Thursday, August 12, 2010

School building program not 'timely' in averting slump

WE'LL say it again. Labor's capital works stimulus spending could not have "saved" Australia from recession, as Julia Gillard claims. This is because the crisis had passed by the time the hard hats got on to the school building sites.

This was clear from last week's review of the Gillard Building the Education Revolution, which showed that less than half of the $14 billion earmarked for primary school halls had yet to be spent by June this year.

And now an Auditor-General's review of the $550 million stimulus spending on 137 "strategic" local government projects similarly finds that the construction work ramped up after the recession risk had passed.

Labor's stimulus promised a "timely" counter to the global financial crisis that hit in September 2008. The $550m of strategic projects, part of the Regional and Local Community Infrastructure Program, were supposed to be concentrated last year.

The Treasury's stimulus estimates assumed that "timely and efficient" program delivery would result in "minimal lags" in boosting the economy. But the Auditor-General finds the scheme was flawed from the start, mismanaged along the way and plagued by council porkies [lies].

A "large proportion" of projects were not ready to proceed, were always going to take longer "than necessary to provide timely stimulus" and were hit by "high project delivery risk". By the end of last September, only a quarter of the 137 projects were reported as having started. By then, however, the economy already had been growing for three quarters in a row.

And Reserve Bank governor Glenn Stevens assessed the economy's downturn to be "mild".

Even then, the Auditor-General finds, local councils and the federal government seriously over-reported the construction progress. The Commonwealth Co-ordinator-General's progress report claimed that "over $248m" had been paid to councils by the end of last year "based on their construction progress". But the Auditor-General disapprovingly finds that 97 per cent of the $247.8m actually paid to councils by then "did not relate to construction progress".

Much of the money was paid well in advance of actual construction. And the Auditor-General's random site visits found that council reporting was not "sufficiently accurate". In NSW, construction of a Bega Shire Council aquatic centre did not start until February this year, even though reporting to the federal government claimed work had begun in October last year.

Labor can stick to its combined 2009 and 2010 stimulus estimates, but it can't claim this stimulus avoided a recession because much of it was pushed into this year, when the economy already had dodged the bullet.


The Labor party takes credit that is not its due

A comprehensive look at all the facts involved by Niall Ferguson, Laurence A. Tisch Professor of History at Harvard University

GFC should stand for Gillard's Fraudulent Claim. The claim in question is that it was the fiscal stimulus injected by the Labor government that saved Australia from much more serious recession. According to one recent election ad, "Labor did what it had to do to avoid recession and protect jobs." The ABC's Kerry O'Brien unthinkingly recycles this line when asking Tony Abbott how he would have saved the 200,000 jobs Labor "created". It must have been music to Julia Gillard's ears when Nobel Prize-winning economist Joseph Stiglitz gave her his seal of approval recently. He praised the government's debt splurge as "one of the best-designed Keynesian stimulus packages of any country".

Now, I like Stiglitz. Unlike some Nobel prize winners, he hasn't allowed the Swedish central bank's gong to super-size his self-esteem. But this is not the best argument I have heard him make, for three reasons.

First, he is appraising his own handiwork, since he was involved in the package's design. Second, he falls into the "post hoc ergo propter hoc" trap. Just because event B, an economic recovery, happens after event A, fiscal stimulus, doesn't mean that A caused B.

True, the Australian economy has posted just one quarter of negative growth since the crisis began in 2007, a far better showing than any other English-speaking economy. Unemployment peaked at 5.8 per cent, whereas in the US it rose above 10 per cent.

But is Stiglitz sure -- I mean graduate-seminar sure, as opposed to Fairfax-press sure -- that this was really due to the government's $52 billion cash splash?

There's no denying the magnitude of the Australian handouts. If you rank developed countries' fiscal packages for the period 2008-2010, Australia's ranks third as a percentage of GDP, behind only the US and South Korea. So why did Australia's stimulus work so much better than America's? Spare us the fable that it was better designed. After the home insulation fiasco and the now-proven waste on new school halls, that can't withstand serious scrutiny.

Which brings me to problem two with the argument Labor saved Oz. Strangely, the professor has overlooked the other, more plausible explanations for Australia's relative outperformance. Step forward five candidates with a better claim to the credit: 1. Lady Luck 2. The Howard government 3. The RBA 4. China 5. The mining industry.

