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crikey15

Nov 5, 2015

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Could the unthinkable be happening?

One of Tasmania’s privileged insiders, the Federal Hotel Group, is encountering an unexpected public backlash against its monopoly gaming licences, raising the possibility the sun could be setting on the backroom deal-making days that have been a feature of life in the Apple Isle for over 40 years.

The issue brought the spotlight to Federal Hotels, owned and operated by the $480 million Rich List Farrell family, and the aborted attempt by David Walsh to add a casino to a proposed high-end hotel adjacent the Museum of Old and New Art, which has become one of Hobart’s tourist magnets.

It was intended to be an exclusive casino for high-rollers from interstate and overseas, but Federal Hotels had an exclusive licence covering table gaming, poker machines and Keno until 2023 throughout Tasmania. Five years’ notice of any changes is required, which can only be given in 2018 at the earliest.

Discussions between Federal Hotels and David Walsh broke down when Federal Hotels saw the MONA site as an opportunity to extend its exclusive poker machine licence.

Walsh, an inveterate and passionate gambler, loathes pokies as much as he loves a punt and wasn’t prepared to be responsible in any way for extending Federal Hotels exclusivity. He withdrew his application for a casino license but made it plain he would proceed to build the necessary building regardless. In the hope that things may change.

At this point the negotiations between Federal, Walsh and the government became public when David Walsh blogged what was happening.

Federal Hotel boss Greg Farrell then came out with what has to be one of the most self-defeating media releases ever when he suggested $100 million of upgrades planned for his two casinos, in Hobart and Launceston, plus a new high-class hotel at Port Arthur that had been on the drawing board for 10 years, would not go ahead without the certainty of an extension to its poker machine licence.

The media statement stopped everyone in their tracks. Did we hear correctly? Is this guy serious?

Here was a group that negotiated a secret deal with the Bacon/Lennon government in 2003 for a 20-year exclusive licence to own and operate poker machines in the state’s pubs and clubs, with the only consideration being it had to spend $25 million on a new 150-room hotel at Coles Bay on the East Coast, once again offering to spend some of the windfall gains on tourism assets.

The hotel promised in 2003 ended up as a 25-room luxury resort built five years late.

The value of the licence is arguably worth about $15 million a year. The government was prepared to forgo this amount with a special deal because the group was considered a reliable operator and its businesses had brought benefits to Tasmania ever since Australia’s first casino licence was granted in 1972. Furthermore, the government argued that a cap on machine numbers had been an agreed offset with social benefits and an exclusive monopoly would lessen the amount of advertising that might otherwise tempt vulnerable customers to part with too much of their hard-earned.

It was an astonishing deal.

The forceful Bacon/Lennon duo won the PR war assuring Tasmanians that the deal would enable the Federal Group to expand its regional tourism, increase employment and act as a marketer for the state, which would have spillover benefits for the entire industry.

The deal has failed to deliver as promised.

Over the last 10 years shareholders have taken 70% of after-tax profits as dividends, an extraordinarily high amount for a capital-hungry business supposedly in a growth stage.

Depreciation allowances exceeding after-tax profits swelled the group’s  cash coffers, but instead of being spent on developing tourism assets, the purchase of an existing bottle shop chain and other pokie pubs from third parties, located in demographically suitable areas crammed with the maximum permissible number of poker machines, took precedence.

The regional tourism businesses at Freycinet, Cradle Mountain and Strahan have recently been sold as the group has predominantly retreated to the major cities, notably Hobart, where accommodation is booming, ironically due largely to the success of David Walsh’s MONA.

The Federal Group has predominantly enjoyed the full support of both major parties together with the fierce unswerving backing from industry lobbyists. Back in 2008 then-opposition leader (now Premier) Will Hodgman dared to question the transparency of the government’s dealings with the Federal Group and was roundly criticised from every quarter.

Today the climate is different.

In the past, blaming Greens for being anti-development helped garner support for controversial projects. But more operators are eyeing off accommodation opportunities in Hobart. An exclusive licence to Federal Hotels gives them an unfair advantage. The industry has toned down its fulsome support. News Corp’s The Mercury is actively questioning what’s happening, and the ABC has taken a keen interest. Independent MP Andrew Wilkie has helped remove an element of partisanship with his anti-pokie stand.

Federal Hotels has withdrawn to the shadows.

The opportunity now exists for Hodgman to “do a Turnbull”, take a new policy direction, abandon the old “special deals for mates” approach, reform the poker machine industry and loosen the chokehold on addicted players.

Australian Capital Territory

Jan 17, 2014

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Gay sex convictions are set to be abolished beyond Victoria, with New South Wales and Tasmania considering following the state’s example in expunging the record for sexual acts that occurred between consenting men before homosexuality was decriminalised. But advocates and those affected say this is just the first step, and they are calling for an apology.

Gay sex was first decriminalised in South Australia during the mid-1970s, with Victoria passing similar laws soon after in 1981. Tasmania was the last state to remove laws against homosexual sex between men, with decriminalisation occurring there in 1997.

Tom Anderson, a disability worker from Wodonga, was charged under Victoria’s anti-gay sex laws when he was just 14 years old despite being the victim of sexual assault. Although he wasn’t convicted, Anderson says it is important for other states and territories to follow Victoria’s example because there are men across the country who have to live with the pain of their convictions every day of their lives.

“It’s a terrible secret to live with,” he told Crikey. “For me, the actions by the police and the legal system had more of a lasting effect on my life than the effects of the abuse. The abuse I came to terms with, but the trail of the legal system has haunted me.”

