Campbell Newman must get the privatisation message right

The Newman government faces a challenging political task to convince sceptical Queenslanders of the merits of privatisation.

Reports last year suggest the government is investigating selling the state's extensive portfolio of assets, after recommendations by the Costello Commission of Audit led by former federal treasurer Peter Costello.

That being the case, 2014 is an opportunity for Premier Campbell Newman and his Treasurer Tim Nicholls to try to sell the virtues of privatisation to the public.

However, privatisation has long been unpopular in the electorate.  The defeat of the Bligh government in 2012 is widely pinned on its unpopular sale of the coal railway carrier QR National, port facilities in Brisbane, and other assets, after having said during the 2009 election campaign that it would not go down that path.

So how might the Newman government get the electorate onside on the need for such a big reform?

To help counter perceptions that selling government assets is a radical initiative, the government should emphasise that privatisation is a common economic and financial management practice.

The latest ''Privatisation Barometer'' report indicates governments around the world raised about $US189billion from asset sales in 2012, the third highest total since 1988.

While some of this was accounted for by the US government's withdrawal of its bailout of insurers and car companies, impressive outcomes were attained in mixed-economy Europe, China, the autocratic Middle East, and elsewhere.

Since 1988 governments have sold assets in fields as diverse as aviation, banking and insurance, broadcasting and social services, construction, electricity generation and distribution, manufacturing, mining and telecommunications.

With electricity and port facilities having been successfully privatised, including by other Australian states, it would not be so extreme if Queensland chose to follow suit.

Another argument to be made is that transferring assets from the public to the private sector usually leads to a better long-term economic performance on the part of the privatised entity.

Government-owned entities are forced to adhere to political imperatives, such as providing below-cost services to favoured constituencies, while also being insulated from the direct effects of competition and the threat of bankruptcy or takeover.

Such circumstances necessarily lead to wastage as government entities operate less productively than their private sector peers.

On the other hand, numerous studies, including those in peer-reviewed academic journals, indicate privatisation is generally associated with improved financial performance and productivity gains.

Academics William Megginson and Jeffrey Netter surveyed the privatisation experiences of developed and developing countries, concluding that privatisation works in the sense that divested firms almost always become more efficient, more profitable, and financially healthier — and increase their capital investment spending.

After the electricity sector was privatised in Victoria and South Australia, labour productivity improved and high service reliability was maintained.

The final key argument Newman and Nicholls should consider is that selling assets can allow the government to focus more effectively on core tasks, such as law and order.

Declining production costs, technological advancements and access to global financial markets mean the private sector is more capable than ever of managing assets once controlled by government.

The prospect of billions of dollars to be made through asset sales would no doubt be attractive to the government, given the troubling budgetary circumstances the state faces.

But sound arguments for privatisation should not — and cannot — rest on financial considerations alone, if privatisation is to have any hope of passing muster with the public.

Privatisation critics will try to demonise any proposal to sell government assets, so patient and intelligent political arguments are needed if privatisation is to win over the voters.

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A peer funding model for the arts?

A recent paper by five mathematical computer scientists at Indiana University (published in EMBO Reports, a forum for short papers in molecular biology) proposes a clever new model for science funding that makes use of collective allocation (peer-funding) rather than expert-panel-and-peer-review funding mechanisms.  I want to consider whether this might also work for arts and cultural funding.

Public science and research funding in Australia, as in most of the world, is based on a process that has remained largely unchanged for 60 years.  This begins with calls for submissions of reasonably detailed project proposals.  These then pass through expert panels (e.g. the Australian Research Council) and then on to the peer review process in which carefully selected ''peers'' evaluate the proposals and write detailed reports, before passing these back to the panels for final judgement.  The high-level of process and accountability makes this the gold standard for taxpayer-sourced public funding of research (philanthropic trust funding often mirrors this architecture).

But it is expensive to run, and onerous to all involved.  Perhaps one in ten projects proposed will be funded.  The amounts of time and effort invested by all those seeking funding will tend toward the expected value of the grants, meaning that once overhead costs to panels and reviewers are added in, these function to a considerable degree as a redistribution mechanism.  Rob Brooks wrote about this on The Conversation last year.

The new model the computer scientists propose bypasses this expert-panel-and-peer-review system altogether by simply taking the whole public lump of funding, and allocating it unconditionally (yes, unconditionally) to all ''eligible'' scientific researchers.  It would thus function like a kind of ''basic income''.

They calculate that if the National Science Foundation budget in the US were divided among all who applied for funding, it would deliver about US$100,000 per scientist.  The problem with this, apart from an expected blowout in the number of people who claim to be scientists, is that we've just lost oversight, accountability and peer review.

So here's what the computer scientists propose:  everyone who receives funding gives some fraction (say 50% of their previous year's funding) to other scientists whose work they like or think particularly interesting and valuable.  That fraction can be distributed among one or many.  The idea is that this works as a collective-allocation mechanism that basically crowd-sources peer review, and with the added advantage that it funds people, not projects.  It also gets the incentives right for scientists to concentrate on clear communication of their findings and the value of research.

This method replicates the good parts of the previous model:  those with higher peer regard will receive more funding;  and those same people will have a larger say in the overall allocation (the pledge is a fixed fraction of the previous year's funding).  There would, obviously, still need to be confidentiality and conflict-of-interest avoiding mechanisms, along with careful monitoring to ensure that circular funding schemes are identified and punished.

But it also avoids the bad parts:  in providing a guaranteed basic income, it liberates researchers from continual wasteful cycles of grant-writing by furnishing autonomy and stability of funding;  it avoids the overheads associated with process and review;  it enables a continual updating of funding to reflect the preferences and priorities of the scientific community, without getting caught in legacy priorities or political cycles.

Now might this also work for public funding of arts and culture?  The main reason to think it might is that the same inefficiency arguments apply in arts and culture as they do in science:  namely that those seeking grants spend considerable time and effort writing and preparing grants;  face high uncertainty about funding outcomes;  proposals tend toward conservative trend-following of agency preferences;  projects, not people, are funded;  and all the while arts funding bodies and panels (and the peer review process) consume sizable overhead.

On the flip-side, it's not as neatly obvious who would be eligible.  Research scientists can be reliably identified by the high-hurdle of having PhDs, prior publications, and full-time appointments at accredited institutes.  But let's suppose we can come up with an acceptable solution to that long-list problem.  (I'm not suggesting this is trivial;  just that that's not what I want to focus on here.)

I think that this would, potentially, be a substantial step towards a more open and effective funding model (peer driven, not bureaucratically or politically driven).  It would enable creative resources to be more directly spent on artistic production and public communication, with less time and effort wasted on endless rounds of grant-writing and reviewing.

And while still some distance from a decentralised and fully-incentivised market ideal of ''consumers voting with their own dollars'', it is at least closer to that model in reflecting the preferences and judgements of the actual community of practising producers of culture (which is not always identical to appointed ''expert'' panels).  Like the Oscars, in a way.

Might collective allocation of arts and cultural funding be superior to expert-panel based solutions?  What do we think:  crazy or not?

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Bully law a case of IR overload

It took less than a week for the first anti-bullying application to be lodged.  A Melbourne-based law firm is already advertising for anti-bullying clients.  These are sure signs that Australia's litigious industrial relations system is about to get worse.

On January 1, a new anti-bullying jurisdiction came into operation that will see applications to the Fair Work Commission increase exponentially.  Among other changes, the new Part 6-4B of the Fair Work Act empowers the commission to deal with complaints about workplace bullying and issue anti-bullying orders.

Last year, Bernadette O'Neill, the commission's general manager, estimated that the body would receive 3500 bullying complaints each year, increasing the commission's workload by almost 10 per cent.

There are three main problems with the anti-bullying changes.  First, the new laws are vague on what conduct will constitute bullying and how far the provisions will extend.

The act provides that ''bullying at work'' occurs where an ''individual'', or a ''group of individuals'', ''repeatedly behave unreasonably'' towards a worker and the ''behaviour creates a risk to health and safety''.

It is unclear what ''behave unreasonably'' means.

This ambiguity invites litigation.  Parties will invariably disagree about whether the behaviour was unreasonable, and it will fall on the commission to decide on a case-by-case basis.

This is particularly so when courts have held bullying to include things such as spreading rumours and playing practical jokes.

It is also unclear how far the term ''individual'' will extend.  The term is so broad that it appears to include anyone that a worker encounters on the job.

In this case, the commission could order a customer of a business to stop bullying a worker, and it could order the employer to monitor that customer's behaviour.

The number of expected applications is likely to be a conservative estimate given that the changes expand the number of people who are able to apply to the commission.

Applications are not simply limited to employees.  The inclusion of trainees, contractors, work experience students and even volunteers under the definition of ''worker'' will no doubt add to the surge of new claims.

