Tuesday, May 12, 2015

Budget 2015: Reforms to shrink bureaucracy

Iconic assets will be sold and government departments will be slashed in a new effort to reduce the size of the public sector and raise more than $4 billion, in contentious reforms to be revealed in tomorrow’s federal budget.

The federal government will claim spending cuts worth $1.4bn on top of the cash raised from the new privatisations and the sale of landmark properties next door to Parliament House.

The health and education ­departments will be first in line for cuts that are aimed at eliminating waste and duplication, but a further eight departments will be named as the next targets for “functional reviews” to extract similar savings. The government will seek a sharemarket listing or trade sale for the Australian Rail Track Corporation — worth $4bn, according to industry estimates — while pursuing the sale of a valuable communications network and the corporate regulator’s information registry.

As Tony Abbott and Joe ­Hockey count on their new budget strategy to rescue the government and their own careers, they are softening some of the savage blows from last year’s budget while maintaining their claim that they can be tough enough on spending to eventually produce a surplus.

The Australian has been told that the fourth phase of the “smaller government” agenda will also abolish 32 agencies and entities as well as merging the Defence ­Materiel Organisation into the Department of Defence.

Finance Minister Mathias Cormann will announce the changes tomorrow in a bid to highlight the Coalition’s spending cuts, while ­accusing Labor of being profligate in government and proposing tax increases in opposition.

Senator Cormann will promise another phase of the “smaller government” program at the end of this year to claim further savings while selling off more assets in the wake of last year’s privatisation of Medibank Private, which is now listed on the sharemarket.

Another saving will come from new rules on tax deductions for car expenses to be revealed by Assistant Treasurer Josh Frydenberg to add $845 million to the budget bottom line over four years.

The government’s rhetoric on spending cuts is being questioned, however, as it promises a further $3.5bn for childcare — adding to programs already costing $7bn a year — and sacrifices some of last year’s savings from the Age Pension in order to quell a voter backlash. Families will only get the childcare boost if the Senate legislates four blocked proposals to cut family tax benefits, including a halt to Family Tax Benefit Part B when a family’s youngest child turns six — a highly contentious proposal from last year that remains in ­tomorrow’s budget.

An impasse is emerging over the budget before it has been handed down, with Labor and crossbench senators all rejecting the link between childcare funding and the cuts to family tax benefits.

The Prime Minister insisted yesterday on the need for savings, saying: “There will be no new spending in this budget that is not offset.”

Labor focused on the cuts to family benefits to maintain its ­attack on “unfair” reforms, even after including the spending boost for childcare. “We fully recognise that difficult decisions are necessary. What we completely reject is unfair decisions are necessary,” said Labor Treasury spokesman Chris Bowen.

With no political deal in sight on fiscal reform, economists are predicting that the 2015-16 deficit will deteriorate from the $31.2bn forecast last December to $40bn in tomorrow’s budget, according to a new survey of experts by Bloomberg.

Government payments are worth 25.9 per cent of GDP this year, two percentage points higher than in the Howard government’s first budgets, while revenue remains below forecasts and the underlying cash deficit blows out.

The cuts to the bureaucracy will mean that about 17,000 staff positions have been cut across the commonwealth since the last election, offering an answer to conservative critics who charge the Coalition with not being tough enough on outlays.

A further $450m will be added to the savings tally from the “smaller government” program, bringing the total to $1.4bn over four tranches of cuts.

The sale of the Australian Rail Track Corporation — which carries iron ore, coal and other commodity exports — would make a modest impact on commonwealth debt, given that gross borrowings are about $370bn and climbing, but Canberra no longer has major businesses such as Telstra or the Commonwealth Bank to privatise.

Last year’s National Commission of Audit recommended that the rail operator be sold to the private sector, while Infrastructure Partnerships Australia, an industry group, said the business could be worth about $4bn.

A scoping study will also be conducted into the sale of the ­registry service of the Australian Securities & Investments Commission, as revealed by The Australian last year, but the government will retain ownership of the regulator’s data on thousands of companies.

The government will also step up the sale of the Intra Government Communications Network, or ICON, which was set up in the 1990s to link departments and could be sold to telecommunications companies.

