Workplace Relations from Keating to Howard: The Case for Further Reform

An Address delivered in Melbourne
Tuesday, 20 September 2005

The Labor party and the union movement would have you believe that the Government's proposed reforms to our workplaces are a revolution -- the product of ideological zealots.

What they don't tell you is that these reforms are the third stage of a deliberate change that has been going on for 12 years now;  an evolutionary process from compulsory arbitration to agreement making at the workplace level, which was started by Paul Keating in 1993 and accelerated by the Howard Government in 1996;  a third stage which will, in effect, seek to complete the model of industrial relations spelt out by Paul Keating and Laurie Brereton 12 years ago.

What they don't tell you is that these 12 years of changes have merely sought to give practical effect to the reality that had been slowly emerging on the ground, in the workplace through the 1980's and early 90's, in defiance of heavy-handed government regulation, in defiance of the Conciliation and Arbitration Commission's paternalism and in defiance of union abuse of its monopoly position in the industrial arena.

What they don't tell you is that the proposed workplace reforms merely seek to give every workplace the opportunity that has already been grasped by some of our companies, to the great benefit of those companies, and our national economy.

A CASE STUDY -- RIO TINTO

Rio Tinto, and its 10,000 strong workforce across Australia, is one such company.

I recently had the opportunity to tour the Pilbara region to look over Rio's Tinto's Pilbara Iron operations (formerly known as Hamersley Iron).

The success of those operations has contributed significantly to Australia's recent economic performance, but it was not always this way.

Although mineral resource prices are enjoying good times at the moment, even as recently as 2002, resource prices were at extremely low levels.  For example, iron ore prices had declined steadily for the last 30 years.

Underpinning Rio Tinto's ability to cope with the bad times was its significantly increased productivity.  In 1986, Rio Tinto produced 10,000 tonnes of ore per full-time employee;  in 2004, Rio Tinto produced 41,000 tonnes of ore per full-time employee -- a four-fold increase in productivity in under 20 years.  Such a turnaround is a remarkable by anyone's measure.

And it came just in time.

The development of the Pilbara iron ore industry in the 1960s, in response to the needs of Japanese industry, was an extraordinary feat in which the industry can take pride.

It is harder to be proud of what happened in subsequent years.

It is true that more mines were built, and that export tonnages rose.  However, the industrial relations record of the Pilbara deteriorated steadily over the next 25 years until the Pilbara joined the national coal industry in setting records for inflexible work practices, duplication, inflated costs and days lost.

Any productivity gains which were made came largely from economies of scale.  All too often, squeezing out extra tonnes involved throwing capital at problems that were the result of an antagonistic industrial culture.

Strikes and stoppages could be triggered by turf wars between unions, by ideological crusades that had little to do with employees, and by trivial and spiteful claims such as having insufficient varieties of ice cream in the canteen.

Underlying this disruption was the union belief that the aims of employer and employee could not coincide.  This credo dictates that an employee's first loyalty must always be to his or her union.

The result was the gradual destruction of Australia's record of being a reliable iron ore supplier.  All too often, our supply was interrupted, and Japanese steel mills began to encourage other suppliers.

In the mid eighties, the Brazilians developed their massive, high grade iron ore deposit at Carajas.  Exports began in 1986, and the distance from Japanese ports was more than offset by the steel producers' desire for security of supply.

Over the next two years, Australian iron ore shipments declined.

Rio Tinto sent a group of its managers, employees and union officials to Brazil to see the nature of the threat they faced.  However, on their return, their message fell on deaf ears, and Hamersley Iron's fortunes continued to wane.

In desperation, in 1993-94, Rio Tinto introduced an "all staff" workforce -- where traditional "wage" employees were provided with the same benefits as their "staff" counterparts in management.  This change was facilitated by offering all miners individual contracts under industrial legislation recently passed by the Court Government.

The new approach sought to wipe out distinctions between management and employees -- to bridge that historic gap and demonstrate that everyone's fortunes were linked to that of the business or enterprise.

By 2005, this approach has led to increased employee benefits, such as generous superannuation and share saving schemes, and an incentive program linked to business results, which is applied across all employees at Pilbara Iron.

Predictably, when "all Staff" was introduced, the unions opposed it tooth and nail, and the AIRC did its utmost to frustrate the move.  But the workforce voted with its feet, and almost unanimously accepted individual contracts.  Since 1995, no Pilbara Iron operation has lost a day to industrial disputation.  This turnaround in industrial relations is simply breathtaking.

The deal struck provided mutual benefits.

For the staff, it included more money, more time off, more flexibility in taking time off, and a safer, more harmonious workplace.

For the company, it meant greater flexibility, cost control and productivity -- and being able to win back the regard and trust of customers.

While I toured one of the mines, I was driven in a 240 tonne tipper truck with an employee who had worked on the site for 28 years.  I asked "What is the main difference between 1990 and today?"  He answered "Today, we talk".  That's all.

His response encapsulated exactly what enterprise bargaining is all about.  Workplace issues are discussed between supervisors and workers on a daily basis, and dealt with so that they don't become problems.

A key factor in the success of "all staff" is that all employees feel aligned with the business and are proud to see it succeed.  This is important, because for supervisors and management it is no longer a matter of being limited to meeting legal obligations, but rather -- caring about the people you work with and ensuring that people get a "fair go" and are treated as you would want to be treated yourself.

For its part, management has had to learn to "talk" meaningfully to their workforce and deal directly and effectively with workplace issues.  It has removed the "them and us" mentality (and reality) of the workplace.

In the absence of a self-interested wedge being driven between employer and employee, parties, even ones which had a long history of animosity and industrial warfare, were able to discuss, and agree on, a good deal for both sides.

Opponents of individual agreements with employees consistently raise two assertions about the effect of these deals.  Firstly, they argue that safety will suffer as a result of relaxed workplace regulation, and secondly, that the most marginalised members of the community will be exploited.

Contrary to these assertions made about the effects of enterprise bargaining, at the same time as the workplace was made more flexible and efficient, employee safety has increased.  In fact, the number of days lost due to injury has decreased five-fold, and the safety culture is so strong that all employees are empowered to stop doing something that they consider unsafe with the theme "if it is not safe, don't do it that way".  Not only this, but now Rio Tinto is also one of the country's best employers of one of the most marginalised groups in this nation -- aboriginals.

Without the industrial relations breakthrough of miners on individual workplace agreements, it is doubtful that Rio Tinto could have committed $1.9 billion to expanding its port, rail and mine investments to take advantage of China's economic boom.  Moreover, the considerable existing investment in physical and social infrastructure could quite easily have deteriorated in the face of competition from more dynamic overseas competitors.

In short, the whole community has benefited from Rio Tinto's decision, in the face of sustained and powerful opposition, to communicate directly with its employees and reach agreement for mutual benefit.  There is one exception.  The union movement, which violently opposed these reforms, has suffered a decline in membership from well over half of the workforce in the 1990s to almost zero today.

THE LESSONS FROM RIO TINTO

The Rio Tinto experience provides a 25 year window into the depths we have been to, and the heights we can reach, in every workplace across Australia.

The Rio Tinto experience shows the remarkable evolution that has begun to seriously take hold in the way we approach workplace relations in Australia -- the move to negotiating genuine agreements at a workplace level which best meets the peculiar needs of that workplace and those employees.

The Rio Tinto experience shows the fear of further evolutionary change is misplaced, and that scaremongering about further reform is working against the interests of all Australians.

The Rio Tinto experience provides indisputable evidence that strong business performance is linked to understanding and accommodating the personal and varying needs of individual members of your workforce;  it showcases the benefits of treating your employees as you would like to be treated yourself.

The Rio Tinto experience provides a blueprint for continuing the strong growth in the economy, continuing the growth in jobs and take home pay and continuing the low interest rate environment that has prevailed for nearly a decade now.

Rio Tinto is not a one-off example -- the positive experiences which Rio Tinto has experienced -- higher wages, higher productivity and improved safety -- are repeated across the mining sector. ⁽¹⁾  It is not surprising that the mining sector has the highest penetration of Australian Workplace Agreements (AWAs) of any industry. ⁽²⁾

THE LEAD-UP TO WORKPLACE REFORM

Rio Tinto's success forms the backdrop to over 20 years of change -- an inevitable progression towards agreement making at the workplace level.

Let me trace some of the background to the emergence of agreement making in the workplace.

The 1970's saw a dramatic change in Australia's economic paradigm.  The market rigidities characterising post-war economic policy were exposed to external shocks, and our protected inward looking economy could not cope.

The folly of heavy market regulation was exposed.

It was recognised by business people and economists the world over that the world was changing, the world was globalising and, in order to achieve sustainable economic growth, competition needed to be encouraged, government interference limited, monopolies eliminated.

Critical to achieving these goals was the deregulation of markets.  In the 1980's, the Hawke Government, with the full cooperation of the Coalition parties in the Senate, deregulated substantial tracts of our economy.  Australia deregulated the financial sector, floated the Australian dollar, lowered tariffs and subsidies and relaxed restrictions on foreign investment.

Yet, to placate a sceptical and hostile union movement, the Hawke Government went the other way and further regulated and centralised the labour market, under the early Accords.  Accord Mark I had, as its central tenet, "emphasis on a central mechanism for wage determination based on the Australian Conciliation and Arbitration Commission". ⁽³⁾

The system that Bob Hawke re-introduced was one with which he was familiar as an industrial advocate during the 1950s and 1960s.  The "idea" of the post WWII system was that "national" productivity would be distributed "fairly" through national wage increases.

Of course, it did nothing of the sort.  Productivity is not "national".  It is generated personally or, at best, at the enterprise or workplace level.  Centralised wage determination took from those who worked productively and gave to those who did not, discouraging the potentially productive from doing anything more than necessary.

Rather than the productive or the innovative being rewarded, it was the industrially strong who received the dividends of the centralised system.

Under the Accord Mark I, wages were set centrally and tied to rises in prices.  The certainty of wages linked to CPI, brought immediate and serious wage-price spiral pressures.  The combination of deregulation in some sectors in the economy but greater regulation in the labour market was unsustainable and the Accord system went through several rebirths.

Concurrent with the introduction of the Accord, the Hawke Government commissioned a report on the industrial relations system, commonly referred to as the Hancock Report, ⁽⁴⁾ handed down in April 1985.  Despite exploring enterprise level bargaining as a viable alternative, its findings were expectedly conservative.  The Hancock Report found it could not reach any firm conclusion about the consequences:

"which might exist under an alternative system relying more heavily upon collective bargaining" ⁽⁵⁾

In other words, the much heralded Hancock Report sat on the fence in the interests of preserving the status quo, in the interests of preserving the power of the few who sought to dictate all that went on in every workplace across the country, including the setting of wages.

Although enterprise bargaining was formally sidelined by the Hancock Report, the market continued to force the issue.  It was being recognised that tying wage increases to productivity at the workplace was fundamental to achieving sustainable growth.

The Hawke Government did his best to head of this threat to the system, telling the Business Council of Australia that enterprise bargaining would be introduced "over my dead body".

In the end, politically speaking, he was right.

The Hawke Government and the ACTU realised that the Hancock "do nothing" response was not sufficient to save the system, and introduced another twist.  According to them, the productivity problem was not caused by the centralised system nor was it to be fixed by enterprise bargaining.  In fact, the problem was too many unions, not enough training and an award structure that failed to allow for career progression.

Backed by the "thinking" contained in the ex-communist Laurie Carmichael's 1987 manifesto, "Australia Reconstructed", the Hawke Government and ACTU tried to re-invigorate the centralised system by re-working classifications, linking wage rates to the mythical "C10" metalworker and forcing unions to amalgamate.

While policy debate between the experts raged, something more fundamental was happening at the workplace level.

Unconcerned with politics, the market began to vote with its feet.

In the face of sustained, and often vicious opposition from the union movement, and in spite of the significant institutionalised barriers facing early moves towards enterprise bargaining, employers and employees forced the issue in a number of monumental struggles to prevent the centralised system dictating the workforces every move.

Seminal disputes such as Wide Combs, Mudginberri and Dollar Sweets showed that employers, and employees, were serious about determining their own fate, and placed ever mounting pressure on the government and the institutions controlling their fate to give them the power to choose their own destiny.

Finally this pressure came to a head and, in 1987, Accord Mark III was introduced by the AIRC's National Wage Case. ⁽⁶⁾

This decision introduced a second tier of wage increases dependant on enterprises achieving equivalent productivity offsets, and Australia got its first taste of enterprise level bargaining.  However, this link between wage increases and productivity was abandoned the following year under Accord Mark IV ⁽⁷⁾ in favour of award restructuring, as it was recognised that enterprise or workplace bargaining in the existing overly prescriptive award system was unworkable. ⁽⁸⁾

In 1989, as negotiations for the new Accord teetered on the brink of collapsing, Paul Keating threatened to introduce pay increases on an enterprise by enterprise basis. ⁽⁹⁾

This threat was not carried through, but the cries for some move to enterprise bargaining grew as labour market rigidity persisted.