The second major problem is that the absence of cost incentives presents a further risk of a blowout in the number of estimated applications.

The costs of the new system will fall on employers and the taxpayer.

Application fees to the commission are low and parties generally pay their own legal costs.  The new anti-bullying jurisdiction is no different.  While this combination arguably increases access to justice, it also fosters a ''litigate first'' mentality and removes parties' incentives to only advance meritorious claims and defences.

The saving grace of the anti-bullying jurisdiction is that there is no ''pot of gold'' for applicants to chase, as the commission cannot award monetary damages.

However, applicants may be able to seek compensation by bringing multiple claims.  For instance, a worker who alleges racially motivated bullying may decide to bring an application for an anti-bullying order in conjunction with a general protections claim.

There is a genuine concern that disgruntled and underperforming employees may exploit the new provisions to subvert legitimate performance management and disciplinary action.

Under this scenario, countless employers and managers will be forced along to the commission to justify that their management actions were reasonable.

Every application will cost employers countless hours and thousands of dollars to defend — time and money that employers could use actually employing people to produce goods and services.

Taxpayers will also bear the cost of the new anti-bullying jurisdiction.  In the 2013-14 budget, the commission was allocated $24.4 million over four years to deal with workplace bullying matters.

The third major problem is that the anti-bullying changes are unnecessary because they will duplicate efforts of state governments that are introducing tough anti-bullying laws.

Take Victoria for example.  Under Brodie's Law, bullies can face a 10-year prison term.  In serious cases, and where bullying is likely to continue, the courts can issue intervention orders as a preventative measure.

Additionally, individuals who bully fellow employees can be liable for fines up to $253,512 under workplace health and safety laws, while corporate employers risk fines up to $1,267,560.

What we can be certain about is that the new anti-bullying jurisdiction will make an already litigious industrial relations system worse.

Unfair and unlawful dismissal and general protections applications have skyrocketed in the past four years following the introduction of the Fair Work Act.

Annual reports show that in 2008-09, the Australian Industrial Relations Commission (the Fair Work Commission's predecessor) heard 7994 applications for termination matters.

By 2012-13, applications to the Fair Work Commission for termination matters had exploded to 17,375.  These figures do not include applications for non-termination matters, applications made to the Federal Court or appeals.

Although alarming, the figures are not surprising.  The Fair Work Act extended unfair dismissal laws to an estimated 100,000 previously exempt businesses.  General protections expanded so that workplace rights now affect all aspects of the employment relationship.

In termination matters, the reversal of the onus of proof means that employers are presumed to be at fault.

Of course, there is no doubt that bullying can be a serious problem in workplaces and the physical and mental effects of bullying cannot be overlooked.

However, dignity in the workplace will only flourish when the industrial relations system empowers individuals to work collaboratively to resolve workplace issues.  The present system ingrains hostility by relying on the commission every time a dispute arises.

The new anti-bullying jurisdiction is yet another example of the increasing over-reach of the industrial relations system.

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Game finally up for carboncrats

It was promoted as the voyage to study the melting of ice sheets in the South Pole as well as to retrace Douglas Mawson's perilous expedition a century ago.

Yet the Australasian Antarctic Expedition, led by UNSW climatologist Chris Turney, has become a comedy goldmine.

In case you missed the story during your Christmas break, the researchers became trapped in ice so thick that Chinese rescue attempts could not reach the frozen ship.

''It fell to Professor Turney's ship to play the role of our generation's Titanic,'' Canadian satirist Mark Steyn noted.  ''Unlike the original, this time round the chaps in the first-class staterooms were rooting for the iceberg.''

And Parish-based writer Anne Jolis quipped:  ''Maybe the climate-change researchers even raised a glass, if they had any liquor left.  They certainly had enough ice.''

Humour aside, events such as this indicate dark days for green enthusiasts.

Tony Abbott's likely repeal of the unpopular carbon tax this year reflects a global trend:  the anti-carbon agenda is being subjected to the most intense scrutiny, and is found wanting.

The Kyoto treaty effectively expired a year ago.  Prospects for a replacement are virtually zero.  Rich nations are rejecting climate compensation for the developing world.  Europe is in a coal frenzy.  Germany, a former green trend-setter, is slashing unaffordable subsidies to the renewables industry.  The European Parliament is losing confidence in the EU emissions trading scheme.  No Asian nation has an emission trading scheme in operation.  China's and India's net emissions are growing dramatically and governments, most recently Japan's, are abandoning earlier pledges to reduce their nations' carbon footprints.  Even US Democrats, notwithstanding President Obama's direct action-style energy plan, won't pass modest carbon-pricing bills in the Congress.  Add to this those debunked predictions (remember the vanishing Himalayan glaciers, disappearing North Polar ice cap?), and it is clear that Tim Flannery's moment has come and gone.

Meanwhile, 2013 marked the 15th year of flat-lined global surface temperatures, despite record levels of carbon dioxide being pumped into the atmosphere since 1998.  And as the US shale ''fracking'' revolution shows, the most efficient way to cut emissions is not via command-and-control regulation but by allowing private drillers to expand natural gas production.

Of course, the environmental doomsayers remain apocalyptic.  You try going on the ABC's Q&A and raise doubts about global-warming alarmism.  You will still see the inner-city studio audience treating you not merely with hostility but with open-mouthed incredulity.

The climate-change Cassandras are increasingly marginalised here and abroad.

When they abuse, intimidate and victimise anyone with the temerity to criticise the fanaticism of their movement, the inclination of ordinary Australians is either to shrug their shoulders with a profound lack of interest or to grimace at this moral grandstanding.

Historians will probably look back at the years 2006-09 as the time when the climate hysteria reached its peak in Australia, when rational debate was at its most restricted and politicians at their most gullible.

These were the days of drought, unseasonal bushfires, An Inconvenient Truth, the Garnaut Report and, of course, Kevin Rudd's ''greatest moral challenge''.

Crikey, even Rupert Murdoch was ''giving the planet the benefit of doubt''.

Contrary to media stereotypes, many so-called sceptics — such as Abbott, John Howard, Maurice Newman and this writer — recognised that the rise in carbon dioxide as a result of the burning of fossil fuels led to moderate warming.

But because we questioned the doomsday scenarios and radical, costly government-directed plans to decarbonise the economy, we were denounced as ''deniers''.

Those days are over.

Thanks to Abbott's forceful critique of Labor's ETS/carbon tax, and the persistent failure of the carboncrats to reach legally binding global agreements, Australians have risen up against this madness.

At last, there is recognition not just that there are at least two sides to every story, but that when sophisticates seek to shut down debate, it amounts to an attack on the public interest.

That is why the anti-carbon zealots have become so defensive.  The game is up.

The idea of climate mitigation — carbon taxes, cap and trade, channelling taxpayer subsidies to wind and solar power — destroyed the leaderships not only of Malcolm Turnbull in 2009 and Rudd in 2010, but also of Julia Gillard and Rudd (again) last year.

And although the Coalition's approval ratings have declined since the election, polls also show that opposition to the carbon tax remains high.

Last year's Lowy Institute survey said that only 40 per cent (down from nearly 70 per cent in 2006) think climate change is serious and requires action.

And yet, despite this changing (political) climate, Opposition leader Bill Shorten still opposes the repeal of the carbon tax.

If Labor's divorce from the Greens is genuine, he should support the PM's legislation, lest he meet the same fate as his fellow deniers and become a laughing stock.

The farce of an ideologically neutral curriculum

Christopher Pyne has done irreparable damage to the national curriculum project.

This is fantastic.

The damage hasn't occurred because there's anything wrong with appointing Kevin Donnelly and Professor of Public Administration Ken Wiltshire to review it.

No, it's because the supporters of the national curriculum can no longer pretend that imposing a uniform curriculum on every single student in the country isn't an ideological undertaking.

Donnelly is a conservative and in his work as a political commentator, he has made no attempt to obscure his conservative views.  Not least on the Drum.

Conservatives are such strange and alien creatures that the appointment has turned outrage up to 11.  The teachers' union described it as the ''politicisation'' of education.  Bill Shorten implored Tony Abbott to ''please keep your hands off the school books of Australian children''.

And one of the authors of the history curriculum, Tony Taylor, complained that with the Donnelly and Wiltshire appointment, ''we can look forward to 20 years of tedious culture wars in the classroom''.

But if there is a ''culture war'', it wasn't the right that started it.  The national curriculum is already deeply ideological.

That ought not be a controversial claim.  The curriculum is explicit, open, and unabashed about its ideological content.  It's not buried or implied.  It's as bold as a billboard.

