Wednesday, August 31, 2011

The new rich. They're less rich, except in Western Australia

What’s rich?

Low income (Average, bottom 20% of households)

$360 per week

Middle income (Average, middle 20% of households)

$1323 per week

High income (Average, top 20% of households)

$3942 per week

Low wealth (Average, bottom 20% of households)


Middle wealth (Average, middle 20% of households)


High wealth (Average, top 20% of households)

$2.2 million

Mean gross household income, Mean household net worth 2009-10, ABS 6523.0

The global financial crisis has knocked a hole in Australian incomes and spread wealth more evenly, except in Western Australia.

The latest biennial income distribution report from the Bureau of Statistics shows every income band but the lowest went backwards before inflation in the two years to 2009-10; all but the bottom band suffering from a weaker share market and lower capital gains, with the bottom band propped up by an over-the-odds pension increase.

The average income earned by a household in the top 20 per cent slipped from $4136 per week to $3942 after adjusting for inflation.

The average mid-range household income slipped from $1356 to $1323.

At the bottom the average household income climbed from $350 per week to $360.

Total disposable income fell for the first time in 14 years.

The Bureau’s measure of inequality shows incomes being spread more evenly in every state but one... In Western Australia the income earned by the top 20 per cent of households surged 8.7 per cent over and above the rate of inflation pushing up the average for a high income household from $4309 per week to $4682 per week, or $243,464 per year.

By contrast the incomes in every other band in Western Australia slipped pushing up the state’s inequality index 5 per cent.

Western Australia has the highest and most uneven incomes of any state and Tasmania the lowest and most even.

NSW is the second highest earning state followed by Queensland and Victoria.

The typical Melbourne income is $1,422 per week; the typical income in the rest of the state $964 per week.

Wealth is distributed far less evenly than income with an typical household in the top 20 per cent laying claim to $2.2 million in savings and a typical household in the bottom 20 per cent owning just $31,829.

Households that rent earn less and have less saved up than households who own their homes outright. A typical renting household has amassed $158,406, a typical mortgagee household $769,848 and a typical household which has paid off a mortgage $1.8 million.

The proportion of Australians who own their homes outright has slid to its lowest since the survey began in 1994. Around 32.6 per cent of households owned outright in 2009-10, down from 33.2 per cent in 2007-08 and 41.8 per cent since the surveys began after slipping in each one.

The proportion of households with mortgages climbed to an all-time high of 36.2 per cent, as the proportion of renters slipped from 29.7 to 28.7 per cent, making households more exposed than ever before to changes in mortgage rates.

Separate building approval figures show just 7600 private sector houses were approved in July, almost unchanged from June and down 12 per cent over the year. Around 2900 houses were approved in Victoria, down 10 per cent on a year earlier.

“These figures add weight to our view that the housing sector is going backwards at a rapid pace,” said CommSec economist Savanth Sebastian. “Homes sales have hit 10 year lows, house prices have been tracking lower for six months and housing credit is at the weakest levels since the late 1970’s.”

The ABS income distribution report showed the number Australians per house climbed from 2.51 to 2.67 per house in the five years to 2009-10, the first such rise on record.

Published in today's SMH and Age

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6523.0 8731.0

Tuesday, August 30, 2011

David Hicks on Australian Story tonight. It will be good

Why do I think it'll be good?

Because Australian Story isn't always sympathetic to its subject.

The producer Helen Grasswell is one of the very best. She has won many awards for television, one of them shared with me.

The one-hour program is on at the "special time" of 8.30 pm.


House building. The worst month since...

A “perfect storm” of collapsing confidence has pushed new hosue sales to their lowest point in a decade, plumbing depths last reached after the introduction of the goods and services tax.

The Housing Industry Association index shows just 5701 new freestanding houses were sold in July, down 19 per cent on the more-typical 7036 sold three months earlier.

New house sales collapsed 9 per cent in June and a further 9 per cent in July, as already weak demand was hit by a crisis of confidence.

“You had the combination of the interest rate uncertainty, the uncertainty about the carbon tax, the uncertainty about the fragile nature of the federal government, and you had all the global bad news as well, ” said HIA chief economist Harley Dale.

“Consumers were cautious anyway in the wake of the global financial crisis. Then they were hit by this - it accelerated the downward trend.

Dr Dale says the figures are worse than they look. Although July was the worst month since December 2000, that month was unusual as the building industry was reeling from the effects of the July 2000 introduction of the goods and services tax. Leaving the GST period aside there probably hasn’t been a worse month since the interest rate hikes of the early 1990s...

If building weakens further it will approach the lows of of 140,000 annual home and unit starts seen in the global financial crisis.

“It will be back into where we were in the GFC, except now we won’t have a GFC. The residential building industry will need some sort of short term stimulus. I know manufacturers are asking for help, but we will need it too, for related reasons.”

“The underlying demand for new accommodation is around 175,000 dwellings per year. The actual demand is now well below that, setting the scene for a housing crisis.”

At the October tax summit the Association will be pushing for tax relief arguing that new housing is taxed far more heavily than existing housing.

“You pay goods and services tax on new housing but you don’t on existing property; you have a cascading issue with paying stamp duty at various levels with new housing that you don’t with existing property; you’ve got indirect taxation like infrastructure charges, you’ve got hidden taxes like unnecessary costs to business form avoidable planning delays. If you throw it into the mix you’ve got a very heavily taxed sector.”

Published in today's SMH and Age

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Monday, August 29, 2011

What to say about Craig Thomson. Here's the cheat sheet:

This is what was handed out to MPs last week. Really.

Thanks to Mark Reilly of the Seven network.

The Cheat Sheet, Leaked

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We think the rich are too rich. But they're even richer..

New research

When it comes to wealth even the richest among us think the rich have too much - but we’ve no idea of how skewed the distribution really is.

A study prepared by Empirica Research and the Harvard Business School for the trade union movement as part of its planning for the October tax summit finds Australians of all incomes believe the richest 20 per cent of us have around 40 per cent of the wealth.

We think that’s too high. We would prefer a more egalitarian society in which the top 20 per cent have somewhere around 24 cent of the wealth. We would also like the poorest 20 per cent to have 15 per cent, which is a good deal more than the 10 per cent we think they have.

The survey finds us oblivious to the far more skewed truth that the best-off 20 per cent have 60 per cent of the wealth and the worst-off 20 per cent a mere 1 per cent.

The Australians least in touch with reality were the very richest and the very poorest, each believing the richest 20 per cent had 40 per cent of the wealth and the poorest had 9 per cent. Those most in touch with reality were the second-richest group who believed the best-off 20 per cent had 45 per cent and the worst-off 8 per cent.

Presented with three unlabeled pie charts showing Australia's actual wealth distribution, a distribution a United States survey had found to be ideal and an completely even distribution, and overwhelming two-thirds wanted to live in the completely even society.

