Inside Canberra Vol. 67, No. 35 bringing you the latest business intelligence from inside Federal Government

John Fraser: A Good Choice for Treasury From the Gallery In the present context, John Fraser is a better choice to head Treasury than Martin Parkinson. October 10, 2014 If there’s a criticism of Parkinson it’s that he was ineffectual in selling the need for budget restraint. This not to criticise his intellectual commitment, it’s more a function of his • PM ups the ante on Hizb ut-Tahrir: Tony personality type: Parkinson has a boffinish air to him that made his arguments seem abstract. Abbott told Fairfax radio yesterday morning Inside Canberra’s editor worked with Fraser in the late 70’s when, as relatively junior public that “Hizb ut-Tahrir is an organisation with an ideology which justifies terrorism”. The servants, their job was to provide policy advice to Prime Minister Malcolm Fraser. John Fraser PM’s remarks followed Wednesday night’s spent most of his time telling his namesake that he didn’t know what he was talking about. Lateline interview with a spokesman for the Fraser, unlike his two predecessors who both worked for Labor ministers, has never worked group, Mr Wassim Doureihi, who deflected in a politician’s office. He was, however, part of ’s Commission of Audit and repeated questions about his support for he drafted the Charter of Budget Honesty. However, if his past is any guide, he will treat Islamic State’s “murderous” tactics in Syria and Iraq with accusations of violence by politicians of all stripes with the scepticism they deserve. He’s likely to give the Treasurer the western governments including the US and benefit of his opinion without reservation, which will be all to the good. Australia. The Prime Minister praised the His perspective will incline towards mild austerity and in this he will take the fight up to the interviewer, Emma Albericci, saying “good senate for their refusal to acknowledge the need for fiscal consolidation. Fraser’s message will on her for having a go. I think she spoke for Australia on this occasion”. He also be simple: you can fix the structural deficit the hard way or the harder way. It’s time that the thanked Opposition Leader for public was given this message as bluntly as possible and John Fraser is likely to be the man to his “very constructive engagement” with do it. the government on national security matters and signalled that new laws currently before The Foreign Fighters Legislation the parliament “will make it easier to ban organisations like Hizb ut-Tahrir”. The Joint Committee on Intelligence and Security has been meeting this week to consider the Counter-Terrorism Amendment (Foreign Fighters) Bill 2014. The bill is 160 pages long • It’s a dog fight: Although Carl Judge, who and, with the explanatory memorandum running to more than 200 pages, the committee has a was leader of the Palmer United Party in the very limited time to complete its consideration. A number of issues have emerged during the parliament until Wednesday, claimed that he and party founder, Clive hearings: the possibility that journalists could be jailed for visiting a proscribed area undercover Palmer, had parted on amicable terms, in order to report on misconduct by national forces; the definition of proscribed organisations; the pair have taken a couple of pot shots and the fact that the sunset provisions specify a period of ten years before a review. at each other. The Clivenator said that Mr The case for the bill is based on the fact that the current ‘Foreign Incursions Legislation’ Judge was only “standing in as leader” and requires the prosecution to prove that a person travelling to a conflict zone did so for the asserted that his party needs “a real leader able to deliver results for Queenslanders”. purpose of engaging in a terrorist act. Under the new law, all the authorities need to do to For his part, Mr Judge told reporters establish the offence is to demonstrate that the person charged went to, say, Northern Syria. The yesterday that he quit the PUP, leaving defendant can then prove that he or she went there for a lawful purpose. it without a member in the Queensland Appearing before the committee on Wednesday, Brett Walker pointed to these issues as legislature, to stand as an independent because “we’re seeing … faceless people problematic. He also made a strong case for the removal of preventative detention orders behind political parties, driving a political (PVO’s) from the legislation. Walker has consistently made the case that PVO’s are useless in agenda rather than a public agenda”. Judge this context because they do not allow the questioning of suspects. will team up in an independent alliance with his predecessor, Dr Alec Douglas, Faulkner Lets Fly who quit the PUP 2 months ago alleging a party culture of “jobs for the boys” and In a passionate speech to the Light on the Hill Society, meeting at the Revesby Workers Club a lack of democracy in pre-selections. At on Tuesday night, Senator John Faulkner told traditional party supporters that Labor must the time Palmer said he was confident that modernise and increase internal democracy by giving more power to the rank-and-file, re- Mr Judge would lead the party to the next evaluating its relationship with the unions and “undemocratic” factions and eliminating the state election. “stench of corruption” in NSW. He said that those in the party who opposed reform were