Sorry to Spoil the Party Again - but Populism Still Trumps Electoral Victory

• Detailed Comments
• Outline of Real Solutions for All Australians

Working Draft Email

Editor
The Australian

Re: Australia votes yes for competent government, editorial, The Australian, 9/9/13

I should like to belatedly submit that the return to competent government that your post-election editorial endorsed is unlikely in the foreseeable future.

My interpretation of your editorial: Tony Abbott has been elected with a simple mandate: to govern in a decent, competent and orderly manner. Parliament has been damaged over the past 6 years and normal service needs to be restored. The new federal government faces many challenges. If it can deliver on its promise of ‘no surprises’ it will satisfy those who elected it. There are three key goals: stopping the influx of asylum seekers; scrapping the carbon tax; and returning the budget to surplus. Economic and fiscal policies should be top priorities. Australia’s holiday from economic reform has lasted over a decade – including several years under the Howard Government. We challenge Mr Abbott to reduce the size of government. He spoke of a government that lives within its means, understands the limits of its powers and desires a nation of lifters, not leaners. The ALP needs to confront the magnitude of its defeat. The independents and fringe players will potentially perpetuate the kinds of weak parliaments they claim to abhor. It would be a pity if this sabotages the majority’s desire for a return to stable and effective government. The Abbott government must be given a chance to implement its agenda.

The clearly dysfunctional government that Australia endured from 2007 to 2013 was mainly the result of inadequate institutional support to political leaders. Unless and until this is corrected whoever is elected will tend to pursue superficially plausible goals that often lack practical realism and thus produce instabilities, wastage and ongoing chaos.

The ALP’s electoral victory in 2007 was based on a trendy policy agenda that, on close examination, seemed to contain major deficiencies (see Sorry to Spoil the Party – but Populism Trumps Electoral Victory, 2007). That agenda reflected the populist rhetoric that was increasing characterising public policy because weak civil institutions and politicised public services were inadequate in understanding / advising about / rasing public awareness of increasingly complex and unfamiliar challenges.

The incoming Coalition Government’s policy agenda in 2013 seems to contain similar seeds of serious problems. For example:

• Financial, economic and security difficulties in the international environment (eg those associated with 'Asia' and global debt constraints) are likely to adversely affect Australia but don’t seem to have been adequately understood in developing policy proposals. Thus domestic economic and fiscal challenges are likely to be different from / harder than those that have been presumed, and effective international relationships will be a struggle;
• Diversification from economic reliance on mining is needed, but can’t be achieved by just by pushing the 1990s' microeconomic reform button again and again;
• Assumptions about what is needed for effective government seem naïve. For example:
  • difficulties in ‘governing’ generally are likely if fiscal challenges are addressed in isolation (ie through a Commission of Audit);
  • Deficiencies in the provision of public goods and services for which the Commonwealth has no constitutional power can’t be overcome by ever-more-intrusive attempts to micro-manage state activities;
  • Some policies priorities seem suspect (eg funding roads but not public transport).

Those points, and others, are developed further on my web-site (together with an outline of the incoming government’s policy agenda, Real Solutions for All Australians). The latter presents idealised goals built on a foundation of inadequate understanding, and is arguably a formula for more federal government like that over the past six years.

Some suggestions about how institutional obstacles to competent government might be reduced are in Australia's Next Successful Prime Minister (2012).

John Craig

• Looking at the Past?
• Confronting the Fiscal Challenge?
• Over-simplifying a Difficult International Environment

Looking to the Past?

It is sometimes suggested that generals usually plan to  fight the last war, and thus don't adequately prepare for the next one. There is some risk that this applies to Australia's political establishment in the absence of reliable and up-to-date sources of strategic intelligence and analysis.

The incoming Coalition government in 2013 seemed to make much of experience gained prior to 2007 by the Howard Government as evidence of its likely future competence (see Section 21 of Real Solutions for All Australians in relation to (at that time) economic performance, reducing taxes, providing benefits to families and reducing debts)

However Coalition Governments would probably have experienced problems equivalent to those the ALP faced if had they continued in power after 2007 as the favourable economic environment they had benefited from soon disappeared. As was suggested in 2007 (see Sorry to Spoil the Party – but Populism Trumps Electoral Victory):

“ …. the Howard Government would have produced a dismal ongoing performance. Over the past decade it made some changes that boosted Australia's economic performance but the economy gained far more from the 'tail-wind' of an unprecedented global economic boom. Many of the benefits of the boom were squandered on populist middle class transfer payments - which went far beyond compensating those who were disadvantaged by economic change. Machinery of government was further damaged by both eroding the professional independence of the Public Service and trying to micro-manage state functions. The machinery needed to enable the community to cope with a rapidly changing world was seldom established. Australia was committed to a war for reasons that were never really discussed. Complex industrial relations machinery was created “

It will be suggested below that rather than reliance on past experience there is a great deal more that needs to be considered if Australia's new government is to achieve its aspirations. Populism is still not good enough.

Confronting Australia's Fiscal Problems?