For Anderson, expunging the records is just a first step. “When the announcement was made on Sunday, it was like a light had been turned on in the darkness of my past. But what I need is the apology and to tell my story to the Governor and Premier. That is my ultimate desire,” he said.

Rodney Croome, the spokesperson for the Tasmanian Gay and Lesbian Rights Group, agrees. “The expungement will make life easier, but of course the impact of the laws went far beyond those men to stigmatise all people in same-sex relationships. An apology is an essential part of this process,” he said.

In Tasmania, the abolishment of gay sex convictions and an apology has support from Labor, the Liberal Party, the Greens and recently reformed Tasmanian branch of the National Party. Croome says this is particularly important because Tasmania only decriminalised gay sex in the late ’90s.

“We can fairly confidently predict that there are more men in Tasmania who have convictions than any other state. And of course the convictions make it hard for them to obtain employment, housing, and in some cases it has wrecked their lives.”

While it is impossible to track down exactly how many men were prosecuted under sodomy laws in Australia, Croome says there would be at least 10 who would be alive and of working age in Tasmania today.

“I think it is important that the Tasmanian government — whichever political stripe it may be — makes a case to other governments that they follow suit. Particularly Western Australia and Queensland, where these laws survived right up until 1990,” he said.

A spokeswoman for the Western Australian Attorney-General Michael Mischin told Crikey the state did not have any current plans for legislation similar to Victoria’s proposed laws. But she points out that under the Spent Convictions Act 1988, a person in WA can apply to have an offence deemed spent (or ignored). In addition, the law makes discrimination on the basis of a spent conviction illegal.

A law to remove convictions for men engaging in consensual sex was being considered by the Queensland Parliament late last year. But a source close to the issue, who did not wish to be named, told Crikey the proposal seemed to have quietly disappeared since then. He says it’s possible the Queensland government is waiting to make an announcement towards the end of the year, with a state election in mid-2015. The Queensland Attorney-General did not respond to a request for comment prior to deadline.

“For someone to apply it is going to cause more mental anguish and anxiety because they have to sit down and put all their facts on paper.”

Queensland is the only state in Australia where the age of consent for heterosexual acts and homosexual acts is still different — 16 and 18 respectively. The age of consent for gay sex was changed in NSW in 2003, and the issue is likely to be addressed when the state drafts its own legislation to expunge gay sex convictions.

In NSW, Attorney-General Greg Smith has signalled his support for such a law. The independent member for Sydney Alex Greenwich has also flagged his intention to introduce a private member’s bill. Speaking to Crikey yesterday, Greenwich, a former gay rights lobbyist, said he was meeting with the Human Rights Law Centre and the NSW Gay and Lesbian Rights Lobby to discuss the bill.

“The legislation is not something that is going to be quick and easy,” he said. “It needs to be detailed and comprehensive to do justice to the people who were convicted for loving who they loved.”

Like Rodney Croome, Greenwich believes there should be an apology to those who were convicted of gay sex crimes. He’ll discuss the matter with various interest groups to see what form an apology should take.

Jed Horner, policy officer at the Gay and Lesbian Rights Lobby, says NSW will likely enact similar legislation to Victoria, where men will have to apply to have their records expunged. This is to ensure convictions that would be unlawful today — such as rape or interfering with a minor — are not wiped clean.

“Obviously we want to make it easier for people,” he told Crikey. “We don’t want to create further injustice with a long, drawn-out process.”

Tom Anderson has similar concerns. While he understands there has to be a series of checks and balances, he is also worried the application process in Victoria could trigger unnecessary stress. “For someone to apply it is going to cause more mental anguish and anxiety because they have to sit down and put all their facts on paper,” he said.

On Tuesday, the ABC reported that the ACT government had not made a decision regarding the erasure of gay sex convictions; the law against gay sex predates ACT self-government and electronic record-keeping. In a statement, the South Australian Attorney-General John Rau said his state — not Victoria — was the first to address the issue of gay sex convictions prior to decriminalisation:

The Spent Convictions (Decriminalised Offences) Amendment Act 2013 commenced on 22 December 2013, allowing convictions for historical homosexual offences to be spent for all purposes. It is pleasing that other states are now following our lead.”

The spokesperson for the Northern Territory Anti-discrimination Commission did not respond to a request for comment before deadline; however, it is understood the territory is not currently considering legislation to deal with the matter.

Tasmania

Jan 17, 2014

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Tasmanians will go to the polls on March 15, Premier Lara Giddings yesterday confirmed, setting up a super Saturday of simultaneous state elections in Tasmania and South Australia. In both cases, the hopes of Labor — the last remaining Labor governments at a state or federal level — look grim.

Labor’s prospects look particularly bleak in Tasmania, where the party has been in power since 1998. That makes the Bacon-Lennon-Bartlett-Giddings government the same age as Kristina Keneally’s in New South Wales and two years older than Anna Bligh’s in Queensland at the time of their respective massacres in 2011 and 2012. In each case, a strong sense prevailed that all concerned would have been better off if the governments had gone down to more honourable defeats a term sooner.

However, Tasmania offers one sharp distinction with NSW and Queensland: the Hare-Clark electoral system, in which each of the state’s five electorates return five lower house members through a brand of proportional representation much beloved by election watchers. This has traditionally made life for the Liberals very difficult indeed, given their position on the Right of a three-party system in which the centre is occupied by Labor.

