Let's use this election to raise the quality of the politics we get

This may be my 18th election as a journalist, but I confess I find the thought of a six-week campaign a bit daunting. Six weeks of unrelenting political argy-bargy?

Still, it does afford the luxury of one column discussing how we approach elections, before we get down to the many economic challenges the new government will face: climate change, wage stagnation, unaffordable home ownership and wasteful spending on infrastructure, not to mention integrity in government.

In elections, it’s always tempting to vote for the devil you know – a line pushed by all governments. But when you think about it, you see this notion is biased completely in favour of the incumbent. It seeks to shift the voter’s attention away from the government’s performance and play on our timidity.

What do you know about the other lot? Not much. How do you know they won’t be worse? You don’t. But, then again, they could be better.

If we always stuck to the devil-you-know rule, one side of politics would stay in power for ever. The other side would never get a go, and so would become more unknown – more unelectable – as each election passed.

Does that sound like the path to better government? Not to me, it doesn’t. In my experience, the longer governments stay in power, the worse they get. They get lazy and complacent. They worry more about helping their friends and less about keeping the rest of us happy.

They develop a sense of entitlement. They think they own the place and it’s their own money they’re spending. They get more and more reluctant to be held accountable by nosy outsiders and more inclined to keep their failures buried deep.

And that’s just the deterioration in government. The side kept out of power for year after year also goes off. Fewer and fewer of their leading lights have ever been a minister. They lose their corporate knowledge of how to run the country.

I’m old enough to remember the election of the Whitlam government in 1972, after 23 years in opposition. Wow, didn’t it show. And it wasn’t just their inexperience. They wanted to cram 23 years of “reform” into their first three years. Which, of course, is all they were given.

It wouldn’t be good for our governance if government changed hands every three or four years. But I long ago formed the view that no government – Labor or Liberal, federal or state, whether you voted for ’em or whether you didn’t – should be left in office for more than about 10 years.

With their ever-declining standards of behaviour, it’s tempting to give up on our politicians. “They’re all liars.” Actually, they rarely tell outright lies, though some do seem to have very bad memories.

What’s true is that they’re always saying things that are true from some limited perspective, but are calculated to mislead. “Record spending on health”, for instance, means provided you ignore inflation.

But when we give up on our politicians, it means they’ve won. They still get to run the place, but we’ve forfeited our right to a say in how it’s run. We’re happy for other people – including the pollies – to decide our fate. You want to make decisions that benefit your mates at my expense? Be my guest.

The trickier our politicians are, the more closely we should watch them. Whenever I speak to young people about politics, I warn them that the groups the politicians are most likely to screw are the ones that aren’t watching.

Another dangerous attitude is that there’s little difference between the two main parties. It’s true that both sides can be badly behaved, and that many policies are bipartisan. But there are differences between the parties’ approaches and, though the casual observer may find them hard to see, over time they do make a difference.

Paul Keating’s claim that when you change the government, you change the country, is right. Who we vote for in this election will change where we end up in 10 years’ time.

But the more the two major parties seem the same, the more people chose to vote for minor parties or independents – a trend likely to grow in this election. I regard this as a healthy development that will force the duopolists to lift their game.

As the number of independents grows, the possibility of a “hung” parliament increases. Both sides want us to believe this would be a bad thing, leading to instability. That’s the reverse of the truth. Minority governments are so common at state level that their presence goes unremarked.

And independents have a record of using their bargaining power to achieve reforms neither of the big parties fancy – fixed four-year terms in NSW, for instance – and moves towards greater transparency and accountability, such as freedom of information laws, and more resources for ombudsmen and auditors-general.

The way we vote in this election will make a difference. We should be using our votes to impose better quality governance on our wayward and self-serving political servants.

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This isn't America, so please stop acting like a Yank

If there’s one thing that annoyed me about 2021, it’s the way people have been aping all things American. Our financial markets copped a bad dose of it, the media got carried away, we looked to the Yanks – the smart ones and the crazies - to know what we should think and do about the coronavirus, and many on the Right of politics took their lead from Trump’s Republicans.

One on one, I like the Americans I know. But put them together as a nation, and they seem to have lost their way. We’ve long imagined the US to be the wellspring of everything new and better, but these days it seems to be racing headlong towards dystopia.

Who’d want to be an American? Who’d want to live there?

There’s nothing new, of course, about American cultural imperialism. You’ve long been able to buy a Coke in almost any country. Or, these days, a Big Mac or KFC.

But globalisation has hugely increased America’s influence in the world. Wall Street dominates the world’s now highly integrated financial markets. What’s less well appreciated is the way advances in telecommunications and information processing have globalised the news media. Call it the internet.

These days, news of a major occurrence in any part of the world spreads almost in real time. One thing this means is that you can read the latest from The Age or The Sydney Morning Herald in almost any country.

But another thing is that we get saturation coverage of all things America. These days, America’s greatest export is “intellectual property” – patents and copyright covering machines, medicines and software, but also books, films, TV shows, videos and recorded music, and news and commentary from all of America’s great “mastheads”.

Of course, the little sister syndrome applies. Just as Kiwis know more about us than we know about them, so we and people in every other country know more about the Americans than they know about us. Just ask John Fraser, Malcolm Trumble and “that fella from Down Under”.

And remember this: when you’re as big and as rich as America, you’re the best in the world at most things – but also the worst in the world. These guys win the Nobel Prize in economics almost every year but, no doubt, have the biggest and best Flat Earth Society. They have loads of the super-smart, but even more of the really dumb.

Back to this year’s Yankophile annoyances, as soon as Wall Street decided America had an inflation problem and would soon be putting up interest rates, our local geniuses decided we’d soon be doing the same.

Small problem – we don’t have a problem with inflation. Our money market dealers know more about the US economy than they know about their own. To them, we’re just a smaller, carbon copy of America. If you’ve seen America, you’ve seen ’em all.

The Americans have a lot of people withdrawing from the workforce – leaving jobs and not looking for another – which they’re calling the Great Resignation. Wow. Great new story. So, some people in our media are seizing any example they can find to show we have our own Great Resignation.

Small problem. Ain’t true. Following the rebound from the first, nationwide lockdown in 2020, our “participation rate” – the proportion of the working-age population participating in the labour force by having a job or actively looking for one – hit a record high. With the rebound from this year’s lockdowns well under way, the rate’s almost back to the peak.

A lot of America’s problems arise from the “hyperpolarisation” of its politics. Its two political tribes have become more tribal, more us-versus-them, more you’re-for-us-or-against-us. The two have come to hate each other, are less willing to compromise for the greater good, and more willing to damage the nation rather than give the other side a win. More willing to throw aside long-held conventions; more winner-takes-all.

The people who see themselves as the world’s great beacon of democracy are realising they are in the process of destroying their democracy, brick by brick – fiddling with electoral boundaries and voting arrangements, and stacking the Supreme Court with social conservatives.

Donald Trump continues to claim the presidential election was rigged, and many Republicans are still supporting him.

It’s not nearly that bad in Australia, but there are some on the Right trying to learn from the Republicans’ authoritarian populism playbook.

When your Prime Minister starts wearing a baseball cap it’s not hard to guess where the idea came from. Or when the government wants to require people to show ID before they can vote, or starts stacking the Fair Work Commission with people from the employers’ side only. Enough.

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Inheritance: the major life event no politician wants to mention

When I was growing up, my family didn’t have much. We lived rent-free in a succession of down-at-heel manses (the Salvos called them “quarters”), but my father’s stipend was a small one on which to support four kids.

Mum worried about where my parents would live after they retired but, with much scrimping and saving (including making my sisters hand over almost all their wages), they built and paid off a small cottage at Lake Macquarie, near Newcastle.

After my father died, Mum spent many impatient years in God’s waiting room, longing to be “promoted to Glory” and thus reunited with my Dad.

That was in 2004 but, though all she had was the cottage and a thousand or two in the bank, that was enough for the four of us to receive one or two hundred thousand each. By then, we were middle-aged and well established. It was nice to add it to the pile, but we didn’t desperately need it.

More people are receiving significant inheritances these days. They’re getting bigger and will get bigger still.

We worry that houses are becoming unaffordable, but the other side of ever-rising house prices is that inheritance has become an important event in most people’s lives. Many people look forward to it, and family disputes or unhappiness over wills is not uncommon.

But here’s a funny thing. When was the last time you heard a politician talking about inheritances? You didn’t. They never do. I’m sure they think about their own inheritance, but they never want to mention yours or anyone else’s.

In the 1970s, Australia became one of the few rich countries to abolish death duties (state and federal). People were so happy to see the end of them that death duties have become one of the bogeymen of federal politics.

Want to start a scare campaign? Spread a rumour that the other side has a secret plan to reintroduce death duties. Want to oppose limits on share franking credits? Claim it’s a form of death duties.

This is why, compared with other countries, we have little information – and even less reliable figures – on the size and dispersion of inheritances. The pollies fear that if they let the bureau of statistics ask people questions about their wealth, their opponents would jump to conclusions.

This explains why last week’s report from the Productivity Commission was “the first comprehensive research report on wealth transfers” and was initiated by the commission, not requested by the government.

The report explains that rising house prices are just the main reason inheritances are getting bigger. Another is that, with superannuation having been compulsory for about 30 years, more people are dying with unspent super balances. And, of course, family sizes are getting smaller.

The report finds that each generation has been wealthier than the previous one, though Baby Boomers have done particularly well. It found that $120 billion was transferred in 2018 – 90 per cent as inheritances and 10 per cent as earlier gifts – which was more than double that in 2002.

