Gittins picks up CPD’s recent discussion paper and he writes in The Sydney Morning Herald and The Age:

So, just as the Libs now accept the legitimacy of Medicare, so Labor now accepts the legitimacy of taxpayer-subsidised and enforced private health insurance. One of the few remaining ideological gaps has greatly narrowed.

The pity is that, as John Menadue and Ian McAuley explain in a new paper published by the Centre for Policy Development, subsidising private health insurance doesn’t only advantage the better-off (including yours truly), it makes healthcare more expensive than it needs to be.

Healthcare costs to the community – whether funded by the taxpayer or privately – are already growing rapidly and are set to keep outpacing most other costs, becoming by far the greatest pressure on government budgets.

That makes healthcare the greatest source of pressure for rising taxes. Nothing wrong with that – provided we get value for money. But that’s just where private insurance lets us down.

Howard’s subsidy of health fund premiums was really a vote-buying election promise and a gift to the well-insured Liberal heartland. He tried to justify it by claiming that getting more people into private insurance would relieve the pressure on public hospitals.

As all the experts predicted at the time, it didn’t work. It shifted patients from public to private, but it also shifted doctors from public to private, leaving public queues little changed. It did, however, subsidise the better-off in their efforts to jump the queue.

As anyone who’s done high school economics could tell you, the benefit from a government subsidy of the price of something is shared between the buyer and the seller. The health funds have become a lot more profitable than they used to be.

All arrangements that separate the true cost of something from what you appear to pay for it at the counter encourage overconsumption, overservicing and overcharging. That’s true of Medicare as well as private insurance.

But unlike private insurance, Medicare has countervailing advantages. Being a single national payer, it has lower administrative costs and, more to the point, greater ability to counter the market power of healthcare providers.

Our many private health funds have little ability – and little incentive – to counter overservicing and overcharging. It’s a well established principle in health economics that those countries with the greatest reliance on private insurance to finance healthcare have the most expensive healthcare – without a commensurate improvement in their health. The United States is the classic case.

Using carrots and sticks to prop up private insurance not only subsidises a two-class health system, it delivers its greatest benefit to the incomes of medical specialists. Great idea.

Ben writes:

For Labor, the economy remains the Government’s potential strong suit: one the few areas of public policy where voters grudgingly admit it is doing a decent job. Labor’s efforts to see the country through the worst of the GFC with only one quarter of negative growth may not win it too many plaudits in the community — Labor in fact still trails the Opposition in poll figures on questions about which party is best at managing the economy — but compared to the unpopularity of issues such as asylum seekers and the carbon tax, the Government at least sees the economy as favourable territory in which to manoeuvre.

For the Coalition, the economy is similarly conducive terrain. The last recession in this country was under Paul Keating in the early 1990s. Since then the country has enjoyed a long boom that coincided with most of John Howard’s reign. We can never be sure exactly why, but perhaps this is the reason the conservative parties enjoy a natural advantage with voters, who seem automatically prepared to believe that the Liberal Party in particular is a better manager of the economy that spendthrift Labor.

Labor has been dealt a rather more tricky hand of cards than the Coalition thanks to external economic events. Sure, the Coalition navigated the Asian financial crisis of 1998 and the bursting of the dotcom bubble in 2011, but neither can really compare to the worst economic downturn in the northern hemisphere since the 1930s. That’s what confronted Labor in September 2008, only 10 months after John Howard was thrown out of office. The turbulent and unsettling years following 2008 have seemed very different to the sunny years of the mid-2000s.

The actions that the Rudd government took in response to the GFC in late 2008 and early 2009 form the backdrop to the current economic debate. Simply put, that response was a triumph of pragmatic economic policy-making. Australia went hard and early with fiscal stimulus accompanied by a big drop in interest rates. This pumped money into the economy at a time when consumers could have been frightened into putting away their credit cards. It also helped strugglers in the mortgage belt with a windfall reduction in their fortnightly mortgage repayments. Despite some significant corporate failures from over-leveraged companies like Centro and Babcock and Brown, Australia didn’t see a massive wave of corporate insolvency, and the fiscal stimulus took up the slack of falling private investment. As a result, unlike most of the western world, Australian aggregate demand therefore held up, and the country stayed out of recession.

Read more from Ben Eltham in New Matilda here.