The 2010 election result had the Liberals clear winners in terms of votes cast, with Labor reduced from 14 seats to 10 and the ALP vote crashing by 12.7%. As then-premier David Bartlett had spent the campaign talking up his party’s determination not to govern with the support of the Greens, the talk on election night was of an imminent change of government. But with the Liberals likewise finishing the count stranded on 10 seats and the Greens standing firm in their refusal to do business with them, Labor remained in office by default.

Four years on, Labor finds the burdens of long-term incumbency weighing more heavily than ever, having spent the last term governing from a position of political weakness through a coalition arrangement with the Greens (which Giddings pointedly brought to an end yesterday).

High as the Hare-Clark hurdle may be, the Liberals — who remain under the leadership of Will Hodgman, as they were in 2010 — will go into the campaign with every confidence of clearing it.

Parallels between the federal and state spheres are misleading more often than not, but the present situation in Tasmania looks very much like an exception. The period of Labor-Greens rule has mostly coincided with Labor being in minority government federally, and both opinion polls and the federal election result have offered a strong impression that the unpopularity of each was feeding into the other.

In particular, the Liberals’ success in poaching Bass, Braddon and Lyons from Labor at the federal election — with respective swings of 10.7%, 10.1% and 13.5% — suggests a path to majority government has opened in the state’s north.

“To crudely simplify the maths of Hare-Clark, the Liberals can expect to gain the three seats they need …”

To crudely simplify the maths of Hare-Clark, the Liberals can expect to gain the three seats they need if their vote improves by 2% in Braddon, 5% in Lyons and 6% in Bass (or by 4% in the Hobart fringe electorate of Franklin, where the federal election swing was only half as big).  That happens to be roughly the difference between the Liberal vote at the 2010 state and 2013 federal elections in the case of Bass and Braddon, and at least 3% less in the case of Lyons.

The Liberals have two reasons to hope they can do quite a bit better than that, the first being the polls. Large-sample polls conducted by ReachTEL over the past six months have consistently found the Liberals to be doing at least 5% better at state than federal level, and Labor doing correspondingly worse.

The second is the rhetorical trump card the Liberals have in being the only party that can credibly claim to be a potential majority government, an asset that greatly boosted Labor as it powered to its landslide wins in 2002 and 2006.

There is, however, a fly in the ointment in the shape of the Palmer United Party, which succeeded in winning a Tasmanian Senate seat and stands poised once again to blitz the airwaves with television advertising. An encouraging development for the new party is the decline in support for the Greens, whose vote in Tasmania fell by half at the federal election. That raises the possibility of PUP candidates emerging as piggies in the middle of 2-2-1 results of the kind that have traditionally delivered seats to the Greens.

A particularly promising prospect is the north-western electorate of Braddon, where a Greens candidate was elected by a razor-thin margin in 2010. The PUP’s lead candidate in the electorate is Kevin Morgan, whom Clive Palmer has proclaimed with characteristic reserve to be “the next premier of Tasmania”.

In one sense, the Palmer insurgency presents the Liberals with a potentially substantial obstacle on their path to majority government. But it also promises to sharpen their message that they and they alone offer an alternative to four years of parliamentary chaos.

Economy

May 31, 2013

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Most attention focuses on the federal budget in May, but state budgets help complete the fiscal mosaic.

On a state-by-state comparison it’s pretty easy to have a cheap shot at Tasmania for being a basketcase, but adjusted for scale and rural location factors Tasmania is little different from other areas in Australia. Its budgetary problems throw into stark relief the problems facing all states.

The preoccupation with debt and deficits that afflicted the discussion about the federal budget has carried over to the state budget. Despite sound reasons for running deficits, Tasmania has no option but to move to surpluses, as it has little cash remaining and cannot borrow because, as presently structured, it can’t service any more than the current $220 million sum and has by its words and actions undermined its capacity to raise more of its own revenue.

The wholly owned government businesses — specifically the three electricity monopolies covering generation, distribution and retail functions — are loaded with debt and will struggle to support more borrowings.

When declining revenues from GST and state taxes smashed the state’s bottom line, the government upped the percentage taken as dividends from the electricity companies, which fortunately coincided with rosier future profits given the carbon tax bestowed relative cost advantages upon Tasmania’s largely hydro-based generation network. But electricity demand patterns are changing, and the carbon tax is likely to disappear after September 14.

Federally, the doctrine of surpluses being good and deficits bad adopted by both major political parties means that as we are forced from deficits to surpluses as soon as politically possible, each budget will be contradictory relative to its predecessor. And when government surpluses eventuate the iron law of sectoral balances means the private sector will inevitably be in deficit — just another problem for the Tasmanian economy as it attempts to move forward from a situation where gross state product is estimated to have contracted by 0.75% during 2012-13.

The estimated outcomes for 2012-13 brought a further rundown in the state’s cash reserves. Next year, 2013-14, they will disappear altogether. Over the past two years the only cash on hand has been from grants paid in advance by the federal government. This has been used as working capital to fund the ordinary operations of government.

In the current year 2012-13, 98% of operating revenues (excluding tied capital grants) were spent on operating expenses, 5% paying the costs of unfunded superannuation to retired public servants and a further 5% on new plant equipment and infrastructure. Fortunately the costs of servicing borrowings were negligible.

“Removal of the carbon tax will hurt Tasmania because of the dominance of existing renewables, but the Liberals only accounted for the change in the first year of its plan.”

