If You’re Worried About Privacy, You Should Worry About The 2016 Census

If you blinked, you missed it. On December 18 last year, the Australia Bureau of Statistics announced that at the 2016 census in August it would, for the first time, retain all the names and addresses it has collected “to enable a richer and dynamic statistical picture of Australia”.

Keeping names and addresses, we were quietly told, would enable government planners to do more rigorous studies of social trends.

It is only now that the significance of the ABS’s change is spilling out into the press.

For the past 45 years, it has been the ABS’s practice to destroy that identifying information as soon as all other information on the census forms is transcribed – first onto magnetic tape, and now into vast digital data banks that allow statisticians to slice and dice at their whim.

In the 2001 census, the government first offered Australians a choice as to whether they would like their name-identified information kept. This year that opt-in system will be a compulsory system. Your name will be kept whether you like it or not.

The risks to privacy are blindingly obvious. The safest way to protect data is to not collect it at all. The second safest way is destroy that data after collection. There is no such thing as 100 per cent safely secured information. We know this from bitter experience. The last decade has seen a constant stream of unauthorised releases of apparently secure private information: the 2015 Ashley Madison hack being just the most embarrassing of these.

After all, privacy risks don’t only come from hackers and other rogues. Government departments have a poor record of protecting information from their own staff. The Department of Human Services admitted there were 63 episodes of unauthorised access to private files by its staff between July 2012 and March 2013. The South Australian Police Force accuses up to 100 of its own members of unauthorised access to police files every single year. ABS staff are no more or less virtuous than any other public employee.

The ABS argues that identification information will be stored safely and separately from the rest of the census data, creating a firewall that protects against individual identification. A spokesperson told Radio National last week that the ABS “never has and never will release information that is personally identifiable”.

There are a lot of unanswered questions here. But no matter what firewalls the ABS places around access and matching, it is a truism that any data that can be used usefully can also be used illegitimately.

And of course, what are considered legitimate and illegitimate uses of data can change over time. Rules written in 2016 could be changed in 2026. The data collected now might be used in a very different way down the track.

Identification retention could have practical consequences as well. A population that is rightly worried about the security of their information is less likely to answer the census either accurately or at all. Indeed, this has historically been the ABS’s big concern with keeping identification. They told a parliamentary committee in 1998 that the reduction in data quality from a reluctance to answer questions truthfully was not worth the trade-off.

A lower quality census would lead to lower quality government statistics across the board. A lot of things hang off the census. Census data guides electoral redistributions, Commonwealth grants, education funding and so on. Risking the integrity of all that in the hope that future data might be marginally more interesting to genealogical researchers and government planners seems like a terrible deal.

Although they profess to have changed their mind on the risk of lower quality data, we can speculate these concerns might be why the ABS announced the new policy in the dead holiday season. The less publicity given to the change, the less likely Australians are going to hear enough about the new census rules to be worried about their privacy.

While the Coalition’s support for traditional rights and freedoms has taken a battering over the past few years, overriding the ABS decision would go some way to reclaiming its liberal heritage.

After all, it was a Liberal Treasurer, Billy Snedden, who first mandated the destruction of names and addresses in census forms in 1971 in response to privacy concerns. And Cabinet records show the Fraser government – at the behest of treasurer John Howard – unhesitatingly and immediately rejecting a 1979 proposal by the law reform commission to retain census names and addresses.

The digitisation of absolutely everything has made privacy one of the central problems of the 21st century. If anything, Australians are more aware of the dangers of identity theft and information insecurity than they have been at any time in history.

As the ABS change shows, the debate over warrantless mandatory data retention was just the tip of the iceberg.

It is true that modern governments are data hungry. Planners and regulators want more and more information about the populations they govern.

But to the extent we have an interest in protecting ourselves against government excesses, we have an interest in denying governments carte blanche to collect information. We are not just data points in a planner’s spreadsheet. They work for us.

Submission to the House of Representatives Standing Committee on Tax and Revenue Inquiry into the External Scrutiny of the Australian Taxation Office

With Sinclair Davidson

Introduction: The parliament should unequivocally reject any reduction in the level of scrutiny applied to the Australian Taxation Office (ATO).

The ATO lists five separate bodies which it considers as external scrutineers: the Australian National Audit Office, the Commonwealth Ombudsman, the Inspector-General of Taxation, Office of the Australian Information Commissioner, and the Productivity Commission. However, with the transfer of responsibility for individual complaints about taxation from the Commonwealth Ombudsman to the Inspector-General of Taxation, four of these five oversight agencies have oversight of the ATO only insofar as the ATO is a statutory agency, rather than unique oversight of the ATO.

