Yesterday, in his address to the National Press Club, when he could wean himself off talking about talking to “real Australians” at Rooty Hill and similar places, and after he spent half his speech attacking the government, Tony Abbott intimated that there might also be some sort of reason to vote for the Coalition other than relentless negativism.

On cue, a policy popped out on infrastructure – a confused mishmash of PPPs and savings measures – involving Infrastructure Partnership bonds, which would be issued by private infrastructure partners to raise capital, and investment in which would attract tax rebates and tax concessions for Super funds. It’s confusing, unwieldy and as usual, just meant to make a political point – which if you can cut through the morass, appears to be something along the lines of “there is an alternative to public debt”.

Robert Merkel discussed this announcement in a previous post at LP. There’s also a good deconstruction of this thing at Grog’s Gamut.

Leaving aside whatever can be made of the policy “detail”, I think what’s significant about this plan is that the Coalition really have done next to no genuine policy development, and any putative agenda for a Coalition government is just a product of whatever they think it will take them to win the election.

You can see why Tony Abbott doesn’t want to debate the economy.

Lenore Taylor and David Uren in their book Sh*tstorm tell the story very simply.

The first stimulus package of October 2008 was labelled the Economic Security Strategy. The $10.4 billion package consisted mostly of cash payments ($8.7bn) to pensioners and families, plus $1.5bn for the First Home Owner Grant Boost and $0.2bn for the Training-Productivity Places Program.

The second package, labelled Nation Building Package, included funds for the Australian Rail Track Corporation, university and TAFE infrastructure, a 10% capital investment allowance and the bringing forward of road spending.

This was followed by the whopping $41.5 billion Nation Building and Jobs Plan in February 2009. This included a further $12.7bn in cash payments and a major move into the construction industry with $14.7bn in the BER, $6.6bn in social housing and Defence homes, and the $3.9bn Energy Efficient Homes program (insulation and hot water rebate). To round it off there was $2.7bn for a small business and general business tax break and $0.9bn for black spots, boom gates and community infrastructure.

Schools had some advantages. The reach was right across the nation because there were schools in every suburb and town. There are a million construction workers across the country and when there is a downturn they often are the first to feel it.

Construction could be started quickly, because schools already own the land and don’t usually need lengthy local government planning approval to build on it.

Furthermore, template designs could be used. To my certain knowledge large architectural firms also used this approach with private schools.

To Gillard’s astonishment no list of needy or disadvantaged schools could be provided, so they decided to do the lot.

The BER was designed to create jobs fast.

In the May budget of 2009, a further $22.5bn Nation Building Infrastructure program was included. I’ll say a bit about that later, but it was stuff that required longer term planning.

With the ink barely dry on the Budget, on 3 June 2009 Treasury came in with a truly beautiful number. There had been growth of 0.4% in the March quarter.

At this point the Coalition wanted to call off the stimulus package, but Swan’s advice was that the recovery was still fragile. In the construction sector, private construction was down by half, but the massive spending on schools “was enough to keep the construction industry steady.”

This was crucial to Australia’s economic fate. In the 1990s recession, around 100,000 building workers lost their jobs, while the collapse of construction activity had knock-on effects in manufacturing and service industries.

The employment numbers in the construction industry fell by barely one per cent.

That’s it basically, apart from how the $14.7bn became $16.2bn.

Finance costed the scheme on the basis that overall, schools would spend about 90% of their entitlement and a few would not apply for funding. Education developed guidelines that allowed states and independent school authorities to apply for the maximum funds and to reallocate funds from one school to another.

So it was a bureaucratic stuff-up basically, not a cost overrun.

Personally I think the amount of waste in the whole stimulus program is miniscule, given the timing and the magnitude of the expenditure. The Government should be lauded for its competence.

Furthermore, I think that if monetary measures had been used there would have been a downward spiral of confidence with a conservative Reserve Bank chasing the decline with reduced interest rates. As it happened, confidence was maintained to the extent that for many in Australia the GFC didn’t happen.

The strategy started with an emphasis on cash in consumers’ hands. Then shovel-ready projects or projects that could be brought on stream quickly. Then projects that meet long-standing neglect in infrastructure and projects that should in the course of time improve the productivity of the nation.