Next year, 95% of operating revenues will be spent on operating expenses, 5% paying pensions and benefits and 6% on new plant infrastructure and injections into government businesses. The cash tin will then be empty.

The following years will be break even or better, but if the pattern of the recent past is repeated the estimates for future revenues are optimistic.

Hence the situation is a little precarious, especially as the federal capital grants received in advance and used for working capital will have to be “repaid” when it’s time to spend as intended. Tasmania has elected to become a cork in the ocean, at the mercy of the elements. Batten down the hatches, reef the sails and pray the GST rate will increase is essentially the government’s plan.

Despite the Liberal’s virulent criticism of the government’s budgets, in releasing its alternative Plan for a Brighter Future it accepted all the government revenue projections, fiddled with a few expenses and proclaimed “our bottom line is better than yours” and “we will reach a surplus a year earlier”.

Removal of the carbon tax will hurt Tasmania because of the dominance of existing renewables, but the Liberals only accounted for the change in the first year of its plan. No need to worry about the other three years, we were told, because any costs will be offset by the dividends from a growing economy. How was not explained. The risks and sensitivity section in the budget offered no basis for the Liberals’ ebullient view. An increase in employment of 1% will only lead to payroll tax rising by $4 million, hardly enough to offset declining returns from the electricity companies.

The Liberals also reaffirmed a commitment to tearing up the recent forest agreement bankrolled by the federal government. Amounts to be spent were removed and treated as savings despite retaining the incoming grants as income.

The government-owned Forestry Tasmania is insolvent and propped up with a letter of comfort from the government, hasn’t produced operating cash surpluses for years even when woodchipping was rife, has pawned its motor vehicle fleet, sold its softwood plantations, has hardwood plantations that are cash flow negative, has spent federal grants money paid in advance on operating expenses, and whatever it earns barely covers overheads. It therefore needs a government lifeline of $25 million each year to pay wages. The Liberals disagree with the views of the newly constituted board and say the injection is not needed because they will grow the industry. Again, how was not explained.

The government appropriates amounts each year into the Treasurer’s reserve to meet unforseen expenditures. It is not included in the bottom line calculation, because it is only a contingency. But that didn’t stop the Liberals removing the contingency and counting it as a bottom line savings.

A recent opinion poll taken before the budget revealed the undecided vote heading towards the March 2014 state election had risen to 30%. While the Premier resorts to Pollyanna imitations rather than adequate explanations of the state’ situation and a way forward, the opposition’s response is little more than a hoax unlikely to restore much needed trust amongst the growing numbers of disaffected and disillusioned.

*John Lawrence was employed as an economist for five years before returning to Tasmania as an accountant in public practice and an observer and researcher on finance and economic matters at the state level

Federal

May 1, 2013

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Passage of the the Tasmanian Forest Agreement Bill in the state’s lower house effectively ended three years of negotiations between the forestry industry and environment groups. The deal is being celebrated by many as a resolution to the 30-year conflict over native forests in Tasmania and a win for the environment and economy. Nothing could be further from the truth.

The only secure environmental benefit from the deal is that around 80,000 hectares of forests will be formally protected immediately. The protection of the remaining 420,000 hectares of proposed reserves has been postponed and is now contingent on the environment movement ceasing all protests and the Forest Stewardship Council granting certification to logging in the native forest areas that remain available for harvest. The reservation of these forests is scheduled to occur in two tranches, one in late 2014, the other in 2015.

In return for this, Tasmania will receive over $350 million from the Australian government (around $130 million of which has already been paid), which will be used to “restructure” the forestry industry, compensate displaced forest workers, pay out forest contracts, subsidise regional development projects and help establish and manage the new reserves.

When the smoke and spin is cleared away, the deal looks more like an old-fashioned industry assistance package than a conservation outcome. Seemingly, Tasmanian Premier Lara Giddings agrees. In singing the praises of the deal yesterday, she said that it:

“… marks the point where we can put aside old hostilities and take control of the future of the forest industry by responding to the needs and wants of global customers … There is no other alternative to the worst downturn Tasmania’s forest industry has ever seen. The stark choice was either to adapt to changing global demands or see more jobs lost and the rapid decline of the industry. Anyone in any doubt about the importance of this deal to the forest industry need only look to the strong endorsement of companies like Ta Ann, Artec, Neville Smith Forest Products, Bunnings and our own GBE Forestry Tasmania.”

If it looks like an industry assistance package, smells like an industry assistance package, and the Premier describes it as an industry assistance package, then it probably is an industry assistance package.

The simple truth is that the native forest sector in Tasmania and elsewhere is in decline and has been for the better part of the last 20 years. Since the onset of the global financial crisis, the sector has gone into free fall, with Tasmania bearing the brunt of the downturn because it is so heavily reliant on woodchip exports to Japan, which have plummeted.

The Tasmanian Forest Agreement was always designed to prop up the Tasmanian forestry industry and get it through the current crisis. The environmental component was an add-on that was supposed to soften the blow to taxpayers and help give the Gillard government a greenish hue.

“Anyone with even a skerrick of economic rationalism in his bones should be appalled by the continued provision of subsidies …”

The Australian government, Tasmanian government and the forestry industry have all made it clear that, without the government handouts provided under the agreement, the native forestry sector in Tasmania will collapse. Hence, by propping up the sector and perpetuating native forest logging, the agreement will result in worse environmental outcomes, not better. Without a native forestry sector, there is no need for reserves to protect forests from logging.

