Access Card Day!

The Senate report comes out at about 3.00pm this afternoon. I am told that it is about 30 pages long. There may well be minority reports as well.

The Office of the Access Card is getting in just ahead of time.

Last night it released a Myth Busters facts sheet to correct some common misconceptions about the proposal.

Expect those talking points to be repeated by Coalition MP's throughout the day. My favourite is

"The card is not an ID card"

For an examination of this question read Still quacking like a duck by Graham Greenleaf, Professor of Law, UNSW, Co-Director, Cyberspace Law & Policy Centre.

Also last night, in a timely fashion the Parliamentary Library released an excellent dispassionate analysis.

Read more >>

Labor (voters) highly confident

Monday's poll results are literally incredible.

The ANU's Andrew Leigh calculates they imply that Labor's chance of winning is higher than 999,999 in 1,000,000.

In The Age Tim Colebatch calculates that

THE new opposition would be left with barely enough MPs to field a footy team if the ACNielsen/Age poll figures were repeated on election day.

Of 87 seats now held by the Coalition parties, 68 would switch to Labor, assuming a uniform swing in all seats. The Liberals would lose every seat in Melbourne, with Treasurer Peter Costello among the casualties.

In NSW, the Coalition would be left with six seats, with Prime Minister John Howard, Deputy Mark Vaile, Environment Minister Malcolm Turnbull and Health Minister Tony Abbott among those dumped.

Labor would have 128 of the 150 seats, the Liberals 16, and the Nationals and independents three each.

In today's Canberra Times I write about strange evidence from the same weekend that the poll was taken that seems to indicate that something real is happening.

Read on...

Consumer confidence has surged in the last month, but only among Labor voters.

The Westpac-Melbourne Institute survey of sentiment conducted on the weekend shows that consumer confidence climbed 9 per cent among Labor voters but remained broadly unchanged among Coalition supporters.

The survey was conducted in the same weekend as the Herald AC Nielsen poll that showed Labor would easily win an election conducted on that weekend.

Consumer confidence has surged in the last month, but only among Labor voters.

The Westpac-Melbourne Institute survey of sentiment conducted on the weekend shows that consumer confidence climbed 9 per cent among Labor voters but remained broadly unchanged among Coalition supporters.

The survey was conducted in the same weekend as the Herald AC Nielsen poll that showed Labor would easily win an election conducted on that weekend.

Confidence among Labor-voters is now higher than for any year since before the Coalition was elected in 1996.

But with confidence at 111.5 index points, Labor voters remain less financially confident than Coalition voters at 128.8. Labor voters have not been more confident than Coalition voters than since before the Howard government came to power.

Westpac’s chief economist Bill Evans yesterday described the surge in confidence among Labor voters as “unusual”, all the more so because it preceded Monday’s publication of the AC Nielsen poll that showed Labor clearly ahead. But he said earlier polls appear to have encouraged Labor voters to believe that there was a real chance of a change in government.

The proportion of Australians expecting good economic times in the five years ahead jumped by 8 per cent in the month of March. The proportion believing that now was a good time to buy a major household item jumped by 5 per cent.

Mr Evans described the overall level of consumer confidence as “heady”. He said the economy was likely to pick up further throughout the year.

“The evidence on housing is definitely turning, consumer sentiment will go with the housing numbers, there is no doubt we will start to see the benefits from strong investment coming through on the export front, at this stage it is without any threatening inflation numbers, and all our lead indicators are pointing to a very tight labour market so the employment story will hang on in there and it will really only be the supply of workers that will contain things,” Mr Evans said.

Australia’s unemployment rate is currently 4.5 per cent, the lowest for three decades. Economists expect that rate to remain little changed when the labor force figures for February are released this morning.

The ANZ’s measure of nationwide job advertisements jumped 3.4 per cent in February. The number of new jobs advertised each week now exceeds 216,000.

More than 800 new jobs are now advertised weekly in the ACT, up 11 per cent in the past year - the biggest increase of any state or territory other than Western Australia.

The recruitment agency Manpower reported on Tuesday that 31 per cent of bosses say they want to hire more staff, compared with 20 per cent a year ago.

The Bureau of Statistics yesterday reported a jump in both personal and business borrowing. Personal loans increased by a seasonally-adjusted 7 per cent in the month of January and business loans by 12 per cent.

Read more >>

Tuesday Column: Australia's imminent biometric 'Access Card'

Why is it that each time a new government minister promotes the wonders of the new Access Card I feel a chill? It could be because of the succession of ministers in charge – 3 in the last 3 months.

It could be because each has expressed a deep and previously unadvertised personal commitment to the idea of an Access Card.

And it could be because of the things that they say.

Last month, before resigning from the Ministry over having met Brian Burke Senator Ian Campbell claimed that the proposed card was “not an ID card”.

He said its use would be limited to accessing Medicare, Centrelink and Veterans’ benefits. If any future government wanted to use it more broadly it “will have to bring a new law in”.

I have heard that kind of talk before...

In early 1988 the then Tax Commissioner Trevor Boucher personally assured me that the proposed new Tax File Number scheme would be completely voluntary. If you didn’t want to hand over your TFN to a financial institution it would deduct tax from your earnings at the top marginal rate and you would be able to claim back the overpayment later. You wouldn’t have to quote your TFN.

And the tax file number was to be used only for purposes relating to tax. In the reassuring words of the then Treasurer Paul Keating: “No other government or non-government agency will have access to the Tax Office file number registration system, nor will it be able to use an individual's TFN for any registration system of its own”.

Yet a year after getting the bill through parliament the government extended it to make the TFN compulsory when applying for an unemployment benefit. And then it extended it further to make the TFN compulsory when claiming sole parents payments, family allowances, students grants, veterans benefits and first home benefits grants.
Most of these new uses had nothing to do with tax. For none of them was the TFN voluntary.

What happened to Australia’s TFN identity system happens so often that that there’s a phrase for it – “function creep”.

Allan Fels who examined the current Access Card proposal for the government says the idea dates back to at least 1939. In that year the British government introduced an identification card with 3 purposes. By the time it was abolished a decade later it had amassed 39 uses.

Drivers’ licences were originally introduced in order to certify that the owner was licensed to drive. These days ActewAGL and TransACT ask for your licence number if you want to connect the gas, water or electricity or telephone. When I told the man from TransACT that I didn’t have my drivers licence number on me (and couldn’t see why I should hand it over) he rang back three times asking for it.

TransACT’s official position, outlined to me yesterday, is that handing over a drivers licence number is voluntary. It says any form of identification, even a mother’s maiden name will do - but that’s not how it seems when you’re trying to get the phone on.

The government’s official position is that no-one will be able to require you to hand over your Access Card for any purpose other than those for which it was created. On AM last month Senator Campbell said that anyone who tried to force you to hand over your card could “actually potentially go to jail for five years.”

But, with your written consent, anyone will be able to ask for the card. The Australian Privacy Foundation has told the current Senate inquiry that it expects that “consent” will quickly be written into the application form for every bank account, video store card, RSL club membership, retail loyalty card - and job.

And there are reasons to believe that the people behind the card expect this sort of “function creep”. Later this month at a conference in Sydney the Chief Technology Architect in the Office of the Access Card is due to present a paper entitled Towards a Cashless Australasia.

Three years ago the technology solutions vendor Peter Solomon who had partnered with the former National Party leader Ian Sinclair in a company promoting a universal identity card outlined the way in which he expected one to evolve. He told The Bulletin it would start out as a health card, then, “once we have the health card in place, we can add Medicare details, tax file number, driver's licence and police data, superannuation details, all aspects of social security – the basis of a truly multifunction card. It will rapidly become an apolitical issue, and it will not be a very difficult task to convince society on the question of civil liberty,” he said.