In 1989 the Business Council Bulletin noted of the system:

"What we have developed in Australia is an industrial relations system in which the trade unions have too much scope to exert industrial muscle, employers have too little incentive to resist, the structure of unions and awards speeds up the transmission of wage pressures and there is no power with the tribunals to ensure observance and enforcement of awards.  We have a system almost 'designed' to impair productivity and to abort growth at regular intervals." ⁽¹⁰⁾

Eventually the balloon burst.

The onset of the "recession we had to have" gave impetus to the restructure that we should have had.

In October 1991, the AIRC handed down a supplementary National Wage Case decision, ⁽¹¹⁾ endorsing en masse enterprise level bargaining and establishing principles for the certification of agreements.

The requirements laid down by the AIRC in late 1991 resemble many of the present requirements for certification of an enterprise agreement, and this decision is widely accepted, for formal purposes, as the commencement of enterprise bargaining in Australia. ⁽¹²⁾, ⁽¹³⁾  The AIRC was a reluctant convert and did its best to neuter enterprise bargaining from the start.

In 1992, the legislative underpinning for certified agreements was beefed-up by the Industrial Relations Legislation Amendment Act 1992 and enterprise level bargaining was firmly placed in the public spotlight.

However, the 1992 amendments gave significant discretion to the AIRC to refuse certification "in the public interest" where the agreement related to only one enterprise ⁽¹⁴⁾ and did not permit employee-employer bargaining, leading to trepidation from employers lifting their heads above the trench.

KEATING'S 1993 REFORMS -- THE
FIRST STAGE IN WORKPLACE BARGAINING

When Paul Keating was re-elected in 1993, he sought to implement the substantive steps towards the decentralisation of wage determination -- and move towards agreements setting terms and conditions at an enterprise or workplace level.

On 21 April 1993, Paul Keating addressed the Institute of Company Directors and outlined his vision for the new Australian labour market:

"let me describe the model of industrial relations we are working towards.  It is a model which places primary emphasis on bargaining at the workplace level within a framework of minimum standards ... Over time the safety net would inevitably become simpler.  We would have fewer awards, with fewer clauses ... We need to find a way of extending the coverage of agreements from being addons to awards ... to being full substitutes for awards."

Not long after that, in true form, the ACTU nobbled Mr Keating's vision for the modern workplace.

When Mr Keating's initiatives were introduced in Parliament, they were a watered down version of Mr Keating's grand vision for workplace reform.  However, despite the ACTU's objections, Mr Keating's Industrial Relations Act 1993 introduced, for the first time, as the primary object of the Act:

"Encouraging and facilitating the making of agreements, between the parties involved in industrial relations, to determine matters pertaining to the relationship between employers and employees, particularly at the enterprise or workplace level" (emphasis added) ⁽¹⁵⁾

The reforms introduced two streams of agreement making.

The first agreements, known as "certified agreements", were available to employers who were involved in a dispute under a federal or state award, and required union agreement.  These agreements were little more than an institutionalised endorsement of earlier practices, albeit that the requirement to prove that such an agreement was not contrary to the public interest was removed.

However, the second stream of agreement making, known as "enterprise flexibility agreements" broke new ground. ⁽¹⁶⁾  For the first time, legislation enabled employers to override the award system by reaching agreement with a group of its employees without union involvement. ⁽¹⁷⁾

Even though workplace reform had commenced in earnest, significant roadblocks impeded employers reaching agreement -- unions were entitled to intervene in any agreement which came into their purview, ⁽¹⁹⁾ and the Commission had the discretion to refuse to approve the agreement where the employer had not notified all relevant unions of their intention to negotiate with employees , and the requirement to bargain in "good faith" permitted the union movement to exercise substantial control over the process.

These legislative provisions, with the aid of a complicit AIRC, meant the union movement was able to exercise substantial control over the process.  Moreover, the AIRC did its best to stopping the spread of the Rio Tinto, direct dealing model.

In a series of cases, during the early to mid 1990s, involving managers from Rio Tinto's Western Australian operations, the AIRC denied the benefit of staff arrangements to the blue collar workforces in Rio Tinto's alumina businesses, despite the direct experience of the benefits that could be won by breaking down the false distinction between "award" and "other" employees.

A decision in November 1995 by a Full Bench of the Commission summed up this attitude:

"On the matter of staff contracts and the role of unions in the collective bargaining process a Full Bench of the Commission in a decision affecting a CRA subsidiary company operating the Bell Bay Aluminium Smelter came to the following conclusions which we endorse:

"The establishment of conditions of employment at an enterprise level through a system of individual contracts between a company and each of its employees is one at variance with our system of industrial relations, a system which, since its inception, has been based upon collective processes as the means of providing terms and conditions of employment at the workplace.  The present IR Act is based on a system of collective regulation in which registered organisations of employers and employees acting as parties principal are an integral part of the collective processes which operate under the Act.

The company's actions in deliberately seeking to eliminate the role of the unions at the workplace through the establishment of individual staff contracts, is inconsistent with the central role that registered organisations are given under the IR Act, in the prevention and settlement of industrial disputes.  The Commission has a statutory obligation to encourage registered organisations [s.3(e)]." ⁽²⁰⁾

In addition to legislative and institutional road-blocks, the processes underpinning agreement making were arcane and inaccessible to the average employer.

Even where the employer was able to decipher an award, the approach taken to interpreting the "no-disadvantage test" meant that various contingent liabilities and benefits in awards needed to be addressed with such certainty that it was virtually impossible to draft an agreement without referring back to an award, and most awards were hundreds of pages long.

For most employers, it effectively eliminated their ability to bargain directly with their employees, and if they did, the agreements amounted to little more than awards with add-ons.

Over the working life of the legislation (about two years) just 261 enterprise flexibility agreements were approved covering only 23,200 employees. ⁽²¹⁾  These statistics indicate that the legislation failed to provide a real alternative to awards for employers other than those with large, unionised workforces.

This first foray into enterprise bargaining was little more than a vehicle for unions to place further demands on employers, and provided them with a second bite at the cherry -- when award level negotiations did not achieve their goals, then enterprise bargaining provided another alternative.

Some inroads were made into industry level wage determination, but the difficulties in negotiating, drafting and approving agreements affected the take-up rate of agreements, meaning that the true benefits of enterprise bargaining -- productivity based bargaining and the simplification of awards and industrial regulation -- were compromised.

Nevertheless, Mr Keating's reforms and the success of individual contracts under State legislation gave the broader business community a sniff of the benefits associated with agreements at the enterprise level. ⁽²²⁾

THE SECOND ROUND -- THE WORKPLACE RELATIONS ACT 1996

When elected in early 1996, one of the first priorities of the coalition government, which had supported Mr Keating's initial round of changes, was to seek to give full effect to the model outlined in Mr Keating's 1993 speech to the Institute of Company Directors.

These changes included reducing the scope for third parties to interfere in agreement making, clarifying where responsibility lay in this process.  Awards were simplified, limiting their ability to regulate all aspects of the workplace.  A broader range of agreements was made available, with provisions for the first time for agreements between individual employees and their employer, and agreement-making was made more attractive and accessible.

So far as industrial action was concerned, s127 was inserted into the Workplace Relations Act 1996 (WRA) to prevent unlawful industrial action and sections 45D and 45E were reintroduced into the Trade Practices Act 1974 to prevent unlawful boycott conduct.

Once enacted, the WRA clearly reflected the Government's desire to move agreement making to the forefront of industrial regulation, with the object of:

"Ensuring that the primary responsibility for determining matters affecting the relations between employers and employees rests with the employer and employees at the workplace or enterprise level" ⁽²³⁾

At the heart of these reforms was continuing the move away from compulsory arbitration and towards agreement making at the workplace level.

This was attempted, partly, by the introduction of two new streams of agreement making -- the ability of an employer to negotiate directly with their employees, either collectively or individually, largely free from third party interference (other than the Commission in the case of collective agreements), unless that was the wish of the employees affected.

In collective agreements, the requirement to notify all relevant unions prior to negotiations commencing was removed, and union interference was only permitted in the process where an employee actually requested their presence. ⁽²⁴⁾  Furthermore, the requirement to bargain "in good faith" was removed, as was the double-standard for certification (at least statutorily). ⁽²⁵⁾

Easily the most controversial amendment from a union point of view was the introduction of AWAs, which allowed, for the first time at a federal level, employers to make individual agreements with their employees.  The introduction of AWAs was bitterly opposed by Labor and the ACTU.

In addition to permitting individual employers and employees to reach agreement, AWAs introduced another significant innovation to the industrial landscape.  For the first time, the approval of agreements was to be conducted by a bureaucratic process through the Office of the Employment Advocate rather than the adversarial, and sometimes arbitrary, processes of the AIRC.

The Government's 1996 reforms also made it easier for flexible, family-friendly practices to be introduced at the workplace.  About 83 percent of federally certified agreements now contain at least one family-friendly provision such as carers' leave, part-time work or time-off in lieu, and a third of these have three or more family friendly provisions.  By contrast, the union backed award system has persisted with provisions which deliberately hinder family-friendly practices, such as persisting with bans on part-time work, despite the disproportionate influence on women seeking to balance work and family. ⁽²⁶⁾

Without a majority in the Senate, and with weak leadership of the Labor party, the scope of these reforms was hindered.  The WRA as passed by the Senate contained a number of modifications limiting the effectiveness of the Coalition's reforms.

The reality of political necessity meant that the WRA as passed limited the effective uptake of agreement making by employers.  The principal limitation was the forced retention by the Senate of the no-disadvantage test, which has continued to be used by the Commission and the unions alike to frustrate and severely complicate agreement making, both at the workplace and the individual level.

Firstly, although awards were "simplified" to 20 allowable matters, this process was lengthy and adversarial and, even though "simplified", awards were still considerable documents, typically 100-300 pages of unintelligible legal jargon.

Parties wishing to enter into an agreement still faced the additional costs in the drafting of the agreement and the uncertainty in having their agreements endorsed, and the prospect of agreements fully replacing awards was, in most cases, thwarted.

Secondly, where agreements were made with award free employees, the designation of an award for the purposes of the no-disadvantage test for award-free employees, such as some salespeople and some management employees, meant that in order for an employer to "simplify" their existing employment arrangements, they were required to pick-up all the baggage associated with the designated award.

Despite these shortcomings, the WRA proved to be far more successful that its predecessor and took Australia another significant step forward towards genuine and simple agreement making.  Productivity benefits flowed.

In 1997, the first year of operation of the WRA, there were 1441 union agreements covering 335,986 employees, and 278 non-union agreements covering 30,008 employees.  In 2004, there were 10,906 union agreements covering 1,247,102 employees and 2,988 non-union agreements covering 169,559 employees. ⁽²⁷⁾

These figures are demonstrative of greatly increasing the accessibility of workplace level agreements, however, they still tend to be focussed in large to medium enterprises.

As at 31 August 2005, a total of 744,966 AWAs had been approved by the Office of the Employment Advocate, across 14,768 employers since the 1996 reforms were implemented.  478,194 (or 64%) of all approved AWAs were approved in the last three years.  However, despite employing 50% of the workforce, small business represents only 15% of the AWAs being approved. ⁽²⁸⁾

Importantly, the creation of AWAs meant that when the Gallop Labor Government removed the right to individual contracts under WA legislation, Rio Tinto, and others, were able to offer their workforce federal AWAs, and avoid a return to the divisive award based system.

What these figures suggest is that although the 1996 reforms have made workplace agreement making accessible to many more businesses, there is still a significant way to go before agreement making is accessible for all employers.

THE EFFECTS OF THE REFORMS

It is widely recognised that this progressive introduction of flexibility into individual workplaces has been one critical factor underpinning the resilience and growth of the Australian economy over the last decade.

In the last ten years these reforms, in combination with other reforms, have led to 1.6 million new jobs being created, the lowest level of unemployment in 29 years, and the lowest level of long term unemployment in 19 years, take home pay increasing by 14.9% more than inflation, and low interest rates.  Importantly, the collaborative nature of workplaces stemming from employee/employer agreements has fostered the lowest level of industrial disputation in Australia's history.

Indeed, Access Economics estimates that the value of these reforms in 2004 amounts to over $8,000 per year per worker. ⁽²⁹⁾

Indeed, in opposing the government's latest round of reforms, even Mr Beazley has recognised the success of these 12 years of reform:

"An industrial relations system that has produced high productivity growth, moderate wage outcomes, low strike levels and record corporate profits does not need radical change ..." ⁽³⁰⁾

And Mr Beazley is right -- radical change is not required.  Nor is it being proposed.