Anyone with even a skerrick of economic rationalism in his bones should be appalled by the continued provision of subsidies to a sector that employs so few people (less than 2000 in Tasmania) and adds so little to the economy. Outrage will be compounded by the fact that, by ensuring continued native forest harvesting in Tasmania, the deal will add around 2 million tonnes of greenhouse gas emissions to Australia’s accounts every year until at least 2020. This will cost taxpayers around $50 million annually in lost carbon revenues or direct action spending.

To make matters worse, the postponement of the declaration of the 420,000 hectares of reserves means that, in all likelihood, Tasmania and its forestry sector will receive the outstanding $216 million in federal government handouts but never deliver the reserves. This is partly because of the conditions placed on the creation of the reserves, and partly because of state politics. By late 2014, the polls suggest the Tasmanian Liberal Party will be in power, and it has pledged to rip up the agreement if it is returned to office.

In the end, the only positive for the environment that can be taken from the deal is that it has not derailed the proposed extension to the Tasmanian Wilderness World Heritage Area. For those who haven’t followed the process, the Australian government is putting forward an additional 170,000 hectares of Tasmanian forests for inclusion on the World Heritage List. Of the area nominated, approximately 50,000 hectares is already in reserves, meaning the deal is supposed to give formal protection to an additional 120,000 hectares of forest. However, due to amendments made in the Tasmanian upper house, 35,000 hectares of these forests will now not be reserved in a national park unless Forest Stewardship Council certification is granted.

Thankfully, whether the Tasmanian Parliament formally protects these forests is largely immaterial. If the Australian government proceeds with the World Heritage nomination and the World Heritage Committee agrees to the listing, federal environmental law will prohibit harvesting in these forests.

To salvage something from this process, the Gillard government has to make the provision of the outstanding money contingent on the Tasmanian Parliament formally protecting the remaining reserves. Without that, the agreement is nothing more than an industry handout.

*Andrew Macintosh is an Associate Professor at the ANU College of Law and is acting director of the Australian Centre for Environmental Law

Tasmania

Jan 30, 2013

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For most Tasmanians a darker reality lies behind the seductive tourism brochures showcasing the state’s pristine wilderness, gourmet-magazine articles celebrating its burgeoning food culture, and newspaper stories gasping at a world-leading art museum. Tasmania ranks at the bottom among Australian states on virtually every dimension of economic, social, and cultural performance: highest unemployment, lowest incomes, languishing investment, lowest home prices, least educated, lowest literacy, most chronic disease, poorest longevity, most likely to smoke, greatest obesity, highest teenage pregnancy, highest petty crime, worst domestic violence. It seems not to matter which measure is chosen, Tasmania will likely finish last.

Why Tasmania is such a long-term underperformer, and what might done to improve, are important questions — not only for Tasmanians but also for the nation as a whole. In fact, it can be argued what’s happening in Tasmania is not an exception but a microcosm for a major part of Australia; it is already typical of non-metropolitan regions and might represent more of Australia’s future. One advantage in Tasmania, however, is that because it is both a “region” and a state, data and other information are available that allow us more clearly to see patterns that remain buried among bigger aggregates in other states, which elsewhere combine the big cities with non-urban regions into a comforting average.

The underlying problem is simple but intractable: Tasmania has developed a way of life, a mode of doing things, a demographic, a culture and associated economy, that reproduces underachievement generation after generation.

Everyone knows the problems; they are manifest, reported day after day. The reality is that Tasmania has bred a dominant social coalition that blocks most proposals to improve. Problems and challenges are debated endlessly, with no resolution. Most discussion avoids mention of the uncomfortable truths at the source of underperformance.

Ultimately, Tasmania doesn’t change because its people don’t really want to. They don’t need to change because their way of life is mainly financed by the mainland. Far from helping overcome this pattern, the nation’s resource-boom prosperity is enabling and cementing Tasmania’s under-achievement. It’s allowing the government to pay an ever-expanding proportion of the population not to work; it’s driving up wages, materials, transport, regulation, exchange rates, and other costs that make Tasmania’s traditional industries uncompetitive; and it’s allowing government to subsidise non-performing industries.

The result is that Tasmanians face little incentive or pressure to change. Unlike New Zealand, which has no rich big brother and must find ways to earn its own living, Tasmania enjoys a permanent and ongoing transfer from mainland cousins that reinforces failure.

The difficulties are most obvious in the economy. Tasmania’s unemployment rate in October 2012 stood at 7.7%, by comparison to the Australian average of 4.9% — a difference of nearly three percentage points or, expressed more starkly, a rate of joblessness more than a third greater. In 2012, the poor performance of the Tasmanian economy was a dominant topic in local public discussion. It felt depressed. Traditional industries, particularly forestry and energy-intensive manufacturing based on hydro-electricity were in sharp decline, while tourism and service sectors were sluggish and appeared unable to pick up the slack.

The fate of the forest-products industry was emblematic of Tasmania’s challenges. Plunging global wood chip prices, rising Australian exchange rates, wages set by booming mining industries, tightening environmental regulation, and internationally effective campaigns by environmentalists, combined to lose customers in high-paying markets such as Japan and Europe and make the industry uncompetitive in growth markets such as China. The industry collapsed as revenue dived and costs spiralled. It had became increasingly uneconomic to harvest the trees, transport them for processing, transform them into sawn timber, plywood, or wood chips, freight them to markets and replant the harvested areas. It was estimated in 2012 that Tasmania would lose $50-100 per tonne on exported wood chips at prevailing world market prices, and the industry needed to export two million tonnes to break even. The state-owned entity that managed the public forests, Forestry Tasmania, was haemorrhaging cash, at the rate of an estimated $30 million a year.

