Sunday, 8 December 2013

Gas Report link

The Gas Report

http://www.energyandresources.vic.gov.au/about-us/publications/Gas-Market-Taskforce-report

Thursday, 5 December 2013

Speech to CEDA on Victorian Gas Task Force

Notes for a Speech to CEDA

The Gas Task Force was an initiative of then Premier Ted Baillieu at the end of 2012. The trigger for the establishment of the Gas Task Force was a meeting, with the Premier, of business leaders who raised their concerns of the expected impact on Victoria of gas exports from Gladstone and more general issues about the eastern gas market arrangements and possible reforms.
Clearly the impact on the manufacturing sector and the importance of continuing supply and price were key issues.
The Task Force recommended;
1. The Government support the industry – the one thing they will not do – even though Queensland SA and WA are strong supporters of the gas industry
2. Lift the bans on fracking and exploration for coal seam gas
3. Adopt best practice – National Harmonisation Regulatory Framework, ban Btex
4. Gas Commissioner; engage with the public on all issues
5. Gas Commissioner; provide information and liaise with local communities; chair the independent water committee; advice on fracking, green etc; put fracking info on the web;
6. Establish royalty rates, holiday period; $ for local communities via royalties for the regions; double existing compensation
7. Nominate the ‘go to’ person in state bureaucracy
8. No reservation
9. Joint marketing to go to ACCC
10. Standing Committee on Energy and Resources; set out our agenda, resource information, transmission capacity, and recommend that market issues should go to the Productivity Commission including capacity trading and use it or lose it provisions

There is nothing complicated about the recommendations but if adopted they would ensure that Victoria had a well-managed industry that could respect the interests of the agricultural sector as well as maintain the environmental assets of our State. The political reaction to the report is that there is no rush. And more science is needed. Labor echoes the government’s position. Both sides of politics are on a unity ticket. Both sides of politics want the issue deferred to after the election. Labor says it will have a 12 month parliamentary committee to consider how to manage an onshore industry. Labor actually wants to string the issue out until 2015 and the Napthine government has a similar timetable.  There are systems for managing the coexistence and they were recently described by John Lenders, State ALP Shadow minister who said
‘I am confident you could follow what they’ve done in Queensland and get a satisfactory outcome. It’s a model you would use to build from in Victoria, no question of that… Queensland has found a way that engages their farming communities more effectively than anywhere else in Australia.’
Both sides talk about consultation. Both sides could have been consulting a year ago or more but neither have done anything. Labor proposed consultation through a parliamentary committee in 2011 and has done nothing since. The Government will have consultation but they can’t start until April. In the meantime the State government has had, for nearly two years, $10 million of Commonwealth funds to do water studies and yet has done nothing. And of course exploration is the best way to gather information on water and yet the government has confirmed its ban on drilling for coal seam gas.
In my opinion, to secure existing jobs and to provide the prospect of more jobs, both Victoria and New South Wales cannot afford to delay.
We should follow the lead of the US where gas production has revitalised the manufacturing sector.
The barriers to onshore production are political.
The lesson to learn from policy failures in NSW is that governments who abandon public debate soon find that scare campaigns and green activists fill the vacuum. And then the public debate is soon mired in false claims, partly because government has not ensured the public is fairly informed and because some activists have other political agendas. Sadly, instead of promoting increased supply of gas by constructively responding to genuine issues, decisions taken in Victoria with its moratoriums and NSW with various policies have encouraged and helped legitimise the green activists. Victorians should be under no illusions. Gas prices are already rising and will have a negative impact on Victoria’s manufacturing base. As prices spike in the lead up to the next state election, I hope neither political parties then say they want to do something about it or that they are sympathetic to those who lose their jobs. That moment has passed.
There are many reasons why manufacturing in Victoria is under pressure. Victoria is not a rust bucket, not yet, but unless governments are prepared to fight for real reform to reduce costs then the prospects for Victoria are fading. Many of the cost burdens on business are imposed by governments, State and Federal.  Victoria could regain its manufacturing base but it will take a lot more commitment by both sides of politics to give Victoria the chance I believe it should have but which seems most unlikely.
The political campaigns against the gas industry are principally all about scare mongering. The fracking debate is full of overblown nonsense. The greens have an ulterior motive. Green activists strongly oppose any fossil fuels even though gas has much lower emissions than brown coal. Gas is not only important to lower emissions, it is also essential to the use of wind power.
I have seen many scare campaigns in my time in politics but this particular campaign has been allowed to run for far too long and will have adverse repercussions for living standards and jobs.  Fracking; Gaslands; Peter Hartley; “There is no proven case of fracturing fluid or hydrocarbons produced by fracturing diffusing from the fractured zone into an aquifer” (address at Deakin University Melbourne 8 October 2013). See also GeoScience Page 18.
Not only are concerns about fracking exaggerated, the reality in Victoria is that the geology in places like Gippsland are different and fracking is not likely to be needed on the scale currently underway in Queensland. Onshore gas has been underway in Queensland for at least 15 years.

There are very few countries in the world that ban fracking because there is no reason to do so. Fracking was invented in the late 1940s; it is a new technology and more and more firms are turning to green fracking which is another innovation from the gas industry.

Victorians with an open mind should visit Roma and nearby and hear how the gas industry has been a boon for regional Queensland including for farmers (see also the Australian Sat 26 October 2013) and despite thousands of fracking operations.

Queensland has worked through the same issues as Victoria and New South Wales. Rather than turning a blind eye to the possibilities of natural gas, the southern States would do well to learn from Queensland’s mistakes and look carefully at the success they are now enjoying.

SOUTH Australian Resources and Energy Minister Tom Koutsantonis has slammed Victoria's decision to extend its ban on the use of hydraulic fracturing (fracking) in the hunt for unconventional sources of oil and gas.
Mr Koutsantonis said the move by the Napthine government to extend the ban until July 2015 -- and restrictions on the coal-seam gas industry in NSW -- was against the national interest.
He said the decisions would "condemn Australians both here and on the east coast to rising energy costs".
The Australian 29 November 2013
Premier  Napthine (7 Nov 2013) says
"There is no hurry, there is certainly no hurry. We will consider these matters carefully," he said.
"As I say the gas has been in the ground onshore for tens of thousands of years. It'll be there for some time yet."
http://www.abc.net.au/news/2013-11-06/victorian-premier-denis-napthine-won27t-be-pressured-into-maki/5073310?section=vic
Many of the landmark buildings in Melbourne were built on the success of new Australians who walked to the gold fields of Ballarat and elsewhere. We were once a resource state. But not now; now, we don’t even want to drill 60 or 100 wells and we are not prepared to use the latest technology for drilling. It’s a sad day when Victorians are denied the opportunity to develop their own State.
For people in Gippsland, the gas industry is the best and probably the only real opportunity for new jobs and investment in your region. Unfortunately, you have very few friends to support you and you and have a minority of people in your midst who would deny you the higher living standards you could enjoy. I think the farmer organisations find the issue too hot to touch. They can’t see or don’t want to see the benefits of integrating the gas industry and the agricultural sector. Instead they want to deny all Victorians the assets that are currently the property of the Victorian community. No government will ever agree to the demands of “lock the gate”. The one advice I would offer to the people of Gippsland is to start running your own campaign.  It can be inside the political parties or from outside. I am sure there is a silent majority that can be harnessed in the interests of your region but you will have to take the initiative.

Tuesday, 3 December 2013

Grain Corp

The Abbott government is now the first Australian government to knock back an application to the Foreign Investment Review Board from the business community of our close ally the United States, writes Peter Reith.

I was shocked when I heard the news last Friday that the Abbott government had blocked the sale of GrainCorp to an American company, Archer Daniels Midland. Although the decision is technically made by the Treasurer, Joe Hockey, the reality is that this decision had Tony Abbott's finger prints all over it. And Tony was not alone; he was being supported by Nationals Barnaby Joyce and Warren Truss.

The Nationals were always going to be unhappy with ADM but I never thought that the Abbot government would be the first Australian government to knock back an application to Foreign Investment Review Board from the business community of our close ally the United States. I certainly hope that the Government properly consulted the US as required by our free trade agreement with them - and in a timely manner.

Of course, the Coalition government does not want to start its term with dissension from their National Party colleagues. But dealing with the Nats is nothing new; for example, in the early days of the Howard government, John Howard had to quell a very unhappy National Party on the question of gun reforms. And although it has not been the subject of much public comment, the new Treasurer Peter Costello had to take a very firm stance in dealing with Howard on the exchange of letters that led to a formal agreement on the independence of the Reserve Bank. In both cases, they were difficult issues but no one would question that the right decision was made.

Unfortunately there were numerous signs that the GrainCorp decision was always about politics; in fact Hockey went close to making that point when he talked about disquiet in the agricultural community over the prospect of the sale.

Needless to say, Joyce did his best to whip up the opposition. It seems that the decision had little to do with the national interest and everything to do with agrarian politics, Queensland style.

It is understood in some quarters that FIRB first intended to agree to the application and that Labor was going to approve the sale. However, the decision was not announced when the election was called and Chris Bowen, Labor’s Treasurer, either ran out of time or, more likely, decided to squib it. If it is true that FIRB was intending to say yes, then it has some explaining to do.

I also opposed the one decision made in the Howard years by Peter Costello to block the sale of Woodside. However on that occasion there were genuine issues to be resolved.

