Why should we join another development bank?

Over the weekend Australia announced it will be part of the initial negotiations on the Asian Infrastructure Investment Bank (AIIB).

The AIIB is a global financial institution intended to rival the World Bank and the International Monetary Fund (IMF).  The idea is that the AIIB will fund large scale infrastructure development in the region.

But if the AIIB is anything like the World Bank or IMF, then the new body is certain to be heavily politicised, bureaucratic, and imperialistic.

The AIIB is a China-led initiative, so unsurprisingly the bulk of discussion about Australia's participation in the AIIB has been filtered through a geopolitical prism.

The United States doesn't want us to join.  But then our closest, fondest ally doesn't have much diplomatic high ground to stand on here.

In Brisbane last year the US gave the Australian government a swipe when Barack Obama tried to make climate change a centrepiece of the Australian-led G20 meeting.  Obama did this against the advice of his embassy.  So after that very deliberate diplomatic jab, it's hard to see why their sensitivities about China should be our concern.

And anyway, the US is hardly working to make existing international institutions any better.  For instance, the IMF badly needs reform.  But the US Congress has a veto over any IMF reform.  That intransigence is in part why Britain signed up to the AIIB earlier in March.

Still, it's easy to understand why the United States is upset.

The establishment of the International Monetary Fund and the World Bank at the Bretton Woods conference in 1944 represented a formal shift in economic power from the United Kingdom to the United States.

Britain had a leading role under the gold standard but Word War II ended that.  After Bretton Woods, American leadership of the international economy was reflected in the role of the dollar and the country's influence over the IMF and World Bank.

Seventy years on, the United States is resisting any sense that it might have its historical role usurped by China.

But the geopolitical symbolism of the AIIB is one thing.  Whether the AIIB is a good idea is quite another.

As a general rule, we ought be very sceptical of an economic institution explicitly intended to pursue political, rather than economic, purposes.

The AIIB is part of China's Economic Belt and Silk Road program to build a regional network of infrastructure that would counterbalance the United States.

So already the AIIB is starting with political goals in mind.  Ignore whatever governance structures are imposed on the AIIB by Australia and Britain and other western participants.  The AIIB's investment decisions are almost certainly going to be made on the basis of strategic and political factors, rather than what investments are most economically viable or effective.

How do we know this?  Well, because we've had 70 years' experience with the equivalent institutions of the World Bank and IMF.

The IMF and the World Bank are inefficient and interfering and deeply politicised.  Often they create the problems they are intended to resolve.

The World Bank has the modest goal of ending extreme poverty.  To do so it finances projects in the developing world.  This 2006 US News and World Report investigation uncovered a bevy of inefficiencies, wasteful programs, accounting problems, bureaucratic featherbedding, and quasi-corrupt practices in the World Bank.  No wonder, as the economist Adam Lerrick points out, "After half a century and more than US$500 billion, there is little to show for World Bank efforts."  Unsurprisingly the World Bank wants more money.

The IMF offers financial assistance to countries in economic strife.  But that assistance comes with bureaucratic interference, as the IMF tries to reshape the country they are assisting.  Sometimes IMF reforms are worthy, sometimes they are not.  But they are always imposed as a condition of assistance, often against the democratic wishes of the people.

The anti-democratic nature of IMF intervention is made worse when it combines with the "moral hazard" created by IMF bailouts.  Domestic policymakers feel they can act recklessly because the IMF will save them if they get into trouble.

Development banks are supposed to fund projects that the private sector deem too risky.  But a project which is too risky for the private sector remains risky even once funded by a development bank.  The projects these banks fund too often fall prey to corruption and poor management.  That's why private investors don't want to get involved in the first place.

Last week the Wall Street Journal rhetorically asked, "Why does the world need another development bank?"

For China, the answer is to enhance its geopolitical influence.  The question Australia needs to ask is:  why are we getting involved?

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Why it's OK to strip foreign fighters of citizenship

Citizenship is one of the central ideas of political philosophy.  But not one most people spend a lot of time thinking about.

The Abbott Government proposes to strip Australian citizenship from dual nationals who fight for Islamic State.  (This would only apply to dual citizens as there is a strong presumption in international relations against making anybody stateless.)

And there is legislation before Parliament that would make it harder for children who have lived in Australia for 10 years to automatically qualify for citizenship.

Announcing the citizenship amendments, Parliamentary Secretary to the Minister for Communications Paul Fletcher told Parliament that, "Australian citizenship involves a commitment to this country and its people.  It is a privilege which should not be taken lightly."

Yet beyond fuzzy little nostrums about "membership" and "belonging" it's not obvious what citizenship actually means.

What principles would allow us to judge whether such legislative changes are good or bad?  Is citizenship a right or a privilege?  Who should be a citizen?  But most importantly, why?

Some countries give citizenship automatically to anybody born on their soil.  Australia doesn't.  Here you need an Australian parent too.

The word "citizenship" is absent from the Australian constitution, save an incidental, negative mention in the prohibition on foreign citizens from serving in parliament.

Legally, citizenship is an odd beast.  Citizenship is neither necessary nor sufficient for many of the most important Australian rights and privileges.

Citizenship doesn't give you an absolute right to vote.  Underage citizens can't vote, and neither can citizens who are serving a prison sentence of three or more years.

Citizenship isn't the criteria for enjoying welfare and publicly funded health.  They are protected by our laws.  Non-citizens pay taxes and have access to our courts.  Permanent residents can buy property.

Non-citizens enjoy our version of free speech — the right to political communication — and the freedom to lobby and protest.

A Senate committee roundtable last week batted around the pros and cons of putting citizenship in the Australian Constitution.  (I was one of the participants.)

The idea is that this would offer the High Court some clarity when deciding cases that concern questions of who is and isn't a citizen for legal purposes.

But if we're not clear what citizenship is, then why trust the High Court to decide?

At Federation, Australian "citizenship" was based on whether you were a British subject.  However, this worldly and cosmopolitan idea co-existed clumsily with the other, racist idea of Australianness that was manifest in the White Australia Policy.

Putting anything that reflected that idea of citizenship in the constitution would have been a disaster.

While there exists a thing called citizenship in Australian law, citizenship is really a philosophical concept not a legal one.  And it is a fuzzy concept because the idea of group membership is a fuzzy concept.

Yet, for all that fuzziness, it is central to our notions of identity and politics.

The whole point of citizenship is that it is exclusionary — it is a unique national identity, one that confers specific rights and privileges.

To adopt a nationality is not to join just any old community.  At citizenship ceremonies, new citizens transfer their identity and allegiance from the old country to their new one.

