Category: Articles

Why We’re A Nation Of Homebodies

Most Australians think of themselves as highly mobile. We’re a nation of immigrants, after all. The phrases ”sea change” and ”tree change” are commonplace. But the data suggests otherwise. Compared to the rest of the world, we don’t like to budge.

An immigration department analysis in the 1990s found that the median distance Australians moved was just 16 kilometres over an entire decade. So when Julia Gillard doubled the places in her Job Seeker Relocation Assistance Package, it was actually quite a big deal.

A 2010 election promise, the program gives unemployed workers grants of up to $9000 to travel to find work. It has been expanded to help rebuild Queensland. But the package has an importance that extends beyond welfare, or the Queensland floods. It’s a recognition that Australian job seekers aren’t very mobile.

Perhaps fair enough: Australians like their home towns. As Dr Johnson put it, people ”have a strong attachment to the habitations to which they have been accustomed”.

Yet compare us to the United States. Migrating within the country is a big part of America’s employment culture. Americans are twice as likely to move interstate as Australians. We all know of New York as a city of migrants, but those migrants are as likely to be from within the US as beyond.

The World Bank has demonstrated a clear empirical relationship between high levels of population mobility within a country and that country’s economic growth. In the US, those who travel to find work earn, on average, around 10 per cent more than those who do not. And, unsurprisingly, internal migrants are substantially more likely to be employed.

No surprise then that internal migration is an even bigger deal in the developing world. Right now, China is in the middle of the Spring Festival, an annual event where around 130 million Chinese travel back to their home towns to celebrate Lunar New Year. In 40 days during January and February, there are more than 2 billion journeys taken by migrant workers, reflecting the enormous shift of Chinese labour from the country to the city.

The boom in the Chinese economy is just as much to do with this migration as it is with the slow introduction of liberalised trade. If the 20th-century United States had one of the great mass internal migrations, as the World Bank argues, then the migrations within 21st-century China will be tenfold more spectacular and a hundredfold more significant.

So why are Australians so stagnant? It’s not just a cultural thing.

A big cause of American internal mobility is tertiary education. American students typically travel across the country for the university that’s best for them. Then, when those students look for work, they cast a wide net with an open mind.

But in Australia, our government’s higher education policies encourage uniformity, not diversity. All our top universities offer pretty much the same courses, taught in pretty much the same way, and confer pretty much the same quality of degree. Students can’t justify moving to attend a university offering the same service as a university in their home town. Then, when graduates look for jobs, they only look for jobs near home.

America’s more flexible labour market makes for more entrepreneurial and assertive employees. Just like international immigration, there are few more entrepreneurial activities than leaving home to find a better life.

The Howard government had a similar relocation program to that being introduced by Labor.

Like the Howard-era policy, Gillard’s relocation isn’t just a free ride to Queensland. The package contains penalties. Workers who take the money but ditch their new job within six months are ineligible for unemployment benefits for 12 weeks, if they don’t have a reasonable excuse.

Welfare lobbies and the Greens have embraced the idea of more social assistance, but they bristle at the penalties. We’re used to that: these groups are always happy introducing more cash incentives to get into work, but never happy with disincentives to fall out of it. Mutual obligation has been a tried, tested, and largely bipartisan feature of Australia’s welfare system. Anyway, it’s hard to imagine any better way to protect the scheme from manipulation.

What little debate has surrounded the relocation package has focused on this penalty. But let’s discuss what the package means: why Australians are so reluctant to move for a better job, and the policies that have unintentionally made us that way.

Beyond The Chaos, Federalism Lives On

The critics of political theatre suggest Anna Bligh has shown successful leadership during the Queensland floods and Cyclone Yasi.

Julia Gillard’s notices have been somewhat less positive. Trying to emote in front of TV cameras, she’s looked wooden. Like Samuel L Jackson in the Star Wars prequels, Gillard is talented but the script gives her nothing work with.

That’s a show of leadership succeeding at the state level, and failing at the federal level.

So aren’t you glad we still have states?

The last few years have seen a chorus of voices claiming the very existence of state governments – therefore the entire basis of Australia’s federal system – is anachronistic, a relic of the colonial era, and the biggest impediment to national reform.

Tony Abbott and Bob Carr are openly dismissive of state government powers. John Howard never saw a centralisation he didn’t like. Neither did Kevin Rudd.

Our opinion and letters columns are littered with complaints about wasteful duplication and how just darn unnecessary those states are.

But in the wake of this year’s natural disasters, perhaps federalism could find a few more friends.

Putting aside the performances of Gillard and Bligh, it would have unthinkable for a federal leader to take responsibility for this month’s disaster efforts: floods in Queensland, Victoria, New South Wales, South Australia, and Tasmania, and floods and bushfires in Western Australia have all had their own characteristics. Affected states have each had separate and specific needs. They require their local leadership and expertise.

Busy with the floods and cyclone in Queensland, a lone prime minister spread too thin would have had to virtually ignore the devastating fires in Western Australia.

