in The extensive publicity surrounding the Institute’s report on downshifting (Discussion Paper No. 50) has thrown con- servatives into confusion. What does an economic rational- ist say to people who exercise their free choice and decide to reject the values of consumer society? That’s not in the texts. reports.

No. 34 March 2003 Despite the fact that we are three times able to opt for a 20 per cent reduction in richer than in the 1950s, nearly two- pay and, in exchange, take every fifth year thirds of Australians say they cannot off to do whatever they like. Downshifting in Australia afford to buy everything they really need. Clive Hamilton And it’s not just the poorest who While the reasons for downshifting complain. Nearly half of the richest 20 identified by the Institute’s survey are Pornography on the per cent of households say they do not diverse - more time with family, more Internet have enough money to buy what they balance, more fulfilment - those making Clive Hamilton need. the change share a belief that excessive pursuit of money and materialism The PC’s blind spot These ‘middle-class whingers’ are caught comes at a substantial cost to their own in a life-long quest to make their incomes lives and those of their families. Should sports stars get a match their consumer desires; and free ride? because their desires always outstrip their incomes they constantly feel deprived. The middle-class whinger is Consumer society relies on the never- a close cousin of the ending creation of desire for more. aspirational voter. Young run from health cover But some people manage to break out Richard Denniss of the cycle. New research by has uncovered a large The middle-class whinger is a close Grog and cigs up? but hidden class of citizens who cousin of the aspirational voter in Richard Denniss consciously reject the trappings of whose hands, the pundits tell us, material success. Our Newspoll survey government lies. These voters aspire to Who should pay for found that over the last 10 years 23 per wealthy lifestyles characterised by trophy maternity leave? cent of Australians aged 30 to 59 have homes, private schooling, flash cars, Bruce Chapman & Rishab Sethi made a voluntary long-term change to home theatres and whatever else marks their lifestyles resulting in earning less them out as having ‘made it’. Such 4WDs: The axle of evil money. The figure excludes early retirees, voters are open to political bribery. Richard Denniss those returning to study and women resigning to have babies. But for downshifters the ‘hip-pocket Rupert’s bunnies nerve’ has been cauterised. They might Some employers are responding to the be called ‘anti-aspirational voters’. For Institute notes cultural revolution reflected by these every anti-aspirational voter another ‘downshifters’ by introducing greater remains in the closet; they agree with work flexibility, with the federal the basic values and life priorities of Employment Department announcing downshifters but lack the resolve or, in in January a new deal that allows public some cases, the wherewithal, to make servants to sacrifice pay for an extra two the transition to downshifting. months annual leave. They can also choose more family-friendly hours. For The survey results show that the some time teachers in NSW have been phenomenon is by no means confined THE AUSTRALIA INSTITUTE

to middle-class professionals and successful business people who can Why Australians downshift (%) afford to cut their incomes. Downshifters certainly include people 35 in this category, but they are just as likely 30 to be low and middle-income people who have decided to accept reduced 25 incomes, live more simply and spend 20 more time on activities other than making money. 15 10 The numbers of Australians taking the downshifting path appear to be 5 growing. Many are baby boomers who 0 have done well financially, but just as More Time with More Healthier Post- Other many are in their late 20s and 30s. balance family fulfilment lifestyle materialist Younger downshifters are somewhat more likely to articulate post-materialist values, those that explicitly reject Downshifters frequently report that of downshifting in favour of simpler and they feel the weight of social pressure more sustainable lifestyles. Many have because of their decision. They are Downshifters do not complain: they taken advantage of the flexibility seen to be ‘crazy’ to reject higher in- quietly go about their lives. There is a permitted by the deregulated comes and the accoutrements of ma- clash between their values and those em- labour market. They can more easily terialism. Or they are accused of try- bodied in Australia’s political culture. change jobs, work independently, ing to cover up failure. But They are disenfranchised because much reduce their hours and negotiate downshifters have simply chosen bal- of the political debate is preoccupied more time off. anced lives rather than lives obsessed with things in which they have no inter- with material acquisition. Those who est or actively reject. Role models remain the prisoners of overwork and consumer dreaming, who find them- Rejecting the consumerist definition of selves beset by stress, ill-health and success takes courage, and the absence family strain, will soon be seen as the of everyday role models makes it all Downshifters do not crazy ones. the more difficult. It is unusual for demand that govern- prominent people to reject these values ments solve their The old political parties compete with and when they do – as in the cases of problems for them. former National Party leader Tim each other to demonstrate concern for Fischer and Chair of the ACCC Allan ‘struggling families’, promising tax Fels – their decisions to step down for cuts and middle-class welfare. The po- family reasons attract widespread and litical system is geared towards trying sympathetic attention. But because they to satisfy the noisy demands of Unlike middle-class whingers, have been earning high salaries for a middle-class whingers, demands that downshifters do not demand that gov- long time they do not provide suitable can never be satisfied because com- ernments solve their problems for them. role models for ordinary people think- plaining is endemic as long as wealthy They have been offered a ‘fistful of dol- ing of taking the plunge. people feel somehow deprived. lars’ but have said ‘no thanks’. And those who have consciously made a downward bracket leap are not worried How Australians downshift (%) by bracket creep. They are more likely to 30 ask the Government to ratify the than give them a $30 a week tax 25 break. They remain concerned about 20 affordability; after all, they have reduced their incomes. But they have also proven 15 to themselves that they can do without 10 many of the things they previously took for granted. 5

