Sunday, July 31, 2016

We need an inquiry into the entire Northern Territory

Anyone who doubts that the Northern Territory is different should look at the number of police per 100,000 residents. The Territory has 700. The next highest state, South Australia, has 312. The rest of the nation makes do with 267.

The Territory has 10 judicial officers per 100,000 residents. The rest of us have four.

In graph after graph, statistic after statistic, the Territory sticks out. It spends $1150 per head on police and courts, more than twice the $430 the rest of the nation spends. And it doesn't spend it to the satisfaction of its residents. Territorians are far less satisfied with their police than the rest of us. They are also the most likely to believe they don't "perform their job professionally" and don't "treat people fairly and equally".



And the Territory's super-expensive rehabilitation system is extraordinarily bad at rehabilitating. Sixty per cent of the prisoners released from the Territory's jails are back within two years, compared to half in the rest of Australia. The latest Productivity Commission report shows that one-third of the Territorians who've completed community service orders are back on new ones within two years, compared to one-fifth in the rest of the nation.

The commission is incredibly careful not to draw conclusions from the data it lays out each January in its report on government services. It needs the cooperation of the states in order to get the otherwise unpublished information.

If it was less guarded, it would probably say the jailers in Territory are particularly unproductive. There's one for each nine prisoners, compared to one for each 16 elsewhere. Yet for the most part they simply keep their prisoners locked in cells, for an average for 17 hours each day, compared to 10 hours in the rest of the country. And they are far less concerned about improving prisoner's lives. Only 14 per cent of Territory prisoners attend training courses, compared to 32 per cent in the rest of the nation.

If the jailers live a featherbedded life compared to the largely Indigenous population they are responsible for, it's symptomatic of the Territory as a whole. It employs 12 per cent of its population as public servants, compared to 7 per cent in other states. And it pays them better, an average of $83,000 compared to $75,000 per annum, according to my calculations. It is able to do it because it gets five times its per capita share of the GST distribution. The next most looked after state, Tasmania, gets only 1.8 times what it puts in.

Tragically, the Territory gets the largesse because the formula awards it extra points for Aboriginal disadvantage. But there's no requirement under the Grants Commission rules for it to actually spend that money on Indigenous disadvantage, meaning there's a financial incentive for it not to.



As Australia's foremost expert on state taxation, Neil Warren, puts it, "the Northern Territory likes to have a disadvantaged population – it has no interest in removing disadvantage".

The Prime Minister is right to limit his royal commission into the shocking treatment of youth in detention to the Northern Territory. It'll enable it to zero in on the problem and provide lessons for the rest of Australia.

But his next step should be a proper inquiry into the Grants Commission formula and to the Northern Territory itself.

If it was a state, it'd be a failed state, propped up by creaming off aid intended for its most disadvantaged citizens. It's nearer to us than the other failed states. We are able to fix it.

In The Age and Sydney Morning Herald

Thursday, July 28, 2016

Coal is behind the attacks on wind turbines

First they were supposed to be destroying birds, then sleep. Now wind turbines are being blamed for destroying the Australian electricity market and pushing prices as high as $14,000 per megawatt hour.

As Victoria gives the green light for a massive $650 million wind farm with up to 104 turbines at Dundonnell, 200 kilometres west of Melbourne, and with talk of more wind farms in NSW a Liberal senator has been calling for a moratorium on new turbines until the Productivity Commission examines what they are doing to prices.

"There should be no further subsidies paid for an intermittent and unreliable power source that can be seen as as proven failure," Senator Chris Back is quoted as saying, in an apparent attempt to prejudge the inquiry he is calling for.

On the face of it, it's an odd idea: that adding a new and very cheap source of power should push up prices (wind turbines cost next to nothing to operate). And for the record, it's not true. South Australia has more wind turbines than any other state. They supply more than one-third of its power. Yet a graph prepared by the Australian National University's Hugh Saddler shows that South Australia's average electricity price was much higher when they only provided 10 per cent.