The idea of federalism suggests the closer governments are to those they govern the more responsive and representative they will be. State governments can respond better than Canberra. The start of 2011 has surely demonstrated the validity of that claim.

It’s not even an issue of competence. Politically, Anna Bligh’s government has been on the nose all through 2010. But her “bloody awful tough year” – to use the premier’s words in December – was all but forgotten as the waters rose and the storm approached.

And it’s not to say we won’t find Bligh government failures before and during the floods and cyclone. We haven’t heard the last question about the management of the Wivenhoe Dam, or the Queensland Government’s decision to forego insurance.

But decades – hell, a century – of rolling federal government fiascos should leave us in no illusions Canberra could do any better.

Much has been made of the comparison between the natural disasters of 1974 and this year. But bookended by the Brisbane floods in January, and Cyclone Tracy that Christmas, 1974 was also one of the defining moments for the relationship between the Commonwealth government and its state counterparts.

The two disasters came smack bang in the middle of Gough Whitlam’s push to steam roll his agenda over the states. (Malcolm Fraser would later describe a Liberal approach as “new federalism”. Gough’s plans could perhaps be described as “no federalism”.)

No surprise the events of 1974 led to more restructuring in favour of the federal government. A Natural Disasters Organisation was set up after the Brisbane flood. Cyclone Tracy confirmed the Commonwealth’s pre-eminent position. As the director of operations and plans in the Natural Disasters Organisation recalled, it was these twin disasters which gave the “impetus to the development of legislation and new arrangements for states and territories”.

Unsurprisingly, the reconstruction of Darwin (the Northern Territory was already under Commonwealth administration) was plagued by delay and indecision. Budgets blew out. Accusations of bureaucratic empire-building were thrown around. The Darwin Reconstruction Commission fantasised about building a “Canberra of the North”.

Where state powers were eroded after 1974, perhaps the aftermath of January 2011 will bring us, slightly, back the other way.

Gillard’s uninspiring attempt at leadership might give some small reason to hope for the future of federalism.

After all, Canberra’s failures are federalism’s last remaining defence.

The Prime Minister coincidentally suggested over the weekend she would be pulling back on Kevin Rudd’s grandiose health reforms; reforms which were to place Canberra squarely in the centre of our health system.

Queensland – poor Queensland – which had embraced Rudd’s reforms with open arms, will likely now have to keep responsibility for their own hospital system, just like all the other states.

The parameters of this cut-back health reform will be debated at COAG next Monday.

But there’s no doubt Gillard is looking to take health reform off her prime ministerial plate. Rudd’s plans to have the Commonwealth assume the vast bulk of responsibility for health and hospitals are being abandoned.

Federalism is the structure of government which the designers of Australia’s constitution intended. That structure has been battered down for a century.

But right now our Commonwealth Government is uninspiring, unloved and, completely unable to pursue its own policy goals. Federalism may have some life in it yet.

Taylor confirms curriculum motivated by ideological antagonism

Finding the philosophical assumptions that underpin a curriculum is careful work. It involves looking less at what’s included than what’s absent.

So it was refreshing to see an article in Crikey on Monday by Tony Taylor, which confirmed everything we discovered in The National Curriculum: A Critique. Taylor simply and forthrightly spells out the curriculum’s ideology in a stark few hundred words.

Of course, that’s not his intention. Taylor drafted a previous iteration of the history curriculum, and claims to be a consultant on this one. He intends to defend the curriculum, but he accidentally condemns it.

Take Taylor’s apparent rebuttal of David Daintree’s claim in our book that the curriculum largely ignores and consistently denigrates the role of Christianity in Western civilisation:

Christianity is covered in Year 8 under “the spread of Christianity”, medieval Europe under the Crusades (not so good, that bit), the medieval dominance of the Catholic Church and the Spanish conquest of the Americas (another not-so-good bit).

Could there be any more concise summary of the curriculum’s hostility? Certainly, as Daintree points out, Christianity, and religion in general, is responsible for much historical wrongs. But religion is responsible for much good too.

But weighing up the pros and cons of religion is, contra Taylor, not the point. It’s an undeniable historical truth that Christianity is one of the keys to understanding the development of Western civilisation. Europe’s advances in law, philosophy, and even science have been conceived of in largely Christian terms, by largely Christian people. To imagine that Christianity’s importance can be neatly summarised by a) the Crusades and b) the conquest of the Americas is not only unhistorical, it’s dishonestly antagonistic.

Taylor would be welcome to hold that view in a polemic. But such polemics should not be imposed on a curriculum that will be imposed on every Australian school student.

A much less typical view of Taylor’s is in response to the shadow education minister Christopher Pyne’s view that the curriculum unjustly underplays the English Civil War:

As for the Bill of Rights and the English Civil War, the former is covered in Year 10 under the optional “egalitarianism” and the latter is arguably just a series of confused and confusing localised squabbles that may have a special significance for UK history, but not for anybody else (unless they like dressing up in period costume).

