Tuesday, December 31, 2013

Broadband - Looking Back and Looking Forward

As December draws to a close we get to reflect on the year that was.  With an election it was always going to be an eventful political year, but it has been even more eventful when it came to the NBN.

Ultimately it got off to a bad start when in February at Estimates NBN Co retreated from a forecast made to an October 2012 JCNBN hearing that they would pass 300,000 premises by June 2013, advising that they were now only forecasting the original target of 286,000.

Matters became worse when on 21 March they advised they would not meet that target, due to contractors not mobilising resources.

But ultimately everything was upended by Coalition Policy and the election outcome.

Coalition Policy

In September 2012 in an article published on business media outlet Business Spectator, Mr Turnbull wrote that he could not provide precise financial figures regarding the difference between the Coalition’s rival NBN policy and the Government’s existing project:

I have been careful not to nominate a particular sum of money as the difference between what we would do and Labor’s current plan. For a start there is enormous scepticism that the NBN Co project can be completed within the cost and timeframe of their business plan. Several very experienced civil contractors and engineers have said to us recently that they think the actual build cost is likely to be $80 to $100 billion for example.

The then Opposition Leader Mr Abbott in February in a speech to CEDA had said that "If we don’t go ahead with the National Broadband Network in its current form, that’s about $50 billion less that the Commonwealth will need to borrow."

Confusion about the basis for that claim came in April 2013 Mr Turnbull released his own policy and decided to be incredibly precise about his own claims of the cost of the existing NBN plan and about the cost of his alternative. This was the day of the infamous $94 billion claim (which was peak funding).

In defending the policy, Treasurer Joe Hockey even climbed in with a comment on an Alan Kohler piece saying "The fact that our NBN policy saves taxpayers over $60bn is obviously so irrelevant to Alan that it does not rate a reference." 

That $60 billion saving claim was based on the peak funding difference between the Coalition costing of the Labor plan and the Coalition costing of their own.

But the real core of the Coalition policy was the need for three essential reviews - of the cost of the NBN and alternatives, of the availability and quality of broadband and a cost benefit analysis.  These were to be concluded within 60 days, 90 days and six months respectively.

The first observation is that none of these targets have been met.  The Strategic Review "clock" was reset a month till the Board and Management were changed, but at the 60 days all that happened was the Minister got a draft.  It took a further ten days to be released.

The broadband availability and quality report was due on 23 December, but all we got was a short 5 page summary.  It appears that all the Department knows is the location of DSLAMs and the number of available ports. Everything else is derived from that.  We have to wait to an unspecified date for the full detail.

The cost benefit analysis team was only appointed the day the Strategic Review was released and their six months start now. We don't know whether the six months is till the Minister gets his draft or till there is a final for release.

That itself is not a great start.  But the content of the two reviews released thus far doesn't really help either.

Strategic Review

The Strategic Review released on 12 December resulted in Mr Turnbull having to inform the Parliament that he could not meet the goal of providing everyone with a speed of 25 Mbps or better by 2016.

The review itself contained a "Revised Outlook" for the existing project, a "radically redesigned" FTTP rollout and a number of alternatives - with the favoured alternative labelled Multi-Technology Mix - or MTM - or Malcolm Turnbull's mess.

It is not my intention to fully compare these. The review itself is being interrogated by the Senate Select Committee on the National Broadband Network (SSCNBN). 

But I do want to share a few diagrams.  The first compares deployment timelines. 

 
This is where Mr Turnbull had to admit that the MTM model doesn't get you to 100% with 25 Mbps by 2016.The leap, however, from 22% under the revised outlook to 43% under MTM looks impressive.
 
However when you examine the previous exhibit you realise this is nowhere near as impressive as it sounds.
 
 
Of the 40% of ALL premises able to access 25 Mbps by 2016, more than half are doing so because HFC is suddenly added to the calculation. This is without building any more HFC at this stage. 
 
Or to convert the percentages from Exhibit 4-2 to a base of the fixed line footprint rather than all premises we see the 43% is made up of 13% FTTP, 5% FTTN and 25% HFC.  Now note that the Revised Outlook has the comparable number of FTTP premises at 22%.  Somehow we are told to believe that passing 18% of premises with new infrastructure instead of 22% is somehow faster.
 
We then also get to the second issue - the promise of 90% having 50 Mbps by 2019.  Exhibit 4-3 shows they just squeak over this line, but in evidence to the SSCNBN the Executive Chairman was not prepared to guarantee that speed.
 
But it is also another major deviation from Coalition Policy. The policy document was unequivocal.  Completion would be 2019, and there would be FTTN in all the areas where there isn't FTTP.
 
 
But the MTM model is completed a year later and doesn't build where there is HFC - in fact HFC grows to cover a further 7%. 
 
It is then that the financials become interesting.  Coalition Policy was quite unequivocal when it came to the difference between Labor's policy and theirs.
 
 
This is really farcical in hindsight, not least of which is the fact that the Strategic Review uses the same revenue assumptions for all the models - so there is no real "price difference" (There is, however, a quite idiotic approach to argue what prices would need to be to get a 7% return, despite having already cruelled the cashflow by reducing prices).

The two stand-out figures are CapEx of $20.4 billion, and peak funding (unlevered in Coalition case - i.e. as all equity) of $29.5 billion.

How does this stack up with the MTM model?


Cumulative CapEx blows out $10 billion to $30 billion, and peak funding (all equity) hits $39 billion while it is $41 billion if debt is raised (a ten to eleven billion dollar blow-out on Coalition estimates). 

Mr Turnbull was asked on 7:30 about how he was missing his 2016 target, and his plan would cost $11 billion more than he'd said.  He replied;

And the fact is that the NBN Co is a much bigger mess than even we had thought it is. We have got to stop the spin.

But the fact is, it is not in worse shape than he'd claimed NBN Co was in when he launched his policy.  He'd claimed a peak funding of $94 billion and completion by 2025.  The most the Strategic Review could back in was peak funding of $73 billion and completion by 2024. In fact, NBN Co was in better shape than he had claimed.

The single most interesting paragraph in the whole of the Strategic Review comes at the end of Chapter 2 which had detailed the Revised Outlook.  It said;


In other words, the most important thing to do right now is to get over the reviews and the management changes and roll out FTTP as quickly as possible as any other changes are made.

Availability

As far back as his speech to the National Press Club in August 2011 Mr Turnbull has made a claim that "The NBN extends high-speed broadband to at least 2 million premises with inadequate service."  That claim when analysed was based on some figures included in the NBN Implementation Study, which in turn was quoting from a 2003 Senate Committee hearing, and even at that hearing the figures were being referred to as already including cases of remediation.

In fact the full footnote to the speech read;

The McKinsey/KPMG NBN Implementation Study (2010) identified 1.2 million pair gain or RIM lines where ADSL was not accessible (p.190), and another 0.4 million premises in the ‘last 7 per cent’ (p.282) where DSLAMs hadn’t been installed in Band 4 exchanges. In addition there is another imprecisely quantified cohort of underserved premises which are in Exchange Service Areas where ADSL2+ is available but the length of the copper run from the DSLAM is too long to allow reasonable speeds.  ADSL2+ has a theoretical maximum download speed of 24 mbps and upload speed of 1 mbps. But average download speeds in Australia are around 10mbps and 63 per cent of users are at least 2km from the exchange (NBN Corporate Plan 2011-13, p. 40). If distance from the exchange exceeds 4km maximum theoretical download speed falls below 6 mbps. FTTN/FTTC resolves this problem by reducing the average and maximum lengths for copper runs.