It is increasingly recognised that Australia's federal government faces a severe budgetary problem  (see sources outlined in The Long Term Impact of the GFC, 2009), and the incoming administration has acknowledged and committed to addressing the structural deficits that it faces.

Examples: Reducing waste / debts and helping to keep interest rates low are included amongst top policy priorities (Section 1); the poor structural budget position (including unfunded promises / deficits / accounting tricks) is mentioned (Section 3); and a Commission of Audit is proposed to keep the budget under control - on the grounds that Australia's $160bn net debt is seen to be too high (Section 5).

Unfortunately there is a lack of realism about these intentions because:

• Australia has a significant problem with excessive debts, namely those affecting:
  • state governments because of their capital / infrastructure spending expectations, and inadequate revenue sources (as illustrated by the blow-out in Queensland's public debts to crisis point as a result of at-times-incompetent efforts to catch up on infrastructure backlogs - see Auditing the Commission); and
  • households because Australia's current account deficits have mainly been balanced by capital inflow that was directed through banks to fund home mortgages. The latter poses a major risk should international capital cease to be readily available (see Australia's Hazardous Foreign Liabilities in an Unstable International Environment);
• However the Commonwealth Government's net debt is not yet a significant problem because (at about 15% of GDP) it is trivial by comparison with the debts facing many other countries. In fact the Commonwealth's relatively low debts have been a factor in Australia's lucky ability to protect itself against the risks implicit in its real debt problems (eg by offering guarantees of banks at the start of the GFC which prevented any interruption of the flow of international capital into real estate - an interruption that might otherwise have led to a property price collapse (like that prior to the 1896 depression) and potentially risked making the banks insolvent);
• The Commonwealth's real budgetary problem is that its debts are likely to increase rapidly because of a structural budget deficit that is related to rapidly rising (especially-social) spending expectations while revenue expectations are declining;

One View of the Problem: Commission of Audit needs to establish that there is a budget emergency. This is not easy as Australia has AAA credit rating, and borrows $1bn a week from international creditors. Coalition's election commitments improve budget position only $6bn over 4 years (which is small compared with $1700bn government spending over that period). Incoming Treasurer expects faster growth to increase revenues - but growth is not easy to ensure when this depends on uncertain international factors (eg in China / commodity markets). The main problem is that government's largest spending areas are rising much faster than economy is growing. Social welfare spending rises 9% pa - driven by population aging / pension indexation. Health spending increases 7.5% pa - with payments to states for hospitals rising 10% pa. Spending commitments (eg to NDIS and defence) have large budget impacts. Treasury forecasts are that government will consume an increasing share of economy beyond budget period. A $30bn 'black hole' was indicated by Treasury estimates prior to election. Staff cuts can make little difference - as this only amounts to 5% of Commonwealth spending. 1996 Commonwealth Commission of Audit suggested that budget deficit could not be controlled unless spending on pensions and allowance was controlled. It urged major reorganisation of State / Commonwealth roles - with family services / education / health going entirely to states. Audit commissions have a patchy record.  (Uren D., 'Yes, Mr Abbott, there is a budget emergency, The Australian, 13/9/13)

• The foundations of Australia's structural budget deficits seemed to be laid under the Howard Government prior to 2007 as a tax revenue surge (particularly from capital gains tax) was committed to ongoing tax cuts and welfare / transfer payments to the community (see Long Term Impact of the GFC). This was not officially recognised (eg in Treasury estimates) for many years because of mistaken assumptions about the durability of a commodity boom that arguably resulted from making projections on the basis of conventional economic criteria, without considering the effect of cultural differences on international financial systems and the global economy (eg consider Do Blind Spots Cloud the RBA's Lucky Country Vision?; Structural Incompatibility Puts Global Growth at Risk, 2003 and Debt Denial: Stage 3 of the GFC?). 

While the Coalition’s plan (Real Solutions for All Australians) recognises the need to address budgetary stresses, the method chosen (ie via a Commission of Audit) is anything but a satisfactory way of dealing with this for reasons outlined in relation to Queensland's recent experience (see Reforming State Governments: Does Queensland's Commission of Audit Have the Answer?). The latter notes, for example, that:

• financial considerations, while important, are not the only issue that governments need to address; and
• information and commitment in relation to other important considerations can’t be mobilized through a process that is focused on financial criteria especially if the careers of those having access to necessary information are being put at risk;

There is a need for a balanced approach to all aspects of government.

Over-simplifying A Difficult International Environment

Real Solutions for All Australians makes frequent mention of issues that have international implications.