What this round of reforms is seeking to achieve is simply the completion of the industrial model outlined by Paul Keating in 1993.

THE CASE FOR FURTHER REFORM

As quoted earlier, the industrial model espoused by Paul Keating in 1993 concluded that "we need to find a way of extending the coverage of agreements from being add-ons to awards ... to being full substitutes for awards".

This is precisely where we are today with this third stage of reforms.  We are seeking to make agreements full substitutes for the choking award based system.

The reforms to date, for many parts of the economy, go only part of the way to the model of industrial relations described by Paul Keating, and given greater effect by the Howard Government's 1996 reforms.

There is more to be done.

There is still too much reliance on awards that are hugely complex, detailed and prescriptive.

The benefits realised by the individual agreements Rio Tinto has reached with their miners is still the exception rather than the norm.

Too many workplace agreements are merely add-ons to awards, rather than being comprehensive and tailored to the employee and employer's circumstances.

We still have a system where industry level "pattern bargaining" by unions imposes too many "one size fits all" agreements, with terms and conditions irrelevant and costly to individual workplaces.

We still have a system where third parties of all types can insert themselves too easily into processes to frustrate and work against employers and employees.  Major productivity improvements are seriously stymied.

At the same time, numerous decisions -- such as the controversial Emwest decision -- have "largely thwarted" the processes of agreement making and added to the time and expense of making an agreement with employees.

This is why the Government is taking steps to encourage widespread agreement-making where the procedures are as simple as possible.

So, if we want to continue to grow the economy, continue to create jobs, continue to increase take home pay and keep interest rates low, we need to complete the reform of an out of date system which began 12 years ago.  Standing still is not an option.  The world will pass us by.

In the coming decades Australia faces significant looming pressure from within and without.  Our economy continues to face dynamic pressure from external sources.

The greatest challenge this country faces is the challenge of an ageing population.  Forecasts from the Productivity Commission show that the labour force is expected to grow by 320,000 people between 2002/03 and 2004/05.  By contrast it will take two decades -- from 2024-25 to 2044-45 -- for the same growth to occur. ⁽³²⁾

In addition to an ageing population, the country faces pressure from external competition and unforeseeable shocks such as rising oil prices or natural disasters.

We live in an ever changing world and a dynamic labour market is critical to our survival.

The imminent pressures faced by Australia has led the OECD to conclude in its most recent economic survey that policy should "ensure that the labour market functions more effectively by promoting the negotiation of wages and employment conditions at the enterprise and individual level". ⁽³³⁾

Likewise, only last week the Directors of the International Monetary Fund (IMF):

"welcomed the measures announced in the 2005 budget to expand labour force participation by encouraging the transition from welfare to work.  They supported the proposed reforms of the industrial relations system aimed at further improvements in labour market flexibility that would facilitate additional gains in productivity and employment" ⁽³⁴⁾

The Business Council of Australia has also recognised the need for further reform of the workplace:

"We cannot take even our strong economic position, let alone the future, for granted ... [the economy] requires a new round of macro and micro-economic reform ... focussed on four key areas of the economy -- taxation, workplace relations, infrastructure and reforming business regulation" ⁽³⁵⁾

The conclusions are supported by recently released figures showing that while Australia's economy continues its robust performance, the one area beginning to lag is that of productivity growth.  Further workplace reform will help to continue unlock this country's productive capabilities.

The OECD has recognised this.  The IMF has recognised this.  The Business Council of Australia has recognised this.  The Government has recognised this.  In fact, only the Labor party and the union movement seem to have missed the need for reform.

Standing still is not an option.

THE THIRD ROUND -- GENUINE CHOICE

It is now nearly 12 years since the 1993 reforms commenced, and in the coming weeks and months, the Government will take the next step in the evolution of workplace relations in Australia.

The aim of the latest round of reform is to reach the objective espoused by Paul Keating in 1993, to "find a way of extending the coverage of agreements from being add-ons to awards ... to being full substitutes for awards".

By doing so, the Government will enable employees and employers to agree on terms and conditions which best suit their circumstances.

To encourage widespread and creative agreement making, particularly for small and medium sized businesses, the government will minimise the costs and uncertainty associated with agreement making and remove the red tape surrounding their endorsement.

There are two changes which will make the processes for agreement making more accessible.

Firstly, the no-disadvantage test will be replaced by the Australian Fair Pay and Conditions Standard, a change which was mooted in 1996.  This will be the first time that minimum standards have been legislated at a federal level.

I've already highlighted some of the reasons why the relationship between awards and agreements has been one of the major roadblocks hindering the take-up of agreements.

By introducing these consistent legislative minimums, the drafting of documents will be far easier.  Rather than considering, and complying with, page after page of incomprehensible award jargon, when drafting their agreements, employers need only to comply with these five minimum standards.  At the other end of the ratification process, the minimum legislated standard test will give more certainty to employers when lodging their documents.

Furthermore, by giving leeway in drafting, employers and employees will be able to reach agreement on issues which are better for both sides of the bargain.  Not only can flexibilities which are unavailable under awards be included -- such as permitting a parent to start outside of ordinary hours to let them finish in time to collect their children from work -- but appropriate incentive structures can be included in the agreement to further enhance productivity.  A deal of mutual benefit.

In addition to removing the roadblocks created by the no-disadvantage test, the approval process will be streamlined.

The Office of the Employment Advocate (OEA) will now be responsible for approving individual and collective agreements, moving the focus of agreement making away from an adversarial process.

Agreements will also operate on lodgement with the OEA, rather than the employee and employer having to wait for approval.  For its part, the simpler requirements for agreements will mean that the OEA will be able to more expeditiously approve agreements, and agreements will be able to operate for five years, limiting the costs associated with continual re-negotiation.

I should emphasise that it will only be where genuine agreement is reached that conditions of employment will change, and the Government will provide adequate safeguards to protect the weaker members of the community.

Critical to facilitating genuine agreement making is making the system simpler -- making a system that people can understand and make informed decisions about.

Currently, there are six Industrial Relations Commissions in this country, and they have created a complex web of regulations which all but the most learned industrial lawyers have no chance of understanding, let alone implementing.

With over 130 pieces of legislation and more than 4000 awards across these jurisdictions, many hundreds of thousands of small businesses face the prospect of complying simultaneously with several Awards, a range of state and federal acts and numerous sets of regulation.

Even after negotiating this maze, each of these documents must be interpreted.  They are drafted in archaic legalese.  They are ambiguous and uncertain.  They are "one size fits all".  Even the AIRCs test case standard, the Metal, Engineering & Associated Industries Award contains seven pages to work out a person's annual leave entitlement.

The Government is committed to simplifying the country's industrial relations system by unifying the six systems by providing a set of standard industrial regulations across the nation.

We are not abolishing awards.  The option of an award -- as opposed to a collective or individual workplace agreement -- will still be available.  But awards will be reviewed by a committee to ensure that they meet the needs of the modern workforce.

Yet, the heart of these reforms is to allow employers, no matter how small, to replace hundreds of pages of unworkable award conditions with effective, intelligent, fair agreements of ten to fifteen pages.

In conjunction with these reforms to facilitate agreement making, the Government is introducing a number of other reforms designed to build upon its proven track record of economic management -- to create more jobs and to deliver sustainable growth into the future.

A specialist body will be established, the Australian Fair Pay Commission, to ensure sustainable increases in the minimum wage and award classification wages.

We will also be adressing the current deficiencies in unfair dismissal law, by exempting employers with under 100 employees from unfair dismissal, and increasing the probationary period to 6 months for all employers.

A lot of fear has been generated in the media of late about these reforms, fear which is driven by the same people who opposed our 1996 reforms and, curiously, who started this process in 1993.  These fears are clearly misplaced.

While the overwhelming majority of employers treat their employees with fairness and respect, there are always a few bad apples.  The government is determined that agreement making involved genuine choice and is committed to protecting workers from any unscrupulous employer.

Unlawful dismissals will continue to be unlawful.  It will continue to be unlawful to apply duress to an employee to sign an agreement.  It will continue to be unlawful to sack an employee who refuses to sign an AWA.

There will be more "policeman on the beat" to ensure that employees aren't coerced into agreements.  There will be $12 million spent over the next four years to help small businesses implement agreements that suit their business.

CONCLUSION

In the coming weeks the next step in the evolution of workplace reform will be announced.  It is the continuation of a process which was started under Labor in 1993, continued under this government in 1996 and which has contributed to the great resilience of our economy over the last decade.

The Government is about accelerating the cultural change taking place in our workplaces where we aim to see each and every employer treat their employees the way they themselves would like to be treated.

This change is occurring, but it will become commonplace the more we make our workplaces simpler, more flexible, more collaborative.  Encouraging genuine agreement making at an individual or workplace level is the key to all of this.

In this way, we build trust in a work environment, creating a more stable, better skilled and more committed workforce;  it raises confidence and teamwork, improves decision making and reduces the cost of doing business.

The evidence for this is there for all to see.  Just as the predictions of the Labor party and the ACTU ten years ago that the labour market reform in 1996 would drive down wages, increase unemployment and slash working conditions, were proved to be demonstrably wrong, so it is that all those who seek to denigrate our further reforms will be proved wrong in the years ahead.

No system of industrial regulation can protect jobs and protect high wages if an economy is not strong and productive.  We are determined to unlock more and more opportunities for productive activity and growth in each business.

By focusing on agreement making at the workplace and by simplifying workplace regulation, the government is creating an environment where the people of Australia, be they employee or employer, have more opportunities;  the opportunity to decide what is best for you and your workplace;  the opportunity to tailor working conditions which better suit your family circumstances;  the opportunity for mutual gain;  the opportunity to rise through the ranks;  the opportunity to work.

This government's agenda is facilitating genuine agreement at a workplace level.

It is about letting the people who know what's best for them decide what's best for them.

It is about continuing the strength of business and the growth of jobs.

It is about meeting the challenges of the future.

It is about enabling every workplace to have the opportunity to share in the rewards of agreement making.

It is about facilitating employees and employers talking to each other to achieve a mutually beneficial outcome.

---

REFERENCES

1.  "Workplace Relations -- Action Plan for the Future", Business Council of Australia, February 2005

2.  "AWA Fact Sheet -- August 2005", Office of the Employment Advocate, September 2005

3.  Budget Paper No 1, Statement No 2, 1984-85

4.  Australian Industrial Relations Systems:  Report of Committee of Review, April 1985, AGPS, Canberra, 1985 ("Hancock Report")

5.  Hancock Report Vol II, page 239

6.  Print G8600

7.  [1988] 640 IRCommA

8.  D. Moore "Why the Accord Has Failed", Address to HR Nicholls' Society Forum, Canberra, 24-26 February 1989, page 5.

9.  P. Kelly "Wage Restraint or No Tax Cuts, Keating Warns Unions", The Australian, 4 February 1989

10.  "Time for the Next Industrial Relations Bill", Business Council Bulletin, February 1989

11.  Print K0300

12.  Easson & Forrest "Good While it Lasted:  The Position and Prospects of Australian Unions in 1993", The Economic and Labour Relations Review, Vol 5, No 1, 1994

13.  It is worth noting that the ability for a union(s) and employer(s) to reach agreement and have that agreement certified had existed in legislation for some time (either as a consent award or a certified agreement Section 112 & 115 of the IRA 1988), however, this was the first time that the Commission had developed principles to deal with agreement making en masse.

14.  Section 134D of the Industrial Relations Act 1988, as amended

15.  s3(a) Industrial Relations Act 1993

16.  Division 3, Part VIB Industrial Relations Act 1993

17.  For an outline of the changes, see R Reitano, "Legislative Change in 1993", Journal of Industrial Relations, Vol 36, No 1, March 1994

18.  s170NB Industrial Relations and Other Legislation Amendment Act 1993

19.  s170ND(7) Industrial Relations and Other Legislation Amendment Act 1993

20.  Australian Manufacturing Workers Union & Ors v Alcoa of Australia & Ors (1995) (AIRC, Full Bench, 21 November 1995, Print M7148)

21.  M Wooden, "Industrial relations reform;  the unfinished agenda", Mercer-Melbourne Institute Quarterly Bulletin of Economic Trends, 3rd quarter 2000.