Dual citizenship sits awkwardly with even the most modern ideas of citizenship.

One argument for dual citizenship is that formally offering it is something we sell to potential migrants, making Australia an attractive destination for foreigners.

A more powerful argument is that dual citizenship is simply inevitable.  Children born to parents with different nationalities automatically receive the citizenship of both.  And we have no way of forcing other countries to strip the nationalities of those who become Australians.  We live in a complex, globalised world, etc.

Dual nationals who go to fight for the Islamic State are effectively renouncing their Australian citizenship.  Many dispose of their passports when they get to Iraq and Syria.  It would be hard to imagine a more thorough rejection of democratic values — the values that citizenship is supposed to represent — than going to wage war for a theocratic slave state.

Surely, if we were willing to deny people citizenship because they failed a trivia quiz about Don Bradman, then fighting for Islamic State is also a reasonable disqualification.

Some experts say that giving the government the power to revoke citizenship status from dual citizens makes the very idea of citizenship less valuable.  Citizenship is meaningless if it can be taken away.

But this argument confuses the legal concept of citizenship — a contingent and not particularly coherent bundle of privileges and rights — with the deeper philosophical one.

At a philosophical level, dual citizenship is a lesser form of citizenship, as it represents a less than absolute allegiance and national identity.

And just as importantly, if citizenship is most valuable as a bond between members of a political community, then treating the citizenship of those who reject the community as inviolate undermines that bond.

Fuzzy nostrums sometimes matter.  And if citizenship is to matter it has to mean something.

Simplicity in government a worthy goal

The Australian public sector has become so complex that reforms simplifying policy settings would deliver huge dividends.

Federal Treasurer Joe Hockey's suggestion that prospective first homebuyers should access their compulsory superannuation nest egg to put down a house deposit inadvertently opened up a much-needed discussion about policy complexity.  In particular, critics have sought to highlight a variety of adverse, unintended consequences that could arise if the proposal is implemented in isolation.

Economists have pointed out that a flood of new entrants seeking houses and apartments would further bid up already astronomical residential property prices.

Superannuation fund managers and political defenders of the compulsory superannuation regime, such as former Prime Minister Paul Keating, pointed out the proposal could further increase dependency upon the tax-funded Age Pension.

And, of course, the related point has been made that the Hockey proposal would undermine the compulsory superannuation objective of bolstering retirement incomes, since withdrawals would reduce compounded earnings accumulated over many years.

As a classical liberal, I find the very notion of forced savings objectionable, not least because it means policymakers paternalistically manipulate individual decisions concerning trade-offs between savings and consumption.

In forwarding his proposal, it appears Hockey instinctively understands the paternalism problem underpinning the compulsory super regime and is concerned about worsening housing affordability, especially for younger Australians.

But the critics of the super-for-house-deposit idea do have a valid point when referring to the likely counterproductive effect of the proposal upon house prices, certainly in the absence of deregulatory reform at the state and local levels to radically increase land availability.

The fundamental point to make here is that our system of government has become complex to such a degree that one-shot "silver bullet" solutions would rarely achieve their laudable objectives, if they ever did at all.

Consider all of the major policy debates in this country today, and problems arising from the complexity of large, cumbersome government invariably come to the fore.

The major political parties, regardless of their ideological persuasion, have long seen merit in promulgating a regulation "red tape reduction" agenda often involving promises to hack away at formal edicts which work at cross-purposes with each other.

Our welfare system has become notoriously complex, with the recent welfare review by Patrick McClure concluding that the 20 federal income support payments and 55 supplementary programs lead to "a system that is difficult to understand, navigate and administer."

Worryingly, the elaborate yet incoherent regime of redistributive transfers, according to McClure, "leaves recipients unsure about the potential rewards from work."

And, of course, the Australian taxation regime with its multiple taxing points imposed by different levels of government is characterised by a most hideous degree of complexity, such that it has created its own thriving industry dedicated to assisting individuals file their annual income tax returns.

In arguably the ultimate indictment of such policy complexities, the then Treasury Secretary Ken Henry confessed in 2008 that "our tax-transfer system, designed for humans, now vastly exceeds human scale".

That fiscal and regulatory arrangements at the federal level have evolved in such a complex fashion as to be incomprehensible, at least to the average taxpayer, is concerning enough.

But adding to the complexity of modern Australian government is our "marble cake federation" in which multiple levels of government intervene in similar policy areas, irrespective of codified constitutional authority, simply adding to the complexity burden we live with.

Given the sheer scale of the simplification task ahead for reformers it may not be possible to quantify the benefits, for our economy, civil society, and democracy, which could arise from reducing the degree of complexity from government intervention.

That said, the benefits to be expected in the long run would, surely, be enormous.

One of the great complaints of the business community is that the compliance costs of navigating through established political systems of fiscal rewards or punishments, and regulatory permissions or vetoes, are substantial, wasting scarce resources in the process.

Reducing policy complexities should provide a spur for market-directed entrepreneurship, innovation and productivity, since the incentives for businesses and individuals to seek favours from government would be greatly suppressed.

Crony capitalism, forged by well-resourced economic insiders using their knowledge and mastery of rhetorical arts to persuade government to discriminatorily alter policy settings, would increasingly become economically and financially infeasible pursuits.

Of course, the burdens and costs surrounding the complex nature of government intervention are not restricted to economic concerns, but extend to non-economic matters ordinarily dealt with through civil society.

So, constraining political complexity should also help invigorate civil society, not least because it would empower individuals, families and communities to deal with unique problems, and risks attached with those problems, using their localised knowledge and resources.

Simplifying the ways in which the citizen and the state interact should also ameliorate the "democratic deficit" felt amongst many Australian communities.

A less complex structure of government and public policy should catalyse an improvement in electoral trust, and a greater political focus on less complex, and preferably fewer, matters should eliminate the errors of government failure and improve competence in public administration.

Simplification of government is a highly desirable objective in its own right but we should be under no illusion that the illogical contradictions of complex government can be resolved overnight, or abolished with a simple stroke of a political executive's pen.

There is certainly a role for changing modes of regulatory setting from the prevailing political tendency of prescriptiveness, largely in overreaction to current matters of concern, towards laying down regulatory principles allowing more flexibility for people to creatively solve problems.

As discussed by Peter Schuck in his book, Why Government Fails So Often, vouching for more simple rules in a complex world should enable application and comprehension of laws more cheaply and more predictably than when regulations try to account for all of life's nuances.

