Wednesday, July 04, 2012

Thanks, Gough, for giving us all a chance at university

This is utter rubbish:  The usual Leftist garbage.  It was Menzies who made universities open to all  -- if you had the ability.  And it was a Labor government that ditched Gough's scheme

The Commonwealth scholarship scheme set up by Menzies made the reasonable assumption that only the top third of high school graduates would do well at university and gave that subset both a living allowance and free tuition at university.  I myself got a Commonwealth scholarship  -- and I too come from a poor working class background.  And I ended up with a Ph.D.

Whitlam on the other hand made university "free" to all -- a policy so expensive and wasteful that it was abandoned by the next Labor government  -- under Bob Hawke.  Hawke reintroduced fees and gave loans instead of grants.

I think the Menzies scheme was by far  the most fair, generous and effective of the three systems.  The expansion of university education beyond the top third has simply led to lower standards and a mass of graduates who are no more employable than they would be without a degree.  The unemployed graduate was virtually unknown in my day.  These days it is common.  And a lot of the employed ones are working at McDonald's

So I was able to cruise through university despite having no rich father (and no support of any kind from him at all).  My son, by contrast, also cruised -- but only because I was readily able to pay for his upkeep and his fees  -- which I did.  So which system was fairer to the poor?

Note that I appear to be the same age as the writer below, Geoff Cooper, so he had the same opportunities that I did. 

Gough Whitlam's visionary tertiary education scheme opened up doors for many.

Officially I am two years too old to be classed as a member of the baby boomer generation but I was one of the many fortunate people whose life was absolutely changed through the policies of former prime minister Gough Whitlam, Australia's greatest ever visionary.

As a working-class kid from the then very poor working-class suburb of Yarraville, it was beyond my wildest dreams to even consider having a tertiary education.

Even completing secondary education to sixth form (year 12) was not on my radar.

My old alma mater, Footscray Tech, only went to year 10 and if you lived anywhere west of the Yarra, your biggest decision after completing secondary school was to join the laudable but limited careers of carpentry, plumbing or other of the building trades. Whitlam changed all that.

Never has one man had such an impact on our nation in such a short time. No-fault divorce, universal health insurance, the first real recognition of indigenous people, a major step towards equal rights for women and access to justice for all, to list just a few of his major achievements.

But for me and many thousands like me, it was his creation of TEAS, the Tertiary Education Assistance Scheme, that changed my life and I believe allowed many of us to add so much more to our communities because of it.

At the ripe old age of 31 I was able to undertake what previously had been denied me; I gained entrance to Monash University. The rush of mature-age students into tertiary education in the late '70s indicated just how many of us had missed out on an education during the previous 23 years of conservative rule.

The consequence of Whitlam's education policy went well beyond just personal improvement.

Education has far greater impact for society than just leading people into professions or occupations, it often rounds them off as active members of their community and society gains because of this.

I had followed the usual course of the "Westie" masses and become a carpenter, then moved into teaching as a trade teacher. Thanks to Gough, my degree allowed me to teach history and politics in high schools, where I like to think I was able to influence many of the young charges under my care to think about matters political. (Unbiased, of course.)

Higher education also gave me the confidence and knowledge to participate in local government and play roles in other community activities throughout my life.

Forget the Khemlani affair and Rex Connor's delusional plans to run a gas pipeline across Australia, the fact that our country was dragged kicking and screaming into the 20th century is something that all Australians should be grateful for.

Thirty-seven years on, today's modern Australia is a direct result of the Whitlam years.

Happy birthday, Gough, and so many thanks for giving me and many of my generation a chance at life that previously had only been the realm of the rich.


A fight for free speech in Australia

CITING the Magna Carta, free speech and commercial freedom, the bosses of most of Australia's major media organisations have implored the Prime Minister, Julia Gillard, and the Opposition Leader, Tony Abbott, to block further media regulation.

The Communications Minister, Stephen Conroy, told the Herald last week he would take to cabinet within weeks a plan to regulate the media and impose on owners a public interest test.

A public interest test would compromise billions of dollars of Australian and international equity assets, according to the strongly-worded letter, signed by the heads of Foxtel, APN, Seven West Media, NINE, AAP, News Ltd and the Australian News Channel.

"The Convergence Review has not even been able to define such a test," the bosses wrote. "Frankly, such an approach is quite unacceptable as the basis for managing billions of dollars in asset value in the media sector and will compromise those asset values (and accordingly Australian and international equity holders) negatively - this is both unfair and inequitable."