This system of a single dedicated inspector of the Commonwealth revenue collecting agency is the bare minimum one would require for a liberal democratic tax system. There is a strong case for increased monitoring and scrutiny of the ATO. We believe that this inquiry has been established under a dangerous assumption that the most important independent statutory authority in the Australian government should be freed from the current level of external monitoring. However, the inquiry presents parliament with an opportunity to tighten that monitoring. From both a liberal perspective and a democratic perspective, the ATO needs more scrutiny.

Available in PDF here.

There’s Little To Stop Trump Wreaking Havoc As President

The prospect of a Donald Trump presidency shouldn’t be as worrying as it is.

The United States constitution is specifically designed to prevent presidents from doing too much damage. But the carefully, intelligently designed checks and balances built into the American system of government have been so eroded over the last century that a president Trump could do the sort of harm the founding fathers wished to prevent.

The issue is not so much Trump’s policies. I complained in January that Trump was no conservative – particularly on trade – but then again, he wouldn’t be the first non-conservative president. In fact, policy-by-policy he looks like the most moderate candidate in the Republican field; the temporary ban on Muslim immigration to the United States notwithstanding.

Nor is being a “populist” a crime. Trump would hardly be the first president who got to power by telling voters only what they wanted to hear.

What’s worrying about Trump is his unpredictability, his disregard for any boundary between truth and self-serving fiction, his unbridled narcissism, his instability, and his apparent desire to pursue his enemies with the tools of high office.

He sees himself as a “strong man” – hence his apparent affinity with other strong men like Vladimir Putin. And at this stage it is easy to imagine a chain of events that puts him in the White House.

The American founding fathers were aware that a democratic political system could turn out a person like Trump. The Federalist Papers, the essays written in 1787 and 1788 to argue the case for the constitution, were motivated by a theory of human nature “that men are not to be trusted with power because they are selfish, passionate, full of whims, caprices, and prejudices,” in the words of one scholar.

Hence in the famous Federalist Paper 51, James Madison argued that power must be separated between different branches of government. Each branch – the executive, the legislature, and the judiciary – would vie for power against the others.

“Ambition must be made to counteract ambition,” Madison wrote. The institutional structures of the American republic would ensure that a strong man or narcissist, were they elected to the presidency, would be constrained by the other branches.

Yet those structures have been systematically degraded over the past century. The presidency has accumulated power at the expense of the legislature.

As the word implies, the executive’s intended function is to execute the laws passed by Congress. But the modern presidency has carved out an enormous field of action where it can operate virtually without the oversight of the other branches. The historian Arthur M Schlesinger Jr. called this the “imperial presidency”.

The most obvious example of the imperial presidency is foreign policy. Under the text of the constitution, only the Congress has the power to declare war. But the last war to be declared by Congress was World War II. Since then presidents have been asserting almost unlimited, unilateral power over military engagement and interventionism. The upshot is that, contrary to the founders’ intentions, the president can effectively send the country to war on nothing but their own counsel.

Trump says he now opposes the invasion of Iraq, but he also wants to take Islamic State’s oil. Whatever strategy he implements to do so, the combined forces of the United States military are in practice at his complete disposal.

Just as concerning is the power the president can wield over public policy. The original idea behind Western liberal democracy is that policy is made by the legislature as they negotiate and pass law. But the growth of regulation as a substitute for statute has vested more and more power in the executive government.

In 2014 federal departments, agencies and commissions passed 16 new regulations for every one law the Congress passed. As the economist Tyler Cowen wrote last month: “If there were a president who wished to pursue vendettas, the regulatory state would be the most direct and simplest way for him or her to do so.” Having the vindictive Trump responsible for all this is dangerous.

The shift from a constrained presidency to an imperial presidency has been cultural as well. In his book The Rhetorical Presidency, Jeffrey K Tulis argues that the presidency has assumed a symbolic role not envisioned by the founders.

Voters – and the press – describe one of the key requirements of the office as “leadership”. Yet as Tulis points out, this was not what the founders hoped. The Federalist Papers had only a dozen mentions of the word leader. All but one were disparaging.

During the 20th century, the presidency became about words as much as administration – presidents were rated on their personalities and ability to channel popular sentiment.

Trump is the apotheosis of this change: a demagoguing narcissist who is all surface and shine. But all democracies are vulnerable to such populist figures. The founders knew that. If only their great institutions had been maintained.

Furniture, Rent-Seeking And The Problem With Laws

Law often takes on a life of its own.

