In the lead up to the 2010 election, CPD gathered together 25 Australian thinkers to come up with policy ideas to fill the void left by populist electioneering. We decided to fight the politics of fear with positive visions of the future, instead of more doom and gloom.

First came this website – a place where we could set our own agenda rather than respond to the point scoring that was all too common in this year’s media coverage. It became a place where the CPD community could dream big, think long term and imagine the kind of Australia that we’d like to live in. And now we are publishing the results in CPD’s first-ever hard copy book.

But we cannot make this happen without resources. We’re turning to you to make this possible. DONATE NOW!

If you’re anything like us, you’re frustrated by what passes for policy debate in Australia. In a country accustomed to getting by on luck, and in spite of its leadership, the ideas in More Than Luck are urgently needed.

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Water is a perennial public policy issue in the sunburnt country. Australia has at last retreated from ‘making the desert bloom’ as a basic policy position. ¹

Remnants of that dream remain, however, in a ‘supply-side’ approach that favours technological and engineering fixes to water supply and irrigation, and in water policy debates that focus more on the country than the city.²

So far, political choices about water have been largely framed as the need to resolve water supply crises, to confront the over allocation of water, and to ensure sufficient water for food production and regional enterprises.³ Only recently has the political pendulum begun to swing in favour of environmental flows and the sustainability of aquatic ecosystems, rather than prioritising the consumption of water by people and industry.⁴ Much money and a great deal of effort has been spent to achieve water policy objectives in the face of pressing concerns such as climate change, but effective on-the-ground implementation still seems a long way off.⁵

Australians are rightly concerned about past and current water policies. These concerns are pressing and highlight the need for a new approach to water. Australia’s population is overwhelmingly urban, but dependent on rural food and water production. Issues such as water sensitive cities, water re-use, groundwater depletion, water use in the resources sector, water quality and water/energy interactions are starting to receive more attention. Unfortunately it seems that these emerging water issues are mistakenly regarded as problems that can be solved simply through the application of scientific and technical expertise.

Although past use of science and technology has served the Australian state well and has been an impetus for past growth and development, more of the same is no longer good enough.⁶ Despite recent calls for adaptive and systemic models of water governance,⁷ policies and practices based on dynamic ecosystem models that integrate the social and physical features as well as institutional arrangements and community values have been given less weight in policy implementation.⁸ This omission is critical. Water reform will never be effective without the capability to act on the comprehension that rivers are systemic in nature, and that urban water is subject to cyclic and systemic processes. This is more than just a policy or implementation gap. It reveals a deeper problem of ‘knowing’ about water and its social purpose within the Australian national psyche.

Mythbuster: Australia knows how to do water management and has the right policy mix.

The systemic failure of water governance of the Murray Darling Basin and the rapid turn to technological fixes, such as desalination plants, in Australia’s main cities (Barnett and O’Neill describe this as ‘maladaptive practices’),⁹ is evidence that we still have much to learn about developing policies and practices for managing water sustainably.

Water managing, as opposed to the more deterministic water management, provides an alternative platform for considering long term ecologically sustainable water governance.

The story so far – water law and policy reform

The National Water Initiative, building upon earlier Council of Australian Governments initiatives, aims to reorient water policy and to drive water efficiency reforms by developing guidelines and principles for national water management. Under the National Water Initiative, governments have made commitments to:¹⁰

• Prepare water plans with provision for the environment
• Deal with over-allocated or stressed water systems
• Introduce registers of water rights and standards for water accounting
• Expand the trade in water
• Improve pricing for water storage and delivery
• Meet and manage urban water demands

The National Water Commission (NWC) is charged with leading reform. In a 2009 report, the NWC found that despite 26 years of attention to water policy and law reform, results to date have been less than encouraging.¹¹ Substantial amounts of funding are involved.¹² The Commonwealth government has driven water law reform through financial incentives and more recently intervened to prevent ‘market failures’ involved in systemic ecosystem collapse in the Murray-Darling Basin.¹³

Given the expenditure of public funds we need to evaluate water policy implementation with one eye on the prevailing economic efficiency discourse.¹⁴ But a more fine-grained policy response is also needed to understand the nature of water managing. ¹⁵ Further, while financial implications are important, social values must be considered,¹⁶ as must the hitherto poor relationship between policy formulation and policy implementation. It is useful to think in terms of policy praxis i.e. practical action that is informed by theory and that has a focus on effective water, river or catchment managing¹⁷ rather than the linear concept that policies are simply formulated then implemented.

The water policy ‘problem’ is usually ascribed to the physical lack of water supply rather than the institutional, organisational and community practices that manage water.¹⁸ Water policy is a classic example of a wicked problem (see the definition of wicked problems in the ‘Governance that works’ chapter) or a complex adaptive system.¹⁹ Because water policy is rarely framed in this way, the approaches that work when dealing with wicked problems are rarely used. There is a continual need to deepen and assess the work begun by the national reform process to engage water-related systemic practices and values. All too often in the past citizens have only become aware of the systemic nature of water in the face of breakdown or crisis, as is the case with water restrictions.

Water governance

The extent of the complex institutional framework around water is rarely appreciated. There are a wide range of institutions, rules, plans, agreements and laws with overlapping roles governing allocations, entitlements, environmental flows and rights. Add to this the hierarchical structure of local, state and federal responsibilities and laws, and it is no wonder that the complexity of water governance can become overwhelming and engagement with it is confined to relatively few ‘experts’.

On the other hand, substantial public investments occur not only in the direct provision of water supply and services, infrastructure and instrumentalities, but in the institutional and governance arrangements that manage water in the Australian community and environment.²⁰ Effective water governance is now acknowledged as essential to achieving national water policy objectives.²¹ The difficulties in achieving agreement on water governance are long-standing. More problematically, just what constitutes effective water governance remains an open question.

Australia needs to adopt a dynamic and systemic water managing approach that can co-evolve alongside the formalised reform agenda embodied in new laws such as the Commonwealth Water Act 2007. Such arrangements can best accommodate the systemic characteristics of water,²² and its contributions to countless processes, from functioning ecosystems to its aesthetic values as a reminder of water as a medium for childhood play.²³

The following key challenges are based on ten principles for sustainable water managing and include suggestions for policy implementation to support the ongoing national water reform process.

Challenge #1: Privilege strong ecological sustainability for water

Current water management across Australia is unsustainable. Sustainability though is a slippery term that can justify a wide spectrum of policy responses.²⁴ Hussey and Dovers describe the National Water Initiative as an ambitious attempt to operationalise the modern idea of sustainability in the context of water management. However they see many implementation difficulties. Assumptions about implementation are only now being unsettled by the recognition of significant deficits of capacity and knowledge.²⁵ A particularly vivid example is the continuing failure of the Murray-Darling to run to the sea despite recent high rainfall events at the top of the catchment. This failure means that the salt-flushing function of the river system as a whole is not working. This will exacerbate problems of salinity throughout the river system.

The use of ecologically sustainable development (ESD) in current policy and legal frameworks will accord higher priority to ecological integrity in water.²⁶ But even the ESD formula remains problematic as it invokes concepts of ‘balance’ rather than absolute protection. Inevitably ‘balance’ in political decision-making becomes code for giving priority to short-term considerations. Australia’s ESD commitments are built on a triple bottom line conception of trade-offs between economic, social and environmental considerations. This framing is inadequate for managing the complex dynamic between people and the water environment. The standard must be raised in order to prioritise long-term ecological viability.

Implementation Challenge #1

To move from ecological sustainable development as the policy goal for managing water to achieving ecological integrity for fresh-water ecosystems across Australia.

Challenge #2: Develop capability for adaptive water managing and social learning

If strong sustainability practices are to drive water reform then there is a need for an adaptive and systemic approach to be embedded across the spectrum of decision making for water. This suggestion is not new, but like sustainability the principle requires reinvigoration and more pervasive implementation. Much has been said about adaptive managing but rarely has it been effectively implemented.²⁷ Where it has been successful (e.g. in the managing of Kruger National Park) then adaptive managing is a necessary but not sufficient ingredient as it needs to be situated within adaptive planning and designing. In turn these need to be situated within adaptive governance, (or ‘governing’). One way is to complement the main policy tools of regulation, education, information provision and markets, with ‘social learning’ as a systemic and adaptive governance mechanism.²⁸ Ison draws on long experience of systems research in catchment management situations in Europe.²⁹ He suggests that systems-based social learning research provides a framework capable of dealing with a challenge of such magnitude as achieving sustainable water governance.

Social learning can be understood through the metaphor of an orchestra. An orchestra is something to invest in or to pay for but it is also a social dynamic, a set of people with different backgrounds and instruments coming together to create a performance that is satisfying to someone. Social learning when applied to water governing can be understood as:³⁰

• The convergence of goals (i.e. agreement about purpose), criteria and knowledge leading to the awareness of mutual expectations and the building of relational capital amongst stakeholders (a dynamic form of capital that integrates the other forms, i.e. artificial, natural, social and human);
• The process of co-creation of knowledge, which provides insight into the means required to transform a situation; and
• The change of behaviours and actions resulting from understanding something through action (‘knowing’).

Thus, social learning is a critical part of the process of transforming a situation.

Social learning can be invested in as a means to achieve more adaptive planning and managing.

Implementation Challenge #2

To institute adaptive and systemic water managing as the key framing for institutional organisation. In concert, to create institutional arrangements that enable the co-evolution of water practices across government, industry and the community.

Challenge #3: Shift water planning to a dynamic and systemic not stationary process

The NWI has sought to refashion water management by introducing strategic water planning, particularly in the Murray-Darling Basin. Environmental water allocations, an emphasis on basin-wide water planning, and statutory responsibilities for environmental water management have been key initiatives.³¹ These reforms rely on effective institutional deployment and the adoption of different points of decision making. For example, moves to adjust water allocation entitlements must operate across time and institutional scales to allow sufficient flexibility.³²

Much water planning and assessment remains based on the view that ‘natural systems fluctuate within an unchanging envelope of variability.’³³ By contrast, authors in the leading Science journal have argued that while both scientists and decision-makers have accepted the impacts of human disturbances and climate variations on the water cycle,³⁴ Historically these effects have been assumed to ‘be sufficiently small to allow stationarity-based design.’³⁵ In other words, it is assumed that the predictions underpinning design are relatively static and that structures and processes can be engineered to these specifications. Such assumptions require reconsideration.

Stationarity is no longer adequate for ongoing water resource assessments (e.g. water flows designated for given ‘environmental assets’) and the setting of levels of resource use through ‘caps’ and similar instruments. Water planning and its underpinning assumptions must embrace dynamic and systemic approaches to incorporate non-linear change and high levels of uncertainty. In a climate change world, a water plan such as that being developed by the MDBA, if it is to be effective, has to be capable of change and refinement in the face or surprise, breakdown, and real-time learning.³⁶ A plan as blueprint is no longer adequate. Water managing has to become capable of improvisation. At the moment Australia does not have the institutional arrangements to act deliberatively in real time to manage water holistically over the long term.

Implementation Challenge #3

To adopt adaptive and systemic constructs for water planning and to institute a precautionary model of decision making to accommodate high degrees of uncertainty in future climates.

Challenge #4: It is not always possible to ‘get more from less’

We need to resist a technological fix that promises ‘more from less’ in the face of highly variable and uncertain climatic conditions. In cities, decentralised initiatives around water-sensitive urban design³⁷ include innovative uses of storm water and recycled water. However, to date these changes have been a low priority in the national reform agenda, something in need of rapid change. Such adaptive, localised responses compete against major water infrastructure projects such as desalination plants which were adopted as a reaction to ‘step change’ predictions of decreased water availability. Further, the water industry still wields enormous economic power, especially when aligned with infrastructure development, and consequently it is a major player in setting the technological parameters for water management. Rather than ‘crisis’ reactions which reveal the entrenched path dependency of water management, there is a need to employ a full range of governance tools for meeting the challenges of water supply variability, including demand-side options.

Implementation Challenge #4

To give renewed attention to demand-side water managing to break with path dependency that emphasises technologically-dominated supply-side solutions.

Challenge #5: Integrated decision-making for water

If water managing is to adopt a broader range of regulatory tools, it is vital that decision-making does not become disjointed. One result of the adoption of market-based regimes has been a dilution of institutional responsibilities and a growing role for the non-government sector in water. In a supposedly de-regulated water space there has been a growing spread of organisational responsibilities for the regulation of water including, for instance, water price-setting by Commissions set up to combat anti-competitive practices. Given these changing power dynamics and the flatter organisational structures, it is critical to ensure ‘joined up’ decision-making about water. This should include consideration of the financial implications of water project development. This situation was highlighted by the Victorian Auditor-General when assessing water projects in that state.³⁸ More generally, integrated decision-making and water managing must reflect the inter-connectivity of the water cycle,³⁹ so that groundwater and overland flow are not seen as the solution to surface water shortages. Initial evaluations of the national water reform agenda have been broadly supportive of its coverage, intent and attempt to integrate ecological, economic and social imperatives, yet cautious about the institutional capacity to implement the reforms.⁴⁰

Implementation Challenge #5

To institute an integrated approach to decision-making in water that reflects the holistic and systemic properties of water as well as the interlinking social, economic and cultural systems that interact with water.

Challenge #6: Resolve the fiefdom approach to water governance

Despite many years of promoting integrated water management, there remain disparate regimes for governing water.⁴¹ These are separated across jurisdictions, geo-spatial and biodiverse regions, and across time periods. Water ‘institutions’ range from local government authorities to specialised agencies, such as catchment management authorities (CMAs), and complex intergovernmental arrangements.⁴² The difficulties that such administrative and institutional ‘fiefdoms’ create are well known, and helped create the impetus for reforms at a federal level giving rise to the Murray-Darling Basin Authority.

Matching organisational arrangements to ‘natural systems’, such as catchments, can provide some rationalisation to the artificial institutional and jurisdictional structures for water management. It is doubtful that a full-scale bioregional approach would be adopted. At a more modest scale, the advent of CMAs as the basis for natural resource policy implementation is a welcome development.⁴³ But current trends see decentralised CMAs losing funding in favour of traditional hierarchical governmental funding structures with a resulting increase in the centralisation of decision-making.

Emerging conflicts surrounding water ‘ownership’ and control in urban storm water contexts is another example where institutional and government boundaries create conflict and uncertainty. The demarcation of effective administrative responsibilities across local and state government boundaries, and their intersection with water authority and private interests represents another wicked policy problem requiring effective governance.⁴⁴ This type of institutional complexity can constrain social transformation by splintering the development of meaningful stake-holding. The complexity can produce unintended consequences including policy conflict, the inability to translate policies into local action, and the breakdown or loss of social and relational capital.⁴⁵

Implementation Challenge #6

To resolve longstanding tensions and overlaps in organisations which have responsibilities for water through systemic institutional innovation so as to allow for more effective coordination and engagement in water managing.

Challenge #7: Enacting water governance in the public interest

In 2009, the High Court of Australia confirmed that water is a common resource to be managed in the public interest Water policy and law reform over the past decades has sought to redefine what constitutes that public interest.⁴⁶ A majority of the High Court found that the move to share-based entitlements for the groundwater licences was justifiable as part of the state’s responsibility to institute sustainable water use in the public interest.⁴⁷

This decision is significant as an endorsement of the public interest objectives of the national water reform process which includes the adoption of water planning and the goals of sustainable water allocation and use.⁴⁸

Implementation Challenge #7

To continue to develop and implement adaptive water planning rules and objectives governing water as a shared common resource, reflecting changing understandings of the public interest in water managing.

