Newsflash. The government doesn’t need to break up power companies in order to tame prices. The ACCC says so



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Victoria’s Loy Yang brown coal power station at night. Breaking up generation companies might do little to bring prices down.
Shutterstock

Tony Wood, Grattan Institute

Who wouldn’t want cheaper power?

And who wouldn’t enjoy a bit of a stoush between the big bad generators and the government, trying to break them up on our behalf?

Even if it was largely tangential to keeping prices low.

The “big stick” of forced divestiture, where the government through a court could order an energy company to sell off bits of itself, never made it to a vote in the final chaotic fortnight of parliament just finished.

It will be the subject of a Senate inquiry that will report on March 18. After that, parliament is set to sit for only seven days before the election, so its possible it’ll never happen, under this government.

The government’s bill is good in parts

Parts of its Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill are uncontroversial.

The main trigger was the Australian Competition & Consumer Commission’s June report, Restoring Electricity Affordability and Australia’s Competitive Advantage.

It found against forced divestiture, but thought along similar lines to the government in some respects.

The legislation presented to parliament this month bans three types of misconduct:

  • electricity retailers’ failing to pass on cost savings
  • energy companies’ refusing to enter into hedge contracts (agreements to buy and sell at a particular price) with smaller competitors
  • generators’ manipulating the spot (short term) market, for example by withholding supply.

It imposes civil penalties for the first, forces companies to offer contracts for the second, and provides for divestiture orders for the third, after they have been recommended by the government and approved by the Federal Court.




Read more:
Consumers let down badly by electricity market: ACCC report


There are good reasons for the government to act on the three behaviours, although each of the its proposed solutions raises concerns.

The ACCC wants something similar but different

Firstly, the ACCC did not identify the legislation’s first target as a major cause of high prices. They did observe that it is complicated to shop around and the offers are confusing, and sometime next year Australian governments will force retailers in some states to offer fairer default offers at an affordable price.

But it not clear why the energy sector has been singled out as an industry whose retailers have to pass on cost savings, and not supermarkets or banks or airlines or petrol stations, or any other kind of industry.

Secondly, the ACCC most certainly did raise concerns about dominant generator-retailers preferring not to enter into hedge contracts with competitors, particularly in South Australia.




Read more:
FactCheck Q&A: are South Australia’s high electricity prices ‘the consequence’ of renewable energy policy?


It recommended that the Australian Energy Market Commission impose a “market making obligation” forcing large, so-called gentailers to buy and sell hedge contracts.

Its recommendation has the same intent as the one proposed by the government, although it has the advantage of being administered by a regulator that already exists.

Thirdly, the ACCC also concluded that concentration in the wholesale market means higher prices. Its report focused on the bidding activity of the Queensland government owned generator Stanwell Corporation.

Manipulation isn’t a major price driver

The Grattan Institute identified market manipulation by generators as a contributor to higher prices in our July 2018 report Mostly working: Australia’s wholesale electricity market.

But we found it made a much smaller contribution than high gas and coal prices and the closure of ageing coal generators.

We recommended a rule change to constrain generators’ bidding practices in specific circumstances.




Read more:
Why the free market hasn’t slashed power prices (and what to do about it)


The ACCC recommended giving powers to the Australian Energy Regulator to investigate and fix such problems.

It considered a divestiture mechanism of the kind in the government’s leglislation, but rejected it as extreme.

Its own less extreme recommendations would “if implemented, be a better means to restore competition to a level which serves consumers well”.

Breaking up corporations is a broader question

There may well be a case for breaking up corporations whose size prevents or substantially lessens competition. It happens overseas.

The government cites the example of the United States Sherman anti-trust legislation. It has been in place since 1890 and has been famously used to break up Standard Oil and AT&T. The ACCC does not have this power.

There is debate about whether it would work in the much smaller market of Australia.




Read more:
Uncomfortable comparisons. Why Rod Sims broke the ACCC record


Allan Fels, a former head of the Australian Competition and Consumer Commission a believes it would.

But quite sensibly he argues it should apply across the board, including sectors such as banking in light of the findings of the royal commission.

Ian Harper, who led the government’s 2015 competition review, is less convinced. However, he says if a divestment power is introduced, it should be introduced broadly.




Read more:
Harper Review: a mixed basket for Coles and Woolworths


It’s worth considering divestment powers broadly, rather than rushing to introduce them in one sector of the economy in what was to have been the leadup to Christmas because of a concern that its prices were too high.

The ACCC has already delivered a comprehensive report on the means to bring them down.

The government would be better served acting comprehensively on its recommendations.The Conversation

Tony Wood, Program Director, Energy, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Grattan on Friday: Hokey-pokey politics as the government is shaken all about


Michelle Grattan, University of Canberra

In the topsy turvy Liberal universe, just when the right is trying to
tighten its grip on the throat of the party, the government is haring
off to the left, with this week’s legislation to allow it to break up
recalcitrant energy companies.

As former deputy Liberal leader Julie Bishop – who as a backbencher
has become very forthright – said in the Coalition party room on
Tuesday, “this is not orthodox Liberal policy”. Bishop canvassed the
danger of sovereign risk.