It is easy to believe that the impetus behind the Access Card proposal comes from such people. The reasons quoted by the succession of ministers responsible for the card don’t quite stack up. We are told that it will replace up to 17 existing cards meaning “less clutter in your wallet” (despite the fact that very few of us use even a handful of cards to access government services), we are told that it will mean “less time waiting in queues” and we are told that it will fight fraud.

Exactly where it will fight fraud is a secret. The accounting firm KPMG has prepared a business case for the government that concludes that the card will save between $1.6 and $3 billion over 10 years. In the report made public, the section that backs up this estimate has been “deleted as this represents a risk to government outlays.”

In any event it must be noted that these forecast savings are small as a return on the $1.1 billion that the government expects to spend rolling out the card. In purely financial terms the government would be better off buying shares.

But the project will bring the government a benefit that cannot be quantified - biometric photographs of every one of us (or should I say biometric photographs of every one of us who wants to access Medicare).

Biometric photographs measure and record the exact relationship between each of our facial features. The measurement is said to be so precise that it can differentiate between identical twins. Last week the head of ASIO Paul O’Sullivan told the Senate committee that ASIO and the federal police would be able to access the proposed biometric database without warrants. Should the authorities want to identify who is in a photograph or a video perhaps taken at a protest rally, a football match or a bank robbery they would be able to look up the database to work out who it was.

It is access that could have cleared up the identity of the mentally ill Australian resident Cornelia Rau in 2004 and prevented her from being wrongly locked up as an illegal immigrant.

But I am not sure that it is access most of us want. And despite the repeated assurances of whoever happens to be the minister at the time I am not sure that access won’t spread.

The ministers tell us that the Access Card won’t become a national identification card. I am hoping that’s all it becomes.


Extra recommended reading:

Senate Committee report (due this Thursday March 15, 2007)

Proof of ID Required? Getting Identity Management Right, Malcolm Crompton, Privacy Commissioner 30 March 2004

Read more >>

Saturday Forum: The Qantas protection racket gets set in stone.

All that was missing from this week's orgy of self-congratulation and the sea of red and white on the newspapers and TV were the rousing strains of I still call Australia home.

The Treasurer had pulled off a deal that he said would ensure Qantas remained “Australian owned, Australian controlled and in Australia”.

The foreign-financed consortium bidding for Australia’s national airline is delighted – the Foreign Investment Review Board and the Treasurer will allow its bid to proceed. The overwhelming mass of Qantas shareholders are delighted – they can now get $5.60 a share for an investment whose price has typically ranged between $3 and $4.

And the Treasurer Peter Costello has defused a political time bomb – how to appease those members of his backbench concerned about what will happen to jobs under the new owners and also those concerned about the implications of blocking the world’s biggest airline takeover.

What’s not to like about a political fix designed to deliver the airline’s shareholders $11 billion and to ensure that it remains one of Australia’s biggest employers?

When the dust settles, I fear that there will be a lot not to like...

Indeed: for airline customers, for the Australian economy, for the Australian taxation system and for the Australian government itself the outcome looks to be about the worst possible.

In order to understand why it is essential to recognise that Qantas is far more than just another Australian company. The Treasurer himself acknowledged this in announcing his agreement with the biding consortium on Wednesday. He said one of its clauses requires the new owner to continue to provide “practical assistance to Australians in times of emergency”.

Qantas has long been and will remain an agent of the Australian government for some purposes. Australia needs a national airline and would be unlikely to let it collapse. When the privately-run Air New Zealand faced bankruptcy a few years ago the New Zealand government injected money and bought it back.

In addition the Australian government has long been and is set to remain an agent of Qantas. Our government negotiates access to foreign air routes on behalf of Qantas, and from time to time blocks foreign airlines from competing with Qantas on routes to Australia.

Right now there is hardly any price competition on the most lucrative of Qantas’s routes – Sydney to Los Angeles. Our government continues to block Singapore Airlines from competing with Qantas and United ensuring that travelers to and from the US pay an estimated 38 per cent more than they need to.

According to work done for Singapore Airlines by the Canberra consultancy Econtech an extra airline on the route could boost the number of travelers moving between Australia and the US by as much as 8 per cent, and boost spending by visitors to Australia by more than $100 million.

The Australian government has blocked requests for access the Australia-US and Australia-Japan routes not because it was acting in the interests of Australian travelers or the Australian economy, but because it was acting in the commercial interest of Qantas. (And also in the potential interest of Virgin Blue in the case of Los Angeles, should it start flying on the route.)

Until now an unwritten deal has seen our government has protect Qantas from competition in return for Qantas acting as a good corporate citizen – among other things paying around $200 million a year in tax, employing Australians, and being on call in times of need.

But the takeover bid approved by the Treasurer this week could reduce the Qantas tax bill to something close to zero. Most of the $11 billion that the consortium is spending to buy Qantas will be borrowed. The interest payments, potentially $700 million a year are likely to obliterate the airline’s reported profit and its annual tax bill. (As is the case with all negatively geared transactions, the new owner will in theory be liable for capital gains tax when it eventually sells Qantas for an expected profit, but it is likely to structure the deal in such a way as to avoid as much of the tax as it can.)

And notwithstanding the employment and other guarantees in the deed of undertaking it signed this week, its mammoth interest bill will put it under immense pressure to cut costs.

The five partners in the bidding consortium are the US-based Texas Pacific equity group, Canada’s Onex group, Australia’s Macquarie Bank and Australia’s Allco Finance Group and Allco Equity Partners. Texas Pacific has form when it comes to running airlines. It has taken over
Continental, America West, and the Irish airline Ryanair. Its cost-control at Ryanair is said to be so severe that the airline’s pilots are not allowed to charge their mobile phones at work.

After the Qantas bid became public a number of commentators including myself applauded it as a welcome development. I wrote that “a takeover of Qantas led by money-hungry over-indebted American spivs could be the best thing that ever happened to the Australian traveling public”.

My thinking then was that if the new owner behaved in a totally commercial fashion our government would abandon its implicit contract with Qantas and instead start serving the interests of the traveling public.

Bruce Baird, one the Coalition backbenchers deeply concerned about the takeover encouraged me in this view.

Previously a big supporter of shielding Qantas from competition he told me then: “If it becomes just another company, and for instance starts moving jobs offshore, all bets are off”.

But it turns out that Bruce Baird was a key player in this week’s accord.

He has told me that he had a number of discussions with the consortium and the Qantas chief Geoff Dixon and told them: “if you want to settle people down these are the areas you need to give assurances in”.

He says they listened and replied: “Well that’s what we are planning to do anyway”. He suggested a guarantee.

On the face of it the bidders have got what they want – approval for their takeover – and backbenchers such as Bruce Baird have got what they need – a guarantee on jobs and the like.

But the guarantees in the consortium’s deed of undertaking are full of holes. For example it notes that the consortium has “no intention” of breaking up the airline and “no intention” of reducing regional routes.

That’s why backbenchers such as Bruce Baird are keeping something in reserve. He says for the moment talk of open skies is off the agenda: “We will allow the deal to proceed and then see 12 months into it how they are performing, whether they are living up to their assurances or not,” he says. Only if the consortium misbehaves they will it be threatened with real competition.

The implication is that Qantas will remain protected - perhaps indefinitely - in order to ensure that it continues to act pretty much as it has been.

For travelers, and for the Australian economy, it looks like the worst possible outcome.

But it gets worse.

Baird and his fellow backbenchers believe that if the new owner does abandon its stated intention and indicate that it needs to cut back its Australian workforce they can threaten it with competition.

They may not be paying sufficient attention to the likely financial state of Qantas at the time and the government’s need for it to survive.

After the takeover Qantas will be some $11 billion in debt, with only $3.5 billion in equity. On an operating basis it will be financially precarious. Any unexpected development such as a terrorist scare or an oil price hike could push it to the edge of survival. If in those circumstances it announced that it had to cut staff or move jobs offshore it would be plain that it would not be able to survive an injection of competition.