Challenge #8:  Water in the market: what it can and cannot achieve

Continued redefinition of the public interest in water is part of a larger ongoing transformation emerging from over two decades of policy changes. These changes incorporate not only ‘water trading and water markets’ but also standard-setting and pricing around market measures. Under this de-regulation model, the government steers and coordinates water governance at a variety of levels using a combination of rules and incentives. The new regulatory system is based on a move to ‘purposive self regulation’ designed to change behavioural and institutional patterns associated with water use by ‘moving it to highest and best value use’. However, this reorganisation has not displaced many entrenched institutional and private sector practices that distort market attempts to optimise value.⁴⁹

Where change has been most successful, the emphasis has been to ensure that market competitiveness, water consumer interests, and economic and financial accountability are given traction within water law and policy reform.⁵⁰ Market–based mechanisms have contributed to reshaping water governance, in terms of structural adjustments, and in meeting the variability of water supply in defined contexts. Nonetheless, it is important to recognise that market instruments, such as cap and trade policies, have limitations when dealing with ‘public goods’ in the nature of common pool resources like water.⁵¹ Thus, there remains a strong role for governments to set meaningful parameters within which market measures will operate, such as defining realistic and meaningful sustainable diversion limits for water trading. More generally, governments and tax payers will retain responsibility – and pick up the tab – for externalities such as environmental degradation and market failures like the imminent ecological collapse at the mouth of the Murray River.

Implementation Challenge #8

To develop a fine-grained regulatory framework for water managing that acknowledges the contribution of water-related market measures but which recognises the limitations of reliance upon any one regulatory tool.

Challenge #9: Build civic engagement in water governance

Social practices around water pervade everyday life as well as the formalised relationships between governments,  water ‘consumers’, water authorities, water markets, water regulators and the other myriad of institutions and organisations that manage water. There are many congruent and overlapping responsibilities. The focus on top-down institutional arrangements must be complemented by a focus on the collaborative community-oriented management of water, which shapes how water is understood and valued within Australia. While recent water reform has emphasised community involvement⁵² there has not been a corresponding commitment to detailed planning of the philosophy, role, responsibilities and the process to support effective involvement over time.

Generally, community interests in this model of natural resource management are treated as the subjects of consultation, while the core decision-making remains within the traditional water authority structures.⁵³ Overarching decision-making power remains within the political hierarchy of water ministries. Stakeholders in water catchments face unprecedented institutional change at the same time as being confronted with rapid and potentially catastrophic natural events. There is an urgent need to broaden the constituency of civic engagement with water in a more meaningful manner.

Implementation Challenge #9

To build citizens’ trust in water institutions and to explore governance arrangements that will achieve outcomes in an equitable, effective way, balancing bottom-up and top-down processes.

Challenge #10: Effective integration of social learning about water values

To understand water in its ecological context will require breaking with the view of water as a ‘quantity’ of a resource, towards an appreciation of water as an integral process within landscapes and lives. Reassertion of the technological fix approach under climate change conditions simply re-contextualises an older discourse without adding significantly to an expanded cultural ‘knowing’ about water. For example, the functioning of rivers and their long term sustainability and existence as socio-cultural features in the landscape has a cultural existence in the Australian nation. How people imagine river futures contributes greatly to our humanity, as well as having a physical and utilitarian function. Water reform must be framed around cultural values as part of building social consensus in order to generate social learning for concerted action to make water usage sustainable.

Implementation Challenge #10

To encourage social learning as an approach to water policy reform in order to generate new practices as a result of understanding water as a cultural phenomenon.

Endnotes

The story so far

The national apology delivered in federal parliament by Prime Minister Kevin Rudd on February 13th 2008 appeared to signal a major transformation of Indigenous policy in Australia. Defeated Liberal Prime Minister John Howard had tenaciously refused to make this elementary gesture. Indeed his prime ministership was marked by a rejection of the reconciliation process that had begun in the Hawke/Keating era. His antagonism towards any recognition or protection of Aboriginal rights was almost visceral.

The apology together with the endorsement of the United Nation’s 2007 Declaration of the Rights of Indigenous People immediately differentiated Rudd’s Indigenous affairs policies from those of Howard’s. Like the apology, the Howard government opposed the Declaration, refusing – along with Canada, New Zealand and the United States – to become a signatory because of ideological problems with both the concept of the Declaration and its content, especially its recognition of the right to self-determination.

These symbolic gestures raised expectations that the Labor government would aggressively tackle Aboriginal disadvantage – that the symbolic shift would be matched by actual improvements to the material circumstances of indigenous Australians. Rudd nurtured encouragement of this expectation in his apology speech: ‘unless the great symbolism of reconciliation is accompanied by an even greater substance, it is little more than a clanging gong. It is not sentiment that makes history; it is our actions that make history’.

It is therefore surprising and disappointing that the key Indigenous affairs initiatives and assumptions of the Rudd-Gillard Labor Governments were inherited from Howard’s. These include the quarantining of welfare for Aboriginal people; the belief that home ownership by itself can reduce poverty; the view that private schools offer a panacea for poor education levels amongst Aboriginal children; the suspicion of Aboriginal control over land; and the granting of land tenure through leases to the government and through conditional access to public housing.

Combined with the continuation of the Northern Territory intervention – perhaps the most concerted attempt to implement the above policy vision – the Rudd- Gillard Governments have furthered an agenda that was designed by the Coalition.

As the Northern Territory intervention demonstrates, this agenda is top-down (designed in Canberra and implemented with little or no consultation or engagement with Indigenous people, their organisations or their communities), is influenced by tired ideology (mainstreaming and assimilation – approaches that have been tried before and failed), laced with the self-righteousness of paternalism (“we just care about women and children”) and clearly discriminatory (given that the Racial Discrimination Act had to be suspended in order to implement the policy).

The reform agenda: Closing the Gap

Aboriginal and Torres Strait Islanders have shorter life expectancy, lower levels of education, higher levels of unemployment, and are more likely to live in poverty and to live in an overcrowded house than other Australians.

New 2005-2007 experimental figures from the Australian Bureau of Statistics calculate life expectancy at birth of Aboriginal and Torres Strait Islander Australians at 67.2 years for men and 72.9 years for women. These figures are well below the 82.6 and 78.7 year average for non-Indigenous females and males respectively, for the same period and create life expectation inequality gap of 9.7 years for females and 11.5 years for males. ²

Approximately 30 years ago, life expectancy rates for indigenous peoples in Canada, New Zealand and the United States of America were similar to the rates for Indigenous peoples in Australia. However, significant gains in life expectancy have been made in the past two decades in the indigenous populations in Canada, New Zealand and the United States of America. Comparable mortality rates for Aborigines and Torres Strait Islanders in 1990-1994 were at or above the rates observed 20 years ago in Maori and Native Americans, being 1.9 times the rate in Maori, 2.4 times the rate in Native Americans, and 3.2 times the rate for all Australians. ³

Indigenous people have lower levels of education than non-Indigenous Australians. 49.9 per cent of non-Indigenous Australians have no non-school qualification compared with 71 per cent of Indigenous Australians.

The Rudd-Gillard Labor Governments have adopted the rhetoric of “closing the gap” to describe their aspiration for achieving socio-economic equality for Aboriginal and non-Aboriginal Australians.

The positives

Overall, there are many positive aspirations in the rhetoric of this reform agenda. These include aims to:

• Increase the literacy rates of Aboriginal and Torres Strait Islander children and to improve levels of their school attendance;
• Improve the health of Aboriginal people;
• Reduce violence and sexual abuse of Indigenous women and children.

But there is a gap between these aspirations and results on the ground. And there is a gap between the government’s rhetoric of wanting to take an “evidence based” approach and its actual policies.

The barriers

Some of those barriers to achieving equality for Indigenous people under the current policy framework include:

• The limited definitions of “closing the gap”. The areas targeted by the government in its report card are narrow. Australians for Native Title and Reconciliation (ANTaR) have pointed out that there are serious flaws in the broader strategy, in particular, overlooking evidence of what works, including key determinants of health inequality and disadvantage critical to achieving its closing the gap targets and not working in partnership with Indigenous people to develop or implement its closing the gap strategy.
• Funding interventions instead of facing the underlying issues. Indigenous policy is always targeted at intervention, at emergency. It rarely seeks to look at the underlying issues. Addressing disadvantage requires long term solutions, not just interventions. Rather than always reacting to a crisis, a long-term sustained approach requires addressing the underlying causes of disadvantage. This means resourcing adequate standards of essential services, adequate provision of infrastructure and investment in human capital so that communities are developing the capacity to deal with their own issues and problems and have the skill sets necessary to ensure their own well-being. There are no short-cuts, quick fixes or panaceas. Whatever the perceptions of the electorate, the fact is that there is not enough money spent on Aboriginal housing, education and health. ⁴ The pot is too small and no government will fix the problems while all they do is engage in trying to redirect the scarce resources towards one pressing need at the expense of others.
• Focus on remote communities. Much of Indigenous policy is targeted at remote communities – resources too. ⁵ Look at where the previous government and the current government are directing resources for social housing and you will see it is primarily focused on remote communities. Yet the largest Aboriginal communities do not live in remote areas. They live in cities. The largest is in Western and South Western Sydney with 28,065 Indigenous people. ⁶ And on the recent Australian Bureau of Statistics figures it is one of the most socio-economically disadvantaged communities in the country, more disadvantaged than many of the Aboriginal communities being targeted by the federal government. ⁷
• Ideology over research-based approaches. Indigenous affairs is full of ideologies. These include the ideologies of assimilation and mainstreaming, the newer ideologies of mutual obligation and shared responsibility, and the ideology that communally-held land is bad – if it is held by Aboriginal people – and should be unlocked so that non-Aboriginal people can access it. An example of the ideological approach in action is the policy of quarantining the welfare payments of parents of Aboriginal children who do not attend school. There is no evidence that shows that linking welfare to behaviour reforms is effective. ⁸
• Failure to engage in a robust policy debate. When the Northern Territory intervention was first rolled out in June 2007, the Howard Government silenced critics by accusing anyone who didn’t support all of the measures of ‘protecting’ paedophiles. Once in office, the Labor government has done much the same. Rational policy debate over whether these policies are effective is avoided by the repetitive deployment of phrases such as ‘we just care about women and children’ or mealy-mouthed assurances that ‘we are committed to closing the gap’.

Policy ideas

Idea #1 – A non-discriminatory housing policy

The policy on Aboriginal housing reflects the discriminatory assumptions that run through federal Aboriginal policy-making. Housing in the community sector is the responsibility of the Federal Minister for Housing, Tanya Plibersek, whilst Aboriginal community-owned housing falls under Macklin’s ministerial responsibilities. Macklin argues that Aboriginal communities would benefit from the ‘strong regulatory framework’ provided by the state and territory government agencies in relation to the provision of housing.

By comparison, Plibersek is more sceptical of the ability of public housing authorities to deliver, as reflected by her remark that, ‘We are often not delivering opportunities for public housing tenants; 90 per cent of stock is held by eight government providers; and our system is not transparent or accountable.’ ¹³ She has also spoken supportively of what she thinks community-based housing organisations can provide: they are good at tenancy management, often have lower rates of rental arrears and possess better track records at maintenance than state housing authorities.

There is an important ideological difference here. Plibersek supports the transfer of the title of public housing from state and territory housing authorities over to the community housing sector so that they can provide housing. Macklin has a completely different attitude. She insists that the title of the land on which community housing is built must be transferred from the Aboriginal community to state housing authorities through a long term lease (from 40 to 99 years). Housing is then delivered by government housing authorities (the same ones that Plibersek described as ‘not transparent or accountable’) and the release of monies is contingent on communities leasing their land back. Yet this is the housing policy to which Macklin has adhered as part of the Northern Territory intervention.

There is more than just ideology at play, however. Fundamental practical questions have been asked, since the $680 million housing program in the Northern Territory did not deliver one new house in the space of 18 months. The 2010 budget papers reveal that seven houses were finally built under the program after two years. Warlpiri Elder, Harry Nelson Jakamarra, had this to say on the matter: ‘The Intervention housing program has not built any new houses at Yuendumu. We are just being blackmailed. If we don’t hand over our land we can’t get houses maintained, or any new houses built. We have never given away any Warlpiri land and we are not going to start now.’ ¹⁴

Ampilatwatja is a town three hours from Alice Springs. It was taken over with a five-year lease that came with the promise of new housing. The housing stock was transferred to Northern Territory Housing. No new houses were built and much needed repairs did not take place. By July 2009, the town was overflowing with raw sewerage. A plumber was supposed to be on his way but his truck broke down, or so the community was told. They packed up and moved to a camp six kilometres from the town, symbolically taking them outside of the prescribed areas of the intervention.

Idea #2 – Removing punitive welfare conditions

The embrace of income management policies is another example of how the continuation of conservative ideological dogma runs contrary to evidence-based public policy. For instance, the quarantining of welfare payments was included as part of the intervention with the seductive rhetoric that it would be linked to school attendance. This played well with an electorate who probably assumed that low attendance rates and poor educational outcomes for Aboriginal children were caused by the poor parenting of their parents. Yet there is evidence that shows that poor educational outcomes for Aboriginal children are explained by other factors.

An evaluated trial of a scheme linking welfare payments to school attendance in Halls Creek found that the attitudes of parents of Aboriginal children were only one of the factors that affected school attendance. It pointed to the central role of quality teaching and general school culture plays in the attendance and performance of Aboriginal children. It also found that the housing situation in Halls Creek – where overcrowding is a critical problem – is unlikely to provide an environment where families can be ‘school ready’. ¹⁵

There is simply no evidence that shows that linking welfare to behavioural change is effective. In fact, there is evidence that suggests the very opposite: the imposition of such punitive measures in an already dysfunctional situation will exacerbate the stress on households. ¹⁶ The goal of improved attendance may be better achieved by the introduction of breakfast and lunch programs; programs that bring the Aboriginal community, especially Elders, into the schools; Aboriginal teacher’s aides and Aboriginal teachers; curriculum that engages Aboriginal children; and programs that blend the development self-esteem and confidence through engaging with culture with programs that focus on academic excellence.

These effective programs and strategies show the importance of building a relationship of trust between Aboriginal families and the school in order to target attendance and performance. These factors come from a range of successful community-school driven projects including Augusta Primary School in South Australia, Cairns West State School in Queensland, Darlington Public School in New South Wales, the Deadly Ways to Learn project in Western Australia, the Ganai project in Victoria, the Merredin Senior High School in Western Australia, Narrabundah Primary School in the ACT, Nidia Noongar Boodjar Noonook Nyininy materials, the “Road Open: The Kimberley” interactive DVD, the Rosetta Primary School in Tasmania and Yarrabah State School in Queensland.

All of this suggests that, rather than simply punishing parents for their children’s non-attendance, the government should be providing schools and teachers that meet the needs of the Aboriginal community.

It cost $88 million to make the initial administrative changes in Centrelink to facilitate the welfare quarantining yet not one additional dollar was spent in the first wave of the intervention on any of the types of programs that have been proven to engage Aboriginal children in schools.

