Drivers deserve and need better roads

A leaked version of Melbourne's latest draft transport plan placed its focus on "congestion-busting".

One suggestion was to reduce congestion by building fewer roads.  Another was to discourage drivers from shopping trips during the day by reducing speed limits.

The apparent strategy is to make road use sufficiently unattractive so that people will give up using their cars and wander over or cycle to the local shops and "activity centres".

The leaked draft plan follows an all-too familiar theme.  It panders to noisy anti-car groups who want to force a greater use of public transport, plus more cycling and walking.

But cars (and commercial vehicles) are basic to Melbourne's liveability because modern cities have highly dispersed destinations.  Even the most efficient public transport struggles to serve the nine-tenths of trips that don't radiate to the city centre.  As a result, trains, trams and buses account for only 10 per cent of our trips.

Cycling features prominently in government transport plans though it represents only 0.6 per cent of trips.

Cycling also attracts a disproportionate level of funding -- before Christmas, Federal Transport Minister Anthony Albanese, as part of the "infrastructure stimulus", announced funding for more than two dozen new bicycle paths.

But, unlike heavily taxed motor vehicle users, cyclists pay no direct costs.

Even excluding general taxes on motor vehicles, specific road use taxes in Australia (mainly fuel excise and licensing) collect far more revenue than is spent on roads.  Car use is milked by governments to bankroll other spending.

Siphoning off revenues raised by the motor vehicle user eventually impacts on road speeds and travel times.  And getting around the city, especially in the journey to work, is taking longer.

In 2006 people spent 40 per cent more time travelling to work than 15 years earlier.  Travel speeds for Melbourne car trips have not improved since 2003 while trips have become longer.  Nor have public transport speeds improved -- we have faster trains but trams have become slower.

It's a cliche that time is money but cities exist and prosper precisely because they allow fast personal and commercial interaction.  Where travel times increase, cities work less well and decline in relative and sometimes absolute terms.

Road capacity therefore needs to keep pace with users' needs.  The consumer/taxpayer is demonstrating a willingness to finance more and better roads, including within urban areas, with their outlays in fuel excise, licence fees and tolls.

Rather than using this revenue on road expansion, the Victorian Government may be preparing us for additional road use taxes masquerading as "congestion charges".

Aside from the fact that motorists already overpay for roads, the problem with a congestion tax is the government monopoly over roads.  This gives governments an incentive to skimp on new building in order to increase its revenues.

Instead of penalising car use, governments should deliver road users the services their taxes are paying for.  Failure to do so not only robs the car and truck user but also undermines the efficiency of the city and its wealth-promoting abilities.

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Climate target is foolhardy

As a face-saver to December's collapse of the world climate negotiations, governments agreed to the Copenhagen Accord.  This had vague provisions to pursue measures to limit global temperature increases to 2ºC.

The accord offered no guidance as to how this might be achieved but did say it would involve deep cuts in emissions of carbon dioxide and other greenhouse gases.  Accordingly, developed country governments agreed to lodge quantified measures they would adopt to reduce their emissions by 2020.

Australia has made an unconditional commitment to reduce emissions by 5 per cent on 2000 levels, agreeing to increase this to 15-25 per cent, conditional on an international agreement.  By comparison, Canada has agreed to a conditional reduction of 17 per cent on 2005 levels;  the EU a conditional 20-30 per cent on 1990 levels;  Japan a conditional 25 per cent on 1990 levels;  New Zealand a conditional 10-20 per cent on 1990 levels;  Norway a conditional 40 per cent on 1990 levels;  Russia a conditional 15-25 per cent on 1990 levels;  and the US a conditional 17 per cent on 1995 levels.

Australia is the only jurisdiction to have offered an unconditional reduction in emissions by 2020.  This commitment has problems.

The first is that it is based on proposals that have been voted down by parliament and which, though being re-submitted, seem certain once again to be rejected.  Hence, not only has the Rudd government uniquely offered to deliver something unconditionally but parliament has denied it the offer it has made.

It may be argued this doesn't matter as there is bipartisan agreement for a 5 per cent cut in emissions by 2020.  At the end of January, the Coalition announced similar goals to those of the government in its climate policy.

However, this is invalid for two reasons.  First, the government lodged its commitment before it knew of the Coalition's plans.  Second, the government has maintained the Coalition's policy will not achieve the goal it has set.

It may be argued the global warming negotiation system is a meaningless farce and everybody is merely posturing.  But no other country has offered an international commitment it cannot keep.  Instead, they have ensured they would not be held to account for missing any 2020 targets they might set themselves.  Their submissions were accompanied by conditions.  Japan's offer is "premised on the establishment of a fair and effective international framework in which all major economies participate".  Canada's commitment was, "to be aligned with the final economy-wide emissions target of the US in enacted legislation".  Even the EU stipulates "that other developed countries commit themselves to comparable emission reductions and that developing countries contribute adequately".

In contrast, the Australian government has chosen to offer a firm commitment that is quixotic.

Gesture diplomacy of this nature must have repercussions on our credibility.

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Activist left's global agenda

The great divergence between classical liberals and their philosophical opponents has always been the primacy placed on freedom in people's lives and enterprise over the coercive hand of government.

Classical liberals argue government's role should be limited to creating the framework for a market economy rooted in property rights to deliver prosperity, and a free society that respects choice and empowers individuals to unleash their maximum potential.

Conversely, the Left has always seen freedom as dispensable in pursuit of goals of equality and social justice.

And having failed to convince people across the world that higher taxes and more regulation are good for them, it has developed a seemingly pro-choice agenda to achieve the same objectives, calling it "libertarian paternalism".

Libertarian paternalism seeks to nudge individuals toward the government's preferred behavioural choices by taxing, regulating or depriving consumers of the goods and services they would choose with free will.

Nudge theory argues that rather than banning McDonald's Big Macs the government should tax them higher than other foods, regulate their maximum salt content and restrict them being advertised.

Then if a consumer ignores government nudges and buys a KFC chicken wing, a Krispy Kreme doughnut or a can of Coca-Cola, they were always determined to do so irrespective of the consequences.

There's nothing libertarian about old-fashioned nanny-state paternalism but it hasn't stopped nudge policies being including in the Rudd government's National Preventative Health Taskforce report.

The taskforce's report recommends government use a range of backdoor measures to indirectly regulate what Australians put in their mouths.

And to push forward its nanny-state agenda, Health Minister Nicola Roxon has introduced legislation establishing a National Preventative Health Agency to implement proposals from the taskforce.

Once established, this nanny-state bureaucracy will outlive governments and exist solely to recommend how government should regulate businesses and people's lives to achieve paternalism.

Politically, nudge threatens to be the New Deal of the 21st century, granting its supporters the licence to scold opponents as indifferent to the overweight, binge-drinkers and smokers.  And the nanny state is being driven by the second battleground of the Left -- international institutions used to drive policies into domestic public debate.

UN institutions and their policy recommendations are grossly under-scrutinised because international institutions don't attract the same permanent opposition developed through parliamentary systems.

And because the permanent bureaucracies of these institutions have progressively been infiltrated by Left activists, their role has shifted from neutral administrators into policy advocacy bodies lecturing governments about what and how they should govern.

It's simply inconceivable that without UN institutions driving the debate about climate change the Australian public would be debating how to introduce huge non-revenue neutral taxes and regulations that will harm our global competitiveness.

And at the Copenhagen climate conference, 30,000 of the 45,000 registered delegates were Green-Left activists pushing for a UN treaty that sought to haul capitalism into a regulatory framework based on environmental principles.

But UN institutions aren't just driving the climate change debate.

Many of the Preventative Health Taskforce report's recommendations replicate the World Health Organisation's strategies to limit the retail sale and advertising of processed foods, and alcohol and tobacco products.

And academics and activists dismayed at the WHO's lack of binding power over governments are pushing for the formation of a framework convention on global health.

The framework would seek to bind countries on how they deliver health services and regulate food consumption to tackle obesity and binge-drinking, and further marginalise smokers.

But because the public under-appreciates the politicisation of international institutions, activists regularly cite UN recommendations to support the curtailing of freedom.

And because classical liberals have barely bothered to engage in international institutions, the Left has been given a free ride.

But drawing a line between the dots of UN proposals, there is a clear trend of incremental government encroachment on free enterprise and individual liberty that would make Fabians proud.

The challenge now for classical liberals in a world where the Left has found its messages and its battleground is how to respond.  But to date few have identified how the Left has developed new vehicles to repackage and drive its previously rejected ideological agendas.

Until classical liberals become familiar with their new battlegrounds, nanny-state paternalism will be directed by political UN bodies in Geneva and supported by libertarian paternalism foot soldiers in Australia.

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Easier zoning would deflate home prices

Australia has 11 of the world's 25 least affordable cities for housing.  The American consultancy Demographia this month released data of 272 urban areas around the world, and Sydney, the Gold Coast, and the Sunshine Coast were three of the four least affordable.  Melbourne was seventh.

The reason for Australia's high prices is extreme zoning measures, which prevent new housing developments.  Other places with similar restraints include Vancouver -- the least affordable city -- and California, Florida and Britain.

