Wednesday, August 26, 2015

Parkinson: We're 'sleepwalking into a mess'

Australia is facing the equivalent of a recession in the next decade as incomes grow at only a fraction of the officially forecast pace, the National Reform Summit has been told.

The past head of the Treasury, Martin Parkinson, told the Sydney summit that unless Australia acted quickly, it would sacrifice as much as 5 per cent of the economy in the next ten years, the equivalent of a recession.

"Unless we actually grab this challenge by the horns and really get concrete about what are the priority issues, we are actually going to find ourselves sleepwalking into a real mess," he said.

aug 26, 2015

Economic modeller Janine Dixon from Victoria University had told the summit the Treasury's Intergenerational Report had painted a "rosy" picture of the future, projecting average growth in real income per person of 1.4 per cent, meaning that by 2055 Australians would enjoy real incomes 75 per cent higher.

Her own modelling had real incomes growing by less than 1 per cent per year, meaning that by 2055 incomes would be only 44 per cent higher.

"Put another way, it would take an extra 20 years to reach the income forecast in the Intergenerational Report for 2055," she said.

Her modelling has productivity growing at only half the pace assumed by the Treasury, whose assumption was based on the unusually high decade of productivity growth that followed the economic reforms of the early 1990s.

Melbourne University economist Ross Garnaut said if her estimates turned out to be correct, the budget would "never get back to surplus".

Reserve Bank governor Glenn Stevens said Australia's economic growth rate had mostly started with a "two" instead of a "three", "despite the lowest interest rates in our lifetimes".

Dr Parkinson said if economic growth remained nearer to 2.5 per cent than 3 per cent, as much as 5 percentage points of gross domestic product would be lost over the next decade.

"If this is not happening because our population growth is slow, it means willingly accepting the impact of a recession," he said.

"The loss of GDP from a recession is about 5 or 6 percentage points."

Without acting we would be "sleepwalking into a real mess".

The summit has brought together 100 business and community leaders to try and discuss issues the organisers believe the government is afraid to touch. It is sponsored by KPMG, and both the Australian Financial Review and The Australian newspapers.

Asked to be specific about tax or spending measures that could help boost growth, Dr Parkinson said the most obvious way in which the tax system held growth back was the way in which it skewed tax concessions to the top end of the income distribution.

"It's not a retirement incomes policy, it's a wealth accumulation policy," he said. "That doesn't make sense to me. It's an obvious area we should be looking at."

The draft communique to be refined at the summit notes "widespread concern" that super tax concessions are used for purposes "inconsistent with the purpose of the retirement income system".

Australian National University tax professor Miranda Stewart cautioned the summit against cutting income tax rates in order to emulate either New Zealand or Singapore. She said New Zealand was more heavily taxed than Australia and Singapore housed most of its citizens in public housing.

In The Age and Sydney Morning Herald

Sunday, August 23, 2015

Happy Birthday: How copyright lost touch with reality

The world's most popular song is about to have a birthday.

It's Happy Birthday to You, and it will turn 121 on October 13.

Yet unbelievably, if we are to take at face value the claims of Warner/Chappell Music, it is still in copyright.

An awful lot of people find it easier to take the claims at face value. They pay up, making Warner/Chappell a reported $2 million a year from the song. It even hit up the American Girl Scouts for a fee after they sang it at a camp. Others buckle in different ways. At least one documentary movie has been withdrawn from circulation because it included footage of subjects singing Happy Birthday without authorisation. Most movies avoid it. How long since you've seen it in a birthday scene?

You're safe singing it at home though. That's a private rather than a public performance.

How can it be that a tune almost universally regarded as public property is still be in copyright 121 years after it was composed? Especially given that at the time the initial term of copyright was 28 years. The answers are spilling out in a US court case which is exposing how murky and fear-ridden the world of copyright really is.

One of them is that the world's favourite composition was a composition. Just like Kookaburra Sits in the Old Gum Tree, wrongly listed in the Angus and Robertson All-time Favourite Australian Song Book as "traditional", Happy Birthday was actually composed by a person: two people in fact, Patty and Mildred Hill – one of them a teacher, the other a musicologist. They tried out their compositions on Patty's students.

Somewhere in the late 1880s they achieved something remarkable: a song that fitted the limited vocal range of children yet was meaningful, a bit like Kookaburra.

Initially named "Good Morning to All", they published it in a 1894 book called Song Stories for the Kindergarten.

