Ideas@TheCentre – The Centre for Independent Studies


Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

Fair go fear-mongering flies in the face of facts

10 May 2013

benjamin-herscovitchInstead of getting his government’s fiscal house in order, Treasurer Wayne Swan is fanning fears that the fair go is under threat. He has even called the 14 September general election a ‘referendum on the fair go.’

As my new report A Fair Go: Fact or Fiction? shows, Swan’s fair go fear-mongering is unfounded: Australians from even the poorest and least educated families are entering the ranks of the nation’s wealthiest and best educated.

Approximately 12% of sons born into the poorest 20% of families become part of the wealthiest 20% of the population as adults, and almost a third of the children of fathers who stayed at school until Year 10 or below gain university qualifications.

Just as humble beginnings are no barrier to success in Australia, a privileged background is not a substitute for ambition and ability.

Not only do 17% of sons born into the wealthiest 20% of families fall into the poorest 20% of the population as adults, but slightly more than a fifth of the children of university-educated fathers only complete Year 12 or less.

This massive movement both up and down the socioeconomic hierarchy makes our meritocratic society one of the most socially mobile in the industrialised world.

Approximately 41% of the children of parents who did not complete high school pursue tertiary education, putting Australia almost 10 percentage points ahead of its closest OECD competitor, and more than 20 percentage points ahead of the OECD average.

The earnings advantage enjoyed by the children of wealthy fathers is also only slightly higher in Australia than that of the social democratic Nordic countries, and approximately half the rate of the United States, France and the United Kingdom.

Clearly, Swan’s doom and gloom is out of touch with the evidence: Australia remains a fair go success story.

The experience of millions of Australians – from battlers who have come good to affluent first-generation migrants who arrived with little more than drive and raw talent – shows that the fair go remains the defining feature of contemporary Australia.

Benjamin Herscovitch is a Policy Analyst at The Centre for Independent Studies and author of A Fair Go: Fact or Fiction?

Why I work for a classical liberal think tank

Meegan Cornforth

10 May 2013

The heavy veil on life in North Korea was lifted a little with a startling BBC exposé documentary North Korea Undercover and SBS’ Insight program on Tuesday night, giving a glimpse of what life is really like under such a repressive regime.

North Korea Undercover created a furore not because of its disturbing content but because journalist John Sweeney recruited a number of students from the London School of Economics to act as a front enabling him to gather facts and rare footage – international journalists are banned from North Korea but international student visitors are not.

The mission without doubt was extremely dangerous, but did expose the dire situation in North Korea. The constant propaganda and excessive control that North Koreans live with is the stuff of nightmares. That people are forced to live under such oppression in the twenty-first century is a harsh reminder to those of us in more fortunate, liberal countries that we simply must not take our freedom for granted. And this means not giving our governments too much power.

Critics of the CIS’ work sometimes label us as hard-hearted capitalists whose sole agenda is to advance ourselves at others’ expense. We certainly believe in enlightened self-interest, but it’s wrong to assume there is no compassion or concern for others involved, or that we support an anarchist state. At the core of classical liberalism is the unwavering belief that the best chance humanity has to prosper is when people have the right to speak and act freely under the rule of law, governed by a small and genuinely democratically elected government in a free market environment.

The CIS recently launched a key initiative to reduce the size of government lest we find ourselves with the problems and dwindling freedoms of Europe, or God forbid, North Korea. The TARGET30 campaign seeks to drop government spending to 30% of GDP within the next decade. Curbing state expenditure is critical – increased spending means increased bureaucracy to administer that spending, and the danger of slipping down the slope towards big and obtrusive government.

Glimpsing the cold, grey and loudspeakered world of North Korea was a sharp reminder why I work for the CIS.

Meegan Cornforth is the Events Manager at The Centre for Independent Studies and has been with the Centre for five years.


Gillard Deal Risks NDIS Timebomb

13 May 2013 | The Australian Financial Review

In its eagerness to lock in the funding and governance arrangements for the National Disability Insurance Scheme (NDIS), the Gillard government seems to have created a fiscal time bomb, where future federal governments may be liable to pay billions more for the NDIS than budgeted.

The agreement between the Commonwealth and NSW governments in December is supposed to provide care and support to around 140,000 NSW residents, or about one-third of Australia’s NDIS-eligible population, with funded supports at an initial cost of $6.5 billion a year, or around $46,000 per person per year.

While the arrangements with each state or territory will be slightly different, they are unlikely to deviate too much from the NSW agreement. Using this as a proxy for the rest of the country, the NDIS will provide approximately 420,000 people with funded supports at a cost of around $19.5 billion. However, these figures are on the lower end of possible costs compared to other estimates.

For example, the Australian Government Actuary (AGA), in its review of the Productivity Commission’s NDIS costings, estimated that the NDIS would provide disability services to 441,000 people at a cost of $22 billion a year, or around $50,000 per person per year.

The distinction between the extrapolated NSW figures and the AGA’s figures highlights a problem for future Commonwealth governments. There is a $2.5 billion difference in the annual cost of the NDIS, and the Commonwealth is liable to pick up most of the tab if the AGA’s costings become reality.

For the agreement between the Commonwealth and NSW governments not only outlines the funding arrangements for the NDIS, it also sets out who will pay for any cost blowouts.

During the launch and transition phase of the NDIS, from 2013 to 2018, the Commonwealth has agreed to accept 100 per cent of the risk of the scheme, which will be driven by unexpected population growth, wage increases, and price inflation in the launch sites.

When the scheme is fully operational in 2018, the Commonwealth will accept at least 75 per cent of the ongoing risks of the NDIS.

This is why the $2.5 billion difference in the annual cost estimates between the AGA’s $22 billion figure and the proxy figure of $19.5 billion based on the NSW agreement is so important.

The Commonwealth will be liable to cover at least 75 cents for every dollar of spending in excess of its agreement with the state governments. If the AGA’s estimate is closer to the final outcome, the Commonwealth will be on the hook to pay at least an additional $1.9 billion per year for the NDIS, and could pay as much as the entire $2.5 billion difference every year.

What is doubly concerning is the AGA’s estimates are conservative, assuming six per cent average annual cost growth. They do not take into account the distinct possibility of a financial blowout in the NDIS.

Government expenditure on Medicare benefits increased on average by 8 per cent every year since 1985. And from 2000 to 2009, expenditure on New Zealand Accident Compensation Corporation scheme increased by more than nine per cent each year.

The Gillard government has agreed to take on an extraordinary amount of financial risk to ensure that the NDIS is locked in during the last few months it might have in power. While Julia Gillard may reap some short-lived political benefits from a ‘fully’ funded NDIS, future federal governments will have to bear extraordinary financial costs because of this short-sighted political victory.

Andrew Baker is a policy analyst at The Centre for Independent Studies.