Recent data from Australian Property Monitors on house price trends across capital cities showed that, despite already being extraordinarily high, prices rose a further 12 per cent last year.  Apartment prices rose 10 per cent.

Sydney, Australia's most expensive housing market, recorded increases at about the national average.  Melbourne prices rose more than 18 per cent.

Compared with median house prices of $596,000 in Sydney and $518,000 in Melbourne, the median in similar cities, Dallas and Atlanta, was $US150,000 ($169,000) and $US129,000 respectively.

Another way of evaluating prices is to examine median prices as a multiple of median incomes.  On this measure, to buy the average house in Sydney last year required nine times average annual earnings.  In Melbourne, it was eight times annual earnings.

By contrast the average Atlanta house cost just 2.1 times the region's average annual income;  for Dallas the cost was 2.7 times the average annual income there.

For a median-priced house in Sydney and Melbourne, the standard monthly mortgage payment is estimated at $2988 and $2521 respectively.  In Dallas and Atlanta the payments are $US790 and $US680.  In terms of proportion of income, mortgages cost between 13 and 17 per cent of gross income in the two US cities, compared with more than 50 per cent for Sydney and Melbourne.

Some claim land availability limits housing options for Australian cities.  This is incorrect.  Far less of Australia is urbanised compared with other countries.  Sydney has enough developable land on the Cumberland Plain to expand the city size by 50 per cent, without even examining other possibilities.  Melbourne, like other Australian cities, has no land constraints.

The NSW Premier, Kristina Keneally, responded to the Demographia data by questioning its reliability, but there is no doubt about the accuracy of the estimates.  She claimed infrastructure costs for development outside established areas would be exorbitant, and that the energy usage accompanying such development would be excessive.  On neither count is she right.

Infrastructure costs of new developments on the urban periphery are generally lower than those involving redevelopment of so-called brown-field sites within the city's existing area.

As far as energy consumption is concerned, the Premier's view is contradicted by an unlikely source.  The Australian Conservation Foundation documents greenhouse gas emissions by suburb, which is a proxy for energy use.  In inner Sydney there were 37 tonnes of greenhouse gas per capita.  In inner-west Burwood it was 22 tonnes, in outer-west Parramatta 20 tonnes and on the fringe at Campbelltown 16.68 tonnes.

Similarly in Melbourne, central Port Phillip had 27 tonnes per capita, inner Darebin had 23 tonnes and outer Melton 18 tonnes.  The reasons behind such differences are many, but include increased energy spent on clothes drying and heating, and lifts and lighting in apartment blocks.  Contrary to many misconceptions, few people in the outer areas take long energy-intensive daily commutes by car to the central business district.

Those areas in the US where punitive zoning is not in place have been dubbed "flatland" by the economist Paul Krugman.  He recognised the housing boom and the bust last year were confined to that half of the US with highly restrictive land use regulations.  The prices in these land-restrained places collapsed as a result of the US recession.  However prices showed little movement in Texas, the Carolinas and other areas where re-zoning is readily approved.

Houses in Australian cities have seen price rises similar to those US areas where strict zoning approvals are in place, but because Australia has had only a mild recession, property prices have remained relatively stable.

These matters aside, the planning regimes throughout Australia disadvantage new homebuyers.  While our land preparation and house building industries are as cheap as anywhere in the world, the planning and zoning stranglehold on land releases pushes up prices to astronomical levels.

Experience reveals the thicket of regulations impeding planning approvals is impenetrable even to provisions explicitly designed to override them.  And homebuyers suffer.

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In for a penny, in for a pound and the splurge goes on

The Federal Government's fiscal response to last year's global financial crisis reveals the problems posed by adopting outmoded approaches to economic policy.  In the teeth of what was described by Prime Minister Kevin Rudd as an "economic cyclone", the Government made a host of decisions in an effort to stimulate economic activity.

In October 2008, an "economic security strategy" was implemented, at a cost of $10.4 billion.  This was followed in February 2009 by a "nation building and jobs plan", a $42 billion spending catalogue of shock-and-awe proportions.

A year on from the final component of its stimulus strategy, the Government is now crediting itself with ensuring that Australia avoided a technical recession and securing a lower than expected unemployment rate.

It is clearly impossible to ascertain the economic impact of a more restrained approach, with the Government having made its fiscal choice for substantial spending.

However, detailed analysis of the stimulus packages by a number of Australian economists suggest that the Government's fiscal strategy in its current form may have caused more long-term economic harm than good.  It is inconceivable that the stimulus would sustainably boost national income, or that the multiplier effect of Government spending is greater than one, given that the expenditures are financed by taxes or public sector borrowings (implying higher future tax burdens).

In other words, the Government stimulus is merely of a redistributive nature, with a handful of economic activities preferred by policymakers undertaken at the expense of taxed non-beneficiaries spread across the rest of the community.

According to the latest report from the Commonwealth Coordinator-General, the stimulus packages have supported 200,000 jobs.  Taking the Government's estimates at face value, this represents an average cost to taxpayers of at least $262,000 a job.

With more than 10 million Australians in employment, there were effectively many who missed out on the Rudd Government's fiscal game of pass the parcel.

The Government recently highlighted the need for improved market productivity to meet the economic challenges of an ageing population.  However, it is doubtful that stimulus measures such as subsidies for insulation batts, funds for duplicated school halls or $900 pre-Christmas cash giveaways would rate highly in any self-respecting economist's list of productivity enhancing initiatives.  Indeed, it is estimated that only 14 per cent of the $42 billion stimulus is being directed to economic infrastructure, such as road and rail.  Even so, no cost-benefit analysis of such projects has been published to facilitate external scrutiny of their economic impact.

The Keynesian stimulus approach adopted by the Government has also bitten off more than it can chew when it comes to fiscal sustainability.

Discretionary spending has played a role in plunging the budget into an expected $54 billion deficit this year, together with a $200 billion net debt that will not be repaid until 2021-22.

Some economists argue that such fiscal outcomes do not matter.  We can simply wait for the cavalry of economic growth to arrive, driving up revenue collections to convert a budget deficit back into surplus.

Public debt is immaterial because we owe it to ourselves.

These claims do not stand the test of scrutiny.  Budget deficits matter to the extent that they affect the efficient allocation of resources in the real economy.  Higher revenues would be collected from some individual or business that may be less inclined to invest, save or work longer.

The higher level of spending facilitated by a budget deficit could be allocated to inefficient ventures, and the size of government also increases with adverse consequences for long-term growth and productivity outcomes.

It is also well known that persistent budget deficits tend to crowd out private sector investment, as the public and private sectors increasingly compete for loanable funds in constrained credit markets.

The consequent higher interest rates would tend to facilitate an exchange rate appreciation, in turn reducing Australia's net exports.

Public sector debt has similar economic consequences to recurrent budget deficits, with the added penalty that future workers who did not politically consent to the borrowings have to shoulder the burden of repaying the principal and interest on the debt.

With the recent assessment by US think tank the Heritage Foundation that Australia is the most economically free nation on earth, aside from the Hong Kong and Singaporean city states, it is appropriate to consider what role supply-side reforms since the early 1980s have had to play in driving current economic outcomes.

For a start, the depreciation of the floating Australian dollar through the second half of 2008 buffeted exporters from the worst of the global economic downturn.  However, this beneficial impact did not last as subsequent interest rate increases led to a more subdued export performance in recent months.

There has also been much anecdotal evidence that employees and employers had taken advantage of a more deregulated labour market to revise working conditions in the face of a subdued economy.  This allowed more workers to keep their jobs, in turn enabling more businesses to keep their doors open, than would otherwise have been the case.

However, the industrial relations policies of the Rudd Government will increasingly weaken the effectiveness of the labour market to flexibly respond to economic changes, at least without creating fresh inflationary pressures throughout the economy.

Industrial strife afflicting Western Australia's mining industry is a warning signal of the potential pressures ahead.

Twelve months on it remains essential to ask why did the Government pursue Keynesian fiscal policies, a prescription to macro-economic management repudiated by the 1970s stagflationary episode?

The key to answering this question perhaps lies in observations made after the cessation of the Cold War by James Buchanan, founder of the public choice school of economics.

Buchanan pointed out that while the fervour for socialism in the economic realm had faded, there has been an unwillingness to fully embrace alternative market approaches.

According to Buchanan, "politics will not work, but there is no generalised willingness to leave things alone".

To put it simply, reflexive political intervention in economic markets remains alive and well.  This provides a breeding ground to implement "go early, go hard and go household" policy exhortations, not only at the expense of taxpayers but the long-term productive fitness of Australia's market-based economy.

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Folly of focusing on Joyce

The Canberra press gallery has peculiar priorities.  This week we've found out that the national broadband network hired a Labor mate to a $450,000 a year job without advertising the position and without interviewing any other candidates.

We have also discovered that a federal government scheme to subsidise household solar panels, estimated to cost $150 million over five years, has in fact cost $1 billion in 18 months.  That's a budget blowout of more than 600 per cent.

This comes on top of the deaths of four people while working on a government scheme to install insulation in homes.

