Wednesday, September 16, 2015

We have a new Prime Minister...

On Monday night Malcolm Turnbull fulfilled his ambition (I think he would say destiny) to become Prime Minister of Australia.

Source November 1970 issue of The Sydneian (see note)

I must admit to being a little astonished about some online commentary from  the tech sector (and one recently tech sector journalist). For the new(ish) online newsletter I wrote two columns.

Now writing for Crikey Josh Taylor opined "The area Turnbull had the most interest in, during his time as communications minister, was the digital economy." This is sheer fantasy since his only real DE contribution has been the DTO. As my editor at James Riley noted

Prior to the 2013, Malcolm Turnbull had fully expected to be given responsibility for government ICT – to use the power of Commonwealth as the largest buyer and user of technology to drive cultural change across the digital economy. This did not happen, and a series of election promises related to ICT procurement that were made before the 2013 poll did not come about as a result.

In my own contribution, mostly written before the challenge, I noted how the review of the ACMA could create the opportunity for some significant "machinery of Government" reforms. I noted that in his first address the PM had stated his intention to reinvigorate the Government’s policy making in relation to embracing the opportunities that the 21st century has to offer.

The proposed changes would create a Department capable of prosecuting the case. while the Secretary of the Department of Communications, Drew Clarke, is acting as Mr Turnbull's Chief of Staff he will have an ideal opportunity to press this case.

It was in relation to the NBN that commentary became even weirder.

iTwire reported "Internet Australia has called on incoming Prime Minister Malcolm Turnbull to fast track construction of the National Broadband Network, claiming the Abbott Government failed to understand the importance of the Internet."

In a separate story they also reported "Telecoms research group Ovum’s principal government technology analyst believes that Malcolm Turnbull’s appointment as Australia’s Prime Minister will see a change in the fortunes of the NBN, including a faster rollout and shift back towards FttP."

Both of these are simply delusional. Mr Turnbull would claim that his move to the Multi Technology Mix was all about speeding up, and the one thing Mr Turnbull will not cede ground on would be the greater use of FTTP.

itNews reported a host of industry types saying that NBN execution should now be the focus, from Communications Alliance CEO John Stanton, AIIA CEO Suzanne Campbell, Laurie Paton again and even the Competitive Carriers Coalition (membership????) executive director David Forman.

Mr Forman said it was more important to make sure services on the NBN remain competitive rather than focus on the technologies used in the network. He added, “This is an opportunity for a higher level of bipartisanship. Both parties agree on the NBN, and the things they disagree on – around technology choices, are really in the past and at the margins.”

These comments are right, it is not now time to re-prosecute the case for a change to an all FTTP deployment. The nation cannot afford the delay. But as I note in my other piece for InnovationAus, Mr Turnbull should not be able to claim his approach to the NBN as an example of good administration.

As I outline the evidence is clear that Mr Turnbull made the decision to change the technology on the basis of a rushed and seriously flawed piece of analysis. Each time he has had to recalibrate the cost of his flawed approach he has costed the FTTP counterfactual. While the cost of his own plan has almost doubled, the costing of the alternative continues to collapse.

Space did not permit me in the article to outline how heroic Mr Turnbull's assumptions are about the ramp up after the 2016 election (see below).

Nor did it permit the hilarious piece of testimony whereby NBN Co's CFO asserted the shift in the HFC deployment had no impact on revenue only to have the committee demonstrate to him the 56% decline in revenue to 2017 between the Strategic Review and the Corporate Plan.

Nor did I have space for a long exposition on the subject of "transparency." Having declared he is being more transparent and just publishing a weekly rollout progress, Mr Turnbull is credited with more transparency even though there is actually less. The latest example is the latest Corporate Plan that only provides information to on revenue, costs and rollout to 2018 - the minimal legislative requirement. The plans released in 2010 and 2012 gave full profiles to the end of rollout and data points for 2028 (self-financing) and 2040 (life for Discounted Cash Flow analysis).

Here we are two years into the implementation of Mr Turnbull’s plan and everything he said about it in 2013 is now in tatters. Mr Turnbull’s “evidence” about the NBN is no less manufactured than Godwin Grech’s evidence in Utegate. Yet Mr Turnbull wasn’t sacked by Mr Abbott, it happened the other way around.

Those who follow the NBN could believe that Mr Turnbull’s rush to bring on the leadership challenge was motivated by the need to move before his NBN debacle caught up with him.

 It takes the special kind of person that Mr Turnbull is to instead use his management of the NBN as a template for governing the country.

******************************************************** Note:
The review of the Globe Players production of Othello says, in part:

To be moved by the full force of Othello’s tragedy the audience must believe in an Iago hell-bent on revenge against Othello; a revenge motivated by pique at being overlooked for promotion. Although always careful to conceal his true character in the presence of others, Iago’s revenge becomes an obsession taken to the point of paranoia…. 

With a voice of rich quality, M. B. Turnbull spoke the poetry with clarity, although his soliloquies needed to be less mellifluous and more varied. In voice and commanding presence, he showed he possesses the resources to have given a believable performance as Iago, had he acted with less artifice and more spontaneity. On the one occasion when he dropped to a quieter, more natural tone in the “not poppy, nor mandragora” speech, and became a credible character, he showed how genuinely chilling his performance might have been.

The review is only accredited to N.G.S. – I have no idea who that was.

Tuesday, September 01, 2015

Two years in - almost

It is now very nearly two years since the last Federal election. In the week just passed the Prime Minister cancelled a scheduled Cabinet meeting that despite reports to the contrary did actually have items on the agenda. He went bush to revere the grave of Eddie Mabo - the man responsible for winning a court case under British common law that found there was such a thing as native title, a thing the Coalition opposition at the time claimed would make no one's home safe.

