Premiums up, rebates down, and a new tiered system – what the private health insurance changes mean



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This year’s premium increase is small in comparison to previous years – but it still outweighs wage inflation.
From shutterstock.com

Peter Sivey, RMIT University and Terence Cheng, University of Adelaide

If you have private health insurance, or are considering getting it, a series of changes coming into effect on April 1 are worth knowing about.

These include the annual premium increase, a small decrease in rebates, the introduction of a new tiered system designed to simplify things for consumers, and some premium discounts for young people.

This year’s premium increase is quite small compared to recent years, and the reforms are generally sensible. But cost pressures and confusion in private health insurance cannot be fixed overnight.




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A modest increase in premiums

Private health insurance premiums will increase by an average of 3.25% in 2019. These increases are relatively modest, as premiums have been rising at between 4% and 6% per annum for more than 10 years.

However, compared to consumer price index inflation of 1.8% and wage inflation of 2.3%, premiums are still rising substantially in real terms for Australians.

But in the current environment, above-inflation premium rises are not unexpected.

For comparison, consider the public health system, where spending increased at nearly 7% per year in the decade to 2017.

Out-of-pocket spending by patients also had an above-inflation trend of 5.1% per year over the past decade.

So both public and private expenditure on health are increasing substantially. Driving this is the increased usage and price of health care. Hospital visits are growing at 4% a year, and health price inflation is a further 2% per year.

Many hospital procedures such as cardiothoracic surgery, colonoscopies, hip and knee replacements, are increasing in volume by over 5% a year. So as patients use their health insurance more, it’s reasonable for the price to rise.




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Rebates continue to decrease slowly

Most Australians with private health insurance receive a rebate from the Australian government to help cover the cost of premiums.

Means testing of rebates along income tiers was introduced in 2012. This sees individuals and households with higher incomes receive lower subsidies.

From 2014, the government began indexing rebates every year, using a formula that is calculated as a difference between the consumer price index, and the industry weighted average increase in premiums.

As a result of indexation, rebate entitlements have been gradually falling.

Government rebates for private health insurance go down a small amount each year.
From shutterstock.com

For example, this means in 2013/14, a person aged 65 or below earning less than $88,000 (base tier) would have received a 30% rebate. Today, a person of the same age in the base tier would receive a rebate of just over 25%.

From April 1, rebates will decrease between 0.1% to 0.5% from their levels in 2018/19, depending on the income tiers that people fall into.

For a typical family policy that covers both hospital and extras (with premiums approximately A$140 a fortnight), the decrease in the rebate translates to a very small rise in premiums of A$1 a fortnight.

Basic, bronze, silver or gold?

One key initiative starting on April 1 is the introduction of four tiers of private health insurance coverage: basic, bronze, silver, and gold. This is distinct to the income tiers we talked about above.

In this case, each tier mandates the minimum set of treatments (defined by clinical categories) that insurers must cover.




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For instance, policies in the “basic” tier are required to cover rehabilitation services, hospital psychiatric services, and palliative care.

Insurers can include other types of treatments which are not mandatory under the basic tier, if they choose to do so. Each additional tier covers a wider range of treatments, in addition to services mandated in lower tiers.



The Conversation/Australian Government, CC BY-ND

This simplified categorisation of policies is designed to help consumers understand how comprehensive their cover is, and enable them to more easily compare products offered by different health funds.

While this initiative provides consumers with greater clarity on the types of services covered by each type of health insurance product, it still does not standardise care completely.




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Health funds can offer to cover, in lower tier products, treatments that are mandated only in higher tiered policies (such as providing coverage for pregnancy in a basic policy).

This may confuse patients if they assume their policy covering pregnancy will also cover other costly private procedures such as joint reconstructions (bronze), or back, neck and spinal surgery (silver).

Young people

From April 1, health funds will be able to offer discounts on premiums of 2% for each year a person is under the age of 30 when he or she takes up private health insurance. Premium discounts are capped at a maximum of 10%. The discount is retained until the person reaches the age of 41, after which it will be gradually phased out.

This initiative is being introduced to encourage young Australians to purchase private health cover and to stem the decline in private health insurance ownership among younger people. From September to December 2018, the largest net decrease in insured persons was recorded in people aged 25 to 29.

These discounts on premiums for young people complement the Lifetime Health Cover policy introduced in 2000, which was designed to encourage Australians to take up private hospital insurance earlier, and also to maintain cover.

Under the Lifetime Health Cover policy, which is still in force, people above the age of 30 without private cover are required to pay a 2% loading on premiums for each year they are over 30, if they choose to take up private cover later on.

Other changes

Another key change is that health funds are permitted to offer private hospital policies with a higher excess, in return for lower premiums. The maximum permitted excess is increasing from A$500 to A$750 for singles, and A$1,000 to A$1,500 for families.

Travel and accommodation benefits will be allowed to be included in hospital insurance plans for customers living in regional and rural parts of Australia. This will assist patients and their carers to meet the additional costs of having to travel to urban centres or capital cities to receive specialised treatment.

Natural therapies such as yoga, naturopathy, pilates and reflexology will no longer be covered under a general treatment policy. A total of 16 natural therapies are excluded. A review undertaken by the National Health and Medical Research Council concluded there is no clear evidence of the efficacy of these therapies.

Finally, to strengthen consumer protection, the role of the private health insurance ombudsman will be expanded, giving the agency new powers and greater capabilities to address issues and complaints.The Conversation

Peter Sivey, Associate Professor, School of Economics, Finance and Marketing, RMIT University and Terence Cheng, Senior Lecturer, School of Economics, University of Adelaide

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

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Fairness isn’t optional. How to design a tax system that works



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No-one would ask low earners to pay the same as high earners.
Shutterstock

Fabrizio Carmignani, Griffith University

This is part of a major series called Advancing Australia, in which leading academics examine the key issues facing Australia in the lead-up to the 2019 federal election and beyond. Read the other pieces in the series here.


Any discussion of the tax system requires a common understanding that its purpose goes beyond revenue.

To see this, ask whether we would be willing to raise as much revenue as we do now by simply requiring each resident and business to pay A$16,400 a year, with no further complications.

We could do this. It would generate the A$450 billion the Commonwealth raises now.