We see this all the time. First, parliament introduces a law to solve a public policy problem. Decades pass. Things change. Perhaps the problem might no longer be considered a problem. Technologies change. Opinions change. But it is easier to pass a bill than repeal an act. Special interests come to rely on the status quo. As a result, governments often reconceptualise why the law was first introduced in order to defend that status quo.

Nowhere is this pattern more obvious than in that cesspit of special interest rent-seeking that we call intellectual property law.

The United Kingdom has decided to increase the intellectual property protection for design – which covers manufactured artistic creations like furniture, jewellery, and architecture – from the life of the creator plus 25 years for registered design works, to the life of the creator plus 75 years. An extension of 50 years.

In practice this means design works will get the same length of protection enjoyed by other artistic creations. Furniture, architecture and jewellery designs will be treated much the same as songs and movies in copyright law. Once their protection expires, other manufacturers are free to reproduce the designs, as long as they describe their products as “replicas” or “reproductions” of original designs (lest they violate trademark law).

In Australia, furniture designers want the same changes. Here design protection lasts just 10 years. An Australian manufacturer told BRW in January that Australian design protection was inadequate. A spokesperson from the furniture manufacturer Herman Miller told Fairfax’s Domain last week that companies selling replica design furniture are “tricking the consumer and undervaluing the original design”.

There’s a lot of money at stake. The iconic Eames lounge chair will set you back about $8,000 if you buy an authentic one produced by Herman Miller. But the chair was first designed in 1956 and is long out of design protection. So you can get a replica of the Eames lounge chair for a tenth of that price from any number of retailers.

A licensed edition of the even more ubiquitous, and older, Eames plastic moulded side chair will cost the better part of $1000. Or you could pick up a replica for $80 or so.

Part of this price difference is due to quality. Another is the price of the brand – manufacturers are able to charge a premium for customers who want the real deal rather than an inauthentic product.

But none of that price difference is because the designers have to recoup the cost of the original design. It has been a long time since Herman Miller recouped the design cost on their lounge chair.

And that is all that matters. Justifying the UK change, the minister for intellectual property, Baroness Neville-Rolfe, argued it would right the “unfair” imbalance between manufactured designs and other artistic production.

But what does fairness have to do with it? Intellectual property law is not about being fair to furniture designers. Intellectual property has a purpose.

Standard economic theory says the market will under-provide creative products because creative products are easy to copy. To fix this, intellectual property offers creative producers a monopoly over their work. But that monopoly is only available for a time, because we, the consumers of creative work, have an interest in accessing and repurposing the back catalogue of human creativity.

All these caveats mean that intellectual property isn’t really property, as I’ve argued in the Drum before – it’s a regulatory workaround to an assumed market failure. It only has value insofar as it resolves that failure. It does not exist to funnel consumers into high-priced authenticity.

Furniture design is an example of a creative market that thrives despite lacking much of the intellectual property protection enjoyed by other creative works. Indeed, the fact that Herman Miller can still charge enormous sums for a design available at a tenth the price shows that both the cheap and expensive wings of the market can co-exist.

The availability of replica mid-century design means more people can enjoy better aesthetics at home. It is hard to see what public benefit restricting these designs to people who can spend $800 on a single side chair – as the UK government is doing – would provide.

Sure, on the scale of national politics, how long the design monopoly over Eames chairs should last is a pretty minor thing. But it is an informative one. If the government establishes privileges for one group others will want equivalent privileges.

The content of intellectual property law is almost never considered from first principles – that is, what do we fundamentally want our intellectual property regime to achieve. Rather, it is a scruffle of political power, long divorced from the theory of market failure and a textbook need for clever regulatory intervention.

The Coalition Government has spent the last few years trying to crack down on copyright infringement. If policymakers cared about the purpose of copyright protection they would only do so if it was clear that such a crackdown would lead to the creation of more new creative works. Of course there is no evidence that it will. But the holders of the rights to movies and music believe that pirates are depriving them of revenue. And governments listen because they’ve forgotten why copyright protection was introduced in the first place.

In other words, intellectual property has become its own justification. Put down your textbooks. This is how law works in the real world.

Negative gearing changes aren’t bold or courageous

Why are we talking about negative gearing?

The simple answer is Bill Shorten released Labor’s negative gearing policy. (For better or worse, this is how you control the media cycle. Release policies.)

The more complicated, more worrying answer is that the economic debate is so empty – that the range of acceptable discussion is so narrow, that big picture ideas are so thin on the ground – that changing negative gearing is the boldest economic reform the political class can reckon with.

Removing negative gearing has been done before. Where in 2016 negative gearing changes counts as a courageous barbecue stopper, the Hawke government’s abolition of negative gearing barely rates a mention among the great regulatory upheavals of the era. It’s a sad illustration of how our vision of the range of possibilities has shrunk in three decades.

