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Seeking a fair GHG reduction target:part 6- Equitable Reduction Targets

This is the 6th sixth post in the series: " Seeking a consensus on GHG reduction targets ". In earlier posts we suggested 4 prop...

Sunday, 17 April 2016

Pre-poll populist posturing

It is in the air and the air-waves. All manner of old and new policies are being dusted off, kites being prepared for flying, expert groups forming to pour water on ideas not yet released. Yes, an election is coming.

It is an unsavory time in modern democracies where we see the sausage being made. Honesty, responsibility and simple integrity are displaced by self interest, populism, and electoral advantage.

There are too many instances to list them all, but consider; -
  • The Very Fast Train project - a recycled infrastructure project rolled out several times in the past but all analysis shows it is just as unjustifiable today as it was in all previous incarnations
  • Bank bashing - It was not that long ago that the ALP rejected a Royal commission into the financial system, but given the likely focus on Union corruption in the coming battle, what better distraction than the banks. We may be bad, but look over here they are equally bad or perhaps even worse.
  • Prominent Australians pushing barrels -  In the first instance claiming that Australia is a high taxing country and that a drop in Company tax would have no benefits, forget the economics books which say the contrary, In the second we have a panel declaring they want to pay more Tax. Try to sell that one to the battlers!
  • ALP policy to eliminate Negative Gearing - forget that this was done before by the ALP with poor consequences , forget that it is patently unfair to those the ALP claims to support, and forget the negative consequences; higher rents, lower economic growth
  • Terminating the Road Safety Remuneration Tribunal - The government seems to have belatedly seen the light after the owner drivers were about to start picketing Canberra. 
Each of these issues have been driven by more than a soupcon of populism and posturing.

We are yet months before an election and already we have this nonsense beating its way to our door.
One can can only wonder what hodgepodge of irrational legislation will be wrought from this pre-poll populist posturing?

It is certainly no way to govern a country. 

Friday, 15 April 2016

Spark and Grind

Following yesterday's Knowledge Nation 2016 summit many in the commentariat are highlighting the need for more graduates with the 'right' skills. As noted at the conference, successful innovation requires the confluence of many factors, a supply of suitably educated capable graduates is just one.  Moreover Australia's lack of success in commercialization, we rank last of the 33 OECD countries in commercialization of research, is not due to lack of bright ideas. The failure is not due to lack of supply of educated graduates.

We have the Spark

Australians are an innovative lot, and whether our inventors were graduates or just lateral thinking others, they have produced more than our share of inventions. We obviously have the spark of creativity.

...but lack the Grind

To paraphrase Mr Edison, Innovation is "1% inspiration and 99% perspiration". We lack the 'grind' required to turn our ideas into reality.

Many reasons have been cited for our failure, but I would group them into just three; -

1. The benign culture of our Universities 
Our Universities clamour for funding from the public purse but do too little to generate funds themselves. Academics are driven by pure research as their success as academics is more dependent on papers than patents. This has developed a sense of academic purity which eschews base commercial motives and distracting industrial dalliances.

2. Lack of risk capital
The commercial success of the best ideas requires significant investment over many years before returns are generated. Moreover such investment carries high risk so investors must mitigate this risk across many projects. With few successful locally commercialized innovations we have not developed the requisite venture capital market in Australia.

3. An all too mobile workforce
For the most capable inventors and for the best ideas the world beckons. Attractive facilities, high salaries and the opportunity to work with the best researchers in the world draw our innovators to greener pastures overseas.

Small significant steps

How do we counter these shortcomings? The glib answer is gradually. Each of the factors above has a positive feedback.  After each successful locally commercialized Australian innovation venture capital will be easier to raise and many capable graduates will be employed. Success will breed success.

Given we are so far below par incentives to redress our failure are very much overdue. But it is not easy to turn this around, and it will not happen with slogans or summits. Nor can you simply throw money at it, as it will end up like most government sponsored projects as a wasteful and even counterproductive exercise. Some improvement until the money runs out then a return to where you started.

