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.

WA should invest and lower taxes before hoarding revenue

24 February 2012

On 22 February, WA Premier Colin Barnett said his government would announce a sub-national sovereign wealth fund as part of the forthcoming state budget and legislate to introduce the fund later in the year.

The Liberal-National government is committed to ensuring future generations of West Australians have a legacy from this historic period of economic development, built predominantly on the significant but finite resources available to us at present.

Robert Carling and I explain why the premise behind the WA move is flawed in our just released CIS Policy Monograph, Future Funds or Future Eaters? We note that Australia’s resources are not finite in any economically meaningful sense. Well before these resources are exhausted, substitution on both the supply and demand side of commodities markets will have consigned them to being an economic irrelevance. In the meantime, continuing productivity growth and technical progress will mean future generations of Australians will enjoy a much higher standard of living in an economy that will increasingly be dominated by service industries.

To the extent that Western Australia is now enjoying windfall revenue gains, there is no reason why the state government cannot invest this revenue in productivity-enhancing infrastructure and other projects that will yield a stream of valuable services into the future for the benefit of future generations. Government expenditure programs should aim to do this anyway, but it is particularly important to the extent that the revenue streams from the current mining boom are thought to be temporary. Mining revenue could also be used to lower or abolish inefficient state taxes that will expand the economy and grow the state tax base for the benefit of future generations.

Hoarding revenue in financial assets will produce a return in line with the future performance of those assets, but this is likely to be poor compensation for not using the revenue today to increase spending on productivity-enhancing infrastructure and lowering the state tax burden.

Stephen Kirchner is a Research Fellow at The Centre for Independent Studies and co-author of the report Future Funds or Future Eaters. He tweets here.

Slow justice damaging political culture

24 February 2012

The wheels of justice grind slowly, but perhaps even more so in Australia. Comparing the speed of Fair Work Australia’s investigation into Labor backbencher Craig Thomson to a snail’s pace is unfair to common molluscs. Following the three-year-long inquiry into Thomson’s alleged misuse of a union credit card is rather like watching tectonic plates drift.

Does it really need to be this way? Is this how such affairs should be dealt with in a liberal democracy?

As it turns out, other mature democracies are more rigorous about similar accusations of personal misconduct. Rather than letting proceedings drag on behind closed doors for years as in the Thomson saga, other countries are quicker in initiating formal criminal proceedings. And even before the results of such trials are announced, there is often enough public pressure on office holders to vacate their positions.

Consider the British MPs who were indicted of false accounting in the parliamentary expenses scandal. After a newspaper had revealed their fraudulent claims in May 2009, they were formally charged in February 2010. Their political parties deselected them from the following election; prison sentences between nine and 18 months were delivered between January and July 2011. Having served a quarter of their sentences, they have meanwhile been released under conditions.

From the first public allegations to court trial to imprisonment and conditional release, the British expenses scandal was shorter than Fair Work Australia’s initial investigation into Thomson.

Losing office can be even faster in Germany. Last Friday, President Christian Wulff resigned after the Lower Saxon state prosecution service had formally requested the suspension of his legal immunity. This followed newspaper reports claiming Wulff had accepted gifts from business friends in return for favourable treatment.

The threat of preliminary proceedings was enough to force the president to resign. Although Wulff maintained his innocence in his resignation speech, he argued that public doubts over his personal credibility would make it impossible for him to exercise the office of head of state.

Wulff’s departure barely took nine weeks. But even that was considered too long by most German commentators, who claimed that public trust in democracy had been damaged by Wulff clinging to power. By staying to long, they argued, Wulff had done a disservice to himself and the office of president.

The speed with which both Britain and Germany have dealt with claims of personal misconduct was quite appropriate in both cases. For the democratic system to be trusted, it is vital there are no lingering doubts about elected office holders. Substantial claims need to be dealt with quickly, and in court, to avert harming the integrity of the political system.

Surely Australia would not want to copy the Italian example in which criminal proceedings against former Prime Minister Berlusconi have been dragging on for years, not least because of political interference.

In any case, even something as slow-moving as tectonic plates may eventually result in an earthquake.

Dr Oliver Marc Hartwich is a Research Fellow at The Centre for Independent Studies.
For sensible economic chatter, follow him on Twitter.

Lent for climate change?

24 February 2012

The season of Lent began this week. Some Christians will mark the six-week period of preparation for Easter with prayer and fasting. Others will take this opportunity to renew their commitment to what they consider important moral causes.

One moral cause spruiked this year has been the call by leaders of Christian churches in the United Kingdom for repentance and a ‘change of direction’ to fight the dangers of climate change.

The campaign has been organised by the Christian environmental lobby group Operation Noah, which was founded in 2001 to promote ‘the urgent need to address climate change.’

The group recently launched a declaration called ‘Climate Change and the purposes of God – a call to the Church.’ Predictably, the Archbishop of Canterbury, Rowan Williams, is one of the signatories.

Operation Noah’s convenor, Anglican bishop David Atkinson, has even gone so far as to describe climate change as ‘the most significant moral question facing us today.’

Australians absorbed by the implosion of the federal government will remember a similarly extravagant claim made by former Prime Minister Kevin Rudd who said climate change was ‘the greatest moral challenge of our time.’

Rudd blinked when the political cost of attempting to meet that ‘moral challenge’ became apparent. It eventually cost him his job.

Now Bishop Atkinson has out-Rudded Rudd by declaring that the theory of man-made carbon dioxide-induced climate change ‘is not mostly about science. It is about something deeper – how we see ourselves in relation to God, to others, to the whole of creation.’

He may well be right. But by moving the terms of the debate from the realm of science to the apparently higher ground of moral theology, Atkinson has displayed a disordered sense of priority.

Those looking for great and greater moral challenges in the contemporary world don’t need to look too hard. The Syrian government is slaughtering dissidents and foreign journalists. Iranians are threatening to immolate the ‘Zionist entity’ in the Middle East. And criminally corrupt governments in Africa are starving their people.

Faced with moral challenges such as these, Atkinson’s claim may be audacious. But, then again, it might just be plain ludicrous.

Peter Kurti is a Visiting Fellow at The Centre for Independent Studies. He makes neither audacious or ludicrous remarks on Twitter.