The complaint is about spot prices, those instant short-lived prices the big industrial users have to pay if they haven't insured against sudden movements, as a lot have not. Spot prices did indeed jump into the stratosphere a week or so back when the wind wasn't blowing. The typical spot price facing an industrial customer is $100 per megawatt hour. Suddenly they faced $14,000 – a more than 100-fold increase. Ever since South Australia closed its last coal-fired power plants and mothballed its newest and most efficient gas plant it has had to import extra power from interstate when the wind has been low.

Normally, this isn't much of a problem, but as it happened the main cable used to import power from the eastern states was operating way below capacity when the wind dropped. It was being upgraded from a maximum capacity of 460 to 650 megawatts. That'll mean fewer problems in the future, but it created an awfully big problem at the time. So much so that the South Australian government directed the Pelican Point gas-fired power near Adelaide to get back on line.

It had been closed because the owner could make more money selling its gas contracts to exporters. So South Australia faced special circumstances. The gas export boom had closed one backup power supply and work on upgrading a line had closed another.

But we are forever being told there are lessons for the rest of us. One newspaper refers to South Australia as "the canary in the coal mine". Australia as a whole can't import power, the argument goes, and if it relies on wind as much as South Australia does, its backup generators might go out of business.

The truth is more complicated. The worst kind of generators to run alongside wind turbines are the coal-fired ones. They're extraordinarily bad at switching on and off, which is what's needed to fill the gaps when the wind's not running. The best kind are hydro plants, and combined-cycle gas turbine plants. Moving to wind necessarily means closing redundant coal-fired generators, which is needed anyway in order to cut carbon emissions.

It doesn't mean that at all for combined-cycle gas turbine or hydro plants.

And guess which industry has been most heavily promoting the canary in the coalmine argument? Yes, the coal industry, through the Minerals Council of Australia.

With fewer coal-fired plants, and with wind plants scattered throughout the nation, the system has the potential to work surprisingly well. Energy analyst David Leitch points out that in South Australia most of the wind turbines fire up at the same time, but if they were also placed in northern NSW and Tasmania (where the wind blows at very different times) each would fill the other's gaps.

South Australia and Tasmania overlap only 10 per cent of the time. At other times, the gap would be filled by storage: either batteries or water storage as wind power pumps water up to the top of mountains while the wind's abundant and lets it drop through hydro plants when it's not.

Wind needn't be a problem, regardless of what you've been told. But it does leave very little role for coal, which supplies base load power for which a wind-dominated system would have little use.

Asked to model the cheapest possible way of supplying electricity in the future if Australia needed to cut its emissions by three quarters, Ben Elliston of the University of NSW and Jenny Riesz of the Australian Energy Market Operator came up with a scheme in which 60 per cent is produced by wind, 17 per cent by gas and only 6 per cent by coal.

That's the future facing our traditional generators as more turbines get built. Not blackouts, not big price spikes, but extinction. I reckon it's the real reason their friends are upset.

In The Age and Sydney Morning Herald

Thursday, July 21, 2016

ABS endangers the census by asking for names

Expect to hear lots about the census. From August 1 we will be getting letters advising us of our login codes instead of the traditional hand-delivered forms. The catchphrase is "get online on August 9".

But what we won't be told as loudly is that there's another more fundamental revolution planned for 2016. The Bureau of Statistics is going to keep our names.

The deal used to be that our answers were anonymous. The bureau got to find out where we lived, where we were born, who we worked for, what we got paid and what religion we subscribed to, but it didn't get to keep our names.

The census collected statistics rather than information on individuals (although it was extended 10 years ago when the bureau began to ask us about our exact date of birth rather than our age).

This provision of our names will be compulsory. At least that's what the bureau says, although it is hard to see what the legal basis it would have to prosecute someone who refused to hand over their name.

The Census and Statistics Act empowers it to direct people to provide "statistical information" and requires it to "publish the results of these statistical collections". Names aren't usually thought of as statistics, and there would be an outrage if the bureau actually published them. Bill McLennan, a former head of the bureau who helped rewrite the Census and Statistics Act in the early 1980s, says flatly that it doesn't have the authority to demand names.

