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Stability

July 4th, 2016 75 comments

Malcolm Turnbull went to the election warning against the instability of a “hung” Parliament and a minority Labor government. It’s now clear that the most unstable outcomes within the range of possibility are those where the LNP forms a government with 76 seats (working majority of 1) 75 or 74 (presumably relying on Bob Katter and/or Nick Xenophon for confidence votes). The knives are already out for Turnbull, and there are at least three potential successors in the wings, all convinced they could do a better job than Turnbull or either of their rivals. So, any understanding Turnbull might reach with independents is liable to be overturned at any moment.

On the Labor side, the rules changes introduced by Kevin Rudd make it just about impossible to remove a sitting PM, and there is, in any case, almost no appetite for a change. So, if Labor manages 72 seats or more and forms a minority government, there’s a good chance that the government and parliament could run its full term.

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Polls, pundits and punters yet again

July 2nd, 2016 36 comments

It’s too late to influence anyone’s vote, and I doubt that many of my readers are in much doubt as to which way they will go, so I’ll return to one of my favorite topics, the relative predictive power of polls and betting markets. Most of the time, comparing the two is a tricky exercise, since the odds in betting markets and those implied by polls tend to converge as the election nears. Not this time, however. The polls have remained at or near 50-50 throughout the campaign, with the additional complication that 5-10 seats may be won by independents or minor parties. Yet, as of a couple of days ago, the LNP was paying $1.08 for a dollar bet, implying a winning probability of around 90 per cent.

In classical statistical terms, that means that, if the LNP loses (does not form a government) the null hypothesis that the betting odds are correct can be rejected with 90 per cent confidence, which is commonly considered good enough for social science work. Unfortunately, things don’t work the other way around. If we disregard markets, the chance of an LNP win is probably a bit above 50 per cent, so a win for the LNP wouldn’t prove anything one way or the other. For that, we’d need a case where the polls strongly predicted a winner, while the markets were even money or going the other way (the key concept here is the “power” of the test).

In an important sense, anything less than a clear LNP majority would constitute a rejection of the betting market hypothesis. If the majority is small, then the outcome will inevitably have been decided by a few thousand random votes reflecting unpredictable chance.

Anyway, we’ll see soon enough.

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Australia opens trade talks with Britain during election campaign?

June 30th, 2016 17 comments

A report in the UK Sun (Murdoch, but directly quoting a government minister, presumably accurately) quotes UK saying that “senior politicians in [Australia and South Korea] had called [seeking trade deals with the UK] in the past 48 hours“. If that’s true, it seems like a spectacular breach of the caretaker conventions.

From Wikipedia, the relevant part of the conventions

The Government ordinarily seeks to defer major international negotiations, or adopts observer status until the end of the caretaker period.

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A policy-based election, a policy-free campaign

June 28th, 2016 15 comments

The 2016 election is remarkable in two ways. First, more than at any time in the past 20 years, the two parties have presented strongly opposed policy platforms reflecting underlying ideological differences on economic policy, symbolic (bankers vs unionists) and substantive (upper income tax cuts) class issues, climate policy, equal marriage and more. On the other hand, having set out these differences, the parties have run campaigns that are (because of the eight-week duration) twice as vapid and uninspiring as usual. None of the big issues have been debated seriously.

Most notably the pretext for the double dissolution, the ABCC bill, has barely been raised. It’s obvious enough why Labor would want to avoid arguing about allegations of union corruption, whether those allegations with or without merit. On the LNP side, the $100 million handed to Dyson Heydon and his Royal Commission has so far (AFAICT) failed to produce a single conviction for any act of union corruption, while a number of prosecutions have fallen over in more or less embarrassing circumstances.

Unsurprisingly, the polls have barely moved from the deadheat position they were in at the beginning of the campaign. Perhaps more surprisingly, with a week to go, both betting markets and media pundits are uniformly convinced that the government will be returned with most predicting a narrow majority. Given the random element in any election, making a strong prediction of a narrow win is nonsensical. There are always half a dozen seats where random, unpredicted factors emerge on election night. So, if you think a narrow win is the most likely outcome, you must impute a significant probability to a narrow loss. If the government does not get a majority, this fact will suddenly be discovered with an air of profundity. If it does, the pundits and punters will congratulate themselves on their instinctive connection with the mood of (51 per cent of) the Australian people

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Labor and the Greens

June 19th, 2016 80 comments

The election campaign has brought into focus the long-standing problem of how Labor and the Greens should deal with each other, which became critical after the 2010 election. Both parties have made a mess of things this time around. Rather than go over that ground, I’m going to give my view on how they should work in the future.