“Just a series of confused and confusing localised squabbles” is a strange way to describe the revolt of parliament over the monarchy, the trial and execution of the King of England (an extraordinary break with the past) the declaration of a republic, and its disintegration into dictatorship.

The English civil war echoed through the intervening centuries. It was just as important as the French Revolution. If not more: the principles that were developed after the civil war have become the principles on which liberal democracy has been implemented around the world.

There is a direct line from the Rump Parliament to the Declaration of Independence, to the Declaration of the Rights of Man and the Citizen, and, even, to self-government in Australia.

This is a strange thing to have to remind one of the designers of the national curriculum.

If the intention of the national history curriculum is — or should be — for Australian students to understand how their world became, then Taylor’s bizarrely dismissive attitude about one of the foundation events of that world is astonishing.

And if we needed confirmation that the national curriculum is motivated by an ideological antagonism to the history of Western civilisation, Taylor’s short column is it.

The Truth About Energy Subsidies

Is the Australian Government subsidising the fossil fuel industry?

So said the Climate Institute, when they heard Julia Gillard was scrapping solar schemes to pay the flood bill.

This claim shouldn’t be casually dismissed.

Because it’s one thing for fossil fuels to be cheaper and more efficient when all energy technologies are competing on a level playing field.

But it’s quite another if government policy is artificially boosting the competitiveness of fossil fuels. If, in other words, taxpayers’ money is being used to boost the dirtiest technologies and suppress the cleanest.

Would it be unfair to describe this argument as typically “neo-liberal”? The Climate Institute’s claim suggests a free market in energy, where the Government treats all forms of energy production neutrally, would be a more environmentally friendly one than what we have today.

One writer on Greenpeace Australia’s website condemned “taxpayer handouts” being used to “line the pockets of the wealthy fossil fuel industries”. Remove corporatist government subsidies – instantly get a greener Australia.

It’s a shame these claims don’t really hold up.

The definitive version of the subsidy argument is contained in a 2007 Greenpeace paper written by a researcher at the University of Sydney’s Institute of Sustainable Futures.

And the Institute of Sustainable Futures’ definition of what constitutes a subsidy to the energy industry is broad, to say the least.

Take, for instance, what the paper describes as the largest subsidy to the energy industry – roads. In the author’s view, roads are a government subsidy to private transport, therefore a subsidy to petrol, therefore a subsidy to fossil fuels.

Never mind buses use roads too, or bike lanes are being built into roads across the country – two climate-friendly modes of transport which would struggle without roads.

But, on the facts, this subsidy claim is wrong. The Department of Infrastructure’s own figures show the money raised by road and vehicle-specific taxes ($16.2 billion in 2006-07) is much more than is spent by all levels of government on roads ($12.1 billion the same year).

Anyway, it’s hardly reasonable to describe government investment in roads as a direct subsidy to the energy industry. Unless you are happy to describe government investment in health as a subsidy to the pharmaceutical industry. Or government investment in schools as a subsidy to the whiteboard industry.

Certainly, other subsidies exist, but it’s unclear why they would be of deep concern to environmentalists.

The Greenhouse Gas Abatement Program, for one. Or the Low Emissions Technology Demonstration Fund, which supports a range of carbon capture projects. There are more.

These are programs specifically designed to make energy more environmentally friendly. It’s a bit rich to insist, on the one hand, the Government should encourage cleaner energy, and, on the other hand, criticize the Government for implementing projects which try to.

It’s hard to see many environmentalists congratulating a government which eliminated those sorts of programs. Sure, Greenpeace would like those programs to be replaced with fully renewable energy programs. But subsidies are either bad or good. It seems Greenpeace would like their elimination to be contingent on introducing other subsidies. Hardly the most principled anti-subsidy position.

Complicated tax arrangements for company cars are often cited as subsidies, without the proviso that those arrangements are designed to ensure company cars are treated exactly the same as all other forms of income.

Similarly, some environmentalists are also upset about fuel tax concessions for primary producers being available to miners. But, like it or lump it, miners are primary producers too. The fuel tax concession is not an energy subsidy. Quite the opposite. It’s a measure to ensure the tax office treats all forms of production the same.

Instead, the environmentalists just want to penalise miners for existing.

Nor does Australia’s lack of a carbon tax constitute a subsidy for energy. Well: any more than our lack of an idiot tax constitutes a subsidy for idiots. The Gillard Government argues the externality of carbon pollution should be internalised through some sort of price mechanism. But the absence of that mechanism is not a “subsidy” in any useful sense of the word.

This is not to say that, globally, subsidies to fossil fuels aren’t a problem. The 20th century’s mania for central planning left its mark on the energy sector.

Electricity and petrol was as subject to misguided industry policy as any other industry. The global energy landscape is a mesh of tax breaks, tariffs, quotas, preferential planning and regulatory controls price controls, grants, government investments, rebates, and outright subsidies.