The final package, the $22.5 billion Nation Building Infrastructure Measures, is worth spelling out in detail (numbers represent $billions):

1. 3.4 Road Network investment
2. 4.6 Metro rail
3. 0.4 Ports
4. 4.7 National Broadband network
5. 3.6 Clean Energy Initiative (does not include $1bn of existing funding)
6. 2.6 Investment in Tertiary Education and Research
7. 3.2 Hospitals and health infrastructure

This is from a government that is supposed to lack vision. The NBN, for example, will not cost the Government $43bn. Firstly, that figure is the upper bound of the worst case scenario ($38 – $43bn) worked out by an independent consultant on the basis of the experience in Tasmania and five actual tenders for the roll-out. Secondly, the Government contribution is to be a little over $11bn over 8 years. It’s a steal at the price.

Taylor and Uren say that there is still $30bn of this program to go in the out years. The government had to raid some hollow logs and fund the rest through debt. That’s why the mining tax was important. It still leaves us short of funding for infrastructure. I understand that Infrastructure Australia has identified about $80 billion worth of projects that are not included in the stimulus money.

The Coalition is fond of household analogies. If householders didn’t go into debt they’d all be living in tents.

Bob Gregory last week said we could do with more debt, not less. If now is not a good time to borrow up a bit and get the job done, when will it be?

If you use the corporate analogy, the government of Australia has a lazy balance sheet. We are paying for that in the quality of our lives and future productivity. Anyway, that’s what I think.

BTW Sydney only got just $91 million out of the stimulus money to plan the Western Metro, because no planning had been done. This is a major reason why migrants are scape-goated and fears about asylum seekers in boats arriving in Western Sydney have some traction.

But how “full” is Western Sydney?

Over at Troppo, Don Arthur has taken an invaluable look at stats on population growth, and decline, across Sydney.

His conclusion? Contrary to the established narrative, trumpeted for years by Bob Carr, Sydney is not “full”. Things are a lot more complex than the political predicates for the policy debate would have us believe.

And it’s not surprising there’s plenty of room in Campbelltown. Between 2001 and 2006 , the population of the Campbelltown LGA fell by 2.1% — a net loss of 3,019 people.

As the map below shows, many areas of Sydney experienced population decline between 2001 and 2006 (pdf). Some of the booming new suburbs of the 60s and 70s are slowly emptying out. While the children have grown up and moved on many of their parents have stayed behind. And when these empty nesters own their own home, there is little incentive to move. To pick just one example, between 2001 and 2006, Sutherland Shire added 2,494 new dwellings but failed to arrest the decline in population. With fewer people in each home, the number of residents fell by 1,015 (pdf).

You can see the same pattern in Brisbane. Suburbs once on the city’s fringes, with large houses built in the 60s and 70s, when the average number of kids was still above 2, are now inhabited largely by elderly residents. At the same time, houses are packed, by unscrupulous landlords, with international students and recent immigrants crammed into over-priced properties. Local shops have closed, and activity has retreated to huge shopping centres further out from or closer in to the city. Public transport is minimal, with a few shoppers’ buses wending their way through deserted streets a few times a day.

It’s these areas where the fear of crime, inspired by a populist and irresponsible media, really takes root.

Arthur observes:

In time, the new suburbs on the fringe will go into decline. But if travel to work times rise and petrol becomes more expensive, some may never undergo renewal. In the Atlantic Christopher Leinberger warned that America’s outer suburbs may become the new slums. There’s a risk that some of our new suburbs will too.

In truth, we’re reaping the rewards of decades of poor urban planning, exacerbated recently by the craven obeisance of state governments to the property development lobby.

There are no quick fixes, but we actually need to think about how we live in cities, and that may well entail giving up on the “wide open spaces” Julia Gillard invoked in the leaders’ debate last night.

Nothing in this campaign so far convinces me that a path to resolving problems of growth and decline in our urban footprint are really on the agenda.

If it is the case that residents of Western Sydney and elsewhere are primarily concerned by a lack of infrastructure, it can’t all be plonked in there tomorrow. She’s said we need to pause and take a breath, and Tony Burke is leading a review.

But yesterday, on radio, she sought to deny any link, being confronted by a jingle that interspersed some of her remarks with very similar ones from John Howard.

On cue, the rather odious Scott Morrison popped up to attack this delinking. Keane wryly observes that we should “[b]ear in mind that the Coalition’s idea of a population debate includes graphics with red lines from Islamic countries invading Australia.” But the Coalition’s answer is also a review – by the renamed Productivity and Sustainability Commission.