Reference is made to: exports / stopping the boats as priority issues (Section 1); the transformations occurring in Asia and the constraints of a debt-challenged world (Section2); Australia's need to be competitive and take advantage of Asian opportunities (Section 3); the need for deeper Asian engagement (Section 4); attracting investment (Section 6); gaining more growth from Asia (eg by boosting trade / investment; deepening knowledge / engagement; recognising importance of India / Indonesia / China; seeking free trade agreements; developing Asia-capable talent; developing Asia literacy beyond languages; establishing a two-way Colombo plan; and encouraging study of foreign / Asian languages) - (Section 8) ; exports of agricultural products / services / education; expanding into Asia; encouraging international investment (Section 10); encouraging higher education as an export industry; focusing immigration on skilled migrants; study of foreign / Asian languages; developing people to people relationships in Asia; two-way Colombo Plan; fostering 'Asia capable' learning (Section 17); certainty for 'live exports' trade; developing regions as Asian 'food bowel; strengthening rules related to foreign sale of agricultural land; immigration to service national interest; refugee intake to focus on those in most need; emphasis on skilled migration (Section 18); strong borders and national security (Section 20)

However, while major international developments (such as the transformations in Asia and the constraints imposed by high debt levels) were mentioned in Section 3, there does not seem to have been sufficient analysis or understanding of these (and other) current major trends and that conventional policy initiatives (such as those contained in Real Solutions for All Australians) quite probably inadequate.

There seems, in particular, to be an urgent unmet need to consider the economic and security implications of cultural differences (eg those suggested in Competing Civilizations). For example:

• the growing chaos in the Muslim world (reflected in political instabilities and conflicts) partly reflects cultural obstacles to success that affected societies have experienced. Blocking the asylum seekers who flee those conflicts from coming to Australia by boat is an inadequate response (see Boat People Magic?). Unless the chaos in the Muslim world is resolved it has the potential to not only expose the world to torrents of refuges, but potentially to disrupt global oil supplies and / or destabilize Indonesia (see The Muslim World Seems to be Headed for Chaos);
• there seems to be no serious consideration of what would be different about a real ‘Asian century’. Real Solutions for All Australians is a bit like the previous government's Asian Century White Paper in presuming that the transformations occurring in 'Asia' would result in a regional environment that operates on the basis of Western-style institutions and methods. That assumption is unlikely to be valid - and amongst other consequences are that
  • trade and investment dealings with East Asia are complicated by the fact that: (a) while 'commercial dealings' in Australia involve independent profit-seeking enterprises, in East Asia major enterprises will tend to be part of state-centred mercantilist agendas - so that there will also be political implications in any dealings; and (b) organised crime groups can play a role in officially sanctioned dealings (see Babes in the Asian Woods);
  • there is a need for a much broader than conventional approach to defence (for reasons suggested in Comments on Australia's Strategic Edge to 2030).  The latter suggests that a broader concept of 'national security capabilities' is needed because of: (a) the radically different and unfamiliar way in which 'Asia' works; {b) the way strategy is conducted in 'Asia'; )c) the relationship between defence and economic considerations; (d) the need for an 'Asia-literate' assessment to realistically assess China's options and motives; and (e) the existence of other challenges that may require more than a business-as-usual strategic response.
• the methods used to achieve economic 'miracles' in societies with an ancient Chinese cultural heritage (especially Japan and China) seem to have played a role in the global financial crisis (for reasons suggested in Fixing the Debt Problem). This refers, for example, to savings gluts (which created a requirement for loose monetary policy elsewhere if global growth is not to stall) that have been an essential feature of the mercantilist methods used to achieve ‘economic miracles’ in East Asia –  because they involve the use of national savings to maximize production by state-linked enterprises (with limited regard for profitability) rather than encouraging profit-seeking-investments by independent enterprises;
• those mercantilist economic methods and their major trading partners' responses constitute a 'clash of civilizations' rather than merely being about economic management (see Unrecognised 'Financial War'? and Currency War?). Increasingly apparent security issues in East Asia such as China's tensions with its neighbours and North Korea's belligerence seem likely to be a corollary of the 'clash of civilization' that mainly has it expression in terms of financial / economic systems (eg see 'Art of War' Speculations about North Korea's Threatsand Fasten Seat Belts: Rough Weather Ahead

International institutions established under US leadership after WWII (and which reflect Western political and economic preference ie democratic capitalism) have been proving increasingly ineffectual, and there has been a real risk of a breakdown of globalization like that at the end of the 19th century that preceded WW1 (as suggested in The Second Failure of Globalization). The latter refers to: (a) weaknesses in international institutions such as UN, World Bank and IMF that have arisen because of incompatibility between their founding principles and many of their members; (b) US's disengagement from those institutions as they became ineffectual - and shift towards unilateral action (with supportive allies) most notably in relation to the Cold War against Communism and the 'war against terror' that is mainly associated with Islamism extremism; (c) the inadequacy of 'hard power' methods for promoting 'Pax Americana - as illustrated in Vietnam, Iraq and Syria; (d) the establishment of new institutions such as the G20 to deal with financial instabilities - and it failures because cultural aspects cultural dimensions; (e) US 'pivot to Asia'; (f) US partnership with Russia as method for dealing with problems in Middle East

Problems in the global economy are unlikely to favour ofr even allow significant improvement in Australia's economic performance Debt Denial: Stage 3 of the GFC?; Credit Bust First: 'Sixth Revolution' Later;  China: Heading for a Crash or a Meltdown; ;

• problems in international financial system related to: financial imbalances; high levels of debts in various places; effect of QE on generating asset bubbles, and potential financial crises associated with ending it; incompatibility between financial systems that have been the basis of economic ‘miracles’ in East Asia and global financial system that has operated on Western profit-focused principles; security stresses in East Asia related to China, Korea and Japan;