Further, COAG evaluation data showed that the Northern Territory was spending 47c on the education of an Aboriginal child for every $1 spent on the education of a non-Aboriginal child. Many Aboriginal communities in the Northern Territory do not have enough teachers, classrooms or desks to accommodate all the children that reside in the community.

A punitive measure placed on families to ensure their children come to school is hypocritical from any government that neglects the same children by failing to provide adequate funding for a teacher and a classroom. Even if it did work to physically bring more children into a classroom, how can a quality education be received if there has been under investment in teachers and educational infrastructure to begin with?

Quick wins: Three fixes in three minutes

Combining pragmatic politics and progressive policies

There have been claims that plenty of money has been spent on Aboriginal and Torres Strait Islander people with little impact. Here are three targeted policy initiatives that would give guaranteed good results.

Quick win #1 – Adequately fund Aboriginal legal services to meet the needs of their clients

Aboriginal legal services have been underfunded for over 15 years. The Rudd-Gillard government delivered a one-off funding boost to the community legal services sector but Aboriginal legal services are still funded less per case than mainstream community legal services. This significantly hinders the capacity of the Aboriginal legal services to meet the needs of Aboriginal people going before the courts and adds to the higher levels of incarceration, particularly as a result of the refusal of bail.

Quick win #2 – Invest in diversionary programs

Despite the findings and recommendations of the Royal Commission into Aboriginal Deaths in Custody, incarceration rates of Aboriginal people continue to rise, particularly for Aboriginal women and juveniles. Diversionary programs, particularly those working with young offenders, have been effective in reducing the re-offending rates. These programs – such as circle sentencing – have been trialled but resources have not been allocated to ensure that they can be rolled out in the communities that need them the most.

Quick win #3 – Support community controlled Aboriginal health services

Like the Aboriginal legal services, Aboriginal health services have been underfunded, making it difficult for them to meet the needs of their client base. ¹⁷ While there has been a push towards mainstreaming of Aboriginal health provision, there remains a strong case for Aboriginal health services. The health needs of Aboriginal people are distinctive and complex and services that target those specific needs are far more likely to be effective. ¹⁸

Aboriginal people still show reluctance to use mainstream services, believing they are more likely to be discriminated against.

So crazy it just might work…

Engage with Indigenous communities and commit to building their capacity

Policy makers continue to overlook and dismiss the knowledge that Aboriginal people have about solving their own problems. The research in Australia and in Indigenous communities in North America shows consistently that the best way to lessen the disparity between Indigenous and non-Indigenous people is to include Indigenous people in the development of policy and the design and delivery of programs into their communities. Apart from sounding like common sense, the research shows that this engagement assists in ensuring the appropriateness and effectiveness of those policies and programs, as well as community engagement with them, and therefore greatly increases their success.

This level of engagement requires investment in building the capacity of Indigenous people and their communities. This means a commitment to something that policy makers often overlook: the need to invest in human capital. If participation by Indigenous people is a central factor in creating better policy, program and service delivery outcomes, there needs to be more effort to build up the capacity for that kind of engagement. This would include:

• rebuilding an interface between the government and the Aboriginal community through representative structures so that governments can more effectively consult with and work with Aboriginal people.
• focusing on the provision of training and education in ways that improve the capacity of Aboriginal communities. This means moving away from simple solutions like simply removing children into boarding schools and instead looking at a range of strategies that build the skill sets and capacities of adults as well as younger people who need to retain contact with their families if they do leave for better schooling opportunities;
• increasing the number of Aboriginal people in the public service and who are engaged with developing and delivering Aboriginal policies and programs; and,
• looking at flexible employment arrangements such as work-for-the-dole schemes that understand that in many Indigenous communities there is no viable workforce or there are barriers to entering the workforce. Such schemes can assist with the provision of services and infrastructure in the community at the same time as they build capacity and skills within the community itself.

Conclusion

While the apology was a significant symbolic shift in the national dialogue between Indigenous and non-Indigenous Australians, the policy shift between the Howard Government and the Rudd-Gillard Government was less discernable. Key policy initiatives and ideological assumptions, particularly those that formed part of the Northern Territory intervention, continued despite a change of government. Under Labor, the quarantining of welfare payments and the requirement that Aboriginal communities lease back land in order to access housing money have been rolled out across the country, even though there is evidence of the failure of these policies to improve the conditions of Aboriginal people in the Northern Territory.

The ambition of ‘closing the gap’ is an admirable one and should be the key target for government policy. However, current policy approaches are running contrary to the evidence of what works in achieving better outcomes and the government continues to ignore the clear evidence of current policy failure. The poor results from current government policy are exacerbated by the fact that the Coalition shares the same ideological approach and has not questioned government failure in this area to the extent that it has in others. The losers in that have been Aboriginal people on the ground.

Indigenous policy needs a complete rethink. As Kevin Rudd said during his historic speech apologising to the stolen generations, we have to stop making the same mistakes that we made in the past. Fine rhetoric – but Indigenous communities now need that sentiment to guide policy makers.

Endnotes

by Eva Cox

There are two good arguments for framing policies to create more civil societies: one is that life will be better for all, the other is that we will feel it is. Democracies should be social systems that distribute the myriad of experiences, resources and relationships fairly and civilly. Effective policy responses to global financial and climate crises require high levels of good will, resilience and generalised trust rather than a culture of fear and self interest. Governments need the trust of voters to make legitimate decisions for the common good, and that depends much more on social well-being than on individual economic circumstances.

Policies that increase social well-being must take into account the quality of our links with those we know, whether at home, at work or in communities, as well encouraging the growth of quality ties with those outside our immediate circle.

Good policy making, whether in the classically social portfolios, on environmental issues, or economic ones, must also be framed by accepted views of the kind of society we want to live in. Setting overarching social priorities would improve both the effectiveness and coherence of public policy making and avoid damaging the social fabric through the application of inappropriate economic models.

This distinction has become necessary because too much policy making by both past and current federal Governments has failed to recognise the limits of economic analysis and applied it willy-nilly to inappropriate areas. Economics is a social science, built on limited assumptions about human behaviours that can usefully explain some but not most behaviours. Good policies need to balance the social purpose of the nation state against the practice of making more money to fund its expenses.

When policy-makers assume that the economy is an end in itself the policies shaped by that assumption can be socially damaging. Whether it’s through the attempt to enforce engagement in economic activities through coercive policies or the implementation of economic policies that increase inequality, the blindness to the social purpose of policy creates social rifts, damages social cohesion, increases anxieties across the board and reduces engagement by those who feel excluded and disrespected.

This chapter looks at two main areas in which flawed assumptions are skewing our policy priorities: the mix of tax and transfer policies that collect and redistribute public dollars, and the suite of measures grouped under the inaccurately named ‘social inclusion’ portfolio.

‘Social inclusion’ should be about more than paid employment

The word ‘social’ features only rarely in current policy agendas, and there is no priority given to this area of policy in election debates. This reflects the dominance of economic over social equity issues reflected in the ‘What does ‘progress’ mean to you?’ chapter of this publication. ¹ It is no surprise, therefore, that the Social Inclusion ² portfolio has ended up having social in its name but not in its mandate or its measures of success. When economic activity is seen as the most important measure of social progress then welfare reform is seen as employment policy, paid parental leave is justified by its contribution to workforce participation and productivity, and the Indigenous closing the gap strategy is too often seen through the lens of jobs. ³ This assumes that the primary aim of social policy is to make all individuals fit a narrow definition of ‘independence’ and that paid work is the most socially useful way that anyone can spend his or her time. It leaves out all questions of social relationships, as well as failing to recognise the importance of cultural connections, social responsibilities and care for country and others.

There are interesting questions being raised internationally on the important role that making time – not just money – plays in increasing social well-being. The New Economics Foundation ⁴ is exploring ‘time banking’ as a way of recognising the non-monetary value of time spent helping others. The Foundation describes the outcome of time-banking programs as ‘a parallel economy, using time as the medium of exchange, putting these forgotten assets to work meeting the forgotten needs, and by doing so making connections between people and rebuilding a sense of trust.’ ⁵

The sharing of paid and unpaid work is part of good parenting and good communities. Full time employment (or over-employment) for some and none for others is not a good basis for dealing with climate change and diminishing resources. However our tax and transfer systems continue to penalise part time workers, particularly those with limited time or paid work capacities, while rewarding the wealthy.

Higher participation and productivity requires a workforce that is comfortable with its non-work roles as well. This means a tax and transfer system that is not clearly linked to the residual Justice Higgins wage earner model, which assumes that an unpaid support system exists for all workers. It must recognise the value of the informal care and cultural sectors to enhance the capacities of communities to manage workplace and other changes.

Better policies for tax and an income security system should involve integrating ideas from successful Indigenous standpoints and some related feminist critiques of current public policies. These marginal viewing points provide useful guides for moving outside the overly influential economic models to a more inclusive social system. Using the failure of western (male) goals for education, health and family functioning in Indigenous communities can contribute to our understanding of how to engage in collective well developed social cultures. Similar, but less obvious, is the need for inclusion of aspects of the social system that have been seen traditionally as female or the private domains of home, care and social cohesion. A system that balances and integrates the social and cultural domains into forms of income support can provide both better social outcomes and economic ones.

Human nature: we’re just not that simple

These and other policy mistakes can be traced to flawed but deeply ingrained assumptions about human nature:

• Classical economics assumes that humans are rational self-interested individuals, so all that’s needed for good policy is to get the price incentives right. The logical consequence is that those who make the ‘wrong’ choices should suffer the consequences. This assumption triggers a contradictory conservative desire to enforce ‘good’ behaviour and avoid the costs of deviance.
• This assumption creates policies to make people self supporting and assumes that if they don’t have jobs, it is because they have problems: they’re lazy, or maybe have other personal flaws. Therefore, at best, they may need treatment for lack of skills or for personal or group health or character flaws.  The implication is that government needs to change, pressure or punish them until they get a job.

This approach ignores systemic bias: the inequalities of how societies allocate resources and opportunities. Instead it assumes individual problems with fitting in. It is an approach which denies the fact that there is such a thing as unequal power in society.

Being part of fractured, unequal, untrusting societies is stressful even for those who benefit from inequality and more so for those at the bottom of the pile. Increases in income don’t automatically lead to better social outcomes, as has recently been shown in the work of Michael Marmot, Richard Wilkinson and others. ⁶Their meticulous research finds that equality levels are better indicators of the quality of life than average per capita GDP.

The explanation for this finding is that well-being rests more in perceptions rather than the direct material impact of inequalities. Other recent research shows that humans mix emotions with reasons in assessing quality of life, and in particular that there is a gut reaction to unfairness, however defined. ⁷ Therefore people’s perception of their societies as unfair can affect well-being overall and undermine the sense of agency required for society to function well and for people to be willing to contribute to the common good.

Governments need to make policies that help society become more civil. Individuals exist within a network of relationships – individuals’ happiness does not only depend on their own circumstances, but on their relationships with those around them. The quality of a society rests on the ways in which it values the connections between people – not just on the sum of their individual well-being.

When social inclusion becomes social exclusion policy

The government’s social inclusion policy is a major indicator of its social agenda, despite the policy being relatively low profile and having few budget items. This policy area states that its aspirations are ‘reducing disadvantage, increasing social, civic and economic participation and developing a greater voice, combined with greater responsibility’. This may sound relatively broad but the actual priorities are much narrower, as indicated in their documentation of the issues on their webpage – and the programs they fund for implementation. ⁸

The delivery model for welfare payments puts many conditions on recipients which are designed to push them into certain activities and make them employable. ⁹ So it assumes that the major faults lie with the excluded, whether as individuals or in some type of community. Therefore the current government view of its own role is to provide remedial services, coercively if necessary, to ensure that the people involved move into approved slots in the economy. The way to show success is to become employed, or at least be obviously preparing for employment. The message is clear. People are only valued and included if they are self-supporting members of the paid workforce.

This area was part of the current Prime Minister’s portfolio and her various statements about the importance of hard work and the emphasis on finding people jobs as the way ahead suggests the deep embedding of these assumptions in the newly-elected Gillard Government. The Coalition already signalled its views when in government by its Welfare to Work policies, which have continued under Labor.¹⁰

Evidence-less policy – unfair and ineffective

These approaches to what is seen as individual, or at best community, dysfunction fail to take into account the findings of Marmot et al. Their research seriously suggests we need to look at whether high levels of social dysfunction, as is seen within some Indigenous communities and other poorly functioning outsider groups, may derive from the loss of a sense of agency because of perceived systemic unfairness.¹¹

The Northern Territory Intervention and the more recent expansion of its income management scheme to other working age recipients is the wrong response to long-term despair as it focuses on fitting ‘flawed’ individuals into an existing social system without recognising the flaws in the system itself.  This is despite the lack of evidence that such strategies work.¹²

There is no recognition that many of those who end up on Newstart may be excluded because of prejudice or inappropriate workplace demands. Nor does the current system recognise the difficulties single parents face in finding jobs that fit in with care, let alone dealing with employer prejudices against them, as shown in research I and others did for the New South Wales Department of Women. ¹³

Not only is such policy making seen as unfair, it does not work. The experience of the original compulsory income quarantining of 50 per cent of government payments in the 73 communities has produced no evidence that it has improved life and reduced risks in these communities. However, it is being extended to the rest of the Northern Territory and de-racialised under claims that it will restore fractured families.¹⁴ This demonstrates an official conviction that income control results in positive behaviour change that overpowers evidence, reason and logic.

By pressuring all those out of paid work into jobs, without regard for their other responsibilities, the time for care of others is limited. This may sometimes reduce direct government spending, but at what social cost?

Changes are needed

Recognising the socially useful activities requires an equitable tax and transfer system to redress the cultural and gendered divide between activities that are publicly recognised or not. This becomes a problem when payments are income tested on joint incomes, which unfairly penalises the lower income earner, as recognised in the Henry Review, or by intersections of tax and welfare payments. ¹⁵

Indigenous societies value the activities of engaging with kin, sharing stories, caring for country, ceremony and traditions, as highly as earning money. Similarly, most unpaid activities within other communities, households and family are overlooked despite being essential to wider social functioning. The way that public policy undervalues the costs of our social obligations for care and social maintenance can be particularly harmful to the more vulnerable, less resourced people who have to cope with difference and change.

Ken Henry, in the Tax Review ¹⁶ and in other speeches, showed his awareness of social and ethical issues involved in taxing and spending designs. The design of tax and transfer payments can be powerful affirmations of what a society values and what it condemns. The distinction is best illustrated by the attitudes of the media, public opinion and in policy making towards ‘entitlements’ to tax cuts and concessions compared to the moralistic, controlling and downright mean attitudes to ‘welfare’ payments. Yet $100 paid under either system costs the public the same amount.

Therefore, any examination of these major policy areas needs to define its principles and purposes. The overview of the Henry Report starts with the following claim in the letter to the Treasurer: ‘The Report presents a vision of a future tax and transfer system that would position Australia to deal with the demographic, social, economic and environmental challenges of the 21^st Century and would enhance community wellbeing.’

Note the word social is there as it is in an earlier Australia Council of Social Service (ACOSS) speech where Henry was quite explicit about his aims in the Review.

‘I chose the title of this speech — ‘how much inequity should we allow?’ — for a couple of reasons. For a start, it is mildly provocative, which I thought might help pique your interest. The instinctive response of many to the question would be to answer — none; a just society would not tolerate any inequity. Of course, beyond this instinctive reaction things get complicated. I will return to this later.