And it would be appealing in some ways. It would minimise tax evasion. There would be no exemptions, no tax returns, no loopholes. And payment would be easy to monitor. It would also save the taxpayer the cost of submitting tax returns and the government the cost of checking them.

We all want some fairness

People who earn more than A$76,000 would be delighted, because they would pay less tax than they do now.

Households with people who earn much less would be less happy. Each child, no matter how young, would have to pay A$16,400. A household with two parents (one working) and one child would have to pay twice as much as it does now.

Unemployed Australians would pay the same as mining tycoons. Mum-and-dad businesses would pay the same as large corporations.

But we wouldn’t accept such a system, because it wouldn’t be fair. And that’s not just because fairness is one of our core values.

Inequality has an economic cost. Modelling by staff of the Organisation for Economic Cooperation and Development (OECD) shows that a 1% increase in a nation’s inequality lowers its gross domestic product by between 0.6% and 1.1%.

The researchers find that beyond a certain point growing inequality can undermine the foundations of market economies and lead to inequalities of opportunity. They report:

This smothers social mobility, and weakens incentives to invest in knowledge. The result is a misallocation of skills, and even waste through more unemployment, ultimately undermining efficiency and growth potential.

Progressivity helps

Almost all developed countries use the tax system to fight inequality, by increasing the rate of personal income tax as taxable income grows. In a typical “progressive” personal income tax system the first $5000 earned might be taxed at ten cents in the dollar, while subsequent earnings might be taxed at 20 cents in the dollar. The result is that higher earners pay a greater proportion of their earnings in tax.

Australia has such a system. Our personal income tax system is more progressive than most of the 36 OECD members.

But it has been getting less progressive over time.

A standard measure is the difference in proportion of earnings devoted to tax (the “tax wedge”) for high earners on 167% of a nation’s average income and low earners on 67% of the average. The greater the difference, the more progressive the system.



The graph shows Australia’s system became less progressive throughout the first mining boom in the 2000s. It then became more progressive during the global financial crisis and probably as a result of the government’s response to it. Progressivity has been drifting down since.

Unless we take action to make our personal income tax system more progressive, it is likely to become less progressive still.

Tax cuts legislated in 2018 will accentuate the trend by dramatically flattening Australia’s personal income tax scales by 2024-25, unless reversed as Labor has promised should it win the election.

Our company tax rate is high …

Company taxes are almost always proportional, set at a flat rate. Debate is about how high that rate should be.

Lower rates are said to encourage business investment, stimulating employment, wages and economic growth. But if company taxes are cut, government needs to find more revenue from somewhere else, or wind back spending.




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Australia’s standard rate is 30%, reduced to 26.5% (and soon enough 25%) for companies with turnovers of less than A$50 million. It is the second-highest rate in the OECD, behind only France. A broader measure of Australia’s “effective” company tax rate, taking into account tax breaks, still shows it is high compared to other countries.

The high rate is little noticed at home. Most Australian shareholders are able to get a tax credit for the company tax paid on the profit that funds their dividend (a practice Labor has promised to wind back). This means the credit can cut the the income tax collected from a dividend recipient to zero, but not below it resulting in a payment from the Tax Office.

… which may not be a problem

There is no clear association between corporate tax cuts and economic growth.

Rough calculations using OECD and International Monetary Fund data suggest that, if anything, higher economic growth is associated with smaller tax cuts.

In part this is because foreign companies consider things other than the tax rate in deciding where to invest. In part it is because the revenue lost from corporate tax cuts has to be made up from somewhere else (most likely from extra income tax as incomes rise and push people into higher tax brackets).

Since 2001, when Australia’s rate of company tax was cut to 30%, Australia’s annual economic growth rate has averaged 2.9%. In the 17 years before then, when the company tax rate averaged about 39%, annual economic growth averaged 3.5%.

None of this implies causality. But it does show that lower company tax rates and better economic performance do not necessarily go together.

International surveys show that Australia, despite its relatively high company tax rate, is regarded as one of the 20 countries in which doing business is easiest. What most works against Australia is the high costs of electricity.

New taxes are waiting in the wings

In summary, there appears to be scope for reducing personal income tax rates at the lower end of income distribution while increasing them at the top end.

Our company tax rates are high, but this need not be a problem.

If company taxes were to be cut, other taxes would have to increase. One option is to increase the goods and services tax. But this is not ideal as the GST is a regressive tax; that is, it tends to make income distribution more unequal.

There are other options.

We could impose an extra, much higher tax rate on very high incomes, as Democratic representative Alexandria Ocasio-Cortez has proposed for the US.

It wouldn’t be a first. Australia’s top marginal rate was 75% in the early 1950s. Or we could reimpose an inheritance tax. A well-designed one would not only fund government spending but also work against intergenerational inequality.




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The Conversation


Fabrizio Carmignani, Professor, Griffith Business School, Griffith University

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

Why Canada’s immigration system has been a success, and what Australia can learn from it



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Prime Minister Scott Morrison has called for a rethink of the ‘top-down’ approach to immigration in Australia, allowing states and territories more input.
Shutterstock

Jock Collins, University of Technology Sydney

Immigration policy will be a critical issue in forthcoming state (Victoria, NSW) and federal elections. The disproportionate impact of immigration on population growth and public infrastructure in Sydney and Melbourne is the key issue.

If we look to the example of another immigrant-friendly country, Canada, however, we can see how giving states and territories a greater role in immigration target setting and selection can help take the pressure off major cities without drastically reducing immigration rates.

Immigration certainly impacts on Australia’s population to a greater degree than most Western nations. Among OECD countries, only Switzerland and Luxembourg have a higher percentage of foreign-born people than Australia.

Today, 28% of the Australian population was born overseas. The key issue for Australia is that immigrants are more likely to live in large cities than smaller cities or regional areas. According to the Australian Bureau of Statistics, 85% of immigrants live in major urban areas, compared to just 64% of Australian-born people.




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Indeed, according to the International Organisation for Migration (IOM), Sydney is now equal-fourth in the world (with Auckland and Los Angeles) with the highest percentage of foreign-born residents (39%), while Melbourne is not far behind (35%). Nearly two-thirds of residents in Sydney, Melbourne and Perth have at least one parent who was born overseas.

