Abbott Needs To Hit The Reset Button

The Abbott Government is about to learn that the hardest political manoeuvre is changing direction.

In their times, Kevin Rudd, John Howard and John Hewson tried this tricky exercise. Each fumbled.

Rudd shelved the emissions trading scheme in April 2010. This did nothing to restore his prestige. Rudd was shelved by his colleagues two months later.

Howard tried to adjust WorkChoices when it was clear that the policy lacked popular support. The new fairness test, introduced in May 2007, did not placate WorkChoices’ critics. Howard lost government and his seat.

Hewson released Fightback! in November 1991. Over the next year the Coalition bled support. Hewson tried to relaunch a softer version of the package in December 1992. It didn’t help.

But those leaders had it easy. The Abbott Government is likely going to have to pull this manoeuvre quite a number of times over the next few months.

The Medicare co-payment is going to have to be restructured and revised if it is going to pass the Senate. (Even that may not be enough. Clive Palmer yesterday announced he would vote against any co-payment, no matter how small.)

The mining tax will have to be decoupled from the measures it was supposed to fund – the schoolkids bonus, for instance.

The changes to welfare are unlikely to pass in their current form, so it’ll be back to the drawing board with those as well.

The Government hasn’t even begun the university fee deregulation debate, but when it starts it will be bruising.

And then there’s the paid parental leave scheme – not formally part of the 2014 budget but its generosity casts a shadow over every austerity measure. PPL is meant to be up and running next year.

What makes the Government’s problem even worse is that it’s trapped by both legislative forces and public opinion. Tony Abbott’s prime ministerial predecessors have only had to deal with one, rather than both.

Take Rudd’s emission’s trading scheme. The scheme wasn’t overwhelmingly popular, sure. But, in mid-2010, it was hardly a government-killer. Rudd’s real problem was legislative gridlock. His error wasn’t delaying the scheme – the parliament had already done the delaying for him – but taking responsibility for that delay.

Howard didn’t have an obstructive senate. In fact, he had the opposite problem – a compliant upper house that offered no check on his government’s longstanding urge to centralise labour market regulation.

And of course the unpopularity of Fightback! was fatally manifest long before Hewson had a chance to test it in parliament.

The bottom line for Abbott is this, and it’s dire: the Government is unable to legislate policies that voters don’t want anyway.

So it’s hard to see any alternative. The Government has to effect a policy reset – a mini budget. The budget needs to be redone and relaunched. Contentious policies have to be revised, and, critically, argued for on their own terms. If the Government wants to reform Medicare, then great: let’s hear the case for reform. We haven’t yet.

The longer the Government delays that reset, the more trouble the festering budget is likely to cause.

The protracted Senate negotiations are starting to manifest in discipline problems within the Coalition itself.

The canary in the coal mine here is the paid parental leave scheme.

Abbott’s Liberals were never strong supporters of PPL. The Nationals always hated it. But the longer the PPL scheme remains unlegislated, the more internal dissent is revealed.

There has been an uptick in anti-PPL sentiment over the last few weeks. Madonna King’s Joe Hockey biography – which revealed that Rupert Murdoch knew more details of the scheme than Abbott’s treasurer before it was launched – didn’t help.

Fairfax papers reported on the weekend that the only supporter of the scheme in cabinet is the Prime Minister himself.

Paid parental leave has, perhaps, been an exception for which disloyalty is excused. It was the subject of internal grumblings from the moment it was announced by Abbott.

Yet we discovered yesterday that the culture of dissent around PPL is spreading to other issues. Coalition backbenchers are now freely floating ideas about how to adjust the co-payment to make it more equitable and popular.

And more concerning still is the infighting revealed in this piece by Peter Hartcher – backbenchers and ministers lining up to apportion blame for the budget’s unpopularity. It is apparently easy to find Government members willing to anonymously rag on their colleagues.

Something needs to change. Some commentators have called for a reshuffle. There are, after all, a large number of young and talented politicians in the outer ministry and backbench, and a few too many Howard-era holdouts in the cabinet.

A reshuffle is a drastic thing, especially so early in a first term of government. Yet it wouldn’t fix the budget gridlock, or make the individual items in the budget more popular.

The problem, in the end, is that budget. And the only way to resolve it is to reset it.

Security Bill Widens Government Surveillance Powers

The National Security Amendment Bill (No.1) 2014, introduced into federal Parliament last month, is 128 pages long. The bill’s explanatory memorandum is larger again – 167 pages.