Then to cap it off, the Prime Minister goes on the ABC's Q&A program on Monday night and comes up with lines such as unemployment in Australia is "the second lowest of all the major advanced economies in the world".  Which is not true.  Japan, South Korea, the Netherlands and Austria, for example, have lower unemployment rates.  The PM also claimed:  "My predecessor ripped a billion dollars out of the public hospital system."  In fact over the life of the Howard government, funding to public hospitals doubled.

But who does the Canberra press gallery want sacked?  Barnaby Joyce.  Why?  Because a few days ago Joyce, as shadow finance minister, raised the possibility of Australia defaulting on its sovereign debt.

"Foolish", "farcical", "crazy", and "dangerous" are some of the media's descriptions of Joyce's comments.  There's no doubt that Joyce's remarks were foolish.  And naive.  And the attention they generated distracted the focus from a more legitimate argument about the effect of government borrowing on interest rates.

Joyce's mistake was to construct a thought bubble in public.  And he's got form.  Restricting foreign investment, and breaking up the Big Four banks have been the subject of some of Joyce's other thought bubbles.  To a certain extent the problem is not so much that he's willing to engage in contemplation of this kind, but that he's pondering ideas that are quite contrary to what coalition policy should be.

The irony is that on some issues Joyce is excellent.  He's one of the few MPs willing to speak out on how environmental regulations are eroding landowners' property rights.  And to declare himself sceptical about the science of climate change.

It seems that when it comes to Joyce, the media hold him to a higher standard than his government counterparts.  If Joyce had made any of the sort of the factual errors that Rudd committed on Q&A, the pressure on Tony Abbott to sack him would have been irresistible.

Joyce is branded as incompetent because he confused billions and trillions.  Meanwhile his opposite number, Lindsay Tanner, is happy to wave through the largest infrastructure project in the nation's history, the national broadband network, without any sort of cost/benefit analysis whatsoever.  Surely Tanner's job as Finance Minister is to do exactly what he doesn't appear to be doing.  Peter Garrett as Environment Minister is getting the blame for the cost overruns of his green loans scheme, but the question has to be asked, what was the Department of Finance and Deregulation doing while the Department of the Environment, Water, Heritage and the Arts was going $850 million over budget?

In December last year, when Joyce contemplated requiring the major four banks to divest their assets to promote competition, Financial Services Minister Chris Bowen went on ABC radio's AM program complaining of Joyce's "irresponsible thought bubbles".  Bowen accused Joyce of thinking "that it's fine for Australian governments to go in and break up existing businesses.  We [the Labor government] have a different view".  Bowen is right.

However, the interviewer failed to ask Bowen why he was outraged by Joyce's suggestion that the banks be broken up to generate competition in the financial sector, yet he seemed completely comfortable with a Labor government doing exactly the same thing to Telstra.

However ill-considered Joyce's words about Australia defaulting were, the man's in opposition.  He can't actually do much.  Consider what's worse.  The shadow finance minister engaging in idle speculation on the country going broke, or the real Finance Minister allowing his cabinet colleagues to run amok?

Of course the Canberra press gallery should scrutinise what opposition MPs say and do, but there's also a government they should be reporting on.

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The wisdom of the ages

The release of the latest Intergenerational Report shows in detail why the Federal Government's policies are in desperate need of an overhaul.

Despite the natural increase of the population and steady migration contributing to a total Australian population of 36 million by 2050, it is forecast that the proportion of Australians aged 65 and over is expected to almost double to 23 per cent by the middle of the century.

This demographic ageing implies that the numbers of working-age people to fiscally support the aged will decline significantly.

Today there are five people aged between 15 and 64 to each person aged 65 and over.  By the middle of this century, there will be just 2.7 people of working age for each older Australian, the report says.

Already the messages from the Government about the appropriate policy responses to address the economic and fiscal challenges of population ageing have been mixed.

Prime Minister Kevin Rudd has talked promisingly about the need to boost productivity and engage in micro-economic reform.  The Intergenerational Report says Australia's economy could be 15 per cent larger by 2049-50 if productivity growth rose to 2 per cent a year.

But the potency of the prime-ministerial rhetoric is dulled when it becomes apparent that the Government's productivity strategy rests on spending other people's money on unproductive infrastructure, such as the national broadband network, and more corporate welfare including R&D grants.

Compounding the issue is the gap between words and deeds on the economic policy front that has already emerged, constraining our capacity to deal with long-term challenges.

For example, our ability to enhance productivity at the workplace level has been stymied by back-to-the-future industrial relations changes that have reduced flexibility and reasserted union power.  Major elements of federal stimulus spending, including $900 cash splashes, subsidies for insulation batts, duplicated school halls and ornamental local government projects, were informed by the need to spend taxpayers' money quickly rather than finding the best-value proposition.

Meanwhile, the Rudd experiment in co-operative federalism including regulation reform is failing under the weight of COAG's reform inertia.  The Government has also trotted out its advisers to test the electoral waters regarding other ways to respond to the economics of ageing challenge.

Treasury Secretary Ken Henry recently said the tax system needed to be prepared for the probability that revenue needs would grow strongly in the longer term to finance the government-provided goods and services demanded by the community.

This attempt at softening up the electorate for extra tax hits ignores the fact that the very same electorate is likely to express its displeasure against rising taxes, including through the ballot box.

The community uproar against the Emissions Trading Scheme, with the cascading revenue effect of cap and trade licences potentially raising the prices of every conceivable good and service in the country, is a case in point.

Henry's plea for additional money also ignores the global reality of labour and capital movements constraining the revenue appetites of governments.  Push taxes up too much, and people (including those of working age) and industries will either move away or not relocate to Australia in the first place.

More fundamentally, the proposition to increase taxes into the future will harm Australia's quest to improve its productivity performance.  This is because taxation distorts the economic activities of businesses and individuals, reducing the potential to reallocate scarce resources to the highest-valued uses.

Meanwhile, the Government has been fiscally preying on future generations -- that dwindling share of workers in our demographic mix of tomorrow -- by backsliding towards a fiscal regime of Budget deficits and public debt.

Young Australians yet to enter the world of work will have to shoulder the burden of repaying the principal and interest on government debt for at least another decade, if not longer.

These fiscal outcomes in response to the global financial crisis have put Australia further behind in its attempts to address demographic ageing.  The latest mid-year economic and fiscal outlook statement shows the Commonwealth expects an accrual budget deficit of $54.4 billion, or 4.3 per cent of GDP.

At the time of the second Intergenerational Report, the former Howard Government estimated the Budget would be in surplus this year to the tune of $13 billion, equivalent to 1.1 per cent of GDP.

The Treasury estimates that the fiscal gap between expenditure and revenue will approach 2.75 per cent by midcentury.  This is contingent on the Rudd Government's assumption of a return to Budget surplus by 2015-16, a highly optimistic one given the Government's propensity to spend a fiscal inheritance rather than implement deep spending cuts.

The worsening long-term fiscal outlook presented by the Intergenerational Report shows why policy actions befitting economic conservatives, in the form of lower taxes, strict limits on government spending and economic deregulation, will become increasingly vital to head off the impending fiscal crunch of ageing.

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Take the politics out of commerce, not vice versa

Last week the Australian Electoral Commission published its latest donation figures for political parties.  Donations are down from last year.  Nevertheless, these figures were accompanied by the standard appeals to "clean up" the political process and get corporate influence out of politics.

But it was also the week that the federal government introduced its emissions trading scheme into Parliament for the third time.  In the government's words, if passed, the emissions trading scheme "will change the things we produce, the way we produce them, and the things we buy".  When the government has this sort of ambition, is it really any surprise businesses are trying to influence the political process?

The problem with political donations isn't that corporations are unduly trying to manipulate laws and regulations to their benefit.  It's that politicians are trying to shape an Australia where businesses have to involve themselves in the political system or they just might go broke.

The government plans to give out billions of dollars worth of free emissions permits as part of its emissions trading scheme.  And the Coalition's policy includes an "emissions reduction fund" of about $1.2 billion per year for some companies that reduce their emissions.

So if you had an aluminium smelter, and you didn't take any politicians out to dinner in 2009, you've neglected your business responsibilities.  Your competitors will be wining and dining any backbencher they can grasp.

But some of the biggest donors this year weren't energy firms.  The banks handed over a few lazy hundred thousand dollars to the major parties.  Even while smarting from the financial crisis, the banks were self-aware enough to recognise the government's guaranteeing of their bank deposits at taxpayer expense was a great deal for their shareholders.

And they'll want a say in what comes next:  like the Senate inquiry announced last week into small business access to finance.  And whatever the government does with executive pay reform.  And the results of Treasury secretary Ken Henry's tax review.  My point isn't that we should feel sorry for the banks;  they're as protected by the government as they are regulated by the government.

But when Kevin Rudd says Westpac should have a "long hard look at itself", or when Tony Abbott hints that if he makes it to the Lodge he'll impose more banking regulation in response to the interest rate rise, what do we expect these firms to do?  Just sit back and cop whatever regulation the government deems?  Or, worse, whatever regulation their competitors convince the government to impose?

If firms aren't donating, they're lobbying.  The government's register records nearly 300 lobbying firms.  More than 1800 Australian organisations paid these lobbyists to saunter around the corridors of Parliament.  Even The Big Issue apparently feels the need for professional representation in Canberra -- the magazine is listed as a client of two of Australia's biggest lobbyists, Hawker Britton and Enhance Corporate.

