Tuesday, 27 December 2011


Gillard can run, but she can't hide from the Nauru backflip


In the aftermath of another tragic loss of life, the Gillard Government has decided that the detention facilities on Nauru could be reopened.

For this to happen, the Government does not need to negotiate with its allies in the Greens or the Coalition. It does not need a deal with anyone. It does not need a deal with Tony Abbott. It should stop talking; it should just do it.

Labor caused the current problems by repudiating every aspect of the Howard government policy.

Labor said that the detention facility on Christmas Island would soon be a white elephant and now they are expanding facilities. They said they disagreed with Nauru, but now they say they are ready to reopen it. They said the increase in arrivals was caused by "push" factors, but now they argue the opposite. Now they say Nauru will not work without Malaysia, but Nauru worked without Malaysia under the Howard government.

At the time of the children overboard controversy, Labor was apoplectic about Coalition policy towards refugees, but Labor's Malaysian deal is tougher on refugees than anything the Coalition ever proposed. Labor was beside itself about the treatment of children but kept many in detention. Left-wingers all round the country berated the Opposition for years on its offshore processing policy, but most have largely fallen silent while Labor has incorporated parts of the Howard government policy into Labor's platform. Labor said Coalition policy was too expensive, but Labor's budget has blown out by $3 billion.

A political backflip is not necessarily a bad thing. It can be the right thing to do. For example, encouraging the US to put marines into Darwin or selling uranium to India. Paul Keating was good at backflips. Bob Menzies was not against pinching a Labor policy if it was a good one. One of the tricks to a well executed backflip is to declare that you are performing a difficult manoeuvre with élan and confidence. There is no point hiding from a backflip.

With the Nauru backflip, Julia would have been better to do it herself and try to turn the politics into a plus. Instead, she thought it was best done when she was on holiday; she might run, but PMs can't hide. She also made a mistake in trying to get Tony Abbott to give her some political coverage. He would not cross the street to help Labor and why should he? In a democracy, the Opposition is entitled to stick to the policy that their supporters voted for in the last election.

The other trick about a good backflip is to execute the flip as if you mean it. This one looks a bit hesitant because Gillard says she is considering Nauru to persuade the Coalition to support the Malaysia project. In effect she says Nauru will not work. So why do it at all?

She is going to a lot of trouble to remove 800 boat people from Australia. We will then take 4,000 refugees from Malaysia.

There is no other plan. There were 892 boat arrivals in November and more than 1,000 this month. The people smugglers could easily send 800 by early 2012. What then? No-one in the Government can say what happens to boat arrival 801.

I speculate that in the pre-Christmas discussions, Scott Morrison asked Minister Bowen to go back to the Malaysians on this point. Obviously if Australia takes five people for every one that we return to Malaysia then the arrangement has limited benefits. Why does Labor want the swap? If the Coalition agree to Malaysia and if Nauru is just a token operation and the boats keep coming, Labor will say that Nauru is a failure. This is already Labor's stated expectation. Maybe they just want to prove it; that was Minister Bowen's reason, as reported by the media, for putting up Nauru to the Cabinet when the High Court knocked out the Malaysia deal. Maybe Labor's hope is that then the Coalition will be compromised in its ability to criticise Government policy on temporary protection visas (TPVs), their policy on turning back boats, overcrowding in detention centres and the myriad of other problems caused by Labor's wrong policy and incompetence.

I remember Bob Hawke as PM tried pulling the usual "sharing the problem with the Opposition" on John Howard. He did not fall for it.

Tony Abbott is far too wily for Ms Gillard.

It is standard practice for the public to denounce both sides as equally useless and "too political", but this attitude should not apply on the asylum seeker issue.

The Coalition cannot be accused of playing politics when it has had a consistent policy on boat people for about 10 years. The Opposition should not be under attack simply because it is not prepared to change its policy. No-one can fairly say that Tony Abbott has been negative on the issue of boat arrivals. He has opposed the Government on its policy, he has enunciated his alternate policy and has been totally vindicated by events.

Labor gave up any pretence of taking the moral high ground on this issue so they should stop talking about how the Opposition needs to demonstrate good faith. Labor's use of the term "good faith" in policies on both workplace relations and boat people is devaluing the normal meaning of "good faith".

If the Government is fair dinkum in wanting offshore processing, they should immediately reopen Nauru, reintroduce temporary protection visas, restart talks on Manus Island, and renegotiate a permanent arrangement with Malaysia without the 5:1 swap limitations, but with fair protections for refugees.