The threat that Baird and colleagues believe that they are holding in reserve would become worthless. If the new owner does abandon some of the guarantees it has given this week, any punishment to make it comply might run the risk of pushing it under.

Qantas is too important to the Australian government to be allowed to fail. If the consortium does get into trouble there will be a political imperative to help it further rather than harm it by opening Australia’s skies.

The consortium’s financial weakness will become its political strength. That’s part of the genius of the consortium’s takeover plan. It is likely to never have to face real competition and the government is likely to do whatever is needed to ensure that Qantas survives. The fortunes of the government and a group of ruthless foreign-backed takeover merchants will become tied together. If you would like not to be ripped off when you travel overseas, you are now likely to have to wait a very long time.

Read more >>

Convergence.

Look where growth is picking up...



Now look where growth is slowing down...




These graphs from the ANZ are taken from the December quarter national accounts, released on Wednesday.

Below is what I wrote for Thursday's CT...


A surge in consumer spending at the end of last year has pushed up Australia’s rate of economic growth and sparked talk of yet another interest rate hike.

Gross Domestic Product jumped by 1.0 per cent in the last three months of last year – twice as much as expected – despite repeated interest rate rises.

GDP climbed by 2.8 per cent throughout the year, with consumer spending soaring 3.8 per cent.

Imports jumped by 10 per cent, outstripping slower export growth of 4 per cent.

The Reserve Bank pushed up interest rates three times last year last year in May, August and November in an attempt to restrain spending and inflation.

Yesterday’s accounts released by the Bureau of Statistics suggest that consumers were resilient in the face of those hikes, spurred on by increases in both employment and household wealth.

The chief strategist at TD Securities Stephen Koukoulas said the accounts were enough to “jolt the complacency about rates being steady”.

The most likely date for another interest rate hike is August 8, the day after the Reserve Bank board meeting which will consider the much anticipated June quarter inflation figures.

The Bank’s governor Glenn Stephens told a parliamentary committee last month that he had no qualms about lifting rates in an election year. “I do not accept and I do not think we ever could accept the idea that in an election year, which is one year out of three, we can not change interest rates, that would be crazy. If in August if it needs to be done it will be done,” he said.

The accounts show an acceleration of growth in Australia’s southeastern states with trend growth climbing in NSW, Victoria, South Australia and Tasmania. Demand growth fell in the mining-rich states of Western Australia, Queensland and the Northern Territory suggesting that impetus from the mining boom is slowing. Trend growth remained steady in the ACT.

The state figures came as a relief to the NSW Premier Morris Iemma who was campaigning in Queanbeyan. He had been bracing himself for claims of a technical recession if NSW demand had fallen again in the December quarter after sliding in the September quarter.

Instead it rebounded 1.4 per cent. The Premier said his rival the Liberal Leader Peter Debnam had been “rubbing his hands with glee hoping for the worst possible news on the economic front.” Mr Iemma said he was not satisfied with the 1.4 per cent rebound in NSW, adding that his state had “a long way to go” to get close to Western Australia.

In fact, on the figures released yesterday NSW is closing in on Western Australia. Its quarterly trend rate of growth in state final demand is 0.6 per cent, Western Australia’s is 0.9 per cent.

The big divide in economic growth is now between the cities and the bush. GDP fell 11 per cent in the December quarter. It has fallen 23 per cent in the last year

Read more >>

Tuesday Column: Paying teachers for performance

Who’d want to be a teacher? Whether it’s back to basics, a national curriculum, or the latest: payment by results, politicians are forever drawing up new schemes designed to help teachers teach better.

Payment by results, apparently up for discussion at an education summit convened by the minister Julie Bishop next month, is particularly insulting.

The inference is that teachers aren’t being paid to deliver results at the moment.

Of course not everyone finds such an idea insulting. Australia’s chief executives, among them those whose performance has been the worst, seem to love it.

A few years back I was at the annual general meeting of Bluescope Steel, at the time chaired by Peter Smedley then lorded as a business genius for his stewardship of the Mayne health and logistics group, since broken up.

An elderly shareholder sitting near the back asked him why he felt the need to pay his chief executive a performance bonus on top of his salary.

Smedley replied in what I took to be a condescending tone that that in fact the chief executive received three salaries: a wage, which he said was a payment “for turning up”..., a short-term bonus for keeping the share price high in the short-term, and a long-term bonus for keeping it high in the long-term.

I thought it disturbing that one of Australia’s major public companies would pay its chief executive a six or seven figure salary “for turning up” – Smedley’s exact words – and I think that’s what disturbs me now about the idea of paying teachers extra for “performance”.

That, and the fact that performance is hard to measure.

Auditors love to tell this story: When Sydney had a problem with its trains running on time it collected statistics on every arrival and departure from every platform and compared it with the timetable. Drivers were instructed to more closely match the timetable. So they shot past stations without picking up passengers. I know, it happened to me. But it improved the drivers measured “performance”.

Auditors call this a misspecification – picking the wrong target.

But it wouldn’t happen in teaching would it? After all, the results of teaching can be measured quite precisely at the end of each year in standardized tests.

Well, yes it would.

The state of Iowa in the United States has been measuring primary school teaching outcomes for decades now as part of the Iowa Test of Basic Skills.

In 2002 a University of Chicago economist Steven Levitt played a hunch. Examining the test results for the eight years to 2000 he noticed that some teachers seemed to always to improve the academic performance of every class they taught. But those students seemed to regress to where they had been as soon as they moved on to different teachers.

Using high-level statistical analysis he concluded that 4 to 5 per cent of teachers in Iowa had cheated by “adjusting” the answers of their students after those students had completed the exam papers. (It helped that students were given pencils with which to complete the exam papers and that pencil is easily rubbed out.)

I have experienced a lesser form of teacher cheating myself. Many universities now ask students to grade their tutors at the end of each semester. Sitting in on a tutorial for a student who was ill I saw the tutor hand around biscuits and tell the class how much he loved each and every one of them before distributing the evaluation forms.

One of mantras chanted by those in the United States administering the No Child Gets Left Behind program which links school funding to test results is that “What gets measured, gets done”.

Critics of this type of program say that that is its weakness.

Its supporters in Australia may be surprised to know that it has been tried here before. I certainly was.

Last week the ABC’s Background Briefing radio program searched back into history to outline the results of the Victorian education department’s “Payment By Results” program introduced in the 1860’s.

Education historian Professor Richard Selleck explained that each Victorian teacher received a base salary, and then an extra salary dependent on the results that their children got (in much the same way as would Australian CEO’s more than a century later).

Inspectors would come into primary school classrooms and set and mark exams. The percentage that each class got in the exam would feed directly into the teacher’s performance pay.

As Selleck said: “In one sense when you went into a classroom, you were looking at your financial future, if you were a teacher.”

So teachers worked to ensure that their students did well.

As Selleck put it: “Teachers studied minutely the questions each inspector was likely to ask in reading, writing and arithmetic, whatever the course was. They passed them on to each other, they reduced their curriculum to the narrowest one possible, abandoning subjects that were not going to be examined and concentrating almost entirely on what was examinable.”

On AM last month the Education Minister Julie Bishop described the evidence to support performance pay for teachers as "overwhelming". She promised to release that evidence ahead of her April summit with state and territory ministers.

The most persuasive-sounding evidence to date comes from the Department of Education Reform at the University of Arkansas. It has examined the fledgling merit pay scheme in Little Rock, Arkansas funded by the Walton family which owns Wal-Mart. It finds that it has boosted maths results by 4 percentage points above those of schools without performance pay.