An even more depressing thought is how disconnected the negative gearing discussion is from the big economic challenges we face. There are two reasons one might consider negative gearing changes. We might want to gather more revenue for the Commonwealth budget. And we might want to ease pressure on the housing market.

That Labor has a more-tax-revenue approach to budget repair and favours negative gearing as an explanation for high house prices is well-known.

But it’s a worry that the Treasurer, Scott Morrison, while defending negative gearing in general,believes that the “excesses” of negative gearing need to be tackled.

First, this goes against Morrison’s apparently rock-solid belief that spending needs to be reduced, rather than revenue increased.

Second, it implicitly concedes the view that the house price boom is caused by demand – too many investors – rather than supply – restrictions on land release and NIMBYism.

Third, and most importantly, changes to negative gearing have nothing to do with economic growth. Nothing.

It’s true that you could make a creative, complicated, multi-stage argument that lower house prices might eventually lead to growth benefits. But all else being equal, it is hard to see why removing money from the economy – as any proposal that increases government revenue would – might help the economy, rather than hinder it.

The unfortunate conclusion is that both the Government and the Opposition are talking about negative gearing because they have so few ideas of what to do next.

Just look at Morrison’s speech to the National Press Club last week. As a generic political speech it was perfectly adequate – an outline of the economic climate and reiteration of previously announced policy positions. But as an attempt to articulate the economic direction of the Turnbull Government it was empty.

On the question of budget balance Morrison only managed to demonstrate that very little had been done to reduce the deficit – as his 7.30 interview made perfectly clear, the Coalition has spent $70 billion of the $80 billion it has saved.

Perhaps the problem is that the bank of reform ideas is empty. Property commentators have been hyperventilating about negative gearing for ages. Maybe it’s only being talked about because the political class has run out of other things to talk about.

Yet the Australian policy community is rich with ideas: big bang ideas and small marginal ideas. The Abbott government commissioned the production of many of them. We’ve had the Harper review into competition policy, the Murray inquiry into the financial system, and the encyclopaedic audit commission report. These reports offer hundreds and hundreds of pages of policy discussion, recommending everything from intellectual property law changes to returning some income tax powers to the states. So where is the shadow of that formidable ideas production in our federal parliament?

Morrison has given a partial answer. From a growth point of view, cutting the company tax rate could get the biggest bang for our reform buck. This would be hard politics, especially if the revenue loss was compensated with a GST rise. As the Treasurer explained, “the proposition that you tax mums and dads more so companies can have a tax cut has an obvious problem.” Yet that problem has been surmounted before. Company taxes were cut in 2000, and again in 2001, at the same time as the GST was introduced.

It seems clear that politicians feel more hemmed in than they were in the past. That’s either because they lack courage – or because they lack the stable foundations on which to be courageous. Australian politics has now experienced half a decade of leadership instability, brought about by the fractious decision to roll Kevin Rudd in 2010.

Our policy debate is more shallow, limited and parochial than it has been for decades. Yet at the same time the need for major changes – changes that would spark economic growth – is as pressing as it has been since the 1970s. That changing negative gearing is the best that Labor and the Coalition can come up with is a condemnation of their failure to lead.

Is The Government Chasing Growth, Or Just Revenue?

How on earth did tax reform come to be seen as the great white whale of economic reform in the 21st century? The debate about whether to raise the GST to 15 per cent is a classic case study in out-of-control policy making.

A White Paper into taxation was part of the Coalition’s 2010 election policy platform, intended to set an incoming Abbott government with an agenda for a second term.

Having cautiously sympathised with the arguments for increasing the GST while in opposition, in 2013 Joe Hockey revealed the GST would be part of the White Paper process. This had a political message. The Rudd government hadn’t even allowed its “root-and-branch” Henry Review to consider changes to the rate or breadth of the GST.

Half a decade after it was announced, the White Paper process is as good as dead, and over the weekend Malcolm Turnbull was backpedalling furiously from a GST increase.

There’s been lots of sound and fury. Remember Rudd’s pantomime about Vegemite in the 2013 election? Now nothing.

There is of course a very sensible economic argument for a GST increase. The GST is a relatively efficient tax. It is also very transparent. We know who pays the GST – consumers. In this sense it is much better than some of the other mainstays of the Australian tax system, like the corporate tax, which is levied on corporations but the economic burden of which is actually shouldered by a combination of workers and investors.

Consumption taxes encourage saving and do not discourage earning, as personal income taxes do. Swap inefficient taxes for efficient ones and all else being equal there will be economic benefits. Stop me if you’ve heard this all before.

