Carbon tax can't work unless all share the load

Over the next two weeks the justification for introducing a carbon tax will unravel as securing a new international carbon cutting agreement collapses.

This afternoon Australia time, an attempt to find a continuous international agreement to cut greenhouse gases will commence in Durban, South Africa.  The key focus of the conference is to negotiate the framework for cutting emissions after the Kyoto Protocol expires at the end of next year.  No one is expecting much.

Over the past few weeks disengaged governments have deliberately lowered expectations to avoid a repeat of the spectacular collapse of morale following the Copenhagen summit.

What's being ignored is the structural impossibility of securing an agreement now and even in 2020.  The modern international system was designed after World War II on the principle that rich countries designed the rules but also carried all the responsibilities.  By comparison poor countries got little say and weren't expected to do any heavy lifting.

That changed in the 1990s.  Developing countries have rallied and are now exercising their voice, but still don't accept the same level of responsibility.  That spirit is enshrined in the principles of the UN Framework Convention on Climate Change.

The convention text states that action should be taken ''on the basis of equity and in accordance with their [countries] common but differentiated responsibilities and respective capabilities [and] accordingly [developed countries] should take the lead in combating climate change''.

The proposition appears reasonable:  developed countries are those that have emitted the most to date and become rich in the process, therefore they should take the lead.

But during this century developing countries will be the source of emissions growth and it's politically unsellable in democracies that countries should take on a heavy cost burden while others free ride.

That nexus is at the heart of the ongoing deadlock in international climate talks.  And it's not alone.

The same problem exists in the World Trade Organisation.  The 2001 Doha Development Agenda is near collapse because developing countries want developed countries to cut their subsidies and tariffs while they keep their own barriers in place.  The fact that their own trade barriers are harming their economies is immaterial to the debate.  And the same pattern exists in most multilateral forums including the UN's health, intellectual property and even biological diversity bodies.

Considering cutting man-made greenhouse gas emissions is only a worthwhile exercise if every country pulls their weight:  the challenge is unsolvable with an equity-based approach.

Accepting that there'll be no new international agreement soon, Climate Change Minister Greg Combet said in a speech to the Australian National University on Friday that our government ''would be prepared to accept a second commitment period for Kyoto [post-2012] if it were matched by parallel commitments by other major emitters''.

Combet's words are cheap.  Combined, China and the US contribute more than a third of the world's emissions and have already stated they won't join.

China has already stated that Kyoto ''is the cornerstone of the climate regime and its second commitment period is the essential priority for the success of Durban'' while also making it clear they won't be a party to it.

Meanwhile the US is seeking to unwind commitments they've already made.  At the Cancun summit last year rich countries agreed to finance a $US100 billion-a-year ($103bn) Green Climate Fund to help developing countries adapt to a changing climate.  Earlier this week the US lead negotiator, Todd Stern, advised the US wasn't happy with the design compromising their paid-up membership.

The most likely outcome of the conference is a reviewed timeline for securing a global agreement.

Meanwhile Australia is spruiking a negotiating deadline for the middle of this decade to have an operational agreement by 2020.  Even that's ambitious.

As the ANU's Stephen Howes and Frank Jotzo wrote on these pages the focus is to get ''bottom-up'' momentum through carbon markets to push international action.

Combet clearly agrees.  In the same ANU speech Combet claimed that ''international carbon markets are growing irrespective of the developments in the UN negotiations''.

Combet's statement is factually incorrect.  A World Bank report released earlier this year highlighted that carbon markets are in recession because of the lack of confidence of a new international agreement post-2012.

The earlier expansion of the number of carbon markets is headed in the same direction, as political resolve wanes in the face of limited international agreement.  Following the re-election of the John Key-led National government in New Zealand, their impotent emissions trading scheme will be made even weaker.

Equivalent mumbles are now appearing in Europe.

It's hardly surprising.  Last week a study from Swiss global banker UBS reported the European scheme has wasted $287bn without cutting emissions.

According to data from the UN climate change body, almost all of Europe's emissions reductions were achieved through decreased industrial activity caused by the global financial crisis.  The only country where carbon markets are expanding because of domestic policy is Australia under Combet's leadership.

All of this is bad news for Australia's carbon tax.  The carbon tax was passed through the parliament on the myth that other countries would take equivalent action reducing the economic harm it will impose.  Combet said we should expect ''Durban will be one stepping-stone along the path''.  He should be careful where he steps.  The conference's stepping stones are more likely to be lily pads.

A job for life is hard labour for a modern economy

The ACTU on October 24 announced an inquiry into insecure employment.  It has identified 40 per cent of Australian workers as being engaged in one of four categories of insecure employment:  independent contracting;  labour hire;  fixed-term employment;  and casual employment.

The campaign's banner is ''Secure Jobs.  Better Future''.  Its objective is an employment nirvana where almost everyone is a permanent employee.  The employees will enjoy the fruits of permanent employment, a suite of union-endorsed conditions and entitlements.  The workers will then worship the ACTU for creating a workers' paradise in Australia.

The publicity to date has featured the usual horror cameos of worker exploitation.  Such exploitation has occurred under all labour market manifestations.  It is wrong under any circumstance and labour market regulation should always facilitate its punishment and eradication.

The national inquiry will involve public hearings by a panel chaired by former ALP minister Brian Howe.  A former senior presidential member of the Australian Industrial Relations Commission, Paul Munro, will be deputy chairman.

The ACTU introduced the insecure employment concept in September.  This coincided with the release of the results of a survey of union members called the Australian Working Census 2011.

Union sources describe the campaign as unprecedented.  Employers and business are urged to participate to demonstrate the inquiry's independence.  This pleading suggests it may be legitimate to question the degree of independence of the whole exercise.

The chairman said he would approach the investigation with an open mind.  He said he had a longstanding concern about how the changing nature of work was affecting the economy and society.  Howe added the sweeping statement:  ''If the theme of the post-war years was all about security, now it's all about risk.''

This gives an indication of where the inquiry is headed.

What chance is there that the initiative will conclude that casual, contract and labour hire employment are an intrinsic characteristic of a modern labour market that assists Australian firms compete in a connected and dynamic world economy?

The chairman even expanded on these sentiments in reassuring us that the inquiry would approach its task with an open mind.  He observed:  ''As work becomes more insecure, it not only puts pressure on the mortgage and the household finances if people can't get decent paid work, but it is putting a terrible strain on their family lives and their communities.''

What chance is there of the inquiry adopting a submission that many Australians prefer casual, contract, fixed-term and labour-hire employment?  Will the inquiry entertain a view that the labour market has changed markedly from the 1970s and that the 24/7 world of today demands labour market flexibility?  Rigid labour rules telling people how they must work end in catastrophe.  Just cast a glance towards the rigid labour markets of Europe for an international model of what not to do.

I believe the ACTU campaign misreads the mindset of working-age Australians and the economic imperatives of 2011.

This is not surprising as trade union membership has fallen to a mere 14 per cent of the private-sector workforce.  The ACTU and unions increasingly reflect the views of this declining segment of our society.  Of the 41,000 respondents to the Working Australia Census 2011, 98.1 per cent or 91.8 per cent, depending on which section of the census report you rely on, were union members.  This is not a representative sample of Australians.

Many Australians enjoy the independence and freedom of contracting and labour hire.  It affords them control over their own destiny.  It allows them the opportunity to build a business and benefit directly from their skills and knowledge.  They place a premium on a satisfactory balance between work and private life objectives.  Careers are often pursued jointly with partners to maximise family and job potential.

Younger people are not as turned on by stability, certainty and belonging as their parents.  They will typically change jobs frequently throughout their careers.  The idea of working for a long term with a single employer is the exception.  The sense of belonging to a collective such as a union is anathema to many.

Many businesses have to deal with peaks, troughs and seasonal variations in operating conditions.  The management of these changing conditions through a permanent workforce is often untenable.  Casual employment enables many businesses to cope.  Also, casual employment offers thousands of young people an entry path to permanent employment.

It is wrong to claim as the ACTU does:  ''All the convenience goes to bosses and all the stress and uncertainty associated with casual work goes to employees.''

The spirit of enterprise and having a go has been beneficial to Australia.  It has been fundamental to the development of industries that underpin our prosperity.

To impose union-devised restraints on that spirit will weaken our prospects in this competitive world.

The ACTU should recognise that many Australians value choice, freedom, independence, individuality and having a go.  They accept the risks of relying on reward directly linked to effort.

The ACTU has misread many working Australians today.  Its campaign is bound to fail.

ADVERTISEMENT

Withdrawal from Afghanistan would not hurt our US ties

While the past week's coverage of the enhanced military co-operation between Canberra and Washington may suggest otherwise, the most urgent item on Australia's foreign policy agenda is how to extricate ourselves from the depressing and endless war in Afghanistan.  The conflict has dragged on for 10 years and never have so many people on both sides of the Pacific been questioning its value.

According to an Essential Research poll this week, support for Australia's withdrawal from Afghanistan has increased from 47 per cent to 64 per cent in the past year.  And according to a CNN/ORC International poll last month, a record high 63 per cent of Americans now say the war is no longer worth fighting.

And yet in his 3000-plus-word address to Parliament last week, President Barack Obama dedicated only one paragraph to the conflict.  (Prime Minister Julia Gillard skipped the subject altogether.)  One is left with the impression that our political leaders increasingly find it harder to justify a war that involves more blood and treasure and no promise of a happy ending.

Make no mistake:  we were right to invade Afghanistan in October 2001 in order to hunt down Osama bin Laden and his cohorts as well as topple the black-turbaned tyrants who gave al-Qaeda shelter and support.