To find a rationale for a frolic into what in other circumstances the
Liberals would no doubt denounce as “socialism”, one might see it as
driven by the veto of the so-called conservatives.

Those on the right (led by Tony Abbott and his band) have long stopped
the government putting forward a sound energy policy, despite the
strong pleas from stakeholders across the board.

Instead, trying to respond to the pressing electoral issue of high
electricity prices, the government has reached for its “big stick”
including the threat of divestiture – a policy that’s being attacked
by Labor as well as business.

Shadow treasurer Chris Bowen was correct on Thursday when he said:
“this is what we see when a government’s policy agenda falls apart”.

Having to defend this draconian policy, first from critical Coalition
backbenchers (who won some changes) and then in parliament, the
government found itself tied in knots.

Given this is such a radical proposal, it was also in an enormous rush with the legislation, introducing it on Wednesday and wanting the House of Representatives to pass it by Thursday.

But that timetable was stymied by Labor. Passage through the House
will have to wait until February.

Meanwhile there will be a Senate inquiry, reporting in March. This
puts off a Senate vote until budget week in April – ensuring a lot
of noise about this controversial measure just when the government
will want all the attention on a budget crafted to appeal to voters
for a May election.

Even if the divestiture legislation gets through the Senate next year,
a likely Labor election victory would mean we’ll probably never see
this particular “big stick” wielded. It’s highly doubtful the threat
will have been worth the angst, or the trashing of Liberal principles.

The final parliamentary fortnight of 2018 coincided with the first
fortnight of the hung parliament.

For Scott Morrison, it has been an excruciating two weeks, with the
backlash from the Liberals’ trouncing in Victoria, Julia Banks’
defection to the crossbench, Malcolm Turnbull’s provocative
interventions, and an impasse with Labor over the plan to protect LGBT
students.

The government’s stress culminated in Thursday’s extraordinary battle
to prevent a defeat on the floor of the House.

This test of strength was over amendments, based on a proposal
originally coming from new Wentworth member Kerryn Phelps, that would
make it easier to transfer people needing medical treatment from Nauru
and Manus to Australia.

As both sides played the tactics, a remarkable thing happened in the
House of Representatives. Behaviour improved one hundred percent, with
none of the usual screaming and exchanges of insults. This pleasing
development was, unsurprisingly, driven by self-interest – neither
government nor opposition could afford to have anyone thrown out ahead
of the possible crucial vote.

Earlier, Morrison had shown anything but restraint when at his news
conference he described Bill Shorten as “a clear and present threat to
Australia’s safety”. Once that would have been taken as a serious
claim, which a prime minister would have been called on to justify. In
these days, it’s seen as a passing comment.

In what was a highly aggressive performance, Morrison gave us another
foretaste of what he’ll be like on the hustings.

In the end, by its delaying tactics in the Senate, the government
prevented the amendments reaching the House before it adjourned, and
so avoided a test of the numbers.

Defeat in the House would not have equalled a no confidence vote, but
it would have been a serious blow for Morrison. Looking for a
precedent, the House of Representatives’ clerks office went back to
votes lost in 1929 (which led to an election) and on the 1941 budget
(which brought down the Fadden government).

But the government may have just put off, rather than prevented, the
reckoning. Phelps said on Sky, “I am sad that we didn’t get this
through today … because I believe it would have gone through on the numbers … But you know if we have to wait until February, at least I believe that there is a light at the end of the tunnel.”

Dodging this vote meant that legislation to give authorities better
access to encrypted messages to help in the fight against terrorism
looked like it would be delayed. Once the House had adjourned, any
Labor amendments the Senate might pass couldn’t go back there until
February.

The government had declared the encryption measure was urgent, and the
blame game started in anticipation of a hold up. Then, mid-debate in
the Senate, Labor abandoned its attempt to amend the bill, which
glided through. In an agreement which may mean something or nothing,
the government undertook to consider the ALP amendments in the new
year.

Shorten didn’t want to be open to the government’s accusations of impeding legislation the security agencies said would help prevent terrorist
acts. “I couldn’t go home and leave Australians over Christmas without
some of the protections which we all agree are necessary,” he said.

The events of this week show why the government decided to have
the minimum of sitting days before the election next year.

The new parliamentary session will open with a deadlock on the
protection of gay students, the divestiture plan up in the air, and
the Nauru-Manus vote hanging over the government.

And by that time Scott Morrison will have had his first and probably
his last Christmas at Kirribilli.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

View from The Hill: Day One of minority government sees battle over national integrity commission


Michelle Grattan, University of Canberra

Whatever it does, the Morrison government seems to find itself caught
on the sticky fly paper. As if it didn’t have trouble enough with
trying to decide about the embassy in Israel and the religious freedom
report, on Monday it became messily entangled in the issue of a
national integrity commission.

On the first day of formal minority government, the crossbench flexed
its muscle and the government bowed to the new reality.

Well, not quite bowed – but bought time by taking a line of least resistance.

After the independent member for Indi, Cathy McGowan, introduced her
private member’s bill for a national integrity commission, the House
of Representatives considered a motion from the Senate which called on
“the federal government to establish a national anti-corruption
commission”.

The government didn’t oppose the motion, which went through on the voices.