Change can happen faster than you think – help us seize the moment and point to the alternatives. Add your voice to ours!

MASTERCLASS: Participate: the new tools of digital engagement with Richard Wilson

• Melbourne - Wed 15th February, 2012. More info and registration
• Adelaide - Thu 16th February, 2012. More info and registration
• Sydney - Mon 20th February, 2012. More info and registration

But why all the fuss?

With Australia boasting low unemployment and government debt, coupled with high and growing wages (Australia is the country with the highest median wealth according to Credit Suisse Research Institute), Mike Seccombe debunks a few myths on why our perceptions of cost of living are far from reality.

Drawing heavily from CPD fellow Ian McAuley’s research paper, ‘What Are We Complaining About? An Analysis of Cost of Living Pressures’, Seccombe illustrates how Australia has reaped the rewards of ”Australian exceptionalism” grounded in the most successful economic system of the late 20th and early 21st century: a low-tax country with high quality public institutions, a low-debt country leading the world in human development and infrastructure.

So why do so many Australian’s have the perception that they are ‘doing it tough’? Quite possibly, we have confused cost of lifestyle, with actual cost of living. For instance, there are certain expenditures that are nowadays considered the norm, such as home extensions and private-schooling. It may also have to do with the fact that the more ‘salient items’ (such as fruit, utilities, housing) have risen, while ‘less-salient items’ (appliances, electronics, shoes, computers) have decreased dramatically. We deal with salient items almost everyday, therefore we are more likely to take a conscious note of these rising prices. Little is our attention taken by the drop in less-salient prices, hence the disproportionate outlook on the overall cost of living.

Of course, there is a certain faction of the Australian public that are feeling the pinch of cost of living pressures, such as those renting and those who are dependent on government benefits. Yet, it is not these groups who are doing the “complaining on talkback media” and being stirred into resentment in politics and the media.

“Real people are more subjective. Behavioural economics shows that the fear of a loss is more keenly felt than the anticipation of a gain. And despite Australians’ current wealth, the evidence is that we look out to the world and see uncertainty.”

Read the full article in The Global Mail here.

Want to do some further reading on this issue? Have a read of Ian McAuley’s paper on cost of living pressures in Australia.

Ian McAuley | What are we complaining about? An analysis of cost of livng pressures

In our second paper Ian McAuley asks: are most Australians really ‘doing it tough’?

In response to the widely-held notion that we are all suffering from cost of living pressures, Ian McAuley goes looking for the evidence. He finds that for the majority of Australians rising incomes have kept well ahead of rising prices. Some people are feeling a squeeze: renters and people who rely on government benefits other than the age pension have seen their living costs rise faster than their incomes. McAuley draws on studies of consumer behaviour to explain why others might feel like they’re struggling.

“Australia will have to make hard decisions over our future energy policy. We will have to invest significant amounts of taxpayer money if we want to abandon business as usual — as indeed we must. And we will have to navigate some very treacherous political waters, as the combined might of the status quo mobilises to protect the profits embedded in our existing energy infrastructure.”

Read the full article in the New Matilda here

Watch the full program on the ABC website here

In response to the widely-held notion that we are all suffering from cost of living pressures, CPD fellow Ian McAuley undertakes a thorough research of the evidence. Ian finds, in fact, that for the majority of Australians rising incomes have kept well ahead of rising prices. Some people are feeling a squeeze: renters and people who rely on government benefits other than the age pension have seen their living costs rise faster than their incomes:

• From 2003-04 to 2009-10, rents rose by 41 per cent in today’s dollars.
• While age pensions are linked to average earnings, some other benefits are linked to the official inflation figures (Consumer Price Index). Costs have been going up by 3.7% a year for these people, while incomes have only been going up by 3.0% a year.

For most Australians, the paper finds that ‘expectation inflation’ is a much more likely explanation for perceived cost of living pressures.

Some people are possibly feeling poorer because house prices have stopped rising. This is the flip side of the illusion of ‘wealth’ associated with the strong rise in house prices from 1995 until 2009.

Some household bills, such as electricity, attract particular attention. Even though electricity takes only around two percent of our income, electricity bills can come as a nasty shock, particularly if there is some combination of higher usage and a price rise.

Research in consumer behaviour finds that we are far more attentive to price rises than price falls. While we are very conscious of price rises for items such as bananas and school fees, we are less aware of price falls, such as those which have occurred in clothing, telecommunications and domestic appliances.

