Crispin Hull

It is the best of territories and the worst of territories. We seem to be a place of statistical extremes. That is one of the consequences of being a small, recently created territory with a unique core business: administration.

Usually, the ACT figures well in those statistics that detail things flowing from a high-education base: higher average incomes; lower unemployment; better health; better participation in sport and culture. And we do poorly in the things that smack of a decadent society: high drug-related crime; high suicide rate, single parenthood, high alcohol intake and so on.

It was therefore surprising when the Commonwealth Department of Education placed the ACT last among states and territories for many elements in a survey of computers in schools. What is going wrong? Surely, the ACT is the most highly computer-literate state or territory. The Australian Bureau of Statistics cites the ACT as having the most computers per household. Well, we should not be too alarmed. The department’s report warns us about small sample size. It choose only five of the ACT schools. Also the survey was completed in May, 1998, and since then there has been a concerted effort by the ACT Government to get more computers into government schools. The ACT Government reckons it is on the national average now, according to its audit of all schools.
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The 12-point accountability plan put by the Australian Democrats this week has much to commend it. The plan seeks to make politicians, political parties, bureaucrats and corporations more accountable and to make information more accessible.

The proposals are welcome in the light of recent rort allegations within the major parties and in the light of the Howard Government’s disillusioning performance in outdoing the Hawke-Keating Government when it comes to appointing mates and political allies to key statutory appointments and when it comes to conflicts of interest and abuse of entitlements. Unfortunately, the proposals suffer from a Catch-22. The very people they are directed at are the very people who will have to pass them into law.

Among the proposals were for greater internal democracy in political parties. Branch-stacking by parties has been rife for decades. And when Labor moved to stop it by requiring branch members to be enrolled on the electoral roll in the electorate, the stacking did not end. Rather people falsely enrolled in the electorate so they could still stack the branch.
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Regulation of broadcasting in Australia in the past two decades has been pitiful. Self-regulation has resulted in falling standards. The report by a panel set up by the Australian Broadcasting Authority into cash for comments at Radio 2UE involving and agreements between presenters John Laws and Alan Jones with large corporations shows the short-comings. Worse, Laws and Jones have continued to attract large audiences despite all the adverse publicity relating the cash-for-comments scandal. It indicates that the public needs a regulator to control the excesses of broadcasters because the marketplace is not doing it either.

The panel made recommendations to the authority which presumably it will adopt. They were little more than to slap 2UE on the wrist with a feather considering the panel found 2UE guilty of five breaches of the Broadcasting Services Act and 90 breaches of the Commercial Radio Codes of Practice. It said 2UE should institute a training program on the obligations of the holders of broadcast licences; it should disclose on air commercial arrangements with sponsors if material about the sponsor is being broadcast; it should keep a public register of those agreements on their internet; it should make sure the separation of advertising and editorial matter is clear. None of those things is beyond what would be expected in any event of a commercial broadcaster, with perhaps the exception of the public register.
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The Israeli people want peace. They just don’t seem to know who to get it. The trouble is they want peace on their terms. Every opinion poll suggests a yearning for peace and a negotiated settlement with the Palestinians. But every time an Israeli leader goes into negotiation, usually in the US, he has to worry about voter backlash. Inevitably, obvious and reasonable concessions to the Palestinians are not made. The Palestinians despair. Their leaders, too, worry about their political support. Violence erupts. Israelis and Palestinians on the street become more hard-line and peace, so close, becomes even further away.

It seems that every time Israelis elect a new leader the hawk of the election campaign becomes more dovish at the negotiating table and the dove of the election campaign becomes more hawkish as he realizes the prospect of electoral back-lash at re-election time. But either way, hawk or dove, no Israeli leader has been able to secure a complete peace agreement that sticks. Ultimately, the Israeli people are too fearful of the concessions it would take: acceptance of a Palestinian state; of a shared Jerusalem; of access to holy sites for all religions; and some concession about returnees.

The election of Ariel Sharon yesterday (Australian time) is unlikely to be a mould-breaker.
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The British Government and its Northern Ireland Secretary Peter Mandelson are being reckless and short-sighted over Northern Ireland. The Government has introduced a Bill into Parliament that will come into force at the end of the week unless the Irish Republican Army begins decommissioning its weapons. The Bill would reimpose direct rule from London, taking power away from the local Northern Ireland legislature and two-month-old power-sharing Government. The British Government acted after the independent commission, led by Canadian General John de Chastelain, reported to the British Government about the state of progress in weapons decommissioning. The report has not been made public, but it is widely thought that it says absolutely nothing has happened. No weapons have been turned in or rendered inoperable.