But as the then foreign minister, Alexander Downer, has recognised, that mission has mainly been accomplished.  Other issues -- the routing of the Taliban and the building of a viable democratic state -- are simply beyond our reach.

Almost all trends are moving in the wrong direction:  the corruption-plagued Afghan government remains a basket case, our ally Pakistan can't be trusted, the occupation is costing the Americans $10 billion a month, and Australian deaths have nearly trebled in the past 18 months.

American hegemony should not be confused with American omnipotence.  If the experience in Iraq and Afghanistan has taught us anything, it is to recognise that when it comes to defeating tribal warlords in alien societies, the US finds itself wrong-footed and outwitted, not so much an eagle as an elephant.

No wonder Obama wants to withdraw as much as a third of the US occupation presence before next November's presidential election.  In fact, in mid-2012, before the fighting season concludes, he will pull about 35,000 troops out of Afghanistan.

To what extent will such a rapid withdrawal expose our Diggers to even greater risk?  Gillard has failed to answer this.

No one should doubt the skill and bravery of our armed forces in Afghanistan.  But our war aims are incoherent, our exit strategy is never explained, and our presence is exacerbating the problems we went in to solve, serving to destabilise Pakistan rather than to stabilise Afghanistan.

No one wants Afghanistan to once again become a Club Med for terrorists.  But as distinguished US conservative columnist George Will asks:  ''If US forces are there to prevent re-establishment of al-Qaeda bases -- evidently there are none now -- must there be nation-building invasions of Somalia, Yemen and other sovereignty vacuums?''

Moreover, the Afghan Taliban do not yearn for global martyrdom;  they merely want to restore Pashtun rule in Afghanistan.  That may not be ideal for the people of that war-torn country, but it hardly represents a threat to vital Australian interests.

Would Canberra precipitate a crisis in US-Australia relations by withdrawing our 1550 troops from the war?  Hardly.  Most NATO leaders have rejected Obama's appeals for extra troops in the south, where most of the fighting is occurring, and other allies -- Canada, the Dutch -- have pulled out.

History also shows that the alliance can survive.  Robert Menzies and Dwight Eisenhower bitterly clashed over the Suez crisis in 1956.  Gough Whitlam's ministers Jim Cairns and Tom Uren called Richard Nixon and Henry Kissinger ''maniacs'' and ''murderers'' for the Christmas bombing in 1972.  Bob Hawke's left-wing Labor comrades rejected Ronald Reagan's MX missiles in 1985.  None of these episodes damaged ANZUS.

The US alliance should remain the centrepiece of Australian foreign policy, under a Labor or Coalition government.  But one can agree with that assessment and still believe there is no silver lining to this war.

We should leave Afghanistan to the drones and the US elite and specialised forces, search for a negotiated political settlement and withdraw our troops from what is known as the ''graveyard of empires''.  That is what most Australians want.  But political pressure needs to grow stronger if withdrawal will be achieved any time soon.

ADVERTISEMENT

''Profit'' is not a dirty word -- it keeps the system going

It seems that one obligatory item can be found at any protest rally these days, regardless of its cause.

Be it an ''occupy'' mob protesting against relative income inequality, a group campaigning for an environmental cause or a cohort agitating for social changes, one is almost guaranteed to find at least one placard that reads:  ''People before profits''.

This sentiment has long been reflected in socialist thinking, which conceives the appearance of a profit in a company's accounts as evidence of the exploitation of production value provided by underpaid working classes.

Other lines of thought also inform this antagonistic attitude towards profit making, such as the idea that firms can only reap profits by imposing exorbitant prices on goods and services that the consuming public is forced to bear.

To some extent the economics profession has largely unwittingly fed public sentiment against corporate profitability, by portraying continuous profit as a kind of market imperfection in a world where perfect competition would otherwise eliminate economic profits in the long run.

All of these approaches which feed the ''people before profits'' narrative create an obstacle to a more reasoned understanding of the largely beneficial role and nature of profit.

When it is appreciated that the attainment of profits is a signal of economic excellence, and not greedy exploitation or awkward imperfection, there is in fact a good argument instead to scrawl ''people and profits'' on placards rather than ''people before profits''.

When explaining profitability it would be remiss not to mention the entrepreneur, such as Henry Ford, Steve Jobs, Bill Gates or Sir Richard Branson, who purchases and marshals capital, labour and other resources to produce goods and services for sale on the open market.

The entrepreneur undertakes the task of organising the business and covering its costs, assuming economic risks and confronting government impositions, all in the hope that the effort invested will eventually reap a reward of a profitable economic activity.

As important as the entrepreneur is to any market economy, it is the action from the other side of the counter that confirms whether or not a business keeps some revenue leftovers after all the expenses are covered.

In other words it is the amount of purchases by humble, everyday customers that determines if a business, regardless of its size, generates a profit representing a return to perceptive yet hard working entrepreneurship.

As the 20th century economist Ludwig von Mises once stated, it is the purchasing decisions of customers that ''render profitable the affairs of those businessmen who best comply with their wishes''.

And, lest public suspicions linger that a dollar of profit earned is a dollar reaped through monopolistic exploitation, a profit announcement by one business sends out a signal to businesses everywhere that there exists a market that could keep on delivering an excess of revenues over costs.

These profits encourage entry by new sellers into the lucrative market, in turn providing further investment and employment opportunities for market participants.  Economic creativity is fuelled as new entrepreneurs tinker with the successful products with a view to deepening the market with more sales to new customers.

In addition to the role of profits in encouraging product quality improvements, competition between larger numbers of business rivals will tend to drive down final prices for the benefit of the consumers.

Like applause volunteered by patrons at an art exhibition or sporting match for outstanding performance, profits represent the echoes of economic applause resonating throughout the entire market system.

Yet those who complain about profitability also tend to ignore the existence of profit's flipside, and that is loss, as a powerful error-correcting element of the market process.

When all is said and done nobody is forced to provide custom to a private business.

If the business does not provide a useful product or decent service there will be no custom and hence insufficient sales revenues to cover costs and deliver a profit.

And technological, economic and other changes can also render a previously profitable business model unviable in the long term.

The economic reality is that it is a commonplace experience for a profit rooster one day to turn into a feather duster of loss the next.

Ironically this is a key to why capitalism is so successful.

That is because a business incurring a loss signals to the wider market that scarce resources should be redirected to other ventures instead.

This will then ensure that a market economy sticks with more efficient activities more generally.

Anti-capitalist protesters in recent weeks have trained their critical attention toward politically well-connected business establishments, particularly in automobiles, energy and finance, that persuaded governments to subsidise their operations and insulate them from adverse economic conditions.

These protesters share with small government classical liberals an intense distaste for rent-seeking activities that ''socialise'' corporate losses at taxpayer expense.

But the two groups diverge to the extent that anti-capitalists not only wish to see an end to the corporate welfare culture but also to the realisation of profits through honest, open, customer-pleasing market competition.

The appearance of ''people before profits'' placards will come and go as protests wax and wane, but which side arguing the merits or otherwise of profitability ends up winning the hearts and minds of the public will unquestionably play a critical part in shaping our future economic direction.

ADVERTISEMENT

A touch of Fightback! would do Abbott a lot of good

This week marks the 20th anniversary of the launch of the Federal Coalition's groundbreaking economic reform manifesto, Fightback!

At a time when the public is beginning to question the Federal Coalition's commitment to a serious reform agenda, it is pertinent to remember where Fightback! began.

Announced in late 1991 amidst a conflation of soaring unemployment, spiraling debt, declining productivity, growing welfare dependency and a deteriorating Federal budget, Fightback was promoted as a panacea for the ills plaguing the Australian economy at the time.

In seeking to restore Australia's economic prosperity, Fightback! aimed to ''achieve a generational change in policies and attitudes''.  Fightback! proposed a 15 per cent GST, $13 billion worth of income tax cuts, $10 billion of expenditure cuts, a multi-billion dollar privatisation program and a complete overhaul of Australia's social security, Medicare, higher education, workplace relations and public service systems.

By putting policy before politics, Fightback! sought to recast the political landscape, placing the battle of ideas front and centre.

At first, this approach was hugely successful.  It brought down Bob Hawke and his party's public support.  But over time, Fightback! became better known as a form of slow-working political poison.  Its sharp edges, rigid ideology and lack of political grease resulted in the Coalition losing 1993's unlosable election, and brought about the political demise of its key architect, John Hewson.

Yet, while Fightback! died unloved, its policy legacy lived on.

Over four consecutive electoral terms, the Howard Government successfully implemented much of the Fightback! agenda.  Indeed, the intellectual arguments for the GST, personal and company tax cuts, public enterprise privatisations, IR liberalisation and the modernisation of the higher education and Medicare systems can all trace their roots back to the original Fightback! vision.

But today, no such vision exists.  Fightback! has been forgotten, the economic dries have vacated the field and liberal politics is now dominated by the practice of relentless opposition.  Where in the 80s and 90s liberal politics was a melting pot of ideas and serious debate, today it is a policy wasteland.  Destroying ideas is almost as important as creating them, and nearly every reform the Government proposes is wrong.

This development is a tragedy for Australian politics and bodes poorly for our nation's long term future.

When political parties stand for nothing other than their desire for power, policy integrity begins to erode.  And in recent months, the consequences of this affliction have begun to show within the Federal Opposition.  Protectionism, economic isolationism and timidity on IR reform are all the early signs of a policy vacuum opening up.

While populism has always had its place within opposition politics, it cannot be allowed to rule the roost.  Eventually, ephemeral statements must be replaced by philosophical conviction.