But the big difference this time is that the Costello decision was made by a government that had already established its credentials as an economically rational economic manager that had already introduced big reforms on workplace relations, with the budget back on track to paying down debt. Howard also had a good record of standing up to the Nationals when, in Opposition, he championed the end of the single desk for grain sales.

This is not the case for the Abbott Government. Abbott's government is brand new and many are watching its every move to see what sort of government it will become.

The Abbott supporters want a sign not that the Abbott Government gets every decision right but that they make more good decisions than Labor. I know that is not ambitious but it would still be an improvement on the last 6 years.

Unfortunately, Abbott, even before getting into government, had already made a number of decisions that should never have been made.

He has burdened business with his paid parental leave; he should never have agreed in the first place to Gonski funding; and he has deferred much needed labour market reform. And now comes the ADM decision.

ADM was not such a hard decision. The really hard decisions will be in the budget. I don't have much doubt that Joe Hockey knows what has to be done but all these big decisions have to be endorsed by the PM.

As well as ADM, Hockey also touched upon another decision that the government may have to consider. The government has a policy to reduce red tape. Normally these issues are determined by market forces but Qantas is handicapped by legislation put in place to preserve its national carrier status.

The idea of a national carrier became obsolete with privatisation and greater competition in the aviation industry. But the legislation remains on the books and is hard to repeal thanks to the socialist tendencies of the ALP and the Greens. Remarkably, Labor has even suggested that they could inject taxpayer money into Qantas to keep it afloat. Having spent billions of dollars on establishing a government owned monopolistic broadband utility, Labor now wants government to get back into the business of owning an aeroplane company. Whichever way you look at their propositions, Labor wants the government to subsidise a business with taxpayer funds.

Given the huge amount of taxpayer money already wasted by Labor in the last six years it is hard to understand how they could now propose even more waste.

Hockey says it should be the subject of a national debate. Australia does not need a debate; we need a government that makes it clear it will not be wasting any more taxpayer money with subsidies for business and that its priority, as promised, is to return the budget to surplus ASAP.

Peter Reith was a senior cabinet minister in the Howard government from 1996 to 2001 and then a director of the European Bank for Reconstruction and Development from 2003 to 2009. View his full profile here.

Thursday, 14 November 2013

Rudd to leave Parliament

Kevin Rudd to leave politics.

The hardest achievement in politics is to be elected leader of the opposition and then wrest government from the incumbent. Rudd managed this feat in 2007.
Whatever his alleged faults, many Australians thought that the Labor caucus was wrong to oust  Rudd from the Prime Ministership in his first term. There is no doubt that the caucus panicked; at the time of the Gillard  coup, the two party preferred vote according to News poll showed Labor still ahead.

Politics is a tough game and leaders have to wear the barbs of public opinion more than most.
Rudd made the point yesterday that regardless of how tough you may be by reputation politicians at the top of their profession still feel the barbs. Inevitably, if you take a stand on an issue, you will soon cop the consequences. Twitter has become the platform of choice for more abuse.
Perhaps Rudd might take with him, the suggestion of Paul Keating this week on ABC TV, that the barbs are best counted as badges of honour collected by those who are prepared to stand in the public market place and contribute to the public debate.

Tuesday, 29 October 2013

Gas

The scare campaigns surrounding fracking have been allowed to run for far too long and will have adverse repercussions for living standards and jobs, writes Peter Reith.

Last Friday, I completed my role as chairman of the Victorian Government's task force on the eastern gas market. The report will be printed and handed to the Premier this week. The decision to publish the report is a matter for the Government.

I hope that the Victorian Government will make a positive decision on the future of the gas industry sometime before Christmas; the only barrier is politics. In my opinion, in order to secure existing jobs and to provide the prospect of more jobs, both Victoria and New South Wales cannot afford to delay.

Victorians have a choice; they can close their eyes to the future or they can follow in the steps of great Victorians like John Monash and Henry Bolte and strive for the investments and jobs that could be the destiny of our state.

The lesson to learn from policy failures in NSW is that governments who abandon public debate soon find that scare campaigns and green activists fill the vacuum. And then the public debate is soon mired in myriad false claims, partly because government has not ensured the public is fairly informed and because some activists have other political agendas. Sadly, instead of promoting increased supply of gas by constructively responding to genuine issues, decisions taken in Victoria with its moratoriums and NSW with various policies have encouraged the green activists. This situation will have to change.

Victorians should be under no illusions. Gas prices are already rising and will have a negative impact on Victoria's manufacturing base.

There are many reasons why manufacturing in Victoria is under pressure. Victoria is not a rust bucket, not yet, but unless governments are prepared to fight for real reform to reduce costs then the prospects for Victoria are fading. Many of the cost burdens on business are imposed by governments, state and federal. The willingness of the Victorian Government to tackle energy prices, especially natural gas prices, may well be a litmus test for both sides of politics. Victoria could regain its manufacturing base but it will take a lot more commitment by governments than anything proposed since Fightback in 1993.

The most immediate issue is that in the early years from 2014, the Queensland LNG export plants may not be able to acquire sufficient natural gas from their new gas fields and, in that case, they will source gas from sources otherwise slated for domestic use, thereby pushing up the price.

In anticipation, prices are already rising. There is little reliable information on what the exact impact might be but at worst there could be big price increases for residential users, a shortage of gas for businesses, and even business closures and job losses.

Green activists strongly oppose any fossil fuels even though gas has much lower emissions than brown coal. Gas is not only important to lower emissions, as has happened in the US, it is also essential to the use of wind power, as wind power needs to be supplemented because it is not always available.

The Greens also oppose nuclear power which would reduce emissions and they are running strong scare campaigns against gas exploration and production in Victoria and New South Wales.

I have seen many scare campaigns in my time in politics but this particular campaign has been allowed to run for far too long and will have adverse repercussions for living standards and jobs.

One key part of the scare campaign has centred on hydraulic fracturing, otherwise known as fracking.

The film called Gasland is part of the scare campaign. It shows gas coming out of a water tap in a kitchen with the blunt suggestion that this is the result of fracking (as seen in the trailer). This is a bald lie because 'swamp' gas in water taps in that part of the US has been a known phenomenon since long before fracking.

Another favourite claim surrounds the Condamine River in Queensland. The first report from the department "confirmed that bubbling gas observed in the Condamine River poses no risk to the environment or to human or animal health".

The investigation is continuing but the claims being made are not verified.

I sought advice from senior officials at GeoScience Australia. They told me that concentrations of chemicals in ground water or connections to aquifers were 'unlikely'.

That was probably an understatement. Although fracking in Victoria has been limited, there is no known case of problems.

There have been more than one million fracking operations in the US alone (according to some sources, fracking numbers have now exceeded 2.5 million). According to respected expert Professor Peter Hartley from the University of WA, a former President of the US Association for Energy Economics and an economics professor at Rice University in Houston, "There is no proven case of fracturing fluid or hydrocarbons produced by fracturing diffusing from the fractured zone into an aquifer." (These comments were made during an address at Deakin University in Melbourne on October 8).

Not only are concerns about fracking exaggerated, the reality in Victoria is that the geology in places like Gippsland are different and fracking is not likely to be needed on the scale currently underway in Queensland. Onshore gas has been underway in Queensland for at least 15 years.

There is virtually no country in the world that bans fracking because there is no reason to do so. Fracking was invented in the late 1940s; it is a new technology and more and more firms are turning to green fracking which is another innovation from the gas industry.

Victorians with an open mind should visit Roma and nearby and hear how the gas industry has been a boon for regional Queensland including for farmers (see also The Australian, October 26, 2013) and despite thousands of fracking operations.

Queensland has worked through the same issues as Victoria and New South Wales. Rather than turning a blind eye to the possibilities of natural gas, the southern states would do well to learn from Queensland's mistakes and look carefully at the success they are now enjoying.

Peter Reith was a senior cabinet minister in the Howard government from 1996 to 2001 and then a director of the European Bank for Reconstruction and Development from 2003 to 2009. View his full profile here.

Tuesday, 9 July 2013

Egypt

There is every prospect that the upheavals in Egypt will prompt many to try to escape poverty and persecution and come to Australia, writes Peter Reith.

Bob Carr has finally worked out that many of the boat people who want to come to Australia are economic refugees.

What is amazing is that 12 years after the Tampa a senior member of the Labor has finally recognised the obvious. It demonstrates that Labor's policy on boat people has been delusional or perhaps merely driven by political expediency.

None of this is to deny that there are many groups of people who are persecuted. Of course they are persecuted; particularly women and various ethnic groups, and many are desperate.

And understandably all they want is a free society where individuals are free of persecution, where the parents can get a job and the children an education. These are the most basic hopes of anyone.

Australia has a long-standing humanitarian policy that acknowledges these basic wants. And the Australian people, most of whom are themselves migrants, support that policy as long as the fabric of Australian society is not put off-balance by so many arrivals that we can't manage the intake.

Labor has clearly undermined public confidence in the management of the immigration program and this has undermined public support for immigration more generally. A strong immigration program is a key ingredient to Australia's future and that policy should be free of discrimination and it should not be buttressed by the sort of xenophobia now being exercised by Labor's policy on foreign workers.

There is no antidote to Labor's dismal failure to manage Australia's borders. The reality is Labor is still delusional about various elements of the boat people issue. Only in the last week, Kevin Rudd and the new Immigration Minister Tony Burke (see The Australian, July 6-7, 2013) were trying to rewrite history by claiming that Rudd's mistake as PM was that he acted too slowly to the arrival of boat people from Sri Lanka. Rudd's mistake was to deliberately overturn Howard's policy.