That is a frustrating turn of events, but it should not have provoked such a sudden, tightly framed deadline which the British Government knew would not be met. The history of IRA behaviour would have made it obvious. So now after two years of enormous effort, peace in Northern Ireland is threatened. It is almost as if the British Government wants the peace framework to collapse.
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We were warned in the 1970s. When tax cases came before the High Court then, the court ran a very socially damaging line, led by the then Chief Justice Garfield Barwick. The line was that it was up to the Parliament to specify tax liability with exactitude and if a taxpayer structured his or her affairs in a way that minimised tax, too bad, the taxpayer could avoid the tax. The barren fruit of this approach was Kerry Packer’s famous line that anyone who pays a cent of tax more than he has to is a fool. The tax-avoidance industry flourished. At the time one or two judges dissented, particularly Justice Lionel Murphy. Justice Murphy warned that if the court continued with this approach, Parliament would pass wider and wider tax laws with ever more discretion on the part of the Tax Office to ensure tax was not avoided. He warned that Parliament might have to enact laws that enabled the Tax Office to set whatever tax it wanted and to chase it down for as long as it took.

He was right, as we saw in the High Court last week.

The court ruled that provision in the Income Tax Assessment Act entitled the Tax Office to revisit tax assessments for an indefinite time in the future. The court said that the tax law did not have to be fair, just certain and final. The case was about a woman who said her income was $4470 in 1987. The Tax Office said she was liable to pay no tax. Years later the office changed its mind and disallowed a $10,000 deduction. The taxpayer objected saying there was a three-year limitation against reassessment. But the court sided with the Tax Office, saying the three-year limitation did not apply in this case because an assessment of zero liability to pay tax was no assessment at all.

The case illustrates

Prime Minister John Howard should resist the knee-jerk reaction of his back-benchers to change in any significant way the quarterly Business Activity Statement. Anything new is bound to attract opposition. Anything new is bound to cause a certain amount of difficulty until the new becomes the routine. The BAS system has simply not had enough time to be bedded down to become routine. Businesses have only had to present two BASs, so business owners and their staff have hardly had time to familiarised themselves with the procedure. It would be like turning on a spreadsheet program on a computer and after giving it a couple of starts pushing it aside and returning to a calculator or manual adding-up.

Australia has one of the easiest financial reporting standards fior business in the developed world. Most require monthly reporting. The BAS is not especially onerous. Indeed, a lot of welfare recipients have to lodge forms not much simpler and more regularly. For too long much of Australian small business has slopped along with a shoebox attitude to accounting. The shoboax of receipts comes out towards the end of the financial year for the annual tax return. It is not good enough. The BAS has imposed some welcome discipline on small business. Many business have very little idea how they are travelling through the year. The BAS will help them track not only liability and credits for GST and income tax, but also profit and loss, outstanding creditors and the like. The requirement for quarterly reporting has made many businesses update their accounting procedures and the computing used to do it. Having come this far, the Government should hold out. The vast majority of businesses are coping well with the BAS. More than 90 per cent got the first one in on time and that is likely to be exceeded the second time around.
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Australian politicians from both sides of the political fence are consistent indeed in explaining Australia’s economic fortunes. When growth rates in Australia falter, external factors like events in the US or Asia are pointed to as the key cause for blame by those in Government (whether Coalition or Labor) and those in Opposition blame inept economic management by the Government. When growth and employment are up those in Government put it down to excellent internal economic management, while those in Opposition either deny it is happening or put it down to good luck or flow-ons from external factors. Thus the economic mutterings and explanations on the causes of the current economic must be taken with a grain of salt. Moreover, economic forecasting and explanations by politicians has to be seen in the light of the electoral cycle. The closer the election the more panicked the response.

It is fortunate, indeed, therefore that one of the main levers of economic management – setting official interest rates — is in the hands of the Reserve Bank, more particularly, the monthly meeting of the Reserve Bank Board. It will meet tomorrow.