But it has come in for criticism. The associate editor of the Arkansas Times, Warwick Sabin put it this way on Background Briefing:

“Well I'll be very blunt with you. The Department of Education Reform at the University of Arkansas is only about a year old and it was established with money from the Walton family, which has a very public interest in pushing merit pay… They did not pick schools that already were performing very well, because those schools would not produce the improvement that the merit pay advocates would like to see.”

Merit pay may well have some merit. But until Julie Bishop releases the evidence she has assembled, we will have to be content with the publicly available evidence, which is far from conclusive and points to pitfalls. Many of us would be reluctant to entrust our children to teachers who were focused almost exclusively on measurable results.

The ANU economist Andrew Leigh is one of Australia’s leading proponents of performance pay for teachers. But, in apparent contrast to the minister, he is aware of its potential limitations. He says that designing a good merit pay system is hard but not impossible.

He told me that if he was advising the minister he would be suggesting setting up a series of different trials, using different methods of rewarding different types of performance in different schools. He says then we would know what education authorities in Little Rock and elsewhere still do not – whether rewarding teachers for performance works as well or better than rewarding CEOs, or whether it is impossible to reward the right things.

Read more >>

Interviewing at its worst

2UE's John Laws with the Labor Party Leader Kevin Rudd later this morning.

LAWS: Will you tell me what was the purpose of your meeting Brian Burke three times in 2005? I mean, it can’t be anything, you weren’t planning a bank robbery...

LAWS: I’ve got to tell you that we’ve had literally hundreds of emails this morning. I’ve tried to read as many as I could. But more people have supported you than the Prime Minister because they can see through this Ian Campbell sacking...

LAWS: The Leader of the Opposition, the Federal Opposition, Kevin Rudd. And there it is. You’ve got the story. It’s up to you whether you choose to believe it or not. I, frankly, do.


The whole thing is over the fold.

If the ABC interviewed like this it would be in deep trouble, and rightly so.



LAWS: Kevin Rudd is, as you know, Federal Opposition Leader, and he’s on the line. Good morning, Kevin.

RUDD: Good morning, John. How are you?

LAWS: Good thank you, probably better than you. You’re under a bit of pressure, aren’t you?

RUDD: Well, these things happen in politics and I always knew that we were going to go through a negative phase between now and the election and I think we’re in the middle of one.

LAWS: You sure are. Will you tell me what was the purpose of your meeting Brian Burke three times in 2005? I mean, it can’t be anything … you weren’t planning a bank robbery.

RUDD: Absolutely not. I have a good friend in Western Australia. He’s a WA Member of Parliament whose name is Graham Edwards. You may have met Graham over the years –

LAWS: Yes, I have.

RUDD: And Graham has known Brian Burke for a long time. I often stay with Graham when I’m in Perth and Graham asked me in 2005 to meet with Mr Burke. That happened over breakfast at Graham’s house. And after that there was a coffee, I think, and then after that there was, or at another point during the year, there was this dinner which has been the subject of some debate in recent times.

LAWS: Yeah well, you were the guest of honour, virtually, at the dinner.

RUDD: Well, Graham invited me to this dinner. And as he’s indicated in his statement the other day, what happened was he then of course told Mr Burke that I was coming. Mr Burke, it now seems, circulated this email to his contacts from the business community inviting them along. But when I went to this dinner I was completely unaware of the email or its contents. I knew that I was going to a dinner which Mr Burke would be at and where business people would be at. That’s the beginning and the end of it.

LAWS: Did you, at any time, talk to Mr Burke about the Labor leadership?

RUDD: On the question of the Labor leadership, can I just be absolutely clear cut about this.

LAWS: Please.

RUDD: This goes to the core of what Mr Howard’s been saying on your program and elsewhere today, I think. And that is at no time had I ever asked Mr Burke to support me to remove Kim Beazley and be replaced by me – never, ever, ever, ever – and that’s just an absurd allegation for Mr Howard to make. I think what Mr Howard is doing is simply trying to engage in a general campaign of political smear against myself. But on the facts of it, I’ve got to say it’s exactly as I described it.

And can I just add one thing to that, John, listening to what Mr Howard was saying this morning? It’s very important for people to know that Mr Burke has always been a lifelong supporter of Mr Beazley. Secondly, Mr Edwards, the person who I was staying with in Perth, is also a lifelong supporter of Mr Beazley. Does anyone think that at a dinner like that I’m going to go and declare publicly to a room like that that I am asking for their support to remove Mr Beazley and to replace him as Leader of the Labor Party? It’s absolutely absurd. And apart from all that, it’s simply not the way in which I operate. And all this, by the way, John, occurs I think some almost one and a half years before the ballot on the Labor Party leadership at the end of last year. I think we just need to nail Mr Howard’s false accusation at me for what it is – and that’s just negative smear.

LAWS: OK. My understanding is that the West Australian caucus went against you anyway – seven to two – or something so even if you did talk –

RUDD: It was worse than that. You can put that down to my lack of charisma in the West. I got two out of nine votes. So, that’s my understanding anyway. So, I just think we need to put this into some context. The other thing Mr Howard’s been saying is that he says that I therefore have some debt of obligation to Mr Burke. Well, if I didn’t ask for Mr Burke’s support to remove Mr Beazley as leader and for me to replace him as leader, how can there be any debt of obligation? That’s the first point. And secondly, what does he mean by debt of obligation? Is he saying that I asked Mr Burke for money? Did I ask him for fundraising support? Did I deal with him on some financial transaction? These are very wild accusations by Mr Howard. And the answer to all those things is no, no, no, and no. (inaudible) for Mr Howard to say these things.

LAWS: And can you tell me what you did say to Brian Burke about, just out of interest?

RUDD: Well, Mr Burke has obviously a big interest in politics and as I said in my statement the other day in Canberra, there was a general discussion about national politics, a general discussion about State politics, and I have no recollection whatsoever myself of any discussion of Mr Beazley’s leadership. It’s a large dinner and I can’t rule out the possibility that others may have discussed it. But on the core question of Mr Howard’s accusation – which is that I am there in Perth to ask for Mr Burke’s support for the removal of Kim Beazley and the replacement of Mr Beazley by me – that’s an absolute untruth. And Mr Howard should hang his head in shame for saying that sort of thing.

LAWS: Can I ask you your opinion on the dismissal or the walking away of Senator Campbell?

RUDD: Well, I think as one of my colleagues said yesterday or the day before, it’s difficult to find someone who smiles on the day that they are sacked and Mr Campbell had a smile, Senator Campbell had a smile all over his face. The reason for that obviously is this: Senator Campbell says he’s done nothing wrong. Mr Howard says he’s done nothing that would cause him not to be reappointed in the future, so what this is all about is simply Mr Campbell, or Senator Campbell, falling on a false sword, some sort of rubber sword, for six months. Why? To justify Mr Howard running on a continuing, negative smear campaign against myself.

On the question … the other accusation by the way concerning all of that which Mr Howard has been making on the radio programs this morning while I’ve been in the air is this: he’s saying that I’m engaged in some sort of cover-up. John I think your listeners need to know, when I was first asked about whether I’d ever met with Mr Burke, this was in November last year, I said to The Australian newspaper that I had on a couple of occasions, it turns out to have been three. That’s in black and white in The Australian in November last year. And did Mr Costello jump up and demand explanations then? Did Mr Howard jump up and demand explanations? No, not at all. What’s happened three months later is that Labor is actually doing OK in the opinion polls. I think the Government’s concerned about a shift in the national mood across Australia. And what they’ve done therefore is turn immediately into the direction of a negative, personal smear campaign against myself in order to take some paint off.

I admit, and I’ll say this to your listeners quite clearly, that in 2005 I obviously got it wrong. Had I 20:20 hindsight, had I known what was actually going on in relation to the activities which are now subsequently before the Commission of Inquiry in Western Australia, of course I wouldn’t have met with Mr Burke. I understand that and I accept responsibility for it and I think admitting that you’ve got something wrong is important in leadership and that’s not something I’ve ever heard Mr Howard ever do, admit that he’s got anything wrong.