Secondly, I selected this title because I consider this to be one of the most significant choices society faces. Indeed, the question assumes inequity is a social choice. And it is. Leaving fairness solely to the market to determine should be unacceptable to a civilised society. Societies will choose how much inequity they allow according to the institutions, norms, laws, policies and programs they adopt.’ ¹⁷

The following recommendations and principles follow his stated intentions with more emphasis on the social than he was able to do. Therefore a tax/transfer system, in what it collects and redistributes, should affirm what is seen as socially as well as individually valued.

Principles for change

This involves setting up principles for long term changes to policies that:

• Recognise engagement in social as well as economic activities needs to be on the government’s agenda when setting the criteria for funding and taxing.
• Policies need to balance earning income through producing goods and services for money with the many other aspects of life which warrant public encouragement and support.
• This should include the full gamut of useful social roles, some paid and many unpaid, some formalised but others informal. Public recognition should encourage appropriate engagement with personal wellbeing, the needs of others and the common good.
• Payments, tax imposts, concessions and rebates need to contribute to the overall progressiveness of the system, or at least be justifiable as fair.
• Systems changes need to recognise diverse cultural values and be gender neutral.
• This may involve reviewing the units of payment to deal with the clash between taxing individual incomes and transfer payments that assume interdependence and shared resources.
• New de facto legitimation also carry problems as transfer payments can assume  that co-habiters may be responsible for each other, even if they deny this
• The gap between pensions and benefits needs to be decreased or abolished to recognise minimum income needs are related to workforce participation.
• The tax/transfer system should be based on assumptions that people, in general, will be prepared to take responsibility for their income needs if the wider social system treats them fairly.

Specific policy proposals

• Stop the extension of income management in the Northern Territory and possibly other disadvantaged areas in Australia as it permanently shifts the basis of income support from facilitative to punitive, particularly for parents.
• Where communities require income management, they should be offered the option of voluntary community based packages of income management and allied support services or in response to individual or household behavioural triggers.
• Return all sole parents income recipients with children under 12 to the parenting payment rates and conditions to ensure that they have enough basic income
• Urgently review the payment levels of Newstart and other benefits and raise it to an adequate base payment.

Reforming the broader system – mainly from the Henry Review

• Establish an independent tribunal to set and maintain payment levels to remove the decisions from populist political pressures with a brief to establish a basic income support level for all.
• Design categorical income supplementation and support programs that recognise needs for financial support for both the direct costs of children, and the costs of reduced access to paid work and the extra costs of disabilities.
• To facilitate movement between paid work and care-based time demands, accept the principles outlined in the Henry report for reducing effective marginal tax rates but inquire further into whether this is best done by changes to the tax or to the means test to reduce current effective marginal tax rates.
• Set up a review of cohabitation and interdependence under the Human Rights Commission.
• Accept the principle in the Henry recommendation that there be a single family tax benefit payment and that the total amount of family assistance should be withdrawn with a single rate to avoid overlapping withdrawal disincentives for working.
• Explore the Henry proposal possibilities of taxing payments rather than income testing them and other ways to reduce the savage effective marginal withdrawal rates.

Retirement and non employment income

• There should be a retirement bonus payment as a top up for those who have zero or very limited superannuation ($10,000) or other forms of saving by themselves or legal partner. This payment would supplement those solely receiving the single age pension who have often had good reason for being unable to save or contribute and balance the public contributions to substantial retirement income via tax concessions.
• A longer term options could be a social investment income support payment to be made available for people who engage in extensive socially valuable tasks in communities. This could encourage community services generally as well as make viable communities where there are no other sources of funding e.g. in isolated areas such as homelands.

Co-habitation reforms

• Questions of joint income testing (transfers) versus individual own income testing should slowly move towards being similar across tax and transfer systems, but in the meantime co-habiting should be assessed on shared income and costs.
• The law should recognise that social relationships do not equate with financial ones where there is no legal obligation or evidence of shared financial resources.
• Pooling of incomes should be assumed only where there is evidence of shared control over a set proportion of incomes or a formal agreement for funds to be pooled for use by both parties.

Conclusions

The above recommendations are a very brief set of policy proposals in response to complex issues. They point to alternative approaches to those adopted by both the major parties during the 2010 election, and seek to counter the scramble to sell the economic credentials of the major parties to voters via bribes and fear of tax increases. The evidence can be read to show that people distrust those who offer bribes and bargains and prefer trustworthy leadership. ¹⁸ In the long run politicians cannot hope to retain voters’ trust while pursuing unfair and ineffective policies based on flawed assumptions about what is important to people and society.

Endnotes

by Tani Shaw

When it comes to the really important things in life, research shows that people from all walks of life share a lot in common¹. The things that we value most seem to be spending time with those we love, a fulfilling job, a healthy life in a safe and secure environment, access to a good education and health care, time in the sunshine enjoying nature and Australia’s beautiful landscapes, the right to believe and vote² according to our values and a sense that we are part of a community.

The other chapters in this book show different areas in which Australians want progress. 75 per cent of us support stronger human rights protections³ for example, and 72 per cent want action on climate change, even before a global agreement is reached.⁴ Very little has been done in either of these areas. Why? What other forces may be overriding this clear call for change? Part of the problem lies with a single statistic that governments and economists use to track how Australia is performing economically. This simple statistic is often treated as the most important measure of whether or not we are on the right track as a country.  It is “GDP” or Gross Domestic Product. Despite being aware of its limitations, many policy makers, political leaders and commentators treat GDP as the most important measure of the “progress” of our society and our “quality of life”. GDP measures the total amount of goods and services sold in Australia each year. When GDP is seen as the primary measure of success, then the most important economic goal of any “good” government is to make sure that GDP grows every year.

A large part of the debate over whether Australia should introduce an emissions trading scheme before most other countries turned on whether this would make us less economically competitive than the countries that delayed. If so, we were told, this would negatively impact on ‘economic growth’. Other countries were having the same debate, and although the facts pointed in the opposite direction⁵, even the fear of harming GDP growth was enough to stop many politicians in their tracks. The wish to keep GDP growing at any cost has contributed to the current international stand-off on climate change. The costs associated with climate instability are going to be enormous…but let’s not think about that now. There are short term gains to be won.

So does producing more each year actually help us to secure what we value most? Of all of the ‘universally valued’ things listed above, none of them are counted in GDP (although below a certain level of GDP per capita some of these things tend to be far less attainable). So why does this measure have so much influence over the way our country is run?  This chapter aims to unpack that question and to describe a movement that exists in Australia and worldwide to find a better way to measure “progress”.⁶

If we are measuring and aiming for economic growth in GDP then this is what we will achieve. If we are measuring economic strength and stability, environmental sustainability and the well-being of people then we are more likely to achieve it. This brings us to key point #1:

Key Point #1 – National primary statistics and indicators need to reflect the goals of society

Firstly, let’s unpack GDP a bit. GDP was not designed to be the main indicator of progress.  In 1944 each country had different types of systems for national accounts. This caused problems because when one country’s figures changed the other countries didn’t know how to react and this caused unnecessary fluctuations in international markets. So in 1944 at the Bretton Woods conference in the U.S. 144 nations decided to choose a single measure by which to compare economic activity between countries, GDP.  The goal was transparency and greater economic stability.

Economists then began to equate GDP growth with the economic well-being of individuals.  So what does “economic well-being” really mean? In 2009 President Sarkozy of France commissioned some of the best economic minds in the business, Nobel prize winners Professor Joseph Stiglitz and Professor Amartya Sen, together with Professor Jean-Paul Fitoussi to look at GDP, economic performance and social progress.⁷  They identified some pretty significant gaps in the usefulness of GDP as a way to measure economic well-being.

GDP does not include all those types of personal economic well-being that cannot be measured with a price tag, such as support at home from family and friends, volunteer work in the community and many other activities which can make a difference to the affordability of someone’s existence. As well as not measuring a lot of activity, GDP is so unrefined that if there is a major environmental accident, GDP generally goes up because of the cost of the clean up and if there is a war, it goes up because of the boost in weapons production.

GDP also does not include many of the positive and negative things that happen when purchasing something. An inexpensive item like a bus fare to visit a relative may hold much more “value” than an expensive repair to a car. Economists call these hidden values “externalities”. Negative externalities include pollution or toxic waste that a product may leave behind or under-priced access to a natural resource which is depleted or lost in order to produce something.

Sometimes goods and services can cost more than they are actually worth just because they are difficult for people to understand, such as complex financial and investment packages or mobile phone plans. They may be expensive and will be counted in GDP, but may not represent a high level of value to someone’s economic well-being.

Finally, and this is a big one, a country can have high GDP but have a huge gap between rich and poor. GDP is calculated for the whole country then divided by the number of people to get an average figure. So if Australia has a large number of poor people, we will not be able to tell this from looking at GDP.

When it comes to the natural environment, on which we depend, the biggest problem with the GDP growth model is how unsustainable it is in the long term. As GDP grows, so do negative externalities. With GDP growing at four per cent each year, total production doubles every 18 years. If you match this increase with population growth, expected to reach 35 million in Australia by 2056, then our current model of GDP growth would have each person in this larger population producing more each year. If current patterns continue, this would lead to resource shortages, accelerate species extinction and many other environmental impacts. This may come with the benefits of genetically modified food, mass produced consumer goods and hi-tech living in concrete jungles… but is this the type of life we want?

So, if GDP is so inadequate as a measure of national progress then why aren’t more people talking about it? Well there has been an active effort by the Australian Bureau of Statistics (ABS), the Australian Treasury, academics and non-government organisations (NGOs) to put forward a broader approach to measuring progress. Since 2002 the ABS has put out a report called “Measuring Australia’s Progress.”⁸ The Australian Treasury also has a wellbeing framework for strategic planning and decision-making.⁹ Policy think tanks and NGOs including the Centre for Policy Development, The Australia Institute and the Australian Conservation Foundation are actively involved in sustainable economy and well-being initiatives. The ABS also gathers a wide range of data from health and education to the environment, to help inform wider measures of progress.

Broader measures of progress exist, such as the ABS “Measuring Australia’s Progress” report. However the dominance of GDP as the main indicator of progress remains in policy decision making and announcements to the Australian public. This brings us to the second key point:

Key Point #2 – GDP growth dominates and overrides all other measures of progress

If we are to achieve economic strength, environmental sustainability and societal well-being, statistics will help inform this process but will not change it. The change comes from how policy is made by government…when taxes are being decided on such as an emissions trading scheme, or budgets are set to fund initiatives such as free dental care for all Australians, or new laws are created such as container deposit legislation which has been stymied by drink companies and bottle manufacturers for years.

Collecting statistics does not change anything. The change comes from the use of the new measures in government decision making.

This raises key point #3:

Key Point #3 – Indicators alone cannot change the way we measure progress, the real test is how policy is developed and communicated

How do we influence how policy is made? One way is for governments to design policy based on the needs of the citizens of Australia. This has been put forward recently by the head of the Department of Prime Minister and Cabinet, Terry Moran, who in March of 2010 released a paper entitled “Reform of Australian Government Administration: Building the world’s best public service”.¹⁰ Moran proposes in chapter six of the review that the needs of citizens be the starting point for all Australian Public Service Programs. But how can the needs of citizens be determined?

One approach which is gaining popularity, particularly at the local and regional level of governments, is extensive citizen input. Projects are popping up around the country, such as Community Indicators Victoria¹¹ and the commencement of the development of the Australian National Development Index.¹² Such projects seek to determine what Australians consider to be “progress” through extensive consultation. Another example worth mentioning, due to its solid reputation amongst statisticians around the world, is the Canadian Index of Wellbeing¹³, which involved extensive consultation with Canadian citizens.

“Consultation” is a bit of a dirty word in some circles. It smacks of tokenism and lip service and there are plenty of community groups who have been badly burned by giving up their time to contribute ideas only to have decisions made which ignore them. Never-the-less, consultation seems to be moving from tokenism to becoming a vital part of our democratic processes for governance.

There is also some promising news from the “top”. Australia is part of the club of richest nations in the world, known as the OECD (Organisation for Economic Cooperation and Development). It is an invitation only club but non-member countries also participate, sharing knowledge in many areas, including national statistics. For decades statisticians from each member country have been gathering data on all manner of things, from health to education, the economy to the environment. The United Nations also does the same thing, but is more focused on developing countries.

Something started happening about five years ago within the OECD. Statisticians started turning out in big numbers to discuss the notion of “progress” and how it is to be measured. The OECD found itself home to a social movement for change, coming from statisticians, calling for a broader measurement of “progress” that goes beyond just economic growth. This movement reminds me of the green ban marches that happened in Australia in the 1970s. Builders in Australia were protesting at the demolition of heritage buildings and the construction of inappropriate building. The builders protested to the point of stopping major construction jobs. The construction companies lost millions of dollars and the builders, whose bread and butter came from construction, lost their income. The result however was the introduction of new demolition laws to preserve buildings of special significance.¹⁴

Statisticians may not be going on strike, but in a way they are on the front line as the builders were. Statisticians are the interface between policy makers and the public, and according to the chief statistician of the OECD at the time Enrico Giovannini, they are saying that “we are measuring the wrong thing”. They are diligent, dedicated professionals and to do their job well they have to become good listeners. Good research and statistics is now based increasingly on consultation rather than observation from afar. Statisticians have been joined by academics, NGOs, philanthropic organisations, The World Bank, the United Nations Development Program and others to call for changes to the way we measure progress.¹⁵

The Australian Bureau of Statistics is an early adopter in this movement for change. However, none of this action means anything if, at the end of the day, it fails to influence the way policy is made by government. At the moment the greatest signs of influence are at the local and state level, with projects such as Community Indicators Victoria. The implementation of the Moran Review in the Australian Public Service provides an opportunity to find innovative ways of determining the “needs” of the Australian public. Perhaps this will foster a culture of consult first, plan later, in the public sector. The head of Treasury, Ken Henry, is also a vocal advocate of incorporating environmental sustainability into our national fiscal policy as a matter of urgency. ABS and Treasury are advisors, but are not the decision makers. Ultimately it is the prime minister and elected ministers who can choose whether or not to heed the advice and instruct policy makers to incorporate broader measures of progress at the outset of policy development.

In 2009 the OECD Global Project entitled “Measuring the Progress of Societies” conducted training courses for future policy makers in various countries, including the Australian Bureau of Statistics in Canberra. In the course a framework was presented by which broader measures of progress could be incorporated at the outset of policy development. During the scoping and initial design of a new policy, dimensions of progress are nominated and indicators by which the dimension could be measured. For example, when developing a policy for new release of a region for urban development broader measures of progress could be incorporated into the policy through the design of an indicator table as follows:

Example – Measures of progress for new urban development

The use of dimensions and indicators, as above, can assist policy makers in determining measurable outcomes for the various elements of “progress”. Much will depend however on the brief for policy design, which comes from the relevant minister. This brings us to another key point.

Key Point #4 – Moving beyond the GDP growth paradigm to broader measures of progress requires a choice by elected politicians to change the way policy is developed

The extent to which a policy maker can influence the dimensions and indicators for a particular policy outcome may vary within each organisation. In the meantime individual policy makers – whether they are a policy maker in a government department, an academic, a statistician or a minister – have the opportunity to incorporate broader measures of progress into the planning. A groundswell of interest will create an environment conducive to change.