It was claimed that Attorney-General Christian Porter wanted to set out
the government’s objections to the McGowan bill, which he couldn’t do
in private members’ time.

The real reason was the government didn’t want to test its numbers on
the floor when there could be a defector or two from its own ranks.

Porter embarked on something of a lawyer’s frolic as he pointed to
dangers in the bill.

He warned that any public official who, it could be argued, had
breached public trust or impaired confidence in public administration
“would be liable to a finding of corruption”, even for a trivial
matter.

The ABC would come under the proposed body. So Porter conjured up the
scenario of ABC political editor Andrew Probyn (who, it will be
recalled, former ABC chairman Justin Milne wanted shot) being caught
under the bill.

On Porter’s account, that would be because Probyn was found in breach
of the ABC code of practice’s provision on impartiality for saying
Tony Abbott was the “most destructive politician of his generation”.

“Under this bill before the House—no ifs, ands or buts—Andrew Probyn
would be found to have committed corruption,” Porter declared.

He didn’t sound as if he were joking but maybe the Attorney has a very
dry sense of humour.

Not that McGowan is claiming her bill has the detail right. What she
and other crossbenchers are trying to do is force the government’s
hand.

How far they’ll succeed is not clear – they’ll get something but not
the full monty.

The government’s preference would be to do nothing. But that’s no
longer politically viable. Labor is committed to a new anti-corruption
body (once it didn’t believe in one), and the level of public distrust
of the political system makes this an issue that resonates in the
community.

The government now finds itself in the rather bizarre situation of
having voted for a “national anti-corruption commission” without
committing itself to one.

In fact, such a commission is the least likely to get a tick of the
three options before the government. Porter has all but written it
off.

The other options, according to Porter, are expanding one of the
existing 13 bodies that presently deal with integrity and corruption
(probably the Australian Commission for Law Enforcement Integrity),
or merging some of them to eliminate overlap.

Ideally the way forward would be by a bipartisan approach. The issues
are indeed complex and state experience suggests the need for careful
balances and protections. But bipartisanship not the way of things
before an election.

Attacking Shorten, Scott Morrison accused him of being preoccupied
with a “fringe issue”.

Morrison said the matter would be dealt with “through a normal Cabinet
process”. Porter says this process is well underway. Indeed a lot of
it happened under Malcolm Turnbull – Porter says he has been working
on it since he became attorney-general nearly a year ago.

Both the embassy question and the religious freedom report are in
“processes” at the moment.

The government received another prod on the latter when on Monday a
Labor-chaired Senate committee recommended in its majority report that
a ban on religious schools discriminating against gay teachers should
be considered.

This goes much further than the government’s plan – bogged down in
negotiations with Labor – for legislation to prevent discrimination
against gay students. The opposition is expected on Tuesday to push the
government to act immediately on its promise to protect students.

As the Liberals took in the devastating Victorian result, there was
the feeling that the Morrison government was just holding things
together.




Read more:
View from The Hill: Labor’s 55-45% Newspoll lead adds to Liberals’ weekend of woe


Senate president and Victorian Liberal Scott Ryan, who rarely enters controversies given his position as a presiding officer, unleashed a restrained but pointed assault against the right of the party (and rightwing commentators).




Read more:
Senate president Scott Ryan launches grenade against the right


Victorian Liberal backbencher Tim Wilson delivered a sharp message to the coal lovers. “If anybody thinks that there’s this great public sentiment out there that people really deep down hate renewables and they’re hugging something like coal, I say again — get real”.

That immediately encouraged a rerun of Morrison’s coal hugging in parliament.

In question time the Prime Minister was decidedly shouty and aggressive.

And, despite the crossbenchers now looming large in his world, he
didn’t make time to sit in the chamber for Kerryn Phelps’ maiden
speech. He had other engagements, his office said.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

State governments can transform Australia’s energy policy from major fail to reliable success


Tony Wood, Grattan Institute and Guy Dundas, Grattan Institute

This week we’re exploring the state of nine different policy areas across Australia’s states, as detailed in Grattan Institute’s State Orange Book 2018. Read the other articles in the series here.


Energy policy in Australia is a major failure. The federal government has been unable to forge an effective policy to ensure affordable, reliable and low-emissions electricity. It’s time for the states to step up.

Internationally, responsibility for climate change policies rests with national governments. The federal government says it remains committed to Australia’s target under the Paris Agreement, but it has abandoned the emissions-reduction obligation of the National Energy Guarantee (NEG). This leaves Australia’s electricity sector, which is responsible for 34% of our overall emissions, with no credible policy to reduce those emissions.

The states should fill this policy vacuum if it persists. They should work together on a nationwide emissions reduction scheme through state-based legislation, independent of the federal government. A Commonwealth-led national policy would be best, but a state-based policy is far better than none.




Read more:
The too hard basket: a short history of Australia’s aborted climate policies


In October 2018 the COAG Energy Council agreed to continue work on the reliability element of the NEG. The states and territories should maintain this support and implement this policy with the Commonwealth government, and so support the reliability of the National Electricity Market during a challenging transition.

The Grattan Institute’s State Orange Book 2018 shows that there is also much the states can do to reduce energy prices. Consumers are understandably upset – household retail prices have increased by more than half in the past decade, according to the Australian Competition and Consumer Commission (see page 7 here).