Instead of talking about "good faith", Labor should perhaps show some commitment to fix the problems for which they are responsible, and then they might finally act in "good faith".

Tuesday, 20 December 2011

Forget the predictions for 2012, focus on good decisions

Sitting in a committee room in the House of Lords, the US economist Art Laffer was once asked how long would it take before the effects of a new flat tax could be assessed.

His answer was a question; if you drop a $US100 note on the Wall Street footpath, how long do you think it will take before someone picks it up? Picking up the dollars is a consequence of the dropping of the note.

Many people will make predictions for 2012 although often, like picking up Art's $100 note, the predictions are really the consequences of decisions already taken.

Take the issue of asylum seekers as an example.

When Julia Gillard's Malaysia deal failed, she predicted that boat arrivals would increase but in reality the increase in boats was a consequence of not implementing her policy. The tragedy of the last few days was shocking but, by her prediction, it was not unexpected by the Government. In fact, such events are the reason for the Labor Party adopting offshore processing as their policy even though they say that their policy can't be implemented when of course it could be implemented in Nauru. A government that was fair dinkum in wanting to pursue an offshore policy would at least give Nauru a trial which was one reason why the Immigration Minister unsuccessfully put that proposal to Cabinet.

You don't need a crystal ball to know that more boats will arrive in 2012 and public dissatisfaction with Labor's policy will grow. The Greens and the refugee lobby will next agitate to legalise the smuggling trade to stop boats sinking. In 2012, the boat arrival numbers are going to grow; that is not a prediction, it is a consequence of decisions already made.

Another reality for the Government is that Europe's problems will worsen in 2012. This is not a prediction; it is the consequence of longstanding economic policy failures of European democracies. But it will have ever greater impact in Australia as 2012 unfolds. And the issue for the Government will be how to react. We don't know how hard the tsunami could hit us but, given that Federal authorities are seeking detailed scenarios from the banks on the possible impacts of 12 per cent unemployment and a 30 per cent drop in house prices, it is reasonable to assume that we could be in for a rocky ride.

At this stage, the Government has shown no inkling of what to do and no sense of when. Neither side of politics has yet called for a contingency plan. The Government thinks it did enough with its dodgy numbers in the mid-year forecasts but otherwise Australia is awash with economic complacency and a bit of bank bashing. Of course, for the Government, contingency planning would immediately put the microscope on three big items that they can't touch, namely, the NBN, industrial relations reform and the carbon tax. For the Coalition, they would have to add industrial relations to give their plan credibility but it's off the agenda for now.

If it is good enough for the banks to consider what to do in the case of a 12 per cent unemployment rate, surely it is good enough for the Government to encourage some public discussion on what to do in the event of a major economic downturn.

For Julia Gillard, if she wants to lift her poll ratings into the 40s, which Paul Keating says is necessary for her to have any chance of winning the next election, then she needs to focus on Australia's economic circumstances. She needs to clear the decks and focus on the hip-pocket nerve. She should defer the gay marriage debate and cancel her promise to the Greens for a referendum to change the Australian Constitution. Ms Gillard will do neither and unless she can convince the public that she can manage the job of prime minister, I predict she will not last as PM.

The September 2010 agreement between the Greens Party and the Labor Party was to:

Hold referenda during the 43rd Parliament or at the next election on Indigenous Constitutional recognition and recognition of local government in the Constitution.

Julia Gillard does not have the authority or political standing to push through some potentially significant changes to our Constitution. The apparatchiks who run her politics will tell her that they don't want the referendum to be held at the same time as the next election because it will reinforce the public view that she is incapable of focusing on what is most important to the voters, namely the economy.

The alternative is to hold the two referenda in 2012. This is a complication because the vast majority of voters are not au fait with legal matters and they have a sensible level of cynicism about constitutional changes. They are often swayed by the simple question: if the bicycle is not broken, why fix it?

In addition, even if the Coalition were silly enough to support the Indigenous referendum, which is highly unlikely, there are already many voices from the Aboriginal community who oppose change. Northern Territory Indigenous MP Alison Anderson articulated a common view about constitutional recognition in these words:

It's a diversion from the real issues of education, health and housing. This is just something for Julia Gillard to go down in history with.

And Warren Mundine, former ALP president and Indigenous leader said of the latest proposals:

I feel strongly about this – it's a hundred steps too far… I am opposing it and will campaign to oppose it.

There is zero chance this proposal will ever be accepted and if presented will only annoy the public at the waste of holding the referenda.