22.  By this time agreement making existed, in some form or another, in various state jurisdictions

23.  s3(a) Workplace Relations and Other Legislation Amendment Act 1996

24.  Section 170LK of the Workplace Relations Act 1996

25.  See note 17 (Wooden)

26.  For example, see the National Construction Industry Award 2000.

27.  Source:  DEWR

28.  "AWA Fact Sheet -- August 2005", Office of the Employment Advocate, September 2005

29.  "The Reform Divident", Access Economics, July 2005, in Locking In Our Prosperity?:  2005 and Beyond, Business Council of Australia, July 2005

30.  K Beazley "Why Aren't We Investing In the Skills of Australians?", The Australian, 7 March 2005

31.  For an analysis of the role of unions and the court system in the implementation of the 1996 reforms see S Wood "The Death of Dollar Sweets", Address to HR Nicholls' Society Forum 5-6 May 2000

32.  Productivity Commission "Economic Impacts of an Ageing Australia", AGPS, April 2005

33.  Economic Survey of Australia 2004:  Policy Brief, OECD, January 2005

34.  International Monetary Fund Public Information Notice 2005 Article IV Consultation, (PIN No. 123, September 2005)

35.  Locking In Our Prosperity?:  2005 and Beyond, Business Council of Australia, July 2005

Howard sees his "enterprise worker" as ending class warfare

In a significant but under-reported speech in July this year, Prime Minister John Howard announced that in his view the most important economic development of the past 20 years is the rise of the "enterprise worker".

In describing this new worker, he not only identified the army of independent contractors who make up some 28 per cent of the private-sector workforce but also pointed to vast numbers of employees who see working life differently to the ideas of the past.

People once wanted lifetime security in full-time work and repaid this by loyalty to the boss.

Now, many people see income security as coming from their own effort.  They rely on themselves.  Expectations of a lifetime job with one boss is seen as potentially stifling.  Work and lifestyle have merged rather than being separate.  Constant change is part of work.

But in his speech the Prime Minister did more than make a casual observation about the changing attitudes of workers.  What he did was declare that the Government's workplace reform agenda is targeted to respond to the needs and demands of this new work attitude.

And it's not a narrow appeal.  He sees this new worker as coming from a state of mind existing as much within the blue-collar sector as in the professional and white-collar groups.

What the Prime Minister in effect did in his speech, was announce that the changed work attitudes have crossed over into politics.  In embracing the enterprise worker, he was rejecting the traditional idea of class warfare in Australia.

Broadly speaking, the politics of Australia since the Second World War has been dominated by battles between left- and right-wing ideologies.  These opposing political positions are tied to the idea that business always involves war between workers and bosses.

The left argues that exploitation of workers by bosses is inevitable in capitalist societies and government has to have institutions that stop bosses exploiting workers.  The right argues that the bosses are needed for wealth creation and if bosses are constrained too much, wealth creation stops.

From the perspective of the left, the key institution that has operated in Australia to stop worker exploitation is the industrial relations system.  The Government is now going to change that.  The left say this will strip workers of their institutional protection from exploiting bosses.

The union campaign against the changes plays on the idea that even if individual workers have confidence in their own boss, it can be imagined that some other, undefined boss may exploit some other undefined worker.

Ordinarily and in the past, the Government should have been expected to counter this campaign by mounting a robust defence of the wealth creation value of bosses.

However, in his July speech, the Prime Minister was restrained in his defence of the value of bosses.  What is different this time is that the Prime Minister's key thrust is a rejection of the left-right debate and the launching of a newer idea.

He says that the enterprise worker mindset is widespread.  Many people, he says, no longer see themselves as employees or employers, workers or bosses but rather as businesses -- their own business.

If the Prime Minister is correct, the implications are substantial, but not just for the union movement.  It impacts equally on Australian business lobby groups.  Culturally, industry bodies are attuned to running a defence of the right of bosses to be bosses.  They do this partly through the industrial relations system.

However, in his July speech, the Prime Minister is saying that workplace wars have dying relevance and that the new laws will shift away from favouring the traditional employer-employee collective structures.  This will be done by first moving the emphasis of employment law, to focus on individual relations between an employee and employer.  Second, new law will protect the rights of independent contractors as small businesses.

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Time to tap into technology

Queensland Premier Peter Beattie recently was quoted talking up Brisbane's water shortage.  He said computer modelling has shown that without rain and without water restrictions, Brisbane would be without water by December 2006.

I read on and discovered that with water restrictions we would run out just two months later in February 2007.  Are the restrictions really worth all the trouble, I pondered, if we are going to run out of water anyway?  That night it rained.

On the weekend I read The Courier-Mail and Australian Water Association report on the future of southeast Queensland's water.  The Courier-Mail should be congratulated for commissioning a report that pulls together a lot of basic information.

The report, available from The Courier-Mail's website, indicates that most of the southeast including Brisbane, Gatton, Ipswich, Caboolture, Redcliffe and Logan has enough water until 2025.  According to the report, the "safe yields" will not be exceeded until then.

In contrast Toowoomba, Crows Nest and Jondaryan already have exceeded their "safe yield".  Indeed it is reasonable to conclude from the report that Toowoomba does have a water crisis.

But even this can be averted through a commitment to water recycling and perhaps a cap on Toowoomba's populations.

By 2025 the greater Brisbane region is expected to be home to another one million people and the existing dams will be inadequate.  Rather than build new dams, the new reports suggests governments support a combination of water recycling and also build a few desalination plants.

Brisbane, like other state capitals, is situated beside the ocean and is thus well positioned to use desalination technologies.

As Professor Bjorn Lomborg, Danish statistician and author of Cambridge University publication, The Sceptical Environmentalist, has said:  "Desalination puts an upper boundary on the degree of water problems in the world.  In principle we could produce the Earth's entire present water consumption with a single desalination facility in the Sahara, powered by solar cells.  The total area needed for the solar cells would take up less than 0.3 per cent of the Sahara".

The Courier-Mail and Australian Water Association report indicates that desalinated water would cost $1 to $1.40 per thousand litres to produce.

I am now paying about $0.90 a thousand litres for the water delivered to my home by Toowoomba City Council.

But I am being told I really shouldn't use it to water my garden -- or at least not my lawn.

I would be happy to pay a bit more for my water and use recycled water, including for drinking, if I didn't have to worry so much about running out of water.

KPMG's Bernard Salt, arguing in favour of a new dam for Sydney, recently commented that "without the dam, four, and eventually five, million residents of Sydney must daily adjust their lives to accommodate water shortages so as to preserve the bushland and the downstream environment outside the city.

"With the dam and no water restrictions this generation of Sydney residents and the next are freed from the daily grind of preserving every single guilty drop of water".

Interestingly, surveys in Sydney and Melbourne have found high levels of public support for water restrictions.  Certainly a community continually told it is about to run out of water is going to support restrictions and rally against people like me who like to water their lawn.

The advantage with desalination and recycling, as proposed in The Courier-Mail and Australian Water Association report, is that it doesn't really matter whether it rains.

In 1983, I won the Grade 6 Form Prize.

I was given a book titled SOS Save the Earth.  The book focused entirely on reducing pollution.  Indeed, in the 1980s environmentalism was about pollution -- chimney stacks, leaded petrol and cleaning up smelly rivers.

Twenty years later many of these issues successfully have been addressed and the environmental focus has moved on to saving water and saving energy.  Indeed, now the Victorian Government's eco-perfect family includes a young girl called Hydra Sustainable who says we should only wash our hair once a week -- to save water.

I've been there and done that, and I suggest we endorse the new The Courier-Mail and Australian Water Association report and get cracking on the water recycling and desalination initiatives so my children and grandchildren can wash their hair and water their gardens every other day -- should they so please.

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Abandoning Agriculture and Science

The president of the Australian Conservation Foundation (ACF), Professor Ian Lowe, has just written a book titled A big fix:  Radical solutions for Australia's environmental crisis.

In his book, Prof Lowe suggests Australian society will not survive this century unless we make dramatic changes to the way we manage our environment.

Unfortunately he has nothing positive to say about Australian agriculture.  His assessment is that we are a country mining our resource base and that:

"We have tried to produce more than the sustainable yield from our agricultural land to meet the costs of our imports, but we are paying the price now in degradation of both cropping and grazing land".

He goes on to suggest that tourism should replace fishing and logging as a future source of income.

Farmers, fishers and timber workers might just prepare to let the media storm that will probably follow release of the book on 7th October wash over them.

But I suggest the book launch be abandoned and the book pulped.

Why?  Because in the book, Lowe, a professor of science, suggests we should abandon science.

He states:

"Sustainability science [which he supports] differs fundamentally from most science as we know it.

The traditional scientific method is based on sequential phases of inquiry:  conceptualising the problem, collecting data, developing theories, then applying the results ... Sustainability science will have to employ new methods, such as semi-quantitative modelling of qualitative data, or inverse approaches that work backwards from undesirable consequences to identify better ways to progress".

Prof Lowe is suggesting science should not be sequential, that there is such a thing as semi-quantitative modeling, and we should image the worst, no matter how unlikely.

But science has to be sequential.  You advance a hypothesis.  For a hypothesis to be proven, it needs to be predictive, so you make predictions based on the hypothesis and devise ways of testing the prediction.

There is no way that any of those steps can be taken out of sequence and still be called science.

The wooliness of Lowe's thinking is demonstrated by his second proposition.

The idea of "semi-quantitative modelling of qualitative data" suggests Lowe doesn't want to count the results accurately.

The third proposition could be referred to as the "Chicken Little Principle".

If I say the sky is falling, then there is no time to go through the normal rigour of the scientific method, because by that time the sky will have fallen.

So let's junk science and close down Australia's primary industry base because this particular author feels there is some damage occurring to the environment.

If the book launch goes ahead and it becomes a best seller, I at least hope that it will be sold under the banner of "new age" rather than "science".

Furthermore, Prof Lowe should resign as a professor of science because he has clearly abandoned the discipline.

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Save the whaling

Why is it that the International Whaling Commission condones the slaughter of rare whales by indigenous peoples using what are, arguably, inhumane traditional methods, while ruling against the commercial harvest of more common species by more humane methods?

"Aboriginal subsistence whaling", as it's known, is currently permitted by the commission for Denmark (fin and minke whales), the Russian Federation (grey and bowhead whales), the islands of St Vincent and the Grenadines (humpback whales) and the United States (bowhead and grey whales).  A key condition is that meat and other products from the slaughter not be sold.

In the lead-up to a recent meeting of the commission in Ulsan, South Korea, there was no discussion of the number of humpback whales the Grenadines are allowed to kill in the Caribbean -- even though this species is listed by the International Union for the Conservation of Nature as vulnerable to extinction.

The harvest of smaller species belonging to the suborder Odontoceti (for example, dolphins and pilot whales) is not regulated by the commission and not discussed.  This includes, for example, the slaughter of long-finned pilot whales by Danish Farosese fishermen by driving the whales close to the shore, then weighing the animals down with ropes attached to stones.  The whales are then stabbed in the blubber with a sharp hook, called a gaff, before being pulled to shore.

Before the Ulsan conference, Australia's Environment Minister, Ian Campbell, travelled the world railing against the slaughter of whales -- concentrating entirely on Norwegian and Japanese whalers.  He was reportedly "shocked and saddened by recently broadcast images of whale-cooking classes in Japan".

I don't like the idea of killing whales and I am always outraged when science is wrongly invoked to justify politics -- as Japan does to justify the continual harvest of minke whales for essentially cultural reasons.  But I am just as appalled by ignorance and double standards on this issue.

Norwegian whalers have a long cultural tradition of killing, eating and selling whale products.  They argue that minke whaling is an environmentally sound way of producing food, that the harvest of whales is based on scientific advice drawn from the best available knowledge, and that decisions are based on the precautionary principle (because there's uncertainty about biological data on the number of whales, harvesting is done cautiously and with a reasonable margin of safety, they say).  All harvesting is accompanied by monitoring, they add, and systems exist to ensure compliance with regulations.

Whaling was suspended in 1986, and Norway -- after some reluctance and faced with the threat of sanctions -- also halted whaling the following year.  But when, in 1992, the commission's scientific committee estimated the north-east Atlantic minke whale population had reached 86,700, Norway resumed whaling.  Despite this, the number of minke whales in the region is now estimated at 112,000.

Whales are harvested by Norwegians according to a strict quota system based on an understanding of population numbers and dynamics.  The 2005 season allows Norwegian whalers 796 minke whales -- up from last year's 670.  The whalers must operate in accordance with strict protocols for killing whales which are deemed humane.  Whales are said to die instantly when struck by a harpoon tipped with the grenade.

Greenpeace made its name by opposing commercial whaling.  In an insightful review of Greenpeace's early years, environment journalist Fred Pearce has written, "Greenpeace was far from being the first green group to oppose whaling.  But it was the first green group to ignore the scientific arguments about whale reproduction rates, population dynamics, and how large a sustainable cull might be, in favour of an undiluted ethical argument:  save the whale".  The media war was effectively reduced to the simple issue of whether or not "whales are good".

