Saturday, December 28, 2002

Yet another inquiry over summer

The House of Representatives Communications Committee is to inquire into worth of splitting Telstra into two.

It'll do so quickly.

Telecommunications analyst Paul Budde writes:

"The Structural Separation Inquiry is arguably the most important telco inquiry ever conducted by this government will take place in only five days in February - none of them in regional Australia - and the report is to be tabled on March 24.

"Given this ridiculous timeframe, I think the outcome of the Inquiry should be that more investigation is required.

"It is also frightening to observe the government's tunnel vision. Their image of the telco world is apparent in the following comment they made about the Inquiry.
'However, we are categorically and genuinely opposed to such an idea because it would have a disastrous effect on Telstra's competitiveness and the industry. We think the idea is just plain stupid.'

If this is indeed their view, then the government must believe that the OECD, the European Union, several European parliaments and Professor Allan Fels are stupid, since they all support the idea of structural separation. From its lofty position, the Australian government apparently believes it is the only one to get it right. But its track record proves the opposite. Competition in telco land is dying, thanks to the policies that have been implemented by the government since 1996/1997.

"Its digital TV policy is the worst in the world; its privatisation policy is in shambles; its regional policy has just been shot to pieces by the Estens Report - yet they take the high ground and call everyone else stupid.

"Structural separation is inevitable; the problem is how to identify the format that best suits us in Australia and how to implement it over a 3-5 year timeframe. This government continues to try to hold back the international tide in telco-land, they continue to fight battles that they are going to lose anyway, so why not at least try to follow the overseas trend and tap into the global think tanks that are operating on a much more mature level?

"The rest of the world doesn't privatise its telcos - only 3 out of the 30 OECD countries have fully privatised operators. Governments around the world consider telco infrastructure to be a national asset and accept the fact that long-term government involvement is required, at least for large sections of this network. We are still waiting to learn the government's position on this, as requested by the Estens Report, but up till now it has flatly denied any responsibility.

"We hold Inquiry after Inquiry, and the messages that come out of them are always pretty clear - yet the government is fighting progress every inch of the way."

Wednesday, December 18, 2002

No gifts, just cash

That's what some economists say. The person who knows how to get the most for Geraldine Doogue out of $50 spent on her is Geraldine herself. Anyone else trying to guess what will make Geraldine the happiest won't hit the spot as well. That's I told her on Life Matters this week and I presented estimates from the US last Christmas suggesting that eight billion dollars of the 50 billion dollars spent on gifts is wasted as a result.

The debate has important implications for welfare payments. Should needy people be given cash that they probably want, or gifts in kind that they might not such as cheap bus trips, discounted housing etc.

But there's another side to the debate, and I said on Monday that I was reluctantly quite taken with it. The paper I quoted from had the intriguing title of Here's something you never asked for, didn't know existed, and can't easily obtain: A search model of gift giving.

Inquiring all summer

On Life Matters 9 December I talked about the extraordinary number of important government inquiries taking place over summer and asked - why it is that John Howard (belatedly) seems in so much of a hurry.

By far the most important is the Prime Minister's Home Ownership Taskforce.

Set up at the end of November, with submissions due by the end of December and with a final report due by March the deadlines are tight.

But the work won't be as hard as it might have been. Virtually everyone on the Task Force and its subcommittees has already indicated that they support the idea that'll be investigated. (See John Quiggin for a note that suggests that this may have been a criteria for an invitation to work for the Taskforce.)

Malcolm Turnbull's Menzies Research Centre will run the Task Force. It is the group which has been pushing the proposal. As was once said about Allan Bond the Prime Minister appears to want his advisors to tell him how to do what he wants not whether he should.

Which worries me little. The idea of allowing individuals to buy houses through a limited partnership with financial institutions has much going for it...

Right now, many individuals are condemned to all of the indignities and uncertainties that go with renting because they can't afford to buy a house.

Almost as bad, most of those that can have put everything they own and more into "one property in one suburb of one city. No one who is engaged in any sort of responsible financial advice would ever advise someone to do such a thing, and yet most Australians do."

Super funds and financial institutions by contrast are crying out for an asset such as housing. In aggregate residential real estate is safe - a much-needed hedge against stocks and bonds.

The MRC wants stamp duty and other rules changed to allow financial institutions and individuals to buy houses in (say 50-50) partnership. The individual ("managing partner") would have the right to live in the house and make alterations etc to it for as long as they wished.