But in practice, as Turnbull became more interested in a GST change over the last few months it became clear those benefits were illusory.

First, much of the new revenue would be eaten immediately by compensation to lower income groups. Second, some of it would probably be given to the states to satiate their demands for revenue and pay fidelity to the original GST revenue bargain. Only what was left could be traded off for tax cuts.

In the Australian on Monday, Paul Kelly argued that dropping the GST showed that, for Turnbull, short term politics had trumped sound policy. Kelly asked: “Where does the growth dividend he badly needs come from once ambitious tax reform is rejected?”

Yet by the time all the stakeholders had been bought off, it is not at all clear that an ambitious GST increase would bring a growth dividend – and certainly no growth dividend large enough to justify the cost of political capital.

The lesson here is that politics and policy are not really opposed. We live in a democracy. Everything is compromise. Good policy that is politically impossible cannot be considered truly good policy.

Anyway, even in a perfect world an increased GST would be a hard sell. Probably much harder than the original GST, even though a five percentage point increase is smaller than the original 10 percentage point introduction.

The Howard government was justifiably able to pitch their new 10-per-cent-on-everything tax as “not a new tax, a new tax system”, because the GST was novel, coherent and substantive.

Anything an Abbott or Turnbull government might do – even the grandest trade of a consumption tax increase for income tax cuts – could only appear as marginal changes to the Howard tax settlement. And without the look of revolution it was going to be hard for GST changes to look like anything more than a tax increase, and one widely believed to burden poorer Australians.

Imagine if the Government actually proposed a GST boost in order to fund a tax cut for corporations. This would be at the same time economically sensible (that is, likely to bring a big boost to economic growth) yet it would also be politically suicidal – especially for a government struggling hard with the “unfair” legacy of the 2014 budget.

There is no question that marginal efficiencies could be found if the tax system was rewritten. But not of the sort of economy-boosting significance that the Turnbull Government hopes.

The GST has taken on an aura of bold reform that it does not deserve. And, having taken that aura, it has crowded out discussion and debate about alternative growth enhancing strategies that would leave the tax system as it is.

That aura means there is lots of support for tax reform in the press. But so what? There is no agreement as to whether tax reform is supposed to help the economy, or whether it is simply to raise more revenue. The Government has been stuck haplessly between these two forces ever since Hockey released his tax discussion paper last year.

Right now Turnbull and Scott Morrison are casting around for new approaches to tax in the lead up to the May budget. But they first need to answer a simple question: why are they interested in tax reform at all? For revenue, or for growth?

It has to be said, once again: persistent budget deficits are a terrible time to attempt tax reform.

Opening statement to Commonwealth Select Committee on the Social, economic and environmental impacts of the Murray-Darling Basin Plan on regional communities

With Sinclair Davidson and Scott Hargreaves

The Murray Darling Basin Authority appears to be immensely proud of the fact that the Murray Darling Basin Plan was endorsed in the House of Representatives by 95 votes to 5, and argues this shows the plan “balances the competing interests” of usage of the basin.

However, this committee has heard a great deal about the negative impacts of the Plan.

As our colleague Dr Jennifer Marohasy pointed out to the committee, dramatic improvements in environmental outcomes could be achieved through restoration of the Murray River’s estuary. Letting the Lower Lakes fill with seawater during periods of drought could save approximately 900 gigalitres of freshwater per year in evaporation losses alone.

While we do not propose to address that issue today, what it does suggest is that an adaptive approach to the plan which only has room for incremental changes risks locking in poor outcomes.

We recommend the Productivity Commission immediately be commissioned to conduct a full cost-benefit analysis of the Murray Darling Basin plan with the knowledge that has been gained through this inquiry and the implementation of the plan so far.

A cost-benefit analysis that assesses alternative policy settlements, such as estuary restoration, would also clarify the opportunity costs of policy choices foregone.

It is the case that the Water Act requires the Productivity Commission to conduct an inquiry into “the matter of the effectiveness of the implementation of the Basin Plan and the water resource plans”, which the MDBA describes as an “audit”.

This is inadequate. Rather than an implementation assessment occurring five years into a seven year plan, the Productivity Commission should have been tasked to inquire every three years during the implementation phase, and to study not only into process, but the purpose of the plan.

Furthermore, the Productivity Commission should be enabled to constantly monitor the progress and efficacy of the plan, as well as alternative approaches. Only an external body would have the required objectivity to conduct cost benefit reassessments.

A final word about the scope of cost-benefit analysis. The 2012 Regulatory Impact Statement argued that “Many environmental benefits [of the plan] can only be expressed in biophysical/ecological terms, rather than in monetary terms”.