As a consequence many Westerners have come to venerate cetaceans, the zoological order which comprises the 80 or so species of whales, dolphins and porpoises.  It is not unusual for cultures to venerate particular animals:  orthodox Hindus venerate cows, believing them to possess divine qualities.  But is this a useful basis from which to develop national and international environmental policies for the conservation of species?

Dugongs, like whales, are long-lived marine mammals.  They feed on sea grass in northern Australian waters and are slow breeders, suckling a single calf for over 18 months.  Two papers published last year in the British journal Animal Conservation suggest dugong populations in the Torres Strait are grossly over-fished.  The Australian government accepts that about 1,000 dugongs are killed each year by indigenous communities, and that this is probably 10 times the estimated sustainable harvest.

I respect the rights of indigenous Australians to hunt dugongs, and I respect the right of Norwegians and Japanese to hunt whales and trade the products of their slaughter.  But the activity must be sustainable.  Instead of playing emotion, the Australian and other Western governments could learn from the reasoned and scientific approach taken by the Norwegians.

The same four principles could be applied to the harvest of dugongs in Australian waters, under a strict quota system.  The issue of Aboriginal subsistence whaling needs to be acknowledged and discussed.  Australian Aborigines and Danish Farosese fisherman may kill the animal with a traditional weapon, but they do this from motorised boats.

And perhaps it is time Australians started to acknowledge that our aversion to whaling is cultural, based on a new-found love of whales, and not scientific.

Hazelwood trumps the politics

After painfully long reviews, the State Government has finally granted Hazelwood Power station's owners the right to continue providing Victorians and industry with electricity.  By all accounts it took considerable pushing and shoving by the more sensible members of cabinet such as John Brumby and Energy Minister Theo Theophanous.

What should have been an automatic sign-off became bogged down in controversy because of the Government's hand-wringing and deference to Greenpeace and other environmentalist fanatics whose agenda is to return Victoria's living standards to their level of a century ago.

The genesis of the Hazelwood saga was the privatisation of the business back in 1996 when a consortium led by International Power bought the generator and its associated mine for $2.4 billion.  Under government management, Hazelwood, once the pride of the state's generation sector, had become an inefficient and overmanned poor cousin, which 20 years ago was scheduled to be decommissioned in 2005.  But its present owners have transformed it into a reliable workhorse that produces over a fifth of the state's electricity.

International Power refurbished two of the plant's eight generator units at a cost of $400 million.  Since 1994-95, its productivity in terms of output per employee has risen 50 per cent and its availability to run whenever required matches its more modern competing power stations.

The application for an extension should have received automatic approval.  Victoria is not so capital-rich that it can knock back a proposal that will extend the life of a vital facility when a rebuild would cost $3 billion-plus.  Moreover, in the face of development refusal there would be few investors willing to risk committing funds.  And in the absence of any action, Hazelwood would be gradually wound down and industry and consumers would find electricity bills eating into their living standards.

International Power has made thin profits from the business, and the money spent on upgrading and extending the plant's life was justified by the "sunk" nature of its investment.  Doubtless the company would have gratefully accepted a payment by the Government to close down its facility.  This would have pleased the green cheer squad, which would have been full of ideas on how to fill the hole -- one-quarter of the state's electricity production capacity.  We would hear an intensification of praise for windmills, dim light bulbs, less air-conditioning and a phase-down of the state's smelters.  But the upshot would have been electricity costs rising.  The real outcome would have been lost jobs and a gradual winding-down of the state's economy.

The process under which Hazelwood was put through the wringer points to other political deficiencies.  The Bracks Government is demonstrating itself to be hostage to every crackpot green group, some of which it funds through our taxes.  It only takes a whiff of green lobbying for the Government to dither or to take ill-judged decisions that are contrary to sound public policy.  In addition to the Hazelwood issue, this is evident in regard to channel deepening to enable Melbourne to remain a world-class port, the ban on genetically modified food technology, the cruel tax on new home buyers represented by the Five Star energy requirements, and a host of other matters.

A great deal of the angst and time costs in the Hazelwood case stemmed from the political favours extended by the Bracks Government.  Subsidising green groups to campaign against the power station was one such favour.  Appointing an activist supporter as president of the Victorian Civil and Administrative Tribunal was another.  Together, this brew meant that a local planning decision became embroiled in the global issues of climate change that are the responsibility of the Commonwealth Government.

Hopefully the Bracks Government will learn some lessons from the strain under which it put itself in what should have been a straightforward application to extend the life of a factory.  Among these is to better understand the forces it unleashes when it provides political oxygen to some of its favoured advocacy groups.

Another is in the regulatory setting.  The actual decision on modification of Hazelwood's mining lease is controlled by the Environment Effects Act and 13 other acts.  This level of government oversight speaks volumes about the overregulation that is crippling the state's businesses.  The existence of all this legislation and the manner in which it can be manipulated is testimony to the need for a regulation-busting outfit such as the Victorian Competition and Efficiency Commission to be given its head to allow a freeing up of business decisions.

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Hazelwood expansion the right move

The Bracks Government's decision this week to approve the expansion of the Hazelwood brown coal power station was not just the right decision, but the only possible decision.

Large reserves of low cost brown coal have long been one of the Victoria's key competitive advantages.

It is used to generate more than 90 per cent of the state's electricity and has allowed the state to maintain world competitive electricity prices and thereby attract and keep energy intensive manufacturing activity.

Victorian Governments have long recognised the importance of brown coal.

During the Cain Government, the expansion of the coal sector was identified as a top development priority not only to generate exports directly but as means of attracting energy intensive industries.  Under Kennett, the brown coal/ electricity industry was seen as a prime source of improved productivity and funding.

Indeed, the Hazelwood plant played a major role in the Kennett reforms.

Kennett found an eager buyer and the new owners turned it into an efficient, profitable and clean plant.  The sale not only generated $2.5 billion in income for the government but saved billions of dollars by avoiding the cost of a replacement plant.

The Bracks Government confronted a different policy environment.  The electricity industry is now privately owned and operates in a competitive, interstate market, thus is outside direct government control.

And the greenhouse scare has gained force and mesmerised many in the Government.

For most of this decade the Bracks Government successfully pursued its usual tactic of trying to please everyone.  It placated the greenhouse lobby with promises to restrict greenhouse emission.

At the same time it told the productive side of the economy not to worry.

This was always going to be a short term strategy and a decision was eventually forced on them.

The planning bureaucrats, always keen on another rationale for regulation, took the government at its word and put its commitments to reducing greenhouse gases into planning laws.

The greenhouse lobby used this hook to appeal a Government decision to approve rezoning application need for the continuation the Hazelwood mining operation.

An activist judge appointed to VCAT by the Bracks Government upheld the appeal and the Government was forced to make a policy choice.

That is, it was forced to either go with brown coal, which is CO₂ intensive, or with the alternative proposed by the greenhouse lobby -- windmills, solar cells and energy rationing.  We are not talking about a small change as Hazelwood accounts for 25 per cent of the state electricity consumption.

The decision was in reality not difficult.  The greenhouse lobby's options are not even close to being viable.  If adopted, they would necessarily result in significantly higher electricity prices, outages and a loss of jobs and investment.

Moreover, they are unlikely to reduce greenhouse gas emissions.  The processing activity lost here would migrate elsewhere such as China and result in new and offseting emissions.

In the end the Bracks Government recognised that coal is the state's main future energy source and that technology and bringing China and India into the loop are the key to addressing greenhouse gas emissions.

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Prosperity's deadly spiral

"Is there any other point to which you would wish to draw my attention?"

"To the curious incident of the dog in the night-time".

"The dog did nothing in the night-time".

"That was the curious incident," remarked Sherlock Holmes.

In Arthur Conan Doyle's story The Silver Blaze Sherlock Holmes investigates the disappearance of a racehorse and the murder of its trainer.  Holmes establishes that the horse, Silver Blaze, was led out of its stable while a dog was sleeping in the yard nearby.  The case rested on the fact that the dog didn't bark, meaning that whoever took the horse was someone the dog recognised.  The point being that what didn't happen was more significant than what did happen.

The current tax debate in Australia is like the tale of the dog in the night.  To properly understand the economic and political dynamics of the debate we need to consider what is missing from that debate.

It has been taken for granted that if personal income tax rates are to be lowered, any reductions will be paid for by either increasing other taxes or by eliminating existing tax concessions.  In other words, tax cuts must be revenue-neutral.  However, such "solutions" focus on only one side of the tax-and-spend equation.

As yet, no one has suggested reducing public spending to pay for tax cuts.  In today's climate such a proposal is almost unthinkable.

The idea that those tax concessions that complicate and distort the tax system, such as negative gearing, should be eliminated is a good start.  However, such "tax expenditures", as they are labelled by Treasury, represent only potential tax that is not collected.

Since the past federal election the relatively few political problems which the coalition has had have been almost entirely of its own making, and Opposition Leader Kim Beazley has not been able to make much headway against John Howard.

Given this, it is almost bizarre that the tax debate is actually being carried on in terms much more advantageous to Labor than to the government.  After all, one side of politics is meant to be in favour of more tax, and the other side in favour of less tax.  But this isn't at all how the debate is proceeding.

Both major parties seem to be saying (insofar as it is possible to unravel what is Labor's position) that tax cuts in one area are achievable only if they are balanced by tax increases in other areas.

It hasn't always been like this.

Once upon a time the Liberal Party was an unashamed advocate for lower tax and a smaller public sector.  For example, at the 1987 federal election Howard promised to "significantly reduce the role of government" and ensure "unprecedented cuts in expenditure" in order to introduce a flatter personal income tax regime with only two rates of 25 per cent and 38 per cent.  The direction of John Hewson's Fightback! was similar.

So what is it that has changed over two decades to alter the Liberal Party's position so dramatically?

The answer is, in one word, prosperity.  Australia's record rate of economic growth, the product of the Hawke and Keating reforms of the 1980s and then cemented by Howard and Peter Costello, has succeeded in removing the incentive for any further reform.  The problem for those supporting industrial relations change is exactly the same as that faced by advocates for lower taxes.

The challenge is to counter the claim made by opponents of reform, which is that further improvements are unnecessary because the country is already performing well.

Prosperity, in the form of GST and land tax revenues to the states, and business tax revenues to the commonwealth, has resulted in governments of all persuasions (Liberal and Labor) seeking to maximise the political benefits available through increased expenditure.

Prosperity has created a death spiral of higher government spending, leading to higher community expectations of government, leading to higher taxes, leading back into higher government spending again.  Whether such a situation is sustainable when world commodity prices are not booming only time will tell.

But one thing is absolutely certain.  If and when an economic downturn does occur, the solution to our problems will not be more government spending and taxing.  It will be individuals and businesses responding with creativity and enterprise that Australia will have to rely upon.  At the moment it is difficult to say that the tax system does much to foster those two attributes.

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Submission to the Review of National Pipelines Access Regime

Submission to the Ministerial Council On Energy's
Review of National Pipelines Access Regime

INTRODUCTION

We confine ourselves to one aspect of the review, namely,

Comment is invited on the relative merits of the following options for improving the investment climate for greenfields gas pipelines:

1. the Commission's proposal to permit developers of pipelines to seek an upfront test of whether a new pipeline is likely to meet the coverage tests, and to obtain a binding ruling for a fixed period of 15 years if the tests would not be met;
2. implementing a price regulation "holiday" for greenfields pipelines for 15 years;
3. whether non-price obligations should be applied to greenfields pipelines that have a price regulation "holiday".

It is our view that the weaker proposals of the Productivity Commission would frustrate the essentially deregulatory intent of the proposals set out in the COAG Energy Market Review, the Parer report.

ADMINISTRATION OF COVERAGE

For the reasons set out in the MCE Paper, placing a need to obtain a no-coverage ruling would reduce certainty and lead to protracted negotiations between the proponent and the ACCC.  It might also alert other parties to an opportunity that the proponent had spotted and lead such other parties, who may not have needed to expend the same amount of resources searching for the opportunity, to offer alternative more intrusive regulatory arrangements.

Such arrangements are always likely to be more welcomed by bodies that have regulatory control as their main business.  Seeking a binding ruling from a body that has a clear interest in maintaining regulatory controls which boost its own influence would exacerbate our concerns about any proposals that approached the greater regulation espoused by the Productivity Commission.  At the very least, the approach would need to be to a disinterested party and not to the ACCC which would be administering the regulations.