It’s an absolute behemoth – complex, labyrinth, and, to outsiders, entirely opaque. In that sense, the bill is a great metaphor for the massive national security apparatus that has developed since the September 11, 2001 terror attacks.

It’s also the first major piece of Australian national security law reform since Edward Snowden a year ago revealed America’s program of global and indiscriminate mass surveillance.

Timing matters. The Snowden revelations demonstrated that not everything done in our name is done in our interest – and too often it is done without any democratic scrutiny, let alone the approval of voters.

So what should voters make of the Abbott government’s new national security bill?

It seems the three most significant elements are a new power to allow spies to plant software on targeted computers, new penalties for intelligence whistleblowing, and a prohibition on anybody releasing any information about “special intelligence operations”.

But it isn’t clear what the practical implications of these powers are. Are there any boundaries on what constitutes a special intelligence operation? Could journalists be prosecuted for reporting on national security leaks? Getting details out of the government is like pulling fingernails.

National security is a unique area of public policy. It’s one of the most important functions of government. Yet citizens have very little idea of what the government does under the guise of protecting them.

So the debate over national security powers is always held under a veil of ignorance. Usually serious public policy discussion requires evidence. But when we’re talking about security those evidentiary standards go out the window. The best we get is hand-waving about terrorism and, now, Australian residents fighting in Syria. We’re told to take the government on trust.

Given that a basic principle of democracy is that governments must justify themselves to the citizenry, this is a problem. Terrorism is a real threat. But it is not a blank cheque for legislative change.

The democratic accountability problem is enhanced even further by the fact that – as the Edward Snowden leaks have demonstrated – Western governments have repeatedly lied about their national security actions and have kept hidden evidence of their own wrongdoing.

In his recent book, Secrets and Leaks: the Dilemma of State Secrecy, Princeton academic Rahul Sagar argues there are no easy ways to impose democratic accountability on the national security state.

Blind trust isn’t an option. Democracies cannot rely on blind trust. Unfortunately radical openness isn’t an option either. We don’t want the bad guys to know everything about ongoing enforcement operations.

Institutional accountability mechanisms – like parliamentary committees and independent watchdogs – are good, but they tend to be captured by the agencies they are overseeing.

Sagars conclusion is that the best we can hope is that whistleblowers expose wrongdoings.

When America’s mass surveillance program was first revealed by Snowden last year, the Obama administration instinctively responded the program was necessary to prevent terrorism.

Yet in December, 2013 the administration’s own advisory panel concluded that bulk mass surveillance “was not essential to preventing attacks” and traditional, targeted surveillance methods was sufficient. This panel was no naive civil libertarian whitewash. One member was even a former CIA deputy director.

A study by the New America Foundation – a bipartisan thinktank partly funded by the US government – concluded mass surveillance “has had no discernible impact on preventing acts of terrorism”.

Australia is one of the members of America’s Five Eyes surveillance coalition, alongside Canada, the United Kingdom and New Zealand. Unfortunately our governments have been no more honest than American administrations about the need for new security powers.

For instance, the government claims its national security bill is mostly just a long-overdue update of 1970s-era telecommunications interception law. But this argument would be more plausible if the Telecommunications (Interception and Access) Act 1979 had not been updated more than 50 separate times in the past two decades.

The bill is apparently the first of a series. Attorney-General George Brandis said last week a second tranche of reform will make it easier to prosecute Australians fighting overseas, and make it illegal to “promote” terrorism. OK. But it’s already illegal to “incite” terrorism. Is that not enough? Will the government explain, specifically, why changes are needed? Don’t hold your breath.

A third tranche is likely to introduce mandatory data retention. That policy would require internet service providers to record almost everything every Australian does on the internet, just in case law enforcement agencies – from anti-terror spies to competition regulators – decide, in the future, to have a look. Mandatory data retention is both expensive and repressive.

There will probably be a fourth tranche. Tony Abbott wants to be a tough-on-terror prime minister.

The Snowden revelations should teach us one thing. Now, more than ever, the burden of proof rests on those who say we must trade off our liberty and privacy for security. That burden has not been met.

A social problem, not a technological problem: Bullying, cyberbullying and public policy

With Simon Breheny

Introduction: Bullying among children is a significant and serious issue. In recent years, thephenomenon described as “cyberbullying” has received a large amount of social, political, and academic attention.

The Commonwealth government has announced that it is seeking legislative change to deal with cyberbullying. The government plans to institute a Children’s e-Safety Commissioner with power to takedown harmful content directed at children from the social media sites.

The Children’s e-Safety Commissioner is a serious threat to freedom of speech.