How your state measures up on energy.
Grattan Institute State Orange Book 2018

The federal government is certainly focused on price – Prime Minister Scott Morrison has referred to Energy Minister Angus Taylor as the “minister for getting electricity prices down” – but many important pricing policies depend on state action.

Retail pricing is the obvious example. Poorly regulated retail electricity markets have not delivered for consumers. Retail margins are higher than would be expected in a truly competitive market. Many consumers find the market so complicated they give up trying to understand it.




Read more:
A high price for policy failure: the ten-year story of spiralling electricity bills


State governments should work alongside the federal government to help consumers navigate the retail “confusopoly”. Governments should require retailers to help consumers compare offers and get the best deal. They should also stop retailers using excessive pay-on-time discounts (which tend to confuse rather than help consumers and can trap lower-income households), and ensure vulnerable customers do not pay high prices.

However, governments should resist the temptation to use price caps as a quick fix. If set too low, price caps could reduce competition and drive longer-term price increases.




Read more:
Capping electricity prices: a quick fix with hidden risks


Western Australia, Tasmania and the Northern Territory, which have not yet adopted retail competition, should move in that direction – while learning from the mistakes of others.

Network costs make up the biggest share of the electricity bill for most households (see page 8 here) and some small businesses. This is particularly an issue in New South Wales, Queensland and Tasmania, where network values increased substantially under public ownership and those costs were passed on to consumers.

These states should write down the value of their overvalued networks or provide rebates to consumers, so the price of the networks is more closely aligned to the value they provide to consumers. Given the poor performance of publicly owned networks, any network businesses still in government hands should be privatised.

Responsibility for setting network reliability requirements should be transferred to the Australian Energy Regulator to prevent risk-averse state governments from imposing excessive reliability standards, which would drive up network costs again.




Read more:
Amid blackout scare stories, remember that a grid without power cuts is impossible… and expensive


Until recently, it seemed state governments had learned the lessons from the bad old days of excessively generous subsidies for rooftop solar. That was until August 2018, when the Victorian government committed more than A$1 billion to pay half the cost of solar panels for eligible households and provide an interest-free loan for the remainder. Most of these systems would pay for themselves without subsidy. The Victorian government should abandon this waste of taxpayers’ money.




Read more:
Policy overload: why the ACCC says household solar subsidies should be abolished


Finally, Australia’s gas market is adding to the price pain of homes and businesses. As international prices rise, there is no easy way to avoid some painful decisions. But some state policies are making matters worse.

The Victorian and Tasmanian governments’ moratoria on gas exploration and development constrain supply and drive up prices. The moratoria should be lifted. Instead, these states should give case-by-case approval to gas development projects, with safeguards against specific risks.

Australia needs reliable, affordable electricity to underpin our 21st-century economic prosperity. That must be protected while we also decarbonise the energy sector.

Energy market reform was at the forefront of national competition policy in the mid to late 1990s. But reform has since slowed, and the states are partly responsible. The states can rekindle the fire by pursuing a clear, nationally consistent action plan for affordable, reliable and low-emissions electricity.

Australia’s households and businesses – and the environment – are relying on the states to step up.The Conversation

Tony Wood, Program Director, Energy, Grattan Institute and Guy Dundas, Energy Fellow, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

State governments are vital for Australian democracy: here’s why



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State government remains an important part of the Australian political landscape.
Wes Mountain/The Conversation, CC BY-ND

Frank Bongiorno, Australian National University

As Victorians head to the polls in less than four weeks, there is a wider question worth considering than whether or not the Andrews government is likely to be given another term. Do state governments actually matter?

Imre Salusinszky, a former adviser to then- New South Wales premier Mike Baird, recently tweeted: “State government in 2018 is about running four or five businesses. The whole Westminster thing is preposterous. An efficient model would be a six-person executive guided by a People’s Convention meeting biennially for a month. Doesn’t need party politics and chocolate soldiers”.

That seems unlikely, but the idea that state governments have become too municipal to be taken seriously is familiar. For decades, federal politicians with a high opinion of themselves have treated the state government as beneath their notice or contempt.




Read more:
Three areas to reform federal-state financial relations


The exposure of the rorting and corruption of a number of state politicians – notoriously Eddie Obeid and Ian Macdonald during the most recent period of Labor government in New South Wales – has also fuelled a more general contempt for state politics. But the states at least have well-developed integrity systems that have landed a few crooks in prison. It would be mischievous as well as libellous to explore whether some of their federal counterparts have been cleaner or luckier.

The habit of treating state government as a poor relation might not be recent. Most of the big names in colonial politics headed straight into the Commonwealth parliament in 1901. Later, it is doubtful whether a federal politician would have ridiculed a Jack Lang or Ted Theodore – New South Wales and Queensland Labor premiers respectively – as dealers in triviality. But they, too, eventually headed for national politics.

With their eyes on the growing power and prestige of federal government as it acquired ever stronger control of national finances, historians have underestimated the continuing significance of the states in major policy areas. Land has always been a big one, as it is today in relation to housing affordability and urban development.

