Budget 2017: Energy Policy's Gushing Wounds Won't Be Fixed With A Mop And Bucket

If you had a wound that was gushing blood onto the floor and your doctor prescribed a mop and bucket, you'd ask where he got his practicing certificate and why he wasn't fixing the actual problem.

Yet this approach is exactly how most western governments are tackling the question of skyrocketing electricity bills.

In Australia, household electricity costs have increased by over 100 per cent in the last decade, or over five times the rate of inflation.

Worse is yet to come with wholesale and futures electricity prices on the east coast now regularly over $100 per megawatt hour compared to the historic benchmark of $50 and widespread acknowledgement that the investment climate for energy is effectively broken.

But after commissioning countless reviews into the operation of the energy market, re-stating support for the Renewable Energy Target, seeking to squeeze the Snowy Mountain Scheme for more power and imposing export restrictions on gas companies, the Turnbull Government announced in Tuesday's Budget a one-off $75 payment to pensioners to compensate for increased household energy bills.

This story is the same throughout the western world, including in the United Kingdom, where despite household electricity prices increasing by 133 per cent in the decade to 2014 on the back of a commitment to reduce carbon emissions, favour renewables and dismantle coal power stations, the Conservative Government has just announced that if re-elected on 8 June it will put a "cap" on electricity bills.

The problem in both countries, as well as in Germany, which has amongst the highest electricity prices in Europe, where over 50 per cent of household power bills are government charges, and around 330,000 households have their electricity cut off every year, is that governments are trying to bend the rules of physics, engineering, markets and nature, to fit in with a flawed political ideology.

Electricity machines that can operate 24 hours a day seven days a week fuelled by the natural energy stored in coal, gas and uranium will always be more efficient than machines dependent on the vagaries of Mother Nature, whether solar, wind or hydro-electric.

Real markets where private sector suppliers are given the freedom and the ability to develop new products to meet the demand of consumers will always work better than fake markets created by government bureaucracies to find solutions to problems that they themselves create.

Fiddling with markets also leads to unintended consequences.

The Blair Government pushed more diesel cars onto the British market because they emit less CO2 than conventional petrol.  Ten million cars later, London is now reportedly choking on nitrogen oxide (a diesel by-product) and governments are looking at new ways to force diesel cars off British roads.

Northern Ireland's "Cash for Ash" scandal where businesses were paid GBP1.60 for every GBP1 they spent on "green energy" made it profitable to burn good trees to heat unoccupied rooms and may cost taxpayers nearly GBP 500 million.

In Germany, despite renewables achieving what most would consider to be a critical mass, the Renewable Energy Levy has increased from 0.2 cents per kilowatt hour in to 6.88 cents in 2017 and funds new renewables as well as compensates existing renewables for the fall in the wholesale price caused by these extra renewables.

Fiddling is also expensive.  Last year it was estimated that compliance with the UK's Climate Change Act would cost consumers and businesses over GBP 300 billion by 2030 and Germany's "Energiewende" 520 billion Euros by 2025.

It is only in the USA, which has embraced unconventional gas exploration and development to the chagrin of environmentalists, where the price of energy is falling.  It is ironic that while in the laissez faire US CO2 emissions have fallen, in meddling Europe emissions reduction has now stalled.

Renewables are only viable if they are built or funded by government or if government uses taxes or red tape to "nudge" the market and ensure that the cost of alternatives are increased to match the cost of renewables.

It is like an athlete that wants to win Olympic gold but is only the tenth fastest runner so they spend their days lobbying to get the other nine disqualified or hobbled, rather than just training harder or looking for another career

To this end, it is instructive that on Monday renewables advocates used their PR channel (a.k.a. Four Corners) to re-argue the circular logic that the best way to prevent a significant increase in electricity bills is to introduce an emissions intensity scheme to penalize fossil fuel generators, forcing them to increase their prices to match renewables.

If western governments were serious about tackling energy bills, they would put energy affordability and security ahead of CO2 reduction as the goal of the electricity system.

In Australia, the Turnbull Government should abolish or at the very least close the Renewable Energy Certificate scheme to new generators.  If it won't abolish or privatise the Clean Energy Finance Corporation (CEFC) then it should at least ensure that the CEFC is allowed to fund lower emissions coal, gas and nuclear power generators.

Governments should also ensure that renewable operators are required to account for those periods of low or no power generation, either through batteries or by paying for reliable back-up generation.  This would allow more accurate comparisons between the costs of different technologies.

While using taxpayer money to fund new or upgraded electricity generators is not ideal, Australians already pay over $2 billion every year in renewable subsidies.  This money would be better used to just build new, multi-decade fossil fuel or nuclear power generators for use until technologies improve.

With 100 years' worth of black coal, 1,000 years of brown coal, hundreds of years of gas and 30 per cent of the world's uranium, Australia should have the lowest electricity bills in the world.

Reducing costs would be a far better long term solution than the quick fixes of seeking to control private electricity demand or offering temporary bill relief.

No Contest Of Ideas Just A Grubby Fight For Votes

For years, legitimate questions have been raised over what the modern Labor Party stands for.  Following the 2017 budget, those same questions now hang over the Liberal Party.

In the House of Representatives on March 11, 1999, Peter Costello, then treasurer, accused the ALP of lacking discernible values:  "The Labor Party stands for nothing but populist oppositionism."

The Liberal Party has been in power for almost four years.  With the support of its Coalition partner, it has won the past two federal elections.  Yet many of the policies promoted and implemented during this period of Coalition government seem at best discon­nected from the philosophical platform on which the Liberal Party was established by Robert Menzies in 1944, and at worst a repudiation of those ideals.  Does the Liberal Party now stand for nothing but populist government?

When Kevin Rudd declared less than two weeks out from the 2007 federal election "I am an economic conservative", it was more than merely a tactical ploy to unseat John Howard and Costello as celebrated responsible economic managers.  It was a challenge to the identity of the Labor Party.

That statement demonstrated the respect that even Labor had for a conservative economic agenda in government, even if only because such a message was popular.  It was a powerful signal about confidence on the centre-right that liberal values were being adopted by the major party of the left.

The 2017 budget — with a permanent new tax on Australia's most successful financial institutions, and government expenditure continuing to increase for the foreseeable future — shows the opposite is true today:  the left is so brimming with confidence that the major party of the centre-right is implementing its ideas.

In 2007 it was no surprise Rudd felt the need to say he was a fiscal conservative.  The record of the Howard-Costello years is remarkably impressive.

Before Howard came to power in 1996, net debt as a percentage of gross domestic product had reached 18.1 per cent.  By the end of the Howard government it was minus 3.8 per cent.  In the 1995-96 budget government spending had reached 25.6 per cent of GDP.  Howard and Costello brought that down to 23.1 per cent in their last budget in 2007-08.

As we know, Labor in government departed significantly from the economic narrative Rudd had promised before the election.  Prime minister Rudd embraced profligacy for the same reason that opposition leader Rudd had paid lip service to frugality:  political expediency.

In many ways Rudd was the perfect embodiment of the modern Labor Party:  an ideological chameleon willing to do whatever it took to retain power.  Though some have painted Rudd as a political outsider, he is in fact a product of the party he joined at age 15.  And his lack of conviction is no doubt connected to the structural problems within Labor today.

Trade union representatives continue to make up half of delegates at ALP state and national conferences.  Such a structure made sense when union membership rates were relatively high.  In 1990, 40 per cent of full-time workers were members of a trade union.  When the Rudd government took power in 2007 that had fallen to 18.9 per cent.

And while union membership rates remain high in the public service (they were still as high as 39.5 per cent in 2015), they have declined rapidly in the working-class industries where the ALP has traditionally found support (12.36 per cent in manufacturing;  11.37 per cent in construction).

These changes in the makeup of the single largest stakeholder in the Labor Party are turning the political wing of the working class into a party of the cultural elite.  Radical climate change policies such as the carbon tax may make wealthy inner-city dwellers feel good about themselves but they sharply increase the cost of living and smash blue-collar workers.  Caught between old Labor and new Labor, the ALP is stuck in an ideological vacuum.

Perhaps because of this shift towards populism, the Liberal Party no longer appears to be anchored in principle either.  In the years following the Howard government the Liberal Party has struggled to prosecute its philosophical agenda.  The current budget abandons any pretence that government should be smaller.  It accepts growing levels of government spending as the new normal, leaving less room for individuals to pursue their own opportunities.