Another way in which complexity could be addressed is if Australia dedicates itself to a "one issue, one government" style of federalism, in which different levels of government are assigned exclusive expenditure, taxation and regulatory responsibilities without interference from other governments.

There is also something to be said for the broader classical liberal political enterprise favouring a wholesale reduction in the size and scope of Australian government, since limited government prospectively becomes a much more coherent government.

It is true that given our political system seems naturally geared toward complexity, simplifying government will not be for the politically faint-hearted.

So the question is:  is there anybody in our political assemblies and legislatures at present up to the task?

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Less is more leaves ABC stumped

The ABC's Fran Kelly couldn't help herself on Tuesday morning when she interviewed visiting American economist Arthur Laffer on Radio National.  Not happy to simply tell her listeners who Laffer was and let him speak for himself, before he had even said a word, Kelly started the interview by describing what he was going to talk about as "whacky".  And just to make sure ABC listeners got the message Kelly later tweeted:  "Boost growth by cutting taxes to rich.  Huh?  Ex-Reagan adviser Arthur Laffer explains how @rnbreakfast."

Arthur Laffer is the author of the most famous diagram in modern economics — the Laffer curve.  It shows something simple and obvious.  When the tax rate is zero, the government will collect no revenue.  When the tax rate is 100 per cent, the government won't collect any revenue either.  The insight of Laffer and so-called "supply side economics" is that reducing the tax rate can stimulate economic activity and ultimately generate more government revenue.  Which is exactly what happened under Reagan.

Fran Kelly's reaction is not unusual.  Few things are more likely to befuddle an ABC journalist than being told lower taxes are good for economic growth.  But to be fair, given the argument for cutting taxes is made so rarely in Australia these days, it's no surprise Kelly was perplexed.  If the majority of public policy commentators in this country are calling for higher taxes, that's what the ABC will report.

The Labor Party, trade unions, the welfare lobby and government-funded think tanks certainly don't argue for lower taxes.  Nor (sadly) does the Coalition.  Worse, the Coalition raises taxes.

The Coalition's "deficit levy" on high income earners is assumed to raise $3 billion over the next four years.  Over that time Commonwealth government revenue is projected to be a total of $1710 billion.  For the sake of a 0.175 per cent difference in revenue over four years (in the scheme of things, a rounding error) the Coalition gave Australia one of the highest top marginal rates of personal income tax in the world.  The government demonstrated that in the name of "fairness" it would penalise those who already paid more than their fair share of taxes.  The Coalition can now hardly complain about how its first budget is attacked because it's "unfair'", when it was the Coalition itself that decided the budget must be "fair".

THOSE RECOMMENDING SURCHARGES "HYPOCRITICAL POLITICAL HACKS"

It's no wonder that in an interview with Jonathan Shapiro for The Australian Financial Review, Laffer said of the deficit levy:  "I'm not Australian.  I don't know enough about the country, but if that was done in my country, the people that recommended those surcharges would be hypocritical political hacks ... Rich people are different from us.  They can hire lawyers, accountants, deferred income specialists, senators ... we can't.  The one thing we know about US taxes is that whenever you raise tax rates on the rich you collect less money from them and whenever you lower tax rates on the rich, you collect more money from them."

Instead of the Abbott government arguing with the left about "fairness" — a debate the government should never have started in the first place (because "fairness" is only a code word for redistribution) — Tony Abbott and Joe Hockey should been explaining how to grow the economy.

The PM and Treasurer could do worse than study the principles for tax reform set out in Laffer's book The End of Prosperity:  How Higher Taxes Will Doom the Economy — If We Let It Happen.  The first principle is:  "When you tax something you get less of it and when you tax something less, you get more of it."  Another is:  "The higher the tax rate, the more damage to the economy and the greater the economic gain from reducing the tax rate."

Perhaps the most important of Laffer's principles for tax reform is about social justice.

"The best tax system helps make more poor people rich, not rich people poor."

Maybe the question of how tax cuts can help poor people could be the topic of conversation when Laffer is next interviewed on the ABC.  And in the meantime, a copy of The End of Prosperity is on its way to Fran Kelly.

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Communications Minister Malcolm Turnbull's metadata move will aid regulators, not security

The Abbott government has rightly focused on red tape reduction and deregulation.

But Communications Minister Malcolm Turnbull could well preside over one of the largest increases in the regulatory burden since the telecommunications market was liberalised two decades ago.

At the very moment when Turnbull seems to have cleaned up the mess that was the national broadband network, his mandatory data retention policy puts the entire competitive dynamic of the Australian telecommunications sector at stake.

Terrorism is a very real problem.  The existence of the Islamic State in Iraq and Syria has heightened the terror threat.  If there are serious gaps in our anti-terror law framework, they should be filled.  The government has spent the past six months doing so.

However, the data retention bill the government has put forward — which requires telecommunications providers to store masses of data on their customers for no other purpose than if a law enforcement agency or regulator wants to have a look at it in the future — is not a targeted anti-terror law.

ACCESS TO NEW DATA

If data retention is just for terrorism, the government could legislate to ensure it was just for terrorism.  But from what we know, both the Australian Competition and Consumer Commission and the Australian Securities and Investment Commission are likely to get access to the new data.

Indeed, over the half a decade that data retention has been debated, its most fervent advocates have been economic regulators, not counter-terror agencies.

One draft data set (even as Parliament is set to vote on the bill, we still don't know what the final data set to be retained will be) included a requirement to store records of "download volumes" for two years.  What anti-terror benefit would that add?  Download volumes would useful in copyright infringement cases.

The threat data retention poses to privacy has been widely discussed.  But data retention is, first and foremost, a new economic regulation.  So let's treat it as sceptically as we would any increase in the regulatory burden on business.

COST OF MOVE

Prime Minister Tony Abbott has said that the cost of data retention would be around $300 to $400 million, or just 1 per cent of the total revenue of the telecommunications industry.

This is a very significant amount of money.  Telcos are already some of the most highly regulated firms in the country.

Turnbull has suggested government will contribute substantially to the cost of implementing data retention.  But whether we pay for data retention through internet bills or just general taxation, we'll still pay for it.

This new burden could dramatically reshape the telecommunications sector.  All else being equal, large firms, with their well-established regulatory teams, are able to comply with new regulation much easier than small firms, which lack the economies of scale to absorb costs.

The unfortunate result of burdensome regulation is push smaller firms out of the market, reducing competition as they disappear.  Less competition will, in the long run, result in higher prices.

In the case of data retention, it isn't just size however that matters.  Some telcos have more complex networks and technologies and legacy systems — think of Telstra — for whom imposing these new requirements might be disproportionately expensive.