In earlier periods, closer settlement, soldier settlement and land taxation were all state matters. There is also mining. When he was Western Australian minister for industrial development in the 1960s, Charles Court was practically running an arm of Australia’s international policy in his negotiations with the Japanese over new iron-ore projects.

Large fields of activity remained predominantly state matters after federation – education, health and hospitals, public transport and roads, local government, and law and order. The capacity of the Commonwealth to act in a range of fields was either untested, or tested and found wanting.

In the area of social security, it was far from clear before the second world war that the Commonwealth would become predominant. The Commonwealth also left some fields to the states even where its authority to act was unquestioned – such as in marriage and divorce law before 1959-61.

For much of the twentieth century, most major public utilities, such as railways, were controlled by the states. Many became massive government bureaucracies and monopolies. On a smaller scale, Queensland had state-owned butcher shops and pubs.

In social, industrial and conservation policy, the New South Wales Labor governments of the 1940s, 1950s and 1960s showed that caution was not inconsistent with policy innovation. Rather more adventurously, Don Dunstan’s South Australian Labor governments of the late 1960s and especially the 1970s, provided a blueprint for the social progressivism associated with the Whitlam revolution. Dick Hamer’s progressive Liberal government in Victoria complemented the Whitlam agenda.

South Australian premier Don Dunstan lead a socially progressive government associated with the Whitlam revolution.
The Centre of Democracy, South Australia

The 1980s revealed some of the limits for state governments in economic policy. The Victorian Cain Labor Government’s economic interventionism won the active dislike of Bob Hawke and Paul Keating. It ran up against the barrier of national economic policy and, eventually, political turmoil and financial scandal. Other governments were dogged either by corruption, as in the case of Western Australia and Queensland, or financial mismanagement, as in South Australia.

These results pushed the following generation of Labor leaders and governments towards notable caution and probity. By the mid-2000s, the credit ratings agencies were taking on the role of de facto third chamber of the state legislatures.

Still, the Bracks Labor government in Victoria sought to use its personnel and resources to influence the national policy debate. It contributed a National Innovation Agenda, which the Rudd Government took up as a starting point for its own efforts in that field.

The nature of the compact John Howard formulated to get his Goods and Services Tax up, which saw revenue going to the states according to an agreed formula, also provides premiers with a captive national audience whenever the issue of tax policy reform arises.




Read more:
From ‘Toby Tosspot’ to ‘Mr Harbourside Mansion’, personal insults are an Australian tradition


Where does this leave state government today? In the first place, it shares with federal government control over areas that are among the most controversial and difficult for government. Energy policy is near the top of the list. And no one would regard Victoria’s new euthanasia law as anything other than a matter of high seriousness.

State government’s capacity for innovation and experimentation in fields that matter, and are not dependent on federal control of the purse-strings, remains alive. The Council of Australia Governments, or COAG, offers a forum in which such influence can be exercised. State governments in Victoria and South Australia have been pursuing the idea of a Treaty with Indigenous people, at a time when the issues of constitutional recognition, an Indigenous voice to parliament, and a Treaty or Makarrata have stalled at the national level. At the territory level, it was the ACT government that passed Australia’s first bill of rights law in 2004.

State governments provide Australians with choice and a government that, for most people, will be less physically and spiritually distant from their daily lives than Canberra. There are also the benefits of variety. For some years during the time John Howard was dominating the federal scene, every state and territory government was controlled by Labor.

Today, there is a more even division between the parties. It remains true, however, that in a time of disillusionment and distrust of politicians, state government provides electoral choice, checks on federal government power, and a large array of the services that Australians think of as peculiarly the province of government.The Conversation

Frank Bongiorno, Professor of History, ANU College of Arts and Social Sciences, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

How to restore trust in governments and institutions



File 20181108 74763 tnwgy2.jpg?ixlib=rb 1.1
It takes collective action to deal with global issues.
from http://www.shutterstock.com, CC BY-ND

Grant Duncan, Massey University

Addressing the UN General Assembly in September, UN Secretary-General Antonio Guterres warned that the world is “suffering from a bad case of trust deficit disorder”.

Trust is at a breaking point. Trust in national institutions. Trust among states. Trust in the rules-based global order. Within countries, people are losing faith in political establishments, polarization is on the rise and populism is on the march.

Yet, it takes global collective action, and hence trust, to prevent proliferation of nuclear weapons, address climate change and uphold human rights. It takes trust across political parties and across generations to create a durable consensus to reduce economic inequality and poverty.




Read more:
If politicians want more trust from voters, they need to start behaving with civility and respect


Decline in trust

Surveys of people’s trust in politicians and governments generally show a long-term decline, especially in the United States which has surveys dating back to 1958. As President Trump thrives on distrust, this trend is unlikely to reverse anytime soon.

Decline of trust is not uniform in all democracies, but, if you ask people whether they trust politicians, the answer is likely to be negative, even in countries like Norway. Furthermore, voter turnouts are in decline – another symptom of distrust. But, if we lack political trust, then we lack the foundation on which to negotiate collectively any sustainable solutions to the world’s most urgent problems.

In western political thought, trust is traditionally seen in two closely related dimensions. In John Locke’s version, trust is a gift from the people to those who rule, conditional upon powers being used for the people’s security and safety. In John Stuart Mill’s version, the elected representative is regarded as a trustee who acts on voters’ behalf rather than a delegate acting only at our behest.