The local government proposal is also doomed from the start. It has been put twice before by Labor governments and resoundingly thrashed. Local government is a creature of the state parliaments and a mini bill of rights for councils is either just tokenism or a grab for more federal power. In 1988 the vote was one of the largest 'no' votes ever recorded in the history of Australian referenda.

Like many things in politics in 2012, these outcomes are not so much predictions than the obvious consequence of factors and widely held opinions already well known based on Australia's long experience with referenda and economic management.

A lot of bad decisions have been taken in 2011 and earlier, including the carbon tax, asylum seeker policy, fiscal policy, industrial relations and others. And they all have consequences, so forget the predictions, forget about Nostradamus and let's hope that in 2012 more attention will be paid on making good decisions in the national interest.

Merry Christmas and Best Wishes for 2012.

Tuesday, 13 December 2011

Why Europe might go broke and how it will hurt us


Peter Reith
I never had much time for David Cameron. When he first became opposition leader in the UK, he was soon pandering to the greens and he tried to undercut a Tory tax policy group of which I was a member.
I was also unimpressed when one of his closest colleagues told me how Cameron would not sit next to Margaret Thatcher at a Tory function because he did not want to be seen to be associated with Thatcherism.
I may have to change my mind. By rejecting the latest European rescue plan it seems that Cameron has finally had to accept the Thatcher view about Europe.
Taxation without representation is anathema to democrats and transaction taxes are not the answer to Europe's problems. Cameron was right to say no.
The reality is that politics and economics in Europe leave a lot to be desired. It is not nearly as supportive of free enterprise as Australia. Its economic performance has been mediocre for decades. And European attitudes towards basic democratic values are different to ours.
I worked for six years in London in the European Bank for Reconstruction and Development (EBRD), which is owned by about 60 governments, but run by Europeans. The best thing I did whilst I was at the bank was to persuade Wayne Swan that Australia should sell its shares and leave the bank. Sadly, although the decision was publicly announced, Swan later changed his mind and Australia remains a member of the EBRD.
I believe that my reflections do not reflect a partisan Liberal or Labor view. I found that when I spoke to Australians from different party political interests, but with similar experience at the EBRD or other international banks, our views were remarkably similar.
Quite often at an EBRD board meeting, I would say "if this were a meeting of the Australian Cabinet, my boss, the PM, would say 'I doubt that this proposal would meet the barbecue test'". A lot of things that happened at the EBRD fell into that category. My UK and US colleagues were of a similar mind.
The EBRD was established to promote democracy and free markets. Its mandate was to facilitate the establishment of private banks and other private sector businesses in the countries that were liberated by the fall of the Berlin Wall. The idea was that once the banks were operational then the EBRD would withdraw because otherwise, instead of helping the new private banks, it would be competing against them.
By the time I left the EBRD, the bank was clearly in breach of its mandate to not compete with the private sector and it was operating in countries like Moldova that had no intention of becoming democratic. But no-one was prepared to force the bank to abide by its own constitution. The truth is that over time, the EBRD was captured by its management and the board and shareholders were bystanders. The incentives for directors were to take their tax-free income and enjoy themselves. When I caused a fuss by demanding better governance rules for directors, a European colleague took me out to lunch and said "Peter, we have a good life here in London. You should spend more time improving your golf". He was not joking.
The directors of the EBRD were nearly all public servants from treasury departments. Most knew little about banking. They were experts at self preservation. Most had sauntered from one international bank to another.
The trick was to start out in the developments banks unit of the home treasury. Then get a job as alternate director at, say, the Nordic Investment Bank, and follow up with the Council of Europe Development Bank in Paris and brush up on your French. Next, get a promotion to the EBRD in London, and finally, cap off the career as one of the nine vice presidents at the European Investment Bank (EIB). The EIB has a nice pension deal. Meanwhile the departmental pension was still being topped up even though directors were getting a double dip at the EBRD.
When I first arrived, the bank was opposed to transparent reporting of perks. The Belgian executive director even said on one occasion, that if the bank reported his salary in the annual report, as some of us proposed, he would make sure the report was never released in Belgium. The same attitudes to accountability are evident in Brussels and other European institutions like the EIB. Democratic supervision and accountability is so weak it is worthless.
I note that the new president of the European Central Bank is Mario Draghi who wasportrayed by Mike Carey in last week's Drum as a Goldman Sachs person because he had a job there for three years. Personally I do not see conspiracy in his history. I see unaccountable bureaucracy.
Draghi is one of a large number of bureaucrats who have spent their life on the merry go round of the European and international banks circuit. Mr Draghi has held board level positions or higher at the World Bank, the Bank of Italy, the Bank for International Settlements, the International Bank for Reconstruction and Development and the Asian Development Bank. They are all government quangos.
These institutions are, in essence, autonomous self perpetuating organisms unresponsive and unaccountable to anyone except themselves.
The British euro sceptics and Margaret Thatcher were right all along. There is a democratic deficit at the centre of Europe and, as we have seen already in this latest turmoil, the Europeans have no compunction in turfing out an elected government and installing a technocratic alternative.
So the bureaucrats are largely running the policy and none of them are too interested in free enterprise. Europe is weighed down with deficits. And no-one has been prepared to fight for the policies that might lift productivity and provide the revenue to pay the interest on their debts.
Europe has failed to face the reality of its economic situation for decades, so it is not obvious that they will do so anytime soon.
In organisations with little sense of responsibility or accountability, issues are normally avoided. When decisions are forced onto the board table, then those who disagree do not hesitate to obstruct the outcome.
This happened at the EBRD when the US, Australia, Canada and others, albeit in a minority on the board, pressured the EBRD to limit its jurisdiction. Consequently, there was a public declaration that the EBRD would concentrate on those countries with the greatest need. Within weeks, the eurocrats were undermining the decision. They were relentless and successful in overturning the decision without reference to the shareholders. They would not accept a decision that threatened their cosy existence. From my experience, even if decisions are made by the Europeans in response to their financial crisis, which I doubt, then there is no reason to be confident that the decisions will then be implemented.
Capitalism and free enterprise have their problems and so does democracy. But despite many imperfections, these concepts have lifted billions of people out of poverty and given them a taste of freedom that very few have enjoyed in the history of the world. The model depends on public participation from both consumers and citizens. It also depends on systems that provide incentives for good behaviour. The system best known to achieve that is a free market.
The incentives for the eurocratic elites in Europe are not sufficiently aligned to the public interest. This is a basic fault at the ERBD, in Brussels, in the EIB and elsewhere. The idea of a united Europe is still a good one and the free movement of people and capital within competitive markets is worth pursuing. But, based on my experience at an international bank run by Europeans, they are going to have to reengineer their political and democratic processes a lot more than they realise.
Sadly, in the meantime, Europe's problems of civil unrest and poor economic performance are going to impose economic hardship on a lot of innocent bystanders, including Australia.