It's strange that we seem to blame the companies who donate money to political parties for the corruption of our democracy, rather than the politicians who take that money and change the law to suit.  A US study last year found that for every dollar US companies spent lobbying Congress, they received $220 in tax benefits.  What firm wouldn't want that sort of return on investment?

The solution isn't to regulate political donations, or crack down on lobbyists.  We could try.  But the stakes are far too high for any limit on corporate influence to be effective.  A company that feels its entire raison d'etre could be eliminated with the stroke of a legislative pen will find a way to influence politicians, whether we like it or not.

We've gotten into this situation because of a bipartisan belief that there are no limits to what government should do -- there are almost no areas of the economy the government shouldn't oversee, regulate or direct.

So do we want commerce out of politics?  We'll have to get politics out of commerce first.

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Flexibility a key in emission reduction policy

This week in Canberra the Government and Opposition issued rival plans for handling emissions of greenhouse gases.

The policies from both sides are targeted at reducing emissions by 5 per cent by 2020.  This really means a reduction of 27 per cent in 2020 emissions per head, because the target base is the year 2000.  And if worldwide emissions are to be reduced to a level the Government believes necessary to prevent global warming, Australia's reduction will have to be 80 per cent.

Mr Rudd thinks global warming is the greatest moral challenge of our time.  He went to the Copenhagen conference on climate change last December determined to use his skills to ensure a meaningful agreement on carbon reduction.  The conference collapsed when China, now the largest emitter of greenhouse gases, refused to cut its emissions.  China recognised that such measures would undermine its economic growth.

Oblivious to these international developments, the Government is sticking to its Carbon Pollution Reduction Scheme (CPRS).  Central to this is the emissions trading system, a form of tax on the carbon component of energy.

There are different assessments of what this tax entails.  One Treasury estimate puts it as raising $16 billion a year in tax by 2020.  Treasury's modelling for the Government's Garnaut Climate Change Review put the required tax by 2020 at $53 per tonne of carbon dioxide.  This doubles the cost of electricity, taking $30 billion a year from people's pockets.  In today's money that's $1200 per person -- largely in increased electricity charges.

This is in addition to existing measures.  These include energy ratings on new houses and the requirement that forces electricity retailers to provide 20 per cent of their supplies from renewable sources.

Renewable energy is three times the cost of conventional sources.  Such measures and the various subsidies, like taxpayer-supported rooftop panels, together already amount to a $3 billion a year slug on the taxpayer and energy consumer.

The Coalition's plan adds to the multitude of programs aimed at reducing emissions but rejects the carbon tax component, which it sees as a scattergun approach.

Instead it intends to combat emissions by a series of rifle shots, costing only one-twelfth the Government's CPRS price tag.

Predictably, the Government claims the Coalition's plan would not deliver the claimed reduction in emissions.  It is probably right, but Mr Abbott's proposals have the great merit of avoiding locking in a vast new tax and bureaucratic control system that Labor's CPRS entails.

The Coalition plan provides a sort of insurance policy that can be intensified or abandoned depending on future circumstances.  This is important because Australia's emission reduction measures are irrelevant unless all countries adopt similar plans.  And the failure of the Copenhagen Conference probably rules out any prospects of an international treaty.

Moreover, almost every day brings fresh revelations discrediting the science behind global warming projections.  These have falsified forecasts about the imminent demise of Himalayan glaciers, disputed predictions of the disappearance of the Amazons rainforests and have started to question the historical data which forms the basis for any action.

All of this counsels against Mr Rudd's CPRS, which stores up irrevocable future costs.

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Our Nixonian PM

"At one time or another, he had espoused almost every worthy principle, often repeatedly," Newsweek once observed of Richard Nixon.  "But in practice he violated enough of them to make all of his protestations suspect."

Could the same thing be said about Kevin Rudd?  In Question Time this week, the rattled Prime Minister berated several Liberal MPs for changing their position on his emissions trading scheme:  "Where lies consistency?" he cried.  Never mind that Copenhagen went up in smoke and that none of the world's major polluters will cut back on the greenhouse gases that the increasingly discredited Intergovernmental Panel on Climate Change says cause global warming.  The point here is that Rudd is an opportunist of such proportions that the only thing that exceeds his reach is his grasp.

This is a man who defined himself during the 2007 election campaign as an "economic conservative", committed to low public debt, fiscal rectitude and free-market reform, but who now represents the reincarnation of Whitlamism and a big-spending, big-union, big-government, debt-ridden agenda that caused so much economic angst in the 1970s.  A man who derides the "neo-liberal" legacy of John Howard and Peter Costello, but who, like Tony Blair, has been the economic beneficiary of the conservative government that preceded him.

A man who appealed to the metropolitan sophisticates by weakening Howard's border protection controls, but who now panders to Howard's battlers by preaching a "hardline" policy against "evil" and "vile" people-smugglers.  A man who insisted before the election he'd turn back the boats, but who, a year later, laid out the red carpet to thousands of unlawful arrivals.

A man who claimed climate change was "the great moral challenge of our time", but who now, in a changing (political) climate, jettisons the evangelical language and hardly raises the subject in stump speeches.  A man who pledged to lead the globe on man-made warming, but who now tells us we will "do no more, no less than the rest of the world" -- which means doing nothing, since hopes for any verifiable, enforceable and legally binding global agreement are a chimera.

A man who promised not to means-test the baby bonus and the private health insurance rebate, but who is nonetheless now trying to do so in the Senate.  A man who railed against corporate greed and unfettered capitalism, but who is watering down already modest proposals to weaken the fat cats' ability to pay themselves obscene salaries.  A man who promised the Commonwealth takeover of the public hospitals if their performance did not improve, but who has hardly even raised the issue since he's been ensconced in the Lodge.

The power of this vacillator's U-turns and reverse gear is up to the best international standards.

Now, when I say that Rudd is Nixonian, I do not mean he is guilty of dirty tricks or obstructing justice.  I mean that, like America's 37th president, the Prime Minister has no sense of philosophical identity, conviction and inner core.  A man who commissions hundreds of inquiries and 2020-style summits but who never does anything has no true beliefs.

Looking at Tricky Dick's political career from 1947 to 1974, it is difficult to identify anything in which the disgraced president seemed genuinely to have believed other than his own political success.  One moment, he was a staunch anti-communist who championed a Pax Americana;  the next, he was a realist advocate of detente and international multi-polarity.  One moment, he was a champion of fiscal conservatism and the Jeffersonian ideal of states' rights;  the next, he was an unashamed Keynesian who centralised federal power at a rate that would have made LBJ proud.  One moment, he was Taiwan's best friend and Mao Tse-tung's bête noir;  the next, he went to Red China to sup with the devil himself.  Sure, the friction of playing the role of conviction warrior while being in reality a malleable politician was only one of many frictions that contributed to Nixon's downfall, but it played its part.

Looking at Rudd's political career since 1998, it is also difficult to identify anything he seems genuinely to believe other than his own political success.  How else to explain someone who spent years currying favour with the likes of Greg Sheridan and the Australian's editorial team on the Right as well as Phillip Adams and the Monthly on the Left.  During the past three years in the limelight -- first as opposition leader, then as Prime Minister -- he has executed one stunning U-turn after another.

Say what you like about John Howard, you always knew where he stood and what he was about.  He was an unapologetic nationalist, economic reformer and social conservative.  On several politically unpopular issues -- Iraq, the GST, Telstra privatisation, industrial relations reform -- Howard was never afraid to challenge popular opinion and provoke people into thinking and then arguing about the causes he sincerely believed were in the nation's interest.

When Rudd, on the other hand, assumes the role of tough guy on any given issue -- public spending, people-smugglers, global warming -- there is always an air of detached calculation about his performances, a sense that in different circumstances he could just as happily be arguing the opposing case.

Until recently, he has been subjected to very little media scrutiny.  Alan Jones is unquestionably the most fearsome inquisitor in the nation.  So awesome is his reputation that Rudd has gone to great lengths to avoid being interviewed by him, preferring instead the celebrity-style ambience of FM Radio and the Seven Network's Sunrise crew that helped promote his rise from obscure backbencher in 2001 to alternative prime minister five years later.  But those of us hoping for blood at breakfast last week were not disappointed.  Why?  Not because of anything Mel and Kochie did, but because of probing questions that ordinary Australians were allowed to ask.  Without any warning to the PM, the talkback TV segment included three questions from voters in Sydney, Melbourne and Adelaide.  He badly failed two questions -- one on government allowances and another on incentives for mums to return to work -- and he struggled with another one.

The episode gave the impression that Rudd is manifestly divorced from reality, that without talking points and proper tutoring from his minders he is devoid of substance, and that if probed hard enough all the contradictions and inconsistencies that are part of his political make-up will wash off.

What Adlai Stevenson once said of his old nemesis Richard Nixon could also be said of Kevin Rudd:  "This is a man of many masks.  Who can say they have seen his real face?"

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ABC 24-hour news plan will cripple diversity

The announcement by ABC managing director Mark Scott of a new 24-hour, seven-day-a-week television news channel will harm Australia's media diversity and innovation through the ABC's monopolisation of the market.

