Tuesday, 31 July 2012

Last week, on the same day, there were two news stories touching on a key economic issue.

One was about Qantas teaming with Emirates, an airline owned by the UAE Government. The story pushed up Qantas shares by nearly 10 per cent.

You don't have to be an economist to understand that working collaboratively with a company, albeit a state-owned enterprise, can be good news for jobs and economic performance.

The other story was triggered by comments from Tony Abbott in China that it would be rarely in Australia's interest "to allow a foreign government ... to control an Australian business".

The comments were arguably a little ambiguous and shadow treasurer Joe Hockey sensibly clarified the situation when he said (in the AFR, July 27, 2012):

I do not see any need for changes to the national interest test nor do I see any need for dramatic changes to foreign investment rules.

He then added:

We need foreign investment, we welcome foreign investment. If we are going to get growth in our economy, foreign investment is going to help us, not hinder us.

Unfortunately, the matter is not at an end.

The problem is that, although he is a good man in many ways, Barnaby Joyce has a bias towards protectionism and he does not like foreign investment.

These positions are not viable for the Australian economy, but no one has told Joyce that his positioning is not acceptable. Instead, he has been running a populist campaign on his twin hobby horses.

Abbott likes Joyce but wants to keep in with Nationals leader Warren Truss. Truss gives Abbott little trouble, but Truss is threatened by Joyce's popularity and has been looking for a way to keep Joyce at bay by conceding him some policy ground.

It was obvious to me last week that Truss was speaking in the knowledge that he had a wink and nod from Abbott. My experience of Warren Truss is that he would not normally go public expressing a view unless he thought it was going to be adopted.

It looked to me that his remarks were emboldened by his understanding of "progress" of an internal paper not yet released. Some in the Coalition want a different approach to appointments to the FIRB, a new national interest test and in some cases a requirement to list on the ASX.

Abbott said on the weekend (AFR, p3, July 30, 2012) that he will soon release a paper, "that will include some good improvements". He thinks he can have his cake and eat it too; he says, "We have a good foreign investment review regime".

So why change the system? The current system is basically a Treasury operation. The government sets the rules and oversees implementation. It should not be changed.

Abbott wants the FIRB to reflect "the range of businesses in this country". Why? FIRB should represent the government of the day, not rent seekers or people who have no idea about economic management.

Tuesday, 24 July 2012

At last Labor takes fight to the Greens

When Bob Brown left the Parliament only a few months ago, many predicted the demise of the Greens.

Although the counting in the Melbourne by-election is not finished, it looks like that prediction is coming to fruition. But because the Greens have a swag of Senate seats, it will take time before their influence is reduced.

If ever the Greens were going to win against Labor, then this was their best chance. Despite the proliferation of minor parties, it was a straight contest: Labor versus the Greens.

It was a wise move by Ted Baillieu to let them fight it out without the distraction of a Coalition candidate. It is the second time he has made the right call on dealing with the Greens.

The point about the Greens is that they are further to the Left than Labor. They have a wide policy agenda. They probably spend just as much time on gay marriage and asylum seekers as they do on the environment.

And on workplace relations, they have been more closely associated with militant unions than unions more committed to workers on low pay.

They get very little scrutiny. And they are zealots, as exemplified by the fact that they voted against the first attempt to introduce climate change policy. If that policy had been enacted, then it may well have stayed on the statute books, but instead, as a result of the controversy that followed, including the axing of PM Rudd, the carbon tax is now virtually certain to be repealed.

That does not worry me, but it demonstrates that zealots can play political havoc with the major parties when people like PM Gillard give them too much say and when they are not prepared to accept that in a democracy, there are times when it is sensible to acknowledge other points of view, even if you think they are wrong.

Melbourne may be more Left than some seats, but the result showed they still support sensible policies like funding for local Catholic schools and they still think that a little pragmatism to stop asylum boats is better than doing nothing while hundreds drown on the perilous trip to Australia.

Daniel Andrews, the Victorian Labor leader, is claiming that Labor's win in Melbourne has sent a message to Victorian Premier Ted Baillieu. He could not be more wrong.

The by-election result was forged by Labor's NSW Right aggressively attacking the Greens. Thank heavens the state secretary in NSW, Sam Dastyari, and Paul Howes and others finally did something to protect the mainstream of the Labor Party vote.

No-one can say for sure it made the difference, but Labor internal polling suggests that it was not without influence in a close contest.

In a way, the win was against the tempo of the play. Under Gillard, policy has been run by the Greens on issues like climate change and the mining tax.

The relevance of the outcome for federal Labor is real enough but nuanced. The decision to intervene by NSW demonstrates that there is a vacuum at the centre of Australian politics. The Right know that if they don't challenge the Left, then they are finished as a political party.

Labor has had these internal fights before. Their problem now is that PM Gillard does not understand that if she won't do the job, then the NSW Right will have to do it for her. So when Dastyari took up the cudgels, he reinforced Gillard's weakness.

No wonder the unions have certain doubts about Gillard, even though on workplace relations policy, she gives them everything they want, even at the expense of the broader economy.