Nevertheless I believe there are some simple practical steps that the government could take to gradually build an innovative culture that will continue to grow over time.

My ideas on this are still developing but I suggest the following as a start;-
  • Provide a loan facility to inventors to fund patenting of new ideas and for proof of concept experiments. Similar to the HECS scheme the loan should be repayable together with a commercial return if /when the idea achieves commercialization
  • Link some University funding to innovation activities. Say 20% of the funding of a University could be tied to activities which directly support the development of a future product. 
  • Universities should retain some ownership of any invention/product developed by their staff and/or using their premises
  • Provide risk capital for small start-up companies with standard commercial returns . The $1B already cited by the Turnbull government seems an overkill, and is likely to generate larger projects with higher risks. I envisage project grants with maximum $10m but mostly smaller. 
These act to remove the obstacles faced by innovators and provide funding, on commercial terms, until a sufficiently active local venture capital market meets this need.

Tuesday, 5 April 2016

Time to take the initiative

Fervor to fiasco

Consider the widely acclaimed Tax reform agenda touted by the newly elected PM just a few months ago. Announced with great enthusiasm and a clear set of guidelines;
 "A reform package must at the very least, raise the revenue we need, share the burden fairly across the community and do so in a way that incentivises employment, investment and innovation." Rebuilding Foundations of Reform 5 Nov 2015
Much has happened in the ensuing months that has tarnished this simply stated and noble goal. Serial qualifications of what will be 'in' or 'out' have muddied the waters. An eloquent Mr T has waffled his way around the subject, with everything 'on the table' except of course GST, and no negative gearing, well perhaps a little bit, but only where it is really justified.

His opponents are well nigh saying 'I told you so', and while his adherents and the media are maintaining the faith, for now, they are eyeing for exits. His numbers, the pedestal on which he justified his ascension, are wavering.

So too Scot Morrison. He joined the Tax reform crusade with great gusto, but his early propositions were beaten down, no doubt by Mr T, leaving ScoMo looking stupid. Saying one thing one day only to withdraw it the next. No wonder he has taken to saying little. Recall the much heralded presentation to the Canberra Press Club. A roomful of economists and political journos well primed with earlier hints of major pronouncements waiting in anticipation to receive... naught. That went over like a lead balloon. No doubt Scomo is not happy having his reputation as an effective 'doer' being trashed even before delivering his first budget.

This political ineptitude has left the electorate nervous about what the budget will bring. With its self- generated constraints and a looming double D can the government pull something out of the hat and regain the popularity it was bestowed for having disposed of Abbott?

Take the initiative now...

The government has shown remarkably poor judgement in the execution of the Tax Reform Debate. The vacuum left by vacillating between what is 'in' or 'out' has enabled the opposition to take the high ground by announcing their own policies and contrasting their decisive position against that of the government. It has shown in the polls. So it is time that the government takes the initiative and sets the narrative for the upcoming budget. 

Detailed policy measures can be left to the budget itself, however the narrative sets the scene, gives the media something to discuss and incidentally highlights ALP's role in creating the massive government debt and the reckless spending that led to our ongoing structural deficit. It also builds on why the LNP was elected in the first place, to be good economic managers.

A suggested Budget Narrative is presented below (this is reprinted from an earlier post Hypothetical Budget FY17 )

Budget FY17 Narrative

Size of government
All money raised by government is revenue foregone by individuals and corporations. Therefore it is incumbent on the government to remain as small as possible but have sufficient revenue to effectively and efficiently deliver the services the electorate mandates.

Historically, average Australian government revenues have been below 25% of GDP. While in recent years this has blown out due to both additional spending and lower tax revenues, your LNP government will return the revenue to and then ensure it remains below this historical average.