We do not accept that argument. Value is created through human action, and can only be appreciated on a human scale. In this context there is something we could label as “conservation value”. There is an opportunity cost to not using resources that may otherwise be used. There is an option value associated with maintaining biodiversity, even if we have no intention of exchanging an asset or selling it.

These values can be estimated. We might debate how well they are estimated but this sort of thing can be done and is done on a regular basis.

Undefined and incomparable environmental benefits should not be used as a policy trump card.

Just because a benefit cannot be measured with precision does not mean it has infinite value. An upper or lower estimate of the benefit, translated into monetary terms, is necessary to understand policy choices.

This is the approach we recommend the Productivity Commission take.

Is Abetz right about the same-sex marriage plebiscite?

Senator Eric Abetz’s statement to the Guardian last week that he would not consider the results of a plebiscite on same-sex marriage binding – that is, he might vote against a same-sex marriage bill even if a majority of the population had voted for it – is revealing.

Yes, it has an obvious political explanation. There’s been a lot of “clever” politicking over same-sex marriage. The plebiscite was an attempt to kick the issue into the long grass – an expensive delaying tactic. Nominally conservative politicians have even called for pointless constitutional change to hold back a policy that has a clear majority of support.

But Abetz’s statement is more interesting in that it exposes deep confusion, uncertainty and ambiguity about the relationship between politicians and voters. Aren’t politicians supposed to be our representatives? And if so, what does that mean?

Abetz made two arguments. First, he reserved judgment as to whether the plebiscite would be a fair reflection of the public’s views. If he felt it was stacked against traditional marriage (say, through an unbalanced distribution of funding) he would not consider it binding.

But Abetz also left it open to reject the plebiscite’s results regardless. As he said: “People elect us so that we exercise our own best judgments on all the issues that come before us.” Politicians must “take into account the views of the electorate, the views of the nation and their own personal views.”

But why should the “personal views” of politicians have any weight in political decision making? What is so special about political consciences?

I can think of few professions that I would trust less to follow their consciences than politics – surely the only industry where megalomania, narcissism and confrontation is not just tolerated but is actually a positive. And the idea that political consciences need to be protected is precious beyond belief, given that the practice of politics involves trading off personal beliefs for electoral gain.

There are workarounds to Abetz’s objections. The enabling legislation for the plebiscite could be written so that same-sex marriage is legal automatically after a positive popular vote. Concerns about unfair funding balance should be resolved by not funding any side at all.

But the real question raised by both the plebiscite (which suggests same-sex marriage is too important to be resolved by Parliament) and Abetz’s insistence on a conscience vote (which suggests same-sex marriage is too important to force parliamentarians to go against their beliefs) is why we elect politicians in the first place.

Are they there to represent the views of the voters in Parliament – effectively employees whose job is to do the bidding of their electorate as faithfully as is practicable? Or are they there as sort of an elected aristocracy – placed into power as a popular endorsement of their inner selves?

It is in the interests of the political class to believe the latter, with all the quasi-mystical implications about power and political authority it brings. The most famous expression of this worldview was offered by thegreat conservative Edmund Burke in a speech immediately after he was elected for the first time as the member for Bristol in 1774. Burke argued he was first and foremost a member of parliament with a responsibility to deliberate on behalf of the whole nation, and was not there to reflect “local purposes” or “local prejudices”.

The speech to the electors of Bristol is one of the basic texts of Western democratic politics. But rarely are the views of the electors of Bristol reported. Burke was not a popular local member. When the next election came around – six years later – he had so clearly dissatisfied Bristol voters that he deliberately ran dead, ultimately coming fifth in a ballot of five candidates. Burke did not represent the electors of Bristol again.

The voters seem to have believed Burke had been elected to represent them, and had no hesitation dumping the great conservative thinker when they learned he did not share that view.

In this light, the decision to hold a plebiscite on same-sex marriage rather than a parliamentary vote was a rather devastating indictment of the Australian political class. First it suggests that our so-called representatives are unable to adequately represent our views – whether those views be for or against marriage reform. Second, for those who hold to a more Burkean vision of democracy, it makes politicians look less like confident, deliberative aristocrats and more like cowards, unable to come to decisions on policy questions they find uncomfortable.

Don’t get me wrong. If the goal of democratic choice is to discern what most people want, then direct democracy is much more effective than delegated representation. But then we should be subjecting more government policy to a plebiscite. Things like tax increases, spending programs, military engagements, regulatory interventions, law and order schemes – they could all go to a popular vote.