The asset sales will also include four Canberra landmarks, including West Block, the closest commercial property to Parliament House and a likely home for lobbying firms, as well as East Block, and Anzac Park East and Anzac Park West on the main thoroughfare leading to the Australian War Memorial.

The government has rejected the option of selling the Treasury building and the John Gorton building, which houses the ­Department of Finance — the agency conducting the overall sale program.

Two other sales will be scrapped. Defence Housing Australia will not be sold, given concerns that this could have made it harder for Defence personnel to find homes when transferred around the country.

The Royal Australian Mint will be kept as part of Treasury.


Soft censorship wins out over public policy


The University of Western Australia’s decision to reject Bjorn Lomborg’s Australian Consensus Centre is disturbing for its validation of a culture of soft censorship.

The human right of free speech is about ensuring laws don’t restrict what people can say. One of the most important arguments in favour of free speech is that it keeps debate open so bad ideas can be challenged and exposed, to continue the march of human progress.

That requires more than just stopping censorious laws. It also requires a culture that tolerates dissent and allows for challenging ideas to be voiced, heard and debated.

Australia’s culture of open debate is increasingly sick. Outrage, confected or otherwise, is a popular tool to condemn your opponents because it avoids the need to actually debate ideas.  Instead you merely need to demonstrate they are offensive or attack the legitimacy of the person voicing them.

The centre to be led by Bjorn Lomborg was established to debate competing public policy priorities.

Lomborg heretically thinks that tackling infectious diseases that kill millions is more important than cutting greenhouse gas levels.

UWA academics claimed the centre “tarnishes the reputation of the university”.

The UWA student guild claimed “students, staff and alumni alike are outraged” because a centre would be “led by someone with a controversial track record”.

The campaign of outrage eventually led to vice-chancellor Paul Johnson cancelling the centre because it lacked support from the academic community.

Those students and staff involved at UWA have successfully adopted a cancerous tactic from Britain called “no platforming”.  “No platforming” is a policy of Britain’s National Union of Students.

The policy evolved out of an attempt to stop institutions having speakers that promoted racism and fascism.  To “no platform”, students protest against someone being given a platform to speak, or where it has been provided, campaign to have it removed.

In Britain, the tactic has been successful.  But it has now evolved beyond simply opposing racist or fascist views to target people who don’t fit accepted progressive groupthink, such as Lomborg.

Some may wrongly draw a parallel between Lomborg’s experience and that of former SBS sports commentator Scott McIntyre.

They are nothing alike. McIntyre slurred a large section of the public and broke the terms of a voluntarily agreed employment contract that led to his dismissal. Lomborg simply proposes contrarian public policy ideas. That’s it.

As with the financing of any activity with public money, it is entirely legitimate to question the Abbott government giving $4 million towards Lomborg’s consensus centre.  But for the most part that wasn’t the reason that academics and students condemned the centre.  The predominant criticism of Lomborg is that he thinks there are higher public policy priorities than climate change.

Lomborg’s views are not about science, they’re about public policy.

Public policy is a debate about competing priorities for government.  Everyone is entitled to their views on public policy.  There is no one correct answer in public policy.

Nor is policy about evidence. Evidence informs policy development. The direction of policy is primarily decided by the questions you ask. The questions asked are heavily informed by values and political priorities.

For example, if we ask the question about how we stop man’s contribution to climate change, it is underpinned by a number of values including that it is a priority, and that mitigation of emissions is better than adaptation, among many others.

Similarly, if the question is, as Lomborg asks, what’s the most efficient use of taxpayers’ money to tackle the world’s problems, it is underpinned by a different line of values and inquiry.

The question informs how evidence is then collected, weighted in any analysis and thereafter used to draw conclusions.

If the evidence Lomborg collects to answer these questions is wrong, then it should be exposed through evidence and reason. If they’re right then they will be influential.

Instead, the University of Western Australia essentially endorsed a culture of soft censorship by stopping these public policy questions even being asked.

It’s hard to think of a more anti-intellectual act to promote wilful ignorance about contemporary public policy challenges.

A friend of mine recently joked: what’s the opposite of diversity? UWA just proved the answer: university.


The Left strives to keep students in the dark

Henry Ergas

Aristotle opens the Metaphysics with one of his most striking phrases: “By their nature, all men desire to know.” Quite so. But not at the University of Western Australia.

