Month: November 2000

Fiscal alarm bells should be ringing. At the Federal level, Treasurer Peter Costello, finds himself with a much larger surplus than predicted at Budget time six months ago. The surplus is now predicted to be $4.3 billion, up from $2.8 billion at Budget time. At the local level, ACT Chief Minister Gary Humphries finds himself with a surplus of $31 million, up from the predicted surplus of just $4.2 million. The most alarming thing is that both Governments are due to go to the polls in about a year’s time. The temptation will be strong for them to buy votes.

Already Prime Minister John Howard has indicated that some money will be spent on rural and regional roads. That suggestion came after a fortnight of persistent refusal to give some relief on petrol tax, in particular, not to apply the usual consumer-price-index rise next February because a large part of that rise can be put down to a CPI spike generated by the GST. The Government had promised that petrol would not go up as a result of the GST, it gave plenty of ammunition to the Labor Opposition to argue for petrol tax relief. Mr Howard was right to hold firm, however. It would be better to repay debt and for the Government to take money out of the economy at this stage of the business cycle. That would, as Mr Howard acknowledged, reduce the pressure on interest rates.

So, why the change in tune now. The surplus is slightly bigger, but the fiscal principle should be the same. In the boom part of the cycle, Governments should be running surpluses, to slow the boom and even out the effects of the cycle. It also enables the Government to have money up its sleeve when conditions worsen so it can stimulate the economy. There is no guarantee that Government action on its own can even the business cycle, but it can help if done responsibly. However, in the past three decades, Governments have been too fond of spending without commensurate saving in good years. Moreover, it keeps expanding its role as the economy grows.
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This week 22 members of the Australian Labor Party lined up for pre-selection for next year’s election for the ACT Legislative Assembly. There are more candidates than seats in all three electorates so a pre-selection vote will be taken on November 25.

Some people might be concerned that the ACT is in for a year-long campaign and wonder why Labor is pre-selecting so far out from an election. They need not be. It will not be possible to maintain an intense campaign for a year.

The pre-selection timing is well worthwhile in the context of the ACT’s Hare-Clark system and Labor is to be commended for abandoning the idea of attempting to run party tickets or to aim to change the electoral legislation to allow for above-the-line party voting. Instead, the party is to permit candidates to run individual campaigns with individual fund-raising and spending in addition to the overall campaign. Candidates would obviously have to be careful to remain consistent with overall party policy if they want to avoid the appearance of disunity. In the past Labor has insisted on a single campaign and with rare exceptions centralised the funding of the campaign – both with respect to the collection and spending of money.
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There is no need for any hurry in the count for the US presidency. The framers of the US Constitution deliberately put a gap between the election date and the swearing in of the new President. In the meantime, President Bill Clinton goes about the task of chief executive ensuring that the governance of the United States run smoothly. Indeed, at the very moment officials are counting the crucial vote in Florida, Mr Clinton is engaging in talks at the highest level on the situation in the Middle East. Whoever takes the White House will no doubt take up where he left off.

The Florida Secretary of State, Katherine Harris, has announced that the outcome in Florida will not be announced until next Friday. The 25 electoral college votes in Florida will determine the result. Vice-President Gore might have won more of the popular vote, but the presidency is determined by voting in the Electoral College which comprises delegates from each state. The number of delegates is determined by the number of members of Congress (both House and Senate) a state has. The framers of the Constitution wanted to ensure smaller states got a reasonable say because every state has a minimum of two senators and one representative. It gives the least populous states like Hawaii three votes. On the other hand, California has 54.

Under the US system there is no proportional or preferential voting. The candidate with the most votes in a state takes all of the Electoral College votes of that state. Thus Mr Bush might win Florida by a handful of votes, collect the 25 Electoral College votes and together with the other states he has won win the presidency even though Mr Gore has more votes overall.
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Prime Minister John Howard and the Coalition have won a third term, but it was not a resounding endorsement. The Coalition picked up an increase of primary vote of just over 2 per cent and just under 2 per cent on a two-party preferred basis. Much of that primary swing came from the decline of the One Nation vote.