steering the party onto the rocks. • ABS pulls unemployment numbers: Bureau of Statistic’s seasonally “I say to those who resist opening up our structures to more participation and more democracy adjusted unemployment figures have been because they see their control over managed and pre-negotiated outcomes slipping away: stop volatile since it adopted a new methodology clinging to the wheel,” Senator Faulkner said. “You are steering us straight for the rocks.” to determine that set of numbers back The Senator, a 25-year veteran of parliamentary rough and tumble and a long standing in July this year. In the wake of a series of rogue results, the Bureau’s decided supporter of pre-selection of upper house candidates entirely by the rank-and-file, backed far- to withdraw the data and use a different reaching moves to enhance democracy within the Labor party, moves which go well beyond methodology. It’s hired external consultants those supported so far by opposition leader Bill Shorten. “We must rebuild Labor from the to review the problem and Treasurer Joe grassroots — not the top down,’’ he said. Hockey, who’s in Washington for an IMF Faulkner said that he felt as if he was beating his head against a brick wall but, he added, he meeting, told reporters that he’s asked the Treasury Secretary to investigate the wouldn’t stop arguing for what he believed to be right, necessary and in Labor’s best interest. matter. While there’ll be no seasonally The current contempt for politics in Australia derives from a lack of trust in the political adjusted figures released for September, process and a view that politicians were only in it for what they personally could get out of it. the raw data, released yesterday, indicates “Without trust, politics is a contest of personalities, not ideas; a contest with no more relevance that unemployment rose in line with expectations by 0.1% during the month than an episode of Masterchef,” Senator Faulkner said cuttingly. to 6.1%. Faulkner says that trust is essential to governments: “On that consensus of trust rests the Michael Keating operation of our government: the ability to make decisions, even where they may not be Parliament House, Canberra popular; the ability to pass laws, even where they constrain or disadvantage some members of Tel: (02) 6273 3001 the community; the ability to assign what may be scarce resources to priorities, and therefore [email protected] not to other areas or interests.” There’s a message in the Senator’s speech for both sides of politics. Copyright © 2014 – published by Keating Media Pty Ltd, ABN 66 141 863 078, LPO Box 8305, ANU Acton ACT 0200, Australia Tel: +61 (0)2 6273 3001 - Email: [email protected] - Website: www.insidecanberra.com Inside Canberra is a Trade Mark of Keating Media Pty Ltd. Inside Canberra October 10, 2014

2 The Government will Compromise on the Budget The opposition has been unable to contain its schadenfreude. “I mean this budget is out of control,” The current said on Monday. “We’ve seen massive budget dysfunction.” He was referring to a statement by Joe Hockey from New York on Sunday that the budget was under pressure because of the situation will not decline in commodity prices which, it’s estimated, will cost the budget $2 billion more than forecast have come as a this year and $4 billion next year. Hockey also has to accommodate the expenditure on national security surprise to Hockey and defence associated with the campaign against terrorism which will cost an estimated $1 billion a year. These factors, when combined with the senate’s refusal to pass about $10 billion worth of budget savings, risk making Hockey look as ineffectual as his predecessor, . The current situation will not have come as a surprise to Hockey. In the Budget Statement No 2 on the economic outlook, released in May, Treasury forecast that the economy was likely to grow at below trend and that government revenue was likely to decline. The government’s objective, as stated in the budget papers, was to introduce fiscal consolidation in a way that wouldn’t impact on growth. The statement forecast a fall in commodity prices with coal prices weak and iron ore prices easing. However the statement was overly optimistic: nominal GDP was forecast to grow at 3% in 2014-15 before strengthening to 4.75% in 2015-16. This week the IMF has reviewed these forecasts and adjusted them down to 2.8% in 2014-15 and 2.9% next year. This will probably see the forecast budget deficit of $30 billion for this year revised upward in December’s MYEFO and Hockey forced to explain why the budget isn’t “out of control”. The budget had an underlying strategy based on a modest contraction in government spending that was to be offset by an increase in infrastructure investment which would have a large multiplier effect. To an extent this has been thwarted by the senate action which will necessarily limit the infrastructure spend Neither the fiscal because Labor and the Greens are opposed to the asset recycling programme because it involves the consolidation nor privatisation of state assets. The government’s objective was to encourage the states to sell mature assets the infrastructure and to invest the proceeds into new infrastructure. The federal government would provide a subsidy of 15% of the value of the asset sold. The idea was to leverage $5 billion of Commonwealth funding into investment is $40 billion of investment over the next five years. At