I know, I know. This is fantasy stuff. Imagine the political class admitting it was not competent to rule on the big issues.

Kevin Rudd guaranteed bank deposits and gave us something we already had

In October 2008, as credit markets seized up around the world, then-Labor Prime Minister Kevin Rudd and Treasurer Wayne Swan introduced the Australian bank deposit guarantee, to ensure that no depositor in an Australian bank could lose their money. Since at least the 1980s, some academics and many commentators had been calling for such a scheme to prevent bank runs. In 2008, the Rudd government satisfied those demands.

However, my research has found that Australia already had what was believed to be, at least at the time of its introduction, a fully-fledged guarantee of deposits at Australian banks, and has had since 1945.

This deposit guarantee was forgotten, either accidentally or deliberately, by the agency that was intended to implement it – then the Commonwealth Bank, and now the Reserve Bank of Australia – even though the provisions passed in 1945 remain in substance today.

This episode is more than an historical curiosity. It tells us some interesting things about the fallibility of government, the need for careful, clear legislative drafting, and (possibly) the dangers of independent agencies disagreeing with parliament.

The guarantee emerges

Banking was largely unregulated in Australia before the Great Depression. The 1937 Royal Commission on Monetary and Banking Systems was the first time the Commonwealth seriously considered how the government ought to respond if a bank failed under its watch.

The Royal Commission recommended that illiquid or insolvent banks ought to be taken over by the Commonwealth Bank, which was being reconstituted as a warts-and-all central bank. If the bank was merely illiquid, then the Commonwealth Bank should try to revive it. One possible action might be to temporarily guarantee the stricken bank’s deposits. But if the bank was truly insolvent, the Royal Commission recommended it then be liquidated and the Commonwealth Bank ought to “announce its estimate of the amount which the depositors may expect to receive”.

In 1938 the conservative Lyons government translated this recommendation faithfully into legislation, however political turmoil prevented the bill from passing. The Curtin government introduced banking controls through national security regulation in 1941, although did not immediately consider the question of failed banks. Concerned these regulations would expire at the end of the war, John Curtin and his Treasurer Ben Chifley turned their mind to a new Banking Act at the end of 1944.

It is clear from cabinet papers and the Commonwealth Bank’s archives that the Curtin government had a drastically different idea of the government’s responsibility to depositors. Advocates for the new Banking Bill in cabinet told the assembled ministers that the government would offer depositors a “guarantee against loss which would be incorporated into the Banking Act”.

The cabinet debated the consequences of this guarantee – including how it might undermine the competitive advantage of the Commonwealth Bank’s deposit services – but finally agreed that “the depositors shall be guaranteed the security of their deposits”.

This shocked Commonwealth Bank officials, who, when informed of the Curtin government’s intention in late January 1945, realised that if they took over a bank whose assets were less than its liabilities, it might have to backstop depositors’ funds out of its own pocket. The post-war regulatory apparatus of prudential supervision – the system of inspections and controls over private banks – came from the demands of the Commonwealth Bank in response to its new responsibility for depositors’ funds.

Yet in practice the legislation was deeply ambiguous as to the Commonwealth Bank’s responsibility for deposits in failed banks. The only difference between the Lyons government legislation and the Curtin government’s legislation was the heading of the provision and marginal notes, which changed from “provisions with respect to Banks unable to meet their obligations” to “protection of depositors”, and from “supply of information” to “Commonwealth Bank to safeguard depositors”.

Nevertheless Labor members claimed throughout the parliamentary debate over the Banking Bill that it offered “real and an effective guarantee of the safety of bank deposits”. Cabinet, the Commonwealth Bank, and parliament believed that it had introduced a deposit guarantee in 1945.

The guarantee disappears

Indeed, the idea that the Curtin government had guaranteed the banks remained Labor lore for decades. In 1973, Gough Whitlam told parliament:

“No bank registered under Australian Parliament legislation can go bankrupt. In return for that guarantee against loss, banks pursue a lending policy which the government of the day approves”.

The relevant provision in the Banking Act did not change, yet by the mid-1980s the Reserve Bank was explicitly denying any deposit guarantee existed.

So what happened? The Commonwealth Bank might have just forgotten about the guarantee. Central banks are human institutions, and to be fair the legislation on the page is deeply ambiguous. A more concerning explanation is that the Commonwealth Bank might have deliberately forgotten about the guarantee – contrary to the intention of parliament – given how unhappy it was with its introduction.

Until the global financial crisis, academics and commentators used to bemoan the stubborn belief held by the public that bank deposits were guaranteed by the government, apparently contrary to Australian law.