Room for scepticism

In general, people who vote are more likely to express higher levels of trust in politicians and in government. But some may vote in order to defeat a candidate or party regarded as untrustworthy (on an “anyone but” basis) while others may not bother voting because they are highly, if not naively, trusting.

In any political system, it is not prudent to trust completely, however. We have constitutional checks and balances precisely because we trust no one at all with absolute and unaccountable powers. In a democracy, whether one votes or not, we have little choice but to entrust a relatively small number of representatives with powers to pass laws and to govern, but we are not called on to abandon scepticism or to have blind faith.

The big issue, though, is how to develop greater trustworthiness in the individuals whom we do elect, and how to build greater popular trust in decision-making systems, even when we disagree openly and strongly over particular concerns.

Trust in politics

Trust is not a thing that one can literally build, break and then rebuild. Political leaders cannot simply approve a policy and a budget to rebuild trust in the way that we rebuild worn-out infrastructure.

If we demand trust from people, they are likely to react with scepticism. Sledge Hammer’s famous “Trust me, I know what I’m doing” was funny for good reason.

Political and economic systems that are “rigged” (when they produce unfair outcomes or are downright corrupt) are unlikely to be trusted, moreover. Many people in affluent countries are finding that hard work for long hours is not providing a standard of living sufficient to achieve reasonable life goals.

Electoral systems often deliver disproportionate results. Politicians attack one another for short-term gain rather than work for the good of the country. Reducing economic inequality and reforming electoral systems or campaign finance laws may help to address the problem of political trust.




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What to do

But there is a deeper “bootstraps” problem, as it takes political trust to gain the consensus to take the actions needed for such significant reforms. It takes trust to build trust. It would be morally unacceptable, however, to give up on the project of restoring political trust on the grounds that it’s too hard.

We need first to understand clearly the kinds of actions entailed in trustworthy conduct – for example, abstaining from taking advantage of the vulnerable, paying heed to people’s complaints, promising no more than one can deliver. If we adopt these characteristics in our own behaviour, then we are in a much better position to expect them of others.

Beyond individual conduct, we need to examine carefully our economic and political systems. The world will never be perceived by all as completely fair. But the difficult task of restoring political trust is inextricably entwined with the tasks of critically reflecting on our own behaviour as leaders in our communities and then working for significant reforms to social and economic policies and electoral systems.The Conversation

Grant Duncan, Associate Professor for the School of People, Environment and Planning, Massey University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Grattan Institute Orange Book 2018. State governments matter, vote wisely



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The beauty of our federation is that each state can learn from each other.
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John Daley, Grattan Institute

This week we’re exploring the state of nine different policy areas across Australia’s states, as detailed in Grattan Institute’s State Orange Book 2018. Read the other articles in the series here.


Election season is looming.

Voters in Victoria go to the polls within weeks; in New South Wales within months.

State policy has rarely been more important. But what should the priorities be, not only for the governments in Australia’s two biggest states, but also for the other states whose elections are further away?

In this series for The Conversation, based on our State Orange Book 2018, the Grattan Institute outlines where state and territory governments should focus to improve Australia.

There are problems a plenty

The problems aren’t hard to find. Per capita income has been flat for five years as the mining boom subsided. Home ownership is falling fast among the young and the poor. Those on low incomes are spending more on housing, and homelessness is rising, particularly in NSW.

Our schools are not keeping up with the best in the world. In most states, people are waiting longer for medical treatments. Electricity prices have increased significantly over the past few years while the climate policy wars rage on.

A new State Scorecard compiled by Grattan Institute compares states and territories on the most important outcomes for each policy area. In many cases, some states are much better than others because their governments have implemented important reforms – often without much fanfare.

Victoria’s hospitals cost less per patient and contribute more to better health than elsewhere. Queensland’s school students learn more in Years 3 to 5, and they are performing much better than they used to. Many Western Australian school outcomes are also much better.

The Australian Capital Territory has started to replace inefficient stamp duties with a much more efficient broad-based property tax. NSW has used the good times to improve its budget position. NSW, Victoria, South Australia and the ACT have all increased the transparency of political decision-making and tightened controls over money in politics.

But each state can learn from the others

Every state and territory can learn from others and do better.

State governments – particularly NSW and Victoria – face population pressures. They need to resist political pressure to wind back planning reforms that have helped to increase housing supply, and instead go further to ensure enough housing is built, particularly in established suburbs, to accommodate rapidly growing populations.




Read more:
Australia’s dangerous fantasy: diverting population growth to the regions


NSW and Victoria should commission work to enable the introduction of time-of-day road and public transport pricing to manage congestion in Sydney and Melbourne.

All states should stop announcing transport projects before they have been analysed rigorously. They should also evaluate completed projects properly.

There’s much states can do

Although the Commonwealth controls many economic levers, there are many others that are primarily state government responsibilities.

Land-use planning policies don’t only affect housing affordability. They are also amongst the biggest policy levers for state governments to boost economic growth.

Geography matters a lot to economic growth. An advanced economy like Australia is dominated by services industries, which often benefit from co-location and tend to concentrate in major cities.