There will always be people who want to come to Australia for economic reasons and most of the time they will be able to claim that they are being persecuted. The issue for Australia will continue to be, how many refugees can we afford to take? It is a decision for Australia to make, as stated by John Howard and derided by Labor.

Bob Carr has been questioning why Iranian refugee numbers have increased strongly in the last 12 months. The next pressure could easily be from Egypt. There is every prospect that the upheavals in Egypt will prompt many to try and escape the poverty and persecution that is everyday evident in Egypt. Right across the Middle East there are many poor countries where poverty is normal, where women are daily abused, where religious freedom is at best a theory, never a reality, and where the only hope of a better life is to escape to a first world country like Australia.

I said on the Drum on August 11, 2011, "I doubt that Egypt will turn to democracy." Two years later, despite the promise of the Arab Spring, the military still runs a police state. The experiment with democracy has come to an end, for now.

The military and its elitist supporters has long convinced itself that Egypt could not allow democratic freedom because this would open the door to well-organised Islamic extremists. They talked about economic reform as a means to deny extremists from gathering support from young disaffected unemployed, but their reforms were so slow and insignificant that there has never been enough economic progress to meet the needs of a growing population. Egypt has an old style socialistic economy full of loss-making enterprises, red tape, and corruption. As a result, Egypt has never established a vocal moderate middle class to act as a counterweight to minority extremism.

An Egyptian government that was secular and liberal would be more likely to respect the basic human rights of women. And a government committed to economic reform would offer the prospect of more jobs and higher living standards.

This is Egypt's best option but it was not the option taken when the Muslim Brotherhood won the election only 12 months ago. Egypt has no experience of a democratic society. It is not surprising that it is easy to whip up a crowd when unemployment is over 50 per cent for young people (as suggested by John Lyons in The Australian, July 6-7, 2013). President Morsi had the chance to change Egypt for the better but he needed to remain popular. He needed to bring the public along with him. It is an essential ingredient of any democracy. As soon as the military saw that Morsi had lost public support, the military knew it had the window of opportunity to reinforce its power. The military have been a lot more politically savvy than ex-president Morsi.

You don't need to be rich to be democratic. Look at India; it is poor but still democratic. Nor does religion have to bar the way forward to a freer society; Turkey and Indonesia have both shown that democratic reform is possible despite many obstacles.

At least the former president Mohammed Morsi did not have the power to wage war on his own people.

The most likely outcome is that the military will revert to all its usual police state activities. Unfortunately, many Islamists will reckon that the attempt at democracy was ill-advised and many will think that violence is their only path back to power.

AP reported over the weekend there were 36 dead and Mr Morsi is still in gaol. We can only hope that the latest events turn out to be a mere part of the transition to democracy, that violence does not escalate, and that Egypt finds its own formula for a more liberal and economically successful society. Of course only time will tell if Egypt becomes another Syria or Libya. I hope not.

Tuesday, 2 July 2013

Rudd

When you factor in the special circumstances of individual electorates, we see that Labor's election campaign under Kevin Rudd is starting from the back foot, writes Peter Reith.

Labor has been good at making heroes of their leaders but let no-one forget: Julia Gillard's term as PM was terminated because Labor decided she was a such a liability that they would be thrashed at the 2013 election if she stayed.

This was exactly the same justification for Gillard knifing Rudd in 2010. It was no great compliment for Gillard back then and not now for Rudd, especially given the reality that so many senior ministers have decided to either leave Parliament altogether or take their bat and ball and refuse to help the Rudd campaign.

When your party is going into an election, the obligation of all MPs is to work for the return of their side. It is a betrayal of Labor's collectivism to refuse to assist. The same goes for the ministers who are going altogether; they have had plenty of time to announce their departure.

Normally MPs leave and give ample time for their successors to work the electorate and prepare for the election. The truth is that many are going now, after Rudd's return, because they can't stand Rudd or else they think he is certain to lose. It is disingenuous for ministers to say that they will sit on the backbench because it is a matter of honour. Never before has there been such an en masse spit the dummy by so many ministers.

Already some in Labor are running the line that Gillard was a good leader. The truth is that Gillard was a disappointment from the start. Labor and its faceless men installed Gillard in the expectation that she would be much better than Rudd in the forthcoming 2010 election. Labor's glum faces on the night of the 2010 election were testimony to that disappointment.

Only a few days before the election Gillard had promised there would be no carbon tax under her government. After the election she announced the carbon tax and decimated her reputation in the eyes of the public. To make matters worse, the tax was a massive impost on the economy and has done little for the environment.

Two outstanding claims with their attendant boasts are uncertain. In respect of Gonski and DisabilityCare, the proposals have been legislated, but DisabilityCare is now in trials and until they have been assessed, the success of the scheme is unknown.

Gonski is based on the proposition that spending more money will improve educational outcomes; that claim is highly questionable. Similarly, to say that more federal control over education will be a positive for education is also highly questionable. In both cases, there are also major questions about the funding. Gonski may never get off the ground and it will be some years before DisabilityCare is assessed by its beneficiaries.

The poll result was what Labor wanted. The first was from the Fairfax ReachTEL poll, published in Saturday's Fairfax newspapers. It showed a big swing to Labor in four of Labor's key seats. It was not surprising that Labor supporters were seen returning to Labor. The Galaxy Poll and the Newspoll both showed swings to Labor and two party preferred outcomes that were neck and neck. Time will tell if these first results are realistic. It will be at least a month or so before we get a better sense of public opinion.

Follow the polls by all means, but if you want to assess election prospects, you need to look at each seat. In all the excitement of Labor's internal fights, there was little comment on the announced departures of Rob Oakeshott and Tony Windsor. Windsor was as strong a Labor supporter as any Labor backbencher. Oakeshott was similar although not as wily as Windsor. But their announcements were important because they seal two seats for the Coalition.

Rudd has got off to a shaky start. In his first press conference he said he wanted better relations with the business community. Fair enough, but the next day, there were pleas by business for Rudd to step in and stop two of the worst aspects of two pieces of legislation that were unceremoniously being pushed through for the unions. One was Labor's xenophobic laws on foreign workers and the other was on union rights of entry. A mere gesture to business could have been easy for a new PM. But instead, he decided now was not the time to upset the unions.

The House of Representatives has 150 seats. Of those seats, 73 are held by the Liberals and Nationals, 72 by Labor and five by independents. Tony Windsor and Rob Oakeshott have returned both of their seats to the Coalition. If you assume Andrew Wilkie (MP for Denison) and Adam Bandt (Green) survive, then they will support Labor. Bob Katter would remain genuinely independent but support the Coalition. The bottom line is that Abbott will start the election with 76 seats and Labor will have 74.

The special circumstances of Craig Thomson suggest another seat to the Coalition in Dobell where the margin is 5.1 per cent. That would make it 77 versus 73.

Then it also pays to look on a state-by-state basis e.g. SA and Tasmania. There is not usually many swing seats in SA. According to the Australian (June 28, 2013), based on work by the South Australian Centre for Economic Studies, "Labor's last mainland state has fallen into recession after South Australia recorded its worst economic slump since the State Bank collapse in the early 1990s." To me, that suggests it will be difficult for Labor to pick up a seat in SA.

Or look at the polls in Tasmania. The polls have been showing fairly heavy losses in at least three seats. If that is right, then the margin will be 80 versus 70. Even on this rudimentary calculation, Rudd needs 10 seats elsewhere. It's not obvious where they might come from. Of course, no-one knows the outcome but it certainly looks like a hard slog for Labor even with the resurrection of Kevin Rudd.

Tuesday, 25 June 2013

Labor and policy

The personality battle within Labor is intertwined with the party's other problems - its failure to reform and right its policy wrongs, writes Peter Reith.

Nothing much has changed since I wrote at The Drum in mid-February:

"Yesterday's Nielsen poll is just another blow to a Labor Party in decline. It reports that the Coalition leads 47 per cent to 30 per cent for Labor. In my view, despite the reality that the numbers will move around in the months ahead, get used to Labor lagging the Coalition."

As of June 21-23, Labor's primary vote is on 29 per cent and the Coalition is on 48 per cent. And nothing much will change in the 12 weeks to the September election.

The only possible change is if Julia Gillard goes, and even then, at best, Labor might save a few seats with Kevin Rudd back in the Lodge.

Labor's continuing infighting is not about to come to an end this week or anytime between now and the next election, nor will it come to an end after the next election. Labor is tearing itself apart in public. The Coalition's campaign ads will not need to be any more than a few video clips of what key Labor MPs and union bullies think of their colleagues.

Ministers are openly trying to cripple their colleagues. Ministers like Gary Gray, Peter Garrett and Stephen Conroy have all said that if Gillard is voted out then they will retire to the backbench. And by that action alone they will be campaigning against a returned leader by their mere existence on the backbench. Whatever they say or do, the public will not believe that they have buried the hatchet.

Maybe Kevin Rudd will challenge this week and lose. In that scenario, in the time up to the election, unless he retires from Parliament in the meantime, every time he gets out of bed, he will be accused of stirring trouble.

The personality issues are intertwined with the big policy issues and the need for party reform.

The personality issues are important. PM Gillard is the most ideological Australian prime minister I have ever seen. She has little time for the sort of consensus that was pivotal in Bob Hawke's success. She has none of the commonsense pragmatism of John Howard. She is a true believer in gender wars and she is closely allied to the thinking of the radical green movement. She is also an opponent of party reform, opposed to breaking the link with the minority union movement, and thoroughly committed to further reregulation of the labour market. She has changed her position on boat people but not until she was confronted with the consequences of loss of life. Now her policy has been swamped by new arrivals.