The average inheritance, we’re told, was $125,000. But that included a few large inheritances plus many much smaller ones. The average inheritance received by the wealthiest 20 per cent of recipients was $121,000, and by the poorest 20 per cent was about $35,000. Or so we’re told.

Not surprisingly, the children of rich parents received much bigger inheritances than the children of poor parents. Nor is it very surprising that the children of rich parents tend also to be rich, while the children of poor parents tend also to be poor.

But this may surprise: if you switch from focusing on absolute dollars to looking at relative size, you find that the smaller inheritances received by people without much wealth increase that wealth by a much higher percentage than the larger inheritances increase the wealth of already-rich recipients. The same thing can be seen in other countries’ figures for wealth transfers.

So, to a small extent, the growing prevalence of inheritance is reducing the gap between rich and poor. And, as the report’s authors stress, inheritance isn’t the main reason the children of the rich are also rich and the children of the poor also poor.

No, monetary inheritances explain only about a third. The rest is explained by “all the other things parents give their children – education, networks, values and other opportunities”. And remember, IQ is mainly genetic. Luck is another factor.

Did you notice how little of the wealth transfers gifts accounted for? The authors say they couldn’t find strong evidence of larger transfers from the Bank of Mum and Dad “despite popular belief”.

Sorry, not convinced. By their own admission, the data they’ve been using are “somewhat limited”. My guess is that more people receive inheritances than their figures show. The size of inherited amounts seems very low. As for parents having to cough up to help their kids buy a home, it’s become a big deal relatively recently.

So if the statisticians can’t find much evidence of it, that’s probably because they haven’t been asking the right questions.

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Net zero can't be reached by magic, but we can ease the pain

Scott Morrison’s long-term plan for net zero emissions by 2050 won’t impress anyone who’s been following Australia’s long and tortuous battle over climate change. But then, it’s not intended to.

His “learning” after miraculously wining the unwinnable election in 2019 is that whatever half-truths he tells voters will be believed by enough of them. Particularly since God is on his side, not the side of those other, untruthful and ungodly people.

No, his Plan – which is not a plan to achieve net zero, just an optimistic forecast that it will be achieved – is largely a political document, intended to be sufficient to convince those voters who aren’t paying attention that he’s “doing more” to cope with climate change.

His goal is not so much to fix the climate as to neutralise it as an issue at next year’s election. Climate change is an issue that naturally favours Labor. He wants all the focus to be on two issues that naturally favour the Coalition: the economy and national security.

He was walking a tightrope last week. He had to discourage voters in Liberal heartland seats who were worried about global warming from trying to send their party a message by voting for liberal independents – as they’ve done in Tony Abbott’s former seat and, briefly, Malcolm Turnbull’s – by convincing them he was serious about reducing emissions.

At the same time, however, he needed to reassure voters in the National Party’s various Queensland coal-mining seats that he wasn’t serious.

His solution was to produce a document that says: the boffins I hired assure me we’re on track to eliminate net emissions by 2050 but, don’t worry, this will be achieved by the miracle of new technology, without anyone feeling a thing.

There’ll be no new taxes, no new regulations forcing people to do things and no new costs on households, businesses or regions. We won’t shut down coal and gas production, and no jobs will be lost.

Does it sound a bit too good to be true? Voters in the Liberal heartland tend to be well educated and well informed. I doubt it will do the trick.

As we’ve seen with the pandemic, when our federal leaders fail to lead, others feel a need to fill the vacuum. The premiers, of course, but also many people from business and the community.

The latest report from Tony Wood and colleagues at the Grattan Institute, Towards net zero: a practical plan, offers a more realistic assessment of the challenge we face, says why we must get more achieved by 2030 and proposes ways this can be done without too much pain.

Perhaps because he’s not standing for office, Wood is frank about the difficulty in getting to net zero. The scale and pace of change involved in a net-zero target are “daunting, but they are outweighed by the consequences of the alternative.

“Factors outside Australia’s control will shape the flow of capital and the demand for our exports, while climate change itself will increasingly threaten Australians’ lives and livelihoods.”

Just so. Only a fool would believe we can avoid pain by doing nothing. We can seek to delay the pain, but that would relinquish our ability to influence our future, as well as making the pain greater.

The longer we leave it to make big progress towards net zero, the more pain we ultimately suffer. But also, our failure to throw our support behind the global push for earlier progress – which is what we’re failing to do in Glasgow this week – increases the risk that the goal of limiting warming to 1.5 degrees will be exceeded by the end of this decade, making it less likely we ever get back below it.

But while it’s foolish to think we can avoid pain, we shouldn’t imagine the pain will be intolerable. And here’s the trick: provided it’s done sensibly, paying a bit more tax and putting up with a bit more regulation is actually intended to reduce the amount of pain, and share it more fairly.

Wood accepts Morrison’s figuring showing that we’re likely to exceed the 26 to 28 per cent reduction in emissions by 2030 we promised to make in 2015. But we’ll still fall short of the 45 to 50 per cent reduction we’re being asked to make and other rich countries are agreeing to.

Wood’s plan for getting up to the higher target is neither heroic nor frightening. While we wait for the technological breakthroughs Morrison’s modelling assumes will come, we should get on with applying the technology we already have.

Generate electricity almost completely from renewables, and step up the move to electric cars and vans by tightening emission standards for petrol-driven cars, giving EVs tax breaks and supporting the spread of charging stations.

This is the first step towards the new green manufacturing industries that will provide the regional jobs for miners and gas workers to move to as other countries stop buying our coal and gas.

It won’t be easy or painless, but it’s not beyond the wit of decent governments.

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We risk becoming a business kleptocracy, with pollies showing how

I was startled the other day to hear a mate saying he was a bit depressed by the thought that Australia was turning into a business kleptocracy. What? Surely not. But the more I thought about it, the more I realised he was on to something.

I’ve written a lot in recent times about the failure of what lefty academics call “neoliberalism” and its quest for smaller government. Going back to the reign of the Howard government, both sides of politics have accepted the fashionable idea that, though there are plenty of services governments should continue asking taxpayers to pay for, the actual delivery of those services should be “outsourced” to the private sector.

Why? Because, as everyone knows, the public sector is inefficient, whereas the private sector is highly efficient. Because it would be so much better to have more of us working for business and fewer working for the various arms of government. The greater efficiency should lead to lower taxes.

I’ve pointed to instances where this mixture of ideology and tribalism has failed, leading to lower quality services without much evident saving to the taxpayer. In a democracy, it’s always right to hold governments ultimately responsible for their stuff-ups.

But is that the whole story? My mate’s looking at it from a different angle: what do the many failed attempts to hand service delivery to for-profit operators say about the ethics and trustworthiness of Australia’s business people?

That, for a surprising number of them, if you see some money lying around with nobody watching, you grab it? That while ripping-off customers is unethical and will soon get you a bad reputation, overcharging “the government” is a harmless, victimless crime? No human was hurt in the making of this profit?

One of the first government services to be outsourced was childcare. Before long, a single company bought up more than half the childcare centres, expanded overseas and then collapsed. To avoid leaving many parents in the lurch, government had to step in and sort it – at great expense.

Much of the sector remains privately owned. Last week the United Workers Union produced a report finding that three-quarters of the 12,000 enforcement actions taken since 2015 were against for-profit providers.

The Rudd government drew much criticism over the deaths of several people caused by faulty installation of pink batts during the global financial crisis. But what does it say about all the inexperienced operators using unqualified workers who flooded into the industry because they saw an easy buck to be made?

Bipartisan decisions to open vocational education to private operators and charge fees on a similar basis to the HECS loan scheme, attracted many new operators, some of which used salespeople offering free iPads to unsuitable youngsters who signed up for “free” online courses. Cost the taxpayer millions in debt write-offs.

The present government and the four big banks swore there was no need for a royal commission into possible misconduct but, when its hand was forced, we all remember how much misconduct was uncovered.

An accountants’ report for the royal commission into aged care found that, using a common definition of profit (earnings before interest, taxes, depreciation and amortisation) for-profit aged care providers in the second-highest quartile had a profit margin of 16 per cent, compared with 13 per cent for non-profits and 4 per cent for state government providers in 2018. Return on equity was 12 per cent for non-profit providers and 72 per cent for for-profit providers.

This week Sydney’s Star casino joined Melbourne’s Crown casino in being accused of turning a blind eye to suspected money laundering, organised crime and foreign interference.

Whether or not you think Treasurer Josh Frydenberg should have included in the JobKeeper scheme a provision to claw back assistance that proved not to be needed, it’s surprising to see some big companies announcing healthy profits while hanging on to their grants.

This week the Fair Work Ombudsman filed court proceedings alleging that the Commonwealth Bank had knowingly breached its wage deals with employees as part of a $16.4 million underpayment.

The ombudsman’s annual report for 2019-20 said it had recovered more than $123 million for 25,000 employees, including $90 million in underpayments that employers self-reported.

Some of our biggest and seemingly most respectable companies, including Woolworths, Coles, Wesfarmers’ Target and Bunnings, Qantas and Crown casino – not to mention the ABC – have admitted or been accused of “wage theft”. Underpayment seems standard practice in the restaurant industry.

We’re asked to believe these are innocent mistakes made by big corporations with big human relations departments and computerised payroll systems because industrial awards and agreements are so hellishly complex. Sorry, I don’t.