The bureau says they will be stored separately from the rest of the census for up to four years and released only in an "anonymised" form for projects "approved by a senior-level committee and subject to strict security provisions". Those projects will link what the bureau knows about us from the census with other information authorities know about us, "in the public good".

I can think of any number of such worthwhile linkages in the public good. One would be linking the census to the Pharmaceutical Benefits Scheme to find out what drugs are prescribed to people in what occupations and what family circumstances. Examples the bureau uses are weaker, including the better targeting of mental health services, something that could probably just as easily be done without names.

Tell the ABS this is the first you've heard of its decision to retain everyone's name and it'll scoff. It outlined it in a press release issued the Friday before Christmas with the misleadingly vague title of ABS response to Privacy Impact Assessment.

It conducted the privacy impact assessment itself and found that "retaining names and addresses for the purpose of richer and more-dynamic statistics and more-efficient statistical operations has very low risks to privacy, confidentiality and security". One of the risks it dismissed as low was "function creep" - a gradual increase in the use of names as more and more government agencies pressed the bureau to exapn its use of them.

In place of broad consultation (it appears not to have approached the Australian Privacy Foundation) it convened its own small focus groups. "In working through examples, focus groups were generally comfortable with the protections that the ABS would put in place," it says.

Which would be a change. The first time it put forward the idea in the lead-up to the 2006 census, it was rewarded with a damning (genuinely independent) privacy impact assessment by privacy expert Nigel Waters. It considered trying again in the lead-up to 2011 census but but was overruled by then Australian Statistician Brian Pink amid concern about a public backlash.

Since Pink left in 2014, the ABS has rumbled along in a leadership and oversight vacuum. He wasn't replaced for 11 months, during which time the bureau suffered appalling problems with its unemployment survey and drew up cost-saving plans to abandon the 2016 census and move to 10-year surveys rather than five.

Pink's successor, David Kalisch, flicked the switch to "go" only last May when the parliamentary secretary, Kelly O'Dwyer, managed to secure enough money to both upgrade the bureau's ageing aging computer system and retain the census.

Four months later O'Dwyer was promoted and replaced by Alex Hawke who has just been promoted and replaced by ... well this week no one was quite sure, but the census will probably become the responsibility of the Treasurer, Scott Morrison.

The daftest thing about the bureau's poorly communicated decision to retain and use our names is that it'll run alongside its existing "time capsule" program in which we are invited to give our consent for our details to be accessed in 99 years, but not before.

"Information is only kept for those persons who explicitly give their consent," the bureau's website assures us, somewhat redundantly. McLennan says what's planned is without doubt "the most significant invasion of privacy ever perpetrated on Australians by the ABS".

When the Crikey website wrote about it earlier this year, the ABS accused it of undermining the "complete public trust" it needed to conduct the census and get accurate rather than falsified information. It's making a good fist of it itself.

In The Age and Sydney Morning Herald

Census: They've been quietly holding on to our names for years

The Bureau of Statistics has been quietly hanging on to the names it collects with the census to conduct studies, despite a public commitment to destroy them.

Australian statistician David Kalisch told Fairfax Media the Bureau had been keeping the names it collected for up to 18 months.

"They've done it under the guise of: 'this is while we are processing the data'," he said.

"They've done linkages, they've done other things. What's happening now is we are being more transparent about it."

The studies have been conducted despite a commitment on the ABS website that "name and address information will be destroyed once statistical processing has been completed".

They used the names and addresses on census forms to link the census answers to department of immigration records, to school enrolment records and to the Australian Early Development Index.

The names were destroyed only after the records were linked.

Separately, and without asking for consent, the Bureau has been tracking five per cent of the population (more than one million people) through what it calls the Australian Census Longitudinal Dataset.

It has been using the names on the forms to create "linkage keys", which enable it to follow respondents over time. Each census, the same name produces the same linkage key, enabling movements to be tracked. Once each key has been created, the name itself has been destroyed. It is impossible to reverse-engineer a key to derive the name.