The most successful political leader from the centre left on the world scene in recent years has been Tony Blair. He was proudly New Labour. Julia Gillard is old Labor. Blair kept Thatcher's deregulated labour market whilst Gillard has busily overturned the Howard reforms. The unions can't ever admit the reality that old Labor is finished. So, as a result, the failure to reform and their many wrong policy decisions have left the ALP stranded in its own mess. Regardless of which side is in power, the following current Labor policies are all unsustainable: the Hansonite policy on 457 visas; labour market reregulation; shipping industry; car industry protection; the transport industry; and the constant promulgation of green-inspired red tape on environmental projects. Labor's approach is undermining Australia's longer term future.

Australia's last recession was in the Hawke/Keating years. Keating boasted "this is a recession that Australia had to have".

The period after the recession saw the usual lift in economic activity as happens after a downturn. The Howard government benefitted from the upswing and did a good job managing the SARS outbreak, the Asian financial crisis, and the end of the internet boom. Despite all the usual economic ups and downs of the economic cycle, 11 years later, there was never a recession under Howard.

Howard left office with not even a prospect of recession, money in the bank, a new tax system and a more efficient labour market. In contrast, under Labor, debt has grown massively, Labor's signature tax reform was the botched mining tax, the unions have been given a free kick through labour market reregulation, and informed commentators are measuring the prospects of a recession in Australia.

Labor's economic mismanagement has made Australia more vulnerable to economic gyrations. The Reserve Bank has already raised doubts about the resources boom and a well-known economist was reported in the AFR last week (June 19) as follows: "Saul Eslake puts the likelihood of a recession at 25 per cent ... "

Against this background, Michelle Grattan put it well last Friday when she wrote at The Conversation:

Labor's paralysis over the prime ministership has become a disgrace. To have this bitter infighting drag on through the final fortnight of parliament is extraordinary self-indulgence. It reflects the stubbornness of Julia Gillard, the bloody-mindedness of Kevin Rudd and his forces, the weakness of the caucus, and the absence of independent senior figures in the parliamentary party who are willing [to] step up to force a resolution.

Tuesday, 18 June 2013

Political Manipulation

From Julia Gillard's speech on the so-called gender wars through to the Federal Government's biased funding for the referendum on local government funding, the public has witnessed another week of political manipulation, writes Peter Reith.

When columnist Peter Hartcher of the SMH describes Julia Gillard as having made a "blatant effort to manipulate voters by dividing them" over gender then mere bloggers should take note. A bit of manipulation is nothing new. And gender is not the only topic for manipulation. But is some manipulation OK and some not?

The latest Fairfax Nielsen poll shows another disastrous fall in Labor's election prospects. Labor's primary vote has dropped to 29 per cent. Last week's manipulative speech about gender and the role of women by PM Gillard was badly received by men but a ringing testament to the popularity of blue ties.

I suspect that Gillard's attempt to divide men and women in the hope she would get many more women's votes (than she would lose men's votes) will go down as Gillard's signature miscalculation. I will certainly continue to wear my blue ties as a reminder of the futility and plain stupidity of the Gillard tactics.

The idea of gender wars is overdone; as my late father, a doctor in Sandringham for many years, used to say, you only have look at the large crowd at the MCG to realise they are all the result of not war, but close relations between the sexes.

The 7 per cent drop in the men's vote for Gillard following her speech strongly suggests that the 'gender war' is not well received. The whole incident will not only be an embarrassment for Gillard but also for Gillard supporters like the daughter of the Governor-General and wife of Minister Bill Shorten, Chloe Bryce, the president of Women for Gillard. But as for the word 'manipulative', the public have already had their say without putting a label on the speech.

But gender wars were not Gillard's only problem; both Gillard and Rudd have been manipulating Gonski for political advantage. At the end of the week, the Gonski claims by Gillard were allegedly being opposed not just by Abbott but also by Rudd. The Weekend Australian (Paul Kelly) reported: "The Rudd camp believes the Gonski school agenda is a saga of policy mismanagement where funds are pledged without prospects of better results. Rudd is worried about the fiscal cost. He can be expected to act decisively against the half completed Gonski agenda."

By Monday, in the same paper Gillard people were confirming Rudd's intentions and Rudd people were denying the first report. This skirmish is par for the course; it might be political suicide and it might be a case of manipulation but there is nothing wrong with it.

And then for good measure, up pops the issue that can't go away even if many are not interested i.e. the referendum. It is turning out to be another one of Gillard's attempts at the manipulation of public debate.

Speaking to the Australian Local Government Association (ALGA) on Sunday night, the Prime Minister said, "I know you are putting together money to fight for a Yes vote. Tonight, I pledge that the Government will also assist with additional resources for your campaign."

On Monday morning also at the AGLA Conference, Minister Anthony Albanese announced that an additional $10m would go to the 'yes' case and $0.5m would be given to the 'no' case. That makes the total 'yes' case $10m from local government, $11.6 m already announced and the $10m announced by Albanese; a total of $31.6 versus $0.5m for the 'no' case. The last time a political party tried to manipulate a result (in 1988), Labor spent taxpayers money on the 'yes' case until the High Court stepped in to stop Labor from acting in breach of the law.

This time round, Labor repealed the law so as to allow the Gillard Government to bias their spending in favour of the 'yes' case. The repeal is for 12 months only - so it was a special deal to 'fix' the local government referendum campaign only. In addition Labor has reduced the brochures that go out to all voters so as to reduce the flow of information on the 'no' case. Of course, the brochure will start with voluminous pages of the 'yes' case before the 'no' case, obviously in the hope that voters will not read the 'no' case. This is a form of manipulation that breaks all the rules and undermines the legitimacy of the ballot outcome.

To me it looks like the Government is using the local government referendum to bolster their real objective and that is to try and stay in government. Their first hope is to swamp the media so as to curtail space for the Coalition's election campaign. But the main plan is to have the 'yes' advertising full of comments about how grateful everybody should be to the Labor government and especially Gillard for their support of local government. This is a naked attempt to buy votes - not for local government but for Labor. And of course the ALGA has fallen for it hook, line and sinker.

All of these above are examples of manipulation but in most cases the public can sort out the nonsense. The one really bad case in recent times was the treatment dished out to Mary Jo Fisher, formerly Senate for South Australia. She has suffered for many years with a mental health problem. And when you are in the fish bowl of Australian politics you are under more scrutiny than most experience in a lifetime. She left Parliament and is now back at work. The latest Weekend Australian told her story; a story of resilience and courage. Sadly, when she was in Parliament, too many people manipulated her circumstances to mount a defence of Craig Thomson. That was one form of manipulation I hope we never see again in the Federal Parliament.

Wednesday, 29 May 2013

Local government referendum

Worse still, by getting his arguments so totally wrong, he has missed the real dangers lurking in the details of the proposal: dangers to local government raised by independent experts.

Saunders starts by saying ''we should think again on the terms of 'recognition' of local government'' and ''this is not a good idea''. Then she says the proposal ''undermines the authority of the states in areas of state responsibility''. Her next point is that the proposal will not only increase Commonwealth power but executive power.

She notes that Canberra funding will come with ''no limits on the conditions that can be attached to a grant''. This is a powerful point for Joyce - he reckons ''local governments know how to do local roads better than state governments and definitely better than federal governments''.

But, as Saunders warns, federal government conditions will mean that federal bureaucrats will be running the show, not councils. Joyce thinks that the federal government should not be interfering with basic council functions but he is urging voters to support more power to federal bureaucrats to do exactly that.

According to Saunders, the proposal is ''not constitutional recognition of local government''.

''Constitutional recognition is about dignity,'' she writes. ''There is nothing dignified about receiving conditional grants under these kinds of arrangements.''

My final point relates to Joyce's spectre that councils may not be able to be funded for ''mobile phone blacks pots, bridges and community infrastructure''.

Joyce says that these are ''probably unconstitutional too'' but there is no question that the Commonwealth can always make grants in areas of Commonwealth responsibility.

So if mobile phones are within the federal government's jurisdiction then Joyce's claim about mobile phones would obviously be scaremongering.

And, of course, the Commonwealth can make grants on any topic as long as it goes through the states. No wonder that the Labor government has not tried to say otherwise.

Twomey canvasses many of the same issues in a longer piece. It is one that is well worth reading.

Twomey says: ''I cannot see why the grants that are currently being given directly to local government cannot be passed on to local government through s 96 grants. It is difficult to argue that the potential unconstitutionality of such grants is the 'problem' that needs to be 'fixed' by a referendum, when there is another, clearly valid, way of giving the same amount of money to the states for the same purposes without the need for a constitutional amendment. In effect, there is no 'problem' - merely a perception of a problem - which is likely to be blown out of the water in a referendum campaign.''

And Twomey makes another point especially relevant to Joyce, who wants to represent local government in NSW.

She argues that a likely outcome of a ''direct funding'' constitutional amendment would be the establishment by the Commonwealth of a single horizontal fiscal equalisation formula to be applied to all local government areas and that this would seriously disadvantage NSW and Victoria.

Joyce should read the fine print before advocating a proposal that will mean more power to the federal bureaucracy and potentially significant disadvantage to the people he wants to represent.

Peter Reith is a former Howard government minister, chairman of the NO case in 1988, when local government recognition was last put to a referendum, and former Phillip Island Shire president.