LAWS: I’ve got to tell you that we’ve had literally hundreds of emails this morning. I’ve tried to read as many as I could. But more people have supported you than the Prime Minister because they can see through this Ian Campbell sacking. I mean, how the man could do as something as obvious as that, I don’t know. It’s to me not politically clever.

RUDD: Well, I think Mr Howard is basically just trying to create a platform on which to run a negative campaign against yours truly into the future. I’d much rather debate Mr Howard on the positive policy plans for Australia’s future when it comes to working families under financial pressure; when it comes to climate change; when it comes to my proposal for an Education Revolution; what we’re doing on water, and how we end the blame game between Canberra and the States – things that matter to working families across this country. Instead, what I have to put up with in the last four days is this personal, negative smear campaign. And I as I said, John, before, if they were really serious about this why didn’t they raise this three month ago when I put all this on the public record – that I’d met with Mr Burke a couple of time back then.

LAWS: I’ve got to say, I don’t quite understand for a moment why you wouldn’t offer a detailed, unqualified explanation about the conversation you had with him. You’ve now done that to me. Wouldn’t it have been easier if you did that originally and you wouldn’t have had such a tough three days?

RUDD: When Mr Costello raised this in Parliament last Thursday, I went straight out of the Chamber into my office and said the best thing to do is to respond to the questions of the national Press Gallery and then I went into the press room and stood there for nearly an hour and took ever incoming question from the Press Gallery. And what then emerged … and that went on for, as I said, nearly an hour and all sorts of questions, and I stayed there until those questions had been exhausted. Since then, two subsequent questions have emerged about, one, the whole matter of whether I had asked Mr Burke to support me in some attempt, according to Mr Howard, of removing Mr Beazley from the leadership and to be replaced by me. And secondly, this question of the emailed invitation concerning whether or not I was a guest of honour, I think I’ve dealt with both those today on your program.

LAWS: You have. I appreciate your time, Kevin. Thank you very much for talking to us. I think it was a good thing to do because people were wondering why you weren’t talking. But you said you were in the air, or something. Are you flying?

RUDD: I was flying from Brisbane to Melbourne this morning and let me tell you, that takes a while.

LAWS: It does.

RUDD: So, I came into the office here and got the message from my office that you’d been trying to track us down so I put some meetings to one side just to ring you back in order to be able to speak to your listeners.

LAWS: I appreciate it very much, Kevin. Thank you.

RUDD: Thanks for having me on the program, John.

LAWS: Pleasure. Bye. The Leader of the Opposition, the Federal Opposition, Kevin Rudd. And there it is. You’ve got the story. It’s up to you whether you choose to believe it or not. I, frankly, do. And really, that should put an end to the whole non-event.

Read more >>

Interviewing at its best

2UE's Mike Carlton and Peter FitzSimons with the Treasurer Peter Costello early this morning.

JOURNALIST:

It’s a strange set of priorities isn’t it, when Mr Downer and Mr Vaile can preside over the AWB scandal, send $300 million off to Saddam Hussein, they keep their jobs, Senator Campbell goes after a 20 minute meeting?

TREASURER:

You know, nobody made more of that than Kevin Rudd, who kept on saying that Mr Downer and Mr Vaile had to know what a Jordanian trucking company was doing…

JOURNALIST:

No, they had to know what AWB was doing, and they didn’t. Downer and Vaile keep their jobs. Why is that?

TREASURER:

They were the subject of an extensive Royal Commission which cleared them. Now…

JOURNALIST:

It didn’t clear them at all, it didn’t investigate them.


The whole thing is over the fold.

If only the ABC interviewed this well!


JOURNALIST:

Treasurer Peter Costello is on the line, morning.

TREASURER:

Good morning Mike, good morning Peter.

JOURNALIST:

Good to talk to you. You don’t know that any of this really matters today to the ordinary voter who right now is getting ready to go to work to make a quid.

TREASURER:

I think what voters will be asking themselves is whether Mr Rudd has told the truth and whether his version of events are credible, and that is an important issue. You have got somebody who is putting himself forward to be the Prime Minister of Australia; this is the first time he’s ever been under any pressure. When he was put under pressure he wasn’t forthright, he didn’t come out and say the facts, and I think people want to know what they were.

JOURNALIST:

Mr Costello, he’s at least forthright enough to say ‘I’ve made a mistake, it was an error of judgment on my part’.

TREASURER:

Well Peter, he certainly made a mistake and he certainly made an error of judgement. But the question now is did he tell the facts? He said, oh look, I was staying with Graham Edwards, Graham said come out to dinner, lo and behold, I went out to dinner and there’s Brian Burke. Now, as I said in the Parliament, it’s a bit like Bill Hunter in Muriel’s Wedding – ‘Deirdre Chambers, what a coincidence!’ What a coincidence Brian Burke was there. And then of course, up turns this email that shows Brian Burke had invited people there to meet Kevin and Kevin was the guest of honour. And by the way, Kevin gave a speech once he arrived there.

JOURNALIST:

Mr Rudd says they never saw that email, he simply went along because his mate Graham Edwards, the Labor MP, said come to dinner.

TREASURER:

Yes. And Brian Burke had already invited people to meet Kevin, and when Kevin turned up, lo and behold, he gave the speech. The funny thing is, you walk into a restaurant, you are not expecting Brian and his clients to be there, but you turn around and you say, well seeing as you’re here, I’ll give you the speech for the evening. I don’t think you’d believe that Mike.

JOURNALIST:

Is everybody at that dinner then, comprised, if, does that include the West Australian mining businessman Andrew Forrest, who was at the same dinner?

JOURNALIST:

One of the Prime Minister’s closest friends.

TREASURER:

Yes well a lot of people in Western Australia knew that if you wanted to get on with the Labor Party, the Labor Government in Western Australia, you should retain Mr Burke. He was the person of great influence and as the Crime and Corruption Commission has shown, he actually used to get a lot of value for his clients.

JOURNALIST:

Well hold on, you said the other day that anyone who deals with Brian Burke is morally and politically compromised, does that include the Prime Minister’s close mate Andrew Forrest, the West Australian mining businessman?

TREASURER:

Mr Forrest was retaining Brian Burke to try and get influence with the Labor Government in Western Australia.

JOURNALIST:

But was he politically and morally compromised in doing so?

TREASURER:

Well he was a businessman, he was looking after his business…

JOURNALIST:

But Mr Costello, if I may just say, you did say in very strong language, anybody who deals with him is morally compromised. Now surely you don’t let them off the hook then if oh well it was only because he was trying to advance his business interests?

TREASURER:

No, businessmen are always trying to advance their business interests, but they are not running for Prime Minister. Hang on, if Andrew Forrest were running for Prime Minister, he would be totally unsuitable for the job by reason of the fact …

JOURNALIST:

But he can run a mining company ok …

JOURNALIST:

Oh, come on.

TREASURER:

Well come on Mike …

JOURNALIST:

Oh come on, you’re tying yourself in knots, that’s ridiculous, you said anyone who deals with Mr Brian Burke is morally and politically compromised, anyone.

JOURNALIST:

Except mining magnates.

TREASURER:

No, no, no, I’m sorry, Kevin Rudd is in hock to Brian Burke. Brian Burke now has the goods on Kevin Rudd because, have you thought about this: Brian Burke can come out at any time if Kevin gets into office and tell the truth about that meeting. And the moment he does, of course, Kevin Rudd is in deep trouble.

JOURNALIST:

Why did Kevin Rudd…

TREASURER:

No, this is a very important point Mike. Kevin Rudd, as of this day, needs Brian Burke more than anybody else, because he needs Brian Burke to stack up his version of events. That’s why, if Kevin Rudd gets into a position of even more influence, it is a very dangerous situation.