Two years ago on the morning after the election, Andrew Robb (then Finance spokesman) announced on ABC's Insiders 

We're ready to do the job I can tell you...

The minority government - there was no sense of direction, you know people felt there was no-one in charge, we're heading different directions every week in response to the Greens' demands and the crossbenchers and all the rest. So it led to a situation where Australia's been on hold for 12 months now. We are open for business I can tell you.

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.

The Prime Minister stayed in the Northern Territory while the National Reform Summit was held. Here's a question - if Cabinet had been scheduled then cancelled when did the PM decide to be away that week? Was it before or after the date for the summit was announced.

In her closing remarks to the summit BCA CEO Jennifer Westacott declared "We will not stand by and have the next election be a race to the bottom of the things politicians will not do."

But there's the rub - because that is certainly all this Government promises; it is all it has ever promised. This is the government that believes in small government - led by a Prime Minister who is fundamentally caught in a contradiction. As I wrote previously "He dislikes Government and so really doesn't know what to do when in charge of one."

The embarrassing thing for the business community is that they backed this horse in. The over the top campaign on the mining tax was the start of it. The incredibly conflicted position on carbon - demanding that Government provide certainty for investment and then attacking the tax once it was implemented perpetuated it.

Tax reform has become a laughing stock. More things have been ruled out than in, the GST is touted as a way to close the $50 billion funding cut to state health and education budgets, yet kind uncle Joe wants tax cuts. Uncle Joe's speech last Monday was decried as the greatest embarrassment, conflating as it did bracket creep and high tax rats at the top.

Every time he opens his mouth Joe makes the case to reduce the tax burden on the richest Australians.

 And so the Prime Minister plays the national security card - some research somewhere tells him that its the economy and national security that the conservatives are traditionally strong on. At great pains to stability inside the ALP Bill Shorten refuses to bite.

Even last weekend when the Operation Fortitude media release first made the airwaves Bill was vaguely supportive of the plans to enforce immigration laws. It was only once the nonsense had collapsed that he was more strident.

The ABF is right, of course, that the kind of operation actually planned was the kind of operation immigration officers have assisted with in the past. What was different was that the attempt to politicise border security, including the uniformed Border Force.

So some well intentioned media adviser wrote a release designed to make it sound more dramatic, that the ABF would be pounding the pavement to keep Melbournians safe. Only a fool wouldn't realise that this sounded like a regime in which everyone had to cover their papers for presentation to the police - name your undemocratic state of choice for a comparison.

Then it transpires that the fool wasn't the guy who drafted it, but a guy in the Minister's office. The release was sent up first on Wednesday and not opened. Concerned he'd had no reply the officer sent it back up on Thursday, at which point he got approval.

And the Minister's response? He was crook on the weekend which is why he laid low. The Prime Minister's response - that it was an operational matter that didn't involve the executive.

Well he's wrong. Because the problem never was the operation that the ABF planned to be part of nor its role in it. The problem was the ham fisted attempt at politicising national security that was approved by the executive.

As a Labor man there is nothing I want more than Tony Abbott to stay PM right up to the next election. But as an Australian I simply don't think the country can afford another year of ineptitude on this scale.

Dutton, Hockey and Abbott - and probably Robb as well - need to be pensioned off by their party. Some of their junior ministers and parliamentary secretaries are more suited to their seats at the Cabinet table. And take your pick between Turnbull, Morrison or Bishop (J) - any one of them is a Poirot compared to Abbott's Inspector Clouseau.

Wednesday, July 08, 2015

Why is party discussion so hard for the ALP to manage

Big blaring headlines today in the Oz that Australia needs 21st century philosophical shift reporting on the Wran Lecture delivered by Luke Foley.

Cutting to the chase Luke Foley has announced that he will be proposing to National Conference a replacement of the existing Objective of the ALP as enshrined in Clause 2 of the Constitution the following:

The Australian Labor Party has as its objective the achievement of a just and equitable society where every person has the opportunity to realise their potential. We believe in an active role for government, and the operation of competitive markets, in order to create opportunities for all Australians, so that every person will have the freedom to pursue their well-being, in co-operation with their fellow citizens, free from exploitation and discrimination.

I do not intend to debate that wording now - I just want to reflect on two things.

Firstly, despite the way it is portrayed by Troy Bramston, the resolution at the 2014 State Conference was NOT to delete the Socialist Objective but to start a process that would see a draft prepared by the NSW Policy Forum.  To that end I wrote for Challenge my own review of the Objective.

That article also highlights the second point which is that the Objective really includes both Clause 2 and the 23 points that follow "To achieve the political and social values of equality, democracy, liberty and social cooperation inherent in this objective, the Australian Labor Party stands for" in Clause 3.

Anyone who is proposing a rewrite of Clause 2 really needs to also rewrite Clause 3. Indeed it would be better if the two were combined in one clause.

I am happy to agree with the proposition Foley advanced in his conclusion that "The forum for this debate is this month’s ALP National Conference. We once held conferences where big ideas were expressed with passionate intensity. We were that party once. We must be that party again."

Yes, conferences should be places where debate occurs, not just stage managed outcomes. But that debate should be the pinnacle of an active Party within which the issues to be brought to the floor of conference have been actively discussed, considered and refined.

The Party also has a problem in that while its Objective is specified in the Constitution, Chapter 1 of the National Platform is devoted to Labor's Enduring Values. The current statement of Values is not succinct. Unfortunately the draft prepared for Conference is worse.

I also wrote for Challenge a short item that included a critique of just one obnoxious clause. I am hearing from people involved in the process that this is "the Leader's Chapter" and that it is hard to get any amendment to it.

How things have changed. In April last year Bill Shorten gave a speech Towards a Modern Labor Party. In it he had this to say about Chapter 1.

That is why I have thrown my support behind the decision of the last National Conference to undertake a major review of the ALP National Platform in time for our 2015 National Conference. 