Much easier to believe a culture has developed that business’ contribution to the economy is so heroic that behaving with honour and even obeying penny-fogging laws is optional.

And how could business people have reached such a self-serving conclusion? Perhaps by observing the Morrison government’s unashamed rorting of grant programs and Saint Gladys’ sanctification of political pork barrelling: it’s not illegal and everybody does it.

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Fear is driving good economic policy out of the political market

When it comes to politicians, some are good shots and some are cheap shots. These days, the successful politicians – you wouldn’t call them leaders – have relied heavily on cheap shots. The cheapest being to spread fear.

The simple truth is that humans have evolved to continually check their environment for threats. Those who weren’t so obsessively cautious died from some misadventure before they’d managed to have kids.

One way of defining civilisation is that it’s the quest to remove all threats to life and limb. This is the largest role performed by government and the main thing our taxes pay for.

The welfare state – including universal health care and social security payments – is about removing the threat of people dying because they’re too old or sick or disabled to work, or just can’t find a job. The welfare state is a giant risk-sharing system, a massive insurance scheme.

But though our lives have become infinitely less risky – one reason we live much longer than our great grandparents - we go on scanning our environment for threats. Which is good news for the news media - and the reason most of the news they choose to tell us is about bad things – and for less-scrupulous politicians.

Politicians have long known how easy it is to play on our fears to their own advantage. In our more racist past, the “Yellow Peril” was a frequent issue in election campaigns. Scott Morrison’s AUKUS nuclear subs deal led pollster Peter Lewis to wonder whether Morrison would consider “tapping the Coalition’s longstanding brand advantage on national security for a fear campaign about China’s rising influence”.

As the independent economist Saul Eslake rarely loses an opportunity to remind us, in recent years it has suited politicians to greatly exaggerate the risk we face from terrorists. Both sides have been happy to play to our fears that all those people arriving in leaky boats would take our jobs and clog our highways.

But issues of economic management are far from immune to the fear treatment.

Since politics has become so professionalised – a career path you start on after university, rather than a contribution you make after succeeding in some other field – politicians are people who worry more about what they have to do or say to attain and retain power than about why they need power to fix all the things they believe need fixing.

The more we’ve come to distrust our politicians – all politicians – the more they’ve realised the only thing they can say that we’ll believe is how bad their opponents are. Ask a minister how the government’s policy would work and the answer you get is disparagement of the opposition’s policy.

Invariably, any plan to tackle pressing economic problems, or just make the economy work better, has pros and cons, winners and losers. Bingo. A pollie with a plan is a pollie fighting a scare campaign.

One man with a massive plan was economist-turned-pollie Dr John Hewson. He lost the unlosable election in 1993. Another man with a plan was Bill Shorten. He had to fight scare campaigns on every front.

This was partly the Liberals’ retaliation for the success of Labor’s under-the-radar social media Mediscare in the 2016 election. Guess what? The coming federal election will be the battle of the scare campaigns, with as few substantive policies as possible.

Gresham’s Law says bad money drives out good. A new law says scare campaigns drive out policy reform. Or maybe B-grade pollies drive out A-grade. When it comes to standards of political behaviour, it’s always a race to the bottom.

One price we pay for this is that it encourages pollies to take no thought for the morrow. “I’ll just get re-elected and cope with whatever problems arise, if any do.” It raises muddling through to bipartisan policy.

Another price is that we go through the ritual of electing governments with little knowledge of what they secretly hope to do – or may have to get on with if circumstances force their hand. Why risk outlining your intentions when it’s safer to make up stories about your opponents’ evil intent.

But not to worry. An ever-helpful media will spend most of the election campaign pressing them to bind their hands by “ruling out” this and ruling out that. Thanks, guys, that’ll really help.

Since the rise of Tony Abbott, the Coalition has benefited greatly from scare campaigns about the cost of acting to reduce carbon emissions.

But pressure from G7 leaders, international financial markets, sensible Liberal voters threatening to elect independents, and now even the Business Council, may force Morrison to campaign on the claim that moving from fossil fuel to renewable energy could do wonders for the economy.

It’s true – but who’ll believe him?

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Timing the economy to fit a pandemic election is a tricky business

So, with Scott Morrison pulling the new AUKUS pact out of his hat, will we be off to a khaki election? It would hardly be the first election conservative governments have won by promising to save us from the threat to our north.

But that’s why I doubt it. For an issue to dominate an election campaign, it has to be in contention. National security is an issue that always favours the conservatives, so Labor won’t be offering any objection to AUKUS or nuclear subs.

Similarly, an issue that should figure large in the campaign is whether the Coalition is too conflicted over climate change to be worthy of re-election. But that issue naturally favours Labor, so Morrison won’t want to take up that fight.

Which leaves? The economy, stupid. Until the end of June, the economy was looking in great shape, better than it had been even before the pandemic. But the arrival of the Delta variant means that, right now, more than half the national economy is back in lockdown, and looking mighty sick.

Does it surprise you that Morrison’s so keen to see the south-eastern mainland states out of lockdown and the others opening their borders, and is pressing the premiers accordingly? He desperately needs the economy back looking trim and terrific by March – May at the latest.

Add to this the business community’s pressure to get back to business – “don’t bother me with all the COVID details” – and the public’s impatience to get life back to normal. Sydneysiders have had enough of lockdowns; Melburnians have had more than enough – something even “Dictator” Dan Andrews can see.

So Gladys Berejiklian and Andrews have added their separate modelling by the Burnet Institute to Morrison’s National Plan modelling by the Doherty Institute – not to mention the independent modelling by the Kirby Institute – and announced their “road maps” for opening up their economies progressively once vaccination rates have reached 70 per cent and 80 per cent of the eligible population, expected in mid-to-late October and early November.

NSW is projected to be only about a week ahead of Victoria, and the gap between 70 and 80 per cent only about two weeks.

Everyone’s so pleased to be getting on with it that we risk losing sight of the high risks the two premiers are running. If all goes to plan, we’ll be back to a new (still-masked) normal by early next year, and the economy will be humming in time for a March election.

But models, based on a host of unmentioned explicit and implicit assumptions, inevitably give politicians and punters a false sense of certainty. No model can accurately predict something as mercurial as human behaviour. And, as we’ve learnt, a new coronavirus knows nothing of models and is a law unto itself.

The risk Andrews and Berejiklian face is that so many unvaccinated people contract the virus that our hospital system is overwhelmed, with people dying because they were turned away, leading to a number of deaths the public finds unacceptable. Whether they press on or turn back, the premiers would be in deep trouble.

The first risk comes from an ambulance and hospital system that, 18 months after the crisis began, is already at full stretch. The premiers tell us our wonderful health workers are coping; the message from ambos, doctors and nurses on the ground says they’re close to collapse.

The next risk comes from the inconvenient truth that our vaccination targets of 70 and 80 per cent of people 16 and older turn out to be just 56 and 64 per cent of the full population. That’s a huge proportion of unvaccinated friends and relations.

Remember, too, that these are statewide averages. They conceal less-vaccinated pockets of particularly vulnerable groups – the disabled, the Indigenous, for instance – and a city-country gap that leaves many rural towns hugely exposed, together with their limited hospital capacity.

Even the decision to move as soon as the 70 and 80 per cent targets are reached, rather than wait another fortnight for vaccines to become fully effective, carries a risk of higher infection.

Both the Burnet and revised Doherty modelling say starting to open up at 70 per cent rather than 80 per cent is likely to involve significantly higher infections, hospitalisations and deaths. Why take that risk just to avoid waiting another fortnight or so?

Morrison’s national plan called for all states to open up together once all had reached the 70 and 80 per cent targets, but now NSW and Victoria are going first. This increases the risk that, despite the other states’ closed borders, the virus will spread to them – where the lesser threat of catching the virus has caused vaccination rates to be much lower.

The risk for Berejiklian and Andrews is that they could be moving the Delta outbreak from the city to the country. The risk for Morrison is that, by pressing those two to open up early, he could be moving the outbreak from one half of the economy to the other.

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The real reason we’ve hit policy gridlock: fear of public opinion

You don’t have to agree we owe big business a living to know that our public policies are far from perfect and that every government’s job is to beaver away at improving them. Nor to know recent governments have tired of doing that. We each have our theories on why this has happened, but now someone sensible has analysed the reasons policy reform has ground to a halt.

John Daley, the man who spent the past decade building our leading non-aligned think tank, the Grattan Institute, having handed its leadership over to Danielle Wood, has just released his last report, Gridlock: Removing barriers to policy reform. It’s his magnum opus, worthy of study by everyone who thinks they know a bit about how modern Australia ticks.

Daley defines “reform” as “changes to policy that would improve the lives of Australians” (as opposed to improving the careers of our top business people).

He starts by demonstrating that the pace of reform really has slowed, and isn’t just old-timers remembering the glory days of Hawke, Keating and Howard and complaining about “the young people of today”. He dismisses the excuse that “you can’t float the dollar twice”, noting “there are plenty of other good policy ideas that governments have failed to adopt”.

Daley examines the fate of the many policy recommendations in the regular reports of the Organisation for Economic Co-operation and Development, but focuses on the success or failure of the 73 proposals made in Grattan’s reports over the decade to 2019, covering budgets, tax and welfare, retirement incomes, housing, transport and cities, health, energy (aka climate change) and education.

He finds that, of the 73 reforms, about a third were substantially implemented and two-thirds weren’t adopted. He identifies seven main potential blockages to good ideas going ahead: popular opinion, partisan shibboleths, vested interests, a weak evidence base, budgetary costs, upper house obstruction and federal-state disagreement.