A new state-based approach?

The stress that rapid population growth has placed on Melbourne and Sydney has recently become a topic of much debate. This week, Prime Minister Scott Morrison pledged to reduce the annual permanent immigration cap of 190,000. Australia accepted just 162,417 immigrants last year, the lowest level in a decade.

Morrison has also called for a major rethink of the “top-down” approach to immigration in Australia, allowing states and territories to request the number of skilled migrants they’d like to admit each year.

The states and territories currently have a limited ability to nominate applicants for certain skilled visas. But state-nominated and regional visa approvals have fallen in recent years to just over 36,000 last fiscal year following tighter restrictions.

Morrison wants to see a bigger role for states and territories:

This is a blinding piece of common sense, which is: how about states who plan for population growth and the Commonwealth government who sets the migration levels, actually bring this together?

What we can learn from Canada

The Canadian government gave provinces a say in setting targets and selecting economic immigrants – similar to Australia’s skilled migration intake – in the early 1990s. Quebec was first to receive a high degree of autonomy in the process – it was given the right to set its own level and selection criteria for all economic immigrants. (The ability to speak French was a must.)




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Quebec was also granted the right to set all of its integration programs, funded by Ottawa every year. The payments reached C$540 million this fiscal year, or C$13,500 for each newcomer.

After Quebec was given this authority, the other Canadian provinces demanded the same. But they received far more limited rights than Quebec. They can nominate the number of economic migrants they need as part of the national immigration target set by the federal government, but they can’t independently set their intake target and selection criteria like Quebec.

While provinces nominate – or in Quebec’s case, decide – annual intakes, all cases are still routed through Ottawa for application integrity testing and vetting for criminality, health and security. Ultimately, final approval rests with Ottawa.

Last year, the Canadian government set an ambitious target of admitting 1 million total immigrants from 2018-2020. The target for next year is 330,000 immigrants, of which about 190,000 will be economic migrants. The remainder will enter under the family reunification category and the refugee, humanitarian and protected category.

About one-third of the economic migrants (61,000) will be admitted through the Provincial Nominee Program. This figure excludes Quebec, which will set its numbers separately.

How the Canadian system encourages rural immigration

Giving the provinces a greater immigration policy role has helped to dramatically shift the settlement of immigrants beyond Canada’s biggest cities.

According to immigration statistics, 34% of economic migrants in 2017 landed in destinations outside Canada’s three most populous provinces, Ontario, Quebec and British Columbia – compared to just 10% in 1997.

After immigrants arrive, the key issue for the provinces is retention, since immigrants can leave at any time. The provinces put a strong emphasis on ensuring that economic migrants receive a strong welcome on arrival and are provided with support programs, including education, access to local migrant community networks and assistance finding a job for those who are not sponsored by employers.




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One of the biggest success stories of the Provincial Nominee Program is thinly populated Manitoba, which has added 130,000 migrants since 1998. Ninety percent have gotten a job within a year of arriving and nearly the same number has ended up staying in Manitoba permanently. New arrivals also express some of the greatest feelings of belonging of all immigrants in western Canada.

Most immigrants to Australia end up in Sydney or Melbourne, but other states and territories need them more.
Joel Carrett/AAP

Why this could work in Australia

South Australia, Tasmania and the Northern Territory – as well as other regional and rural areas across Australia – want more immigrants and refugees.

Attracting immigrants to less-populated states is the easy part: those willing to settle outside Sydney and Melbourne can receive more points if they are skilled migrants, possibly making the difference as to whether they come to Australia or not. The key issue is retention.




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My fieldwork with refugees in Australia has shown that the majority of these migrants love living in regional communities and have received a warm welcome from locals. Our research also found they are willing to stay in regional areas if they can get jobs there. Another way of encouraging more immigrants to settle in regional areas could be to offer them priority in the family reunion process.

Importantly, Canada also doesn’t politicise immigration policy. Australia should follow Canada’s lead by giving the states a bigger seat at the immigration policy table and resisting the temptation to blame immigration for complex growth problems in our overcrowded cities.

Reducing the immigration intake cap will have no significant impact on reducing congestion or strain on public infrastructure in Sydney and Melbourne, but it could severely constrain economic growth.The Conversation

Jock Collins, Professor of Social Economics, UTS Business School, University of Technology Sydney

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

Would a better tsunami warning system have saved lives in Sulawesi?


Jane Cunneen, Curtin University

The death toll from the magnitude 7.5 earthquake and resulting tsunami that struck near Palu, Indonesia, on Friday evening continues to rise, with several regions yet to be reached by rescue teams.

But the size and location of the earthquake should not have come as a surprise. Palu is situated at the end of a long, narrow bay which is the surface expression of a very active fault, the Palu-Koro fault.

The area is at high risk of tsunami, with several large earthquakes and tsunamis occurring along the fault within the past 100 years.




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Details of Friday’s incident are limited, but already there are questions being asked about the effectiveness of Indonesia’s tsunami warning system.

It was developed after the devastating 2004 Boxing Day tsunami that occurred after an earthquake near Sumatra, but in this recent event the warning did not reach many of the people who were affected.

The tsunami occurred in an area where there are no tide gauges that could give information about the height of the wave. There are reports that a more high-tech system could have saved lives if it had been fully implemented.

Most of Indonesia’s deep ocean tsunameter buoys, specially designed to detect tsunamis in the open ocean, have not been working since 2012.

The Indonesian Tsunami Warning System issued a warning only minutes after the earthquake, but officials were unable to contact officers in the Palu area. The warning was cancelled 34 minutes later, just after the third tsunami wave hit Palu.

Tsunami history of Palu

Large earthquakes are not uncommon in Palu, with 15 events over magnitude 6.5 occurring in the past 100 years. The largest was a magnitude-7.9 event in January 1996, about 100km north of Friday’s earthquake.

Several these large earthquakes have also generated tsunamis. In 1927, an earthquake and tsunami caused about 50 deaths and damaged buildings in Palu. In 1968 an earthquake with magnitude 7.8 near Donggala generated a tsunami wave that killed more than 200 people.