First, both parties need to realise that they are part of the same centre-left movement. For Labor that means giving up the idea that the Greens are a temporary irritant that will go the way of the DLP, if they are abused and/or ignored long enough. For the Greens, it means abandoning Third Way rhetoric suggesting that they represent an unaligned alternative to a two-party duopoly.

In electoral terms, the starting point for both parties should be an exchange of preferences in all seats, with the LNP last. That starting point doesn’t preclude changes in the case of particularly objectionable (or particularly good) candidates, but it does rule out the kinds of negotiations we’ve seen so many times with the LNP or with conservative minor parties. It also rules out the fake piety of Green “open tickets”.

Such a policy would be good for the centre-left as a whole, but it would also benefit each of the parties to adopt it unilaterally. The alleged hardheads who negotiate these deals have repeatedly bungled them, while creating division and attracting bad publicity.

Equally important is the question of how the parties should work in Parliament. The most important is the case that emerged in 2010, with Labor needing Greens support to form a government. My reading of that episode is that both parties were harmed by the conclusion of a formal deal, and that a coalition with Green ministers would make things even worse. Instead, the Greens should support Labor on confidence votes, and negotiate on all other legislation on the merits.

An approach like this would enable the Greens to influence policy in positive ways, while not tying them to Labor policies they regard as unacceptable. For Labor, the obvious benefit is that they could form a government while maintaining a formal position of “no deals”. For the centre-left as a whole, the policy outcome would be better than that from a Labor government with a tame majority.

Categories: Oz Politics Tags:

Am I the only person …

June 18th, 2016 39 comments

… who’s totally dissatisfied with the coverage of the likely election outcome. Every article I’ve read seems to be along the lines of the following deduction

1. Labor can’t possibly win the 21 net seats it needs for an absolute majority
2. (implicit) Any outcome other than an absolute majority for one major party or the other is inconceivable.
3. Therefore, any outcome other than an LNP majority is impossible and inconceivable.

Obviously, the problem is with implicit step 2. As Inigo Montoya remarks to Vizzini, in the princess bride (a constant user of the term “inconceivable”) “You keep using that word. I do not think it means what you think it means”.

As far as I can tell, it is entirely possible that the next Parliament will include 10-12 non-major party independents (two to four Greens, up to three Xenophon, three current independents and perhaps two more). Of these, three or four would hold seats taken from the LNP, meaning that the government can only afford to lose about 10 seats to Labor before we get to a deliberative Parliament. Of the non-majors, there’s only one (Bob Katter) who could be regarded as a reasonably safe vote for the government.

Maybe the pundits have taken all this into account. But, if so, I’ve seen no evidence in what they’ve published. It’s still two-party preferred and what I’ll call the “fallacy of the excluded middle” in everything I read.

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A better way of collecting fines

June 18th, 2016 35 comments

Although I’ve been involved in economic policy debates for most of the last 40 years, it’s not often that I can point directly to a substantive outcome, in the sense that a policy proposal I’ve generated is implemented, or at least adopted by a major political party. There’s nothing surprising in that. There are lots of people involved in the policy process, and most successful policy proposals reflect the efforts of many people, combined in such a way that it’s hard to tell whether any one person mattered.

But I was happy to see this proposal from the Labor Party to allow state governments to collect criminal fines through the tax and welfare systems (as with HECS debts and child support), rather than jailing defaulters as at present. This was idea I put forward in a paper with Bruce Chapman, Arie Friedman and David Tait, back in 2004 (paywalled, unfortunately).

As is argued in Labor’s press release, there would be obvious improvements and cost savings, as well as the avoidance of unnecessary suffering for people who can’t afford to pay. But for me, the change in collection mechanism is of interest mainly because it makes possible more radical reforms.

Read more…

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Halfway horse-race commentary

June 11th, 2016 49 comments

Four weeks in, and with the two parties neck and neck, this ought to be an exciting point in the election campaign. But thanks to Turnbull’s trickiness* of calling a double dissolution requiring eight weeks of campaigning, it’s anything but. Still, it seems like a good time for some horse race commentary, partly repeating what I’ve said before.

* First, taking the horse race analogy seriously, the behavior of betting markets is as if two horses had run neck and neck in a dozen minor races, but one was still the overwhelming favorite for the big done. To spell this out, the polls have been virtually level pegging for many weeks, but the betting markets have barely moved. On past history, the two will converge by election day. If, as I expect, that means the betting odds will move towards the poll, this campaign will count as a major piece of evidence against the idea that markets are good aggregators of knowledge. And, of course, the converse is true

* Second, the likelihood of a deliberative Parliament, with neither major party having a tame majority is increasing all the time. That’s a good thing in the abstract; how good depends on whose votes turn out to be critical

* Third, the one consistent trend has been the precipitous fall in Malcolm Turnbull’s standing across a wide range of measures. Whatever happens on election day (short of a surprise LNP landslide), I don’t expect Turnbull to be PM a year from now.