Turnbull and Attorney-General George Brandis claim that mandatory data retention will require telcos to store no more data than some firms do already — just store it for a bit longer.

It's not clear which firms they're referring to.  The entire industry has been up in arms about data retention.  The proposed policy is not just a minor extension of existing practice.

Nevertheless, there's a reason some telcos store data more than others.  The smallest internet service providers survive by keeping their data storage and infrastructure costs as low as possible, hoping to pull customers away from the big firms with lower prices or better service.

For the law enforcement and regulatory agencies that have spent the past six years lobbying for data retention, regulatory compliance costs are an abstract second-order issue.

But for internet users and taxpayers, who will be charged higher prices by a declining number of internet service providers, the economic effect of mandatory data retention is a big deal.

Policy retreats expose the Government's weak will

Every government budget, even the most generous, has winners and losers.  That's politics.  The interests of one group are bartered against the interests of another group.  Scarce resources meet infinite wants.

In this light, the Abbott Government's rolling series of policy retreats are a very bad sign.

How will the losers in the 2015 federal budget react now they've seen how completely the Government has caved in to those who lost in the 2014 budget?

The lesson of the last 12 months is this:  dig in your heels and eventually the Government will come around.

Last week Industry Minister Ian Macfarlane announced the latest backdown:  the Government is not going to abolish Australia's car subsidy program after all.

Exactly what Macfarlane's announcement meant was unclear for some days.  The Government has apparently decided that considering a) it can't get car subsidies legislation through the Senate, and b) the car companies have decided they're going offshore anyway, there's not much point continuing to fight.

Treasury has been briefing that the cost to the budget of this backdown will be just $100 million, not the $500 million suggested by the Adelaide Advertiser last week.

But financial cost isn't the point.

What matters is the signal it sends to any rent-seekers at risk of having their privileges taken away.  Don't give ground.  The Government will give up.

Indeed, the last few months of barnacle scraping has exposed more than a few weaknesses in the Government's hull.

The Government has been explicit that it will now defer to the Australian Medical Association on any and all reforms to Medicare, as Mike Steketee pointed out on The Drum on Thursday.

The Australian Medical Association is one of the most entrenched special interests in the country.  Abandoning the copayment is not just a huge win for them on a policy level, but a big boost for their political influence.

The Government watered down its welfare reform proposals, again in response to a "widespread backlash".

It looks to be trying to work an about-face on the proposal to change how pensions are indexed.  Never mess with pensioners.  They have real clout.

And on Monday Christopher Pyne divided the apparently indivisible relationship between research funding and university deregulation.

Imagine what these policy retreats are teaching the crossbench.

When Jacqui Lambie dug in her heals on the issue of defence force pay, the Prime Minister said he would not submit to "blackmail".  But eventually the blackmail worked.  The Government submitted earlier this month.

The Government has to negotiate with the crossbench over and over.  If something is truly non-negotiable it should stay truly non-negotiable.

Lambie, a neophyte without a party, managed to stare down the Government all by herself.

Now Canberra just waits for Lambie's next line in the sand.

But let's return to the car subsidies question, because it goes to the heart of the Government's policy approach.

When the decision to end these subsidies was announced in the May 2014 budget, it was seen as part of a trio of decisions — along with the decision not to bail out Qantas, and a similar decision not to bail out the fruit manufacturer SPC Ardmona — that defined the Abbott Government's economic philosophy.

The Government's rhetoric could have been scripted by Milton Friedman.  Recall what Abbott said when he decided against the Qantas bailout.

We do not believe in government by chequebook and we certainly don't believe in any normal circumstances that government should be playing favourites between competing private businesses.

Would the Government repeat such heady stuff today?  I doubt it.  Macfarlane sold the car subsidies announcement last week not as a temporary stay forced on the Government by a recalcitrant upper house, but as a concession to jobs and seats in South Australia and Victoria.  No room for Friedmanism there.

With the release of the Intergenerational Report a fortnight ago, the Government has finally started to spell out the fiscal problem, and why it is important to get the budget back under control.

This is work that ought to have been done by last year's Audit Commission.  Better late than never, I guess.

Yet the Government's recent decisions seem to fly in the face of that challenge, abandoning budget savings in order to chase the opinion polls.

On the one hand, the fiscal challenge has never been so great.  On the other hand, the Government's willingness to pursue tough reform has never been so brittle.

And it has shown a weakness in resolve that every special interest in the country will target when the budget comes around in May.

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A cigarette that could actually save lives

Electronic cigarettes may be the greatest tool in the fight against lung cancer that the world has ever seen.  They're cheap, convenient and they're helping smokers everywhere to quit.

And the best part about this health solution?  It doesn't involve government.

Demands for governments to identify and solve problems are a recipe for disaster.  They lead to higher taxes and less freedom.  A cure administered by the nanny state is worse than the disease.

Meanwhile, free markets are coming up with innovative ways to tackle some of our most deep-seated problems.

Take lung cancer.  According to Cancer Australia, lung cancer was responsible for 8,114 deaths in Australia in 2011.  Smoking increases the risk of cancer.  The government response is regulation, taxes, advertising and sponsorship restrictions and bans.

A better response involves opening up markets and allowing individuals to make choices about their own lives.

There are a range of cigarette substitutes already on the market.  Electronic cigarettes are the most prominent, and they're currently taking the world by storm.

E-cigarettes are battery-powered nicotine vaporisers.  They do not contain tobacco or produce smoke.  E-cigarette users inhale vapour, which produces a similar effect to smoking without the health risks caused by the carcinogenic and toxins of combustible tobacco products.

The global e-cigarette market is worth around $2 billion.  This is predicted to grow to $10 billion by 2020.  Part of the success of this new product is that it is used as a device to help traditional cigarette smokers to quit tobacco.

An article published in August 2014 in the peer-reviewed Journal of Public Health concluded that "the use of [e-cigarettes] can reduce the number of cigarettes smoked and withdrawal symptoms ..."

In an article for BMC Medicine last year, Peter Hajek of the Wolfson Institute of Preventive Medicine said:  "although there is no doubt that smokers switching to electronic cigarettes substantially reduce the risk to their health, some tobacco control activists and health organisations discourage smokers from using [e-cigarettes] and lobby policy makers to reduce [e-cigarette] use by draconian regulation."

E-cigarettes and reduced risk products should be seen for what they are — the latest in cutting-edge tobacco quitting devices.

It's against the law to sell these products by claiming they have a therapeutic benefit.  But the science is clear — e-cigarettes save lives.