This malaise goes back at least as far as the previous government.  While the current budget taxes banks to pay for Gonski 2.0, the Abbott government proposed to tax Australia's largest corporations to pay for an absurdly expensive paid parental leave scheme.

The 2017 budget shows the Liberals are just as guilty as Labor in losing touch with core beliefs.  Both major parties have all but conceded they exist not to participate in a battle of ideas but merely to win the next election.

This Budget Ends The Liberal Age

Maybe it's time to acknowledge what in recent years has become obvious, and what was confirmed on budget night.

A unique period in Australia's modern history is drawing to a close.  For three decades both of the country's major political parties held a commitment to policy reform based on the principles of economic liberalism.

It might be that in the future we'll look back on these 30 years as an aberration of our political and economic history.  Two-hundred years ago Australia was settled by Europeans as an inward-looking, statist colony.  There's every indication that's a condition to which we'll return.

Tony Abbott's former chief of staff Peta Credlin said of the budget:  "When they come to write the history of conservative governments in this country, the 2017-18 budget will be a defining moment.  Last night, the Howard-Costello era ended.

"In its place, Malcolm Turnbull and Scott Morrison delivered a budget that owes more to the ghost of Labor leaders past than it does to Liberal fundamentals of debt reduction, prudent spending, lower taxes and smaller government."

If in 2014 Tony Abbott had delivered a high-taxing, high-spending budget as the Coalition did this week, maybe he'd still be prime minister.

Credlin's assessment as it applies to the Liberals is correct, but her point can be drawn even more broadly.  On budget night it wasn't just the Howard-Costello era that ended.  The Hawke-Keating era ended too.  Within minutes of Morrison revealing a new and arbitrary tax on the banks, the shadow treasurer Chris Bowen announced his support for it.

In truth, the burial rights for the heritage of Hawke and Keating were uttered by Kevin Rudd following the global financial crisis.  In February 2009, in an essay in The Monthly, he repudiated "the triumph of neo-liberalism" and "free-market fundamentalism".  The ALP has been living in the shadow of Rudd's pronouncement ever since.

Rudd was typically overblown, but he wasn't wrong.  "From time to time in human history there occur events of a truly seismic significance, events that mark a turning point between one epoch and the next, when one orthodoxy is overthrown and another takes its place."

The philosophical confusion of the Liberal Party was encapsulated by Morrison on Tuesday evening.  He had said the budget wouldn't "tickle the ears of the ideologues".  But the ideologues of the left would have been delighted at the Liberals' super profits tax on the banks.  Until this week, the only people talking about such a tax were the Greens.

Also on budget night the Liberals' double standards were made apparent.

In February, when explaining why the Turnbull government could not abolish the Renewable Energy Target, the Treasurer said:  "When you put in laws ... if you put them in one day, and you change them the next day, what do you think people investing are going to do and thinking about the stability of government policy?  That's called sovereign risk."

So if you're running a wind farm, the Turnbull government won't dare touch you.  But if you're running a bank, the Liberals will happily throw a metaphorical brick at you.  If you're a Liberal-voting retiree trying to live off your superannuation savings, the government will throw two bricks at you.

The claim that the 2017-18 budget is the way it is because of a recalcitrant Senate is a fig-leaf excuse hiding much bigger problems.  And it is not just on government spending that the Liberal Party is abandoning its principles.  The Turnbull government took a fortnight to decide its position on changes to penalty rates — and what that position is remains unclear.  And both the Abbott and Turnbull governments took years to decide what they thought about freedom of speech.

For the Liberals, the end of the heritage of Howard and Costello is more recent than what happened to Labor — but more dramatic.  The ALP wasn't founded, for example, to defend the cause of free enterprise against big government — the Liberal Party was.

A typical member of the Labor Party doesn't believe taxes should be as low as possible so individuals can be free to choose to spend their own money as they wish — the typical member of the Liberal Party does.  Once upon a time a typical Liberal MP believed that too.

Best Way To Make Markets More Competitive Lies In Legislating To Cut Red Tape

Competition is a natural feature of a free market.  The idea that the way to increase competition is to strengthen competition laws is naive and misguided.

The debate over strengthening section 46 of the Competition and Consumer Act is about to heat up again.

The government — along with the Greens and Nick Xenophon — wants to introduce an "effects test" into the legislation.  The Labor Party is opposed.

The relevant provision, entitled "misuse of market power", prohibits a corporation with a "substantial degree of power in the market" from taking "advantage of that power in that or any other market" to eliminate or "substantially damage" a competitor, prevent entry into the market, or deter or prevent a person from engaging in "competitive conduct".

The proposed change would remove the second and third parts of the test, and leave in place the substantial market power element.  The current list of proscribed purposes would then be replaced by a more general prohibition on conduct that has the purpose or likely effect of substantially lessening competition.

This proposal grew out of Ian Harper's Competition Policy Review.  The final report of that review, released on March 31, 2015, recommended a strengthening of the misuse of market power provision by including an effects test.

Then Small Business Minister Bruce Billson was one of the strongest proponents of the change.

Prime Minister Malcolm Turnbull, in announcing the government's intention to legislate on March 16 last year, said that the effects test would "ensure that our competition law works better to enable competition, to enable smaller businesses, emerging businesses, to be better able to compete because we know that while larger firms are often very innovative and very often very competitive, they are more innovative if the hot breath of competition is coming down their neck.  So we want to have a competitive Australia."

The shadow assistant treasurer disagrees.  ALP MP Andrew Leigh made the reasonable point that "actions like cross-subsidising cheaper milk, which are not done with the purpose of lessening competition, could have the effect of lessening competition".

This is a point that has been raised by Coles chief executive John Durkan.  Durkan argued in March last year during a speech to the American Chamber of Commerce in Australia that he was "concerned that under an effects test regime, companies like Coles will be less able to bring about cost decreases and therefore lower ­prices".  And that "another less efficient business may seek to argue that their inability to offer similar prices is somehow unfair".

These ongoing debates uncover a deeper issue with competition law.  At the heart of this area of law is the idea that competition in the market can be promoted through legislation.  And the rationale for the promotion of competition is that it is of benefit to the consumer.

Certainly, that's the stated justification for the misuse of market power provision.  But there's a legitimate question about whether state intervention in fact promotes competition, or ever could.

The first High Court case that contemplated section 46 was Queensland Wire Industries v BHP almost 30 years ago.  In the judgment, Chief Justice Anthony Mason and Justice Ronald Wilson made the astute observation that "competition by its very nature is deliberate and ruthless".

"Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away.  Competitors almost always try to 'injure' each other in this way," the judgment says.

Although these words were uttered in the context of general support for the existence of section 46, they offer an insightful critique of competition laws on the whole.

What is the relevant difference between conduct that prevents a firm from entering the market, and being so successful that you push an existing firm out of the market?  After all, a legitimate effect of competition can be the closure of competing firms.

The current test, which requires a court to consider "purpose" at least approximates a distinction between intended and unintended conduct.

The problem with the new effects test is that conduct which appears to be anti-competitive may in fact have a legitimate pro-competitive purpose.  But without the requirement of purpose, evidence of a pro-competitive intention will be irrelevant.

At the end of the day, the effects test runs into the same issues that all competition law faces.  It's almost impossible to administer because it fails as a concept.

Firms are constantly battling it out for market dominance.  It's the nature of free enterprise.  That's not to say that anti-competitive practices will occur from time to time but the answer is not to tie up millions of taxpayer dollars in unsuccessful litigation.

The answer is to create an environment that makes it easier for competition to occur.  Wherever it appears there is a lack of competition look first at whether there are artificial barriers to entry that governments can eliminate.

The current push to strengthen competition law should be abandoned in favour of a renewed effort to substantially cut red tape.  This is the only competition policy the government needs to make it easier for new firms to enter existing markets, to allow current firms to compete, and to provide better outcomes for consumers.

Turnbull And Trump Showed We Were Allies, Now To Work Together On China

Relief may be Malcolm Turnbull's overwhelming emotion as he settles back for the long flight home from New York before a crucial budget.

Returning to his home town and the inevitable protests for the first time since the inauguration, President Trump may have kept the PM waiting for a few hours.  But it was worth it.

Trump was welcoming, warm and — dare one say it — presidential, putting the two leaders' testy February phone call behind them and declaring his love for Australia.