* To be sure, Julia Gillard’s attempt to hold on to her leadership by calling an election eight months in advance makes Turnbull look moderate. But that was an absurdity doomed to fail, as it did.

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Campbell Newman: the gift that keeps on taking

May 26th, 2016 7 comments

A little while ago, it was revealed that the Queensland taxpayers were picking up the bill for Campbell Newman’s indefensible defence in a defamation action brought against him and Jarrod Bleijie (aka Boy Wonder) for accusing two Gold Coast lawyers of being bikie criminals, apparently on the sole basis that they were fulfilling the professional obligation of providing some bikies with a defence. The bill amounted to $0.5 million, and was greatly increased because Newman and Bleijie refused to mitigate the damages by apologising.

Now, thanks to the Oz, we learn how we are paying for the new State Executive Building, which Newman and then-Treasurer Tim Nicholls assured us we would get for nothing as part of a complex land deal. In reality, it turns out Newman left us on the hook for a 15-year lease at above market prices. Of course, the Oz being the Oz, this is presented as the fault of the current Labor government, which denounced the deal at the time and has continued to do so.

Categories: #Ozfail, Oz Politics Tags:

The two-party preferred fallacy

May 22nd, 2016 17 comments

Back in the 1970s, when the idea of analyzing voting and poll results in terms of the “two-party preferred vote, it was a major advance. Even though Australia has had preferential voting since (I think) 1921, it was poorly understood, to the point that when a candidate or party with plurality of votes lost on preferences, it was seen as a source of justified grievance (not helped by the fact that both the DLP and the Australian Democrats were splitoffs from a major party that aligned mostly with the other major party).

But that was in the days when Parliaments (or at least Lower Houses) were almost invariably made up solely of members of the major parties. Just as in the 1970s, the facts have changed but concepts haven’t caught up with it. Even though it’s now very common for the government to have a minority of seats, and such governments have worked very well, pundits still treat this outcome as an aberration, a “hung Parliament”. This is reflected in the continued use of the two-party preferred measure, which presumes that the last two candidates in any electorate, after preferences are distributed, will be those of the major parties. So, for example, Green votes for Adam Bandt are allocated between Labor and Liberal parties and used to forecast the election outcome, even though Bandt’s preferences will never be distributed.

There are various ways this could be fixed. The ideal one, in my view, would be to replaced “two-party preferred” with a seat-by-seat allocation of votes to “two most preferred”. That would need big samples to be reliable, but there are a variety of techniques that could be used to mitigate the problem.

The big benefit of this is that we could then see whether or not the poll was predicting an outright majority for one party. Assuming equal luck in marginal seats, a poll giving more than 50 per cent of the “two most preferred” vote to one party would imply a majority of seats for that party.

My reading is that most of the current polling yields a deliberative (or, as our pundits persist in describing it, “hung”) parliament as the central estimate, with enough error to allow either side the chance of majority. Given the likely alignment of independents and Greens a deliberative parliament would probably allow the formation of a Labor minority government. That raises the thorny question of the relationship between Labor and the Greens, which I will deal with in another post if I get time.

Categories: Oz Politics Tags:

Election open thread

May 9th, 2016 60 comments

For once I feel pretty happy about my predictions: a Labor win in a class war election. Have your own say on this or any election-related topic.

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Defending Australian institutions

April 27th, 2016 34 comments

The (presumably) forthcoming double dissolution will raise many issues. But most of them can be summed up as the defence of Australian institutions that have been under attack by radical extremists. I’m referring to such institutions as the ABC, CSIRO, the weekend, public education, the union movement, the fair go and our natural environment. Mention of any of these is enough to raise a derisive sneer from the radical rightwing apparatus that dominates much of Australian politics, most obviously the supporters of Tony Abbott who (ludicrously) call themselves “conservatives”. Turnbull promised something better but he is campaigning against all the institutions I’ve mentioned. It’s time to tell those who want to undermine our way of life in the name of free market ideology and rightwing tribalism where they should get off.

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A Royal Commission to end all (or most) Royal Commissions

April 18th, 2016 28 comments

In political terms, it’s hard to fault Labor’s call for a Royal Commission into the banking system. It’s a neat riposte to the government’s Double Dissolution trigger, the ABCC bill derived from the Royal Commission into trade union corruption, which spent $100 million to announce that it had discovered a handful of cases of petty corruption*, claimed to be “the tip of the iceberg”. (That was one of a string of Royal Commissions set up as political vendettas by the Abbott government, none of which found anything useful.) The hypocrisy of this effort, when we are daily bombarded with evidence of corruption in business, finance and the LNP itself is obvious, and the proposed Commission provides a convenient political hook. And doubtless there will be plenty of evidence of individual wrongdoing, real or alleged.