They would have an incentive to maintain the house well, because when they did decide to sell they would get to keep a certain proportion of the proceeds (say 50 per cent, or maybe 45 per cent).

Although the institution has no say in when the house is sold, in aggregate the resale rate will be predictable and will provide regular income, without the fund needing to lift a finger to manager the property.

Australia has led the way in financially innovative solutions before. We invented HECS, we invented the Child Support Agency ideas now copied elsewhere. This idea has the same sort of potential.

At least that's what the Prime Minister thinks. On Life Matters I said he is acting like a man who has little time, and wants to achieve something worthwhile before he goes. Curiously Ross Gittins arrived at the same conclusion (about little time) at about the same time.

Also inquirning over summer is the Dawson review of the Trade Practices Act which was due to report at the end of November but has had its deadline extended until the end of January. Allan Fels looks set to get much of what he wants.

And the HIH Royal Commission which has to report by the end of February. Its terms of reference do not include and have been interpreted not to include the political donations made by HIH and FAI. A pity. Because they may be part of the explanation for what happened.

And there's the hard-to-come-to-grips-with Prime Minister's review of the corporate governance of Commonwealth statutory authorities. John Uhrig ex of Westpac and CRA has been given until June to report on the management of organisations including the Australian Taxation Office, Australian Competition and Consumer Commission, Australian Prudential Regulation Authority, Reserve Bank of Australia, Australian Securities and Investments Commission, Health Insurance Commission and Centrelink.

What's it all about? The PM promised it during the election. He gives the impression it is about bringing the organisations which bug business under tighter control of Government Ministers. Which is probably exactly the wrong thing to do. As the Palmer Report into the collapse of HIH makes clear. If the relevant Minister (the then Treasurer John Howard) hadn't intervened to issue an insurance licence to FAI over the head of the Insurance and Superannuation Commission in late 1970's the HIH collapse may not have happened. The right answer is probably less Ministerial control over Allan Fels, Graeme Samuel and the lot of them. It must be said though that there was a failure of corporate governance at APRA. It was under funded and as the Palmer Report makes clear, its board members had a hands-off approach to their job.

I discuss here what appears to be a general laxity in these organisations when it comes to investigating complaints.

My fear is that the people to whom the Prime Minister promised the inquiry want more laxity not less.

Update/ Correction

A closer reading of Ross Gittins talk shows that he didn't suggest Howard was to resign in the year ahead. He canvassed the possibility in great detail before concluding that Howard wouldn't do it.

Monday, December 02, 2002

The physics of peer pressure

Bracks. Listens. Acts. Econophysists have a cynical view of elections. They say that's the way the evidence falls. I explained on Life Matters this morning that according to econophysists Jozef Sznajd and Katarzyna Sznajd-Weron from the Polish Academy of Sciences and also Dietrich Stauffer from Cologne University a 'signature' in the pattern of voting at elections matches that found in the alignment of metal filings. The metal filings get that pattern through the simple decision-making rule of each aligning itself in the same direction as most of its nearest neighbours. In other words, the filings decide their alignment based purely on the alignment of the filings they happen to rub up against. They don't decide based on the strength of an argument.

There are circumstances in which the strength of an argument does matter for magnetically-charged particles. It is when they are in solution, and they cluster around 'seed particles'. The most convincing particles build up the biggest clusters. But the 'signature' pattern of the distribution of alignments that results is completely different to that that we see in the results of human elections.

Peer pressure appears to matter when we decide to vote. Considering the issues does not.

Bruce Schechter, the author of the New Scientist article concludes that "there's only one way to be sure that our future elections are not determined by the opinions of our neighbours. We need to abolish the right to free speech: it's undermining democracy."

Perhaps he is right. Perhaps we need secret and silent deliberation of the issues, in the same way as we need a secret ballot.

Then again, perhaps our decisions about how to vote at elections are no different from any of our other decisions. (Whether to buy Levi's jeans etc.. etc.) Most of the "decisions" we make may in reality be no more than simple responses to simple stimuli. Our minds may invent a rationale after the event to make us feel that we are in control.

Inventing explanations might be the hardest work that our conscious mind does. A bit like a section of the bureaucracy that devotes most of its effort to proving that it actually has work to do.

Just a thought... or perhaps a simple response to stimuli, or perhaps an explanation for a simple response to stimuli.