The curriculum nominates three great themes (that is, three ''cross-curriculum priorities'') which are to dominate and define Australian education for the next few decades:  Aboriginal and Torres Strait Islander histories and cultures, Asia and Australia's engagement with Asia, and Sustainability.

All worthy topics, of course.  How are they ideological?  Take sustainability.  The sustainability theme is intended to ''[create] a more ecologically and socially just world through informed action''.  That's virtually the definition of ideology:  a positive description (we are harming the planet) combined with a normative ideal of a better social order (an ecologically and socially just world).

If this isn't clear enough, well, one of its ''organising ideas'' is the sustainability ''world view'':  ''value diversity and social justice are essential for achieving sustainability''.

Perhaps this is an ideology you agree with.  Ideology isn't a bad thing.  Everybody's thought is shaped by ideology, whether they're aware of it or not.  But it's ideology nonetheless.

So it is bizarre to object, as Julia Gillard did on Friday, that the ideological direction of the curriculum was not dictated by the Prime Ministers' Office.  Are we supposed to feel better that a group of independent (read:  unelected) education specialists (Kevin Donnelly calls them ''educrats'') determined the future philosophical underpinnings of our compulsory education system?

(That rule by unelected experts is supposed to be more legitimate and morally superior to rule by elected representatives just shows how anti-democratic our era really is.)

A curriculum is always going to be ideological, in the basic sense that an ideology is a lens through which we make sense of the world.

Alan Reid summarises one view of a national curriculum as ''the major means by which the citizenry, collectively and individually, can develop the capabilities to play a part in the democratic project of nation-(re)building.''

An ideologically neutral curriculum is a contradiction in terms.

So at best the national curriculum faces a sad future of continuous rewriting at every change of government.  Politics is about competing world views, after all.  In the words of Christopher Pyne, ''I don't think the national curriculum is a static document.''

Luckily, in a liberal democracy, we have a way to bypass fundamental disagreements about world views — decentralisation.

There is, simply, no good reason to have a national curriculum.

The first moves towards federal government involvement in the curriculum were initiated, hesitantly, by Malcolm Fraser as John Gorton's education minister, who complained that there were ''unnecessary differences in what is taught in the various states''.

Since then a national curriculum has been a persistent goal of the Commonwealth education department and the small world of education academics.

The intellectual case for a national curriculum, developed over half a century, has involved a lot of theorising about democracy and nation-building and civic virtues.

But now the defenders of the curriculum are trying to pretend these great philosophical goals never existed — that their curriculum is a pragmatic, neutral, unambitious thing.

The utilitarian case for Commonwealth curriculum control has always been absurdly weak.  It rests on the desire for ''consistency'' for the tiny proportion — less than 3 per cent — of students that move interstate during their schooling.

At the very least, the curriculum should be handed back to the states.  It is not a project worth pursuing.

But better yet would be a system of multiple, competing curriculums which schools and parents can choose from, according to their own values, tastes, preferences, and philosophies of education.  This is not as far-fetched as it seems.  Australian schools already offer the International Baccalaureate, Montessori, and Steiner curriculums.

When a population's values conflict, we should look for solutions in political economy.

Don't want Christopher Pyne deciding what your children are taught?  Perhaps a curriculum imposed by the Commonwealth Department of Education is not for you.

Devolving curriculum decisions down to the school level ought to satisfy both critics of Kevin Donnelly and critics of the curriculum as it stands.  And it would instantaneously end the culture war that everybody seems so worried about.

The national curriculum is a high ground.  It was designed to be that way.  Bulldoze the high ground, end the war.

Repeal the economic vandalism crippling shipping

Anti-competitive coastal shipping laws have existed in Australia for more than a century.  While recent changes have made the laws worse, we shouldn't settle for winding back the changes:  the laws should be entirely repealed.

The economic case could not be stronger.  According to an impact statement prepared by the Department of Infrastructure and Transport, repealing coastal shipping laws has the potential to increase Australian GDP by up to $466 million to 2025.

Scrapping the generous subsidies offered to Australian-registered vessels will save more than $254.5m over four years.  Exempting foreign-registered vessels employing foreign crews from the Fair Work Act will cut production costs of Australian manufacturers, saving local jobs and boosting the nation's export competitiveness.

Over time, the coastal shipping trade has become more competitive.  While the number of Australian ships engaged in the coastal trade only slightly declined between 1996 and 2006, the number of foreign ships almost tripled.

Rather than recognising that increased competition was delivering cheaper freight for Australian commodity producers, in 2012 the federal Labor government introduced more than 250 pages' worth of new laws to ''revitalise'' the Australian shipping industry.  Of course, ''revitalise'' meant that the government was going to artificially protect Australian vessels by restricting or prohibiting foreign competition.

Labor's changes meant that foreign-owned vessels employing foreign crews now needed to comply with Australian labour laws.  The changes also overhauled the old licence and permit system with a complicated three-tiered licensing system.

While Australian vessels now have unlimited access to the coastal trade, foreign vessels can only apply for temporary licences that come with extensive conditions and reporting requirements.  Australian vessels are now also subsidised by various tax incentives.

The changes were economic vandalism.  In introducing them, the government consciously placed Australian-registered coastal shipping vessels above Australia's broader economic interest.  The Department of Infrastructure and Transport warned that the more effective the changes were at keeping Australian vessels afloat, the worse Australia's economic growth would be.  Economic evidence from Deloitte Access Economics projected long-term job losses for the shipping industry.

The coastal shipping trade exists primarily to service Australian producers of bulk commodities such as iron ore, alumina, and sugar.  About 85 per cent of all coastal shipping cargo comprises of dry and liquid bulk.

Coastal shipping favours these goods because the market for containerised transport is the most competitive in road and rail.

Astonishingly, the former government's changes to coastal shipping laws have increased the price of the producers of these bulk commodities.

By restricting or prohibiting foreign competition, the immediate economic effect is to drive up domestic transport costs for these commodities.

The Bell Bay Aluminium smelter in Tasmania's north is just one example.  Coastal shipping from Tasmania is already more expensive than shipping between mainland ports, and the 2012 changes have made costs unsustainable.

In a recent submission to the Productivity Commission, BBA gave evidence that as a result of the changes its freight costs had increased from $18.20 a tonne in 2011 to $29.70 in 2012 — an increase of 63 per cent.

BBA's demurrage rates more than doubled, from $14,000 in 2011 to $35,000 in 2012.  As a direct result of the changes, BBA's total costs increased by $4m per year.

BBA is a viable export manufacturer that contributes an estimated $690m per year to the Australian economy.  Yet this poor legislation has decreased its competitiveness at the same time as the price of aluminium is relatively low and the Australian dollar is relatively high.

With manufacturers such as Holden announcing that they will cease operations in Australia and food manufacturer SPC Ardmona looking for government handouts to remain viable, we need to do everything that we can to support viable Australian producers.

The 2012 changes missed the proper focus:  costal shipping reform needs to drive cost efficiencies for Australian producers of bulk goods.

The coastal shipping market will be most efficient if it is free from the burden of these anti-competitive laws.

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Reality is yet to reflect optimism

According to Dun and Bradstreet's (D&B) business survey, firms are optimistic about 2014.

But, following announced departures of Ford, Holden and Sydney's Kurri Kurri aluminium smelter, this year brings serious concerns about the ongoing viability of other key businesses, including Toyota and the Point Henry aluminium smelter.  A strong Aussie dollar, rising energy costs, and poor labour productivity have caused these disappointments.

The dollar is now off its peak level.

And the Abbott Government is attempting to reduce energy cost penalties caused by the carbon tax and other such policies.  Labor opposes such measures and, indeed, the Rudd/Gillard Government left poison pills to impede other energy cost reductions.  These include institutions such as the $10 billion Clean Energy Finance Corporation which appears determined to continue wasting money to thwart the Abbott Government's policies.  The Commonwealth seems reluctant to simply cut off these bodies' access to funds.

Another obstacle to restoring a strong economy is entrenched trade union power aided by labour laws and judicial appointments.

Australia is unique in having a ''Fair Work'' Commission that controls the employment terms and conditions of almost every worker.  The Commission has increasingly become a vehicle for providing jobs, at $350,000-$600,000 a year, for union leaders and their lawyers.  Many of these appointees bring with them their anti-business ideology.  Partisan appointments have also steadily infiltrated the 40 judges comprising the Federal Court.  One third of those appointed by the Gillard/Rudd governments were ALP stalwarts.

The industrial relations system resulted in Holden's factories being loaded with productivity-sapping union controls, which impaired the carmaker's ability to operate efficiently.  Furthermore, a compliant management has allowed union extortions to bring wages that are twice the level seen in other workplaces.  Even with governments funding almost 30 per cent of investment, the labour cost penalty has strangled the firm, with workers preferring redundancy rather than the conditions prevailing in the US and Germany.