Decades later it began appearing in other books under a different title: Happy Birthday to You.

Until that point America hadn't had a birthday song.

Legal historian Robert Brauneis​ has made the song his life's work. He says birthday parties only became common in the early-1880s and birthday cakes in the mid-1880s. American schools weren't age-graded until the late 1800s, meaning America lacked "the prerequisites for the development of a standard birthday song – the proliferation of birthday celebrations that involved a dramatic moment at which a group of invitees, often children, addressed the honoree".

Until Happy Birthday.

By rights it ought to be long out of copyright, if it was ever in it. Back in those days authors had to register to stake a claim. The initial term was 28 years, with an extension of 14 years on application. But in 1909 the US extended the term of the extension, then extended it again in 1976 and again in 1998.

Every one of those extensions was retrospective, right up to the present 67 years, making a total of 95. This means that because the version Warner/Chappell claims to own was published in 1935, its multimillion-dollar copyright won't expire until 2030.

Or so it says. The performers it has touched up for money have found it easier to pay than argue, until now.

Touched up for a mere $US1500 in 2013, filmmaker Jennifer Nelson said no. She crowdfunded a lawsuit and has come up with what her legal team describe as a "proverbial smoking gun". Buried within a cache of documents initially withheld and too blurry to read was a copy of a book with the music with birthday lyrics published in 1922, well before the 1935 publication that Warner/Chappell claimed was the first. After finding the original in a library, her legal team determined that it lacked the copyright notice required at the time of first publication, meaning that Happy Birthday to You was probably never in copyright and was merely reprinted in 1935.

If the court rules in Nelson's favour Warner/Chappell might have to repay a fortune. But she has uncovered more than potential fraud. She's discovered how difficult it is for anyone to be sure of what happened so long ago. In Australia scores of songs and books are unavailable for public use merely because no one knows who owns them. They're called "orphan works", locked away forever, just in case.

This week Treasurer Joe Hockey announced a long-overdue Productivity Commission inquiry into Australia's intellectual property laws. It might turn out to be one of his most important decisions.

Peter Martin is economics editor of The Age.

In The Age and Sydney Morning Herald

Thursday, August 20, 2015

Virtual producers, bulk wine masquerading as boutique..

Wine producers face the prospect of losing their generous tax rebates in the wake of a Treasury finding of widespread and systematic rorting of the scheme.

Assistant Treasurer Josh Frydenberg has given the industry three weeks to respond to Friday's discussion paper, which puts forward four options: abolishing the rebate scheme altogether, replacing it with a grant scheme that would be phased out over time, banning bulk and unbranded wine producers from the scheme, and tightening the definition of "producer of wine".

Whereas beer and spirits are taxed per unit of alcohol, wine is taxed on the basis of its wholesale price. The Wine Equalisation Tax is set at 29 per cent, but the first $500,000 of each producer's tax is rebated, effectively exempting $1.7 million of each producer's wine.

The rebate was designed to support small winemakers. But the Treasury paper makes clear it is being used by much bigger winemakers multiple times.

Refund claims have increased each year since the scheme was introduced in 2005, climbing from $119 million to more than $300 million.

The Treasury says some so-called "virtual winemakers" are buying grapes and contracting out the manufacturing process solely in order to claim the rebate.

Other bulk wine producers who have claimed the maximum rebate allow their growers to retain grapes and claim another rebate as if they were the producer, getting a kickback from the growers in the form of inflated processing fees.

Producers are able to claim more than one rebate for the same parcel of wine by blending and remanufacturing in the name of different entities. The Treasury says the arrangements have survived despite legislation in 2012 designed to stamp them out.

Winegrowers are also able to claim multiples of the rebate limit by entering into partnerships. The paper gives an example of  "Jack, John and Jill" who each have a one-third interest in four companies. Each company acquires grapes from the same source and processes them in the same factory but, because none of the trio  neither Jack nor John nor Jill control any of the companies in their own right and because none of the companies control each other, they are each able to claim up to $500,000 in rebates, a total of $2 million.

In The Age and Sydney Morning Herald

Tuesday, August 18, 2015

By design. Why super system hurts women

Women put away only half as much super as men, and suddenly we're concerned.