"In 2016, I have decided to keep names and addresses for longer," Mr Kalisch writes in today's Sydney Morning Herald and Age. "This will enable the ABS to produce statistics on important economic and social areas such as educational outcomes, and measuring outcomes for migrants."

Labelled by former Australian Statistician Bill McLennan "the most significant invasion of privacy ever perpetrated on Australians by the ABS," the decision will formalise what was happening informally before Mr Kalisch joined the ABS in 2014. It will extend the period for research using names from 18 months to four years. All names collected will be deleted by August 2020 or when studies have been completed, whichever is the soonest.

The decision is a retreat on a announcement in December that names and addresses on census forms would be retained indefinitely.

"There are extremely robust safeguards in place to protect the privacy and confidentiality of the information collected in the census, including names and addresses," Mr Kalisch writes in today's Fairfax Media publications. "The ABS never has and never will release identifiable census data."

Kat Lane, vice-chair of the Australian Privacy Foundation, said the real issue wasn't the ABS security system. It was that there was no justification for tracking or personally identifying Australians.

In The Age and Sydney Morning Herald

Wednesday, July 20, 2016

Hard times. We're no better off than in 2009

If you think you are worse off despite a raft of economic statistics saying things are getting better, you're probably right.

Australia's longest-running household survey finds home ownership is increasingly out of reach for many of us, one in eight families don't have $500 in savings in case of emergency, and that real household disposable incomes peaked in 2009.

Australia's longest-running Seven Up! style longitudinal survey of Australian households finds that real household disposable incomes peaked in 2009 and still aren't back to where they were.

The finding is different from those of other studies that survey different Australians at different times.

The Household, Income and Labour Dynamics in Australia survey (known as HILDA) tracks the same 17,000 Australians each year to find out whether their particular living standards have improved rather than those of the population on average.

Beginning in 2001, the survey finds that the typical household was better off each year until 2009, with the typical real household disposable incomes climbing from $57,704 to $76,264 - a gain of 32 per cent.

The gain includes more than what happened to households on average, it includes promotions and increased employment opportunities for household members surveyed.

Between 2009 and 2011 the global financial crisis pushed down typical household income 5 per cent to $72,260 as household members lost jobs, worked fewer hours and lost pay rises.

Since 2012 household income has recovered slowly, climbing to $75,731 in 2014, still 0.7 per cent worse than in 2009, meaning typical Australian families are no better off than they were five years ago.

Household disposable income is the combined income of all household members after receipt of government pensions and benefits and after taxes. It is adjusted for inflation.

Household wealth has also been slipping, sliding 3.3 per cent since 2010. Between 2006 and 2010 it climbed 4.8 per cent.

Superannuation is the most important household asset after property, but it is a long way behind.

In 2014 the average household owned a home worth $392,241, secured with a debt of $100,689 and a second property worth $138,718 secured with a debt of $42,226.

The average superannuation balance was $168,011, average share ownership $44,116 and average cash in the bank $51,118.

But in this survey, 12 per cent of households surveyed were unable to lay their hands on $500 of savings in the event of an emergency.

Almost 80 per cent said they believed that savings of at least $500 were essential.

Five per cent were unable to afford dental treatment when needed. Almost all believed that dental work was essential.

Seven per cent were unable to afford new clothes for their school-aged children. Sixty per cent believed new clothes were essential each year.

Professors Peter Saunders of the University of NSW and Roger Wilkins of the University of Melbourne used the answers to construct a "deprivation score" which counted the number of essential items the individual could not afford.

Twelve per cent of Australians were deprived of at least two essential items. Seven per cent were deprived of at least three.

Single parents had the worse deprivation score, with almost 20 per cent unable to afford three or more essential items.

Singles were much worse off than couples regardless of whether they had children.

Nine per cent of single non-elderly men were deprived of three or more essential items and eight per cent of women.

Retirees were much better off with only 3.5 per cent of singles deprived of three or more essential items and less than 1 per cent of retired couples.

Fourteen per cent of unemployed Australians were unable to afford three or more essential items.

