm'':  strange that a phrase coined by Bob Katter could get so much currency.

But despite the unusual result of this election, everything is returning to a familiar pattern.

Katter's idea of a new paradigm is actually recourse to an earlier paradigm -- a protectionist economy where trade policy is dictated by rural electorates.

Not being stupid, Katter must have known neither party leader would embrace a wholesale re-regulation of the agriculture sector.

He managed to get Tony Abbott to agree to some of his 20 demands, but only the ones Abbott was already sympathetic to -- for example, those relating to property rights, the Wild Rivers legislation and local hospital boards.

The intended audience for Katter's demands were in Kennedy, not Canberra.

Rob Oakeshott's new paradigm -- a bipartisan government built around consensus -- sustained a major setback when not even he wanted to join it.

Then there's the new paradigm of minority government.

Certainly, we could be entering an era of multiparty democracy, where both sides have to form permanent or semi-permanent coalitions across the political spectrum to ever rule again.

Or the prominence of the independents could be an aberration;  a quirky parliament following the closest election since the war.

The latter is far more likely.  The former will only occur if the increase in Greens support is permanent, and substantial enough to hold the balance of power in the House of Representatives after elections which aren't this close.

Let's talk again when Greens representation in the lower house is non-trivial.  One seat does not make a revolution.  And one excruciatingly tight election does not make a new paradigm.

So watch everybody revert to form.

Since the independents made their choice, the relentless focus on their every word and gesture has somewhat subsided.  The Coalition, quite rightly, is beginning to recognise Rob Oakeshott isn't the main game.  Labor is.

Gillard's ministry reshuffle is bold and has plenty of gristle for Abbott to chew.  It's hard to figure out what the Prime Minister was thinking when she split the education portfolio so chaotically.  The elevation of Peter Garrett -- sacrificed by Kevin Rudd when the government's insulation policy went pear-shaped -- seems to be asking for trouble.  And Penny Wong in finance?

But forget the details for a moment:  boldness is good.  It's necessary.  Gillard has to demonstrate that her government is not her predecessor's government.  A government that loses its Prime Minister and nearly office in its first term is, almost by definition, a failure.  It would not do to have the same faces in the same roles.

Still, there's not a single Green or independent around the Cabinet table.  No new paradigm there.

The election's abnormal result was a function of Labor's first term.  Yet there seems to be an increasing view inside Labor that the problem with this election was the press -- that the new paradigm isn't needed in politics, but in journalism.

It must be comforting to think so.

Speaking to Barrie Cassidy on Insiders on Sunday, the Prime Minister turned to the media, saying that she didn't believe in ''editorialising on the front page''.

But remember:  over the last 12 months, Labor has been pounded from both sides of the political spectrum.  If anything, the most sustained condemnations of the Labor government's performance came on the issue of climate change.  Claims that school halls were overpriced were nothing compared to the rapid depletion of Rudd's leadership credentials after he dropped the emissions trading scheme.

Much ALP support was lost to their left, not to the Liberal Party.  And it's hard to blame the front page of The Australian for the Greens' record vote.

Similarly, the complaint that the media encouraged a policy-free election is a peculiar one.  The last three years have seen some of the most sustained policy debate in Australian history.  The ins and outs of the emissions trading scheme and the mining tax, and the efficacy of Keynesian stimulus spending have been rehearsed over and over in the national press.

Gillard can't blame the press for the ALP's internal soap-opera during the campaign.

On Insiders, the Prime Minister said ''It took three independents to find the $11 billion black hole -- that should have been a job done by journalists''.

This is disingenuous.  The independents didn't find the hole.  Treasury did.  It's all part of Charter of Budget Honesty shenanigans, but Gillard doesn't want to dwell on that old chestnut.

Labor needs to seriously figure out what went wrong last term, not simply attribute the tight election to a hostile national broadsheet, or an uncooperative press gallery.

The spotlight returns to the leaders of the two major parties.

With her parliamentary support precariously near collapse, the Prime Minister wants to paint Abbott as the disaster we narrowly avoided.  Gillard has to hope Abbott becomes Mark Latham and implodes in a fiery ball of crazy.

And, with Peter Garrett's promotion, expect to hear a lot more about pink batts from the Coalition.

That was a short-lived new paradigm indeed.

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What can we expect from our government?

While independents, Greens and Australian Democrats have played major roles in the Senate, the normal position of independents in the lower House is one of total impotence.  The three independents in the previous Parliament did not bother to turn up during many sitting days and to have done so would have been a waste of their time.

This has changed in ways they would never have expected.  We have watched them milk the airways for publicity.  And we have seen them extract concessions from the two main parties which were previously beyond their dreams.

Some of these concessions, like the reform of Question Time, are long overdue and should be welcomed.  Others involve more staff, better accommodation and regular briefings from Treasury and the Prime Minister, as well as vast amounts of spending on their favoured causes.

There were no suggestions on how to spend less money.  And, aside from some of Bob Katter's 20 points, no causes for less regulation were championed.

How durable is the support of the four non-ALP MPs?

All four have compelling reasons to maintain Labor in power as long as possible.