JOURNALIST:

It’s a strange set of priorities isn’t it, when Mr Downer and Mr Vaile can preside over the AWB scandal, send $300 million off to Saddam Hussein, they keep their jobs, Senator Campbell goes after a 20 minute meeting.

TREASURER:

You know, nobody made more of that than Kevin Rudd, who kept on saying that Mr Downer and Mr Vaile had to know what a Jordanian trucking company was doing…

JOURNALIST:

No, they had to know what AWB was doing, and they didn’t.

TREASURER:

… what an Australian company, which neither of them owned or controlled, right? So, they have got to know what an Australian company was doing in Jordan, with a Jordanian trucking company, according to Mr Rudd, but he can’t tell you what he was doing in Western Australia in 2005. He can’t tell you why he went there…

JOURNALIST:

He says he did tell us, he says he did tell us.

TREASURER:

Well he can’t tell – no, well hang on, why was he there? He says this dinner was just peripheral. Why was he there? He can’t tell you what business took him to WA. If Brian Burke didn’t take him to Western Australia in 2005, what did?

JOURNALIST:

I don’t know, but you can toss that around can’t you, until you are black and blue but you’re ignoring my central point here, you’re ignoring my point. Downer and Vaile, either through negligence, incompetence or sheer ignorance, ignored the AWB scandal, $300 million pumped off to Saddam Hussein, they keep their jobs. Why is that?

TREASURER:

They were the subject of an extensive Royal Commission which cleared them. Now …

JOURNALIST:

It didn’t clear them at all, it didn’t investigate them.

TREASURER:

Well hang on, no, it did.

JOURNALIST:

No it didn’t, it wasn’t supposed to investigate the Government.

TREASURER:


Well, you know, you can believe Kevin Rudd’s line on that if you like, but I’m sorry, it investigated AWB and it found that AWB had not told any Minister, nor was there any reason for any Minister to know. Let me put it to you like this Mike, would you like a Royal Commission to investigate Kevin Rudd’s meeting at Perugino’s?

JOURNALIST:

What are you trying to suggest went on at Perugino’s, I mean this is …

TREASURER:

Well I’ll tell you what went on. Kevin Rudd was looking for influence in the West Australian Labor Party. To get influence in the West Australian Labor Party, the person who had the most of it was the disgraced Brian Burke, the disgraced Brian Burke who Geoff Gallop had said was to have no contact with Labor figures. And Kevin Rudd was flying into Western Australia, to not only make contact with him, but to get influence in the West Australian Labor Party, which would be useful for his career and has proved to be very useful.

JOURNALIST:

Although, Mr Costello, I must say I know from having written the biography of Kim Beazley, how close personally Kim Beazley was with Brian Burke for many a, many a year. You know, it wouldn’t have been the obvious thing, if you were seeking, seeking power from the power brokers in Western Australia to go to Brian Burke as your first call to undermine Beazley.

TREASURER:

Well Brian Burke as we now know was the most influential person in the West Australian Labor Party, if you could attract him, you’re in business.

JOURNALIST:

Yeah but Burke and Beazley were mates, Rudd’s hardly going to go to Burke and say look, can you help me toss Beazley.

TREASURER:

Well let me tell you Mike, when you’re looking for votes, you are looking for votes from everybody, particularly the powerful.

JOURNALIST

You speak as a man of experience in these matters.

TREASURER:

Well, obviously I’m not successful.

JOURNALIST:

That’s very modest of you.

JOURNALIST:

Mr Costello, how do you know with such certainty what went on at that dinner, you speak as if you know exactly what happened.

TREASURER:

Well we now have the email, we now have the witness accounts of people who were there, and the only person whose account we don’t have is Kevin’s. Now, if Kevin wants to go in to the Parliament and say why he did go to Western Australia; produce, you know, his itinerary for the day; have an explanation as to how he turns up to give a speech at a meeting he didn’t even know was on, and it’s credible, I suppose we could say well maybe you should overlook the emails and the other guests, and believe Kevin, but you see…

JOURNALIST:

One of the difficulties with Kevin Rudd is trying to stop him giving a speech, so you can’t be surprised he gave one.

TREASURER:

Yes. One of the problems with Kevin now is he says he won’t say any more about this, and what he has said to date isn’t very convincing.

JOURNALIST:

Mr Costello, is it fair to summate that you personally would not sup with the devil to become Prime Minister?

TREASURER:

Well, I’ll tell you what I wouldn’t do. I wouldn’t fly into Western Australia and seek Brian Burke’s backing for my political career. No, I wouldn’t do that, no.

JOURNALIST:

Don’t think it would help you a lot. Good to talk to you, thanks for your time.

JOURNALIST:

Thank you.

TREASURER:

Good on you, thanks fellas.

Read more >>

Only in the topsy-turvy city of Canberra... would the Coalition think it could win votes by painting Labor as a small-spender

Today Labor announced planned cuts in government expenditure on attaining office worth $3 billion (details over the fold).

Here's how the ACT's Liberal senator Gary Humphries responded:

20,000 PUBLIC SERVICE JOBS TO GO?

Rudd Labor has given its clearest signal that a blood bath is in store for Canberra public servants should it win the next election.

Today in The Australian, Labor’s Finance spokesman Lindsay Tanner again expressed disgust at the growth of public service jobs under the Coalition Government.

But he now appears to be flagging the number of jobs he wants cut – 20,000.

“The message is clear for Canberra public servants: Your jobs are on the line at the next Federal election,” ACT Liberal Senator Gary Humphries said today.

“With over a third of Commonwealth public servants working in Canberra, this would probably mean a cut of 7,000 jobs in this city.

“Kevin Rudd is travelling around Australia promising extra funding and services, yet he wants Canberra public servants to do more with less.

“As was the case with Mark Latham, Rudd Labor wants to rip funding out of Canberra to pay for its election promises to other parts of the country.

“Strong investment by the Commonwealth has off-set the ACT Government’s economic incompetence. But if Labor obtains power Federally, it’s double-trouble for Canberra,” Senator Humphries said.

Here's Labor's announcement:

LINDSAY TANNER MP

SHADOW MINISTER FOR FINANCE

LABOR’S $3 BILLION SAVINGS PLAN

Federal Labor today announced a massive savings plan to cut out $3 billion of Howard Government waste.

These $3 billion in savings across the 4 years of the federal budget will put downward pressure on inflation and interest rates.

Labor’s savings plan includes:

· Saving $394 million by scrapping the Howard Government’s extreme work laws;

· Cutting $350 million worth of Howard Government political advertising; and

· A $395 million cut in the use of consultants in the Commonwealth public service.

(A full list of savings is attached below)

A Rudd Labor Government will use its $3 billion savings plan to cut wasteful spending and increase investment in productivity drivers like education, skills and infrastructure.

Complacency and lack of discipline by the Howard Government has allowed unnecessary spending to flourish. Splurges of taxpayers dollars on political advertising and high cost consultants are proof of that fact.

If introduced today, Labor’s savings would save $3 billion over the Budget estimates period. Labor will continue to pursue savings options, and make further savings announcements prior to the election.