Nor is there any mystery as to why. According to a press release issued late Friday by the university’s vice-chancellor, Paul Johnson, the proposal to establish, with $4 million in federal government funding, an Australian Consensus Centre which would undertake “detailed economic cost-benefit analysis into many of Australia’s, and the world’s, biggest challenges”, had met “strong opposition” and hence could not proceed.

Since there was no consensus to seek consensus, it was better to let ignorance flourish than for the merest shard of knowledge to creep in.

To say that is not to ignore the distress Bjorn Lomborg’s occasional presence at the proposed centre, where he was to have been an adjunct professor, would have caused the university’s tender minds.

Yes, Lomborg’s credentials might seem impeccable: not only is he Danish, gay and invariably clad in a T-shirt and jeans, but his books on environmental issues are heavily cited, including by an array of the bien-pensant that ­ranges from Barack Obama to Ban Ki-moon.

But all that, as the Romans used to say, is just the hood that masks the crime.

For by his own admission, Lomborg is a “sceptical environmentalist”, which implies that doubt may be warranted; and while — heaven forfend — he has never questioned the reality of anthropogenic climate change, he has argued that the costs and benefits of devoting scarce resources to mitigating that risk should be compared to those of addressing the planet’s other pressing woes.

Where that might lead hardly needs to be spelled out. After all, cost-benefit analysis forces one to identify the objective being sought, measure the sacrifice seeking it would impose and specify any uncertainty about the gains that would be achieved.

Moreover, it exposes those estimates, and their assumptions, to public scrutiny, making it possible for them to be tested as new information comes to light.

And since not all problems can be tackled at once, it allows an informed assessment of whether the cause of alleviating human misery might not be better served by investing in, say, defeating malaria than by building wind farms and solar panels.

Simply countenancing that possibility is doubtless more than sufficient to condemn the venture outright. But Lomborg’s crimes don’t end there. Rather, as Mungo MacCallum noted, not only has his work been praised by Tony Abbott but “Lomborg is (a) favourite of The Australian” — to which that noted scholar adds “enough said”.

Good thing then that the proposal has been scotched, defaming Lomborg in the process. As Daniel Defoe — who, having been condemned for blasphemy, knew a thing or two about tolerance — wittily wrote three centuries ago, masquerading as a High Church Tory Anglican: it might be too much to hope that “Her Majesty (could ensure) all Dissenters were hanged or banished”; but surely “as in (the) case of insurrections and rebellions, if a few of the ringleaders suffer, the multitude are dismissed”.

It would, however, be quite wrong to regard this as censorship, the National Tertiary Education Union’s WA division secretary, Gabe Gooding, assures us. On the contrary, “it’s absolutely not censorship, it’s about the academics being really concerned about standards”.

And as UWA student guild president Lizzy O’Shea emphasised, there are impressionable 17-year-olds on the campus, who don’t deserve to be exposed to someone with Lomborg’s “sort of research standing”.

So true; and so reminiscent of Andrei Zhdanov, Stalin’s commissar for culture, who claimed that far from being censorship, “protecting” Soviet youth from the “decadence”, “orgies of mysticism and superstition” and “passion for pornography” of writers such as Anna Akhmatova and Boris Pasternak was “liberation”, which helped keep “the only conflict in Soviet culture that between good and best”.

It is therefore not surprising that Lee Rhiannon, who imbibed the Zhdanov doctrine as mother’s milk, led the charge against the centre; nor is it surprising that the green Left, with its “fiends of righteousness”, in Blake’s expressive phrase, who are not seekers but saviours, would thunder at anything which threatens their beliefs.

And it is unsurprising too that Labor, which refused to release the climate change model Treasury had developed and prides itself on rejecting cost-benefit analysis, would fall smartly into line.

But one wonders whether the vice-chancellor, a distinguished economist, was well advised. Faced with no less intense controversy, Max Weber, perhaps the pre-eminent social scientist of the 20th century, had little doubt about the course to take.

"If there are views which disqualify an applicant from appointment to the faculty", he wrote, "then there are views the university’s current researchers are not allowed to come to". From that moment, freedom of inquiry is irrevocably dead; and “the result of such a castration of the freedom and disinterestedness of university cannot be compensated by the finest institutes, the largest lecture halls, or ever so many prize-winning works”.

