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  • Leader of the Opposition Address to The Sydney Institute

    27/07/10

    E&OE

    In the leaders’ debate on Sunday night, the Prime Minister claimed to be a reformer. Her evidence was the MySchool website that simply made available to the public the results of national testing data collected under the previous government’s reforms; and a national occupational health and safety regime that could take decades to bed down if previous COAG reforms are any guide. It’s almost 20 years, for instance, since Bob Hawke and Nick Greiner first declared that there would be national recognition of credentials gained in any state but even this modest goal has yet to be realised.

    In a recent newspaper article, the retiring Finance Minister, Lindsay Tanner, provided his own list of the government’s reforms dominated by the (as yet unlegislated) 2009 Budget commitment to lift the pension age to 67 by 2023. His reform checklist also included digital TV, quality standards in childcare, ending discrimination against same sex couples and improving R&D tax concessions. Most of this is unfinished business. Readers would probably find this “less than exciting”, Tanner confessed before insisting that “the government is doing a lot of reform work”. “Don’t let anyone tell you otherwise” he said, sounding only half convinced himself.

    Apart from the apology, rolling back some of the former government’s workplace changes and a welfare measure in the Northern Territory (of which more later), there’s little to show for the past three years. Only 22 of 2650 promised trades training centres have been built, three of 36 promised GP super clinics are fully operational, and four of 260 promised childcare centres are open. Of these, 222 won’t be proceeded with once a further 34 have been finished.

    Sure, Australia survived the global financial crisis pretty well but this owes far more to the reforms of previous governments than to the spending spree of the current one. The prime minister claims that the stimulus spending was necessary to save jobs, but at about $250,000 each, the 200,000 jobs allegedly saved by the $53 billion in stimulus payments look to have been dearly bought. It’s hard to believe that the pink batts programme has saved Australia from recession or that it was necessary to spend $16 billion on overpriced school halls to weather the global financial crisis of late 2008; especially when the so-called Building the Education Revolution programme is scheduled to last longer than the First World War to tackle a crisis that the Reserve Bank governor thinks only really lasted eight weeks. The Prime Minister’s anxiety to have voters focus on the future, to be “moving forwards”, betrays Labor’s fear that the record it has to defend is record deficits, record new tax proposals, record boats and getting rid of an elected prime minister in record time.

    Labor thinks that building a government-owned monopoly in telecommunications infrastructure should be considered a visionary economic reform. But why would you trust this government to spend $43 billion without a business plan or cost benefit analysis on a massively complex project when it couldn’t be trusted to get pink batts safely into people’s roofs or to get school halls built at anything like the standard price? The minister who couldn’t adequately oversee the school hall programme is now the Prime Minister asking to be entrusted with a $350 billion government and a $1.3 trillion economy.

    The previous government introduced work for the dole, cleaned up the waterfront, banned semi-automatic weapons, began to sell Telstra, established the Job Network, and managed a once in half a generation fiscal repair job in its first term, before fighting for re-election pledging historic tax reform. By contrast, the current government has essentially been minding the shop when it hasn’t actually been inflicting damage. Compared to the record of the previous Labor government, which floated the dollar, deregulated the finance market and started to cut tariffs in its first term, the current government lacks both competence and conviction.

    The introduction of an emissions trading scheme was to have been the government’s big reform but the former prime minister was apparently talked out of risking a double dissolution election by the current prime minister. Voters had seemed to give the former Prime Minister the benefit of the doubt until he indefinitely abandoned his policy to deal with what he’d repeatedly called the “greatest moral challenge of our time”. The current prime minister’s honeymoon seems to have ended equally abruptly when she declared that her policy to deal with the “greatest economic and political challenge” of our time, in her words, was to subcontract the decision to a giant focus group. Who needs a parliament when the hard decisions can be made by 150 voters chosen by lot and lectured to by experts for 12 months or until they make the right decision? With the prime minister wanting a carbon price and the Greens, whose votes will be needed for any legislation to pass, wanting a carbon tax, the “citizens’ assembly” proposal looks like a pre-election smokescreen for a great big new tax on everything that the prime minister would rather not publicly explain or defend.