Imbalances as the Underlying Problem

The collapse of Lehman Brothers in 2008 was just a symptom of looming problems. The past and future of the financial system remains controversial. Larry Summers withdrew from candidacy for the chair of US FED because many Democrats hold him responsible for the financial liberalisation that, in their view, led to the GFC. The debate about the origins of the crisis is not over. Lehman's failure 5 years ago was less significant that many believe because a financial crisis was coming anyhow, and was a product of over-stretched balance sheets. And impaired balance sheets are the reason that recovery has been long delayed. The decision to let Lehman fail in September 2008 had a devastating effect on markets - until G& finance ministers declared in October 2008 that they would not let systemically important banks fail. The core global financial system thus became wards of the state. Governments and central banks dealt with global financial panic quickly / efficiently - though a serious aftershock emerged in Europe in 2010. Yet restoring banks was insufficient to generate vigorous recovery - even in the US which recovered fastest. An income inequality has increased as the policies employed meant that much new income went to the top of the income distribution. Many institutions (not just Lehman) might have failed to cause the panic. The underlying problem was: economies had become dependent on debt-fuelled spending promoted by higher property prices. Panic resulted when that demand engine ceased. The intermediaries who had bet on rising asset prices were in trouble - as were economies that had made the same bet and those who hoped to sell to them. Economies had become dependent on debt-fuelled growth because of the global savings glut (especially in developing countries in Asia) identified by Ben Bernanke (FED chairman) in 2005. That glut was indicated by the real interest rate on safe securities, and by global imbalances. This glut led central banks (especially the US FED) to respond to contractionary forces with monetary policy that promoted a domestic bubble. The explosive rise of gross debt resulted from leveraging up property and financial assets to generate household spending sufficient to absorb potential supply - including net foreign supply. The world is characterised by excess potential supply - and central banks in the high income world have been offering )and are continuing to offer) cheap money to compensate. But economic performance remains weak. Lehman's failure was not the cause of this, but was a symptom of the imbalances that did. The only way to restore economic health is to restart the credit machine - though over-reliance on monetary policy is only the least-bad option. There is no alternative in countries affected by foreigners mercantilism and domestic aversion to investment and fiscal deficits.  (Wolf M., We still live in Lehman's Shadow, Financial times, 17/9/13

VERY ROUGH NOTES ONLY ......

Proposals in Real Solutions for All Australians seem overly simplistic in relation to:

• proposals for free trade agreements and attracting foreign investment (Sections ???);
• developing 'Asia literacy' beyond learning languages. Though this is needed, it is vital that Australia's leaders, rather than students, are the first to do this (see Understanding China: Focusing Education on the Under Fifteens Would be Fatal and A Strategic Approach to Asia Literacy). 'Asia capable' political / governmental system would also be useful (see not just students)
• While it is already recognised that international economic difficulties will adversely affect Australia’s federal financial position, the potential adverse impact is significantly greater;
• There is a view that the international competition is economic – whereas it is even more cultural
• encouraging international investment in mining is not straight forward given goals of neo-Confucian economies
• The fundamental problems of developing relationships / doing business in East Asia not being address – individuals versus groups

As noted in Australia's Competitiveness: Some Suggestions there is a pressing need for better strategic intelligence

Economic development and Diversification

• While there is undoubted value in diversifying Australia’s economy, (a) it is not constructive to focus on particular sectors – except perhaps as example; and (b) measures that involve merely creating an environment for enterprise initiative which is quite inadequate for reasons suggested in Stimulating Practical Action on Productivity; Advisory council could create benefits for insiders
• Picking winners is not constructive – need to create an environment for productive enterprise generally, without giving preference to 5 ‘pillars’ (ie specific categories of enterprises)
• Proposals to review competition policies need to involve recognition of adverse effects on the ability of governments to ‘govern’ and undertake functions subject to serious market failures . Talks about building strengths in manufacturing innovation in nonsensical terms (ie by creating an environment to support competitiveness - how? and by building on virtually-non-existent existing strengths
• Business Advisory Council on economic development will focus on what government can do for business, which has nothing to do with economic development (which involves what businesses can do to better support one another - and can only realy be addressed if political process / actors are excluded)
• Competition is only part of requirement for productivity – also require competencies. Competitinon policy review – also need to consider adverse impacts on public sector effectiveness

Governing

Preparing the Fight the Last War?

That experience is of little current relevance because it primarily involved a long global boom based on easy credit which laid the basis for both the GFC and the heavy debt levels that currently constrain global growth because QE is again likely to be feeding asset bubbles. (see Debt Denial: Stage 3 of the GFC)

Reducing Red Tape

• Reducing red tape requires changing the way in which social, environmental and economic issues are addressed. It is not sufficient to merely eliminate red / green tape, but to establish alternatives to the political process for addressing issues. The problem otherwise is that minor cuts to red / green tape will be swamped by new regulatory requirements
• one-stop shops for environmental approvals will have to try to take on either overly simplified / inflexible rules related to diverse environmental issues or consist of large bureaucracies that internalize / duplicate all of the competencies of specialised agencies
• Cutting red tape requires changing the way problems are dealt with – to create an alternative to political process

Improving Public Sector Operations in a Federal System

Many of the proposals for improving public sector operations are likely to substantially worsen those functions - because they involved attempts by Australia's federal government to centrally plan / micromanage functions for which this is inappropriate.