Let's begin with providence. Unlike the US, not to mention Britain, Ireland and others, Australia didn't have a sub-prime-fuelled housing bubble. Sure, prices went up substantially, but they also started correcting in 2003, well before others, and subsequent cost increases reflected a structural gap between supply and demand rather than crazy credit.

Australia's ability to circumvent the worst of the crisis was also assisted by better regulation -- with a single, empowered banking and insurance regulator in Australian Prudential Regulatory Authority -- and the banking system's strong domestic focus. Aussie banks were not looking to emulate their American peers, because they didn't need to. And the misfits that did exist, Allco and Babcock & Brown, weren't exactly Lehman Brothers. Any weak links in the system were easily gobbled up by the four majors, which now rank among only a handful of the world's AA-rated banks.

All this meant the extreme credit tightening that began in 2007 didn't trigger a surge in defaults or bank failures, as it did elsewhere. On the contrary, thanks to high immigration and fertility, it's the Australian population that has been surging.

Next, let's give at least partial credit to the previous government. The reason it was possible for Labor to run a deficit of 5 per cent of GDP was due to the fiscal position it inherited from the Howard government. With net debt essentially eliminated, Australia had the healthiest fiscal position of any developed economy outside Scandinavia. That is, of course, the biggest difference between Oz and the US, which entered the crisis with an already large structural deficit.

But perhaps most galling is how Labor can claim all the credit for the recovery when the RBA surely played at least as large a part -- and many would argue larger. The RBA cut its cash rate from 7.25 per cent to 3 per cent when the crisis struck. But the speed with which the RBA has been forced to raise rates -- faster than any other central bank in the G20 -- suggests the size of Labor's stimulus was unwarranted. The RBA was clearly concerned that Labor's stimulus risked over-heating the economy and stoking inflation. This is the downside of superfluous stimulus. As economist Christopher Joye has shown, small business, residential mortgage, personal and credit card interest rates have all been materially higher under the Rudd-Gillard government than under Howard.

The RBA's key role has in fact been the management -- through benign neglect -- of the exchange rate. That sharp depreciation relative to the dollar (down from 98 to 62 cents) probably did as much as anything to generate an Australian recovery. The trade statistics tell the story. Net exports surged from 2.4 per cent of GDP in the first quarter of 2009 -- the nadir of the GFC -- to 5.4 per cent in the first quarter of this year.

And that brings us to a further reason for Australia's buoyant performance: the role of China, now the country's biggest customer. If there was one place where stimulus really worked, it was China, though notice that it took the form of government-induced expansion of bank lending, rather than deficit finance along classic Keynesian lines. That Chinese stimulus sucked in a ton of imports from all China's Asian trading partners, including Australia.

Finally, let's raise our hats to Aussies who did the most to meet China's booming demand: the diggers. Yes, the Australian mining industry, which accounts for nearly 10 per cent of GDP and circa 40 per cent of total exports, moved heaven and earth -- well, certainly earth -- to satisfy China's needs. We see the fruits of this effort every day, most recently in the record $3.6 billion trade surplus in June, the biggest in history.

Unfortunately, the government is doing the very reverse of tipping its hat. On the contrary: it's dipping its hand into the mining companies' pockets. Even the watered-down proposal cobbled together by Gillard with three mining giants will still tax iron and coal companies' so-called "super profits" at a rate of 30 per cent. "Super" currently means anything above 12 per cent returns on investment.

There are so many things wrong with this proposal that it's hard to know where to begin. First, it's a classic bit of arbitrary, inconsistent government action, moving the goalposts when the game is going in one direction -- rather as if Bill Clinton's administration had suddenly decided to tax companies on their market valuations in 1998. Second, it's the kind of thing that alienates foreign investors -- and Australia's vast mineral wealth cannot be fully tapped without their involvement.

Third, it capriciously penalises smaller firms in just two sectors. Fourth, it arguably infringes the traditional rights of the states to the mining industry's revenues. Finally, taxes of this sort are justified only when the revenues raised are devoted to accumulating alternative assets, to compensate future generations for the depletion of non-renewable assets by today's Australians. But that is not what Labor proposes to do with the $10.5 billion the tax will raise over the next two years.

Stimulus? Yes, sure, Labor has stimulated the Australian economy, in the same way that Ned Kelly used to stimulate the economy of Victoria.


"Glare" stops solar panel plan

How dare the sun be so glary?