    The government might have “lost its way”, as the Prime Minister declared on her first day in the job but, a month on, the confusion is worse. With an advertising campaign about to restart, it’s obvious that the mining industry had not agreed to the government’s new tax as the Prime Minister had claimed. With the East Timorese parliament twice unanimously rejecting the proposed offshore detention centre, the prime minister has no effective solution to the new wave of illegal boat arrivals triggered by the government’s earlier dumping of the former government’s policies.

    The government remains more talk than action. The talk might now seem more soothing and initially more plausible but the action is even less convincing. The new Prime Minister is a smooth talker alright but actions always speak louder than words or in this case blunders are more eloquent than assurances. With its two most effective ministers leaving at the election and Kevin Rudd’s position as foreign minister designate unclear, the government looks out of its depth and the Prime Minister is starting to look over-promoted. There’s no doubt that senior Labor politicians have never been better at reading focus group reports but can any of them actually run a government?

    The frightening prospect now looms of the NSW Labor malaise contaminating the national government, with hard decisions frustrated by union self-interest and party leaders being dumped at the first dip in the opinion polls. Julia Gillard can’t guarantee that, if elected, she would serve a full term because she can’t guarantee that the powerbrokers would let her. The same fate could await Ms Gillard as befell Kevin Rudd and Morris Iemma and as awaits Anna Bligh: political death at the hands of faceless powerbrokers thinking to appease the electorate with a human sacrifice.

    The first task of an opposition is to hold the government to account so criticism is an opposition’s stock in trade. By contrast, a government that immediately resorts to negative campaigning is conceding that it doesn’t deserve to be re-elected. Indeed, this government’s principal case for re-election seems to be that it’s been hopeless but that the opposition would be worse. That’s what I intend to refute tonight. My task is to show that, if elected, an incoming Coalition government would be a far more prudent manager, a more sensible conservationist and, perhaps most importantly, a more respectful and consistent reformer than our opposition.

    Much has been made of the Coalition’s decision not to change the workplace relations legislation. This doesn’t mean that the Coalition has no stomach for reform; just that there has been more than enough reform and counter-reform in this area. Only a dog with a bone would refuse to accept the people’s verdict. The message that businesses have given me over the past few months is that they’d rather put up with the current legislation than endure yet another round of change. Knowing when to back your own judgment and when to respect the wishes of others is one of the most important aspects of leadership. Often, it’s not weakness but wisdom to accept that you have to change your mind.

    Much has been made of the Coalition’s decision to introduce a fair dinkum paid parental leave scheme that gives mothers their real wage for six months to be at home with their newborns. The objection seems to be not so much to paid parental leave as such but to the manner of paying for it or to the fact that others allegedly miss out. Parental leave should be a workplace entitlement, not a welfare one. Labor’s scheme is not paid parental leave at all because it fails to give women their actual wage for time off work to be with their baby.

    Like the provision of sick pay, long service leave and holiday pay, the provision of parental leave should be borne by business. If it had to be borne by an individual employer, though, small business would have a disincentive to employ younger women. Making the cost of parental leave a charge on business generally means that there’s no reason not to hire women. Making the cost a charge on those larger businesses with a taxable company income over $5 million a year means that there’s no extra burden on hard-pressed small business. Of the 770,000 companies in Australia, only 3,300 would be liable for the paid parental leave levy. Putting the administration into the hands of the Family Assistance Office all-but-eliminates the additional paperwork required from business under the government’s scheme.

    Peter Costello’s Intergenerational Reports said that the only way to avoid the demographic destiny of a comparatively smaller working population paying ever higher taxes to support more retirees was to boost the three “Ps”: population, participation, and productivity. Paid parental leave should mean that working women can more readily choose to have more children; it should certainly give mothers more reason to choose to stay in the workforce; and by keeping experienced workers in employment it should boost productivity.