0 The emergence of a large class of Lower- Reduce Stop Change Other paying hours work career downshifters in Australia challenges the job Continued on page 11

2 THE AUSTRALIA INSTITUTE Pornography on the Internet In early March the Institute released research advocating greater liberalisation of censor- ship laws governing pornography on the Internet. This may come as a surprise to many readers of this newsletter. After the storm of publicity created by the Institute’s two papers, many may have formed the impression that the authors of the papers were advocating a crackdown. Clive Hamilton, one of the authors, explains.

At present there i,s in effect no males are likely to be at least as strongly and freely available on the Internet, censorship of pornographic materi,al on affected by exposure to violent includes pictures showing women being the Internet with the exception of child pornography as the young men on raped, acts of bestiality and extreme pornography which is vigorously whom much research has been fetishes such as coprophilia. suppressed. By law, however, it is illegal conducted. for an Australian Internet Service The authors took the view that while Provider (ISP) to host material that In our view, the research literature’s X-rated videos routinely portray sex in would be R-rated, X-rated or refused documentation of significant ways that are dehumanising and classification if it were on film or video. associations between adult use of certain degrading to women, the existing video So some material that is legal for adults types of pornography and sexual classification and regulatory system is to see on film and video is illegal for aggression is of real concern. It is likely about right, and it would be futile to Australian ISPs to host on the Internet. that similar relationships exist among attempt to use the censorship But, in practice, adults and indeed teenagers: consumption of some types classification system to address these children in Australia have easy access to of pornography is associated with broader aspects of gender relations in a vast range of pornographic materials sexually aggressive attitudes and Australian society. on the Internet via overseas ISPs. behaviours. This association may be particularly strong for the four to five However, there are strong grounds for This is why virtually all pornographic percent of 16 and 17-year old boys in concern about exposure of children to material on the web is from abroad. our study who watch X-rated videos some of the depictions of violent and There are no sanctions in practice because and view Internet sex sites every week. extreme pornography on the Internet. the IT industry has convinced almost The reports call for mandatory filtering everyone that to attempt to stop it What is pornography? of pornographic content by Australian would be unworkable or prohibitively ISPs. expensive. But the ISPs have pulled the If there is one crucial point that the wool over our eyes in a so-far-successful Institute’s research attempted to make, The reports, while attracting strong attempt to protect the profits they derive in part through its content analysis of support in the community, have been from the huge amount of pornographic pornography, it was that a distinction criticised by two groups – libertarians material that is downloaded daily. Apart must be drawn between what may be and the ISPs themselves. from strident claims that ‘it won’t work’, called ‘mainstream pornography’ (the the ISPs have not been able to back up sort of material that is permitted on X- Some libertarians have attempted to their position. rated videos) and what the authors have characterise the authors as wowsers, dubbed ‘violent and extreme although the Institute’s track record on The Institute’s research demonstrated pornography’. The latter, which is easily issues such as family structure makes this firstly that exposure to pornography on video and the Internet is widespread Newspoll survey of 16-17 year olds (%) amongst teenagers (see the table). It also carried out a thorough review of the Respondent gender Boys Girls literature on the effects of exposure to Watching X-rated videos is widespread among boys 84 84 pornography and determined that the research evidence is sufficient to conclude Watching X-rated videos is widespread among girls 15 4 that frequent exposure to pornography, Personally watch X-rated videos 73 11 and especially violent pornography, is probably responsible for an increase in ...at least monthly 21 0 sexual aggression, and certainly Looking at Internet sex sites is widespread among boys 88 83 strengthens attitudes that are more Looking at Internet sex sites is widespread among girls 16 7 accepting of sexual coercion and rape. Accidental exposure to sex sites on the Internet 84 60 While little research has been carried out Deliberate exposure to sex sites on Internet 38 2 on minors, for obvious reasons, it is reasonable to conclude that teenage ...at least monthly 11 0