If things do start to change, the signs will be that policy announcements from politicians will focus less on economic growth as the magic cure for quality of life in Australia. GDP will no longer be regarded as the only guiding light for moving us forward. We will know things have changed when we turn on the radio in the morning and instead of hearing how our problems are solved because we’ve produced a whole lot more stuff than last year, the news will read something like this:

“Australia’s national progress improved overall last quarter, according to our National Development Index. We saw a rise in the sustainability index due to the significant improvements to water flows in the Murray-Darling; our economic strength index dipped slightly due to unexpected delays in the implementation of the much-anticipated Emissions Trading Scheme and our well-being index rose sharply on news that the Federal Government will cease the Intervention in the Northern Territory, in accordance with international human rights law.”

Some commentators have argued that implementing an index of this kind would be a mistake because it is inherently flawed owing to the subjective nature of its basic value judgments. After all, who will decide which components are included in such an index and how much weighting/emphasis should be given to one aspect of progress over another? There is some merit to these concerns. However, a better way to look at this challenge might be to ask:

Would this be more or less valuable and informative than using a single, unrepresentative measure of production as the national indicator of whether or not quality of life in Australia is getting better or worse?

Endnotes

by Ray Ison

Future public sector reform needs to differentiate between reform that does the wrong thing in the right way and reform that does the right thing.¹ To consider what the right thing is, we need to look at the big picture and ask: does Australia have the forms of governance it needs to be effectively governed? This chapter takes a step back and presents a systemic perspective on:²

• how some situations that need to be governed are, or could be, framed,
• the systemic failings that are built into our current governance arrangements,
• some of the findings and recommendations of the recent Moran Review³, and
• recommendations for improving public sector reform.

Re-framing governance in a climate-change world

What is governance?

Governance encompasses the totality of mechanisms and instruments available for influencing social change in certain directions. While governance is a much broader idea than management or administration, it is not some abstract label but an action that has to be carried out. Governance is the context in which adaptive planning, designing, regulating and then managing sits. Governance that is ‘adaptive’ incorporates learning and change in response to uncertainty.

Governance and systems thinking

There are many good introductions to systems thinking and how it can be used.⁴ Unfortunately too few people know what it is and how to use it. Most rarely make it to first base because they are trapped in a dominant linear, causal mode of thinking typified by projects, prescriptions, objectives, deliverables and blueprints. Better governance requires a more skilled use of systems thinking.

Reframing the situations to be governed

At this moment in Australia, the public service (APS) faces a growing number of seemingly intractable policy problems, and the pressing need is to work out how to make governance work in conditions of uncertainty.

In 2007, the APS Commission (APSC) produced a very thoughtful review of ‘wicked problems’. This review described ‘wicked problems’ as problems that:

‘go beyond the capacity of any one organisation to understand and respond to, and [where] there is often disagreement about the causes of the problems and the best way to tackle them…key ingredients in solving or at least managing complex policy problems include successfully working across both internal and external organisational boundaries and engaging citizens and stakeholders in policy making and implementation.’

Rittel and Webber coined the term ‘wicked problems’ in the 1960s, and contrasted them with ‘tame problems’ where the main stakeholders agree on the nature of the problem and what would constitute a solution. With tame problems, they found that traditional problem solving approaches could be reliably used. In their experience, however, ‘tame problems’ were rarely present and traditional approaches often made wicked problems worse.

Walking becomes painful if the shoes no longer fit, or are wearing out. This is a good description of the failure to deliver systemic and adaptive governance in a world in which an increasing proportion of the problems that governments face are ‘wicked’. Making these ideas real in terms of public sector reform is a great challenge. Unfortunately there are very few examples of using systems thinking and practice (ST&P) to guide public sector reform.

Whether situations are framed as ‘wicked problems’ or not is a choice we can make. In the Moran Review, for example, the word ‘wicked’ does not appear. Instead there are framing phrases like: ‘policy challenges in the era of globalisation are so complex, and the solutions so contested…’ or ‘policy issues are increasingly complex and interrelated…’ “Complex” is one of the new framings of choice, but while the language may change, the situations to which the language refers have not gone away. They are, if anything, multiplying and it will take a shift in thinking, the practices that result from that thinking, and in our governance structures to engage with them effectively.⁶

Alternative structures of governance

The term New Public Management (NPM) has been applied to an approach to public service reform that focuses on performance management, the devolution of managerial controls to individual agencies, the restructuring of public sector industrial relations arrangements and outsourcing of service delivery to third-party service providers.⁹ Kathy MacDermott has looked at the history of New Public Management in Australia and found that the approach has been internalised by the APS in ways that leave it much more vulnerable to the pressure towards politicisation. The Moran Review needs to be considered in this light.

Ian McAuley notes that the Moran Review report uses the words ‘strategy’ and ‘strategic’ 136 times in its 81 pages ‘but not once are they defined…What is meant by the term ‘strategic policy’? Is it long term and system wide? Is it just clever?’¹⁰

The report states that ‘…strategy requires having a vision over a horizon of a decade or more, not a single planning cycle. For the public service, strategic thinking means thinking how the public service will do its job beyond the next electoral cycle.’ But if strategy is just long term planning, then there is nothing to suggest that the Moran Review will achieve anything other than doing more of the wrong thing in the right way. What is missing is an understanding that good strategy depends on how situations are framed (e.g. the ‘wickedness’ of problems) and how the ‘system’ of governance is structured.¹¹

McAuley also draws attention to the report’s use of the term ‘leadership’:

‘…another word used freely — 63 times — … again without explicit definition. For example, senior public servants are expected to “model leadership behaviours including promoting innovation and challenging unnecessary risk aversion …” This all sounds fine’ he says, ‘but note the tautology: leaders model leadership. The implicit leadership model, illustrated in the report with a neatly drawn pyramid, assumes that authority and leadership are closely intermeshed or perhaps even indistinguishable.’

Leadership is better understood as an emergent property of the interactions of individuals and context rather than as the position description or personality trait of an individual. Our current governance arrangements are for the most part designed to maintain hierarchical, command and control decision making. There are other options better suited to our circumstances.

To me, responsible autonomy is the form of governance that most closely aligns with the skill set that is desirable in the 21^st Century public sector. If the aim is to create the space for new solutions to emerge then there are clear advantages to purposefully creating the conditions for devolved self organisation – a key attribute of systemic and adaptive governance.

Unfortunately the essential measure of public sector performance under New Public Management and the Moran review, is that of efficiency. In systemic terms, this is only one of several measures of performance. One could add efficacy – does it work? Effectiveness – does it achieve its purpose? Equity – how are the benefits distributed? Ethicality – is it ethically defensible? Efficiency gains may come at a cost to other measures of performance. ¹⁴

Investing in systems thinking and practice

I have argued for embedding systemic thinking and practice in the APS as a core capability within a broader systemic and adaptive governance regime.¹⁸

I am not the only one. In July 2009, Lynelle Briggs argued for the development of more horizontal accountability mechanisms (a form of horizontal governance) and the need for skills and capabilities for APS staff in:¹⁹

(i)             problem framing and boundary setting

(ii)           generating fresh thinking on intractable problems

(iii)          working across organisational and disciplinary boundaries

(iv)          making effective decisions in situations with high levels of uncertainty

(v)           tolerating rapid change in the way problems are defined, and

(vi)          engaging stakeholders as joint decision-makers (not just providers or recipients of services).

Other research has highlighted the need for systemic capability for effective leadership and sustainability management. In ‘Exceeding Expectation: the principles of outstanding leadership’ research undertaken by The Work Foundation (UK) shows that outstanding leaders ‘think systemically and act long term… Outstanding leaders achieve through a combination of systemic thinking and acting for the long term benefit of their organisation. They recognise the interconnected nature of the organisation…’

Geoff Mulgan, writing in 2001, identified seven factors that increased the relevance of systems thinking to policy making and to the functions of government. These were:

1. the ubiquity of information flows, especially within government itself

2. pressure on social policy to be more holistic

3. the growing importance of the environment, especially climate change

4. the connectedness of systems and the new vulnerabilities this brings

5. globalisation and the resultant integration of previously discrete systems

6. the need to be able to cope with ambiguity and non-linearity

7. the understanding that planning and rational strategy often lead to unintended consequences.

He concluded that out of all these factors has come a ‘common understanding that we live in a world of complexity, of non-linear phenomena, chaotic processes, a world not easily captured by common sense, a world in which positive feedback can play a hugely important role as well as the more familiar negative feedback that we learn in the first term of economics.’ He also recognised that ‘so far remarkably little use has been made of systems thinking or of the more recent work on complexity’ and that in part this is ‘to do with the huge sunk investment in other disciplines, particularly economics’.

The trends and imperatives recognised by Mulgan have, if anything, become more pronounced since 2001.²⁰ However,  so far little has been done in Australia to respond to them and it is not clear that key decision-makers would know how to do so. There is a tendency within government to limit the definition of need to skill development,²¹ but research demonstrates that to do this is to miss the point entirely; skills are necessary but not sufficient unless developed within a theory-informed organisational ‘ecology’ that is systemic and adaptive.

Evidence of systemic governance failures

A major study by Stein Ringen looked at what the UK New Labour party achieved in terms of its own social policy objectives over the ten year period 1997-2007.²² Ringen studied the flagship policies of child poverty, education, social justice and health. He found that they had achieved ‘absolutely nothing’. His study provides strong evidence for the systemic failure of UK governance by highlighting the problems that emerge when governments adopt a command and control approach and fail to mobilise citizens or stakeholders in policy development and implementation. His sobering conclusion is that no UK government, of any political persuasion, can currently get done what it is elected to do.

Ringen’s findings illustrate a situation that can be understood as a ‘structure determined system’. It is not only governments that are constrained by the system in which they operate. Take utility companies that deliver social goods – such as water or energy. Most now have as a main measure of performance the profit derived from sales of water or energy and associated services. The system is not structured to recognise that in today’s world the main social benefit from water and energy comes from how little water or energy is used and the efficiency of its use. We create measures of performance which conserve particular structural relations that give rise to particular forms of organisation. Only by inventing new organisations with different structural relations can we break out of the constraints that the old structures impose on our thinking and behaviour.

Challenge #4. Seriously examine Ringen’s prescriptions for the reform of the British ‘constitution’ in the Australian context

Ringen argues for:

•           a return to genuine cabinet government, breaking the power that has moved to the Executive, which has distorted the historical ‘constitution’ on which the Westminster system is built

•           the re-invention of local governance, something very different to local government as we know it (this can be understood as a new form of horizontal governance)

•           public funding of political parties through a citizen-based voucher system and the abolition of all donations to political parties, thus creating a level playing field sensitive to citizen interests and totally transparent.²³

Innovating in systemic and adaptive governance

Our current governance system does not have the variety that is needed to maintain a viable system. Ringen’s analysis looks increasingly relevant to the Australian context. In reinventing local governance (horizontal governance) we need bold institutional arrangements which protect the self-organising and emergent nature of the local and which is coupled more fruitfully with the existing vertical model that underpins our form of representative democracy. There is no blueprint for doing this – we have to invent new ways forward. By framing the challenges in ways that embrace uncertainty and complexity we can relegate command and control strategies and optimisation strategies to where they rightfully belong – subsidiary to systemic and adaptive governance.

What doesn’t work: joined up government, targets and ‘deliverology’

In the UK New Labour’s catch cry of “joined-up government” was built on understandings of the ‘third way’ as articulated by Anthony Giddens. It espoused a desire to increase the extent of joint working between different parts of government and to identify innovative ways of delivering public services which served their Better Government agenda as well as reducing the cost of delivering public services and/or improving the quality and effectiveness of services delivered to the public.

As experience in the UK demonstrates, the notion of ‘joined-up thinking’ and ‘joined- up government’ became, conceptually and practically, an empty cliché. It can be argued, joined-up government failed because of inadequate conceptual and praxis skills and poor institutional settings to enact joined-up government. Targets and ‘deliverology’ in particular undermined New Labour’s espoused intentions.²⁴

The ‘targets culture’ that became endemic in the British New Labour government as well as widespread in other areas of government and corporate life. The development of a targets culture is a good example of privileging systematic approaches over systemic, sometimes at considerable social cost.

As Simon Caulkin, The Observer’s former management editor, rightly observed:

‘The Health Commission’s finding last week that pursuing targets to the detriment of patient care may have caused the deaths of 400 people at Stafford between 2005 and 2008 simply confirms what we already know. Put abstractly, targets distort judgment, disenfranchise professionals and wreck morale. Put concretely, in services where lives are at stake – as in the NHS or child protection – targets kill.’²⁵

Simon goes on to say:

‘Target-driven organisations are institutionally witless because they face the wrong way: towards ministers and target-setters, not customers or citizens. Accusing them of neglecting customers to focus on targets, as a report on Network Rail did just two weeks ago, is like berating cats for eating small birds. That’s what they do. Just as inevitable is the spawning of ballooning bureaucracies to track performance and report it to inspectorates that administer what feels to teachers, doctors and social workers increasingly like a reign of fear.’

John Seddon has been an erudite and consistent critic of New Labour’s commitments to targets and ‘deliverology’, a term coined by Sir Michael Barber, a former Downing St insider.²⁶ Unfortunately ‘deliverology’ seems in danger of breaking out in Australia.  Responding to criticism of failed service delivery, the former Prime Minister Kevin Rudd’s strategy for the future had all the hallmarks of ‘deliverology’ gone mad. He said:

‘We need to lift our game, I need to lift my game, in terms of delivering on these undertakings… The key thing for us is to get on with the business of delivering to the Australian community, in critical areas of need, in health, in education, in real action on climate change as well… This is critical for the future, and we’re taking a pounding because we haven’t been up to the mark so far… I think people are becoming disappointed at the pace of the delivery of the commitment that we have made.’²⁷

One can be sympathetic at the sentiments that appear to lay behind this act of mea culpa, but in its framing and in its prescription, it is a recipe for ongoing systemic failure.

An agenda for future public sector reform

1. Our concept of the reform process needs to be expanded to include the need to reinvent governance
2. Those responsible for managing public sector reform need to reframe the issues. The reform agenda as currently framed – as one of better administration, service delivery, narrowly defined efficiency and enhanced command and control by the executive – is a recipe for poor governance
3. Intractable policy issues require more systemic approaches; governance arrangements are needed that broaden our definitions of problems by opening up the process to a wider range of perspectives
4. Investment in the skills of systems thinking and practice is an urgent priority that needs to run in parallel with the invention of new institutional arrangements that are conducive to engaging with and managing complex, ‘wicked’ situations
5. New experiments in horizontal governance are urgently required. A good starting point would be to reinvent catchment management authorities so that they operate nationally to govern water, rivers and human livelihoods as a coupled social-ecological system. Such authorities would work most effectively with an income stream (e.g. a rateable base) that is independent of government short-termism. A similar model needs to apply to Australia’s cities.²⁸

Endnotes

by Marian Sawer, Kathy MacDermott and Norm Kelly

‘Everybody to count for one and nobody for more than one.’ – Jeremy Bentham

The principle of political equality has always been central to democracy and to the way democracy was understood by the democratic reformers of mid-19^th Century Australia. The Australasian colonies were regarded as being in the vanguard of democratic innovation and at the end of the 19^th Century such innovations became part of the federal compact. The new Constitution expressly precluded plural voting (provisions for property owners to have extra votes), and the Senate was to be directly elected on a popular franchise, unlike any other upper house of the time.¹ There were to be no privileges based on property, and in the words of the first commentator on the Australian Constitution, University of Melbourne Dean of Law Harrison Moore: ‘The predominant feature of the Australian Constitution is the prevalence of the democratic principle, in its most modern guise’. He believed that this underlying principle meant that rights were protected not through a Bill of Rights, but through ensuring as far as possible that individuals had an equal share in political power.²

During the 20^th Century, progress in this area continued. For example, property qualifications for State upper houses were finally abolished. Later, the malapportionment which made the votes of rural property holders worth more than the votes of urban residents was gradually removed, except for in the Western Australian Legislative Council. However, the last quarter of the 20^th Century saw the influence of property again assume a major role in electoral politics. The dependence of political parties on corporate donations has served to undermine fair electoral competition and hence the principle of political equality.