    Of course, everything has to be paid for and, for the reasons already stated, the Coalition thinks that a modest levy on large business is the best way to fund it. If the budget was in $20 billion surplus rather than $57 billion deficit, it would be easy to reduce company tax by 1 or 2 per cent to make “headroom” for the new levy. That would be the Coalition’s preferred position. Labor’s claim that the paid parental leave levy is a “Woolies and Coles tax” entirely misses the point: paid parental leave is good for the economy; Labor’s coming mining tax and likely carbon tax are bad for the economy. Paid parental leave puts money directly into family’s pockets; by contrast, the whole point of putting a price on carbon is to raise prices to consumers. The levy to fund paid parental leave is not big enough to damage companies but the scheme itself is big enough to improve society.

    Paid parental leave helps the 62 per cent of mothers who are in the paid workforce for just one day a week or more just prior to having a baby. It does not apply to full time working mothers only. Part time and casual workers who do one day a week will be covered. It’s important to acknowledge that, these days, most families need more than one income to survive. Effective policy needs to accommodate the social changes of the past few decades while continuing to support society’s most effective mutual help mechanism. I have always accepted that middle income families with children are Australia’s new poor, particularly single income families, and would like to do more to help them. The Coalition has just announced more help for families’ educational expenses and restored funding to occasional care but may not be able to target more specifically for “stay at home” mums until the budgetary situation improves.

    The first task of government right now should be to get debt and deficit down. The government is borrowing $100 million every single day. This is money that could otherwise be available to small business for productive investment so it puts upward pressure on interest rates. As well, wasteful government programmes (like the one proposing to spend almost a million dollars on a covered outdoor learning area which local builders could do for a quarter the cost) push up prices and add to inflation.

    Governments should live within their means, as families and small businesses do. The Coalition has already announced $47 billion in reductions to Commonwealth borrowing and spending. This largely comprises programmes to create bureaucracies rather than to deliver services. More spending reductions will be announced over the course of the election campaign. Meanwhile, the government is trying to position itself as the people’s champion against spending cuts while also seeking credit for its own (unannounced) programme of spending cuts. Obviously, it would be much easier to expand worthwhile programmes or to invest more in infrastructure once the Budget is back in surplus and the debt paid-off. In the meantime, a responsible political movement has to say “no” to all-but-the-most-pressing new spending commitments. That shouldn’t stop policy makers from considering the types of reforms that might be desirable when the fiscal position improves.

    Many of the Henry Review’s 138 recommendations have no more than theoretical merit. Still, Ken Henry has spent most of his professional life thinking about how to improve the tax transfer system and these recommendations in particular should not have been ignored by the government. His recommendations to raise the tax free threshold to $25,000 and to make personal tax rates lower and flatter should be considered a priority once budget surpluses are big enough to afford them.

    The Coalition’s readiness to devolve the management of public hospitals and public schools to local community boards or to parents’ councils, at first glance, doesn’t look like an economic reform. It is, though, because we spend some $25 billion a year on public hospitals and $15 billion on public schools and making them more responsive and more efficient means that they can be more productive. Social reforms are economic reforms too if they reduce the cost of delivering services or if they get more people into work.

    The object of welfare reform should be to get more people into the workforce. Work for the dole, one of the signature programmes of the former government, was designed to ensure that working age people actually were working: preferably for a wage but, if not, for the dole. It was also designed to ensure that otherwise marginalised people had the chance to show what they could do rather than what they couldn’t. Reforms to disability pensions were designed to encourage at least part time work and reforms to the supporting parent benefit were designed to help sole parents to re-enter the workforce. Not all of these reforms were popular but they were necessary if an entitlement mindset was to become a personal responsibility one.

    As part of the emergency intervention into the remote communities of the Northern Territory, the former government amended the social security act to provide for the conditional payment of benefits. In the Territory’s remote communities, 50 per cent of government benefits were to be quarantined to the necessities of life rather than be available to fund gambling, drinking and smoking.