Critical to Toyota's survival are exports to affiliates overseas.  To restore competitiveness, management asked its workers to vote on a package of 22 cost savings, none of which involved cutting wages.  In a similar situation, Boeing's employees in Seattle, voted in favour of survival.  But allowing democratic decisions by workers was too much of a risk for Australia's unions.  They took court action before Mordy Bromberg, one of the ALP friendlies appointed by the Gillard government.  Judge Bromberg refused to allow workers to vote on the management's proposal, thus probably signing the death warrant for the last Australian car assembly plant.

With aluminium smelting, Australia was once an ideal location and could recover that position if energy taxes and regulations were removed.  Smelting too however has a cost-padded labour force.  Union heavy Paul Howes, in an attempt to deflect blame for a future closure of Port Henry, claims to have agreed to ''quite good efficiencies'' over the past couple of months.  This is probably a case of too little, too late.

These developments suggest it was the Coalition's election victory rather than genuine underlying improvements that were behind the confidence expressed in D&B's business survey.  Much needs to be done to translate these hopes of the business community into reality.

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There is no such thing as reform without risks

The Australian political class has a complex, neurotic, and self-destructive relationship with the word ''reform''.

On the one hand, every incentive faced by incumbent governments favours the status quo.  Serious policy change is complicated and risky.  Reform is easy to stuff up, it's bound to upset interest groups, and it's a gimme for the opposition.

It's safer to minimally implement your election promises, relax in the comfy chair of government, and focus on distributing the benefits of office.

But on the other hand, ''reform'' is the gold standard of Australian politics.  Journalists and historians like to see big policy changes that reshape the country, and they like to see lots of them.

Australian political legacies are a simple equation.  Good governments are those that reform (Whitlam, Hawke, early Howard).  Bad governments are those that squib reform (Fraser, Rudd).

This trade-off is no doubt what has preoccupied the Abbott Government over the Christmas break.

The Coalition won government by promising to be everything Labor was not:  calm, austere, and rigorous.  But not-being-Labor is an agenda for 12 months, not three or four terms.

Every Coalition government lives in the shadow of the Fraser government.  Those press articles about ''business urging reform'' may be paint-by-numbers but they aren't going to go away.  (Here's one from yesterday in the Australian Financial Review.  Here's one in the Australian today.)

The Coalition's long-term political legacy rests on three major inquiries due to report in the next year — three inquiries that have been specifically designed to provide the Abbott Government with a reform agenda.

The Commission of Audit reports in March.  The review of Australian competition policy will take 12 months once it is formed (presumably in the next couple of weeks).  The financial system inquiry has been formed and will deliver its final report by November.

The Commission of Audit is obviously important to get the budget back under control.  The other two ought to be big deals as well.  Previous inquiries into competition policy and the financial sector fundamentally reshaped the Australian economy.  Think the Hilmer Report that kick-started Keating-era National Competition Policy, and the Fraser government's Campbell Committee which lay the foundation of financial deregulation.

Yet so far the Abbott Government's reviews seem modest, even bashful.

The inquiry into competition policy is supposed to be ''root and branch''.  But its political sponsor is Bruce Billson, the Minister for Small Business, and has been sold almost entirely as a way to level the playing field between small and big business.

Competition policy ought to be about ensuring market forces have free play to drive prices down and spur innovation.  However, the Coalition seems to think competition policy is about ensuring consumer prices are high enough to give farmers a ''fair go''.

The Financial System Inquiry is also peculiarly insular.  Joe Hockey thinks Australian banks should source more capital from within Australia.  It appears the lesson the Government has taken from the Global Financial Crisis is that we are too integrated with the world economy.

This lengthy analysis in the Australian Financial Review from November suggests the inquiry will focus on developing a domestic corporate bond market.  If that's the big policy from the financial system inquiry, then the whole endeavour will have been a bit of a flop.

Indeed, a flop may be what the government is hoping for — that the results of the inquiries are managerial but not bold.

The story of the Rudd government explains why.  In 2010, Ken Henry's review into taxation gave Wayne Swan a whopping 138 separate recommendations to reform the tax and transfer system.  But Swan wasn't sure how to handle reform on such a grand scale, and ended up pursuing just one — the mining tax.  We all know how that ended.

''Reform'' is such a vague and ambiguous concept that any significant policy change is described as reform.  For some, reform is carbon taxes and abolishing negative gearing.  For others, it's labour market deregulation and reducing green tape.

Either way, reform is presented as a good in and of itself.  Every government is desperate to be seen as the Hawke government — the ideal reforming type.  In part that's because of the near universal consensus in Australia's policy community that freeing up the economy was a great idea.

Just as significant are the Coalition's constant reminders that they supported Labor's liberalisations and asset sales at the time.

It's easy to assume in hindsight that the politics of reform were relatively simple.  But the 1986-1987 cabinet papers released last week underscore just how uncomfortable and bitter economic reform actually was.

Take shipping — one of the key liberalisations in the story of Australian productivity.  Greg Jericho tells the story here of how the Hawke government's desire to open up the Australian coastal trade to foreign ships was scotched by the ACTU.  Shipping reform had to wait for the Howard government, for whom broken relations with the union movement was no great loss.

The hero story of the reform era that is told in the business pages every week is no more a reflection of what happened during the Hawke and Keating governments than the West Wing is of the Clinton administration.

If the Abbott Government wants the historical mantle of ''reform'', it will need to take some risks.  And it will need to make some enemies.

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The missing milestone

Last October's bushfires meant that 2013 was not a good year for the Blue Mountains.  It should have been a year of celebration.  However, unless you paid very close attention, you probably missed the fact that last year marked the 200th anniversary of one of the most momentous events in Australian history — the crossing of the Blue Mountains by Blaxland, Lawson and Wentworth.  For 1813 should surely rank with 1788, 1901 and 1915 as one of the big years of Australian history.  It was the year that opened up the interior of the continent to the development of key industries such as wool, wheat and mining.

Yet the only attempts to commemorate the crossing were almost all local and small scale.  The only even moderately high profile effort was News Limited cartoonist Warren Brown retracing the route, which generated some press coverage.  There were no new television programmes about it, although the National Film and Sound Archive did post an earlier documentary about the crossing on YouTube — it was made in 1965.  This does seem rather sparse acknowledgement of such a momentous anniversary.

In the quarter century from the start of the first British Settlement at Sydney Cove in January 1788 until 1813, the colony of New South Wales had only expanded to other coastal locations such as the Hunter and Hobart.  This was all about to change when on 11 May 1813 Gregory Blaxland, William Lawson and William Charles Wentworth set off from Blaxland's property, south of what is now St Mary's, to cross the Blue Mountains.  Following a previous failed attempt, Blaxland had developed a strategy to follow the ridges, rather than the valleys, and the felicitous choice of route is reflected in the fact that the Great Western Highway and main western railway still largely follow it.

Another clever feature of their journey was to treat every stage as a two-day process.  On the first day, the bulk of the party would set off, leaving horses and supplies behind and then, having navigated their way through the bush for a few miles, the advance party would turn back and cut a wider path for the horses to follow the next day.  After three weeks of this repeated process, they had covered about 50 miles and had succeeded in reaching the top of the Divide.  From the top of what became known as Mount Blaxland, the explorers could see what looked like potentially prosperous country stretching away to the west.

By the end of 1813 the colony's Surveyor-General George Evans, under instructions from Governor Lachlan Macquarie, had followed their route and surveyed some of the plain to the west.  Within two years, Macquarie himself had travelled across the mountains and founded the town of Bathurst.

This flurry of postcrossing activity tends to undermine the argument of emeritus Sydney University history professor Richard Waterhouse that the explorers' contemporaries did not share the modern view of the importance of crossing the mountains.  Waterhouse was quoted as saying that ''the report of the successful Blaxland crossing in the Sydney Gazette in 1813 amounted to one paragraph — a similar size to an article on a cockfight''. No doubt many 1813 Sydneysiders, just like their 2013 successors, wanted to read about sport rather than hard news, but Macquarie clearly understood the significance of the discovery.

Waterhouse is far from alone among modern historians in downplaying the importance of Blaxland, Lawson and Wentworth.  Indeed, in recent decades, it has become something of a fashion to sneer at what one writer has referred to as ''the most hackneyed event in Australian history''.  One line of attack has been to question whether Blaxland, Lawson and Wentworth were actually the first settlers to cross the mountains.  From the early days of Sydney town, escaped convicts and other adventurers had sought ways to scale them, most being turned back when the valleys they followed ended in sheer rock faces.  Some have argued that one John Wilson crossed in 1798, but the evidence is not convincing.  Certainly, in 1802, the Frenchman Francis Louis Barrallier got within a day's walk of the top of the Great Divide, before a lack of provisions forced him and his party to turn back.  There was also the botanist George Caley who regularly visited the mountains to collect specimens, but there is no evidence that he got much beyond the eastern foothills.