Former Green, Wilkie, and current Green, Bandt, are positioned on the far left of the ALP on almost every issue.  While they will try to drag things further off centre, the ALP will be aware of how poisonous this might be for future election prospects.

Certainly for the time being the two Greens must dine on the ALP main course.  They cannot afford to force an election as both of them are vulnerable to loss, especially if the Liberals decide not to preference them on the basis that it is better to have the ALP in Parliament than people who will automatically support Labor and have a further platform for promoting whacko policies.  These include:

• the corralling modern agriculture with measures like bans on GM food;
• no new coal mines;
• bans on wood chip exports;
• prevention of deep-sea bottom trawling, reduced fishing generally and bans on all factory-ship based fishing in Australian pelagic fisheries;
• prohibiting the exploration for, and mining and export of, uranium;
• opposing new coal mines and the expansion of existing mines;
• placing further restraints on landholders' rights;
• phasing out intensive farming practices in meat, dairy and egg production;  and
• nationalising major irrigation systems and severely reducing the use of water for irrigation purposes.

The two leftist independents' position in the lower House will be strengthened considerably after June of next year when, with the Greens support, the ALP can get measures through the Senate.  This will be a testing time and will put additional pressure on parts of the ALP policy that are reconcilable with those of the Greens.  These include:

• some form of new mining tax;
• many carbon related measures including a carbon tax, emission reduction obligations on power stations, cash for clunkers, emission requirements on new buildings and tax breaks for green buildings;
• increased superannuation guarantees;
• workforce entitlement guarantees;
• banning uranium mining in national parks;
• a new vast expansion of marine parks where fishing would be prohibited;
• preventing the import of illegally felled timber;  and
• increased regulation of industrial and agricultural chemicals.

Further carbon related measures seem certain, especially as the media have spun the folklore that Rudd lost his support once he abandoned the carbon tax and that if Julia had gone full throttle on this she'd now be firmly in power.  Actually, research was showing that people might express support for carbon suppression measures but they will not pay for these and Abbott would have destroyed an ALP campaigning on a ''big new tax''.

With the election over, some further movement towards this agenda is likely.  Tony Windsor has expressed some scepticism about whether global warming is taking place.  Nonetheless, he has apparently swallowed the propagandistic projections that ''putting a price on carbon'' will be relatively costless to the economy and is therefore a decent insurance policy against what its promoters wrongly call a cataclysmic outcome.  Gillard would doubtlessly prefer to procrastinate on this but her hand might be forced.

She might also have wanted to quietly defer the mining tax until the strength of its opposition is gauged but, if so, Wayne Swan is singing from a different prayer sheet.  This has already caused ructions.  While the Greens would happily see mining crippled the two independents are not so sure.  Their response was to say that the issue had been placed on the back-burner until the full enchilada of the Henry Tax Report is considered in toto.  Windsor has since suggested that he might have been misunderstood.

Like the other two independents, the two country members have strong reasons to avoid a new election.  Tony Windsor inadvertently confided at his press conference that the Coalition would win a new ballot before realising that this was revealing him backing a government which the national electorate would not chose (his own electorate would clearly favour the Coalition).  The independents' power is really to influence new legislation and an Abbott government would much more securely close that off as its administration would be more about reversing ALP excessive spending rather than legislating for more regulations.

Unlike the other independents, Windsor's electoral position is rock solid.  He also has far more political substance than the others and he has experience almost two decades ago in holding the balance of power in the New South Wales Assembly.  For the Coalition, his performance then was most discomfiting -- they claimed he constantly changed and escalated his demands as a condition of on-going support.  He would doubtless have a different view.

Both Windsor and Oakeshott are, no doubt, genuine in their belief that country Australia has been getting the short end of the stick in terms of government spending.  Indeed, almost all country MPs would agree with this even though it is not supported by the expenditure facts and employment outcomes.  In particular, the prospect of a broadband roll-out that gives internet connections in country areas as fast as those in Sydney is irresistible;  and to hell with the costs!

Unlike Windsor, Oakeshott's performances in the media have convinced many, probably including some of his constituents, that he is a verbose, empty vessel and perhaps not even the full quid.  He would be vulnerable in the event of a new election.  While he has finally decided not to take the Ministry he had previously sought, this followed highly public advice from other independents who pointed out it would unambiguously compromise his independence.  His decision also followed the revelation from Morris Iemma that he had previously sought a Cabinet position from the State Labor Government when he was an independent member in the New South Wales Parliament;  that bid was rejected because his vote was not crucial to the government's survival.

Fragile coalitions often persist.  The original ''mince pie'' coalition cobbled together by a 24-year-old William Pitt just before Christmas 1783 lasted 18 years.  And closer to home in recent years we have seen the party in power relying on independents and going the full distance in Victoria as well as with Tony Windsor in NSW.

The money would have to be on the federal ALP/Green/independent alliance lasting the full distance.  This means there is something of a regulatory agenda brewing with an ALP disposed towards more intervention in the economy, Greens who loathe all commercial businesses other than eco-tourism and the ''conservative'' country members who have little interest in smaller government and are out for massive new licks of spending allocated to their broader constituency.