Many Australians believe the popular myth that we need ABC television and radio to deliver high-quality news and current affairs because commercial stations will only deliver infomercial-based current affairs and populist news.

The myth is based on the assumption that there is a market failure caused by commercial stations failing to deliver high-quality television news and current affairs programming, and that a taxpayer-funded broadcaster has to fill the gap.

The ABC does currently produce much of Australia's higher-quality Australian news and current affairs programming, but there is no market failure.

A taxpayer-funded ABC doesn't fill a market gap left by commercial networks -- it crowds them out of providing quality news and current affairs.

Commercial stations cannot reasonably compete for the high-quality news and current affairs market because they're playing on an unfair playing field against an ABC that doesn't have to worry about where its next buck is coming from.

The ABC is a tax-financed and tax-exempt organisation occupying the same market space that commercial operators could otherwise occupy if they were able to charge for the services they provide.

The crowding-out potential of the taxpayer-funded ABC is best demonstrated in the one major media market where it is absent -- morning newspapers.

The private sector is completely capable of delivering high-quality state-based and national newspapers at a price the market is prepared to pay.

But if the ABC started giving away high-quality morning newspapers, News Limited, owner of The Australian, and Fairfax would find their newspapers crowded out of the market by a taxpayer-funded alternative.

And by establishing a 24/7 news television station, the ABC is likely to crowd out the current commercial all-news channel, Sky News.

Sky News already provides a high-quality service, so there is no justification for tax dollars to be wasted on a market hole that doesn't need to plugged.  In doing so, the ABC will effectively be engaging in government-sponsored predatory pricing.

By entering the 24/7 news channel market, the ABC will be undercutting the viability of Sky News to attract viewers, and with it the rate and volume of advertising revenue it can collect.  And the cost of the ABC's efforts is that it is likely to cripple innovation in Australia's media market.

The ABC has a patchy record in media market innovation and has only just identified the opportunity to introduce an Australia-specific 24/7 news channel that has been filled by Sky News for years.

Also, despite originally paying lip service to online opinion commentary to complement general news, the ABC has only recently established a dedicated online opinion commentary website.

This new opinion website has been introduced despite at least four other commercial opinion-specific competitors existing in the market.

Both examples demonstrate that a behemoth ABC already moves slowly.  But the most concerning element of Scott's vision is his motivation to establish this new 24/7 news channel.

The ABC's position as a preeminent news provider was threatened following a 2005 decision by Sky News managing director Angelo Frangopoulos to compete against the ABC for the Department of Foreign Affairs and Trade's contract to deliver our soft-power international television network, the Australia Network.

With the looming re-tendering for the $20 million-a-year contract, Sky News has already made it clear it intends to snare the contract from the ABC.

But in November last year, Scott sought to outflank Sky News's capacity to tender, arguing that the Australia Network services should be merged with the ABC's charter-mandated delivery of the Radio Australia international network.  If it did so, the ABC would be locking out competition to tender for the Australia Network contract.

By now announcing a 24/7 news channel, the ABC looks like it is using taxpayer dollars to seek revenge to crowd out Sky News on their own turf.

Leadership lacking on tax

At the rate Kevin Rudd is going, there's every chance tax reform will go the same way as "the greatest moral challenge of our generation".  After two years of telling us Australia would lead the world on climate change, and that Australia would slash carbon emissions regardless of what anyone else did, this week we found out the truth.

On Wednesday the government announced it would maintain its relatively modest target of reducing the country's emissions by 5 per cent by 2020.  One moment "our children's fate -- and our grandchildren's fate" depends on decisive climate change action.  (That's what the PM said in November).  The next moment the Climate Change Minister is issuing a press release saying Australia won't do anything more on climate change until "the level of global ambition [to reduce emissions] becomes sufficiently clear".  (Which is what the minister did two days ago).

It's hard to avoid the impression that the government's climate change objectives were as much about gaining political advantage over their opponents as they were about saving the planet.  Now that the politics of climate change has got harder against a Tony Abbott-led opposition, the fate of our children and our grandchildren has become less important.

It looks like tax reform is being subjected to the same sort of political machinations that climate change policy suffered.  There's the charade of the government refusing to release the report into the tax system it was handed a month ago because, in the words of the Treasurer, the government needs to "examine" the report.  What is there to "examine"?  According to Wayne Swan, the review panel headed by Treasury secretary Ken Henry is "independent".  So if the review panel is independent, and if its recommendations are not government policy, what is the Treasurer afraid of?

Of course it's debatable just how "independent" a review panel can be when two of its five members are public servants.  And the picture becomes even more confused when it is remembered that the person who will be examining
the report -- Ken Henry -- is the person who wrote the report in the first place.  Presumably one of the benefits of the Treasury secretary examining a report he's just written is so he can correct any typos or misprints in its 1000 pages.

What we do know is that the report is 10 centimetres thick and it is printed on A4 paper.  And this we know because these facts were reported in the media at weekend.  But still the public isn't allowed to see the report.  Instead we're treated to a series of selected and carefully positioned leaks, hints and suggestions about what might be in it.

In a speech last week, Henry warned that Australians might have to work longer and pay more tax to pay for an ageing population.  This can only be described as Henry doing the government's dirty work for it and softening up the public for what's coming next.  However, what the Treasury secretary thinks is largely irrelevant.  It's up to the politicians to make the decisions.  Ultimately it's a political choice whether taxes go up and whether we end up working beyond 65.

If policies are to change they will change because of political leadership.

There's not too much leadership in having public servants let loose public policy balloons while politicians stand< at a safe distance.  On the ABC's AM program a week ago, the interviewer pointed out to Swan that Henry's
comments were not "much different" to what Peter Costello said as treasurer in 2003.  At the time, Swan complained that Costello wanted to force employees "to work until they drop".  It's a revealing example of how the process of policy debate has changed under Labor.

Whereas once a Hawke or a Keating or a Howard or a Costello would have braved the challenge of telling the public the facts of life, the task is now left to public servants.

From the Treasury secretary's speech last week we learned what we've long suspected.

He said "it would be prudent to plan on the basis that the tax system will, over time, have to generate revenues to meet substantially larger fiscal costs".  Translated that means -- no tax cuts.  If Henry's review doesn't recommend tax cuts, and if it is only about how to tax more people to get more money for the government, the review deserves to go the same way as the Prime Minister's climate change policies.

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What do Haitians need most? To get away from Haiti

It will take much more than a global outpouring of grief to fix Haiti.  But there is one concrete way rich countries could really help out -- immigration.  Twelve days after the Haitian earthquake, the choices for the poorest nation in the western hemisphere are stark.  Haiti was already an impoverished and virtually ungoverned nation before January 12.

Haiti's poverty has meant it lacks the basic things that make wealthy nations better able to cope with natural disasters -- functioning emergency services, law and order, safe and stable buildings, and supplies that are cheap, abundant and accessible.

So with poverty and the failure of development being at the centre of the Haitian tragedy, it's easy to be cynical when the usual crowd pipes up.  Last week, UK Prime Minister Gordon Brown reportedly asked schlocky American Idol judge Simon Cowell to record a charity single to raise money for Haiti.  George Clooney has hosted a fund-raising telethon, complete with "all of his famous pals", as US Magazine succinctly described them.  And Linkin Park, Alanis Morissette and Peter Gabriel are all donating "unreleased tracks" for a charity compilation.  They're no doubt trying to help in good faith.

Haiti has been a long-term recipient of foreign aid.  Between 1990 and 2005, foreign aid to Haiti came to $US4 billion.  Aid provides about 7 per cent of Haiti's total gross domestic product.  And for the past century, economic growth in Haiti has either been stagnant or declined.  The reasons for this are many.  Extraordinarily bad governments, which in the 20th century seesawed between repressive dictatorship and corrupt plutocracy, have undermined any legal framework for the protection of civil liberties, property rights, or for law and order.

It is for this reason that, when assessing the impact of its aid projects, the World Bank found "in project after project, the reason for delayed implementation or cancellation, is a coup [or] civil unrest".  This has been compounded by the bureaucratic complexity of many aid projects, administrative failures by Haitian governments, and confused priorities on the part of donors.  Future assistance programs will have to directly tackle Haiti's biggest problem -- bad governance -- if they are to succeed.

But if the developed world really wants to help Haiti, we could let as many Haitians as humanly possible work in the West.  We could dramatically expand our guest worker and migration programs.

According to a 2008 study by the Centre for Global Development, Haitian immigrants in the US earn on average six times more than equally educated Haitians who stay home.  It would be more effective and efficient to allow Haitians to move to other countries than wait for the international community or aid organisations or the Haitian Government to repair two centuries of institutional failure.

Immigration away from Haiti will actually help Haiti.  Foreign aid to the country may be substantial, but it is overwhelmed by what expat Haitians send home.  In 2008, foreign governments gave Haiti $US912 million.  Haitian expats sent back at least $US1.3 billion, according to the most conservative estimates.  Other estimates suggest unreported remittances to Haiti might account for up to a third of Haiti's total GDP.

And while much foreign aid is delivered directly to the Haitian Government (which doesn't have a wonderful track record in using it well), these remittances go straight to the Haitian people.

