Dec 20, 2011

The 2011 Crikeys: the government policy hits and misses

2011 was the biggest year in economic policy for a long time - which isn't saying much. What was best and worst?

Bernard Keane — Politics editor

Bernard Keane

Politics editor

After years of reform drought, 2011 turned out to be one of the more productive years for economic reform. But only up to a point: each of the big set-piece reforms put in place by the government were flawed and undermined by politics and successful fightbacks by rentseekers and special interests -- the states, the mining industry, big carbon emitters. This would have counted as an average year for reform in the 1980s and 1990s. Still, there’s a context for everything: when the rest of the developed world is seemingly incapable of balancing their own budgets, a government committed even to the bare bones of continuing reform looks good by comparison. Indeed, some of the strongest criticism of the government from non-political sources this year was for its insistence on returning the budget to surplus next year. Strange times we live in when the business sector whinges about a Labor government’s fiscal rigour. And after 2010, in which the quality of economic debate went significantly backwards (Andrew Robb's infrastructure bonds proposal honourably excepted), we'll take what we can get. So who did best, worst and why? Best policy achievement The best policy package put together this year is Bill Shorten's Future of Financial Advice reforms (which Chris Bowen initiated), designed amongst other things to end the long-running rort of commissions for financial advice on superannuation and the conflict of interest of financial planners spruiking in-house products to clients. If implemented, the package will be good for the retirement savings of millions of Australians and good for future budgets. But it remains unpassed, and the gullibility of the independents, who appear to have been swayed by a self-interested campaign by financial planners, and the cynicism of the opposition, which allows financial planners to dictate its position, may yet cruel the hopes of Australians for a better super and wealth management system. The carbon pricing package therefore gets the gong, despite being deeply flawed. The deep irony of the package is that after as varied a line-up as John Howard, Kevin Rudd, Malcolm Turnbull and Tony Abbott all supported or promised a carbon price, it was Julia Gillard -- who explicitly ruled one out -- who delivered it, albeit in a form in which much of the heavy lifting of the long-delayed decarbonisation of the Australian economy will be done by less-efficient direct action measures favoured by the Greens and the opposition. Nonetheless, for a painfully carbon-addicted economy like Australia’s, it is way past time that a structural mechanism for curbing the addiction was put in place. That's now been done, in however flawed a fashion. Worst policy failure No contest: asylum seekers. This was a huge failure politically for Gillard (and Bowen), but more importantly a failure of moral courage by the entire parliament. We're fortunate in Australia: rare is a public issue in this country for which the cost can be counted in lives. A successful economy is critical; our health system crucial to our quality of life, our education system a vital aspect of civil society and the economy, but our asylum seeker policy --such as it currently is -- is prompting people to place their lives at risk to come here, and many are dying. It is in our hands to reduce, if not eliminate, that tragedy, but our parliament does nothing. Biggest legislative win One of the few unalloyed successes of this government has been its record of getting legislation through parliament. Its Migration Act changes were atypical: this is a government adept at securing support for its bills. It saved the best until last, securing the passage of its mining tax (profoundly flawed, but anyway) through the House of Representatives with some minor tweaks and some money for the independents. It was a classic piece of legislative horsetrading to give Gillard her "year of decision and delivery". For all the predictions about instability and uncertainty, this minority government has a legislative record not much shy of standard-issue governments without a Senate majority. Best public policy report It’s a rare thing that can achieve bipartisanship these days, but that’s what the Productivity Commission managed with its report on a national disability insurance scheme. Typically hard-headed, the PC nailed the deep flaws of the current hotchpotch of support systems: "The current disability support system is underfunded, unfair, fragmented, and inefficient, and gives people with a disability little choice and no certainty of access to appropriate supports." It did exactly what the PC and its predecessor bodies are best at: framing the debate and laying the groundwork for major reform by demonstrating the costs of current arrangements and proposing a solution, which will form the basis of the government's reform efforts on this front in coming years and which will hopefully be picked up by an incoming Coalition government. Most influential think tank Public policy is now contested more than ever. No economic issue can creep onto the agenda without special interests commissioning the same handful of economic consultancies -- you know who they are -- to churn out rubbish modelling designed to suit the interests of those commissioning it. Think tanks have proliferated, first on the Right and then the Left, feeding the media cycle with reports and op-eds. The economic forecasts of private sector firms are treated as Holy Writ by the media. But amongst it all, the Productivity Commission remains one of the most important players in Australian public policy: independent even of government, forthright, and accused of bias only in relation to the vigour of its economic rationalism. You only have to look at who hates the PC to know it's on the side of the angels: crass populist and economic xenophobe Barnaby Joyce insists he likes to use its reports as toilet paper. Except, of course, for when he agrees with them. The PC -- a creation of the Howard government when it brought togther the Industry Commission, the Bureau of Industry Economics and Economic Planning Advisory Commission -- is an ornament to public life in Australia. Stupidest report As economic consultants proliferate and their confected numbers about job losses, economic impacts and squandered GDP are sprinkled around like confetti, it’s difficult to single out a single report that more than any other laid on the stupid. But there is one -- from one of the biggest sources of garbage "independent" reports, the copyright industry. Time and again this industry -- one of the world’s most powerful cartels, who still make billions from gouging Australians -- has vomited into the media cycle absurd claims about the impact of filesharing. In March, the Australian Content Industry Group produced a doozy: a report on filesharing that claimed it cost the Australian economy $900 million a year. ACIG released excerpts of the report, but not the report itself, to Fairfax for a Sunday paper splash and then sat on the report for over a week. When it was finally released, the reason for ACIG's reluctance became clear: the report did no work on filesharing levels in Australia but simply applied the conclusions of a wholly discredited European report to our own market. Even by the standards of Big Content, it was a howler. *Later this week: the Crikeys award the best (and worst) in media, business and culture