In The Age and Sydney Morning Herald

Sunday, July 17, 2016

Austerity is the giant 'natural experiment' that cost a British treasurer his job

What if the prime minister sacked the treasurer and promised to govern for everyone, not just those near the top?

"That means fighting against the burning injustice that if you're born poor you will die on average nine years earlier than others; if you're black, you're treated more harshly by the criminal justice system than if you're white; if you're a white working-class boy, you're less likely than anybody else to go to university; if you're at a state school, you're less likely to reach the top professions than if you're educated privately; if you're a woman, you will earn less than a man; if you suffer from mental health problems, there's not enough help to hand; if you're young, you'll find it harder than ever before to own your own home."

The prime minister is Britain's Theresa May, outlining a new set of priorities. And yes, she did sack the treasurer as soon as the Queen commissioned her on Wednesday.

George Osborne had been Chancellor of the Exchequer (Britain's treasurer) since the Conservatives won office in 2010. Inheriting an economy only just emerging from the global financial crisis he blamed Labour for the resulting debt and introduced a £40 billion ($70 billion) austerity budget that hiked the goods and services tax and slashed welfare and infrastructure spending in order to quickly restore the budget back to surplus.

I should point out that there's no real parallel in Australia. Despite all their talk about quickly restoring the budget to surplus, Tony Abbott and his treasurer Joe Hockey were far too clever to attempt to do it here, as are Malcolm Turnbull and Scott Morrison.

The ratings agencies applauded, and Britain's economic recovery collapsed. The Nobel Prize-winning economist Paul Krugman says the UK was almost unique in having "gratuitously chosen to pursue austerity".

Six years of depressed economic growth later the ratings agencies took away its AAA credit rating anyway in the wake of Brexit vote. The vote was in part a reaction to what British citizens had had to endure.

Now a new study, by Larry Summers and Antonio Fatas of the US National Bureau of Economic Research, finds that rather than boosting confidence and economic growth as the British treasury had expected, or at least damaging it for only a short time, the austerity budgets in Britain and its neighbours appear to have left "permanent scars", lowering economic growth for good though a process known as hysteresis.

Hysteresis is a scientific word referring to the phenomenon by which when some materials are heated or given an electric charge they change permanently, not reverting to their former state when the heat or charge is removed

While they don't put numbers on the lower economic growth they think Britain will have to permanently endure as a result of the austerity budgets, other estimates suggest the UK economy is 4.5 per cent smaller than it would have been had the budgets not depressed an already weak economy. And to little effect. The wonder of mathematics means that winding back GDP growth in order to cut the debt-to-GDP-ratio itself pushes the ratio up.

Krugman says Britain has just conducted what amounts to a giant natural experiment. We'd be wise to note its results. Theresa May already has.

In The Age and Sydney Morning Herald

Thursday, July 14, 2016

The three simple tweaks that would tell us the truth

What if budgets, and candidates for office, told the truth?

All it would need is a few simple changes to the law. Each is within reach. Nick Xenophon and the rest of the Senate crossbench have been handed an unparalleled opportunity to remake the budget and political process while their bargaining power is at its peak. Malcolm Turnbull probably wouldn't even mind. Like his predecessors, he himself would like things to work better, but left to himself he'll never get around to it.

Here's what Nick and his colleagues should ask for:

1. A Parliamentary Budget Office that can tell the truth

Right now, for the most part, it is gagged. If (say) Labor asks it to cost an election policy, it will produce a document of up to 20 pages setting out the specific proposal it costed, the reasons why it arrived at the figure it did, and a reliability score on a six-point scale from "very low" (black) to "high" (green). But in the election just pastpassedLabor hung on to every one. We were left to guess the means by which the PBO arrived at the figure Labor said it had and how reliable the PBO thought it was.

The law doesn't allow the PBO to release its costing documents itself, no matter how much it is verballed. It is able to correct the record if a party says it has come up with one figure when it has come up with another, but that's as far as the law enables it to go. It is perfectly open to the political party that requested the costing to release it, and the Greens routinely do. But Labor, and before it the Coalition, has taken the tactical decision not to. They don't want to give the other side something to attack.