The "2 million lines" claim featured highly in Coalition statements, including;

  • “When they announced this scheme, when they announced this three or four years ago, there were 2 million Australians that couldn't, on their wire line, download a YouTube video. There still are.” Malcolm Turnbull Lateline 27 Nov 2012)
  • “Much of Australia has good communications infrastructure but not all; at least 2 million premises cannot access broadband or are constrained by limited speeds.” (Malcolm Turnbull website 7 Dec 2011)
  • "If you look at the Implementation Study prepared by KPMG and McKinsey, the study notes that there are about 2 million premises where you can’t get a decent DSL service.” (Paul Fletcher Twisted Wire 20 Dec 2012)
  • “By comparison there's an estimated two million households and businesses that have substandard broadband and don't appear to be getting any level of priority.” (Senator Birmingham to AFR 12 Feb 2013)
  • “It is scarcely believable so little has been achieved since 2007 given there are approximately 2 million Australian households which have sub-­‐standard fixed broadband or no access at all.” (Dr Bill Glasson, LNP candidate for Griffith, letter to Department Secretary to resign as Broadband Champion 22 Feb 2013)
  • "Alan, the tragedy of all this is that there are at least two million households in Australia who don't have - basically don't have broadband at all.” (Malcolm Turnbull, interview with Alan Jones, 27 Feb 2013)

The two million lines suddenly became 1.5 million after the election.  In his Ministerial Statement accompanying the release of the Strategic Review Mr Turnbull said;

Shortly we will publish the first ever analysis of broadband availability in Australia. It will confirm areas encompassing about 1½ million premises have little or no broadband. Many are in regional areas.

Somehow magically an election outcome provided 500,000 premises with broadband that didn't have it before!

In announcing the release of the summary of the broadband availability and quality report, the Minister said;

Key findings of the report are that there are approximately 700,000 premises unable to get access to a fixed broadband service and an additional 920,000 premises in areas with estimated median peak download speeds of less than 4.8 megabits per second (Mbps).

So now we have the availability and quality report defining the number with "little or no broadband" as 1.62 million.

But what should we make of this observation?

The first is that the 700,000 with nothing are predominantly, but not exclusively, the areas receiving fixed wireless and satellite.  There appears to be no difference in the approach to these, scheduled for completion in 2015.

More surprising is the claim that a "median peak download speed" of 4.8 Mbps is now the definition of "inadequate".

This dramatically contrasts with a statement Mr Turnbull made as Opposition Leader.  Speaking on radio 4RO on 15 April 2009 Mr Turnbull said:
I've got a Next-G wireless card in my laptop and when I was in Mackay yesterday I was getting 3.5 Mbps … that allows me to do everything I need to do.
In 2009 3.5 Mbps allowed him to "do everything I need" - but by 2013 having less than 4.8 Mbps qualifies as inadequate?

I have no real difficulty with Mr Turnbull over four years realising that requirements of download speeds are increasing.  It's just that his own policy doesn't. 

There are many who would argue that every premise without FTTP has inadequate broadband, the real number is 12 million not 1.5 or 2 million.

The other challenge revealed in the report is that "approximately 1.4 million premises (13 per cent) are in areas where fewer than 40 per cent of premises can access a fixed broadband service." These are the areas from which the majority of complaints come - they are the complaints about there being "no port available".  This is an issue that should be fixable. Presumably for exchange based DSLAMs as FTTP gets rolled out there will be DSLAMs that could be relocated from decommissioned exchanges.  For RIMs there is a useful conversation to be had with Telstra about a further extension of the top-hat program.

Where to from here

The Senate Select Committee will continue its evaluation of the Strategic Review.  Irrespective of that the review itself for the MTM scenario is predicated on continuing to rebuild momentum in the FTTP deployment.  The assumptions for the MTM model (page 96) include that FTTN deployment will commence in the second half of CY15.  That is vastly different from Dr Switkowski's expectation in evidence of getting FTTN rollout happening by the end of CY14.

Everyone who wants FTTP needs to focus less on what the alternatives might be, and more on encouraging the Minister to instruct NBN Co to build the deployment rate as fast as they can while they undertake any redesign.  The MTM model forecasts 26% FTTP which is higher than the 21% in the Coalition Policy. 

The best way to do this is by writing to local MPs. Ideally clever people inside the various NBN campaigns could construct a simple website that uses he AECs digitised maps to do an electorate lookup for an address, then prepare a completed and addressed draft letter or e-mail on the theme of encouraging the Minister to instruct NBN Co to continue to rollout FTTP as quickly as possible while it continues to undertake its review activities.  Lots and lots of letters, especially ones that are slightly tweeked by the individual help.

The second thing is to focus more on why the higher speeds and a four port NTD are needed for the applications that we expect will be common once the NBN becomes universally available. 

This is an area where people and organisations should use the opportunity to make submissions to the Senate Select Committee (by 31 January). The Committee has limited direct resources of its own, so don't expect that they will be able to find something just because it has been previously published.  Submissions from people already using fibre, or people with plans to use fibre either for themselves or in applications will help make the case.

The future of broadband in Australia is still a live policy question.  To get a good outcome requires good people to be very active.


Tuesday, December 24, 2013

Why Christmas is for Everyone

As we celebrate Christmas it is useful to reflect on the significance of the day, what it really means and why it really is a celebration for everyone.

So we all know the reason is the annual celebration of the birth of Jesus. This raises two questions, did Jesus exist and was this his birthday?

Last week I was in a conversation with someone who raised the line that if there really had been such a rebellious sect leader as Jesus then he would have appeared in the written records of the Romans, not just the Biblical tales. This rests on a common fallacy that historic facts are accurately recorded at the time, and are known as such from the moment they occur.

A good example was given on Coast Australia last week and the story of the massacre of Lizard Island.  When first reported in November 1881 Mrs Watson, her child and two staff were killed by natives.  The account was repeated in December...in a report that confirmed Mrs Watson's body had been hacked into pieces and thrown into the sea.  The real story was that Mrs Watson had floated to another island and died of thirst.  

On the basis of how "facts" do or do not get recorded, it is simply reasonable to allow the idea of Jesus as a historical figure as "fact". That the stories themselves might conflate the teachings of more than one rebel doesn't change the fact that we can talk of Jesus.

No matter what the truth of the lineage and birth of this person, no one believes he was born on 25 December. Certainly the biblical nativity stories do not correlate to mid winter.  It is generally acknowledged that Christians attached the celebration of Jesus birth to per-existing mid-winter festivities.  This is a demonstration of a feature we come to later, the universality of the message.

So now let's just focus on the world of Jesus. Israel was a country with a history as a religious state that effectively traced its successes and failures to the periods when the people were loyal or disloyal respectively to their God.  They believed they were a chosen people.

But the religion itself was practiced through "the law" and what you ate, circumcision and other superficial behaviours were interpreted as what the will of God required.

At the same time the country was occupied by Romans and the people "chosen by God" were looking for a leader to liberate them.