For a leader who is often criticised for lacking discipline and disrespecting history, he stuck to the script throughout a thoughtful and often passionate speech about the the two countries' shared military history and sacrifices.  His remarks were made poignant by the presence of surviving Australian and US servicemen at a gala event commemorating the 75th anniversary of the crucial Battle of the Coral Sea.

MEETING THE PRESIDENT MATTERS

It is always a big deal when Australia's Prime Minister meets the US President.  Irrespective of party politics, the vast majority of Australians recognise that the US alliance is important to Australia's security, and the voting public expect the prime minister of the day to manage the alliance effectively.

Gough Whitlam's clash with President Richard Nixon strained the alliance and contributed to public anxiety about his leadership;  Mark Latham's petulance towards the George W Bush administration fed into a narrative that he was too erratic to be allowed to remain Labor opposition leader, contributing to his political downfall.

The stakes were higher than usual this time following the phone call — demonstrated by the fact that Turnbull took the time to make the trip the week before the budget.  Australian diplomats worked every avenue to get the President to attend the commemorative event.

The setting provided a good opportunity.  The commemorative event on the USS Intrepid — herself a veteran of the Pacific campaign — was the perfect setting to underline the long history of shared interests, values and sacrifice that underpin today's Australia-US alliance.  It was an ideal opportunity for the two leaders to patch up their differences and get their relationship off to a fresh start.

A REMINDER OF SERVICE

It served as a timely reminder of the vital contribution US maritime power and alliances have made to both countries' security and prosperity — and to the wider Indo-Pacific region — since the Second World War.

It also highlighted the daunting array of threats and challenges facing the United States, Australia and their allies today — whether from a nuclear-armed North Korea, Islamic State and other Islamist terror networks, a revanchist Russia, an increasingly bullying China, or the domestic forces of populism and protectionism.

Hopefully Turnbull reinforced the efforts of his Japanese counterpart Shinzo Abe to convince the President and author of The Art of the Deal that for the United States strong alliances and partnerships mean significantly more negotiating leverage rather than unnecessary cost.  Over the long term they bring the United States benefits that a transactional approach can never equal.

The same can be said for open regional economic arrangements such as the now defunct Trans Pacific Partnership.

TRUMP IS CHANGING ON FOREIGN POLICY

Many of the serious figures around the President such as Secretary of Defense Jim Mattis, National Security Advisor HR McMaster and Secretary of State Rex Tillerson know this, and Trump has changed course on a number of important foreign policy issues, including the role of NATO, US alliances with Japan and South Korea, and — seemingly — initiating a trade war with China.

Nonetheless, there is still work for Australia and other US allies to do to convince a sceptical President that alliances and free trade serve American interests.

The New York summit provided a forum for the two leaders to compare notes on how to tighten the screws on North Korea, including by inducing China to take real action to rein in its belligerent ally (rather than continuing to go through the motions).

With US, Australian and other coalition forces making ground against IS in Syria and in Mosul, its capital in Iraq, Turnbull will have been able to remind the President of Australia's significant military commitment and to discuss strategy in that campaign, as well as in Afghanistan and the Middle East more broadly.

It is also an important time for US and Australian political leaders to compare notes on the Indo-Pacific region, including with an eye to the forthcoming APEC leaders' meeting and East Asia Summit.

AUSTRALIAN LEADERS ARE LISTENED TO

Going right back to prime minister Robert Menzies and his peerless foreign minister Percy Spender, US presidents listen when Australian leaders articulate a thoughtful, coherent agenda for how the two countries can work together, and with other allies and partners, to reinforce security and promote prosperity in the region — particularly when allies step up and show a preparedness to accept the inherent risks and costs.

North Korea and Islamic State are serious threats (in different ways).  But the strategic trajectory China seems embarked on will be of greater long-term consequence for the United States, Australia and the rest of the world.

China is adept at leveraging its cooperation on the issue of the day to obtain time and space to pursue its salami-slicing coercive strategy to erode US influence, weaken alliances and extend its own influence in the Western Pacific.  Beijing repeatedly used non-binding promises on climate change as a bait-and-switch gambit with the Obama administration, and it has gamed the last few administrations on North Korea.  Getting Australia, other key allies and the Trump administration on the same page will be vital to avoid the same trap this time round.

Ultimately both sides shared a modest goal for the New York encounter:  smiling media images to show they have put the phone call behind them.  To that extent, they will be satisfied.  But Australians — and Americans — have the right to expect their leaders to aim higher, and to show that they have agreed a solid plan on how their countries will work together to deal with current and future challenges and to shape a secure and prosperous future for their peoples.

Let's Put People In Charge Of Their Own Super

Imagine if your boss called you into their office to tell you they had decided who you could bank with.  Or your private telephone or electricity provider.  Or whether you had to invest in shares or even the make of private car you could drive.

While most Australians would consider employer involvement in these private financial matters to be antiquated, absurd, patriarchal, or even downright suspicious, the law currently allows considerable third party involvement in your superannuation.

Some 25 years after the beginning of compulsory superannuation, the industry's value has grown to $2 trillion, an amount expected to reach $9 trillion by 2040.

Yet perhaps unsurprisingly given its origins as an instrument of the workplace relations system, employers, unions, employer associations, the Fair Work Commission, and lobby groups for both industry and retail super funds retain considerable influence over how these funds are invested.

Around 20 per cent of Australians or 2 million people have little or no choice where their superannuation money is invested, up to 40 per cent have more than one superannuation account and potentially 60 per cent accept the "default fund" offered by their employer.

The Heydon Trade Union Royal Commission highlighted the problematic relationships between some employers, unions and super funds, with its Final Report noting:

The potential for coercive conduct and conflicts of interest in enterprise bargaining identified in respect of employee benefit funds also exists in respect of superannuation funds.

With the default fund market alone worth $475 billion, the question of who picks a default fund, why that particular fund is selected, and if an alternative system could be more transparent, encourage stronger competition and empower consumers, is particularly important.

The Productivity Commission is currently looking at this issue, and its Draft Report, published on 29 March, had some good suggestions, including to only allocate a default product when an employee first joins the workforce, and the possibility of an NZ-style centralised clearing house for super payments, to reduce the impost on employers.

The Commission also showed that it understood the extent to which the system is influenced by vested interests.

It noted that only 3 of the 52 Inquiry submissions supported some sort of objective tender mechanism to select default funds and that:

There was near universal agreement amongst participants across all parts of the industry — industry and retail funds included — that it would not be desirable for the Commission to contemplate a tender or auction model.

Tellingly, it found:

The ability of this issue to unite an otherwise disparate set of industry voices against the introduction of an auction or tender model may, itself, be instructive [and that] the Inquiry has managed to unite the superannuation industry against the Inquiry's potential contemplation of more than incremental reform.  A healthy dose of scepticism would suggest that there must be rents to be recovered for the benefit of members for such unanimity to be valid.

This proprietorial approach is also apparent in the reactions industry stakeholders have had to the suggestion that the Turnbull Government is considering allowing first home buyers in its May 9 Budget to access their own superannuation to help fund a first home deposit.

As anyone who has ever tried to withdraw money from their own superannuation account can tell you, the industry clearly considers the funds it manages, to be its very own.

So, what should be done?

The simplest approach would be to abolish compulsory superannuation.  Turning off the automatic rivers of gold would remove the need for any default fund and likely foster the immediate consolidation of underperforming funds and reduction of fees, as providers clamour to retain market share.

However, given that this is not likely to be on the cards, the Turnbull Government should at least seize the initiative and use next week's Budget to announce a reform plan to put employees firmly in control of how their superannuation is invested.

Firstly, the Government should re-introduce its lapsed Superannuation (Choice of Fund) Bill, to extend choice of fund to all employees under workplace determinations or enterprise agreements.  Personal superannuation accounts should not be a plaything for members of the industrial relations club.

Secondly, the Government should allow first home buyers to access their own superannuation money for a first-home deposit.  This would immediately ignite the interest of under-25s in what would likely become their second most important financial asset.

Thirdly, the Government should declare that employers have no role in selecting default superannuation products for their employees and announce a tender process to select up to five private sector superannuation funds to be given the right to act as defaults for a set period.  The tender should be open to existing retail and industry funds, as well as to new, approved, competitors, including from overseas.

It is instructive that the ACTU and superannuation industry representatives have already made supplementary submissions to the Commission arguing to leave the default system alone, because any default selection panel may be "political" or "comprised of ex-bankers".