There are other reasons why the journey of Blaxland, Lawson and Wentworth has come to be seen as more problematic by recent generations.  For decades, people have been deserting Australia's interior and resettling on the coastal fringe which has reduced our collective empathy with, and understanding of, the importance of what goes on beyond the Divide.

Further, where once opening up the interior was seen as unarguably good and progressive, in recent times this has been balanced against the negative impact that this had on the indigenous occupants of those grasslands.  Yet the fact that crossing the Divide magnified several times over the impact of British settlement on Aboriginal Australians only adds to the significance of what Blaxland, Lawson and Wentworth achieved.  From 1813 onwards, the whole Australian continent, not just the coastal fringe, became available for settlement.  This completely changed the economic development of Australia and fundamentally altered the lives of many generations of settler and indigenous Australians.

Geoffrey Blainey pointed out in The Tyranny of Distance that, in earlier years, colonists had no great practical incentive to explore the interior, which he argued was more significant than the mountains' impenetrability in delaying a crossing.  However, with the coastal plain becoming more crowded, that was changing in the 1810s.  If Blaxland, Lawson and Wentworth had not crossed the Blue Mountains in 1813, some other explorers would have done so in the ensuing years.  Whoever did it, and whenever it occurred, it was always going to be a landmark event.

Perhaps when John Dunmore Lang argued in the 1850s that ''the passes of the Blue Mountains are like the Straits of Thermopylae and could be defended by a mere handful of Australian Greeks against the whole power of Persia'', he was guilty of overstating their impenetrability and significance.  In 2013, we did the opposite.

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Let's avoid the slippery slope of mass surveillance

Two US federal court decisions in the past month have once again dragged into the spotlight the National Security Agency's Orwellian program of dragnet surveillance.  Both courts were testing the constitutional validity of the systematic monitoring of civilians' electronic communications.

The judgments of New York and Washington ultimately disagreed, yet both clearly shared grave concerns that this routine spying posed a very real threat to citizens' liberties.

The District of Columbia's judgment scathingly remarked that it could not conceive of a more ''indiscriminate and arbitrary invasion'' than what was conducted by the NSA.  The phone surveillance carried out by the NSA is an insidious and tyrannical program.  It involves the systematic combing of millions of people's metadata, in the vague hope that it may unearth some new plot.

It is not only Americans who should be concerned.  There is every reason that, if it is not already occurring to the same extent in Australia, we are not far off the same level of government control.  As it stands here, organisations such as local councils and the RSPCA are already able to apply for your private phone records.

The ongoing saga of the NSA's scandal is proof that we cannot trust governments with our privacy.  The past decade has seen many of our freedoms whittled away for the alleged greater good.  Australians' security must be taken seriously;  however, the readiness with which we have let the government remove our freedoms to protect us is of grave concern.  A fine balance must be struck to ensure that we are defended without opening ourselves to totalitarianism.  The NSA revelations are forcing citizens of the Western world to discover what a mammoth and invasive intelligence framework has been created on their behalf.

Barriers are always set in place to protect against such an abuse of power, yet these protections are useless unless we hold the government to account.  In theory, all warrants must be granted by an accountable and public court.

The law states that the surveillance cannot be just a fishing expedition and that there has to be a credible reason to justify such an invasion of privacy.  In practice, secret courts such as the Foreign Intelligence Surveillance Court grant clandestine warrants and no one may read the court's decisions.

It seems the legislature and judiciary do not practise what they preach.  It was revealed earlier this year that US telecommunications provider Verizon was ordered by the FISC to hand over to the NSA on an ongoing and daily basis all metadata regarding its customers' telephone calls.

This metadata includes the time the call was made, location data, call duration and any unique identifiers.

Even the chief judge of FISC, Reggie B. Walton, acknowledges that this secret judicial process is merely a rubber stamp.  The judges seemed hamstrung and had to trust that the evidence they were provided was accurate.  The secret court appeared unable to check the veracity of the NSA's claims.  This resulted in decisions being made based solely on information that was provided by the NSA, to justify why the agency should be granted exactly what it wanted.

Turns out that the NSA is way ahead of us and already has at hand technology to decrypt the data of 80 per cent of the world's mobiles.

This is all outrageous enough, yet new reports keep appearing detailing the utter incompetence of the intelligence agencies.  These are the people with their hands on information that can track every waking moment of our lives.

A large number of Americans had their phones accidentally monitored when the NSA mixed up the area codes of Egypt (20) and Washington (202).  Then there were the spies masquerading as orcs and elves on the online game World of Warcraft.  This mission was working just fine and with excellent results — until they realised that the targets were just other undercover agents.  There have been cases of jealous NSA employees using the vast surveillance powers at their disposal to spy on spouses and their love interests.  This included listening in on calls and tracking their whereabouts using geolocation data.

And Australia is definitely taking the NSA's lead.

Leaked documents have shown that the Australian Signals Directorate (one of our intelligence agencies) felt at ease disseminating the private information of Australians to foreign spy networks.  Not just metadata, which already gives a picture-clear map of where you go and who you communicate with, but also the collation of private medical, legal and business records.

This breaches innumerable federal and state laws enacted to prevent such a Big Brother role for government.

Most of us are constantly connected to devices that record everyone we contact and everywhere we go.  Even turning off your mobile phone does not stop the GPS from sending data back to the satellite.

This metadata creates a shockingly detailed road map of our lives and is private information that we should guard closely.  Every opportunity a government is given to dig deeper into our lives, it will seize and rarely cede.  Our loss of privacy is not a concern because governments justify their actions as being for our own good.  The threats change but the response never differs:  give us more power and we will make all your problems go away.

The federal judgments in New York and Washington will certainly be appealed.

Let us hope that the Supreme Court will take a stand for civil rights and protect US citizens from such an arbitrary invasion into their lives by the state.

Our freedoms are what distinguish us from the authoritarian regimes of this world.  We have unwittingly sacrificed our freedoms for our security.  Australia must take heed from the scandal gripping America.  We are already treading the same sinister path and we must turn back.  Otherwise soon we will have our own spy scandals to report.

Beef industry needs greater control of money from levies

The Federal Government's proposed Senate inquiry into the collection and disbursement of levies in the beef cattle industry should be seized by producers.

They should take control of the money government takes from them and reform the way it is spent.

Both the Australian Beef Association and the United Stockowners of Australia have long complained about the government-appointed bodies that dictate how farmers' hard-earned cash is spent.

The peak industry body, Cattle Council of Australia, is dominated by councillors appointed by state farm organisations.

They represent fewer than 20 per cent of cattle producers yet set the mandatory levy all cattle growers must pay.

Beyond that, the Meat and Livestock Australia spends the $56 million of levies with inadequate guidance from the cattle growers.  If that was not bad enough, it is not clear that anyone actually knows who is paying the levy.

There is no definitive record of who has paid the tax (or even how much).

The levy is simply collected from the overall cattle yard sales at the end of the day.

By contrast, Australian Wool Innovation offers a fully democratic model for wool growers.

Not only do they directly vote for representatives on the AWI, every three years producers also vote on the rate of the levy, which can be between 0 and 5 per cent.  Recently growers voted for 2 per cent.

The inquiry should also look at the successes other agricultural industries have had in involving the private sector.

The National Grower Register has been used to great effect in the grain market.  Each producer is given their own unique registration number that keeps track of all transactions, deliveries and payments.  The database is universal across Australia.

Any levies are taken directly and there is a record of how much has been paid.

The cattle industry can take both the AWI and NGR's leads to create an industry body that will properly provide for growers' needs.  Cattle growers could create their own company limited by shares, where each share equals a head of cattle.  The more cattle you have, the greater the amount of votes.

This prevents part-time hobby farmers from having greater sway than the producers who have the greatest skin in the game.

To facilitate this, the industry would need a registration database such as the NGR (or even employ them directly to mimic the success they have had in the grain sector) to create a definitive list of the producers, and thus shareholders, of the cattle industry of Australia.

Such a board would be best served by subcontracting out the marketing, research and development to specialised businesses, who will have to tender for the work.

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Australia's march to free speech has begun

The High Court's decision in Unions NSW vs New South Wales is one of the most significant decisions for democracy and human rights in Australian history.

It's on par with the 1951 decision which quashed the Communist Party Dissolution Bill.

It reveals a High Court inching — slowly, reluctantly, unhappily — towards a full-blown recognition of the human right to freedom of speech and freedom of association:  the sort of uncompromising liberties expressly found in United States' First Amendment.