Into this environment came Jesus, who preached that the way to honour God was not to follow rules but to behave in certain ways ...most importantly through love of one for another.  When Jesus invokes his followers to believe in him it is usually interpreted as believing in his divinity, but it can equally be applied to believing his message.

And Jesus confounded the chosen people by saying that any person could be one of the chosen people by simply following Jesus, following the testimony of love.

Despite all the horrendous things done in the name of Christ, despite some of the distorted theology, it was the simplicity and universality of this message that explained its early adoption. And while the co-option of the faith to the State for some 1500 years (roughly 300 to 1800, longer in some cases) can explain a lot, the ability of the faith to be of use to the State came from the faith's intrinsic value.

So when it comes to Christmas everyone can celebrate an artificial anniversary of the birth of a man who taught the world that what matters is not ritual nor race but loving one another. 

Don't get me wrong, I'm not saying that you can't believe in love without believing in Jesus.

I am saying that everyone who believes in love can celebrate Christmas.

Merry Christmas to you all.
 

 
 

Monday, November 11, 2013

That Bruce Hawker book

One of the problems with the plethora of Labor insider books is that you don't want to line the pocket of the author, but you know you need to read them.

The Rudd Rebellion is such a book.  I haven't finished it, and I might never do so.  But the start of the book up to the first few weeks of the Rudd return teach the reader two things.

The first is that Rudd Mark II was still entirely a creation of focus groups and market research.  Not only in the planning of the execution, but in the positioning of the new brand.

The second is that team Rudd's reform of party rules was motivated by this research, by the need to develop a response to research that the public wouldn't vote Labor because the party would still replace him.  

So people who get excited about party reform need to put that bit in the bin called irrelevant.

Monday, October 28, 2013

Abbott and the NBN

The fact that Tony Abbott referred to the previous Government as "wacko" in an interview with the Washington Post has received some coverage.  But most of it has missed the point that the reference was to broadband.

An excerpt:

What have you actually accomplished?
The flow of boats is significantly reduced. We have drafted legislation to repeal the carbon and mining tax. We’ve just announced a commission to review the size and efficiency of the government on an agency-by-agency basis. We’ve taken control of the national broadband network, and we will deliver faster broadband much more quickly and less expensively than would have been the case under Labor.
Labor wanted a national broadband network?
It’s a government-owned telecommunications infrastructure monopoly, which was proceeding at a scandalous rate without producing any commensurate outcomes. We are changing the objective from fiber to every premise in the country to fiber to distribution points, and then we will use the existing infrastructure to take the broadband to individual premises.
Is that cheaper and more efficient?
Vastly.
But Labor wanted to extend fiber to every household?
Welcome to the wonderful, wacko world of the former government.
So you believe the former government was doing a lot of things that were bad for the country?
I thought it was the most incompetent and untrustworthy government in modern Australian history.
Be more specific.
They made a whole lot of commitments, which they scandalously failed to honor. They did a lot of things that were scandalously wasteful and the actual conduct of government was a circus. They were untrustworthy in terms of the carbon tax. They were incompetent in terms of the national broadband network. They were a scandal when it came to their own internal disunity. They made a whole lot of grubby deals in order to try and perpetuate themselves in power. It was an embarrassing spectacle, and I think Australians are relieved they are gone.

So there we have it - the NBN was "wacko".  A new term for it.

Some people have noted that the PM seems to still be behaving like an Opposition Leader campaigning rather than a Prime Minister governing.  That theme also came through in the PM's interview with Andrew Bolt.
Here the PM said;

One of the differences between the good government that I served and the poor government that I replaced, is that the good government didn't feel that its main job was manipulating the media.

It still contrasted Howard with Rudd/Gillard, not Abbott with Rudd/Gillard.

But in the conclusion of the interview he denied there was an issue in this exchange.

AB: There's a thing called impostor syndrome, this feeling of, 'My God, am I really up to this?' I think you suffered that early on as Opposition Leader. I don't get that sense of you now as Prime Minister.
PM: The short answer is no … I know exactly what you are talking about, but no, this is a position that I have every right to hold. And these are duties and responsibilities that I think I am more than entitled to discharge.

I keep going back to the way the PM deals with the NBN though, where it still seems the dominant theme is about the cost.  So I think I see the PMs hand leading the pen for Bolt to write today;

[Shorten] praised the National Broadband Network, which the Coalition will soon expose as a financial disaster worse than most critics warned.

Meanwhile on the other side of the world Google continues to provide reasons for a fibre to the home network.

Over here the simple fact is that the job of delivering a broadband network now rests with Tony Abbott and Malcolm Turnbull.  And while the Minister seems to understand that, the PM still doesn't.






NBN Review and Henry Ergas

NBN Co has announced the selection of three advisory firms to contribute their services to the strategic review process:
  • Deloitte will provide governance and the program management office services to ensure the Strategic Review fits within the parameters and tight deadline for submission set by the Government;
  • KordaMentha will contribute to the analysis of the current NBN operational and financial performance;
  • Boston Consulting Group will participate in the review of the timing, financials and product offers under alternative models of delivering very fast broadband They are Deloitte, Korda Mentha and BCG.

A forensic accounting firm is an interesting choice that reflects the conviction that the books have been cooked.  It will be very interesting to see what comes of that.

The selection of Deloitte is a bit unsurprising in that both KPMG and E&Y had done work verifying earlier plans for the shareholders and board.  But a concern with Deloitte is the possible presence of Henry Ergas among their number, though this my be slight given the scope of work they have been contracted to do.

Ergas was a champion of competition reform in the 1980s before going on to establish his successful economic consultancy NECG. This firm gained a reputation as an adviser to the big end of town, defending them from regulation designed to introduce competition, especially Telstra. I've previously mentioned on this blog a bit of criticism Ergas scored from a judge about his conduct as an independent expert.

After he sold his business to Charles River Associates (CRA) Ergas did some work for the Liberal party.  One was a flawed study for the Menzies Research Centre on productivity in state governments.  This was followed by a tax policy for Malcolm Turnbull that was never released.

Ergas was a persistent and early critic of the NBN.  In some ways it was like the criticism of Kevin Morgan because it unpicked work he had done.  In the case of Morgan it was the creation of Telstra from the Telecom/OTC merger (in which Ergas was on the other side). In the case of Ergas it was the defence of the vertically integrated Telstra.

Ergas rushed to print soon after the April 2009 announcement claiming services would cost $215 per month.  He also whipped up a cost benefit analysis that claimed the network was worse than an alternative plan by some $17 billion (by recollection).  That CBA assumed there was no need for services at higher speeds achieved with FttN, was over a shorter period than the NBN case (10 I think, rather than thirty) and used a commercial discount rate.

Today in the Oz Ergas has again shown his ability as an advocate rather than as an expert. His theme is a "pathology" of high cost projects.

He claims that a common feature of such projects is that:

The goals being pursued by new programs are not clearly defined, and the difficulties and risks involved not rigorously and transparently assessed.

Of the NBN he writes;

In the case of the NBN, the decision to proceed was largely based on unpublished advice from the Australian Competition & Consumer Commission, which lacked the capability to evaluate the options and bore no responsibility for the outcomes. By the time a more thorough analysis was commissioned, the government's decision was well-entrenched, and the analysis was limited in ways that precluded that commitment being questioned.