Reference was made to: policy priorities including infrastructure - especially roads; putting communities in charge of hospitals and schools (Section 1); boosting productivity by making hospitals and schools more responsive to community needs; getting more value for infrastructure spending by unclogging congested roads / highways  (Section 7); encouraging 40% of high school students to study foreign (hopefully Asian) languages (section 8); better managing water resources; encouraging education modernisation and use of IT (section 10); reducing road / highway bottlenecks; developing a rolling 15 year plan of national projects with Infrastructure Australia; improving the latter's governance; encouraging private infrastructure investment; prioritising specific road / highway projects; building more dams (Section 11); delivering better local roads and modern infrastructure (especially roads) - Section 13); hospital management will be sought through local boards - so communities and experts (rather than bureaucrats) will be in charge of improving performance; seeking a patient-care first staff culture and better outcomes for patients (Section 16); Parents, principles and communities (not unaccountable bureaucrats) will be put in charge of schools - and 'students come first' culture will be sought; schools will be encouraged to be come independent - thus providing simpler budgeting and resource allocation; teachers ill be supported by ensuring rigorous curriculum - without being too rigorous / prescriptive; school funding will be indexed to costs; science education in primary schools will be emphasised; cyber bullying will be addressed; and National Schools Chaplaincy program will be supported. (Section 17); water resources will be used to develop regions as Asia's food bowl; new land development in north Australia will be sought; encouraging states to reduce red tape to improve housing affordability; establishing a national safe-streets program with use of CCTV (Section 18)

There are significant problems with these intentions.

For example roads and highway are not necessarily to ‘solution’ to improving transport in future (eg see Brisbane’s Transport Monster).– because:

• for environmental reasons major cities have ‘urban footprints’ which make it impossible to get access to the cheap rights of way that are needed for a cost-effective urban transport system. 'Solutions' to urban road infrastructure has been unaffordable because of environmentally-justified constraints ; and
• the costs of energy / fuels for a road-based transport system could well become unaffordable  The global ‘peak oil’ event was expected about now, and to result in rapidly escalating oil prices. The development of fracking technologies seems likely to post-pone that peak – but may well not prevent the expected consequence of ‘peak oil’ (ie escalating fuel costs which ultimately constrain road transport options).
• Transport systems have to match urban / regional land use and other considerations -  which states would be reasonably well positioned to coordinate if their ability in this regard was not constrained by fiscal imbalances that shift their priorities from effective performance of their constitutional functions onto financial considerations and centralised lobbying for federal funding..

• Power of Federal Parliament (section 51): trade and commerce; taxation; export bounties; borrowing; postal / telegraphic services; defence; lighthouses; astronomical / meteorological observations; quarantine; fisheries; census and statistics; banking; currency; insurance; weights and measures; bills of exchange; bankruptcy and insolvency; copyrights; naturalisation and aliens; foreign corporations; marriage; divorse; pensions; other payments and allowances; civil and criminal courts; recognition of state laws; making special laws for some races; immigration; influx of criminals; external affairs; relations with Pacific Islands; acquiring property; control of railways for naval / military transport; railway construction 9with state consent); concilliation and arbitration; matters referred by states;
• Australia has a federal system. Infrastructure / hospitals and state schools are state responsibility. A major component of policy involves dictating what happens in state functions. Centralization is the problem – not the solution. Can’t avoid disputation unless change the constitution – far better to end fiscal imbalances;
• Proposals for improving public sector functions (eg in infrastructure, hospitals and schools) involve primarily displacing state governments’ roles in relation to what are constitutionally state functions. This raises constitutional difficulties – as without a successful referendum states will remain involved in those areas. Centralisation is already a major part of the problem. The approach to infrastructure that the plan envisaged (ie imposing large road expenditures) may not make sense in relation to either regional transport or urban development requirements.
• Federal government involvement in infrastructure is a by-product of financial imbalances that are responsible for many of the problems in Australia’s federal system
• Putting local communities in charge of hospitals and schools could be achieved by correcting the financial imbalances that undermine the effectiveness of Australia’s federal system. Creating parallel bureaucracies federal / state oversee hospitals and schools is not constructive (see Fixing Australia's Health and Hospital Systems?, 2008 Is a National Health and Hospitals Network Progress? 2010
• Infrastructure Australia plan for projects. It is divorced from amny of the considerations responsibilities that are involved in major infrastructure. One can't just deal with these as 'projects' that are presumed to be divorsed from other considerations. Attempts to get consensus on national plan involving complex questions could take 10 years to finalize, where incremental decentralised initiative would be far less complex and slow
• Goals for hospitals and schools could best be addressed by fixing fiscal imbalances . Proposals do not involve reducing bureaucratic control - merely shifting the bureucrats to more remote Canberra. Overall effect would be to reduce the effectiveness of government in Australia - and the risk that regional communities will be unaware of policy issues and alienated - thus giving rise to marginal / disruptive political factions
• For example, imposing road rather than public transport funding priorities is likely to be incompatible with: (a) urban development patterns that state / local authorities envisage; and (b) the provision of cost-effective transport in the medium to long term future.

