Australian Politics 2015-04-02 16:05:00

Reform can deliver jobs, cheaper goods

CHEAPER books, longer shopping hours and medicines available at supermarkets could be on the cards as a result of a new report.

THE federal government has released a 548-page report by economist Ian Harper and a panel of other experts on Australia’s competition rules.

Professor Harper, whose review is the first of its kind in two decades, said if state and federal governments acted on his 56 recommendations it would boost productivity, help balance the budget and bolster the economy and jobs.

Competition Minister Bruce Billson said he was optimistic reform could boost economic growth by at least 2.5 per cent of GDP over a decade.

One of the key recommendations is to immediately remove regulations governing retail trading hours and parallel imports, which shield local businesses from overseas competition.

Prof Harper said they should no longer apply to books and second-hand cars, delivering “net benefits to the community”.

The report cited a study showing book prices could fall by about 35 per cent.

Long-standing restrictions on pharmacy location and ownership should be scrapped, opening the sector to more competition under a simpler set of rules guaranteeing access to medicines and quality of advice.

The report also calls for rules governing planning and zoning, taxis and ride-sharing and mandatory product standards to be reviewed as a priority.

Limits to the number of taxi licences in a particular area and rules preventing other services from competing with taxis raised costs for consumers and blocked innovation, the report said.

While the ACT, Northern Territory, Victoria, Tasmania and NSW have almost completely deregulated trading hours, the report said Western Australia, South Australia and Queensland still had significant restrictions.

“Deregulation of retail trading hours is overdue, and … remaining restrictions should be removed as soon as possible,” the report said.

The report said road user charges should be imposed, with the money going towards new roads and maintenance.

Co-operation between the state and federal governments in easing fuel tax and registration fees could ensure there is no overall extra impost on road users.

Road congestion in cities is estimated to cost business almost $6 billion a year and motorists about $3.5 billion.

Mr Billson said he would be consulting over the next eight to 10 weeks before bringing a submission to cabinet.

In the meantime, state governments could unilaterally act on some of the findings.

The review called for new laws to prevent big companies from misusing their market power.

That should address concerns of small independent grocers that Coles’ and Woolworths’ dominance is seriously affecting their ability to compete.

Australian Competition and Consumer Commission chairman Rod Sims said he particularly supported the findings on roads, shipping, intellectual property and parallel imports.

A spokesman for federal Transport Minister Warren Truss said there is a “sound economic rationale” for road user charging.

But many complex issues needed to be worked through before it could be rolled out on the scale recommended by the Harper review.

Among the issues were equity, technology and privacy concerns.

The minister’s spokesman said a federal government response would be released in the second half of the year and it was hoped an action plan involving the states and territories could be released by the end of the year


Retirees facing new assets test for pension

The federal government is considering a breakthrough proposal to trim the Age Pension for wealthy Australians who can fund their own retirement, setting up a way to overcome a blockade in the Senate and achieve savings worth $20 billion over a decade.

Social Services Minister Scott Morrison is looking at scaling back access to the pension as an alternative to the government’s controversial changes to payment rates, launching talks with senators last night to seek a new deal on reform.

Adamant that savings are needed to make the pension sustainable, Mr Morrison will negotiate with Senate crossbenchers on a new proposal to change the pension asset test in order to scale back the benefits for the richest retirees while leaving millions of pensioners untouched.

The family home would be off-limits under the proposal that Mr Morrison is sending to policy ­experts in his department to forecast the likely savings and guide the crossbench negotiations.

The Australian Council of ­Social Service launched a new phase in the pension debate yesterday by conceding the case for savings, despite Labor’s claim that the current system is sustainable and there is no need for the savings outlined in last year’s federal budget.

At the heart of the new debate is the fact that couples with $1.1 million in private wealth, in addition to the family home, can still qualify for a part-pension, raising questions over whether the threshold should be lower.

Mr Morrison said the assets threshold was now up for review and would be discussed in order to secure ­reform in the upper house.

“It should very much be on the agenda for debate,” he said.

“For ACOSS to put it on the table is a good contribution. The precise measure they’ve put forward is obviously something we would have to look at in terms of ­whether we think it goes too far or is too extreme. That’s an assessment that needs to be made.