Our National President Jenny McAlister and members of the National Policy Forum along with Shadow Cabinet and Caucus are all engaged in these consultations. 

But everyone needs to have a say in this process – and we should start with Chapter One. Chapter One contains Labor’s enduring values. 

We need a new Chapter One, a democratically-drafted statement that captures what modern Labor stands for. (emphasis added)

I agree with Bill, and Luke and even Chris Bowen.

The ALP needs both a statement of its objective that describes what motivates the party - and that differentiates it from the other mobs. It needs a statement of its enduring values that really does express the interests and motivations of the party members and affiliates.

Accordingly I believe that National Conference (to which I am not a delegate) should

(a) in regard to any motion to rewrite the objective - create a small group whose task it is to prepare a restatement of the objective (incorporating both Clause 2 and 3), that the drafting be conducted in an open consultative fashion, and that once it reports to National Executive a plebiscite should be held of all members and affiliates (using the 50/50 rules as being proposed by Tim Ayres for direct elections) and adopted if carried by a simple majority of votes.

(b) in regard to enduring values - acknowledge that there has not been the consultation on Chapter One called for by Bill Shorten and that whatever is submitted should be adopted but that a resolution should be passed that the new National Policy Forum immediately begin a task of drafting a version more useful in promoting what the party stands for to potential members and voters.

With any luck the two processes would work in tandem and the ALP would get coherence between its Objective in its constitution and its Enduring Values in its National Platform.

Tuesday, June 30, 2015

Structural Separation of Telcos

Big news that Sky in the UK is calling on Ofcom to instigate a full market investigation to examine problems affecting consumers in the UK’s broadband marketplace. The company believes that issues covering both competition and quality of service are sufficient for Ofcom to ask the Competition and Markets Authority (CMA) to conduct an inquiry. A CMA inquiry could lead to the full structural separation of BT.

Despite some views that structural separation was actually in the interests of incumbent telcos, it is a policy that has been strongly resisted by the firms. New Zealand, Australia and the UK all started in the 1970s with the same basic structure of a national government run PTT. They have largely been on the same journey since with different timing of different stages.

In all the "market liberalisation" activity one of the critical issues was always access to the incumbents facilities and services by entrants. Different approaches were taken (including the initial NZ approach of relying purely on generic competition law) but none pursued the "ring fencing" approach proposed by Hilmer for other monopoly businesses because no one knew how to draw the line.

As instances of the incumbent's ability to frustrate competitors regulators and policy makers turned to the question of using something more than accounting data.

The most dramatic mover was in the UK where the head of Ofcom Stephen Carter essentially said to BT "if you don't agree to operational separation I will take action under the Enterprises Act and you will be broken up by the court." BT buckled and in September 2005 Ofcom accepted BTs undertakings.

In Australia at that time the Howard Government was not prepared to be anywhere near as robust. A Parliamentary Committee was tasked with looking at the issue, but the issue was dropped by Labor  (see note) when the realities of forcing the issue on shareholders was considered (interestingly you can't take a reference back from a committee, it just agreed not to hold hearings or to issue a report).

The Howard Government did in a concession to industry impose operational separation on Telstra, but as I outlined at the time in a memorable exchange with Senator Brandis, even the ACCC thought it would be ineffective.

Developments at that time (2002-2007) in New Zealand were equally exciting. Having come to formal regulation of access late (2000) Telecom NZ had still escaped regulation of a wholesale unbundled local loop (ULL to us, LLU to them). At my first meeting with the then head of Telecom Govt relations (Bruce Parkes) he outlined how their strategy had been to forestall regulation by promising a bitstream service, but the critical element was delivery.

Unfortunately management didn't deliver. Telecom's CEO famously declared that she thought there wouldn't be unbundling because "The Government is way too smart to do anything dumb here." But the Government did so anyway. In the course of the legislative process for those changes the Bill was amended to move from accounting separation to operational separation.

Following the debacle Theresa Gattung departed as CEO. In her book Bird on a Wire she details the issues over choosing her successor. The internal candidate proposed that rather than bearing the cost of operational separation Telecom would be better off just going to structural separation. the Board, however, was convinced by the candidate from BT who said operational separation had gone swimmingly for them, and could for Telecom NZ.

The New Zealand Government however then moved on to a fibre to the home plan, and the Government's pre-condition for Telecom having any role in construction was the full structural separation. So now the BT bod is gone and a host of Gattung's staff are back running as CEO's Spark, Chorus and Crown Fibre Holdings (Moutter, Ratclliffe and Mitchell). Bruce Parkes is GM Resources Energy and Communications in the mega Ministry of Business, Innovation and Employment. Mark Verbiest is the Chair of Spark.

In Australia after the realisation that it was all too hard to structurally separate a half-owned Telstra, David Foreman and I noted that the time to achieve separation was when a new access network was built. The Labor policy framed by Tanner and Conroy always included achieving separation as a core policy objective. Unfortunately Telstra management didn't see it that way, with Sol Trujillo saying:

And let me make clear. To even contemplate the prospect of further separation while embarking on such a massive and complex project is ludicrous in the extreme. If further separation is part of the NBN, Telstra is simply not in a position to bid or to build. It is just not feasible - technically or financially - to do this other than in a fully integrated way.

And that, mind you was about an FTTN network, let alone FTTP.

History shows that with the move to FTTP that Telstra did concede (at the expense of a CEO). That the separation is prospective still agitates some providers, but telco policy is a long game.  It is somewhat fascinating to see Telstra aligned with its access seeker colleagues demanding that NBN Co make information available to all RSPs so that Telstra does not gain an advantage.