It is incumbent on governments to ensure any spending is equitable across all sections of the electorate. Within any budget there will be individual measures which advantage some sections and disadvantage others, but taken as a whole the measures in any budget will fall equitably across all sections of the community.

Equity also applies to generational equity. It is immoral for the current generation to continue to spend more than it earns and leaving the debt to future generations. Therefore the government will always strive to reduce government debt and to bring the budget into balance.

Current Economic environment 
While we firmly believe in the above two principles, we find ourselves in a difficult situation.
  • The large increases in expenditure initiated under the Rudd/Gillard/Rudd governments and the subsequent collapse of the mining boom have caused a wide and widening gap between Government income and expenditure creating a ongoing structural deficit.
  • The current gap between Expenditure and Income is such that we are failing our own limits on the size of government. Last year government revenue rose to just under 26% of GDP and due to the on going deficit we are failing on generational equity as well.
  • However our structural deficit cannot be redressed in a single cycle, as the consequences of introducing measures to redress it could be counter-productive putting further pressures on the economy and reducing government revenues.
    Our strategy 
    Given these constraints we see it prudent to take gradual but significant steps to redress our issues, with an emphasis on growing the economy while maintaining but not growing government.

    This implies; -
    • Addressing inequities in welfare and superannuation systems whereby lower income earners subsidize higher income earners.
    • Limiting personal tax relief to the real savings achieved by the above measures.
    • Ensuring full compliance with government policies, applies to corporate and personal tax collections, welfare payments etc.
    • Increasing the productivity within government departments.
    • Increasing productivity within business by eliminating red-tape and high-cost industrial relations practices.

    Start now...

    There is no time to lose. Start now.

    Monday, 4 April 2016

    Spending or Revenue?

    The recurrent argument about whether we have a spending or a revenue problem brings to mind my own experience back so many years ago. As a 10 year old I was given an allowance of but 2 shillings per week. Yes it was shillings and yes it was a long time ago.

     With such a well defined sum I was most scrupulous about my spending. My weekly 'treat' was the Saturday movie matinee at the local cinema, the Coronet in Bondi Junction. Armed with my 2 bob, I set off by tram, 3 pence each way, paid my 1 shilling admission and settled in for a full three hours of entertainment. In those days going to the movies was an outing to be relished, with cartoons, the odd serial, "The Lone Ranger" or "Rocket Man", and after intermission the featured movie. On my way home I indulged myself with 3 pence of chips, wrapped in newspaper, and a potato scallop. A full afternoon for two bob. I still remember this much loved ritual after all these years.

    I knew exactly where my money was being spent and I made sure it was spent on what I wanted. I also know I had a serious revenue problem, as I did not have enough money for chocolate freckles or cobbers or indeed the cream-bun that I also desired. I explained this to my mum in a vain attempt to justify a raise. She disagreed suggesting I really had a spending problem. That I should make do with what I had and perhaps should miss out on the movies one week and indulge in the other vices I felt were entitlements. She even suggested I could walk instead of catching a tram.

    Of course I coped without those extra 'necessities ' and learned to live within my means.

    All in all a good early lesson on many levels.

    Firstly living within a budget requires giving up some things, things you may really want.
    Secondly there are some things you may really want but you can do without.
    And, finally, people will have different perspectives on the same problem.

    These very same lessons seem to apply to our government 'deficit' problem today.
    Our politicians have a different perspective on this problem because they come at it from different sides.

    The ALP see it as a Revenue problem. They have a long list of must have programs like Gonski, Healthcare, Disability Insurance and so on, that require increased expenditure and complain the government is not raising sufficient funds for these essential programs. By defining it as a revenue problem they are providing 'justification' for increasing taxes to raise revenue. 

    The LNP however are motivated primarily by the need to ensure the budget is balanced. They do not want to raise taxes especially since government expenditure as a proportion of GDP is already at historical highs. So they look critically at the ALP wish list and identify what we may want but can do without. Hence the case against funding of Gonski among other things.