3 THE AUSTRALIA INSTITUTE

difficult to sustain. Moreover, the books, films, TV, videos and the The Institute commissioned Newspoll reports call for a liberalisation of laws Internet for both political and to survey parents of 12-17 year old governing Internet porn. As long as it pornographic content. The Australian teenagers. As the tables on the next page is reasonably certain that children are not government does not censor any of show, it is apparent that parents are very being exposed to pornographic these for political content but effectively anxious about easy access to Internet material, the authors support the censors all but the Internet for pornography with 85% expressing hosting of X-rated material on pornography. concern about their children seeing Australian ISPs accessible to adult users pornography on the Internet and 61% who can verify their age. It is hard to see why the extension of saying they are ‘very concerned’. effective censorship to Internet There are two strands to the libertarian pornography (which is the subject of Three quarters of parents of teenagers argument. The first is that no-one censorship laws already) will bring on say that the Federal Government is not should have the right to determine what an authoritarian regime in this country. doing enough to protect children from people see, and if parents are concerned On paper, we already have censorship Internet pornography and 93% would they should monitor their children more of the Internet in Australia; it is simply support automatic filtering of closely. According to this logic, we not enforced vigorously for perceived pornography going into homes. should have a pornographic free-for-all practical reasons. The fear of political n on video, including pictures of rapes censorship of the net in Australia has a and bestiality and, indeed, child hint of paranoia about it. pornography, and the decision to look at it is up to the consumer. If parents People across the political spectrum have are concerned then they should ensure been persuaded that there is something The politics that their children do not buy such sacrosanct about the Internet. For many videos. on both the left and the right it is seen as the people’s mode of of porn And why stop at videos? Why not have communication, an anarchic network a pornographic free-for-all on day-time that has evaded control by big television? The answer, of course, is that corporations. Others see it as the frontier The Institute’s reports on youth there is a social as well as a personal of a technological nirvana and the motor exposure to pornography could have interest in controlling this sort of of economic dynamism for decades to been a nasty trap for the Government. material. come. The Communications Minister Senator Alston is on the record declaring that Yet it is surprising how many This starry-eyed view of the Internet has the Online Content Co-Regulatory ‘progressive’ people appear to hold the been exploited for all it’s worth by the Scheme is highly effective and is libertarian view unthinkingly, including industry and has made it largely “making the Internet safer for prominent academic commentators untouchable. But in the end the Australians and protecting Internet such as Kath Albury and Catherine Internet is no more than a useful tool users – especially children – from Lumby. Ultimately it is a position for communication and the ISPs are just unsuitable and offensive material”. As lacking subtlety and discernment as it another industry that should be one Institute staffer observed: “This is fails to distinguish between types of regulated for the social good like any a no-brainer for Labor”. pornography. Nor does it make a other. It is bizarre that we have ceded distinction between the impacts of control over social policy on an issue as When the results of our study were violent and extreme pornography on important as youth exposure to violent carried on the front pages of the Sydney adults, who have a sexual frame of and extreme pornography to a collection Morning Herald and The Age on March rd reference for understanding what they of IT nerds. 3 Senator Alston dangled one foot in might see, and children, who do not. Forms of censorship in The China syndrome Australia and China

A second libertarian objection might be called the China syndrome. The Australia China argument goes like this. China censors Political Porn Political Porn the Internet for political content and pornography; if we allow mandatory Books P P P censorship of the Internet in Australia Films P P P we are in danger of going down the same path. Government will begin to TV P P P encroach on our political freedoms. Videos P P P A glance at the table should dispel this Internet ? P P view. The Chinese government censors

4 THE AUSTRALIA INSTITUTE

Parental concern about children seeing Internet pornography (%) The PC’s blind spot Response % In its recently released analysis of Very concerned 61 subsidies to Australian industry by Somewhat concerned 20 Commonwealth and State governments the Productivity A little concerned 5 Commission concluded that more than Total concerned 86 $14 billion in assistance was granted by Not concerned 14 all levels of government in 2001-2002.

Don’t know 1 While the Commission estimated that the Commonwealth Government spent $3.9 billion on industry assistance, Source: Newspoll for The Australia Institute we wondered about what the PC failed to include in its list of subsidies. Whether the Federal Government is doing enough to protect teenagers from pornography on the Internet (%) In the section titled ‘health and community services’ the Wide Bay Burnett Structural Adjustment Program Response Total Male Female is listed with a total cost of $100,000. Should be doing a lot more 60 54 65 But no mention is made of the Should be doing a little more 15 11 18 estimated $2.3 billion subsidy provided Total more 75 65 83 to the private health insurance industry through the Howard Government’s 30 Is doing enough 13 17 9 per cent rebate. None/Don’t know 13 18 8 The $2.3 billion in tax rebates to the private health insurance industry exceeds the Howard Government’s total tax the trap by having his spokesperson Government takes the issue very expenditures for the manufacturing, criticise the reliability of the Newspoll seriously and tougher measures will be mining, agricultural and services sectors survey. investigated. combined. But within hours of the first news A no-brainer for Labor has turned into reports, Labor’s IT spokesperson a nightmare waiting to happen. Now C’mon Productivity Commission, we Senator Kate Lundy issued a media when the Government introduces new thought you were supposed to be the release saying that while exposure of laws to protect children from violent and hard-headed exposers of economic children to pornography is a terrible extreme pornography Labor, having inefficiency. OK, maybe the money goes thing nothing can be done about it, declared that they won’t work, appears into the pockets of customers rather other than urging parents to do better. locked in to opposing them. than directly to the funds themselves, but we bet the car industry would not Senator Lundy then batted all week for Just how close is Senator Lundy to the be complaining if the Federal the IT industry. In the opinion pages IT industry? Three months ago she Government promised a 30 per cent of the Times she argued released under her own name a paper rebate on all vehicle purchases. strongly against the Institute’s proposal calling for “a strong legislative regime to regulate the Internet to stop children specifically addressing spam” on the Hey, that’s not a bad idea. A 30 per cent seeing violent and extreme Internet. Decrying the fact that “users rebate on the cost of new cars would pornography. The only answer to net are left to their own devices” to deal with take the pressure off the public transport porn is to ask parents to be vigilant, unsolicited emails, the paper canvasses system and give people more choice! she wrote. a range of legislative means for dealing with spam which should “play a crucial While Labor was listening to the ISPs, role in addressing the problem”. can legislate to stop spam, but laws to the Prime Minister understood stop pornography would be instinctively the politics of porn, It is hard to understand why Senator “unworkable” and “inappropriate”. including the deep concern among Lundy favours a strong legislative parents and the backbench. Over-ruling regime to deal with spam, which is Why Labor would allow its social policy his Communications Minister, he told annoying, but flatly opposes legislation on such a sensitive issue to be his caucus that the current system is to deal with pornography, which is far determined by its IT spokesperson is a obviously not working, the more insidious. She maintains that we mystery. n