It was apparent that the Government was headed for defeat before the Tampa sailed towards Christmas Island and the attacks on the World Trade Center and the Pentagon. Mr Howard cleverly exploited those issues. The election timing was fortuitous for the Government. The Coalition managed to play on people’s fears. The ploy worked – just.

It means that Labor’s strategy did not. Opposition Leader Kim Beazley slavishly agreed with everything Government did on asylum seekers and the response to the terrorist attacks. He suffered for it. Labor – despite having the edge on domestic issues before the international issues bit in – lost nearly three per cent of its primary vote.
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Politicians frequently portray whatever election they are fighting as “”the most important” for decades. They frequently argue that the choice voters must make is a stark one between them and their opponents. Never has this been less so than at this election. The choice Australians must make tomorrow is perhaps the least important of any election in recent times. And the choice is perhaps the least stark.

That said, it is perhaps the worst offering Australians have had at election time for 40 years.

Both sides support the immoral treatment of asylum seekers and the folly of shoulder-to-shoulder support of the United States in its ill-directed attempts to bring to justice those responsible for the terrorist attacks on September 11. Even if a voter were minded to decide on those issues, there is nothing to suggest that Kim Beazley is any less capable than John Howard in dealing with foreign policy or defence matters. Indeed, Mr Beazley’s experience as Defence Minister and Mr Howard’s hitherto concentration on economic issues and lack of interest in foreign policy would give Mr Beazley the edge. Mr Howard’s foreign policy has left Australia in a position where the leader of its nearest neighbour will not return his phone calls.

So it to domestic issues that voters must turn.
Continue reading “2000_11_november_leader09nov election1”

It seems that Texas Governor George W. Bush will narrow defeat Vice-President Al Gore in the US presidential election. Many people in Australian agriculture and many business people may greet this news with some joy. The theory is that Mr Bush as president would favour more freedom of trade. That would help open US markets, particularly agriculture, to Australian and other world producers. The theory is also that as a proponent of small government Mr Bush would not be such a big spender. That should relieve pressure on interest rates in the US which in turn would relieve pressure on Australian interest rates and the Australian dollar.

However, the Australian view should not be so optimistic. On the agricultural front, the election result does not augur especially well for freedom of trade. Mr Bush won a high proportion of his vote in the mid-west farm states. He will not be wanting to upset them by withdrawing subsidies and allowing in foreign goods. On the financial front, the noises of a small spending presidential candidate will not translate into a fiscally responsible president. In fact, Mr Bush is likely to hand very large sums of money back to consumers in the form of tax cuts. That is just a risky for surplus and balanced budgets as the bigger spending by government promised by Mr Gore.

There might be a slightly bigger danger with a Bush presidency because of Mr Bush’s attitude to defence. He wants to continue with high-spending programs like the missile shield. Mr Bush has likened himself to President Ronald Reagan. Mr Reagan spent so much on the military that he turned a healthy Budget situation to large deficit, but at least Mr Reagan – faced with the Soviet threat – had some reason for his action. It is doubtful whether Mr Bush’s advocacy of bigger spending on programs like missile defence can be off-set by more isolationist defence policies. He will find huge pressure from the military, the bureaucracy and other governments for the US to continue playing a major international security role.
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The two major parties and the ACT Greens have put the question of an increase in the size of the ACT Legislative Assembly on the agenda.

Greens MLA Kerrie Tucker wants an increase. She says, quite rightly that an increase would ease the workload and improve democracy. Labor and the Liberals also want an increase, but they want to avoid coping the flak from the typical knee-jerk reaction of the politician-hating public. So they watered down Ms Tucker’s motion in the previous assembly to a call for community consultation on the question.

As things stand, the ACT has the fewest politicians per head of population than anywhere else in Australia. Out 17 MLAs perform all the state functions as well as the functions of local government. Federally, we have just two members of the House of Representatives and two senators.
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Whoever wins the election on Saturday should go back to first base with superannuation. The Hawke-Keating Government set in place some much needed reform of superannuation, but later it could not resist the temptation to increase taxes on it. The initial reform was well thought out. Before 1983 superannuation was an easy vehicle for tax avoidance. Money could be cycled through superannuation quite quickly, thus avoiding high marginal tax rates. The Keating reforms gave tax concessions to superannuation, but quite rightly applied a penalty to bring the tax up to the full marginal rate if money was pulled out before age 55. Further concessions were allowed for people who took annuities and who delayed payments out of superannuation until they were 65. The Keating reform also forced all employers to pay all employees a percentage of their wage as superannuation, ultimately rising to 12 per cent.