A STATE Government-backed scheme to use the sun to power towns in Queensland's scorched Outback has run into the dust due to concerns about the light. Cloncurry in the state's northwest was meant to be the centrepiece of a radical $30 million plan to use solar energy to heat water and generate electricity, cutting carbon emissions and reliance on diesel – and eventually taking the town off the grid.

But The Courier-Mail can reveal that three years after its launch, instead of a forest of 8000 mirrors the project consists only of four test panels and a fake tower behind a locked gate.

It was forecast that by now, a "groundbreaking" 10-megawatt solar thermal power plant would be using steam from water heated in a graphite block to drive a turbine to generate electricity. It should have been supplying power to the homes of 4828 residents.

The Government, which faces criticism over a series of expensive infrastructure blunders, is blaming the project's failure on concerns about light pollution. Boffins are now looking into concerns that residents could be exposed to blinding light from the plant.

Energy Minister Stephen Robertson has broken the official commercial-in-confidence line of the state's commercial partner, Sydney-based Lloyd Energy Storage, to reveal the technological glitch. "There was a glare issue exceeding what they consider to be appropriate levels," he said. "If the glare issue cannot be addressed the project will be moved somewhere else in Cloncurry or it will not proceed."

The State Government earmarked $7 million for the project. Of that, $900,000 had been spent so far, he said. "We are talking about a sunrise industry here, no pun intended," Mr Robertson said. "Sometimes we've got to take a risk with taxpayers' money to prove up this new technology."

He admitted the "timelines had blown out", and said the University of Melbourne had been commissioned by Ergon Energy and Lloyd Energy to prepare an independent report into "glare issues". He said the report would be finalised and publicly released later this month.

He could not say if it was the four panels on the outskirts of Cloncurry that had been deemed "too glary" or those of another project. The company is trialling the same technology at Lake Cargelligo in NSW.

Premier Anna Bligh touted the project for Cloncurry in November 2007, aiming to take a personal interest. Lloyd Energy and the SMEC Group were to contribute $24 million. Subject to feasibility studies, the system was expected to be suitable for any remote town or towns on the fringe of grid power, such as Thargomindah, Quilpie, Cunnamulla, Normanton, Charleville or Julia Creek.


Mental health claims overblown

By Dr Tanveer Ahmed, a consultant psychiatrist.

There has never been a federal election where mental health has received such attention. Led by the charismatic and politically savvy Patrick McGorry, criticism of the government's lack of commitment to the sector has been ceaseless. He has been further aided by the advocacy group Get Up!.

The rise of mental health services to the heady heights of the national conversation is unprecedented, but not coincidental. The net of mental health has never been cast wider and at a time when almost all human distress, at least in the West, is transmitted through the language of psychology.

It underlines a fundamental shift in our beliefs about human nature, from a long held view that people were resilient to a current belief that we are inherently vulnerable to external circumstance. And once the diagnosis of illness is systematically offered as an interpretive guide for making sense of distress, people are more likely to perceive themselves as ill.

McGorry and the former adviser to the government on mental health who resigned in disgust, John Mendoza, have suggested in several interviews that one in two of us will suffer from a mental illness at some stage in our lives. According to such hyperbole, only the common cold can command a wider reach in medicine.

Criticism from the profession has been minimal, largely due to a belief that any extra money for the sector can only be a positive. But a psychiatrist in Adelaide, Jon Jureidini, has combined with a researcher to dispel the myths being espoused by eminent but nonetheless empire-building doctors.

Several of the claims being made are false and are being repeated by Get Up! despite being clearly informed of their errors.

According to the researchers, one-third of Australian suicides are not due to inappropriate discharges from hospital, as McGorry and Mendoza claim. The data they initially used was not related to a random sample from the community, but a group of community mental health patients. This oversight means their claims are out by a factor of 30 - seven preventable suicides out of 750 as opposed to 38 out of 113. Nor are 750,000 young Australians being denied desperately needed mental health services, the premise upon which Headspace and early intervention centres are based. McGorry's claims are based on a 2007 survey where a quarter of 16- to 24-year-olds experienced a mental disorder in the previous year but only 23 per cent of them accessed treatment.

But satisfying a checklist of symptoms does not correlate with a need for treatment, as the very architect of the diagnostic system within psychiatry's Diagnostic and Statistical Manual, Robert Spitzer, has said.

In one of the most heralded critiques of modern psychiatric diagnosis, Professors Wakefield and Horwitz, in their 2008 book The Loss of Sadness describe how context has been removed from what is called illness within mental health.