The decision was released just before the Christmas break.  The High Court found that the New South Wales ban on organisations donating to political parties and third party political campaigning were invalid, as they violated the constitution's implied freedom of political communication.

I wrote about the NSW laws in The Drum in February 2012.  They were a disgraceful and transparent manipulation of the electoral system designed to cripple the Labor Party and its union-centred funding model.

Of course, like all disgraceful and transparent manipulations of the electoral system, they were dressed up in woolly sentiments about enhancing democracy and reducing corruption.

It is a rare law that can unite in opposition the union movement, and environmental groups (the law was particularly damaging for federated bodies like the Wilderness Society).

But it's an even rarer law that can inspire the High Court to trigger its free speech veto.

In a series of cases in the 1990s the High Court discovered a ''freedom of political communication'' buried (''implied'') deep within the Australian constitution.

Of course, there are no words in the constitution that say any such thing, but in 1992 the High Court decided the freedom was in there.

The court's reasoning went like this.  The Australian Constitution is a democratic constitution.  A democracy is predicated on the free flow of communication about political issues.  Therefore the document is predicated on the existence of some form of freedom to talk about politics — a freedom of political communication.

But, as the High Court has always at pains to say since, that freedom is not a general right to freedom of speech for individuals.  It's not like the First Amendment.  No, it's about protecting political communication — and political communication alone — from legislative interference.  There's nothing in the Australian constitution to allow citizens to sound off on everything willy-nilly.

Over the past two decades, the court has kept its free speech lid screwed on pretty tight.  In recent years it has declined to protect the speech of a group of sidewalk preachers in Adelaide, the Islamist Sheikh Haron, and Lex Wotton, one of the Palm Island rioters.

They're probably worried where this whole implied freedoms thing will lead.

And rightly so.  The court's foray into the political philosophy of democracy is embarrassingly underdeveloped.  Our constitution isn't just a constitution for a democracy.  It is a constitution for a liberal democracy — a country where free and morally autonomous individuals mutually consent to democratic government.

And that implies that those free individuals have rights as free individuals.  Australian citizens are not just conduits for electoral debate.  Adrienne Stone of Melbourne Law School makes this argument here.  As she writes, there is a plausible — I would say fundamental and intrinsic — relationship between personal individual autonomy and liberal democracy.  The former is the foundation of the latter.

If the High Court were to recognise this relationship, then the limited freedom of political communication could be transformed into a broader right to freedom of speech.

The constitution doesn't only imply electoral democracy.  It implies individual liberty.

Twenty years ago the judiciary committed itself to divining political philosophy between the lines of the constitution.  Perhaps it should not have started down this path.  But now that it has, it should go where the path leads.

The Unions NSW case suggests they might be doing so.  It is remarkable for a number of reasons.

First, the court has decided that the freedom of political communication applies to the states as well.  That's a big deal.  The previously strict bounds of the freedom are being pushed out.

The US Supreme Court only started imposing the First Amendment on state laws in the 1920s.  Indeed, the First Amendment only really became ''activated'' in the twentieth century.  It had to grow into what it is today.  Australian free speech rights are embryonic — but they're heading in the same direction.

Second, the court recognised that money can be speech.  The way we spend our money is sometimes a form of political expression.  This apparently horrifies many people on the left.  But it is obviously true.  It takes money to buy a T-shirt with a political slogan on it.  It takes money to publish a book.  It takes money to host a website.  To ban the money is to restrain the speech that money was to bring about.

The intuition that money and speech are related is why things as disparate as the proposed secondary boycott laws and the ban on David Hicks profiting from his memoirs are equally objectionable.  They limit speech by regulating its financial side.

Finally, and most interestingly, the High Court's decision quietly suggested something very important, even revolutionary:  corporations have as much right to speech as anybody else.

Of course corporations are not people.  Corporate personhood is just a legal construct to facilitate contracts and lawsuits.  Stop hyperventilating.

But corporations are made of people.

And just because people get together to form organisations doesn't mean they lose their rights once they have.  As the Unions NSW case suggests, businesses, unions and non-profit groups have much in common.  They are all voluntarily formed by individuals to achieve a collective goal.  All legitimately participate in political life.

This is one of the reasons that the US Supreme Court is coming around to an understanding that there is no clear, coherent distinction between ''commercial speech'' and regular speech.

Of course, Americans have a rich body of case law explaining the extent and limits of the First Amendment.  Australia's free speech corpus is fragmented and arbitrary, and cripplingly limited by the High Court's reluctance to follow its own logic where that logic leads.

So it's still not totally clear what our freedom of political communication actually means.  But after the Unions NSW case, we know that, whatever it means, it means a great deal.

Giving to the next generation

Australians may be generous than others in leaving behind a legacy for their family members, but should those inheritances be taxed?

A recent survey by international financial services company HSBC found that 69 per cent of Australian retirees planned to leave an inheritance for their families.

The average value of inheritance expected to be left behind by retirees in this country, of about $US 502,000, is estimated at more than four times the average of other countries surveyed.

A spokesperson for HSBC credited the great Australian appetite for making bequests to strong annual average growth in household wealth, driven partly by high and rising house prices.

Another cited factor informing Australia's position on top of the international inheritance league table is the lack of inheritance taxes, compared with other developed countries, such as the United Kingdom and United States, with large inheritance taxes and smaller average bequests.

Australia owes much to this legacy, in that we have enjoyed lower tax burdens as a result, but arguments favouring inheritance taxes, both here and abroad, linger.

The Australian Greens have favoured inheritance taxation in the past, while now Labor MP Andrew Leigh wrote in 2006 that reinstating an inheritance tax on the super-rich would be consistent with the Australian values of egalitarianism and the fair go.

A bequest tax was also recommended in the 2008 Henry Tax Review final report, on the basis that more revenue could be extracted from wealthy households.

One of the more unlikely sources favouring inheritance taxation was former Nobel Prize economist, and highly-regarded defender of markets, James Buchanan, who went so far as to advocate a 100 per cent tax on bequeathed estates.

As far as the economic arguments go, the case against re-introducing inheritance taxation in Australia seems reasonably straightforward.

Taxes on inheritances would tend to discourage donors from bequeathing their estates to beneficiaries, which in turn increases consumption, and reduces private savings, by those who wish to pass on their assets upon death.

With savings representing the effective feedstock of investment activity by the private sector, the imposition of an inheritance tax would, in turn, deter capital accumulation.

An important, though often overlooked, aspect of this argument is that some start-up entrepreneurs find it difficult to formally access funds from financial institutions, and so inheritances, particularly cash endowments, represent the key initial financing source for many prospective ventures.

However, it appears, at least for some people, that non-economic, or more specifically, ethical, arguments for inheritance taxation override the adverse economic consequences of such impositions.

There appears a widespread distaste of unearned income or wealth windfalls, with bequests seemingly resting alongside lottery winnings and natural resource discoveries as some of the more unpopular forms of unearned wealth acquisition.

A source for the distaste towards inheritances, and hence support for inheritance taxation, is that not everyone can voluntarily endow others with bequests in equal measure, and so without taxes equality of economic opportunities would be foregone.

Putting aside that the productive usage of bequests by donors, for example to establish or expand a business, can deliver widespread benefits to non-beneficiaries, distinctions between unearned and earned income, or wealth, seems too indiscriminate for clear guidance.

For example, other forms of unearned gain, such as Christmas presents, birthday gifts, or charitable donations, do not earn public rebuke, and attract calls for their taxation, in anywhere near the same intensity as inheritances do, if at all.

Classical liberals more appropriately distinguish between incomes and wealth attained either through voluntary means, say, by earning a wage or receiving a gift or donation, or through coercive means, say via government subsidies, tax breaks or regulatory holidays.

According to this perspective, voluntary transfers should ideally be left untouched by inheritance taxes or other coercive instruments that serve to expunge justly acquired property, whilst the coerced transfer of incomes and wealth should cease.

This approach would ameliorate the prospect that inheritance taxes would unintentionally level down the attainment of opportunities in society, whilst simultaneously ensuring that artificial privileges, such as those acquired through longstanding crony relationships between governments and businesses, are eliminated.

A final twist is served by James Buchanan's argument that beneficiaries will wastefully expend resources to secure favouritism, and thus greater shares of the inheritance, from the donor, and thus taxes are required to prevent such perceived wasteful conduct.

It is difficult to surmise why such conduct by potential recipients would necessary represent a social cost borne by the entire community, and not a cost borne primarily, and willingly, by the individuals involved.

Furthermore, using the blunt instrument of taxing intra-family income or wealth transfers is likely to come at the inappropriate cost of penalising transfers made in the cause of genuine affection between family members.

Inheritance taxes were relegated to the dustbin of Australian fiscal history during the late 1970s to early 1980s, through tax abolition initiatives at both federal and state levels of government.