In the 2013 election it reached farcical proportions. Labor had serious doubts about the Coalition's proposal to save $5.2 billion over four years by letting go of 12,000 public servants. It couldn't see how the numbers added up. They added up because the Coalition planned to start the cuts immediately rather than later as the Labor had assumed, but Labor didn't know that. So it launched its attacks in the dark. As they intensified and as the Coalition stonewalled, it showed selected journalists a copy of the PBO report. They could glance at it but couldn't copy it in case it fell into Labor hands.

The Parliamentary Budget Office costs $20 million per election cycle. Yet its work is regarded as private property even after the policies it has costed are publicly announced and the PBO's figure is quoted. That's until 30 days after the election has produced a prime minister. Yes. Bizarrely, the PBO is required to publish its policy costing documents after the election is over, when it's too late for them to make any difference. The Governor General commissioned the prime minister on Monday, meaning we won't be able to properly examine what we were promised until August 10.

In NSW an improved version of the Commonwealth legislation requires the Parliamentary Budget Officer to publicly release a costing document "when the parliamentary leader who requested the costing notifies the Officer that the policy has been publicly announced". The requirement in no way restricts the ability of political parties to consult privately with the Office about potential policies that may never see the light of day. But as soon as a final policy is put before us with a price tag, we've a right to know exactly what that policy is and what the price tag means.

It's hard to see the prime minister objecting to such a requirement, unless he is planning to be in opposition. It requires more from the opposition than from the government. The government tends not to use of the PBO, relying on the public service up until the election is called.

2. A zombie-free budget

We were told that the May budget marginally improved the financial outlook. What we weren't told, explicitly, is that $8 billion of the measures in it were so-called "zombies", left over from the 2014 and 2015 budgets. If they couldn't get through in 2014 and 2015, it's a fair bet they won't get through in 2016. The ratings agencies think so. An honest budget would exclude those savings from the bottom line, allowing them to be treated as a bonus in the unlikely event that they ever eventuated. A simple change to the rules would allow only new measures to be counted toward the surplus or deficit, weakening the published budget position but making it more credible.

3. A split budget

Right now investment in projects such as railways and hospitals is treated the same in the budget as day-to-day spending on things such as salaries. But it's not. Wisely chosen investment projects are worth borrowing to fund, but day-to-day salaries are not. An honest budget would split recurrent spending from investment spending, making sure the first was usually in balance and the other usually in deficit. The change would make the published budget position look better than it does now and would probably please the ratings agencies because it set out the truth.

Xenophon and the crossbenchers should ask for each of these changes and also for proper cost benefit analyses ahead of any major new infrastructure projects, tax changes or trade deals. It's not much to ask, but it might turn out to be the most valuable thing they achieve.

In The Age and Sydney Morning Herald

Thursday, July 07, 2016

The campaign's other big lie: 'export agreements'

Here's another lie. Our trade agreements boost exports. Malcolm Turnbull and Scott Morrison said so repeatedly during the campaign on the basis of next to no evidence, rebadging their agreements with Japan, Korea and China "export agreements".

Even on election night the Foreign Minister Julie Bishop used the line, castigating its biggest election winner, South Australia's Nick Xenophon, for expressing scepticism.

"He is against free trade agreements," she told the ABC. "South Australia is the state that will benefit enormously from the free trade agreements the Coalition have signed."

Xenophon isn't against trade agreements. He wants the Productivity Commission to run benefit-cost studies on what they actually achieve, something the Coalition has resisted at every turn.

There's no evidence that South Australia or any other state will "benefit enormously from the free trade agreements the Coalition has signed", in large part because the Coalition has ensured there isn't.

It refused outright to commission a cost-benefit analysis on the giant Trans-Pacific Partnership deal it signed in February which is yet to be ratified. More than a decade after it negotiated the US-Australia Free Trade Agreement it hasn't looked back to find out what happened. A prospective study it did commission on the new Japan, Korea and China agreements found that taken together they will boost our exports 0.5 to 1.5 per cent, while boosting our imports 2.5 per cent, which means they will send our trade balance backwards.