    Although prompted by particular circumstances, namely the epidemic of abuse and domestic violence chronicled in the Little Children are Sacred report, the intervention also represented the furthest development of the Howard Government’s thinking about the welfare system and was a logical extension of changes that had been taking place since 1997. In essence, the changes were designed to have people on benefits take their responsibilities seriously: to seek work and to work where it was available and to provide conscientiously for their families.

    The underlying principle, which the phrase “mutual obligation” attempted to convey, was that society had serious obligations to people who had difficulty providing for themselves but that those people also had serious responsibilities to contribute as best they could. People had social as well as economic responsibilities to society which the intervention’s welfare quarantine legislation was the first significant step towards enforcing.

    Shortly before the 2007 election, the former government announced that parents whose children did not attend school or who were seriously neglected would also face welfare quarantine. The new government would do likewise, said the incoming families minister, Jenny Macklin. Family payments, she said, “are there to be spent in the interests of children, not squandered on drugs or gambling”. Unfortunately, quarantining payments on the basis of poor behaviour is normally dependent on the cooperation of the states which collect and control the relevant data. Although the current government has announced a number of trials of welfare quarantining for delinquent parents, the only place where conditional quarantine seems to have been enforced is Cape York where the Family Responsibilities Commission can make these sorts of orders.

    One of the Labor Party’s problems with the original intervention was the suspension of the Racial Discrimination Act to ensure that welfare quarantining in remote indigenous communities could not be challenged. To keep some form of quarantining once this suspension was lifted, the current government has narrowed the scope of quarantining but extended its application. Instead of applying to all benefits in 73 remote communities, automatic welfare quarantining now applies only to all longer term unemployment beneficiaries but it does apply throughout the Territory. Automatic quarantining now applies to a specific benefit (at least in the Territory) rather than to specific communities. At least in the Territory, automatic welfare quarantining no longer applies just to Aboriginal people but to everyone who has been on unemployment benefits for longer than a year. This is a highly significant change. Minister Macklin may have struggled to deliver the government’s promises on remote indigenous housing but she has diligently worked to ensure that welfare beneficiaries are aware of their social responsibilities.

    This, of course, raises the question: if the automatic quarantining of unemployment benefits is just and fair in the Northern Territory, why not implement it elsewhere? Why not set aside for the essentials of life half the government payments of long term unemployment beneficiaries in other parts of Australia? Regardless of where they live or who they are, people on unemployment benefits would normally spend at least half their disposable income on the necessities of life. Quarantining 50 per cent of their payment would not impact on responsible beneficiaries but should help to ensure that others at least have some food on their table and a roof over their heads.

    It is very difficult to propose detailed policies in this area from opposition. Too much data is held by government agencies and is not generally available. Because general quarantining for long term unemployment beneficiaries in the Territory is a new programme with considerable start up costs, it’s difficult at this stage accurately to cost an extension of the programme. What I can say, though, is that an incoming Coalition government will carefully review the operation of this wider form of quarantining after July next year, when it has been in operation for 12 months, with a view to extending it more widely across Australia. Depending upon how it’s gone, we may extend it to further regions on a trial basis or more generally across Australia. Again I congratulate Minister Macklin for implementing this measure and pose the question: if it’s right and just in the Territory and it is, on the government’s own assessment, why not elsewhere?

    This is the kind of policy that a government of real economic conservatives should consider, especially if obtaining truancy and child protection data from the states continues to be difficult. A Coalition government would certainly work hard with the states to pursue wider conditional quarantining but we should also consider further automatic quarantining along the lines now in place in the Territory.

    This is the kind of incremental reform, based on widely accepted principles, that should be the hallmark of a government that respects the social fabric. It should produce a better life for long term unemployed people. It should also help to consolidate the social compact by assuring taxpayers that welfare payments are being put to good use. Today’s economic reform, as Prime Minister Howard once said, is the basis of tomorrow’s prosperity. Similarly, today’s social reforms are the basis of the stronger and more cohesive society of the future that the Coalition is determined to build.
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