This sensible and disciplined savings plan will put downward pressure on inflation and interest rates. Labor’s savings include and build on the $1 billion of savings announced in November 2006

2 March 2007

SUMMARY OF LABOR’S SAVINGS

Figures in $million 2006-07 2007-08 2008-09 2009-10 Total
Limit FTB (B) to those who earn under $250,000 7.5 7.5 7.5 22.5
Withdraw Australia's contribution to the European Bank for Reconstruction and Development 88.0 88.0
Remove tax deductibility for political donations 9.5 11.6 21.1
Remove surplus funding due to WorkChoices 53.5 138.2 141.7 61.4 394.8
Fold Invest Australia functions into Austrade 23.5 23.5 23.5 70.5
Reverse 2006 Budget measure for on-line electronic authentication 4.0 12.6 9.1 25.7
Abandon Medibank Private sale and associated sale costs 12.0 12.0
Reverse increase in MP's printing allowance 2.0 5.0 5.0 5.0 17.0
Require industry to fund the Financial Literacy Foundation 5.3 5.4 10.7
Streamline government advertising and eliminate political propaganda 50.0 100.0 100.0 100.0 350.0
Abolish Prime Minister's Community Business Partnership 2.0 4.3 6.3
Use centralised telephone services and websites to advise on aged care availability and save uncommitted Carelink funds 13.7 13.7
Require industry not taxpayers to fund the Do Not Call Register 4.0 10.1 7.6 6.2 27.9
Partially reverse 2006-07 Budget decision giving extra running costs to the Department of Foreign Affairs and Trade 4.5 8.5 8.9 9.4 31.3
Reverse 2006-07 budget decisions to increase Australian Securities and Investment Commission funding 19.3 36.7 36.8 37.0 129.8
Defer Access Card for further examination 145.0 157.0 302.0
Abolish Carrick Institute awards and reduce Institute funding 5.4 10.7 10.7 10.7 37.5
Absorb the cost of the Future Fund advisory unit 0.4 0.7 0.7 0.7 2.5
Reduce spending on non-Defence related recruitment agencies 7.0 15.8 15.8 15.8 54.4
Reduce spending on consultants 56.5 112.9 112.9 112.9 395.2
Reduce spending on political opinion polls/market research 7.5 15.0 15.0 15.0 52.5
Reverse December 2006 decision to create Digital Australia and increase ACMA funding 2.9 7.0 5.9 6.2 22.0
Remove funding to employers to promote WorkChoices under the Employer Advisor Program 12.5 12.5
Remove December 2006 funding increase for the PM's Nuclear Energy Taskforce 3.9 3.9
Improve purchasing and administration arrangements of Commonwealth air travel 6.0 15.0 15.0 15.0 52.5
Reduce funding for the National Capital Authority 1.0 3.5 3.5 3.5 11.5
Reduce duplication in tax administration by abolishing the Inspector-General of Taxation 2.2 2.2 2.2 6.6
Extend Centrelink compliance campaign - 'Keeping the system fair' 51.8 53.4 55.0 160.2
Redirect 2006-07 budget measure to increase Australian Taxation Office funding to compliance activity to produce larger compliance dividend 7.0 62.1 175.7 235.7 480.5
Re-introduce the voluntary Student Supplement Scheme saving money in youth allowance and AUSTUDY 34.7 31.3 28.1 94.1
Reverse December 2006 decision for National Training Centre for Aerial Skiing 2.5 2.5
Close Nauru and Manus Island detention centres 10.0 27.0 27.0 27.0 91.0
Total # 275.4 943.1 994.8 789.4 3001.2

# Labor's November savings announcement included $125 million arising from the proposed withdrawal of Australian troops from Iraq. Following questioning in estimates, no clarity was given of the Government’s actual funding in the forward estimates. Although the Government has no exit strategy from Iraq, it has not provided forward estimates of the cost of troop deployment beyond 30 June 2007. Labor will withdraw Australian combat troops from Iraq, but it is difficult to estimate the savings from the withdrawal of troops because of the lack of transparency relating to these costs in the forward estimates, as well as the fact that the precise timing of the withdrawal will be subject to the stage that the combat troop rotation has reached and negotiations with the United States and Iraqi Governments on a staged withdrawal. Therefore the savings from the withdrawal of combat troops cannot be included in this savings package.

Read more >>

Saturday Forum: Why Canberra has a housing crisis.

Looking for somewhere to live? If we are to believe the Chief Minister help is on the way. This month Jon Stanhope will release his long-awaited affordable housing strategy - six months in development.

For an unknown number of Canberra workers camping on couches, driving in from Goulbourn or not knowing whether they will be able to cope with a jump in rent it can't come soon enough.

In order to fix the problem his steering group will first have to work out exactly what's behind it.

Perhaps the first point to acknowledge is that despite the impression we have in the ACT our rental crisis is not unique. Type the words "rental crisis" into a newspaper search engine and you will also come up with dire stories this year from Sydney, Melbourne, Brisbane, Perth and Adelaide...

Reserve Bank figures show that throughout Australia rental vacancy rates are
at their lowest since the early 1980's. Canberra's average vacancy rate of
1.8 per cent last year was not that much different to Sydney's 1.9 per cent
or Melbourne's 1.7 per cent.

As the Bank's Governor Glenn Stevens put it the parliamentary committee late
last month: "Rental vacancy rates are low right around the country. No
particular region stands out all that much."

Governor Stevens was not saying that things aren't dire for people
attempting to move to cities such as Canberra, merely that at the moment
they are dire for people attempting to move to every Australian mainland
city.

He says the root cause is the truly phenomenal surge in house prices over
the last few years. People who would have once bought now can't, so there
are more people wanting to rent. At the same time landlords are discovering
that renting out properties is no longer a particularly good way to make
money. The Governor says that as a proportion of the cost of a house rents
have halved over the past few years. This wouldn't have mattered that much
when landlords could expect to sell their properties later for a big capital
gain, but it matters now that prices have stopped rising.

The new very advantageous tax treatment for superannuation due to start in
the middle of the year will drive even more investors away from real estate.

That's why the Governor's very public suggestion a couple of weeks ago that
landlords should consider putting up their rents should be seen as a public
service. Either house prices are going to have to fall or rents rise in
order to keep enough landlords in the business.

In parts of Australia prices are falling. In some parts of South Western
Sydney it is said that most of the auctions on Saturday mornings are at the
behest of mortgage providers selling their customers' homes because they
can't keep up the repayments. Those mortgage providers are none to fussy
about the prices the properties sell for and so prices are plummeting.

But not in Canberra. Perhaps more so than any Australian city property
prices in Canberra are, to use economic language: "sticky downwards".

Here's why.

Canberra residents are different to people in the rest of the country in two
important ways. One is in the type of jobs they enjoy. Census data shows
that Canberra workers are much more likely to be in professional jobs than
workers elsewhere. 40 per cent of Canberra workers are in professional
jobs. Only 33 per cent of Sydney workers are. The other is in who their
employer is. Canberra workers are far more likely to work for the
government.

This makes Canberra workers typically more financially secure than workers
in other cities. Put simply - if interest rates go up they are far less
likely to be forced to sell. As well, they seem to be far less inclined to
sell when prices go down, perhaps preferring to hold on until prices
improve.

Data from allhomes.com.au shows that typically around 6,000 houses change
hands a year in Canberra. In 2001 the figure was 7,500. Last year it fell
to 4,153 - the lowest annual total since allhomes began collecting figures.
It looks as if Canberra homeowners have the ability and the will to hang on
rather than sell when prices are falling.

Other things are different about the Canberra real estate market as well. A
higher proportion of houses are rented (33 per cent compared to 29 per cent
in Sydney) and there are more group houses (4.7 per cent of households
rather than 3.8 per cent). This means that paradoxically while more of the
population is financially secure than elsewhere less of it has housing
security.

And because the absolute number of new houses built each year is low,
Canberra housing is vulnerable to unexpected shocks.

Typically around 200 houses a month are built in Canberra. In January four
years ago bushfires destroyed or damaged more than 500.

And the Commonwealth government, the ACT's biggest employer, has provided
another shock. In its latest budget it ramped up plans for recruitment,
apparently setting aside funds for an extra 3,000 to 5,000 Canberra-based
public servants.

It is hardly surprising that a land-release program decided on months or
years in advance has difficulty coping.

The most important part of the solution to be recommended by the Affordable
Housing Steering Group later this month is likely to be releasing more
blocks of land. It is a straightforward fix guaranteed to work, but it will
take time to take effect.