The Obama Administration's recent announcement that Haitians already living in the US (illegally or not) will be granted temporary visas is an important step.  But for domestic politicians in the developed world, increasing foreign aid is less politically complicated than dramatically expanding immigration intakes.  And certainly less controversial.

Nevertheless, even a modest expansion of guest worker programs in the US and other developed nations will have a greater long-term effect than any amount of money Simon Cowell's charity single can raise.

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Legislated robbery must be restrained

New South Wales landowner Peter Spencer recently ended a hunger strike protesting about a state government zoning that prevented farming on his property.

His actions have drawn attention to the abilities of state governments to take people's property without compensating them.

The issue stems from decisions 15 years ago by the Howard government to reduce greenhouse gas emissions.  The federal government saw preventing land clearing for agriculture as a costless way of achieving this.  It recruited the state governments, which control land use, to administer the measure.

Unlike the federal constitution, state constitutions do not provide for fair compensation for land or any other property taken from individuals.

Canberra thought it had discovered a magic pudding.  Politicians were faced with noisy demands to reduce greenhouse gas emissions and an electorate reluctant to pay for this.

An apparently costless way out of the dilemma was to prevent farmers from using their land.

While farmers may have unwillingly donated their land assets, there are few of them and they have little political power.  Moreover, after decades of land-use controls, clearing prevention looked like just another regulatory restraint.

After years of litigation, the NSW Government offered Peter Spencer $2 million in compensation.  That was the value of his land after the regulations had made it unproductive.

That's like the government deciding that nobody may ever again inhabit your $500,000 family home or visit your $500,000 tourist facility, thereby reducing its value to $20,000 and claiming $20,000 is fair compensation!

And there are a dozen different laws allowing state governments to do this.  These range from zoning restraints, laws regarding heritage and species conservation, through to land acquisitions for new roads.

Prime Minister Kevin Rudd's advice to Peter Spencer was to let the law take its course.  But that entails accepting the theft of property that the government has sanctioned through legislation.  That's how the rule of law used to work in communist countries.

Fairness aside, there are very good reasons why governments should be restrained from taking people's property.  Without such restraint, people's incentives to save, build businesses, even acquire family homes, are undermined.

Saving and investing is based on people having confidence that their property rights are secure.  Laws that are not enforced or are arbitrarily used by government cause economic decline.

Secure property rights therefore underpin economic prosperity.  They are crucial for productivity growth, which Mr Rudd this week announced as a new priority for Australia.

But productivity growth requires more than lofty statements.  It requires less -- not more -- government control and regulation throughout the economy.

Government respect for property rights is one essential feature of this.  Property rights would be more secure if all governments were obliged to provide full compensation for measures that devalue property.

For short-term political gain and to avoid expense, governments are often tempted to take unfair and economically harmful measures against those with little political muscle.

There can be no guarantee against arbitrary use of government powers to prevent such actions but constitutional provisions provide a useful restraint.

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The Tote faces the music

The closure of iconic rock venue The Tote provoked a groundswell of opposition to Victorian Premier John Brumby's draconian liquor licensing laws.

The Tote has been slugged with an increase in licensing fees this year of several thousand dollars, as well as increases in the requirements for security guards and reduced operating hours -- two security guards required before, during and after each show, be it a late night rock concert or a lazy afternoon of acoustic folk.  The total cost of the new regulations for The Tote was reported to be around $75,000.

These new costs, coupled with the legal fees incurred during the constant battles between the owners and VCAT, have resulted in a slow and painful strangulation of the small pub in Collingwood.

As the venue housed live music, it was automatically considered "high-risk" under the Brumby government's guidelines, despite having a pristine record of lawfulness.  This is the same category as a King St nightclub, and, paradoxically, any alcohol-serving venue open before 9am.

The new costs, however, do not represent the entire regulatory burden on licensed venues.  Governments force venues to prohibit smoking in bars.  Venues that house live music require Place of Public Entertainment permits.  Building inspections are relentless.  Governments force new venues to stop serving alcohol after 1am.  And in recent years, there was a 12-month freeze on all new liquor licenses.

On Saturday, fans of live music from all over Melbourne descended on The Tote to bid farewell to the venue that has housed international acts and local up-and-comers alike.  The scene was reminiscent of the film The Boat That Rocked, where rock fans sail out to save broadcasters of a pirate radio station, shut down by an all-controlling government.

The closure of The Tote is symptomatic of the ideology of the nanny state.

In a bid to curb alcohol-fuelled violence, the state government has introduced new measures which, rather than targeting violence, target venues that sell alcohol.  The brunt of these measures has fallen hardest on live music venues.

Bruce Milne, publican for The Tote, claimed that government bureaucracy and regulation had the Australian live music scene "dying a death of a thousand cuts".  This is particularly painful in a city like Melbourne, where the abundance of live music is not only popular with tourists, but is an integral part of our culture.

Indeed, this is not the first time that this situation has happened.  Last year, the New South Wales government imposed tight restrictions on liquor licenses.  Many smaller venues were forced out of business due to this heavy-handed approach.  And yet the Victorian government seems to be either oblivious to this, or simply apathetic.

Sadly, it seems that this is part of broader trend towards nanny-state policies in recent years.  The Victorian government has attempted to implement the notorious 2am Lockout policy.  The Victorian opposition has proposed a ban on bongs.  The Federal government has increased taxes on alcopops.  The Federal opposition has proposed increasing taxes on cigarettes.  And then, of course, there is the Federal government's attempt to censor the internet.

These policies all come with the proclaimed intention of protecting people (from violence, supposedly obscene viewing material, harm due to drug misuse, etc.), but they always seem to come with unintended consequences.

Furthermore, they are all grounded in the ideology that says that the government is a better manager of our lives than we are.

The huge regulatory burden seems to hit the smallest players the hardest.  Higher prices that are required to cover these costs mean that young people go to fewer concerts.  Small venues do not have the money to pay these costs and still maintain profitability.  Small bands that use small venues no longer have anywhere to play.  And this is killing our culture.

My first local concert was at an underage afternoon at The Tote.  I saw a small band that has since gone on to release two albums and tour the world.  If the nanny-state ideology is allowed to continue, this may be confined to the dustbin of rock and roll history.

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Obama a victim as Americans struggle to accept a lesser role

If a week is a long time in politics, then a year is an eternity.  Twelve months ago, Barack Obama's presidential inauguration completed a political realignment in the US.  Democrats had huge majorities in both houses of Congress and liberals were dominant in Washington for the first time since Lyndon Johnson's "Great Society" of the 1960s.  Pundits proclaimed the end of conservatism and there was heady talk of a new dawn.

Today, however, the President and his party are in the political doldrums and voters are rebelling in states that Obama won comfortably only a year ago.  The discontent runs so deep that a conservative won the Senate seat in a state with no Republican members of Congress and that had been represented by the Kennedy family for six decades.  The prospects for Obama's legislative agenda -- from health-care reform to an emissions trading scheme -- look increasingly bleak.  The vaunted liberal realignment has vanished within a year.  It was not supposed to be this way.

White House apologists blame the Democratic candidate in Massachusetts, Martha Coakley, whose endless gaffes make Sarah Palin look almost presidential in comparison.

Meanwhile, her Republican opponent, Scott Brown, was the model candidate:  smart, athletic, charismatic, handsome and a family man.  But the candidates, however weak or impressive, do not explain the tidal wave of discontent that has swept across one of America's most liberal states.

Conservatives have a different interpretation:  the Republican Party's resounding victory is a rejection of what the Pulitzer Prize-winning columnist Charles Krauthammer describes as "the most radical [in American terms] ideological agenda since the New Deal" of the 1930s:  namely, liberal Democratic legislation on health, education and climate change.  America, after all, is a right-of-centre nation:  polls show conservatives remain the largest ideological group, outnumbering liberals nearly two to one.

The Massachusetts result, along with Republican wins in governor races in Virginia and New Jersey in November, represent a backlash against big government.

But although Americans may be rejecting Obama's vast expansion of state power, neither are they embracing the Republican agenda.  The party is leaderless and riven by factionalism.  It has been suffering the kind of mental sclerosis that afflicted Democrats in the 1970s.  With most conservatives identifying shock-jock Rush Limbaugh as their leader, it is clear that Republicans lack philosophical self-reflection.

A more intriguing explanation for Massachusetts exists:  that the backlash against Washington has less to do with Obama's ideological overreach and more to do with America's spiritual doldrums.

As he commemorates his first year, Obama is understandably focused on reviving the US economy and rebuilding Haiti and Afghanistan.

But he has the even more difficult task of restoring the American people's faith in their future.  In other words, the US is bogged down in a cultural crisis, and this stems from expectations about America's future that no president can meet.  For generations, Americans have seen their nation as "a city upon a hill" (John Winthrop) and "the last best hope of Earth" (Abraham Lincoln) that would make the world "safe for democracy" (Woodrow Wilson).

The same vision is echoed in the idea of the American Century, which shaped the national consciousness after World War II, when the US enjoyed an almost absolute supremacy in world affairs.  The collapse of Soviet communism and end of the Cold War reinforced the perception of American exceptionalism.