He then returns to the general theme;

That troubled programs prove such hardy survivors is partly because the "tyranny of sunk costs" comes into play. Projects that would never have been undertaken if their total costs had been known at the outset are not cancelled because each evaluation concludes spending a (relatively) little bit more might still make the exercise worthwhile. As hope triumphs over experience, natural selection is put on hold.

Ergas then goes on to make some specific assertions about how the NBN fits this description, including reference to a report that shows "accumulated losses" that supposedly wasn't released.  This is somewhat confusing since both the 2011-14 and 2012-15 Corporate Plans made it clear that like any large project there are losses before turning an EBITDA return.  This is confirmed in the 2013-16 Plan that has since been released.

But the crux of the story is the implication that Ministers have lied about the project.  He refers to a July launch of the NBN in Coffs Harbour for a switch on event, and the accusation that nothing was actually switched on. It is true the building was not in the fibre footprint, but that was not an assertion made by the Minister.  Equally the demonstration at the back of the room of an application was not at the request of the Minister.

He then asserts that "the stunt" could have landed the Minister in gaol if he had been a company director.

This must be interesting for the former executives of Optus who launched the Optus local call service over their HFC network - because they actually used a Telstra local call for the event.

Ergas is wrong on the facts of what the Minister actually asserted, and he is wrong on the claim of the extent of the penalty that would apply.

Finally, let's just reflect on another great project - the Jindalee Operational Radar Network.  JORN is another ripper case of a big project that had early implementation problems - when managed by Telstra - but now is usually touted as an outstandingly brilliant part of our defence capability.

Critics of the NBN like Henry Ergas have focussed on its choice of objective and the challenge of delivering that objective, and have developed a narrative that there is some "truth" to be revealed.  The risk is that those revealing the "truth" have invested so much in their own narrative that the counter claim is more flawed than the original.



 

Thursday, October 17, 2013

Nicola Roxon's John Button Memorial Lecture 2013

The full text of Nicola Roxon's John Button Memorial Lecture 2013 makes interesting reading.

Bernard Keane in Crikey has labelled it "revisionism", but primarily for the comments made about the PJCIS review of data retention.  He has found a few quotable sources to regret the focus on Kevin yet again, and to create concern that it will provide the basis for yet another Rudd set of whispers.

But the speech was structured around ten points as a guide to future leaders. Ms Roxon said it herself best;

I want to provide some practical tips for the next Labor Government, and for Labor MPs, on how best to conduct themselves. And how to ensure that a fresh Labor purpose is constantly in focus, and ways that mission can be delivered. I hope it might be of use to Bill Shorten as the new leader, and to others, as they go about their work of regaining ground for Labor.

Superficially it may seem boring to talk about housekeeping and conduct, when a party of progressives wants to be about ideas and improving lives. But I use examples to highlight their necessity if we want to deliver fabulous policies effectively.

We can want power, but we have to want it for a purpose. So we have to know how to use that power well, and to full effect.

The structure of her speech necessitated talking about bad examples from the party's immediate past, and it didn't focus on KRudd exclusively for that.  Of course, the structure could have been chosen just to provide an excuse for that, but the points she made seem appropriate when stripped of their examples.

The focus should be on her "ten points".  I've listed these - with an additional sentence or two in some cases - below. 

1) Labor must always focus on the fact that good policy improves people’s lives and that is why the party exists.  (and a related issue here is: don’t do too many things at once.)

2) Governments as a whole, and the prime minister in particular, need to keep their focus high level - spending time and energy on the things that really matter.
If you can’t describe what you are doing in general terms, and its purpose, then either the policy isn’t right, or you’ve descended into detail most people don’t need and probably don’t want to know.

3) Good leaders are good delegators.

4) Labor needs to welcome debate, not fear it.
A progressive party needs to be able to argue over issues and not see it through the prism of internal politics.

5) Be polite and be persuasive. Or I could call this "Keep yourself nice".

6) Always ask what you can do for the party (and the nation) not what it can do for you (with apologies to JFK).

7) Good governments run best with good diaries - so boring, but universally true.
This is not just about housekeeping, as it seems, but you actually can get better policy, get more done and protect against foreseeable problems if you plan a diary and run to plan. You can only get to an end game if you have planned where you want to go.

8) Choose good people - as leaders, as MPs and as staff.
In every walk of life, successful organisations need a pool of talented people, and politics is no different.

9) Accept you are not always right, and cannot always fix everything. It’s easier with this as your starting point.
If the public is promised a messiah, they’re inevitably going to be disappointed.

10) And lastly, never forget polling is only a snapshot, not a predictor.

She makes the case well for the leader in the Hawke tradition.  One who delegated.  One who was able to engage in a public discussion on policy.  The secret to that discussion was always to have a range o options, and include in it something more extreme than you were happiest to go.  Coming back from that extreme is then seen as a consequence of consultation. 

On the point of polls it is surprising that Labor has never developed a better understanding of the way Mark Textor uses polls for the Liberals.  Textor uses polls to determine HOW to frame the Liberals messages, not WHAT the message is.  They use polls as part of the process of persuasion, not as a way to decide what to reflect.

Roxon finished with a rallying cry.

And now the invitation is to the next generation to think how they will refresh the Labor purpose - to pump some new blood into its beating heart. And to be ready to conduct themselves with dignity, so they get time to bed down the vital reforms of the next generation, reforms that we know only Labor will deliver.
We should never, ever as a Party be ashamed of our past.
We should celebrate it, learn from it, and use it to improve our nation’s future.
Good luck - and thank you.

That is a great peroration.

The speech as a whole makes a great manifesto for aspiring politicians.  It should be read as such, and not as a critique of one or two PMs.

Sunday, October 13, 2013

Keep the faith

The historic first ALP leadership ballot is over.  It generated a new level of interest in the party, received widespread community attention, and provided media coverage that belied the election loss.

The results are in.  The rank and file voted nearly 60/40 for Anthony Albanese, but Bill Shorten won on the strength of the caucus vote.  

Some party members are already reacting with desperation, feeling that the initial foray into democratising the party has been frustrated by the caucus ballot. Some are reaching out on social media suggesting they will now 'give up on the party.'

I can understand the reaction but would counsel all of them to stay and continue to drive further reform.

The move to democratising the party by allowing a member vote for leader of the FPLP was championed by Sam Dastyari.  That should tell the members something. It was the one move that he felt comfortable with not affecting the power of state secretaries and the factional system that underpins them.

But this is not a genie that can easily be put back in a bottle.

Members of the party need to do the following.

- ask your mp or duty senator how they voted and why, they didn't represent views of the base so let them know your displeasure
- discuss with your fellow members the areas of further reform you want to see
- continue to promote the values of the ALP which seeks to represent the people who make a living by what they do, not what they own.  The party that stands for jobs and growth, opportunity, sustainability and a fair go
- encourage more people to join

Leaving will not create change! The only option is to stay and fight for it.

Tuesday, October 08, 2013

ABS Internet Activity - June 2013

The latest version of the ABS series 8153.0 - Internet Activity, Australia was released today.

This is an incredibly useful series, but one that inexplicably the ABS seems to continually wilfully misrepresent in its accompanying media releases.

