Month: July 2014

There’s a revealing story in the new Joe Hockey biography by Madonna King – revealing not only about the Treasurer but about the Government of which he is a senior member.

In 2001 Hockey was minister for financial services in the Howard government. It was a junior ministry but one that gave him responsibility for the Australian Prudential Regulatory Authority, and, through it, the stability of Australia’s banks and insurance companies.

So it was Hockey in the hot seat when HIH, the second largest insurer in Australia, went into liquidation in March 2001.

The HIH liquidation meant that thousands of Australians were suddenly uninsured.

Hockey was informed that HIH’s losses could have been up to $8 billion. He was invited into cabinet to explain what was going on. John Howard asked him how the government should react.

“We should step in,” Hockey said.

King says the cabinet meeting descended into a debate about the desirability of bailouts.

Howard and Peter Costello were the most opposed. They spoke of the dangers of moral hazard – creating a belief that private companies were implicitly guaranteed by the government. They noted that in 1997 their Wallis inquiry into the financial sector had warned against bailing out private firms.

On the other side of the argument were Hockey and the young minister for workplace relations, Tony Abbott. HIH was exceptional circumstances. King writes that “many of those now facing ruin were Liberal Party stalwarts who were practising self-sufficiency, and funding their own lives”.

Hockey told cabinet: “These are our people.” HIH’s customers were Howard’s battlers.

King isn’t the first person to have recorded the cabinet machinations over HIH – Tony Boyd had them in a story in April last year.

But in King’s biography they’re more particularly informative because they emphasise – as the entire book does – that Hockey is a quintessential Liberal moderate.

On almost every major issue that King records Hockey takes the moderate side.

When Hockey was minister for tourism Qantas came to the government asking for regulatory relief to increase its foreign ownership. “I wrote to Cabinet, basically, over my dead body,” Hockey recalls.

King writes that liberalism for Hockey is about individual rights, parliamentary democracy and – this is the crucial one – “a commitment to improve society through reform”.

It’s striking how much the Abbott Government is heavily populated by moderates. Hockey and Abbott are moderates. (That Abbott is no free market ideologue is long and well attested, but best shown by his paid parental leave scheme.) George Brandis is from the moderate wing of the Queensland liberals. Christopher Pyne is a South Australian moderate.

Yes, the Government has its share of dries – Andrew Robb, for one, and Mathias Cormann.

But this team is strikingly different from the previous Coalition government. Howard and Costello had serious dry credentials.

Howard was Malcolm Fraser’s last treasurer and tried to drive that government towards liberalisation and deregulation – a direction Fraser was unwilling to go. When the Liberal Party went into opposition Howard was affiliated with various dry groupings.

Costello’s dry credentials were even stronger than Howard’s. He was a founder of the HR Nicholls society, a group dedicated to pushing for industrial relations reform. Costello got Liberal endorsement in a sweep of moderates for the New Right in 1989.

Of course, Howard and Costello’s dry pedigree did not stop their government from being relatively heavy taxing and big spending.

And despite Hockey’s earlier views, it’s now his policy to remove all the ownership shackles from Qantas.

People can change, of course. It’s easier to be an airline nationalist when you’re tourism minister than treasurer.

But nor does the 2014 budget look like something moderates would produce – with its harsh welfare changes, market-oriented university reforms, and abolition of dozens of government bodies.

King’s book provides some help here.

The key to understanding the budget is the Medicare co-payment – or, more specifically, the Medical Research Future Fund the co-payment is to support.

Media reports of the Hockey biography have focused on the description of the fund as “the sunshine that could wrap the budget coverage in the warmth its authors believed it deserved.” The implication is that the fund is as much public relations as policy; a softener for the budget’s hard edges.

But in context King makes it clear that Hockey, and his Government, does in fact believe that the Medical Research Future Fund is a substantive policy reform. It will bring long term “structural change”. Hockey told his biographer he came up with the idea of investing in health while reflecting on 19th century Sydney’s investment in seawalls.

This is too corny to be entirely fiction. It is seems it is genuinely his belief that Medicare’s long term sustainability will be ensured by a massive government research body. This is hardly the dry-as-dust approach to Medicare that has been so widely condemned.