Thursday, 16 May 2013

AMMA National Conference


It gives me great pleasure to officially open AMMA’s 2013 National Conference here at the Melbourne Crown Convention Centre.
My former political opponent Paul Keating once stated that, “If you are not living in Sydney, you are camping out”. He got that wrong.
In 2012 The Economist magazine rated Melbourne as the most liveable city in the world. The good news is that our new Premier Denis Napthine and his dynamic new Treasurer Michael O’Brien are in the business of supporting the growth in Melbourne’s population with record levels of new infrastructure. And, in contrast to the fiscal shambles in Canberra, they have done so whilst keeping the State’s triple A rating and a surplus. With our world class galleries and the birthplace of Australian Rules football, I am sure you will enjoy your time here in this international sporting and cultural centre.
It is my pleasure to pay tribute to the policy leadership that AMMA has provided with distinction for resource employers since 1918. This legacy of 95 years places AMMA amongst the most experienced industry groups in the land.  AMMA’s steadfast voice for industry is a valuable mainstay in the public debate and makes a significant contribution to our country. I also pay tribute to your members like the iron ore companies in WA who took up the options of individual agreements under WA law and then under the Howard governments reforms in 1996. Your industry demonstrated that harmonious relations between employers and employees can provide win/win outcomes for everyone and that AWAs worked well in your sector. Your industry demonstrated that under the Howard IR policies you could make irrelevant the unions approach of “them and us”.  And on top of those achievements you also showed how a great industry can provide real jobs for indigenous Australians. To AMMA and its members, I say you are an industry that all Australians can be proud of.
The work you do on workplace relations is more important than ever. It is at the heart of good economic policy. As Paul Krugman said famously "productivity isnt everything but in the long run it is nearly everything". And as Gary Banks (Chairman of the Productivity Commission) said at the end of 2012 "…..productivity begins in the workforce".
So that is why I can’t say I was happy with the Coalitions IR policy. But I was not surprised and the only consolation for a very limited policy is the reality that if Labor were to be re-elected then the situation would be even worse than it is today.
Abbott's policy (P4) starts with this endorsement of Julia Gillard's legislation “A Coalition Government will keep the Fair Work framework...."
In other words, Abbott’s policy is basically Labor's policy. Abbott says Fair Work has 'many positive aspects' so his policy is to deal with 'some problems'. In other words, Abbott's policy is a series of band aids.
But there are some useful band aids including a return to the right of entry provisions as originally promised by Julia Gillard and the resurrection of the Australian Building and Construction Commission. (I now note that Labor’s budget has cut funding for Labor’s paler version (FEWBC) of the ABCC by $6m pa so Joe will have to find that). The measures to tackle “strike first, talk later”, the proposals to review the Road Safety Remuneration Tribunal” and the intention to “put productivity on the agenda” are worthwhile aspirations.
The attempt to confront the pro union bias of existing greenfields agreements is also laudable although proposing more arbitral powers is unfortunate. Arbitration is a step back into the past. Under Howard, the direction of policy was for a system based on minimum standards but now both sides want to provide arbitration for some of the highest paid workers in the economy. To me, that is unacceptable.
Two other measures ; one for bullying and one for an appellate jurisdiction within the Commission have some rationale but personally I’d prefer to see a smaller Commission not a costly  burgeoning bureaucracy meddling even more.  I commend the move to tighten up union governance including penalties that are the same for companies and directors.
The proposed IFAs (Individual Flexibility Agreements) are nothing like the Australian workplace agreements that were used by over 1.4 million people in the Howard years and of course AWAs were introduced well before WorkChoices. In Western Australia, a large proportion of workers in the mining industry enjoyed high wages on individual agreements and employers found they dramatically reduced the incidence of industrial action and strikes.
And as you know better than I, the mining industry is a prime example of where a reliable supply of product is crucial to the negotiation of contracts with foreign investors – if supply can be guaranteed, a premium price may be able to be secured. AWAs worked and we need them back in your industry.
Also in the policy is the proposed paid parental leave. It is wrong in principle because it is well beyond minimum conditions and anyway we can’t afford a new tax when government policy should be to reduce tax on business. On the same theme of more costs, Labor’s massive budget tax hit on the exploration industry will be a huge blow to Australia’s future prosperity.
Australia has lost a lot of its competitive position in the last few years. We can’t afford to fall further behind. There is currently over $300 billion of investment under consideration in the Australian resource industry. Our policy makers don’t seem to realise that the $300 billion is not all guaranteed to come online. With this week’s budget deficit shambles and uncertainty remaining in the global economy, shoring up our resources investment should be a very high priority of both sides of politics to ‘future-proof’ our nation.
 According to a recent Reserve Bank paper your industry accounts for over 1.1 million Australian jobs, both directly and indirectly. That is more jobs than manufacturing, as many as in retail, and twice as many as in tourism. You are not asking for a billion dollars to keep you afloat you only ask that the government does not make you uncompetitive.
With the Coalition now committed to delay any further consideration of major reform until after the 2016 election, we are entering a dark period of at least five years for those who want Australia to have a modern labour market suited for a modern economy. The Coalition’s decision to adopt a band aids approach for now is a purely political decision. Regardless of that decision, the need for reform remains a high priority for pursuing more jobs and higher living standards.
I say to your industry, it is vital that you keep up the pressure for change. Do not let up on the issues; individual agreements, protected industrial action, adverse action, the details on trade union right of entry and greenfield agreement making, penalty rates, unfair dismissal, paid parental leave and anything else that undermines your right to manage your business in a private sector economy. Keep up the fight for your business but also for the Australian community.
I believe the public will be looking to the business community to take the lead. In the last three years you did what was asked of you. You gave government and opposition the evidence to justify reform but they turned a blind eye. Now business needs a new more aggressive approach. You need to be campaigning from October. The unions are always campaigning – you need to do the same.
And for Tony Abbott, the more the public realise the disastrous state of the budget the more they will expect the Coalition to advocate real solutions.
So as soon as the September election is over, assuming Abbott wins, I urge you to press the government to act quickly in giving the Productivity Commission (PC) its reference on workplace reforms. A double dissolution is possible on the carbon tax and mining tax bills so the government will have many distractions in its first months but that should not delay the PCs work. Business should be offering a draft of the terms of reference to the government. In addition, it will be important that the PC report is handed to the government within 18 months so that if an early election is ever called the government will have no excuse for not having a real policy at the next election. The other point is the importance of the PC appointing the right people to conduct the review. The new head of the PC might or might not have the same enthusiasm for IR reform as his predecessor so the appointment of more than one commissioner would be reassuring as well as practical given the size of the task.
The terms of reference need to reflect the reality that Australia competes globally for skills, technology and limited investment capital – something all too clear to you as a resource industry audience. Australia cannot afford to allow complacency to let us lose our competitive edge. And we would be negligent to think that we can only win support for reform by waiting until things get so bad that only then might we address our economic inadequacies.
Good policy equals good politics. Ask Gillard or Swan – their failure as economic managers as demonstrated in this week’s budget will be the final nail in their political coffins.
The trouble with a lot of today's politics is that too many people start by worrying about the politics before they consider the merits of good policy. The better approach is to first focus on what would make good policy and then worry about how to manage the politics.
And don’t anyone tell me that reform is too difficult. Abbott’s win in the September election will be as much about getting rid of Labor as it will be about the alternative policies. But once in government, Abbott will find that the quality of his management including vital IR reform will determine his future. And in that regard the sooner he fixes the IR system the longer he will last as PM.
 What the current Coalition needs to remember is that the WorkChoices ‘bogeyman’ is nothing new. The bogeyman was alive and well in the period leading up to the '96 election but we never walked away from labour market reform.
If you have a good policy you can win the debate.
In the months leading up to the 1996 election, the Coalition was constantly taking the fight up to the Keating government on workplace reform. We won that debate because we never gave up on our small business constituency, and equally we never gave way on supporting reforms that were vital such as those in the resource industry. At no stage did John Howard announce that he would not have individual agreements. We managed the policies and won the politics. And we did the same with the GST and on the waterfront. Now the challenge for Australia on labour market reform is even greater than it was in 1995/6.
In 2013 the system has gone backwards.
Union militancy is on the rise, with strike levels at their highest since 2004. Union access to the workplace has opened right up. It was no surprise to see the re-unionisation of Bell Bay in Tasmania on the back of wholesale union recruitment drives in the workplace. The adverse action provisions make unionists a protected species and employers face often unmeritorious claims fuelled by unlimited compensation and a reverse onus of proof on employers to disprove allegations.
Agreement-making options have been reduced and the ACTU is pushing for more arbitral powers and the return of a 'them versus us' mentality. Productivity has all but been pushed off the bargaining table. And clauses can be put forward to restrict the use of contractors and other business arrangements essential for an employer’s competitiveness.
On top of all that, the Government has been stacking industrial tribunals to a level unheard of under any previous government.
But it is never too late to advocate good policy. Whether it is Labor or the Coalition, Mr Shorten or Mr Abetz – who will debate each other at this Friday’s Great Debate Luncheon – the need for genuine labour market reform is becoming more pressing every day in the national interest.
This is why organisations like AMMA play such an important role in industry and policy advocacy, and our national progress.
Workplace relations reform has been exaggerated as a bogeyman and it is time to get back to the real debate, which is not about Work Choices or any other policy of the past, but about fixing the real problems that exist now.
Our future depends on it. Remain determined, remain focussed and continue the professional contribution that your industry makes to informed debate. Australia needs to hear what you have to say more than ever and so on that note, I wish you a very successful National Conference.