Tuesday, 6 December 2011

IR panels re-established: unspoken and unquantifiable

I never kept a diary as a politician but I did squirrel away a few things that caught my eye. The quote below definitely grabbed my attention.

The background was that in 1999, I sought legal advice on an idea of mine to impose conditions on universities so that, if they did not meet federal industrial relations (IR) standards, then the Howard Government would cut their funding.

The advice came from a well respected Queen's Counsel and his junior. The opinion canvassed what possible legal action might be taken to thwart the Commonwealth in the event my policy concept was actioned.

The barristers said:

It may be expected that proceedings would be taken in the Federal Court. A number of the judges, formerly sitting as members of the Industrial Relations Commission, who are regularly assigned to workplace relations matters have backgrounds which may be fairly said to be on the non-employer side of industrial relations work. We make no suggestion of any real or apprehended bias. Nonetheless, and while the scope and operation of section 170NC remains so unsettled, our expectations of the likely outcomes of disputes on these issues must be informed by various unspoken and unquantifiable considerations relating to the forum of determination. We expect that the Commonwealth might be less at risk on appeal than in trial proceedings, particularly trial proceedings in Melbourne. Nevertheless, however, these considerations make us more anxious, and less settled, in our conclusions.

This advice was not the first time I had cause to look more closely at the judiciary. In 1996, the IR policy (drafted by me) proposed the abolition of the Industrial Relations Court (IRCA). To my surprise, during the 1996 election, the Chief Judge of the IRCA attacked the policy on radio, as described by Dr John Forbes in an article for the Samuel Griffiths Society.

There was a more spectacular Wilcox appearance in February 1996 at the height of a federal election campaign. In what the national daily termed an "extraordinary intervention", the learned gentleman gave "a series of interviews" in which he roundly criticised the Coalition's plans to amend "unfair dismissal" laws. His Honour's contribution to the political hurly-burly provoked Peter Reith, MP to express his "absolute amaze[ment] that a Federal Court judge ... should deem it appropriate to make a political entrance into the ... campaign on behalf of the Labor Party".

In April, 1998 Wilcox presided at an appeal to the full Federal Court in the Patrick Stevedores - MUA litigation. It was an opportunity to rebuke journalists for mentioning the career of the trial judge (North J) as an advocate for trade union parties.