Despite this history, many people in Palu were not aware of the risk of a tsunami following the earthquake. Ten years on from the 2004 Boxing Day tragedy that killed at least 226,000 people, there were concerns about tsunami warning systems across the region.

An advanced warning system currently only in the prototype stage may not have helped the people of Palu, as the tsunami struck the shore within 20 minutes of the earthquake.

Such early warning systems are most useful for areas several hundred kilometres from the tsunami source. In regions like Palu where the earthquake and tsunami source are very close, education is the most effective warning system.

It is not yet clear whether Friday’s tsunami was caused by movement on the fault rupture from the earthquake, or from submarine landslides within Palu bay caused by the shaking from the earthquake.

The sides of the bay are steep and unstable, and maps of the sea floor suggest that submarine landslides have occurred there in the past.

If the tsunami was generated by a submarine landslide within the bay, tsunami sensors or tide gauges at the mouth of the bay would not have sensed the tsunami wave before it struck the shore in Palu.

Communication networks

High tech tsunami warning systems are able to send out warnings through phone networks and other communications channels, and reach the community through text messages and tsunami sirens on the beaches.

But in areas where a devastating earthquake has occurred, this infrastructure is often too damaged to operate and the warning messages simply can’t get through. In Palu, the earthquake destroyed the local mobile phone network and no information was able to get in or out of the area.

Timing is also crucial. Official tsunami warnings require analysis of data and take time – even if it is only minutes – to prepare and disseminate.

This time is crucial for people near the earthquake epicentre, where the tsunami may strike within minutes of the earthquake. Those living in such areas need to be aware of the need to evacuate without waiting for official warnings, relying on the earthquake itself as a natural warning of a potential tsunami.




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The need to raise awareness of the risk becomes even more challenging when large tsunamis occur infrequently, as in Palu. Many residents would not have been born when the last tsunami impacted the town in 1968.

So high tech warning systems may not be effective in areas close to the earthquake epicentre. Ongoing awareness and education programmes are the most important part of a tsunami warning system in coastal areas at risk of tsunami, no matter how infrequently they occur.The Conversation

Jane Cunneen, Research Fellow, Curtin University

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

Reforming our political system is not a quick fix. Here’s a step-by-step guide to how to do it


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Regaining public trust in government starts with steps like capping political donations and establishing a federal anti-corruption body.
Lukas Coch/AAP

Mark Triffitt, University of Melbourne

With public trust in government already in serious decline over the last ten years, the downfall of yet another prime minister between elections underlines both the importance and urgency of making serious changes to our political system.

The key to renewing Australia’s democratic system is to view it as our next major reform challenge, just as economic renewal was prioritised in the 1980s and ’90s.

So far, however, the changes proposed by political commentators, academics and think tanks are largely single reforms, such as citizens’ juries to seek more public input into policy, or fixed four-year terms for federal parliament to allow more time to tackle big problems and implement complex policy.

These fall short of matching the scope of the challenge: democratic renewal requires multi-level and multi-step change addressing interconnected issues. In short, we need a comprehensive roadmap for political reform.


https://datawrapper.dwcdn.net/zqYaz/4/


Charting a roadmap for renewal

We first need to recognise that two distinct crises are contributing to declining public trust in government.

The first is a “crisis of representation”. This results from a fragmented, highly diverse electorate that increasingly fails to connect with major parties. The major parties are left with shrinking, less diverse memberships.

The second is a “crisis of functionality”. Our democratic system is increasingly unable to deliver good public policy in a consistent or coherent way, and to convince the public to support it.




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This “crisis of functionality” is partly due to the decline of the public service and its ability to deliver independent, quality policy advice to ministers. Also to blame is an increasingly myopic approach to policymaking by parties obsessed with short-term polling and point-scoring.

But it is also linked to the “crisis of representation”. As an increasingly disconnected public turns its back on politicians, it also loses trust in their ability to deliver sound policy programs and decisions.

A two-stage approach

The dual nature of these problems underlines a critical issue. The roadmap not only needs to link up separate reforms, it also needs to be rolled out in stages to persuade a highly distrustful public that democratic renewal is in the interests of everyone – not just those in power.

The first stage is what I would call “creative governance”. The aim here is to start restoring public trust in government by making immediate and tangible improvements to the political system.

These reforms would have clear precedents or strong levels of public support. For example, national uniform caps on campaign spending, like those recently introduced in New Zealand, would reduce money in politics. This in turn would put the onus on politicians to explain their policies with more fact-based detail instead of expensive, slogan-based advertising campaigns.




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Other possible reforms include real-time disclosure of all political donations, which is already in effect in Queensland, and the establishment of a federal anti-corruption commission, also already in existence at the state level.

Recent surveys show that a majority of Australians support both moves and believe these would improve transparency in the political system.

Setting the scene for deeper reform

The more difficult second stage of political reform is what I call “systemic renewal”. The goal here is to realign our democracy with the fundamentally changed dynamics and expectations of how it should work in the 21st century.

For instance, a major overhaul of our federal-state constitution is needed to update a framework originally written in the 1890s. It’s replete with outdated rules, processes and responsibilities.

However, this has largely failed to capture the public’s imagination because of the arcane way experts talk about the problem and potential solutions. Reframing it as part of a broader democratic renewal to usher in a more nimble and representative political system is much more likely to gain public traction.




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Major reforms are also needed to make federal parliament more effective and less dysfunctional. These might include eliminating Question Time and mandating a strict code of ethics for MPs aimed at addressing toxic behaviours like the bullying crisis rocking the Coalition government.

Reforms like these would raise the level of decorum in parliament and set a new standard for parliamentary behaviour. This would increase public confidence that politicians both reflect and are accountable to modern values.

Lastly, a “Citizens’ Assembly” could be formed of randomly selected citizens to act as a non-partisan check and balance on parliament. Such an assembly could be modelled after the citizens’ juries that have been trialled successfully around the world, including Ireland, Canada and South Australia. The assembly would be given the responsibility to chart out long-term, national policy blueprints in areas like health, tax and education.

With this kind of direct voice on a national level, the public would be much more involved in policymaking and thus more vested in the success of their government.

Thinking like reformers

What’s clear is we must do the hard strategic thinking of reformers if we are serious about fixing our political system.