the present time neither the fiscal consolidation occurring to a nor the infrastructure investment is occurring to a degree that will have the impact on the economic adjustment the government needs. degree that will The truth is that the economic circumstances confronting Hockey are a lot tougher than those that have the impact confronted the . Wayne Swan liked to say that he had the burden of the global on the economic financial crisis to deal with but, when the Gillard government came into office, nominal GDP was growing at close to 9%. It was in this context of abnormal revenue growth that Labor put in place long adjustment the term expenditure programmes that were based on assumptions that this level of revenue growth would government needs continue indefinitely. At the moment Joe Hockey has to deal with revenue growth that has fallen to 4% and a senate that wants to retain the expenditure based on much higher growth trajectories. It’s not all doom and gloom: the IMF forecasts that unemployment will peak at 6.25%, which is in line with the Treasury forecasts (although all recent seasonally adjusted unemployment figures are now in doubt given that the ABS has conceded they’re unreliable and pulled them). The Reserve Bank of Australia says that the long awaited transition from the mining to non-mining activity is gathering pace. Business confidence is on the rise and retailers are looking forward to their best Christmas in several years. Commercial construction is expanding and residential construction has seen its biggest rise in 9 years. Despite this, the Treasurer says that the budget will take “a hit” from a slowing world economy and the fall in commodity prices. However Hockey’s determined not to gild the lily: he says that the mid-year economic forecast and outlook (MYEFO) would be realistic about the state of the economy and the state of the budget but it’s not going to be a mini-budget. The government’s resolutely pressing ahead with its current budget measures even though some of them are unlikely to be passed. Measures that are currently being blocked include $5 billion in university reforms, $2.2 billion in fuel tax increases, $3.5 billion in GP co-payments, $1.3 billion in changes to the pharmaceutical benefit scheme, $9 billion in welfare savings and $5 billion in savings that Labor announced in government but rejects in opposition. The political and economic imperatives now make it crucial that the government break the impasse over the budget however they have to do this in a way that doesn’t leave them looking weak and The political incompetent. The first move should be to postpone the paid parental leave initiative until the budget’s and economic in surplus. This would save the budget $20 billion over the forward estimates. The second move should imperatives be to take off the table the direct action plan to reduce carbon emissions: this would save $2.55 billion and its elimination could be blamed on Labor and the Greens. Thirdly the Greens should be pressured to now make it pass the fuel tax increases as a measure to help reach the 5% carbon reduction target in place of direct crucial that the action which they don’t like. Finally the opposition should be pressured to pass the measures which they included in the budget when they were in government but refuse to pass now. It could be pointed out government break that these measures must pass the “fairness test” since they attracted no objections when introduced by the impasse over Labor. These measures would go a long way to closing the $10 billion hole that Hockey confronts and the budget would give the government negotiating time to work on the other savings measures. The government needs to toughen up its message about the consequences of not taking action on the budget and John Fraser, the incoming Treasury Secretary, is well equipped to do this. Fraser’s message will be that the money supply is in danger of getting out of control and, if that occurs, the remedial action will be a lot more painful than the current savings measures and monetary policy is not controlled by the senate. John McDonnell Inside Canberra October 10, 2014 The Problems of the Economics of Science and Technology in Australia 3 In post-war Australia the natural jobs for a science and technology graduate were in the CSIRO, which looked after a few national champions like BHP and CSL, or in education. Unfortunately the world’s moved on and Australia’s structures are finding themselves irrelevant not just in the international supply chain but also in the local political discourse. To make matters worse, attempts by the science lobby to reconnect internationally at an economic level leave local graduates bewildered and left out as most graduates with the marks and track record to make desirable employees are overseas students. It is no surprise that this bewilderment shows up in the focus groups that the major parties consult on a regular basis. The average Australian is disconnected from these opportunities. Although its citizens enjoy the highest levels of education and technical qualification ever on an international OECD comparison, Australia is on the trailing edge. Now several decades after other OECD countries have made the connection between Industry and Research organisations Australia is following suit. Attempts by the In appointing Larry Marshall, a man with Silicon Valley business development credentials, as head of