King may be exaggerating Hockey’s moderate instincts. Her book is incredibly positive and flattering. Biographies often tell you more about their author than their subject.

But the overwhelming impression given by the Hockey biography is of a Liberal moderate assuming a role that demands aggressive dryness.

Tony Abbott ought to be watching Victoria closely.

His problem – a disgruntled former Liberal controlling the balance of power and holding the Government’s agenda to ransom – is exactly what Denis Napthine has had to deal with for the past year.

In 2010 the Victorian Coalition won government with a one-seat majority. Such a margin would have been perfectly serviceable if it wasn’t for the fact that Geoff Shaw, the Liberal member for Frankston, was accused of an entitlement rort, fell out with the Speaker, then fell out with his party, and then fell out with the entire Parliament.

Since then he has been creating havoc. Shaw has a single agenda – he’s anti-abortion – but beyond that he’s been mainly focused on creating problems.

So yes, Shaw is a lot like Clive Palmer – the man who was a climate sceptic one day and an Al Gore climate ambassador the next.

In June the major parties finally ganged up on Shaw and voted to suspend him from Parliament.

Obviously Palmer and his three senators won’t be suspended or expelled, even if the Abbott Government wanted to do such a fundamentally undemocratic thing.

The first and most important lesson of Victoria is simple: Abbott needs to go to an election as soon as he can.

When the Shaw crisis came to a head last month, Napthine said he would have liked to call an election six months ago. Spill the entire Parliament. Let a ballot resolve the crisis.

But in Victoria the key mechanism to resolve parliamentary instability in the Westminster system – an election called by the government leader or forced by the head-of-state – was eliminated when the previous Labor government introduced fixed terms.

Abbott doesn’t have that problem. And his problem is in the upper house not the lower. He can play the double dissolution card.

This would be a drastic strategy of course, especially because the polls make it look unappetising.

But the alternative may be a lot worse.

The new Senate has sat a single week but there must be Coalition hard heads thinking about the future.

So let’s play this out. (As a hypothetical, mind you, not as a prediction. Who’d be so reckless as to make predictions about the 44th Parliament?)

The carbon tax is likely to be repealed. But almost every piece of ancillary legislation to that repeal has been held up or explicitly rejected by the balance of power senators. They won’t abolish the Australian Renewable Energy Agency, they won’t abolish the carbon tax compensation tax cuts, and they won’t abolish the Clean Energy Finance Corporation.

Sure, in themselves these programs are subordinate to the main game. The Government gets its win from repealing the carbon tax.

Yet Palmer is certain to repeat his theatrics with every moderately controversial bill. The GP copayment. The medical research fund. The welfare reforms. University deregulation. Those dozens of agencies the Government has promised to abolish. Why wouldn’t Palmer make trouble? What else has he got to do with this time in parliament?

And that’s just Palmer and his senators.

Ricky Muir, Bob Day, David Leyonhjelm, Nick Xenophon, John Madigan – none of them are fully signed up to the Coalition’s budget, let alone their broader program.

We could very easily get to Christmas without the substance of the May budget having been passed.

Could the Abbott Government negotiate its way through to parliamentary stability? Perhaps. But recall that last week wasn’t the first time the Abbott team’s negotiating skills have been wanting. The Coalition failed to negotiate minority government in 2010.

These are the Abbott Government’s parliamentary problems. The polls are a worse problem.

Before last week the mantra has been that it is a long time until the next election – polls change. Yet after last week that mantra sounds a little desperate.

More importantly, the Victorian saga shows that voters blame anarchy in parliament on the government. It’s not fair, of course – the Napthine Government is governing well enough. Yet the parliamentary drama overshadows everything.

It is certainly true that if Abbott went to a double dissolution, voters may give him an even more unpredictable parliament, stuffed full of Palmer senators and micro parties. If so, then the Coalition will just have to grin and bear it. Such is democracy. (For that matter, Shaw could be returned in Frankston, and the Victorian Parliament might be hung again.)

But what’s the alternative?

Laura Tingle wrote in the Australian Financial Review on Friday that “cornered ministers have resorted to arguing that no matter how untidy things were at the moment, the Prime Minister will get to the end of this year”.

An earlier rallying cry was that the Government just needed to get to July 1 when the senate changed over. Before that, the Government just needed to get to Christmas.

