Ideas@TheCentre – The Centre for Independent Studies

Ideas@TheCentre

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.

Budget realities

01 November 2013

robert-carling In establishing the Commission of Audit, the Commonwealth government has emphasised rooting out inefficiency, waste and duplication. This is a commendable goal, but a substantial reduction in the growth rate of Commonwealth spending over ten years – which is what is needed after the splurge of the last decade or so – cannot be achieved solely by these means. There will also need to be a moratorium on new program initiatives and cuts to the scope of existing programs. Health, education and social security cannot be quarantined from the search for savings.

This financial year the Commonwealth will spend almost $400 billion. If we exclude defence from further net cuts (on the grounds that it has already been emasculated by the previous government) and account for the fact that public debt interest and transfers of GST revenue to the states cannot be reduced, about $300 billion remains in the domain of potential savings. Of this, almost 80% is spent on health, education, social security and welfare, either directly or as grants to the states for those purposes.

No doubt money can be saved on the administration of programs, and by eliminating unproductive Commonwealth oversight of state health and education activities. But the great bulk of the money goes not to administration (the pinhead) but to the programs themselves (the elephants that sit on the pinheads). For example, administration of social security and welfare costs $3.7 billion while the cash benefits to people cost $134.4 billion.

Curbing the growth of spending on health, education, social security and welfare is the key to a lower tax burden and a balanced budget. It means overturning the habit of spending more public money as the solution to every perceived problem and instead looking for ways to spend existing allocations more effectively. (This applies to education as much as it does to anything else, Gonski notwithstanding.) It means re-engineering the health system to reduce subsidisation of private costs and give the private sector a larger role in service delivery. It also means that some people will have to make do with less income support from social security. And it means the Commonwealth withdrawing from state areas of responsibility.

Unless government is willing to face up to these hard choices, the results of the Commission of Audit, while tangible, will be modest in the overall scheme of a $400 billion Commonwealth budget.

Robert Carling is a Senior Fellow at The Centre for Independent Studies.

The end of the end of history?

01 November 2013

benjamin-herscovitch Capitalist liberal democracy's twentieth century victories against expansionist fascism and communism were hard-won and yet also unequivocal.

As Francis Fukuyama argued in 1989: The 'end of history' arrived in the wake of the 'unabashed victory of economic and political liberalism'; politically and economically, there was 'nothing else towards which we could expect to evolve.'

With the rise of shrewd forms of authoritarianism challenging the liberal mantra of open markets and societies, the presumptive end of history may prove short-lived.

Savvy authoritarian regimes around the world are carefully plotting paths to relative peace and prosperity while denying their citizens' democratic rights and freedoms: One-party state capitalism in China under the Chinese Communist Party (CCP); anti-democratic populism in Russia under the seemingly perpetual presidency of Vladimir Putin; and technocratic and monarchical Islamism in Qatar under the House of Thani.

With the CCP presiding over the most populous nation in history and the world's second largest economy, the evolution of communist party rule in China offers the most revealing and high-stakes test case for authoritarianism's global prospects.

China under the CCP is beset by severe institutional, environmental, political and social challenges: Endemic corruption, chronic air and water contamination, violent separatist movements and staggering inequalities.

Yet as my latest foreign policy report shows, these strains on the Chinese political system are unlikely to sweep the CCP from power.

With a strong track record of reform in the post-Mao era, the party has shown that it has the will and wherewithal to mitigate many of the sources of instability and popular discontent, and thereby secure its political survival.

Starting in the 1970s and 1980s, the CCP under Deng Xiaoping supercharged the economy with a measure of economic liberalisation. In the 1990s, the CCP broadened its constituency by encouraging businesspeople to join the party and decentralising elements of decision-making via the consolidation of village elections.

Under the Hu Jintao and now Xi Jinping administrations, the CCP has continued its pragmatic reformism with massive spending to curb China's atrocious pollution problems, revised legislation to better manage the expropriation of village farmland, and a concerted crackdown on graft and maladministration.

Capitalist liberal democracy is still what Fukuyama called 'the best possible solution to the human problem,' while the survival of the CCP's one-party state is far from a fait accompli.

Nevertheless, the success of the CCP's adaptive authoritarianism suggests history might have been rebooted.

Benjamin Herscovitch is a Beijing-based Policy Analyst at The Centre for Independent Studies and author of Accountable Authoritarianism: Why China's Democratic Deficit Will Last, released on 31 October 2013.

Beefed-up cop is back

01 November 2013

alex-philipatos In an effort to boost productivity in the building and construction sector and tackle lawlessness, the Coalition government has revealed the finer details of the soon-to-be-reintroduced Australian Building and Construction Commission (ABCC).

Since 2009, the construction industry has been besieged by large influxes of strike activity. Illegal strikes and intimidation are becoming more commonplace, such as the infamous Grocon blockade in August 2012, where unionists blocked entry to Melbourne's Myer Emporium construction site for over two weeks in breach of two Supreme Court injunctions.

As part of the ABCC's reintroduction, maximum penalties for breaches of workplace laws will be roughly double – up to $110,000 for companies and $22,000 for individuals. The ABCC will also acquire tougher coercive powers, while the government will introduce a national building and construction code for government-funded projects.

The reintroduction of these powers to the commission addresses the shortcomings that led some in the industry to label Labor's regulator as a 'toothless tiger.'

One of the changes to the building industry regulator which the Labor government implemented was a prohibition on investigations where the parties had come to an agreement. This meant unions could, and often did, inflict large losses on companies, and would bully and intimidate workers with the knowledge that so long as an agreement was eventually reached with the employer, an investigation would be avoided.

Smaller companies simply found it too expensive and time consuming to enter into their own legal battles, and had little choice but to agree to the union's costly demands. In instances where a successful case was brought against militant unions or against rogue companies, the penalties dished out were too small to act as an effective deterrent.

The Coalition government will scrap the prohibition which means the commission will now be able to pursue penalties against unions even after an employer and the union have come to an agreement.

There are, however, concerns by unions and workers over the commission's power to compel testimony from witnesses. Individuals ought to maintain their rights against self-incrimination, but a regulator may need these powers to gather evidence for its investigations. Bodies such as the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission have, and use, these powers.

With tougher powers granted to the ABCC, it is now up to the commission to use them effectively and responsibly.

Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.