These actions have proven to be far-sighted ones and so, in the interests of avoiding higher taxes on Australians, it is best not to resurrect this odious tax idea which fails on economic and ethical grounds.

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A time to be thankful for the market economy (really)

The State Library of Victoria holds an engraving from 1865 titled ''Christmas in Australia''.  About two dozen people, presumably an extended family, are having a Christmas picnic in what appears to be Ferntree Gully in Victoria.

At first glance, their Christmas is not too different from ours.  Food, family, the outdoors;  it looks lovely.

But the celebration depicted in the engraving would have been an enormous, expensive, time-consuming, and overwhelming logistical task.

Ferntree Gully is more than 30 kilometres from the Melbourne CBD, and in 1865 almost everybody lived in what we now think of as Melbourne's innermost suburbs — Richmond, lower Carlton, North and West Melbourne.

We can see three horses and in the distance a carriage.  That wouldn't have been enough for 20 people.  And carriages cost a lot of money.

The journey to Ferntree Gully would have taken hours along very poor dirt tracks.  They would have had to bundle up everything:  children, rugs, sporting equipment and pets.  To say nothing of the food, which would have to be kept safe.  (Well, maybe.  This was before widespread understanding of the germ theory of disease.)

The journey probably started the day before.  Hence the tent in the background.

When we think about how our lives differ from our ancestors, it's easy to focus on the big things:  television, telephones, cars, and electricity.

That is, consumer comforts.  The stuff that makes individual life less arduous.

But we forget how economic growth and technological change has made our relationships closer, easier, and cheaper to maintain.

A century and a half later, the classic Australian Christmas is no longer a trip to the bush but a suburban backyard barbecue.  That change has only been possible thanks to the market economy and consumer society.

How?  Let's take it one word at a time.  Suburban, backyard, barbecue.

Obviously, Australia's sprawling suburbs rely on cheap ubiquitous motor transport.  (Trains and trams can only service a few kilometres either side of their tracks).  A short trip to the developing world should be enough to demonstrate that car ownership indicates wealth.

Backyards, too, are a sign of prosperity.

As the food historian Barbara Santich points out, it was relatively recently — that is, after the Second World War — that backyards were turned over from home food production and gardening to leisure.  The reason was affluence, as well as the convenience and availability of supermarkets.

Hence, the 1865 journey to Ferntree Gully.  The Australian backyard of our ancestors was an economic asset, not a social setting.

This remained the case well into the twentieth century.  A short book from 1928 explains to Britons the difference between Christmas in Australia and in the mother country.  The book tells the story of the "long trek" taken by Australians on Christmas Eve to the mountains and the sea.  Cars would be heavy loaded with tent-poles and gramophones and food.  And, of course, spare tyres.  Celebration would start at dawn the next day.

Finally, the barbecue.  The barbecue is a remarkably recent invention.  Its pre-war equivalent was the "chop picnic", where meat was cooked on a small fire in the ground.  The figures in the background of ''Christmas in Australia'' are probably having a chop picnic.

When backyards were freed up, Australians started building permanent barbecues out of brick fuelled by firewood.  (Nobody wants an open fire in their backyard.)

The free standing portable metal barbecue fuelled by a gas bottle became prominent in the 1970s.  Gas barbecues are better in almost every way:  they're cleaner, heat faster, and, as they cool down rapidly, they're safer too.  It was only thanks to better materials, cheaper energy and technological innovation that the free standing gas barbecue became the Australian norm.

And of course, they're still getting cheaper.  The 1978 barbecue shown here cost $670 in 2012 dollars.  These days you can pick up the same thing for $90 and a gas bottle for $30.

So our traditions change according to our prosperity.  Our relationships do too.

That family in Ferntree Gully 150 years ago were — as European settlers — at least a four-month journey on an iron clipper ship away from the family they may have left behind.  Communicating with their relatives by letter would have taken twice that.

In the 1930s the situation was much better.  An Australian wanting to travel to Europe could have flown.  But aviation was in its infancy.  The flight would have been extremely high cost — far too high for a mere holiday — and taken more than a week.

Today we can cross the planet in 24 hours.  And, with the internet, communication is instantaneous.  That technological change has made seeing and appreciating our family much cheaper.

The cost of sending a gift to a family-member across the other side of the world by sea freight has declined by two thirds between the 1930s and 2013.

Flights to see family members are a tenth of what they were.

An international phone call is one 100th of what it was 85 years ago.  If we use Skype, it is effectively zero-price.  Letters, too, cost nothing online.

Australia is a very rich country — one of the richest in human history.

And there's no better time to reflect on how that wealth has made it easier to have stronger relationships than Christmas.

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Foundation must be principles, not worthy aspirations

It's time to reassert the importance of human rights as universal, consistently-applied principles, not increasingly diluted worthy aspirations.

Australia's Human Rights Commission should specifically focus on advancing Article 19 of the International Convention on Civil and Political Rights.

That Article primarily focuses on the right of free expression and free speech.

Of course, there are many human rights other than free speech.  The human rights commission should also stand up firmly for the human rights of movement, association, worship, private property and the right of people to decide how to live their lives.

But it is the views on free speech that seem to have drawn the most attention, particularly relating to the call for the full repeal of Section 18C of the Racial Discrimination Act.

Section 18C has drawn significant public ire because of how it was used to shut down the free speech of Herald Sun columnist, Andrew Bolt, through the courts.

At times it will appear inappropriate to defend free speech.  After all, no one is required to defend the principle from the excessive use of the words "please" and "thank you".  Free speech needs to be defended only when someone says something that does offend.

Section 18C limits free speech when it may offend, insult, humiliate or intimidate an individual or group of individuals.  Bolt was found to fall afoul of this provision in articles published in this newspaper about the racial identity of some indigenous Australians.

That case made Section 18C famous, but this debate is not just about Bolt.  His views receive plenty of oxygen in public debate through his columns, radio appearances and his television program, The Bolt Report.  Those platforms give him the opportunity to broadly respond and defend himself.

But it should be noted that because laws have been used to shut him down, it is a reminder of how important free speech is to defend all human rights.

This debate is about the human rights of every Australian — those who don't have the same platform as Bolt either to make free comment or defend themselves against attacks on their speech, including by government laws.

Many people have pointed out that there are get-of-jail-free cards in the law.  They are right;  the subsequent section of the law provides a series of exemptions based on whether the speech is exercised in "good faith" and in certain circumstances.

But they are not sufficient.  One of the most insidious developments of those who want to keep the law is that Bolt would have got away with his argument if he was accurate in his article.

The gateways of free speech don't open and close based on accuracy.

Should people seek to be accurate?  Absolutely.

But free speech is only an extension of thoughts and thoughts can be built on an incorrect understanding or assumption.  The best way to deal with inaccuracies is have them expressed, heard, challenged and exposed for their faults.

The solution is not to shut down speech.  The solution is more speech, much more, particularly for different voices.

That's why Section 18C should be repealed totally.  The extent that speech harms people's reputation is better dealt with defamation laws rather than subjective tests that benefit one section of the community over another.

Preserving these human rights should not be an endorsement for how people exercise them.  Exercising traditional human rights also provides a mechanism to address behaviour many of us do not like through voluntary codes and social convention.

Even if people have the right to say almost anything they want, that does not mean a free-for-all.

For example, workplaces are well within their rights to adopt codes for how employers and employees should conduct themselves to make sure everyone is respectful.

The same can also be applied to associations based on membership.  And we should all exercise our freedom of association to engage with or distance ourselves from people we think express vile and repugnant views.

I want to inform and promote a traditional human rights-based approach to the laws that govern our lives.  In many cases it will not be simply adding or removing a law, but how we can positively reform them, and our institutions, to achieve change.

There are many important human rights issues being debated around Australia.  Some people argue that religious schools should not be able to discriminate against employees or students, especially when they are funded with public money.

But then how do we reconcile the human right to worship, or free association, with the aspiration that religious institutions that provide public services should not discriminate?

What I know is that with innovative thinking, we can advance society and promote aspirations we all share to unleash the maximum potential of every Australian and preserve and protect the integrity of traditional human rights.

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As officialdom tries to dilute them, human rights must be defended

The Human Rights Commission should defend our traditional human rights from a principled position because they are vital to the preservation of a free society.

The focus in defending human rights in recent years has been on free speech.  This is appropriate as free speech is arguably our most fundamental right.  Without free speech the capacity to defend all other human rights is diluted.

But it is clear that there are many other threats to the pantheon of traditional liberties, and many freedoms that have suffered neglect in recent decades.

The Australian Human Rights Commission is statutorily charged with promoting the principles within the International Covenant on Civil and Political Rights.  That obligation is entirely consistent with my view that the government's role is to create the legal framework to preserve and protect traditional human rights, such as free speech, association, movement, worship, property rights and self-determination.