the science lobby CSIRO, Industry Minister Ian Macfarlane said: “Dr Marshall would guide CSIRO through a significant new phase in which the national science and research institution will play an increasingly important role to reconnect in the Australian economy.” internationally However the real problem is this: Australia’s leading the G20 in pursuing renewal of business models at an economic through financial and taxation policies and innovation. Given that its science and industry policies should be aiming at the new paradigm that is the road map for the G20 to 2015, it is a pity that there seems to be level leave the no clear coordination between Hockey and Macfarlane. The Treasurer told the Centre for International local graduates and Strategic Studies in Washington DC this Wednesday (US time) that “The G20’s achievements this bewildered year have been considerable. The nations that sit around the G20 table can honestly say “we made a contribution”. Given that we have Leaders of 85 per cent of the world’s economy sitting at the table, it is timely to recognise that our deliberations can make a significant difference. To my colleagues and the many who support our work, I say thank you. Whilst our Presidency may end in December, our efforts in support of the G20’s work will not diminish. There is still much work to be done to stimulate growth, to facilitate job creation, and to build infrastructure that delivers enduring prosperity for all our communities”. Given that we’re shifting with commitment to a new paradigm, maybe we should look beyond next year and not just go down the well-trodden paths of others who have been successful in the past. Roger Hausmann

‘a better class of sunset’ – The Collected Writings of Christopher Pearson Introducing the Prime Minister who, together with South Australia’s (Labor) Health Minister Jack Snelling, launched the book a week ago last Wednesday, Nick Cater, one of its two editors, quoted Pearson’s 2007 article ‘The Candidate’: “In the post-election upheaval, few in the commentariat rate The articles are highly as a contender ... However he’s the Liberals’ best bet.” Abbott observed wryly that, nicely arranged, while he may have been able to convince the party he was the best leader, “I only wish I could do the same thing with the voters”. under typically The book, a compilation of some of Pearson’s articles culled from 20 years of writing for the Pearsonian Review, the Australian and the Financial Review, reflects the extraordinary breadth of his interest in, and the depth of his knowledge of, matters ranging from politics, art, literature and music, theology and food headings, in to modern manners for his considerable number of godchildren and adoptive nieces and nephews. groups which The articles are nicely arranged, under typically Pearsonian headings, in groups which reflect the extent reflect the extent of his interests and enthusiasms. Looking at the contents list I concluded that it was a ‘dip and set aside till later’ kind of book. I marked a dozen or so pieces which, I thought optimistically, would prove fertile of his interests and sources for the odd quote. That was about midday on Wednesday. I finally fell asleep on the book, close enthusiasms to 3 o’clock yesterday morning, having read a great deal more of it than I’d planned. Many will disagree with Pearson’s views, particularly his thoughts on politics and the history and culture wars, but few will be the worse for having read ‘a better class of sunset’, if only for the elegance of his writing. “Like most people who make their living by writing … I have a particular dread of being silenced by a stroke. To be sidelined … made inaudible or perhaps incomprehensible even to those closest to you, would be a grim dress-rehearsal for mortality” (in ‘Mortal Questions’ 2006). And on preparing children for leaving home (in ‘The Perfect Pantry’ 2008): “It’s important that learning about tea be understood as an ordinary pleasure rather than an exercise in snobbery.” Never a man afraid to expose a lie, his meticulous research (even before Google) and wide reading thoroughly equipped him to know one when he saw one. Rebuffing arguments in Robert Manne’s 2001 Quarterly Essay, ‘In Denial: the Stolen Generation and the Right’, Pearson says: “The truth is the truth, Never a man and it can’t be relativised away.” afraid to expose a The book’s final article, which lends its name to this collection, is a touching reflection on the lie, his meticulous consolation to be had from sharing poetry and music with friends. Writing in May 2013, just four months before his death, Pearson says “There is something tender and heartening about listening to great music research (even and poetry with people you are fond of, no doubt because … it affords a rare occasion for some of life’s before Google) choicest pleasures to be shared”. Christopher was very much that kind of person and occasions for sharing were, for him, not so rare. thoroughly The Prime Minister closed his speech at the book launch with the observation that “I have always equipped him to believed words were important. Long after our lives and deeds have been forgotten, our words are know one when he there as monuments to what we thought”. This book goes a long way to building that monument for Christopher Pearson. saw one Kate Critchley Inside Canberra October 10, 2014 4 Holes in the Australian - Indian Nuclear Arrangements? The – like