It is also worth noting that one of the big criticisms of Labor's approach was the claim that Telstra was best placed to construct the NBN - especially FTTN. But now we see that Telstra has not won any construction contracts in the new model. They have, quite simply and as expected, moved on to focus on being the best RSP in town.

It is also fascinating to see who the complainant is in the UK, Sky. Here in Australia News Ltd papers have always led the charge and particularly defended the Telstra position in 2007-08. Now it is a News subsidiary making the call in the UK for a review that could lead to structural separation.

This history has a lot more chapters to be written yet. Hopefully I'll get to chronicle some more.

Note: The Tanner paper "Reforming Telstra" does not appear to exist online anywhere. I may have a paper copy. Would love it if someone has a copy.
Update: A kind reader has sent me a copy of Tanner's paper - it is now here.

Thursday, June 11, 2015

RTIRC Round 3

Fans of telecommunications policy will have noted the release this week of the Issues Paper for the inquiry by the latest Regional Telecommunications Independent Review Committee.

The Committee now chaired by Deena Shiff is the third time one has been created under the legislative change that accompanied the full privatisation of Telstra. The preceding two were chaired by Bill Glassen and Rosemary Sinclair.

Prior to these reviews were two other reviews looking at the same issues chaired by Tim Besley and Dick Estens.

Unfortunately the Department of Communications doesn't think that maintaining a historical record of policies and reviews is a productive activity. Their own page on Regional Telecommunications Review contains a number of broken links (as at 12:43 on 10 June 2015). Even the RTIRC's own website has a broken link to the previous report.

Just as well DigEcon maintains a history of the reviews on its website.  On that page all of the four previous reports and Government responses can be found.

Tuesday, May 26, 2015

What Tony Abbott Really Believes

Arriving at Bill shorten's McKell institute address at the Great Hall of the University of Sydney I was confronted by a group of young leftist (further left than ALP Left) protesters who urged me to "fight Tony Abbott." I advised the unfortunate sods that I had been fighting Tony Abbott since before they were born.

My wife, on the other hand, thinks I am just carrying too far an obsession since University days.

My observation, in response, is that the Tony Abbott who won the Presidency of the SRC and the Tony Abbott who won the Prime Ministership are the same being. My original thesis was that having won the job he had no idea what he wanted to do with it.

My thinking has advanced - in both cases he wound up leading an entity (the SRC, the Government) whose very existence he reviled. I expressed this in the comments section of Crikey yesterday as:

Re. "Hockey bungles the message, but Abbott’s is a failure of conviction" (Friday). Bernard Keane is wrong when he says of Tony Abbott, "he appears (extraordinarily for a politician so frequently identified as an ideological warrior) to lack a core policy vision that informs his handling of the vicissitudes of public life." He is right that Abbott doesn’t really stand for small government, even though he genuinely believes that government shouldn’t do anything people can do for themselves. What he simply believes is that all government is bad. But by definition that includes his own government. So every morning he wakes up to his eternal contradiction. His only saving grace has been that three Labor leaders in succession have been equally devoid of conviction.

As if by magic the PM gave me validation for the proposition in an answer to a question without notice yesterday (from Tanya Plibersek), saying:

I say to the member who asked the question that this is a government which understands that the best form of welfare is work. This is a government that understands that the best and most generous thing you can do for the people of Australia who are currently doing it tough is to maximise their chances to have a go—to go out and get a job, to go out and get a better job, to work more and to do the right thing by themselves and their family. 

I cannot understand why members opposite do not get it. Why is it that they seem to prefer people who are trapped in welfare than people who are liberated by work, to do the right thing by themselves, their families and their communities? 

But when I ponder this question I think the answer does become clearer. Members opposite quite like it when people are trapped in welfare because, if they are trapped in welfare, they are dependent on government. We certainly want government to be there to help. But governments should be there to help; governments should never be the master of the people. They should never, ever be the master of the people. 

The trouble with members opposite is that they are no longer a working-class party; they are a welfare-class party. That is the problem. That is the measure of the decline of the once great Labor Party. They would rather see people stuck in the welfare system than helped by government to get the jobs that will liberate them for the rest of their life.

It could be argued that this form of words is just an attempt by the PM to make himself out to be a "pro-jobs" kind of guy - even though ACTU commissioned research says voters in coalition held marginals think he isn't doing enough to create jobs. But the form of words reflects the deeper Abbott - nothing could be worse in his world view than the Government actually doing anything to help.

And you see this in the so-called small business plan. It is entirely about what the Government won't be doing - it won't be charging as much tax, it won't be defining certain assets as capital that need to be depreciated rather than counted as an expense.

Tony Abbott didn't just dislike the Rudd Government or the Gillard Government. He dislikes Government and so really doesn't know what to do when in charge of one. So that's when he lets his behaviour be determined by the last person he spoke to and the PM becomes Australia's most powerful sycophant.

Labor's challenge is how to combat something that is no more than a column of smoke.

Friday, May 01, 2015

A lesson in journalism

Items in today's AFR linking Senate obstruction and firms investing offshore is a classic example of how trying to craft an enticing lede can wind up misrepresenting the actual story.

Today's AFR has a story today that in the print edition "ran off the front" under the heading Innovators pushed offshore, says Thodey.  The story itself inside the paper (page 13) was headed 'Frustrating' Senate holds back innovation: Thodey.

The online version of the story had a heading more in keeping with the front page heading Telstra boss David Thodey says Australia is losing innovation to Singapore.

The front page lead began:

Telstra chief executive David Thodey said Australian companies are investing in more welcoming countries like Singapore because of the federal government's failure to foster innovation.

The full story and the online version actually started:

Telstra's outgoing chief executive David Thodey says Australian companies are choosing to invest overseas in more welcoming jurisdictions like Singapore because of the federal government's inability to pass reforms that foster innovation.

The problem for the story is that there is no evidence anywhere that Thodey linked the Senate issues to the innovation issues.