The Therapeutic Goods Administration should recognise the medical benefits of these products and immediately approve their use for thousands of Australians trying to quit smoking.

Governments should be making room for life-saving innovations.  Markets for new products that allow individuals to make better choices must be allowed to flourish.

Where governments have failed the free market will succeed.

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Islamic State is destroying ideas, not just artefacts

It is characteristic of totalitarian societies that they feel they need control over the past as well as the present.

So it's hard not to see an echo of Stalin's erasure of his former comrades in the deliberate destruction of ancient artefacts and archaeological sites by the Islamic State.

The difference being that when IS bulldoze the 3000-year-old Assyrian city of Nimrud, as they reportedly did last week, they're not just trying to erase their victims' history, but humanity's history as well.

In late February the United Nations released a report describing IS persecution of Christians, Shiah Muslims and religious minorities like the Yazidis as "war crimes, crimes against humanity and possibly genocide".  IS has been murdering gay men and politically active women.  It is guilty of genocidal atrocities on a historical and savage scale.

Among this human slaughter the destruction of a few antiquities might seem like a small thing.  And of course it is.  But it still offers a revealing window into the mindset of radical Islamism.

By now everyone has seen photographs and video of IS militants smashing up statues in the Mosul museum last month.  Happily some of those were plaster replicas.  Not all were.

In the last few days IS has apparently been tearing down the ruins of the ancient Iraqi city of Hatra.

The most prominent Islamist destruction was that of the Buddhas of Bamiyan — two towering Buddha statues in Afghanistan dynamited by the Taliban in March 2001.

Obviously much of the destruction is deliberately done for Western eyes.  The destruction of the Bamiyan Buddhas was one of the rare times Afghanistan made headlines before the September 11 terrorist attacks.

The Taliban sent mixed messages about the purpose of the destruction of the Buddhas.  Some officials claimed it was done for standard iconoclastic reasons.  An Islamic state could not tolerate the image of an idol from another religion.

But a Taliban envoy to the United States offered a more prosaic, political reason:  the Buddhas were destroyed because the West was only offering aid money to restore statues rather than to prevent malnutrition.

The footage of the Mosul museum and Bamiyan Buddhas was broadcast across the world.  One Syrian anthropologist told the New York Times in February that "it's all a provocation".

And it is true that IS's iconoclastic principles don't apparently prevent them from exploiting the lucrative black market for antiquities.

Nevertheless, IS relishes its reputation for brutality and inhumanity.  That reputation is part of its recruiting strategy.  It offers foreign fighters an absolute break with, and resistance to, the Western world — an ascetic and violent Islamism that is totalitarian in the truest sense of the word.  It believes in nothing except itself.

This brutality is its reason for existence.  It is what makes the Islamic State, in its mind, the bona fide caliphate, rather than just another militant theocracy in the Middle East.

Last week two writers at the Daily Beast said we shouldn't attribute this historical destruction to "militant Islam" — lots of totalitarian states try to erase the past.

This is like saying we shouldn't blame fascism for German atrocities between 1933 and 1945.

And IS's symbolic ambitions are greater than their 20th century predecessors.  Where Hitler and Stalin sought to rewrite history, Islamist totalitarians are trying to destroy it.

Much of the destruction is taking place out of the eyes of the West.  Some we only learn about through rumours and unconfirmed reports.  For instance, a stunning Ottoman castle in the Iraqi town of Tal Afar has been destroyed — we think.  IS has been destroying Christian monasteries, Yezidi shrines and Muslim mosques, both Shiah and Sunni, with little reaction in the West.  In Mali Islamist radicals destroyed ancient libraries and tombs.

This destruction isn't just a calculating provocation for the benefit of Western audiences.  It's ideological.

Worse than those who would downplay the role of Islamist radicalism in this arc of destruction are cultural relativists that excuse it.

Take this academic paper, which condemns not the destruction of the Buddhas but "Western Civilisation's ... fundamentalist ideology of heritage preservation".  The Taliban's dynamite was just part of the back and forth of history.  Why are we so precious?  "This paper should not be read as a call for more destruction," the author says.  But, as they say, if you have to write it...

In fact, the Islamist war against artefacts and archaeology is part of a broader "cultural terrorism" being waged around the world, where the target is not an enemy but their idea of themselves.

The Charlie Hebdo killers — and all those who have threatened cartoonists and critics with murder — waged this sort of cultural terrorism as well:  attacking not just people, but ideas and symbols that speak to how we understand ourselves.  We think of ourselves as an open society, they try to close it by force.

David Hume believed that from the diversity of history we discover the "constant and universal principles of human nature".  By trying to destroy their own heritage, IS and other Islamists are trying to separate themselves from the world.

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Pay gap due to women's choices, not gender bias

It has become a fashion to mark International Women's Day each year with discussion about statistical differences between what women and men working full-time earn on average, and how this is a problem requiring urgent redress.  Much of the pay gap between women and men is influenced by the choices people make for themselves, rather than discriminatory attitudes by employers.

For the record, the most recent Australian Bureau of Statistics figures indicate that full-time male workers earn an average of $1587.40 per week, whereas women earn $298.10 less on average.

In other words, the observed gender pay gap in this country presently stands at 18.8 per cent.

For many feminists such an outcome represents an indictment, for the pay gap is often claimed to be grounded in persistent and widespread sexism by employers refusing to extend wages to women on a par with men.

But is it really the case that the pay gap is wholly attributable to gender discrimination in the labour market?

Economic theory and empirical analysis would suggest not.

It is easy to fall into the trap of thinking the average pay gap means a woman with the same qualifications as a man, with similar tastes, and doing exactly the same job will be paid 18.8 per cent less.

But that is an erroneous viewpoint, because it implicitly assumes that individual women and men are heterogeneous workers, which they are not.

Individuals have fairly extensive choice over the quantity and quality of education, skills, and work-relevant experiences they accumulate, and this human capital investment has a major bearing on observed wages earned by women and men.

Studies show that Australian girls generally perform better than boys at school, but tend to prefer enrolling in humanities tertiary courses, which subsequently pay relatively lower wages in employment, rather than the sciences, which offer higher career wages.

Some employees seek relatively higher wages for jobs which may require longer working hours or be more risky to perform, and so "compensating differentials" required by women and men to assume those jobs also influences their wage levels.

It generally appears that women tend to assume working roles which provide more pleasant and safe conditions, and which provide greater flexibility for part-time work to accommodate family responsibilities.

Numerous empirical studies, here and overseas, suggest that factors predominantly captured by observed differences in labour market choices and worker characteristics explain a significant amount, but not all, of the variation in the average gender pay gap between women and men.