Letters addressed to the Prime Minister and Opposition Leader commend the Coalition for its public support of press freedom.

They claim if the government's public interest test (which could apply to the Fairfax majority stakeholder Gina Rinehart) is approved, there would be a "massive increase in regulation" on "subjective, vague and imprecise" grounds, which would stymie free speech.

"While a 'public interest test' may have an appealing-sounding ring to it, it is really, in our view, nothing more than a political interest," the bosses argue.

"It has the capacity to be misused by politicians of all persuasions to block the acquisition of media companies by people they do not agree with or simply do not like."

A Fairfax spokesman said the company did not add its name to the letter because "we didn't think it was the right tone".

The joint move by the seven companies is an escalation of the campaign against government interference with the media. But most recent debate has focused on Mrs Rinehart amid concerns she could interfere with the company's editorial independence.


Ceiling on housing affordability reached, and won't be breached

For years when people at dinner parties worried about houses becoming too expensive for the younger generation to afford, I used to tell them not to worry: it was logically impossible for prices to rise to a level no one could afford. Why do I remind you of this? Because it's starting to look like I was right.

When prices are rising, and have been for many years, it's easy to conclude they'll go on rising forever. Even easier to conclude - as every real estate agent encouraged us to - is that house prices can only ever go in one direction.

As we're discovering, it turns out not to be true. According to Saul Eslake, of Bank of America Merrill Lynch, Australian house prices rose by 142 per cent between 2000 and their peak in late 2010, but in the 18 months since then have fallen by a national average of about 7 per cent. (In Sydney the fall's been 5 per cent; in Perth, 9 per cent, Melbourne 11 per cent, Brisbane 12 per cent.)

There's no shortage of people, particularly foreigners, who're convinced this increase went way beyond what the "fundamentals" of supply and demand could justify - a bubble, in other words - and it won't be long before the bubble bursts and prices come crashing down, as they have in the US and various other countries.

They may prove right, but I'm with Eslake, who argues it's unlikely. He estimates the present level of house prices is fully justified by the change over several decades of the two main factors determining the affordability of housing: household income and the level of mortgage interest rates.

The Australian median house price rose from 2.8 times average annual household disposable income in 1993 to four times in 2001. Since then it's been relatively stable. What allowed that multiple to rise so greatly was a "structural decline" in mortgage interest rates that occurred in the 1990s with the return to low inflation and the shift to the official interest rate being set by an independent central bank rather than politicians.

We could have used that fall in interest rates to pay off our homes much faster, or to increase our spending on other things. Instead we decided to use it to borrow more and move to a better house.

Because so many of us made that choice at pretty much the same time, we weren't all able to move to "better" (bigger, better appointed or better located) homes. Rather, the main thing we achieved was to bid up the prices of homes generally.

In the jargon of economists, we took that essentially once-only fall in the average level of mortgage interest rates - which Eslake estimates to have been about 4.5 percentage points - and "capitalised" it into the value of our homes.

Eslake argues house prices aren't likely to come crashing down because we have the income and borrowing capacity to afford the price of housing at roughly its present level, because we haven't been building more homes than the growth in the population justifies (in fact, we've been building too few), and because we haven't been borrowing against our homes to finance other consumption.

Eslake does predict, however, that house prices will rise much more modestly over the coming decade or two than they did in recent decades. Whereas they rose at the rate of 9.5 per cent a year during the noughties, he predicts rises averaging 3 per cent or 4 per cent a year in future.

Why? Because there won't be another, one-off, structural fall in the level of interest rates that greatly increases our capacity to borrow without increasing our monthly repayments. (Don't confuse the Reserve Bank's ups and downs in interest rates as it manipulates rates to manage the economy through the downs and ups of the business cycle - which get so much attention from the media - with the underlying average level of rates over a longer period.)

Without a structural shift in interest rates, house prices can't rise much faster than household incomes are growing. The indirect flow-through to households of the ever-rising prices we were getting for our mineral exports caused household disposable income to grow at an average rate of about 7.5 per cent a year over the past decade or so.

That compares with 4.5 per cent a year during the 1990s. Now commodity prices have stopped rising and are easing back, a more modest rate of growth is likely in coming years.

Which brings me back to where I started. The value of your home is easily determined: it's worth what you can find someone willing to pay for it. The value of homes generally can be no higher than what people generally are willing to pay and able to pay.

While it's always possible for prices to be higher than particular individuals can afford, it's impossible for them to be higher than most people can afford.

But it's surprising how much flexibility - room for give and take - there is in the system.