“But the principle, the extent to which you’re addressing taper rates on assets, is a legitimate issue to raise.”

The government’s original proposal was to change the indexation of the pension in 2017 so that payments would increase twice a year at the rate of the consumer price index, rather than the current approach which is to increase it in line with inflation or wages, whichever is higher.

While the indexation changes are not forecast to save money until 2017-18, when they add $178m to the budget bottom line, the Parliamentary Budget Office has estimated the savings would build to $22.8bn over a decade.

The Australian understands the ACOSS proposal, conservatively costed, would raise between $15bn and $20bn over the next decade if it began next year. More people retiring with more wealth would boost the savings in the later years, although ACOSS has not specifically modelled the full 10 years of its proposal.

The ACOSS proposal would scale back eligibility for the pension instead of changing its indexation. It would reduce the threshold — called the “asset test free area” — for cash or investments that people could own in addition to their family home and still qualify for the pension.

ACOSS proposes to cut the threshold for single homeowners from $202,000 to $100,00 and for couple homeowners from $348,000 to $150,000.

As well, ACOSS proposes increasing the rate at which pensioners lose their income for every $1000 in assets — not including the family home — they earn above the asset test free areas.

Currently pensioners lose $1.50 a fortnight for every $1000 in ­assets above the free area but this would rise to $2 a fortnight under the ACOSS proposal.

This would reduce the assets available to part-pensioner couples from about $1.1m today to $794,250 on top of the family home. These changes would save $1.45bn in 2016-17, according to ACOSS estimates.

Mr Morrison said the nation could save just as much by changing eligibility rules as it could by adjusting the indexation of the payments, ensuring it could meet its broader goal of scaling back the budget deficit.

“Of course you can — that is true,” he said. “And it’s important that you do it in the way we’ve sought to do it on the CPI measure, which is to do it in a modest way.

“The government is not looking for short, sharp shocks here — they’re the sort of initiatives we’re trying to avoid. We know that if we do it in a modest, incremental way, we can avoid having to do that.”

There are 2.3 million aged pensioners but ACOSS does not have figures for how many part-pensioners would be affected by its proposal.

The budget savings would flow not only from reductions in pension payments but also in cuts to the number of people who qualify for the pension and therefore also receive the Pensioner Concession Card — which entitles people to subsidies for medicines and other benefits.

Mr Morrison has previously warned that he could not take the indexation reforms “off the table” unless a new proposal was put “on the table” in its place, leading him to welcome the ACOSS suggestions yesterday.

“Now the government, I think, can look keenly at this proposal put forward by ACOSS and I think it provides a point of reference for others in the debate as well,” he said.

Mr Morrison was adamant the family home would not be ­included in the asset test for the pension but he made it clear the wider assets test was on the agenda for change. Spending on the pension is projected to rise from 2.9 to 3.6 per cent of GDP over four decades without reform, according to the Intergenerational Report. The government reforms would trim it to 2.7 per cent of GDP.


Making Australia Great wrong to blame economic woes on anti-Chinese policy

Fiscal and monetary policy and the regulation of credit, not migration, are the key features of Melbourne’s booms and busts

The final episode of George Megalogenis’ three-part television series, Making Australia Great, was broadcast on Tuesday night. It was a terrific series, looking at the big economic challenges Australian governments have faced since the long postwar boom hit the wall with the appearance of stagflation in the mid-1970s, taking us through the mistakes and the achievements of various governments with clarity, verve and arresting visuals.

Then about 15 minutes from the end of the episode, it went fearfully awry, turning from a well informed program about economics to a bizarre one about migration, with the astounding claim that the anti-Chinese immigration campaign of 1888 and the consequent restrictions on non-white immigration caused the stagnation of the Australian economy until it took up a more open migration program after World War II.

So why at the end did Megalogenis’ series collapse into a story about immigration? Was it because SBS was one of the potential buyers and it is interested only in stories with a migration angle?

In 1888 Australia had one of the highest standards of living in the world, and Marvellous Melbourne was booming, staging a huge international exhibition to celebrate the first century of the continent’s European invasion. All true.

Megalogenis then claimed that the arrival of the ship SS Afghan carrying Chinese men was the moment when it all changed, when, in response to huge popular protests, the Australian colonies introduced the first version of the White Australia Policy and closed their borders to non-white immigrants. Still true.