DOWNLOAD and read ‘What Are We Complaining About? An Analysis of Cost of Living Pressures‘ here.

Change can happen faster than you think – help us seize the moment and point to the alternatives. Add your voice to ours!

Chris Bonnor writes:

The media stories at the start each school year are usually predictable: getting ready for school, the cost of schooling, the odd crisis or two. Most of these are written well in advance.

But a story this week broke the mould and created more than a little interest. The Australian told of a leaked report which dispelled any doubt that government policy was largely responsible for the increasing residualisation of public schools – and at a great cost to their enrolled students. The report by Professor Richard Teese added new and disturbing information to what we already know.

In one sense the situation it portrays isn’t new. The residualisation of public schools, the ones which are obliged to be free, accessible and inclusive, was inevitable from the day governments funded private schools to compete with their own. The charging of fees alone would guarantee that they would harvest the middle class, leaving the public provider – as John Howard once put it so – as a safety net for others. You couldn’t write a better script to create social, resource and academic divides between schools.

Read the full article in On line Opinion here

Change can happen faster than you think – help us seize the moment and point to the alternatives. Add your voice to ours!

“The only foundation for a successful country is a strong economy”, said Tony Abbott in his National Press Club address yesterday.

That much is uncontentious, but his claim that previous Coalition governments had delivered sound economic management was outrageous.

“Australians can be confident that the Liberal and National parties will provide good economic management in the future because that is what we have always done in the past,” he said. “We have done it before and we will do it again.”

That’s a wild statement. The Coalition has had the fortune to hold office in good economic times — including the postwar boom of the 1950s and 1960s and the period from 1996 to 2007 when the Howard government enjoyed the dividends of the Hawke-Keating economic reforms, and when the world economy was enjoying a long speculative-driven boom. Good luck, perhaps, but not good management.

In fact he went on to praise the Howard government specifically, saying: “16 members of the current shadow cabinet were ministers in the Howard government which now looks like a lost golden age of reform and prosperity.”

If he were serious about the Opposition’s claims of economic competence, he would hardly mention service in the Howard ministry as an endorsement. The Howard government’s economic report card is overall a dismal one.

Read the full article in New Matilda here.

Change can happen faster than you think – help us seize the moment and point to the alternatives. Add your voice to ours!

Money and power sometimes walk hand in hand….

Rinehart thinks it is far too costly and difficult to build new mines in Australia. She is against the mineral resource rent tax and the carbon tax, which she claims will “will diminish Australia’s attractiveness to foreign investment”. (Luckily, the bosses at Korean steel-maker Posco apparently weren’t listening. They decided to invest $1.5 billion for a stake in one of Hancock’s iron ore mines shortly after this speech was made). She also wants to open up mining to overseas workers on short-term visas, and create “special economic zones” (read: tax havens) in the north-west “with policies conducive to opening and developing successful businesses, to enable more opportunity for exciting vision and development, with low taxation for those Australians who want to work and live in our north”.

Such attitudes are commonplace among Western Australia’s corporate elite; indeed, some of them Coalition policy. Getting rid of the mining tax and the carbon tax are scarcely fringe positions, after all. The difference between ordinary businesspeople and Coalition voters and Rinehart is … well, it’s the money. “The very rich are different to you and I,” remarked F. Scott Fitzgerald, “they have more money.” And for no-one is this truer than for Rinehart, who has the wealth to buy up large swathes of the media and run it according to her own prejudices, if she chooses.

Given Rinehart’s attitudes and proclivities, many have understandably begun to speculate about whether she really does intend to take over Fairfax completely, and if so, whether she could exert control over the media company’s editorial positions. The answers, I think, are yes, and yes.

There’s not a lot of point of owning a stake in a failing newspaper business unless you want to use it as a mouthpiece for your own political ideas. Even Rupert Murdoch understands this: News Corporation has long subsidised under-performing media assets like The Australian and the Wall Street Journal precisely because of the political clout they contribute.

And the answer to the question of whether a media owner can drive the editorial positions of the media outlets she owns should also be obvious with reference to the Murdoch examples. 

Read the full article in New Matilda here.

Change can happen faster than you think – help us seize the moment and point to the alternatives. Add your voice to ours!