So up popped Mark Latham on Sky News, calling Gillard’s policy “a “con job” and “fraud of the worst order” on the good citizens of western Sydney” and calling for an immigration cut. Incidentally, Latham has also been touting Kevin Rudd, another former Labor leader, as a loose cannon. The irony of that apparently escapes him.

So what do we have here?

Two things at least:

(a) The unravelling of policy made on the run, and made precisely to try to straddle the sorts of terms that will make people with very opposed views on why they don’t want higher immigration happy;

(b) The difference between a “debate” and a stoush which is driven by policy designed by focus group.

In truth, it’s not very enlightening.

Update: An interesting take from Peter Brent:

Qualitative research – where groups of swinging voters are gathered for drinks and nibblies and led in a discussion – is better, but even that is loaded with the researcher’s assumptions.

Something being a red hot issue doesn’t make it a vote-changer. But if the researcher believes it is, her findings will reflect this.

Prime Minister Julia “I choose my words very carefully” Gillard may insist otherwise, but everyone knows “sustainable population”, border protection and immigration are all tied together. That’s the whole idea of talking about them.

Having high levels of immigration is, like recent decades’ economic reforms such as deregulation, privatisation and lowering of tariffs, something both political parties agree on but the majority of voters don’t (at least at the time).

You might call it a technocratic consensus. It’s not a democratic one.

We face, as Shaun Carney suggests today, a fundamental disjunction between the pressing problems facing our nation and the infantilism of public debate:

The tendency towards verbal infantilism is so ingrained in our politics that it’s not even remarked upon in the media. Politics is more and more about marketing, and less and less about ideas. It’s just a given.

This all comes at a terrible potential cost. Our political system is at a crucial juncture: can it still function effectively or will it go down the American road, where there are no agreed facts, only rejection and abuse, and the legislative process becomes dysfunctional? What is at stake in the resource rent tax controversy is the authority and legitimacy of not just this government, but any Australian government.

Carney is quick to condemn the marketing-speak of politicians. But it may be, as Tim Dunlop argues in a piece at The Drum, that our institutions more generally are failing us. Chief among them, he suggests is the political media:

The problem is not just leadership. It is that politics (broadly understood) is governed by practices and conventions that are not up to the task of solving our problems. We can barely discuss issues meaningfully any more.

Governments try and sneak through change by underplaying the problems because they know the media will treat every issue in either a partisan or a superficial manner (often both) and play a mindless game of gotcha. Oppositions will tell people what they want to hear, oppose for the sake of opposing, and attack wherever possible because it is easier to smear the other side than present a legitimate alternative.

So what is the key to change?

It lies with the media. To all intents and purposes they are the public sphere and until they do their job better, we won’t get anywhere. What’s more, they are the only ones with at least a theoretical commitment to disinterested discussion and objective assessment of the facts.

I’m not arguing for some ideal-type, ivory-tower approach to public debate, some mythical situation where pros and cons are weighed dispassionately and the answer found. But I am saying we deserve better than we are currently getting.

Amen to that.

QUEENSLAND has replaced the usual suspect of NSW as the nation’s sickest state and threatens to drag Australia into a prolonged recession.

Queensland has by far the worst budget position of all the states, and its citizens face the sharpest fall in living standards as unemployment is forecast to almost double in the next two years, from 4.25per cent to 7.25 per cent.

In fact the budget projections show Queensland below the national average in unemployment, and contracting less than the national economy. It is certainly legitimate to question the Bligh government’s economic strategy – and also to question why more wasn’t done in the Beattie years to build up infrastructure and public services. But Megalogenis’ argument conflates the state’s fiscal position with the health of Queensland’s economy in a false and unhelpful way… though it’s probably less unhelpful to Bligh than the “85 billion on the credit card” front page in the Courier-Mail yesterday. Perhaps she can take some comfort from the fact that the C-M’s overt bias towards the LNP had no discernible impact on the March election result.

New LNP leader John-Paul Langbroek delivers his reply in Parliament today. No doubt it will be all about debt and deficits. The ALP is more interested in beating up stories about a leadership challenge, part of a move to wedge and split the LNP on the privatisation bills. It’s a mystery to me why Labor Ministers would be chortling about the prospect of LNP (probably former National) members voting against a firesale of state assets.

Ps: For those interested, the Queensland budget papers can be found here.