Like every credible plan to reform a major institution showing multiple dysfunctions, we need more than one reform idea. We also need to test these ideas against the root causes of the institution’s malaise. And we need to organise them into a strategic and practical sequence.

The alternative is to believe Australian democracy will magically right itself. Which is no alternative at all.The Conversation

Mark Triffitt, Lecturer, Public Policy and Political Communications, University of Melbourne

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

Zimbabwe’s financial system is living on borrowed time – and borrowed money



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An illegal money changer holds bond notes outside a bank in Zimbabwe’s capital Harare.
Reuters/Philimon Bulawayo

Roger Southall, University of the Witwatersrand

Zimbabwe’s financial system increasingly resembles a house of cards. Were one card to give way – for instance, if South Africa’s power utility, Eskom, were to have the temerity to suggest that Zimbabwe actually pay for the electricity that it’s supplying the country – the entire edifice would collapse.

To put it another way, the government is bust. It is again printing money to cover its spiralling costs, and inflation is rising. And given that there’s an election looming in 2018, Zimbabwe’s ruling party, ZANU-PF doesn’t want to cut-back. Far from it, it wants to carry on spending, as fast as it can.

The rot goes back to the early 2000’s. ZANU-PF profligacy had been fuelled by acontinuous cycle of simply printing more money, and resultant runaway inflation. Mega-inflation meant that ordinary people lost their pensions and whatever savings they had, as the Zimbabwe dollar lost its value and people resorted to barter or the use of other currencies.

Ultimately, the government faced no choice but to accept reality. In 2008 it scrapped the Zimbabwe dollar in favour of a basket of other currencies, although within a short time, this meant in effect the reign of the US dollar.

“Dollarisation” allowed for the pursuit of more rational policies by the coalition Government of National Unity which followed the disputed 2008 election. However, its control of the electoral machinery ensured that ZANU-PF won a resounding victory in the 2013 election. Within a short space of time it returned to its familiar policy mix of profligacy, corruption and populist economics.

Yet ZANU-PF faced major problems. Above all, “dollarisation” meant that the cost of Zimbabwe’s exports on international markets was high. Worse, the dramatic collapse in agricultural production since the early 2000s (following the appropriation of white farms) alongside the decimation of the country’s manufacturing industries meant that there was relatively little to export anyway. Tobacco production has recovered a little, but the quality is less than it used to be, so returns are relatively less.

Meanwhile government insistence that mines should be 51% Zimbabwean owned has done nothing to entice inward investment or boost exports.

In short, the capacity of the economy to earn US dollars by selling goods externally has fallen dramatically, and the supply of money circulating within the country has dried up. Unemployment stands at around 90%.

President Robert Mugabe’s latest response has been to replace finance minister Patrick Chinamasa, who had been warning of the structure’s fragility in ever more urgent tones. The new finance minister is Ignatius Chombo, a party loyalist, who will brook no talk of any need for structural reform.

The bond notes

Faced by a looming crisis, the ZANU-PF government has resorted to three key strategies.

One has been the issue of “bond notes” (of different denominations) by the Reserve Bank of Zimbabwe. Officially, they’re designed to swell the amount of money in circulation within the country. The problem is that apart from having no value outside the country, nobody trusts them as they have been issued by a ZANU-PF government, and it was this government that presided over the hyperinflation.

ZANU-PF’s announcement that it was issuing bond notes was met with a run on the banks as depositors sought to withdraw dollars as fast as they could. Their assumption was that this was a government ploy to reintroduce the Zimbabwean dollar. The Reserve Bank of Zimbabwe responded by limiting the amount of dollars individuals could withdraw.

People are reluctant to use the bond notes. But they’re still sometimes forced to accept them because of the sheer shortage of “real” money. As a result when they can, they rush off to the local bus station where they can sell them for dollars to currency traders – albeit illegally.

The second strategy has been the rapid expansion of country’s ability to manage electronic transactions. Its aim has been to expand the amount of money in circulation without using up “real” dollars.

Accordingly, government employees are now largely paid electronically Similarly, government employees (and everyone else) now pay nearly all their bills within the country electronically.

And Zimbabweans are rarely able to convert the notional sums of dollars they hold in the bank into real cash – unless they make use of the currency traders in illegal transactions.

Meanwhile, with the rate of inflation continuing to rise combined with the widespread lack of faith in the banks, many Zimbabweans spend their bank balances on consumer goods as quickly as possible rather than attempting to “save”. After all, if times get hard, you won’t be able to get rid of your bond notes, but you may be able to sell your fridge.

Fanciful financial system

But it’s the third strategy which the government has pursued which is really fuelling a fanciful financial system.

Since 2013, government expenditure has steadily increased year by year, despite the country earning very little internationally. The ZANU-PF government may have hoped to fund this by its old trick of literally printing money, that is, by expanding the supply of bond notes.

But such was the negative popular sentiment that the Reserve Bank of Zimbabwe seems to have restricted their issue. Supposedly the issue of bond notes is backed by a USD$200 loan by the Afreximbank, but no-one really knows how many have been issued because the central bank provides no information.

What the government has done instead is to fund its rising costs by issuing treasury bills (whereby the government touts for loans on the capital market against promises of later redemption). No-one in their right mind would want to buy them, but Zimbabwe’s banks today have little option. As inward investment into the country has dried up to a trickle, there is little else for them to spend their money on, and the interest rates that the government promises to pay are, at face value, attractively high.

The coalition government of national unity recorded budget surpluses for three of the four full years in which the opposition controlled the Treasury. For its part, the ZANU-PF government recorded deficits of USD$186 million and USD$125 million in 2014 and 2015. Recently, the then finance minister Chinamasa projected a deficit of USD$1.41 billion for 2017. As of June 30, 2017, there were USD$2.5 billion worth of Treasury bills on issue.

The ConversationIn other words, the spending will continue. Zimbabwe’s financial system is living on borrowed time and borrowed money. It will again end in financial ruin, as it did in 2008. But all ZANU-PF cares about is ensuring that it wins the next election and allowing its political elite to “eat”.

Roger Southall, Professor of Sociology, University of the Witwatersrand

This article was originally published on The Conversation. Read the original article.