5 THE AUSTRALIA INSTITUTE

Should sports stars get a free ride? Sports stars including Lleyton Hewitt, Cathy Freeman and Shane Warne have benefited from taxpayer funded assistance via the Australian Institute of Sport. The Institute has pro- posed a HECS-style scheme under which sports stars who make the big time would be required to pay it back. Richard Denniss explains. Despite the fact that public assistance training. By setting the threshold at a The Commonwealth Government, can run into the tens of thousands of high level the scheme ensures that it is while not dismissing the idea of a HECS dollars per year, AIS graduates, unlike only those athletes who can convert elite type scheme for athletes, has claimed that their university counterparts, are not sporting success into elite incomes who it would be too administratively difficult. required to make any contribution to would be asked to make a contribution. However, given that athletes’ agents the cost of their training once they manage to monitor the earnings of succeed in turning their elite sporting An important issue in designing a athletes in order to extract their performances into elite incomes. HECS type scheme for athletes is the commission, it should not be excessively fact that many highly paid graduates of difficult for the Government to ensure Athletes at the top of popular sports the AIS earn their incomes outside compliance. have the capacity to earn extremely high Australia. Many sportspeople, particularly soccer players, are residents incomes. While average Australians with While the amount of money raised from of other countries. Pat Rafter has shifted full time jobs earn around $40,000 per such a scheme would not be substantial his residency to Bermuda in order to year, and university graduates begin in the context of the entire avoid paying taxes in Australia. their HECS repayments at only $24,000 Commonwealth budget, the per year, to qualify for the top 50 sports To overcome this problem it would be opportunity exists to raise sufficient earners in Australia required an income necessary to ask all athletes offered funding to either increase the number in excess of $1 million in 2002. Between scholarships by the AIS to sign a of scholarships to elite athletes or to them the graduates of the AIS in the contract which commits the athlete to improve funding for encouraging top 50 sports income earners earned making contributions in accordance participation in community sport. more than $50 million dollars in 2002. with the repayment thresholds. The Similarly, given the role model status of contract would commit athletes to athletes in Australia it is important that The scheme put forward by the Institute making a contribution to the costs of welfare recipients see that ‘mutual would require sportspeople who sign their training in years in which their obligations’ are not imposed only on up to AIS programs to begin to repay income exceeded the threshold. the vulnerable in society. n their debt once their incomes reached $100,000. University graduates are required to begin to repay their HECS Ex-AIS athletes among the top 50 sports earners 2002 debts when their incomes reach $24,365. Ranking Name Sport Estimated Period of AIS The objective of setting the repayment gross earnings support threshold at such a high rate is to ensure that young people are not deterred from 2 Lleyton Hewitt Tennis $18,800,000 1993-1994 participating in elite sport. Many elite 4 Mark Viduka Soccer $7,500,000 1992-1993 sportspeople, especially ones training 10 Craig Moore Soccer $3,750,000 1992-1993 for sports that attract less attention 14 Marco Bresciano Soccer $3,000,000 1997 from sponsors, are unlikely to earn significant income from their sports 14 Josip Skoko Soccer $3,000,000 1992-1993 21 John Aloisi Soccer $2,000,000 not known 21 Robbie McEwen Cycling $2,000,000 1994-1996 29 Cathy Freeman Athletics $1,720,000 1992-1995 30 Shane Warne Cricket $1,700,000 1990-1992 31 Glenn McGrath Cricket $1,500,000 1992-1993 31 Kevin Muscat Soccer $1,500,000 not known 31 Lucas Neil Soccer $1,500,000 1992-1995 40 Adam Gilchrist Cricket $1,300,000 1991 40 Brett Lee Cricket $1,300,000 1995-1996 47 Brett Emerton Soccer $1,000,000 1995-1996 47 Hayden Foxe Soccer $1,000,000 1994 47 Michael Klim Swimming $1,000,000 1994-2000