The great American social scientist Daniel Patrick Moynihan, who Labor’s Andrew Leigh claims is his role model, was equally forthright. If university administrators did not unflinchingly oppose “the authoritarian tendencies of the Left” and its refusal of rigorous analysis of policy alternatives, “you are going to end up with a university in which decent men simply do not try to serve their function of teaching and learning”.

When the president of Stanford found he could not resist their pressure, Moynihan concluded, it was unquestionably his duty to resign. And indeed it was. Because Aristotle teaches us this too: that we can speak the truth only when we can say how things really are. If our universities can’t, they don’t deserve to exist.


It’s black and white - this Green’s got to go

FORMER Greens leader Christine Milne’s decision to quit the senate at the next election was greeted by a chorus of blindingly hypocritical hyperbolically overly polite humbug. The political class was doing what it does best, protecting its own.

The real monument to Milne, and her predecessor Bob Brown, is the economically wrecked island state of Tasmania, the putrid petrie dish of the failed Green experiment. According to the ABS figures released yesterday, seasonal unemployment in Tassie last month was 7.3 per cent, more than a full percentage point higher than the national average. That, in large part, is due to the lunacy of the Green leadership in the state and nationally.

With the willing assistance of former Labor prime minister Bob Hawke and his political fixer, former environment minister Graham Richardson, the Tasmanian economy was effectively torpedoed when the Greens (still in their formative years) launched their first successful major anti-dam campaign, around the Franklin River.
The dam, which would have supplied the island state with cheap, non-fossil fuel-based hydro-electric power, was killed to please left-wing voters living in inner-urban Labor seats on the mainland.

The campaign cost Labor support in Tasmania but the emergent Greens knew that it was electorally more pragmatic to save a Tasmanian river than Tasmanian jobs.

There were echoes of those early Tasmanian campaigns in the recent NSW state election where the tree-hugging Greens won seats campaigning against the safe extraction of natural gas in areas where there was no CSG extraction.

In areas where gas extraction or forestry provides actual employment — that is, in areas where workers do more than turn on a power-hungry computer — the Greens don’t fare too well.

Milne’s political career was launched with another employment-destroying campaign, the blocking of the Wesley Vale pulp mill, a mill designed to meet standards more stringent than any other similar project in the world.

Tasmania’s quaint Hare-Clark electoral system delivered her a seat in its house of assembly in 1989. She went to the senate in 2004.

Throughout the dysfunctional Rudd-Gillard-Rudd government she distinguished herself with wild claims on climate change and was rewarded with billions of dollars’ worth of unproductive alternate energy projects which taxpayers will be bankrolling for generations.

Though no reputable scientific organisation in the world has linked a specific weather event to climate change, the former schoolteacher (English, history and social science) has never failed to drag extreme weather events into her unreal vision of an impending apocalyptic warmist fantasy.

“Global warming is driving extreme weather events around the world and the debate needs to be on the impacts of global warming,” she told a press conference after a typhoon devastated the Philippines in November 2013.

“Tony Abbott has created a phony debate in Australia. He never is prepared to talk about the connection between extreme weather events and global warming because he knows that tugs at people’s heartstrings,” she said.

“He knows ... that the Australian people will start joining the dots.”

If people did actually join the dots, they would have realised long ago that Milne was just plain dotty.

“Do you want death or do you want coal?” she asked late last year.

“Coal is bad for humanity and Tony Abbott is bad for Australia.”

Coal actually remains the cheapest source of energy in the world and has been responsible for markedly lowering the gap between the richest and poorest people in the world in recent decades.

Wacky Milne never knew when to stop, and harboured an overwhelming obsession with Abbott, even issuing a press release about the highly dubious claim that he had sought to unilaterally engage 3500 Australian troops in a ground offensive.

Though it was later proven to be false, Milne still found it a “frightening insight into a leader whose solution to everything is more aggression”.

The hope is that the new Green leader, Richard Di Natale, is a little more grounded.

Reading his maundering maiden speech, there is little to believe he will offer anything more than any other textbook inner-city sandalista, despite donning a three-piece suit for his first press conference.