Presented with two unlabeled charts showing the actual Australian distribution of wealth and the more unequal distribution in the United States only 22 per cent wanted to live in the US... Among Coalition voters the proportion preferring to live in the US was 24 per cent, among Labor and Greens voters 20 per cent.

“Australians apparently favour a significantly more equal distribution that they believe currently exists and a dramatically more equal distribution than actually does exist,” the researchers conclude.

Asked how much tax Australians on a range incomes actually paid the survey group overestimated every one. Australians on $200,000 were thought to pay an average of 38 per cent instead of 32 per cent. Australians on $79,000 were thought to pay 27 per cent instead of 22 per cent, and Australians on $36,000 were thought to pay 18 per cent instead of 12.9 per cent.

The group wanted all tax rates cut, but curiously wanted them cut from the high rates they imagined to near the actual rates.

Australians on $79,000 were felt to deserve an average tax rate of 21 per cent, close to the actual rate of 22 per cent. Those on $36,000 were felt to deserve 12.1 per cent, close to the actual rate of 12.9 per cent.

The researchers were perplexed by the finding. “While people strongly favour increasing wealth within the lowest 20% of households, they do not spontaneously translate these attitudes into support for policy mechanisms that could realise that goal,” the report concludes.

ACTU secretary Jeff Lawrence said the survey showed tax reform need not mean an unending series of tax cuts.

“Real tax reform is directed towards satisfying Australians’ needs and preferences. It must reflect the type of society the majority of Australians aspire to be,” he said.

Seperately the National Alliance for Action on Alcohol has complained the October 4 tax summit will have no public health representative.

Co-chair Todd Harper said it showed the Government had “taken alcohol tax off the agenda – even as an issue for discussion”.

Published in today's SMH and Age

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Sunday, August 28, 2011

NewsCorp, the Governor and Industrial Relations.

The Australian thinks Reserve Bank governor Glen Stevens called for a review of industrial relations laws:

Lucky to lazy country: review IR to stop decline

RESERVE Bank governor Glenn Stevens has called for a review of Julia Gillard's industrial relations laws, warning that Australia's prosperity is making the country lazy about productivity reform.

Addressing the House of Representatives economics committee in Melbourne yesterday, Mr Stevens said he did not expect the world economy to enter a new downturn and added that the bank would hold interest rates steady until clear evidence emerged of the effect on consumer and business spending of recent turmoil on the markets.

However, he said persistent inflation at a time when much of the economy was slowing made the Reserve Bank's task more difficult. He laid the blame on rising business costs caused by weak productivity.

``We do tend when times are good not to press as hard on some of those reforms as we might,'' Mr Stevens said.

``I don't think there's any doubt that the period of maximum focus on productivity-enhancing reforms was in the period when the banana republic issues were debated,'' he added, referring to Paul Keating's years as treasurer in the 1980s.

``We felt we had to do it better and we did do it. It perhaps proves harder to do that when affluence has been better for a period of time.''

Mr Stevens said the government had a ready source of advice on what to do from the Productivity Commission. Its agenda included the efficient pricing of utilities and infrastructure, improving competition, reducing inefficient regulation and reforming zoning and planning rules.

However, pressed by Coalition and government members on the committee, Mr Stevens said the business people he spoke to believed that the government's industrial relations reforms, imposed to replace the Howard government's Work Choices regime, had reduced the flexibility of the workforce.

``They might be wrong in their assessment of the system, but I think there are people who feel that,'' Mr Stevens said. ``If they are wrong, then it would be good to get the heads together and show how the system is actually very flexible, because I think there are people whose instinct is that it has gone back the other way.

``While I do not have a silver-bullet policy to fix the problem, I can do no other than say as a public official that we should be giving careful consideration to these matters but, by all means, on as rigorous evidence as we can find.''

The Prime Minister yesterday defended her record on productivity, including dumping Work Choices. She said that rather than compete with the world on low wages and conditions, ``I put in place a plan to compete with the world on knowledge and skills . . . to unlock the real drivers of future productivity"...

Except that he didn't. He did not call for a review of Julia Gillard's industrial relations laws.

The nearest he came was when he he said:

"What businesspeople say to me — and I think this would be a theme I have heard from a number of quarters — is not so much that wages are excessive and indeed at this point in time the aggregate data on wage growth which is probably fourish, a touch under maybe, is on a par with what we have seen over the years. What people say to me, I cannot verify it obviously, from their individual businesses is that they find it harder to negotiate flexibility. That is something that is said. If that is true that I think is a matter for concern... If they are wrong, then it would be good to get the heads together and show how the system is actually very flexible, because I think there are people whose instinct is that it has gone back the other way."

A long bow.

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Saturday, August 27, 2011

Relax. Rates steady for months to come

Reserve Bank governor Glenn Stevens has signalled steady interest rates for months to come, saying in turbulent times it’s “a good idea to sit still”.

But at the same time he has dashed hopes of cuts in rates or intervention in the foreign exchange market to take pressure off the dollar.

Told the high Australian dollar was causing firms such as BlueScope Steel to close plants and lay off workers Mr Stevens told the parliamentary hearing he understood but added: “What can we do about it?”

“Arguably interest rates can be a bit lower than otherwise, but I would say they are.”

“We haven’t intervened. I myself thought when it reached $US1.10 it was getting a bit ahead of itself, but it has fallen back a bit since then. We have not intervened because our assessment is that it would be fairly futile in the environment we are facing - there are very big global forces at work.”

Mr Stevens called on China to devalue its currency - “a significant distortion in the global system,” but he said Australia’s views carried little weight.

“I can make the comments, and no doubt they will be publicly reported, but what would really make the difference is a long-run engagement with the Chinese on why it is actually in their interests,” he said.

Both sides of politics should be prepared to delay their commitment to return the budget surplus...

“Let us suppose you saw weaker than expected activity and the budget took longer to go to surplus. There is nothing particularly wrong with that, actually. Are we going to jack up rates were that to occur? No, I do not think so.”

The governor suspected inflationary pressure was easing but said it was too early to tell.

“In times of tremendous turbulence, I think it’s a good thing just to sit still if we can, rather than add to turbulence by starting to change our settings. It is often good to sit still as a kind of tactical thing,” he told the hearing.

Published in today's Age

My favourite bit from Friday's hearing:

Dr LEIGH: Governor, there have been a number of statements that you and others have made about the importance of pay being strongly related to productivity outcomes in the economy. In a context in which there has been some public comment on the salaries of Reserve Bank officials, this might be a useful opportunity for you to comment on your views on some of that commentary, changes in Reserve Bank salaries and the relativities to other central banks.

