More reform threatened

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.

Directional politics

A few Prime Ministers back, Australian politics seemed to be all about Western Sydney. On the conservative side of politics, unremarkable politicians who managed to win and hold former Labor electorates were lionised, while similar wins in other parts of the country were seen as part of the normal ebb and flow of electoral politics. On the Labor side, the region was invoked by the NSW Right (many of whom preferred not to live there) as the basis for its “aspirational” politics. This was all nonsense. The two million or so people who live in Western Sydney vary far more among themselves than they differ from the Australian population as a whole. To the extent that they have any sort of collective identity it hasn’t stopped large numbers of them for voting for (or, for that matter, against) governments led by silvertails from the North Shore, Northern Beaches and Eastern Suburbs.

But since the brief return of Kevin Rudd, the focus has shifted back to an area of more traditional concern: Northern Australia and its supposed need for development. I had hoped to see the end of this when Turnbull became PM, especially given the government’s fiscal woes. But sadly, this is not to be. Not only is the $5 billion development fund still alive, but we are getting stories about Turnbull’s plans to “unlock the North“.

As it happens, I’m in North Queensland right now, and I lived in Townsville for most of the 1990s. Like everyone else in the region I received a special “zone allowance” under the tax system to compensate me for living in a pleasant (if rather warm) coastal city with all the amenities that would be expected by a resident of, say, Newcastle or Wollongong. I understand that this allowance is still available. Nothing of the sort is on offer to people in poor suburbs or declining country towns in the rest of the country.

Like every other place in Australia, the North has plenty of unmet needs for services and, though to a much lesser extent than people seem to think, physical infrastructure. But it is in no sense “locked up”. There are road, rail and air transport links that meet the needs of the region with the same adequacy or lack of it as most other places in the country. Internet access is taken for granted in all but the remotest parts of the region. Ports, and transport links to them, are well developed to carry agricultural and mineral exports wherever they need to be sent. And so on.

Moreover, as with Western Sydney, the region has much the same diversity as the rest of the country, with a corresponding diversity of needs and wants. The cities of Rockhampton, Townsville, Cairns and Darwin differ as greatly from each other and from the rural areas they serve as they do from cities and regions in the rest of Australia.

We don’t need a Northern Australia policy any more than we need a Western Sydney policy. Public infrastructure projects should be assessed on the basis of their merits, and not their location. Private investment should be left to the commercial judgement of those involved. The $5 billion development fund should be rolled back into general revenue and used wherever it is most needed.

What the unions really need

As I observed here, the Trade Union Royal Commission has spent tens of millions of public money to show that the corrupt behavior of a number of Health Services Union officials is the exception rather than the rule. The payments made to a dozen or more TURC lawyers, after a ‘limited tender‘ process of very dubious propriety, far exceed the amounts involved in any of the handful of offences alleged in the Commission’s report.

But that’s not to say all is well with the Australian movement. The steady decline in union membership is mostly the result of external causes (the increased power of employers, a stream of anti-union laws, and so on), but the unions haven’t always helped their own cause.

Here are some changes I think are needed:

* Term limits for union officials. To take just two examples, Bill Ludwig has been Secretary of the Queensland AWU since 1988 while Joe DeBruyn was National Secretary of the SDA from 1978 to 2014. Both men used their entrenched position to exert political power within the Labor Party, in ways entirely unrelated to the interests and concerns of their members. Which brings me to:

* Ending affiliation with the Labor Party (or any political party). Bob Hawke recently pushed this idea as a way of freeing the ALP from the corrupting influence of the CFMEU. But the real problem is the other way around. The ALP, like most Australian political parties is a shell, controlled by factional chiefs, notably including union officials who control important blocks of votes. Obviously, someone whose main role is as a party apparatchik can hardly do a good job of representing workers

* Actual workplace experience for officials. Bill Ludwig was, at least for a few years, a pastoral worker before he was a union official. By contrast, Joe De Bruyn was one of the first representatives of a modern type – the career union official. He went to work in the SDA straight out of uni , getting the job on the basis of DLP political connections, and stayed there until he retired 40 years later.

Feel free to comment or offer your own suggestions.

Update A colleague tells me that, before devoting himself to the concerns of retail workers, Joe de Bruyn had a brief stint as an agricultural economist at the University of Sydney, where I also worked early in my career. Agricultural economics was a formative influence for quite a few Australian politicians, notably including John Dawkins and John Kerin, as well as many who became prominent in the public service and the broader economics profession.

What about the iceberg ?