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Expect Libs to go in for the kill

Despite calls for consensus politics, for the next three years Australians should expect a Liberal-led opposition to behave like an animal that's tasted blood and is hunting down its limping prey.

Textbook politics says that after a second election loss, oppositions descend into factional infighting, regular bouts of leadership speculation and backstabbing between individual MPs.  But none of that is likely to occur.

As former Senate leader Nick Minchin said on Monday's Q&A, ''Tony Abbott is a Liberal hero''.  Unless he finds a way to fall on his own sword, Abbott's position is secure.  Instead, the party leadership will lick its flesh wounds and focus all its energies on tearing down the government that is only one MP short of collapse.

While the chalice handed to Labor may appear poisoned, the reality is that politics is a zero-sum game and both sides would rather drink from it than from nothing at all.  Government brings jobs, salary increases, legislative power, media attention and the resources to prosecute your case, all of which will be invaluable for Labor as it seeks to turn its minority status into a majority.

But because Labor has only secured victory through the support of a rainbow coalition of the Greens and independents, its legitimacy will always be tested.

In announcing his decision, even Rob Oakeshott supported the introduction of a parliamentary swear jar for every time the word ''mandate'' is uttered on Capital Hill.  Faced with this scenario, Abbott and the opposition's modus operandi won't be for the consensus politics Oakeshott has been calling for.

Instead, the opposition will seek to chip away at Labor's weakest links in the hope of forcing resignations to destroy the government's numbers and make the independents choose between a minority Liberal government or another election.

Since the independents will almost certainly lose their box seat after the next election, they're far more likely to switch governments.  It's for these reasons alone that the opposition is likely to stick to the agreement for parliamentary reform.

Despite their posturing, both the Liberal and Labor parties have been dragged to a reform agreement to secure support.  The opposition will be keenly aware that it may need the independents' support any day.

And the policy terrain will provide Abbott with opportunities.  In three years, the national broadband network will be sufficiently rolled out that it cannot be rolled back.  But it will also deliver cost blowouts and broken promises on data speeds.

The support of independent MPs, the Greens and Labor for a carbon price will provide Abbott with fertile ground to link cost-of-living increases back to the government.  The mining tax will almost certainly fail and make it impossible for the government to pay off Australia's debt levels within the advertised time frame.  And the prospect of a double-dip recession may cause the government to go further into debt and strengthen Abbott's argument that Labor cannot manage the economy.

Labor's prop to get over the line, the Greens, will also be more heavily scrutinised.

Once the Greens secure the balance of power in the Senate in July, their agenda for higher taxes and greater intrusion by government in the lives of ordinary Australians won't win votes.

By signing a pseudo-coalition agreement with Labor, the Greens have already compromised themselves:  instead of being a purist party they are just one in pursuit of power.

The challenge for Abbott over the next three years will be to maintain the discipline he demonstrated throughout the campaign.  He has been on a journey of political reinvention since the end of the Howard government.

Despite his success, his accession to the leadership was caused by a political and policy crisis over climate change, not his prospects as a leader.

He will be elected unopposed as leader in a few days' time and has succeeded in transforming himself from a candidate who only had a handful of votes in the first Liberal leadership ballot after the 2007 election to a Liberal messiah.

With discipline, he has pried open Labor's weaknesses and kept attention on its failings to the point that Labor limped over the finish line with help.  That took Abbott less than a year.  He has now tasted blood.  Over the next three years don't expect him to let his prey go.

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Minority government gridlock good for the ALP

Labor lost the war.  But it won the reconstruction handily.

Nobody thought the Gillard team could come together as it did in the last two weeks.

Julia Gillard herself kept largely out of the public eye;  distant and, dare I say it, prime ministerial.

The leaks stopped after Kevin Rudd was brought back inside the Labor tent.  (Sure, that could be a coincidence.)

Even Mark Latham quietened down.  His post-election column in the Australian Financial Review was, mundanely, on the Governor-General.  Somewhat topical.  But not disruptive.  Hardly the Mark the Knife of the campaign.

Considering how close the ALP came to all-out bloodletting -- a certainty had Abbott won government -- this was a remarkably restrained performance.

Compare Gillard's Labor team to the Coalition.

It started on election night when Barnaby Joyce picked a fight with Tony Windsor on live television.  Windsor had previously called Joyce the ''Sarah Palin of the north'', so the two were never going to get along well, but Joyce could have bitten his tongue a little harder.

Since election night, we were treated to a carnival of the Coalition's ''personalities''.  Bill Heffernan inexplicably called Rob Oakeshott's home.  Never mind what he described himself as.  Why did he call?  Heffernan is a backbencher.

Alby Schultz, another backbencher, also thought claiming the independents were arrogant, naive, and ''holding the country to ransom'' was a good idea.

In the last few days, the usually disciplined Andrew Robb was claiming it was ''inconceivable'' the independents would support Labor.  Who was he addressing with those remarks?  He might as well have dee-double-dared them to go with Gillard.  And Tony Abbott wrote an ill-advised column in the Daily Telegraph repeating presumably the same points he'd made to the independents in private.

The bluster-your-way-into-government strategy didn't work very well.