As our nation delves deeper into the 21st century, complex issues such as population growth, skill shortages, rising energy costs, declining productivity, sustainable development and tax reform will all require a comprehensive Liberal response.  The challenge for the current generation of policy leaders is to ensure that a detailed and thoughtful one is authored.

Unfortunately, the lesson many politicians learnt from the original Fightback! experience was the importance of placing smart politics before good policy.  Indeed, it is this lesson which has given birth to the small-target strategies of many subsequent opposition leaders.

However, Australian politics need not be this way.  Fightback! had more than one lesson to teach.

Fightback! showed us that while smart politics was important for winning government;  sound policy was necessary for providing good government.

As the Federal Coalition knuckles down in the lead up to the next Federal Election, it should keep this lesson in mind.

Good governments cannot govern on the hop.  They need a roadmap to ensure they do not lose their way.  Fightback! did that for Howard.  No one did it for Rudd.  Time will tell if someone does it for Abbott.

ADVERTISEMENT

Yes we can ... with exceptions, qualifications and requirements

Barack Obama told the Australian Parliament last Thursday that our country and his are ''among the most open economies on Earth''.

This is true, as far as it goes.  The United States is 10th out of 141 countries on the Economic Freedom of the World Index.  Australia is fifth.

But that observation sits uncomfortably with almost everything else Obama said in his speech to the Parliament.

The 44th president mouths his support for free trade but carves out so many exceptions, qualifications and requirements that, if those caveats were put into action, the United States would plummet down the economic freedom rankings faster than you could say ''level playing field''.

After all, how to reconcile ''History teaches us the greatest force the world has ever known for creating wealth and opportunity is free markets'' with ''We seek trade that is free and fair''?  Perhaps it is asking too much of the White House speechwriting B-team to be internally consistent.  Yet it is not clear what the qualifier ''and fair'' is supposed to do apart from repudiate ''trade that is free''.

Free trade is the universally recognised principle that national borders should be open to goods no matter where they come from.  Fair trade is the opposite.  First literally:  the phrase originated as a synonym for protectionism in the 19th century.  And second practically:  its modern popular use describes a trading system that discriminates between different third world producers according to first world standards.  Those who conflate the two are saying they support free trade and oppose free trade at the same time.  That's incoherent even for politics.

Obama then ticked off a series of standard refrains.  Countries need to play by the rules (as if the benefits of trade are only possible if that trade is approved by World Trade Organisation lawyers in Geneva).  Currencies need to be market driven (a clear swipe at China, which is desperately, if nervously, trying to fix its currency issues).  ''Workers' rights'' need to be respected (wholly admirable, but this vague demand has been long used by unions to protect themselves from foreign competition).

It's obvious from his speech alone that Barack Obama is no friend of free trade.  It's less obvious why so many Australian conservatives and liberals were full of praise for the president when he was here.

Obama's domestic record on trade openness is not good at all.

Most notoriously, his stimulus package had a crucial ''buy American'' provision.  The provision mandated that steel, iron or manufactured goods purchased with stimulus money had to be produced in the United States.

Actually, it was worse than that.  Steel, iron or manufactured goods purchased for a project which received any stimulus money at all had to be domestically sourced.  In other words, if a project received just one dollar of federal stimulus, everything bought with non-stimulus money on that project had to be American as well.

The Government Accountability Office found that Buy American red tape badly delayed many stimulus funded projects.  And, of course, substantially reduced their value for money.

The administration's jobs act, which is spluttering its way through Congress at the moment, has the very same Buy American provision.  This is naked, unabashed protectionism imposed as a gesture to Obama's trade union supporters.

Yes, the administration talked a big game on the benefits of free trade agreements between the United States and Korea, Columbia and Panama.  These agreements were negotiated in the twilight of the Bush era.  But Obama deliberately delayed passing those agreements for four years.  His friends in Congress were responsible for part of this delay, sure.  But the White House squibbed many opportunities to shepherd the agreements through.  Then the administration saddled the agreements with expensive trade adjustment payments which ensured further delays:  the US federal deficit would make anyone question whether now is a good time to expand the welfare state.

The Obama administration also had a chance late last year to resuscitate the Doha round of international trade talks, as the trade analysts Philip I Levy and Scott Lincicome pointed out at the time.  They completely failed to do so.

As a candidate, Obama played the same game as he did in Australia last week.  He would say he was a supporter of free trade, but then rail against ''unfairly traded'' products which ''flood'' American markets.

In his State of the Union address this year he said his goal for the country was to ''win the future'', a bizarre and hackneyed phrase which implies that prosperity is an international competition with winners and losers.  This is the exact opposite of what we know about trade -- countries which exchange do so because it is mutually beneficial.  Trade is not a contest some countries ''lose''.

As a small country plugged into the global economy, Australia depends on free trade for our prosperity more than most.  The US president came to our parliament and disingenuously championed protectionism.  It should be embarrassing there was no outcry.

The less Parliament sits, the better off we all will be

''We're getting on with the job''.  This has long been the standard response of Julia Gillard and her leadership team to questions about low poll numbers, the Foreign Minister's latest tweet, or anything else they don't want to talk about.

The hung Parliament isn't gridlocked.  Far from it.  More than 140 pieces of legislation have passed through both houses.  And despite the gauntlet of Bob Katter, Adam Bandt and a motley crew of independents, more than 180 pieces of legislation have gone successfully through the House of Representatives.

A few months ago Treasurer Wayne Swan was bragging this was ''in pretty stark contrast'' to the US and Europe, where parliaments have passed fewer laws.

But hold on:  why is all this law-making a good thing?  (Great!  More rules!)  The government's delight at its hectic law-writing schedule must be surprising to those who actually have to deal with the consequences:  judges.

Chief Justice of the Federal Court Patrick Keane said earlier this year the ''volume and complexity of federal laws'' meant that ''opening the Tax Act [which has blown out to 6000 pages long] is like entering a parallel universe''.

So it's weird the government thinks placing even more Byzantine restrictions on society and the economy is worth boasting about.  Certainly, not every piece of legislation passed has made a new law.  Some bills change laws already on the books, others eliminate existing laws.  Yet every change has consequences.

Business surveys report a huge increase in the amount of time it takes to monitor regulatory and legislative change.  Corporate boards spend more time than ever focusing on legal compliance, instead of on service delivery or innovation.

That's not just the fault of Gillard's government.  It's the fault of successive governments, Labor and Coalition, which have steadily increased parliamentary productivity.  Now there is an orgy of fresh legislation every year.

And those governments have been egged on by a political culture that favours action -- any action -- over steady-as-she-goes.

Commentators have recently complained that governments no longer have an appetite for big reform.  At least, not like Bob Hawke, Paul Keating and John Howard did.  Let's put aside the questionable evidence for this claim.  Isn't it remarkable how so much of this commentary avoids judging the virtues or otherwise of that ''reform''?  The criticism seems to be that legislators aren't pushing through massive change at a sufficient clip.  Anything will do.  Huge new taxes, or huge new tax cuts.  Doesn't matter.  Just as long as they're huge.

The Parliament and the press gallery are predisposed to like active governments.  A great politician is one who changes the country.  A great parliament is one that maximises its opportunity to write and pass new laws.  Australian political history is one long game of one-upmanship.

Poor old Kevin Rudd took this bias to its logical conclusion.  He spun so many government wheels in motion that his successor is only now starting to control its oversized chassis.

The bias towards legislative frenzy is not helped by oppositions that accuse the party in power of being all talk and no action.  This was true while Brendan Nelson held the Liberal leadership.  But it's an odd criticism coming from a conservative party.  Conservatives believe change for change's sake is fundamentally bad.  The last thing a conservative would want is frenzied reform.  ''Do nothing'' should be a compliment.  Let society evolve by itself.

Just as bizarre are the opposition's complaints the government hasn't planned for enough parliamentary sitting days.  The government will sit ''only'' one in four working days in 2012.  But that's excellent.  ''No man's life, liberty or property are safe while the legislature is in session,'' wrote a 19th century lawyer.  The fewer sitting days the better.  The father of liberalism, John Locke, argued that while parliament was better than monarchy, parliamentarians need to be restrained.  One way was to limit how often they sat.

Conservatives who understood these issues hoped the 2010 election result might restrain Parliament's obsessive law-making.  Obviously not.  If only the hung Parliament was as deadlocked as its critics claim.

ADVERTISEMENT

A note of scepticism about the Obama visit

The first time I turned out for a US president was two decades ago when George H.W. Bush came to town.

He drove through Sydney and I ran cheering behind the motorcade.  I was only 20 and, like most yanko-philes, I was panting just to get a glimpse of the man who had kicked the Vietnam Syndrome in the Gulf.

Those were the days.  The US had just emerged the victor from the Cold War without a shot being fired or blood being shed.  It achieved global superpower status, not by assertive or ambitious action on its own part, but by the self-induced collapse of its rival.  It had no plan in place to exploit its unexpected dominance, nor did it formalise and adopt one.  The US military seemed more concerned with having effective exit strategies in place than with implementing ambitious, open-ended projects.

It pains me to say this, but this week's presidential visit seems very different.  Don't get me wrong:  the Australian people still greatly admire the US president, clearly a man of great wit and intellect.  The 60-year-old alliance remains the sacred cow of Australian diplomacy.  And the US remains the world's largest economy and its lone superpower.  All true.  But serious doubts dog what Sir Robert Menzies called ''our great and powerful friend''.

Once universally considered to be awesome in its scope, today the world is much more aware of the limitations and costs of US military power.  When it comes to defeating tribal warlords in medieval societies, America finds itself wrong-footed and outwitted, not so much as an eagle as elephant.