Australia started introducing public funding for political parties in the 1980s in order to reduce dependence on corporate money and to ensure parties had the means to communicate with the electorate. As in other countries, the amount of public funding was tied to the level of public support for the party, measured by the number of votes gained above a certain threshold, with all votes being of equal value. However, Australian governments “forgot” to tie receipt of public funding to abstention from private donations. Unlike public funding, corporate donations were not tied to a fairness formula, so that parties received very different levels of funding per vote. For example, at the 2001 federal election the amount of private money received by political parties with parliamentary representation varied between $29 and $6 per vote, while public money was set at a standard $1.80 per vote.³

Instead of becoming less dependent on private money, the major parties became ever more dependent on it, especially with the escalating costs of television campaigning. At the same time, the remaining statutory caps on campaign expenditure were removed, except for the Tasmanian Legislative Council, giving an advantage to those with the wealthiest friends and backers. The degree of fairness that public funding was intended to introduce into democratic elections had been swiftly undone.

Political finance reform in international perspective

Australia is not the only democracy confronting the dilemmas posed by the role of money in electoral politics. The combination of the escalating cost of campaigns, shrinking party membership and deepening public mistrust about politicians and money contributes to loss of confidence in democratic institutions. The 2007 Australian Election Study showed that 69 per cent of voters believe that big businesses – the kind of organisations which make the most substantial donations to political parties – have too much power.

But while other democracies, including Canada, New Zealand and the United Kingdom (UK) have taken serious steps in recent years to tighten up their political finance regulation,⁴ Australian governments have been slow to grasp the nettle. Indeed, under the Howard Government things went backwards at the federal level, with the weakening of disclosure requirements, raising the threshold for disclosure to $10,000 (or $90,000 if a donor gives to the State, Territory and Federal divisions of a party). The Rudd Government twice brought forward Bills to bring the disclosure threshold back down to $1,000, but they were defeated in the Senate.

There are remarkably few restrictions in Australia on the size or source of donations to political parties. Australia even allows donations by foreign interests or those with an interest in government contracts or planning decisions. One exception, arising from continuing and well-publicised scandals, is the legislation passed in New South Wales in December 2009 prohibiting donations from property developers.⁵ While the singling out of one class of donations is understandable, it is unlikely to be effective in the long term in allaying integrity concerns or achieving a level playing field.

By contrast, in Canada both Liberal and Conservative governments have taken major steps to remove the influence of corporate money from the electoral process and to ensure a level playing field in elections. Instead of campaigns being mainly funded by large corporations, they are now predominantly funded (at a lower level) out of the public purse.

But what of the so-called hydraulic nature of political finance – the idea that if money can’t go directly to political parties it will flow through other channels, such as third parties? In Canada, third parties have to register with Elections Canada once they have spent more than $500 on election advertising. They then have to disclose their expenditure and donors and comply with an upper limit on third party expenditure ($150,000).

The Canadian model of political finance regulation, in the fully-developed form shown above, has been in place for the last three general elections. It requires close oversight by a highly-respected and independent electoral management body (Elections Canada) and provides a useful model for Australia to build on.

In Australia, it is sometimes suggested that political finance reform would be constitutionally impossible. The argument is based on Australia’s short-lived (1991–92) ban on paid political advertising in the electronic media, which was found by the High Court to infringe the implied Constitutional right of political communication. Similarly in Canada, Constitutional challenges were made on the grounds that restrictions on third-party advertising infringed the freedom of expression guaranteed by the Canadian Charter of Rights and Freedoms. However, the most recent restrictions (rather than bans) have survived such a challenge, with the Supreme Court finding in 2004 that the restrictions were reasonable in the interests of electoral fairness.⁶ It concluded that the restrictions were necessary to provide a level playing field for political discourse. The restriction of some voices was necessary so that others might be heard.

This should also be the argument put forward in Australia. There should be limits on the size of political donations and on campaign expenditure, whether by parties or third parties. Through ensuring that these limits are reasonable and appropriate to achieving electoral fairness, they should not fall foul of the “implied right of political communication” identified by the High Court in the 1992 Australian Capital Television Case.⁷ Such reasonable restrictions already exist in Australian electoral law, including the three-day blackout of electronic political advertising in the final few days of a campaign.⁸

Timeliness

The only real restriction on political donations in Australia has been the requirement for disclosure. However, the usefulness of disclosure has been significantly reduced by its lack of timeliness. For example, it took 16 months after the 2004 federal election before voters found out that Lord Ashcroft, a foreign citizen (of Belize and the UK) had given $1 million to the Liberal Party before the 2004 election. If he had given this amount to the British Conservative Party during an election campaign it would have been disclosed within a week.⁹

Some steps have been taken in Australia to improve timeliness. For example, New South Wales and Queensland now require disclosure every six months.¹⁰ However in the era of electronic transfers, there is no reason why donations should not be reported to the Australian Electoral Commission (AEC) at the same time as they are transferred to the bank, and then published on the AEC website.

Government advertising

One way in which political parties supplement the donations received from private sources is by using government resources for party purposes. Clearly this is most open to incumbent governments, and the most flagrant example is the use of government advertising for political rather than public benefit. Expenditure on government advertising reached a peak in the later years of the Howard Government when the federal government became Australia’s biggest advertiser, ahead of corporations such as McDonalds or Coca-Cola.¹¹

Then Labor leader Kevin Rudd declared the misuse of government advertising to be a “cancer on democracy” and the 2007 Labor Platform made a number of important commitments to remove this “cancer”.

In 2008 the Rudd Government fulfilled its promise to put in place guidelines to ensure taxpayer-funded advertisements were not used by the Federal Government for party political purposes. The guidelines set out procedures for ensuring that advertising campaigns of a certain value complied with five principles – relating to when campaigns could be conducted, how campaign materials should be presented and the legal and procurement responsibilities to be considered. In 2010, those guidelines were amended following a review conducted by former senior public servant Dr Allan Hawke. The main issue arising from the amendments is whether the revised guidelines will make it easier for the government to spend taxpayers’ money on campaigns that serve its political interests rather than the public interest.

The 2008 Guidelines were not legislated (indeed, the commitment to legislation was dropped from the ALP’s 2009 National Platform) and were not always clear with respect to some procedural matters. But they did have a practical impact. For example, expenditure on public advertising fell. Transcripts of government advertisements can now be found on agency websites, as can certification from both the Auditor-General and agency chief executives that campaign material complies with the guidelines and is not party political in content. The factual content of campaign advertisements has arguably increased, although there is little evidence that the “good news” overtones are being muted.

It is important to understand what has been achieved through the Government’s 2008 Guidelines in order to understand the extent to which this achievement has been put at risk by the 2010 revisions.¹² The revised approach incorporates two key changes: the transfer of the responsibility for reviewing proposed campaigns from the Auditor-General to a new Independent Communications Committee appointed by government and composed of eminent former public servants, and the widening of the scope for exemption from the Guidelines.

The transfer of the responsibility for reviewing proposed campaigns from the Auditor-General to a new Independent Communications Committee has occurred because of concerns that the Auditor-General was taking, ‘an overly risk-averse, conservative approach to Government communications activities’.¹³ The Guidelines require the Auditor-General to pronounce on the compliance of a campaign with the Guidelines before that campaign is undertaken, while the ongoing functions of the Auditor’s Office entail undertaking performance audits of the same campaign after it has been completed. As the ACT Auditor-General noted when asked her views on the same model: ‘That created a risk for us, because later on, if we come back and do a performance audit and find a number of government advertisements are totally a waste of money because they did not achieve the intended outcome to change people’s behaviour or to inform people, it looks as if we are in conflict with ourselves because we approved them in the first place’.¹⁴ The possibility of such a perceived conflict, it has been argued, would tend to make the Auditor-General’s decisions unnecessarily conservative. Hence the expectation that the transfer of the review function to an Independent Committee is likely to result in a more relaxed application of the Guidelines.

Moreover, the scope for excluding particular advertising campaigns from compliance with the Guidelines has been widened. Under the old 2008 Guidelines, the Cabinet Secretary could exempt an advertising campaign from compliance on the basis of a national emergency, extreme urgency or other extraordinary reason. In the revised Guidelines “extraordinary” has been revised to “compelling” on the ground that this revision provides more flexibility. There is clearly a question as to whether such additional flexibility is desirable or necessary.

These are the changes that have been criticised as watering down the implementation of the government’s 2007 election commitment and widening the scope for political interference in government advertising campaigns. Such concerns have been exacerbated as the government moved quickly to give itself an exemption from its own Guidelines in order to fast-track a defensive campaign on its proposed mining tax.¹⁵ That campaign was withdrawn following a deal with the mining industry, which ceased its own campaign at virtually the same time. It is to be hoped this exemption did not represent the first of a series that will progressively undermine Labor’s 2007 election commitment to clean up government advertising.

Until they become law, the Guidelines will remain vulnerable to reinterpretation or revision. In the Australian Capital Territory the Liberal Opposition, with support from the Greens, has passed legislation to regulate government advertising. The Government Agencies (Campaign Advertising) Act¹⁶ was passed in December 2009 and came into force July 1st 2010. Among other things, the Act requires campaigns costing over $40,000 to go to an independent Campaign Advertising Reviewer for a compliance review. The appointment of the Reviewer must be supported by at least two thirds of the members of the Legislative Assembly. Ministers may exempt urgent matters from the Act, but the exemption will be disallowable by the Assembly.

The incoming federal government should follow the example of the Australian Capital Territory and legislate to ensure government advertising is not used for party purposes. Any exemption from the procedures and principles applying under the legislation because of a national emergency, extreme urgency or other compelling reason should not exempt the campaign from the application of Principle 3 (Campaign materials should be objective and not directed at promoting party political interests). Where an information or advertising campaign has been exempted from the usual compliance oversight, agency chief executives should be required to certify that the campaign is nevertheless compliant with Principle 3.

The legislation should, at minimum, incorporate a requirement to report annually on the value of each campaign as defined in the 2010 Guidelines.

The electoral roll

While getting private money out of electoral politics and preventing the misuse of public money is part of the recipe for restoring the principle of political equality, another equally important ingredient is ensuring that eligible citizens are able to participate.

Although enrolment is compulsory for eligible Australians, the Australian National Audit Office estimates that 1.1 to 1.4 million otherwise eligible voters are missing from the electoral roll.¹⁷ This is because they have never enrolled, or because they have moved location and have not enrolled at their new address. Apart from the portion of the population who will intentionally avoid being enrolled, there are two significant reasons for this high level of non-enrolment: complicated procedures to enrol, and a lack of sufficient time to enrol after an election is called.

In 2006 the Howard Government introduced more stringent “proof of identity” requirements for people wishing to enrol or to change their enrolment. The new ID rules make it more difficult for the AEC to enrol people, even when the Commission is aware of an enrolled person’s new address. Under current Commonwealth rules, the AEC can send an enrolment form to a person’s new address, but the person has to fill out, sign and return the form to the AEC before becoming enrolled. Often a voter will see that the AEC has their new address, and assume that they are enrolled. In addition, the 2006 changes shortened the opportunity to enrol once an election was called – previously seven days – to the day election writs are issued. Federal elections are not held on a fixed date (as occurs in some States, including New South Wales and Victoria), so this leaves potential voters little time to enrol or update their enrolment.

Best practice in modern international electoral administration provides for “smart” enrolment, also known as “direct” or “automatic” enrolment. Under an automatic enrolment regime, a commission initiates or updates a person’s enrolment when it is notified by government agencies that a person has reached enrolment age or has changed address. The person is then informed that they are enrolled and asked whether they have any objections. This shift of emphasis is important, as it requires the person to take action to un-enrol, rather than to enrol. Automatic enrolments address, in particular, the relatively low enrolment of young people who tend to be highly mobile and either drop off the roll, or never get on it. Other demographic groups, such as transient workers and renters, also benefit. In these days of electronic rolls, automatic enrolment also largely removes any need to “close” the rolls before an election. There is no reason why new enrolments and enrolment updates cannot continue up to election day, as occurs in countries including Canada and New Zealand.

Of course, best practice in achieving a more comprehensive roll can also have partisan affects. Young and itinerant people are considered less likely to vote for conservative parties and more likely to vote for Labor or the Greens. However, the democratic principles of fairness and inclusiveness should override any partisan considerations. While the Coalition may argue that citizens have a duty to comply with the current registration requirements, there is an onus on government to facilitate ease of access to participation, especially under a compulsory enrolment and voting regime.

In 2009, the New South Wales Labor Government passed legislation for automatic enrolment, and is set to implement it ahead of the March 2011 State election. In order to avoid confusion, New South Wales is waiting until after the Federal election to implement the new arrangements. In June 2010, the Victorian Labor Government introduced legislation into Parliament for automatic enrolment. With a general election due to be held in Victoria on November 27th 2010, it is unclear whether the Brumby Government will seek to pass the legislation prior to then. As the States and Territories operate “joint-roll” arrangements with the AEC, there is huge potential for confusion if voters become automatically enrolled at the State level, but remain unenrolled for Federal elections. The different systems will create confusion for voters unless the Commonwealth also adopts automatic enrolment. Given that the two largest States (which contain 58 per cent of all Australian voters) are moving to modern enrolment systems, it is imperative that the Commonwealth and other States and Territories also adopt a process that is seamless for voters.

Since coming to power in 2007, the Labor Government has introduced legislation to reform the current enrolment requirements. The proposed changes include restoring the seven-day enrolment period after an election is called, removing some of the ID requirements introduced by the Howard Government, and to allow voters to update their enrolment electronically (as you would, for instance, for your bank accounts). Previous reform attempts have been stymied by the Senate, so it may not be until the new Senators take their seats from July 2011 that the current Bills can be passed. Under the agreements between the newly-elected Gillard Government and the Greens and Independents a national inquiry into broader electoral reform will also report by October 1st 2011, enabling further legislation in 2012.

It is time for reforms that place political equality ahead of perceived partisan interests. Political equality and democratic integrity cannot be taken for granted. These values require sound legislation and strong oversight bodies that remove temptation from the government of the day. We have attempted to show the urgent need for this in the areas of political finance, government advertising and electoral enrolment.