Yet pause to think about just how close they came to victory;  just how close Tony Abbott -- Tony Abbott! -- came to unseating the first federal Labor government since Paul Keating.

In all likelihood Abbott would have made a perfectly competent prime minister.  Just as he made a perfectly competent health minister.

Yet Abbott was tossed the leadership at the end of November 2009 while the Liberal Party came to grips the emissions trading scheme.  That was an emotionally traumatic time for parliamentary Liberals;  by the end of it, they seemed glad they got any leader at all.

Say what you like about the policy performance of the Rudd government.  But the 2010 election clearly showed that, by any standard, they screwed up their term badly.

Rudd swept into power taking seats that had never been Labor-held, knocking out senior ministers like Mal Brough and Gary Nairn, and, of course, humiliating John Howard in Bennelong.

Rudd was seemingly impregnable, with broad mandate for action.

He promptly commissioned a series of reviews.

So in the first year of the Rudd government, the opposition claimed Labor was ''all talk and no action'', and a ''do nothing'' government.

This misread Rudd.  The real problem was that the prime minister was trying to do too much.  Eventually those reviews report.

For instance, it's easy to commission the Henry tax review, but what on earth did the government plan on doing with it when it was finally completed?

When John Howard tackled the GST, his government took an election and nearly a full term of office to do so.

The Henry review came with 138 recommendations, all major, covering nearly every aspect of government.

And it handed down those recommendations in a policy environment that saw Kevin Rudd trying to deal with the emissions trading scheme, the ongoing stimulus package, health and hospitals reform, preventative health reform, Aboriginal disadvantage, and the national broadband network.  (There are no doubt others I have missed.)

In that complex reform environment, Rudd chose the Henry review's mining ''super-tax'' -- surely the stupidest nickname for a tax hike ever -- to add to his collection of bridges too far.

The government eventually had to back down from most of its grand schemes.  Or substantially revise them.  Or delay them.  Or hope everybody had forgotten about them.

Eventually, Labor even revised the prime minister before it went to the polls.

So the gridlock of minority government could be good for the ALP.

Rob Oakeshott and Tony Windsor were quick to say their support for Labor did not indicate support for Labor's policies, or, indeed, any policies.

They're under no obligation to back the Gillard agenda.  When the next stimulus package or mining tax comes up in parliament, the Government will have to negotiate with -- convince -- Rob Oakeshott, Tony Windsor, Adam Bandt and Bob Brown, Andrew Wilkie, and failing one of those, Bob Katter.

It could be pretty slow going.  But it will force the Government to concentrate its mind on one thing at a time.

A Gillard minority Government may end up more effective, and more unassailable, than a Rudd government with a mandate, a healthy buffer of seats, and a pile of big plans for Australia.

Kevin Rudd may end up wishing he didn't win so comfortably in 2007.

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A cynical look at parliamentary reform

We're usually a distrustful lot.

When it was revealed Andrew Wilkie had asked for federal funds to redevelop the Royal Hobart Hospital, everybody was quick to accuse him of pork-barrelling.  And quick to accuse the Coalition, which was apparently happy to meet Wilkie's request, of vote-buying.

No disagreement here.

But why does this cynicism seem to fall away when we talk about parliamentary and electoral reform?

Rob Oakeshott released his final list of agreed reforms yesterday.  They're a mixed bag.

Some, like a Parliamentary Budget Office, are long overdue.

Others are just cosmetic.  Take time limits for questions and answers during question time.

Oppositions seem to find this idea intrinsically appealing.  When Julia Gillard was a shadow minister during the Howard years she proposed to limit question time answers to four minutes.  Of course, once Labor won government, her eagerness to crack down on parliamentary waffle and showmanship suddenly evaporated.

But no reform proposal can compel the Prime Minister to answer questions they do not want to.  Whether question time is a circus with long answers, or a circus with short answers, won't make it less of a circus.

Not that it really matters.  Let politicians have their fun.

It's unlikely time limits -- or another Oakeshott reform, ''Questioners and ministers to use best endeavours not to use notes'' -- will do much to encourage better government.

Many of the parliamentary reforms are specifically designed to boost the power and influence of independents -- greater involvement in determining the business of the House of Representatives, and a rule to ensure private members' bills actually get dealt with.

They've played a smart game, trying to cement their power beyond the life of the hung parliament.

No surprise they wanted parliamentary processes changed to be more independent-friendly.

The last few weeks have provided a clear illustration of how seemingly well-meaning reforms to improve parliament and electioneering can go awry.

The controversy surrounding the Charter of Budget Honesty should be a reminder no reform is politically neutral.  The provision of the Charter which allows Treasury to cost the oppositions' policies overwhelmingly favours incumbents.  Nick Minchin admitted as much on ABC's Q&A on Monday night.

That's why incumbent governments claim any failure by the opposition to submit policies to Treasury is an affront to the dignity of Australian democracy.

The Charter is a charade designed to make the opposition look immature and unfit to govern.  John Howard and Peter Costello used the Charter against Labor for a decade.  Labor loves the opportunity to use it against the Coalition.

It's a cynical game, politics.

The Oakeshott reforms indicate electoral funding ''improvements'' will be a priority for the independents in the next parliament.