The deficiencies of the present arrangements were becoming clear at the time of the application for the revocation of the coverage over the pipelines serving Sydney.  In 2000 we argued,

"An additional pipeline brings new competition.  This means the basic premises on which the competition policy arrangements are set for infrastructure do not apply.  The regulatory arrangements are posited on natural monopoly, an oxymoron where new competition actually emerges.  Regulation in those cases contains all the inevitable downside costs but no upside benefits." ⁽¹⁾

In our submission to the PC's review of the Competition Policy Agreements ⁽²⁾, we maintained that there had been a fundamental policy change as a result of the Hilmer report and its acceptance by COAG.  We argued that since the agreement of governments in the competition reforms to curtail their assumptions of monopoly provisions in major areas of the economy, there had been no constraints on new developments.

CRITERIA FOR COVERAGE

All new pipelines by definition are greenfield sites and should, therefore, not be regulated.  In order to develop a taxonomy for policy we argued,

"There are six important classifications of essential service or bottleneck infrastructure that may justify a difference in regulatory policy approach:

1. That which has been built without any market protection, especially that built since 1995 which is almost by definition "entrepreneurial" rather than regulated.
2. That which introduces new competition, albeit is not identical to existing facilities.
3. Privately built infrastructure built prior to 1995 that enjoyed no government protection.
4. That which is owned by the private sector but was built under a regime that offered protection from competition.
5. That which was owned by a government but has since been sold under contractual terms to the private sector.
6. That which was built by and remains owned by a government."

We argued that the only case for regulatory control concerned the fourth, fifth and sixth of these since the others had been built under a regime where they had no privileges.  The main issue is how to remove the constraints of regulatory intrusion over those pipelines that were built under some monopoly provision and remained with market power.  The effluxion of time is likely to whittle away at that power and criteria for abandoning regulation in those circumstances are necessary.

Of course, we recognised, drawing off long practices that governments will assert some controls to ensure some sort of common access to monopolies if their "essential facility" nature became significant.  Such controls have been seen since ancient times in the administration of ports, railways and, more recently, telecommunications.  In most instances, telecommunications appears to be a recent case in point, the controls can be lifted and freedom of commerce fully restored as technology erodes an "essential facility's" market power.

The case of access holidays covers new investment built without any assistance.  We repeat our contention in our earlier paper

"Where there are no regulatory restraints on competition, we see the most promising conditions under which entrepreneurs seek out new needs or seek the meeting of existing needs more cheaply.  The outcomes of new infrastructure built under such conditions epitomise the gains made by competitive processes.  For, although mistakes in competitive strategies are inevitable from time to time and excessive or wrongly sited infrastructure will be built, the outcome of the process of free market decision-making offers us the best use of resources and the widest scope for the application of human ingenuity.  If excessive building occurs, unless there is (illegal) collusion the mistakes cannot be retrieved from the consumer.

"Indeed, in such circumstances the consumer obtains windfall gains as the rivals seek to cut their losses by expanding their market shares and in the process driving down the price.

"Infrastructure built by private enterprise in the "post-Hilmer" era should not be required to grant access or be subjected to price restraints.  The builders of such infrastructure are responding to a profitable opportunity that they foresee, one that, by definition, also confers gains on the buyers of the service.  The two parties obtain a mutual gain.  The sharing of the gain is one for bargaining between the parties but the consumers of the goods that the facility supplies cannot be worse off since without it they would not have that particular access route and perhaps not the product that the access delivers.

"For its part, the owner of the new facility in this "post-Hilmer" era, cannot obtain gain from it by virtue of some form of government granted privilege.  The owner will, moreover, usually be building a project that carries some economic risk.  Such risk may emanate from a failure of the market to develop in the predicted way, new competitors, or the "howling gales of creative destruction" stemming from a technology that renders existing approaches archaic.

"Thus, in deciding to push ahead with the facility, the supplier had no lien on the idea and no lock on the supply itself.  Once built, the facility is not protected from imitators.  It may be that a successful facility becomes immensely profitable, like Microsoft Word.  But it can only do so if it provides value in excess of that which imitators and new approaches provide.

"Such mutual gain is at the heart of the private enterprise system.  Attempts to "redistribute" it can only harm the process.  This can be illustrated in the case of a new pipeline.  The owner of the pipeline will usually have considered a spectrum of alternative market projections (and perhaps a spectrum of cost projections).  There is uncertainty and, implicitly or explicitly, the owner will weight each scenario in making his investment decision.  If his threshold is a rate of return of 15% and he is considering scenarios that might yield rates ranging from 25% to 5% but provide a weighted average rate of 15%, cutting off the potential to earn the higher rates will reduce the weighted average to something less than the threshold.  The regulatory action would then eliminate the commerciality of the project.  In such a case, the sponsor and the customers would both be losers.

"Even if, in this case, a new developer were to arrive and build the pipeline, that developer would have done so in the light of the experience gained by the original developer.  The process would still result in an inferior outcome because the regulatory process would have demonstrated a cost in originating new ideas and will deter investment in searching out new opportunities.

"We have seen an example of this with the Central West gas pipeline.  This was a marginal project which required a Commonwealth grant in order for its owner, AGL, to justify its go-ahead.  The ACCC required AGL to lower its prices based on a rate of return on capital of 7.5% compared to a rate it sought (and had been agreed by the users) of 10%.  Although such an outcome brings lower costs to the customers in the area, the decision undermines entrepreneurship.  It has no place in a situation where there is no monopoly.  AGL had no franchise to supply gas to the area in question.  It has many rivals in Australia seeking opportunities to find new markets.  The outlet is from the Moomba to Sydney pipeline, largely owned by AGL but operated by EAPL as a totally independent entity.  Had an AGL rival approached EAPL they would have secured the same conditions as those gained by AGL.

"AGL had determined that the customers for the pipeline would be willing to pay $2.78 per gigajoule in 2004 but the ACCC has determined they must pay no more than $2.32.  Intervention to reduce a price sought by an enterprise in this way is a sure route to economic stagnation.  At best it will lead to the entrepreneur engaging in wasteful deception to try to persuade the regulator that his costs are really higher or his market weaker than he has said they are.  Most likely, it also sends a message to all businesses looking at expanding networks under the ACCC's oversight that they must please more than the target customers.  Hence, the decision of the ACCC to cut the price of using the pipeline in this way will have a sobering effect on other worthwhile ventures."

We set out similar cases in considerations covering duplicated facilities.  We see any extension of a pipeline to be a Greenfield pipeline which automatically qualifies for absence of regulation.  Where the pipeline is part of an extant system that is covered by regulatory provisions for expansion to meet demands of new customers that are defined contractually, then those obligations should, of course, remain.

Parer recognises that when a regulator places obstacles in the way of a new facility being constructed, there is a loss to the economy.  The case for new pipelines to be free of price regulation is no less strong than that for new bakeries, car plants or any other facilities that have no government franchise.  Regulation that closes off market entry by insisting that incumbents underprice their services is just as harmful to a healthy economy as regulation that forbids competition.

Although the regulators will maintain that they are simply ensuring a price that gives a fair return to the provider, they cannot but set a price above that which the market would justify.  This is because no customer is obliged to pay the price that the pipeline is obliged to supply the service.

It follows that, though it might be said that the facility may, once completed, enable its owner to extract "monopoly" prices, this cannot be the case.  A new facility is introduced in a situation where life went on peacefully and productively.  Whatever price the new facility requires cannot leave the customers worse off since they have the choice of not accepting its services at the price sought.  And, indeed, if the facility is able to earn very high returns, this simply demonstrates that it is highly innovative or that its builder was taking a considerable risk.  In either case it is both premature and counterproductive to tax away these gains with regulatory measures.

Requiring new pipelines to be regulated is gratuitous and contrary to efficiency.  New pipelines enjoy no exclusivity and by definition have no franchise or monopoly.  For gas customers they can only bring benefits.  Unless or until a facility can be regarded as "essential", regulating it will impede its development and any redistributive changes the regulation might bring would not compensate for the reduced level of efficiency that regulation entails.  The new pipeline competes for customers in the same way as all other goods and services and has no lien on the consumer dollar.

REMOVAL OF COVERAGE

It should be accepted without further analysis that once a new pipeline has a regulatory holiday, any existing pipeline with which it is engaged in serious competition should be immediately removed from regulatory coverage.  To do otherwise is to penalise the existing pipeline with paperburdens and inflexibilities that its new rivals don't have.  In all likelihood, as the regulator cannot impose a higher than competitive market price (since the customers would migrate to the new provider), the incumbent pipeline will have its price set too low by the regulator.  This is likely to harm the abilities of both pipelines to operate according to the optimum interaction of customer and supplier.

Sadly, the regulatory authorities have not always exhibited such common sense wisdom and have sought to maintain coverage, for example over the Moomba to Adelaide pipeline after the SEA gas line was commissioned and the Moomba to Sydney pipeline after the Duke pipeline was commissioned.  Hence we consider that provision should be made explicit to extend parallel regulatory holidays to pipelines that compete for the same customers where such a provision is agreed for a Greenfield pipeline

CONCLUSION

While there is a case for pipelines originally built under franchise protection remaining under regulatory control until new competition emerges, this is not so with the post 1995 era pipelines.  Post 1995 era pipeline developers rely on market discovery and business acumen to profitably meet consumer needs, just like entrepreneurs contemplating any other investment.  Setting more onerous terms for new pipeline developments will bring sub-optimal levels of capital expenditure on them.

Accordingly, we would recommend a regulatory holiday of 15 years for all new Greenfield pipelines.  Such pipelines should have neither price guidelines or determinations nor non-price obligations.  Existing pipelines that serve the same markets as the Greenfield pipeline should automatically have their coverage revoked.

---

ENDNOTES

1.  Price and Access Regulation of Gas Transmission Pipelines, A Submission Regarding the Regulatory Considerations of the NCC and ACCC on the Eastern Gas Pipeline and the ACCC on the Central West Pipeline, Energy Issues Paper No. 13 February 2000.

2.  Review of Competition Policy, The Productivity Commission's inquiry into Clause 6 of the Competition Principles Agreement, December 2000.

Left to sink or swim, it's our ag that could drown

I enjoyed a meal of crawfish with farmers in Louisiana a few years ago, where the locals boasted the Port at New Orleans was the fifth largest in the world.

Vast quantities of grain and oil seed, including genetically modified (GM) cotton and GM soybean, were shipped down the Mississippi and to the world via New Orleans.

Along comes Hurricane Katrina and New Orleans is no longer a busy port but a city reeling under gale force winds, a tidal surge and then a crime wave.

New Orleans is built on a delta and deltas tend to sink when the supply of sediment for delta and wetland building is less than the rate of subsidence due to natural geological processes.

Levee banks, built to contain flood waters, have significantly reduced the supply of sediment to New Orleans and surrounding wetland areas.

The levees are designed to keep the water within the main river channel of the Mississippi so the sediment is dumped at the extreme end of the delta.

It was over that meal of crawfish that I learnt that the sediment eventually slides down the continental slope to fan onto the deep ocean floor.

Among the news reports over the last few days there has been comment that New Orleans is three metres below sea level.

The farmers had joked the city could one day slide into the Gulf of Mexico.

I have previously written that the Murray-Darling Basin River drains 14 percent of the landmass of Australia and that the mighty Murray has an average annual flow, including diversions for irrigation, of 14 million megalitres.

Compare this to the Mississippi River which drains 41 percent of the United States and has an average annual flow of 405 million megalitres.

There is no equivalent of New Orleans in Australia and there is no great port at the bottom of the Murray River.

Adelaide is about 100 kms to the west.

There are holiday houses on the lake system that sits at the bottom of the Murray and then a series of barrages build to keep the lake's water fresh, and beyond that, a dredge working to keep the Murray's mouth open.

The Murray-Darling Basin is the food bowl of Australia but when you compare total agricultural production in Australia to the US we really are insignificant.  We produce about 34 million tones of what the World Resource Institute classifies as cereals;  the US produces 334 million tones.

We produce about four million tones of meat, they produce 37 million tones.

Our mighty Murray River and its dependent farming communities are puny in the global scheme of things.

And on reflection it is perhaps more likely that Australian agriculture will be let to slide into oblivion through corrosive state and federal government policies, than New Orleans will be left to slide into the Gulf of Mexico.

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Cash and contentment: the truth

According to the new gurus of happiness, most of us are mugs.

We spend our lives pursuing money, wealth and the good life for ourselves and our children only to find that it makes us unhappy.  Indeed, as a society we are a failure.  Our pursuit of economic growth and wealth has only led us down the path of unhappiness.

All the good things of life, from washing machines to plasma TVs to reliable and safer cars to modern medicine, have made us unhappy.  And it has led to an epidemic of depression, environmental destruction and social dislocation.

Of course, the "money is evil" claim is not new.  It has been the rallying cry for collectivist movements through the millennia.  The Bible, Karl Marx, Timothy Leary and Greenpeace all rail against the innate evilness of the pursuit of money.