    There are of course compelling arguments for all the ALP must-haves, and I don't pretend to have properly addressed these arguments. I too had compelling arguments for my wish list of must-haves with my Mum, but in the end a responsible adult took control.

    We too sorely need a responsible adult to take control of our budget deficit.

    Friday, 1 April 2016

    24-7 but barely skin deep

    With an ever increasing stream of News, especially in the lead up to the next election, our media are happy. There is no shortage of material to feed the 24-7 news cycle monster. There is an unprecedented range of serious issues to cover; -
    • Islamic Terrorism
    • Geopolitical power tremors; - rise of Russia and China to challenge the 'status quo"
    • Migration and asylum seekers
    • Climate change
    • US presidential elections
    • Senate reform legislation
    • Our economic challenges - deficits and budgets
    • Coping with growth in our cities
    • Developing the North
    • Indigenous Affairs
    • Education and Health
    • The federal election
    Yet of all these serious issues the one that seems to take a disproportionate time is the machinations of the politicians. Our media commentators are sidetracked into the spurious, the tawdry, the scuttlebutt. Revision after revision of past elections and PMs. A book on Abbott by Savva held attention of every media outlet for weeks. Last week it was about Abbott Turnbull relationship and whether Scott Morrison was 'in' or 'out' of the 'inner circle'. All this to the neglect of in-depth analysis.

    I accept that these personality politics are a valid topic for commentary and analysis. They are a great source of merriment and titillation for the journos and listeners alike. So coverage is relevant. But really !! How much time should be spent on the gossip as opposed to the serious?
    This last week coverage of the Abbott 'intervention' and the Morrison -Turnbull relationship were incessant on virtually every news and political medium. It seems the journos 'fiddle while Rome burns'.

    Where is the in-depth analysis?

    Dominated by these distractions our 24-7 media makes no time for the real work of journalists to provide both broad and comprehensive coverage of topics relevant to society. There are many relevant topics that are begging for attention (eg see the dot points above). Let me also suggest a few more specific subjects that deserve scrutiny; -
    • What is the relationship between Educational Outcomes and investment?
    • What is the underlying cause of aboriginal disadvantage ?
    • What should be the size of government? 
    • What is 'Fair' when it comes to economic matters?
    • Is there too much legislation? 
    • What is the proper role of government in Education? 
    • How much should a modern government spend on Health?
    • Where is the line between personal and state responsibility?
    • Is there a case against foreign ownership? 
    • How to fight corruption?
    • Should there be public funding for elections?
    Each of these question is relevant to our daily lives. Yet the news media pay scant attention to them.

    Must present all viewpoints

    These questions and many like them can be covered in many different media formats. But to inform the public any coverage must include all opposing viewpoints. Too often our media regards analysis as simply presenting one side of the story, often backed up by an 'expert'. A contrarian view is often not covered at all. Or even when it is, it is presented in unequal light through 'tricks of the trade', the order in which arguments are presented, being given unequal time, the words, tone and body language of the presenter and so on. That is simply advocacy and not journalism. The ABC has been particularly guilty of this approach, but it is really quite widespread on all our political commentary programs.

    My preference is to always present the topic in general terms by a journalist then advocates of each side of the argument face each other and present their views. It is only when a proposition is tested by direct confrontation with its opposite that the viewer starts to appreciate the complexities and nuances in an issue. 

    This format has been used very successfully on America's PBS Newshour program where topics are invariably covered both in depth and without bias by presenting both sides of an argument and allowing the adherents to face each other in debate. I should also mention that the interaction of all the journalists is exemplary. No aggressive tone or body language, no interruptions at all, but respectable discourse. (see Raising the standard of Australian Journalism )

    Code of Ethics

    To a great extent the success of the PBS Newshour program reflects the code of ethics it sets as a benchmark for all reporting on the program (see below).

    I could think of no better starting point for our own Australian media!