But many things in recent decades -- the quagmires in Vietnam, Iraq and Afghanistan, Watergate and other political scandals, the mounting trade and budget deficits, the subprime mortgage crisis, the decline of US unipolarity and what Irving Kristol said were "clear signs of rot and decay germinating in American society" -- have helped to shatter US confidence.  Suddenly, the dominant vision of Pax Americana faded without anything -- even the war on terror -- emerging to replace it.

The void means that Americans have oscillated between periods of clarity and purpose, and periods of intense doubt and uncertainty.  Clearly, Americans in 2008 embraced Obama's optimistic vision of change and renewal.  But in the year since, he has failed to meet the lofty expectations that the public, the media and he himself set.

In recent years, polls consistently show most Americans think their nation is heading down the wrong path.  Hence the rapid mood swings within the electorate, epitomised in Obama's fall from adulation to anger within a year.

Of course, America has undergone crises before, but it has never endured one quite like this.  It is not just that the US military is stretched to breaking point.  Nor is it just that the US is mired in double-digit unemployment and skyrocketing levels of debt.  It is more to do with whether Americans will gracefully accept a lesser role in a multipolar world.

Notwithstanding the hopes of the Obama campaign in 2008, the President has been unable to quiet Americans' doubts about their future.  That may not be his fault, but it helps explain the meaning of Massachusetts.

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Massachusetts' message

The US Democrats Senate election failure in their traditionally Massachusetts stronghold was a consequence of President Obama not listening to why Americans really sent him to the White House.

Only weeks ago most pundits and pollsters wrote off the election to fill the Senate seat vacancy caused by the passing of its incumbent for the previous half century, Ted Kennedy, as a certainty for the Democrat's Martha Coakley.

After all, Massachusetts is the US Democrats heartland and was a State, until Tuesday evening, which only sent Democrats to Washington at the election that propelled Obama into the White House.

But the Democrat's collapse in support from independent voters shows they haven't learned the lessons of the last national election.

During the final years of Bush's Presidency his approval ratings slipped from bad to worse for numerous reasons, but they didn't truly hit rock bottom until his Administration mismanaged the fallout from the global economic crisis.

By bailing out failed companies and irresponsible banks Bush's popularity, and the chances of McCain to succeed him, crumbled.

Riding on the wave of "change we can believe in", a fresh slate Obama argued against the Bush Administration's economic policies.

But since assuming office Obama has expanded the size of government by mobilising public money to bailout businesses that should have been allowed to fail.

Bailouts have remained consistently unpopular amongst Americans who are culturally supportive of the free enterprise and the correlation between risk and reward and, sometime, failure and responsibility.

But by bailing out car maker General Motors the government has been using taxpayer's dollars to socialise losses and allowed company Directors to flaunt their responsibilities.

And Obama's now infamous Health Care Bill that would seek to expand government funding and delivery of healthcare was also a key issue that rallied voters to Brown.

Following the election result Democrats should be listening to the underlying reasons tens of thousands of independent voters switched Parties in droves.

But it's clear some Democrats haven't heard the Massachusetts' people's message.

Following the election result some Washington Democrats have argued the Health Care Bill should be passed unamended through the House of Representatives following its equivalent passage through the Senate in December last year.

By not amending the Bill it won't then need to return to the Senate for support after Brown has been sworn in and the Democrats lose their filibuster proof majority in the chamber.

And the opposition to the Health Care Bill was about more than its text.

Because Massachusetts already has a State-based universal healthcare system independent voter disquiet was rooted in the Democrats efforts to ram the legislation that would expand the size of government through the Congress with limited scrutiny.

And it's the profligate, roughshod expansion of big government that is now mobilising Americans and giving Obama a taste of his own medicine.

To get elected in late 2008 Obama built a nation-wide grassroots campaign of rank-and-file Democrats to graft independent voters to his election cause.

But following his election his big-government, big-spending, high-tax solutions have united conservatives, centre-right liberals and libertarians to engage in similar grass root campaigns under the banner of the now famous Tea Party groups protesting against expanded government.

In the Massachusetts Senate race Tea Party groups were held responsible by senior Democrats for mobilising independent voters against Coakley and for Brown.

Republicans are justifiably buoyed by Brown's victory, but they should be sober in their victory.

At Brown's victory rally supporters chanted "John Kerry's next" demonstrating cockiness amongst Republicans about their prospects to knock off the former Democratic Presidential and serving Massachusetts Senator.

Considering the strong democratic leanings of Massachusetts it's more likely Brown will be replaced after the two years of the term he has been elected to serve concludes.

And Republicans can only take limited comfort in Brown's victory.

Throughout the campaign Brown promoted himself as an "independent Republican" who advocated for traditional Republican values like lower taxes and less government spending -- policies Republicans haven't been good in enacting in recent years.

As a consequence, both Parties were sent the same message in Massachusetts that Americans still want less, not more, government.

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Lack of Global Agreement Offers a Chance to Cut Our Losses

Most politicians across the world recognise that measures to reduce CO₂ emissions impose costs on their economies, whether they employ a carbon tax, cap-and-trade or regulatory approach.  Failure at Copenhagen showed politicians recognise such costs exceed the benefits.

Having basked in international approval by ratifying the Kyoto treaty at the Bali meeting, Kevin Rudd faced criticism in Copenhagen.  John Bolton, the Bush administration's UN representative, accused him of pursuing an emissions tax in order to micro-manage the economy.  Australia was condemned for its inclusion of emission reductions resulting from reduced land clearance and for excluding emissions from bushfires.  China and India accused Rudd of being a show pony;  and the main developing world negotiator, Lumumba Di-Aping, depicted Australia's approach as "climate change scepticism in action".

In fact, Australia is already implementing expensive carbon mitigation measures:  subsidies to high-cost renewables and taxpayer-funded energy conservation subsidies.  These programs cost $2.8 billion a year on top of regulatory requirements for energy efficiency and green feed-in tariffs, which would add at least a further $1.5 billion.  These measures are equivalent to a tax of $200 a year per person.

The Carbon Pollution Reduction Scheme costs would be additional.  Treasury put the costs per head of a CPRS with a 5 per cent reduction in emissions at $700 by 2020 and $4300 by 2050.  A 25 per cent reduction (and remember, the reduction needed is 80 per cent) was put at $1200 and $5700 for the two years respectively.  Even these numbers assume a remarkable pace of new technological development and adoption for carbon capture and storage and renewables.

The NSW electricity price regulator said the CPRS would increase the average retail energy bill by 15 per cent, with the energy component increasing by 60 per cent.  Even as early as 2012-13 about $300 a year would be added to the average residential customer's annual bill and more than $2000 for a typical business.

Some prominent business leaders say passing the CPRS is essential to give business certainty.  Yet the bill before parliament cannot give such certainty because it simply gives authority to the government to determine emission levels.  Even these levels are subject to disallowance by the Senate.

The price of CO₂ emissions is the all-important trigger for new capital spending on low-CO₂ emissions projects and for scrapping high-CO₂ investments.  And under the CPRS, it is parliament that would determine this on a year-by-year basis.  The only certainty is where the government guarantees specific projects or provides "free" credits, a process that would turn into an ugly winner-picking exercise.

Established businesses with high emissions have opted to support the CPRS hoping to benefit from free allocations of carbon credits.  They see the proposal as offering valuable competitive opportunities for their own activities or as minimising losses they might incur.  The losers include small businesses and consumers that don't get a share of the tax spoils, and businesses that are not yet established and never will be if a punitive tax is threatened by Australia.  The economy as a whole is the ultimate loser because higher energy prices are a result of the CPRS and any regulatory alternative would have a similar effect.

The ACTU's Sharan Burrow claims there is $6 trillion in global funds for investment in clean technologies, renewable energy, sustainable design and green buildings.  Few governments are convinced such funding is real:  if they were, leaders at Copenhagen would have been outbidding each other with new carbon reduction proposals.

The outcome of Copenhagen gives us the opportunity to quietly adopt a wait-and-see policy.  The government's rhetoric has already shifted from pursuit of world leadership in emission reduction programs to doing "no more, but no less" than the rest of the world on climate change.  The CPRS tax-and-spend program or the alternative of further regulatory measures would inevitably induce cost increases and undermine the economy.  Among world nations, Australia is among the most dependent on fossil fuels for its wealth creation.  With no global emissions reduction program on the horizon, we have an opportunity to suspend further economically debilitating measures.

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Free Trade Brings Heaps of Benefits

It's five years since our free trade agreement with the US entered into force and the results are in:  Australia has won.

In the lead-up to January 1, 2005, public debate correctly highlighted the fact that the agreement wasn't perfect.

Australia did not secure an end to US restrictions on imported Australian sugar and immediate liberalisation of trade restrictions on other agricultural commodities.

And Australia secured equivalent trade-offs by maintaining television local-content restrictions that were outdated and heavy-handed regulations on the pharmaceutical industry.

Since the FTA commenced, critics have continued attacking the agreement because our trade deficit with the US has widened.

Yet an average $1.2 billion increase in our annual merchandise trade deficit between the 2005-06 and 2008-09 financial years is insignificant in comparison with the US investment windfall the FTA delivered.