There are few areas of political reform infused with more cynicism than campaign finance reform.

Centre-right parties have been traditionally sceptical of calls to get money out of politics.  Yet campaign finance reform has an unlikely champion in Malcolm Turnbull.

No doubt, Turnbull's desire for reform is heartfelt.  But that doesn't mean it is devoid of self-interest.

Recent support within the Liberal Party for donation reform is motivated by one big thing:  the party is struggling to fundraise.

Back in 2008, while shadow treasurer, Turnbull noted that between 1997 and 2002, state and federal Labor had raised $82.6 million.  In the same period, the Liberal Party had only managed $54 million.

The party has been gasping for money for a long time now.

This is because corporate donors tend to donate to the Liberal and Labor Party equivalently.  Neither party has an advantage in the corporate donor market.

Yet the Labor Party can draw upon the substantial largesse of the trade union movement.

Just after this latest election was called, the Liberal Party's federal treasurer, Alan Stockdale, was publicly worrying his party would be outspent ten-to-one by the unions.

Liberal support for donation reform is as much an attempt to block the flow of union money to the ALP as it is to ''clean up'' Australia's political system.

This strategy is a calculated risk.

Bans on political donations tend to favour incumbent governments, not oppositions.  Oppositions need donors' money more than governments do.

Cash-strapped oppositions can never broadcast their political message as effectively as incumbent governments can.  The public information advertising so common in modern Australia is as much about advertising the party in power as advertising government policies.

So campaign finance reform may create more problems for the Liberal Party than it solves.

But have no doubt:  most politicians who propose campaign finance reform consult with their parties' treasurers before they do so.

The same goes for any parliamentary reform.  Uppermost in their mind is how these reforms will change the political mathematics.

Self-interest is never far away.

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Life under Gillard could be an expensive business

If Julia Gillard holds government, the alliance she will have cobbled together will speak in one voice on one major issue -- climate change.

Andrew Wilkie's addition to the Gillard side on Thursday afternoon confirms this.  The new independent from Tasmania had ''a price on carbon'' prominent among his 20-point list of priorities for action.

Despite many Greens being uneasy with a quasi-market approach to climate change, Melbourne MP Adam Bandt and his party have embraced an emissions trading scheme.

And Gillard will be looking to keep the nine Greens holding the Senate balance of power in her government's tent -- a task made much easier by the lower house agreement she signed with Bob Brown this week.

Let's say Rob Oakeshott and Tony Windsor fill up seats 75 and 76 in favour of the Labor government.

Oakeshott is clearly for climate action.  In February, when the government's Climate Pollution Reduction Scheme was looking ever more hapless, Oakeshott called its collapse ''a pox on both the major parties'' and a ''disgraceful failure of so-called leaders in this country to tell the story of climate change and energy security''.

Tony Windsor has said that a price on carbon is inevitable, that he supports it, and doesn't believe it will be a disaster for the bush.

Anyway, that's the maths.  Bob Katter may end up supporting Gillard, but does Bob Katter strike anyone as a team player?  The member for Kennedy thinks Sir Nicholas Stern and Ross Garnaut are ''lightweights'', so it's unlikely the government could count on his support for climate legislation any time soon.

Assuming the Labor alliance can survive the next three years -- and that Gillard's leadership will too -- the precariousness of minority government will leave the prime minister looking for a policy win.  An emissions trading scheme is an obvious candidate.

And not just any ETS.  The 2009 model reflected the need to negotiate with the Liberals in the Senate.  A new ETS would reflect a deal with the Greens, who rejected the last one as too weak, and the independents -- Oakeshott has shown a reverence for Garnaut's original, ''pure'' emissions trading scheme.

Hung parliaments can be funny things.  Despite the low profile of climate change in the 2010 campaign, and despite not gaining government in its own right, the ALP may now be more able to enact the policy it most wanted to last term.

But the debate over climate change policy has regressed badly.  In 2009, Parliament was discussing the mechanics of the government's elaborate cap and trade scheme.  But in 2010, we're stuck on this simple phrase:  ''price on carbon''.  It makes it all sound so simple.

But what would its target emissions level be?  When would it start?  How should trade-exposed energy-intensive industries be compensated, if at all?  Should low-income earners be compensated?

Not to say anything of the main policy crunch of November and December 2009 -- the failure of the Copenhagen summit.  An emissions trading scheme cannot achieve its goal without being part of a global agreement.

The notion of putting a price on carbon is popular.  Around 50 per cent of Australians believe climate change is a serious problem that should be tackled by government.

Yet actually paying that price is substantially less popular.

A poll by the Lowy Institute has tracked the willingness of Australians to pay extra for electricity.  The number of people who refused to pay anything to tackle climate change has increased from 21 per cent in 2008 to 32 per cent in 2010.  And less than a third of those who believe that there should be a significant price on carbon report themselves willing to pay a significant price for energy.

Even if the federal government manages to get an ETS through Parliament, the key to emissions reduction is to slowly but perceptibly increase the cost of emitting.

Recent elections have shown us Australians are inordinately sensitive to real or imagined cost-of-living increases.  Few governments would be eager to deliberately ratchet up the price of electricity every single year.