“It is important to understand what it is about Tasmanian culture and society that permits such an abrogation of responsibility, a refusal to confront reality.”

Forestry is only one example; other resource-dependent, processing-intensive, export-oriented industries suffered similar fates. The vegetable processing industry had all but disappeared and energy-intensive metal processing was in jeopardy. Clearly the forestry industry had reached a watershed, and would need to change, or perish. But the industry appeared unable, or unwilling, to change, and most. Tasmanian politicians’ response was to deny the need, blame the Greens, or delay the inevitable. The industry, strenuously backed by the Liberal Party and key Labor figures in Tasmania, essentially demanded the “right” to endless public subsidies. Any serious discussion of a new future for the industry was ruled out of bounds, for fear of offering succour to the conservation lobby.

It is important to understand what it is about Tasmanian culture and society that permits such an abrogation of responsibility, a refusal to confront reality.

The challenge is not that the scale of job loss is too great to be made up by growth in other sectors. Rather it relates to failure to take the action required to bring opportunities to reality, either in forestry or other areas.

The economic problem Tasmania needs to address is not especially large. A common mainland misconception holds that Tasmania’s economy is ‘dominated’ by forestry. When questioned, respondents (including in Tasmania) estimate that it accounts for “about 20%” of Tasmania’s economy. This perception arises from the disproportionate share of media attention on environmental issues that swirl around forestry. But it’s not accurate; Tasmania’s economy is not forestry dependent. By 2012 just over 1% of jobs in Tasmania were in forestry, and even less depended on native-forest activity.

Nevertheless, the shrinkage of the forestry sector poses important challenges for Tasmania. The best available data available revealed the Tasmanian forestry industry had shed about 3500 jobs between 2008 and 2011. With a full-time workforce of 153,000 in 2011, these jobs accounted for just over two percentage points of Tasmania’s unemployment rate, or a third of the unemployed — roughly the disparity between Tasmania’s unemployment rate and the mainland average.

But two additional aspects of the forestry sector give it particular importance. First, the industry was concentrated in rural and non-metropolitan regions, which have historically had few alternative sources of non-government employment. Declining forestry jobs has eroded these communities’ confidence. With mainland states booming in resource sectors, displaced Tasmanian workers left these communities, stripping them of some of the most economically productive and vibrant members. Forestry has also historically contributed a disproportionate share of Tasmania’s tradable sector. The great majority of forest products are sold out of the state, a large proportion out of Australia. This is important because traded sectors tend to exercise greater leverage over the economy — they can grow much faster because they tap larger markets and have higher “multipliers” of associated economic activity.

One might imagine that responding to the decline of the forestry sector would be a high priority. An effective response would not be too difficult. The challenge posed by the decline of the forestry sector is essentially to accelerate economic development sufficiently to create about 3500 new jobs in sustainable industries, with an emphasis on the most affected regions. Success would overcome the damage inflicted on the Tasmanian economy by the decline of its forestry sector and align the unemployment rate with the rest of the nation. To be more ambitious, creating 10,000 new private sector jobs would inspire a boom in Tasmania, and essentially eliminate unemployment. Continue reading “What’s wrong with Tasmania, Australia’s freeloading state?”

Companies

Sep 26, 2012

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The story of Gunns is a parable of corporate hubris. You can, as they did, corrupt the polity, cow the media, poison public life and seek to persecute those who disagree with you. You can r-pe the land, exterminate protected species, exploit your workers and you can even poison your neighbours.

But the naked pursuit of greed at all costs will in the end destroy your public legitimacy and thus ensure your doom. Gunns was a rogue corporation and its death was a chronicle long ago foretold. The sadness is in the legacy they leave to Tasmania — the immense damage to its people, its wildlands, and its economy.

Opposition to Gunns long ago outgrew any conservation group and Gunns was in the end undone by the many, many people who refused to give in to its threats, lies and intimidation. It was the small victories of the little people that ended up delaying the project until it disappeared into the fantastical realms of commercial impossibility.

Yet for a decade the only policy either major party has had has been Gunns and Gunns’ pulp mill. The former premier Jim Bacon, near his death, confessed to Peter Cundall that “the forestry industry were too strong” for him to take on. Of the latter, Premier Lara Giddings observed not so long ago that “the pulp mill was no longer the icing on the cake for Tasmania, but the cake itself”.

In consequence of this non-policy, the prosperous years of the early 2000s, when Tasmania should have been reinventing itself to ensure it had a prosperous future, were instead lost as government identified state interest as Gunns’ profit margins. The Tasmanian government mortgaged the island’s future to Gunns and squandered the good years pursuing the chimera of the pulp mill. The result is the wretched economy and impoverished society that is Tasmania today.

It appeared foolish for Premier Giddings to seek to keep the myth of the pulp mill alive in her statement to Parliament yesterday. These comments offer only false comfort to the mill’s supporters and uncertainty to its opponents. Yet the mill is dead — legally in limbo, socially unacceptable, politically impossible, and commercially fantastical. Its end ought to mark the possibility of a new beginning for Tasmania when the state can seek to address its many problems with many solutions free of the bitter divisions Gunns promoted and prospered from. The death of the mill should be a source of hope, not despair.