How much businesses can co-locate is affected by planning rules that guide the availability of land both for businesses and the homes of the people who work in them.




Read more:
RBA research shows that zoning restrictions are driving up housing prices


Fewer restrictions on land use and subdivision will increase economic growth by enabling more people to access more jobs, while allowing firms to optimise their location.

There are other economic levers. All states should follow the lead of the ACT and replace stamp duties with broad-based property taxes.

States should reform electricity markets to encourage reliability and reduce emissions – whether or not the Commonwealth cooperates.

And much states should not do

States should stop promising to restrict competition in order to increase the sale price of assets like ports.

And they should accept that no amount of regional spending is likely to do much to accelerate regional growth beyond what is going to happen anyway.

The State Orange Book 2018 shows that the states and territories could deliver services better.

Each can be guided by the best

Other states should follow Victoria’s lead and reduce the cost of each procedure in public hospitals, and the variations between them.

And they should develop more community-based prevention programs to reduce the disparity between regional and urban health outcomes.

States should lift progress for all school students by identifying and spreading good teaching practices at the same time as strengthening the evidence base on what works best in the classroom.

They should also invest more in early learning for the most disadvantaged students.

And make their decisions more open

Institutional reforms are needed.

States need more visibility of their long-term budget positions.

While institutional accountability is improving in many states, Western Australia, Tasmania and the Northern Territory need to limit election spending and make political donations and lobbying more transparent.

Because they matter

State government doesn’t always get as much attention as our federal politics. Often the important things sound a bit boring: the management of hospitals and schools; the rigorous assessment of proposed transport projects; and the minutiae of planning schemes.

But when these things are done well, they make a big difference to people’s lives.

So when people cast their votes in the Victorian and NSW elections, there is a lot at stake.

We hope this series will help voters to understand the key issues, and perhaps help leaders in every state understand the difference they can make.The Conversation

John Daley, Chief Executive Officer, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Government to set up new multi-billion Future Drought Fund


Michelle Grattan, University of Canberra

Prime Minister Scott Morrison will announce a Future Drought Fund, that will grow to $5 billion over a decade, at Friday’s national drought summit.

The fund is to provide support against future droughts, helping primary producers, non-government organisations and communities prepare for and respond to their impact.

It will be given an initial $3.9 billion injection, and will expand to $5 billion by 2028. The funding will be managed by the Future Fund Board of Guardians.

From 2020, about $100 million annually will be available, with payments starting on July 1, 2020.

Morrison has made dealing with the impact of drought one of his priorities since becoming prime minister, with various immediate measures for the current dry.

The summit will be attended by all levels of government, and representatives of farming and agribusiness, banking and finance services, and community and charitable organisations, as well as experts.

The special envoy for drought, Barnaby Joyce, and the coordinator-general for drought, Major General Stephen Day, will speak, while the Bureau of Meteorology will brief on present conditions and the projected outlook.




Read more:
Politics Podcast: Barnaby Joyce on facing the drought and rural women


The planned fund will provide community services and research, and assist the adoption of technology to support long-term sustainability in periods of drought, through capital or ongoing initiatives. It could include investments in local projects, infrastructure, and research.

The criteria for the type of projects to be supported have yet to be determined and the government says these would continue to change, depending on the drought and community response needed.

Initiatives to be supported by the fund would be decided as part of the budget process.




Read more:
Helping farmers in distress doesn’t help them be the best: the drought relief dilemma


Morrison said that in his visit to Quilpie in western Queensland, which he undertook immediately after becoming prime minister, he had been struck by “the strength, resilience and hope” displayed by the families.

“Our response to the drought has to be the same. Deal with the here and now, but also make sure we plan for the future.

“That’s what the Future Drought Fund is all about. Putting money aside for non-rainy days in the future,” he said.

“The fund will build over time, starting with an initial $3.9 billion up front. Part of the earning in the fund will be used to fund important water infrastructure and drought resilience projects, while the balance is ploughed back into the fund, so it grows to $5 billion over the next decade.

“This funding will support farmers and their local communities when it’s not raining.

“The challenges of drought vary from farm to farm, district to district, town to town and we continually need to adapt and build capacity – the Future Drought Fund gives us this opportunity,” Morrison said.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Government raises glimmer of hope for New Zealand deal on refugees


Michelle Grattan, University of Canberra

The Morrison government has sent qualified signals that it might agree to some refugees from Nauru being settled in New Zealand.

It says it would be “more likely” to support the New Zealand option if Labor agreed to pass legislation to stop these people then being able to reach Australia by the back door, via the free travel arrangements between the two countries.

The positive note comes ahead of Saturday’s Wentworth byelection, in which the situation of the refugees is one of the issues.

New Zealand has for years had on the table an offer to take 150 of the refugees a year.

The legislation at issue – which has not been able to obtain Senate support – would prohibit anyone who’d come by boat and was settled in another country from ever being allowed into Australia.

But Labor remains opposed to the legislation in its current form.

Opposition immigration spokesman Shayne Neumann said Labor welcomed the government’s “sudden and unexplained interest” in considering a deal with New Zealand.

But the “lifetime ban” legislation “is not required to secure regional resettlement arrangements,” he said.