Government support for fossil fuels in the last century was as fashionable as government support for renewable energy is today.

If we were smart, we would approach this modern fashion much more cautiously, keeping in mind the perverse consequences of the fashions of past.

According to the OECD, eliminating global fossil fuel subsidies would reduce energy-related carbon dioxide emissions 5.8 per cent by 2020 compared to the baseline scenario. Because subsidies to favoured industries are inefficient, the world economy would be richer to boot.

The OECD is very careful defining what constitutes a subsidy.

The Climate Institute and Greenpeace aren’t. They want to make a political point: that free marketeers, so diligent finding government programs to cut, deliberately ignore taxpayers’ money being handed to their fossil fuel mates.

Cutting those subsidies would be the lowest possible hanging fruit of emissions reduction. If they existed, doing so would have bipartisan support.

But apart from a few emissions reduction programs – which most environmentalists would oppose eliminating – they are nothing more than green mythology.

Drowning In Gillard’s Flood Levy Spin

The Prime Minister first raised the prospect of a flood levy 10 days ago. Her government wants taxpayers to believe the levy is an unavoidable consequence of the natural disaster in Queensland – imposing a special tax is regrettable, but out of the government’s hands.

Yet the day she signalled the flood levy also happened to be a day when her minister Kim Carr quietly announced the start of the government’s Automotive Transformation Scheme. This scheme packages up $3.4 billion of taxpayers’ money and wires it directly to the dilapidated (but very well connected) car industry.

No one begrudges spending to fix Queensland’s damaged infrastructure. The flood reconstruction is not an optional spend. But the money the Rudd and Gillard governments have pledged to give the car industry over the past few years has been.

All up, the government will spend $5.6 billion on flood reconstruction in Queensland, New South Wales and Victoria; $1.8 billion of that will be raised by the flood levy. The rest, certainly, will come from budget cuts. For instance, Julia Gillard announced she would cut $234 million of automotive subsidies to help pay the Queensland bill. But that is a paltry sum, considering the rest of the government’s car programs will continue. Especially considering eliminating the balance of these programs would easily cover what the flood levy is intended to raise. The full New Car Plan for a Greener Future totals $6.2 billion.

Same with the cuts to climate programs. It may sound like Gillard has made hard decisions cutting $250 million out of carbon-capture research and $160 million from the solar hot-water rebate scheme. But simply trimming a couple of the most embarrassing programs – such as the ”cash-for-clunkers” election promise – is hardly aggressive budget cutting. Governments should be congratulated for any cut of wasteful spending. But there’s nothing about Gillard’s cuts that makes the levy a necessity. It is still a very avoidable tax hike, despite the Prime Minister’s claims.

She gave the game away at the National Press Club on Thursday, when she said: ”The great majority of Australians are ready to contribute” to Queensland’s rebuilding. Special levies are only enacted when the government feels confident taxpayers will fork out with minimal resistance. The Howard government was comfortable imposing a gun buyback levy in the wake of the Port Arthur massacre because public opinion clearly demanded action on guns. We are never charged special levies for unpopular things. There has been no automobile subsidy levy; no Kevin-Rudd-wants-a-spot-on-the-UN-Security-Council levy.

So the worthier the use of public funds, the more likely the government will charge taxpayers extra for it. What is funded out of existing revenue and what is funded with a special levy is a political calculation – made by politicians with a close eye on what the opinion polls will bear – not a public finance calculation.

This is the context in which we have to understand the flood levy. But instead we have heard claims that critics of the tax resent helping flood victims. Or that the spirit of ”mateship” requires the government to temporarily increase taxes. These are emotional arguments designed to achieve political goals.

The politics of the flood levy underlines how momentous the government’s decision was to flush the economy with stimulus spending during the financial crisis. You only get one surplus to spend on a national crisis. Rudd’s ”kitchen cabinet” decided that crisis was the GFC: $90 billion worth of spending commitments between September 2008 and May 2009 plunged the federal budget into deficit. We won’t ever know how our economy would have fared if it saved the surplus for a later crisis – such as the floods.

But the Treasury admitted last year there was no statistically significant correlation between the size of an OECD country’s stimulus package and its economic recovery. Some countries – Japan, for instance – spent more than us and yet suffered worse than us.

The debate over the stimulus package is well rehearsed. But the flood levy makes it necessary to revisit. The federal budget is rich with fat. Yet Gillard suggests she cannot find spare change to rebuild the country after an unprecedented natural disaster. If she genuinely can’t – if there are really no government programs left to cut, no funds to spare and no alternatives to a tax hike – then the decisions taken over the past few years, which have placed the Commonwealth budget in such a dire fiscal situation, need to be scrutinised more than ever.