The state election campaign was a shambolic affair, and it was almost lost. Despite an inept performance, Labor was re-elected primarily because the “jobs” theme and the promise to continue to invest in public infrastructure despite the economic crisis touched a chord with voters. Anna Bligh made much of standing up to credit rating agencies.

So why the turnaround? A couple of factors are at work. The first is Bligh’s inability to set her own direction, adopting rather the path of least resistance recommended by right wing apparatchiks in her office. Let one grumpy voter in a focus group whine about debt, and, well, forget the election promises. Secondly, there’s the misplaced obsession with “strength”, driven by the same advisers. This apparently means tossing Labor policy out the window and pursuing supposedly popular brawls with unions.

This mob have an inability to understand that Labor governments always need to pursue a direction contrary to that favoured by the big end of town to be a success. Talk of ‘reforms’ in the context of short-sighted privatisations is quite risible in this context.

Nor is Bligh apparently capable of learning from the past. Wayne Goss’ government was defeated not by the ‘Koala road’, but in large part because years of managerialist lunacy alienated the public sector vote. Similarly, the slashing of services in outer suburban and regional areas and decisions such as the one to close down the QR workshops in Ipswich in the midst of a recession and deep structural economic change had a lot more to do with the rise of One Nation than some innate Queensland redneckism.

Peter Beattie knew all this.

The irony – or rather, one of the many ironies – is that the government and top bureaucrats have recently been pontificating about the need for public sector spending to create demand in a sluggish economy. That seems – insofar as it means anything – only to apply to bricks and mortar and roads and bridges and to completely eschew people’s livelihoods. All ‘Bligh the Builder’ is paving the way for at the moment is her own defeat.

As Westbury writes, “this decision is one that is so staggeringly out of touch with the realities of cultural policy at the moment that it is scary.”

As usual, I find myself in agreement with much of what Marcus writes (more of that below). However, I think there is every reason to be far more optimistic about this decision than the initial outrage from the various unfunded parts of the arts community suggests. It may be that this decision will actually materially advance the cultural policy debate in Australia, by motivating the various forgotten voices in the arts community to finally coalesce into a coherent movement for change.

Westbury writes:

The billion dollars offered up for the opera house renovations is stark reminder of how the norms of one world clash with the realities of the other. For that much larger community of artists outside government run arts centres and organisations this represents more than will be invested in them for decades or perhaps hundreds of years.    

He’s right. The annual ongoing funding budget for the NSW cultural grants program is $22 million – which means this infrastructure commitment would fund around 45 years of NSW’s current arts grants programs. Of course, this is not an apples and oranges comparison, given that one is capex and the other is recurrent. And the NSW government spends $222 million a year on cultural institutions like the Art Gallery of NSW, the State Library, Australian Museum, Historic Houses Trust of NSW, Museum of Applied Arts and Sciences, NSW Film and Television Office, and the Sydney Opera House Trust itself. (Figures from the NSW Department of the Arts, Sports and Recreation Annual Report). So this decision needs to be placed in that broader context.

But will this renovation even happen?

To begin with, let’s exert a little political analysis to the debate. The NSW government is not exactly flush with cash. Like all the states, it faces a worsening recession and deteriorating fiscal position. Many of its already-announced infrastructure priorities are dependent on the successful privatisation of NSW’s electricity generation assets, not to mention wads of cash from the Commonwealth. The Commonwealth money is in itself no certainty, given that the Building Australia Fund is dependent on future budget surpluses that have now evaporated. Further, state-based bond issues are being squeezed by the expanding need for the feds to issue bonds to cover the suddenly large and looming Commonwealth deficits – as Western Australia has recently discovered. In short, the global financial crisis has set tight new limits on the scope of state governments to build expensive new  infrastructure projects - a major topic of the recent Queensland election.

Secondly, there is every reason to believe this decision might actually cause a large groundswell of opposition from within the arts community itself. Part of this is the eye-popping figure of $1 billion – or around 6 times the annual budget of the entire Australia Council. But another part of this is the likelihood that any spat about the project may uncover the weakness of the far-from-unified lobbying effort in favour of this decision. Rather than a monolithic lobbying force, the forces of conservatism and vested interest in the Australian arts that drive the current policy paradigm (described by prominent academic Jennifer Craik as “elite nurturing“) are actually quite thin – although generally well represented in parts of the mainstream media.

