Tuesday, 26 July 2011

Cut the waste: good for country, good economics and good politics

Julia Gillard's future is in her own hands. She looks finished but if she uses her available time wisely she could survive.

Her strengths and weaknesses are obvious.

Government waste is one reason the public have no time for Julia. It is annoying for many people to work hard, struggle to balance the family budget and then see Julia wasting billions. The public will not listen to her until she listens to them. Her carbon tax campaign has become an invitation to voters to throw her out of office.

A better approach would have been to first show how she could save the taxpayers' money before she started to demand taxes on carbon or more from the miners.

The problem of selling an unpopular policy is not new. The Coalition had a not dissimilar problem in 1996. We were seeking support to sell Telstra but we knew it was unpopular; people did not like selling the family silver. But the polls also showed our environment policy was supported. So John Howard joined the two policies by saying that we would sell Telstra and proceeds would go to green initiatives. This really took the sting out of the Telstra initiative. Julia's position is different but she would be in better shape if she tackled waste.

She may end up being forced to amend her package; maybe after the Joint Parliamentary Committee makes its recommendations. She could then portray herself as being 'reasonable' and also announce some savings measures.

I have picked four possibilities because they meet all the criteria of good economics and good politics and admittedly one is a hobby horse of mine.

Kevin Rudd recently used a foreign aid review to double Australia's foreign aid budget. By 2015 we will be spending $8 billion a year. I have no idea why the Coalition went along with this, especially when this programme could be easily cut without affecting anyone except Kevin. Hugh White a respected academic wrote last week that much of this spending does not achieve its objective. Then he said "Both the review panel (rather coyly) and the government (more blatantly), acknowledge there is more to aid than altruism. No prizes for guessing that more aid to Africa and the Caribbean is all about our UN Security Council bid…".

The government should sell its share of the European Bank for Reconstruction and Development (EBRD). It would raise roughly $80m. It is an easy decision on the merits because Wayne Swan previously agreed to its sale based on a Treasury recommendation. When he first deferred the sale he may have been influenced by the financial crisis. But a lot of EBRD money went to Russia which does not need Australian funds.

The EBRD was established to help countries behind the Iron Curtain become free market and democratic. No-one has explained why we should be funding countries that are now neither free nor democratic. Swan later abandoned the sale altogether to give the job to Bob McMullan who had said from Opposition that the Coalition only stayed in the bank to give me a cushy job. At least I tried to get our money back and I am still trying. But of course the real reason for Labor not collecting the $80m is obvious. Kevin Rudd thought the sale might jeopardise his prospects of winning the Security Council bid.

The Coalition is not immune from wasting money either. When the Howard Government was first elected, it cut spending in many areas. In my Department we abolished the office of the Special Labour Adviser at the International Labour Organization in Geneva. The posting was not needed; it was originally a Whitlamesque political pay-off. I used to boast about the savings from abolishing an office that served no real purpose. To my dismay I later found out that a Liberal successor re-established the office. It should be abolished again. Kevin and the ACTU would complain but that would only make Julia look good.

For many years, until recently, Australia's Ambassador to the Vatican in Rome was also Australia's resident Ambassador to Ireland. The former arrangement worked well. Our Ambassador was able to do all that was needed by taking three or four annual trips to Rome, usually for a week or two and then return to Dublin. Kevin decided, probably against Foreign Affairs advice, we needed our Ambassador in Rome and spent millions setting up an office. The position will soon be vacant and the previous arrangement should be resumed.

These four suggestions demonstrate that it is not hard to save hundreds of millions, maybe even more. Governments waste money every day.

Gillard should make a serious effort to cut spending. This approach would demonstrate that she wants to stay in the Lodge; it would be good for the country, good economics and good politics. And it has a hidden bonus because it would allow her to say to her Foreign Minister "Sorry Kevin we just can't afford some of your ideas". So Julia would get a chance to enjoy her politics as well.

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