However, I don’t think this proposed Commission will be any more useful, in practice, than Abbott’s. The problem with the banks is not so much breaches of the rules but the rules themselves. What we need is another inquiry which, unlike the Campbell, Wallis and Murray inquiries is not run by advocates of financial deregulation.

The Royal Commission we should really have is one into Abbott’s Royal Commissions, taking the same nakedly political approach as those Commissions did. The Commissioners, the counsel assisting and the government ministers who called the Commissions should be questioned on the political understandings with which they approached the job, the waste of public money involved. With luck, that would deter any future use of Royal Commissions as partisan vendettas, and leave them to inquire into real issues of public concern, where the powers of Royal Commissions really are necessary.

Finally an observation and a question: Having been critical of the TU Royal Commission, I’ve tried to be consistent in the prediction that this one will be similarly ineffectual. Did any of those now arguing that we don’t need a Royal Commission into banking make the same observation about TURC?

* As far as I know, no union offical has yet been convicted of a corruption offence as a result of the Commission’s work, while at least four prosecutions have failed or been dropped. My guess is that the total number of convictions will end up below 10, and the total amount of money involved not much more than a million dollars. That’s a pretty appalling return for $100 million of public funds that could have been used to protect the community against armed robbers and burglars, not to mention white collar criminals.

Categories: Economic policy, Oz Politics Tags:

Cruising for a bruising

April 15th, 2016 19 comments

Rather inconveniently for the government, it had no sooner dismissed calls for more tax revenue from the usual lefty suspects (including me), when Moody’s came out with a warning that the much-loved AAA credit rating couldn’t be saved with expenditure cuts alone*.

Scott Morrison came back with a line that must have sounded like a good idea at the time. On the one hand “of course there will be revenue measures in the budget”. But, unlike Labor “additional revenue would be applied to reducing the tax burden in other parts of the economy”

That sounds good if you say it quickly enough. But let’s put some specifics in there. It seems clear that “revenue measures” means higher tobacco taxes. and “reducing the tax burden in other parts of the economy” means cuts in the company tax rate and the budget repair levy. So, Morrison’s budget message is

we’re going to tax smokers to fund cuts in company tax and tax relief for top income earners.

Good luck with that.

Of course, Labor is also planning higher tobacco taxes. But they will be able to say that they are using the revenue to fund better health services. And, of course, Labor has been consistent while the tobacco hike will be another backflip for the LNP (unless they get cold feet and do a double backflip, as seems entirely possible).

I’ve given up betting on elections after being unable to collect my winnings when Intrade collapsed a few years back. But for those so inclined, I’d recommend a look at Sportsbet, who are still offering 3.5 to 1 against Labor supplying the next PM (minor aside: most scenarios for so-called “hung” parliaments would lead to this outcome)

* I’m not a believer in ratings agencies, as I’ve said many times, and I don’t think a AAA rating is particularly meaningful. However, the core input to the rating is an estimate of future budget balance, so it’s not all that surprising that Moody’s, looking at the same data, have reached the same conclusion as I did.

Categories: Oz Politics Tags:

The Oz makes the case for higher taxes

April 14th, 2016 13 comments

A couple of days ago, I was one of fifty signatories to a letter opposing the proposed cut in company tax rate and rejecting the general idea that Australia needs lower taxes. We got excellent coverage from the ABC, Fairfax papers and so on. But by far the most extensive was from The Australian. I counted at least four stories all with a prominent run on the website

* A straight new story, though of course replete with phrases like “the left wing establishment”
* The IPA attacking the signatories as the “fatuous fifty”
* Shorten also attacking the company tax cut as a recipe for “mayhem”
* A front page piece saying a tax increase is a lazy way of solving our problems

Not so long ago, the Oz would have ignored a statement like this (or stuck it in a short story on the inside pages) with the plausible justification that it’s just a bunch of lefties saying what lefties usually say. The fact that they felt the need to reply over and over is revealing, in two ways.

Read more…

A class war election

April 12th, 2016 44 comments

Until quite recently, any discussion of income inequality in Australia was met by howls of “class war” from the political right. Particularly under Abbott, the right wanted to fight on culture war issues, while treating economic policy as a matter of competent management, in which the conservative parties were assumed, by default, to be superior.

Suddenly, however, it appears we are going to have a class war election, largely because of the choices made by the Turnbull government.
Read more…

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A deliberative Parliament

April 11th, 2016 17 comments

With the ebbing of Turnbull triumphalism, it’s become evident that the forthcoming election may produce, as in 2010, a House of Represenatives in which neither Labor nor the LNP has an absolute majority. Such an outcome has been common at the state level for some time, and is the norm in upper house elections based on some form of proportional representation. It has proved entirely consistent with stable governments, productive legislation and full-term Parliaments.