Add to this the plethora of problems that afflict the US -- stubbornly high unemployment, consistently lacklustre growth, skyrocketing debt and rising budget deficits, increase numbers for home foreclosures, badly damaged credibility and prestige after Iraq and the GFC, what neoconservative founding father Irving Kristol once identified as ''clear signs of rot and decay germinating in American society'' -- and it is no wonder smart people question whether the US can sustain the burdens of global hegemony.

As US scholars and former office holders as ideologically diverse as Richard Haass, Brent Scowcroft, Joe Stiglitz and Paul Kennedy have recognised in recent years, America's serious fiscal crisis will eventually erode its economic power, which is the foundation of military power;  and as the relative gap between Washington and other rising powers diminishes, the costs of challenging American hegemony will decrease and the payoff for doing so will increase.

That is what in essence the authors of our Government's Defence white paper appeared to recognise two years ago.  We are witnessing, they identified, ''the beginning of the end of the unipolar moment -- the two-decade era of American pre-eminence in the region''.  Translation:  taken together with the dramatic rise of China and the emergence of India, US decline presages a shifting balance of power in east Asia.

It has been said that post-9/11 US foreign policy is a work in progress, and that those who get too close run the risk of being hit by a piece of falling scaffolding.  It's not clear whether the decision, formally announced in yesterday's joint press conference, to allow US forces to use Darwin for forward positioning will hurt Australia's standing in Beijing.  But it is surely the case that although the US alliance will endure, it should also change in the new era.

How so?  Well, instead of the sturdy, straightforward virtues of unconditional loyalty, we'll need to play a more demanding diplomatic game than ever before.  Instead of going ''all the way'' on the American bandwagon, we'll need to cultivate some of the skills of the helpful passenger -- which include some careful steering, timely map reading, a judicious use of the brakes and, not least, better road manners -- lest we crash into our largest trading partner.

Which perhaps makes it surprising that Julia Gillard has marched in lockstep with the president on two key issues that could have unintended consequences for Australian foreign policy:  the deal to enhance military cooperation with Washington as well as her strong support for the depressing and endless war in Afghanistan.

(Incidentally, it is striking that the usual suspects have not treated Gillard as they did John Howard:  where are Mungo MacCallum's taunts of ''Little Julia''?  Or Humphrey McQueen's rants about the ''American lickspittle''?  Or Alison Broinowski's lament about the ''Deputy Sheriff''?  More to the point, the PM's stance on the rotations of US forces and the Afghanistan war mark a far cry from her calls in 2005 for an ''independent foreign policy'', which is left-wing code for snubbing Uncle Sam at every opportunity.)

The elephant in the room during Wednesday's press conference, as well as in Parliament House today, was unquestionably China.  Although they express themselves in different ways, both Obama and Gillard seem oblivious to the emerging geopolitical reality that distinguished Harvard Professor Steve Walt has recently identified.

Writing in the Washington-based National Interest, Walt argues:  ''If China is like all previous great powers -- including the US -- its definition of vital interests will grow as its power increases;  and it will try to use its growing muscle to protect an expanding sphere of influence,'' he argues.  Given its dependence on energy imports and export-led growth, Beijing might want to make clear that no other state deny it access to the resources and markets, on which China's future prosperity and stability rely.  Such a situation, warns Walt, would encourage Beijing to challenge the current US presence in Asia.

Now, people of good faith will fret and wail about an expansionist dragon;  and this is understandable at face value.  But they should also recognise that the US, since it rose to great-power status, has also sought to exclude outside powers from its neighbourhood.  It is one thing to say the enhanced military coordination that Obama and Gillard announced this week won't amount to containment, but China will probably think differently.  Look at it from another perspective:  how would the US feel if the Chinese maintained a network of alliances and a sizable military presence in the east Pacific?

As Walt concludes:

Over time, Beijing will try to convince other states in the region to abandon ties with America, and Washington will almost certainly resist those efforts.  An intense security competition will follow.

How would Gillard, for instance, respond to a Sino-American spat over Taiwan or the South China Sea?

The other key issue, of course, is Afghanistan, a war without purpose and which has lasted more than ten years, longer than the combined length of our participation in the first and second world wars.  (In his 3,000-word address to Parliament today, Obama dedicated only one paragraph to the war while Gillard skipped it altogether.)  It is not clear to what extent Obama's withdrawal of one third of the 100,000 US troops from Afghanistan in mid-2012 will expose our Diggers to even greater risk in a quagmire where Australian casualties have nearly tripled in the past 18 months.  But it's a question that neither the president nor Prime Minister satisfactorily explained.

Don't get me wrong:  it was imperative to hunt down Osama bin Laden and his cohorts as well as topple the black-turbaned tyrants who gave Al Qaeda shelter and support.  But that mission has mainly been accomplished.  Other issues -- the routing of the Taliban and the building a democratic state -- are simply beyond our reach.  Our war aims are incoherent and our presence is exacerbating the problems we went in to solve, serving to destabilise Pakistan rather than to stabilise Afghanistan.  We are spending more blood and treasure in a misbegotten adventure in the graveyard of empires.

No-one wants Afghanistan to once again become a Club Med for terrorists.  But as the distinguished US conservative columnist George Will asks:

If US forces are there to prevent reestablishment of Al Qaeda bases -- evidently there are none now -- must there be nation-building invasions of Somalia, Yemen and other sovereignty vacuums?

Would Canberra precipitate a crisis in US-Australia relations by pulling out of the war?  Hardly.  Most Nato leaders have rejected Obama's appeals for extra troops and many -- Canada, the Dutch -- have pulled out.  Look, too, at history:  Menzies and Eisenhower bitterly clashed over the Suez crisis in 1956;  Whitlam's ministers called Nixon and Kissinger ''maniacs'' and ''murderers'' for the Christmas bombing in 1972;  Hawke's Labor comrades rejected Reagan's MX Missiles in 1985.  None of these episodes damaged the alliance.

The US alliance should remain the centrepiece of Australian foreign policy, under a Labor or Coalition government.  But one can agree with that assessment and still believe that there is no silver lining to the war.

So for what it's worth, here's my tip for the Prime Minister as she waves Obama goodbye today.  Leave Afghanistan to the drones and the US Special Forces, withdraw from this odd, irrelevant place and save our diplomatic resources for what really matters:  ride two horses simultaneously in our own region.  Washington won't be thrilled, but it would serve the Australian national interest.

ADVERTISEMENT

Free trade tied up in knots

We should welcome the fact that Australia will be the shower head capital of the world thanks to what happened in Honolulu a few days ago.  Leaders of the 20 countries in the Asia-Pacific Economic Co-operation forum (APEC) decided to cut tariffs on ''green goods'' to 5 per cent by 2015.

Our Prime Minister celebrated and said this would open up markets for Australian-made products such as wind turbines, fuel cells and water-saving shower heads.  Great.  APEC is proof of just how distorted the priorities of developed countries have become.

APEC is more worried about shower heads than about the 200 million people in India who don't have access to drinking water.  (Although since India is not a member of APEC, maybe this wasn't that much of a concern.)

None of the Australian journalists at the Honolulu meeting asked Julia Gillard whether she believed Australians could make wind turbines, fuel cells and shower heads better or more cheaply than the Chinese.

Maybe Australians could make these products better, but we can't make them more cheaply.  At the same time as the PM talks about the wonderful potential for Australia to make shower heads, it is the official policy of her government to push up the price of one of the most significant costs in the manufacturing process -- energy.  All of this is happening while the chances of the United States adopting a ''price on carbon'' are practically zero.  Which is what President Barack Obama admitted when he arrived in Australia this week.

But the APEC meeting wasn't a complete waste of time.  Nine countries, including Australia, the US, Chile and Vietnam, committed to forming a free trade zone as soon as possible.  This is good news.  And it's good that Labor is behind it.  At the moment, Labor's rhetoric on free trade is better than the Coalition's.

Tony Abbott's new anti-dumping policy is completely unnecessary.  His threat to force importers to demonstrate that the goods they bring into Australia are not sold at less than the cost of production is a bureaucratic nightmare.  Dumping is far from the biggest issue facing Australian manufacturing.

Increasingly, these non-tariff barriers appear at the behest of environmental non-government organisations (NGOs).  The Illegal Logging Prohibition Bill, now in the Federal Parliament, aims to stop the importation of illegal logged timber.

Similar to Abbott's anti-dumping proposals, timber importers will be required to prove their timber is not illegally logged, a task that is expensive, time-consuming, and may prove impossible.  As a study commissioned by the Department of Agriculture, Forestry and Fisheries revealed, the legislation is attempting to solve a problem that doesn't exist.  Australia's timber imports are less than one-tenth of 1 per cent of global timber production.

This shows how environmental NGOs are successfully converting their anti-corporate campaigning into legislative trade barriers.  Timber, coffee, sugar, cotton, palm oil and beef are some of the commodities the NGOs have set their sights on.  As I identified in a recent report, Environmental NGOs imposing [in]voluntary regulations on consumers and business, there's a growing tendency for NGOs to boycott individual companies that don't comply with the NGO's self-imposed standards.

If a corporation attempted such action against another corporation as a result of a commercial dispute it would be illegal under the Competition and Consumer Act and the Australian Competition and Consumer Commission would intervene.  But under an exemption in the act, if an NGO boycotts a company because of ''environmental'' concerns, it is legal.

Abbott has allowed Julia Gillard to capture the free-trade high ground.  This is incredible given it was the Gillard government that unilaterally banned the live cattle trade to Indonesia.

Further, at the same time as the government talks about cutting tariffs, it's establishing a whole new series of non-tariff barriers on imports and exports.  The latest, thanks to the government's tobacco plain packaging legislation, means that cigars imported into Australia will need to have the bands around them removed.