When it meets it will be bearing in mind that the United States seems set for a slowdown in growth, or maybe a mild recession. A recession in the US will affect our export markets, so Australia will need to boost domestic demand to replace it, if we are to avoid a worse downturn than otherwise in store. It can do that by lowering interest rates. Further, the US has already reduced interest rates by a full percentage point in the past month. This means that Australia can afford to lower interest rates without causing international investors to flee Australia, putting pressure on the currency by lowering the exchange rate.

The Reserve Bank has to perform a delicate balancing act. It must ensure that demand is not boosted to artificially high levels with low interest rates so as to fuel inflation. Conversely, it must not put the breaks too hard on with high interest rates to cause unnecessary business retraction and consequent unemployment.

The bank must also act within the context of the Government’s fiscal position. If government itself has boosted demand by increasing spending, then interest rates would have to stay higher than would otherwise be the case. However, the fiscal position is a slow-moving beast. Interest rates act on the economy more quickly.

The signs are that the Reserve should reduce interest rates, but some caution is warranted. The US economy, coming off a greater high, is slowing more quickly than the Australian economy. The US is going through a dot.com bust after a dot.com boom – a boom Australia never had. Also, retail figures issue last week indicate that the Australian economy is not as weak as commentators had earlier suggested.

Prime Minister John Howard and Treasurer Peter Costello have changed their tune since late last year when they were saying everything was rosy. Now they are warning that Australia is in for a slow-down and only the good economic managers – the Coalition – can be trusted to manage the economy in difficult times. It was self-serving twaddle. Much of it was insurance so that if the economy does slow in this election year, they can say that it was expected and predicted and there is no cause for alarm. The Reserve should to listen to the over-stated case by Mr Howard and Mr Costello. Nor should it get too alarmed at the US position, despite statements by its own deputy governor, Glenn Stevens, that the us slump could have a serious impact on Australia.

Rather it should hark back to the position of its Governor Ian Macfarlane late in 1999. Then he argued that it was better to engage in a constant fine tuning rather than fewer short, sharp shocks. Moreover, Australia has gone through a couple of local one-off events – the GST and the Olympics – the effect of which has not been worked through.

The Reserve should opt for a cautious quarter to half percent reduction, rather than attempt to engage in a big-boosting statement which it might have to partially reverse later. That would have an unnecessarily negative impact on business confidence.

The great conundrum of democracy is being tested in Austria. What if the people vote for representatives who do not uphold democratic values and who, in an extreme situation, move to end democracy? What if those representatives get a majority or a balance of power?

It is happening in Austria in the wake of last year’s stalemated election. It is what happened in German in 1933 and led to Hitler coming to power. In Germany in 1933, however, Hitler had fewer obstacles. The president at the time, former World War I general Paul von Hindenburg was an old man with little power of resistance. Austria is in a better position with President Thomas Klestil. Mr Klestil is in an invidious position, largely brought about by the actions of the centre-right Austrian People’s Party which has signed a coalition with the far-right People’s Party. Together they have a majority in the Parliament. Mr Klestil therefore has no choice but to let them form government. However, he has not been completely compliant. He has required the People’s Party, headed by Joerg Haider, to sign a pledge to respect democratic values. Perhaps this will give him some armoury later if Mr Haider abuses his power. It will also go some way to reducing fears elsewhere in Europe about trends in Austria.
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Prime Minister John Howard has given two reasons why the remaining 51 per cent of Telstra in public hands should be privatised. The first is that the money realised could retire public debt and the proceeds be used for things that only governments can do, like health and education. The second is that it is a conflict of interest for the Government to be at once the regulator of Telstra and its half owner.

Both these arguments have some merit, subject to some qualifications. Until the 1970s, it would have been difficult for private enterprise to run a telecommunications company in Australia. Only government could mount the capital to build and run the infrastructure. Nowadays there is enough private capital about to do the job. A counter to Mr Howard’s argument is that Telstra is such a successful company that the Government should keep its share and keep the profits rolling so it has more money for education and health. But that counter-argument has dangers. Under that theory, Government could engage in all sorts of commercial activity for profit. The better position is that taxpayers money should not be put at commercial risk. Further, one of the main reasons Telstra is doing well is that the Government changed the regulatory environment. There is now more competition in telecommunications. The competition delivered efficiencies, profit and risk to capital at the same time. The logical outcome of deregulation and competition is privatisation, or at least privatisation of the parts of Telstra that are subject to competition. The Government should not have its capital tied up in Telstra. It should retire debt.
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