But there have to be carefully delineated limits to human rights when they come into conflict.

For example, language that explicitly incites violence and directly threatens another individual's safety can be legitimately restricted.

Similarly, in broad principle, defamation law comes from a direct conflict between free speech and people's ownership over their earned reputation — essentially a property right.  Defamation law makes it justifiable to limit speech when it unjustly harms that reputation and the right for an individual to earn from it.

The question for government is:  where do you set the bar?  If the defamation bar is set too low free speech is curtailed.  Too high, then people can destroy other's reputation without recourse.  I think it's clear that, right now, the bar is too low.

But the broader concern is the dilution of human rights by governments in favour of other aspirational, often seemingly worthy, goals.

A practical example is Wednesday's decision by the High Court on the rights of unions to donate to political parties.  From a human rights perspective, the NSW laws preventing any collective of individuals seeking to speak through a common voice — unions, environmental groups, businesses and non-profits — from donating to a political party violated freedom of speech and association.

To its credit the court unanimously struck down the NSW government's restrictions on the basis that they "impermissibly burden the implied freedom of communication on governmental and political matters, contrary to the Commonwealth constitution".

The court's decision is important because it affirms the right to free political communication that the court found was implied in Australia's constitution two decades ago.

Another is the Queensland government's recent anti-bikie gang laws, being adopted in other states.

If bikies commit crimes the police should investigate and prosecute criminals.  But from a human rights perspective it is entirely unjust that freedom of association should be squashed to make the job of the police easier to investigate.  Rather than empowering police to prevent an already comprehensive list of crimes, these laws have created a host of new crimes that could easily be used to punish law-abiding citizens in the wrong place at the wrong time.

Some might say my approach to preserve and protect these traditional human rights is absolutist.  This is not the case.  But too often we have been willing to undermine fundamental rights in the name of "balancing" them.  Rights should be as absolute as possible.  Universal human rights need to be upheld and protected.

The Human Rights Commission should continue defending them from being further diluted.

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Fracking scares impede wealth creation

The probable reserves of unconventional coal-seam and shale gas in Victoria, NSW and Queensland dwarf the conventional gas reserves in offshore Victoria and the Cooper Basin and may approach the magnitudes found off the North West Shelf.

The unconventional gas is extracted by fracturing rock — fracking — to allow gas and oil to escape.  This is a process with a 60-year history throughout which it has never resulted in public harm.

Reserves of gas are, of course, valuable only if governments allow them to be extracted.

Although it is politically irresponsible for governments to prevent wealth creation on the basis of counterfeit scares, the Napthine and O'Farrell governments in Victoria and NSW have bowed to such scares.  These scares are based on specious allegations that extracting coal-seam and shale gas through fracking will create environmental problems, especially groundwater pollution.  The Coalition governments in both states face opposition to gas development from some of their own supporters as well as from the Labor Party seeking to tap a vein of voters with strongly held views and casting an anxious look at Greens rivals.  That does not condone the vetoes.

The Victorian government has completely forbidden development of any unconventional gas reserves in the state.

In NSW, where radio shock jock Alan Jones spearheads the campaign against fracking, the government has banned mining close to towns and in prime agricultural land.

It claims the exclusion zones comprise about 20 per cent of the state but they contain the lowest cost prospects.

Regulatory impediments in NSW have meant the state, though having similar potential to Queensland, collected a mere $120,000 in gas royalties last year, compared with $850 million north of the Tweed.

Victoria commissioned Peter Reith to head an inquiry into the activity.  Like every other responsible study, this found fears of inadvertent harm were groundless and any risks were easily prevented — indeed, there is already a commonwealth-state 18-point leading practice framework.

The Reith report also advised that Victoria has an urgent need for future supplies and fracking should be allowed to proceed immediately.  It pointed out that the minerals belong to the crown and value in them is shared under a known royalty regime between the government and the discoverer, with landowners being fully compensated for any damage, inconvenience and disturbance from the activity.

In addition it warned that a gas reservation policy for local consumption would simply divert the product to firms seeking below-cost inputs and deter exploration.

Unfortunately, reports of this nature invariably raise other agenda items.  Reith's report is no exception.  He felt the need to call for a new regulatory authority, the gas commissioner.  Designed to promote better acceptance of drilling and fracking, this also incorporates an "independent water science program" to scrutinise and report on whatever it fancies, new guidelines, bans on certain chemicals, full disclosure of the chemicals being used and independent monitoring.

The report also advocates further and unnecessary government resources to forecast consumer demand for gas and transportation capacity.

To placate different interests, Reith also recommended siphoning off some of the royalties to a regional fund and doubling the de facto royalty paid to the landowner to $20,000 a well.

Offsetting this, the report advocates a lower royalty rate and a royalty holiday — measures that are surely unnecessary for an industry anxious to start exploration on established terms.

The Reith report also advocates requiring the Exxon-BHP joint venture to cease selling as a single unit.  The objective is to force the two firms to compete with each other in the hope that this will drive down prices.  Whether or not this would eventuate, and be desirable in the light of the report claiming that prices need to rise, a forced divestiture sets ugly precedents for future joint ventures.

The tragedy, though, is that just as the Reith report sensibly concluded fracking should go ahead, a timid Victorian government put in place a further review process, leaving bans in place until after the next election.

The government optimistically thinks a further pause will buy it time to make the right decision.  However, ahead of the next election it will face pressure to maintain the moratorium — which, on its present record, it is unlikely to resist.

The corporatist state is so pervasively within the business decision making framework that it is paralysing innovation.  We need to find ways that allow decisions to move forward under the rule of law without parties having only an incidental interest in developments being able to recruit regulatory barriers to block them.

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Did the New Zealand film industry just eat our lunch?

James Cameron is going to film the next three instalments of the Avatar franchise in New Zealand.  He promises to spend at least NZ$500 million, employ thousands of Kiwis, host at least one red-carpet event, include a NZ promotional featurette in the Avatar DVDs, and will personally serve on a bunch of Film NZ committees, and probably even bring scones, all in return for a 25% rebate on any spending he and his team do in the country (up from a 20% baseline to international film-makers) that is being offered by the New Zealand Government.

The implication that many media reports are running with is that this is a loss to the Australian film industry, that we should be fighting angry, and that we should hit back at this brilliantly cunning move by the Kiwi's by increasing our film industry rebates, which currently are about 16.5% (these include the producer and location offsets, and the post, digital and visual effects offset) to at very least 30%.  These rebates cost tax-payers A$204 million in 2012, which hardly even buys you a car industry these days.

So what are the economics of this sort of industry assistance?  Is this something we should be doing a whole lot more of?  Was the NZ move to up the rebate especially brilliant?  First, note that James Cameron has substantial property interests in New Zealand already, so this probably wasn't as up for grabs as we might think.  But if that's how the New Zealand taxpayers want to spend their money, that's up to them.  The issue is should we follow suit?

The basic economics of this sort of give-away is the concept of a ''multiplier''), which is the theory that an initial amount of exogenous spending becomes someone else's income, which then gets spent again, creating more income, and so on, creating jobs and exports and all sorts of "economic benefits" along the way.

People who believe in the efficacy of Keynesian fiscal stimulus also believe in the existence of (>1) multipliers.  Consultancy-based "economic impact" reports do their magic by assuming greater-than-one multipliers (or equivalently, a high marginal propensity to consume coupled with lots of dense sectoral linkages).  With a multiplier greater than one, all government spending is magically transformed into "investment in Australian jobs".

So the real question is:  are multipliers actually greater-than-one?  That's an empirical question, and the answer is mostly no.  (And if you don't believe my neoliberal bluster, the progressive stylings of Ben Eltham over at Crikey more or less make the same point.)

But to get this you have to do the economics properly, and not just count the positive multipliers, but also account for the loss of investment in other sectors that didn't take place because it was artificially re-directed into the film sector, which no commissioned impact study ever does.

This is why economists have a very low opinion of economic impact studies, which are to economics what astrology is to physics.

What does make for a good domestic film industry then?  Look again at New Zealand, and look beyond the great Weta Studios in Wellington, for Australia and Canada both have world-class production studios and post-production facilities.  Look beyond New Zealand's natural scenery, for Vancouver is an easy match for New Zealand and Australia pretty much defines spectacular.

No, the simple comparison is that New Zealand is about 20% cheaper than Australia and 30% cheaper than Canada.  New Zealand has lower taxes, easy employment conditions and relatively light regulations (particularly around insurance and health and safety).  It's just easier to get things done there.

If Australia really wants to boost its film industry, it might look more closely at labour market restrictions (including minimum wages) and regulatory burden and worry less about picking taxpayer pockets and bribing foreigners.

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