Tuesday, 7 May 2013

paid parental leave, IR and referendum


Tony Abbott should heed the advice of his colleagues and rethink his policies on parental leave, workplace relations and local government recognition, writes Peter Reith.

Yesterday morning one of the Coalition's younger MPs spoke out on AM radio. His name is Alex Hawke and his seat is in Sydney. He will be an MP of increasing influence in the Federal Parliament because he demonstrated that he had the guts to speak out on a matter of fundamental policy. He voiced his concerns about Tony Abbott's paid parental leave scheme. His comments were common-sense, and they were measured. He is one of a number of younger MPs in the Coalition who are both ambitious as well as being "economic rationalists".

The dying days of the Gillard Government will be especially remembered for its dreadful and costly economic mismanagement, and the Coalition will want to be known as the party that fixed the mess. To promote good solutions will require well thought out and consistent policy positions, and the young rationalists will be the ginger group that not only argue the case but will demand, by their intellectual force and predominance in the internal debates, to be the ones to implement the necessary policy changes.

This process could be difficult for Tony Abbott unless he is assiduous in working with colleagues rather than trying to shut them down.

The Hawke criticism of the paid parental leave policy was inevitable because, on its merits, it is obviously bad policy but also because it was thrust on the parliamentary party without proper discussion and without the mandate of the shadow cabinet and party room. Hawke was gutsy to speak out because when your side looks like winning, some MPs understandably keep quiet because they don't want to throw away their chances of a ministry. But at the same time, if the leader forces policy on the colleagues knowing that the closer to the election the more sway he has over them, then he must expect some will resent unilateral decision making.

The paid parental leave proposal is a unilateral policy imposed by Abbott. There are at least two other Abbott unilateral policies that are difficult.

The biggest is Abbott's decision to ban any thought of individual agreements in the Coalition's workplace relations policy. The ban was announced on ABC TV without reference to the shadow cabinet or the party room. At a time when the policy is most needed to turn around Australia's poor productivity performance, Abbott has closed that option for the foreseeable future. Abbott has acted on his perception of the politics but the only way to lift living standards is to lift productivity so avoiding workplace relations may be bad politics as well.

The second is Abbott's reported negotiations with Minister Anthony Albanese to rush through a change to the Australian Constitution; another decision without shadow cabinet or party room approval. The intention has been to hold a referendum concurrent with the September 2013 election. Recognition of local governments was opposed by the Federal Council of the Liberal Party in July 2012 and will likely be opposed by the states who all opposed the idea when it was put in 1974 by Whitlam and in 1988 by Bob Hawke's Labor. If Abbott forces the party room to support a referendum, there is no doubt he will split his Coalition premiers and organisational supporters.

Apparently the Liberal National Party in Queensland, allegedly promoted by Barnaby Joyce, are supporting the proposal because they think that local government recognition would somehow advance their standing in rural municipalities. How this would happen is not obvious.

In my experience, as a former shire president of a small rural shire, the idea of interference from Canberra bureaucrats telling the local council how to run local affairs would only annoy councillors, not encourage them to vote for the National Party. And if they think they can get more money from Canberra, they have rocks in their head because there is nothing legally stopping Canberra today from funding local government at any time.

If the proposal is meaningless then there is no reason to vote for it, but if it means more power for Canberra, which has been Labor's real intention for decades, then it should be rigorously opposed.

Local government is the responsibility of state parliaments and there is no reason or evidence to think that allowing the central government to meddle with local government will in any way improve the delivery of local services. It is much more likely that the more Canberra controls local government, the more there will be duplication and red tape, which will only increase the costs of administration of local government and clog up local decision making.

A more general cause for concern about the proposal has been eloquently advanced by the Institute of Public Affairs. Chris Berg from the institute (The Age, May 5, 2013) sees the local government ploy as part of a broader plan by the Commonwealth to expand its rights to spend taxpayers' money by neutralising the limits set out in the Constitution.

He makes a strong point; if you want the Gillard Government to continue on its spending spree, vote yes. He says:

... the real story here is how the Commonwealth is trying to erase all parliamentary, legal and constitutional impediments that limit its spending. The referendum is just a small skirmish in a larger war. (p19)

Time is running out on this issue. If Abbott is determined to press ahead then I would expect him to try and railroad his parliamentary party next week at the party room meeting in the shadow of the budget. I have no doubt that a large number of Coalition MPs, including senior members of the cabinet, are opposed to a referendum. The only question that remains is who is prepared to stand and oppose any attempts to cosy up to Labor to support its push for more central government.

Tuesday, 23 April 2013

Defence will suffer from Labor's poor performance


Australia's financial circumstances are the responsibility of the Labor Government's dreadful mismanagement of our economy and the country's defence is paying the price, writes Peter Reith.

Get ready to feel the cold winds of Labor's self-induced austerity. But austerity will not mean just lower living standards; it also means compromising Australia's sovereignty.

The solemn responsibility of every government is to protect our country. But under Labor, Australia's ability to protect itself is likely to take another blow in this year's budget.

It was bad news yesterday on revenue and more bad news on defence is likely. In a sense Labor has no choice. It started cutting last year. As Grattan says:

Labor has so much bad news for the budget; it is trying to dump all the bad stuff before the budget so that the budget can include a few baubles for the headlines. But don't expect that anything that Labor says about the budget before the election will be an honest assessment of the true situation strategically or in regards to economics.

Yesterday's speech by Prime Minister Gillard was not to give the public an open statement about the budget, it was all about trying to minimise public reaction to the budget. Labor's only plan is not to fix the budget but to fix Labor's political problem that no-one believes what Ms Gillard or Wayne Swan say about the budget.

There are three basic contradictions in what Labor now says. Firstly, how can a revenue decline of $12 billion be the problem when the extra spending since Howard left office in 2007 is now nearly $100 billion more than Howard's last year? Secondly, Gillard says, since October 2012, there has been a $12 billion fall in revenue but revenue this year is still $25 billion more than last year? Thirdly, if the revenue 'fall' is such a problem why has Gillard not announced that the budget will have to match the revenue drop with a corresponding cut to spending? So Gillard can't say revenue is the problem, the problem is more spending and Gillard has again pledged more spending.

There is a fourth contradiction. Gillard says the underlying reasons for the revenue situation are the high dollar and softening commodity prices. But this is not new. This describes Australia's circumstances for the last three years. The real reason that the numbers have been so wrong is because Labor has been spinning a line that it would get the budget back into surplus this year. Labor's figures have been adopted to meet the political objective, not to inform the public.

And don't kid yourself that Australia's burgeoning debts and falling living standards are somehow also the Coalition's fault. Australia's financial circumstances are very much the responsibility of the Rudd-Gillard Government's dreadful mismanagement of our economy for the last seven years. And it follows a pattern.

In the 1970s, after three years of Whitlam's economic chaos and massive spending, the Coalition under Malcolm Fraser had to clean up the mess. Initially Hawke was a better manager but Keating, as PM, dumped his fiscal credentials and left another round of massive debts. From 1996 to 2007, the Howard government had to clean up for the second time since 1945. Howard's challenge was not easy; when he came to office the budget had not been in surplus since 1989, our region was hit hard by the Asian financial crisis, living standards were stifled by an antiquated labour market and the unions were constantly dictating government policy and attacking key parts of the economy like the wharves and resources. Howard left office with no debts.

In 2007 Labor took over a budget in surplus and a strong economy. That record has been squandered with serious consequences for our Defence.

Under Hawke Labor, Defence had a mixed record. It gave higher priority to the Navy and the Air Force. As a result the Army was under pressure due to lack of resources. But the decision to build Collins Class submarines was problematic and we never got the capability that we paid for. All that changed with the Howard government because its reforms improved the economy and thus revenues and Howard had the political will to rebuild Australia's military capacity.

When Rudd took office, his 2009 white paper promised a strong position on Defence. But he was soon spending on a grand scale and priority for Defence was slipping. It slipped further under Gillard. At least Rudd wanted to upgrade the submarine fleet. The objective for 12 new submarines was kept alive under Gillard although with the proviso that the option of nuclear powered vessels was disallowed for political reasons.

Unfortunately, the underlying financial mismanagement of the economy and the federal budget is quite rapidly denying Australia's ability to defend itself. This came to public attention in last year's budget when the Defence budget was cut by $5.5 billion and thereby dragging Defence's percentage of spending as a proportion of GDP to 1.56 per cent. This is the lowest since 1938 and much of the spending cuts have occurred in capital items thereby directly undermining military capability to defend Australia. Australia should be seriously considering the purchase of US nuclear powered submarines. There is no excuse that when it comes to Australia's security we should have the best that money can buy. Sadly, Labor has neither the money nor the political will to protect our country in the future.

In the Australian "referendum proposal"


FROM The Australian's front page story yesterday, it seems likely the federal Labor government will soon announce a referendum to coincide with the September election.

The referendum will propose the recognition of local government in our Constitution. The excuse for the referendum is that a recent decision by the High Court has put in question the legality of commonwealth funding direct to the states. But this is a ruse. Labor has wanted this change for decades and there is nothing to stop the commonwealth funding local government via the states.

If, as expected, Tony Abbott supports Labor's proposal by dragooning the partyroom, he will do so without any discussion with his MPs or the party organisation and will split Coalition premiers, rank-and-file supporters and a swag of his MPs.