The purpose of this paper is to outline the scope of the cyberbullying problem, the conceptual framework within it must be understood, and develop principles by which policymakers can address the cyberbullying problem. Without understanding the cyberbullying phenomenon it is impossible to devise effective policy that will not have unintended consequences and threaten basic liberties like freedom of speech. Unfortunately it is not clear that the government has clearly understood the causes, consequences, and characteristics of cyberbullying.

This paper argues that cyberbullying is a subset of bullying. It is bullying by electronic means. It is not a problem of a different kind from bullying in an offline environment. Cyberbullying is a social problem, not a technological one.

Available in PDF here.

Hockey: The Moderate Man Forced To Be Dry

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.

Politics, Not Policy, Will Decide Who Gets Bailed Out

What can we do about “too big to fail”?

The interim report of the Commonwealth’s Financial System Inquiry, chaired by David Murray and released last week, spends a fair bit of time talking about this puzzle.

“Too big to fail” describes financial institutions, mostly banks, which have become so large and so deeply integrated into the financial system that if we let them collapse they would take everything else with them.

If a corporation is too big to fail, then, it follows, taxpayers have to bail them out.

It’s quite a problem. A market economy is supposed to be dynamic, full of entries and exits. Firms that add economic value thrive. Those that do not go broke.

So bailing out failed companies makes the economy less efficient. More gallingly, it redistributes money from the poor to the rich. And it creates “moral hazard” – a belief by management that ultimately they won’t have to pay for their mistakes.

Moral hazard is a particularly severe problem for banks. Banks trade on risk. A bank’s basic job is to transform short-term highly liquid deposits into long-term extremely illiquid loans. Too much of the latter will prevent redemption of the former.

Too big to fail encourages banks to make riskier loans. Why wouldn’t they? They’re not the ones bearing the cost of failure. Taxpayers are.

So it would be great to get rid of too-big-to-fail. Or at least limit it somehow. The Murray Inquiry has a few ideas: higher capital requirements for bigger institutions, for instance, or new procedures for when banks do fail.

But the question isn’t what should we do about too-big-to-fail but what can we do about it.

And the answer to that question is almost certainly nothing.

Because no matter what the Murray Inquiry recommends – no matter what policy the Government or Reserve Bank or Australian Prudential Regulatory Authority imposes today – the decision of which firms to bail out and which to let fall will be made by the policymakers of the future, according to their own whims, and mindful of political, not economic, considerations.

Simply put, there are no ways to credibly constrain future governments from deeming an institution too big to fail.

Nowhere is that clearer than in the United States.

After the savings and loans crisis of the late 1980s, American policymakers decided to put some limits on the availability of government bailouts. The result was the Federal Deposit Insurance Corporation Improvement Act 1991. This law was supposed to set rules under which an institution would be considered too big to fail.

But those carefully constructed limits fell apart when the Global Financial Crisis hit. Consumed by panic, the American government bailed out not only banks but money market funds and Fannie Mae and Freddie Mac – two bodies that were theoretically and legally owned by private shareholders but were implicitly backed by a government guarantee.

Now American policymakers say they’ve come up with a new system supposed to constrain too big to fail – the 2010 Dodd-Frank Act. Will it work? Don’t bet your house savings account on it.

We’re lucky in Australia to have gone the better part of a century without a high-profile bank failure. But we’re hardly immune to the political pressures that have created the too big to fail problem.

One predecessor of the Murray Inquiry, the Fraser government’s Campbell Committee, argued the responsibility of the government is to keep alive the system as a whole, not prop up individual institutions. Banks should be allowed to go under.

But who gets bailed out is a decision made by politicians not economists.

In 1990 the Farrow Group – a Victorian group of building societies whose most prominent member was the Pyramid building society – got into serious trouble. In July 1990 John Cain’s Victorian government gave it the bailout it wanted, guaranteeing more than $1 billion of unsecured deposits. (The full story is told in this paper).

Was the Farrow Group too big to fail? The Cain government said it was – it was “systemically significant”, to use our contemporary econocrat buzzword.

Systematic significance is a term of art, and not a very clear one. Since the Global Financial Crisis systematic significance has become a totem of financial regulation. The idea is that too big to fail isn’t just about size, but more about integration.

There’s been a cottage industry of academics trying to figure out how to tell which institutions are systemically significant.

No doubt they’re all doing great, insightful work. But the fact remains these studies of systemic significance are just a lot of after-the-fact reasoning.

It was policymakers – not scholars – who came up with the idea that some institutions were just too interconnected with the financial system to collapse peacefully.