And it should also be acknowledged that an undue emphasis on the average pay gap masks important, yet more subtle, wage variations between women and men.  The sorting of women and men into different occupational roles is often blamed for influencing the gender pay gap, but Australian studies have shown that women's earnings would in fact be lowered if the occupations they worked in mirrored those of men.  In other words, if women worked in jobs that men currently dominate, the women's wages would be lower across the board.

This observation is partly due to the fact that there are significant numbers of middle-class female workers in public sector and related service occupations, such as nursing and teaching, but also an ample cohort of lowly paid males in industrial occupations.

Another interesting issue relates to what extent gender pay gaps across income distribution are informed by characteristics embodied in groups of workers.  For example, researchers Juan Baron and Deborah Cobb-Clark found that the (median) gender pay gap for Australian low-paid workers is almost completely explained by variations in productive skills, but not so for those who are highly paid.

There is other interesting research in Australia and abroad examining the drivers of gender pay gaps on the basis of age, and even sexual orientation and gender identity, and further research is needed to provide meaningful interpretations of pay gaps between women and men.

Although the gender pay gap narrows once these factors are considered, these often do not fully explain the variation in the female-male pay gap.  It is argued by many researchers that the pay gap left unexplained by empirical models may be attributed, at least in part, to gender discrimination.

In Australia national equal pay legislation dictates that women performing the same duties as men should receive the same award pay rate, but that doesn't mean sexism has no effect upon labour market outcomes.  For example, young women might be deterred from studying science-related courses at university, which enable access to high-paying jobs, because of stereotypical attitudes to the effect that girls "can't do" STEM subjects at school.

But more immediate policy responses which promote economic freedom in this country could also help mitigate the effects of gender-based pay gaps on the lifetime earnings of women, partly because more competitive markets would impose greater costs on discriminating firms.

Measures promoting economic freedom, such as lowering tax burdens and deregulating the childcare sector, should also encourage more women to invest intensively in their own human capital, and help smooth transitions between work and family responsibilities.

For International Women's Day 2016 it would be ideal to avoid sensationalist, but misleading, average pay-gap statistics, and instead discuss the respective roles of attitudes, preferences, cultural norms, and policies in shaping economic and social opportunities for women.

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Super reforms: fact and fiction

The tax treatment of superannuation is coming under heavy fire, but is the criticism well placed when we are forcing people to invest funds into a compulsory super regime?

In the latest effort to design the false narrative that the federal government is suffering a "revenue problem", some analysts and commentators assert that Australia must aggressively clamp down on concessional taxes for superannuation.

The way in which superannuation is treated by tax authorities is becoming exceedingly complex, certainly from the perspective of the average Australian who, unless in exceptional circumstances, cannot access their super until retirement age.

But in general terms, taxes on superannuation are imposed, first, on pre-tax income contributed to a fund, second, on income generated from assets held in the fund, and, third, on income withdrawn from the fund.

Many Western countries tend to exempt the contributions and fund's investment income from taxation, but impose tax on the payouts received by the retiree and, often, at a tax rate equivalent to a full-time worker's marginal income tax rate.

What Australia does is fairly distinctive, in that we tax super fund contributions at a rate of 15 per cent (instead of an employee's marginal income tax rate), the earnings of super funds are taxed at 15 per cent, and people aged 60 or more are exempt from tax on payouts from the previously taxed contributions and accumulations.

Leaving aside issues such as contribution ceilings and income thresholds for tax concessions, and the tax treatment of early retirees, Australia maintains what is known as a TTE super tax arrangement, in which contributions and earnings are taxed but payouts exempt, whilst other countries apply an EET regime.

Those favouring easier revenue access for government are, first and foremost, complaining about revenue foregone because of superannuation's tax concessional treatment, using estimates from the Commonwealth Treasury's Tax Expenditures Statement as their lightning rod.

The latest Treasury statement shows the total revenue foregone from super tax concessions total $32 billion this financial year, with the major items being tax concessions upon contributions ($16 billion) and upon fund earnings ($13 billion).

It is suggested that the Commonwealth government can readily claw back super tax concessions, which are comparable to the amount of expenditures allocated to the age pension, to help plug the current budget deficit gap.

Another point of criticism directed at Australia's superannuation tax concessions are that they disproportionately favour wealthier individuals, compared with those on lower incomes and those who take more extensive spells from the workforce.

The Financial System Inquiry report, released late last year, indicated the majority of concessions accrue to the top 20 per cent of income earners.

Reflecting the increasing sensitivities toward the distribution of income and wealth in Australia evident in the public policy debate, the tax concessional treatment of superannuation is seen in some quarters, with evidently a large dose of rhetorical flourish, as a "rort" for one-percenter types.

But these criticisms of the regime, or at least the policy principles underpinning superannuation tax concessions, should not go unchallenged.

The $32 billion revenue foregone estimate associated with superannuation tax concessions appear to be at the high end of the scale, conditioned by assumptions conveying the impression of a monstrous revenue "black hole" which, in fact, may not be so severe.

When Treasury considered the removal of tax concessions would generate a behavioural response, via reduced superannuation contributions whereby voluntary contributions are directed elsewhere, that assumption reduced contributions and earnings tax concessions estimates to $27 billion.

The Treasury typically uses an income tax benchmark to estimate the cost of superannuation tax concessions, assuming contributions are taxed like any other form of income, earnings are taxed like any other form of investment, and benefits are untaxed.

But when applying an alternative tax benchmark in its Tax Expenditures Statement for the last financial year, which assumed taxed contributions at marginal rates but left earnings and benefits untaxed, Treasury estimated a very substantially lower value for the tax concessions.

It is certainly the case that higher income earners with greater income and wealth holdings are able to invest greater amounts in tax-advantaged superannuation vehicles, but given our "entangled political economy" of fiscal and regulatory interventions by government, often running at cross purposes, it is becoming difficult to credibly look at any one policy area in isolation.

Some may claim the flat tax concessional tax structure applied to superannuation might relatively advantage the wealthy, but overall Australia has a very highly progressive tax system and, despite intense political pressures to loosen targeting, a fairly robust means-testing regime for accessing social services.

The top 1 per cent of income earners, for instance, pay nearly 20 per cent of all income tax revenue, thus it should not be all that surprising that governments seem more willing to bribe those who already contribute much to the tax system with more of their own money through the super tax concessional back door.

With much of the critical focus on government policies focused more keenly on their equity implications at this time, it appears that many railing for a heavier tax load upon superannuants have overlooked the policy rationale for not taxing superannuation at the high marginal tax rates typically paid by salaried workers.