With money locked up for up to 40 years, hundreds of separate funds, some of the world's highest administrative fees, opaque commercial relationships and limited personal choice it is little wonder that people are disengaged from the superannuation system.

A reform package that improves choice and competition, removes vested interests, involves the private sector and empowers people to take greater responsibility for their own financial future is one that should comfortably be put forward in the Liberal name.

Reducing Red Tape In Australia: ''One In, Two Out'' Rule

Red tape costs the Australian economy $176 billion, 11 per cent of GDP, each year in foregone economic output.  Similarly, in the US red tape is estimated to cost $2 trillion annually, or 12 per cent of GDP.

On 30 January 2017, the Trump Administration released the Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs.  The Order announced a "one-in-two out" approach to regulation, which it described as "for every one new regulation issued, at least two prior regulations be identified for elimination".

This report outlines the effect of implementing a similar one-in-two-out rule on Australian regulation.

Reality Is ''The Rich'' Do Pay Their Fair Share

It is pre-budget silly season again.  You know, the time of year when we get to hear all of the good reasons why government should spend more money.

It is also when we get to hear why government should tax more.  To hear some people tell it, the power of taxation is quite astonishing — it can solve any and every social ill.

If only negative gearing were abolished or the capital gains discount removed housing affordability would improve.  If only the government introduced a new tax on internet sales, Australian retailers would face an even-playing field.  If only big business would pay more tax, life would be fairer for the rest of us.  Not to mention "the rich" who seem to hardly pay tax at all.  If only life were so simple.  There is a lot of nonsense that gets sprouted about taxation.  But every year there is a reality check in the form of the Australian Taxation Office's annual Taxation Statistics.

Recently the ATO released the data for the 2014-15 financial year.  As always it makes for interesting analysis.  Did you know that "the 1 per cent" paid more in personal net income tax than the bottom 50 per cent of personal income tax payers?  The top 5 per cent of net personal income tax payers (earning above $167,348) paid over 33 per cent of net personal income tax while only earning 21 per cent of taxable income.

If people are worried about inequality, they should look no further than our personal tax system.

The company tax system is little different.  In 2014-15 just over half of 1 per cent of all companies had a net taxable income of over $1 million.  That small number of companies paid 74.78 per cent of the $68.4 billion in net company tax collected that year.  When we look at the actual tax distribution for Australia — official data from the ATO — it becomes very clear that the Australian government, with all its spending, is very highly reliant on the hard work and efforts of a small number of taxpayers.

It gets worse.  When you drill down into the company tax data, it quickly becomes apparent that two industries prop up the revenue:  financial and insurance services, and mining.  The two industries many Australians love to hate.

The mining industry in particular punches well above its weight.  Mining companies make up less than 1 per cent of the total number of companies in Australia, yet they pay over 14 per cent of the net company tax with an effective tax rate of 26 per cent.  That figure excludes any royalties paid to the state governments — strictly speaking royalties are not taxes, but they still contribute to the public purse.  Financial services and insurance pay nearly 36 per cent of net company tax with an effective tax rate of 21.4 per cent.

Notions that "the rich" or "the big end of town" aren't paying their fair share are simply not supported by data from the ATO.

On budget night, rather than talking about toughening up, or improved integrity measures, or new tax increases, it would be nice if Treasurer Scott Morrison thanked the hardworking taxpayers of Australia and congratulated them for their excellent performance.

What Part Of Free Speech Doesn't Liberty Victoria Understand?

Liberty Victoria's decision to reward Gillian Triggs with its annual Voltaire Award is a perfect example of the left's perverse interpretation of freedom of speech.

Today, the Victorian "civil liberties" advocacy organisation had this to say about Gillian Triggs, who as President of the Australian Human Rights Commission since 2012 has overseen some of the worst known abuses of section 18C:

This year's Voltaire salutes Professor Triggs for her courageous stand on people's rights, especially free speech.  As she said recently, "It is important that we teach our children to be strong and to speak out for the values that are important to them.  At the same time, it is important that we have legal protections in place where people are silenced by hate speech or don't have the power to speak back."

If you think that doesn't quite line up with what Voltaire said, you would be right.  Voltaire was a French enlightenment philosopher who was famously credited as saying "I do not agree with what you have to say, but I'll defend to the death your right to say it."  His target was the establishment of the day, which in France was the powerful Catholic Church.

In contrast, Triggs is a member of the modern bureaucratic establishment who explicitly rejected Voltaire in The Australian in 2013, saying that "Freedom of speech is alive and well in Australia but, with respect to Voltaire, we will not defend to the death those who abuse this right by vilifying others on the ground of race."  In recent years, Triggs' presidency at the Commission has seen the brutally mismanaged 18C case against the Queensland University of Technology students, and the obviously frivolous complaint against the late Bill Leak.

Liberty Victoria is ostensibly a civil libertarian organisation, but for the most part promotes a predictable left wing line about human rights.  It is this left wing interpretation of human rights that would lead it — and other organisation like it — to find no inconsistency with awarding a free speech award to a person who readily administers laws designed to chill freedom of speech.

As the quotes above show, the left sees freedom of speech as something to be managed by the state.  Within that worldview, you have powerful people who have excessive free speech, and who "abuse" their free speech by being hateful.  At the other end of the ledger, there are people who are in some way silenced by the excessive free speech of the powerful.

The logical end point of this illogical premise is to establish even more powerful authorities and bureaucracies to police this abuse and redistribute freedom under the law.  As New York University professor Ulrich Baer recently argued in the New York Times in a piece regarding the violent protests at American universities against the presence of conservative speakers:

The idea of freedom of speech does not mean a blanket permission to say anything anybody thinks.  It means balancing the inherent value of a given view with the obligation to ensure that other members of a given community can participate in discourse as fully recognized members of that community.  Free-speech protections — not only but especially in universities, which aim to educate students in how to belong to various communities — should not mean that someone's humanity, or their right to participate in political speech as political agents, can be freely attacked, demeaned or questioned.

To Baer, the radical campus activists have their hearts in the right place because by physically stopping voices from being heard they are ensuring "that other members of a given community can participate in discourse as fully recognised members of that community."

To the left, Triggs truly is a free speech hero because she is in a position to punish those people exercising free speech in the "wrong" way.

This is in contrast to the classical liberal tradition which explains that human dignity comes from equality under the law.  When society respects individual autonomy and operates under universal principles such as freedom of speech, there is no imbalance that needs to be addressed.

Triggs and her allies only believe in the freedom of speech they agree with.  By awarding a free speech prize to Triggs, Liberty Victoria not only makes a mockery of Voltaire, but also of themselves.

Why Should Everyone Else Pay For Your Expensive University Degree?

Australian students have the immense privilege of being able to attend a world-class university regardless of their bank balance, or family background.

And that will continue under the government's recently announced plans to make students foot more of the bill for their degree, and to start paying it back sooner.

The beauty of Australia's higher education contribution scheme, or "HECS" as it's widely known, is that students are only expected to repay less than half the full cost of their studies after they land a job that earns them a comfortable living.  By the time former students are earning the government's newly revised threshold of $42,000 a year for compulsory HECS repayments, they will be taking home a healthy $700 a week after tax and super contributions.

That is a far cry from packaged noodles, tinned spaghetti and instant coffee.

And once students do start work, the dividends are enormous.  University graduates can expect to earn well over $1 million more throughout their working life than those without a degree.  They also enjoy around half the average unemployment rate, as well as having the opportunity to spend valuable years plying their trade in their chosen field.

That kind of pay-off makes the government's proposed fee increase of no more than $3600 a year look like chump change.  Anyone who claims an increase of this order will stop school leavers from pursuing their dream career can join me for a bicycle ride to the moon.  Indeed, whatever way you slice it, taking out a HECS loan to attend university stands to be the best investment you're ever likely to make.

It's fashionable to romanticise the Whitlam government's introduction of free tertiary education as a shining example of the truly egalitarian society Australia ought to be.

But where is the fairness in asking the majority of Australians — three quarters of whom don't have a university qualification — to subsidise the debt of tomorrow's professional class who are likely to earn more over their lives than they will?

With an eye-watering national debt of $550 billion and an annual deficit of $37 billion, there is no painless or politically simple way of bringing our country's finances back to a sustainable footing.  Faced with the challenges of an ageing population, chronic infrastructure backlog and inexorably rising health costs to name a bare few, hard-headed choices in our national interest are sorely needed.