The Trade Unions Royal Commission report, released in the dead news time between Christmas and New Year has had an extraordinarily soft reception from the media. After spending tens of millions of dollars of public money (not to mention the amount witnesses would have had to spend on legal representation) Dyson Heydon has come up with about a dozen allegations of criminal corruption. By far the largest is one involving his own former star witness, Kathy Jackson. Most of the others are for small amounts, some as minor as using the union credit card to get a tattoo.

Of course, it’s deplorable that the funds of union members should be misused for private purposes, and if the allegations turn out to be true, those involved should face the appropriate penalties. But compare these allegations to the routine behavior of members of Parliament. Under the “Minchin rule”, they can charge almost anything they like, with no penalty greater than being required to repay expenditures found to be unjustified. Even while Heydon’s inquiry was running, we saw revelations of misuse of public funds on both sides of politics, notably including senior figures in the government that launched this inquiry. And the situation in the business sector is no different.

Heydon’s other allegations are directed against union officials for the way they do their job. In this respect, the unions can’t win: the AWU gets hit for sweetheart deals, and the CFMEU for going too far in the opposite direction, with allegations of intimidation and blackmail. It’s important to remember these are only allegations. On past experience, most will fall over in court, if they make it that far.

Heydon claims that his findings represent “the tip of the iceberg”, but surely, after all this expenditure and long running hearings, we are entitled to expect the whole iceberg. The Auditor-General should be called upon to investigate this appalling waste of public money.

A quiet word

Apparently, the Director-General of ASIO has been getting in touch, quietly, with a number of government MPs, warning them that their anti-Islamic comments are potentially damaging to national security. They have been complaining about this as an infringement of free speech. Their comments have been made to News Corporation publications (which have published similar comments and could be subject to the same criticism). Julie Bishop has defended ASIO’s actions, but she is in the wrong.

It’s highly unlikely that the MPs in question would have been upset if ASIO had warned off MPs who were seen as being too soft on terrorism. But their hypocrisy doesn’t justify ASIO’s intervention in politics. Both MPs and newspapers are entitled to freedom of speech, and shouldn’t have security officials telling them what to say or not to say.

On the other hand, freedom of speech doesn’t mean freedom from consequences. Having accepted the judgement that government MPs are acting in a manner prejudicial to national security, Turnbull and Bishop can’t sit on their hands. They should be telling the MPs in question to choose between keeping quiet and moving to the cross-benches, where they can say whatever they like without implicating the government.

Won’t anybody think about the sceptics?

Annabel Crabb asks “Who will speak for the sceptics now” and concludes “Watch this space, because it won’t be empty for long”.

In my view, Crabb is relying on two dubious assumptions. The first is that the denialist position adopted under Abbott reflected the “scepticism” of the party base, rather than vice versa. The great majority of “sceptics” are, in fact, credulous believers in what they are told by trusted authority figures, notably including conservative political leaders. Since most LNP voters appear to be happy with the shift to Turnbull, it seems likely that they will adjust their opinions to fit with those of the government. The minority who are seriously unhappy have nowhere else to go.

The second assumption is that any view which is widely held in the general community will inevitably get some political representation. That simply isn’t true. To take a couple of examples, all the evidence I’ve seen suggests strong support (not from the same people, though I’m sure there’s overlap) for the reintroduction of capital punishment and for the renationalisation of the Commonwealth Bank. Those views aren’t represented in the political process and aren’t likely to be.

Coming back to Crabb’s question, if we were going to see a significant backlash against Turnbull on this issue, there would be background leaks from senior ministers, not snarky tweets from insignificant backbenchers. People like Robb, Frydenberg and Dutton, who presumably would prefer the Abbott line, have stayed quiet, as far as I can tell.

The one option for denialists is a minor party run for the Senate. That would create some nasty complications regarding preferences, but wouldn’t really change anything, any more than the election of an LDP senator did last time around.

Meet the new boss …

As has happened before, I was travelling when the Prime Ministership suddenly changed hands. I’m still on holiday, though I briefly appeared before the South Australian Royal Commission on the Nuclear Fuel Cycle yesterday. But even without following the news closely, it’s easy enough to see that the Turnbull LNP government is basically the Abbott government with the gratuitous culture war element removed.

On climate change, for example, we’ve seen the end of attempts to kill the highly successful Clean Energy Finance Corporation, but no major change to the absurdly misnamed “Direct Action” policy, and a doubling down on Abbott’s support for coal from newly promoted minister Josh Frydenberg.