That's because those bands violate the rules on plain packaging.  It's a worry that in communist Cuba you can smoke a cigar that has the manufacturer's band around it, but you can't in Australia.  And it's a worry when the Cuban government threatens to take Australia to the World Trade Organisation.

The Labor government talks a good game on free trade.  The problem is that the reality doesn't always match the rhetoric.

Commonwealth Games bad news for the Gold Coast

Poor Gold Coast.  Acting Queensland Premier Andrew Fraser told reporters after the city won the right to hold the 2018 Commonwealth Games over the weekend that the economic benefits would be ''priceless''.

That's right:  the Queensland Treasurer suggested that the financial gain for the Gold Coast was completely unquantifiable.

Politicians are living in a fantasy land when it comes to the economics of major events.

Evidence that international sporting festivals provide any economic benefit to their host is almost non-existent.  The games will discourage as much economic activity in the Gold Coast as they will boost.  Probably more.

We have enough serious, scholarly, dispassionate studies of major events to be strident here.  Winning the Commonwealth Games is nothing to celebrate.  It is bad news for the Gold Coast.

Of course that is not how the Games bid has been pitched to voters.

Anna Bligh has argued the bid is ''vitally important for the future of the Gold Coast''.  Fraser may believe the benefits are priceless, but the Government and the bid team have been spruiking an economic benefit to the city of between $1.4 billion and $2 billion (naturally, the Government prefers the higher number).

According to comments by the bid chair Mark Stockwell late last year, the Games will also create 24,000 jobs.  In Queensland Government press releases, that projection has become a nice round 30,000 jobs.  One press release is higher again, and weirdly specific:  33,540 jobs between 2015 and 2020.

These figures are apparently based on a ''feasibility study'', which the Government commissioned.  The study is not available for public scrutiny.

It doesn't have to be.  We already know it's wrong.

In their 2008 paper ''Do Economists Reach a Conclusion on Subsidies for Sports Franchises, Stadiums, and Mega-Events?'', the economists Dennis Coates and Brad R. Humphreys survey the ''large and growing'' peer-reviewed literature on major sporting events.

There is an overwhelming consensus among academic economists that no tangible economic benefits from subsidising events, stadiums, or sports franchises exist.  None at all.  In fact, some papers have found substantial losses from hosting these big national or international sport festivals.

After all, major events are not all economic boom.  They are disruptive.  Roads are closed.  Residents stay away;  when locals might have gone out for other entertainment, they stay home fearing crowds.  Businesses which cannot take advantage of the visitors see their sales slump.

Major events are not even unambiguously positive for the hospitality industry.  One study failed to find any statistically significant relationship between the US Super Bowl -- which moves from city to city each year within the same country and provides a convenient natural experiment for major sporting events -- and hotel occupancies or retail sales.

Infrastructure gets built, sure, but not necessarily the most useful infrastructure.  Events distort spending priorities.  Stadiums have only limited uses once the event is over.  Transport designed to ferry thousands to an event only held once might not be the most useful transport once fans go home (and why governments don't do their job and build needed infrastructure until a major event forces them to do so is beyond me).

Add these problems to the large amount of taxpayers' money used to directly finance major events, and the economic case slips away very quickly.

One academic analysis of the 1994 World Cup in the United States estimated the host cities lost up to $9.3 billion.

But beforehand the boosters were predicting it would increase economic activity by $4 billion.

Every single Commonwealth Games, World Cup or Olympics is matched by a consultancy report forecasting the huge numbers of jobs that will be ''created'', the flood of tourism which will be unleashed, and the massive infrastructure investment that will be sparked.

Anna Bligh launched Queensland's bid for the Commonwealth Games in August 2008.  The feasibility study came well after.  She told parliament in June 2009 she had ''recently'' agreed to commission the study, but the Premier was already talking up all the glorious new jobs it would bring.  You might say that was jumping the gun.  It wasn't.  It was a study commissioned by a Government for a major event.  Of course it was going to find a squillion jobs would be created.

Last year the Gold Coast Business News decided the benefits of the Games so concrete, the reverse must be true as well.  They titled an article on the bid ''Unsuccessful Games bid could cost Gold Coast $2B''.  Sounds serious.

What happens from now is all very predictable.  Tourism lobbyists will spend the next seven years talking up the event.  A few years after the Games have ended, and once it is blindingly obvious the influx of long-term tourism dollars has not arrived, they will blame the Government for ''failing to capitalise'' on the global goodwill.

Then everybody will move onto bidding for the next event, armed with fresh new consultancy reports and suffering amnesia.

Such is the fantasy world of major events.

ADVERTISEMENT

Cutting the slack and saving the budget

With uncertainty surrounding the growth prospects of European and US economies, and a languid non-mining economic performance in Australia, attention has again turned to how the federal government will achieve a budget surplus in 2012-13.

Despite their best rhetorical efforts, government ministers in recent months have softened their stance to now enlighten us that the surplus is now an ''objective'' rather than a steadfast policy commitment.

But as the economic scene worsens internationally, there is heightened speculation that the government will have no choice but to belatedly add to the customary efficiency dividend policies by eliminating some existing programs to meet its budgetary promise.

A chorus of politicians, including Greens leader Senator Bob Brown, and business representative organisations, have not aided the fiscal consolidation cause by lambasting the surplus policy as a political ploy lacking economic merit.

Others, such as the Centre for Policy Development, have sprung up defending the commonwealth public service against the prospect of cost savings through a reduction in government employment.

A recent CPD report purports to show that the case of bloated, or excessive, government employment is overstated.  According to the CPD figures, if we compare ongoing APS employment against population growth then the total number of Australians per public servant has increased from 1991 to 2009.

In the opinion of the report's key author, James Whelan, this trend means that the ''service delivery capacity of the APS has diminished.''

Alternative measures, drawn from ABS wage and salary earner statistics over a longer period, show a similar trend but it is unclear that such indicators tell us much about the appropriateness of existing public service employment.

As the CPD report rightly notes, it is true that small-government adherents such as myself have suggested that numerous employees within the commonwealth public sector do not deliver any frontline services of any kind.

To a great extent this is a product of deliberate policies to reduce the extent of commonwealth services delivery, as exemplified by privatisation in the areas of aviation, banking and telecommunications from the 1980s to the mid-2000s.

Most economists agree that such microeconomic reforms were appropriate, enabling the more efficient private sector to innovatively deliver a range of additional services to customers at lower costs in real terms over time.

While the CPD report bemoans our successful privatisation record there is no credible evidence, apart from a few nationalisation agitators in the recent debate over the Qantas dispute, that most Australians are clamouring for a return to an era in which the commonwealth assumed the commanding heights over a wide range of services.

The divesture of government assets played its part in reducing commonwealth government employment, but its effects were temporary as total public sector numbers once again increased over the previous decade to 243,700 people in June 2010.

A considerable number of these extra commonwealth public servants are solely engaged in policy advisory, administrative and regulatory roles that unnecessarily burden business with obligations inimical to the encouragement of entrepreneurship and a broader growth in the economy.

These burdens will only worsen when the carbon tax administrative machinery, to accompany the Climate Change Department, possibly becomes a reality next year.

And these trends do not fully account for the growth in outsourcing of government work to private sector contractors, a number of whom were themselves public servants retrenched during the period of APS rationalisation during the late 1990s.

Another factor which must be taken into account when considering the appropriateness of public service size is the increasing commonwealth policy influence over functions and services traditionally undertaken by the states.

This erosion in state policy autonomy has enabled the federal bureaucracy to mushroom in areas such as education and health, blurring financial and policy accountability to taxpayers and provoking intergovernmental blame games abhorred by most Australians.

Those arguing against retrenchment within the public service as a way to reduce the budget deficit effectively argue that the existing size and composition of the APS is optimal, and must be quarantined from further rationalisation.

It follows from this argument that the government should only seek to return the budget to surplus and pare back public debt by seeking explicit tax increases or gamble on future economic sunshine delivering additional government revenue.

There is little doubt that these propositions are instinctively supported by the current government as a matter of political principle.

This is because as domestic manufacturing industries continue their slow decline, the public sector unions have gradually displaced manufacturing unions as kingmakers within the wider trade union movement.

And spending cuts won't please public sector union members whose livelihoods depends on maintaining, and indeed growing, government expenditure.

Election survey statistics also show that the majority of public sector workers tend to vote for left of centre political parties, leaving the Gillard government to believe that it is best not to bite the political hand that feeds it.

For these reasons there is little surprise that the Australian federal government has shown so far that it reacts to calls to reduce the size of the commonwealth public sector in a manner similar to someone who endures a toothache.

But to overlook opportunities to consolidate the budget by cutting expenditure, including reducing public service numbers where the role of commonwealth government is inappropriate or no longer relevant, severely limits our options to regain fiscal credibility and sustain economic prosperity.

ADVERTISEMENT

For and against an ABC-run Australia Network

On Monday night the Federal Government killed off the tender process for the Australia Network contract.

But debate continues over who should host the service;  should it be maintained by the public broadcaster, or should commercial media have the same opportunity?

Despite today's hoopla surrounding the Australia Network, the Government was right to go to tender and should have given the contract to the most competitive bidder -- Sky News.

The late announcement of the cancellation of the calamitous Australia Network tender process may have been justified by Stephen Conroy because of leaks to The Australian.  But few would buy it.

The earlier transfer of the tender process from Kevin Rudd to Stephen Conroy was the first clear sign that the Government was never going to let Sky win.  And that meant twice rejecting the recommendations of an ''independent'' government panel against Aunty.

In response to the debacle Greens Communications spokesperson, Scott Ludlam, argued ''the idea that a commercial identity could replace Australia's interests and culture in this region better than the ABC -- our national broadcaster -- was really misguided''.