By “partisan shibboleths” he means policy views that are contrary to the weight of policy evidence, but are almost universally held within a political party or party faction, while much less widely accepted in other circles.

“One of the functions of shibboleths is that they mark membership of a group – a ‘tribe’. A belief is likely to be more effective as a marker of membership when it is not rational – otherwise the belief would be shared by many people who are not part of the tribe,” he says.

It will surprise many that, by Daley’s reckoning, the biggest blocker by far is popular opinion, not opposition from vested interests or party shibboleths.

Of the 23 Grattan reforms that were substantially implemented, none was unpopular, and none was opposed by powerful vested interests without that opposition being countered by substantial independent evidence from government reports and the like.

Only one of the successful proposals ran counter to a party shibboleth, and only one involved a big budget outlay.

By contrast, the most common blockage among the 50 proposals that weren’t adopted was that they were unpopular with the electorate. That accounted for 15 of them.

After that came 10 blocked by party shibboleths (although three of these were also unpopular). Six of the remainder were actively opposed by powerful vested interests not countered by strong independent evidence. Three more were blocked because the evidence for them was poor or contradictory, and five were blocked because they involved large budgetary costs exceeding $2 billion a year.

As for the other potential causes of blockage, in only two cases could their rejection be attributed mainly to a failure to pass the Senate. Federal-state disagreement was a significant issue in only six of the proposed reforms that weren’t adopted, and all of them were probably blocked for other reasons.

It’s hardly surprising that popular opinion is a powerful force in a democracy. But this is worth remembering when we’re tempted to think that the power of vested interests and politicians’ corruptibility are the reasons governments don’t make the changes we think they should. Maybe they don’t because not enough people agree with us.

Daley finds that whereas, over the past decade – but not necessarily during the preceding “golden age of reform” – public opposition invariably doomed a reform proposal, popular support is no guarantee a policy will be adopted. However, it certainly improves the chances.

Where the immediate effect of a reform is to reduce taxes or prices for consumers, it’s likely to be popular. And public opinion has a tendency to focus on immediate effects rather than on promised longer-term benefits.

But liberal democracies have always been a delicate balance between popularly elected rulers and a whole series of institutions – ranging from the courts and central banks to expert administrators of everything from water allocation to child protection – designed to temper popular views.

People tend to trust these experts much more than politicians. And it’s long been accepted that the primary duty of elected representatives is to govern according to their judgment of what's in the interests of their electors, rather than simply following the opinion of their electors, Daley says.

Our not too distant past holds plenty of examples of governments pressing on with controversial policies, confident in the belief that public opinion can change once people experience the reality of a policy change they didn’t like the sound of.

When they do so, they end up winning a lot of respect – something they so obviously lack at present. “So it is surprising that unpopularity has become an automatic strike-out for policy reforms,” Daley says.

He concludes that, “in general, Australian governments today seem less willing to take on public opinion.” How have Australia’s institutions changed to make public opinion so much more decisive?

And what can we do to improve things? Good questions – for another day.

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Reality is catching up with our freeloading, populist climate deniers

Don’t be taken in by the Morrison government’s outraged cries of “protectionism” against the EU plan to impose a carbon tariff on our exports to Europe. It’s we who are in the wrong, failing to do what we should have to reduce emissions, in favour of politicking and populism.

What we’re seeing is just the reality of the world’s need to act to limit climate change catching up with a government and federal party which, since Tony Abbott used denialism to seize the party’s leadership from Malcolm Turnbull in 2009, decided to make global warming a party-political football: a way to beat your opponents, not a need to tackle the nation’s biggest problem.

It’s a condemnation of our business people that, when their own side of politics offered them a way to postpone the inevitable costs of adjusting to a low-carbon world, they happily embraced it.

It’s a condemnation of Australian voters that they were willing to allow their preferred party to tell them whether they cared or didn’t care about their children’s future. It should have been the other way round. “It’s all too hard; you do my thinking for me.”

But the game has moved on since those bad days, and now it’s not just the rest of the world that’s realised there’s no future in denying the reality of climate change and the need to act. As each day passes, we see more evidence that our own financial regulators, banks, investors and businesses are accepting the inevitable and modifying their behaviour.

All our state governments – most notably the Berejiklian Coalition government of NSW – have embraced the target that all other rich nations have embraced, net-zero emissions by 2050. Everyone can see that our refusal to take climate change seriously is wrong-headed and unsustainable.

So, apart from being a national embarrassment – we’re the person stopped for not wearing a mask, so to speak – it’s no bad thing that even other countries have stepped in to oblige our national government to shoulder its responsibilities.

As part of their plan to reduce their emissions by 55 per cent by 2030, the Europeans are toughening up the emissions trading scheme they introduced in 2005, which imposes a price on the carbon emissions of European industries.

To prevent this putting their industries at a disadvantage against imports from countries that don’t impose a similar carbon price on their own industries, the Europeans plan to use a “carbon border adjustment mechanism”, a tax on imported cement, fertilisers, aluminium and iron and steel to bring their carbon costs up to those faced by local producers.

This not only levels the playing field for local industry, it eliminates the incentive for producers to move their production to countries without carbon pricing.

These problems are ones we ourselves worried about when designing Kevin Rudd’s original carbon pollution reduction scheme (which the Coalition and the Greens voted down in 2010) and Julia Gillard’s carbon pricing scheme of 2012 (which was repealed by Abbott in 2014).

So what the Europeans want to do can’t honestly be called protectionism. It bears no similarity with the new import duties China’s imposing on some of our exports.

What’s true is that it’s a messy but necessary way of solving the “wicked” problem of climate change which, being global, can only be fixed by all of the world’s big emitting countries doing their bit. This is why we can expect many other big countries – starting with America, and maybe extending to Japan − to impose similar carbon border taxes on those countries that try to freeload on those doing the right thing, while helping to sabotage the good guys’ efforts in the process.

So there’s no reason for any of us who believe climate change is real and must be countered to have any sympathy for the Abbott-Turnbull-Morrison government. All its sins of expedience and populist politicking are finding it out. It took a bet that the rest of the world wouldn’t get serious, and we lost.

The point is, had we stuck with either the first or the second version of our own emissions trading scheme – which were actually designed to fit with the Europeans’ scheme – we wouldn’t have this problem.

By now our exporters would be paying our carbon tax to our government (or, if they weren’t yet, we could easily fix it) rather than paying the same tax to foreign governments. Why’s that a good idea?

From the beginning, this government has used climate change as nothing more than an opportunity to attack the other side of politics by pushing populist delusions that taxes are always and everywhere a bad thing. Bad for the economy. Yeah, sure.

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Morrison needs the guts to save business (and the unions) from folly

Talk about don’t mention the war. The great and good – who miss jetting off overseas several times a year – keep telling us the economy won’t recover until we’ve reopened to the world. Seems they just can’t bring themselves to focus on the obvious: it’s wages, stupid.

It’s self-evident that, ultimately, it would be bad for our economy for us to stay a hermit kingdom. But these worthies are wrong if they imagine that re-opening our borders would immediately strengthen the recovery.

It’s true that our airlines won’t recover until the borders open, and our universities will remain crippled. But because Aussies normally spend far more on touring overseas than foreigners spend touring here, our tourism industry (including every country town) has been doing nicely thank you from the temporary ban on Aussies doing their touring abroad.

Our econocrats have been busy extending the fiscal stimulus to get unemployment down and skill shortages up, in the hope this will bid up wages, and so give the nation’s households more to spend through our businesses.

Trouble is, business has grown used to covering shortages of skilled labour by importing workers on temporary visas, thus avoiding pushing up wage rates (and training costs). Get it? The real reason they want the borders re-opened ASAP is so they can go on playing this game.

But it’s just one of many stratagems our businesses have been using to keep the lid on wages: increased use of part-time and casual employment, labour hire companies, discouragement of collective bargaining and greater use individual contracts, evading labour laws by pretending workers are independent contractors, and even wage theft.

Little wonder “most Australians have not had a meaningful pay rise for almost a decade” and “living standards have stagnated”, as Brendan Coates, of the Grattan Institute, reminds us.

And little wonder the economy’s growth was so weak before the arrival of the pandemic, and threatens to go back to being weak once last year’s massive fiscal stimulus has dissipated.

Market economies are circular – the money goes round and round. And nowhere is this clearer than in the two-sided nature of wages. Wages are both the chief cost faced by most businesses, and the chief source of income for their customers.

See the problem? The more success the nation’s businesses have in keeping the lid on wage costs, the less money the nation’s households have to spend on all the things business wants to sell them.

When the two sides of the wage coin get out of whack, so to speak, business starts strangling the golden goose. Efforts to achieve a healthy rate of economic growth – and rising living standards – won’t be sustained.

This is a form of market failure called a collective action problem. What seems to makes sense for the individual business is contrary to the interests of business as a whole. But no business wants to be the first to stop skimping on wage costs for fear of losing out to its competitors.

The solution to collective action problems is for some authority to come in over the top and impose a solution on all players, thus leaving none at a competitive disadvantage and all of them better off in the end because their customers have more money to spend.

In other words, the only way for us to escape an anaemic, wage-less recovery is for Scott Morrison to intervene in the economy to get wages up.

Since the Fair Work Commission’s annual minimum wage case affects the wages of one worker in four, he should have intervened in the case – as has always been the feds’ right – to encourage the commission to give a generous increase after last year’s miscued pandemic minginess.