Just because the major parties support a proposal does not mean success is guaranteed; ask Gough Whitlam and Malcolm Fraser, who joined hands in the 1970s. Nor do polls foretell the results. When Labor's 1988 local government referendum was first announced the polls showed public support but it was soundly defeated. Only eight referendums have passed to change the Constitution and Labor has succeeded only once.

I do not understand why Abbott would want to muddy the political waters with an unnecessary referendum when the one priority for the September election is to terminate the worst Labor administration in living memory. If the proposal is meaningless then there is no reason to vote for it but if it means more power for Canberra, Labor's intention for decades, it should be opposed. Local government is the responsibility of state parliaments and if the central government meddles with local government it is likely that there will just be more duplication and red tape, increasing the costs of local government and clogging up local decision-making.

There are four common reasons for the failure of referendums and all are relevant here.

First, the public does not like proposals to give the federal government more power.

Second, part of the problem has been poor process. This proposal has been considered by a federal parliamentary committee with a majority of Labor MPs, which is not an adequate forum for review. The best way to conduct a referendum is first to hold a convention so that the people are not only responsible for the outcome, they are also involved in the first steps for change. This was relevant in 1988 when the record low for a referendum was set at 30.79 per cent.

If Abbott unilaterally announces the Coalition's support, then the Coalition's own lack of good process will further undermine the chances of success of the proposal.

The Constitution is not the plaything of government or opposition and effective process is essential to good government.

Third, most Australians don't like politicians fiddling with the Constitution; if the bike is not broken, why fix it? And there is evidence the public doesn't like being harassed for a third time for a change that has been rejected twice.

Fourth, the public has a well-founded fear about the consequences of change, especially after the judges of the High Court have decided to interpret any change differently from what the public expected. This was a factor in 1988 when the Catholic Church recommended a no vote partly in fear of how the courts might interpret the meaning of religion, burdening the country with unforeseen outcomes.

It applies equally to managing local government.

If the Coalition and Labor rush through the legislation to change the Constitution, not only will good process be abandoned but, with no dissenting voices, the rules of the parliament will ensure that there is not even a formal no case committee to put the alternative point of view. The debate will then be biased in favour of the yes case and a noisy election will smother the right of the electorate to hear both sides. If Mr Abbott wants a referendum, he should defer the proposal until the public can carefully consider the arguments within a better process, as John Howard provided for the republic debate.

Peter Reith is a former Howard government minister and chairman of the committee for the successful no case in the 1988 referendum on local government.

Tuesday, 16 April 2013

The economy is the main game


The polls could tighten before the September election but Labor is still destined to be severely punished for incompetence and woeful economic management.

It has been a bad week for Labor but at least policies have been centre stage. The economy will be the main issue and Labor's behaviour has not helped.

It seems the public refused to fall for the phoney fast train idea. The origin of this latest proposal came in the deal with the Greens in 2010. You would think that Labor had worked out by now that cuddling up to the Greens is politically disastrous.

A fast rail track down Australia's east coast would cost $114 billion. The project would not generate a return until 2060 or thereabouts and so taxpayers would be paying more taxes for 40 years for a service that most people would never use. It would stop at every marginal seat from Brisbane to Melbourne and, at best, would be no quicker than flying. And that assumes that all the estimates of traffic and cost are realistic which is highly unlikely. If someone really thinks it is a good idea, let them waste their own money, not the wages of the average Aussie.

No wonder the Nielsen poll was so emphatic; this style of politics is especially galling from a government that has just abandoned its promise to reach a surplus in 2013 and now has abandoned the objective altogether for the foreseeable future. The government likes to claim that the economy is in good shape, so how is it that the government can't reach a surplus?

The fact is that Labor has abandoned any pretensions about economic management - Labor will lose the next election having not produced a surplus at any time since federal MP Wyatt Roy was born.

The second phoney ploy was better disguised. Presumably John "457" McTernan thought up the idea to send John Howard to Thatcher's funeral even though Howard was going anyway. McTernan must have been smiling because the announcement worked a treat.

I reckon there were two real reasons Gillard would not go. Firstly, in her younger days Gillard would have preferred to be with the radicals in Trafalgar Square celebrating Thatcher's death and secondly, to the extent she would be noticed, comparisons between Thatcher and Gillard would be odious. In particular, unlike Gillard's train, when the French/British channel project was devised, Thatcher made sure the investors would be more responsible for the losses than the taxpayers. Thatcher was committed to private enterprise not massive government expenditures on white elephants like government trains and a government telco with costs already skyrocketing towards twice what was forecast and well behind on schedule.

The cancellation of the massive Browse project in WA was yet another straw in the wind even though an offshore platform might be a better, more commercial plan. But all the same, at one time, the investors wanted to proceed with a plant on the coast and it would have been especially beneficial to the local Indigenous community. Unquestionably, the blowout in costs, in part due to Gillard's industrial relations changes in 2008, are now wreaking their impact on the resources sector.

The loss of 500 jobs at Holden was yet another reminder that governments, state and federal, have been throwing away good money after bad. Jac Nasser, respected chairman of BHP and formerly head of Ford in Australia, made it very clear that car manufacturing in Australia is inevitably going to come to an end.

Prime Minister Gillard can't admit the blindingly obvious because she can't afford to disappoint the unions that have propped up her government in return for taxpayer monies propping up the car companies.

Labor's policy puts up the price of cars that are an input for many businesses. There is a fundamental disconnect between saying you support jobs and then burdening business with costs of car transport or taxes like the carbon tax. Additional costs undermine jobs.

Then along came the unemployment numbers showing that trend unemployment is rising. This was not news. Nor is it surprising that more and more people are now dropping out of the workforce and more women are going into part time work. These are the very outcomes railed against by Labor and the unions but which have been the consequence of the Labor/union alliance.

Maybe the one thing that Labor might get right is the weekend announcement of cuts to university students. It certainly makes a mockery of Labor's complaints about Victorian cuts to TAFE funding.

Labor's plan exposes how government funding changes behaviour. The Australian yesterday had a front page story of students stating that they will no longer be given $2,050 cash p.a. under the Student Start-Up Scholarship and instead will have to repay the substitute loan. Apparently students defer starting university just to become eligible for the $2,050.

A policy that rewards students for deferring their education must surely deny the workforce of qualified workers, thereby reducing productivity and the revenue to government that follows. So it might be justified although it will be interesting to see the details.

The savings are to go Gonski but what is a Gonski? I know it is more money the government does not have but surely education reform should be about the quality of teaching, not the money per se? Until Labor can explain what will be done by the states, who run the schools, to improve education, the whole scheme seems to start from the wrong premise.

It has been an action packed week for Labor. If they are to do better in the elections than suggested by the latest poll, then Labor certainly would not want another week like last week.

Tuesday, 9 April 2013

Margaret Thatcher Vale in AFR


Margaret Thatcher was one of the greats of our time. She came to office when the UK was on its knees and needed a Prime Minister to pull the UK out of the economic mire. In doing so, she became an inspiration to millions of freedom loving citizens around the world. Her basic theme was that economic freedom was an essential ingredient of political freedom. Thatcher was a true believer in free markets and, in consequence, she wanted the economy to be guided by citizens not government bureaucracies. Her objective was not so much driven by ideology but the belief in a system that actually worked in practice to promote jobs growth and higher living standards. It is a quest that still drives many people around the globe.
A lot of people still yearn for a Thatcherite leader. I can’t help but look at today’s political landscape and wonder why the western democracies have not been able to produce the leaders needed now to drag the first world out of its economic troubles. Just when they needed a real leader, the US voted for Obama, a good man in many ways but not a man with a feel for economic management. If ever the Tories should have won in a landslide, the UK ended up with a minority government and David Cameron. I never liked Cameron since one of his whips told me that when organising a function at which Thatcher and Cameron (the then Opposition leader) were to sit side by side, Cameron insisted that he not sit next to the “Iron Lady”. His tactic in his Opposition days was to distance himself from Thatcher. One of the few times he was seen with Thatcher in public was only after Gordon Brown stood on the steps with her at Downing Street. I did not forget Cameron for that either – but it demonstrates that for a conviction politician like Thatcher it is difficult not only dealing with the official Opposition but with your own team as well. Too many politicians today approach issues with the question being how to manage the politics of the decision to be made. Thatcher’s approach was to decide what was right first and then work out the politics. The former represents the pursuit of personal interest; the latter is the pursuit of national interest.
Whilst Thatcher’s resolve in dealing with the Argentinians over the Falklands affirmed her “Iron Lady” status, Thatcher’s contest with militant unionism in the early 1980’s was a reason why the UK public came to respect her as a leader. The same thing happened with Ronald Reagan who stood up to the flight controllers in the US. In Australia, todays politicians shy away from a political argument with the union movement. Major reform is not expected until a second term if the Coalition is elected in September. In the UK, Thatcher was elected in 1979 and introduced labour reforms in 1980, 1982 and 1984. Thatcher never blinked when she faced the miner’s violent strikes, the Wapping dispute and the eventual reform of the docks.
Whether you call it economic rationalism or Thatcherite economics or otherwise, Thatcher’s proselytising of good economics encouraged not just right wing politics but many others from across the political spectrum. Both sides of politics in NZ were certainly influenced by Thatcherism.  The first major economic reforms in NZ, like privatisation, were introduced by the Lange Labor government and in particular the treasurer, Roger Douglas.  NZ was like the UK, in dire economic circumstances and the Douglas reforms basically saved the day.  NZ was then lucky because when the inevitable change of government arrived, the incoming Nationals picked up from where Douglas left off. The issue that Lange had been unable to confront was labour market reform. The Nationals then abolished NZ’s compulsory arbitration system that had for years burdened Australia and NZ. The next NZ Labour government left individual agreements in place.
Similarly in the UK when John Major finally lost office to Tony Blair some of the structural reforms of Thatcher years were kept. Blair never overturned Thatcher’s labour market reforms. When I was arguing for labour reform in the Howard years in the late 1990s my favourite speech was to quote Tony Blair speaking to the UK Trade Union Council and compare Blair’s speech to Kim Beasley at the ACTU promising to overturn not just the reforms from 1996 but Keating’s minor reforms as well.
It will be a long time before we see anyone in Thatcher’s class and it beats me why the Poms will only give her a ceremonial funeral when a State funeral is the highest honour. No wonder the UK needed the daughter of a grocer when all they had were blokes still worrying about their old school ties.