Only when Labor was defeated by the Greens on asylum seeker policy did they start to realise how bad things have become as a result of Gillard's decision to team up with the Greens after the 2010 election.

Of course, it was an easy decision for Gillard to deal with the Greens, because the real Gillard has always basically been a leftie. The Victorian Parliamentary party is generally to the Left, although they usually appoint more moderate types like Steve Bracks as the human face of their team.

The truth is that Andrews and Gillard were both too weak to stand up to the Greens. They were both in the same camp as the Left. They were on side with John Faulkner and Doug Cameron, the leader of the Left in the Federal Labor caucus. Gillard and Andrews should have backed the decision of the NSW Right to take on the Greens.

So the lesson for Gillard is that whatever her real views are on politics, as PM her mainstream support is still the centre Right, and if she keeps giving way to the Left, whether within the caucus or with the Greens, then she will have to be removed (regardless of the polls).

Because if the Labor Party is too far to the Left, then it will never win enough votes to form government.

One Nation comparisons
One senior Labor member said that the Greens were the Coalition's One Nation. Of course, such comparisons have their limitations, but it is true that, like the Greens today, One Nation aimed to displace a major political bloc, especially the National Party.

The "Joh for Canberra" campaign also had delusions of supplanting the federal Coalition and, like the Greens today who are constantly undermining PM Gillard, it fed off dissatisfaction with the Federal Coalition at the time.

Monday, 9 July 2012

With allies like that, who needs enemies?

The whiff of discontent between the Federal Labor Government and their alliance partners, the Greens, spells trouble for both parties.

In the middle of the Peacock/Howard years, Bob Hawke said if you can't run yourselves, you can't run the country. Discord within the ranks makes the business of government very difficult because the main players end up spending most of their time extinguishing political fires lit by their colleagues.

What makes this situation different is that the Greens are in the Gillard tent, but they will not hesitate to walk outside and turn the blow torch on their allies. They have their cake and eat it too; all care, but no responsibility.

In contrast, within the coalition of the National Party and the Liberal Party there is, most of the time, a common political objective to win seats and then government. For the Greens, they don't want to be in government with Labor; they want to supplant the Labor Party.

Of course, they are entitled to try but when you look at the record of the motley crew sitting behind Senator Milne and if you look at their policies, they are so far removed from mainstream Australia , the prospects of them bumping off Labor is negligible.

The Greens stopped the first legislation on climate change and, as a result, set off a chain of events that has given Labor grief. It took away the tax cuts for business, which were a quid pro quo on the mining tax, and it scuttled the Malaysia solution. Prime Minister Gillard should be asking herself with allies like that, who needs enemies?

But the disasters are not all behind Labor. Labor has done deals with the Greens for referendums on local government and Indigenous Australians. Back in 1988, the referendum on local government was put to the voters and it was thrashed. Nothing has changed since in terms of constitutional matters so another referendum would be a rerun. This proposal is just tokenism and fiddles with a constitution that has been guarded by the Australian public who need very good reason to make any change.

Even if the Coalition supported the proposal, I would expect Coalition State governments to oppose it. This would be enough to seal its fate. Even without opposition from the States, a lot of people think councillors are too full of themselves and it could be easily defeated anyway.

The second referendum is on recognition of Indigenous Australians in the Constitution. The Australian Constitution was drawn as an agreement between the States and the Commonwealth to decide who would be responsible for the different activities of each level of government. Our constitution is not a set of cherrios to people who have made a  contribution to our society. It is not a Bill of Rights. That has been discussed since the constitution was first drafted. Australia followed the Westminster approach. We could adopt a change, but a mini Bill of Rights was also turned down in 1988.

You can tell that some Labor ministers want to push the issue, but they have nearly left it too late for this year and the Party's faceless men will not want a referendum campaign leading up to next year's election.

The Minister forcing the issue seems to be Jenny Macklin, another one of Labor's many dud ministers.

Both sides of politics will often use a form of shorthand to attack the arguments of their opponents. As long as the party has a clear policy position, there is nothing wrong with reducing an argument down to "sound grab" dimensions.

In the 1988 referendum campaign the Coalition had a simple theme. It was intended to encourage voters to look behind the proposed referendums and see the complexity of the proposals. Our theme was "there is more to this than meets the eye".

It worked well because the 1988 proposals were complex and we had distributed substantial written arguments that demonstrated the 'No' case.

The Labor Party's hymn book for attacking Tony Abbott includes various themes which are repeated around the country ad nauseam. A Labor Minister who cannot think of anything else to say will invariably parrot favourite lines like "Abbott's relentless negativity" or a plea for bipartisanship quickly followed by a claim that Abbott is "seeking to politicise" an issue for base political motives.

When last week, I heard Jenny Macklin attack Abbott over the idea of a referendum to include recognition of Indigenous Australians and when she reached down for Labor's hymn book, it reminded me of very similar remarks made by Labor in the 1988 campaign.