If we want to take care of those who are sick, without work or who can't otherwise go it alone, it makes sense to share the burden with those who can.  By that standard, paring back the funds used to pave the way for doctors, lawyers, scientists and engineers without raising the entry barriers for future students is a perfectly equitable place to start.

None of this is to say there aren't scores of students buckling under the cost of living independently while studying 40 hours a week.  But if we actually want to help students doing it tough, there are far better things we could do than paying off a debt they will only encounter once they're taking home an easily liveable wage.

But as famously said by Paul Keating, the Treasurer who abolished free university and introduced the HECS system, "a free higher education system is one paid for by the taxes of all, the majority of whom haven't had the privilege of a university education.  Ask yourself if you think that is a fair thing."

On that score, Education Minister Simon Birmingham's announced shake up of university funding is exactly the kind of fair and forward-thinking policy the Coalition government should be championing.

Section 18C Letter To The Editor Of The Law Society Journal

Race Discrimination Commissioner Tim Soutphommasane's essay "Setting the Record Straight" about Section 18C of the Racial Discrimination Act (LSJ February) perpetuates more misconceptions than it dispels.

It is true that the Racial Hatred Act 1995 was introduced following the tabling of three government reports in the early 1990s, but it is not accurate to say section 18C reflects the recommendations put forward in those reports.  Not one of those reports recommended for a civil prohibition on offensive or insulting language.

Nor is it appropriate to refer to the current interpretation of 18C as "settled law".  As readers will be aware, the Full Court of the Federal Court or the High Court is not bound by the interpretation of equal or lower courts.  Nor is the present interpretation clear.

That 18C applies to "profound and serious effects, not to be likened to mere slights" is no less vague than "offend" and "insult", and doesn't make any clearer what conduct amounts to "mere slights", "profound and serious effects" and what falls in the chasm between them.

Another level of confusion in the law is the so-called objective test for whether there has been a breach of section 18C, which uses "the reasonable person of the target ethnic or racial group".

Justice Ronald Sackville recently noted in reference to a case which used the subgroup of "young, impressionable, Jewish people faced with Holocaust denial" that "once you get to that kind of level, I think in fact, you are dealing with concepts that are extraordinarily difficult to apply and will not work."

Section 18D is not a reliable defence for freedom of speech.  In 20 years and close to 80 cases being heard in the Federal Courts, the 18D defence has only be accepted three times, and two of those were from the Bropho series of cases.

The chilling effect of section 18C arises not from the outcome of court proceedings, but from the process before a complaint reaches court.  This was most glaringly demonstrated in the case against several students at Queensland University of Technology.

The complaint was launched after 20-year-old student Alex Wood commented on an unofficial student Facebook page:  "Just got kicked out of the unsigned indigenous computer room.  QUT stopping segregation with segregation ...?"

For this comment made in May 2013, Wood was subjected to three-and-a-half years of legal drama before the matter was dismissed in the Federal Circuit Court in November 2016.

This is an indefensible example of section 18C, which makes its omission from Dr Soutphommasane's article unsurprising.

To the question "What is it that people want to say, which they can't already say?" the answer is that Alex Wood should be able to write Facebook comments critical of his university.

Likewise, a cartoonist should be able to draw satirical political cartoons and a Church should be able to erect a statue commemorating WWII sex slaves without the threat of legal sanction, as happened to Bill Leak and the Ashfield Uniting Church in the past 12 months alone under section 18C.

Dr Southphommasane's intent was to address the lack of "clear public understanding of how the Act and the AHRC in fact operate".

In fact, opponents of section 18C have witnessed how the law operates in a very clear way, and recognise it has no place in a liberal democratic society.

Locking Down Crime

Community safety is the highest priority of the criminal justice system and the NSW government can be proud of the latest batch of crime statistics.

Robbery and theft have declined 13 per cent from the last quarter of 2016.  Other serious crimes such as murder and assault are stable.  This stands in stark contrast to Victoria where serious crime is skyrocketing, up 20 percent over the past two years.

When it comes to reducing crime in Australia, NSW is leading the way.  Building on this success, the government now has the opportunity to launch a wide-ranging criminal justice reform program.

The government is already addressing some known problems in the system.  Fifty-two per cent of prisoners are repeat offenders, and the government is responding by spending $237 million on programs to reduce recidivism.  To deter crime, the state has also committed $57 million for new and upgraded police stations.

The last state Budget committed a record $8.1 billion to criminal justice.  And over the next four years, the government will add 7000 new prison beds at a cost of $3.8 billion;  more expensive than WestConnex.

But the public is entitled to ask:  is all of this money being effectively targeted towards community safety?

Is increasing incarceration the best way to keep the streets safe?

To answer these questions, my new research suggests that NSW can learn from the experience of the US.

Over the past decade, more than 20 American states have taken steps to safely reduce the growth of incarceration.  Texas, for example, has avoided $US3.9 billion in prison spending while seeing massive declines in serious violent, property and sex crimes.

The process begins with punishment reform for non-violent offenders.  In the words of former Texas politician Jerry Madden, we need to separate those criminals we are "afraid of" from those we are merely "mad at".

While violent criminals need to be locked up, many other offenders can be safely punished in the community, with measures such as home detention, community service, fines and restitution orders.

In NSW, the most serious offence of 48 per cent of prisoners was a non-violent offence.  Among these offenders are petty thieves, minor drug offenders, and traffic offenders.  Given the average annual cost of locking someone up is almost $90,000, implementing punishment reform for even some of these people would help to offset the cost of the programs that the government has proposed.

In practice, punishment reform means that much of the money saved by slowing the growth of incarceration still needs to be spent on criminal justice, to pay for case officers, monitoring, and halfway houses.

There is also clear evidence that increased policing is more effective in deterring crime than measures such as making prison sentences longer.

Over time, savings are produced by reducing crime and, in particular, reoffending.  Importantly, the money saved should stay in the criminal justice system.  The government should ignore calls from social engineers to use these redirected funds in any way that treats the criminals as victims and wants to blame society for their crimes.  Criminals are accountable for their actions.  No excuses should be made for them.

Instead, the government should set the expectation that offenders will become productive citizens.

That is in line with both commonsense and the American experience.  Studies have shown the best way to keep people on the straight and narrow is employment.  For this reason, American states have expanded skills education, reduced barriers to employment such as licensing requirements, and offered tax incentives to businesses that hire released prisoners.

To the government’s credit, NSW is already moving in this direction, with increased TAFE study opportunities for inmates and work programs in prisons.  Training should always focus on marketable skills, and not feel-good programs in the arts and music.

For the government, there is also an interesting political observation from the US.  Successful criminal justice reform has been led by conservatives.  Contrary to the view of left-wing commentators, traditional principles of personal responsibility and fair punishment are the bedrock of the criminal justice system.

And only conservatives can be trusted to cut costs rather than throw taxpayer money towards favoured causes.

As the experience of US states such as Texas demonstrates, staying true to our values while addressing the problems and cost pressures within the criminal justice system has been a political victory for conservatives.  It can be a win for the Berejiklian government as well.

Malcolm Turnbull must learn from Breitbart and fight culture wars

Last week when he announced changes to the laws on Australian citizenship and foreign workers, Malcolm Turnbull spoke passionately about "Australian values" and the need to respect our culture and history.

It was a long overdue foray from him into the debate about our changing national identity.  Unfortunately many on the political left demean that debate by labelling it as merely a manifestation of the so-called "culture wars" and as a debate not worth having.  But as the left knows perfectly well, culture is everything.

On Anzac Day the Prime Minister's rhetoric about Australian values confronted reality when ABC presenter Yassmin Abdel-Magied posted inappropriate and offensive comments on Facebook about the day of commemoration.

Turnbull is now facing increasingly strident calls from Coalition MPs for Abdel-Magied to be sacked from her federal government posts.  And MPs are asking the not entirely unreasonable question why the Department of Foreign Affairs and Trade funded her international tour to promote a book she'd written.

FREEDOM TO SPEAK, EVEN IF HURTFUL

Make no mistake.  Abdel-Magied should be absolutely free to say what she said, no matter how hurtful or offensive.  No one is suggesting she be the subject of an 18-month secret investigation by the Human Rights Commission, as Alex Wood was when in 2013 as a student at the Queensland University of Technology he wrote on Facebook "Just got kicked out of the unsigned Indigenous computer room.  QUT stopping segregation with segregation".