In particular the article quotes Thodey as saying:

When you have an elected government who is unable to get policy through because of the Senate, there is something inherently wrong, I think it's a real issue for the country because we need to have good fiscal management. I have sympathy for the government but I think they have to keep at it.

The AFR conveniently also ran an edited extract of the actual interview. In that the full quote on the Senate read (The parts in bold are the ones repeated in the actual article).:

I think anyone that looks at it, any Australian would say it is frustrating when you have an elected government who is unable to get policy through because of the Senate, there is something inherently wrong. So it is frustrating, but it is what it is. I can't change that. So we get on with life and go and do something else. I can't change the structure of the senate and that is fundamentally where it is at. Do I get frustrated that there isn't more opportunity to discuss real policy reform and really get on with the job rather than cheap shots going back and forward because the senate is finely balanced institution at the moment? However that is the political system and I can't change that so I can only work on what is that I can control. Yeah, I think it is a real issue for the country, we need to have good fiscal management.

There is nothing in those words that link the Senate issue on fiscal management to innovation policy.

On innovation the article quotes Thodey as saying (edited from original to put in speech and remove some matter):

Australia's lack of an overarching innovation program had already encouraged Telstra to shift some resources abroad. What do I do about that? I just get on and do it inside Telstra and open Muru-D in Singapore – that's what I do,

Ultimately, yes I do think [we will fall behind] and I don't think it's purely about the tax treatment of startups in terms of share options. It's about … where we believe our future value will come from and it will be around enabling people to be creative and innovative. It's not just science and technology; it's about every business like BHP, celebrating the [biotechnology company] CSLs.

I am still trying to innovate here with e-health, if we can get the information flow going better there between pharmacists and doctors and hospitals that's really game changing,. But yes, we will all just start to flow where that is appreciated and recognised. I would not ever say it as a threat because life is not like that. I see it as an opportunity to really provide people the vision and opportunity so people can get on with it.

Improving tax regulations for startups, boosting employee share schemes and allowing more crowd-funding systems were vital for helping creativity and innovation thrive.

Unfortunately none of this appears in the edited extract. But once again there is no link here between the Senate issue and the lack of an innovation agenda from the Government.

I have absolutely no idea where in the creation of the story the link was made between Thodey's distinct observations that he thought the government not getting legislation through the Senate was frustrating and that the government was not encouraging innovation.

I suspect it was made at a editorial level in an attempt to give the story bite. The AFR has run a number of articles recently effectively on the theme of the business community deciding it is their job to lecture Senators on a theory that their job is to just pass the Government's program.

But in this case it is not merely inaccurate, it results in a very inaccurate description of reality.

In particular David Thodey in the interview excerpt said:

Do I get frustrated that there isn't more opportunity to discuss real policy reform and really get on with the job rather than cheap shots going back and forward.
And that is the truly fascinating part because the place where discussion of real policy reform in support of innovation is going on is in the Senate inquiry into Australia's Innovation System. Telstra's submission made quite detailed recommendations for an innovative Australia, being:

1. Develop a National Vision to support innovation, and support the establishment of a National Innovation Council. 
2. Invest in education and skills 
a. Ensure appropriately trained STEM teachers are available to engage and educate students at a primary, secondary and tertiary level so that they can contribute to the next generation of Australian innovations 
b. Skills – support for visas for overseas innovators. 
3. Provide a base level of government funding for research organisations to undertake fundamental research and to enable them to then partner with industry. 
4. Ensure government policy supports innovation: 
a. Reforms to allow startups to offer tax-effective employee share schemes 
b. Maintain R&D tax incentives for all Australian companies 
c. Maintain regulatory certainty to support innovation 
d. Support for modernisation of the Intellectual Property (IP) system. 
5. Finance innovation effectively – encourage the private sector to provide funding beyond the start-up stage and develop a better functioning venture capital system. 
6. Lead by example – ensure government’s own operations and actions support innovation: 
a. Implement the Commission of Audit’s recommendations 
b. Develop a Digital First approach for each agency 
c. Leverage government’s power as a purchaser to support innovative solutions that reduce costs and deliver better services to the community.

It is disappointing that someone's desire to get a story about "Senate obstruction" blunted Thodey's message about in action on innovation. The culprit isn't the Senate, it is the Government.

Sunday, April 26, 2015

The sacking of Scott McIntyre

I'm prepared to make the call that SBS has over-reacted in sacking Scott McIntyre.

Yes, it is easy to find a breach of the SBS Social Media policy,  if only because the Twitter account doesn't include a disclaimer that the views are his own - as recommended by the policy.

The tweets themselves - four in total - are opinions of ANZAC Day and Australia's role in war that are shared by a minority of people (though not by me), but they are not unique nor offensive.  Given the social media code says the values are "creativity, collaboration, diversity and respect" one could argue the posts reflect on diversity. SBS more than most should acknowledge this is NOT a mono-culture. They are poorly expressed - and are framed in a way that they fail the respect test.

But this is a counselling issue not a sacking one. These are not abhorrent views, they do not bring SBS into disrepute.

The only thing bringing SBS into disrepute is the reaction of the CEO.

Saturday, April 25, 2015

100 years after Gallipoli

I don't need to draw anyone's attention to the fact that it is 100 years today since the Australian and New Zealand troops landed at Gallipoli.

But after a century the significance of the event is still much debated.

As blog readers would know my grandfather Harry Leopold Spratt (later H L S Havyatt - but that is another story) landed at Gallipoli in May 1915 with the Wellington Mounted Rifles. They left their Egyptian camp on May 9 landing on May 12. So I tend to approach Anzac Day from as much a New Zealand position as I did Australian.

The New Zealand story is a bit different - they weren't  a recently federated nation for which the battle was a defining point in the new nation's history. Their constitutional relationship was just as it had been when many New Zealanders fought in the Boer War.