But the politicians could not help themselves. Here was a miltch cow. By the end of the Keating Government superannuation was taxed at 15 per cent on the way in, at 15 per cent on the earnings while it was in, and at 15 per cent on the way out. Australia became one of the highest taxers of superannuation in the industrialised world.

The Coalition was no better. First it extended the timing and cut the percentage of salary going to superannuation. They it imposed the surcharge tax on high income earners. The rationale on the latter was dubious. Treasurer Peter Costello argued that low-income earners were getting less of a tax concession than high-income earners, so a 15 per cent surcharge was imposed based on current income – not on how much income one might expect on retirement or how much one had in a fund. Superannuation should be about future income, not present income. If there was an inequity, the answer would have been to give low income earners a bigger break.
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Now the result of the ACT election has been declared, Labor Leader Jon Stanhope must start the serious task of forming government. Technically, he will not become Chief Minister until he is voted in by a majority on the floor of the Legislative Assembly on its first day of sitting. That is how it should be. The people’s house votes on who should lead the executive government and that leader should choose his or her ministers. There is no need for a Governor to “”call on” someone to “‘form a government”.

Mr Stanhope was in no position to do anything before now because he could not be sure who would make up the Labor caucus. Now he knows. He has the option of choosing four or five Ministers from among the eight Labor members. He should opt for five. That will leave the other three hard pushed to do all the committee work if the Assembly persists with the rule that Ministers should not serve on committees. That rule is right in principle, but as a practical proposition it causes difficulties in such a small parliament. The answer is to increase the size of the parliament. That might cause popular resistance initially, but governance in the ACT is suffering because of the smallness of the Parliament. There has been no increase in the size since 1989, despite a large increase in the number of people being represented and the size of the economy to be managed.

In the meantime, when Mr Stanhope casts around to shape his ministry, at first blush it seems that he will face a balancing act between opting for experience or opting for gender balance. The only females among his eight Labor MLAs are those elected for the first time at the election two weeks ago.
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Fiji is now paying the terrible price for abandoning the principles of democracy and the rule of law after the coup by George Speight in May. When Speight took the Prime Minister and other parliamentarians hostage in May, the military failed to do its job. That job was to uphold the Constitution and the rule of law. If at the time it felt it could not have arrested Speight and his gang and restored the elected Government without undue bloodshed then in the short term it could have negotiated to put an end to the immediate crisis. But after that, the army should have insisted on a return to democratic government. Instead, it conspired with the Council of Chiefs to fulfill one of Speight’s key aims: the overthrow of the elected Government purely on the grounds that it was led by an ethnic Indian. Speight himself was taken into custody, but the upshot of the military’s failure after the May has been that Speight was made into a hero and martyr. It gave succour to his followers which in turn led to this week’s bloody attempt to replace the commander of the Fijian military, Commodore Frank Bainimarama, with Colonel Filipo Tarakinikini, the man who took the soft approach on Speight after the coup attempt. The rebels attempted to seize control of the army at Queen Elizabeth Barracks in Suva. Three loyal soldiers are dead and 14 in hospital. Five rebels are dead and four were in hospital. Twelve rebels have been captured and about 16 remained on the run. The toll goes beyond the injuries and deaths. Inevitably, the incident will be a major setback to economic recovery and the restoration of democracy. That in turn will result in greater suffering, particularly among the poor in Fiji.

The lesson after the coup should have been that violence is not rewarded. The military should have restored the government of Mahendra Chaudhry when it gained control on July 13. It has Speight in custody, where he fortunately remains after the failure of this week’s attack. Alas, the lesson after the coup was that violence is rewarded. So Speight’s supporters thought they could have another crack at it.
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