Tuesday, 12 February 2013

Stop treating sport as a religion


I enjoy watching sport and I barrack for Essendon but I don't think sport is a religion and it certainly is not what it once was.

In his day Sir Donald Bradman was up there on a par with prime minister Robert Menzies in public standing. Even more recently, in 1996, I thought it was great when John Howard resumed the tradition of the PM's XI in Canberra. I thought then it was great because it accorded our cricket team a standing that befitted the national team. But sadly, I don't think these days will last.

It's time politicians started treating sport as the business it is, not a religion. Children should be taught that sport is good fun and a healthy activity for body and brain, but it is only a game.

Senior people in sport e.g. Australian Rules Football describe their sport as an "industry". Of course they are right, but an "industry" is rather different to the idea of sport for the glory of the club or country.

The truth now is that most elite sport is principally a form of entertainment. Players play for the money; I don't begrudge them for that but the idea of playing elite sport for the love of the game is now different.

As the ACC report says, the sport and recreation industry was worth $8.82 billion in 2006. And money changes everything, including attitudes to winning and fair play, as suggested by the ACC and doping authority:

The ACC and ASADA have identified significant issues in professional and sub-elite sport in Australia which undermine the principles of fair play as a direct consequence of the use of PIEDs.

Money affects what players are prepared to do to win, the attitude to other players, and the behaviour of players. Personally, I don't like the grunting by tennis players or the exaggerated expressions of a player who has just won an important point or goal. I also don't like the young players who make so much money that it goes to their head and they don't know how to behave. I was taught that winning is not everything and spitting the dummy is bad manners.

Not surprisingly, with lots of money at stake for all the participants, the fringe dwellers in society are looking for their chance to make a quid on the side. No wonder the police are wondering about what is happening when a soccer game between a Melbourne team and the Adelaide team attracted wagers of nearly $50 million on the outcome of one match alone.

The activities of the ACC are clearly justified, although I have my doubts about the way they have proceeded. A general warning seems fair enough, although I wonder, given that these problems have been known about for some time, why hasn't anybody been charged?

Is it really necessary to slander a whole group of people, most of whom find drugs as abhorrent as much as the rest of society? Is it fair to besmirch sports organisations as a group and on a grand scale when so many people are totally innocent and just love their footy or other activity? I would like to know who had the idea to make a big splash with the ACC report. Given that the report was restrained in what it could say publicly, what other strategies could have been used to get out their message?

It's no wonder that the release of the Australian Crime Commission Report into sport has raised concerns about the ACC's modus operandi - not because of its report but because of the involvement of the Government. Already I can't help but think that the commission would have been wiser to have kept the Government at a distance from the report.

Whatever Labor does in the next six months, it will have to think strategically to do whatever it can to disassociate itself from Mr Obeid, former Labor National Labor party president Mike Williamson, and former Labor MP Craig Thomson. More importantly, it also has an obligation to try to avoid tarnishing, by their associations, third parties such as the ACC.

There are now two examples where Labor's associations have been a problem. In my view, they demonstrate that the Government's ability to govern will be handicapped more than ever as the election looms.

Clearly the announcement of the early election was derailed by Thomson and Obeid and then coloured by the reception to the announcement of two ministers jumping ship. It was a classic case that the political baggage already accumulated by the Gillard team impaired its ability to even announce the date for an election.

The second example could be more serious.

I am now wondering if the timing and presentation of the ACC report may also have been, albeit even to a limited degree, determined by the Government. If so, was the timing wise given the Government's obvious need for a fresh agenda at the time of the continuing Obeid and Thomson matters?

The Government wants to parade Jason Clare as Labor's minister to pull back some votes in Western Sydney. What Minister Clare can't afford is to be seen as pursuing the Coalition instead of the doping issues. In my view, for that reason, it would be wise, from now on, for Gillard and Clare to keep out of the sports issue lest they politicise the issues and thus undermine the ACC.

Labor is desperate for money. Maybe this would be a good time to cut some of the middle class welfare that Labor likes to target.

Maybe politicians should stop treating sport as a religion and chop back sports funding at places like the Institute of Sport, which was set up by the Fraser government and which was modelled on the East German model after we failed to win enough Olympic medals when Fraser was PM.

Tuesday, 5 February 2013

Gillard's not-so-merry band of has-beens and hacks


When I filed last week I was not aware that the Obeid matter would be at the Independent Commission Against Corruption (ICAC) inquiry, that Craig Thomson would be arrested, or that Prime Minister Gillard would make another poor decision when she announced the 2013 election.

However, I was right to predict that Thomson and Obeid would spend 2013 reminding Labor voters why they should vote Liberal and that we could expect more "ill-judged political behaviour" from Gillard. Although my mini predictions came to pass earlier than expected it was really no surprise because these issues are all constant in the chaos known as the Gillard Government.

It seems Gillard had similar thoughts about politics as well because we now know that as recently as last December Gillard postponed a ministerial reshuffle because she thought it might imperil her position as prime minister. It is no wonder many people have thought all along that the Gillard Government would not last a full term. But the reason Labor has survived is not because it is better than the polls suggest, but because people like Tony Windsor, Rob Oakeshott, Craig Thomson, Andrew Wilkie and Peter Slipper have all done their bit to support it.

Although the stench of corruption that lingers over Labor (and the union movement) is part of the "lack of moral and political purpose" (as described by ALP vice-president in The Australian (paywall)) and will cost Labor seats at the next election, what happened last week will not determine the fate of the Government. The die for the next election was already cast.

The main thing about the Gillard speech to start the year was her failure to explain how Labor can afford its big promises for more spending on education and health (NDIS). The rest is just the usual Labor circus and only interesting for its insights on how the party thinks. Gillard specifically did not want the announcement to be anything other than a once only change. In the end the whole exercise was as much an empty stunt as anything else, but not carefully thought through. It was the sort of thing John Howard would never do.

David Marr on Insiders tried to justify the stunt by saying that Gillard needed the announcement to show that she was not responding to Tony Abbott's allegedly constant calls for an early election. I thought it was a backhander for Gillard because Marr implicitly concedes that Gillard is forever trying to play catch-up politics against Abbott. When you are the Prime Minister, the idea is to set the agenda and not waste political capital on your opponent. It only elevates the competition. However, the leak that the prime reason for the deferral of the reshuffle was out of fear of a leadership challenge also plays into the hands of Rudd.

The problem with the announcement was the timing. My guess is that Gillard acted with little thought to the consequences of an early election announcement. She obviously did not check with the bureaucracy (because she would not trust public servants not to leak) on the issue of equal time in the media for the Opposition once the election date is announced.* Nor did she think about the timing for the announcement of the retirements of Nicola Roxon and Chris Evans.

There was no excuse for this oversight as Gillard knew both had been musing about leaving for 12 months and certainly must have discussed matters with them last December. Both could have stayed on as ministers until the election. That was my experience. When I was appointed defence minister I told prime minister John Howard I may not continue after the next election. He accepted that. When I announced my impending retirement he wanted me to stay until the election. It meant continuity, as it could have been the case with Roxon.

We don't know whether Gillard asked Evans or Roxon to leave immediately although in Roxon's case it was clearly in the Government's interest that she leave as soon as possible. To me, it looked like she was pushed, but very gently. If she was not pushed then she would have stayed as Attorney-General until the election. Roxon had become a liability. Only in the last week, she had to announce a proposed change to her disastrous anti-discrimination bill. Roxon has been under enormous pressure as the Senate committee hearings helped reveal the widespread view that her bill would, in its current form, restrict freedom of speech. This must have been a final blow to Roxon.

Roxon's performance as Attorney-General has not been a happy one. Her legal experience working for the unions may have sharpened her skills as a partisan operator but it did not equip her with the broader experience of the law that is so essential in the Attorney-General's role. A different lawyer would have been more cautious than her blatantly political comments and might also have better handled the payment of a $50,000 settlement to James Ashby in the Slipper case.

As to whether Mark Dreyfus will be any better remains to be seen. He is certainly better qualified but in contrast to someone like Daryl Williams (Attorney-General in the Howard government), who was especially disengaged from politics, Dreyfus looks like he will not be much better than Roxon. It appears (Paywall) Dreyfus may have already been given his marching orders to ameliorate the Roxon bill, but that is because the bill has become politically toxic. The better indicator of his form was his attack on Christopher Pyne when he called on Pyne for an apology for comments which turned out to be similar to comments made by Dreyfus in 2011 (whoops!).

The Labor Cabinet is full of very average ex-union types and union lawyers who specialise in setting up slush funds. The best thing Dreyfus could do for Labor is to demonstrate that Labor has a new Attorney-General who actually knows something about the law and demonstrates some common sense.