Supporters of emissions reduction argue that new technologies will fill the gap and keep prices down.  To a degree, that's true.  But the pace of technological change is not guaranteed.  There's no reason to believe that the price of wind power will drop in concert with a rise in the carbon price.

In her deal with the Greens, Gillard ditched the much-ridiculed citizens' assembly.  Instead, she plans a climate change committee, formed under the auspices of Parliament, and including only those committed to a price on carbon.

Her alliance may help Labor get emissions trading through Parliament.  But the emissions trading model the climate change committee devises may create more political problems than it solves.

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As a business manager, Victoria doesn't hold water

Rain is falling in Victoria and water restrictions are being relaxed.

How well has the Government performed as a business manager in drought-proofing Melbourne and other Victorian cities?

The Thomson Dam -- Victoria's most recent major catchment development -- supplies on average 150 gigalitres a year, a third of Melbourne's needs.  It was commissioned in 1983;  since then Melbourne's population has increased by 30 per cent.

Soon after being voted in, the Bracks/Brumby administration abandoned previous Melbourne Water plans for ensuring supply keeps up with demand.  Melbourne Water planned a sequential development of catchments in the east of the state to service the growing needs of urban centres.

Daunted by the prospect of adverse publicity from demonstrators in koala suits at a dam site, Labor pretended that climate change would mean water shortages.  And it argued that Victoria couldn't afford the $1 billion cost of a new dam.

So the Government introduced usage restrictions, and built a pipe from the northern irrigation area and a desalination plant.

The pipeline from the north can deliver about half as much water as a new dam in the eastern ranges.  Including spending on irrigation channels, it has cost $1.1 billion.  On top of this are expenses of pumping the water over the Great Divide.

The desalination plant's costs are $5.7 billion for about 150 gigalitres a year -- about the same as would be provided by duplicating the Thomson Dam either in the Thomson catchment itself or on the Mitchell.

The bottom line is that to avoid spending $1 billion ($1.35 billion in today's money), the Government embarked on programs costing $7 billion.

Moreover, pumping water through the northern pipeline and from the desalination plant, unlike water flowing naturally from the mountains, entails increased emissions of greenhouse gases which the government says it abhors.  (Only an idiot could believe the claim that pumping the water entails ''100 per cent offset of electricity by renewable energy'').

In addition, the Government has forced Melburnians to save water.  This has meant dry sports grounds and gardens, and expensive water conserving devices.

Many areas around the world have desalination plants and water recovery measures.  But they, unlike Victoria, are running against capacity limits to new dam-fed supplies.  Victoria has enough rainfall in its catchment areas to avoid forever the need to artificially create drinking water or to acquire it from irrigators.

In deliberately shunning the use of our abundant natural water resources, the Government is therefore sacrificing community wealth.

Even without accounting for the expenses and inconveniences of water restrictions, the Government's solutions to ensuring an adequate water supply comes at a cost premium of $6 billion.  This means the Government has wasted $1000 for every person in Victoria.

Few people evaluate the Victorian Government's performance as a business manager now that most of the former state-run businesses have been privatised.

But the present Government has allowed political considerations to override commercial realities on water -- one of the few businesses it actually owns.

With this experience, imagine what excess costs would be loaded on to the community if the State Government still owned electricity, gas, forest plantations and the TAB.

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Snapping at heels of civil liberty

It was obviously a tactical error for Paul Hogan to tell the Australian Taxation Office to ''come and get me, you bastards''.

The ATO claims Hogan used offshore accounts to hide profits from his film Crocodile Dundee and avoid paying tax.  So they slapped him with an order to prevent him leaving the country.  Never say the Tax Office isn't fearless:  Hogan was visiting Australia for his mother's funeral.

The order was lifted yesterday after the Tax Office and Hogan had a ''cordial'' meeting.

There are many reasons to be concerned by this course of events.  The Hogan case is a window into just how draconian the government's taxation and regulatory powers have become.  To start:  Hogan has not been charged with any crime.  Sure, he allegedly owes the government money -- some reports claim it could be up to $150 million, after interest and penalties.

But he has an absolute entitlement under our taxation system to dispute that amount.  And there's a fair chance he could win:  about half of all tax disputes end with the taxpayer paying less than the ATO claimed.  Tax disputes are complex and technical.  Taxpayers have been known to make mistakes.  So has the ATO.

On a purely practical level there was little reason to believe he was a flight risk.  Hogan is no Carlos the Jackal.  Yes, he lives overseas, but he has returned to Australia frequently in the many years he has been under investigation.  He has five children and nine grandchildren here.

Hogan's bad luck was to find himself smack bang in the middle of a political push to eliminate the use of overseas tax havens.  He is the highest profile target of Project Wickenby, a federal government crackdown on offshore tax evasion and tax avoidance.

Project Wickenby's conflation of evasion and avoidance is a big problem.  Everyone tries to avoid paying more tax than they have to.  We all keep receipts of work-related expenses and rigorously, if not enthusiastically, tally them up to be deducted from our income.

One Henry tax review recommendation was to set a ''default'' deduction, institutionalising this minor and common form of tax avoidance.