Mr STEVENS : I am not sure I can help much there. I do not set my own pay. The board set it. They had quite a lengthy process of reviewing it after the system had been in place for many years. They took their decision, and I take what I am given, like anyone else in the country. I am not able to give you the whys and wherefores of whether that was an appropriate decision. I did not take it. I had no involvement in it.

Yes. "I take what I am given, like anyone else in the country."

If only. $1.05 million

Gittins: "Stevens's pay has jumped 85 per cent in five years, equivalent to annual rises of 13 per cent."

Like anyone else. If only.

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Friday, August 26, 2011

Tax summit. Who gets an invite:

Tax Forum Invitation List

Pascoe, Clitheroe to chair October 4 tax summit

We are pleased to announce that the facilitators for the forum will be Paul Clitheroe and Michael Pascoe, who will bring many years of experience in taxation, finance and the media to their roles.

• Mr Clitheroe is a leading commentator on financial issues and is renowned for his ability to explain complex money issues in plain English. As Chair of the Financial Literacy Board, he has established a national strategy to improve the financial skills of all Australians through schools and the workplace.

• Mr Pascoe is one of Australia’s most respected and experienced finance and economics commentators, with 37 years in newspaper, broadcast and online journalism covering economic, business and finance issues.

And there's a program:

Day 1, Tuesday 4 October

Registrations open at 7.30am

. Introductory session

. Business tax session


. State taxes session

. Environmental and social taxes session

Evening function

Day 2, Wednesday 5 October

Day 2 starts at 8.30 am

. Transfer payments session

. Personal tax session


. Tax system governance session

. Closing session

Close of Tax Forum at 4.30pm


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Want to improve indigenous lives? Build more houses

Productivity Commission chief Gary Banks has backed a finance department finding that the $3.5 billion the Commonwealth spends on indigenous programs each year yields "dismally poor" returns.

The finance department strategic review, released this month under freedom of information laws after a one-year battle found strong commitments and large investments of government funds had “too often produced outcomes which have been disappointing at best and appalling at worst”.

Launching a biennial report that found outcomes had gone backwards in seven of 45 measures monitored by the commission Mr Banks said “plenty” of polices were not working.

“A recent finance department strategic review of indigenous expenditure has made that clear.”

“I don’t think we should be too critical - it is a very hard area to get right. But the key is to be open about failure and to learn from it,” he said.

The report found a widening of the gap in the rates of child abuse between indigenous and other Australians.

The number of substantiated cases of abuse and neglect climbed from 15 to 37 per 1000 Aboriginal children in the most recent decade, compared to an increase of 4 to 5 per 1000 among other Australians....

Rates of hospitalisation for assault were seven times higher for indigenous men and 31 times higher for indigenous women than for non-indigenous Australians.

The imprisonment rate for Aboriginal men soared 35 per cent over the decade; the rate for women 59 per cent.

“At least now we know more than we did. As recently as two years ago we could only find trend data for about one half of the measures we wanted to examine. Now it’s two-thirds. There’s more to go, but its an improvement.”

Les Malezer, co-chair of the National Congress of Australia’s First Peoples questioned the point of collecting the data when the authorities didn’t seem to notice.

“We have to face the fact that results are not coming,” he told Mr Banks at the launch. “One side of government produces the information and the other side doesn’t get called to account.”

Productivity Commissioner Robert Fitzgerald said one of most important things the government could would be to ease overcrowding in indigenous homes.

The proportion of indigenous houses with more than twice as many people as bedrooms has remained unchanged at 27 per cent for five years. In the Northern Territory the proportion exceeds 60 per cent.

“We have invested heavily in indigenous reading programs at schools with no discernible impact. But what is absolutely unquestionable is that easing overcrowding helps educational outcomes, health outcomes, the home environment and makes communities safe.”

“That one change it would have multiple outcomes.”

Families and community minister Jenny Macklin said since prime minister Rudd committed to closing the gap in 2009 “more than 800 new houses have been completed”.

Australian National University professor Mick Dodson said the houses often weren’t being built where indigenous people wanted to live and weren’t the kind of houses they would want had they been consulted.

Published in today's SMH and Age

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A uni degree will extend your life how much?

What’s the worth of a university degree? Around four extra years of life according to the first Australian study of the subject, and a high income is worth even more.

Andrew Leigh has a day job as a member of parliament, representing a seat in the Australian Capital Territory. This morning (FRI) he will be quizzing the Reserve Bank governor as part of his responsibilities as a member of the house economics committee. But until last year he was researching these sort of questions as a professor at the Australian National University, and academic papers take a while to be published.

His finding, prepared with Sydney University health academic Philip Clarke, is that being quite rich makes you roughly half as likely to die in any given year as someone who is quite poor.

If you are in the top 20 per cent of income earners you can expect to live six years longer than someone in the bottom 20 per cent.

If your education extends beyond Year 12 you can expect to live four years longer than someone who stopped when they left school.

Age makes little difference to gaps, nor does gender.

The gaps are larger than those found in earlier surveys and approach those for indigenous and non-indigenous Australians.... In 2009 the Bureau of Statistics found indigenous Australians were likely to die ten years earlier than other Australians.

Dr Leigh and Mr Clarke examined deaths among the 14,500 Australians surveyed each year for the Melbourne Institute Household income and labor dynamics project. When someone surveyed in one year can’t be contacted in the next, one of the reasons recorded is “death”.

The more usual method is to examine death rates between suburbs. The Bureau of Statistics finds men living in the most well off suburbs live four years longer and women two years longer than their counterparts in the most disadvantaged suburbs.

But Dr Leigh says this can understate the differences, “for example if palliative care facilities tended to be located in high-income neighbourhoods”.

Published in today's SMH and Age


If your education extends beyond Year 12:

4 years

If you are in the top rather than the bottom 20% of earners:

6 years

Previous Bureau of Statistics findings based on high and low income suburbs:

2 to 4 years

Death, Dollars and Degrees: Socioeconomic Status and Longevity in Australia” by Philip Clarke and Andrew Leigh, forthcoming in Economic Papers

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Thursday, August 25, 2011

If there's one BlueScope they'll be hundreds: Why Treasury shuts its wallet tight

Senior government advisors are trying to ensure BlueScope doesn’t become a Kodak or a Mitsubishi.

Both had problems staying afloat. Both took money from the government, and both sank anyway.

The concern this time is acute. BlueScope will lose 1000 workers when closes its hot strip mill in Western Port and its blast furnace at Port Kembla. A payment, grant or concession to keep BlueScope afloat wouldn’t cost much in grand scheme of government budgets and could even make sense if it was thought its problems would be temporary or limited to it alone.

The problems at the Kodak film manufacturing plant and processing lab turned out to be temporary until it was clobbered by the arrival of digital photography more than a decade later and went under.

Mitsubishi had special problems deriving from its Japanese parent.

But there’s nothing special about BlueScope.

The deepest fear within Treasury is that it will be typical....

Former Treasury boss Ken Henry put his department’s position bluntly in February at his final appearance before a Senate inquiry. Firms in trouble needed to face "the very real question of whether with the exchange rate being where it is they are able to remain in business".

Treasury believes the exchange rate could stay high for 20 to 30 years. It if hands out government money just once to help BlueScope, Holden or whoever stay afloat now it could find itself continuing to hand out money monthly for years to come.

By the time the dollar fell again Australia might not want the equivalents of Kodak to be in business anyway.

“I would say to you then that the best industrial structure of the Australian economy then, in 20 years time, would be quite different from the one we had 20 or 30 years ago,” Dr Henry told the committee.

Treasury’s frustration has been that it is hard to get that message out. It is general advice about what not to do. It only finds a place in government brief when there’s a specific crisis and government ministers are tempted to give in, just once.

The compassionate decision to give Bluescope workers special facilities to help them transition to new jobs and the decision to make former Queensland premier Peter Beattie Australia’s first Resources Sector Supplier Envoy are victories for the Treasury. It has held the line against what could become an unending and pointless drain on the nation’s finances.

The Reserve Bank is having increasing trouble maintaining its line that higher interest rates will soon be needed regardless of the position of BlueScope and other firms struggling under the weight of the high dollar.

Graham Kraehe, BlueScope’s chairman, is a member of the Reserve Bank board. Also on the board are former Roger Corbett, chairman of Fairfax Media (publisher of The Age) and Jillian Broadbent a current director of Woolworths.

The Bank insists all of its recent board decisions have been unanimous. But those decisions have been to keep rates steady at a time when Bank staff saw the need for interest rate hikes.

That’s why the market is betting on lower rates. It expects the Bank to give it the hearing the Treasury will not.

Published in today's Age

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Mixed progress. Our Indigenous gap widens, narrows

Indigenous imprisonment, substantiated child abuse and chronic disease continue to trend higher two years after Kevin Rudd announced an ambitious program to “close the gap” and four years after John Howard announced his Aboriginal intervention.

The latest trend data assembled in a report entitled Overcoming Indigenous Disadvantage show improvement in only 13 of the 45 indicators monitored by the government. In another 10 the report finds “no real improvement”. In seven it finds outcomes going backwards.

Although the first such report since Kevin Rudd committed Australia to “closing the gap” in 2009 much of the data is dated, providing only an indication of the trend at the time the commitment was made or slightly after.

The Indigenous imprisonment rate for men soared 35 per cent in the decade to 2010; the rate for women jumped 59 per cent. By 2010 Indigenous Australians were imprisoned at 14 times the rate of other Australians. In 2009 Indigenous youth were detailed at 23 times the rate of other Australians, a decline from the peak in 2008.

The rate of substantiated child abuse in Indigenous families more than doubled over the decade to 2009-10, a period in when the rate of substantiated abuse among other Australians climbed 25 per cent. The report says while it is possible some of the increase is due to improved child protection action, “some is likely to reflect real increases in child abuse and neglect, given little improvement in the social and economic circumstances of Indigenous people”.

Indigenous Australians remain twice as likely as others to suffer a severe disability, a gap unchanged over the six years to 2008... The gap in hospitalisation rates for most chronic diseases was also unchanged, except for heart disease, diabetes and end-stage renal disease, where the gap grew.

Indigenous employment has climbed in the four years to 2008, but at the same rate as non-Indigenous employment meaning the gap is unchanged.

Indigenous households earn $300 per week less than other Australian households, a gap that is unchanged although real Indigenous incomes have increased strongly, keeping pace with other incomes.

Home ownership rates climbed steadily between 1994 and 2008 with the proportion of Indigenous Australians living in a home that was owned rather than rented (either with or without a mortgage) climbing from 22 to 29 per cent.

The proportion of Indigenous students completing Year 12 climbed from 20 to 26 per cent between 2001 and 2008 and the academic performance of Indigenous Year 12 students improved, but the performance of non-Indigenous students climbed faster, widening the gap.

The proportion of Indigenous Australians working towards or holding post-secondary qualifications climbed from 26 per cent to 34 per cent in the four years to 2008, but the proportion of other Australians holding or obtaining post-secondary qualifications also climbed, leaving the gap unchanged.

Mortality rate among Indigenous Australians appears to be falling, with child mortality falling sharply, but the report’s authors complain good data on life expectancy is unavailable, leaving them unable to judge progress on Kevin Rudd’s 2009 commitment to close the life expectancy gap within a generation.

Overcoming Indigenous Disadvantage will be launched this morning by its principal authors, Gary Banks and Robert Fitzgerald of the Productivity Commission and Professor Mick Dodson of the Australian National University.

Published in today's SMH and Age

Australia's Indigenous Report Card

Indigenous imprisonment - worse

Substantiated child abuse - worse

Chronic disease - worse

Employment gap - unchanged

Education gap - unchanged

Income gap - unchanged

Home ownership rate - improved

Infant mortality gap - improved

Steering committee for the review of government service provision, Overcoming Indigenous Disadvantage, to be launched this morning

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Wednesday, August 24, 2011

Mining hurts us more than we think

Wednesday column

Mining was always going to crush manufacturing.

If you are in any doubt that as mining advances manufacturing inevitably retreats you can set yourself right by examining an extraordinary graph of mining and non-mining export earnings produced by Richard Denniss of the Australia Institute.

Over the past decade mining exports have climbed by around five per cent of GDP; non-mining exports have slid by around five per cent of GDP. The relationship has been almost exactly one to one.

That’s not to say the ratio won’t improve. Mining exports might one day do more than simply replace non-mining exports. There might one day be few other exporters left to crush, the massive investment in new mines and mining machinery currently underway might one day pay off in much higher earnings, as it is meant to. But what’s important are the directions of change. As the mining industry does better, other trade exposed industries do worse.

The main mechanism is straightforward. Higher minerals push up the Aussie dollar which makes exports harder to sell and imports much cheaper.

There’s also a secondary mechanism. The mining boom (particularly the mining construction boom) gets the Reserve Bank worried about inflation. It talks up the possibility of higher interest rates - until this month that’s exactly what it has been doing - and consumer and business confidence stall.

Step three takes place when our relatively high interest rates and talk of higher ones draws more money in from overseas pushing up the dollar further.

It’s bad for steelmakers, bad for any trade-exposed industry, and to a lesser extent also bad for industries with no competition from trade. If consumers and businesses are wary of spending - as the Reserve Bank has tried to ensure they are - they will be wary across the board.

There’s a view about that this is a reasonable price to pay... Our record mining investment should pay off big-time. By throwing far more than ever before at mining we are pushing ourselves out “further along the risk-return frontier,” as Reserve Bank assistant governor Philip Lowe recently put it.

The high dollar has positives for all of us, even as it makes it harder for some of us to compete. It increases the buying power of each dollar we earn and also the buying power of those we’ve saved. It is one of the ways in which the proceeds of the boom are shared more widely.

And jobs will take care of themselves. It is not carelessness that makes Treasury assume full employment in its modeling of tax and other changes, it is reality. Employment is usually close to full. The ratio of working age Australians to dependent age Australians is set to shrink from 2 to 1.5 in coming decades making workers even more prized.

So should we be worried?

You should if you are in the steel mills owned by BlueScope that are being squeezed out of business. Sure, they’ll probably be another job available for you somewhere, but it mightn’t be where you live and it mightn’t be doing the kind of work you are used to. Employment is growing fastest in the health and aged care industries.

Australia as a whole would have good reason to be worried if the mining boom suddenly ended. We might have lost the ability to make steel and cars even though, with the dollar low again, it would make sense to return to doing it.

To this the former Treasury head Ken Henry would reply that the boom isn’t likely to end any time soon.

In his final Senate appearance this year he said: “Lets' suppose that in 20 years time commodity prices come off, quite significantly. I would say to you then that the best industrial structure of the Australian economy then, in 20 years time, would be quite different from the one we had 20 or 30 years ago."

Firms in trouble need to face "the very real question of whether with the exchange rate being where it is they are able to remain in business".

But something else is lost with the ability to make steel and cars apart from flexibility we may turn out not to need.

It’s the ability to make steel and cars. Other nations subsidise those industries precisely because they think they are worth having - for defence reasons, for security of supply and also for emotional reasons. While much of my generation deals with intangibles in white collar jobs, we know our fathers made real tangible products in factories. We think it matters.

What can be done to make sure we continue to make things? OneSteel is making a better first of it than BlueScope, expanding its iron ore export operation as a hedge in the same way that newspapers are getting into the internet.

Getting behind the originally-designed mining super profits tax would have helped. It would have taken money from the miners and given it to manufacturers and other non mining companies in the form of a 2 percentage point tax cut - enough to offset the effects of the higher dollar for a while. Some may be regretting not getting behind it.

And staring down the Reserve Bank would help.

It’s been saying it’ll eventually have to push up rates because wage growth is running ahead of anemic productivity growth.

It is, but the measure of productivity growth relied on to make the claim is bogus:

Australia Institute research released this morning shows non-mining productivity growth is a very respectable 2.5 per cent. Mining productivity is plummeting pulling the average way down. As minerals prices get higher more and more resources are being thrown at mining and less and less productive mines are opening.

The gross value added per mining worker has almost halved since the start of the mining boom eight or so years ago. This shouldn’t surprise us, and it’s not a bad thing.

But it isn’t a reason to punish the non-mining economy even further. That’d be adding insult to injury.

Published in today's SMH and Age

Mining Australias Productivity

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Tuesday, August 23, 2011

Thank heavens.Thomson resigns as economics committee chair.

Parliament deserves that dignity.


Embattled federal Labor MP Craig Thomson has confirmed he will step down as chairman of the House of Representatives economics committee.

His decision comes after NSW police said they were looking into the alleged misuse of a credit card issued to Mr Thomson when he was general secretary of the Health Services Union.

"Today I have advised the secretary of the House economics committee that I have decided to resign as chair of the committee," the member for the NSW Central Coast seat of Dobell said in a statement on Tuesday.

"The current circumstances will clearly distract from the important work of the committee.

"I continue to reject claims of wrongdoing."

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"Bribery? The RBA? No need for a Royal Commission"

So I guess it'll be up to Craig Thomson's economics committee. Oh my.
Labor and the Coalition have combined to oppose a push for a royal commission style inquiry into the Reserve Bank note printing bribery scandal.

Proposed by Greens MP Adam Bandt before the house adjourned late last night (MON) the inquiry would have examined allegations of corruption in securing note printing contracts and payments to overseas agents in offshore tax havens.

The inquiry would have been asked to uncover what the Reserve Bank, Austrade and the Australian government each knew about the alleged corruption, when they knew it, what due diligence was applied and what investigations were made into the allegations.

Mr Bandt told the House Because the more that came to light about the bank note scandal, the more it was clear the Reserve Bank faced serious questions about its corporate governance.

He said The Age had reported Reserve Bank executives failed to notify the police of evidence it had as far back as 2007 that agents of its subsidiary Note Printing Australia were bribing officials in Malaysia and Nepal....

The Australian Federal police were not told about the allegations until two years later, after The Age had exposed corruption concerns at another half-owned Reserve Bank subsidiary Securency.

Labor and Coalition MPs opposed an inquiry arguing it would interfere with the progress of bribery charges presently before the courts, the first under Australia's new foreign bribery laws.

Labor MP Tony Zappia quoted the Bank as saying the law firm it hired, Freehills had found no breach of Australian law by any of its staff or by Note Printing Australia.

Until the Australian Federal Police found otherwise he was prepared to rely on the word of the Bank.

Labor MP Andrew Leigh said the note printing technology commercialised by the Reserve Bank was world-leading, in the same league as the black box flight recorder. The Bank had served had served Australia well during the global financial crisis.

Coalition MP Kelly O'Dwyer said Treasurer Wayne Swan rather than the Bank should be answering questions. The Bank was already under investigation by the police and matters were before the courts.

Coalition MP Paul Fletcher a very serious justification would be needed to invoke the coercive powers of a royal commission. There would be no such justification until the police reported.

Mr Bandt said the inquiry would not cut across the police investigation because it would focus on the alleged failure of governance within the Reserve Bank, a matter beyond the scope of the police.

Mr Zappia said the parliamentary committee chaired by Labor's Craig Thomson would have an opportunity to quiz Reserve Bank governor Glenn Stevens when he appeared before it in Melbourne on Friday.

Debate on the motion was adjourned.

Published in today's SMH and Age

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Monday, August 22, 2011

Swan's bank switching package WAS a useless joke - Bernie Fraser confirms it

The much-heralded bank switching package unveiled by Treasurer Wayne Swan within months of Kevin Rudd's election was bureaucratic, cumbersome and “fundamentally flawed”, according to the man appointed to review it, former Reserve Bank governor Bernie Fraser.

The scheme required customers planning to change banks to tell their old bank, request of printout of regular deductions and deposits, take it to the new institution, obtain one letter from the new institution for each payment that would be moved across, to sign each letter and then return them to the new institution.

So unwieldy was the process that in the three years since the process was used in only 6000 of the millions of occasions on which customers switched banks.

“I think at the time those in charge thought they were making progress,” Mr Fraser told the Herald. “Banks that weren’t enthusiastic could agree to it knowing it didn’t commit them to much.”

Trumpeted by Mr Swan as a reform that would allow customers to vote with their feet, the package was accompanied by a "hotline" that turned out to be the Australian Securities and Investments Commission switchboard.

“All the incentives were wrong,” Mr Fraser told the Herald... “It relied on the old bank, the losing bank, to play the game and assist the customer to quickly move to another bank. And it was bureaucratic and cumbersome for customers wanting to switch.”

“Both of those things seemed to be fundamental flaws.”

The new scheme recommended by Mr Fraser and yesterday endorsed by Mr Swan will require customers to fill in just form and lodge it with their new institution rather than the one they are leaving. It will start next July.

Mr Swan also announced a one-page mortgage insurance fact sheet and a national e-conveyancing system for property transactions due to start in 2013.

Mr Fraser said he had been more successful than Mr Swan three years earlier in getting the banks to agree to a good switching scheme because he had been given “a big stick”.

He had been asked to investigate “full account number portability” which would enable anyone who switched banks to carry with them their account number, meaning all details would move across.

Mr Fraser found the idea would be “massively expensive” for the banks, in his words: “akin to taking a gold sledge hammer to crack what is really quite a small nut.”

While mobile phone companies were able to manage phone number portability, financial institutions were more complex and had no central clearing house.

Bank switching was in good health with or without special measures. One in three new home loans was in fact a refinancing of an old home loan with a new lender.

Published in today's SMH

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Try living on NewStart. It's getting harder. ABS figures show so.

$237.45 per week and not keeping pace

The buying power of Australia’s unemployment benefit is shrinking.

New figures compiled by The Age show in the past ten years the purchasing power of the fortnightly Newstart allowance has slipped $22 at a time when the buying power of the fortnightly pension has soared $175.

The difference is because of a large one-off jump in the pension in 2009 and because the pension increases in line with average male earnings while Newstart increases in step with the lower consumer price index.

The single unemployment benefit is now just $474.90 per fortnight. The single pension - once identical to the unemployment benefit - is now a much higher $729.30 per fortnight.

Projections prepared for the Henry Review show Newstart shrinking to a mere third of the pension by 2050 unless the rules are changed.

Cost of living figures released by the Bureau of Statistics show Newstart recipients even more disadvantaged than the comparison suggests.

Living costs for Australians on allowances other than the age pension climbed 4.6 per cent during the past financial year at a time when the consumer price index climbed 3.6 per cent... Living costs for Australians on allowances have outpaced the official rate of inflation in all but two of the past ten financial years.

The cumulative effect means the buying power of the unemployment benefit is falling, despite the claim on the Centrelink website that Newstart is adjusted “in line with increases in the cost of living”.

False advertising from Centrelink
“It is galling and simply appalling that the government publishes data on the cost of living for benefit recipients, and then fails to take note of the results and raise payments to job seekers,” said Gerard Thomas of the Welfare Rights Centre.

“The last time the rate of unemployment benefit was raised beyond the consumer price index Clinton was President of the United States, the internet was just an idea and mobile phones were rare and the size of bricks.”

Tougher rules due to start in January will cut the number of Australians assessed as eligible for the disability support pension by around 40 per cent pushing more Australians onto Newstart.

The Organisation for Economic Co-operation and Development warned in November that the single rate of Newstart had fallen below the poverty line, raising “issues about its effectiveness in providing sufficient support for those experiencing job loss or enabling someone to look for a suitable job”.

The Australian Council of Social Service wants the size of NewStart discussed at the October tax summit.

A spokesman for employment minister Chris Evans said the Government recognised being on Newstart was “no easy ride”.

“That’s why our first priority is to help people get a paid job,” the spokesman said.

While the budget had left the single Newstart formula unchanged it had eased the income test for principle carer parents on Newstart.

Published in today's SMH and Age

The OECD on Newstart

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6463.0 6467.0

Saturday, August 20, 2011

What is genius? Ian Carroll, a celebration

Cleverness. Genius. At their core is the ability to spot patterns, usually across contexts.

Ian Carroll was extraordinary.

As executive producer of every one of his TV shows I had friends working on, and as executive producer of the one I worked with him on he would come up with story ideas others were inclined to dismiss as off the pace. And then time and time again, two or so weeks later his idea would turn out to have been exactly the right one. He could do this because he was always taking in information ans seeing the skeleton behind the form, spotting a pattern, seeing how things would pan out. To talk to him was an education.

And I did, long before I worked for him.

He would ring me up out of the blue and say - what do you think about this.

His professional and romantic life was played out on a giant canvas. Yet he was completely self-effacing, shy.

As a force for good in the ABC he was probably unrivaled, yet he was never managing director.

What follows will leave out a lot. There's a lot I don't know. Read about Ian Carroll here and here and here.

In 1985 after working on Nationwide (a precursor to 7.30) he got what he had been lobbying for - a chance to take over ABC television news. Until then ABC TV news had been prepared using ABC radio reporters such as myself and TV reporters who were also required to file for radio. In Sydney they were in separate locations... With no training or tutoring in how to put together television reports and without the opportunity to view the vision, people such as myself made pretty average television stories. ABC TV News even used the radio theme music. On D-Day the two separated. (Not that us radio reporters minded - one had a sign on his door that read "all I want is a day when I can stop working for television".)

To fully take on the commercial networks the new program (called The National) started at the commercial 6.30 pm time slot, rather than the old ABC time of 7.00 pm.

So worried were Nine and Seven they immediately moved forward their bulletins to 6.00 pm where they have remained ever since.

The National ran for 60 minutes and melded news and current affairs, using a news presenter Richard Morecroft and a current affairs presenter - a young, recently on-air pregnant Geraldine Doogue.

ABC traditionalists hated it. At the end of the year ABC TV news returned to 7.00 pm.

But under the apparent form of failure lay a victory. I am sure Carroll knew it.

The old TV news bulletin hadn't returned. The new one was made by the new all-TV staff. (Nor did the old theme return. The theme Carroll introduced in 1986 is still regarded as the best ever. Last year it came in at Number 11 on JJJ's Hot 100).

He had something of a personal victory as well, ending the year with Geraldine Doogue who he later married - the whole thing played out in the gossip pages, especially those of the Sydney Daily Telegraph.

Gerry and Ian were made for each other. The perpetually curious had found the perpetually insightful. And the perpetually shy had found the perpetually outgoing.

Some years later, forewarned the new ABC administration had it in for him, he fled to Nine and Today.

He made Today a cutting edge current affairs show, using the his instinct for knowing days or weeks ahead how something would pan out and what people would talk about.

(Incidentally he turned the other cheek and hired the same Daily Telegraph gossip columnist, who had made his life a misery, as his gossip/society reporter. Not many people would do that. Of course it worked. Carroll wouldn't have doubted it. The man who had caused him anguish was forced to confront the fact he had been dealing with a human being. Later he did the same thing at Four Corners, giving the ABC critic Gerard Henderson a role as guest reporter.)

While in commercial television he conceived LateLine and came back to the ABC with Kerry O'Brien. It worked partly because of Kerry's formidable interviewing skills. But it worked mainly because of the breadth of topics covered and the way in which almost every one was exactly in tune with the times. Carroll again. He read, he thought, he saw patterns.

Then there was Four Corners, the new national 7.30 Report (on which he employed me) and sudden retirement from all program making. He wanted a rest from continually thinking about the news, he told me.

In his new role he was a strategist, helping ABC adjust to new environments and new technology.

He foresaw the way TV reporters would eventually come to edit their own stories. He outlined this to me back in the late 1990s a decade before it happened. Equipment had traditionally been very expensive and staff relatively cheap. So it made sense to work a few pieces of editing equipment hard with dedicated editors. As equipment became dirt cheap and staff relatively expensive there would be little cost in leaving the editing equipment idle, putting one set on each reporters desk... and so on.

He set up the ABC's first add-on digital channels (later temporarily abandoned in a cost-cutting drive) years before the more recent, much praised ABC 2 and ABC 3.

And he saved Australia Television. Seriously. When the part-Murdoch owned Sky News made a bid to replace the ABC as Australian government's overseas television broadcaster during the Howard years, Murdoch was certain to win.

That Murdoch didn't was incredible. Unbelievable. Building the case, building the coalitions, understanding the subtlety of everyone's different positions, winning over a government that wanted to punish the ABC was almost impossible, and nearly killed Ian.

Saving Australia Television will be far easier this time. Well, it ought to be.

Along the way Ian quietly applied to be managing director of SBS TV. He made the mistake of telling the selection panel their mission statement was wrong. Rather than "communicating Australia's living diversity" the SBS should be focused on bringing stories from other nations to Australia.

He didn't get the job, but a few years later the SBS saw the light and adopted his sort of slogan: "Six Billion Stories and Counting". He was right, early.

Ian died last night of cancer, his family and friends gathered around him.

He was impossibly young - 64.

In one year we have lost Murray Sayle, Cathy Carey, Tony Barrell and Ian Carroll. We shouldn't have.

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Friday, August 19, 2011

Seven days until Craig Thomson has to grill the Reserve Bank governor

Do I need to say the obvious?

The governor will be under pressure next Friday.

Over his over his oversight of Note Printing Australia and his knowledge of bribes...

Over disputes at the Reserve Bank board.

I'll be there.

We are set to have the parliament represented by / the grilling led by a man who is himself compromised and has chosen to abandon legal proceedings that would have given him the opportunity to clear his name.

Can anyone else see a problem?

THE POWER INDEX: Craig Thomson's timeline

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Thursday, August 18, 2011

Maybe Craig Thomson will greet the governor

Gillard today:
"I have full confidence in the member for Dobell."

MP linked to prostitutes

Date: December 07 2010

Geesche Jacobsen

THE federal Labor MP Craig Thomson's mobile phone records, driver's licence details and credit card vouchers with his signature show he used a Health Services Union credit card to pay for the services of a Sydney escort agency, the Supreme Court was told yesterday.

The court was hearing legal argument in a defamation case brought by Mr Thomson, the Labor member for Dobell, against Fairfax Media, publisher of the Herald. The paper last year published allegations concerning the use of a credit card issued by Mr Thomson's then employer, the Health Services Union.

Fairfax's barrister, Sandy Dawson, told the court credit card statements for $2475 and $385 in Mr Thomson's name showed two entries in the name of Keywed Pty Ltd Restaurant in Surry Hills, on April 9, 2005 and August 16, 2007. That company name was linked to the escort agency Sydney Outcalls, he said, and it was not unusual for adult services to make the entry on financial records ''look like a culinary experience rather than a more sensual one''.

The credit card vouchers for the transactions were issued in Mr Thomson's name, were signed and noted a driver's licence number. According to subpoenaed RTA records, a licence with that number was issued to Mr Craig Robert Thomson of Bateau Bay. NSW drivers' photo licences can be used to verify a person's identification.

Mobile phone records for a number listed as Mr Thomson's on a 2006 union press release showed two calls to phone numbers associated with the escort agency, Mr Dawson told the court.

Around midnight on April 8, 2005 and on August 16, 2007 the records show a call to a number listed on the internet as belonging to the service. The records of August 15, 2007 also show calls placed in Bateau Bay in the morning as Mr Thomson had ''plainly come down the Pacific Highway down from Bateau Bay … to Sydney'', Mr Dawson said.

According to documents filed with the court, the calls were made to telephone numbers for ''Sydney Escorts - Room Service'' and ''Sydney Escort Connections'', both apparently associated with the Sydney Outcalls escort agency.

Mr Thomson has strongly denied using the credit card to pay for the services of an escort agency or other adult services. In court yesterday his barrister repeated his denials that he had signed the credit card vouchers or used ''the services in question''. ''These facts are hotly contested,'' Sue Chrysanthou said.

Mr Dawson alerted the court to the records, contained in an affidavit filed in court, when arguing Fairfax had properly sought an order for costs relating to dispute in the process of discovery for the defamation hearing.

Mr Dawson said Mr Thomson had supplied only an ''unverified list'' in which he listed no credit card documents for discovery.

But Mr Thomson's barrister responded by saying Fairfax had acted unreasonably and its original motion for discovery was ''ridiculous''. Ms Chrysanthou argued Fairfax was trying to ''bully and harass'' Mr Thomson and ''take advantage of their superior financial position and resources''.

''We never defended the motion … We just wanted the matter resolved, we just wanted the proceedings brought on,'' she said before Registrar Christopher Bradford, who reserved his decision on the application.

Mr Thomson is suing Fairfax over a series of articles dating from April 2009, claiming, according to his statement of claim, he has been defamed by suggestions he had been guilty of using his HSU credit card fraudulently and he had dishonestly used his employer's credit card to pay for the services of prostitutes.

Fairfax denies defamation and says the articles are true.

Senate Hansard

Wednesday June 15 2011

Senator RONALDSON (Victoria) (13:00): At the heart of this Gillard Labor government lies the truth that it is an illegitimate government. The government is not only illegitimate but also hopelessly divided. Only today we read how Labor backbenchers are at war with each other about policy decisions taken by their own party. It is a tale of zombies and daleks. The members—described by one of their own as 'zombies'—are generally too frightened to speak out. The factional warlords—the 'daleks', according to one past leader—are angry at their loss of power and influence. Today's media reports describe a vicious exchange in yesterday's caucus meeting between a backbencher from the New South Wales Central Coast, the member for Dobell, Mr Craig Thomson, and his New South Wales Labor colleague Senator Doug Cameron.

Paul Keating famously declared that where New South Wales Labor goes, so too goes the nation. This is indeed a troubling omen for our nation. Today I wish to discuss renewed allegations against the said Mr Thomson—all of which are on the public record. Mr Thomson's actions go to the heart of this government's legitimacy. Mr Thomson is now into his second term as a member of the House of Representatives. Nevertheless, serious concerns remain about Mr Thomson's past as a union heavy in the Health Services Union. There are serious allegations including allegations of fraud and electoral misconduct. It is time to end Labor's deafening silence concerning these very serious allegations. Put simply, it is time for the Prime Minister to show leadership. Mr Thomson is not fit to be a member of parliament and he should be stood down immediately. Of course, the Prime Minister knows this. In normal circumstances the member for Dobell would not be allowed to continue. But, in the so-called 'new paradigm' where the government has only a wafer-thin majority, the Prime Minister lacks the courage and the leadership authority to deal with the member for Dobell appropriately.

Before he entered parliament, the member for Dobell was National Secretary of the Health Services Union. His union provided him with a credit card which was to be used for union related expenditure. The member for Dobell was entrusted by the union to spend its funds appropriately—something he ultimately would not do. It is alleged that over a five-year period the member for Dobell withdrew $101,533 in cash advances from his union credit card. Further, it is alleged he used his union credit card to fund his election campaign for Dobell. Without any authorisation to do so, Mr Thomson allegedly spent over $104,000 of the HSU's money on his own election campaign. This alleged breach of trust by the member for Dobell resulted in both the HSU and Mr Thomson filing false election expenditure disclosure reports with the Australian Electoral Commission. So cavalier was the member for Dobell with his union credit card that it is alleged by Fairfax media that on at least four occasions he used the card to pay for prostitutes. Fairfax detailed those allegations, and I will not repeat them here today. Is this what the hardworking members of the HSU expect their union dues to be spent on? Is it right that the money that mums and dads gave to their union to represent them in the workplace is siphoned off for such activities? The answer is, of course, an emphatic no.

I will turn now to the HSU investigation. Ms Kathy Jackson took over as National Secretary of the Health Services Union when Mr Thomson entered parliament in 2007. She was reportedly appalled by the rorting that went on during Mr Thomson's tenure. Ms Jackson advised the union's lawyers, Slater and Gordon, to engage BDO Australia to conduct a forensic audit of the HSU national office. The member for Dobell was owed $191,913 in employee entitlements when he resigned from the HSU. However, due to the cloud that hung over his head concerning misuse of union funds, the HSU instructed its lawyers to write to Mr Thomson informing him that he would not receive his entitlements. Ms Jackson, courageously, reported the member for Dobell to Fair Work Australia for further investigation. Fair Work Australia's investigation into the member for Dobell is ongoing. Amongst other things, the investigation will determine whether his credit card expenditure breached any fiduciary duties which he owed to the union.

On the back of media allegations against him, Mr Thomson's inappropriate dealings have been raised on a number of occasions in Senate estimates with both the Australian Electoral Commission and Fair Work Australia. It has now become apparent that, despite his serious breach under the Electoral Act, Mr Thomson will avoid being charged with the serious indictable offence of providing a false declaration to the Com­mon­wealth. We have also learned that 12 people have been interviewed during the Fair Work Australia investigation and that several demands have been made for documents to be handed over. While Mr Terry Nassios of Fair Work Australia still has conduct of the day-to-day affairs of the investigation, and he believes that it would not compromise the investigation for it to be made public exactly who was interviewed, he has been overruled by the Gillard government at Senate estimates. The reason for being overruled remains unclear. Or is it? We are not allowed to know the names of the people interviewed or what they said. The investigation, we are told, will be completed in the latter half of this year. Following the investigation, Fair Work Australia will seek advice from the Director of Public Prosecutions as to whether to prosecute Mr Thomson. The matters I have raised today are not new. They were revealed exclusively by Mark Davis of the Sydney Morning Herald on 9 April 2009. At the time, the member for Dobell denied the allegations. He began defamation pro­ceedings against Fairfax. He complained to Simon Benson of the Daily Telegraph, 'Unfortunately as a politician you have to go through a legal process to prove your innocence.'

Mr Thomson's defence was that he was interstate at the time of some of the escort agency transactions. However, in interlocutory proceedings it was revealed that phone calls were made from Mr Thomson's own telephone to one of those agencies. It was also revealed that his drivers licence number matched the licence number taken down on the credit card slip when he paid for one of the escort agency services. At one point during the interlocutory proceedings, Mr Thomson was ordered to pay Fairfax's costs. On Monday, 6 June 2011, we found out that just days before a three-week jury trial was scheduled to begin Mr Thomson filed a notice of discontinuance with the Supreme Court of New South Wales. What does this mean? It means that, despite every opportunity to prove that he did not rip off his union and spend their money inappropriately on himself and his election campaign, Mr Thomson surren­dered. It shows that, despite the opportunity to prove in court, before a jury of his peers, that the serious allegations against him were false, Mr Thomson folded.

On 6 June this year, in a Sydney Morning Herald article headed, 'Labor MP drops case against Fairfax', Geesche Jacobsen wrote:

Fairfax Media, publisher of the Herald, was defending the case on the basis the allegations were true. It alleged that Mr Thomson was unfit to be a federal MP. Fairfax stands by the allegations published in the articles, which appeared from April 2009.

By filing a notice of discontinuance in his defamation proceedings against Fairfax, Mr Thomson has ensured that the allegations have now become the truth. It was reported in on 8 June that Mr Thomson is now alleging that Fairfax breached the terms of a confidential settlement and that he has again referred the matter to his lawyers. It is another action designed to stall the inevitable. It is another action that we know will not be followed up with completed legal proceedings.

In conclusion, this issue no longer rides on the back of the Fair Work Australia investigation or Mr Thomson's defamation proceedings, which is the subtle message being pushed by the ALP. The Prime Minister knows the truth. If she does not, then she should read the newspapers and Hansard more carefully. She must act now. These very serious allegations require her full attention. Her crumbling credibility and the diminishing authority of her government rest on her satisfactory handling of this matter. It is time for the Prime Minister to say whether or not she supports Fairfax media's statement. If she believes Mr Thomson is fit to be a member of parliament, the Prime Minister must make a clear statement explaining why. In doing so, she must publicly refute the allegations of fraud, inappropriate use of union funds for pros­titutes and syphoning of funds to support an election campaign; if not, she must immed­iately sack Mr Thomson. Mr Thomson refused to defend his credibility at trial and, as a result, the Prime Minister's credibility is now on trial.

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