He should be trying to set a higher wage “norm” for private sector employers by giving his own federal employees a decent, 3 per cent annual pay rise, and pressuring the premiers – Labor and Liberal – to do likewise.

He should be legislating to protect Australian workers – and his own tax collections - from the ravages of the “gig economy”, which tries to hide its evasion of our labour laws behind its genuine and welcome technological innovation.

And the very least he should be doing is to beef up the Fair Work Ombudsman’s staffing and ability to stamp out wage theft which – purely by mistake, you understand – has become endemic. This outbreak of utterly unAustralian illegal behaviour tells us a lot about the ultimately self-destructive, anti-wage mania that is gripping the nation’s business people.

The obvious problem is that doing anything to increase wage rates is totally foreign to a Liberal politician’s every instinct. The Business Council would be incandescent. Nixon going to China is one thing, but a Liberal putting up wages? Never.

Sorry, but the world turns, and successful leaders must turn with it. We used to have a chronic problem with inflation; now it’s chronic spending weakness. The unions used to have too much power; now they have too little.

Even so, there’s one thing a Liberal Prime Minister could be doing to help without giving offence to Liberal sensibilities. It would actually be a blow against his union and Labor enemies that would do a lot to strengthen the economy’s prospects over the next four years, should he have the strength to put the economy ahead of his own political discomfort.

It would save Australia’s workers from the self-interest of the union elite and the mindless tribalism of Labor (not to mention the bullying of a certain former Labor prime minister), which is happy to give their unions mates what they demand because the Libs want to destroy industry super (which is true, but not a good enough reason to oppose a change that would leave workers and the wider economy better off).

The strange thing about last month’s budget is that, though it sees the econocrats’ wage-lifting strategy getting unemployment down to 4.5 per cent by about the end of 2023, it sees no growth in real wages for the next four years.

In evidence to a Senate committee last week, Treasury secretary Dr Steven Kennedy was obliged to explain this discrepancy. It’s because, starting next month, legislation requires compulsory employer contributions to their workers’ superannuation to be increased by 0.5 percentage points for five Julys in a row, until they reach 12 per cent of wages in July 2025.

Relying on strong empirical evidence, Treasury has assumed that employers will cover 80 per cent of the cost of this impost by raising wages by that much less. The nation’s workers will thus be forced to save rather than spend a significant portion of what would have been their future pay rises.

The nation’s greedy, ticket-clipping super-fund managers play on everyone’s instinctive fear that they aren’t saving nearly enough to provide for a comfortable retirement. It suits the union elite (and their gullible Labor mates) to go along with this deception, even though Grattan’s Coates (and Treasury before him, and the recent Retirement Income Review since him) has demonstrated that, after including a part-pension, most workers will have plenty.

So the Labor tribe wants to force the nation’s employees to live on less during their working lives so they can live like royalty in retirement. Why doesn’t Morrison seek to reverse this Labor-initiated legislation? Because he fears he’d lose votes in the labour movement’s ensuing fear campaign.

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Banks: bad guys one minute; put-upon credit providers the next

With Scott Morrison hit by a seemingly unending series of headline-making problems, his standard techniques for dealing with them are getting easier to detect. He sees them not so much as policy deficiencies to be rectified as political embarrassments to be “managed” away.

One technique is to tough it out, hoping the media caravan will soon lose interest and move on. When that doesn’t work you give the appearance of responding to the outcry without actually doing much. Call an inquiry of some sort – maybe, if the pressure continues, even three or four different inquiries – then say you can’t act, or even discuss the matter further, until the inquiry has reported many months hence.

I’m finding it hard to avoid the suspicion this is how he’s dealing with the huge – and hugely expensive – problems in aged care. When Four Corners came up with (yet another) expose of the mistreatment of old people in institutional care as the election approached in 2019, he neutralised it as an election issue by promising a royal commission.

The commission’s hearings and interim report confirmed our suspicions that mistreatment was widespread. While releasing the interim report, Morrison announced that quite some millions would be spent on measures that sounded like they should help ease the problem – a bit.

When he released the commission’s final report early this month, he announced more millions of spending on this and that, promising the government’s full response to the commission’s multi-billion-dollar recommendations would be revealed in the May budget.

He seemed open to the idea of using an increase in the Medicare income-tax levy to cover the massive cost, but Treasurer Josh Frydenberg lost little time in hosing down that possibility. Aged care has hardly been mentioned again from that day to this.

Why do I have a terrible feeling that, should aged care not come back on the media agenda between now and budget night, what’s announced will be only a token response to the continuing and worsening problem?

You see a similar trickiness in the government’s response to the widespread complaints about the behaviour of the banks and other financial institutions. Those complaints led to repeated calls for a royal commission.

Malcolm Turnbull and his treasurer, Morrison, went for ages fobbing off these demands – denying there was a problem. But when some government backbenchers threatened to support an opposition motion for an inquiry, Turnbull had no choice but to relent.

The hearings by former High Court judge Kenneth Hayne revealed endless instances of financial “misconduct” and received months of media coverage.

Hayne’s final report lobbed just a few months before the 2019 election. Morrison’s successor as Treasurer, Frydenberg, immediately announced he was “taking action on all 76 recommendations” and “going further”. This apparently wholehearted acceptance of the recommendations defused bank misconduct as an issue in the election campaign.

It’s now two years since Frydenberg’s commitment. Professor Kevin Davis, of Melbourne University, says the government has yet to implement 44 of the commission’s recommendations, and has turned its back on five key reforms.

Frydenberg initially accepted the proposal to outlaw the practice of mortgage brokers being remunerated by the lending banks with a commission based on a percentage of the size of the loan. But, after industry lobbying, Frydenberg let it stand, replacing it with an obligation that brokers act in the best interests of their customers.

Hayne’s very first recommendation was that the existing “responsible lending obligation” – making it illegal to offer credit that was unsuitable for a consumer based on their needs and capacity to make payments – not be changed.

But, last September, Frydenberg announced that this obligation had been costly to lenders and was delaying the approval of loans. The present principle of “lender beware” would be replaced with a “borrower responsibility”. Legislation to bring this about is awaiting approval in the Senate.

It’s a “reform” that’s been welcomed by the banks, but vigorously opposed by Davis, various legal academics, consumer groups, the Financial Rights Legal Centre, Financial Counselling Australia – and my co-religionists at the Salvos, whose free Moneycare financial counselling service is offered at about 85 sites across Australia.

Like all the critics, the Salvos note the “asymmetry of knowledge and power” between consumers and the providers of financial services. The credit products offered have become increasingly complex and opaque. “Our experience is that understanding these products requires an above average level of literacy and financial literacy,” they say.

The proposed reduction in the scope of responsible lending obligations would reduce regulatory oversight and thus increase the risks for borrowers. “Our overwhelming evidence [from] delivering financial counselling in Australia for the past 30 years is that credit remains too easily accessible and that this has devastating consequences for the people we support . . .

“For people already experiencing, or at risk of, financial hardship, easier access to credit may mean they will get caught in a cycle of increasing debt. This has significant implications for physical and mental health.”

I fear the Salvos are right.

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Neglect of aged care more proof of PM's blokey blind spot

Everywhere you look, Scott Morrison and his ministers have a women problem. You see it even as he uses the media focus on allegations of sexual assault as cover for his efforts to convey the aged care royal commission’s damning report to the too-hard basket.

When you think about it, aged care is the ultimate women’s issue. Of those receiving aged care, women outnumber men two to one. Who does most of the worrying about how mum or dad are being treated – and probably most of the visiting? More likely to be daughters than sons.

The commission’s report found that the root cause of the common ill-treatment of people in aged care is the insufficient number, inadequate training and low pay of aged care workers. And who are these overworked, undertrained and woefully paid age care workers? Almost all of them are women.

Now do you see why aged care conditions have been low on the priorities of successive governments? Not enough rich white men jumping up and down.

Aged care is huge. Despite understaffing, it has 366,000 paid staff, 68,000 volunteers and 28,000 contractors – about 3 per cent of the whole workforce.

The report found that at least a third of people in residential and at-home care had experienced substandard care. It identified food and malnutrition, dementia care, use of physical and chemical restraints and palliative care as needing urgent improvement.

Aged care used to have prescribed staffing ratios, but they were removed as part of the push to get for-profit providers into the “industry”. The report found that what regulation of facilities exists isn’t enforced because the government knows it’s not paying enough to make quality care possible.

The providers will tell you there’s a shortage of properly qualified personal care workers and nurses. Probably true. But those who are qualified are less attractive because they have to be paid more. Registered nurses have more choice about the industry they work in, so they must be paid more and treated better.

Lack of trained workers is a two-sided problem. If there was more demand for qualified workers and they were offered better pay and conditions – permanency, for instance – more would go to the trouble and expense of acquiring qualifications to supply.

Providers complain of high rates of staff turnover. They don’t mention that when they overwork, underpay and give workers no guarantee of regular work – or delegate their responsibilities as employers to a labour-hire company - a lot of workers soon leave in search of something less terrible - say, picking fruit in the blazing sun at Woop Woop.

It’s a funny thing: workers who are given little loyalty don’t tend to give much back. You’ve no idea how selfish workers can be. Don’t they know I’m trying to increase profits? Next time I see a Coalition MP I’ll give him (the hims are more receptive) an earful about how the dole’s so cushy these young bludgers don’t want to work.