Micromanagement In The Regulatory State

Another year, another 6,369 pages of law. Spread over 150 acts, that was the Commonwealth’s total new legislation in 2010.
Not a bad effort considering their usual legislative binge was interrupted by an election.
The received wisdom about Australia’s political and economic history over the last few decades is wrong.
Think we’ve been living in an era of deregulation? In an era of small, timid, “neo-liberal” government?
The data suggests otherwise.
The Australian Government has been massively, overwhelmingly, and comprehensively expanding its intervention into all aspects of the economy.
Compare 2010’s 6,369 pages to the 1980s, when the parliament only passed around 2,000 pages of law every year. Twenty years before that parliament would pass even less: just 500.
The first few Commonwealth parliaments were lucky to pass more than 100 pages a year. In 1907 the Governor-General ticked off on a paltry 17 pages of new law.
It took just a few hundred pages of legislation to set up the Commonwealth. But 110 years later it apparently takes more than 6,000 new pages to just keep it running.
Admittedly, these figures come with a lot of caveats. In 2010, Australians didn’t have to obey 150 more laws: some legislation is passed to alter or repeal existing legislation. Not all of it, by any means, but some.
And the figures don’t factor in the immense volumes of statutory legislation implemented by the Commonwealth last year, usually hovering around 2,500 to 3,000 pages. Or the pages of legislation passed by state governments, which varies between 1,000 and 4,000 depending where you live. The states implement statutory legislation too.
Yet with all its caveats, looking at the number of pages of law passed each year illustrates two things.
First: the more laws a government passes, the busier it is. We have increasingly busy governments. Australia’s legal and regulatory system is being continuously shuffled around. Continuous change has its consequences. To take one of the more prominent examples, in the last few years businesses have had to get up to speed with niceties of Workplace Agreements, then the complexities of WorkChoices, and now the nuances of Fair Work.
Second: the regulatory framework which governs the economy is increasingly complex. Longer laws are more complex laws. The WorkChoices act was 762 pages. The Fair Work act was 651. People (not just lawyers) have to read and understand those tomes.
Regulation spawns more regulation. Not all regulation works to achieve its goals, so regulators and politicians just pile more and more rules on top. And a great deal of regulation is imposed just for its symbolic benefit – the need to “do something” in response to public demand. The OECD calls all this “regulatory inflation”.
Condemning the “volume and complexity of federal laws”, the Chief Justice of the Federal Court of Australia Patrick Keane told the Australian Financial Review Friday that “opening the tax act is like entering the door to a parallel universe”.
This growth in government control over the economy is hard to reconcile with Kevin Rudd’s view that a “particular brand of free-market fundamentalism, extreme capitalism and excessive greed” has dominated the last decades.
Take the now-orthodox view the global financial crisis was caused by a lack of regulation. This view seems to ignore the abundance of regulation governing the banking and finance sector in the United States, and, indeed, globally.
Certainly, in the aftermath of the crisis, a batch of new international banking regulations have been implemented, most notably the Basel III accords. But rarely is it pointed out there was a Basel I and a Basel II. Each were substantial regulatory frameworks themselves.
Indeed, the perverse incentives created by Basel II’s capital requirements (which encouraged banks to hoard AAA-rated mortgage backed securities) were one of the major causes of the crisis in the first place.
Other regulations administered by the American Securities and Exchange Commission protected the private ratings agencies – which granted the AAA grades – from competition. It gets worse. Jeffrey Friedman convincingly argued in Cato Policy Journal last year that not even the SEC knew about this latter regulation, which it itself had imposed in 1975.
If there are too many regulations for even the regulators to keep track, then our problem isn’t too little regulation.
The expansion of regulation is a bipartisan project. The Howard government was just as enthusiastic about regulating as the Rudd and Gillard Government has been.
With 6,369 pages of legislation, 2010 was unfortunately an unexceptional year.
So it’s time we recognised our political system for what it is. It’s not neoliberal. Nor is it social democratic. Australia is a regulatory state – one in which three levels of government have wrapped society with a complex and confused mesh of rules and laws which micromanage everything we do.

Why Greedy Gerry And His Mates Will Win In The End

Gerry Harvey is not Australia’s most popular man right now. It would have taken a hell of a campaign to convince Australians that imposing GST on internet retail purchases under $1000 was not just good policy, but the only fair thing to do.

It’s hard to feel bad for the retailers’ coalition, which includes Myer, David Jones and Target as well as Harvey Norman, because it seems like they’re trying to divert attention from higher prices in their shops, which have nothing to do with the GST at all. Hence the popular backlash.

But despite their tone deafness, the retailers have identified an issue that will be huge in the future. For better or worse, the government will eventually be forced to close the GST-free loophole. The alternative is to admit an efficient consumption tax is impossible in a world of global commerce.

Sure, in 2010, only a tiny percentage of retail sales were online. But there is no reason to believe Australians’ engagement with online retail and services has peaked. After all, it took some time to get where we are today: people had to get comfortable with buying goods, sight-unseen, from a website or auction seller.

There’s a generation gap too: 82 per cent of Australians aged 25 to 34 reported purchasing goods online, compared to 38 per cent of those above 65.