The young Kiwis, especially those signing up to the Mounted Rifles (which was BYO horse), envisioned a quick war with lots of riding around in battle.

In this they were perhaps no more deluded than the European powers who did not expect the war to be a drawn out trench stalemate.

As Richard Stowers book Bloody Gallipoli starts:

Most nations have set aside days to celebrate great military victories or liberations of cities and countries. New Zealand has a day to remember a national tragedy.

It is common to "blame" Winston Churchill for the disaster of the Dardanelles campaign. It was a hastily conceived campaign as a desperate move to try to get some movement in the war, despite Churchill's own prognostication two and a half years earlier that the straits could not be forced.

Yet we should be grateful. As Peter Fitzsimons notes in today's SMH the alternative plan - favoured by Field Marshall French - was simply to immediately deploy the Australian and New Zealand forces along the Western Front intermingled in English units and not as a distinct force.

What the British would have made of these troops if deployed immediately to those fronts is anyone's guess. We do know that British officers found the larrikin element of the ANZAC troops hard to manage.

But Sir Ian Hamilton told once told Asquith "These New Zealanders and Australians, and best of all the Australian Light Horse and the New Zealand Mounted Rifles, and above all the last named, are the flower of our troops or of any other troops in the world."

The British landed at Cape Helles suffered worse casualties than the Anzacs, but the perception remains if the British troops had been more like the Anzacs the campaign might have ended differently. In particular the August thrust commemorated every Anzac day at Lone Pine and Chunuk Bair may have resulted in success if the British effort had matched that of the Anzacs.

The significance of ANZAC is shown most starkly by New Zealand. Without any separate foundation narrative, after Gallipoli the colony/dominion determined that its troops would never again be placed under foreign command.

It was the moment when the individual antipodeans were starkly shown that they weren't inferior to anyone else, and when their Governments decided that they should not be subservient.

The formalities took time - in Australia's case the Stature of Westminster only adopted in 1942 and the Australia Act in the 1980s. It isn't complete - we aren't a republic and who gets called "the Honourable" is even determined by royal patent.

It really was like that startling moment that hits us all sometime in late adolescence when we realise we are an adult now.

Other countries celebrate a victory because they often had to fight a war against a foe - or an oppressor - to reach that point of realisation.

For New Zealand - and Australia - it happened at Gallipoli.

Tuesday, April 07, 2015

Explaining "fairness"

This morning's NewsLtd papers had a Simon Benson splash of a statement supposedly made by nine business groups. At the time of writing I can't find the statement on the websites of the biggest three - the BCA, ACCI or AiG.

I am always suspicious of stories clearly written off the back of a "drop" to one journalist that is rewarded with a splash. The AFR has posted the story online but it looks as if it has been entirely written from the News story not the document. It is not beyond the realm of possibility that one of the named groups doesn't actually support the statement and it has been prematurely released.

But drawing on the AFR story the guts of the statement is as follows:

With the Prime Minister signalling a 'dull' budget and the Opposition Leader continuing to focus almost exclusively on budget 'fairness' you could be mistaken for thinking there is no significant problem with the state of the nation's finances.

It's also tempting to look at Australia's relative prosperity, built on a quarter of a century of economic growth, and attribute it to luck or a rich endowment of natural resources. It's a comforting thought that growth is somehow automatic and that year in, year out, despite our many challenges we will continue to improve our lot.

The reality of where prosperity comes from, however, is much more sobering and if neglected will set us on a path to economic despair." Past giants of economic reform did what was right for the long-term benefit of Australia and not because it was politically expedient - it very rarely if ever was. They shared a commitment to the national good and emerged from both the Liberal and Labor parties and even the Senate cross-benches.

Today, our leaders must stand on the shoulders of these reform giants and ensure our living standards remain among the highest in the world.

We cannot continue to mortgage our nation's future on the questionable assumption that we may be in a better position to fix the budget on the never-never, particularly given the need to allow for future economic shocks like another global financial crisis and the cost of servicing debt.

There is no escaping that reform is hard and often unpopular in the short-term but achievements by those who came before show that long-term benefits can be achieved if approached in the right way.

Our message to today's leaders is simple: governing is not just the responsibility of government, it is the duty of all members of Parliament, and we must stand on the shoulders of reform giants before it is too late.

Unfortunately like most such statements lately everyone is talking about "reform" but there is very little detail of what reform might actually be needed. There is also no explanation in any of this what the apparent link is between business conditions and Government debt and deficit - other than the work of the Government and business community to use the budget position as a way to clobber both business and consumer confidence.

But the story was drawn to my attention because of the offhand manner in which the business lobby groups have sought to dismiss "fairness" as if Labor is merely pursuing this because of genuine reasons including values rather than a convenient label for destabilising the Government.

So let's explain "fairness."

I can understand the difficulty in part. The ALP website says Labor is for Fairness but the text that follows is a mixed bag on university fees, NDIS, housing affordability, sex discrimination and domestic violence.

Bill Shorten made a better fist of it in October 2014 in a speech to the National Policy Forum when he said:

But I think that chapter one must begin with Labor’s belief in fairness.

Fairness drives prosperity, it underpins growth, it lifts living standards, it creates jobs – it gives everyone the chance to fulfil their potential.

Fairness insists upon the equal treatment of women, supporting their march through the institutions of power.

Fairness demands we care for the vulnerable, it demands we speak up for the powerless, include the marginalised and uplift the disadvantaged. And fairness is a pact between generations. That means opening the doors of education, from the earliest years giving every young Australian the chance to go on to a great school and onto university or training.

Fairness between generations means that Australians should not have to work hard all their lives, only to retire poor.

And fairness between generations means caring for the environment - passing on to our children a healthier national estate than the one we inherited.

That’s the higher ground I want Labor to reach for.

Unsurprisngly Nick Cater, now Executive Director of the Menzies Research Centre, outlined a different view in The Oz in September 2014. Cater confusingly claims that "fairness" was not part of Labor's policy platform from 1949 to 1980, and that Hawke's use of it was limited. Yet he then quotes from Chifley's 1949 campaign speech to try to contrast that view from Shorten's.

The more complete reference in Chif's speech is:

I well remember when, by their thousands, breadwinners, ill-clad and underfed, queued at factory gates seeking work. We, the Labor Party, feel we have a sacred responsibility to see that all sections of the community receive justice, and that the less fortunate section of the community has protection from want, unemployment and insecurity.

We affirm for every man the right to receive a fair return for his labour, enterprise and initiative. But we do say that it is the duty and the responsibility of the community, and particularly those more fortunately placed, to see that our less fortunate fellow-citizens are protected from those shafts of fate which leave them helpless and without hope. That is the objective for which we are striving. It is, as I have said before, the beacon, the light on the hill, to which our eyes are always turned and to which our efforts are always directed.

We work and fight, not for personal gain, but that our fellow-citizens may labour under good and ever-improving standards and conditions, free from want, insecurity and misery.

Cater tries to argue that the Chifley vision is restricted to fairness in terms of return for effort and welfare as a protection from "shifts of fate."

What Cater is really on about is trying to position Labor as believing the solution to all ills is to spend our way out of them. He then refers to the whacky Tony Mackin view that Labor's economic stimulus did nothing other than push up the dollar.

I don't think you'd have seen any difference between Chifley's reaction to the Abbott budget from Shorten's. Chifley would approve of the Opposition Leader making a submission to the minimum wage case.

A better attack on Labor's use of "fairness" was made last month by Kelly O'Dwyer at the CIS. She said, in part:

Fairness’ is being hijacked as a one-word slogan by Labor and the Greens to encapsulate a very narrow concept while ignoring many crucial dimensions of fairness. 

Fairness is not only complex at a micro level; it is also complex at the macro level as well. There is absolutely no question that fairness involves assisting the truly disadvantaged and marginalised. But it also involves questions of intergenerational fairness. Amongst other things, it also involves looking at the hidden winners and losers, questions of personal responsibility and reward for effort, and complex transitional questions.

In what is part of a now common Liberal trick O'Dwyer actually questioned the "fairness" of a progressive tax system. To O'Dwyer "user pays" is fair and anything smacking of cross-subsidy is unfair.

In doing so O'Dwyer is tapping into the earlier critique of the term "social justice" which questioned who had the authority to determine the appropriate distribution of incomes in a "socially equitable" way.

(It is also notable that both Shorten and O'Dwyer touched on "intergenerational" fairness - though one used it to talk of the environment and the other of debt.)

The response of the neoliberals is that the only "fair" way to distribute resources and incomes is through "the market."

This is not the place for a full critique of neoliberal conceptions of the market. But it is worth noting that the observed human preference for "fairness" demonstrated by the ultimatum game is not well represented in markets.

Governments (and firms actually) exist because markets can't resolve all issues. Representing "fairness" is one of them. And the answer to the question of "how can Government's decide" is simply because Government's are elected.

Despite the great fear of the upper classes that expansion of the vote would see the poor appropriate all the wealth of the rich, it doesn't happen. Social mobility is part of the reason - too many people have aspirations of being rich to support full expropriation.

Surprisingly people's bias for fairness also extends to balancing fairness in reward for effort as well as fairness of opportunity and fairness of outcome.

Unfortunately when given a microphone today Bill Shorten simply responded by saying he was up for reform but would support things that were fair, and not things that were unfair without any further explanation.

And it really is time for him to say a little bit more.

Firstly, fairness is good for the economy. Increasing income and wealth inequality restricts economic growth; and it isn't solved by economic growth.

Secondly, fairness is good for our security. Crime is more prevelant the larger the poor underclass is.

Thirdly, fairness is moral. Even Hayek understood that the "shafts of fate" play just as much a role in those who are very well off as those who are destitute. Lang Hancock just happened to fly under a storm and find the Hammersley range. Which song will be a hit depends as much upon the network of people who like and recmmend it as it does the song's intrinsic qualities.

To really win Bill Shorten needs to use every opportunity to explain how fairness "drives prosperity, it underpins growth, it lifts living standards, it creates jobs – it gives everyone the chance to fulfil their potential." He needs to stop assuming that the population at large understands or shares his view. Clearly the Australian business community doesn't - and they need to!

Wednesday, March 11, 2015

Housing Affordability

Let's start with the obvious. I am not a fan of neoclassical economics for most of the standard reasons cited by heterodox economists.

Firstly it doesn't account for the formation of preferences. Individual preferences are usually constructed as part of the social system - they aren't just individual preferences. They are also shaped by experiences, which explains the "endowment effect"- we value losing something we have more than we value gaining it in the first place.

Secondly the obsession with mathematics. Not because using maths is wrong, but because the assumptions made are made with a view to keeping the maths tractable rather than the model accurate. The worst case of this is the use of structural forms of equations for econometric studies that bear no relationship to any established theory.

But bear with me because I'm going to talk about the "housing market" for a moment as if it really was a theoretical market.

Today the Master Builders Association said "The latest housing finance highlights the urgent need for a national housing affordability agenda to increase the housing supply and ensure first home buyers are not locked out of the market,”

I'm fine up to the word "agenda". Let's just question whether "supply" is the issue everyone claims it is. If supply is constrained below a notional equilibrium level that means the price of houses is higher than it needs to be to reflect the cost of construction. That means in new housing someone is really cleaning up...and that can only be the suppliers of construction or the suppliers of land.

Why then does the Master Builders Association want to increase the supply? Wouldn't it result in a loss of margin and hence return on investment?

There is one perfectly good explanation - and that is that the MBA doesn't want us to look at the real problems. The first of these is the geographic question - our housing market is highly distorted by the huge increase in prices for property close to where the jobs are as recently detailed in an RBA paper.

The second is the presence in the market of speculators rather than investors. The former expects to get their return from the increase in the asset value rather than the income stream from the asset. You don't invest in residential real estate for the rental income.

Unless, of course, you are part of the third limb of the problem - an uneven playing field when it comes to the cost of investing. An owner/occupier pays their mortgage out of post tax income - an investor pays it out of pre-tax income, often arranging negative gearing.  Sure the investor pays capital gains tax - but only at half the rate they should. Either the CGT discount has to go, the possibility of negative gearing, or both, to take this cheap money out of the housing market.

What we don't need to do is pour petrol on the flames of the roaring house prices - which is what diverting super funds would do.

The answer to housing unaffordability is to change the geography of our cities - spread the jobs and change the transport infrastructure, end negative gearing and end the CGT discount.

Maybe once those priorities are addressed we can address adding supply - without them adding supply only continues to provide super profits to developers and builders.

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Monday, February 23, 2015

National Security

It is with some trepidation that I comment on the Prime Minister's National Security Statement this morning, but I feel I cannot let it pass.

Let me first just comment on the timing and style of the announcement. When commenting after surviving the spill motion Mr Abbott said "I suppose last year I was so focused on economic security issues, on national security issues, that I didn't have enough time to talk to my colleagues." But just to be sure he didn't take all the blame he sacked Phillip Ruddock as Chief whip - and went straight back to worrying about national security.

When Mr Abbott last made a National Security Statement it was in Parliament in September last year. His central theme then was "On questions of national security, it’s always best if government and opposition can stand together, shoulder to shoulder."

Today he made his announcement surrounded by security agencies and not in Parliament. His earlier letter to Labor leader Bill Shorten on data retention had been labelled by the recipient as "seeking to politicise the process for bringing in anti-terrorism laws."

Today's statement left no doubt about that. It called on the Senate once to pass legislation and support for data retention (without addressing any of the Labor and community concerns) and changes to citizenship laws.

But let's analyse some of the elements. Of the "terrorist threat rising" we are told "We have seen the beheadings, the mass executions, the crucifixions and the sexual slavery in the name of religion."  I will take Mr Abbott seriously when he addresses Saudi Arabia about beheadings for sorcery, when he treats every mass execution everywhere in the world with the same revulsion not just those by IS.

He said "We have seen the tactics of terrorists evolve...Now, in addition to the larger scale, more complex plots that typified the post 9/11 world, such as the atrocities in Bali and London, sick individuals are acting on the caliphate’s instruction to seize people at random and kill them. These lone actor attacks are not new, but they pose a unique set of problems." But nowhere does he address the actual question of scale - or proportionality. Lone actor attacks are still almost as scarce as the large scale attacks were - only with far less victims. This is what victory looks like, not defeat.

On proportionality I note that on average one woman a week dies in Australia as a result of domestic violence. But his response is to put domestic violence on the COAG agenda.

Mr Abbott in his speech noted "All too often, alienated and unhappy people brood quietly." But his response is to ensure adequate policing once these youths have become radicalised and threats. Wouldn't it make more sense to wonder why they are alienated and unhappy?

One of the reasons is economic disadvantage. One of the causes of that is that not all households make the assumptions about the value of education that we assume.

Part of the attention of the Gonski funding formula is to recognise that you need more school resources where you do not have family support (whether by inclination or capacity) of education.

Unsurprisingly, domestic violence contains some common elements.

Perhaps it is time we asked ourselves how and why we are failing so many young Australians.

The Liberal philosophy that 'you are on your own' is part of the problem. Labor, and old style Christian, values of 'we are all in this together' demand action.

Finally Mr Abbott said "For a long time, successive governments have been concerned about organisations that breed hatred, and sometimes incite violence. " This is not true. There are many Christian groups breed hatred against honest law-abiding Muslims. That includes the Rev Fred Nile and the Christian Democrats.

It is time the Prime Minister woke up to the fact that the issue is not just Islamic theocracy, it is theocracy of any kind. There should not be a Christian Prayer said at the commencement of Parliament. Religious names should be prohibited for political parties.

We need to place religious tolerance for all religions that respect it, and maintain a strong secular state.

But Mr Abbott - as is his natural instinct - is just trying to play politics.

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Sunday, February 01, 2015

Election timing

The turmoil in the Australian Government at the moment has people talking about an election as an option. They need to get a grip.

Firstly a double dissolution isn't currently an option, as no legislation has been twice rejected with three months in between as required by the constitution as a trigger. Indeed, and oddly, Chris Pyne decided to reintroduce his university reforms rather than set them up as a trigger.

We then get to the timing of an election. A House of Reps election can be called at any time. One must be called within ten days of the term of the house expiring, which it does three years after it first met after the last election. The house met on 12 November 2013, so election needs to be called by 22 November. If it was called that late we'd be voting on Christmas Day.

But to keep the house elections aligned the timing of Senate elections comes into play. A Senate election cannot be held more than twelve months before the term of the Senators expires, which is 30 June 2017! So a combined Senate and HoR election is only possible in the window between 1 July 2016 and the requisite period (I think 42 days) after 22 November. My money in on some time in October or November 2016.

Of course, were the PM crazy brave and decide to go for an HoR only NOW he could wait much closer to 30 June 2017 and have simultaneous elections. That would have been a great strategy now if he was facing Senate obstruction AND was leading in the polls. It wouldn't unblock the senate but would set up a great 2017 strategy.

Who knows ... Maybe he will convince himself that an election would focus the electorates mind.