Since the Keating government, the Commonwealth has forced people to forgo higher salaries for the sake of contributing to super funds that cannot be accessed until later in life.

Given the inconveniences of this financial policy paternalism, not to mention endless superannuation policy tinkering, tax biases against long-run savings patterns, and the existence of welfare programs, there are disincentives for individuals to save even more for retirement, which would seem to justify at least some sort of concessional treatment for super.

The rates of tax applicable to super contributions and earnings serve as a role model for the lower, flatter general income tax regime that Australia should aspire to, but, in the final analysis, the concessions would not garner such political discord if we abandoned compulsory superannuation altogether.

To do so would likely increase take-home pay for workers, ease financial repression experienced by lower income earners, reduce skewness in asset holdings such as housing, help deflate a boated financial sector, and treat Australians as adults who can confidently come to their own trade-offs between consumption and savings.

Ending compulsory superannuation would be a much more durable reform than a shameless revenue grab aimed at tax-captive superannuants.

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New boss John Fraser can restore Treasury to glory

It would be wrong to call John Fraser the new head of the Commonwealth Treasury Department an "economist's economist".  Firstly, because he's not and secondly, because it would be an insult.

Unlike most economists, and unlike nearly every economist in Treasury, Fraser has some real-life experience.  He escaped the village that is Canberra.  He worked for two decades in the department and was one of its deputy secretaries but he's also spent 20 years at the global financial giant UBS, including more than 10 years in London as chairman and CEO of its asset management business, one of the world's largest investment managers.  It would be safe to assume Fraser didn't return to the public service because he needed the money.

There are other ways in which the new Treasury boss is different from the normal, run-of-the-mill economist.  Last week he declared to the Senate Economics legislation committee:  "I do not resile from the point that I do not think spending our way out of lower economic activity is the way to go."

Once, such a view was uncontroversial.  Today, practically every international economics organisation preaches the opposite.  And when Fraser said Ronald Reagan's personal and company tax cuts had "helped to reinforce the entrepreneurial spirit which is alive amongst the smaller and medium-sized businesses in the US", there were almost audible gasps from the Labor senators.

Treasury was once the most important and influential department in Canberra.  It's still the most important department.  One of Fraser's key tasks will be to restore Treasury's position as the pre-eminent source of honest and rigorous advice to government.  Some time in the past decade, Treasury ceased to be the custodian of the finances of the current and future generations and instead became a cheerleader for bigger government.

The nadir for Treasury's reputation came in 2010, when Sinclair Davidson discovered the department had cherry-picked data in an attempt to prove that countries with large stimulus packages (such as Treasury recommended for Australia) performed better during the global financial crisis than countries with smaller packages.  In fact, there was no statistically significant difference.  The previous year, then prime minister Kevin Rudd claimed Treasury modelling proved a carbon emissions trading scheme would not reduce employment in Australia.  Alex Robson later revealed the basis for Treasury's claim rested on the patently absurd assumption that an emissions trading scheme would "apply globally".

There are many reasons why the Abbott government has struggled to communicate the scale of the economic challenges facing Australia.  One is that Treasury has failed to explain the consequences to politicians and the public if the country's fiscal trajectory does not change.  The overwhelming sentiment among modern-day Treasury economists is that Australia is not Greece and never will be, so there isn't too much to worry about.  The 2015 intergenerational report released on Thursday does explain the consequences.  The report identifies that under what it calls the "previous policy" scenario (ie the previous Labor government's policies), government debt would within 40 years be more than 120 per cent of gross domestic product.  Currently it's 15 per cent of GDP.

Fraser understands the consequences of Australia potentially having a debt bigger than the size of its economy.  He has a first-class honours degree in economics — and he's honest.  Arguably the most important attribute any adviser to government is honesty.  During the Senate committee hearing, when Coalition senator Matt Canavan asked about the impact on the exchange rate of fiscal consolidation, Fraser replied he didn't know and said there was "a Himalayan mountain of books written about that issue".

The point he was making was that on many of the big issues in economics there's no right or wrong answer — there are just opinions.  Economics is the study of human behaviour.  What we call "the economy" is in fact just the bundling together of the myriad of decisions that every individual makes every day.  Economics is not a science and never can be.

There are lots of smart economists but only the most intelligent of them have the intellectual honesty to admit that not even economists have the answer to every question.

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Meet the man who could change the budget

No Australian bureaucrat is as influential — intellectually as well as politically — as the Secretary of the Treasury.

Under the Rudd government Ken Henry was a de facto minister.  And think of John Stone, Sir Frederick Wheeler, Sir Roland Wilson.  Every word they said was a synonym for authority.

So we probably should have all paid more attention to the new Treasury Secretary's political debut last week.

Especially considering that, ultimately, the Abbott Government will live or die on the performance of its next budget — something the secretary is responsible for designing.

John Fraser, a former asset manager and public servant, became Treasury Secretary in January this year.  On Wednesday he had his first appearance at Senate estimates and on Friday he gave his first major speech, to the Committee for Economic Development of Australia.

What he said was significant.  Let's start with his approach to stimulus — particularly important given rumours and reports of a need to prop up the economy with some government spending in 2015.

You probably remember that at the height of the Global Financial Crisis Ken Henry came up with a simple slogan for Labor's enormous stimulus package:  "Go hard, go early, go households."

At estimates last Wednesday, John Fraser had an entirely different perspective on radical stimulus:  "I approach fiscal stimulus in whatever circumstances with a great deal of care."

While he declined to directly criticise the previous government's damn the torpedos! approach, Fraser wondered aloud about the economic models that justified fiscal stimulus decisions.

And he argued that the decision to stimulate had to take into account the productive capacity of the economy.  This is a subtle point, but it is one that indicates that the secretary might want to shift focus from the demand side of the economic equation to the supply side.

Ken Henry's stimulus advocacy was the result of a shift in thinking within Treasury that had begun in a series of secret workshops in 2004.

So the question is whether John Fraser's comments will represent a shift the other direction:  away from Keynesian demand management and towards a focus on production and supply.

If so, then we're in for some interesting times.

In December I pointed out that Joe Hockey's rhetoric had taken a very Keynesian turn.  The budget is now seen as a "shock absorber" for the economy.  Hockey's been saying that the economy is far too weak for any substantial cuts to the budget — and playing down any return to surplus any time soon.

Fraser seems by disposition and argument unsympathetic to this sort of orthodox crude-Keynesianism.  In his Friday speech he said repairing the budget was "an immediate priority".