The Chief Minister has talked about quarantining some of the new blocks of
land for low-income housing. When announcing the release of 500 new blocks
at west Macgregor last month the Planning Minister Simon Corbell specified
that 75 or them had to be used for "affordable housing". From an
economic point of view there is nothing much wrong with such an idea
although, predictably, developers are less than enthusiastic.

Chief Minister Stanhope has also talked about allowing buyers to share
equity with in their homes with silent owners, an idea whose strongest
political champion to date has been the Liberal frontbencher Malcolm
Turnbull. As Chairman of the Menzies Research Centre before entering
Parliament in 2004 Turnbull commissioned a major report on the idea that
found it had merit.

Real estate agents want the Steering Group to recommend a cut in land taxes.
The head of the Real Estate Institute in the ACT Peter Blackshaw has
actually called for their elimination. But the argument isn't
straightforward, even if the ACT could afford to do without the income form
land taxes. It is generally agreed that land taxes depress land prices, not
increase them. That's right: depress. If an investor knows that there will
be annual costs involved after buying a property that investor is likely to
be prepared to pay less for the property in the first place. Removing land
tax would start a prices frenzy in the ACT (unless buyers expected the tax
to be reintroduced) shifting prices up to a new plain. On the other hand it
would, as the Institute suggests, increase the number of landlords. It
would do it at the cost of even higher house prices.

From an economic point of view every solution other than increasing the
supply of land for housing is mere tinkering at the edges, however
worthwhile. Increasing the supply of land will both increase the number of
houses for sale and the number of properties for rent. It is likely to
prevent house prices from rising for a while longer and maybe persuade some
of those home owners withholding their properties from sale while they wait
for a rebound to give in.

As it happens there are good reasons to be wary about the Canberra housing
market as a long-term investment proposition.

As I mentioned, it is particularly vulnerable to shocks. And shocks can
come from either direction. The Labor party yesterday unveiled a $3 billion
plan to cut commonwealth spending. The ACT Liberal Senator Gary Humphries says if implemented it would most likely mean a cut of 20,000 government jobs - 7,000 of them in Canberra.

Or perhaps not. Labor might not that many jobs. Or the Coalition could get
back and cut jobs itself. Or continue to increase them.

That's Canberra's problem. Decisions made by the Commonwealth are sudden,
unpredictable, and have a disproportionate effect on the demand for houses
and Canberra house prices.

A big slump the ACT housing market is entirely possible. Right now that
seems unlikely, just as did last week's sudden downpour and hailstorm after
months without rain.

Most of Canberra would hardly be praying for a cutback government employment and a slump in the ACT economy - but it would fix the housing crisis.

The Chief Minister's affordable housing steering group is certain to recommend more practical measures when it reports later this month, the most important of which will be dull but effective: an increase in the number of
blocks for sale.

Read more >>

The poor get the picture. Does Peter Garrett?

If Labor’s shadow cabinet thinks that the middle-class owns million dollar houses, I can’t help wondering what their election strategy to target mainstream Australia is going to look like.

That's the ANU's Andrew Leigh, who takes a break from parenting today to comment on this Peter Garrett radio transcript.

On ABC Adelaide's Matthew Abraham and David Bevan program Tuesday the Labor front bencher was asked, quite legitimately in the view of Labor's taunts about Malcolm Turnbull, whether he was a millionaire.

I hate to say it, again, but Garrett's reply was excruciatingly embarrassing, not to mention wrong.

BEVAN: Are you a millionaire?

GARRETT: Well, anybody who owns a house in Sydney or around Sydney probably qualifies for that but I’d say I’m a person of moderate means.

As Andrew Leigh notes, the median house price in Sydney is $520,000.

As he says: "If Labor’s shadow cabinet thinks that the middle-class owns million dollar houses, I can’t help wondering what their election strategy to target mainstream Australia is going to look like."

Read more >>

Slicing the states' pie

At last. NSW and Victoria have stopped subsidising Western Australia and have almost stopped subsidising Queensland.

From here on in it looks as if the big four will be sudsidising the rest together.

As the Reserve Bank Governor said - Australia's economies are converging rather than moving apart.

Here's my report for tomorrow's CT:

New South Wales, Victoria, South Australia and the ACT have emerged winners from the latest carve up of the nation’s financial cake, with Western Australia the big loser.

The new arrangements recommended by the Grants Commission will give the ACT $13 million more next financial year than it would have got had the old split continued.

In addition the ACT will benefit from an extra $55 million it is expected to receive because of an increase in the size of the GST cake.

NSW is by far the biggest winner from the new split, gaining an extra $277 million, largely to compensate for sluggish earnings from stamp duty compared to other states.

Western Australia gets $271 million less than it would have under the old split, mainly to take account of what the Commission describes as the “unprecedented strength” of its economy.

Previously subsidized by NSW and Victoria, Western Australia now joins them as states assisting the rest of the country...

Queensland now barely remains subsidized, losing $166 million in grants as a result of the new split.

The changes are less severe than they would have been had they fully taken into account the current financial strength of Queensland and Western Australia. By legislation they are based on data averaged over the previous five-years.

Nevertheless Western Australia’s Treasurer Eric Ripper yesterday slammed the new split saying that the west was being punished for its economic success. He said the rest of Australia was happy to enjoy the fruits of its economic boom, but not happy to put money back.

“Our state is subsidising the other states to the tune of $4billion a year, by more than $2,000 for every Western Australian - that’s the highest per capita subsidy in the nation,” he said.

Driving the increase in the ACT’s share of the pie is the hit in revenue it took when it phased out a number of taxes at the Commonwealth’s request. The ACT lost more revenue per person from that decision than other states.

The ACT is also being compensated for relatively low stamp duty collections.

The Commission’s report says that the ACT property market has been the second slowest in the nation over the last five years.

The Chief Minister Jon Stanhope said he was pleased with the Commission’s decision to award the ACT an extra $13 million and that it was more than he had expected.

“However it is not more than we are entitled to or more than is justified,” he said.

The NSW deputy premier John Watkins was less gracious saying that even though his state was $277 better off it was still subsidising the rest of the country it was still some $2.4 billion short.

“If we had our fair share, if we had that $2.4 billion extra we would put it into frontline services such as hospitals, schools and police and transport,” he said.

The Chairman of the Grants Commission Alan Morris said that the changes reflected the accelerating pace at which the state’s earning capacities were changing.

“Western Australia and Queensland have boosted their own source revenues and consequently, in line with the objective of promoting fiscal equalization, reduced their share of GST funding,” he said.

The report highlights was it says is a “convergence” of economic capacity among Australia’s four most populous states - NSW, Victoria, Queensland and Western Australia, although it says more recent data suggests that process may be slowing.

Read more >>

Maxine...

"...you're not the only one to take the whole world on..."

The photo is by Lorrie Graham, the lyrics are by Sharon O'Neil. The single was a big hit in Australia in 1983 and curiously Maxine McKew herself once told her colleagues she had never heard of it.

I have eulogised about my colleague of two or so decades here.

A leading ABC television journalist, she was a foreign correspondent and then chucked it in to work Channel 10.

As she told me once "I am a gypsy"...

Then, reversing the usual order of things, she dived into radio as the Chief Political Correspondent for the ABC programs AM and PM in Canberra, which was where we met.

And then dived into business reporting - another new horizon - setting up the new ABC business program The Bottom Line with Max Walsh, taking me with her.

Made host of Lateline after the business show collapsed, after a year or so she set off instead for print - another new horizon - joining The Bulletin magazine.

She continued presenting Lateline on Friday nights and filling in for Kerry O'Brien on The 7.30 Report and then approached ABC radio about working with me on an interview program - Sunday Profile.

More than enough new horizons for most lifetimes... but not Maxine's.

Anyone who says she won't be a success as a politician doesn't know Maxine.

And I am thrilled to.

Read more >>