6 Source: Business Review Weekly THE AUSTRALIA INSTITUTE

Young run from health cover The Howard Government’s scheme to promote private health insurance is unfair and in a mess, as the Institute has been saying for some years. Richard Denniss takes up the story. Young people continued to desert of premium increases and declines in health insurance covering gym shoes private health funds in their thousands membership that the current system was and golf equipment while low income in the three months to December 2002. designed to fix. earners who cannot afford private health The Institute has been keeping a close insurance do not even have access to watch on the quarterly figures published The end of the gym shoe subsidised dental care. by the Private Health Insurance Administration Council (PHIAC). As In recent weeks the Government has In announcing its intention to address shown in the figure on the next page, announced an attempt to reduce the this problem, the Government stated the number of people under 40 has financial pressure on health insurers and that the health insurers will need to come been declining steadily while people increase the fairness of health funding up with a suitable arrangement. This over 50 continue to join up. by limiting the rights of the health could be a problem. If, under pressure funds to offer ancillary benefits with from the health minister, the health Changes in the age composition of the peripheral links to health such as golf funds come to an agreement to limit membership should be as much a clubs, camping equipment and classical the types of services offered to concern to the Government as it is to music CDs. customers will they be engaging in the private health insurers. Older people collusive behaviour as defined by the incur substantially higher health costs At present there is no limit to the kind Trade Practices Act? than younger members. This is due to a of benefits that health insurers may number of factors including the choose to offer their customers and the increased likelihood of hospitalisation, funds might just as well offer a free tank the increased likelihood of post- of petrol (perhaps to go on a relaxing The market failures in operative complications and the high holiday) as massages and gym club cost of treatments most likely to be memberships. Lifestyle benefits, such as the health industry required by older health insurance those listed above, have been used to are both numerous customers. induce people into taking out private and fundamental. health insurance. According to analysis by Dr Jim Butler of the ANU, some young people are Such an approach to marketing may be paying nearly $6 in premiums for every inefficient but should not normally be $1 they can expect to receive back from of concern to the Government. The Australian Competition and their private health insurer, and on However, given that the Consumer Commission (ACCC) will average people do not get a dollar back Commonwealth provides a 30 per cent need to assure itself that collusion has for every dollar they put in until they rebate on the total cost of private health not occurred and certify that the changes reach their early 50s. insurance premiums, ancillary benefits are in the interests of consumers. The increase the cost of the rebate to the ACCC, whose role is to protect Changes to the private health insurance Government. consumers rather than design system, particularly the introduction of government health policy, may rule that the Lifetime Health Cover rules, were an agreement between health insurers is designed explicitly to reduce the average anti-competitive and does not deliver age of health fund members. Younger More than any other in- benefits to consumers. If so, ancillary benefits will continue to drive up the people were encouraged and coerced into dustry, health demon- joining in order to lower the average age cost of both health insurance premiums of members, and in turn, to reduce the strates both the need and the 30 per cent private health average cost of each member to the for and effectiveness of insurance rebate. health funds. government interven- tion. A solution to this problem would be As the average age of members begins for the Health Minister, Senator Kay to climb once again the financial pressure Patterson, to change the law to exempt on the private health insurers is resulting a wide range of ancillary benefits from in higher insurance premiums. Higher The Australia Institute has long been a the 30 per cent rebate. While this insurance premiums in turn drive away critic of the current system which approach has the benefit of certainty and young, relatively healthy members, provides a 30 per cent rebate to people timeliness and places the Government, resulting in the same unsustainable cycle who can afford to take out top private not the private health insurance

7 THE AUSTRALIA INSTITUTE

industry, in charge of the health the provision of some services, it is However, as with our universal health insurance system it is not the preferred important that, from a policy insurance system, the effectiveness of course of action. The rebate should be perspective, the tail does not wag the the PBS is being undermined by a range abolished forthwith. dog.