But the question of whether what Abdel-Magied did should be unlawful is entirely different from whether it is appropriate for her to hold official government positions and be an ABC presenter.

What the government does about Abdel-Magied remains to be seen.  If the ABC could name among its senior ranks of journalists and commentators a single conservative who admitted to voting for Tony Abbott and to liking Donald Trump, then perhaps Abdel-Magied's position at the national broadcaster would be slightly more tenable.

The person who understood this better than anyone in recent times was Andrew Breitbart, who is renowned for saying "politics is downstream from culture".

Breitbart was one of the co-founders of The Huffington Post, and in 2007 he started the Breitbart News Network.  Steve Bannon was one of the company's original board members and took over when Breitbart died suddenly in 2012 at the age of 42.

The year before his death Breitbart published his book Righteous Indignation:  Excuse Me While I Save the World.

CELEBRITY IS EVERYTHING

Breitbart was quite explicit about the purpose of his network.  He had the aim of starting a site "unapologetically pro-freedom and pro-Israel".

Breitbart had an uncanny understanding of the intersection between culture, the media, and politics.

In an interview on Fox News in April 2011, he talked about Donald Trump.  At the time Trump was considering running for the Republican nomination for the 2012 presidential election.

"Is Donald Trump a conservative?" Breitbart was asked.

"Of course he is not a conservative," Breitbart answered.  "He was for Nancy Pelosi before he was against Nancy Pelosi.  But this is a message to those candidates who are languishing at 2 per cent and 3 per cent within the Republican Party who are brand names in Washington, but the rest of the country don't know… celebrity is everything in this country.  And if these guys don't learn how to play the media the way that Barack Obama played the media last election cycle and the way that Donald Trump is playing the election cycle, we're going to probably get a celebrity candidate."

Breitbart's timing was only four years out.  A few days after that interview Trump announced he would not join the 2012 presidential race.  A public opinion poll at the time showed 71 per cent of those surveyed believed Trump had no chance of becoming president.

If the Coalition wants to win the culture wars it is going to have to start to fight them.  A country's public culture is not only about culture per se.  The fact the Coalition can't pass its cuts to government spending through the Senate is entirely a product of Australia's public culture.

It might be that Malcolm Turnbull has realised the truth of Breitbart's dictum.

We Can't Just Rely On US To Defend Australia

The US missile strike in Syria, rising tensions with North Korea, China's creeping militarisation of the South China Sea, and recent terror attacks all highlight an important reality:  Australia cannot take its security for granted.

For decades Australia and its Asia-Pacific neighbours benefited from a relatively stable region in which open markets, inclusive regional institutions, uncontested freedom of navigation and a favourable balance of power underpinned by the United States' predominant military presence in the Western Pacific were the order of the day.

We and other countries prospered greatly in those conditions:  Australia has enjoyed a dream run of more than a quarter-century of continuous economic growth, China has emerged from poverty to become the world's second-largest economy, and hundreds of millions have joined Asia's burgeoning middle class.

Yet we took our good fortune for granted and mistook hard-won security and economic gains for a birthright.

Today, Australia's economic and national security face increasing threats and challenges.

Terrorism remains a global menace and will endure after coalition forces vanquish ISIL and its "caliphate" in Iraq and Syria;  the threat posed by homegrown terrorists and displaced foreign fighters likely to return to Southeast Asia is significant.

After the Cold War competition between great powers seemed to have been consigned to the dustbin of history, but geopolitics has returned with a vengeance — in Europe, the Middle East and Asia.

Revisionist powers such as Russia, Iran and China are seeking to carve out their own 19th century regional spheres of influence — irrespective of the wishes of their neighbours.

China's growing power and assertiveness pose a particular challenge for Australia and for other countries in our region, not least because of its importance to our economy.

China is using its economic muscle to coerce neighbours and is acquiring advanced weapons intended to prevent the United States from projecting power as it has for more than half a century in support of its allies and of maintaining the regional rules-based order.

This is shifting the balance of power away from the United States and its allies and inducing other countries to acquire their own missiles, submarines, modern fighters and cyber weapons — in the process eroding the military capability edge that Australia has relied on in the region.

Add the uncertainty and anxiety triggered in the region by the election of a self-consciously disruptive US president who has questioned many of the longstanding pillars of US foreign policy, and the result is a volatile mix.

Australia should not panic, however.  We have to take responsibility for our own security, and meeting the Government's commitment to invest 2 per cent of GDP in defence will be a minimum requirement.

But we aren't on our own.

The US alliance remains a vital strategic asset and will become more, not less, important.  At the same time, Australia and other American allies will be expected to do more.

Fortunately, partners such as Japan, India, Singapore and Indonesia share our interest in maintaining a peaceful and prosperous region and will also look to do more with us.

Reducing Immigration Won't Solve The Housing Crisis

Cutting red tape, rather than immigration, should be the principled and consistent solution to lowering prices and improving housing affordability.

Unfortunately, it seems politicians are more concerned with suppressing competition rather than freeing our housing markets.

Tony Abbott has said the government could ease housing demand by scaling back immigration "at least until land release and infrastructure can keep up".  Pauline Hanson and several other conservatives like Cory Bernardi and Mark Latham have all floated similar ideas in recent weeks.

This approach is not only wrong, but it is also short-sighted and dangerous.

Yes, reducing immigration will put downward pressure on housing prices, just as any reduction in demand would.  But its effects are overstated:  very few migrants are so cashed up that they are instantly able to purchase a home that would otherwise be bought by a young Australian.  Far from being cashed up, most who migrate here seek a better life for themselves and their families and work hard to achieve it.

My Nonno migrated from Italy in the 1950s.  Back then, he could not speak a word of English, but had particular skills with his hands and was able to find employment as a steelworker on the Snowy-Hydro.  He and his wife were not able to afford to buy a house immediately, but worked hard and were eventually able to afford a home in the outer northern suburbs of Melbourne.

This is a generational story that many Australians share.  It is one that also applies to the migrants of today.  Do we really believe, in 2017, that well off migrants are buying housing stock and keeping us stuck in traffic on our roads?

But there is a more fundamental point which Hanson and Co miss:  immigration policy isn't housing policy.  Equating the two means the massive benefits that migrants generate for our economy and society are ignored.  In Australia, skilled migrants accounted for on average 67.7 per cent of our total immigration intake in 2015-16.  These people make a great contribution to our economy.

The Migration Council of Australia's report on the economic impact of migration found that our migration program up until 2050 will contribute $1.6 trillion to the Australian economy.  Skilled immigrants and student visas in particular, are our most productive of all visa types.

Further, it is passing strange that some of the advocates of cutting our immigration intake to lower house prices, also are the staunchest supporters of free trade.

A growing immigration intake increases the size of the Australian market, and demand for services across Australia.

Free trade is the belief that the exchange of goods and services across borders is fundamental to our prosperity.  But if we believe free trade in goods, we should also believe in the movement of migrants with valuable skills.

Still, there is no doubt housing affordability is a real issue for many Australians, especially for those under 30.  But the root cause of this problem is not excessive demand, it is restricted supply.

Rentals are also under pressure, with a recent report revealing the proportion of Australian households who rent is now 31 per cent, and 63 per cent of those renters are aged 35 or above.

Reducing our migrant intake at first looks tempting to policymakers, both to bring housing prices down and to ease demand pressures in the rental market.  But unlocking more supply is the only credible long-term way to put downward pressure on rents.  And the way to achieve this is cutting red tape and reducing regulation on housing development.

There is hypocrisy on many sides of this debate that deserve to be called out.

The Greens advocate tax increases through changing negative gearing to reduce housing prices.  Yet it is green-flavoured local councils in the inner city of Melbourne and Sydney that mindlessly block all sensible high-density development in the inner city where public transport infrastructure is readily available.

This forces many Australians, particularly the poor, to suburbs in the outer fringe suburbs that require hour-long commutes into the city.  Not only do they frustrate and oppose the building of major roads to these suburbs, but these same greens will also oppose unlocking land in the green wedges of our cities.

This is compounded by direct costs governments place onto landowners through taxation, planning red tape and stamp duty.  In addition, the array of government commands is becoming more bizarre all the time:  some new houses need a certain percentage of the house made of glass;  some need high energy efficiency standards;  and others require two car parking spaces.  And all the while prices keep ratcheting up.

Cutting red tape on development and unlocking housing supply to meet our demand is the most sensible long-term policy prescription in this debate.