Photo Credit: Kat Mere, http://www.flickr.com/photos/katmere/101812716/

Endnotes

“The greatest shortcoming of the human race is our inability to understand the exponential function”

- Professor Albert A. Bartlett, University of Colorado

A Full World

by Ian Dunlop

As population rises from 6.8 billion today towards 9 billion by 2050, the inevitable logic of exponential growth in both population and consumption is now hitting the limits of global ecosystems and resource availability. The immediate pressure points are energy security, climate change, biodiversity loss, water and food availability, issues which are converging rapidly in a manner never previously experienced. These are only the tip of the broader global sustainability iceberg.¹ Further constraints and limits are fast becoming evident as major developing countries, particularly China and India move up the growth escalator.

This situation is not unexpected; it has been anticipated for decades going back before the 1972 publication of “The Limits to Growth”.² In the meantime the developed world has created a political and capitalist system which has proved incapable, so far, of recognising that the most important factor for its own survival is the preservation of a biosphere fit for human habitation.

The aftermath of WWII bred statesmen and women in both government and business intent upon creating a better world, re-building society, avoiding further conflict and genuinely prepared to take a long-term view. The results were far from perfect, but that vision did provide the foundations for the increasing prosperity the West has enjoyed ever since.

With prosperity came complacency; the assumption that growth within a finite system can continue indefinitely. This is hardly surprising, given that power and influence accrue to those who prosper under capitalism, and that technology until recently has enabled us to push back or ignore any physical constraints. Enormous political and personal capital is now vested in preserving the status quo. As a result, our institutions have become predominantly short-term focused; politically due to electoral cycles and corruption of the democratic process; corporately due to perverse subsidies and incentives, particularly the bonus culture which became the norm through the 1990s. Managerialism³ replaced leadership, statesmen all but disappeared, ethical standards deteriorated, so that we now find ourselves uniquely ill-equipped to handle the long-term challenges which lie ahead. The upshot is a series of escalating crises, most recently the Global Financial Crisis (GFC).

The developing world was intent on slavishly following our example. However in the last decade that began to change as the reality of pollution, resource scarcity and increasing inequity hit home, and it became obvious that the developed world model has serious flaws.⁴

What was workable in a relatively empty world of two-three billion people post-WWII is not workable in today’s full world of 6.8 billion, let alone the nine billion to come. Our ideological preoccupation with a market economy, based on political expediency and short-term profit maximisation, is rapidly leading toward an uninhabitable planet, as sustainability issues of theoretical concern for decades manifest themselves physically, particularly in regard to climate and energy:

Climate change

There is now unprecedented evidence that human carbon emissions from fossil-fuel consumption and land degradation are, on the balance of probabilities, warming the planet at an accelerating rate.^{5 6 7} Despite two decades of negotiation, virtually nothing has been done to address the problem, with human emissions accelerating in excess of the worst predictions⁸. The impact is clearly seen in record global surface and ocean temperatures⁹, rapid Arctic and Antarctic ice volume loss ^{10 11 12 13},  increasing permafrost methane emissions^{14 15}, ocean acidification^{16 17} and escalating extreme weather events.^{18 19 20} These major changes are happening at the 0.8^oC temperature increase we have already experienced relative to pre-industrial conditions, let alone the additional 0.6^oC to 3.5^oC²¹ to which we may already be committed as the full effect of historic emissions is felt.

The inertia of the climate system, particularly the slow warming of the oceans, means that the results of our emissions today only become evident decades hence. Thus unless we take rapid action now, we may well be locking in irreversible climate change of catastrophic proportions for future generations; indeed we may have already done so. A difficulty in gaining acceptance of this thesis is that conventional economics heavily discounts such possibilities.

The appropriate method of handling high impact, low probability events, the so-called “fat tail” conundrum, has been well explored by Harvard’s Martin Weitzman²², arguing that conventional cost benefit analysis is entirely inappropriate in such circumstances. The validity of this argument is beginning to be accepted by mainstream economists such as Paul Krugman.²³

Unfortunately the latest science suggests that the supposed low probability of these events has increased significantly. Given the serious implications for future generations, we should base solutions far more on ethical and moral values than on economics.

The inexorable conclusion is that the global response to climate change has to be moved to a genuine emergency basis, rather than being seen as incremental change to “business-as-usual” which is still the focus of most current debate.

There will always be scientific uncertainties on an issue this complex, with year-to-year climatic variations continuing to be used selectively by deniers to discredit the mainstream science; but the overall trends are clear and they are all moving in the wrong direction. It is tempting to believe the deniers are right, but faced with the mounting empirical evidence, prudent risk management dictates we should not take the risk that they are wrong.

The Copenhagen COP15 meeting was not the failure generally portrayed in the media, albeit the outcome was not what many had hoped for. For the first time the real issues came on to the negotiating table:

• the impossibility of getting agreement among 193 countries via the UN process,
• the necessity for the top 6-12 emitting countries to take the lead in framing solutions; but based on current, not outdated, science.
• The prospect that the real objective must be to limit temperature increase to 1.5^oC or less, relative to pre-industrial levels, rather than the “official” 2^o C,
• the beginnings of a technology transfer and financing package for the developing world

Certainly, legal binding undertakings were missing, but this was a forgone conclusion given that the developed world has yet to put forward any serious proposals to encourage developing country action, and that their own targets and policies are hopelessly inadequate and compromised.

There is a long way to go, but it is dawning on global leaders that the size of the challenge is far greater and more urgent than is being officially acknowledged. Unfortunately it may take some further natural disasters to drive the point home; although that may occur more rapidly than expected if the latest evidence can be believed.

Gradually, the world is starting to understand that, if catastrophic outcomes and climatic tipping points²⁴ are to be avoided, the real target for a safe climate is to reduce atmospheric carbon concentrations back to the pre-industrial levels of around 300ppm CO₂ from the current 392 ppm CO₂.  This will require emission reductions in the order of 40-50 per cent by 2020, almost complete de-carbonisation by 2050 and continuing efforts to draw down legacy carbon from the atmosphere.^{25 26 27 28}

Looked at from a total carbon budget perspective, to have a less than 25 per cent chance of exceeding the 2^oC temperature increase relative to pre-industrial levels, which is still the official political objective, the world can only emit a further 800 Gigatonnes CO₂ in toto from today, a budget which would be used up in less than 20 years. Accepting a 50/50 chance allows the budget to increase to 1,200 GtCO₂, used up in less than 30 years. (The Australian budget runs out in around five – eight years).²⁹ If the temperature target has to be less than 2^oC, the budgets are considerably lower.

The global constraint would only allow around 27 – 47 per cent respectively of existing fossil-fuel reserves (reserves recoverable with existing technology and prices) to be consumed.³⁰ Why then do we continue to pour investment into expanding reserves of oil, gas and coal with increasingly risky and environmentally damaging ventures such as deepwater oil exploration and tar sands if we can only afford to burn a less than half of existing reserves?

Energy security

Cheap energy has been the cornerstone of successful societies for centuries. Take it away and societies historically, if they were sufficiently resilient, have broken down, re-organised at a lower energy level and moved on. If they were not resilient, they collapsed and disappeared. Today, just as economic growth for the bulk of the world’s population is accelerating, the days of cheap fossil–fuel energy are ending, triggered by the peaking of global oil supply and the need to reduce carbon emissions to combat climate change. After years of denial, these realities are finally being acknowledged by official bodies such as the International Energy Agency (IEA)³¹ and some industry leaders.^{32 33 34 35 36} Unfortunately the full implications of the message have yet to penetrated the “official future” of many national governments, particularly Australia.

The alternatives to our traditional energy mainstays of oil and coal range from natural gas, unconventional gas from coal seams and shale and new generation nuclear power to numerous renewable energy options, each of which have advantages and disadvantages. On the demand side, enormous opportunities exist for improvements in energy conservation and efficiency.

There is no “silver bullet” to solve escalating energy security concerns, but much “silver buckshot” whose development must be accelerated, ideally by a combination of regulatory and market mechanisms, to meet future needs. The critical policy requirement is that each option is assessed in the light of its true cost, benefits and risks, as discussed in Ian McAuley’s chapter.  Externalities such as carbon pollution must be fully internalised, inter alia removing the enormous subsidy the fossil-fuel industries have enjoyed since the Industrial Revolution. The competitive ranking of the new alternatives will only emerge gradually, hence the need to accelerate the overall innovation process but avoid picking winners. Each option will take a decade or more to make much impact, so time is of the essence. Whether other forms of cheap energy will emerge, or energy will remain expensive, is unclear, but there is little doubt that energy prices in the medium term will be volatile as the new order unfolds.

Peak oil

Peak oil is not just an economic issue, but a reflection of the physical barriers to energy supply we now face. We are not running out of either oil, gas or coal resources. The issue is how to convert those resources in the ground into flows to the market in an environmentally and economically acceptable manner.

Peak oil is the point at which it is no longer possible to increase oil production to meet demand, notwithstanding increasing prices, as evidenced by the stagnation of global oil supply since 2005.³⁷ It results from the discovery rate of new oilfields falling far behind our escalating use of oil, and the fact that production from long established oilfields is depleting at faster rates than anticipated. As a result, we are forced to explore in more difficult conditions, with ever increasing risk and cost, as witnessed by the BP oil blowout in the Gulf of Mexico and controversy over tar sands production in Canada.³⁸

A critical metric is the “Energy Return on Energy Invested” – how many energy units are produced for the energy invested in producing it. Historically, from an energy production perspective, this ratio has been 100:1 or more for large onshore oilfields; it is now declining below 5:1 in many new offshore oil provinces and tar sands operations, and may fall below 1:1 when the true environmental impact is internalised, at which stage there is little point in continuing operations.^{39 40}

Peak oil, due to the immediacy of its impact, is likely to be the trigger that forces serious action on climate and energy security. The oil price spike to US$147 per barrel in July 2008 warned us of the tightrope we are walking, probably triggering the GFC as it broke the financial back of debt-laden, gasoline-dependent consumers in the US  Prices subsequently dropped as the GFC destroyed oil demand, but have currently recovered to around US$80 per barrel. A further rebound can be expected if economic activity strengthens.

Opinions vary widely on the evolution of global oil supply, and much will depend on the speed of recovery.⁴¹ It may well be that global supply by 2030 is 20-30 per cent below current levels⁴² a traumatic change for a world wedded to oil, particularly in sectors where substitution options are limited, for example for private transport and aviation.⁴³

Coal

Coal is the most critical factor in solving the energy security and climate change dilemma. It is the largest, cheapest and most widely-available fossil-fuel resource, but has the worst environmental impact, with emissions double that of gas per unit of energy. Unless means can be found to capture and store those emissions securely, the coal industry worldwide must shut down rapidly if catastrophic climate change is to be avoided. Clean Coal Technology (CCT) and geological Carbon Capture and Storage (CCS) are seen as the means of securing coal’s long-term future, to the point where they have become unquestioned articles of faith on the part of industry and government. Substantial investments are being made in research and development of both CCT and CCS, with high emission facilities, such as power stations, being built “carbon-ready” so that CCS technology can, in theory, be added as soon as it is available.

Unfortunately that faith looks increasingly misplaced. CCS is established technology in the oil and gas industry where it has been practiced safely for decades by storing carbon dioxide in the reservoirs from which it was originally extracted with the oil and gas. However, sequestering carbon emissions on the scale now required by the climate science means the establishment of an industry the size of the world oil industry, storage in geological formations that have never demonstrated the security and stability of oil and gas reservoirs, solving substantial reservoir engineering problems and, unlike oil and gas practice, transporting the material large distances from source to storage. This has to be done at scale in less than two decades to have any real impact on the climate problem. At present there are only five commercial scale projects worldwide, none in the critical power generation area, and technical progress is painfully slow. The IEA have highlighted the need for 100 projects by 2020, 800 projects by 2030, and 3,400 projects by 2050⁴⁴; an extremely demanding target representing an investment to 2050 of around US$5.8 trillion.

CCT refers to a range of technologies, such as Integrated Combined Cycle Gasification and Supercritical Pulverised Coal Plants, aimed at reducing the environmental impact of coal. However, it is an oxymoron in that coal does not become clean, rather emissions are reduced typically by 20-40 per cent and efficiency is increased;  which is valuable, but does not solve the fundamental problem of coal’s high emissions.

Hence the need for objectivity in developing these proposed solutions. Whilst research on CCS and CCT should continue, it is doubtful they will provide the hoped-for panacea. Given the climate change risks now emerging, it is an extremely dangerous strategy to place most of our eggs in these baskets as Australia is doing, and to lock-in the construction of new high-emission facilities, CCS-ready or not, before the viability of the technology is assured. As The Economist put it:

“Politicians should indeed encourage investment in clean technologies, but direct subsidies are not the way to do it. A carbon price or tax, which raises the cost of emitting carbon dioxide while leaving it up to the private sector to pick technologies, is the better approach. CCS is not just a potential waste of money. It might also create a false sense of security about climate change, while depriving potentially cheaper methods of cutting emissions of cash and attention—all for the sake of placating the coal lobby.”⁴⁵

Gas

Much store is placed on the future role of Liquified Natural Gas (LNG), Coal Seam Gas (CSG) or unconventional gas from shale beds, as a transition fuel to the low-carbon economy in replacing coal, due to gas having roughly half the carbon emissions of coal. However gas is not without its problems in the context of a climate change emergency response – even halving emissions is inadequate, but gas also has some unexpected consequences.

Coal burning emits not just carbon, but also aerosols, tiny particles which are suspended in the atmosphere and have a cooling effect. Cleaner-burning gas does not emit aerosols, so if coal use drops, to be replaced by gas, the level of aerosols drops correspondingly and hence the cooling effect reduces. One unintended consequence therefore of the use of gas may be a relative increase in global temperature due to the removal of cooling aerosols. This is not a reason to delay the reduction in coal burning, but it is a factor which has to be considered in developing a transition plan to a low-carbon future.

CSG and unconventional shale-gas also have complications. They rely on fracturing geological formations with fluids to release gas trapped in the coal seam or rock pores. Depending on the geological strata, this may result in a rapid production build-up, but an equally rapid production decline, necessitating many wells being drilled over an extensive area using large amounts of water, with potential risks to acquifers and land use. All of which requires high standards of regulation and compliance, with associated costs, if these new industries are to operate responsibly. A very different operation from conventional oil and gas production, which is relatively localised.

A further factor is the leakage of gas prior to combustion. Whilst gas when burnt has roughly half the emissions of coal, if gas is leaked to atmosphere pre-combustion, it has a warming potential around 25 times that of CO₂. Hence a leakage rate of around 3 per cent negates the advantage gas has over coal from an equivalent warming perspective. Typical leakage rates appear to be in the 1.5 – 2.5 per cent range, so gas may not have the advantage over coal which is generally assumed. It also emphasises the need for high standards of performance to prevent leakage as the use of gas increases.

Nuclear

The renaissance of the nuclear industry engenders strong emotion, both for and against, in the light of historical accidents such as Chernobyl and Three Mile Island, the risk of nuclear terrorism and weapons proliferation and the legacy implications of nuclear waste. Nonetheless major investments in new nuclear plants are being made particularly in the developing world.

New nuclear technologies promise much safer standards than existing plants, including possibly the ability to use up existing nuclear waste. However these technologies are still in the embryonic stage and far from commercial application.

Given the scale of the climate challenge ahead, it would be unwise, a priori, to exclude nuclear options from the possible solutions. They should be considered, provided the full life-cycle environmental costs and risks are taken into account.