The reason for the abolition of the IRCA was the Coalition's view that IR should not be treated as a standalone, separate specialist jurisdiction. IR should be managed by judges with a broad perspective and all we asked was that the legislation should be interpreted in accord with normal legal principles.

After the IRCA was abolished, a de facto panel emerged in the Federal Court. Unusual in the legal profession, there was some publicity about this issue following a case involving BHP and AWAs. The facts of the case involved employees in WA and yet the union sought an injunction, not in WA, but in Victoria where a judge of the Federal Court issued an injunction.

The H R Nicholls Society in 2000 had voiced its similar concerns about the Federal Court as follows;

The Federal Court has about 50 judges: nearly three-quarters of whom were appointed by the last Federal Labor Government.Moreover, ten of the judges (all appointed by the last Federal Labor Government) were part of the previous Industrial Relations Court.Many of these ten judges were also union barristers prior to appointment.Despite the Industrial Relations Court having been effectively abolished, these ten judges have largely operated a 'de facto IR Court' through the administrative mechanism of the Federal Court "industrial" docket system.Admittedly, this has changed somewhat in the last few months, with commercial judges, such as Goldberg, Finklestein, Merkel and Kenny sitting on industrial cases.This change is so recent that the Federal Court internet page still reflects the system which has applied in Victoria since the disbanding of the Industrial Relations Court of Australia---namely, that Justices Ryan (Panel Co-ordinator), Marshall and North comprise the industrial docket. It is premature to ascertain whether these recent changes will disband the 'unofficial IR court'.

As expected by the H R Nicholls article, in late 2000 or early 2001 this unofficial IR Court was disbanded. Thus, for example, Justice North was free to deal with the Tampa dispute in mid-2001, and other (mainly commercial) judges began to deal with industrial matters from then on.

However, sometime since 2001, the Federal Court re-established IR panels in Melbourne and Sydney.

I do not know when that occurred exactly (perhaps as recently as the last few years), but I would like to know when and how the panels were resurrected and what views were expressed at the time on the issue?

The situation now is that there are various panels in different states according to the Federal Court webpage which states as at November 1, 2011;

The NSW, Victorian and Queensland registries have established panels of Judges to hear and determine particular types of matters. Details of these panels are set out below. A proceeding involving a panel matter will be allocated to a Judge who is a member of the relevant panel.

Thus, only panel members handle IR matters. So, in a sense, the panel operates like a separate Court within a Court. The concept of a separate Court for IR was expressly overridden by the Parliament through its act of abolishing the IRCA. Last week, I spoke to a Deputy Registrar of the Principle Registry at the Federal Court who not only confirmed the existing two panels and their operation but also advised me that the existing panel system is about to be broadened to a national panel for IR cases.

It would be in the public interest to have a better understanding on how the IR jurisdiction is being managed.

In my view, it is not unreasonable to hope that the Federal Court might give an explanation of the reasons for this change to the way the jurisdiction is managed. It would be interesting if the Court could also explain why the new panel is not contrary to the expression of opinion by the Parliament in 1996.

I understand that the Judges who have managed IR matters outside Melbourne and Sydney have provided a satisfactory service. So, if they are now likely to be precluded from the new panel, it would be interesting to know why.

Given that there have only been two panels to date, it is reasonable to infer that the reason for the formation of a national panel has nothing to do with the workload of the Federal Court. But I am not aware in any detail, of the workloads generated in the Federal Court by IR. It would be interesting to compare with other jurisdictions like admiralty, intellectual property, corporations law, competition law and native title.

Given the latest rise in the number of industrial disputes in Australia, is the Court expecting an increase in IR matters coming to the Court? It is also relevant to ask if the panel will be closed to judges other than those already appointed and if there are to be new panellists who will appoint the new panel members? If prior experience of industrial matters is a pre-requisite to membership of the panel, why is that so? Is IR that difficult?

Many, if not most, courts work on the basis that judges handle a variety of work; it gives them a broad view of the principles that apply to judicial work. It encourages a broad perspective and, whilst some specialisation can be useful, a balance of judicial work is sensible. It probably suits the judges to have some variety as well.

Of course, there are some jurisdictions that have stand alone arrangements like the Family Court. And some Courts have a separate panel for commercial matters, although these arrangements seem to reflect the need to manage large numbers of cases.

The good administration of the Courts is primarily the responsibility of the judiciary, but that is not to say that the public does not have an interest in developments in administration. Certainly, in the case of IR, the Parliament has shown an interest and that interest is best accommodated by clear statements on changes or proposed changes, particularly on matters that have already been the subject of parliamentary and public discussion.