Cutting our immigration intake to reduce housing affordability is a reactionary populist policy that plays on the fears of Australians.

GST Change Is A Plain And Simple Tariff, Scott Morrison

The Turnbull government's proposal to eliminate the $1000 threshold before the GST is levied on imported goods is not a tax integrity measure.  It is a tariff, and one that will have serious repercussions that the government does not seem to have considered seriously.

The end of the low-value threshold was first flagged by the government in December 2014.  It formed part of last year's budget.  Now there is actual separate legislation before parliament, and a Senate committee inquiry that will give its verdict on the legislation the same day Scott Morrison releases his 2017 budget.

By July, if everything goes to the government's plan, the commonwealth will be receiving a stream of GST revenue from every global internet retailer that supplies Australian customers with a total of more than $75,000 worth of goods.

That's the plan, anyway.  This proposal is no more convincing now than it was two years ago when it was first announced.

In 2011 the Productivity Commission concluded that inspecting low-value imports at the border to assess their GST liability would cost more money than it would raise.  So rather than getting Customs to collect the GST, the government wants to convince foreign online retailers to do it for them.

Let's imagine this ploy works.  Some of the consequences are easily predictable.  First, many Australians will substitute away from well-known online sellers — such as eBay and Amazon — that have built excellent reputations for facilitating and protecting trade, to those less well-known sellers that are likely not to charge the GST.

Doing so will expose more Australians to online fraud and lead to them purchasing less reliable products from unreliable suppliers that may not meet our high quality and safety standards.  It also will expose more Australians to the more unsavoury sellers on the internet, possibly leading to an increase in unlawful imports into the country.

At the very least, a 10 per cent increase in the cost of digital goods will make intellectual property ­piracy just that little bit more ­attractive.  This is a real cost of the policy that must be fully accounted for.

Second, the way the government proposes to implement this measure constitutes an exercise in extraterritorial power.  The commonwealth Treasury does not have jurisdiction over eBay (headquartered in San Jose, California) or Amazon (headquartered in Seattle).  Attempting to rope them into our tax system will place the Australian government in conflict with our major trading partners.  At the very least this should generate trade disputes at the World Trade Organisation.

Doubly so if our trading partners read the Treasurer's second reading speech introducing the legislation, which makes it clear that this is a protectionist measure to benefit the Australian small businesses that have been "unfairly disadvantaged" by the fact they pay taxes that firms in other countries do not.

This is the nub of the issue.  Transactions that occur in foreign countries should not be liable to the Australian GST.

The GST is usually described as being a "consumption tax" but in fact, for practical reasons, it is a tax on sales.

When Australian consumers purchase goods online from, say, a company based in Britain, the sale does not occur in Australia — it occurs in Britain.

The money is exchanged in Britain, the order is produced in Britain, the sale is processed in the Britain and the dispatch order is made from Britain.

The fact the goods are subsequently imported into Australia does not mean those goods should be liable to an Australian sales tax.  A tax levied on imports is a tariff.  This legislation is an embarrassing reversal of Australia's longstanding free trade agenda.

Morrison pointed out in his second reading speech that his legislation is a "significant world first".  That is not something of which he should be proud.

In the realm of tax administration, at least, Australia is showing itself to be a bad international player.

Rather than introducing a new tariff to protect Australian business from international competi­tion, the government should focus its efforts on those features of the Australian business environment that impose such high prices on local consumers.

Working to lower company tax, high wage structures and reducing red tape would benefit Australians far more than protectionist measures for their small-business constituency.

Young People Need Hope And Jobs, Not Gesture Politics

Calls from two Nick Xenophon Team parliamentarians and Independent Member for Indi Cathy McGowan to establish a Federal Minister for Young People proves that bad ideas in Federal politics are not the exclusive domain of the major parties.

NXT MP Rebekha Sharkie has justified the idea by claiming that "children and young people feel like they're being spoken at, not spoken with by the federal government," "Justin Trudeau is also the Minister for Youth in his country" and this is "not just a left wing idea."

The problem with this proposal is not whether it is said to be left or right wing.  The problem is that it is just a bad idea.

There are currently 42 executive officeholders (ministers and assistant ministers) in the Australian Government with a total of 54 portfolios.

While this is broadly in line with recent Coalition and ALP governments, there is no comparison with the 19-member Menzies Ministry of 1949 or the nine-member Barton Ministry in 1901

Then again it could still be worse.  Bill Shorten's current Shadow Ministry has 48 officeholders and a whopping 84 portfolios!

There are now eight ministers in the Prime Minister's department including the PM, and ministers assisting the PM for the public service, cyber security, counter-terrorism and cabinet, as well as one who is just the Assistant Minister to the Prime Minister.

There is an Assistant Minister for Cities and Digital Transformation who also reports to the Prime Minister, as well as a Minister for Urban Infrastructure who confusingly reports to the Minister for Infrastructure and Transport.

A total of four ministers occupy the social security portfolio, there are also four in foreign affairs and trade, and while there is a Minister for Communications there is also a separate Minister for Regional Communications.

It is little wonder that Federal Government spending has accelerated from $140 billion in 1997-98 to $441 billion in 2016-17, and gross debt is set to pass $500 billion later this year.

The more ministers, their staff and bureaucracies that exist, the more certain it is that they will look for more to do and more places to spend taxpayer money.

Rather than asking how many extra positions we can create, taxpayers should instead be asking what we can eliminate.

For example, why does there need to be two federal education and training ministers when the federal government doesn't run any schools, or three health ministers when hospitals are run by the states?

Why does there need to be a Minister for Urban Infrastructure given that planning, land management and transport are largely State responsibilities, and how many of the Environment Minister's responsibilities could be returned to the States or allocated to the Industry portfolio?

As well as the Cabinet-level ministers for foreign affairs and for trade do we really need a federal Minister for International Development and the Pacific and an Assistant Minister for Trade, Tourism and Investment?

Given the extent to which the Federal Government has already displaced the private sector and State Governments over the last thirty years, the current, unwieldy Administrative Arrangements Order would be a good starting point for serious moves to begin peeling back federal red tape.

Young people need a taxation system that acknowledges and rewards savings and investment, an education system that gives them the skills to cope with a competitive international marketplace and most importantly of all, a state that sees them as individual citizens with amazing potential rather than another disadvantaged group to be "represented" by politicians.

It is the uncontrollable growth of government and the consequential stifling of entrepreneurship and burden of debt, which has done more to damage the prospects of younger people than anything else.

A new Youth Ministry would create jobs in Parliament House and the bureaucracy to be sure, but that is about it.

Criminal Justice Reform Does Not Start In Jails

The new WA Government has said that it cannot afford to build a new $600 million prison planned by the previous government.

But this cost cannot be avoided simply by letting people out of prison.  Criminal justice reform must always be about maximising community safety.

The Government is right to look for inefficiencies in the criminal justice system.  WA has the country's fastest growing prison population, increasing 14 per cent over 2015-16.  The State has one of the highest incarceration rates in the country at 314 per 100,000, a 30 per cent increase over the past 10 years.  This figure rises to 3997 per 100,000 for indigenous Western Australians.

The annual per prisoner cost of incarceration in the State is $130,000.

WA is not the first jurisdiction to face rising incarceration costs.  Over the past 10 years, more than 20 American states have implemented reforms to lower the cost of incarceration while reducing crime and re-offending.  The American experience yields some useful lessons for WA.

The first lesson is to implement punishment reform for non-violent offenders.  In the words of former Texas politician Jerry Madden, we need to make a distinction between those offenders we are "afraid of" and those we are merely "mad at".  For the latter group, Texas expanded community-based punishments and treatment programs.

In practice, punishment reform means a significant portion of the money saved by not building new prisons still needs to be committed to the criminal justice system, to pay for case officers, halfway houses, and monitoring.  Research also shows that police spending is effective for reducing crime.  And in WA, the high level of indigenous incarceration may require special attention.

The real savings come from a longer-term reduction in crime and recidivism.  Texas has avoided more than $3.9 billion in prison costs.

Serious property, violent, and sex crimes fell 12.8 per cent between 2003 and 2010.

WA Corrective Services Minister Fran Logan said he would like to focus on the remand population, which makes up 30 per cent of WA's 6600-strong prisoner population.  But the most serious offence of 46 per cent of WA prisoners was a non-violent offence, showing the potential for wider reforms.  The second lesson is to reduce re-offending through skills training and employment.