What's new is the so-called science of subjective happiness, which is a growth area in our universities.  It is providing apparent evidence supporting the old claim that money does not make you happy and the collectivists are using it in aid of their every cause -- often to the point of absurdity.  Happiness researchers have undertaken thousands of surveys around the world over many decades assessing happiness and its cause.

They have come up with, at least superficially, some surprising findings.  Neither income nor wealth correlate with happiness.  Surveys have found virtually the same level of happiness between the very richest Americans and the Maasai herdsman of east Africa living on less than $1 a day.  Surveys in Japan found that between 1960 and 1987 per capita income increased fourfold while the level of happiness remained unchanged.  Other studies found a negative relationship between income and level of happiness and a slight positive relationship between wealth and level of happiness.

This is surprising because the evidence is that most people clearly would choose to live the life of Donald Trump than a Maasai herdsman.  Most people -- whether it be through education, entrepreneurship or the lottery -- seek greater wealth and go to great lengths to avoid poverty.

And research shows people on low incomes suffer disproportionately from things such as obesity, depression and early death, which would tend to make people unhappy.

So what gives?  The problem lies in people's innate tendency to be happy, but not too happy or too unhappy.

Research shows people are highly resilient.  We can adjust and find happiness in extreme conditions.  Research has shown that quadriplegics eventually report the same level of happiness as the able-bodied and winners of lotteries, after a period of euphoria, revert to their pre-rich state of happiness.  Our level of happiness does not change much with our circumstances -- whether it be money, wealth, age, peace, social capital or friendships.

In short, happiness is not a good empirical measure of people's desires, wellbeing or lifestyle choices for public policy purposes.

Its use leads to all sorts of silly ideas such as those offered by Prof Mirko Bagaric on these pages last week.  He suggests crippling tax rates of 75 per cent on people earning more than $70,000 so as to stop such people from "earning vast sums of money" and becoming unhappy.  He and his joint author claim this will not only make us a happier society, but make the wealthy happier by making them poorer.

The proposal has a few problems.  First, it is mad.  No one believes an extra quid makes them unhappy.  Second, it would lead to the ousting of any government that proposed it.  Third, it would lead to mass tax evasion.

More vigilant happiness researchers caution against jumping to the clearly absurd conclusion that less money leads to happiness.  Many have spent their careers researching poverty and know it's not a happy state.  They know that while people may be happy with their lot in life, they'd prefer to improve it with a bit more money.

While income and wealth don't necessarily make one happy, they sure help.

We know this from the choices of Australians at the ballot box, at schools, in their choice of jobs and at home.  This is reality, and a happy one.

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Uncovering the truth about markets

The Truth about Markets:  Why some nations are rich but most remain poor
By John Kay.
(Penguin UK, 2004, 496 pages)

For someone untutored in economics, it is easy to be perplexed by the question:  how did Australia manage to enjoy uninterrupted economic growth for a period of 14 years?

It is the same question that John Kay attempts to answer on a grand scale in his much-acclaimed book, The Truth about Markets:  Why some nations are rich but most remain poor.

The explanation for Australia has been given in its most elegant form by Gary Banks, the Chairman of the Productivity Commission.  The relaxation of constraints on our economy -- such as floating the dollar, reducing tariffs, forcing competition, privatising government business and freeing up the labour market -- has stimulated action.  But what did we actually do?  These explanations always seem to be the equivalent of giving the patient plenty of fresh air or some really nasty medicine to treat the symptoms.  Thus it was a delight to discover The Truth about Markets and to be carried to a fuller explanation of economics in its broadest context.

Successful economies are very complex.  It is not merely the availability of capital, labour and technology that creates success, but rather social, political and cultural institutions interacting in an economic environment.  The book is a mix of example and explanation with a few scattered statistics.  Starting with a list of 19 rich countries, it is striking to see that only six are outside Europe -- Australia, Canada, the United States, Japan, Singapore and Hong Kong.

New Zealand is not on the list and is described as on the way down.  "If ever a country has been run by economists, it was New Zealand.  From 1984 to 1999 New Zealand followed policies of privatisation and deregulation. ... During this period the country experienced the worst economic performance of any rich state".

Various fundamental issues are discussed, sometimes with delicious illustrations.  The UK Whitehall mandarins are not spared as Kay describes the nuclear planning disaster of Advanced Gas Cooled Reactors.  Nor, for that matter, are idiosyncratic tycoons treated any better.  Kay eloquently illustrates how the scale of economic and business decisions determines big success and big failure.  But, on the other hand, he contrasts this with the Hayekian tenets of diverse, independent decision-making and spontaneous order in the Information Age.

It is distressingly easy to find Australian examples of centralised planning of the sort Kay criticises.  From railways and dams to ethanol and windmills, our politicians continue to pick winners.

But the prize would probably go to those who have sought to regulate communications and media.  They have an almost perfect record of getting things wrong -- starting with early radio regulations of one receiver set to a radio station through to the introduction of high definition digital television.

Perhaps the most interesting chapters cover the attempted development of the poor states, as Kay's analysis helps illuminate the economic forces that created the established rich states.  The discussion of early theories of development and whether countries can be lifted to the wealth and standards of the richest states shows how the complications of economic growth frequently confound the best and brightest of planners.  This does not bode well in the medium term for our nearest neighbours.  His conclusion says it all.

Rich states are the product of -- literally -- centuries of co-evolution of civil society, politics and economic institutions, a co-evolution that we only partially understand and cannot transplant.  In the only successful examples of transplantation -- the Western offshoots -- entire populations and their institutions were settled in almost empty countries.

Kay's conclusions are controversial -- any explanation of institutional economics is bound to be -- but it is a stimulating and fascinating book with clear explanations helped by some of the best examples drawn from the way we live now.

The strange allure of cruel dictatorships

Mao:  The Unknown Story
By Jung Chang and Jon Halliday.
(Jonathan Cape, 2005, 814 pages)

To much fanfare and international recognition, Jung Chang, author of the all-time best selling non-fiction work Wild Swans, and her British husband Jon Halliday have co-authored a definitive history of Mao Tse-tung.  The book has already been flagged as the best political history published this century.  This is not mere historical revisionism;  it indeed could claim to be the definitive corrective of just exactly how monstrous a tyrant Mao was.  Relentless in its depiction of the biggest mass murderer of the twentieth century -- more than 70 million deaths in peacetime -- it focuses very much on Mao the man.

Although just over 800 pages and with copious notes and documentation, this book is for the general public.  It reads as a compelling narrative and is told in the accessible style of Wild Swans.  One of the strengths of the book is that there is no facile moralising.  The authors simply describe a man according to the lights of the people who knew him, or who met him.  This has not stopped the inevitable apologists claiming that it is a calculated demolition job.  After all, Chang's own family were victims, so this must be her "revenge".  In response, Chang is at pains to point out that the book overwhelmingly rests on documented facts and primary sources.  She explained in one Melbourne interview that "the book is not a polemic.  It is a straightforward story with facts.  Readers can draw their own conclusions".

Between them, the authors travelled through China and interviewed over 150 family relatives of Mao, his friends, colleagues, personal staff and members of the top echelon of the Party.  These people had never before talked about Mao on the record.  Although the authors give the reader little alternative explanation or a wider historical context for Mao's actions, it is hard to resist the picture put before us.

The compelling conclusion is simply worse than most of us could imagine:  Mao was totally cynical and unscrupulous.  He survived precisely because he was more ruthless than anyone else he encountered, including Stalin.  Mao, from these direct accounts, had a seamless life of cruelty waged against friend, foe and family alike.  To make the assessment worse, it turns out that there was not even a vestige of ideological belief -- Marxist or communist -- nor idealism of any sort.

The most chilling assessment of Mao was given in detail by the man himself.  In 1918, at the age of 24, Mao wrote in his diary:

People like me only have a duty to ourselves;  we have no duty to other people ... Of course there are people and objects in the world, but they are all there only for me ... Some say one has a responsibility for history.  I don't believe it.  I am only concerned about developing myself ...

On death and killing others:

Human beings are endowed with the sense of curiosity, why should we treat death differently.  Don't we want to experience strange things?  I think this is the most wonderful thing ...

Right from his earliest years, the story traces Mao's psychopathology and his cruelty to others.  It starts with him as a child with his immediate family, then moves to his professional colleagues and allies as they were systematically betrayed for Mao's personal hunger for power, money and domination.  He was totally pragmatic.  Very early in his long life, he had found an easy way to obtain money and do no real work.

Mao's treachery is illustrated during the course of the Long March, where he made his troops march for months through fruitless detours -- thus sacrificing thousands of scarce fighting men -- to serve no other purpose than to advance his bid for leadership.  In another episode near Banyou in 1935, Mao connived, lied and menaced to force Kuo-tao, then military supremo of the main communist force at the time, to take his troops through marshes where there was neither food nor villages.  Mao even urged him "to bring all the wounded and sick who can manage to walk" in a deliberate desire to inflict maximum suffering.  Mao's aim was simply to stall him and consolidate his own position.

In the Great Leap Forward, many of the disasters and hare-brained ideas could have been avoided altogether if it were not for Mao.  He simply did not listen to expert advice.  Rules and commonsense were cast aside when steel mills were required to double production.  As Chang writes, "Mao set the tone for discrediting rationality by saying the "bourgeois professor's knowledge should be treated as dogs' fart, worth nothing, deserving only disdain, scorn, contempt ... As a result, so many of the efforts, at the cost of hundreds of thousands of lives and the suffering of millions, came to nothing.  Backyard furnaces produced steel that was unusable.  Canals and irrigation schemes, often dug with bare hands, were abandoned as useless because of a lack of planning and analysis.  The famous drive to eliminate sparrows caused ecological disaster;  pleas from scientists were ignored.  Over four years from 1958, about 100 million peasants were coerced into such projects, moving a quantity of earth and masonry equivalent to excavating 950 Suez Canals, mostly using their own hammers, picks and shovels, and providing their own food and shelter.  Mao knew precisely and proudly just how many deaths went with each billion cubic metres of soil.  When senior officials in the Gansu province appealed against "destroying human lives" in these projects, Mao had them condemned and punished as a "Rightist anti-Party clique".

The great purges that typified Mao's rule are described in brutal detail.  His distinctive form of terror was to get people to use it against each other.  He perfected this method in Yenan, where everyone was coerced into the exercise of criticism and self-criticism by confessing and implicating each other in terrible "wrongs".  This method, with associated horrendous torture and slow and terrifying death, was extended from Mao's closest colleagues to the whole of China.

Mao's megalomania, his mind-boggling use of resources for his own comfort -- massive and expensive houses built throughout China that he barely used, entire factories set up to ensure him of his own supply of a particular rice, or elaborate printing works constructed to print exclusive editions of just five copies for himself -- are truly stupefying.

One surprising anecdote for this reviewer was the extent to which Mao succeeded in manipulating Richard Nixon through the famous "ping pong" diplomacy and subsequent first trip to Beijing, and just how shoddy was the humiliating treatment Nixon endured in private meetings with him in front of Kissinger.  The book also shows just how much this meeting and the subsequent seduction of the United States played in projecting a benign image of Mao so much at odds with what we now know.

What is left today of this legacy?  Three decades after his death, Mao Tse-tung is still officially endorsed by the present Chinese government, with his bland face hanging in Tiananmen Square and adorning every banknote.  Although it is certainly true that China has changed from the bad old days, the recent defection of a Chinese diplomat in Australia is a contemporary reminder of the nature of the Chinese Communist Party and the way it deals with minorities such as the Falun Gong.  Moreover, the recent demand for independent Chinese bloggers to register with the government -- together with Microsoft's recent admission that its Chinese blog site would block titles such as "freedom" and "democracy" in the country's efforts to control the Internet -- are signs that there is still a long way to go.

One wonders if a book like this will dent the popularity of Andy Warhol's Mao silk-screen prints that passed the $100,000 mark at the New York auction houses some years ago.  However, when some critics can claim that the book is "part of an ideological offensive by capitalism to destroy not just the legacy of Maoism but also the idea of the planned economy and socialism", there is certainly resilience and chutzpah amongst the believing classes in the West.

Dancing on the grave of employment

Chris Berg reviews
Independence and the Death of Employment
By Richard J. Wood
(Voltan, 2005, 207 pages)

William is a 24-year-old shearer from Queensland.

I've worked on shearing teams which are staunch in their observance of the [industrial] Award.  They have the 3 minute bell which is a warning to all the shearers that the end of the run will happen in 3 minutes and they have to finish up their last sheep ... They do not do any weekend work or extra hours during the week or any hours outside the exact allocated hours in the Award ...