Climate Change

• Proposals for ‘direct action’ on climate change are no more useful than carbon pricing in resolving the uncertainties that exist about what needs to be done in relation to climate change;
• Going to take direct action on climate change (rather than have a pricing mechanism) but the real question about what is going on remains unanswered. Temperature change globally has stabilized. CO2 levels may be feedback. Methane emissions are cause of concern

Notes

Alexander S., Peak oil is alive and well, and costing the earth', The Conversation, 9/9/13

US retail sales of gasoline have fallen 50% since the GFC [1]

These Charts Better Not Reflect The True State Of The US Economy

US Motor Gasoline Consumption

Why is US Oil Consumption Lower?, 31/1/13

Much of the policy agenda involves initiatives for which the Commonwealth has no constitutional power - and involves the assumption that centralised control rather than decentralized initiative improves government effectiveness – an assumption that is no more valid for government than is central economic planning;

he creation of a PM’s Advisory Counicl to advise on economic development cannot support the apolitical initiatives that are needed to make a real difference;

• The plan says what is needed – but does not have a realistic method for achieving many of its aspirations;
• Naivety / idealism is the word – built on dubious theories
• not 'governing'

Will deliver a strong, prosperous economy and a safe, secure Australia on the basis of stronger economy / communities; cleaner environment; stronger borders; and modern infrastructure (via: lower taxes; more efficient government; more productive businesses). Stronger economy will involve: competitive manufacturing, dynamic services sector, growing knowledge economy, strong agriculture / mining; and strong small business;

1. Top policy priorities: stronger / more productive economy; get budget under control (cut waste / debt / keep interest rates low to protect against shocks); eliminate carbon tax; grow small business by reducing business costs / taxes / red tape; build 5 pillar economy (manufacturing innovation; advanced services; agricultural exports; education / research and mining exports); generate 1m jobs from better economy; build more modern (especially road) infrastructure); improve health services by putting communities in charge of hospitals and improving cooperation with states / territories; deliver better education by putting communities in charge of improving local school performance; take direct action to cut carbon emissions – and establish Green Army to clean up environment; stop the boats; provide strong / stable / accountable government.

2. Building a strong 21^st Century Australia: Have been listening to people’s / small business's concerns and consulting experts. There is now a need to foster productivity, competitiveness and growth - particularly in the context of the great transformations occurring in Asia and the challenges of a debt-challenged world. The plan is to build a stronger economy and chart a long term course for Australia.

3. A time for decision: Australia’s key economic challenge is to compete successfully in a more competitive world. Government needs to equip the economy to compete, not just point out the opportunities available from Asia’s rising middle class. Asia offers massive opportunities. Tax and labour reforms are vital to achieve this. Australia’s real challenge is lower / simpler / fairer taxes to promote productivity and industries to take advantage of opportunities. There is a need for: improved productivity / growth; better sovereign risk profile; workplace reforms; eliminate carbon tax and mining taxes; streamlined environmental approvals; reduce cost base for mining; increase economic flexibility; address infrastructure blockages; and support small business. Responsible economic management is vital. The structural budget position is currently poor given: $120bn in unfunded promises; government has been in deficit for 4 years; last yeas deficit blew out $30bn; accounting tricks are being used to make budget look better. Government has focused on spending side of economy, not on productivity. Productivity growth has been very poor. Investment in resource projects have been cancelled – raising concerns about new taxes; sovereign risk; poor productivity; and high costs. GDP is growing too slowly, and monetary policy is being used to prop this up. Problems include: over-regulation, inflexible work practices, poor jobs growth. Without strong economy other challenges can’t be addressed. Bad government interested only in its own survival has been part of the problem.

4. Delivering a strong prosperous economy: Key elements of economic plan are: live within means / control budget; lower taxes; boost productivity; deeper Asian engagement; help small business; diversify to 5 pillar economy. Less debt is desirable.

5. Living within our means:. Net debt of $160bn is too high – so budget must be brought under control. A Commission of Audit will be established to identify savings and efficiencies. Savings will be achieved by reducing overlap between different levels of government, and reducing bloated Commonwealth public service (by natural attrition)

6. Lowering taxes: This will include: reduced income tax; reduced company tax; eliminate carbon tax (repealing tax / taking direct action to achieve 5% reduction in carbon emissions by 2020); abolish mining tax (to attract more mining investment). Lower taxes and a reduced sovereign risk profile will attract more investment

7. Boosting productivity: A Productivity Priorities Working Group has been established to consult with business. Better Productivity Plan involves:

• getting more people into workforce (via incentives for employing youth; reinvigorating work for dole; paid parental leave; bonus for long term unemployed; bonus for job seeker relocation; incentives for 50+ employment; suspend unemployment benefits for 30- where unskilled jobs available; differentiating disabilities; more indigenous jobs) ;
• more cost effective public institutions (via making schools and hospitals more responsive to community need);
• reduced red / green tape (via $1bn pa reduced costs to business; state-based one-stop-shop for environmental approvals; requiring each federal department to reduce red tape costs annually; replacing regulatory reporting with independent audits; regulatory impact statements in cabinet submissions; annual deregulation reports; PM’s Department to be responsible);
• improving completion rules (via root and branch review of competition laws; ensure big and small business get a fair go);
• more value for money on infrastructure – unclog congested roads and highways;
• reducing union militancy (via restoring Australian building and Construction Commission; work in existing frameworks to restore balance in workplaces; establish Registered Organisations Commission; make registered organisations comply with rules similar to companies.