In the period from June 2011 to Jun 2012 as the number of wireless broadband connections passed the number of fixed the ABS reported the stats using proportions in such a way as to suggest the actual number of fixed connections was declining rather than merely growing at a slower rate.

Over the last three halves the ABS has gathered data on mobile handsets but as far as I can tell only includes the data in its summary and not in the actual data tables.

That doesn't stop them screeching about it though.

Today's full media release is fascinating. 

Australian mobile handset downloads surge

 Nearly 20,000 terabytes of data was downloaded by Australians with internet access connections via a mobile handset in the three months to June 2013, which is an increase of 6,000 terabytes according to figures released today by the Australian Bureau of Statistics (ABS).

"Download volumes for mobile handsets have really seen explosive growth," said Lesley Martin from the ABS, "and while it's true that the number of mobile handset internet subscribers has also increased, that's been much smaller growth."

The total volume of data downloaded via mobile handsets between April and June 2013 was 19,636 terabytes, which is a 43 percent increase from the previous period of October to December 2012.

Between December 2012 and June 2013, the number of mobile handset internet subscribers grew by 13 percent.

"Mobile handset downloads contribute a small percentage of our total internet downloads - in the three months to June, Australia's total download volume hit 657,000 terabytes, which is up 18 percent compared to the three months ended December," Ms Martin said.

"Australia had 12,358,000 internet subscribers - not including mobile handsets - at the end of June 2013, showing a three percent annual increase.

"In pure percentage terms fibre has been the fastest growing type of connection, with a 26 percent increase since December 2012; but it should be remembered that this growth is from a low base.

"There's now 115,000 fibre connections compared to 6.2 million mobile wireless broadband connections such as a dongle or tablet SIM card, 4.8 million by DSL, 93,000 by satellite, and 227,000 still on dial-up."

Further information is available in Internet Activity, Australia, June 2013 (cat. no. 8153.0) available for free download from
www.abs.gov.au.
The headline and first paras screech about mobile handset download growth.  Only much later do you get to the real story that the handsets are a very small share of the overall data.

Let's just look at the three main trends.

First there is the total number of connections.


The number of fixed and wireless data connections both continue to grow slowly.  They are dwarfed by handset connections which tend to be personal whereas connections tend to be for households.

Then there is the total downloads.


And while there has been a surge in the total data downloaded by handsets as a proportion it really is a miniscule amount.

The best measure is the download per month per service.


 
This is the biggest killer for both the claims of both wireless (dongles etc) and handsets versus fixed broadband.  The downloads per service per month continue to increase on fixed and barely move for the others. 
 
Another way to look at this is the proportion of all data that is downloaded over fixed line versus wireless and handsets.
 

Overall fixed line is slowly taking an even greater share of the overall traffic.
 
It is no wonder that Malcolm Alder, an author of the NBN Implementation Study, is reported by the AFR today as saying the NBN may result in fewer "mobile only" households than first thought.
 
Assuming that the proportion of mobile only would actually be greater was one of Malcolm Turnbull's four bases for asserting a higher cost for the NBN.  It was the only one which NBN Co itself had not earlier refuted.
 
So, simply put, the ABS release is misleading in the extreme.  The data continues to support the need for a fixed broadband network engineered for continued growth in data demand.
 

Sunday, October 06, 2013

Meanwhile in Tasmania

Having woken up to the fact that "honouring contracts" never meant finishing the NBN FttH build there, Tasmanians are getting a tad upset.

Mr Turnbull is quoted by ABC as blaming the former Government saying

The contractor has basically stopped work for several months.  There's nothing we could do to slow down the rollout in Tasmania because it has been dead stopped.

This is technically incorrect because the contractor was still at work in areas not affected by the remediation pause, and has restarted work already.

This is typical Malcolm Turnbull.  Rather than directly respond to the fact that he knows he misled Tasmanians he reaches for a distraction with a false claim about current roll-out.

For the record - mid election (17 August) the Examiner ran a story under the headline Turnbull confirms NBN will honour contracts. It included the following line.

"Tasmanian Senator David Bushby also dismissed Ms Collins by saying the Liberals had costed their policy on Labor's full Tasmanian roll-out, confirming  it would honour Mr Turnbull's earlier pledge to fulfil all contracts."

Mr Turnbull knew that to be a false statement at the time and did nothing to correct it!

To regulate or to deregulate - that is the question...

Communications Minister Malcolm Turnbull appeared on ABC's Insiders today.  In the midst of semi-predictable gumph about the NBN there was a short exchange about the Government's deregulation agenda.  Mr Turnbull said;

Well, we have got an overall policy right across the government of cutting regulation and red tape and both telecommunications and the media, the broadcast media, obviously, are very heavily regulated. What we are undertaking or commencing now is a study of the level of regulation, so the question is what objectives, what is the policy objectives these regulations seek to serve? Is that objective relevant any longer? If it is not, the regulation should go. If it is still relevant, can we achieve the objective more cost effectively?
I am very focused on reducing the cost of doing business in my area and all of my ministerial colleagues are doing the same thing in theirs.
 
His colleague, the Minister for Foreign Affairs Julie Bishop meanwhile was having a good old spray, reported in the Sunday Tele and other News Corp papers by Sam Maiden, about mobile roaming charges.  Ms Bishop said:
 
Since I have been travelling more extensively, I have received some extraordinarily high bills for global roaming, running into the thousands and thousands of dollars. [The regulator should] have the power to carry out a market investigation but also to determine what was a reasonable price.  In Australia I understand that we actually need to enhance the ACCC's powers. I will be talking to Malcolm Turnbull about this.
 
Ms Bishop was apparently aware of the moves already taken by the ACMA - at the direction of the former Government - to insist travellers are informed of the cost.  Despite this Ms Bishop seems to still have been shocked by her bill.

Ms Bishop praised the approach of New Zealand and suggested they had seen good results from a threat to regulate.  She might like to note that the "threat" was made bilaterally by PMs Gillard and Kay in February 2013.

She might also note that the Gillard Government proposed to bring this legislation forward in the Winter sitting period, appearing on the list as

Telecommunications (International Mobile Roaming) Bill
-          amend telecommunications legislation to clarify that international mobile roaming services are services that can be regulated where reciprocal arrangements apply with another country
Reason for legislation:  to implement coordinated action with New Zealand on measures to address the prices to consumers of trans-Tasman mobile roaming
 By recollection the Bill wasn't introduced in June, but it should be already prepared.

So the challenge for Mr Turnbull is whether he dusts off the Bill and introduces it in the first sitting week of the new Parliament - or whether he decides that is not a good look with the overall deregulatory flavour.

Note:  the case is a fascinating one in regulation theory, because the market position with high roaming charges is stable...there is no simple way for competition to solve the problem.
 
 

Friday, October 04, 2013

Proof that Paul Howes is as thick as be seems.

At last there is proof that Paul Howes is as thick as he seems.  Having had his Parliamentary ambition recently thwarted he has signed up to write monthly essays for the AFR to demonstrate his credentials as a leader of extra-parliamentary Labor.