Yet commentators persist in calling this a “hung Parliament”, at least when it appears in the lower house. By analogy with a “hung jury” we might suppose a “hung Parliament” is one that proves incapable of reaching a verdict on who should form a government or what legislation should be passed. We have plenty of experience to show that this is not the case.

If we take the jury analogy seriously, it’s worth extending it to the case where the Parliament contains a majority committed to obeying whatever order it receives from the Prime Minister of the day (or, perhaps, the Cabinet). We have plenty of terms for juries and courts that work in this way, none of them complimentary: ‘packed jury’, ‘kangaroo court’, ‘frame up’ and so on.

Those are unduly harsh metaphors when applied to majority governments. But the experience of Queensland, the only Australian jurisdiction without an (invariably ‘hung’) upper house, suggests to me that the cause of good government is greatly enhanced when Premiers cannot rely on a pliant majority to push through whatever laws they like. Admittedly, we’ve had some really good independents, most notably Peter Wellington. But even independents I would never want in government have proved useful as a check on the overweening power of the executives.

So, in the cause of linguistic improvement, I offer the term ‘deliberative Parliament’ for a legislature that actually considers legislation rather than casting votes as ordered by the leader of the day.

Categories: Oz Politics Tags:

Abbott is right

March 22nd, 2016 45 comments

The LNP, with Turnbull as frontman, will be campaigning on the Abbott government’s record and policies. Apart from a few symbolic and rhetorical shifts (the re-abolition of Knights and Dames, for example), Turnbull has neither deviated from, nor added to, Abbott’s policy program.

There’s a notion being pushed in the media that a big win for the LNP would constitute a mandate to “let Malcolm be Malcolm”. This is nonsense. A mandate isn’t a free pass. It is, literally, a command, to implement the policies on which you have campaigned [1]

Turnbull can’t campaign on Abbott’s policies, then say he has been commanded to implement his own (whatever they might be). So, unless he breaks with Abbott before the election, he might as hand back the job to someone who really believes in the program he is proposing.

Update 25/3 Turnbull has obviously been stung by Abbott’s attack, and is spinning some minor course adjustments (explicitly dumping some policies from which Abbott had already resiled) as a major break

fn1. The mandate idea is most powerful in a bicameral system with an unelected or highly unrepresentative upper house. In Australia, the unrepresentative aspects of the Senate (equal state representation and long terms) are matched by the spurious lower house majority produced by single-member constituencies. So, senators have just as much a mandate to block legislation they have campaigned against as the government has to push it forward. The Double Dissolution is, of course, the way we can resolve this.

Categories: Oz Politics Tags:

Double dissolution

March 21st, 2016 30 comments

Apparently, we are likely to have one, unless the Senate passes the legislation to reinstate the Australian Building and Construction Commission. I predicted a month ago that the Turnbull government will lose office, and I’m more confident now (though far from 100 per cent) than I was when I made the prediction. So, I’ll leave it at that, and open the topic up for discussion.

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Keeping Sea Lanes Open: A Benefit Cost Analysis

March 20th, 2016 21 comments

Whenever I raise the observation that navies are essentially obsolete, someone is bound to raise the cry “What about the sea lanes”. The claim that navies play a vital role in protecting trade routes is taken so much for granted that it might seem untestable. But it turns out that most of the information needed for a benefit cost analysis is available. Unsurprisingly (to me at least), the claimed benefit of keeping sea lanes open doesn’t stand up to scrutiny. I’ve spelt this out in my latest article in Inside Story, reprinted over the fold.

Read more…

Categories: Economics - General, Oz Politics Tags:

A better system of voting for the Senate

March 19th, 2016 30 comments

After a fractious debate, the LNP and Greens have combined to push through changes to the system of voting in the Senate. The primary change is to introduce something like optional preferential voting above the line, replacing the system where party apparatchiks got to allocate preferences. While not perfect, this is an improvement on the old system.

It points the way to a much simpler system. I suggest scrapping the below/above distinction, and moving to a standard optional preferential system, except that we would vote for named party lists. Independents could pick a party name describing their objectives, or just run under their own names.

The main objection to this system is that it rules out the option of voting for (say) Labor candidates in an order different to that of the party ticket, which is currently possible below the line. But, as far as I know, in nearly 100 years with the current system, no candidate has ever been elected ahead of someone higher up their own party list.

Against that, it would be simple, familiar and easy to count, with a greatly reduced risk of accidental informal votes.

Categories: Oz Politics Tags:

Political Bourbonism

March 16th, 2016 23 comments

Laura Tingle had an interesting piece on political memory. in Quarterly Essay recently, and my response (over the fold) was published in the latest issue (paywalled)>. Tingle is the most insightful observer of Australian politics writing in the mass media, but she has always taken the inevitability and desirability of market liberal reform for a granted. I detect a bit of a shift in the latest piece, but that may be wishful thinking on my part.