But rather than demonstrating the ignorance of the public, the story of the 1945 deposit guarantee reveals more the fallibility of government, as the Commonwealth government either accidentally or intentionally forgot its own policy.

There Is Much To Celebrate On Australia Day

Ninety-one per cent of Australians are proud to be Australian, and 85 per cent believe Australia Day is a day for celebration, according to a poll commissioned by the Institute of Public Affairs.

There is good empirical reason to be proud of what Australia has achieved. Sometimes it is worth taking stock.

First: Australia is one of the richest countries in the world. Australia’s GDP per capita was US$61,925 in 2014, the latest year collated for comparison by the World Bank. Only Norway, Switzerland and a few city-states are richer than us. (Financial market turbulence and the exchange rate will have played havoc with our rankings since, but, well, comparative economics is a tough gig.)

Being rich is not everything, of course. The United Nation’s Human Development Index, which takes into account things like life expectancy, inequality and environmental sustainability, puts us at number two, just below Norway.

Second: Australia is one of the most democratic countries in the world. FreedomHouse gives Australia its highest ranking: a “1” for both civil liberties and political rights, including perfect scores for electoral process, functioning of government, freedom of expression and belief, associational and organisational rights, and near perfect scores for personal autonomy and individual rights, the rule of law, and political pluralism and participation. The Economist gave Australia 9 out of 10 in its 2014 Democracy Index. Polity IV gives us full marks for democracy.

Third: Australia is one of the freest countries in the world. We are in equal third place for overall human rights respect in the CIRI’s Human Rights Data Project. We’re ranked number seven on the Cato Institute’s Human Freedom index, and number 12 on the Fraser Institute’s Economic Freedom of the World Index.

These are no trivial achievements. The majority of the world’s population lives in countries which are less free, less democratic, and less respecting of the rights of its citizens than Australia. What we have in this country is a constellation of institutions and cultural norms that are among the best on the planet.

Consider how hard it has been to export those institutions to poorer countries. The best minds have spent decades trying to make developing countries like Australia, and their record of success is, shall we say, mixed. Somehow we have a stable institutional order that combines both wealth and liberty. This is more than enough to celebrate on Australia Day. It is more than enough reason for pride of country.

Pride does not have to be a synonym for obliviousness. There are significant pockets of disadvantage and too many people are unable to enjoy our aggregate prosperity. Every news outlet and every columnist – myself included – pours out a litany of problems with Australia; its government, its society, its culture. These are very often justified.

Even among the aggregate measures of success, there are some worrying outliers. For instance, we are lower than we ought to be on Reporters without Borders’ World Press Freedom Index: number 25 in the world, well below many of the countries we consider our peers.

And it’s also true that January 26 is a peculiar day to celebrate Australia Day, given it is the day a floating prison colony found land as distant from home as eighteenth century policymakers could conceive. That landing was no more the birth of the country we live in than Queen’s Birthday is actually the Queen’s birthday. In The Age yesterday, Martin Flanagan argued that we should switch Australia Day to another day.

But what has made Australia so successful compared with other settler societies has nothing to do with the landing of the First Fleet or the intentions of the early military governors. Success from that moment was not guaranteed. Nor, indeed, did the landing force the settlers into an inevitable clash with the continent’s Aboriginal inhabitants. The pivotal choices were yet to be made.

In his How Australia Prospered, Ian Maclean looks at the paths Australia did not travel. For instance, we avoided becoming like Argentina, a country with which we share many similarities, when the aristocratic squatters failed to entrench a privileged place in nineteenth century Australian politics. There have been many junctures in our history where the Australian project could have fallen apart.

More fundamentally, stable and successful institutional orders do not have “birthdays”. If Australia Day was not January 26, then when should it be? Australia’s origins cannot be pinpointed to colonial self-government in the 1850s, the end of transportation in 1868, federation in 1901, voting rights for women from 1895, the adoption of the Statute of Westminster in 1942, full Commonwealth voting rights for Aboriginal people by the 1960s, or the Hawke government’s 1986 Australia Act, which severed the Australia from the British legal system. Each of these were milestones, yes, but milestones in what was really an evolutionary process. Australia was not created, it grew.

Pretending that January 26 is Australia’s day, even just symbolically, actually undervalues the achievement that is Australia’s institutional heritage. We could just as easily say the institutions that made Australia a success – representative democracy, the rule of law, a market economy – date back long before 1788, even before Britain existed as a discrete political entity.

Any celebration of a nation has to be coupled with an awareness of its past, for good or ill. But while we must not let the good whitewash the ill, neither should the ill be allowed to drown out the good. There is much to celebrate on Australia Day. At least, that’s what the data says.