He has made the amazing discovery that investing in infrastructure builds the nation from which the opportunity to make life better for all can come.  Pity he didn't notice that investing in infrastructure is what Labor in Government did.  Pity he didn't notice that at the first leadership debate Anthony Albanese said he'd be a PM who invested in infrastructure.  But I think Howes is part of the right backing for Bill Shorten.

But when he makes claims that a worker might like an infrastructure investment that HALVES a commute time over a wage increase, it is clear he has no idea what you would need to do to halve most commuting times.  Take mine to the city - 15 minute walk to station, 45 minute train ride, 15 minute walk from station to office.  You can't even make the train trip happen in half the time.

Then he talks about wanting to tap into super savings to fund infrastructure, which then has to be privatised so the super fund can get a return.  Well hand off my super!  Issue infrastructure bonds a proposed by Hockey and backed by McKibbin and let my fund invest, fine. But don't try to create investments with market rate returns.

But the whole point of super is to take future liability for pensions to of government by creating private savings.  If those private savings just get used by government now as a trade for a new future government liability the whole thing becomes absurd.

If this man is a Director of AustralianSuper maybe the Coalition is right to be concerned about union officials on industry super fund Boards.


Novae Meridianae Demetae Dexter delenda est

Monday, September 30, 2013

Chris Pyne - the gift that keeps giving

Chris Pyne has followed up his comments about Uni places and fees by talking about curricula and testing.

In a memorable line he says ''I don't believe in handing over responsibility for government policy to third parties." And hence asserts his right to recast the National Syllabus.

It does, however, slightly affect his claim that the existing syllabus is Labor oriented - since he clearly acknowledges it was written by a third party and NOT the previous Minister.

He also said, ''I know that the left will find that rather galling and, while we govern for everyone, there is a new management in town.''  Which raises the somewhat frightening concept that every time the Government changes the curriculum should too.

The actual curriculum for years 1-10 only cover Maths, Science, English, History and Geography.  The curriculum for senior secondary school are for the same subject areas but in greater depth.

But it was the following excerpt from the report that I thought required more digging.

Mr Pyne said the national history curriculum played down ''the non-Labor side of our history'' despite the Coalition governing for two-thirds of the past 60 years.
I thought I'd look at the content of the Year 1 to 10 Syllabus to try to figure this out, looking at the High School Years.  Really Australian history only features in Years 9 and 10 (Year 7 is ancient world, and year 8 is medieval). The last 60 years is exclusively Year 10.

Let's just face a few facts.  The big events that can't be avoided are WWI, Depression and WWII.  The facts are that Labor governed for most of these periods.

Further examination shows that outside these the focus is on things like cultural change, the war in Indo-China and its aftermath (including refugees) and the environmental movement.

But if we understand that history isn't just content for the sake of content, it isn't just learning a list of Prime Ministers, it ultimately is a study of change. That is it will always look like it is focussed on "progressive politics" because that is where the focus of change rests.

Conservative values are an important part of understanding all these progressive causes.  They explain why the causes weren't initially - or in some cases ever - adopted. 

If Pyne wants to make sure students read these he should sponsor a set of monographs on the conservative responses to those issues. In the end all change has developed through a dialectic - the existing thesis, a proposed antithesis which resolve to a synthesis.  Good history will understand that, but the content areas stay the same.

But I must admit I was wondering what other curricula he thought should be adjusted, because the existing lot is all too much biased by progressives.  So, a few thoughts.

In English - lets stick to the classics written before 1900.  If we do have to do with modern things like understanding newspapers anything will do so long as it is from News Corp.

In biology - obviously he should throw in intelligent design because this Darwinian evolution stuff is just a dangerous progressive theory.

In physics - clearly Aristotelean physics hasn't really been disproved yet, and if we can teach Newtonian and quantum mechanics then surely the "classical" mechanics can be taught.

In mathematics - complex numbers are right out, how can we possibly have maths based on an imaginary number i?
Finally we come to geography - and in high school geography you learn about weather and climate.  True to conservative values this will be taught to be unchanging, just as there will be no discussion of erosion because that is another dangerous progressive idea that the world isn't the same today as it has always been.

Ahh - the wonders of being a conservative!  Life is so much simpler - much less to learn and think about.

Thursday, September 26, 2013

Student Politics

With Chris Pyne saying he wants to abolish the student activities levy we've had lots of commentary as if this is a repeat of compulsory versus voluntary student "unionism".

Some young Liberal bright spark looked down a camera lens and said that student politics was the "training ground" for Labor politicians (as if that alone was a justifiable reason for not having it).

He perhaps needs to know more about his own party to learn

PM Tony Abbott - President SU SRC 1979
Treasurer Joe Hockey - President SU SRC 1987
Communications Minister Malcolm Turnbull - Board Member University of Sydney Union

and going back a bit further

Robert Menzies - President of the Melbourne University SRC 1916

Student politics is a good training ground for lots of people who are later engaged in civic life - including politicians, judges, journalists and others.

Wednesday, September 25, 2013

Myths of competition

Everyone knows prices are lower with competition - right?  Well - actually they aren't. There is absolutely nothing in the theory of competition that says they must be in all circumstances.

But that doesn't stop people from continually asserting it when talking about telecommunications.

The latest horrendous examples occurred on the 7:30 report last night. The short excerpt from a report by Greg Hoy;

IAN MARTIN: Look, I think it's a fantastic opportunity to get more competition going in at least a large part of the market where companies like TPG and Optus will be able to use their own infrastructure to provide services, broadband services, high speed broadband services directly to consumers.

DAVID KENEDY: The Coalition already envisages that it will allow Telstra and Optus, if it wishes, to continue to operate their cable broadband networks which reach about 25 per cent of the Australian market.

GREG HOY: Competition is a good thing, it can drive down prices. But this is sure to trigger a debate as to whether those who haven't already
been connected to the NBN will be saddled with an inferior technology for the foreseeable future.

So let's look at the theory and reality of competition.

The assertion that prices are lower under competition comes down to a simple conclusion of orthodox economics.  The first conclusion is that a profit maximising firm will set price equal to marginal cost. (see note)  The second conclusion is that where the market output is produced by a number of firms (competition) then firms will enter or leave the market till marginal cost equals average cost - so price equals cost and there is no profit.  (This is economists profit which includes the need to get a return of and for capital in the cost).

The monopoly scenario is built around a market where there is no entry or exit - and as a consequence the firm's profit maximising position is where the mark-up (that is (price-cost)/price) is equal to the inverse of the own price elasticity of demand.

This also highlights another myth - hat monopolists charge whatever price they want.  This is not true.  If costs go up or decline then price will too.  How much by depends upon the shape of the demand curve and hence how elasticity changes from one point to another (elasticity varies the whole length of a linear demand curve).

If the cost doubles because there are competing firms and even assuming this creates the competitive outcome (see note) for prices to be lower under competition the monopoly mark-up would need to have been over 100%.  While that is possible, whether it is in fact the case is an empirical not a theoretical question (that is, what is the actual demand). I am not personally aware of any studies that have indicated this has ever been the mark-up in telecommunications access monopolies.

Which is all good so far.  The question is "why one firm?"  That can be because of regulatory barriers.  But economists recognise it can be because of a thing called "natural monopoly" - which is formally defined as one where the cost function is sub-additive.  That is all possible values of industry output can be generated more cheaply by one firm rather than two.