Global discontinuity

Other key factors, such as biodiversity, water and food are also reaching global limits, particularly biodiversity loss which is proceeding 100 to 1000 thousand times faster than the natural level⁴⁶, and at great economic cost.^{47 48}

The overall impact through the 20^th Century is that humanity now requires the biocapacity of almost 1.5 planets to survive.⁴⁹ Unless action is taken to change our ways, by 2030 we will require two planets. So we are rapidly eating up our natural capital and creating the conditions for escalating global conflict as we squabble over increasing scarcity.

There is much discussion on the technical dimensions of this challenge such as climate, energy, food and water, but these are only symptoms. The underlying drivers are population and economic growth which are creating the great discontinuity between the 20^th and 21^st Century as we are forced to address what is, in essence, a global sustainability emergency.

The key question for individual nations now is their preparedness to face up to this challenge realistically. Whether they will lead, prepare themselves and seize the enormous opportunities ahead as energy systems, societal and economic values are re-booted, and the world moves on to a low-carbon, sustainable footing, or allow vested interests to dominate, deny and delay, facing straightened circumstances as the impact of climate change and scarcity takes an increasing toll on their environment, economy and society.

Further, will they acknowledge that the capitalist model as we know it, and the economic growth that goes with it, is no longer sustainable. Capitalism is arguably the most effective mechanism the world has so far known for providing goods and services and creating financial wealth, but as the GFC demonstrated only too well, it is now under attack from itself and its lack of underlying principle. Capitalism should have a major role to play in achieving global sustainability – but what form should it take?

Some nations, and businesses, clearly have got the message – China, South Korea, the US and some European countries for example, are positioning themselves to be world leaders in making the transition.^{50 51} Others, generally the resource-rich countries, continue to drag the chain in the hope that their conventional business models can continue indefinitely, ironically on the back of Chinese growth!

The debate is invariably pitched in the context of the problems and costs of moving away from our comfort zone of business-as-usual. What it ignores is first that business-as-usual is no longer an option, and second the enormous opportunities ahead, as the world is re-jigged for a genuinely sustainable future.

“The 21^st Century will, in fact, be the Age of Nature.  We’ll learn, probably the hard way, that nature matters: we’re not separate from it, we’re dependent on it, and when there’s trouble in nature, there’s trouble in society.”⁵²

Whither Australia?

So how is Australia placed to negotiate this discontinuity?

We have had a dream run since the end of World War II, built on our natural wealth. Despite the occasional hiccup, our economy has expanded year after year, with increasing prosperity.  Much of our success has been built around supplying agricultural products and raw materials to the expanding economies of the world, particularly in Asia – initially Japan, then Korea and South East Asia, now China and India.  Understandably we are proud of being world leaders in agriculture, mining and processing, but we have also created a strong and vibrant society in many other areas, all built around a capitalist, market economy model.

Our resource base is formidable and expanding.  Not only do we have substantial energy resources of gas and coal, but we have the world’s largest uranium and thorium resources and enormous untapped renewable energy – solar, wind, ocean, geothermal and bioenergy.⁵³ Beyond that, iron ore, other metalliferous minerals and agricultural assets abound

However as McAuley points out, as the discontinuity unfolds, that bounty may well become our Achilles heel unless carefully managed. Much of our exports are carbon-intensive – thermal and coking coal, alumina, natural gas, with coal being the largest export earner of around $36 billion in 2009-10.⁵⁴ Our domestic energy system is highly carbon-intensive, largely a result of readily available and inexpensive coal.⁵⁵ Our carbon emissions are correspondingly high, around 19 tonnes CO₂ per capita in 2007⁵⁶ amongst the highest in the world.

A weak point is oil, where Australia has a particular vulnerability. We are around 50 per cent self-sufficient in oil, declining rapidly unless new discoveries save the day which seems unlikely. We rely on long supply lines from Asian refineries for around 85 per cent of our daily product use, offset by high exports. We do not comply with the requirements of IEA membership to maintain a 90 day net import strategic petroleum reserve, relying instead on operational stocks and just-in-time delivery. With a small, geographically dispersed population in a large land mass, we are heavily dependent on transport fuels. The cost of our oil and gas imports is now close to twice our oil and gas exports, with high coal exports saving the day. This will represent an increasing burden on our current account deficit as our level of self-sufficiency declines.

Despite this vulnerability, peak oil is not on the Federal Government agenda. While some state governments have taken it seriously⁵⁷, studies at the Federal level have been dismissive⁵⁸, even though it may have far more impact in the short term than climate change.

If the world now moves rapidly to a low-carbon footing due to climate change, whilst facing increasing oil scarcity due to peak oil, many of our traditional advantages turn into major strategic risks – that is risks beyond our control which have the potential to fundamentally change our way of life, and undermine our economic strength.

Whilst our raw material exports will not cease overnight given likely strong demand from the developing world, a shift toward low-carbon alternatives will seriously disadvantage Australia if carbon sequestration technologies fail. Similarly, we may not find it that easy to secure the oil imports we require. Domestic alternatives, based on our coal and gas resources, such as Coal-to-Liquids (CTL) and, to a lesser extent, Gas-to-Liquids (GTL) technologies are likely to be expensive and environmentally damaging.

In agriculture, Australia is already experiencing the impact of changing temperature and rainfall patterns, which may well be the result of human-induced climate change, with serious drought in many areas and overabundance of rainfall in others fundamentally altering farming patterns and water supply. As the Garnaut Review pointed out:

“Australia has a larger interest in a strong mitigation outcome than other developed countries. We are already a hot dry country; small variations in climate are more damaging to us than to other developed countries”⁵⁹

On the positive side, we have enormous undeveloped renewable energy resources, and there is great potential for the biological as opposed to geological sequestration of carbon, which has substantial benefits for agriculture⁶⁰, and possibly for our coal industry.

A Janus nation

The scenario, of rapid climate change combined with the onset of peak oil, while becoming part of mainstream thinking overseas, is still regarded as extremism in Australia, and not as part of the “official future”.

Ironically, we have some of the best scientific and analytical advice in the world on the implications of climate change and energy supply, in studies such as the Garnaut Climate Change Review and extensive work by the CSIRO and other bodies.^{61 62} They indicate the need for rapid change – advice which is blithely ignored.

On the other hand, the vested interests defending the status quo, particularly those linked to some sections of the resource industries, are amongst the strongest in the world, not surprisingly given the importance of those industries historically to the development of Australia and the resulting power they have accrued.

The resistance to accepting the implications of climate change is well documented^{63 64}, as McAuley points out. At virtually every turn in the tortuous path of climate reform over the last two decades, the vested interests have dominated, determined to slow reform, maximising compensation and escape clauses, without regard to the longer-term implications. Gradually, as the evidence has mounted, outright denial has given way publicly to grudging lip service to the need for action, whilst privately delaying tactics continue.

Successive governments have either not believed the science, or have been brow-beaten into adopting minimalist reform agendas, which are largely meaningless in the context of the real problem. Statesmanship and leadership are notably absent.

Environmental NGOs have, in the main, opted to work “in the government tent” in finessing a minimalist reform agenda, rather than insist on meaningful reform, on the basis that it is better to get something started and then modify it, than nothing at all. That the history of major reform in Australia is that, once implemented, it takes at least a decade to make significant change – a decade we no longer have. The abject failure of that strategy has been demonstrated by the backsliding of the Federal government post-Copenhagen in shelving their emissions trading scheme, whilst other countries move forward.^{65 66}

Other sectors of business are taking a far more positive approach to the changes and opportunities ahead⁶⁷ and are acknowledging the risks of inaction.⁶⁸ From all sides though, comes the demand for certainty to facilitate investment decisions. But “certainty” if based on the wrong definition of the problem, is bound to unravel rapidly.

Meanwhile the resource sector, buoyed up by bullish forecasts of coal and gas demand from organisations like the IEA⁶⁹, are forging ahead with fossil fuel developments. These include the doubling coal exports over the next 20 years, the expansion of LNG exports and the establishment of a coal seam gas industry with major investment in mines, railways, ports and processing facilities. There are however no proven means of sequestering the associated carbon emissions.

The investment in alternative clean energy is miniscule in comparison. The strong research capability which Australia developed in many renewable energy areas has departed to more fertile investment climates overseas.

Our great strategic error

So Australia ends up in the worst of all possible worlds. The science is clearly indicating the need for radical emission reductions. The vested interests ignore these calls, continue to undermine any sensible reform and, by special pleading render ineffective even the minimalist reform proposed in the interests of short-term advantage. In the process, as McAuley discusses, sound policy instruments such as emissions trading are discredited due to the political horse-trading as governments bow to vested interest pressure. Lack of certainty on a carbon price stunts the growth of fledgling alternative energy industries, stifles consumer behavioural change and, combined with conflicting regulatory measures, leads to non-optimal short-term investment decisions.

Business demands leadership from government whilst, with a few notable exceptions, showing none itself, and both main political parties lack the stomach to take on the vested interests. So we fall back into the comfort zone of our dig-it-up and ship-it-out high carbon mindset. In so doing, we are making arguably the greatest strategic error in Australia’s history.

For while Australia is moving backwards on climate change reform, the rest of the world is accelerating. The Chinese, other Asian countries, Europe and the US are all now vying for leadership in the low carbon economy. A decade hence, with the climate science better understood, it is likely that the incremental demand for our high carbon products will evaporate and the bullish IEA demand forecasts, yet again, will never eventuate. Australia at that point will be left with a large inventory of stranded assets, minimal investment in low carbon alternative energy and little resilience to weather the impact of both climate change and peak oil.

The irony is that Australia has some of the best low carbon resources and opportunities in the world^{70 71}, which we seem determined to ignore.

The time has come for a radical re-think of our strategy for the 21^st Century. However it is not good enough just to tinker at the edges of current discredited environmental and energy policies – root and branch surgery is needed. Furthermore, this must be done on an integrated, sustainable basis – what is the realistic carrying capacity of Australia given the societal, environmental and economic pressures likely to confront us?

The pre-requisite is vision and an honest acceptance of the challenge we face.

Re-thinking Australia’s 21^st Century strategy: Key policy settings for a new Government

1. Recognise that population and economic growth have created a sustainability emergency unique in world history. As a result, we are in the midst of a global discontinuity in which societal values, growth, economic and business concepts have to be restructured urgently. In this context, while the day-to-day business of government will continue, serious effort must be allocated to a fundamental review of short and long-term national strategy as “business-as-usual” is no longer an option. Ideally this should be done with bi-partisan support, separate from adversarial politics.

2. Initiate debate on a comprehensive sustainability strategy for Australia, encompassing inter alia climate, population, energy, biodiversity, resource scarcities, economic, tax and business concepts.  McAuley argues for the focus to be on integrated policy, rather than treating issues in separate silos as at present. The objective is for Australia to prosper within realistic national and global carrying capacities, with an emergency plan to achieve the transition to a sustainable future effectively and equitably.

3. Climate change must be treated as a priority as it directly affects Australia’s future even in the short term. The lag effect means that we may well be locking in irreversible changes today which will have catastrophic implications for future generations. The formulation of the climate “problematique”, on which current global and national policy is based, is almost a decade old. In the interim, scientific understanding and the empirical evidence for anthropogenic climate change have progressed markedly, to the point where it is clear that the climate challenge is far greater and more urgent than we assumed. The gulf between current science and policy is widening dramatically. In short, we are trying to solve the wrong problem with the wrong policies.  Until we honestly define the problem, with the appropriate caveats on risk and uncertainty, realistic policy and solutions will not be forthcoming.

Current science suggests that, if catastrophic outcomes and climatic tipping points are to be avoided, the real target for a safe climate is to reduce atmospheric carbon concentrations back to the pre-industrial levels of around 300ppm CO₂ from the current 392 ppm CO₂. This requires the emission reductions and timeframe discussed earlier in this article.  The “climate problematique” should be re-defined in these terms.

4. To maintain the currency of this definition, initiate a regular, objective, statement on the latest climate science and implications, free from political spin, published by authoritative bodies (Chief Scientist, CSIRO, international linkages) which is ongoing, not just in response to events such as Copenhagen or denialist campaigns.

5. Be prepared to challenge conventional thinking and to adopt radical solutions as appropriate. The entire tenor of the climate debate, and energy security, revolves around incremental change to “business-as-usual”, whereas the evidence indicates climate change must be treated as a genuine emergency. Many will argue that this is unnecessary extremism and that change of the extent indicated above is impossible, but that is only so when viewed with current mindsets. We have the solutions, given the will to honestly face the size of the challenge, but they are currently being ignored. Our preparedness and ability to take emergency action was demonstrated with the GFC; there is even more reason to apply the same rationale to climate change.

6. Given the warning of catastrophic irreversible tipping point scenarios, based our response more on moral and ethical values than on quantitative economics. Economic analysis is valuable in charting the most efficient pathway to reach the targets, but it should not be the prime consideration in determining those targets. Far more attention should be given to the “fat tail” conundrum of handling high impact, low probability events where conventional cost benefit analysis is inappropriate.

7. Re-frame climate policy accordingly. The CPRS is a disaster which cuts across all sensible design concepts for effective emissions trading. If implemented, it would impose a major cost on the economy for minimal reduction in emissions; it should be dropped forthwith. We need a “root-and-branch” redesign of climate policy built around the “problematique” set out above, with a balance of market and regulatory mechanisms. The rapid introduction of a carbon price is essential, to provide investment certainty and initiate behavioural change; ideally via a simplified and efficient emissions trading mechanism with minimum compensation and escape clauses. This should incorporate both a realistic short-term starting price and a long-term objective. If this proves impossible due to the historic baggage of recent negotiations, it should be abandoned in favour of a simple “fee and dividend” mechanism to minimise rent-seeking and retain public credibility.

8. Develop a balanced portfolio of solutions, with fair transition arrangements but focusing on the opportunities and benefits of creating new industries rather than the problems and costs of moving away from the old. At present the vast bulk of climate policy is aimed at protecting our traditional carbon-intensive industries, with token gestures toward the low-carbon alternatives which represent our future. This must be re-balanced to direct more seed funding to serious alternative technologies, including consideration of new generation nuclear options.

9. No carbon-intensive projects should be approved forthwith, either for domestic or export use, unless they incorporate proven, secure carbon sequestration technologies. In the absence of demonstrable research progress, funding for CCS and CCT should be cut back.

10. Take genuine global leadership. In addition to rapid, deep domestic emission reductions, actively promote concrete proposals to involve the developing world. Moving toward equal per capita emissions globally, as suggested by the Garnaut Review and others before.  Dispense with the conditional, “we’ll drop ours if you drop yours” approach to emissions reduction.

11. Review Australia’s vulnerability to peak oil based on the latest information. Design integrated climate/peak oil strategies accordingly. Global climate constraints only allow around 27 – 47 per cent respectively of existing fossil-fuel reserves to be consumed. Continuing investment into high risk, low efficiency and low EROEI options, such as deepwater exploration, shale and tar sands, and Coal-to-Liquids should be discouraged in favour of low-carbon alternatives.

12. Explain honestly to the community the sustainability emergency and potentially catastrophic climate risks we now face, but equally the enormous opportunities the solutions open up, with education to develop the platform for commitment to the major changes ahead.

13. Take rapid, decisive action to implement a low-carbon economy.

‘It is no use saying, “We are doing our best”. You have got to succeed in doing what is necessary.’⁷²

Endnotes