And the cost of international shipping is becoming trivial.

The UK-based site, Book Depository, is somehow able to beat almost all Australian retailers on price and ship its products across the world for free. It’s a volume game: the more they ship, the cheaper the shipping for each individual item becomes. The courier discounts the site has negotiated mean many Australian books are cheaper to ship from the UK than to buy at a bricks-and-mortar store here.

Sites like Book Depository use air freight. The savings are even more substantial when you ship.

The rise of the shipping container since the 1960s has reshaped and propelled globalisation more than any other innovation. Where earlier goods would be stowed haphazardly on pallets in small cargo ships, they are now shoved into metal boxes of uniform size, which has changed international commerce to the extent that transport costs are becoming irrelevant.

That’s two disruptive changes working in concert. Driving one side of retail, the revolution of the internet has been proclaimed far and wide. But the revolution on the other side, in international transport, is just as significant yet largely unnoticed.

The waves of change in retail and industry are immense and, of course, welcome. Right now, Gerry Harvey may seem like a rent-seeking whinger. But it is a virtual certainty his campaign is just the first skirmish in a long war between government and consumers who are comfortable circumventing domestic taxes.

As long as the loophole remains, we can expect retailers to try to blur the distinction between overseas and domestic retail. As a pre-Christmas gambit, Myer announced it was considering building a Myer-branded website in Shenzhen, China, to exploit the GST-free loophole.

A transparently political announcement, but not a stupid idea. If there’s a competitive advantage to be gained from restructuring a business to avoid paying local tax, someone (not necessarily Myer, but someone) will try.

The retailers haven’t quite made their case. At the moment, the logistical hurdles to imposing the GST at the border are insurmountable. And there’s obviously no way to get every online retailer around the world to comply with Australian tax law.

Julia Gillard said last week that levying GST on international purchases under $1000 may cost more than it would raise. (Customs ain’t free.) That’s as good a reason as any to rebuff the retailers. Yet it’s at best a temporary reprieve. As online commerce inevitably grows, the arithmetic will change. No government will tolerate watching its revenue hollowed out by changing consumer preferences.

The reaction to the retailers’ campaign has been intense, a reminder Australians don’t like paying tax very much. Less tax is better than more tax; better again is no tax at all.

Yet whether now or in 20 years, the government will have to face the fact that globalisation makes it easier and easier for individuals to get cheap deals. This includes seeking the lowest tax liability.

Policy makers and bureaucrats designing tax systems have long struggled with the fact that globalisation makes it hard to impose heavy taxes. We’ve seen this in the mining tax debate, where miners have threatened to take investment money overseas.

So as we now avoid tax by shopping online, perhaps we might rethink our moralising about those miners or, indeed, the wealthy individuals who protect their earnings in tax havens.

With the internet, tax avoidance is no longer just for the rich.

I think that’s a welcome development. Politicians with big spending dreams will disagree. Gerry Harvey mightn’t be popular, but eventually a government will do his bidding.

National Curriculum Gets Our History Badly Wrong

Julia Gillard began the development and implementation of the national curriculum as minister for education in the somewhat happier days of the Rudd government. It hasn’t gone well. The curriculum’s implementation problems keep piling up. It’s not at all ready to be taught.

The plan was to have the curriculum rolled out in the 2011 school year, but only the ACT will meet that deadline.

New South Wales and Western Australia have decided to delay the curriculum to 2013. The Victorian government announced recently it would do the same. But there are problems with what’s in the curriculum too.

Take, for example, the history syllabus. After a full quota of compulsory schooling, Australian students will be none the wiser about the origins and central tenets of liberalism: the basics of individual rights, representative democracy and the market economy, and the importance of civil society.

Not to put too fine a point on it, but these are the absolute fundamentals of Western civilisation. And they are missing from the national curriculum.

One need look no further than how the curriculum purports to teach ”struggles for freedom and rights”, a ”depth study” for year 10 students.

The struggle for liberty against tyranny is one of the most important themes of the history of the past 500 years. From the English Civil War to the American and French revolutions, the proclamation of the rights of individuals has given us a rich inheritance of liberalism and civil liberties. That, at least, is how you’d think it would be taught.

But according to the national curriculum, the struggle for individual liberty started in 1945. Because that’s when the United Nations was founded.

To hinge the next generation’s understanding of individual rights on such a discredited institution is inexcusable. And it says a lot about the ideology of the curriculum’s compilers: as if individual rights were given to us by bureaucrats devising international treaties in committee.

Do we owe our liberties to centuries of effort by moral philosophers and revolutionaries opposed to repressive governments? Or do we owe our liberties to the UN International Covenant on Civil and Political Rights, devised by governments, and which only took force in 1976? The curriculum implies the latter.

Students go on to study the fight for freedom in the developing world and battles for rights of developed-world minorities. Worthy topics. But oppressed minorities were seeking the same rights held by the majority. Aboriginal Australians wanted full political rights. Black Americans wanted an end to discriminatory Jim Crow laws. To teach the struggle for minority rights without mentioning how the idea of universally applicable rights came into being is to distort history.