Read more…

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Refighting World War II

February 26th, 2016 64 comments

In keeping with his commitment to do exactly what Tony Abbott would have done, but with more style, Malcolm Turnbull has just announced that we are to spend a trillion dollars on fighter plans and submarines. Apparently, there are lots of problems with the hugely expensive F-35 Joint Strike Fighter, which Australia has on order. Rather than look at the details, it’s worth asking we are, yet again, arming ourselves to refight World War II.

World War II was fought on land, sea and air. Submarines and fighter planes played a crucial role. But since 1945, things have changed. The 70 years since 1945 have been marked by near-continuous land warfare in various parts of the world [1]. On the other hand, there has been essentially no naval warfare, in the sense of battles between ships or carrier based aircraft, with the exception of the absurd and unnecessary Falklands conflict. Air combat between fighter planes lasted a bit longer after 1945, playing a big role in the Korean War, but has been pretty much non-existent since the 1980s. All warplanes, these days, are effectively bombers, usually hitting targets that have previously been rendered defenceless by missile attack. Yet the problems of the F-35 stem, in large measure, from its capacity to engage in hypothetical dogfights.

Fighter planes and their pilots still attract most of the attention, and nearly all the glory, in air warfare. But the real work is increasingly done by drone operators, commuting from the suburbs to undertake their task of destruction in air conditioned offices: since they see exactly what they have done, the job is apparently much more stressful than that of a fighter pilot. So far, only the US is using military drones on a large scale, but it’s obvious that this is the way of future wars. The specific problems of the F-35 are irrelevant in this context: it will in any case be obsolete by the time it’s delivered.

As for submarines, Wikipedia gives a list of submarine actions since 1945. There have been six of them, three involving the sinking of surface ships, and three involving the firing of cruise missiles, something that can be done from craft as small as corvettes.

Submarines have been much more notable for sinking themselves. Wikipedia lists four US submarines sunk at sea since 1945, two with all hands. The Russians have done far worse, losing 18 subs, most notably the Kursk, lost with all hands in 2000.

Submarines aren’t obsolete in all their possible uses. If the world ends in a nuclear holocaust, the final missiles will probably be fired from nuclear-armed submarines. But the revival of old-style submarine warfare, using our subs to sink (say) Chinese naval vessels seems remote: the increasing power and range land based anti-ship missiles will soon make naval power obsolete. Even more remote (thankfully) is the use of submarines to attack merchant ships without warning, as was done in both World Wars.

Of course, no one can be certain that seemingly obsolete modes of warfare won’t be revived: For example, there was a cavalry charge during the Afghan war. But spending a trillion dollars on weapons systems that haven’t been used anywhere in the world for decades does not seem like a sensible use of public money.

Having posted this, I’m fully prepared to get a hammering from military buffs who will point out that I have got this or that detail of air and naval warfare wrong. But the idea that detailed knowledge of tech specs or the minor points of military history constitutes expertise is, in this context, quite wrong. In the absence of any significant air or naval warfare within living memory, supposed expertise is about as useful as Scott Morrison’s knowledge of unicorns. The only important thing to know is that, like nearly all military expenditure and nearly all wars, these proposed purchases haven’t been subject to a cost-benefit test and would fail it if they were.

fn1. There’s a case that land warfare has become less frequent, or at least less bloody over time. But it’s hard to tell.

Turnbull opposes affordable housing

February 21st, 2016 46 comments

Responding to Labor’s proposals on negative gearing and capital gains tax, Malcolm Turnbull has warned that property values will fall as a result. He is surely correct. To put the same point in different words, Turnbull agrees that Labor policy will make housing more affordable and thinks that this is a bad thing.

There are some obvious electoral advantages in Turnbull’s scare campaign. As I observed when this topic came up during Abbott’s Prime Ministership, most voters own houses and therefore benefit from making housing less affordable. For this reason, Australian public policy has long been to make housing as unaffordable as possible.

The difficulty for Turnbull arises from precisely this point. He has more or less promised to do something about the tax treatment of property. But, from our current starting point, almost any change must make existing owners worse off. So, when and if he does anything, he will be hoist on his own petard.

Labor’s response to Turnbull has been interesting and, I suspect, effective. The line has been to accuse him of a dishonest scare campaign, without explicitly denying that property values will decline with the removal of unjustified tax concessions.

While this is an example of a non-denial denial, it is I think, defensible. Turnbull is mounting a scare campaign, and doing so dishonestly, attacking policies he might otherwise embrace. This is a much fairer use of the term than when it was used to apply to Labor’s reiteration of its longstanding opposition to expansion of the GST at a time when the government was clearly floating the idea. Pointing out that it was never formal government policy is a silly evasion – it wasn’t as though Labor was inventing the idea.