Turnbull and Shorten haggle over detail of citizenship disclosure system


Michelle Grattan, University of Canberra

Malcolm Turnbull and Bill Shorten are inching toward an agreement on the form of a citizenship declaration that each MP would have to make within weeks.

The two met in Melbourne on Wednesday, with Turnbull hoping they would finalise the declaration. But Shorten, who was accompanied by Labor Senate leader Penny Wong, had two objections to the proposal outlined by Turnbull earlier this week.

Shorten told a news conference later that Labor believed the declaration should outline what steps a person whose parents or grandparents had been born overseas had taken to investigate whether they were a dual citizen. Also, Labor wanted a shorter timeframe for MPs submitting the declaration.

Under Turnbull’s plan, an MP would state the details of where they were born and where their parents were born, and their belief that they were not a dual citizen. The declarations would have to be submitted 21 days after the Senate and the House of Representatives respectively passed a motion approving the new decoration system.

The government plans to move motions for the declaration in the Senate next week and when the House of Representatives meets on November 27.

It emerged on Wednesday that the government was proposing to bring the parliament back in late December to consider the declarations, which would open the way for any MPs who were thought to be dual citizens to be referred to the High Court. But Shorten seized on the point that a special sitting of parliament would be very costly for the taxpayer.

Shorten said the statements should be in by December 1, five days after the lower house resumes, and a week before parliament rises for Christmas.

“This would allow the disclosures to be checked out and then if there are any problems requiring referral to the High Court, that could be done in the last week of parliament,” Shorten said.

On Labor’s proposed tougher test, Shorten said: “Mr Turnbull’s resolution only goes to what the actual individual MP might believe, but I think that we require, and the High Court set, a higher test of us. Labor is not going to support watering down the High Court decisions to help a few MPs scrape back into parliament.”

Late on Wednesday the government and opposition were exchanging proposals for changes to the wording of the motion.

Both Turnbull and Shorten described the talks as “constructive”.

“We are certainly agreed on the need for disclosure of the kind that I’ve set out in the resolution,” Turnbull told a separate news conference.

“We’ve also agreed that the matter must be dealt with before the end of the year.

“By that, I mean that the disclosures should be made before the end of the year and the House and the Senate should have the opportunity, having considered those disclosures, whether any members or senators should be referred to the High Court … of course it may be that nobody needs to be referred to the High Court.”

Meanwhile, Liberal backbencher John Alexander, the member for Bennelong, is waiting for British Home Office advice on whether he is a dual British citizen. The issue revolves around whether Alexander’s father, who was born in Britain, renounced his citizenship – as Alexander believed.

If Alexander turns out to be ineligible to sit in parliament the government would face a byelection in a seat it would be vulnerable to losing.

The government is homing in on Labor MP Justine Keay, from Tasmania, who moved to renounce her UK citizenship before she nominated but did not receive confirmation until after the election. Labor insists that Keay met the requirement to make every reasonable effort to renounce a foreign citizenship.

Issues are being raised about several other MPs. The crisis has already claimed half-a-dozen victims.

Postscript

Four Liberal senators including a minister have nominated for Senate president – but the Nationals New South Wales senator John “Wacka” Williams has said he will not contest. Special Minister of State Scott Ryan has nominated to be the government’s candidate, as have David Fawcett, Dean Smith and Ian Macdonald. If Ryan were successful that would open up a vacancy in the outer ministry.

The government’s candidate will be chosen before the Senate meets on Monday.

Tasmanian Greens senator Peter Whish-Wilson will contest the position against the government candidate but has no hope of success.

The ConversationThe Nationals have never held the position. Williams’ bid was seen as part of the tensions between the Coalition partners in the wake of the citizenship crisis which has claimed two Nationals ministers, forcing Deputy Prime Minister Barnaby Joyce to a byelection and ending – at least for the foreseeable future – the political career of Fiona Nash.

https://www.podbean.com/media/player/k3zus-7afe23?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

North Korea tests not just a bomb but the global nuclear monitoring system



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Lassina Zerbo, Executive Secretary of the CTBTO at a press briefing following the recent suspected nuclear test in North Korea.
CTBTO, CC BY-NC

Trevor Findlay, University of Melbourne

North Korea’s apparent nuclear detonation on September 3 has drawn our attention to a remarkable international organisation that helps detect and identify nuclear tests.

For the Vienna-based Comprehensive Test Ban Treaty Organization (CTBTO), the latest North Korean explosion was easy to detect and locate. With a seismic magnitude of 6.1 and a blast yield of 160 kilotons (Hiroshima was around 15), the purported hydrogen bomb test mimicked a major earthquake. It was quickly sourced to North Korea’s nuclear test site.

Confirming that the event was definitely a nuclear test, as opposed to another type of explosion or an earthquake, is trickier.


Read more: King Jong-Un’s nuclear ambition: what is North Korea’s endgame?


For that we rely on detection of short-lived radioactive isotopes that may leak from the test site, notably the noble gas xenon. The CTBTO has not yet announced such a finding, although South Korean monitors have reportedly detected xenon-133.

Other potential sources of the gas must be eliminated before a definitive conclusion can be reached.

Global network of seismic and radionuclide monitoring stations.
CTBTO / The Conversation, CC BY-ND

In the past, such fallout has usually been discerned after a North Korean test, but not always. Much depends on whether the cavity created by the test leaks or collapses.

Nuclear test ban treaty

The CTBTO’s International Monitoring System, which detected the North Korean test, is designed to verify compliance with the 1996 Comprehensive Nuclear Test Ban Treaty, which bans all nuclear tests in all environments for all time.

Network of infrasound monitoring stations.
CTBTO / The Conversation, CC BY-ND

The International Monitoring System comprises 321 monitoring systems worldwide, using four technologies:

  • seismic – to detect tests under ground
  • radionuclide detection – to detect breakdown products
  • hydroacoustic – to detect tests under water, and
  • infrasound – for atmospheric tests.

The CTBTO’s international monitoring system is sensitive enough to detect underground nuclear tests below one kiloton.

Construction of the system began in 1996 and is now 90% complete.