Instead, as long as people satisfy a criteria for impairment they can be considered ill. Grief-like or behaviourally disturbed reactions to significant losses, such as that of a job, divorce or bankruptcy, automatically qualify as illness. Only the death of a loved one is classified separately.

Much of the posturing around mental health funding does not mention the significant contribution of drug and alcohol abuse that overlaps with what passes for mental health, especially in the field of early psychosis. This is likely to be calculated, given drug use raises questions about morality and individual responsibility whereas mental health elicits a non-specific sympathy.

Psychiatric diagnosis has enormous cultural power in many other fields, from the marketing of antidepressant medications to preventive efforts in schools, general medical practice, disability claims and many legal proceedings. What might seem like abstract, technical issues concerning these definitions have important consequences for individuals and how their suffering is understood and addressed.

Psychiatry has always been the most political of medical disciplines and tends to produce the best doctor-politicians. McGorry is a shining example. While the sector could certainly do with more funds, the exorbitant claims regarding untreated mental illness are indicative of a blurring of the lines between illness and normal, human responses to adversity.


Australia is too laid-back about immigration

Ayaan Hirsi Ali says below that Australians have a right to know those wishing to join their society will respect their traditions and principles. Culturally imcompatible Muslims could threaten Australian society and values

Compared with Europe, Australia is a very fortunate country. It is familiar with the challenges of immigration. It has been absorbing people from far away from the times of the settlers and convicts from Britain to the era of mass exoduses after World War II. And it has natural borders that can be relatively easily controlled. All of this may lead Australians to feel they know how to handle immigration. But such complacency could be dangerous.

The first challenge is to acknowledge and appreciate what is actually going on in the supply of immigration. When in 1951 the Geneva Convention was drafted, the UN reported that about a million people, mostly from Europe, were displaced, seeking asylum or qualified for a refugee status. Today the number is 40 million, mostly from Asia, Africa and the Middle East.

Second, the culture of these potential immigrants is of utmost relevance when it comes to assimilating those welcomed into host nations like Australia. In the 1940s and 50s, Australia was essentially admitting Europeans, nearly all of them Christian. The Indo-Chinese who came later were also assimilated, even though they were sometimes subjected to harsh discrimination. But it will be less easy to assimilate immigrants whose culture is not only different but who may actually reject the Australian way of life.

About 70 per cent of the 40 million displaced peoples, asylum-seekers and refugees are Muslim.

Nor do Muslims come to Australia only as refugees. People from Britain have long been the single largest group of settlers coming to Australia. But the most recent data for all permanent additions to the population by country of birth shows that people from predominantly Muslim countries account for a larger share: 12.5 per cent of new settlers, compared with 11.9 per cent from Britain.

Unlike other migrant groups, Muslims are often targets for their radical brethren. Financed with oil money, agents of Islamism set up indoctrination centres called madrassas in refugee camps. Their teachings are fundamentally incompatible with Australian values. They preach submission to Allah before individual freedom.

Women are groomed to be submissive baby machines; gay people are deemed unfit to live; a worldview is cultivated that obliges the Muslim to distance himself from the unbeliever and never to copy the ways of the infidel.

If assimilation programs have the ambition of integrating the first generation and fully assimilating the second, then Australian policy-makers and citizens must be aware of this reality. Europeans underestimated it.

The result is that the Islamists have been able to establish enclaves and networks in some of the continent's biggest cities. Finally there is the issue of national security and national interest. Australia is a staunch ally of the US and has supported America's war on terror in both Iraq and Afghanistan. There remains a serious threat of retaliation from the worldwide web of Islamists.

Their methods are subtle: sleeper cells, the transfer of moneys to charities that aid or abet terrorism, the support of the gradual Islamisation of Australia, the setting up of institutions of dawa (persuasion, activation of passive or lapsed Muslims, conversion of non-Muslims); the rejection of democratic values and particularly the abuse of the welfare state.

A serious immigration debate needs to acknowledge these alarming realities. This time really is different. So what should Australia's immigration policy be?

Australia is a booming economy that clearly needs to and will increase its population.

Higher fertility alone is not a sufficient answer. Creating policies that help Australian women find a balance between work and the care of children is also necessary but not sufficient. An immigration policy is needed that serves the economic needs of Australia while at the same time maintaining social cohesion.

National security at a time of terrorism that transcends borders and peoples must be the other key criterion in determining who gets to be an Australian visitor or resident and who qualifies for citizenship.