The Senate is holding an inquiry. The finance industry is talking stop-gap solutions. The ANZ wants to give its female staff a $500-a-year top-up. Rice Warner wants to pay an extra 2 per cent into their accounts. Westpac is paying their super while they are on maternity leave. Their umbrella body, the Financial Services Council, wants the law changed so that women can top up their accounts later in life, when presumably they've got income to spare. Other solutions are dafter.

The ANZ is offering free financial advice to female customers with less than $50,000 in super. The Association of Superannuation Funds wants women to "take an hour" to check their accounts each International Women's Day. Newspaper columns suggest skipping coffee, getting spouses to pay into super or working for a company that values women.

Oh, and lifting compulsory contributions from 9.5 to 12 per cent. The industry loves that one.

Every one of these suggestions misses the point. Low income earners get less super than high income earners by design. It's the way the system is set up...

Women are usually low income earners. It's a fact. On average women employed full-time get 20 per cent less than men employed full-time. And because so many are employed part-time, their total wages are on average 33 per cent less. And that's when they are working. Because so many have interrupted working lives their life-time incomes are lower still.

It means lower contributions. Our super system gives the most to those who contribute the most, and then accentuates the difference by giving the greatest tax concessions to those who earn the most. It supports most who need it least. And we are meant to be surprised that it isn't aimed at women.

According to Roy Morgan research, typically, an Australian woman holds just $35,200 in super while a man holds $62,900. A retired woman holds $129,100 in super; a retired man has $192,600.

And because women usually live longer than men, the woman's money has to last longer. It's often said that women are able to rely on their men to get them through retirement. It's one of the tips for how to cope. But many retire without partners. Marriages don't last.

As the Human Rights Commission says: "It is inequitable and impractical that a woman's expectations of financial security in retirement should fluctuate according to her relationship status".

And it's dangerous. The commission says depending on male income "makes the significant number of women in violent or abusive relationships financially vulnerable, particularly as they reach retirement age and the possibility of acquiring an independent income diminishes".

If we were going to devise a system that actually supported those who needed it the most, we would devise nothing like the one we have at the moment.

In large part that's because our system wasn't designed; it grew. In presenting the report of his financial system inquiry late last year David Murray pleaded with the government to define a purpose for super. Is it to help middle-income Australians save a little bit more to supplement the pension? Is it to provide a tax break for the investments of high earners? Is it to replace the pension for all but the lowest of earners?

The system began as a short-term fix for a short-term problem. Retirement incomes scarcely entered into it. Ralph Willis, one of Labor's Treasurers in the Hawke/Keating era, remembers that the building unions had just negotiated a massive pay increase outside of the so-called Accord, under which centralised wage rises were handed out. If the increase had spread to workers within the Accord it would have reignited double-digit inflation.

"It was an open invitation to everyone else to breach the Accord," he told ABC radio years after retirement. "The way of resolving it was to turn it into superannuation."

Workers were given super in lieu of wage rises. Because they were unable to spend it until they retired, it didn't stoke inflation. Before long compulsory super accounted for 4 per cent of each wage, and then 9 per cent. Had the Rudd/Gillard Labor government stayed in office it would have climbed to 12 per cent (and there was talk of 15 per cent). All the while without an examination of what it was actually for.

It isn't supporting the retirements of those most in need. They are forced on the pension. It is helping middle-income Australians put away a bit more for retirement, but at the cost of leaving them with less than they could have in the middle of their lives. And it's serving as a tax dodge for high-wealth retirees who pay nothing on the earnings of their funds or on their payouts for the rest of their lives.

The best way to use super to help low income women would be to abolish compulsion, abolish the tax breaks, and let them access their income when they need it. The extra tax revenue could dramatically boost the pension, and better means testing could ensure the very well off still didn't get it.

It would help women because it would replace the system that hurts them rather than merely ameliorate its worst effects. The worst thing we could do would be to boost their compulsory super contributions, as the industry wants. It would further depress their incomes while leaving the differential on retirement in place.

In The Age and Sydney Morning Herald

Abbott's own figures show he could have done much more to fight climate change

The striking thing about Tony Abbott's attempt to balance damage to the environment against damage to the economy in choosing an emissions reduction target is how mind-bogglingly small the damage to the economy would be.

Abbott's cabinet endorsed the target last week. Whereas until now Australia has tried to lower emissions to 5 per cent below 2000 levels by 2020, at the Paris conference in December it will offer about the same as the United States". It is true the US is offering a cut of 26 to 28 per cent, but its cut is to be delivered by 2025, five years earlier than Australia's 2030.

Comparing like for like and assuming the US continued its promised rate of cuts beyond 2025, the US is offering 35 to 39 per cent, compared with Australia's 26 to 28 per cent.

Abbott might have been hoping we wouldn't notice...

On a like-for-like basis, we will offer less than Britain United Kingdom, less than Germany, less than the European Union, less than Canada and less than New Zealand; less than most of the countries with which we like to compare ourselves, including those with conservative governments.

The Prime Minister says the offer is better than Japan's target and better than China's.

But Japan has lost most of its low-emission power in the wake of the Fukushima​ disaster and China is a developing nation with living standards a fraction of ours. Its offer to cap its emissions before 2030 is more than we could have hoped for.

What's clever about Abbott's offer is that it's just enough for us to be taken seriously. We're at the bottom of a pack, we are not promising as much as needed, but at least we are in the pack.

And the Prime Minister says he has to be "economically responsible".

"We have got to reduce our emissions, but we have got to reduce our emissions in ways which are consistent with continued strong growth," he said on Tuesday.

Evoking an image of balanced scales, he said the last thing he wanted to do was to "strengthen the environment and, at the same time, damage our economy".

Which would make sense if the scales weren't so outrageously unbalanced. His own economic modelling makes the balance clear.

Abbott says it concludes that the cost of a 26 per cent cut in emissions will be "between 0.2 and 0.3 per cent of GDP in the year of 2030".

That's right, between 0.2 and 0.3 per cent of GDP. Not between 0.2 and 0.3 per cent a year, which would be noticeable, but far less than that – about 0.01 to 0.02 per cent a year, which would mean that in 15 years, the economy would be 0.2 to 0.3 per cent smaller than it would have been.

How big would it have been? By then, the projections in the intergenerational report have the economy being one and a half times as big as it is today.

Some of it will be the result of population growth – our population will be 21 per cent bigger by then – but the rest will the result of a higher standard of living, if the projections in the intergenerational report turn out to be correct.

By 2030, instead of being worth $1.6 trillion, the Australian economy will be worth $2.4 trillion; that's unless something dents that growth.

Abbott's modelling shows that the dent from an emissions target of 26 per cent would be 0.03 per cent. The dent would mean that instead of being worth $2.4 trillion when rounded to one decimal place, the economy would be worth $2.4 trillion when rounded to one decimal place. It'd be hard to see.

And hard to feel.

It would amount to $7 billion in a $2.4 trillion economy.

But by then, even with the emissions target, the economy would be growing at the rate of about $5 billion every four weeks. In six weeks, it would have made up the $7 billion it lost as a result of the emissions reduction target.

If you don't much mind feeling as well off as you did six weeks ago, you're going to not much mind an emissions reduction target of 26 per cent. Nor would you mind one much bigger.

The Climate Change Authority's assessment of what is needed works out at a 45 to 63 per cent cut in emissions on 2005 levels. It might set us back 14 weeks.

That's how small an economic price we would need to pay to do everything that could reasonably be expected to limit the increase in global temperature. That's how easy a confident government would have found it to do more.

In The Age and Sydney Morning Herald

Tuesday, August 11, 2015

Revenge, bloodymindedness and gullibility. The untaxing of capital gains

How on earth did we come to be lumbered with a tax rule so bad it is disliked by the Treasury, the Reserve Bank, the Business Council, the Council of Social Service, the Organisation for Economic Co-operation and Development, and both of Tony Abbott's most trusted business advisers?

And why on earth is Abbott still clinging to it?

The storyof how we came to be saddled with a system that taxes wages at twice the rate of profits made from trading real estate is an epic tale of revenge, incompetence, bloody-mindedness and gullibility. Along the way it has forced Treasurer Joe Hockey to set income tax rates higher than he should and fed an explosion in house prices by supercharging negative gearing.

It is, as economist Rory Robertson told his clients in the early 2000s, "almost as though the Australian tax system has been screaming at taxpayers to gear up to earn increased capital gains rather than to work harder to earn increased wages or salaries".

The tale begins in 1985 with what now seem two unremarkable decisions...

As part of the tax white paper process, Labor treasurer Paul Keating made fringe benefits and capital gains subject to tax. Remarkably, up to that point they hadn't been. It meant that if you were paid half your salary in benefits you weren't taxed on it. If you made half your income buying and selling property or shares, you weren't taxed on that. Only ordinary wage earners paid full tax.

These days the Coalition claims to have supported Labor's reforms of the 1980s. But it didn't support those two. The then opposition leader John Howard fumed. "Both should be scrapped – lock, stock and barrel," he said.

Labor made a generous and unnecessary concession. Instead of taxing the entire profit on the purchase and resale of shares or property, it taxed only the profit over and above the rate of inflation. This meant a negatively geared landlord could deduct from their taxable income all their interest payments (including the inflation component) but would have added to their taxable income only their "real" profit (excluding the inflation component).

But over time the rate of inflation fell. More than 8 per cent when Labor introduced the concession, it was heading to 2 per cent by the time Howard took over as prime minister in 1996. Speculators were close to being properly taxed. So under cover of introducing the goods and services tax, he asked his friend John Ralph to conduct a review of "business" taxation, sneaking in a very specific reference to personal tax.

The panel was to examine "capping the rate of tax applying to capital gains for individuals at 30 per cent".

The stock exchange lobbied hard. It commissioned a US economist associated with Reagan-era tax cuts to produce modelling showing that cuts to the capital gains tax rate would be "would be close to self-funding".

They would "yield large revenue feedbacks as holders of relevant assets are provided a greater incentive to sell". Really.

The stock exchange put (rough) numbers on it. At the time capital gains tax collections amounted to 0.4 per cent of GDP. If Australia cut the rate to near where it was in the United States, collections could climb to 0.7 per cent.

Ralph bought it. Under the heading "Rewarding Risk and Innovation", he told Howard to tax only half of each capital gain, and found that on balance the change would bring in more money than it lost.

Fifteen years on, it's possible to assess that claim. Before the cut, capital gains tax accounted for 0.4 per cent of GDP. In the latest year for which we have figures (2012-13) it brought in just 0.2 per cent.

Had capital gains tax been as effective as it was before Howard cut it, it would have brought in an extra $3 billion.

Ralph thought the cut would "encourage a greater level of investment, particularly in innovative, high-growth companies". Instead, it delivered windfall gains to those who had already bought real estate and encouraged everyone else to dive in.

Labor's Kim Beazley waved it through. Only Labor's Mark Latham was prescient, telling a largely uninterested Parliament the cut would "add to the great Australian disease of asset and property speculation, particularly in our big cities".

Reserve Bank official Luci Ellis told a parliamentary hearing last week that the capital gains tax cut boosted property prices more than share prices because property was easier to borrow against.

"It is just more profitable to negatively gear property, because you can gear it more," she said.

The Bank's submission to the home ownership inquiry fingers the capital gains tax cut as one of the key reasons borrowing to buy investment properties exploded from 1999. These days more than half of all the dollars lent to buy houses are snapped up by investors.

Tony Shepherd, handpicked by Abbott to head his commission of audit, says he would scrap the discount. "I can't see any reason for treating capital gains any different from income tax," he told a conference in June.

David Murray, picked by Abbott to head his financial systems inquiry, came out in favour of cutting the capital gains concession. The Business Council has called for a rethink, saying such concessions "distort investor behaviour, particularly at a time of rapid capital gains". The Henry tax review wanted the discount to be cut to 40 per cent and applied to all forms of saving. Labor said no. The Treasury uses its latest tax discussion paper to pose a simple question: to what extent do the benefits of the concession outweigh the cost?

Axing the capital gains tax discount would render negative gearing impotent. It would fund a cut in income tax and take the heat out of the property market. Just about everyone in Abbott's corner agrees, apart from Abbott himself, who's stopped listening.

In The Age and Sydney Morning Herald

Sunday, August 09, 2015

Indefinite copyright is a joke - the recipe for carrot marmalade proves it

I'm suddenly keen on carrot marmalade.

It's sugar-free and "one of the best remedies against the scurvy". I know this because Captain Cook received a letter in 1771 telling him so as he prepared for his second voyage to Australia.

It's in a book of his correspondence in the National Library, complete with the recipe.

About the beginning of October when the yellow carrots are the sweetest, you take fresh out of the ground as many as you intend to make use of. Take care to chose them well, that none with black spots be left between them.

But it's illegal for the National Library to reproduce it. Anyone who comes in to the library is free to look at it, but if the library tries to put it on its website or someone tries to copy it down, they would be in breach of the law. Seriously.

Under Australian law the copyright on published works expires 70 years after the death of the author. In the United States the constitution specifies that copyright shall last "for a limited time". But not so here. Australian copyright on unpublished works never expires.

This means the National Library is unable to digitise the recipe (although a renegade group known as the Australian Library and Information Association has put it on its website along with recipes for rhubarb chutney and muddle cake as part of Cooking for Copyright Day last Friday in which illegally published recipes were used to create treats for morning teas). Useful information is locked away forever. And not only letters to Cook.

If you intend to make but a small quantity of the marmalade you may grate your carrots upon a tin grater but should you want any large quantity, you may mince or hatch the carrots which you put into a kettle and add as much fresh water that your carrots be covered with about four inches.

The National Library also holds original letters written by Jane Austen, Charles Darwin, Henry Lawson, Banjo Paterson and Dame Nellie Melba - about 2 million in all, all of which will never fall out of copyright until the law is changed.

The State Library of South Australia holds the early records of the Holden motor company, including design drawings, from 1853. The War Memorial holds diaries and letters from soldiers who died in World War I. It devotes "enormous" resources to conserving them, but it can't put them online even though that's probably the only way to connect with surviving family members.

When your carrots are boiled enough, you must strain them well through a clean linen, and press the felt well, that all the juice may come out. The dregs are a good food for hogs, geese and ducks.

Australia's copyright term is too long. It was boosted from 50 years after the death of the author to 70 years a decade ago for no reason other than that the United States demanded it in return for granting us a free trade agreement. But that's for public works. The copyright on unpublished works is immortal.

You put the filtrated juice of carrots into another kettle and boil it again over a small fire until it gets the thickness of a fluid honey, at this last boiling you must take great care by constant stirring and by small firing to prevent its sticking to the kettle and burning, which will give to your marmalade a bitter and disagreeable taste.

All our librarians say they want to be able to one day digitise what they've got and share it with us. They've been lobbying the Attorney-General Senator Brandis, but he has other priorities.

In July he rushed through a law that would allow entertainment companies to apply to a court to block sites that illegally displayed programs such as Game of Thrones. It was urgent. Way back in November 2013, he received a series of recommendations from Australian Law Reform Commission report that would open up rather than close down access to information. He was going to carefully consider them.

Brandis is a big supporter of Australia's copyright laws. By waiting rather than acting, he is opening them to ridicule.

Should your marmalade spoil by some accident or other and get some moisture at the top, you take off the moisture with a spoon and boil it again and it will regain its first sweetness.

In The Age and Sydney Morning Herald

Tuesday, August 04, 2015

The Trans Pacific Partnership is still alive and still capable of doing us harm

Don't for one second think the Trans-Pacific Partnership is dead.

Talks to seal the mega-deal between Australia and 11 other nations representing 40 per cent of the world's economy broke up without agreement in Hawaii on Saturday, but agreement is close.

Those involved say all it needs is for a few of the parties to give ground on a few sticking points and all 25 chapters are ready to go.

The 12 trade ministers could meet again within weeks, before the end of August, and declare the deal done. The United States is desperate to get it signed before its extended election season gets into high gear. Canada has an election in October.

Australia is holding out for wants an exemption from so-called investor-state dispute settlement (ISDS) rules for decisions concerning health and the environment, and has so far held out against measures that would prop up the extraordinarily high prices of biologic drugs. But they are differences creative language could smooth over.

A draft of the investment chapter published by Wikileaks shows that Australia has asked to exempt four organisations, including the Pharmaceutical Benefits Scheme, from ISDS. But the request is in square brackets, indicating other nations don't agree. As a back-up, the chapter includes language almost exempting decisions designed to to protect objectives such as public health, safety and the environment. They would not be subject to ISDS "except in rare circumstances".

What this means in practice is that our Trade Minister Andrew Robb could agree to the clause and say Australia couldn't be sued in external tribunals over decisions concerning health and the environment (as it is now by tobacco giant Philip Morris under a different agreement) and later then down the track find himself in the middle of a "rare circumstance".

The clause wouldn't stop Philip Morris or its ilk suing Australia, it would just make it more likely Australia would win...

So far Australia has shelled out about $50 million defending its plain-packaging laws, even though it will probably win.

Australia's hard line on data protection for biologic drugs could also be softened. Biologic drugs are those made with living organisms. There are horrendously expensive. Soliris treats a rare immune disease. It costs our Pharmaceutical Benefits Scheme $500,000 per prescription. The PBS onsells it for $37.70, or $6.10 if the patient holds a concession card.

To get a drug approved, the manufacturer has to submit data from trials to demonstrate that it works and is safe. After five years that data is available to other firms that might want to make it after the patent expires. The US wants to lift the restriction to 12 years, locking away the data for an extra seven years and keeping prices high.

Data protection is separate to patent protection, which lasts for 20 years. If there's a big delay between the discovery of the drug and its approval, it can be additional to patent protection.

And it works the opposite way. Whereas patents grant exclusivity in return for handing over data, data protection grants exclusivity in return for not handing over data.

"You would have to sit in a committee room for a long time to work out a worse policy," says Nicholas Gruen, a patent expert who has prepared reports for the Australian government. "It grants a monopoly in return for nothing."

The US is reportedly considering a compromise to placate Australia. It's a base period of five years, followed by an extension of three years "under certain circumstances". However meaningful, it would allow both sides to claim they had won.

But even considering the idea makes plain how debauched the whole concept of trade agreements has become. In earlier decades the past trade agreements were unambiguously good for the citizens of the nations involved. They cut prices. This one puts them up. The US is using it it in an attemptto try to keep medicines expensive and the cost of taking on US corporations high. In Canada the pharmaceutical giant Eli Lilly is using an ISDS clause in the North American agreement to sue the government for failing to grant it two patents knocked back on the grounds that they weren't sufficiently innovative. Eli Lilly wants $500 million.

Somehowwhere along the road from the 1980s, trade agreements morphed from pacts designed to cut trade barriers to pacts designed to erect them. Negotiators who had previously worked to advance free trade started working to advance the interests of US corporations.

We saw it first in the early `90s in an odd request from the World Trade Organisation for Australia to extend its patent term from 16 years to 20 years. The then Labor government waved it through, handing existing patent holders an extra four years of high prices. A Productivity Commission study found the decision cost more than $376 million.

From then on the demands kept building, most of them made in secret. Much of what we know about the pact presently being negotiated in our name comes from Wikileaks. US corporations are allowed to see what's in it, ours are not.

Trade negotiating has become an exercise in fighting off bad proposals rather than enabling good ones. 

Gruen wants us to get back to basics. He says before we even start negotiations we should make three things clear: that tougher intellectual property laws hurt consumers; that they also have the potential to hurt producers who themselves rely on intellectual property; and that they can only ever be justified where the benefits exceed the costs.

It would put economics rather than tradeoffs at the heart of trade negotiations. It would give us an idea of what we are doing.

In The Age and Sydney Morning Herald

The PC's penalties finding: nothing much wrong here

The most important finding of the Productivity Commission's workplace relations inquiry is perhaps the most surprising, given how keen the government was to set it up: "Australia's recent labour market performance does not suggest a dysfunctional system."

Indeed, "strike activity is low, wages are responsive to economic downturns and there are multiple forms of employment arrangements that offer employees and employers flexible options for working".

It's what the OECD found when it visited Australia earlier in the year. Wages respond well to the labour market and the labour market responds well to wages.

Remember how concerned the Coalition was about our unfair dismissal laws back in the early 2000s when Tony Abbott was workplace relations minister? The commission says they are not particularly onerous by international standards. The number of claims lodged is "relatively small". The payouts are "quite low".

The rules are "unlikely to have significant negative impacts on medium to large businesses, especially considering that their purpose is not to minimise costs to employers, but to balance the interests of both employees and employers", it says.

The commission's broader point is that people are not machines. We employ them in accordance with "ethical and community norms".

Without regulation, "employees are likely to have much less bargaining power than employers, with adverse outcomes for their wages and conditions".

While Australia's minimum wage is high by international standards, modest increases in it are "unlikely to measurable affect employment".

The commission reached this conclusion knowing that Labor's shadow assistant treasurer, Andrew Leigh, found otherwise when an academic. But it says his study was conducted when the minimum wage was relatively higher than it is today.

It finds "compelling grounds" for keeping penalty rates. There are "proven adverse health effects" from night work. Public holidays are "by definition, intended to encourage shared community activities".

Not so Sundays. We do one-third of the weekend socialising we did back in the early 1990s, and twice as much shopping. The commission wants to update our workplace relations system. It doesn't want to destroy it.

In The Age and Sydney Morning Herald