Rather than being "export agreements", the deals for which we have data are better described as import agreements. In every case for which we have clear evidence, our trade agreements seem to have boosted imports more than exports.

Until 2003 we only had one, with New Zealand. We preferred to cut tariffs unilaterally and argue for global free trade rather than play favourites. In the 13 years since then we've added, or are adding, 13.

After the first new-style agreement with Singapore in 2003 our exports climbed much as before while imports (goods and services) surged. After the 2005 free trade agreement with the United States, both imports and exports continued on the trend lines set previously with imports climbing faster than exports, as they did for Chile and Malaysia and as they will for China, Japan and Korea.

Which isn't to say imports aren't welcome. Increased imports lift our standard of living. And while they can lead to the closure of old Australian industries, such as the car industry, they can boost new ones by ensuring the supply of cheap inputs.

But that isn't an argument for our never-ending pipeline of trade deals. We could get the same cheap imports more quickly by cutting all of our tariffs to zero. Seriously. We could do away with much of our mammoth self-perpetuating trade negotiating bureaucracy and trade more simply.

The Treasurer himself provided an unintentional window into how complex these trade agreements have become when during the campaign he lauded "export trade deals that generate some 19,000 new export opportunities".

What were these 19,000 new export opportunities, I asked one of his staff. The number refers to the count of specific line items in the China, Korea and Japan free trade agreements. That's how complicated they've made trade.

A huge chunk of the traders surveyed by the Australian Chamber of Commerce and Industry don't use them.

"In my experience, they have been a waste of time, particularly Thailand. The paperwork to qualify was so onerous it wasn't worth the effort," says one member.

"I know we have one with the US and I know there is one now with Japan and Korea. Is that correct?" says another.

Using the agreements costs more than time. In order to get low-tariff entry into a market such as the United States, an Australian company has to comply with "rules of origin", which means it needs to ensure that no more than a certain percentage of its inputs is sourced from countries outside of Australia and the United States, sending up costs. In 2010 the Productivity Commission found these extra costs amounted to as much as 8 per cent per shipment.

Where exporters attempt to apply with the rules, they shrink trade. One of the few studies of the impact of the US-Australia Free Trade Agreement found it shrank both nations trade with the rest of the world.

That agreement had 980 rules of origin. One of our latest, with Korea, has 5205. The Trans-Pacific Partnership has even more. And because the agreements are not always consistent with each other, the "noodle bowl" of overlapping requirements makes attempting to trade using the new agreements harder still.

Which would be bad enough, were Australia not negotiating more. In the early stages of negotiation are agreements with India, Indonesia, the European Union and a Regional Comprehensive Economic Partnership linking us separately to China, Japan, Korea, Singapore, New Zealand, Thailand, Malaysia, India and Indonesia.

The Productivity Commission wants to take stock, and from here on have it or the Treasury examine whether the deals are actually worth doing. A government genuinely concerned about making things easy for business would have agreed long ago. Xenophon, the Greens and Labor are about to make it see sense.

In The Age and Sydney Morning Herald

Sunday, July 03, 2016

So you think you voted wisely

So you think you voted wisely. Up until 1984 the candidates' names on the House of Representatives ballot paper were arranged alphabetically. So much did this advantage candidates whose names were near the beginning of the alphabet that half of those elected had names starting between the letters A and H.

Andrew Leigh, who with Amy King researched ballot paper order for his book The Luck of Politicssays the candidate at the top gets an extra 1 per cent of the vote. He says that since 1996 there have been nine such candidates who won by less than 1 per cent – one of whom was former Labor leader Kim Beazley.

Gender is also a matter of luck. Leigh says being a woman costs you one-third of a percentage point and makes it much less likely that you will be preselected at all. Of the 13 vacant yet safe seats up for election this time, 12 went to men.

Having a Muslim-sounding name sets you back as well. Leigh and King reckon it equates to 2.3 percentage points. An Asian name costs 1.5 percentage points and a continental European name 0.7 percentage points.