8. Gaining more growth from Asia: – by stronger trade relationships, welcoming investment, boosting exports and deepening knowledge of / engagement with Asia. Australia’s economy will be modernised. People-to-people skills / mind-sets and skills will be improved. Emergence of India and Indonesia will be recognised as well as China. Free Trade Agreements will be sought with China, Indonesia, Japan, India and others. Focusing on Asian opportunities and diversified economy will boost exports. Diplomatic and trade ties with India will be boosted. More Asia-capable talent will be developed (via study / work experience / relationships / learning to adapt behaviour to Asian contexts / working with Asian governments / developing ‘Asia literacy’ beyond languages. A two way Colombo Plan will be developed. 40% of high school students encouraged to study foreign (hopefully Asian) language

9. Helping small business: who are the main job creators by: lowering taxes / costs (abolish carbon taxes / modest company tax cuts); cut red/ green tape (eg by parliament spending 2 days pa removing legislation / regulations); simplifying superannuation payments via ATO; opt-in options for paid parental leave scheme; reviewing competition laws; extending unfair contract protection to small business. Goal is to double rate of small business growth

10. Building a five pillar economy: to guard against having all eggs in mining basket. PM's Business Advisory Council will be established to advise on economic development. Manufacturing innovation will be supported by: repealing carbon tax; cutting red tape; good R&D incentives; creating environment to support international competitiveness; more effective anti-dumping measures; and building on strengths in manufacturing innovation. Strengths in agricultural exports will be enhanced by: building on existing food production strengths and better managing water resources; supporting fishing industry and reviewing Marine protected Areas; and provide stability / certainty to live exports trade. Strengths in advanced services will be increased by: cutting red-tape; emphasising financial services; health services; engineering / architectural services; encouraging IT services; expanding skills into Asian region; give priority to Johnson Report on growing financial services. World class education and research will be enhanced by: encouraging its modernisation and use of IT; and expand education exports in Asia and online. Mining / energy / resource sector will be enhanced by: building on rich resource base; abolishing mining and carbon taxes; one-stop shops for environmental approvals; and encourage international investment.

11. Delivering modern infrastructure: Main emphasis will be on reducing road / highway bottlenecks. A 15 year plan of national projects will be developed with Infrastructure Australia- as a Commonwealth / State plan revised every 5 years. Better value for money will come from working closely with Infrastructure Australia. Its governance will be improved; projects over $100m will require IA cost-benefit analysis; IA will publish project justifications; projects will be priorities on the basis of cost benefit analyses; and project priorities / timetable will be announced in consultation with states in 12 months. Private infrastructure investment will be encouraged - perhaps through Infrastructure Partnership Bonds. Specific major road and highway projects will be prioritiesed. Affordble broadband will be accelerated (with: transparent cost-benefit analysis; use of best available technologies; accelerated progress in priority areas; and end NBN waste). Attention will also be given to building more dams

12. Delivering more jobs, higher wages and higher living standards: Jobs will be created and wages raised by pursuing Better Productivity Plan; getting unemployed young people back into workforce; giving women and families options through paid parental leave and affordable / flexible childcare

13. Reducing cost of living pressures: Families are society's bedrock. Governments role if to support and increase choices available to families. Cost-of-living pressures will be reduced by abolishing carbon tax; lowering taxes; keeping interest rates low; restoring Private Health Insurance rebate; delivering more affordable childcare (following Productivity Commission review); delivering genuine paid parental leave; tackling cyber safety; delivering better local roads and modern infrastructure (especially roads)

14. A more secure retirement: The goal posts on superannuation won't be moved. Structured incentives will be provided for employing the over 50s. Living costs will be reduced by ending carbon tax. Benefits for veterans will be indexed. An Aged Care Provider Agreement will be negotiated with aged care sector.

15. Better services / society: A strong economy will be sought to allow investments in government services (eg NDIS, health, aged care, education). Close cooperation will be sought with states through COAG as they are mainly responsible for service delivery. COAG will be reformed - rather than being used as a parking lot for difficult problems. The backlog of its agenda will be cleared. The NDIS will be implemented as recommended by the Productivity Commission. In collaboration with the states management of hospitals will be sought through local community-controlled  boards - so communities and exerts rather than bureaucrats will be in charge of improving performance. A patient-care first staff culture will be sought and better health outcomes for patients sought at the local level. Mental health services will be boosted with Early Psychosis and Intervention Centres; research, headspace sites; improved employment options. Diabetes research will be supported. PBS listing of medications will be based on independent advice. Private health insurance rebate will be restored. Dental services will be brought under Medicare when possible.