Many parents understand that, from their own privileged position as home owners, they have to assist their children to make the expensive step up to a home of their own.

For as long as enough parents see it that way, house prices will stay roughly where they are.

Were too many parents to be unwilling to help their kids make the step up, however, house prices would have to fall. This generation sells its homes to the next generation.

I take the present small falls in house prices as a sign the limits to affordability have been reached, and won't be exceeded


Fairfax will surely sell to Rinehart if price is right

Peter Costello

Don't get too misty-eyed about the directors' support for the charter of independence.

I WOULD like to see Australia have more newspapers, not fewer. It would be a great pity if Sydney or Melbourne became a one-newspaper town along the model of Brisbane, Adelaide or Perth. Sure, there are national titles that compete in those markets, but I would like to see them compete with two metropolitan dailies as is currently the case in the bigger cities. Or more than two.

It is good to have diversity of opinion and I would like to see more of it. Australian papers should be more critical of each other. When one makes a factual error, the others should point it out. It is likely to make the competitors more careful about being accurate in the future - something that is in everyone's long-term interest. And more reliable papers might win more readers.

But I am not so dedicated to the idea of press diversity to mortgage my house, take out a huge loan and plough my life savings into media stocks. Media stocks have been in long-term decline. When Rural Press merged into Fairfax in 2007 the share price was more than $5. Yesterday it was about 60¢. Think of that. You can buy nearly three shares for the price of one paper.

So in the current climate of gloom arising from retrenchments and plant closures, what does a newspaper company need more than ever? It needs owners who have deep enough pockets to stick with an investment that is not necessarily going to give them a short-term return. If the loyal readership were prepared to buy up the stock to keep the papers unchanged then the problem would be solved. But they aren't. So when someone comes along who is prepared to buy the stock and put a bit of money on the line they deserve to be treated with respect.

The objection to Gina Rinehart is that she is the wrong type of person because she is, after all, a miner. Well, so was David Syme, who came to Australia to dig for gold and made enough to buy into the insolvent Melbourne Age and run it for the next 50 years. The whole city of Melbourne grew off the back of the mining industry, which provided the readership that kept the newspaper in business.

In any other company a shareholder who had near to 20 per cent would be entitled to board representation - not control, but certainly substantial representation. I have read the board's statement of June 29, which explained its objections to Rinehart joining the board. There were two, but they were not consistent. The first is that she is seeking control without paying a premium. The second is that she has not signed the charter of editorial independence.

Let us suppose Rinehart makes a bid that contains a control premium. Will the directors recommend it? If it is high enough, of course they will. They are not going to die in a ditch for a charter of no legal effect. The board does not pretend that the only people who can buy Fairfax shares are those who have signed a charter. Hedge funds and speculators are trading these shares every day.

The board puts its charter argument another way. It says that if the charter goes, the readership will go. It is an interesting hypothesis. A prospective owner would do well to think about it. But if they do not sign the charter and the readership walks, who is going to suffer the loss? Why, the new owner will, of course. They might thank the board for drawing the risk to their attention and decide to take their chances.

Alongside owners with deep pockets, a newspaper needs readers. People will buy it if the quality is good. The readers will judge if the stories are accurate and informative. This does not turn on charters but the quality of the writers. In my view, the broader the stable of writers the broader the audience. This is the strongest discipline on a new owner. If they narrow the readership they will kill off their own investment.

What the Fairfax board is really saying is it wants a better price. It would like the charter if that came along for no significant cost. But at a suitable price these directors will sell, charter or no charter. Dear journalists and readers, do not get too misty-eyed about these directors.

The Fairfax directors were not appointed for their political views. They do not come from a long background in the newspaper industry. They do not represent a particular editorial line. They are professional directors appointed to maximise shareholder value. Their legal duty is to shareholders. And their biggest risk, if current interest wanes, is that the share price could go lower.

I did not sign the recent letter of "eminent people" who wrote in support of the Fairfax charter of independence. I noticed that the owner of The Monthly, Morry Schwartz, did. He makes no effort to publish a diversity of views in publications that he owns. When his editor proposed to publish an article by me in response to one by Kevin Rudd she was not allowed to do so. Shortly after, she left. It is not my idea of editorial independence.

But The Monthly will never be a mass-circulation paper. If its owner wants to fund a particular point of view he is free to do so. The more narrow the view, the more narrow the readership. Fairfax's metropolitan dailies aspire to mass circulation. A wide diversity of views will bring a wide diversity of readers. That applies to any new owner as much as it applies to the current publication.


No comments: