SATURDAY’s GOOD READING AND LISTENING FOR THE WEEKENDFeb 8, 2020
What people in other forums are saying about public policy
ABC’s Saturday Extra with Geraldine Doogue (from 0730 to 0900 or on their website in case you miss it).
In Eastern Africa desert locust swarms – some as big as 200 billion – threaten crops and livelihoods. Their numbers have been building for over a year – but pleas to aid donors have gone unheeded. So where did they come from and what will it take to stop them? Guest: Keith Cressman, Senior Locust Forecasting Officer, UN Food and Agriculture Organisation.
In various parts of Asia and the Pacific the coronavirus has set off racial, political and economic tensions. Guest: Emma Connors.
This year’s list of top tax dodgers is out. Who takes top honours? Guest: Michael West.
Patrick Radden Keefe’s award-winning book, Say Nothing: a true story of murder and memory in Northern Ireland, tells the story of the Troubles in Northern Ireland through the lives of two women – one a victim, the other a perpetrator. He tells Geraldine that in Ireland recent history is very much present – and dangerous.
Patrick Page spent five months walking through Lebanon and discovered a country beyond the news headlines – richly complex, beautiful and intriguing.
The sports rorts affair – it’s not about her gun club membership
Has Australia’s most senior public servant failed to uphold the public service’s values and integrity?
Earlier in the week Mike Keating had an article in Pearls and Irritations about the way the head of the Department of Prime Minister and Cabinet has allowed himself to be drawn into a political role that is entirely inappropriate for a public servant. Keating wrote “It would seem on the evidence that Gaetjens has produced a report whose only purpose was to get the Government off a political hook”.
Keating’s article has been picked up by Adrian Rollins of the Canberra Times – Phil Gaetjens’ sports rorts report ‘reflects poorly on its author’, says former PM&C head.
Morrison’s response to the ANAO report raises basic questions about accountability
In a short (four minute) interview with Linda Mottram on ABC’s PM, former Public Service Commissioner Andrew Podger raises serious questions about the inappropriateness of the Prime Minister’s response to the ANAO report on the Community Sports Infrastructure Program, particularly his appointment of the head of the Prime Minister’s Department to judge the ANAO’s independent examination. On the program itself, he believes the minister exceeded her powers:
Ministers can have an involvement in setting guidelines, but if they overturn a recommendation they are quite entitled to do so usually, so long it is consistent with the guideline they have set. There is every reason to believe that the minister did not do that.
He argues the case for a national integrity commission or an independent ethics adviser, and he points out that Morrison rejected advice from an inquiry into the public service last year – the Thodey Review – that would have clarified the rules of accountability of public servants.
He covers the same ground, with a clear description of the role of ministers and public servants, in an article in The Conversation – The ‘sports rorts’ affair shows the government misunderstands the role of the public service.
In 1984 Special Minister of State Mick Young had to step down from public office when he neglected to declare at Customs a stuffed Paddington Bear toy that was in his wife’s suitcase. Frank Bongiorno’s article in The Conversation Remembrance of rorts past: why the McKenzie scandal might not count for a hill of beans reminds us how standards of ministerial behaviour have slipped, particularly under Coalition governments.
Hold on before we rush into a 12 per cent superannuation levy
ACOSS’s concerns – there are more pressing priorities
There are more important needs to be addressed, particularly in health, income support and housing, before rushing into an increase in the superannuation guarantee from 9.5 to 12.0 percent. That’s the gist of ACOSS’s submission to the government’s retirement incomes review.
In the absence of fundamental reform of the tax concessions, further increases in compulsory super contributions would further entrench existing inequities, including the serious gender gap in retirement incomes.
Their submission presents two charts showing how, across all income bands, Australians in retirement already achieve at least 70 per cent of their pre-retirement income, how those in the highest income brackets (> 95 percentile) achieve more than 100 per cent income replacement in retirement, and how increasing the levy to 12 per cent would worsen this inequity.
Kevin Davis – let’s make the whole system of retirement income simpler, and fairer
Writing in The Conversation – Here’s a radical reform that could keep super and pay every retiree the full pension – Kevin Davis, Professor of Finance at the University of Melbourne, suggests that the whole system could be reformed by introducing a universal (non-means-tested) age pension and treating income from super funds in the retirement phase of superannuation the same way as income from non-superannuation earnings.
(is his idea really “radical” or is it simply application of the established principle of taxation neutrality? It would strike terror in the hearts of tax accountants, superannuation fund administrators, public servants in Centrelink and the ATO, and commission-based “financial advisors”)
The other health panic: private health insurance
Only three private health insurers will be left standing in 2022 is the headline of an article in the NewDaily by Euan Black. He writes about the industry’s “death spiral” as younger, healthier people (wisely) drop PHI, leaving the funds in a destructive positive feedback loop of rising premiums to pay for the health care needs of remaining older contributors.
He draws on a less emotive analysis by APRA member Geoff Summerhayes, who points out that the industry as a whole is in reasonable financial shape, but that many of its 37 firms are not meeting the challenge of making PHI a value proposition for consumers. Rather they are behaving in the industry’s time-honoured tradition of seeking a bail-out:
We’re on the record expressing our disappointment about the industry’s progress responding to the sustainability challenge, with too many PHIs seemingly waiting for the Government to find a miracle cure.
Summerhayes outlines the problems with government interventions so far:
The one constant with all these reforms is that any relief has been temporary, because none have tackled the root causes of the sustainability problem.
Black’s article quotes Rachel David of Private Health Australia who is calling for higher subsidies for the industry.
Unfortunately, in saying that support for PHI is costing $6.4 billion, Black seriously under-estimates the industry’s level of public subsidy. Budget papers reveal another $1.5 billion of revenue forgone associated with the rebate, and there is also an undisclosed amount of revenue forgone – estimated at around $3 billion a year – as a result of high-income earners with PHI being exempt from the Medicare levy surcharge.
That means the total annual public subsidy to this industry is actually around $11 billion. It would be far more equitable and efficient if private hospitals could be funded through the same arrangements as public hospitals, without being channelled through PHI – essentially a privatised tax arrangement that calls on the young to subsidise older generations, many of whom are financially privileged but who generally have high health-care needs.
Reserve Bank Governor Philip Lowe’s speech to the Press Club – The year ahead – has attracted a deal of media attention. He pointed out that the economic effects of climate events are material, and acknowledged that the coronavirus will have an effect on the economy, suggesting strongly that it will be more significant than the 2003 SARS outbreak. Two other warnings seemed to escape media attention, however.
On global equity prices he showed how, supported by low interest rates, they have risen by 40 per cent in two years, warning “It is possible to have too much of a good thing”.
On Australian housing he said: “We are aware of the risk of low interest rates encouraging too much borrowing and driving excessive asset valuations.” He repeated his warning on having too much of a good thing.
In spite of the uncertain economic conditions, he hinted strongly that the Bank will not make further interest rate cuts any time soon. Contrary to the models in Economics 1 courses, there comes a point where further interest rate cuts are ineffective in stimulating economic activity. And he acknowledged that interest rate cuts, because they carry a message that economic times are tough, can dent consumer confidence.
He states “The level of investment spending, relative to the size of the economy, has trended lower over recent years”.
That point is illustrated in the graph below, constructed from National Accounts. Private investment has fallen steeply since 2012 (generally corresponding with the Coalition’s time in office), and public investment has remained low for the last 30 years (generally corresponding with the bipartisan obsession with privatisation).
Polls and surveys
William Bowe’s Poll Bludger reports on the first Newspoll for the year. The headline figure is a Labor TPP lead of 52-48, but care should be taken in interpreting results because they depend on not necessarily robust assumptions about preferences. The poll suggests that support for Labor and the Greens has strengthened since the election, to the detriment of the Coalition.
Morrison remains well behind Albanese both on his approval rating and on his rating as preferred prime minister.
Political donations: the usual suspects spread their love around
The Australian Election Commission has released its Annual Donor Returns for 2018-19. Ariel Bogel and Jack Snape have an analysis of the main findings on the ABC website – Coalition’s $165 million war chest that helped Scott Morrison win election revealed.
Anyone looking for evidence that big corporations, in line with class interests, donated heavily to the Coalition to the detriment of Labor, won’t find it in these returns.
The usual suspects – the Australian Hotels and Hospitality Association, the Pharmacy Guild, and big corporations – tended to give “balanced” donations. Pratt Holdings (Visy) was the only large public company to donate more than $1 million, split between the big parties. Adani’s modest $97 K, by contrast, was all to Coalition parties.
The outstanding donation was $84 million from Clive Palmer’s private companies to the UAP. That works out at $171.40 per UAP vote. Was that $84 million simply a cost of doing business – a payment to secure the election of a government well-disposed to the coal industry?
Who is Pete Buttigieg and where is South Bend?
We all have some impression of Elizabeth Warren, Bernie Sanders and Joe Biden, but who is this young fellow Pete Buttigieg who seems to have come out top in the Iowa caucuses? On Late Night Live, Phillip Adams interviews the New Yorker’s Benjamin Wallace-Wells about Buttigieg. Wallace-Wells is the author of Pete Buttigieg’s high hopes. The interview covers his record as Mayor of South Bend, Indiana, and the influences that may have shaped his political ideas, including but not limited to the Catholic Church, James Joyce and Antonio Gramsci. South Bend has gone through de-industrialisation: but for the fact that it has the liberalising influence of a university (Notre Dame) it would probably be Donald Trump territory. (22 minutes)
Deaths of despair
Anne Case and Angus Deaton of Princeton University have written in Foreign Affairs about America’s Epidemic of despair. They coined the term “deaths of despair” to cover fatalities caused by drug overdose, alcoholic liver disease and suicide. These deaths are the major contributor to that country’s increasing mortality in midlife – between the ages of 25 and 64. Case and Denton find that those without college education – working class people who have been stranded in poorly-paid jobs, often as a result of automation – are disproportionately likely to succumb to a death of despair.
Among the reasons the US stands out in contrast to other countries are its poor level of social security support, its dependence on employer-funded health insurance, and the power of the pharmaceutical industry which has lobbied to make addictive drugs easy to obtain.
The United States doesn’t need some fantastic socialist utopia in which the state takes over industry; instead, what is required is better monitoring and regulation of the private sector, including the reining in of the health-care system.
Prosperity without growth?
Is it possible for a society to enjoy prosperity without economic growth? Views around this question tend to be polarised, but John Cassidy, writing in the New Yorker – Can we have prosperity without growth? – takes us through the complexities of this question. It depends on what we mean by “prosperity” (a concept much wider than material living standards) and “growth” (which may be quite de-coupled from economic metrics such as GDP.) It is possible to have a society with zero CO2 emissions without compromising growth, but the way we get to it may involve serious problems in equity if we’re not careful.
Is liberal libertarianism an oxymoron?
Disciples of the Austrian School in economics – the libertarian movement that spawned neoliberalism and strongly influenced the ideas of Ronald Reagan and Margaret Thatcher – have consistently argued that the government should get out of the way of the private sector, ignoring the realities of market failure and other limitations of the private sector.
One of Pearls and Irritations’ readers draws our attention to the idea of “state capacity libertarianism”, promoted by Tyler Cowen of the Center for the Study of Public Choice (and of George Mason University). His article What libertarianism has become and will become — State Capacity Libertarianism in Marginal Revolution unsurprisingly champions private markets and warns of the dangers of excess regulation, but grudgingly accepts that neoliberalism does not do an adequate job at attending to climate change, improving school education, or dealing with deficiencies in infrastructure. Perhaps some strengthening in “state capacity” may be needed.
Is this a crack in the armour of “public choice” – the academic theory based on the neoliberal idea that all public expenditure, by definition, is intrinsically wasteful?
Richard Denniss of The Australia Institute goes on the road
Richard Denniss is giving a series of evening public talks: Why economics is broken (and what we can do about it). Brisbane 19 February, Melbourne 6 March, Adelaide 11 March, Sydney 6 April and possibly further afield. Promoting the events TAI writes:
Australia’s economy is stagnant, wages growth is the slowest it’s been since World War II, interest rates are lower than ever before and the current economic debate still prioritises a surplus over sound economic management.
A big part of what has gone wrong with our political debate comes from a poor economic debate. A debate that is stuck in the past.
Details and reservations, along with a brief outline of Australia’s structural weaknesses, are on the TAI website.
(Is economics really “broken”, or is it only the Coalition’s ill-informed economic model that’s broken?)
German grief at Brexit
Apart from minor differences between 1914 and 1945, Britain and Germany have a long-standing friendly relationship. On the ZDF Heute Show Oliver Welke expresses his grief at Britain’s departure from the Union (8 minutes).
Saturday’s Good Reading and Listening is compiled by Ian McAuley
Watch out tomorrow, Sunday, for Peter Sainsbury’s Sunday environment round up.