Gillard’s before it – is delighted at the prospect of selling uranium to India. Not only does it see it in trade terms, but as a way of deepening Australia’s relationship with a Carlson believes nation with which we’ve not always had a sufficiently comprehensive engagement. the Indians are Never mind, the politicians have concluded, that India isn’t signed up to the nuclear non-proliferation treaty. The Indians have been responsible with uranium; they are seen as trustworthy. An agreement has jacking up on the been concluded between the two countries and will be examined by the parliamentary committee that issue of “tracking” reports on treaties. A detailed administrative arrangement is being negotiated. All looks smooth. But is it? Australian John Carlson, a non-resident fellow at the Lowy Institute, has raised (in current parlance) a red card. Carlson knows more about these things than almost anyone around; he was director general of the uranium Australian Safeguards and Non-Proliferation Office from 1989 to 2010. ASNO’s brief is officially described as “enhancing Australian and international security through activities that contribute to effective regimes against the proliferation of weapons of mass destruction”. Carlson believes the Indians are jacking up on the issue of “tracking” Australian uranium which means doing the necessary accounting so it can be identified and tracked under the agreement. India believes that these measures are not necessary because international safeguards arrangements provide adequate cover. But Carlson says that, without a full accounting system and tracking, Australia has no way of knowing, over a period of years, what is happening to the uranium and material such as plutonium produced from it. The Canadians ran into this problem some years ago. Officials were concerned when they could not get India to incorporate the detailed checks but the Canadian government intervened and said enough information was being provided. The Americans are still bogged down in negotiations over these details, Carlson says. He says that, if the subsidiary “administrative arrangement” that Australia will finalise with India over coming months does not contain the proper conditions, it would, in legal terms, negate the agreement. While the agreement is public the administrative arrangement won’t be. Carlson, who will make a submission to the parliamentary inquiry into the agreement, argues that committee should wait for the administrative arrangement and insist on seeing it, if necessary at a private hearing. He also thinks the Abbott government should put it to the new Indian government that proper “tracking” and accounting arrangements are non-negotiable legal requirements. Not that he expects this to happen. The word around the nuclear traps is that the Prime Minister’s Office is all for flexibility. Michelle Grattan

Why Abbott Will Never Go into Syria The allies’ Despite sustained US-led air strikes over the past few days on Islamic State positions in Kobane which strategic objective appear to have pushed the militants back from the Turkish border, saving the city was never a priority for is to force ISIL the West: the strategic priorities are protecting Iraq and the oil facilities in particular. The air strikes will now aim to keep ISIL locked in Syria while those in Iraq are pushed back. back into Syria The west has no natural allies in Syria where the Free Syrian Army is now defunct. Northern Syria and to seal the is currently controlled by different groups of Jihadists all of which are opposed to “the Crusaders”. However ISIL is not yet the dominant group and for the moment is hemmed in on its northern border by Iraqi border Turkey and, in the west, by Hezbollah which will fight to stop them gaining a foothold in Lebanon. In the south it has to contend with Bashir al Assad who, it’s been revealed recently, still has chemical weapons. The strategic situation in Syria is murky: Turkey wants Bashir al Assad removed and replaced by a leader who is more congenial from the Turkish point of view. Hezbollah and their masters in Iran want Assad to stay and most of the neighbouring countries like Jordan just want stability in Syria so that the Syrian refugees can go home. The allies’ strategic objective is to force ISIL back into Syria and to seal the Iraqi border. If this is done and the other borders are also sealed ISIL will eventually be destroyed by its autarky. The Greens’ fear that the government will engage in mission creep and, sooner or later, send ground troops into Iraq and Syria is an unlikely scenario. It’s senseless to mount a campaign in Syria if the West’s only possible ally is Assad. The whole point of the Iraq campaign is to develop an Iraqi army that’s capable of protecting its territory in the long term, not to undertake the fight for them. The biggest issue for the allies is gaining the support of the Sunni tribes in Iraq, a large proportion of whom are now on the ISIL bus as a better alternative to the Iraqi government bus. The former head of the CIA, Leon Panetta, says getting them to feel part of a united Iraq will take thirty years. William Perry Screaming Point Human rights for “He has a lot of enrichment: colour television, cable and stereo, but he likes to be alone.” chimps? Pat Laverty, owner of Tommy the Chimp who’s fighting for his ‘human rights’ in the New York Supreme Court.

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