When he faces his first test of realpolitik, will he support the increase in the fuel excise, which the Greens have so far stupidly rejected? Will he cling to the notion that people must be forced on to public transport at the expense of much-needed super highways?

Will he oppose the building of Sydney’s exciting new airport and support the closure of the existing under-utilised and curfew-burdened Kingsford Smith Airport — because it is too close to the Green heartlands of Ultimo and Newtown?

Given that Di Natale embraced his new role without any consultation with the party’s membership (how does that fit with their libertarian ideals?) and basks in the unreal and undeserved sense of moral superiority that Greens claim for themselves, little is likely to change with the switch in leaders.


Agriculture could be the next boom for Australia

Iron ore has been Australia's largest export, but as minerals prices plunge, Australia's economy is under pressure to pivot away from mining and toward the next big boom.

With the exception of Rio Tinto and BHP, the whole Australian iron ore industry is now digging dirt for a loss. The fourth largest iron ore producer, Atlas Iron, will suspend its entire production by the end of this month.

Chinese demand for Australian minerals may be slowing but demand for Australian food and agricultural products is predicted to grow.

Minerals down, food up

Chinese economic growth is slowing and so is its hitherto astonishing rate of infrastructure and building development.

The World Steel Association recently predicted little growth for steel demand globally in the next two years. The Chinese steel industry is also expected to maintain its production capacity at about 800 million tonnes annually due to its declining domestic consumption and pressure from the environmental protection. Australia's thermal coal exports have suffered a similar fate as China tightens rules on air pollution and plans to cut coal consumption by 80 million tonnes by 2017.

However, China has substantially increased its imports of Australian food produce. In 2012-13, China was the second largest export destination for Australian food, accounting for 10% of the total Australian food export by value and trebling it from 2002-03. With the rise of Chinese middle class (a group estimated to number around 250 million), the demand for high quality and value-added Australian food, such as red meats, infant formula milk, seafood, wine, dairy products is and will be strong in the future. It is estimated that China has become the largest export destination of Australian food since 2014.

Australian agriculture sector exports about two-thirds of its food by value annually. However, Australia is expected to only contribute about 3% of the value of global food exports to 2050.

While the debate rages on whether Australia is or is not the "food bowl of Asia", there's no question Australia's reputation as a clean and safe "brand" positions it well as a key supplier of premium food to China.

More to be done

Investment is needed in infrastructure such as water and irrigation facilities, road, railway, and ports as freight accounts for a large portion of the food value in Australia.

Australia has less than 1% of irrigated agricultural land, but it generates more than a quarter of the total gross value of agricultural production . ANZ Bank has estimated that $600 billion of investment is needed for the Australian agricultural industry from now to 2050 to maintain its growth and profitability.

Foreign direct investment (FDI) has been a key part of investment in the Australian agricultural industry. With its strong demand for Australian food and over $US3 trillion in foreign currency reserve, China is an important potential source of investment to the Australian agriculture.

Chinese investors are more prudent now after witnessing the heavy loss of their peers' investment in the Australian mining industry. Our research shows (Huang, 2015 DOI: 10.1002/tie) that Chinese investment in the Australian mining industry has incurred heavy losses so far, including CITIC Pacific Mining, Ansteel, and Yancoal.

The Australian government's Agricultural Competitiveness Green Paper, released in October last year, proposed lowering the threshold for notification and approval of foreign acquisitions to $A53 million for agricultural businesses and $A15 million for agricultural land. That only creates more uncertainty for foreign investment in the agricultural industry, and is not in the interest of farmers and agribusiness operators in dire need of investment.

At the industry level, much is still to be learnt about Chinese consumers' buying behaviours and collaboration with research institutes to developing value-added products is sorely needed.

At the national and state levels, stronger political leaders are needed to develop foreign investment policies that attract and encourage FDI in the agricultural sector, particularly in infrastructure.

Growing and investing in our agricultural industry represents an once-in-a-lifetime opportunity for Australia. Attracting FDI in infrastructure is key to the growth and productivity of our agriculture sector.

Managed properly, agriculture can be the next boom for our national economy.

Australia's emerging agriculture boom can last much longer than the now waning mining boom, as it is underpinned by the demand from the world's second largest and most populated economy.


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