The health market Recent steps to limit the extent of ancillary benefits covered by the 30 per The effectiveness of the The effectiveness of the Australian cent rebate constitute a small (very small) PBS is being under- health system is underpinned by the step in the right direction. However, at the same time the Government is mined by a range of extent of government involvement in government decisions. the industry. More than any other overseeing the collapse of bulk billing. industry, health demonstrates both the need for and effectiveness of Trading in the PBS? government intervention in the of government decisions. The Australia industry. The Australian health system is highly Institute is currently preparing a efficient by world standards. Our discussion paper which will consider The market failures in the health universal system of Medicare avoids the the threats posed to the PBS by the industry are both numerous and problems faced by many countries proposed free trade agreement with the fundamental. Patients do not have access where those who need health insurance U.S. to good information; individuals faced most, the elderly, the sick and the poor, with unanticipated illness do not have a are unable to afford it. The Government has referred ‘choice’ about whether they need repeatedly to the potential benefits to treatment or not; the pharmaceutical The Pharmaceutical Benefits Scheme Australia of achieving greater access to industry has substantial market power (PBS) has been described by an the U.S. agriculture market. There has and the necessarily rigorous restrictions American Professor of Public Health, been virtually no public debate about on who can practice medicine provides Richard Laing, as ‘the best drug pricing the costs to Australia of meeting the doctors also with substantial market system in the world. Australia is the U.S. demands for greater access to some power. one country which seems to have got it Australian markets, including increased right, that what you want to do in deregulation of our pharmaceutical The Government can, and should, play controlling costs is pay what the drugs market. n a central role in both the design and the are therapeutically worth’. This is why delivery of health care services. While the international drug companies don’t the private sector has a role to play in like the PBS.

Hospital Cover Membership by Age (millions)

4.60 2.85

4.55 2.80

4.50 2.75

4.45 2.70

4.40 2.65

4.35 2.60

4.30 2.55 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02

Under 40 (left hand scale) Over 50s (right hand scale)

Source: PHIAC

8 THE AUSTRALIA INSTITUTE Grog and cigs up? A recent web paper published by the Institute entitled Tax Flight? An analysis of the ‘duty free’ system in Australia considered the rationale for ‘duty free’ arrangements and pro- posed a range of reforms designed to improve equity and increase revenue. Its author, Richard Denniss, outlines the arguments. The sale of ‘duty free’ tobacco, alcohol percent of turnover is associated with Furthermore, a major objective of and other goods results in a loss of duty-free stores located in airports. placing high taxes on tobacco and more than $300 million each year in There are more than 150 duty-free alcohol is to discourage their revenue to the Commonwealth shops that are affiliated with the consumption on social and health Government. If tourism numbers, Australian Duty Free Association grounds. It is therefore difficult to both into and out of Australia, grow as employing around 4,500 people. The understand the rationale behind reducing rapidly as forecast then this lost revenue size of the duty-free industry is directly the tax payable on these substances when is likely to increase by around 10 per cent related to the number of travellers, both purchased at an Australian airport rather per year. to and from Australia, a number which than at an Australian bottle shop or is increasing rapidly. supermarket. The term ‘duty free’ is, for the most part, a misnomer. While goods purchased There is no obvious reason to provide While duty-free arrangements for from ‘duty free’ stores are indeed free tax-free shopping to some Australians international travellers are common of customs duties, the rate of duty simply because they temporarily leave around the world, in recent years imposed on imports in Australia, where the country. This is particularly so when substantial changes have occurred. it is levied at all, is usually only 5 per it is recognised that those Australians Increased economic interdependence in cent. The savings that are achievable from who travel abroad for holidays or on the European Community has led to duty free stores arise mainly from business tend to be wealthier than the abolition of duty-free arrangements avoiding large excises on alcohol and average. Cheap cigarettes and alcohol are for travel within the European Union. tobacco and the GST (levied at 10 per not available to those who cannot These changes were opposed by industry cent). afford to travel overseas. advocates.

As indirect taxes such as the GST are It is generally believed that nowadays The rationale for introducing the GST levied primarily to raise revenue or international air travel is available to all was to improve the simplicity and equity discourage certain kinds of Australians, but in fact it is dominated of the indirect tax system. The existence consumption, the rationale for the by the wealthy. The ABS household of duty-free shopping for Australian existence of duty-free shopping has expenditure survey shows that those residents creates both increased disappeared. in the highest income quintile (20 per complexity and reduced fairness. A cent) spend more than five times as number of policy responses is available Savings associated with some duty-free much on international holidays as those to enable the Federal Government to purchases can be substantial. For goods in the lowest quintile. In fact, people in reduce or eliminate the problems where excise is payable, such as tobacco the top 20 percent of incomes spend associated with the current system. and alcohol, savings can be more than almost twice as much on international 40 per cent. For example, a carton of While the simplest solution would be holidays as those in the next highest Peter Jackson Extra Mild cigarettes which to abolish completely duty-free income group. retails for $60.65 can be purchased duty shopping in Australia, such a move free for only $33.50, a saving of 45 per would see foreign visitors to Australia cent. These figures refer only to holiday travel decide to buy certain goods at duty-free and do not reflect expenditure on shops outside of Australia. For this Duty-free stores are estimated to business travel. It is likely, however, that reason, the following amendments to turnover between $1.1 billion and $1.3 high-income earners also dominate the the current arrangements are proposed. billion per year. Of this, around 20 international business travel market. They are summarised in the table. n Proposed changes to duty-free arrangements

Australian passport holders International visitors

Goods purchased in Australia No duty-free entitlement Existing arrangements for duty-free stores. Abolition of the Tourism Refund Scheme

Goods purchased abroad Existing $400 per adult duty-free Existing arrangements except for the entitlement but exclude alcohol abolition of duty-free importation of and tobacco alcohol and tobacco

9 THE AUSTRALIA INSTITUTE Who should pay for maternity leave? Paid maternity leave is back on the agenda. Here Bruce Chapman and Rishab Sethi of the Economics Program, RSSS at the ANU respond to Senator Natasha Stott Despoja’s critique in the last Newsletter of the proposal for a HECS-style scheme for maternity leave.

