Ever since that heroic evening in Sydney in early 1996 when Paul Keating presided over a gala dinner of Australian creative types for the launch of the next plank of his Creative Nation policy, artists have found themselves on the losing side of the culture wars, routinely (and on any economic analysis, absurdly) derided as belonging to the privileged ‘elites'.

A measure of how far the image of the artist has fallen in contemporary Australia is the degree to which the popular cliché of ‘the elites' has become identified with an appreciation of art and culture.

Do you live in the inner city, drink cafe lattes or chardonnay, vote Labor or Green, watch the ABC or SBS and like going to the theatre or opera? Chances are you are an ‘elite'. Andrew Bolt even has a favourite term for artists: ‘grant-fed,' conjuring up images of cattle in feedlots, complacently fattening themselves on the public trough.

Keating lost the 1996 election and the left has been losing the culture wars in Australia ever since. Since most artists have a vested interest in a more liberal and creative society, their despair is not hard to grasp. The money is terrible, too.

David Throsby himself has led the research on the appalling pay for artistic labour and the paucity of economic opportunities available to individual artists. His most recent survey of practising artists in Australia was entitled ‘Don't Give Up Your Day Job' - a sensible precaution given that he found the average artist earns only a few thousand dollars a year directly from their art and creativity.

It's no wonder people like Throsby are calling for a new federal cultural policy. After all, new policies and reports in the arts generally lead to more funding. In the last decade, the Nugent Report bailed out the big performing arts companies while the Meyer Report bailed out the big galleries. The artists and organisations funded by the Australia Council's recently abolished New Media Arts Board have not been so lucky. They're not getting a report, and they're not getting their funding Board back either.

The plight of individual artists has been conspicuously absent from these reports. Lacking a powerful lobbying voice, artists themselves have been almost ignored in the last decade of policy debate. There is no reason to believe any new federal cultural policy will treat independent artists any differently.

This is a tragedy, because while times are tough for individual artists, the ‘major' end of the Australian arts and cultural sector is by no means in the crisis routinely trumpeted.

Since 1996, a steady-as-she-goes approach from a string of junior Arts Ministers under John Howard has meant that Australia's major cultural institutions have by and large survived the last decade in decent shape. The largest of them, the Australian Broadcasting Corporation, is an appropriate bell-weather. While it could not be said to be thriving, the ABC still receives around three-quarters of a billion dollars in annual funding. As its improving ratings show, Aunty is scarcely moribund. And the niche expertise of SBS allows it to expand into lucrative programming areas abandoned by the other TV networks.

Meanwhile, some sectors of the cultural industries are experiencing unprecedented export-driven growth. 10 years ago the Australian game design industry was in its infancy. In 2006 the Australian game sector is booming, exporting a string of popular games to a world market which on some definitions is larger than the motion picture industry. As a recent editorial in the Australian Financial Review pointed out, it is no longer clear why industries like game development receive next to no government cultural funding, while industries like opera and the so-called ‘major' performing arts sector could not survive without them.

Throsby argues that ‘market failure' and the intrinsic value of arts and culture is reason enough for governments to support arts and cultural organisations. The problem with this argument is that it's hard to justify against more police or hospital beds.

And the evidence for market failure in the cultural industries is much flimsier than Throsby makes out. Are ageing audiences and falling attendances for several genres of performing arts really an example of market failure? Or are they, as many critics suspect, merely evidence that the cultural product being presented is failing to capture the popular imagination?

A competing economic theory can be advanced: the concept of ‘moral peril,' afflicting over-protected industries which the state will not allow to fail.

For many cultural organisations in Australia, going broke can be a winning strategy
when it comes to prising more money out of tight-fisted treasuries (for example, The Queensland Orchestra and the Sydney Dance Company, to name but two recent bail-outs). Australia's major performing arts companies have more in common with European farmers or American airlines than Throsby seems prepared to admit.

In truth, the reasons for the so-called ‘crisis' amongst Australian cultural organisations are not hard to find.

Disruptive technologies and a rapidly globalising cultural economy have eroded
the popularity of many artforms and subjected Australia's cosseted cultural sector to the withering winds of competition. In the 1880's, opera was the definitive multimedia experience of its time, delivering technical innovations (think of Verdi's Aida) that made big-budget productions the wonder of their age. The same could be said (and recently has, by Eddie McGuire) of television in 1956.

But opera and TV have been no more immune to cultural and technological change than any other artform or media. In a world awash with iPods, X-Boxes and mobile phones, opera has to take its place in a long queue of historically significant but decreasingly popular entertainments. Who now mourns the eclipse of vaudeville? Or bush poetry? Or mediaeval mystery theatre?

Few in the arts are willing to admit the uncomfortable truth - that the type of art and culture we fund is largely an accident of history and fashion.

This is the real reason we need a federal cultural policy. But the lobbying power of the large performing arts organisations means that in any new cultural policy framework, individual artists are unlikely to see any meaningful improvement in the support available.

This may not be such a bad thing. Never having become dependent on government subsidies (apart from the meagre stimulus of Newstart, of course), Australian artists at the grass-roots remain resourceful, dynamic and entrepreneurial. Small enterprises and collectives, underground artforms and small niches of popularity remain the real incubators of Australian cultural talent. We could defund the Australia Council's Major Performing Arts Board tomorrow, and the majority of Australian artists wouldn't notice.

So what is the way forward for a new Australian cultural policy? Several points suggest themselves immediately:

• A holistic approach. Any new cultural policy needs to consider not just the Australia Council and state and local government level arts funding, but the ABC and SBS, the Film Finance Corporation, pay TV and multichannelling, media ownership laws, urban planning issues like noise laws that stifle music venues, and emerging intellectual property issues such as digital downloads and the ‘creative commons' movement. It should encompass not only direct government funding, but tax breaks for cultural donations and the charity status of many cultural organisations.

• A contemporary perspective. A new policy must take into account the realities of the 21st century, not the verities of the 19th. Technology convergence is conflating artforms that were once separate, but most policy perspectives still treat TV, film and video art as though they were entirely separate entities.

• A commitment to innovation. The touchstone of a new policy needs to be research and innovation. The key funding priority should be the creation and development of artistically meritorious, peer-reviewed new work. Funding innovation will also help emerging artists and the struggling small-to-medium sector, where the bulk of Australia's new work is created.

• New audience development . Funding priorities also need to be rejigged towards developing new audiences. An Australian version of the UK's hugely successful New Audiences project is an excellent starting point, and would cost less than $20 million. By investing in new audience development across the arts, governments can help the whole sector become more sustainable.

• Funding to individual artists. Currently, the only funding source for most independent artists is Newstart. Arts funding in Australia is highly skewed towards organisations — two-thirds or more of the Australia Council's budget currently goes to the 30-odd organisations funded by the Major Performing Arts Board. A balance needs to be struck between funding historically important cultural organisations and encouraging the often eccentric voices of outsiders that may only become significant a generation from now.

• A commitment to competitive grant processes and peer review. Arts ministers are notoriously unwilling to let sick cultural organisations die. But hard cases make bad policy, and the Meyer and Nugent Reports resulted in essentially non-competitive top-ups to under-performing parts of the cultural sector. If we are to fund artists and cultural organisations, let's do it rigorously and transparently, with panels of knowledgeable peers scoring funding applications on the sorts of criteria suggested above.