In particular, contrary to suggestions that Turnbull is going to push for a more “market liberal” approach, Frydenberg is still touting the idea of subsidising the Adani Carmichael boondoggle. I doubt that anything will come of this (on this score, the supposed deal with Downer EDI to build Adani’s railroad seems to have quietly died), but it’s indicative of the government’s position. And the new coalition deal, handing over water policy to Barnaby Joyce, amounts to a repudiation of everything Turnbull stood for when he was Water Minister under Howard.

The abandonment of the culture wars looks like something of a double-edged sword. On the one hand, it was obviously necessary, given the extent to which Abbott’s absurdities discredited the whole enterprise. On the other hand, much of the LNP base and commentariat are so committed to culture war politics that they will have grave difficulty in supporting Turnbull even if they want to: most of their usual lines against inner city elites, latte liberals and so on are far more applicable to their own new leader than to Labor and the Greens.

My success as a pundit is notoriously mixed. Still, I find it hard to see how Turnbull can sustain his initial bounce in the polls without taking tougher decisions than those he has been willing to make so far.

A CHAFTA election? (updated)

Malcolm Turnbull’s coup against Abbott has been the subject of much commentary, and I didn’t have anything to add. But now it’s time to look beyond the juggling of Cabinet positions and to consider some of the long term implications. Turnbull’s rise takes off the table, or radically changes the politics of, a number of issues that would have been central to an Abbott election campaign. Most obviously, there are the issues (climate change, equal marriage, republicanism) where Turnbull is known to agree with Labor but has said he will stick with Abbott’s policies. Obviously, Turnbull can’t run hard on these. It remains to be seen whether Labor can make political mileage out of the contradictions involved.

The ground Turnbull wants to fight on is that of economic liberalism, primarily as represented by the so-called Free Trade Agreements with Korea, Japan and, most importantly, China.

Turnbull has the near-unanimous support of the elites on these deals, even though it’s hard to find even a single economist who would support them with any enthusiasm. Anyone who has looked seriously at the issue understands that the trade aspect of these agreements is trivial. What matters are the side clauses on issues like Investor-State Dispute Settlement procedures, intellectual property, environmental protection and so forth. Unfortunately, political journalists, as a class, don’t do much thinking.

Here, for example, is Laurie Oakes, asserting that

>Labor needs to end up supporting this trade deal. That is the bottom line

but not providing a single argument in favour. In typical “Insider” style, Oakes says

The government charge that Labor is sabotaging jobs would not be a difficult one to sustain.

without worrying about whether this charge is actually true (it isn’t).

In the case of CHAFTA (the unlovely acronym for the China deal), the big problem is not in the agreement itself, but in a “Memorandum of Understanding”, which provides for circumstances under which a Chinese company can import its own workforce, without labour market testing (that is, even if there are Australians willing and able to fill the jobs) and without matching existing conditions.
Read More »

We need a new word for “reform”

Hardly anyone bothered to pay attention to the “National Reform Summit” put on by the Oz and the Fin the other day. The word “reform” tells us everything we need to know about this event: yet more invocations of the exhausted policy agenda of the 1980s, all with the implicit message that we need to work harder. Both Jeff Sparrow at Overland and Ben Eltham at New Matilda have pieces today making this point.

“Reform”, meaning “change for the better” was always a problematic concept, but it was a useful word, and we don’t have a good alternative. I don’t think a single replacement is feasible, but I’d like to try out some alternatives, and call for other suggestions

“Redesign” and “restructuring” are reasonably neutral and can be used to indicate a wide range of policy changes, without assuming anything specific. For example, “retirement income policy redesign”.

“Liberalisation” describes a wide range of things for which “reform” is commonly used, for example “drug law liberalisation” or “financial market liberalisation”. This gives a pretty clear indication of the general line of policy change, without the approval implicit in “reform” (except to the extent that support for liberalization in general is assumed).

What is lacking is a good single word term for what was the primary connotation of “reform” until the 1980s, namely, policy changes along social democratic lines. Any suggestions?

Is anyone surprised …

… by Martin Ferguson’s emergence as an enemy of the Labor Party and the trade union movement? I’m certainly not. Ten years ago, reviewing Michael Thompson’s Labor without Class, to which Ferguson contributed a laudatory foreword, I wrote

The obvious inference from Thompson’s book is not that Labor should change its position but that he, and others who share his views, should join the Liberals.

In 2009, looking at political nepotism in general, I said,

People like Belinda Neal and Martin Ferguson would never have made it into Parliament on their own merits, and would probably have been on the other side if not for their family ties

In between, I noted Ferguson’s support for John Howard’s climate do-nothingism as an argument against the hereditary principle in politics.

My record as a political prognosticator is notoriously mixed, but I got this one right.