Network of hydroacoustic monitoring stations.
CTBTO / The Conversation, CC BY-ND

Australia hosts six seismic, two infrasound and one hydroacoustic station, including a large seismic array and infrasound station at Warramunga in the Northern Territory.


CTBTO / The Conversation, CC BY-ND

Data from the International Monitoring System is transmitted to Vienna via a global communications satellite network, mostly in real time, where it is compiled, analysed and distributed to member states. Sixteen laboratories are available for analysing radioactive fallout.

The treaty also provides for on-site inspections to confirm that a nuclear test has been conducted. The system is funded by member states according to the usual United Nations formula based on national GDP.

A difficult, important achievement

As a member of the Australian delegation, I observed the complex preparatory scientific talks on the system at the Committee on Disarmament in Geneva in the early 1980s. It is a miracle of statecraft and science that this collaborative international infrastructure has actually come into being.

The scientists did not get everything they wanted due to political and financial constraints. Some errors were made in the rush to complete the technical specifications. Installation of some of the stations in remote and inaccessible areas has proved daunting.

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The hydroacoustic system, for instance, passed a significant milestone in June when the final station was completed, on France’s Crozet Islands in the southern Indian Ocean.

After 20 years of planning and construction and the investment of millions of dollars, not only is the International Monitoring System almost complete, but it is functioning far better than its designers anticipated.

It also has unexpected side benefits, such as providing early warning of tsunamis and detecting nuclear disasters. The network successfully detected the 2004 Indian Ocean tsunami and tracked radioactive plumes from the 2011 Fukushima nuclear disaster.

Nuclear test ban treaty

The test ban treaty itself is not in such good shape. More than two decades after it was opened for signature it is still not in force, rendering the CTBTO only “provisional”. This is due to the requirement that all 44 states with a significant nuclear capacity must ratify it.

Currently 183 states have signed, and 162 have ratified. But 8 of the 44 with a nuclear capacity have still not ratified: China, Egypt, India, Iran, Israel, Pakistan, North Korea and the United States. China, Egypt, Iran, Israel and the US have at least signed. China says it is awaiting US ratification before it moves.

After a flawed lobbying effort, President Bill Clinton’s administration failed to secure Senate approval for US ratification in 1999. The treaty has not been resubmitted since, despite President Barack Obama’s undertaking that he would try.

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Given President Donald Trump’s apparent focus on emphasising American military prowess, it seems unlikely that he will favour ratification of the treaty.

More immediately threatening is the return of periodic Republican attempts to defund the CTBTO. These are usually beaten back on the grounds that the US benefits greatly from the worldwide monitoring that only a global system can provide, notwithstanding impressive US national capabilities.


Read more: What earthquake science can tell us about North Korea’s nuclear test


As it has in the past, the Australian government should make representations in Washington in support of CTBT ratification and preservation of funding for the system.

Paradoxically though, even if the other seven holdouts ratify, the one country that continues to conduct nuclear tests into the 21st century, North Korea, can stymie entry into force forever. Its accession to the CTBT should be part of any negotiation with North Korea on its nuclear program.

The good news is that the global monitoring system continues to go from strength to strength, providing reassurance that all nuclear tests, including those less brazen than North Korea’s, will be caught.

The ConversationThe CTBTO’s verification system provides hope that science can quietly triumph while political solutions elude us.

Trevor Findlay, Senior Research Fellow Department of Social and Political Sciences, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Pastor, Church Official Shot Dead in Nigeria


Muslim militants of Boko Haram blamed for killings in Borno state.

JOS, Nigeria, June 10 (CDN) — Muslim extremists from the Boko Haram sect on Tuesday (June 7) shot and killed a Church of Christ in Nigeria (COCIN) pastor and his church secretary in Maiduguri, in northeastern Nigeria’s Borno state.

The Rev. David Usman, 45, and church secretary Hamman Andrew were the latest casualties in an upsurge of Islamic militancy that has engulfed northern Nigeria this year, resulting in the destruction of church buildings and the killing and maiming of Christians.

The Rev. Titus Dama Pona, pastor with the Evangelical Church Winning All (ECWA) in Maiduguri, told Compass that Pastor Usman was shot and killed by the members of the Boko Haram near an area of Maiduguri called the Railway Quarters, where the slain pastor’s church is located.

Pona said Christians in Maiduguri have become full of dread over the violence of Boko Haram, which seeks to impose sharia (Islamic law) on northern Nigeria.

“Christians have become the targets of these Muslim militants – we no longer feel free moving around the city, and most churches no longer carry out worship service for fear of becoming targets of these unprovoked attacks,” Pona said.

Officials at COCIN’s national headquarters in Jos, Plateau state, confirmed the killing of Pastor Usman. The Rev. Logan Gongchi of a COCIN congregation in Kerang, Jos, told Compass that area Christians were shocked at the news.

Gongchi said he attended Gindiri Theological College with Pastor Usman beginning in August 2003, and that both of them were ordained into pastoral ministry on Nov. 27, 2009.

“We knew him to be very gentle, an introvert, who was always silent in the class and only spoke while answering questions from our teachers,” Gongchi said. “He had a simple lifestyle and was easygoing with other students. He was very accommodating and ready at all times to withstand life’s pressures – this is in addition to being very jovial.”

Gongchi described Usman as “a pastor to the core because of his humility. I remember he once told me that he was not used to working with peasant farmers’ working tools, like the hoe. But with time he adapted to the reality of working with these tools on the farm in the school.”

Pastor Usman was excellent at counseling Christians and others while they were at the COCIN theological college, Gongchi said, adding that the pastor greatly encouraged him when he was suffering a long illness from 2005 to 2007.

“His encouraging words kept my faith alive, and the Lord saw me overcoming my ill health,” he said. “So when I heard the news about his murder, I cried.”

 

Motives

The late pastor had once complained about the activities of Boko Haram, saying that unless the Nigerian government faced up to the challenge of its attacks, the extremist group would consume the lives of innocent persons, according to Gongchi.

“Pastor Usman once commented on the activities of the Boko Haram, which he said has undermined the church not only in Maiduguri, but in Borno state,” Gongchi said. “At the time, he urged us to pray for them, as they did not know how the problem will end.”

Gongchi advised the Nigerian government to find a lasting solution to Boko Haram’s violence, which has also claimed the lives of moderate Muslim leaders and police.