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Another fearless prediction

February 20th, 2016 60 comments

As longterm readers know, my record on political and other predictions is mixed, not as bad as some have made out, but by no means uniformly accurate. Still, I’m going to venture my most fearless prediction in some time.

Bill Shorten will be Prime Minister after the next election.

Like most Australian voters, I have no great enthusiasm for Shorten. But, I’ve come to the view that Turnbull is, as the Fin remarked recently, “all hat and no cattle”, and the same can be said of most of his ministry. In particular, Scott Morrison is the most striking instance of the Peter Principle I’ve seen in some time. Brutally effective as Immigration Minister, he handled the Social Services portfolio quite deftly, but has floundered as Treasurer.

Turning from personality to policy, Labor certainly deserves a win. They have stuck to their guns on issues like carbon pricing, and advanced serious and credible policies on tax and public expenditure, something that hasn’t been attempted since John Hewson’s Fightback! disaster in 1993.

By contrast, the Turnbull government is an enigma. Will it go to the election with the policies Turnbull inherited from Abbott? Or will be asked to “let Malcolm be Malcolm”? Or will we see a continuation of the studied ambiguity of the last five months? No one seems to know.

For the moment, Turnbull’s popularity looks like the trump card. The experience of his last stint as leader suggests that this is a fairly weak reed.

The best hope for the government is that the post-Turnbull surge was not so much driven by support for Turnbull as by an underlying LNP majority, submerged by Abbott’s absurdities.

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Something doesn’t add up here

February 20th, 2016 28 comments

The papers are abuzz with speculation about an early election. This is one of the favorite games of the political punditariat, and it usually comes to nothing, but the story this time seems to make even less sense than usual. Part of the problem is that there are three different ways an early election could be held, and the proponents seem to be assuming a “unicorn” or “Pixie horse” (to use Scott Morrison’s evocative terminology) that combines the best of all three from the government’s position.

First, we could have an immediate dissolution of the House of Representatives. This would have a chance of achieving the biggest selling point of the early election idea, cashing in on Malcolm Turnbull’s popularity while it lasts. But such obviously cynical moves have failed in the past, as Campbell Newman could tell you. Also, it would (as I understand it) necessitate a separate half-Senate election in the second half of the year. The political class, with the exception of minority and micro-parties, really hates this idea.

Second, we could have a double dissolution, based on the Senate’s failure to pass anti-union laws, and held under the existing rules. Apparently, the election would have to be called the day after Budget Day (11 May), and couldn’t be held until July. So, it would only be a few months early, invalidating the whole idea. And, of course, it would guarantee a Senate with lots of micro and minor party members.

The third idea, is the second, plus a deal with the Greens to reform the Senate voting rules to allow preferential above the line voting. This would kill off the “preference whisperer” deals that have allowed the election of candidates with almost no votes. The reform makes sense, but why on earth would the Greens rush it through to make life easy for the government? All they have to do is hold off until the Budget session and they can get the reform with no possibility of a double dissolution.

Also, the idea that the reform will kill micro parties seems to be oversold. Automatic preference exchange might be gone, but there will still be “how to vote” cards. With a DD quota of about 7.5 per cent, a candidate with a 4 per cent primary vote, or even less, could easily get in on preferences.

However, no one seems to be making any of these points. Have I misunderstood the arcana of our system, or just got the strategy wrong? Over to you.

Update In comments, Lt Fred makes a convincing case that the Greens want and would benefit from a Double Dissolution. They did much better in 2010 than in 2013, so a DD would be good for them.

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Shorten wins the tax debate

February 13th, 2016 116 comments

Bill Shorten doesn’t have a lot of public support, a fact that reflects his background as a machine politician with a penchant for self-promotion. For a long time he has been accused of pursuing a “small target strategy”, hoping to win by default against Tony Abbott.

The latest developments in tax policy ought to prompt ] a reassessment. The nature of policy debates like this is that the government holds all the cards: control of the political agenda, expert Treasury advice, and the capacity to manage the media with judicious leaks.

Despite all of this, Shorten has left Malcolm Turnbull and Scott Morrison looking flat-footed. Their preferred option of raising the GST rate and expanding its base is dead in the water, but not yet formally disavowed. Opposing it was an easy choice for Shorten, but still one that required him to override some supporters within the ALP.

The general assumption was that the government would soon announce Plan B. But Shorten has now beaten them to the punch. His proposals to limit negative gearing and scale back the concessional treatment of capital gains are more substantial than anything they are likely to contemplate in relation to property taxation. And Labor has already signalled willingness to limit tax concessions for superannuation.

So, unless the government is willing to do something really radical, involving an explicit break with the Abbott era, anything announced in the Budget will look like “me too”.