His proposition is absurd.

First, the Government was right to tender out the contract to extract the maximum value from the different bidders.  Even if the government was always going to unfairly give the contract to the ABC they're still likely to get better value for our taxpayer buck through a competitive tender process.

Second, Ludlam assumes the ABC is best capable of carrying Australia's message to the region.  That's doubtful.

The Australia Network is not a logical extension of the ABC's local programming.

In the lead up to the tender the ABC pulled a sneaky punch trying to merge their mandated delivery of Radio Australia with the Australia Network.  It would have made it impossible for Sky News to bid since it cannot deliver Radio Australia.

But according to reports the competitive edge Sky News has over the ABC came from its successful negotiations with the Chinese CCTV state broadcaster to carry the Australia Network into the People's Republic.  And as part of that deal Foxtel will allow Chinese Communist propaganda to be made available for broadcast through our airwaves.

There are legitimate questions about the merits of that deal.  But it points to a highly significant and relevant structural problem with the ABC bidding for the Australia Network contract in the first place.

The Australia Network contract is part of Australia's suite of soft power public diplomacy.

The Howard government's 2007 foreign affairs and trade In the National Interest white paper described public diplomacy as a ''diplomacy which operates in that area of intersection between the soft realm of image and the hard edge of a country's economic and political interests''.

The title of the white paper perfectly encapsulates the objective of the Australia Network -- to promote our national interest.

And that isn't necessarily achieved by broadcasting Monday night's Q&A bunfight to Jakarta.

In his 2009 Bruce Allen memorial lecture ABC Managing Director Mark Scott highlighted the contradiction between the ABC's public broadcaster role and the Australia Network's pseudo-state broadcaster role.  In his lecture Scott extolled that the ABC ''insisted that the service [Radio Australia] could not exist as a mouthpiece of government ... [and] that tradition endures''.

Leaving aside views about the cultural left-wing bias that extends within the organisation, the ABC isn't charged with being a state broadcaster.  It's a public broadcaster.  The former pushes the government line.  The latter informs the public.

Yet the ABC shares a large component of its domestic-targeted news and current affairs programming on the Network including programs like ABC News Breakfast and even the Gruen Transfer.

Despite the quality of the programming, it's highly debatable that pushing some of those programs advances our soft power national interests.

For a 2007 senate inquiry into Australia's public diplomacy program my submission The Values Deficit included a content analysis of the programs the network broadcasts, rating them against the Australian values of a liberal democracy, human rights and free markets.

Based on the analysis the programs only sent out positive messages on one category -- liberal democracy.  By comparison most programs were values-neutral on human rights and there was not a single supportive message of free markets.

But for the ABC to share content on the Australia Network to meet our values-driven public diplomacy objectives it would be required to compromise its neutral role.  That wouldn't be good for the ABC.

Irrespective, the ABC should be allowed to bid if they can find a way to achieve these twin objectives required of them to deliver the contract.  It would be a considerable challenge.

But nostalgia for ABC delivery should not factor into who wins the contact.  That should be made based on the value of the bids.  Based on all ''leaked'' reports, that's Sky News.

The best way for the right to win culture wars is to privatise them

The best way for prime minister Tony Abbott to win the culture wars might actually be to withdraw the government from them.  One of the greatest criticisms conservatives have levelled at the Howard government is that it failed to win the culture wars, despite its 11½ years in office and many other successes.

When the Coalition government fell in 2007, the ABC remained hostile to conservatives and an outpost for cultural liberals, universities continued to be a safe haven for the Left where conservatives continued to feel unwelcome and our cultural elite was dominated by prominent leftists.

Now is the time for him and his team to begin to think about what impact they will have on the culture wars, just as Julia Gillard and Kevin Rudd did when they were in opposition.

To succeed where John Howard failed, Abbott will have to approach the culture wars in a totally different fashion.

Instead of trying to beat the Left at its own game, Abbott needs an agenda that fundamentally changes the culture wars, by getting the federal government out of them.

Broadly understood, the culture wars during the Howard years were about Australian identity.  They were about who gets to define what it is to be an Australian, and the terms by which it was defined.

Recent history has shown that the Left is much better at using government to favour its side of the culture wars and in many ways the tactics employed by the Howard government in the culture wars actually set back the cause it was trying to advance.

For instance, the appointment of prominent conservatives to the board of the ABC was unsuccessful at changing the tune of the public broadcaster.

Instead, it just gave the Left ammunition in its argument that the Howard government had a political agenda when it came to the ABC.  Of course, the Left does not need to stack the board of the ABC to ensure that coverage is sympathetic to its ideology, because most of the staff of the ABC are already of the Left.

To be clear, bias at the ABC is rarely of a crude partisan nature.  It is true, as the defenders of the organisation protest, that both Labor and Liberal politicians almost always get an equally tough run on its flagship political programs.

Nor is bias at the ABC likely to be part of some conscious, sinister plot to indoctrinate the Australian people.  It is simply the product of the homogenous worldview of staff who are overwhelmingly drawn from similar cultural and ideological backgrounds.

But that doesn't mean it isn't a problem.  As a publicly funded broadcaster, the ABC is obliged to treat the views of all Australians with respect and ensure its reporting remains free of bias.

Instead of recommencing a futile effort to change the culture of the ABC via board appointments, prime minister Abbott should seek to reduce the public broadcaster's reliance on taxpayers' support.  Further corporatisation of the ABC and a requirement that it raise more of its own revenue, such as by advertising through its high-traffic websites, would provide a much greater incentive to management to deliver content that is in demand by Australians.

And the more revenue the ABC collects in its own right, the less valid political meddling in its editorial decisions becomes.

Another example of an effort to advance a conservative agenda that backfired in the culture wars is the debate about values in education.  As education minister, Brendan Nelson proposed that a statement of values, written by the federal government, should be used to ensure that appropriate values were taught in schools.

Building on this idea, his successor Julie Bishop attacked ''Maoist'' state education curriculums and suggested the solution was to hand the power to draft a curriculum for all students to the federal government.

In doing so, they handed Peter Garrett the tools to force these ''Maoist'' curriculums that applied in just some states into every classroom in the country with the highly ideological national curriculum.

While admitting that it sets out to ''shape'' students, not just teach them, the curriculum is appallingly biased and its history section either denigrates or leaves out major events in the development of Western civilisation.

Yet interwoven throughout the whole document is the importance of ''sustainability'', and highly ideological viewpoints, such as the idea that we are running out of natural resources and face an ''energy crisis'', are treated as uncontentious facts.

But instead of redrafting this curriculum with an equally ideological but conservative bent, an Abbott government should throw the curriculum out to the market, through a tender process that allows schools to choose from multiple competing private curriculums.

By taking government out of the drafting of the curriculum, except for setting broad minimum standards, the education system would become depoliticised, and parents would be given the power to choose the schooling they want for their children.

The true strength of this approach is that because of its lack of reliance on control of government spending and regulatory power to fight the culture wars, the important wins that are achieved stand a much better chance of enduring a change of government.

What's more, applying liberal philosophy to a comprehensive cultural reform agenda will also lead to much-needed sensible policy changes that will enhance individual freedom and reduce the size of government in Australia.

The clear lesson from the Howard years is that the Right should be highly wary of using the power of the state to advance its side of the culture wars.  Often, it was unsuccessful.  Worse, it sometimes backfired and made the job of their ideological opponents much easier.

It would be far better for an Abbott government to adopt a totally new strategy by getting government out of the culture wars.

Not only is this much more likely to advance his own side of the conflict, it is also consistent with conservative principles.

ADVERTISEMENT

Pursue productivity in order to slash the costs

Because businesses increasingly compete with international rivals, relatively small cost increases can force radical decisions.

To survive against overseas competition, firms must pursue productivity improvements and cut out excessive costs.

This also leaves the economy in general ever more vulnerable to cost burdens resulting from government regulations.

Yet we are seeing the Gillard Government introduce an avalanche of regulatory impositions.

This week, Parliament passed the carbon tax.  Upcoming is the new minerals tax.

And we are seeing the Fair Work Australia Act re-arming union militancy, notwithstanding Julia Gillard's rhetoric about ensuring we have a ''tough cop on the beat''.  Days lost from industrial disputes are threefold higher than last year.

After two years' incubation, Labor's industrial relations regime is now generating a glut of union demands that would impede management's ability to improve productivity.  The Qantas dispute is the highest profile example of unions seeking to control a business.  If the unions successfully force Qantas to forego productivity improvements, they will condemn the firm to gradual decline.  But few existing Qantas employees will suffer as their terms and conditions are guaranteed.

Qantas is only one of a growing list of companies pressured by government policies.

Sydney-based firm ResMed is a home-grown world leader in technologies that combat breathing disorders during sleep.  Most production is exported in a trade worth over $750 million a year.

Cost impositions from the carbon tax and workplace inflexibilities stemming from Fair Work Australia, are leading ResMed to shift its production to Singapore, which offers more certain electricity prices and superior industrial relations laws.

Coogee Chemicals faces a similar outcome.  Because of the carbon tax, the firm has abandoned plans for a $1 billion new plant in country Victoria and is reviewing the viability of its existing Laverton facility.

Government ministers, in inflicting costly regulations on business, are unaware of the role of profits, in driving efficiency.  As the leftovers after all costs are paid and the reward to owners, profits dominate business decisions, including location choices.

ResMed's decision illustrates the effects of this.  If electricity comprises as little as 3 per cent of the firm's costs, a carbon tax that doubles its energy price can be crucial.  Doubling of ResMed's energy price means an annual cost increase of $20 million on the firm's $750 million output.