Sometimes avoidance is more complicated -- digging through the tax act for exemptions.  Australia's income tax law is 5743 pages long.  Compare this to Hong Kong's 200 pages, and it's no surprise there are many cunning schemes to minimise tax.

There's nothing wrong with that.  Australians have no moral obligation to pay more tax than the tax law requires -- even if it means using offshore accounts.  The government itself admits that many uses of tax havens are completely legitimate.

Evasion is supposed to be very different from avoidance.  For one, it's clearly and unambiguously illegal.  You evade tax when you are liable to pay tax, but deliberately do not.

In Australia, the distinction between evasion and avoidance has been long recognised by law.  Yet in the past two decades the government has deliberately blurred the distinction in order to investigate tax havens and their clients.

One reason governments don't like tax havens is obvious:  money goes to the haven instead of government coffers.  But perhaps a bigger reason is tax competition.  Lower taxes elsewhere pressure governments to keep their own tax rates down.

The Organisation for Economic Co-operation and Development has been running a campaign to have developed nations harmonise their taxes as far as possible and end the ''harmful'' competition.  This international debate about the legitimacy of tax havens and the desirability of tax competition is the background to Project Wickenby and the case against Hogan.

For now, whether Hogan's alleged use of offshore accounts is evasion or avoidance is an open question.  While this question remains unresolved, the ATO's violation of Hogan's freedom of movement -- a basic civil liberty -- is obscene.

It is also a reminder that some of our regulatory agencies and government departments are vested with extraordinarily coercive powers.  Since 2004, Wickenby investigators have been repeatedly accused of being aggressive and using intimidation as a weapon.

The Australian Securities and Investments Commission can be just as draconian.  ASIC has a remarkable array of powers.  It can compel people to answer questions with no recourse to the court system.  ASIC runs private hearings, where people are made to give evidence under oath, with ''as little formality and technicality'' as possible -- ''formalities'' such as the rules of evidence and the privilege against self-incrimination.  The ASIC Act even says the regulator should do ''whatever is necessary''.

A Senate report in 2000 found that a number of government agencies had stronger powers to enter and search private property than the federal police.  In the Herald in July, Professor George Williams argued that many powers held by the Australian Building and Construction Commission ''greatly exceed those given to any police officer in the nation''.

And the Rudd government's Carbon Pollution Reduction Scheme Bill -- had it passed -- would have eliminated the right to silence and the privilege against self-incrimination, and reversed the onus of proof for suspected polluters.

The erosion of these rights and protections in order to tax and regulate should be a big concern.

These protections have developed over centuries to defend the rights of individuals against coercive and unjust state power.

Polluters deserve rights, too.  So do unions targeted by the ABCC.  And people suspected of corporate wrongdoing.  And wealthy taxpayers.

The ATO has badly abused Hogan's civil liberties.  That's bad enough.  But more worrying is that many other regulators have the ability to do so as well.

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Government: who needs it?

The election result isn't all bad.  If you own shares, you shouldn't be unhappy we don't have a government yet.  That's because there's a chance that the longer we don't have a government the better your shares will perform.  Or at least that's the theory according to some American investment strategists.

A few years ago, economist Mark Skousen highlighted that between 1965 and 2007 the S&P 500 Index increased at an annualised rate of 1.6 per cent when Congress was in session, and 17.6 per cent when it was out of session.

Another study analysing sharemarket returns going back to the 19th century concluded that 90 per cent of the gains made by the Dow Jones Industrial Average occurred on days when Congress wasn't sitting.  Starting in 1897, if a dollar had been invested in shares on days when Congress wasn't sitting, and was then converted to cash on days Congress was sitting, by 2000 that dollar would be worth $216.  The strategy of doing the opposite would have turned that one dollar into the princely sum of two dollars.

In the US, the ''Congressional Effect Fund'' was established in 2008.  It advertises itself as ''the first mutual fund to explicitly seek to minimise investor exposure to potentially negative impact of new and proposed congressional legislation on the broad stockmarket''.  It rejoices in the insights of people like Thomas Paine, ''That government is best that governs least'', and judge Gideon Tucker, a New York circuit judge who in 1866 pronounced:  ''No man's life, liberty or property are safe when the legislature is in session.''

The sort of analysis that's been done in the United States hasn't been performed for Australia.  But there's no reason to think the theory wouldn't apply here as well.  Just think what the national broadband network has done to Telstra's share price.  Or what the resource super profits tax did to mining stocks.  Plus, of course, there's the spectre of legislation to set a carbon price.  (Incidentally, it's ingenious how Labor and the Greens don't talk about putting a tax on carbon emissions -- they instead call it setting a carbon price).

And those are only examples from the past 12 months.  If you go back a century there would be dozens of examples of how successive Australian parliaments have destroyed shareholder value.