It takes a lot of dedication to deal with the bodily needs of elderly people you’re not related to. But if you can find the motherly types, surely they won’t mind if you pay them peanuts. The full-time award rate for base-level aged care workers is $21.09 an hour, a fraction less than for base-level cleaners and just $1.25 above the Australian minimum wage.

Much of the poor treatment of people arises from the use of casualisation to save on wages and the resulting high rate of staff turnover, which makes it hard for residents and their carers to develop relationships.

The report found that “older people get the best care from regular workers they know, who respect them and offer continuity of care as well as insights into their changing needs and health requirements”.

In contrast, casually employed carers can struggle to “provide continuity of care and form ongoing relationships with older people”.

Professor Kathy Eagar, of the University of Wollongong, has said that “the staff are so busy that all they get time to do is tasks, like helping with toileting, showering, dressing and feeding residents. A lot of residents report they’re relatively lonely because, even if there are staff, they don’t have the time to talk to them.”

“For people with dementia, it helps to have the same people every day. If I don’t know my name because I’ve forgotten it, but the care worker does know my name, that’s a whole different proposition to if I don’t know it and my carer doesn’t know either,” she said.

Morrison says he’s focused on getting more jobs in the economy. Eagar has estimated that implementing the report’s proposals on staffing would increase the aged care workforce by about 20 per cent.

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Ross Garnaut's new plan to lift us out of mediocrity

If your greatest wish is for the virus to go away as we all get vaccinated, and then for everything to get back to normal, I have bad news. You’ve been beaten into submission – forced to lower your expectations of what life should be bringing us, and our nation’s leaders should be leading us to.

Without us noticing, we’ve learnt to live in a world where both sides of politics can field only their B teams. Where our politicians are good at dividing us and making us fearful of change, but no good at uniting us, inspiring us and taking us somewhere better for ourselves and our kids.

Scott Morrison hopes that if he can get us vaccinated without major mishap and get the economy almost back to where it was at the end of 2019, that should be enough to get him re-elected. He’s probably right. Even his Labor opponents fear he is.

Fortunately, whenever our elected leaders’ ambition extends little further than to their own survival for another three years, there’s often someone volunteering to fill the vision vacuum, to supply the aspiration the pollies so conspicuously lack. Among the nation’s economists, that person is Professor Ross Garnaut, of the University of Melbourne.

In a book published on Monday, Reset: Restoring Australia after the pandemic recession, Garnaut argues we need to aim much higher than getting back to the “normal” that existed in the seven years between the end of the China resource boom in 2012 and the arrival of the virus early last year.

For a start, that period wasn’t nearly good enough to be accepted as normal. Unemployment and underemployment remained stubbornly high – in the latter years, well above the rates in developed countries that suffered greater damage from the global financial crisis in 2008-09 than us, he says.

“Wages stagnated. Productivity and output per person grew more slowly than in the United States, or Japan, or the developed world as a whole,” he says. (If that weakness comes as a surprise to you, it’s because our population grew much faster than in other rich countries, making it look like we were growing faster than them. We got bigger without living standards getting better.)

So that wasn’t too wonderful, but Garnaut argues if that’s what we go back to, it will be worse this time. Living standards would remain lower, and unemployment and underemployment would linger above the too-high levels of 2019.

We’d have a lot more public debt, business investment would be lower and we’d gain less from our international trade, partly because of slower world growth, partly because of problems in our relations with China.

Continuing high unemployment would devalue the skills of many workers, particularly the young. Many of our most important economic institutions – starting with the universities – have been diminished.

The new normal would be more disrupted than the old one by the accumulating effects of climate change and continuing disputes about how to respond to this.

So Garnaut proposes radical changes to existing economic policies to make the economy stronger, fairer, and to treat climate change as an opportunity to gain rather than a cause of loss.

At the centre of his plan is returning the economy to full employment by 2025. That is, get the rate of unemployment down from 6.5 per cent to 3.5 per cent or lower – the lowest it’s been since the early 1970s.

This would make the economy both richer and fairer, since it’s the jobless who’d benefit most. Returning to full employment would take us back to the old days when wages rose much faster than prices and living standards kept improving.

Returning to full employment, he says, would require a radical change to the way businesses pay company tax and the introduction of a guaranteed minimum income, paid to almost all adults at the present rate of the dole, tax-free and indexed to inflation.

It would involve rolling the present income tax and social security benefits into one system. This would benefit people working in the gig economy and other low-paid and insecure jobs, and greatly reduce the effective tax rates that discourage women and some men from moving from part-time to full-time work.

Changing the basis of company tax would cost the budget a lot in the early years but then raise a lot more in the later years. The guaranteed minimum income would cost a lot but would become more affordable as more people were in jobs and paying tax.

Much of the economic growth Garnaut seeks would come from greater exports. Australia’s natural strengths in renewable energy and our role as the world’s main source of minerals requiring large amounts of energy for processing into metals creates the opportunity for large-scale investment in new export industries. We could produce large exports of zero-emissions chemical manufactures based on biomass, and also sell carbon credits to foreigners.

Of recent years, Australia has fallen into the hands of mediocrities telling us how well they – and we – are doing. Surely we can do better.

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Canberra's latest innovation: politics without policy

The most remarkable development since we returned to work this month is Scott Morrison’s barefaced announcement that the government has enough on its plate rolling out the virus vaccine and getting unemployment down, and so there’ll be no attempt to deal with any of our many other problems before the election late this year or early next.

There could be no franker admission that we live in an era of leaders who lack the ambition and courage to lead. Only on those problems so acute the mob is baying for the government to “Do Something!” will something be done – or grand announcements made that give the appearance it’s being done.

It’s Prime Minister as odd-job person. You don’t look for ways to secure our future, you sit there waiting for pressing matters to turn up: a light bulb that must be changed, a dripping tap that needs a new washer. Acute problems, yes; chronic problems, through to the keeper.

It’s the confirmation of what all but the rusted-on voters have long suspected: that our politicians are motivated far more by the desire to attain and retain office than by any great desire to make the world a better place for us to live and bring up our kids.

The opposing political parties continuously accuse each other of being “ideological” – of being mad free-marketeers or tax-and-spend socialists – but this serves mainly to con along their side’s true believers and conceal from the rest of us the political class’s overriding objective: to win the next election by fair means or foul.

It’s not hard to decipher Morrison’s thinking. Like the premiers, his popularity has soared following our successful containment of the pandemic, so his prospects of re-election are high – provided nothing goes wrong between now and then.

That does mean he must ensure there are no major glitches in the rollout of the vaccine – to which he will have to pay much attention – but he needs no further achievements to improve his chances of winning.

Indeed, anything else he attempts to fix offers more chance of losing the votes of the disaffected than of adding votes to his existing pile. According to informed sources (aka well-briefed gallery journalists), there’s little enthusiasm for “reform” of taxation, religious freedom, industrial relations or superannuation.

The government’s existing proposals for modest changes to industrial relations rules – about which the unions are making such fuss at present – will be put to the Senate next month but, should they fail to pass, will be dropped.

Some Liberal backbenchers’ urgings that the legislated phased increase in compulsory employer super contributions from 9.5 per cent of wages to 12 per cent be reversed (which I support) and the success of the non-profit industry super funds be sabotaged in other ways (which I don’t), have yet to be decided on, but will probably be rejected.

We’re told that Morrison’s thinking in turning away from any further policy improvement is that, after all the upheavals of 2020, the voters just want everything to calm down for a while. But that’s probably always true of many politician-weary voters. Sounds to me like a convenient rationalisation for a deeply cynical and self-serving political calculation.

You might expect this to hugely disappoint a policy wonk like me, but I confess my feelings are divided.

Morrison’s decision strike cuts both ways. He won’t be doing many things he should, but he won’t be doing many things he shouldn’t. The need for tax reform, for instance, is always with us – and urgent only in the minds of tax economists, who think of little else, and those well-to-do urgers hoping it will involve them paying less while others pay more.

There are, of course, many big problems he’ll be doing nothing to improve: the misregulation of aged care, the need for better-considered mental healthcare, the way the universities have been hung out to dry during the pandemic, the neglect and destruction of technical and further education, the many respects in which governments help oldies (including their parents) screw the younger generation.

The most urgent and important area of neglect is, of course, our response to climate change. But the federal Coalition is so deeply divided on the issue – and Morrison so hog-tied by loudmouth Liberal backbenchers and the Neanderthal Nationals – that it’s a delusion to expect genuine progress without a change of government.

And maybe not much then. As we speak, Labor is working on how many of its own policies to throw overboard. As Labor was reminded by its shock defeat in 2019, the trouble with policies is that they’re much harder for you to sell than for your opponents to misrepresent.

A big part of the reason politicians have become so lacking in policy courage is the way election campaigning has become so negative. After last time, the coming election is shaping as the battle of the scare campaigns.

Bulldust will fly on both sides. Both sides are readying themselves by having as few policies as possible. An unthinking electorate is being rewarded with policy-free elections. How edifying.

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Whatever our other problems, there’s much less crime to fear

When I went to Sunday school we used to sing “count your many blessings, name them one by one”. It’s good advice, enthusiastically endorsed in recent times by the practitioners of “positive psychology”. But it’s not something the media do much to help us with. So you may not have noticed that we see far fewer stories about the rising crime rate and shocking descriptions of particular crimes.

That’s because, after rising for about three decades, Australia’s crime rate has fallen sharply since 2001. When the dog doesn’t bark, the media rarely notice. But this is a blessing we should be more aware of. Not everything about the world is going to the dogs.