Like pornography, politicians and bureaucrats know systemic significance when they see it. The Victorian government just knew the Farrow Group was too important to collapse. The American Federal Reserve just knew that they had to bail out the private money market funds.

Yes, systemically significant institutions get bailed out – but their significance should refer to the political system, not the financial system.

No matter what the Murray Inquiry decides, in the middle of a panic political expedience is going to beat carefully crafted rules every time.

The Lessons Abbott Should Learn From Victoria

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.

Star Wars Cantina: Patronising Politics Strikes Back

“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.

Shining A Light On The Dangers Of Royal Commissions

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.

Tides To Turn For Shorten On Debt, Boats And Tax

Bill Shorten is romping ahead in the polls right now, but being in opposition is a long-term goal and the tables will turn on three big policy areas before the next election, writes Chris Berg.

Bill Shorten has one of the worst jobs in Australian politics – first opposition leader after a loss of government.

Just ask Brendan Nelson, Kim Beazley, Andrew Peacock, and Billy Snedden.

Yet, thanks to the Government’s disastrously bad selling of the budget, Shorten has an impressively winning poll position. If the election were held tomorrow, Labor would romp it back in.

Unfortunately for Shorten there are no federal elections scheduled for tomorrow.

Opposition is a long-term game – almost certain to be longer term for Shorten than most, as Labor’s new party rules make it virtually impossible to spill him before the next election.

In the Sydney Morning Herald on Sunday Mark Latham claimed the “right-wing hunting pack” is targeting Shorten because he is too successful. (This is the sort of canny judgment that made Latham such a success himself.)

But polls go up, polls go down. If we look out two years from now to the next election, Labor’s political profile is very different. Where Shorten looks strong now, he is vulnerable in 2016. Where he looks vulnerable, he is actually quite strong.

Let’s take the big issues of last year’s election: debt, boats, and the carbon tax.

The debt is Shorten’s biggest weakness.

This seems paradoxical, perhaps, because the Coalition’s budget – that is, its solution to the debt problem – is deeply unpopular. According to an Essential Poll earlier this month, just 23 per cent of voters think that Labor should support university deregulation. Just 27 per cent think Labor should support the pension changes. Just 32 per cent think Labor should back the Medicare co-payment.

These are gimmes for Shorten. Yet opposing the specific proposals will do little to rebuild Labor’s economic reputation.

Wayne Swan destroyed Labor’s standing on the economy when he was unable to wrestle the budget back into the black. Year after year Swan claimed that the budget was returning to surplus. Year after year we got deficits.

It’s easy to free ride on public dissatisfaction with government policy. Voters might be hostile to the Coalition’s individual budget measures but voters are not stupid. Shorten has to suggest – perhaps just hint, allude, imply, give us a knowing wink – that there could be a better way to fix the deficit.

That’s the difference between being a time-serving opposition leader and a viable potential prime minister.

If Shorten is strangely weak on the budget, he is strangely strong on boats.

Labor has careened from one side to another on the asylum seeker issue. Last week a few in caucus tried to engineer a shift back to the left again. Quite apart from the morality and practicality of the policy, Labor looks hopelessly divided and confused.

But will it in two years?

Right now, Labor will be secretly crossing its thumbs that the boats have, in fact, stopped, and stay stopped. It is in Labor’s interest to get boats off the front page; to remove asylum seekers from the centre of Australian politics. A weakness isn’t a weakness if nobody is talking about it.

For Labor, the carbon tax is neither vulnerability nor strength.

This is strange, perhaps, because the carbon tax has been one of the defining policies of the last decade. Elections have been won and lost on it. Prime ministers and opposition leaders have fallen at its altar.

Yet much of the heat dissipated from the carbon tax debate after it was introduced. Kevin Rudd smothered what remained when he announced he would transition from the tax to an emissions scheme. This is a rare example of trying to confuse voters as a deliberate political strategy. (I outlined the farcical nature of this announcement on The Drum when it was made last July.)

Climate activists have tried to respark climate change as a political issue – every once in a while the Climate Institute puts out a poll to try to get momentum going again, as they did yesterday – but realistically the issue is on hiatus. All sides have dug in. It isn’t a positive. It isn’t a negative. It just is.

It is often said that the Coalition didn’t win the 2013 election, Labor lost it.

In other words, it was the Rudd and Gillard government’s faults that were highest on the minds of voters as they faced the September ballot, rather than Tony Abbott’s virtues.

This is true as far as it goes, but those faults were made powerful because of the Coalition’s dogged prosecution of them.

Abbott made the carbon tax into a political liability. It wasn’t before. Same with the boats. And Abbott and his predecessor Malcolm Turnbull made Labor wear its deficit spending.