There was always about Gunns a distinctly personal and political flavour that sometimes smacked more of vendetta than of sound commerce. The demise of Gunns brings to an end a tumultous three decades of Tasmanian history that began with Robin Gray losing the Franklin Dam battle to the Bob Brown-led environmental movement in 1983, continued with Robin Gray losing  the Wesley Vale pulp mill battle and government to a Labor-Green government in 1989, and now the loss of Gunns and Gray’s third white elephant, the Gunns pulp mill.

In each case, the same arguments were run and shown to be nonsense; in each case the island changed regardless. It’s time now we began to honour those changes and seek to build on them, rather than repeat the mistake of searching for the one great project solution and the social conflict their political carriage inevitably demands. Let us hope the days of the cargo cult are over.

Whatever happens next, yesterday was in its way as historic a day as that of the High Court decision in July 1983 that ensured the Franklin River would not be dammed. Australian corporations will in the future ignore public sentiment at their peril.

A great darkness has lifted from Tasmania. The last remnants of the fear that so pervaded and paralysed Tasmanian life are now gone.  But whether Tasmanians have the courage, the wit and the passion to seize the great opportunities that now present themselves remains an open question.

*This article was originally published at Tasmanian Times

Environment

Aug 16, 2012

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In 1974 US newspaper heiress Patty Hearst was kidnapped by the Symbionese Liberation Army. Over the course of the next three months she warmed to their cause and embraced it; she slung an M1 carbine over her shoulder and pulled a bank robbery for them.

Hearst may be the classic example of the Stockholm syndrome, a psychological phenomenon in which hostages eventually identify with their captors.

I bumped into a professional negotiator in the street in Hobart this week. We discussed the interminable Tasmanian forest peace talks that have gone on for something like two years now. “It’s a mess, a blend of the Stockholm syndrome and the Abilene paradox,” he mused.

If you have never heard of it, you will soon comprehend the Abilene paradox and appreciate how common it is. A family member suggests that they all drive 53 miles to Abilene that night for dinner. One by one they agree. Great idea. They drive to Abilene; the meal sucks. And on the way home they all confide they actually didn’t want to go to Abilene in the first place.

So do we have the Tasmanian forest negotiators stuck somewhere between Stockholm and Abilene?

Last night, they revealed the detail of an interim agreement to end the 30-year war in the Tasmanian forests, the war between an industry that goes back to European settlement and an environmental movement that goes back to the battle to stop the Hydro Electric Commission flooding Lake Pedder and that then evolved into the battle to save the Franklin River and then the forests.

The forest negotiators, representing the industry, contractors, unions and conservationists, own no trees but lay claim to the public forest estate for their own ends. At stake is 572,000 hectares, purportedly the latest holy grail for conservationists (though Bob Brown reckons it should be 585,000 hectares and all protected as World Heritage or in national parks).

As the negotiators pore over the maps to share the spoils and run their calculators over compensation to sawmillers and contractors for lost opportunities, Deputy Premier Bryan Green and federal forests minister Tony Burke shout the pizzas.

Meanwhile, the private forest industry, mainly farmers responsible for 26% of the total forest cover here, don’t get a look in, don’t figure in the calculations as the infrastructure of a key component of their industry (fellers, trucks, sawmills) is decimated.

The interim agreement revealed yesterday does not expose how much land the industry has been prepared to cede to the conservationists, nor where, nor their protection status. Nor do we know where the industry will source sufficient timber to maintain viability.

It is understood that they have agreed to lock up about 525,000 hectares, most of it in the original ambit claim and that the sawlog target is down to 130,000-140,000 cubic metres a year. (In 1997 Tasmania’s Regional Forest Agreement had provided for a minimum 300,000 cubic metres.) The latest proposition has been sent off to Forestry Tasmania to do yet more modelling to determine if it can work. We wait another four to six weeks for the response. The previous modelling work does not provide any confidence that the targets can be matched.

Devoid of that detail, the interim agreement is a collection of motherhood statements. While it talks about government compensation to those leaving the industry, we are not told of the guarantees the conservation groups — the Australian Conservation Foundation, the Wilderness Society and Environment Tasmania — are able to give that will rein in the opposition to, and the market sabotage of, the Tasmanian forest industry. Today these three groups are the moderates in a field of campaigners.

So, we look at the faces of the principal negotiators, Terry Edwards of the Forest Industries Association of Tasmania and Phill Pullinger of Environment Tasmania, to try to glean whether they are in Stockholm, Abilene or really going nowhere.

*Bruce Montgomery is a former political correspondent with The Australian and former communications manager with the Forests and Forest Industry Council.

Federal

Aug 6, 2012

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Why is the Tasmanian Labor government about to act on gay marriage when, 15 years ago, it was just about the last in the civilised world to decriminalise s-x between consenting male adults?

Why is the Tasmanian Labor government seeking to lead the way nationally on caged hens and ending the use of sow stalls for pregnant pigs?

Why is the Tasmanian Labor government between a rock and a hard place on forestry?

The answer to all of these questions is to be found in a graph of opinion polling of Tasmania’s political parties over the past seven years. The graph shows Tasmanian Labor in the wilderness. But all is not lost.

Pollster EMRS data shows Labor support on a downward trend from a high of 49% support in 2006 to below 20% today. The Liberals’ trend line is climbing, gradually, from 23% in 2005 to 38% today. The Greens’ trend line follows a similar upward path, from 12% seven years ago to 17% today.

Tasmanian Labor has lost its progressive vote to the Greens while the Liberals are holding the ground of the centre-right. Tasmanians no longer know what Labor stands for. The Greens are stealing its heartland.