In a book published this week, The Vanishing Criminal, Dr Don Weatherburn and Sara Rahman seek to answer the obvious question: why something that just kept getting worse has now been getting better for a decade or two. Weatherburn, formerly director of the NSW Bureau of Crime Statistics and Research, is now an adjunct professor at the University of NSW. Rahman is a researcher working in the NSW government.

First, the back story. The figures show that during the 1970s, ’80s and ’90s, Australia faced rapidly rising rates of break-and-enter, motor vehicle theft, robbery, stealing, assault and fraud.

The international crime survey of 2000, covering 25 countries, showed us having the second-highest rate of car theft, the highest rate of burglary, the highest rate of contact crime – covering robbery, sexual assault and assault with force – and the highest overall level of crime victimisation, the authors say.

At that stage, one in 20 Australian households was falling victim to burglary every year, one in 60 was losing a car to theft, and one in 20 people over the age of 15 was being assaulted, according to the Australian Bureau of Statistics.

Although the rates of particular crimes varied widely between suburbs and towns, no state or territory escaped the rise. “The spread of lawbreaking into the suburbs led to rapidly rising public concern, fuelled by an insatiable media and political appetite for stories about rising crime,” the authors say.

At the time, the country was in the grip of a heroin epidemic, which many believed to be responsible for the rise in theft and robbery.

But then, for no obvious reason, crime rates turned from going up to going down. This, too, occurred across all states and territories.

The authors say national recorded rates of property crimes fell precipitously after 2001. By 2017, break-and-enter had fallen by 68 per cent, car theft by 70 per cent, robbery by 71 per cent and other theft by 43 per cent.

The rates for murder fell by 50 per cent, attempted murder by 70 per cent and the overall rate of homicide (including manslaughter) by 59 per cent.

Rates of assault and sexual assault continued to increase, but since 2008, the annual prevalence of actual assault fell by a third, and threatened assault by almost a quarter.

The big exception is recorded rates of (adult) sexual assault, which were higher in 2017 than in 2001, which were higher than in 1993. This is probably due to increased willingness to report offences to police.

Internet fraud has increased, of course. So has use of methamphetamine – “ice”. But unlike heroin, the authors say, ice has so far not made any measurable impression on rates of theft and robbery. It’s probably affecting violent behaviour, of course.

So why the marked decline in so many forms of crime?

The authors note that crime rates have fallen in the United States, Canada, Britain, New Zealand and many European countries. But the decline has differed in its timing and degree in those countries, suggesting there is no single cause.

Rather, in explaining Australia’s decline, they see a coincidence of various factors. With homicide, they find that all the decline has been in gun deaths, rather than the more common knife attacks. So John Howard’s gun buy-back scheme may get some credit, but they think the best explanation is the steady improvement in emergency medical treatment.

Their best explanation for the fall in assaults is the decline in alcohol abuse among young people, in response to rising alcohol prices. Changes in some factors – such as the fall in heroin dependence – have had knock-on effects.

A reduction in the number of offenders relative to the number of police, and a decline in the size of the market for stolen goods, have allowed other factors – such as the risk of getting caught – to exert a greater influence.

Fortuitously, public pressure for the police to get better results reached its peak just as knowledge about what works in policing began to affect police strategy and deployment.

And all this occurred against a backdrop of low inflation, rising real wages and falling unemployment. Crime rates and unemployment do tend to rise together – something for Scott Morrison to remember as he contemplates putting out his Mission Accomplished banner.

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Economies malfunction when we can't trust our leaders

With the federal, NSW and Victorian governments all mired in questionable conduct but refusing to accept responsibility for their actions, a reminder of the value of ethical behaviour to the good governance of the nation is timely.

A report, The Ethical Advantage, by John O’Mahony, of Deloitte Access Economics, and commissioned by Dr Simon Longstaff’s Ethics Centre, reminds us that while ethical behaviour and trust are different things, a long record of ethical behaviour builds trust, which can be quickly destroyed by unethical behaviour.

To be successful, business leaders need the trust of their customers, employees and suppliers. The less people trust them, the harder they must work – and the more they must spend on marketing and security – to remain profitable.

It’s true you can go for a fair while abusing the trust of others, but when eventually they wake up, they tend to be pretty dirty about it. For years our banks took advantage of their customers’ trusting inattention by, for instance, failing to advise loyal customers of the better deals they were offering new customers. Now they wonder why their customers hate and distrust them.

Years of declining standards of behaviour on both sides of politics, and refusal to accept responsibility when things go wrong, have led to declining levels of trust in our politicians, and lowering respect for our leaders.

The imminent threat posed by the pandemic prompted our federal and state leaders to stop bickering and pull together, with oppositions anxious to be co-operative. The result was a marked increase in public confidence in the Prime Minister and premiers – a bonus Queensland’s Annastacia Palaszczuk banked on Saturday.

But no sooner had the threat eased – but not passed – than we were back to politics as usual. Our leaders don’t lead, they try to score points off their opponents. Great way to kill their newfound popularity.

Unsurprisingly, the report finds that there remains significant scope for us to raise our levels of ethical behaviour and trust. The Governance Institute of Australia’s ethics index, based on an annual survey of Australians’ perceptions of the level of ethical behaviour in society, gave us a “somewhat ethical” score of plus 37 on a scale of minus 100 to plus 100.

This was for last year, before the pandemic, and down from plus 41 in 2017. Across industries, healthcare was seen as the most ethical, with a score of plus 67. Then came education, charities and not-for-profits, and agriculture. Banking, finance and insurance was seen as the least ethical industry, with a score of minus 18.

According to the 2020 Edelman Trust Barometer, just 47 per cent of Australians trust business, government, media and our non-government organisations to do the right thing. Worse, none was seen as strongly competent or ethical – with government being seen as the least competent and ethical out of all our institutions.

Remembering the “steady stream of state and federal political scandals”, the report says, this weak ethical performance is no surprise. Royal commissions have uncovered unconscionable behaviour in religious and other institutions, widespread misconduct in the banking, superannuation and financial services industry, and alarming lapses in aged care quality and safety.

Behaving ethically requires us think a lot about what’s right and wrong in the things we do, the way we treat people and the choices we make. For some action to be legal doesn’t make it ethical. Grant Hehir, Commonwealth Auditor General, says “we care not only about whether an entity is following the legal rules, but also whether it is acting within the intent of the law and community expectations”.

Nor is an action ethical because “it’s what everyone does”. Professor Ian Harper, of Melbourne University Business School, says “we all have values and moral convictions – ethics is about having the courage to apply these in the real world”.

The report says that, apart from the pandemic, we’re facing big challenges to our future, including from climate change, an increasingly risky geo-political environment, new technology and the future of work, and reconciliation with Indigenous Australians.

The actions needed to cope with these challenges “will require leadership of a quality that enables society to cohere in the face of external and internal pressures that would otherwise cause divisions.

“In these circumstances, trust will be at a premium – especially for key institutions. In turn, this will depend on the quality of ethical decision-making by individuals, groups and organisations,” the report concludes.

When the unethical behaviour of business and politicians causes them to lose the public’s trust, governments lose the ability to make tough “reforms”. As the pandemic demonstrates, only when politicians can clearly be seen as acting in the whole public’s best interests will they be safe at the polls.

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Privatisation crusade is core business for tribal Libs

Critics of this year’s strange budget, which claims to be “all about jobs” but is really about helping some people and not helping others, accuse Scott Morrison and his faithful Treasurer of being “ideological”. That’s not a sensible criticism.

To accuse someone you disagree with of being “ideological” is dishonest and hypocritical. It misuses the word, turning it into a meaningless term of abuse. It implies that you’re being ideological, but I’m not.

To be ideological is to hold to a system of beliefs about how the world works and how it should work. So every adult who hasn’t wasted too much of their life watching reality television rather than thinking has an ideology — some better thought through than others.

When I accuse you of being “ideological”, what I’m really saying is that your ideology differs from my ideology and I think yours is wrong.

But I object to the term also because it’s an attempt to intellectualise and dignify a motivation far less noble: our deeply evolutionary instinct to form ourselves into tribes. My side, your side. Us and them. Good guys versus bad guys.

In politics, partisanship leads to polarisation and polarisation to policy gridlock and impotence. For example, look at the dis-United States. The richest, smartest big country in the world has been hopeless at coping with the pandemic, with many, many deaths. The Democrats and Republicans refuse to co-operate on anything. They’ve even turned mask wearing into a partisan issue.

It’s not so surprising that Morrison and Josh Frydenberg have been happy to justify their widely criticised budget choices by reference to their own ideology, saying the budget strategy “is consistent with the government’s core values of lower taxes and containing the size of government, guaranteeing the provision of essential services, and ensuring budget and balance sheet discipline”.

These “core values” are elaborated on the Liberal Party website. “We work towards a lean government that minimises interference in our daily lives, and maximises individual and private sector initiative.”

“We believe ... in government that nurtures and encourages its citizens through incentive, rather than putting limits on people through the punishing disincentives of burdensome taxes and the stifling structures of Labor’s corporate state and bureaucratic red tape.”

“We believe ... that businesses and individuals — not government — are the true creators of wealth and employment.”

To summarise, the individual is good, the collective is bad. Private good, public bad. Government is, at best, a necessary evil, to be kept to an absolute minimum.

Sorry, but this is just tribalism — the Liberal private tribe versus the Labor public tribe — masquerading as eternal truth. It’s phoney party-political product differentiation. Vote Liberal for low taxes; vote Labor for high taxes. Really? I hadn’t noticed much difference.