Their findings echo those of Queensland economists Redzo Mujcic and Paul Frijters who asked volunteers to get on buses, claim that their travel cards didn't work and ask to stay. They ran the experiment 1500 times. The success rate of the whiter-looking volunteers was 72 per cent, the success rate of those with darker skin was 36 per cent.

In the Northern Territory, where photos are allowed on the ballot paper, Leigh and Tirta Susilo analysed the results of the 2005 election and found that in predominantly white electorates those candidates with lighter skin did better. In the electorates with a high indigenous population, dark-skinned candidates did better.

And beauty itself is important. Leigh and King collected the photographs displayed on how-to-vote cards in the 2004 federal election and asked an independent panel to rate them. They found the best lookers (in the top 15 per cent) got an extra 1 to 2 percentage points. Oddly, beauty mattered more for male than female candidates.

Leigh is now himself a Labor politician, re-elected on Saturday. He is male, Anglo and symmetrically faced. But he is self-aware enough to acknowledge that his success is due as much to luck as competence. Most of us aren't.

In his new book Success and Luck: Good Fortune and the Myth of Meritocracy Cornell University's Robert Frank writes that we are incredibly keen to believe the good things that happen to us are the result of our own actions. He says it's not such a bad strategy (it helps to take responsibility) so long as we realise that it isn't true.

Songs become hits if the first one or two web reviews are good, regardless of the others; unknown actors become megastars when they are chosen because the big names aren't available; VHS beat the Beta because it was adopted first by the porn industry.

Frank describes an experiment in which volunteers were sent into rooms and given a problem to solve. One member of each group was arbitrarily made the leader. After half an hour a tray of biscuits was brought in, with four for the three volunteers. In every case the randomly-appointed 'leader' grabbed the fourth biscuit.

It would be nice if those we elected on Saturday showed humility. It'd be nice too if they remembered that the richest among us might not deserve their tax cuts. It would be best if all of us acknowledged that, but for a few rolls of the dice, we would be somewhere completely different.

In The Age and Sydney Morning Herald

'Mediscare' worked because we were already scared

Scare campaigns only work when they reinforce or add to what is already known. 

Within weeks of its election in 2013 the Coalition entertained a proposal from a former advisor to Tony Abbott as health minister to end free visits to the doctor by requiring a mandatory co-payment of $6. Anyone who didn't like it would be invited to take out private health gap insurance.

Its Commission of Audit recommended a co-payment of $15 per visit and $5 per concession card holder, and then its first budget announced that "previously bulk-billed patients can expect to contribute $7 towards to cost of standard consultations." Medicare Rebates would be cut by $5 and bulk billing incentives would "only be paid to providers when they collect the $7 patient contribution". It encouraged public hospitals to charge public patients who walked in off the street in order to stem the leakage from doctors.

Seven months later Abbott dumped the $7 co-payment and replaced it with a $5 co-payment, all of which was to come from doctors, also abandoning that a few months later. Then he announced plans to slash the Medicare Rebate for short visits from $37.05 to $16.95, also abandoning that a few weeks later.

In his second budget he extended an existing one-year freeze on the Medicare Rebates by a further five years to 2020. By then doctors incomes would have fallen 15 per cent relative to other incomes unless they abandoned bulk billing.

And he booked a budget saving of $57 billion over 10 years by lifting grants to states for running hospitals by much less than the cost of running them, a good deal of which is still baked in to the Turnbull government's budget numbers.

Within a year of taking office he called for expressions of interest from the private sector in running the $29 billion Medicare and Pharmaceutical Benefits Scheme claims system. Among the Australian firms that are believed to have responded are Eftpos, Australia Post and Telstra offshoot Stellar. Among the foreign companies are British services giant Serco, which provides immigration detention centre services, Japanese-US technology giant Fuji-Xerox, German software house SAP and US professional services firm Accenture.

Malcolm Turnbull went into the election campaign continuing to defend the outsourcing option, only to abandon it on Q&A after it came to be conflated with privatisation.

The scare campaign worked because Medicare's supporters were already scared.

In The Age and Sydney Morning Herald