So we saw the move at the weekend by Labor to seek to re-establish its social progression by moving to allow gay marriage, another Green initiative. Commentators proffer the view that this is Labor seeking to distract the electorate from the ills of the economy, the continuing impasse over forestry, etc., fiddling while Rome burns, if you like. After all, they reason, this law reform is not going to go anywhere because it has to garner a majority of votes in the 15-seat upper house and that looks doubtful.

And, if it were to pass the Tasmanian Parliament, would it withstand a High Court challenge that presumably would be fought on the basis of a conflict of state and federal law and Constitutional Law 101 says that where there is such a conflict, federal law will prevail?

Meanwhile, Hobart talkback runs hot with calls of outrage from the Christian lobby.

Back to the graph. Examine the entrails. Common wisdom is that Labor will get a bath at the 2014 state election. Many go on to conclude that it means Labor will be driven from office.

It ain’t necessarily so. Without going into the intricacies of the Hare-Clark system that is used to elect the 25 members of the Tasmanian House of Assembly, let me explain what may happen.

We have five MPs in each of five electorates, elected by proportional representation, very similar to the Senate. In 2010 Hare Clark delivered what you would expect: 10 Labor, 10 Liberals and five Greens, 2:2:1 in each electorate. Labor and the Greens joined forces to form a 15-10 government.

To win majority government, a party has to win three seats in each of three electorates (and two each in the other two). That means they have to secure 49.8% of the vote in each of those three electorates. The Liberals, under leader Will Hodgman, are not getting anywhere near that level of support, particularly in southern Tasmania. They are below 40%.

What are you left with? Despite Labor’s appalling stocks, the Greens and Labor, in their combined vote, are closer to 50% than the Liberals. Between them they can see 13 seats. The Greens may be growing in support and Labor declining, but the end result is the same.

This whole social reform exercise in Tasmania is about damage minimisation, consolidating Labor’s progressive vote to shore up 13 seats with the Greens and to keep the Liberals from governing.

It is Liberals who have the bigger problem.

Federal

May 18, 2012

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There used to be graffiti scrawled on a wall in Hobart’s Liverpool Street. It read: “Gray Days in Hobbit Town”. It referred to the writer’s despair in left-leaning West Hobart at having Robin Gray as the then pugnacious, pro-development, cranes-in-the-sky Liberal premier. The only better example of local political graffiti I had read was when low-profile Frank Wilkes was opposition leader in Victoria. A graffiti artist commented on the side of an overpass in St Kilda: “Frank, the Ghost who Wilkes”.

There is tangible despair in Hobbit Town today as the full impact of Premier Lara Giddings’ austere budget reveals itself to those still reading newspapers. The state is going into deficit for the first time in eight years, falling further behind the other states, one fears.

Already the rich states, led by WA, complain bitterly at the deal Tasmania gets from federal GST revenues through horizontal fiscal equalisation (HFE). Under HFE, WA taxpayers get back 55% of the GST they pay while Tasmanian taxpayers get back 160%, reinforcing WA Premier Colin Barnett’s notion that the rich states are artificially supporting the “mendicant” states, notably, Tasmania.

One reads in the world news pages of the newspaper that Greece finds itself between a rock and a hard place as its European partners seek to impose austerity on the Greek economy while those tipped to win the next election there are resolved to ignore the threat of excommunication from the EU. Excommunication for Tasmania is not on the agenda; austerity is.

In the Gray Days in Hobbit Town of the 1980s there was no government reluctance to spend. That left the Labor government of Michael Field to fix the problem of overspending from 1989-1992.

Giddings comes from the Field school of budgetary responsibility, in which austerity is a necessary evil. It hits her government at a time when Labor is at its nadir, an unbelievable 17% popularity, no better than the Greens.

The first glow of the coming election, due in 2014, looms on the horizon. Giddings’ saving grace is that there is an undecided vote approaching 30%. Unless the Liberals, led by Will Hodgman, score at least 48% of the vote statewide at the poll, they are unlikely to win the election under Tasmania’s Hare-Clark voting system. Logic suggests the Liberals have to win 13 of the 25 seats outright; Labor and the Greens have only to win 13 between them.

The view of Tasmania from the mainland is probably schizophrenic. On the one hand, it is seen as the runt of the litter; on the other, it is a nirvana of arts, haute cuisine and some of the world’s best cool-climate wines. That is epitomised by the trade in Hobart’s leading restaurants; up to 80% of bookings at two them are from mainland visitors, here to eat and go to MONA, the Museum of Old and New Art.

So, these are two Tasmanias: the MONA Tasmania and the Tasmania where life is getting tougher, where unemployment is the nation’s highest, those on welfare are the most numerous per capita and where population health is a growing problem.

While Tasmania is a magnet for those who don’t live here, the locals are footing the austerity bill for economic survival through higher power charges, motor taxes and fewer public sector job opportunities while they wait for farmers, miners, niche producers and MONA to drive the economy now that forestry is all but dead.

A state of 500,000 people finds itself accumulating another $300 million in public sector debt this year, about the same next year and the hope, many see as forlorn, that the budget will go back into the black in 2013-14.

In her speech, Giddings said: “Despite the difficult challenges we currently face, Tasmanians have every reason to be optimistic and hopeful. We are in the right part of the world at the right time.”

“Right time” is stretching the imagination somewhat.

*Bruce Montgomery is a former Tasmanian correspondent of The Australian and adviser to Tasmanian Labor and federal coalition governments