Update Immediately after posting this, I found this piece by Laurie Oakes, arbiter of the Australian political zeitgeist, making an almost identical argument.

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Abbott without the attitude

February 5th, 2016 18 comments

Nearly five months after Malcolm Turnbull became PM, it’s finally possible to get a clear view on the big question of what the change means. Has the shift from Tony Abbott has led to a real change in policy approach, centred on growth and innovation? Or is it merely cosmetic, amounting to the end of the tribalist rhetoric and gesture politics that eventually cost Abbott his job.

Based on recent developments, the case for “merely cosmetic” seems overwhelming. Turnbull’s rhetoric about innovation is starkly at odds with the reality of:

* massive job cuts in CSIRO, focused on climate change. The fact that the new entrepreneurial CEO is flogging the dead horse of coal to diesel adds insult to injury; and

* the $5 billion Northern Australia infrastructure fund, a boondoggle based on mid-20th century rhetoric about “unlocking the North”. It was pushed by Abbott as a sop to the Institute of Public Affairs, who underwent a sudden conversion to the cause of publicly subsidised dam projects a little while ago. The political imperative has gone but the money still flows, it seems.

The picture is just as bad on other issues. Turnbull is going ahead with the $160 millikon plebiscite on equal marriage, even though its leading backers, who only pushed it as a delaying tactic, have announced they won’t be bound by the result. Turnbull should have taken these statements as releasing him from any commitments to the anti-equality right, and allowed a free (in both senses of the word) vote in Parliament instead.

On climate change, the rhetoric in Paris sounded OK, but there has been no action to speak of. Turnbull hasn’t even committed to maintaining the Renewable Energy Target, let alone increasing it as he will need to do in the absence of an effective carbon price.

I imagine the appearance of improvement will last long enough to secure an election win for Turnbull. But, unless he starts delivering some change, the reality will become evident before long.

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Provocation

January 16th, 2016 47 comments

We’ve had a series of fatal and near-fatal one-punch assaults in Queensland recently, several captured on CCTV. An even worse case, except that by pure luck the victim managed to put out his hands and avoid a severe head impact was shown recently. One attacker holds the victim to let a second punch him, after which the first (much bigger) attacker delivers a “king hit” and walks off.

What shocked me about this was the alleged attacker’s lawyer, who claimed that he might have a defence of “provocation”. This medieval defence was scaled back after it was used, successfully, by a man who beat his girlfriend to death with a steering wheel lock in 2005 as a result of jealousy, but it apparently remains available to street thugs whose attacks don’t cause grievous bodily harm.

When combined with recent “one-punch” laws, the result is an absurdity. A thug who throws a punch in response to an insult* can’t predict what will happen next. If the victim falls the wrong way and dies, it’s a mandatory 15-year minimum. But if the victim is lucky, so is the thug – he can get off scot-free, or nearly so, with a defence of provocation.

Regrettably, but predictably, the Queensland Law Society has sought to maintain this barbaric defence at every stage. The Law Society’s determination to keep every possible defence open, no matter how anachronistic, undermines more reasonable concerns they have raised with respect to issues such as mandatory minimum sentences.

* Actual or claimed

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More reform threatened

January 10th, 2016 56 comments

The Turnbull government is apparently keen to undertake more reform, in this case applying to the welfare system. This weekend I saw a couple of media reports, unsourced but apparently based on material supplied by Social Services Minister Christian Porter, based on the “alarming” projection that welfare payments will rise from $154 billion to $270 billion in a decade, more than can be accounted for by inflation and population growth.

A huge dollar figure makes for a scary headline but not for sensible analysis. The prosaic facts underlying this projection are
(a) Welfare payments are dominated by the old age pension
(b) The value age pension increases in real terms over time, since it is linked to earnings
(c) Even allowing for an increased age of eligibility, and more reliance superannuation, the proportion of the population eligible for the old age pension is unlikely to fall

Put these facts together, and it’s virtually certain that the welfare bill will grow broadly in line with national income (usually measured by GDP), and therefore will outstrip growth in population and inflation. Indeed, a quick check suggests a compound rate of growth of about 6 per cent*, almost exactly in line with nominal GDP (assuming 3.5 per cent real growth and 2.5 per cent inflation).

The government’s proposed reforms appear to involve attacks on recipients of welfare in the popular media sense of the term (Jobstart, disability benefits and so on). But the only ways in which the growth rate of the welfare bill can be held much below that of GDP are
(i) Freeze the real value of age pensions, as has been done to Jobstart since the 1990s; or
(ii) Reduce access to the age pension, either by further raising the access age or by tigntening means and assets tests.

* Porter’s briefing apparently suggested 7 per cent, which I can’t replicate. Feel free to check.