This is what governments say when they don’t have a Plan B.

Maybe Palmer will calm down. Maybe he’ll play ball. But remember the Gillard government’s hope that they would eventually find “clear air”?

They never found it.

“Senator school”, as it’s colloquially known, happens every time there is a new crop of senators. It’s an induction process.

The two day course takes new senators through the tedious nitty-gritty of work in the red chamber. Education in parliamentary skills is a serious thing.

Usually senator school passes without comment. There’s a (slightly shorter) program for new members of the lower house as well.

This year, however, senator school is newsworthy. It’s been talked about everywhere. The program has been leaked to Business Spectator. AAP wrote, “There won’t be any finger painting but some may have a nap when a dozen new politicians head to Canberra for ‘senator kindy’.”

It’s all incredibly patronising.

The only reason we’re hearing about senator school is because six of the new senators (out of twelve new senators in total) aren’t from the political class.

The nickname that’s been given to the new senate crop is the ‘Star Wars Cantina’ – suggesting the independents are a raucous gathering of aliens, rather than the usual well-disciplined political natives.

(Sometimes the clownish Joe Bullock has been included in the cantina, cast by the press as an honorary independent after he disgraced himself, and Labor, at the election.)

One of the most common complaints in recent years about Australian politics is that it is too clubbish – politicians are drawn entirely from the ranks of political staffers, lawyers, party officials and union reps.

John Howard made this argument last month, decrying the rise of politicians “whose only life experience has been politics”. You hear it from Malcolm Fraser often too.

Here we have, now, a home builder (Bob Day), an agri-business owner (David Leyonhjelm), a military police officer (Jacqui Lambie), a civil engineer (Dio Wang), a footballer (Glenn Lazarus) and a sawmill manager (Ricky Muir).None are ex-staffers. Lambie has the most first-hand experience in the practical business of politics. And all that is a stint volunteering for Labor senator Nick Sherry.

Far from unrepresentative swill, these independent senators are not a bad cross-section of the community. Compared to the rest of the incoming senator cohort they’re much more representative – the other six new senators from the major parties are former union bosses, former mayors, former party directors and former chiefs of staff.

This isn’t the first time the press has treated independent senators as if they didn’t belong.

In 2005 the Canberra Times reported that Steve Fielding was the only incoming senator going to senator school.

A few days later the paper issued an embarrassed correction that, no, all 15 new senators in Fielding’s cohort had to attend.

In other words, the press only find senator school interesting when the aliens take it.

Odgers’ Australian Senate Practice, the manual by which the Australian senate operates, is more than 900 pages long. How many major party senators do you think have read that tome? That’s why politicians have staff. That’s why the parliament has clerks.

Yet we’re being asked to laugh at the entirely reasonable statement by Dio Wang that the details of senate practice are “pretty boring… For things like this it’s always better to learn through practice.”

If we assume that politicians, being human, have limited time for self-education, perhaps it would be preferable they study unfamiliar policy areas rather than the details of senate procedure.

Recall that the new senators aren’t given money for staff and support until they officially enter the senate.

Major party senators have been coddled and cared for by their party organisations while they waited to take their seats.

The micro-parties and independent senators have had to get on with their lives. They’ve had businesses to run and livings to make, while trying to fend off the Canberra press gallery looking for a colourful sound bite to fill out dull copy.

Ultimately, the condescension with which the new senators have been greeted is another attack on their legitimacy to sit in parliament.

I argued in The Drum in April that the new senators do in fact represent the will of the voters; the will of the nearly quarter of the Australian population that chose to vote against the major parties, Greens included.

The major parties are deeply worried that they’ve lost control over their third senate spot. Don’t imagine it’s anything more principled than that.

That raw political calculation explains why the majors have been so patronising towards their new colleagues.

So what explains the media’s snobbery?

There’s a reason we call it a political class. When threatened by outsiders, they protect their own.

Last week, the Senate Standing Committee on Economics called for a royal commission into the Australian Securities and Investment Commission and the Commonwealth Bank over the financial fraud scandal. (You can read the committee’s report here.)

In other words, the key recommendation of one parliamentary inquiry is that the government should establish an even bigger inquiry.