This condition clearly applies to distribution networks.  I have said it before - no one who promotes competitive access infrastructure in telecommunications advocates duplicating water pipes, electricity wires or gas pipes.

We have had three types of competition in fixed line telecommunications in Australia. The first between HFC and copper pairs.  The second between two HFC networks. The third between competing providers over copper.

The competition between HFC and copper should have been intense because Optus's reason for building HFC  was for telephony competition.  But it didn't work very well, and the price point for accessing Telstra's copper was cranked down by the ACCC to the point where HFC wasn't really effective - unless used in a bundle.  The ability of HFC and copper to co-exist is very similar to the co-existence of gas and electricity.  The latter both deliver energy, but the former is better for application that need heat (household heating, cooking, hot water) while the latter is essential for driving everything else.  Pay TV was built to deliver linear TV, copper to deliver voice, and both were tweaked to provide two-way data.  Both have limitations for data - HFC has poor uploads and shared access capacity, while copper has distance limitations and is severely affected by loop quality.

The issue is that FttH is actually superior to both HFC and copper for all the communications applications.  The rationale for competing platforms expires.

The competition between HFC networks was a disaster.  The two networks wound up competing on content, and once one got a sustainable lead the market fundamentally tipped.  The Optus HFC network still exists but is a poor second cousin to Telstra.  It is also important not to get fooled by the accounting treatment of the Optus asset.  Over a billion dollars in value has already been written off - an accountant will measure profit against the written off base - for an economist the written off cost never truly goes away.

Finally we had competition on DSL over Telstra copper.  Competition cannot be credited with any price declines that came about through the reduction in the ULL price by the ACCC.  Where competition has been effective has been in the upstream component - by taking responsibility for the engineering of the service beyond access firms make decisions about Quality of Service.  Others gain benefits from scale efficiencies on backhaul (from access to network core) and transit (from core to other places on the internet).  Really clever firms understand price elasticity and drop prices in anticipation that lower prices will add scale and reduce average cost to justify the price decline.  All of that happens actually in a world just like NBN Co - there is a monopoly access provider.

So really the idea that the access network should be a monopoly is a no-brainer.  Costs and prices will be lower.

The question then is why a Government owned one.  And there are two simple reasons for that.  The first is that as it is a monopoly it needs to be regulated - and one of the best ways of doing that is Government ownership, rather than tension between interests of shareholders and interests of Government.  And the second is the ability of Government to be a patient investor, which enables it to make the big call to build the whole network relatively quickly.

Actually the Australian Government has a good record here.  The copper telecommunications network was built by Government.  When Telecom Australia came to be in 1975 only 62% of households had a phone.  The Post Office had been entirely funded through revenues and commonwealth borrowings since at least 1959.  When Telecom was created it assumed all $4.5 billion of that debt.  Between then and 1989 Telecom paid interest on that debt and repaid $1.5 billion of the principal.  When it was corporatized in 1989 the remaining $3 billion was converted to equity.  The Government received dividends from Telstra in return.  Immediately prior to the first tranche of Telstra being sold it paid a $3 billion "special dividend" to the Government. I can't recall how much the Government got over the three floats - but it was over $50 billion - for an asset with a carrying value of zero!

And an interesting story dredged up from the archives:

Deputy Prime Minister John Anderson says the federal government should consider spending part of the AU$34 billion it will reap from Telstra's sale to build a national fibre-optic network.

Treasurer Peter Costello has said he wants to see all of the money from the Telstra sale tipped into the government's new Future Fund set up to cover public servants' superannuation payouts.

Anderson said a plan by the Nationals think-tank The Page Research Centre, for the government to build an AU$7 billion fibre optic network across Australia, deserved serious investigation.

He also called on the government to have a close look at the true state of Telstra's existing copper wire phone network, its maintenance cost and how much it would cost to replace it if necessary.

Anderson said the issue of how a shortfall of telecommunications services, particularly in the bush, might be met in the future must be addressed.

"It is my view that if it emerges that there are circumstances where the normal commercial forces are not going to drive critical investment in infrastructure and if it becomes apparent that government intervention is needed...the logical first option to fund it would be from the sale proceeds," Anderson told a telecommunications conference in Canberra.

"It's hard not to observe...(that if the technology) was optical fibre rather than copper a lot of the concerns of regional Australians about Internet speed simply would not have arisen."

Later, Anderson told reporters he thought it would be unlikely the government would have to dip into the Telstra sale proceeds to build telecommunications infrastructure.

But he said such a move would be logical if needed.


Note: The orthodox view has been challenged.  Steve Keen has demonstrated that the orthodox approach underestimates the actual price in real markets.  Also if the market is not fully competitive the mark-up doesn't drop to zero even in theory - the mark-up becomes the HHI divided by elasticity where the HHI (or Herfindahl–Hirschman Index) is the sum of the squares of market shares of firms. The lowest that can be under duopoly is merely half - that is the mark-up is reduced by 50%. 

Monday, September 23, 2013

The Tony Abbott we all really know

Tony Abbott started his political career, like so many others, in student politics.

He shot to fame as the first Right President of the Sydney University SRC for quite sometime, and also through taking the fight up to the extreme left at the Australian Union of Students.

It was his career at Sydney that I knew best.  A campaign to become President of the SRC on the key theme that he opposed compulsory student unionism.  And his main gripe with compulsory student unionism was that funds went to support minority causes like feminism and gays, and particularly Left causes like Palestine.

But that was the sum total of his policy.  He didn't control the whole SRC or even the Executive, so he didn't actually achieve much.  The University administration had no interest in voluntary student unionism. They appreciated the services provided and the contribution to campus life from the three funded bodies - the SRC, the Union and the Sports Union.

SRC fees went to many more things than the fringe issues so disliked by Mr Abbott.  They funded Honi Soit, an often outrageous newspaper that has still spawned the talents of many Australian writers.  They funded many clubs and societies on campus, including faulty societies which brought students together. 

The only issue of substance I can recall was a petition Mr Abbott prepared that received enough signatures to require a constitutional amendment for the SRC be put to a vote.  The Executive was concerned that the amendments as drafted would make the constitution internally inconsistent and proposed a slightly different amendment be put.

Mr Abbott launched legal action - listed as Abbott v Havyatt et al.  The matter never went to hearing as the executive relented.  The proposed amendments were put to referendum and defeated.

The purpose of this long tale from over 30 years ago is that the same appears to be Mr Abbott's approach to the much bigger job he won by being clear what he was opposed to, but never what he was in favour of.

Today we read about Mr Abbott's second round (after Climate Change Commission) of agencies to be cut.  The common theme is that they are agencies that do things that Mr Abbott just philosophically (note that word) does not support.

So he abolishes the Major Cities Unit in infrastructure, because it will tell him the importance of public transport investment.  And Mr Abbott's opposition to public transport investment in entirely illogical since he believes these are "over-manned, union-dominated, government-run train and bus systems''.
He is also unwinding what are tagged "nanny state" agencies.  The Australian National Preventative Health Agency - which leads the fight against obesity, alcohol abuse and tobacco use - is listed as one of these.  And it performed the sin of spending money researching the effects of a fat tax despite the fact that neither party was proposing one.