Private good/public bad makes no more sense than its left-wing opposite, public good/private bad. Both are a false dichotomy. It takes little thought to realise that the two sectors of the economy have different and complementary roles to play. One could not exist without the other, and we need a lot of both.

The individual and the collective. Competition and co-operation. Both sectors do much good; both can screw up. The hard part is finding the best combination of the two somewhere in the middle, not at either extreme.

As Frydenberg has often said, the budget’s strategy is to bring about a “business-led” recovery. This explains why most of the money it spends or gives up goes to business as tax breaks. Tax cuts and cash bonuses to individuals come a poor second and direct spending on job creation has largely been avoided.

Frydenberg justified this by saying that “eight out of every 10 jobs in Australia are in the private sector. It is the engine of the Australian economy.”

Surely he’s exaggerating, I thought on budget night. But I’ve checked and it’s true. Or rather, it is now. These days, 89 per cent of men and 81 per cent of women work in the private sector, leaving just 15 per cent of workers in the public sector.

In 1994, before the mania for privatisation and outsourcing took hold, 28 per cent of employees worked in the public sector (with two-thirds of those working for state governments).

The electricity, gas and water utilities used to be almost completely public sector. Now they’re 78 per cent private. Sale of the Commonwealth Bank, state banks and insurance companies mean the finance sector is almost totally private.

The sale of Qantas and Australian Airlines, ports and shipping, airports and much public transport means employment in the transport industry is 90 per cent private. Despite state government ownership of schools, TAFEs and universities, employment in education is now only 54 per cent public.

Despite health and community services being largely government-funded, three out of four workers are privately employed.

See what’s happened? With some help from their rivals, the Libs have worked tirelessly over the past 25 years moving workers from the Labor public tribe to the Liberal private tribe. Haven’t you noticed the big improvement?

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Memo generals: China is our inescapable economic destiny

There must be times in Australia’s history when people look at the nation’s economic experts and wonder if they have any idea what they’re doing. Today, the boot’s on the other foot: people who care about our economic future are wondering what game the nation’s defence and foreign affairs experts think they’re playing.

The concern of many business people and others has been most eloquently expressed by Dr John Edwards, former Reserve Bank board member, in a paper for the Lowy Institute. He’s in complete agreement with Scott Morrison’s assertion last year that “even during an era of great-power competition, Australia does not have to choose between the United States and China”.

Edwards says Australia made its choices long ago, and is now locked into them. “It chose its region, including its largest member, China, as the economic community to which it inescapably belongs. It also long ago chose the US as a defence ally to support Australia’s territorial independence and freedom of action.”

There is a good deal of tension between these two choices, but no possibility that either will change, he says. “Like many other enduring foreign policy problems, it cannot be resolved. It must instead be managed.

“However, it can only be managed if the Australian government has a clear and united understanding of Australia’s interests, and competent people to execute policies consistent with that understanding.”

Australia’s trade with East Asia has been growing faster than its gross domestic product and its trade overall for many decades. Our exports to East Asia now account for more than a sixth of our total GDP. Half of these exports go to China, and now amount to 10 times those going to the US.

Australia is meshed with China’s economy not only because China is such a big market for our exports, but also because China is the major trading partner of our other major markets in East Asia: Japan, South Korea, Taiwan and the ASEAN countries.

Today, East Asia and the Pacific form a regional economic community that, in terms of trade and investment between its members, is only a little less integrated than the European Union, and very much more integrated than the North American region.

“Already selling all it can to Japan and Korea, Australia would not find new markets for iron ore and coal to replace even a part of what it now sells to China. Nor could it easily replace exports of wine, meat, dairy products and manufactures to China. The largest share of foreign tourists is from China, as is the largest share of foreign students,” Edwards says.

“Without trade with China, Australia’s living standards would be lower, its economy smaller and its capacity to pay for military defence reduced.” (Generals – armchair and otherwise – please note.)

“It is difficult to imagine plausible circumstances in which an Australian government would voluntarily cut exports to China. Australia cannot and will not decouple from China’s economy any more than Japan, Korea, Taiwan or Southeast Asia can, wish to, or will,” he says.

Australia’s stance towards the US-China competition must therefore be informed by a recognition that what injures China’s prosperity also injures Australia’s prosperity. Economic "decoupling" of China from North America or Europe is not in Australia’s interests.

But “nor will Australia decouple from its security arrangements with America. The US will remain the primary source of advanced military technology for Australia. It will also remain the primary source of security intelligence.

“And no hostile power can entirely discount that possibility that the US would come to Australia’s military assistance if required. The security arrangements Australia has with America are therefore sufficiently valuable that no Australian government would voluntarily depreciate them, let alone relinquish them.”

The tension between these two pillars of Australia’s engagement with the world will continue for decades to come. The centrality of these relationships makes it all the more important for Australia to conduct them carefully and cleverly, always guided by a notion of Australia’s long-term interests, we’re told.

“China’s growing role on the world stage, its authoritarian government, its suppression of internal dissent, its territorial claims and defence build-up in the South China Sea, together with the deterioration of the relationship between the US and China, make this tension increasingly difficult to manage.

“Thus far, the cleverness Australia increasingly needs is not evident in its handling of relations with China . . . Refusing to take sides in the trade and technology competition between China and the US is Australia’s declared policy. It was wisely adopted – but not deftly implemented,” Edwards concludes, with admirable restraint.

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Weak inflation tells us: it's the demand side, stupid

Despite the remarkable 1.9 per cent fall in the consumer price index in the June quarter, we face no imminent threat of deflation. But it’s not as improbable a fate as it used to be.

Apart from in headlines, one negative quarter does not deflation make. Deflation occurs when price falls are modest, widespread and continuous, the product of chronically weak consumer demand. Businesses cut their prices as the only way to get people to buy what they’ve produced. Their goal is not to make a profit, but to reduce their losses.

Paradoxically, deflation – which was dogging Japan not so many years ago – is to be feared. Why buy now if prices are falling? Why not wait until they’re even lower? But the longer consumers wait, the more prices fall. And the faster they fall, the more businesses cut production and lay off workers. The economy implodes.

By contrast, our fall was produced by cuts in two key government-controlled prices – for childcare and pre-schools – plus petrol prices. We already know these falls will largely be reversed in the present quarter.

Even so, all the other prices in the CPI basket of goods and services rose during the quarter by just 0.1 per cent. People are reluctant to buy during recessions, so businesses don’t raise their prices for fear of selling even less. It’s a safe bet inflation will stay negligible for as long as the recession lasts and for as long as it takes the economy to recover.

Trouble is, we had unduly weak price growth long before the coronasession. Our rate of inflation’s been below the bottom of the 2 to 3 per cent target range for almost six years. The Reserve Bank has been struggling to get it up into the target, "Goldilocks" range without success.

Point is, when you have a problem with high inflation, you have a problem with the supply side of the economy. Supply isn’t keeping up with demand, so something needs to be done to get the economy’s production growing faster and more efficiently.

Conversely, when inflation isn’t a problem but high unemployment is, you have a problem with demand side of the economy. Consumers aren’t spending enough and businesses aren’t investing enough.

But too-low inflation isn’t the only indicator that demand and supply are out of whack. Another sign is record low interest rates. They’re low not just because inflation is so low, but also because “real” interest rates – the lenders’ above-inflation reward for letting other people use their money – have also fallen.

Why? It can only be because the amount of money savers have available to lend (the “supply of funds”) exceeds the amount home-buyers, businesses and governments want to borrow to cover their investment spending (the “demand for funds”). That real interest rates have been falling for years is another sign that our problem is chronic deficient demand, not inadequate supply.

One consequence of this is that the authorities’ ability to encourage borrowing and spending by cutting interest rates has been exhausted. So “monetary policy” has done its dash, leaving “fiscal policy” – the budget – as the only instrument left for the government to use to support the economy during the recession and then to stimulate growth.

If it wants more spending in the economy, the government must do it itself.

There’s just one difficulty. During the period in the 1970s and ‘80s when it was clear the developed economies had a major problem with inflation – meaning the supply side was chronically unable to keep up – the conventional wisdom emerged that the short-term management of the economy should be left to monetary policy, with fiscal policy reserved to help with other, medium-term issues.

This approach fitted neatly with the conservative side of politics’ preference for Smaller Government. Our Liberals have come to view macro-economic management in largely party-political terms: we use monetary policy; Labor uses fiscal policy. We follow neo-classical economics; Labor follows Keynesian economics. We cut government spending and taxation; Labor loves to spend and tax. We worry about deficient supply; Labor worries about deficient demand.

This political ideology approach to macro management can’t cope with the developed economies’ tendency to switch from long periods when supply and inflation are the big problem to long periods when demand and unemployment are the big problem.

You can see this in the Morrison government’s obvious reluctance to spend enough to limit the economy’s contraction to two successive quarters, despite our continuing struggle to contain the virus. You see it in Morrison’s desire to move on to “reforms” aimed at improving the supply side.

Both political sides see that wage growth is too weak at least partly because the productivity of labour is improving only slowly. But the Liberals’ ideological approach to macro tells them the answer to low productivity is more supply-side reform, whereas a pragmatic, more contemporary analysis says it seems obvious that if consumer demand is weak, business investment will be weak and if business investment in the latest technology is weak it’s no surprise that productivity improvement is slow. It’s the demand side, stupid.

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