Cultural policy-making as actually practised in Australian arts ministries is generally far from rigorous, and can often be swayed quite quickly by the whims of the relevant Minister in charge (witness, for instance, the $15 million Victoria Rocks program promised by then-Premier Steve Bracks after a well-timed serve from Claire Bowditch at the ARIA’s.)

It is the relative thinness of the cultural policy debate as currently undertaken in Australia that suggests a decision like this could lead to real opportunities to advance a more progressive vision in the contemporary cultural policy debate.

Cross-posted at my blog.

There’s currently a spread of 136 points between Commonwealth bonds and the bonds issued by the Queensland Treasury Corporation. NSW’s spread is 120. The normal spread is around 30 base points.

Earlier this year, there was a bit of chat about whether the Australian Office of Financial Management could invest in state bonds, and/or structure things such that effectively it offers state debt to the market as sovereign debt. Legislative authority for this strategy already exists. While there are a number of options for assisting the states to borrow for infrastructure, this is the neatest. A number of worthies from the big banks and financial market types are urging the Feds to go down this route. Andrew Fraser and Anna Bligh will be hoping for a quick decision from their Queensland Labor colleague Wayne Swan.

Cross-posted at Pineapple Party Time.

The Labor Party won’t want issues such as health, which remind voters that it’s had eleven years in office, to be central to the campaign.

Rather, the ALP will want to differentiate its economic approach from the LNP’s. Anna Bligh will be arguing that the state government is doing all it can to kickstart the slowing economy – an argument previewed by Fraser when he pointedly observed that the government had chosen to continue to borrow for infrastructure spending rather than cut its borrowing cloth to the demands of Standard and Poor’s. Jobs above all else was the message.

Graham Young’s polling for the National Forum shows infrastructure still in first place among voter concerns, but the economy rocking up the charts. There’s an obvious connection to be made between the two issues, and the Borg’s constant mantra about debt and the evils thereof boxes the LNP in and prevents them from making big ticket announcements. If they do, they’re destroying their own claims about public debt, and suggesting there’s tons of interest at the moment in public-private partnerships is hardly going to be credible in this economic climate. Labor ends up with a twin focus on the economy and leadership, and it’s hard to see this favouring the opposition. From the point of view of where governments’ political support goes when put to the test in an economic downturn, this will be an interesting campaign.

Elsewhere: Derek Barry:

Embarrassing or not, Dr Nicholas Gruen thinks the downgrading could spread to other states. Gruen is the CEO of Lateral Economics and writes for Club Troppo and is a frequent contributor to the Australian Financial Review. He told Woolly Days today that although he was not across the specific budgetary details of each government, it seems likely there will be a trend given worsening budget positions. He also defended Fraser’s position saying that now is not the time to cut back on capital works. As Gruen wrote in the AFR in September (unfortunately no link, the article is behind a paywall) “the electorate likes to see governments investing in the future. And the alternative – arbitrarily restricting investment whilst commuters nurse their resentments in traffic jams or waiting for late trains – is a political road to nowhere.”

Meanwhile UQ academic and economist John Quiggin believes that an AAA rating is overrated and rating agencies are themselves part of the problem. He says the global crisis has exposed fundamental weaknesses in the way in which ratings are determined and adjusted. According to Quiggin, the likes of Standard and Poor’s and Moody’s have suffered credibility issues in the crisis and a need a lot of improvements to restore independence and transparency. “The privileged position held by these agencies can no longer be justified,” he writes.

In any case, downgrading is not a purely Australian problem. Both Spain and Greece were downgraded earlier this year. Now the Telegraph.co.uk reports that Britain too could be stripped of its AAA rating. The Telegraph says Standard & Poor’s have indicated it might downgrade Britain’s rating because of its asset protection scheme. The scheme provides insurance for so-called “toxic debt” but the Telegraph warns the scheme leaves “the taxpayer exposed to losses on billions of pounds of bad loans made by the banks.” Yet as the article itself points out, it is very unlikely the UK Government will ever default on its debt commitments. A credit rating downgrade is clearly not the end of the world.

Nicholas Gruen thinks credit ratings should be taken seriously but governments need to take risks in tough times. That means taking on projects and debts that the private sector is now shying away from. He says that an obsession with an AAA rating now stands as an obstacle to governments playing their rightful role in dealing with the economic crisis. “There’s a dynamic to fiscal responsibility and fiscal management,” he said today. “Had the Queensland Government invested more in the easy times, it would be worth more now.”