But he then claimed that it was these immigration restrictions that caused the end of the first long boom in Australia’s history, the devastating depression of the early 1890s and the decades of stagnation that lasted until Australia began to again open its borders again to non-British migration after World War II.

When the first images of 1880s Melbourne appeared, I thought I knew where the program was headed – to the story of the country’s greatest land boom and the bust that followed: the panicked runs on the banks and building societies that had financed the boom; the failure, one after the other, of so many of them; the spectacular bankruptcies of some of Melbourne’s leading citizens, as well as of many smaller people; the five-day enforced bank holiday in May 1893 and the restructuring of those banks still standing that slowed the supply of credit to a trickle;  the evaporation of the Victorian government’s credit rating with the London money market; the terrible unemployment and the miserable poverty of the depression.

The story fitted well the themes of the series. In the late 1880s a toxic combination of greed, optimism and lax company law fuelled by plentiful British credit created a boom that was totally out of control, especially in Victoria and its grand metropolis of Marvellous Melbourne. When commodity prices began to fall, overseas credit to dry up, confidence to wobble, fraud to be exposed, it all came crashing down.

The early 1890s changed Melbourne, from the confident, flashy, young metropolis of new money and grand buildings into the cautious, wowserish, provincial town which lasted a century. It was not until the 1980s that Melbourne’s land values fully recovered, the grand boom-time houses filled again with new and old rich, and champagne flowed freely again to toast wealth and its pleasures.

And it too was followed by a bust, though nothing as severe as that of the early 1890s. Lessons had been learned and political, legal and financial institutions built which prevented the contagion from one badly run bank or company to another.

There were some spectacular failures, like Pyramid and Alan Bond, but on the whole the financial system weathered the storm. This would have made an interesting historical comparison and revealed more of the achievements that have made Australia great.

The story of Australia’s migration policy is an important one for understanding modern Australia, but it is not the only one and it has little to do with fiscal and monetary policy and the regulation of credit which were the series’ main themes.

So why at the end did Megalogenis’ series collapse into a story about immigration? Was it because SBS was one of the potential buyers and it is interested only in stories with a migration angle? I can’t believe that someone with as much understanding of economic history as Megalogenis really thinks the depression of the 1890s was caused by the restriction of Chinese immigration.


Endangered Black-Throated Finch could derail plans to build the biggest coal mine in Australia

A BIRD no larger than a cricket ball could derail plans to build the biggest coal mine in Australia.

A legal challenge to Indian giant Adani’s plans for the $16.5 billion Carmichael mine by environment group Coast and Country began in the Land Court of Queensland on Tuesday.

If approved, the project would extract at least 50 million tonnes of coal a year from the Galilee Basin and export it through the Abbot Point coal terminal, north of Bowen.

“The environmental harm it will cause, or is at risk of causing, will be correspondingly great,” lawyer Saul Holt QC, for Coast and Country, told the court.

The case will put the spotlight on environmental and economic concerns, including the plight of the endangered Black-Throated Finch.

“If this mine goes ahead … there is a high likelihood of species-threatening harm to the world’s most significant population of the endangered Black-Throated Finch,” Mr Holt said.

“As an environmental issue and risk, it is of the first order and it will be treated as such.”

But lawyer Peter Ambrose, for Adani, defended the company’s environmental modelling and previewed evidence by a range of experts in his opening address.

The company accepts there has been a serious decline in finch populations — which Mr Holt said was 80 per cent since the 1980s. But Adani pointed to offset and management plans that would “provide appropriate controls on the environmental impact”.

In exchange for the 9789 hectares of habitat that would be affected by the mine, there was an offset area of 30,999ha, Mr Ambrose said.

“The applicant’s evidence is they don’t have to move too far, as the offset areas are right beside where they are known to breed.”

Mr Ambrose cited estimates the mine could produce net economic benefits of between $18.6 billion and $22.8 billion.

But Mr Holt said the project would also contribute to the degradation of the Great Barrier Reef through a contribution to climate change.

Adani’s witnesses will argue that thermal coal use is generated by demand — not supply — and electricity generators would find alternative sources of coal if the mine does not go ahead.  Therefore, Adani argues, there will be no net increase in greenhouse gas emissions