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46 thoughts on “The 2011 Crikeys: the government policy hits and misses

  1. shepherdmarilyn

    Psssssst Suzanne troll? Have you heard of the GFC that is now troubling most of Europe just a trifle.

  2. Suzanne Blake

    @ shepherdmarilyn

    Psst Marilyn Left Wing Dyke, yes I have. It lowers inflation, not increases it. That was my point

  3. Jesus García


    Everything is interconnected. GFC did push inflation down back then. But in the past year the demand for our mineral (record price) and other commodities from China push prices up and then we import back from them the finished products as well as services from them or other nations that’s been going through high inflation. QE was designed to push stock prices up so export inflation to the world as well.

    My point about GFC was the overall performance, you are comparing an economy going through a bubble growth with the whole world to an economy going through a GFC. Can’t compare apple to pea, and you can’t compare the mild crisis to the GFC; Europe, Japan & US have been in recession we do have exposure to them as well as indirect exposure because if they slow down that means China also will slow down; that is why China has been internally stimulating its economy.

    Our troops are still in Afghanistan. There is still war there and part of Pakistan.


  4. Jesus García

    2.5% inflation that is core inflation which RBA use to determine policy if I am confusing anyone. l8r

  5. Suzanne Blake

    @ Jesus

    Europe is 4% of our exports, no big deal, what we export there are staples anyway, like Japan, except for the coal.

    Australia did not go into recession during GFC anyway.

  6. Edward James

    Is GFC the Global Financial Crisis? These global issues are too complicated for a PAYG taxpayer like me! Who is being damaged by my Governments malfeasance. I am willing to bet there are a few party members or as I identify you guys in my on line comments here and in newspaper articles in the Peninsula News “political all sorts” reading I have no doubt those two identifying themselves as SUZANNE BLAKE & SHEPHERDMARILYN are tight with the rest of the losers in the two parties not much preferred! Unfortunately for tax payers and rate payers like me it is offensive the way party members on both sides of government insist on accommodating shonky activity by the peoples elected representatives. ! Edward James 0243419140

  7. Suzanne Blake

    @ Edward James

    I am tight with no party, never been a member, nor have I ever attended a political event or rally.

    I too am sick and tired of the incompetent, inept and wasteful Federal Government.

    I live close to you, in the same electorate, so we have the worst MP, who has gone missing since the investigation into him started.

  8. Jesus García


    Either you are being paid for spreading bs propaganda or you are being brain washed.

    FROM DEPARTMENT OF FOREIGN AFFAIRS AND TRADE, our trading partners make up:

    China 13.2%, Japan 12.2%, US 10.3%, EU 17.1%.

    See Suzanne we are exposed to those economies, see Japan, US & EU add up equal 39.6% exposure. Smart people would do research and not listening to the peddling lies that China carries our economy the whole way.

    Yeah I was in hurry, did not going into details about QE cause inflation. While the policy push up stock prices, there were also a lot of excess liquidity that found it way around the world going to unwanted places, people use it in high return investments pushing commodities prices and furthermore most trading contracts around the world are in USD, the excess money cause inflation. UK & US been going through high inflation.

    With the exception Japan, which has adopted low interest for years to stimulate its economy. Because their prices are too high already they experience mild deflation. The liquidity go overseas, people would borrow money from Japan due to low interest rate then convert to GBP to do investment in Britain hence value of GBP/JPY rose significantly over the years. Like wise watch AUD/JPY often whenever it rises Aussie200 also rises because Japanese buy Australian currency to invest in Aussie stocks.

  9. Jesus García

    Aahh moderation, just short then. No Suzanne our trading partners China 13.2%, Japan 12.2%, US 10.3%, EU 17.1%. We are exposed 39.6% to the latter three in total compared to China’s 13.2%

  10. Jesus García

    That was top ten export goods and services from department of foreign affairs and trade.

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