The Railway Quarters area in Maiduguri housed the seat of Boko Haram until 2009, when Nigerian security agencies and the military demolished its headquarters and captured and killed the sect’s leader, Mohammed Yusuf, and some of his followers.

The killing of Pastor Usman marked the second attack on his church premises by the Muslim militants. The first attack came on July 29, 2009, when Boko Haram militants burned the church building and killed some members of his congregation.

On Monday (June 6), the militants had bombed the St. Patrick’s Catholic Church, along with other areas in Maiduguri, killing three people. In all, 14 people were killed in three explosions at the church and police stations, and authorities have arrested 14 people.

The Boko Haram name is interpreted figuratively as “against Western education,” but some say it can also refer to the forbidding of the Judeo-Christian faith. They say the word “Boko” is a corruption in Hausa language for the English word “Book,” referring to the Islamic scripture’s description of Jews and Christians as “people of the Book,” while “Haram” is a Hausa word derived from Arabic meaning, “forbidding.”

Boko Haram leaders have openly declared that they want to establish an Islamic theocratic state in Nigeria, and they reject democratic institutions, which they associate with Christianity. Their bombings and suspected involvement in April’s post-election violence in Nigeria were aimed at stifling democracy, which they see as a system of government built on the foundation of Christian scripture.

Christians as well as Muslims suffered many casualties after supporters of Muslim presidential candidate Muhammudu Buhari lost the April 16 federal election to Goodluck Jonathan, a Christian. Primarily Muslim rioters claimed vote fraud, although international observers praised the polls as the fairest since 1999.

Nigeria’s population of more than 158.2 million is almost evenly divided between Christians, who make up 51.3 percent of the population and live mainly in the south, and Muslims, who account for 45 percent of the population and live mainly in the north. The percentages may be less, however, as those practicing indigenous religions may be as high as 10 percent of the total population, according to Operation World.

Report From Compass Direct News
http://www.compassdirect.org/

 

Pakistani Pastors Fear Retaliation after Police Withdraw Charge


Church leaders were accused of misusing loudspeakers on Christmas.

LAHORE, Pakistan, January 11 (CDN) — Christian leaders in Punjab Province’s Nankana Sahib district said they were apprehensive after a police inspector’s warning on Friday (Jan. 7) that “they would be responsible for anything that went wrong in the villages” if they continued preaching over a public address system.

Eight pastors leading a delegation of more than 100 Christians from Martinpur and Youngsenabad villages had persuaded police to drop the charge of preaching over the church loudspeakers – a practice routinely allowed by Muslims in mosques. They complained of inspector Muhammad Rana Ishaq’s veiled threat to the police chief, but they fear Ishaq will file other false cases against them in retaliation for the withdrawal of the charge.  

The Christian delegation registered a strong protest with the Nankana police chief for restricting their worship. After two hours of talks, the police chief conceded that his staff had discriminated against the Christians and ordered withdrawal of the case. Police had filed a case against the eight pastors for “misusing loudspeakers” on Dec. 25, 2010. The pastors said police should have taken into account that it was Christmas Day, and that residents of the two villages were worshipping in their churches.

Pastor Mubarak Victor of Calvary Gospel Church in Martinpur village told Compass that he and seven other pastors – Chandan Lal, William Kayani, Shahzad Fakhardin, Amoon Samuel, Shamaoon Khokhar, Amir Sohail and Hanooq Daniel – had been named in the case. Victor said the charge was ridiculous, as they have been preaching and worshipping on public address systems for decades.

“Our villages are inhabited by Christians, and we have been worshipping freely for years,” Pastor Victor said. “A ban on using loudspeakers was imposed on Muslim clerics because they often indulge in fanning sectarianism. This action of the administration is nothing but religious bigotry.”

He added that filing a case against the pastors on Christmas Day was a step towards restricting the Christians’ right to worship. The two villages have a combined Christian population of around 10,000.

“Muslims from our neighboring villages are behind this move,” Pastor Victor said. “Over the last couple of years, Muslims, mostly youth and women, have started coming to us for prayers. Almost all the Muslims who have visited my church said they were impressed by our sermons and worship and asked me to pray for them. Some have even denounced their faith but are keeping it a secret from their families.”

He said the pastors were not forcing the Muslims to come to them.

“It is the sincerity in our prayers and the testimonies we share that bring a change of heart in them,” he said.

Pastors Chandan Lal and Amir Sohail voiced similar concerns.

“Martinpur and Youngsenabad are Christian villages. Our public address systems have only been used for God’s Word and to give glory to His name,” Pastor Lal said. “They [police] registered a case against us only to intimidate us into restricting our worship. We won’t accept this at any cost.”

He said that Muslim prayer leaders used public address systems with impunity even though they were the ones who had actually been restricted from using it, other than regular calls to prayer (azaans).

“We have never said a word against any religion, let alone Islam,” Pastor Lal said. “When the villagers don’t have an issue with praise and worship on PA systems, who are the police to interfere?”

Malik Aftab, a village elder from Youngsenabad, told Compass that the villagers would not let police arrest any of the pastors.

“They [the police] are provoking us unnecessarily by registering a case against the pastors on Christmas day,” Aftab said. “Has anyone arrested any mullah [Muslim prayer leader] when they are addressing Eid sermons on loudspeakers? Why the discrimination?”

Chaudhry Habil Qaiser, 90, who is one of the oldest residents in Martinpur village, said he and his 86-year-old wife cannot go to church for praise and worship due to their old age.

“We join the congregation in praise and worship while listening to the church loudspeakers,” he said. “The government should not impose such restrictions in our village.”

Nankana District Police Officer Shahzad Waheed said the pastors had been booked for violating the Amplifier Act, but he had no explanation for why Muslim clerics were not booked for misusing loudspeakers when delivering hours-long sermons on the Muslim festival of Eid and for Friday prayers, especially as these acts led directly to introduction of the Amplifier Act.

Nankana district is the same one that Asia Noreen, the first Christian woman sentenced to death on blasphemy charges, lived in before her conviction. Her village of Ittanwali is about 15 kilometers (nine miles) from Martinpur and Youngsenabad.

Report from Compass Direct News