However, this is too restricted for me.  I would rather have the choice whether I wanted to work weekends.  I believe it is up to the individual ... I believe that if I want to work weekends then that should be okay.

This attitude is repeated in dozens of industries all around the country.  Independent contractor status is, as Richard Wood's new book Independence and the Death of Employment makes clear, increasingly seen as a more flexible alternative to traditional, heavily regulated employment structures.

And independent contracting status, while the most obvious manifestation of this new attitude to work, is by no means the only one.  Wood notes the existence of "independent employees" -- workers who work in firms, and are nominally under the command-and-control contract and structures of employment, but in their "actions, desires, thoughts and ambitions" are independent none the less.  These workers can be a firm's greatest asset but also its greatest weakness:  endlessly creative and innovative if the incentives are right, but resistant and often resentful at having their actions controlled.

Wood's book is a comprehensive, paradigm-shifting overview of these and a countless range of other issues, essentially trying to answer the basic question, "what is employment?"

Most economists tend to think of employment as a work-for-pay relationship.  But Wood suggests that this is incorrect.  He alleges that employment is a relationship of legal and behavioural control -- precisely the argument that the labour Left have been pounding away at for centuries.  The evolution of legal precedent and the formalisation of industrial relations in dedicated bodies has rigidly defined employment in this way.

Employment law distorts many of the objectives of work regulation.  In the context of the law, employees are considered witless and lacking in control.  The employer is supposed to be responsible for their witless employees.  Independence and the Death of Employment controversially argues that employment degrades human beings and removes responsibility.

Employers take the blame for employees' actions -- discrimination or for breaking work safety instructions.

But this is merely the framework with which the legal system approaches employment.  Wood's argument is that the experience of employment is quite the opposite.  Independent contractors and the phenomenon of "independent employees" belie the fact that a job is more than mere servitude.

Career desires, power urges, ego trips and personal self-interest are the dominant motivations in the firm.  Individuals in the firm will be ambivalent toward the firm's making losses if the individual is unaffected.

Economists have long recognised this as an agency problem -- managers, for example, don't always operate in the interests of shareholders.  But the solution is not more highly regulated employees but allowing greater independence, which workers are already striving for, to create the appropriate incentives for mutual benefit.

And the legal framework and regulatory impulses of government which surround employment must catch up.  These are changes that are being made already -- sometimes against great resistance.  The Queensland shearers' desire to practise as independent contractors formed the backdrop to an eighteen-month legal case between the Australian Workers Union and the State of Queensland.

Independence and the Death of Employment is a combination of manifesto, self-help book, and rigorous analysis.  It represents a massive shift in thought on labour regulation and employment, and will be heavily scrutinised and criticised by analysts from across the political spectrum.  But whatever change it represents in intellectual thought, it is dwarfed by the massive change in how Australians work today.

I'm sad because you have a red Ferrari

Happiness:  Lessons from a New Science
By Richard Layard.
(Alan Lane, 2005, 310 pages)

Seven hundred and fifty actors and actresses have ever been nominated for an Academy Award -- those who won an Oscar lived, on average, four years longer than those who had been nominated but didn't win.

How happy you are in the your twenties is a good predictor of how long you will live.

The Himalayan country of Bhutan had banned television and public advertising until 1999.  When the ban was lifted, the crime rate rose and drug-taking increased.

According to Richard Layard, an economist at the London School of Economics, former adviser to the Blair Government in the UK, and now a member of the House of Lords, "happiness" can be scientifically determined by measuring electrical activity in the brain.  We might not know exactly what happiness is, but we know it when we've found it.

It is with information such as this that Layard constructs his argument that the goal of government should be happiness for all.  Money doesn't buy happiness, therefore governments should abandon their concentration on economic growth and instead focus on generating happiness.  The way to do this is for governments to create the concept of "the common good" whereby individuals stop competing with each other and instead learn to co-operate.

Layard suggests, presumably in all seriousness, that a solution to the problem of competition for status and money is "a collective agreement to limit the race of all against all" -- but he says that, sadly, such an agreement would never work because "there are just too many people to make such an agreement possible".  Layard doesn't seem too bothered by the fact that such an agreement would involve interference with individual rights on an almost unprecedented scale.

He freely acknowledges that his greatest happiness for all principle is utilitarian in the extreme, and utilitarianism has always had problems accommodating personal liberty.  Layard discusses the legacy of the first great utilitarian, Jeremy Bentham, who claimed that the best society was one in which the citizens were the happiest -- "the greatest happiness for the greatest number".  Such a philosophy was profoundly egalitarian because the happiness of the richest person had the same weight as the happiness of the poorest, but the problem with utilitarianism -- and the reason why Bentham's disciple John Stuart Mill rejected it -- was because it was fundamentally illiberal.

On a strict application of utilitarianism, if society were comprised of three people, and two people gained happiness through the infliction of pain on a third, there would be nothing objectionable in such an outcome.  There is no scope in utilitarianism for individual rights.  Similarly, in Layard's preferred society, individuals shouldn't be allowed to work to earn money to buy a red Ferrari, because he believes, first, that red Ferraris don't make people happy anyway, and second, that those of us who don't have red Ferraris are jealous of those who do.  What Layard would like to do is not necessarily prohibit us from buying red Ferraris (although one suspects he wouldn't be averse to such a ban).  He suggests that taxes should be increased so that individuals are discouraged from working too hard, and he says that taxes are good because "they are holding us back from an even more fevered way of life".

Layard cites various studies which show that, while in recent times we have got wealthier, we haven't got any happier -- and that people may actually be less happy than they were in previous decades.  For example, the incidence of clinical depression has increased since the Second World War.  From this he concludes that increased wealth is the cause of many of our problems.  But even though events may correlate, that obviously doesn't mean that they are casually related.  It could just as easily be said that the creation of the modern welfare state has resulted in a higher rate of depression.

For those who believe that the fall of the Berlin Wall signalled the triumph of liberal political ideas and free-market economics -- think again.  In a feature about him on ABC Radio earlier this year, Layard announced that civil servants in Britain were "taking some interest" in his ideas.

Baby boom or baby bonus?

What, no baby?  Why women are losing the freedom to mother, and how they can get it back
By Leslie Cannold.
(Curtin University Books, 2005, 336 pages)

"There is never a convenient time to have a baby", the young mother said to me, "and once you get over that, it's fine".

According to Leslie Cannold, it's far from fine.  The hurdles that Australian society places before women of child-bearing age mean that many will never have children.  The problem is not a lack of desire to reproduce, but circumstances that stifle the birth rate.

What, no baby? is well researched and scholarly, and written with humour and flair.  It includes a thorough but non-obtrusive literature review and engaging personal interviews.  Cannold considers recent media commentary on women's childlessness.  This includes a well-deserved bucketing of journalist Virginia Haussegger who, in 2003, wrote in The Age that it was feminism's fault that she was not a mother, and that no-one told her she would run out of time to get pregnant.

Australia's birth rate has declined for decades, and Cannold considers the women behind the statistics.  Few have made a genuine choice, she says, that is, "a decision a person makes when she has a full range of possible options from which to select, and is equally free to choose any one of them".

Her assumption is that most women want to work and mother, or must do so.  Little consideration is given to women who want to opt out of the workforce after starting a family.  In fact, Cannold makes the provocative statement:  "When women do nothing but nurture, they miss out on the sense of mastery that comes from meaningful and valued involvement in the work of society".

The most family friendly nations -- where women have comparatively generous paid maternity leave;  access to low-cost childcare;  support to maintain paid work;  and male partners who significantly contribute to domestic chores -- are those with the highest birth rates.  Cannold seems to believe that the societal conditions mean that women, knowing of the support structures available to them, are confident to become mothers.  I wonder if this could be too simple an assumption.  Leaving aside the reinforcement effect of the policies, did they cause the behaviour, or did they follow it?

Australia's now-rising birth rates also offer a practical challenge to Cannold's thesis that a significantly more family friendly society is the answer.

In the twelve months to September 2004, 255,000 births were recorded in Australia -- the highest number of annual births in almost a decade.  This rise preceded the Federal Government's $3,000 baby bonus, which commenced in July 2004, and it is expected that annual birth figures will continue to rise.

In fairness to Cannold, it's unclear whether Australia's recently increasing birth rate is a true reversal of the trend.  It may represent a catch-up for women of my generation, who have delayed rather than discounted having children, but will probably still have fewer children than our mothers' generation.  The current rise in births may yet taper out.

For Cannold, there are two groups of "circumstantially childless" women:  thwarted mothers and those who wait and watch.

A thwarted mother wants a child, but is stopped by practical barriers.  This may be the breakdown of a long-term relationship, just as children were planned, as the thwarted mother-to-be approaches her late thirties.  For waiters and watchers, the circumstances are never quite right.  "They neither pursue [motherhood] nor actively avoid it;  they simply wait to see how their feelings and their circumstances develop".

It's not clear how changes to government policy, or more supportive partners, could really make this group get on with it.  Is the answer really that many don't want to be mothers, but don't feel comfortable admitting it?  There are practical problems with assessing this, and Cannold rightly criticises a post-feminist tendency to label almost all childless women as having chosen this outcome.  Nonetheless, surely it is not the role of governments actively to push women to have children when, frankly, they seem very half-hearted about the prospect of being mothers.

Aside from this reservation, What, no baby? is a strong and considered contribution to the debate.

Deregulation is no pipe-dream

Premier Peter Beattie campaigns in elections as Queensland's Sir Galahad, saving voters from his own government's depredations.  Incongruous as this may be, it differs little from the detachment of our elected leaders from their own decisions and outcomes when addressing business regulation.

Politicians recognise that red tape ties people up in needless and usually counterproductive activities.  And they see red tape as costly.  Yet they see themselves as only vaguely connected to these outcomes.

Moreover, their deregulation proposals are often coupled with new proposals and rules for business.

Thus, doffing its hat to deregulation, the ALP federal platform says that Labor will introduce "business regulation only to the extent necessary to protect the public interest and the interests of employees, shareholders and investors".  But even that insipid assault on regulation is qualified;  in the next breath the platform announces a plethora of new policies for environmental enhancement, job creation and pursuing the new Holy Grail of "corporate social responsibility".

The federal government's arsenal of deregulatory measures, under prodding by the Business Council of Australia, is reportedly being revived.  This is in contrast to many of its policies which exhibit a curious wish to micro-manage.

On climate change, there are some 50 different regulatory measures designed to reduce the level of emissions of carbon dioxide.  Yet the most junior graduate recruit could easily demonstrate that, if reducing carbon dioxide emission was a worthwhile policy goal, all of these programs should be jettisoned and replaced by a single carbon charge.

Similarly, the federal government seems intent on increasing the Australian Competition and Consumer Commission's regulatory role extending it to every price proposal Telstra makes and threatening to set it loose on the Queensland ports.

This is notwithstanding the ACCC's failings in economic expertise when it comes to other areas that fall within the commonwealth's bailiwick, such as airports and gas pipeline regulation.

Recently, influential ALP policy innovators have been most active in revisiting the issue of regulation.  Shadow treasurer Wayne Swan has publicly recognised "the creeping tide of regulation and the inadequacy of procedures to ensure the benefit of any new regulation outweighs the cost to business".  He also foreshadows proposals to reform the regulatory impact statements process.

The Bracks government assumed a high profile in promoting regulation reform even before the Business Council.  With the Victorian Competition and Efficiency Commission, Victoria has tough vetting machinery to police new regulatory proposals.  That agency, in its first major review, questioned the merits of a poster-child piece of government regulation, the five-star energy efficiency requirements for new housing.

Premier Steve Bracks and Treasurer John Brumby have also called for a "third wave of national reform".  This is bigger on concepts than on detailed reform measures.  And its deregulatory thrust is inconsistent with the Victorian government's frequent inability to resist pressure groups' calls for new restrictions, whether in the form of banning genetically modified food technology or delaying approvals for an upgraded coal-fired power station.

With his record, Bracks's challenge to Prime Minister John Howard to support a 25 per cent cut in regulation smacks of chutzpah.  Even so, he deserves high marks for placing the matter on the table.

Regulation is not some abstraction that politicians have discovered and can eradicate.  It gives expression to the laws that politicians themselves make.  It is idle for those in government to rail against regulations that prevent farmers from chopping down a tree, or a new radio station from operating.

Twenty years ago, the first commonwealth regulation review list included export controls.  The prices that companies negotiated for coal and other mineral exports needed ministerial approval.  In those days, politicians and public servants thought they had superior commercial skills to businesses.

We have made progress in liberalising businesses to make their own pricing decisions.  But environmental, consumer and workplace regulations continue to mount, and new deregulatory initiatives are needed to restore a more limited form of government with all the advantages this brings in terms of personal and economic freedom.

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