The Human Rights and Equal of rest and recovery accrues to mothers, Finally, in terms of leave duration and Opportunity Commission (HREOC) rather than to society generally. loan amount, a scheme with a HECS- released a proposal for a national system Government should still contribute, but type component provides more of paid maternity leave (PML) in their a wholly taxpayer funded PML scheme flexibility. The HREOC and Senator report, ‘A Time to Value’, in December unfairly results in non-parents and other Stott Despoja argue for 14 weeks paid 2002. Under the HREOC scheme, taxpayers subsidising a private choice on leave. However, currently the average eligible women would be entitled to 14 which they receive only a partial return. take-up length of unpaid maternity continuous weeks of PML, funded by The absence of means-testing suggests leave in Australia is 42 weeks. Obviously the Federal Government at a level that that many families receiving the benefit many women want more than 14 is the lesser of the Federal Minimum will be better off than significant weeks, and an optional HECS-type Wage or their average weekly earnings numbers of the taxpayers funding it. scheme offers this possibility. It is also from all jobs. the case that the suggested wage in the Issues similar to these underlay the HREOC model is quite low, and could move from ‘free’ (that is, entirely taxpayer Paid maternity leave has been hotly be increased with the promise of a funded) universities to a ‘user- debated in the Australian media and in future contribution from those contributes’ scheme – but one that with political circles over the past year. In the benefiting. September 2002 Institute Newsletter, HECS protects students whose future incomes are low. This corresponds well Bruce Chapman proposed a funding A HECS-type of loan could be used as with the cross-subsidisation scenarios mechanism similar to the Higher a top-up to a given level of government implicit in government-only funding of Education Contribution Scheme support. While this arrangement is not PML. (HECS). On the rationale that all three completely similar to having families of parents, employers and society Second, Senator Stott Despoja argues contribute to any PML, it is an option benefit from PML, Chapman argued that women take longer than men to that increases potential funding and that all three should contribute, in a repay HECS debt and income-contingent choice, and in a fair and equitable way. manner commensurate with their loans will simply add to this debt burden. n benefit. However, a PML loan can be recorded against the tax file numbers of both The benefits of PML to mothers and parents, if present, and repayments made The Australia families can be divided into a range of in a manner proportional to each income. physical, mental and psychic health Institute This threshold should be reasonably issues and into matters of financial high, say, around $35,000 per annum. security and the reduction of Members of the Institute receive our quarterly discrimination. If PML influences In the case of the separation of parents employees to return to work, firms are the father’s obligation would remain. newsletter and free copies able to maximise returns to on-the-job For the small minority of women of recent publications training. Society benefits from a choosing to have children with the father (on request). potentially larger, and healthier, absent, the obligation would be on the workforce and from higher productivity mothers alone, remembering that If you would like to and increased tax revenue when women repayments are only required if their become a member of the return to paid work. future income is relatively high. Institute please contact us at: Senator Natasha Stott Despoja Senator Stott Despoja argues that the Garden Wing responded with several key criticisms of benefits of PML cannot be construed this proposal. The first is that a HECS- strictly in economic terms, but this is also University House style system for PML further the case with education, health-care, social ANU ACT 0200 ‘perpetuate[s] the trend toward a user- security and most public works projects. pays community’, which is true. All that we are suggesting is that where Phone: 02 6249 6221 However, a user-pays community is also there are any type of private benefits Fax: 02 6249 6448 more equitable in this case. from non-means tested policy, it is reasonable to have contributions from [email protected] That is, it is arguable that an important the beneficiaries but only when and if www.tai.org.au part of the benefit of a post-natal period they can afford it.

