Reflections on Australian politics and policy

I came not knowing much about Australian policy or its political system. That’s partly because it was never really on my radar, but also because it – unduly in my view – seems to receive scant reporting overseas. To be fair I probably still don’t, but it’s been a fairly intensive time here and I’ve been fortunate to meet with politicians past and present as well as senior officials from six of the nine governments here. So, for what they are worth, here are some personal reflections on policy and politics down under…

First, it’s very clearly a new era. Like when you look back at an old photo and suddenly realise your hair cut was out of date even for then, Howard represented a bygone period, and the legacy of his time in office was as much a lack of action as taking the country in some unpleasant directions (like the migrant detention camp in Nauru).There’s now a lot of goodwill and optimism for the future, and strong economic foundations on which to realise progressive goals on health, education, the environment and fairness. On the downside too many issues were pushed into the “too difficult” box for too long and are now long overdue for attention – in particular national infrastructure, social equity, and the natural environment.

Second, the new Prime Minister Kevin Rudd is an interesting and rather unusual leader but ultimately underwhelming. A former public servant, he came into power on the wave of a public desperate to come up for air and look to the future. He has made some good steps forward – on reconciliation with Indigenous Australians, on international engagement, on climate change, on investment in skills and infrastructure. Yet he’s beginning to slip into the territory of endless reviews and initiatives with no clear sense of how they will all land or fit together. Of course this view may be a little premature – he is only one year in – but with a reputation built on technocratic expertise you have to deliver or you’ll fall; and when you do it’ll be fast. Most critically, he lacks a capacity to compelling describe a vision or excite people around that. Change not from, but to.

Third, policy making and public services here are going through a real culture shock after years of relative ease and inaction. There’s much to improve on: a lack of statistics and robust evidence base; weak think-tank and research groups; sloppy policy making processes; an absence of real scrutiny and rigour. In so far as there are articulated ends for public investment there’s still an insufficient account of the means to get there. Blair may have found them late, but the ideas behind market design and user empowerment were fundamentally right. One of the biggest challenges for Rudd will be creating this ‘enabling’ policy infrastructure and capability to drive the outcomes he’s after – and it won’t come quickly or without some heavy lifting.

Fourth, all countries have imperfect governance arrangements and Australia’s is its nine-government federalism. You can obfuscate into the language of vertical fiscal imbalance, or decree that it’s always been that way, but it is broken, doesn’t work for the challenges that Australia faces, and needs to be fixed. The proposed National Partnership Payments won’t solve it, are disingenuous, and will leave the problem to fester for another political generation. I don’t have a perfect solution by any means but a better start would be an honest and principled discussion of where roles and responsibilities should sit and how they might be exchanged.

Fifth, a very positive feature here, and also a good thing about having states, is that policy is made much closer to the community. They are more involved in decisions; policy makers have more regard for the genuine outcomes of policy and not just whether it is theoretically pure and tractable; and politicians devote their time and effort to understanding individual stories and experiences. Just to take one example: there’s much the UK could learn for its next spending review from Queensland’s Toward Q2 work on how to engage, involve and communicate priorities to the public.

Sixth, the policy challenges are unsurprisingly very similar to the UK. Both countries struggle with how to ensure all regions and citizens benefit from a more globalised and knowledge based economy. Both look to prevention, early intervention and personal responsibility to address rising expectations and demands on public services. Both are committed to addressing climate change, and weigh up difficult tradeoffs in how best to transition to a low carbon world. And both the British and Australian public cite quality of life, family and community as the most important things in life yet their politicians jostle to find the appropriate narrative and tools to reach them.

Yet there are also some subtle differences. The most pressing social challenges are here found in extremely remote areas, and this brings with it distinct service delivery challenges not found in the UK. Moreover, Australia’s economy and population are growing much faster than the UK, with consequential upsides and a need to manage changing hotspots like on congestion and infrastructure. Finally, a more balanced and diversified economy than Britain’s, policy makers down under ponder about Australia’s economic future and what balance for risk and reward to target.

But overall I’m left with an impression of optimism and of a country and policy environment that isn’t hostage to a past and has great opportunities to forge new directions. All of which means there’s much to watch in the future…

Reflections on Brisbane...

It’s my last week at work. Soon this blog will be no more, save perhaps for the occasional smattering of smug travel photos over coming weeks. So I thought I’d do a few wrap-up blogs with some reflections on Brisbane, policy and politics down under, and perhaps Australia too.

Starting with Brisbane, I’d definitely recommend paying a visit if you’re ever in Australia. Often passed by, or seen merely as a gateway to the Great Barrier Reef, there’s actually a lot here to see. Australia’s third city, Brisbane started as a penal settlement but its propitious position and claiming of state capital status for the newly founded Queensland (from then inland rival Ipswich) established it as a dominant city. Since the 1970s, and particularly since the 1990s, there has been explosive population growth, with a further 600,000 expected to arrive in the urban region by 2020 (up from the current 1.8 million).

(A peculiar fact about Australia is that there are no mid-size cities between 500,000 and 1 million people. There are 5 large cities – Sydney, Melbourne, Brisbane, Perth and Adelaide – where two-thirds of Australia’s population live and then lots of smaller towns. I can’t think of anywhere in the world with the same urban spread.)

Some of the best things about Brisbane:

• Excellent quality of life: lots of sunshine, relaxed people, close to great coastline and surfing, many interesting day trips around, a year long range of festivals, and strong sense of community and belonging.

• Some world class culture: this seems to have really come on in recent years. The new Gallery of Modern Art (GOMA) has leading exhibitions, so too are the notable Queensland Galley of Art, the State Library, and the South Bank stretch, which architecturally tops London’s South Bank, if falling slightly short on venues.
  