It is standard practice for Labor to claim that anyone, who does not agree with their plans to change the constitution, are negative and political. These are exactly the same sort of comments that were made in 1988, which produced the biggest 'No' votes in the history of referendums. The problem for Macklin is that there are substantial reasons to oppose the foreshadowed referendum.

The problem for the Coalition is that it is not enough to say that any referendum put up by Gillard will be defeated because she is unpopular. The Coalition should oppose the proposal, but they don't want to be seen as 'negative'. So they are left with a half reasonable claim, but one which does not grapple with the substantive issues.

Labor is spending $10m to whip up interest in the proposal. It would not surprise me if the spending is contrary to the spirit of legislation. Labor has form on this; in 1988 the Coalition had to take legal action in the High Court to stop the Labor government from breaching the law. The pity is that instead of splashing money on consultants some of those funds might have gone to a practical project like education.

Tuesday, 3 July 2012

Delusional carbon tax comparisons with GST

It's a fair bet, although less certain than putting money on Black Caviar, that last weekend will be a turning point in Australia's political history, but not as Labor hopes.

The introduction of the carbon tax will be Labor's self-imposed coup de grace. Voters can look forward to a year of election campaigning while the carbon tax erodes our economy and Labor remains paralysed on other key issues like the asylum seeker non-policy. And then there will be an election and Labor will be thrashed.

No wonder the public are sick of politics; we are in our political winter of discontent.

Labor takes solace by comparing the GST with the carbon tax. They only ever quote the comparisons that suit their argument, and that is fair enough as a debating technique, but they are deluding themselves.

For example, Labor now claims it will stick to the carbon tax regardless of the outcome of the next election, but the comparison with the GST is that the Coalition abandoned the GST after it lost the 1993 election.

In the three years from 1990 to 1993, I was the chief GST salesman for the Coalition in my role as shadow treasurer. It was a hard slog, but as a general rule if you had 20 minutes to explain the proposal, then a majority of your audience would accept the GST as a good idea. Our internal polling showed that many thought the GST would be bad for them personally but good for the country.

The trouble was there was never enough time to sell the GST, even with the entire Coalition working to sell it. The GST was widely used in Europe and elsewhere, and it had very strong support from academics and economists. Business liked the GST because it reduced their costs even though they had to collect the tax on behalf of the government.

Despite all the plusses of the GST, in the lead up to the 1993 election (which we lost), we were forced to significantly change the proposal because Paul Keating had effectively eroded our support.

Five years later, despite giving the public a vote on the introduction of the tax in the 1998 election campaign, the Howard government still lost seats. To put it another way, on the two occasions the GST was put to the people at an election, it cost us votes.

Labor can't afford to lose one seat. The carbon tax adds cost to business and reduces Australia's competitiveness; it's an own goal for our economy. The tax in Australia is unlike any equivalent; Australia has become the leading zealous international advocate, while most world leaders will not agree on international action and now can't even be bothered to go to the latest international talkfest on climate change.

The tax is so controversial government ministers either can't explain (as demonstrated by Anthony Albanese on the Bolt Report last Sunday) or avoid trying to explain the rationale for the tax because it is a lost cause. And of course Gillard solemnly promised she would not introduce a carbon tax and then welshed on her commitment.

Labor could have responded to rising public angst by slashing the price of $23 per tonne, but they did not have the political savvy to realise that some acknowledgment of public concern might have smoothed the way for its introduction. Instead they have turned their back on public opinion, and the latest polling shows that opposition to the tax has risen to two to one against. A better comparison for the carbon tax, rather than the GST, might be the poll tax in the UK that finished Margaret Thatcher's political career.

The Gillard Government is terminal, as it has been all through her time as PM; the only conclusion one can come to is that Labor needs to change the leader and, at the same time, change the policy.

Sadly for Labor, the senior cabinet ministers around Gillard seem not to have the authority, the wit or the requisite political savvy to understand that their responsibility is to confront the political reality of Labor's obvious demise.

As an example of the senior people around Gillard, Anthony Albanese does not have the gravitas of a John Button or John Dawkins or Richo; his Australia Day speech, heralded as a vision for Australia, turned out to be taken from a US TV show and confirmed his status as a B-class operator. One of Gillard's many problems is her team, and that is not going to change either.

Unfortunately Australia will have to soldier on regardless. Worse still is that poor decisions are the continuing trade mark of the Gillard Government. The latest example followed the High Court's decision on the funding of the federal chaplaincy program. This decision ruled that the government had no authority for the program introduced by the Howard government (I had retired by then so please don't blame me for that one).

It is a serious matter when a government acts outside its authority. It is even worse if the Parliament, in response, gives up its power to control expenditure by giving the executive virtually unlimited powers to get around High Court decisions. The Coalition suggested a sunset clause but Labor and the Greens voted with the Government.

The Independents in the House are so bereft of understanding of the most basic principles of our democracy that one of them actually said the Government's rushed legislation was somehow good for the Parliament.

Whether you are a Labor voter or a Green or anything else, please don't take my word for this but read what Professor Anne Twomey has said on this issue. Anne is well respected, impartial, and she knows more about how governments work than most people.