10 THE AUSTRALIA INSTITUTE

of an editor lining up in favour of the war, there is one chance in 4WDs: The axle of evil 48,000,000,000,000,000,000,000,000, 000,000,000,000,000,000,000,000,000 Subsidies to the importation of 4WD vehicles into Australia that all will be in favour. will cost the Commonwealth Government more than $1 bil- lion over the next eight years. This estimate was presented There is an alternative explanation. in a paper by Richard Denniss to the Beyond Oil Conference Murdoch’s biographer William Shawcross wrote that Murdoch rarely held in Perth in February. needed to give political instructions to The subsidy on imports of 4WD transport and environmental taxes in his editors: “His editors knew his vehicles exists because passenger car Australia. The paper, which was based opinions, and they knew his financial imports are taxed at 15 per cent while on the Institute’s Discussion Paper No. interests too. Many of them were 4WD vehicles, classified as being 46, Taxes and Charges for Environmental constantly anxious to please him and designed for ‘goods carrying’ purposes, Protection, also discusses the subsidies there is no doubt that one way of doing are taxed at only 5 per cent. In the year to car use built into the fringe benefits so was to anticipate his views.” 2000, 84 per cent of all 4WD vehicles tax system, the implementation of the entering Australia were eligible for the GST and the way that the costs We can expect an orgy of jingoism concessional rate of import duty. associated with damage to roads by should “our boys” go to war in Iraq. heavy vehicles are recouped. n Perhaps it will be a rerun of the The problem with the current system is Falklands War media campaign. that it taxes vehicles according to the Murdoch’s London tabloid The Sun purpose for which they are ‘designed’ distinguished itself with headlines such rather than the purpose for which they as “STICK IT UP YOUR JUNTA”. are actually used. Large 4WDs built on a And when the rusting Argentinean ship truck-like chassis are therefore eligible for General Belgrano was sunk by a British the subsidy even if they have 7 leather submarine, sending hundreds of young seats rather than a goods carrying tray. conscripts to drown in the freezing waters of the southern Atlantic, The Sun The existing subsidy to 4WDs ran its deathless headline “GOTCHA”. illustrates the perverse design of Of course, Murdoch’s local flagship The Australian would never sink to such depths. But with the arrival of the new Downshifting cont. from page 2 Editor in Chief, Chris Mitchell, from the Rupert’s Courier Mail (he is the one who blackened old political parties to rethink their most ’s name by claiming, basic suppositions about what makes erroneously, that he had secretly been for a better society. A preoccupation with bunnies awarded the Order of Lenin), readers more growth and higher incomes is no of The Australian will have noticed a longer enough. Thumbing its nose at proliferation of gruesome crime stories As noted on the ABC’s Media Watch the promises of consumerism, and even breasts on page 3 of the downshifting calls for a sea-change in program, The Guardian newspaper Weekend Australian of March 1st. n how we define success. reported that Rupert Murdoch strongly backs the Bush-Blair-Howard war in Iraq While the rhetoric sometimes changes, with or without a UN resolution. “I think the promotion of consumerist values Bush is acting very morally, very correctly” and growth at all costs is unrelenting he told The Daily Telegraph, his Sydney and these are precisely the social goals tabloid. that downshifters are rebelling against. The Guardian’s survey reveals that by a The pre-eminence of economic factors remarkable coincidence all 175 of to the exclusion of others is at variance Murdoch’s newspapers around the with the life priorities of downshifters, world have reached the same conclusion. a divergence that no amount of family- Murdoch of course always insists that friendly rhetoric can conceal. The main his editors make up their own minds political parties remain a long way from and he does not tell them what to think. redefining the Australian dream in a way that accords with the actions of the It is possible that all 175 could have growing class of downshifters in the era arrived at the same conclusion as their boss. Let’s see. If there is a 50:50 chance of abundance. n

11 THE AUSTRALIA INSTITUTE Institute notes

New Publications Regulating youth access to pornography, by Michael Flood and Clive Hamilton, Discussion paper 53, March 2003 Youth and pornography in Australia: Evidence on the extent of exposure and likely effects, by Michael Flood and Clive Hamilton, Discussion paper 52, February 2003 Funding sport fairly: An income-contingent loans scheme for elite sports training, by Richard Denniss, Web paper, February 2003 Missing the target: An analysis of Australian Government greenhouse spending, by Paul Pollard, Discussion paper 51, January 2003 Downshifting in Australia:A sea-change in the pursuit of happiness, by Clive Hamilton and Elizabeth Mail, Discussion paper 50, January 2003 Tax flight? An analysis of the ‘duty free’ system in Australia, by Richard Denniss, Web paper, January 2003

Forthcoming Publications The benefits of an agening society, by Dr Judith Healy The implications of the US-Australia free trade agreement for the Pharmaceutical Benefits Scheme Human rights and Australia’s international reputation, by Professor Spencer Zifcak Private prisons, by Professor Paul Moyle Access to annual leave in lieu of pay increases, by Richard Denniss

“Every now and then a book that is perfect in timing and tone hits my desk. is that book. It is powerful and potentially transformative.” Rev. Tim Costello

GROWTH FETISH Clive Hamilton

For decades our political leaders and opinion makers have told us that higher incomes are the way to a better future. More money will finance better schools and hospitals, fix the environment, solve unemployment and give us a better future, they said. But after decades of sustained economic growth we must confront an awful fact: the people are still not happy. This fact is the great contradiction of modern politics. Growth Fetish argues that, far from being the answer to our problems, growth fetishism lies at the heart of our social and environmental ills. It not only corrupts our social priorities and political structures, the growth fetish and the marketing society have annexed the very definition of the modern self giving rise to a profound sense of alienation among young and old. Published by Allen & Unwin, Growth Fetish will be available from 7 April. The recommended retail price is $24.95 but members can buy copies from the Institute for $22 (includes postage). “Right on target and badly needed.” Noam Chomsky

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