16. Better health services: In collaboration with states hospitals will be managed by local boards, with CEO to manage budgets - so that communities and experts (not bureaucrats) are in charge of improving hospitals. Patient first culture will be created in staff. Mental health services will be improved by Early Psychosis Prevention and Intervention centres; boosting research; new headspace sites; better employment options. Diabetes reasearch will be supported. Medicines available through PBS will be determined by independent committee. private health insurance rebate will be restored. Dental care will be brought under Medicare when possible.,

17. Better education: Parents, principles and communities (not unaccountable bureaucrats) will be put in charge of schools - and 'students come first' culture will be sought. In cooperation with sates, schools will be encouraged to be come independent - thus providing simpler budgeting and resource allocation. Teachers ill be supported by ensuring rigorous curriculum - without being too rigorous / prescriptive. Current school funding will be indexed to costs. Science education in primary schools will be emphasised. Cyber bullying will be addressed. National Schools Chaplaincy program will be supported. All Australians will be encouraged to seek higher education. Current university funding arrangements will be maintained. Reduced red tape / regulation / reporting will be sort. Research funding will be reviewed. Stable infrastructure funding will be ensured. Higher education as export industry will be encouraged. Advanced skills job training will be encouraged. Incentives ill be provided for giving jobs to young unemployed. Immigration will focus on skilled migrants. Will work with states to encourage 40% of year 12 student studying foreign (preferable Asian) language. Intend to develop people to people relationships in Asia - via two-way Columbo Plan and fostering 'Asia-capable' learning

18. Stronger / better communities: Regional Australia should receive 'fair share' of support. Certainty for 'live exports' trade will be sought. Water resources will be used to develop regions as Asian 'food bowl'. New land development in north Australia will be emphasised. Economic strength wll be promoted. Rules related foreign sale of agricultural land will be strengthened. Housing affordability / home ownership will be improved - by encouraging states to reduce red tape. Population, citizenship and settlement will emphasise economic growth and enhancing Australia's social fabric. Immigration will be non-discriminatory and serve national interest. Refugee intake will emphasise those most in need. Migration will emphasise skilled migrants. To promote safety and fight crime a new national safe-streets program will be established - with expanded use of CCTV. A new Commonwealth / State Standing Council on Law, Crime and Community Safety will be established. Funds will be provided to surf clubs. Community-Business Partnerships will be established to encourage philanthropy. Indigenous Australians will be encouraged to get ahead. Programs will be streamlined. Funding will be directed away from bureaucracies to local communities. Families will be encouraged to ensure that children attend school daily. The Australian Employment Covenant will be supported. Training for training's sake will be ended. PM will spend a week each year in remote community. Freedom of speech and open media will be protected - by rejecting media regulation, encouraging media to lift standards, reject 'public interest tests' for media mergers, and support freedom of speech by prohibiting incitement of racial hatred, but not prohibiting causing offence.

19. Cleaner / more sustainable environment: Direct action to reduce carbon emissions (by 5% by 2020) will be taken involving: Emissions Reduction Fund - which will be spent on domestic action, not offshore credits; supporting specific projects. A 15,000 green army will be promoted. Australia natural water resources will be enhanced (eg by Howard Government's 10 point plan for Murray Darling and planning for new dams). Environmental approval process will be streamlined - including one-stop shop for approvals. Balance will be sought between environmental protection and community needs (eg in relation to fishing and Marine Protected areas). ;

20. Stronger borders and more national security: National interest will come first, strong borders and defence capability will be sought. Strong border will be sought via: seeking cooperation with Indonesia; reintroducing temporary protection visas; instructing navy to 'tun back' boats where safe; give priority to offshore special humanitarian visa applications - and give them priority also in obtaining permanent residency; boost offshore processing; presumption against refugees status will be established for those arriving by boat without papers; jail sentences of people smugglers will be increased; and reserve 11,000 of 13,750 refugee places for offshore applicants; a single case officer appeal process will be restored. Defence force will be boosted - with 3% pa increase in spending; shift from spending on defence bureaucracy to military capacity; acquire state-of-art unmanned aircraft; produce new Defence White Paper; and ensure that there is no submarine capability gap. Counter-terrorism measures in Australia will be strengthened. Stronger focus will be placed on Australia's region in foreign affairs (eg reassigning diplomatic representatives, build relationships with neighbours, enhance US access to bases in Australia, set performance benchmarks for foreign aid, and establish two-way 'Colombo Plan'.

21. Strong, stable and accountable government: Accountability and transparency will be restored. Government will be for all, not special interests. Class war will end. Tony Abbot is a strong leader with a good track record. Coalition team includes experienced ministers. Under Howard Government they helped: turn Australia's economy around, reform tax system, delivered 2m new jobs, delivered more than 20% increase in real wages and doubled net wealth per person; delivered tax cuts and benefits for families; and delivered a budget surplus in10 out of 12 years - paid back $96bn in debt and put away $70bn in net assets; secured Australia's borders and stopped the boats