We could dismiss this distortion as an accident if not for the strong impression it would give students – that the history of Western civilisation is primarily characterised by the oppression of minorities, not the long, slow, spluttering development and expansion of political freedom, liberalism and prosperity.

Rights denied to racial minorities is a stain on our past, but it is not the sole attribute of our history. If the struggle for individual rights against the tyranny of government is one pillar of the history of Western civilisation, the other crucial pillar is the boom in wealth and well-being over the past two centuries.

Here too the national curriculum is distinctly lacking. The year 9 study of the Industrial Revolution includes weeks pondering ”the 19th-century concept of progress” – insinuating that a belief in progress is anachronistic. The syllabus keeps students’ attention on labour conditions, social problems and the slave trade. Again: worthy topics. But it is an accepted historical truth the Industrial Revolution was the bed on which our affluence was born. Hopefully that can be squeezed in between discussions on dark satanic mills, machine-breaking and limits to growth.

And the Industrial Revolution was the period in which slavery was ended. Slavery has been a constant throughout history. Its elimination is humanity’s greatest achievement. But introducing slavery in the Industrial Revolution unit suggests something else: that the invention of modern capitalism was somehow to blame for this ancient crime.

The entrepreneurial spirit of the Industrial Revolution is one we should encourage in students.

Yet the word ”entrepreneur” appears nowhere in the curriculum. And when the curriculum talks about ”wealth”, it only refers to the distribution of wealth, not the creation of wealth.

Sure, the ideological assumptions in the national curriculum are subtle. But they’re pernicious.

Students will not be taught the origins of their world. They’ll learn only of Western civilisation’s mistakes, while staying ignorant about its extraordinary achievements.

So Canberra’s inability to implement the national curriculum may be for the better.

Gillard’s Government Balancing Act

As 2011 opens, Labor is going to face that Julia Gillard’s biggest problem is a crisis of legitimacy.
 
Not the sort of legitimacy Tony Abbott was talking about in the weeks after the election: a government formed in a hung parliament is a valid government, and Gillard is as much a Prime Minister as any other prime minister.
 
But Julia Gillard commands neither influence over her colleagues, control over the processes of government, nor direction of the media cycle. In the months since taking the leadership, she has utterly failed to stamp the Government with her brand or even made clear her philosophy of government.
 
Everybody has noticed that the Gillard Government has no vision, but increasingly you have to wonder whether it has any purpose at all.
 
Kevin Rudd had an awful 2010, but his control over all these things in the first 18 months of his government shouldn’t be forgotten.
 
It was just the way Rudd achieved that control – the endless parade of announcements and policy revolutions that spectacularly blew up this year – that eventually did him in.
 
By contrast, Gillard’s leadership was precarious from its first moment. The leadership spill did more than install a new Prime Minister; it appears to have undermined the internal coherence of federal Labor’s parliamentary party.
 
The Greens have received the credit for the recent debate over gay marriage, but it wouldn’t have been possible if not for the erosion of Labor’s internal discipline in the wake of the spill. Gillard’s strong claim that she doesn’t support gay marriage did nothing to halt dissent from within her own government. She may have even stoked it.
 
It’s no longer fashionable to do so, but I still blame Rudd for Gillard’s problems.
 
Much was made of Gillard’s claim in an interview from Brussels that foreign policy was not her passion – education was. Yet education has been stubbornly out of the Prime Minister’s orbit since.
 
Rudd left so many balls in the air that Gillard’s first few months has been entirely focused on tackling them one by one.
 
Take the politics of asylum seekers. Rudd’s dithering between toughness and compassion throughout 2009 and his last months in 2010 left the Government with no coherent message to counter Abbott’s simple mantra.
 
Rudd then threw a bomb at Gillard in his penultimate press conference, incoherently and confusingly claiming that the leadership question was whether the Government should “lurch to the right” on asylum seekers.
 
Once she got the job, Gillard grasped a badly underdeveloped East Timor solution which didn’t seem to have left the whiteboard stage. (It’s only last week that East Timor received a document outlining the plan – five months after it was announced.)
 
And she struggled to demonstrate that her East Timor plan was at all different from the Pacific Solution her party had spent a decade condemning.
 
It’s not much better across the policy portfolios. The lavish Henry Tax Review has ended with the resignation of its author and a mining tax going into its third iteration. Gillard tried once to wrestle the mining tax down once before, but the drama looks to intrude well into the New Year.
 
Or a price on carbon. Gillard is committed to ambitious climate reform, we’re told. She’s just not entirely sure what that reform is yet. Perhaps it depends on Rob Oakeshott and Tony Windsor.
 
Gillard has struggled to balance these huge policy battles (you could also include health and water reform) with her avowed belief that Labor lost its way in July. She doesn’t want to abandon the appearance of reform zeal which Rudd cultivated, but knows those attempts at reform were the sources of the Government’s problems.
 