And here we come to the first problem of the world according to the Conservatives.  They believe the public service exists only to implement policies decided by politicians.  They do not want the public service to provide advice on the economic, social and technological changes that might require a policy response.

So where are the politicians in this conservative world meant to get that advice?  The first answer is you don't need such advice because the principle approach is to change nothing.

The longer answer, of course, is you get that information from the private sector. The pharmaceutical companies can tell you all you need to know about obesity - can't they?  The distillers, brewers and fermenters can tell you all you need to know about the health effects of alcohol, can't they?  And didn't the tobacco companies do all the research on tobacco?

And is this really "nanny state" - or is it prudent management of the burgeoning health budget.

Then we get told the Australian Institute of Criminology could be reviewed and possibly merged with a University.  Which is possibly fine till you then read about the intention to rip $100 million dollars from Australian Research Council grants. 

The Coalition has always run a line of finding some obscure piece of research funding and making out it represents waste.  In the article today the example of a costly academic indulgences the Coalition plans to wipe out is "a $443,000 study into the "God of Hegel's Post-Kantian idealism''".

It is quite interesting if you Google that phrase.  You find that it is the title of an ARC grant to Professor Paul Redding from the Philosophy Department of the University of Sydney. Professor Redding has edited a volume on "Religion After Kant: God and Culture in the Idealist Era."

Dig further and you realise that Professor Redding's research is part of a bigger Program in the History of Philosophy.  I don't really know where we have got to if an ordinary analytic philosophy program is under attack.  Maybe we really should stop referring to Abbott's own "philosophy" since his Government has such apparent disregard for it.

Much fun has already been made of this line - "Other key Rudd reforms - including the expensive bid for a seat on the United Nations Security Council - are being wound back with a planned new Australian embassy in Senegal to be abandoned." - in the twitterverse.  Memo, we have the seat now.  But do we really want to start by reneging on agreements with Africa?  Does Julie Bishop have no appreciation that after the Pacific Rim, Australia's next strategic focus is the Indian Ocean Rim?

To add to all this let's just remember how impressive Tony Abbott has always seemed on indigenous affairs - he really does get in touch with his Catholic sense of the need to do "good works" here.  But there is now an issue about a plan to spend his first week in office "on country."     While it is tempting to suggest the excuse he could use is that it wasn't written down, the more prosaic reality is that the new PM has discovered (a) that there is more to being PM than he thought and (b) that his security detail simply wouldn't countenance it - yet.

But in reality, what you see is the Government that reflects its leader.  A leader who knows what he doesn't like - and at the top of the list is any independent research or advice on the policy challenges for the government.

After all, you become Prime Minister or President of the SRC by talking about what you don't like - not what you might actually plan to do.

Wednesday, September 18, 2013

Albo's campaign launch in Sydney

Both Albo and Bill Shorten have three word slogans for their leadership campaigns.

Albo's is Vision. Unity. Strength.
Bill's is Party. Policy. People.

I will attempt to deconstruct their messages in a later post.

But here is Albo at his Sydney Launch




Income inequality

On Monday's QandA David Williamson got away with this statement;

But I think all the naval gazing about the ins and outs of factions and that ignores the fact that the Labor Party has to find a direction to go in, to stand for something and they didn't at this election. I think the obvious thing that they need to stand for is the fact that Australia is becoming one of the more unequal countries in the world in terms of the Gini Index, which measures inequality. They are way out. Australia, US and UK are very unfair societies and Labor is supposed to be standing up for fairness but they run a mile.

This concerned me greatly - especially when Father Bob tweeted it as a fact that Australia was as unequal as the US and UK.

The Wikipedia article on this is very useful because it includes the measurement of the Gini Coefficient from the World Bank, the CIA World Fact Book and the OECD (the first two report as a percentage, the third as a ratio).  The OECD reports both before and after taxes and transfers.  The closer to 100% (or 1) the more unequal a society is. 

Let's just record the values for each of the US, UK and Australia using these four measures in order

US - 45, 45.0 and 0.486, 0.378
UK - 34.0, 40 and 0.456, 0.345
Aust- 30.5, 30.3 and 0.468, 0.336

So on the World Bank and CIA data Australia is much less unequal than the US and UK.

The OECD data is more interesting - before transfers Australia falls between the US and UK, but after transfers is more equal than both (which means our taxes and transfers do a better job of  addressing inequality).

Using the OECD data it is correct to say that after transfers Australia is now more unequal than it was in the nineties, and this is cause for concern.

It is also an interesting fact that while before transfers Australia is more equal than France and Germany, that situation reverses after transfers. 

On the basis of the data it is wrong to assert that Australia is becoming one of the more unequal countries in the world.  It is even wrong to say it of the developed world.

It is fair to say that the trend after transfers has been heading in the direction of more inequality, but one could add that currently by GDP per capita (in $US) Australians are the 5th best well off people on the planet.

Robb - again

No sooner had I written about Andrew Robb's claim on Insiders that the mining boom would be rebooted than confirmation came that Robb was moving from Finance to Trade.

Someone at the SMH wrote this comment.


So while Robb has said the mining boom will be rebooted, his job as Trade Minister is to attract foreign investment to help Australia adjust to the end of the mining boom.

Ahhh - if only all politicians could be so "flexible."

Sunday, September 15, 2013

Coalition in disarray on economy

The Coalition's two leading economic Ministers appear to be at odds on what needs to happen in economic management.

The AFR reported this morning (behind paywall) that Joe Hockey has realised the economy continues to need Government expenditure as stimulus.  He is therefore planning to bring forward road building to cover the drop off in construction activity as mining softens.

But Finance Minister Andrew Robb told ABC Insiders last Sunday that the mining boom isn't over  - it is merely resting due to the mining tax.  He said;

As of today the mining boom will be rebooted, right. Under Labor it was finished because of the cost uncompetitiveness that we now have. We will change that. There's $150 billion worth of projects there to be grabbed. We can do so much. We can get Australia open for business. We'll restore an appetite for risk and investment, people's jobs will grow massively. Small business will come out from under the huge shadow that they've had for the last two years.

I tend to agree with Joe.

Mind you if he is really concerned he should make sure the Coalition doesn't change the design of the NBN.  It takes a long time to ramp up road projects, but NBN Co is now ready to continue the ramp up of its construction activity.

Thursday, September 12, 2013

Economy and Abbott

As an update on yesterday's post The Australian today reported "Economy rides Abbott Victory." The evidence offered was an increase in share price and in consumer confidence.

It is a bit of a worry that this paper equates the economy to the share market.  It is about as bad as the way the retailers equate the economy with the sales in their stores.

The reality is the economy is much more than all these. 

But the value of shares on the stock market is a measure of expectation, not reality.  It is how much people expect the shares to be worth either because of what the companies will earn or (in a bubble) what they will sell for in the future.

If, as noted yesterday, the public has an assumption that the party of the bosses is better at managing the economy, then one would also expect the election of the party of the bosses to create a shift in the stock market.  The news that would justify a page one splash would be if this hadn't occurred.

Meanwhile, in commentary on Monday the chair of the BCA was arguing that a double dissolution should be avoided because it would be bad for business and consumer confidence.  This follows the business community's comments about the 'minority' government.

One really gets the feeling that the business community and its cheer squad at the Oz just regard democracy as a nasty little impediment to the capitalist state!