Labor argues the government should negotiate a special arrangement with New Zealand to stop people resettled there from entering Australia, rather than having the catch-all bill.

The issue of the children on Nauru – many of them with serious health issues – escalated in recent weeks, with campaigning by doctors for a more humane approach and pressure from government backbenchers.

On Tuesday the crossbench gave notice of a bill to temporarily relocate children from Nauru for medical treatment.

Crossbencher Rebekha Sharkie asked Scott Morrison whether he would support calls to do this.

It is understood these transfers have been increased after backbenchers Russell Broadbench and Craig Laundy made representations to Morrison in a meeting last month. Victorian backbencher Julia Banks has also spoken out.

Replying to Sharkie, Morrison hinted at more movement recently, when he offered crossbenchers an update “on the issue of transfers that continue to take place on a case-by-case basis”.

There had been quite a number of transfers undertaken, recently and over a longer period, he said, adding that “some work has been done further over the last month on these issues”.

Sources said the sick children were already off Nauru.

At the Liberal party meeting on Tuesday, NSW backbencher Trent Zimmerman asked Morrison about the children and the New Zealand option.

Shorten wrote to Morrison saying Labor would introduce legislation to ensure children received proper medical care.

Among other things this would ensure the recommendation of treating clinicians was prime when determining a temporary medical transfer for a child and ensure the minister, not the bureaucracy, was the final decision-maker on transfers.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

ABC Board Chair over-reaches in a bid to appease hostile government


Andrew Linden, RMIT University

Update: Justin Milne has now resigned as chair of the ABC board.


Reports of the contents of leaked emails written by ABC Board Chair Justin Milne provide a powerful insight into how governments of the day can exert influence over what parliament had intended to be an independent agency.

The emails have emerged in the wake of the ABC board’s termination of ABC managing director, Michelle Guthrie.




Read more:
Government sets up inquiry into embattled ABC chairman’s email


Milne is correct in asserting that the ABC Act requires the board “to independently govern the Corporation, protect its best interests, ensure that it is well funded, well managed and that our content is of the highest standards”.

But it doesn’t operate in exactly the same way as other corporate boards.

The ABC board is different

For example in most corporations, commercial or otherwise, boards exercise control over management by using specific delegations and determining corporate policy.

Boards also appoint the chief executive and in some instances other members of the management group.

However that’s not the case for the ABC.

The ABC Act provides that on advice of the prime minister and communications minister the governor general appoints the chair and other directors with the exception of the managing director and the staff elected director.

Partly non-political

The Act bars former members of parliament and senior political staffers (for a time) from being appointed as the chair or as non-executive directors.

Appointments to all other ABC board positions, including the chair, must follow a merit-based process with candidates interviewed in a process that the government does not control.

But that requirement does not apply to the managing director. This gives the board greater latitude to appointment a candidate that may draw less criticism from the Government of the day.

And partly political

This is highly problematic because of real (but usually latent) potential that a managing director might arrive with an agenda to undermine the board’s statutory role and parliamentary-determined Charter to be an independent public broadcaster.

The potential conflict is more acute because at the ABC the managing director is designated in the Act as the editor-in-chief.

Because the managing director is responsible for content, the reported instances of the Chair pressuring the managing director to remove individual journalists and approaching ABC editorial staff are inappropriate.

Setting the scene for conflict

The Act sets up a potential conflict between most of the ABC directors (who essentially have a trustee role) and the managing director who might be a non-merit based appointee.

The ABC board used to avoid this conflict by sticking to the public service tradition of appointing technocrats to the managing director role.

But over time perceptions about the appointment have become increasingly politicised.



As Marco Bass, ex head of ABC news and current affairs Victoria has written, the temptation to control the news is becoming harder to resist:

What [Guthrie and Shier] shared was an implicit brief to disrupt the ABC, dismantle internal fiefdoms and, importantly, bring the news and current affairs division under control.

Make no mistake, federal governments, regardless of political complexion, don’t care about Peppa Pig. They care about political coverage by the ABC’s journalists and broadcasters.

These idiosyrantic governance rules amplify flaws in the design of boards on which both executives and non executives sit.

Other boards have similar problems

As I and colleagues have written previously, mixing executive and non-executive directors on a single board creates governance problems.

On corporate boards managers who are also directors can (and usually do) position themselves as very powerful gate keepers and dominate both other directors and senior executives.




Read more:
Solving deep problems with corporate governance requires more than rearranging deck chairs


This was a problem at the Commonwealth Bank and from some reports was becoming a problem at the ABC.

If a government can use the idiosyncrasies of the the ABC Act to cower a much-loved and very public institution like the ABC, imagine how pliable agencies like APRA, ASIC and ACCC might be in accommodating the views of a government who might not want to deal with the political fallout of, for example, tough but necessary decisions such as cancelling banking or superannuation licences.


This piece has been edited to remove an earlier incorrect statement that under the ABC Act the managing director is appointed by the governor general on the advice of government ministers. The managing director is appointed by the board, but without the constraints imposed on the government in appointing other board members.The Conversation

Andrew Linden, Sessional Lecturer, PhD (Management) Candidate, School of Management, RMIT University

This article is republished from The Conversation under a Creative Commons license. Read the original article.