Royal commissions have an almost magical, mythical status in Australian politics. They have become less a means to an end, and more an end in themselves.

There are already three royal commissions ongoing at the Commonwealth level: one into institutional responses to the sexual abuse of children, another into the Rudd government’s home insulation scheme, and the third into trade union governance and corruption.

It’s been 20 years since there have been this many commissions going at the same time.

Yet there’s only one real public policy reason to choose a royal commission over any other form of inquiry – their coercive powers.

Royal commissions awkwardly span the gap between executive government and the judiciary. They’re formed by the government of the day according to its whim. See, for instance, the royal commission into pink batts – an incredible precedent for new governments to punish the policy decisions of previous governments.

But while royal commissions are creatures of the executive – that is, driven by politics – they’re also empowered with the sort of coercive powers only granted to apolitical courts.

They can summon witnesses. They can compel those witnesses to produce documents. They can force testimony – even self-incriminating testimony, eliminating the right to silence in the process. They can apply for search warrants. (In the Northern Territory, no warrant is even needed. Any member of a commission can enter any building they want and take what they please.)

As the Law Council of Australia told a 2009 inquiry into royal commissions, the Commonwealth Royal Commission Act “removes or significantly dilutes the traditional common law protections usually afforded to witnesses”.

This makes them exceptionally powerful. Even for undoubtedly worthy subjects of investigation (and who could question the virtue of an inquiry into institutional responses to child sexual abuse?) it should be of serious concern that royal commissions throw basic legal rights out the door. Even the worst people have rights.

Do these coercive powers uncover ‘hidden truths’, as many advocates of royal commissions suggest? Maybe. But royal commissions have lower standards of procedural fairness than courts. They can admit hearsay, for instance. They are as likely to uncover untruths as traditional courts are to miss hidden truths.

In his book Royal Commissions and Public Inquiries in Australia, Scott Prasser distinguishes between royal commissions whose purpose is to advise on policy questions and those that are inquisitorial; that is, those which investigate and expose wrongdoing. All three current commissions take the latter form.

But we already have elaborate and expensive law enforcement and judicial systems to investigate, expose, and finally prosecute wrongdoing.

Every inquisitorial royal commission is a tacit admission that the existing legal system isn’t working. More prosaically, every inquisitorial royal commission should be focused on law-enforcement failure.

One survivor told the child abuse royal commission that “the police don’t listen to children”. Another was told by police “we can’t do anything” and that the issue of sexual abuse was too much of a “hot potato”. Whatever comes out of that royal commission, changes in the way the police handle abuse allegations are likely to have the most long-term importance.

While the ability to coerce testimony may be the only real policy reason to form a royal commission, there are a whole lot of political ones.

Nobody ever made headlines by calling for an interdepartmental review. When a government appoints a royal commission, it is trying to tell the public that there is no limit to how seriously it takes a given issue. The government looked at its menu and chose the crown jewels – a royal inquiry.

When the royal commission into union corruption was announced earlier this year, the unions were quick to denounce it as a witch-hunt.

The metaphor was more correct than was perhaps intended. Once formed, royal commissions are impossible to control.

Usually governments have a good idea about the result they’ll get from an independent inquiry. They write the terms of reference. They choose who heads the inquiry. Did anybody doubt that the Gillard government’s inquiry into media regulation would propose new media regulation?

By contrast, the Fraser government wouldn’t have expected its royal commission into the Federated Ship Painters and Dockers Union to delve into corporate ‘bottom of the harbour’ tax evasion schemes. Royal commissions are fishing expeditions, and heavily armed ones at that.

So why a royal commission into ASIC and the Commonwealth Bank?

ASIC is one of our most heavily empowered regulators (I’ve been banging on about this in the Drum for a while, for instance here, here, here, and here). If any regulator deserved to have its feet held against the fire, it would be ASIC.

Yet, as the Coalition Senator David Bushby pointed out in a dissenting appendix (page 457 onwards), we already have an inquiry looking at the structure of financial regulation.

The Financial System Inquiry isn’t draped in the Queen’s regalia, sure. It can’t coerce testimony.

But isn’t that a good thing? The cultural status of the royal commission has obscured its very real dangers to the rule of law and civil liberties.