An asylum-seeker from Pakistan who is idling his hours away in a refugee camp might be the right person that a miner in Kalgoorlie can train. But given Afghanistan and Pakistan's problems with Islamism, it is reasonable to ask questions about more than just his engineering degree.

How much schooling in madrassas has he had? How loyal is he to the creed of martyrdom? Is he willing to reject the political and social dimensions of Islam? Is he willing to learn the language, values, customs and convictions (in short the Australian way of life)? Will he promise to abide by the law -- Australian, not sharia?

Such questions can and should be asked of whoever is seeking admission into Australia. Merely to be fleeing a failed state or a civil war is not sufficient.

Nor can it be enough simply to have a family member already resident in Australia. Even a proven skill of use to the Australian economy is not a sufficient qualification. Australians have a right to be reassured those wishing to join their society will respect their traditions and principles.

It is abundantly clear from my visit to the Museum of Immigration that previous generations of immigrants were more than ready to sign up for those principles. But the world has changed -- and Australia's immigration policy must change with it.


Mark Latham ambushes Tony Abbott at Penrith RSL, angry veterans tell former Labor Party leader where to go

They used to call Derryn Hinch "The human headline" but "Biffo" Latham has that crown at the moment. The rage and hate that drives the Left is barely confined in him

MARK Latham crashed a veteran affairs policy event by Tony Abbott in Sydney, confronting the Opposition Leader in a packed media scrum. "Long time, no see," Mr Latham said to his former political opponent as the pair met at the Penrith RSL in western Sydney. "Are you brave enough to shake my hand?"

The pair shook hands before Mr Latham, now employed by the Nine Network's 60 Minutes program, quizzed Mr Abbott. He asked Mr Abbott about any role he may have had in the 2003 imprisonment of Pauline Hanson. "I've interviewed Pauline Hanson and we'd like to know, are you willing to apologise for your role in putting her in a prison," Mr Latham said.

"I don't think that's a fair assessment of my role," Mr Abbott responded. Mr Abbott was investigated by the CMC over whether he played an improper role in the chain of events which led to Ms Hanson and One Nation co-founder David Ettridge being convicted and jailed for electoral fraud. The CMC found that while Mr Abbott set up a fund to underwrite a civil legal bid to deregister One Nation in the lead-up to the 1998 federal election, his actions did not amount to misconduct.

Mr Latham went on to ask the Liberal leader about his immigration policy. "I was encouraged at the start of the campaign when you and your spokesperson Scott Morrison said you would be slashing the migration program. "But then it's turned out you've just got the same target as the Gillard Government."

Veterans were upset telling Latham to "piss off".

The confrontation followed a bizarre standoff in which Mr Latham, under the glare of TV lights, stood feet firmly planted about four metres from Mr Abbott. Journalists fired questions at him, but the former Labor leader maintained that he was simply covering the election for Channel Nine.

One veteran shouted ``Piss off Latham this isn't about you".

But despite the overwhelming animosity towards him in the room, Mr Latham calmly poured himself a cup of tea and waited at the centre of a media scrum at the Penrith RSL Club.

He then followed the media pack upstairs and sat in the front row where Mr Abbott was holding a press conference. Mr Latham then challenged Mr Abbott to get infrastructure priorities right. "The real priority is the Glenfield to Leppington line," Mr Latham said. "Will you fast tracked the real priority ... recognising it may not be in a marginal seat."

Mr Abbott said he was pleased Mr Latham was still concerned about former constituents. "Good on you for that." But Mr Abbott said his infrastructure commitments were part of a well thought out plan.

Mr Latham made two attempts at a question in the packed conference before Mr Abbott turned to him. He remained silent as Mr Abbott answered further questions including one on the rising empoloyment rate.

Mr Abbott said he was disappointed at the rise but warned that if further stimulus was needed it had to be the right kind of stimulus, with wastage.

Mr Latham insisted he had supporters when he tuned up to the RSL. While veterans told him to go away _ ""piss off Latham, this is about veterans" _ Mr Latham said there was at least one supporter who encouraged him ... In a newspaper column in 2009, Mr Latham described the nation’s soldiers as “meatheads”. He said they had "limited intelligence and primeval interests in life", in a column in The Australian Financial Review.


1 comment:

Paul said...

So silent for so long, then suddenly he's everywhere. Latham never illustrated the "yesterday's Man" principle better.