  
• Not too small, not too big: the size of the city means you interact with people from a mix of backgrounds and there’s a compelling sense of shared culture. So when a Picasso exhibit comes to Brisbane (as it did earlier this year) it’s a shared experience for Brisbanites. You don’t get that in the likes of London, Paris or New York.
  
  

Some downsides are that it often seems a bit cliquey (the sort of place where you end up living next door to the cousin of the person in the office you don’t like), and that not being Australia’s biggest city (nor the capital) there’s a natural limit of opportunities. And it doesn’t have the same icons as say Sydney.

Brisbane is ranked the 34th most livable city in the world which I think worthy (five places above London, eight above Barcelona, and fifteen over New York). Mind due Zurich and Geneva do have two of the three top spots so there’s clearly something odd going on with the rankings.

Anyhow, the photos below fulfill my honorary role for the state tourist board…

Territories and democracy inaction

I’ve always been a little confused about the difference between a state and territory (or provinces and territories in Canada). I guess they are mostly quirks of history: with the more powerful regions of countries getting the more autonomous state and province title at point of federation, and the weaker or newly emerging ones being left with some inferior 'territory' status.

For the most part it seems to make little difference. For example, the Northern Territory here in Australia have their own legislative assembly under delegated powers from the Commonwealth. And, although they only get to send two senators to the Commonwealth Parliament (unlike the founding States which get to send twelve each) this is pretty fair in terms of per capita share. They did also get a chance to become a state in 1998 but turned it down (mostly because they didn’t want to give the then Chief Minister more power and platform, but also because existing states determine the conditions you join on and it was perceived they weren’t getting a fair offer).

But in other ways it does create two quite distinct classes of citizen. One notable example is the Northern Territory intervention, where the Federal Government used its legislative powers to bring radical change in welfare, law enforcement and land tenure rights that it couldn’t do in the States.

A second example I discovered today is a peculiar discrimination in voting rights. Australia has a constitution, and it can only be changed by referendum. Since 1977 Northern Territorians (as well as people from the Australian Capital Territory) have been allowed to vote in referendums. But for a bill to pass it must achieve what’s called a ‘double majority’: in other words get a majority of both the national vote, and a majority of the States. (There’s actually a more bizarre ‘triple majority’ rule that can apply, where anything that affects a particular state has to receive a majority in that state).

Because they aren’t states, votes in the two territories only count for the national vote. So if say three states plus the two territories formed a majority to pass a bill, and it won the national vote, it would still fail because it needs four states to say yes. A version of this last happened in a 1984 referendum on terms for senators: it had the popular majority of Australians, plus two states and two territories but was blocked by the other (smaller) states. Indeed, this double majority rule is one reason why only 8 out of 44 referendums have ever been passed along with Australian’s relative conservative tendency to limit the role of government. More to the point it’s a very disingenuous way to have been given voting rights back in ’77 and, if perhaps not a daily bind for residents of the territories, does maintain a unjust second-class of citizenship.

Water markets in the Murray-Darling Basin

The best bit of Per Capita’s ‘market design’ conference proved to be the case studies of public markets in Australia, rather than any gems about market design per se. One of those related to water markets operating in the largest surface water system in Australia, the Murray-Darling Basin. Straddling five jurisdictions, the basin carries water from the Murray and Darling rivers over an area equivalent to the combined size of France, Germany and the UK. Water shortages here are not a new problem by any means but have got much more extreme in recent years with:

• Reduced rainfall: rainfall in the last five years has been around 10% of the historical average;
  


• Changed rainfall patterns: with rain falling in different seasons the traditional autumn rainfall over the Murray-Darling Basin has disproportionably fallen;
  


• Over allocation of water rights: which were based on assumptions of higher trend rainfall and lower levels of land utilisation; and
  


• Higher temperatures: with three of the last five years having broken temperature records there has been increased evaporation.
  

How does the market work?

• A new inter-governmental organisation called the Murray Darling Basin Commission has been established to oversee water use: this brings together six governments (the Commonwealth plus Queensland, New South Wales, Victoria, South Australia and the Australian Capital Territory). Beneath this is a highly complex governance arrangement – each can send three Ministers to the MDBC’s Ministerial Council and a further two as MDBC Commissioners.
  
  
• State-level caps on diversions: which prevent upstream States unfairly diverting water, or building dams to reduce flow. (These first came into existence in the mid 1990s.)
  
  
• Inter-state water trades: the six governments are able to trade water rights using fixed exchange rates determined by the MDBC (or by individual states if transparently reported to the Commission).
  

Where’s it all at?

The market is still in very early development and the region remains in a semi-crisis state. Nonetheless it already appears to be triggering some of the innovation and efficiency adjustments you’d expect. For example, there’s been a recent shift in economic composition in the basin, with an increased value of wine production (a falling quantity effect being more than offset by rising quality). There’s also been a shift in use of water as a factor of production with dairy farmers trading their water rights and importing animal feed rather than growing within the basin region.

Where could the market go next?

As the market evolves it could employ a few further features:

• Leasebacks: where one entity buys the rights and then leases back some of the allocation to the user. This would be a good way to spread risk and reduce transactional economies of scale.


• Covenants: this would permanently transfer the environmental rights. Indeed this is happening in part through a Federal buyback scheme worth $10bn.


• Future and options exchange: this would allow for trade of water (and future water rights) in the same way in which that oil exchanges work. So instead of an ‘exchange rate’ you’d get spot prices. For this to work you’d need a fair degree of depth in the market – both buyers and sellers.

I don’t know enough about environmental economics to fully appraise the emerging market here, nor know if there are better examples elsewhere, but it strikes me as a potential good case study for water rights issues occurring in much more extreme environmental and governance circumstances such as the Nile Delta region.