Telstra

The Sydney Morning Herald's editorial on Telstra points out that Telstra is acting in the financial interests of its shareholders, against the interests of Australian consumers and healthy competition. The suggestion to force a separation of Telstra's wholesale and retail divisions if it wins the broadband tender is a good one.

However, even this would be inadequate. Telstra is only likely to stuff things up, cut corners, or even pull out of the contract altogether if the government forces its two halves to separate as part of the national broadband project.

There is a better solution that will improve Australia's telecommunications pricing, technological uptake and consumer treatment. Give the tender to one of the other bidders and force apart Telstra's retail and wholesale components. The infrastructure should be owned by an independent and specifically regulated company, whilst retail Telstra should be forced to survive like every other telecommunications operator.

University fees

The Australian's editorial reasons that the extra $1.5 million that university graduates are estimated to earn over their lifetimes is more than enough to justify the mere $20,000 in out-of-pocket costs for the average degree. That’s a pretty big return—and it’s potentially an argument why the government should invest in free tertiary education, as the amount of tax collected on $1.5 million will greatly exceed $20,000.

However, this argument is wrong. What is needed is not cheaper course costs, but more HECS places and a better approach to university funding. HECS is, in effect, an interest free loan (in inflation-adjusted terms) that one pays back only when one is earning good money. It doesn’t put graduates under financial hardship.

Given the big returns to investment in human capital, the government should be spending a lot more than it does on our universities. Why has Australia only got one or two universities that come within a million miles of being world-topping teaching and research institutions? If more public investment is directed towards university facilities, staff and research grants, not only will the returns to education get even bigger, but the productivity growth of our whole economy will be enhanced as well.

Industrial relations laws

The newly unveiled industrial relations laws, like the WorkChoices laws before them, do some things right yet go way too far in other areas. Giving Fair Work Australia the power to impose wage settlements when a bargain cannot be reached is a good reform that provides the low paid with a safety net and reduces the time lost to industrial disputes.

However, giving unions a seat at the bargaining table when even only one employee is a member is going too far. How does Labor think this will make bargaining either more fair or more efficient? It sounds like a consolation prize for their mates in the unions who unsuccessfully sought a complete tear-up of WorkChoices.

Why must we take two steps forward, one step back all the time?

Budget deficits

Even in Opposition, the Liberal Party is still trying to promote the baseless idea that a federal budget deficit is always a "failure of economic management." By making such statements, Malcolm Turnbull is only making it harder for the government to implement sensible policy to stimulate the economy. Trying to influence the whole economy for selfish political aims, as the Liberals are doing, is a truly terrible failure of economic responsibility.

Reshaping global finance

The Economist’s analysis of the prospects for redesigning global finance and the outcomes of the G20 meeting to approach that task don't inspire much confidence that things will change. Financial and stock markets have overstepped the mark on countless occasions before. The 1980s stock market crash and 2000s technology crash, and their subsequent recessions, did little to fix the fundamental architecture of the world financial system. That is unlikely to change now.

What the world needs is a big expansion of the Bank of International Settlement's reach and regulatory power, putting it on par with the IMF and World Bank. A global financial market requires global regulation, and a regulator large enough to bail out banks when necessary, taking the burden off national governments. The board of the BIS needs to be updated so all G20 nations--and others--are represented, according to their relative economic size. If this were to reduce the clout of the IMF and the stigma of borrowing from an international body, that is all for the better.

Many proposals have been doing the rounds. Carmen Reinhart and Kenneth Rogoff, writing in the Financial Times, are right to argue that an international regulator "with teeth" is needed to reform global finance. But who will have the say in how this regulator is run, who will fund it, and how will we get all nations to go along with it? There are difficult political hurdles that just can't be brushed over. Finance may be global, but bank bail-outs are almost always national.

If a global regulator could be established--a finance version of the WTO, or an IMF with greater regulatory power--several other aspects will be vital. It must be controlled by all major economies, developed and developing, and the say each one has on the regulator's board should always reflect the relative economic size of the countries involved. There needs to be global oversight not just of banks, but also of the the ratings agencies, which are responsible for much of the recent financial strife. Finally, the new regulator will need a great sum of money at hand to bail out troubled banks when required, rather than national governments doing so, as a way to encourage nations to cede regulatory control.

(First two paragraphs published on The Economist letters page, 28 November 2008)

NSW: The stuffed state

Shaun Carney seems pretty spot on with his comparison to NSW's current malaise to that of Victoria in the early 90s. However, there's one key difference he didn't mention. Victoria was eventually pulled out of the doldrums by Jeff Kennett. In NSW we have no Kennett to elect at the next election, only the current opposition leader, Barry O'Farrell, who is saying nothing, devising no policies to save NSW, and doing his utmost best to be even more useless than the string of opposition leaders who preceded him.

In other news, The NSW economy is so stuffed that even the Treasury secretary admits we've been on a downward trend in governance for years. This highlights just how parlous things have become. It wasn't the Treasury running the government all along, as many have suggested, but elected politicians refusing to act in their state's best long-term interests. Coupled with the absence of a credible opposition, NSW is well and truly a basket case.

Sydney local councils

The suggestion to amalgamate Sydney councils into ten mega-councils seems a strange response to recent urban planning and infrastructure problems. The big challenges facing Sydney--public transport, health and education provision, over development, poorly designed large developments and urban sustainability--are not problems that local councils can solve, no matter how big each one is, or how well councils work together. The problem is state government mismanagement, underinvestment and disregard for community-based planning consultation. Until that fiasco is rectified our problems will continue indefinitely.

G20 and global trade

The words that came out of the G20 meeting on the global financial crisis seem very promising. Reducing barriers to international trade would be of great assistance to the world economy and its people, both in the short term for fixing the current mess, and longer term for raising standards of living.

However, two aspects are crucial. First, that this actually happens and isn't just heat-of-the-moment rhetoric. Second, that the right trade barriers are brought down. The United States and European Union have quite a history of ignoring barriers to agricultural trade that severely harm food production and markets across the developing world.

Instead, they focus on reducing trade barriers for high tech services and medicines whilst implementing particular global 'standards.' Restrictive and harmful patent measures that privilege US corporate interests are globalised in this manner. The result is higher prices paid by poor countries for technologies and medicines that would otherwise be the case.

Let's hope this doesn't happen this time. Australia, as a large agricultural producer, is in a key position to mediate global trade talks to achieve the best solutions for the long-run benefit of the whole world.