That $20 million cost comes straight off the bottom line and with ResMed's profit at $50 million this represents a cut of 40 per cent.

As the company's chairman Peter Farrell said, ''ResMed, like other global companies, can and will vote with its feet.''

The company's board of directors cannot remain in a high cost location for sentimental reasons.  Indeed, to opt for higher costs than necessary would eventually threaten ResMed's existence.

Only governments can command the resources to pay for superfluous costs but it is the private, not the government, sector that creates wealth.

Private-sector employers must win customers in the marketplace and competition forces them into the cost savings.

These cost savings drive the productivity gains that enable higher living standards.  But regulatory impositions that discourage investment or push firms overseas mean lower living standards.

ADVERTISEMENT

Politics and economics of a balanced budget

There is a lot of doubt as to whether the Gillard Government will be able to deliver a budget surplus in 2012/13 as promised.

The problem is that government is spending too much and expected revenues will not be as high as initially forecast.

When government needs to balance the books (i.e. run a modest surplus), but cannot raise more revenue, the only solution is to cut spending.  Or, renege on the budget surplus promise.

Each of those choices is politically tough.  The beneficiaries of government spending are usually well-organised and vocal.  Seemingly, however, the promise of a budget surplus has few friends, and many are now suggesting that the Government quietly shelve that promise.

Many economists are making the argument that a budget surplus in 2012/13 isn't really economically important;  it is just the politics that dictates the need for a surplus.  The fact of the matter is that budgets matter, and politics matters too.

To his credit, Wayne Swan has resisted that sort of argument.  While I doubt that he will actually deliver a budget surplus at least Swan has some understanding of the need for fiscal prudence.

Government spending is ultimately financed through taxation.  I am going to ignore financing through inflation -- that is unsustainable and dishonest.  Taxation can be deferred through bond issues, but bonds should be repaid, with interest.  Public debt is deferred taxation.

Now there are always very compelling reasons for government to spend more money.  Lobbying government to increase expenditure is a very lucrative industry in itself.  But we have to trade off the benefits of additional government spending (which actually decline very quickly) against the costs of additional taxation (which rise very quickly).

As government spending increases so private activity is crowded out making the economy more reliant on government.  But like any other organisation there are limits to what government can do well.  As government expands it increasingly undertakes activities that it isn't very good at, and inefficiencies grow.  Combine that with an increasing tax cost and it quickly becomes clear that government spending should be constrained.

Australians have an intuitive understanding of the costs of budget deficits -- every month (except January) the RBA interest rate announcement is widely covered in the news.  Loose fiscal policy, sooner or later, results in high interest rates -- at least, higher than they otherwise would be.

Providing a coherent and credible path back to surplus was a clear message from ratings agencies that enabled Australia to maintain its AAA credit rating after the 2008 stimulus package.

All up this sort of argument suggests that budgets should be smaller rather than larger and balanced rather than unbalanced.  It is fully consistent with Kevin Rudd's argument that, ''This reckless spending must stop''.

The problem is that government can be fiscally irresponsible for a long time.  Much longer than individual households or firms.  As Adam Smith said, ''There is a lot of ruin in a nation''.  Just look at the Europeans, and the Americans.  Fiscal irresponsibility has taken a long time to manifest itself in crisis, but the day of reckoning has arrived.

Taxation and government spending in a democracy are ultimately decided at the ballot box.  It is here that many economists make a fundamental error.  James Buchanan, the 1987 Nobel laureate, has argued many economists propose policy as if they were advising God, or at least an omnipotent and benevolent dictator.  Economists very often overlook the fact that governments have to govern with the consent of the governed.  The bottom line is that there is no economic policy that isn't political.

The electorate has good reason to demand fiscal prudence, after all the costs of imprudence are very high.  So when the electorate decides that it prefers low levels of public debt to high levels of public debt that means that government needs to deliver within a tight budget constraint, or convince the electorate otherwise.

Government also needs to convince the electorate (not to mention the international bond markets) that the public sector is being well-managed.  Expectations play a very important role in economic decision making and confidence is an important component of a healthy growing economy.  One easily observed measure of government performance is the budget balance.  It isn't the only measure and shouldn't be a mechanical measure but nonetheless is an important measure.

A government that cannot balance a budget is not doing a good job.  That must undermine confidence in the economy and it also means that government is imposing huge costs on the economy and future generations.  Of course, just as there are always ''good reasons'' why government should spend more, so too there are always ''good reasons'' why the budget should be balanced sometime in the future, but not just yet.

A government that gets into the habit of not managing its finances ends up imposing huge costs on the economy -- and the electorate knows that.  That is why the Australian electorate has a low tolerance for debt and deficits.

So yes, honouring the promise to deliver a budget surplus is political, but it is good economics too.

ADVERTISEMENT

Media inquiry motives: accountability or revenge?

Bob Brown's submission to the Independent Media Inquiry has an appendix of criticisms he's received in the press since calling for a media inquiry:  ''totalitarian'', ''self-serving'', ''prejudicial and dishonourable'', ''witch-hunt'', ''pillory'', ''fascism'' and so on.

It's a strange appendix to include, considering that the substance of those critiques is how the Greens leader's support for a media inquiry is motivated by personal animus.  And, further, such a motivation means the inquiry is not a benign investigation of the current media regulation, but something more sinister -- politicians trying to use their powers of legislation to punish critical newspapers.

So a bit of an own-goal there.

The Government has repeatedly rejected claims that the inquiry will be focused on News Ltd.  That's clearly not the way many of the inquiry's supporters see it.  Brown can barely go a media appearance without talking about The Murdoch Press.  Critics of the Greens say the minor party is actually the government.  If so, then Brown sees Rupert Murdoch as his loyal opposition.

Labor's backbenchers are also loose-lipped on the inquiry.  A furious Senator Doug Cameron said last week, ''The Murdoch press are an absolute disgrace, they are a threat to democracy in this country and we should absolutely be having a look at them''.

Cameron was angry about reports of leadership instability in the Daily Telegraph.  Maybe the Telegraph reports were a beat up.  Maybe they were not.  ''Government backbencher says leadership speculation is baseless'' is not a decisive rebuttal.

But regulation of the press imposed as revenge for anti-government reporting is much more a threat to democracy than any tabloid headline could be.  That neither Bob Brown nor government backbenchers like Doug Cameron appear to recognise this blindingly obvious problem is worrying enough.

Governments and the press have never gotten along.  The two are, and will continue to be, absolutely opposed to each other.  One accumulates power.  The other undermines it.  Australia's first media proprietor, Robert Wardell, described the free press as a weapon to ''frustrate the designs of tyranny, and restrain the arm of oppression''.  One 19th century Chicago Times editor said ''It is a newspaper's duty to print the news, and raise hell''.

This is certainly not to defend media ethics.  Bad journalism deserves harsh criticism.  Raising hell can bring up devils.  But the choice presented is not between our current media and a noble, ethically-unimpeachable media.  It is whether the Government should to try to ennoble it for us.

What constitutes ethical practices is not for governments or bureaucrats to decide, and certainly not for them to enforce.  Governments are subordinate to civil society.  They must not be the supervisors of their critics.  This is a much more fundamental principle of democracy than the often-repeated idea that free elections require an informed citizenry.  Restraining the actions of government once a parliament has been formed is surely just as important making sure people can decide who to vote for every couple of years.

Sometimes attacks on government or politicians are misinformed, simplistic, or propagandistic.  Sometimes those attacks mix up facts and opinion.  Wrongheaded views -- even wilfully ignorant ones -- are not unique to the press.  They are a feature of democracy.

In his submission, Brown suggests the fact a journalist described him as ''self-serving'' helps strengthen his case.  God knows we wouldn't want the public to think politicians can be that.

Nevertheless, Brown's submission is interesting.  The Greens leader has said journalists don't tell both sides of a story accurately or reasonably.  The submission builds his case at length, free of media gatekeepers.

Brown conflates two separate grievances into one.  First:  The journalist's Code of Ethics, administered by the media union, ''has become a hollow vessel''.  Second:  Rupert Murdoch has oligarchical control over the print media.

Are these two linked?  Brown thinks they are.  A core problem for the Greens leader is ''Almost all the news media in Australia is owned by private corporations, outside of the ABC and SBS''.  In July, as the News of the World scandal hit its stride in the UK, Brown asked whether the News Ltd board meetings should be opened to public broadcast.  This would impose a degree of public scrutiny on a single company that isn't even applied to federal cabinet, or, indeed, his own party conferences.  Perhaps he thinks all private companies should open their boardrooms.  But that's not what he said.  Just News Ltd -- a firm which employs his most strident critics.

The profit motive is one of the most powerful forces in our society precisely because it delivers consumers what they want.  Organisations which offer people goods or services which are attractive and desirable and not prohibitively expensive succeed.  Those which do not, fail.  All government should do is provide a legal framework, under which laws are universally applied.  For instance, to choose a law completely at random, don't hack phones.

The profit motive seems like a pretty good way to deliver journalism which people want to read, watch and listen to.  But, otherwise, the Government spends a billion dollars a year on the ABC -- specifically to address an assumed failure by the market to provide quality media in the absence of a public broadcaster.

Bob Brown would no doubt like the ABC budget increased.  But that's not the argument he is mounting.  Tellingly, the ABC barely rates a mention.  His focus is on the private News Ltd, not the ability of existing institutions to achieve any democratic objective.

Brown's enthusiasm for the media inquiry seems more about fighting his party's critics than any principled position about the relationship between democracy and media.

Greens pressure led to the formation of the inquiry in the first place.  So it is hard to take the Government's reassurances that the Independent Media Inquiry has nothing to do with the hostility of the press.