It leaves her government hesitant, cautious, and ever so slightly intimidated by its own policies.
 
The Government is deeply uncomfortable in its own skin, led by a Prime Minister whose principal qualification for leadership was being agreeable to union bosses and ALP heavies who felt neglected under Rudd.
 
That’s not to say Julia Gillard couldn’t have been a good Prime Minister – or even a great one – or that she couldn’t be one in the future. Right now there’s no reason to suspect this government won’t be able to survive a full term. She has time to grip the wheel of leadership.
 
But one thing is clear right now. Kevin Rudd’s problem was never just communication, although it must be comforting in Labor circles to imagine it was. Gillard’s struggle over the last few months surely has shown how much a fallacy that belief is: changing the messenger hasn’t helped at all.
 
It’s only become worse for the ALP. Tony Abbott is if anything much more electable than he was while Kevin Rudd was leader.
 
Hence Gillard’s legitimacy crisis. One by one, the justifications for July’s leadership spill have collapsed: the Government is less popular than it once was, it is no better managed, its suite of policies are no more coherent, accepted, or closer to implementation.
 
In 2010, Gillard was given the role of Prime Minister. In 2011, her goal must be to own it.

Taxpayers Are The True Victims Of The Global Financial Crisis

About two years on from the financial crisis the world looks very different to the way it seemed in the middle of the economic collapse.
The broad ideological realignment predicted by many never came. But, back in late 2008, it was hard to get away from the hyperbole. Neo-liberalism was dead. Consumerism was dead.
Even deader was the orthodox approach to economics. The entire academic economics profession was looking pretty unwell.
A cover of Newsweek claimed ”We are all socialists now.” French President Nicolas Sarkozy was photographed reading Karl Marx’s Das Kapital.
A clearly overstimulated Kevin Rudd wrote in The Monthly: ”from time to time in human history there occur events of a truly seismic significance, events that mark a turning point between one epoch and the next”.
For Rudd, it was time for governments to grab back the power his prime ministerial predecessors had relinquished.
As the global economy imploded, the ideas of John Maynard Keynes, the economist who suggested government could step in to save it, were always going to be popular.
In retrospect, Australia survived splendidly. We never quite fell into recession. We should be proud. Or perhaps just relieved. Overseas, the outlook is terrible.
The formula that the government claims worked in Australia – pumping money into the economy with reckless haste – has failed elsewhere.
The United States embarked on an unprecedented fiscal stimulus, bailing out car companies and investment banks. But its economy is still moribund, unemployment projected to hover at about 9 per cent for years. Last month it began another round of printing money.
At least the US government is limping along. Across the Atlantic, the wash-up from the crisis has been even worse. Greece is broke. Ireland is broke. Spain looks like it’s about to go broke.
The crisis that was supposed to destroy neo-liberalism seems instead to have hurt big-spending governments.
Economic slumps are stress-testers. Not all businesses fail in a recession. Those that do are either so marginally profitable they were on the edge of failure anyway – think car companies – or had made such poor decisions that they caused the crisis in the first place – including banks that relied on sub-prime mortgages. So too with governments.
The financial crisis was an industrial-scale test of economic wellbeing. Countries that had bad policies before the crisis failed.
Ireland suffered because, having adopted the euro, its interest rates were set by a European central bank more attuned to French needs than Irish ones. Ireland’s economy – its tax cuts and public service bloat – came to rely on a housing boom caused by those theatrically low rates. The boom collapsed.
Greece’s corrupt public sector has engulfed and suffocated its economy over decades – the government was only just able to pay all its employees during the good times, let alone during a crisis. The US economy was weak after a decade of massive overspending under George W. Bush and the trillion-dollar price of military adventurism. Barack Obama’s spending decadence tipped it over the edge. The American economy is paying for years of government irresponsibility.
Yet countries that were robust and healthy – such as Australia with our flexible labour market, good balance sheet and risk-averse Reserve Bank – thrived.
Academic economists are still studying the causes of the financial crisis. One early finding: it wasn’t ”greed”. How important were the American interventions in the housing market, the US Federal Reserve’s artificially low interest rates, Wall Street’s too-clever-by-half mathematicians, or the global capital regulations that inexplicably favoured mortgage-backed securities?
But we know what’s happened since. The moment for Keynes has ended. Now it’s time for free-market economists such as Ludwig von Mises and Friedrich Hayek. The two Austrians said markets should be free to self-correct – better for governments, and better, in the long run, for economies. Governments should have restrained themselves.
Keynes once famously claimed that when the facts changed, he changed his mind. Having ended its flirtation with collectivism, Newsweek now publishes articles about ”The Triumphant Return of Hayek”. Bitter experience will do that.
The real casualties of the financial crisis haven’t been banks or businesses. They have been the rash governments that tried to save them and the taxpayers who provided the cash.