A key provision of the agreement was the relaxation of the threshold requirements for US investors to seek Foreign Investment Review Board approval before investing in Australia.

The results are clear.

According to the latest Australian Bureau of Statistics data, total US investment in 2005 was just shy of $334bn and has increased by an average of $20bn a year, reaching $418bn by the end of 2008.

And attacking a marginal trade deficit increase ignores that free trade is not a zero-sum game and that imports deliver benefits as well.

To be internationally competitive, Australian businesses need technologies that help improve productivity, competitive inputs into domestically produced manufactures and service imports to support industry growth.

Necessary imports added with the significant size of US investment have helped Australian industries grow, create jobs and ride out the global economic crisis.

Increased US investment has also helped foster industries of the future.

According to a Department of Foreign Affairs and Trade analysis, US investment is "increasingly more diversified, particularly with increased activity in the services trade".

US investment is underwriting a boom for our services exports, with the ratio of Australia's goods to services exports to the US roughly two to one.

By comparison, our ratio of goods to services exports to our other top five trading partners is nearly 23 to one for Japan, eight for China, 10 for South Korea and five for India.

Our service exporters are also supported through the FTA's commitment to encourage professional associations and governments to recognise qualifications for people from both countries.  The responsible bi-national working party has already secured greater qualification recognition and, consequently, work opportunities in the US for accountants, engineers and legal professionals.

Not surprisingly, these particular industries now make up some of Australia's largest exports to the US.

And our service industry interests were also advanced through the establishment of the two-year, indefinitely renewable E-3 working visas in the US.

In 2008 the visa was used by 15,000 people and now gives Australians one of the most preferential work visas to the US.

Under the visa, Australia may lose skilled workers to the US in the short term, but the vast majority will return home with knowledge and experience to help Australian industries grow.

It is these dynamic, unpredictable outcomes that demonstrate the benefits of free trade as businesses find new markets, increase imports, increase competition, and cut the price of business inputs and consumer goods that improve standards of living.

But while Australia has won from its US FTA, we shouldn't sit on our free trade laurels.

Although the Rudd government is making all the right public noises on free trade agreements, concurrent regulations and industry support programs are unwinding the dividends of trade liberalisation.

Federal Industry Minister Kim Carr regularly introduces protectionist measures, from increased automotive industry subsidies to offset tariff reductions, to regulations that haze contractors tendering for government projects into using local suppliers.

The NSW and Victorian state Labor governments have introduced protectionist local-content thresholds for government contracts that reduce value-for-tax dollar for state budgets already in deficit.

The Rudd government also bowed to vested interests such as the campaign to keep import restrictions on copyrighted books that protect the profits of multinational publishing houses and marginal electorate-based printing companies that are then passed on to consumers.

Instead of introducing protectionism the Rudd government should be negotiating more FTAs such as the joint Australia-New Zealand FTA with ASEAN countries, which came into force on the fifth anniversary of the US agreement's.

Why?

Because in five years the economic benefits of the US and ASEAN FTAs will be clear, but they won't be for newly introduced protectionism.

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Why palm oil does not deserve its bad press

Recent campaigns against palm oil show non-governmental organisations are more interested in pandering to rich country donors than promoting sustainable economic and environmental development for Southeast Asia's poor.

Following attacks from palm oil industry interests in November last year, the chief executive of NatureAlert, Sean Whyte, claimed "Non-governmental organisations don't want to see it (the palm oil industry) closed down and neither are they seeking a boycott of palm oil", but to see it prosper without doing "damage to the environment".

In making such claims, however, Whyte clearly cannot see the oil palm from the plantation.

In Australia and New Zealand, NGOs have convinced celebrities, television stations and taxpayer-funded zoos to campaign for government regulation requiring manufactured food products to label palm oil ingredients separately from vegetable oils.

Their objective of mandatory labelling is to encourage consumers to choose products that don't contain palm oil and effectively introduce a consumer boycott.

The NGO campaign has had some success, with Australian Senator Nick Xenophon recently announcing he would introduce legislation directing the bi-national regulator, Food Standards Australia New Zealand, to require compulsory separate palm oil labelling.

With mandatory palm oil labelling in force, supported by consumer boycotts, food manufacturers will be faced with the business reality of either losing sales or switching to other oils in manufacturing to keep customers.

It's a decision confectionery manufacturing giant Cadbury made last year after NGOs identified they were using palm oil in their chocolate products and encouraged a consumer boycott, leading Cadbury to dump palm oil as an ingredient.

In Europe, NGOs have gone one step further and successfully lobbied to introduce Europe-wide regulations blocking palm oil biofuel imports unless they meet strict emission standards.

In developed countries, NGO campaigns often prey on the ignorance of well-intentioned donors who aren't confronted with the consequences of NGO policies on out-of-sight and, therefore, out-of-mind rural workers.

NGOs then add images of "cute" orang utans whose habitats are claimed to be lost to palm oil-caused deforestation, to encourage donors to open their wallets.

But garnering donor sympathy to fight the palm oil industry comes at the expense of the exports and livelihoods of the more than 40 per cent of Malaysia and Indonesia's smallholder oil palm growers who rely on the crop for their incomes.

In total, at least two million Malaysian and Indonesian workers depend on the palm oil industry for their livelihoods, including from the large plantation communities that make up a majority of the planted oil oil palm, who don't just provide salaries for workers but also heavily, or wholly, subsidised healthcare, housing and education services.

Attacks on the industry also ignore the clear benefits of palm oil.  At a side-event at the United Nations Copenhagen climate change conference, critics attacked palm oil because, like many other comestibles, it may contribute to the contraction of diabetes.

But palm oil is also a rich source of vitamin A and, according to the United Nations Children's Fund, each year a million infant deaths are caused by vitamin A deficiencies.

But there's no choice between accepting one million preventable infant deaths and allowing the consumption of palm oil that may lead to the contraction of a manageable chronic disease later in life.

And the crop is also substantially more sustainable in comparison with other oils because oil palm yields at least five times the same tonnage per hectare as equivalent seeds.  As a consequence, oil palm needs less land and less resources to produce more.

The irony of the attacks on the oil is that if activists were successful in blackballing its use in food manufacturing, producers would have to switch to alternative lower-yielding crops to maintain their livelihoods.  The consequence would be that they would require more land and more resources to produce less.

Palm oil isn't perfect and it is responsible for some deforestation caused by rogue growers.  But the benefits of palm oil far outweigh the costs.

NGOs may think that eliminating consumer demand may remove the environmental consequences caused by the industry, but attacking the root of environmental degradation won't be solved by attacking palm oil.

Around the world, the key driver of environmental degradation is rarely a single industry, but poverty.

When urban and rural communities are poor, their best escape option is through the exploitation of primary natural resources that promote economic growth and drive the development of manufacturing and service industries.

Without the development of these industries, communities will always be trapped in subsistence living, where the environment will always come second to families finding ways to stay alive and secure food and shelter, especially in rural areas.

Protecting the environment only becomes a priority when societies prosper and can afford environmental protection regulation and the resources to sustainably manage and conserve their natural assets.

Anti-palm oil NGOs like NatureAlert, Greenpeace, Wetlands International and Friends of the Earth may think demonising palm oil will help Malaysia and Indonesia improve their environmental health.

But any short-term environmental improvements will be traded off against the livelihoods of the rural poor, who would be better able to protect their environment when they have economically developed and can afford to do so.

More police on the beat the answer to drunks' violence

What have the NSW Police been drinking?  An email from Chief Inspector Haberley to Sydney bottle shops asks that they take full-strength products off the shelves on Australia Day.

Haberley argues:  "Australia Day (has) become a day for binge drinking" that can lead to violence.

But rather than intimidating bottle shops, the police should focus on making their presence more obvious on the day.

It's absurd to think that a booze sale ban before 2pm will significantly change people's drinking behaviour.

Even the most hopeless drunk has the next 11 days to hoard the cheap whiskey they feel they need to get through our national holiday.

And the ban presumes that any booze-fuelled violence starts outside of licensed venues which will still be able to serve drinks throughout the day.

Not that stupid bans on Australia Day are without precedent.  In 2007, the organisers of music extravaganza The Big Day Out attempted to introduce an Australia Day ban on attendees wearing the Australian flag as capes.

Their theory:  The flag generates a pseudo-mob identity that can lead to loutish behaviour.  Like the flag ban, the police's proposal has prompted many to shout the regularly used and undefined term for when Australian culture is under attack -- "unAustralian".

There aren't many traditions Australians can genuinely call our own.  Surely having a couple of cold stubbies on our national holiday is one of them.  And getting drunk and violent isn't.

On Australia Day most of us have a drink or two but we don't break out into an unruly mob because we know our limits and stop, or we don't know our limits and fall asleep in the sun and get a tan that we feel for the following week.

Rather than attacking a great Australian tradition, NSW Police should be seeking to foster a culture of personal responsibility for our actions.

But it's clear NSW Police don't think this way.  They blame bottle shops for allowing violent idiots to become drunken violent idiots.

Until individuals take responsibility for their own behaviour, anyone prone to violence isn't going to be well behaved regardless of whether they buy beers before 2pm on January 26.