Admittedly there are some things that Parliaments do that are useful.  Such as passing tax cuts.  But the bad days in Parliament outweigh the good days.  Even if Parliament isn't actually passing legislation, there's the threat of legislation, and that creates uncertainty, and uncertainty is bad for business.  Even after a law is passed there's the uncertainty of how it will be interpreted.  As laws become more detailed and more complex, uncertainty increases.  Single pieces of legislation now routinely run to hundreds of pages.  Barack Obama's package to overhaul financial regulation in the United States totalled more than 1000 pages.  The legislation to establish Kevin Rudd's emissions trading scheme was 374 pages.  Inevitably, a government will be formed in Canberra and at the moment it's likely that it will be Julia Gillard who'll be sworn in as prime minister, eventually.  Soon enough Parliament will start passing laws.

It could be however, that as a result of the rise of the independents, the process of passing laws will at least be slowed down.  If the power of the executive over Parliament were weakened if there were an independent speaker.  and if committee structures were strengthened, there's the possibility well get fewer laws, and the laws that we get will be better.

There's scope for a lot more scrutiny to be applied to the proposals that governments present to the Parliament.  An upper house not controlled by the government has the potential to do some good.  Hostile upper houses are not necessarily an impediment to reform, and there are plenty of precedents to demonstrate this from here and around the world.  John Howard ultimately got his goods and services tax through a Senate he didn't control.  In the US, Ronald Reagan, for his entire period as president, never had the benefit of a Republican party majority in the Congress.

It's nice to see that Australians are learning to live without a government.  We've adjusted quickly.  After nearly a fortnight, the machinations in Canberra aren't even the lead story on the nightly news.  Maybe some positives will have emerged from a hung Parliament.  For one thing, maybe well have learned we don't need government quite as much as we think we do.

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Gillard likely to cop expansive Green agenda

Julia Gillard says that neither party has convinced Australia that it alone has won the right to govern and that ''our political processes must change''.  The Greens have expressed a wish to see the House of Representatives and the Senate working together with the government on an ambitious legislative agenda.

Under a Gillard government, the hung federal Parliament potentially means a vast expansion of government regulation, while an Abbott government would be focused on spending cuts, with little call for new legislation.

With the Coalition in power, an opposition ALP-Greens alliance in the Senate would agitate for more taxes, increased spending and more regulation in areas where these two political parties share common goals.

However, a House of Representatives under a Coalition government's control would place severe limits on an activist Senate's ability to promote new spending and regulations.

This is because important matters for change that involve legislation must first be passed by the House of Representatives.

And the Coalition, having fought an election opposing Labor's wasted expenditure and new taxes, has a relatively modest legislative program, largely concerning procedures to combat illegal immigration and the requirement of major firms to provide paid parental leave.

The Greens may support the opportunity provided by the paid parental leave proposal to impose costs on business.  But, by and large, when the ALP-Green majority is seated in the post-July 2011 Senate ''house of review'' under an Abbott government it would be reviewing proposals rather than legislation.

An ALP government would require the support of the Greens as well as at least two of the rural-based independents.  Legislative agendas where the ALP and Greens have reconcilable positions include:  some form of new mining tax;  many carbon-related measures, including a carbon tax;  emission reduction obligations on power stations;  cash for clunkers;  emission requirements on new buildings and tax breaks for green buildings.

They also share common ground on increased superannuation guarantees and workforce entitlement guarantees, as well as banning uranium mining in national parks, a vast expansion of marine parks where fishing would be prohibited, preventing the importation of illegally felled timber, and increased regulation of industrial and agricultural chemicals.

This common ground opens major new avenues for additional regulations, taxes and spending.  But few, if any, of the more important features of such an ALP-Green legislative program could pass the current Senate and an action program would have to wait until July next year.

Even after that, the conservative independents would veto many aspects of it.  Thus, they would be likely to oppose any increased regulation of pesticides, a major expansion of workplace entitlements and an extension of marine national parks.  They may also oppose the mining tax and an early introduction of a carbon tax, two policies the ALP might be looking for an excuse to jettison or defer.

The Greens, in alliance with the ALP, might also want to see some of their own agenda addressed Scrutiny of the Greens' policies reveals just how prosperity-sapping and radical the party is.

The smorgasbord they would present to their alliance partners might include:  corralling modern agriculture with measures such as bans on GM food;  no new coalmines;  bans on woodchip exports;  prevention of deep-sea bottom trawling;  reduced fishing generally;  and bans on all factory ship-based fishing in Australian pelagic fisheries.

They may propose prohibiting the exploration for, and mining and export of, uranium;  opposing new coal mines and the expansion of existing mines, placing further restraints on landholders' rights;  phasing out intensive farming practices in meat, dairy and egg production and nationalising major irrigation systems and severely reducing the use of water for irrigation purposes.

Even if the conservative independents and the ALP itself prevented the Greens' platform from heralding an avalanche of new regulations, a Gillard government would surely have to offer compromises to support some of these proposals.

An Abbott government before and after July 2011, in focusing on expenditure reductions, would mean calls in the Senate for regulations, taxes and spending might simply be noise.  This would probably make it more stable than one led by Julia Gillard.

But a Senate dominated by an ALP-Green alliance might seek to promote policies through influencing the budget money supply bills.  Although the Senate cannot reject supply, it has shown a considerable capacity to modify programs.  In the event of an Abbott government, the extent of this incursion into the preserve of the House of Representatives would be sorely tested.

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