He rejected the idea that the economy could grow the budget back to surplus in the short term — the policy settings had to be changed.  He told estimates that "I do not like public debt".

He made it clear that the budget's problem is just as much on the expenditure side as the revenue side.

In fact, he praised Ronald Reagan's tax cuts for having "helped to reinforce the entrepreneurial spirit" of the United States.  (Although he was less complimentary about Reagan's overall fiscal position.)

And finally he rejected the International Monetary Fund's claims that "austerity" had done more damage than good, by pointing out that the IMF had no monopoly on good advice.

You might say these claims would be very amenable to the Government.  After all, the 2014 budget was in theory all about cutting expenditure, and Tony Abbott has long said he wants to deliver tax cuts by the end of his first term.

But Abbott and his Treasurer have been backing away from the small government fiscal policy Fraser advocated last week.

At the National Press Club last month the Prime Minister said that "because we have done much of the hard work already, we won't need to protect the Commonwealth budget at the expense of the household budget."

Social Services Minister Scott Morrison is apparently seeking more funds for social services like childcare from the budget.  It's all very Howard-era middle class welfare.

And those promised tax cuts are reportedly off the table, according to the Australian Financial Review.

This makes Fraser's staunch defence of the Government's previous agenda very important.  What would Reagan say to the Great Budget Backdown?

Under Fraser's supervision, the 2015 federal budget could look very different to what it might have looked like under previous Treasury management.

Because the Treasury view of the world matters.

The department has a reputation for both stubbornness and intellectual dominance of the political agenda.  Patrick Weller once wrote of Treasury:

Giving the advice it considers to be correct, regardless of the known policy preferences of minister, indeed, sometimes sticking to those views long after an alternative strategy has been adopted by a government.

Elected politicians have fought for and against the so-called "Treasury line" since the department came into prominence in the 1930s.

Right now, the Abbott Government is understandably gun-shy.  But with a deteriorating economy, it's not clear they can afford to be.

It looked like the Abbott Government was all set for a status quo budget that abandoned the project of fiscal repair.  Here's hoping Fraser can be a strong force against reform lethargy.

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Curbing free speech would deprive us of powerful tool to wield against Islamist radicalism

Tony Abbott was right about the significance of the massacre at the satirical magazine Charlie Hebdo when it happened in January.

"Freedom of expression is the cornerstone of a free society," the Prime Minister said.  "From time to time people will be upset, offended, insulted, humiliated ... but it is all part of a free society".  He praised the cover illustration of the next Charlie Hebdo edition, which depicted Muhammad crying.  "I believe in free speech.  I absolutely believe in free speech."

These were powerful, important sentiments.  They were a recognition of the threat of Islamist terror to our basic liberties, a threat which we saw manifest in the Danish cartoons crisis of 2006, the murder of the Dutch filmmaker Theo van Gogh, and the fatwa which led to Salman Rushdie's decade in hiding.  Abbott offered them at a moment when they were most needed.

But fast-forward to last Monday, and a central part of the government's national security strategy is to boost laws against speech that is "vilifying, intimidating or inciting hatred".  The government wants to crack down on hate preachers.

So is free speech inviolate, a liberty that needs to be defended as fundamental to civilisation and democracy?  Or must it be restricted for the fight against terrorism?

To understand some of the ructions within the Liberal Party right now, look no further than the government's back and forth on freedom of speech.  The government is struggling with itself on the very idea of liberty.

The Coalition came to power declaring it would pursue a "freedom agenda".  It would be "freedom's bulwark" against a Labor Party that, under Julia Gillard, had attempted to control and regulate the free press.

And the Coalition promised to repeal, at least in part, section 18C of the Racial Discrimination Act, the law which makes it unlawful to offend or insult someone on the basis of their ethnicity, and the law which Andrew Bolt was found to have breached in 2011.

Section 18C is hardly the only anti-speech law on the books, but it is an iconic one, and was used against the country's most prominent conservative commentator.  For many Liberals, Liberal MPs and those on the right of centre, the 18C promise became a symbol of a reinvigorated, confident liberalism.

Yet over the past six months the Prime Minister has been saying that, in the light of the real threat of terrorism, the balance between liberty and security must tilt further towards security.

This is a false choice.

None of have us the liberty to kill, plot to kill, or incite killing.  Preventing and punishing murder is no restraint on freedom.  The problem comes when the government proposes to do much more than just enforce the law.  Like when it proposes to criminalise non-inciting speech.  Like when it proposes to invade everybody's privacy with mandatory data retention — not just the privacy of those suspected of a crime.

Much of the Abbott government's earlier national security legislation was necessary and important, particularly the elements that cracked down on foreign fighters.  The government now proposes to strip dual citizenship from those who go to fight for Islamic State.

At the same time those necessary legislative changes have been mixed in with some extraordinary overreach.  A bill passed in October means journalists who report on "special intelligence operations" could go to jail for 10 years.  Another bill passed that month made it a crime to advocate ("counsel, promote, encourage, or urge") terrorism.  But incitement to violence has always been illegal.  And there have been laws against advocating terrorism on the books for a decade.

Any law that the government might write to target hate preachers will — almost inevitably — expand to encompass other speech.  The government clearly wants to make it illegal to say things like "Osama bin Laden was a hero".  Any legislation that did so would also criminalise the other ideas too.  One current darling of the academy, the shock philosopher Slavoj Žižek, praises the terrors of Mao, Lenin and Robespierre.

Such speech is distasteful and disgraceful, yes.  It shouldn't be illegal.

Legislative mission creep happens.  For instance, when section 18C was first introduced in 1994, its advocates said it had a strict and narrow purpose.  A piece published in The Age in November that year by Colin Rubenstein and Michael Kapel claimed it was only targeted at "the skinhead on the street yelling racist names and other insults at an Asian man, or a woman in traditional Islamic dress, not newspaper articles or anti-immigration pamphlets".  That has not turned out to be the case.

When he announced that they were abandoning section 18C reforms last year, the Prime Minister said it was because the whole thing had become "a complication" when dealing with Australia's Muslim community.  Labor's fear campaign against the proposed changes had worked.

Yet last Monday Abbott criticised Australia's Muslim leaders, wondering why they weren't speaking up against terrorism themselves.  He told them to police their own communities with the proposed anti-hate speech laws.

Which raises the question — does the government think the war against terror requires us to comfort or to confront the Muslim community?

Abbott's instincts after the Charlie Hebdo atrocity were right.  Free speech is a liberty we have to protect, and it is a powerful tool to wield against Islamist radicalism.  Why does he now think it is a weakness?