By contrast, Shorten is just along for the ride. He’s been gifted the budget backlash. He’ll likely be spared the need to take a stand on asylum seekers. And he’s been excused from boldness on the carbon tax debate.

Shorten might be polling well now, but if he wants to be competitive in 2016 he’ll have to be more proactive than that.

Entrepreneurs Should Not Get Government Support

The 2014 Federal Budget cuts back family payments, places tough new rules around welfare for young people, taxes doctor visits to fund medical research, and reindexes the pension.

But it’s not all bad news!

If you own a business that’s more than three years old, has good turnover, and operates in any one of 14 favoured sectors, you’ll be eligible for $20,000 of taxpayers’ money to hire management consultants.

Better, you could receive a $50,000 grant to employ a researcher for a few months.

Or, the jackpot: if you own a company that’s about to launch a new product or service, you might get $250,000 of matched government funding to help.

The base immorality of corporate welfare is never clearer than in times of austerity.

These obscenities are part of what’s called the Entrepreneurs’ Infrastructure Programme. The program was announced in the May budget, but it’s only now the subject of a public discussion process. (An incredibly short discussion process. The program starts on July 1.)

The program partly rationalises and partly replaces a bunch of other grants and subsidies from the previous government.

It’s worth $484.2 million over five years – the better part of half a billion dollars. This is huge. The change in Work for the Dole payments will only save $1.2 billion over four years, and that will affect many more people.

The entrepreneurs program is funded from a larger cut of industry programs, so the government can say it is reducing expenses somewhat.

But it is still incredible that even in a horror budget the federal government plans to give money away to successful companies.

After all, we’re not talking about bailing out firms in trouble here. We’re talking about handouts to firms the government believes have “growth potential”. Of course, the real winners will be the management consultants paid to pore over business plans on the taxpayer penny.

The Australian government is awash with small grants, minor programs, petty subsidies. State governments are too. Yet these sorts of policies are rarely discussed, let alone justified.

The Australian government has always been in the business of giving privileges to private firms.

The great tariff barriers of the 20th century acted as an indirect transfer of wealth from consumers to manufacturing interests. By preventing cheaper goods from entering the country, consumers were forced to spend more in order to protect certain politically connected industries. Think the car industry.

Tariffs were not presented to the electorate as a gift to private enterprise. The justifications were more complex – Australia needed temporary barriers to build industries until they were adult enough to compete globally, or that the government knew which industries were “industries of the future” and needed a little kick along.

In retrospect these claims were absurd. The “infant industry” argument never went away, even after decades of tariff protection. Somehow our industries were always young.

And with 20-20 hindsight those “industries of the future” just look like wrong turns. Again, think the car industry.

But for all the intellectual debate, the practical, real-world effect of protectionism was to subsidise private companies; a privilege those companies lobbied hard to defend.

The Whitlam government took the first axe to the Australian tariff. Much of the growth in living standards over the last few decades is thanks to tariff liberalisation.

So what’s going on with the Entrepreneurs’ Infrastructure Programme?

It’s tempting to see programs like this as the last gasp of corporate welfare – simply the trinkets that remain after three decades of liberalisation, waiting to be swept up.

But such programs really demonstrate that the political dynamic that supported protectionism is still with us. Rent-seekers and their political supporters have just gotten smarter.

Instead of the implicit taxation of the tariff, governments just hand firms money directly. The grants are given fashionable titles. Labor had a “Green Car Innovation Fund” and “Innovation Precincts”. The Coalition talks about entrepreneurship.

This is a bit strange. Every minute entrepreneurs spend filling out a grant applications is a minute stolen from doing what makes entrepreneurism so valuable: developing new products, finding new markets, and adding value to the economy.

One of the successes of the economics profession has been to persuade politicians that entrepreneurs are important. Entrepreneurs take risks, and those risks are tested in the marketplace. That’s great. But politicians took that lesson to mean they should give money to entrepreneurs. Never say politics doesn’t have a sense of irony.

To the individual taxpayer, the Entrepreneurs’ program will cost a fraction of a cent a year. Who could be bothered complaining about a few cents of tax? To the recipients, though, these subsidies are huge. Politicians will like the subsidies, too. What better publicity than being photographed with innovative entrepreneurs – to have job creators thank politicians for their support in front of TV cameras?

Tony Abbott is fond of an Abraham Lincoln quote: “Government should do for people what they can’t do for themselves and no more.”

How on earth does taxpayer-funded management consultants for private businesses fit that criteria?