What happens to carbon trading after Durban?

The collapse of the price of carbon permits in Europe tells you everything you need to know about the prospects for international carbon trading.  Unfortunately, the government isn't listening.

Earlier this week Climate Change Minister Greg Combet rejected the idea that there are serious issues with international carbon trading and yesterday spoke rosily about the global carbon market's prospects while the EU carbon price crashed.

To support his argument Combet cited the World Bank's Carbon Finance Unit State and Trends of the Global Carbon Market 2011 report that the market has now grown to $US140 billion ($136bn).  But he's clearly only read it to recite convenient anecdotes.

According to the report ''after five consecutive years of robust growth, the total value of the global carbon market stalled suffering from the lack of post-2012 regulatory clarity''.

Meanwhile the price of some emissions permits ''fell by double-digits for the third year in a row'' and ''shrank as well in 2010''.

A carbon market recession should hardly come as a surprise.

An international agreement that provides regulatory clarity so countries commit to cutting their emissions is central to the stability and security of a workable global carbon market.

Until now clarity has been provided by the Kyoto Protocol.  But on December 31, 2012, Kyoto expires without a successor agreement.

Since the 2007 Bali summit countries have been negotiating a successor agreement but cannot agree on how it is to be achieved, despite it having a huge influence on how we should design our own scheme.

At present, negotiations surround whether countries should seek emissions cuts through a second-generation Kyoto Protocol or a non-binding, long-term co-operative action agreement.

Poor countries want a second-generation Kyoto because it obliges rich countries to cut emissions while they're not bound to do anything.  Rich countries want the non-binding agreement because it brings every country into the same tent.

The failure at Copenhagen was about this unresolved impasse.

If agreement eventually can be reached, large emitting countries such as the US, China and other economies will then design their domestic emissions reduction schemes to work within this framework.  Trying to do this retrospectively is likely to be harder.

In three weeks countries will descend on Durban, South Africa, for the last opportunity to successfully lock in a post-Kyoto deal before the protocol expires.  Not even the Gillard government believes that will be achieved.

A recent survey of carbon traders found that fewer than 5 per cent were optimistic there would be a new global emissions reduction agreement by 2015.  Their faith rose only to about 20 per cent for one by 2020.

At least Kevin Rudd realised after Copenhagen's collapse that introducing a carbon price should be deferred until there is greater international clarity.

But the Gillard government appears oblivious as they've guzzled the Greens' carbon Kool-Aid.

As Treasury modelling outlines, Australia will rely heavily on international carbon trading to keep the scheme's cost down.

The point of carbon trading is to facilitate cutting emissions where it is cheapest first and where it is most expensive last.  Mapped across a 100-year time scale, emissions in Australia would not be cut until the last decade.

The reason is because the gap between the source of the majority of our emissions from the burning of cheap, plentiful coal for electricity and the next viable alternative in gas is so large.

To make gas competitive requires a carbon tax of at least $40 a tonne.  To rely on renewables the carbon price needed is in the hundreds of dollars.

Not that other schemes are providing much confidence.

Before its closure in the middle of last year, the price of voluntary Chicago carbon exchange permits plunged from $7.40 a tonne to a mere 5c.

And Europe's carbon price has not been in parity with Australia's $23 a tonne price since June and now sits at about $10 following a downward price trend.

As long as the EU's emissions trading scheme accounts for 97 per cent of the global carbon market, the price will be set in Europe and a price drop there will significantly influence whether emissions cuts will be achieved in Australia.

Not that Europe is leading by example.  China accounts for 40 per cent of Europe's emissions reduction through Kyoto's clean development mechanism that allows developed countries to buy emissions reduction in developing countries and count the cuts against their own register.

At least Europe is consistent.  It is going cap in hand to China to finance its debt crisis and then giving it back to China to cut its emissions.  It's all becoming a bit of a merry-go-round.

The lesson for Australia should be not to get ahead of ourselves.  Talk of climate leadership may be a good sound bite.  But it's a global challenge and requires a globally co-ordinated solution to successfully cut emissions at least cost.

Lack of policy leadership in Australia

Leadership is still about ''that vision thing''.  But it's also about being able to prosecute it within your sphere of influence for challenges you can respond to.

For those of us enthusiastic about public policy, the Australian debate is rather depressing.  Sound bites rule.  Substance doesn't seem to matter.  Scant regard is paid to outcomes.  What's most concerning is that the lack of policy leadership is intertwined with the enormity of the challenges we face.

Broadly speaking, the private sector is fine.  Australia's relative ease in sailing through the global financial crisis' choppy waters demonstrates the importance of a flexible liberal economy.  If Australia had industries propped up by the false foundations government regulation and protectionism provides we would have struggled to adapt.

We haven't struggled.  Not that everything is perfect.  But considering events overseas, every morning Australians should wake up and be thankful for their good fortune.

But our political leaders have lost the plot on influential leadership resulting from the international alignment of Australia as a country worth emulating because of survival through the crisis.

The Rudd and Gillard government's efforts to ''show leadership'' in tackling climate change by introducing a carbon tax, succeeded by an emissions trading scheme, is foolhardy.  No one disputes the government's commitment to cut emissions.  But it's an absurd proposition to suggest we are going to take on significant economic costs for a global environmental challenge and then expect the rest of the world to follow.

Based on the government's logic, the rest of the world would have followed our lead in unilaterally liberalising their trade barriers in the 1980s and 90s.  After all it would have been in their economic interest.  But they didn't.  Instead many have maintained trade barriers ranging from heavy industry subsidies, tariff protection to local content restrictions that make their economy less flexible, dynamic and capable of responding to economic downturns.  In short, they're worse off.

So if countries won't follow us in helping themselves, it remains a fascinating proposition that they'll follow us in imposing economic pain.  The European Union's longstanding emissions trading scheme also shows it unlikely.

You cannot lead by sound bites when you're extending beyond your zone of influence.

Australia can reasonably have an impact by imposing a domestic carbon price.  But greenhouse gas emissions are a global challenge, the externality is also global, and can therefore only be addressed with a global carbon price.

Australia showing leadership may make us feel warm and fuzzy, but it doesn't address the challenge if there is no global price to feed into.

Considering a World Bank Carbon Finance Unit survey of international carbon trader found around only 20 per cent believe there'll be a new international agreement that could provide the pathway to imposing one by 2020, shows we're over reaching.

What's sad is that while we are trying to lead from the front, while other countries are walking in the opposite direction, we need leadership to address challenges we can directly influence.  The real leadership challenges are at home in the public sector reform to convert many of our public sector institutions onto a more sustainable footing.

As the government's intergenerational report outlines by 2050 Australia's health bill will increase by three and a half times compromising the sustainability of taxpayer-funded universal healthcare.  Worse the number of working people to pay the taxes to support it will also decline.

In many ways it is the same challenge that faced the Hawke/Keating government over the sustainability of taxpayer-funded pensions.  Millions of Australians had paid taxes their entire lives with the reasonable expectation that other taxpayers would foot the bill when they decided to give up work.  Nice idea.  But it has struggled to work in practice.

The ongoing crisis of the American social security system provides a clear example of how the interests of working Australians could have been compromised if government didn't show leadership.

But the Hawke/Keating government rose to the challenge and our compulsory superannuation scheme now provides a more sustainable scheme to provide certainty to us all when we retire.  It was a known challenge.  It was within the government's sphere of influence.  It required a mature discussion with the public.  Leadership was shown.

Now it is needed in health.  As the government's own reports show, Medicare is unsustainable in its current form.  And the revenues provided from the present mining boom provide the opportunity to structurally readjust Medicare to make it sustainable.

The establishment of superannuation-inspired Medicare health accounts where individuals contribute to saving for their health costs could be one solution.  Individual Medicare health accounts, coupled with tax cuts reflecting the reduced expenditure by government for healthcare, would enable working people to save for their healthcare throughout their lives.  Considering around a third of all health costs are incurred in a patient's final years everyone would have plenty of time to make sure they are sufficiently protected.

Of course any scheme would require equalising government contributions to ensure those who were not working, did not earn enough, or have overly burdensome health costs don't miss out.  But it would mean we were directly subsidising those who need it most, unlike the current private health insurance rebate, which is not.

What such a scheme would also do is drive competition in the health sector, which is currently an option for those in the private system, and not for those in the public system.  Using the power of competition would drive up standards in the interests of patients and would start to address the shocking information asymmetry between those who provide, and those who receive healthcare.

But most importantly it would put Medicare's universal healthcare principle on a sustainable footing.

But structurally adjusting from the unsustainable Medicare of today to a sustainable system requires mature debate led by responsible leaders.

The same leadership challenge exists if we are to reform education and move towards a system that provides choice for the rich and the poor.

Currently well off Australians buy their way out of the public health system, into independent schools, increasing their choice in values-based education as well standards.  Meanwhile, less well off Australians are trapped in a one-size-fits-all public education system where competitive pressure doesn't drive up standards and kids are locked into their local school.

Under the current system wealthier parents can even game the system by purchasing a house close to a better school than their local one, to improve the standard of education for their kids.  Poorer families cannot.  Introducing a vouchers system where education funding is tied to a student, enabling them to move between schools that increase choice for all parents and children while driving competitive pressure, requires significant structural reform.

Like in health, the leadership effort to do so would be well worth it.  But in a hotly contested political environment, doing so would require our politicians to lead us beyond our comfort zone.  That means the onus is back on us.

As the citizens whom they serve, we have a responsibility to engage in constructive discussion about future policy challenges and not to be played like a fiddle.  In many ways the leadership dilemma rests on our shoulders.

ADVERTISEMENT