About 60 per cent of WA prisoners have been imprisoned before.  Research in Australia and the US has shown a strong correlation between unemployment and re-offending.  While the Government will likely face some pressure to address crime through the welfare system, no excuses should be made for criminals.  The Government should set high expectations for released offenders.  This means insisting people become productive members of society and targeting assistance to that goal.

Texas and other American jurisdictions have tackled re-offending by expanding skills education, reducing barriers to employment and offering tax incentives to businesses that hire former prisoners.  In Australia, the high minimum wage is a particular barrier for higher risk potential employees.

The Commonwealth should consider an exemption for ex-prisoners.

Whatever programs are put in place to reduce offending, they must be tracked and evaluated.  This means that administrators and researchers must have reliable data.  In the US, criminal justice reform typically begins with a top-to-bottom independent review of the system's operation and oversight mechanisms.

The State Ombudsman has experience in conducting reviews of government administration and would likely be able to perform this function.

Finally, the Government should take note of the politics of criminal justice reform.  In the US, reform has been led by conservatives, with an emphasis on community safety and fiscal responsibility.  Even more importantly, reformers have been able to bring the public with them by pursuing reforms consistent with traditional moral principles like personal responsibility and just punishment.

The public, rightly, will not support any reforms that undermine their sense of right and wrong.

Criminal justice reform is therefore not simply about reducing incarceration.  It is about reducing crime through cost-effective, data-driven punishment reform, thereby lowering costs while making the community safer.

Business Bosses Hide Out In The Qantas Chairman's Lounge

Liberal Party pollster, Mark Textor recently gave a penetrating insight into the hopelessness of the policy advocacy provided by many of Australia's business leaders.  Business leaders, he said, had "deskilled" themselves when it came to communicating to the community, and had "retreated further into their bubble".

According to Textor representatives of big government, big business, and big unions "all meet each other in Qantas lounges and have the occasional manufactured blue on the stage of a forum.  And yes, they do have some fundamental differences, but my contention would be that it's not as big as the differences between small and big businesses, not as big as the differences now between the public and political class."

Textor is correct.  The role of big business in the Australian economy and in national politics is the subject of my forthcoming research paper.  Coincidentally it's entitled Australian business and the Chairman's Lounge syndrome.

The Qantas Chairman's Lounge is probably the most exclusive club in the country.  Membership is by personal invitation of the chairman.  It's tucked away behind a private door in airports across the country.  Unlike the Qantas Club, you can't buy your way in.

Too many of this country's corporate leaders suffer from the syndrome.  Its symptoms include an intense desire to be accepted by one's peers, fear of controversy, and preferring what's comfortable and safe.

THE PERFECT METAPHOR

Membership of the Chairman's Lounge is elite, small, and hermetically sealed from the rest of the world — a perfect metaphor for the leadership of big business in Australia.  As with all such groupings of limited size, the pressure to conform is high.  The global business elite have Davos at which they can assuage their guilt for getting paid many multiples of the average wage for doing not much at all.  In Australia we have the Chairman's Lounge.

A feature of those who speak for big business in this country is how homogenous it is.  There might be a degree of diversity when it comes to gender or ethnic background — but not when it comes to politics.

Even if the CEO of an ASX 100 company believed that Donald Trump as President of the United States will be good for the world — they wouldn't dare say it.  But the point is they wouldn't think it in the first place.  It's easy for Chairman's Lounge members to adopt social and environmental causes because most of the time they're not affected by what they preach.

Few Chairman's Lounge members would notice if their family electricity bill went up by $100 a year because of climate change policies.  And because government red tape hurts small business much more than big business, which is one of the reasons why so few business leaders talk about the need to reduce excessive regulation.

A CEO of a big business in Australia is most likely to have attained their status, and therefore their membership of the Chairman's Lounge, not because of their creativity or their skills of entrepreneurship for example, but because they can play corporate politics.  The reality is that many CEOs of big businesses in Australia are company bureaucrats.  And the companies they work for are bureaucracies that have a culture of bureaucracy.

US DIFFERS

In America it's different.  In America the five biggest companies by market capitalisation are Apple, Alphabet (Google), Microsoft, Berkshire Hathaway, and Amazon.  And Facebook is number six.  In Australia our biggest companies are the four banks and the two miners.  Our biggest company, the Commonwealth Bank, used to be owned by the government.  So did two other companies in our ten largest, CSL and Telstra.

Consider what happened when the American executive Sol Trujillo was CEO of Telstra between 2005 and 2009.  Trujillo was not an internal Telstra hire who had spent a career with one jealous eye on the Chairman's Lounge entrance.  He was described as "combative".  But by "combative" people seemed to mean that he firmly stood up for his firm's policy interests in public.

Such forthrightness and policy engagement was not appreciated by his peers.  Trujillo left the country nearly a decade ago.  These days too many of this country's business leaders prefer the peace and quiet of the Qantas Chairman's Lounge to the rough and tumble of fighting for something in the public debate.

No Escaping Brexit Lesson

But that is what will be required of British Prime Minister Theresa May and her European Union counterpart, Donald Tusk, as they navigate what will be the world's most complicated and expensive divorce settlement over the next two years.  Added to that, the EU will need to get its remaining 27 member states to agree to the terms of the divorce, an exercise tantamount to herding cats if previous experience of EU decision-making is any guide.

Regardless of the naysayers and the doubters who still campaign to this day for the UK to remain in the EU, have no doubt the Brexit divorce will go ahead.  By 2019, the UK will be out and free to be a major player on the global stage once again.

Brexit is good news for Australia, but it won't all be plain sailing.  We will need to be as nimble as the UK in making the most of the changing geopolitical landscape.

The most obvious benefit for us is a quick and comprehensive free trade deal with the UK as soon as it exits the EU in 2019.  We can expect wins for our exporters as the UK leaves the protected EU market and opens up its market to our Aussie beef, lamb, wine and fruit.

For most of us, as consumers, we should benefit from cheaper British cars and manufactured goods.  Hopefully we'll get a better deal when it comes to visas for those who wish to live and work in the UK.  The past decade has seen a sharp decline in the number of Australians living in the UK, which can be put down to the British Government's attempt to rein in non-EU migrant numbers.  Out of the EU, the UK will have control over its migrant levels and Australians should expect a return to more favourable treatment in recognition of our shared ties of history, culture and values.

Free of the shackles of the EU, which consumes so much of the UK's diplomatic time and energy, the UK will look to the world.  That goes against the narrative of the ardent "Remainers" that Brexit is a return to a nativist Little England.  Prime Minister May has been quite clear:  post-Brexit UK will be open and global.  Old friends, like Australia, will be back in vogue and we should expect the UK to be focused on our shared interests, especially in the Asia Pacific region where the UK has been largely absent for the past few decades.

The UK will look for new friends too, especially Asian powerhouses like China, Japan and Korea.  We can be part of those new friendships.

The biggest challenge posed by Brexit will be navigating our relationship with the EU.  The EU without Britain means an EU without our most like-minded partner, without its most liberal and outward-looking member state and without its second-biggest economy and contributor.

Without the UK, the EU will be poorer, more introverted, less trans-Atlantic and less internationally engaged.  Coupled with the blow of losing Britain, it will continue to grapple with intractable problems:  the Eurozone crisis and high levels of government debt, systemic low growth and ageing populations, as well as the migrant crisis with its serious ramifications for internal security and social cohesion.

Let's be clear.  An EU distracted, depressed and without British leadership will mean it will be harder for Australia to negotiate its dawdling FTA with the Union.  Without free trade-loving Britain, the much more protectionist French and Italians will be less interested in doing a deal with Australia and more interested in protecting their own farmers.

NOW is a turning point for the EU.  Without Britain, the EU must reshape itself to ensure its own survival.  Elections this year, including in France and Germany, could see Eurosceptic leaders in place, putting the future of the EU in doubt.

EU leaders need to heed the lessons of Brexit — that democracies work when governments stay connected and responsive to people.  Respecting the national sovereignty, identity and values of member states should always trump the interests of the EU and other supranational bodies.  Ultimately, standing up for the common good only matters if it's for the common good of people and not the institutions that profess to serve them.  Losing sight of people means losing their faith.  If you do that, recent history shows they won't be afraid to show their displeasure at the ballot box.

Such is the enduring power of democracy.  That is surely the lesson for the EU and globalism more broadly.