Joel Fitzgibbon

Defence Minister Joel Fitzgibbon's friendship links with a Chinese national seem to have gone well beyond the point of occasional, friendly personal encounters. Free trips to China and gifts from someone also making hefty financial contributions to the ALP seem completely over the top. Particularly when Fitzgibbon lies about the gifts until they are revealled to be facts and particularly given that he is the nation's defence Minister.

Can he be so naive as to assume other countries do not seek to influence and compromise ministers in pursuit of their national interest? How could a person in this position put himself in a position of appearing to be compromised?

Several major Australia-China issues are currently on the Australian political agenda. China seeks a substantial stake in the Australian resource sector.

Joel Fitzgibbon should resign or be sacked.

Accident-prone Liberals

This pessimistic - though I think accurate - piece from conservative columnist/journalist Doug Conway appeared in today's Manly Daily:

ANNA Bligh's historic win in Queensland extends to 25 the number of consecutive state and territory elections where conservative parties have either lost to Labor or won fewer seats.

The only aberration came last year in WA, where Colin Barnett's Liberals managed to form a minority coalition government with the independents.

In NSW the Coalition has not won in its own right since 1988, when Nick Greiner defeated Barrie Unsworth in a landslide.

By the time Nathan Rees goes to the polls in 2011, Labor will have held power in NSW for 16 years.

Anna Bligh's feat in becoming Australia's first directly elected female premier has delivered a fifth straight term to Queensland Labor, which has ruled for 18 of the past 20 years.

Bligh has given hope to other long-standing state Labor governments which must face the polls in the next two years: Victoria, SA and Tasmania as well as NSW.

State Liberals around the nation have consistently failed to unseat Labor governments despite a string of scandals and some clear cases of ineptitude.

Labor was returned to power in NSW two years ago with just a loss of a couple of seats. Yet Morris Iemma's government had been running one of the most sluggish economies in the country, failing to deliver on health, education and transport.

Labor governments, which at times seem to do everything in their power to get beaten, have proved unbeatable, often thanks to Liberal blunders.

An inquiry into vote-rigging in 2001 forced the resignation of senior Labor figures in Queensland but even that made no difference.

John Brogden resigned as NSW Liberal leader in 2005 after making racist jokes at the expense of premier Bob Carr's wife, and later attempted suicide.

Former South Australian Liberal premier John Olsen quit in 2001 after an independent report found he acted dishonestly in trying to attract telecom company Motorola to Adelaide.

Victorian Liberals have never recovered from the unforeseen uprising that tossed the autocratic Jeff Kennett out of office in 1999.

Labor's extraordinary run at state level is not because voters have always been satisfied with ALP government.

As one commentator remarked, it's because they have had insufficient faith in any alternative.

Labor to be returned in Queensland

7.59pm: Despite some good swings to the new LNP I believe Labor will be returned with a much-reduced majority.  In the old Parliament Labor had a huge majority of 37 seats - LNP 23 seats, Labor 63. It was a huge ask for the new LNP to win.  My prediction is based on the ABC's extrapolation of trends given 19% of the vote counted. The LNP needed about an 8% swing to form government - I cannot see them getting that.

Update: By 9-30pm it was all over. The LNP only got a swing of 3.1% and the Labor Party are returned. The number of LDP seats will go up to around 32 which still leaves Labor with a big majority.  The result a disappointment for conservative politics in Australia. The economy is not yet driving voters from Labor.

Commercial-in-confidence

For the right to operate the Australian Grand Prix in two weeks time the Victorian Government will pay Bernie Ecclestone $47 million.  In a civilised society politicians who abuse public trust in this way should be sacked and then jailed.  It is a totally disgraceful waste of public monies.

The $47m figure has only just been revealed.  Apparently Ecclestone threatened to take the Grand Prix away from any Government which reveals his fee. State Premier Brumby when asked of the fee claimed it is 'commercial-in-confidence'.  I wonder.  I suppose I have a nasty, suspicious mind but could it be that political leaders from Kennett to Brumby have paid these bribes to Ecclestone to secure a handful of petrol head votes from among the morons who go in for this 'sport'.  It would spoil the pollie fun to have to tell the adult population of Victoria - most of whom have zero interest in this retarded activity - that they are paying for it.

The Auditor General of Victoria claims that benefits from the Grand Prix had been overstated by $100 million.   There is no demonstrated net economic benefit to the state from it. Let's end this nonsense foreover - no more attempts to buy a few lousy votes for an environmentally-unsound, pointless activity.  If moron petrol heads want to watch this sort of activity let them pay for it entirely and include in that the cost of the externalities (reduced amenity values, emissions, noise and increased traffic congestion around the venue).

Rudd Government - a bad joke

The Rudd Government was elected in November 2007 with a me-tooist approach to policy. Policies were replications of those of John Howard. There were two exceptions - climate change policy and industrial relations.

• By 2007 John Howard had designed an ETS but Rudd promised to get 'really' serious on climate change. After 15 months we have signed the irrelevant Kyoto Protocol and committed to a policy which seeks a maximum GGE emission cutback of a miserably low 15% to 2020. Would John Howard have done less than this?
• On industrial relations Rudd promised to end the tyranny of the Coalition's WorkChoices Policy which delivered some flexibility in the workplace by allowing individual contracts between worker and employer. The policy helped deliver high wage growth and the lowest unemployment in 34 years. Moreover, this is one policy Rudd will deliver on. In the worst recession the world has faced in 80 years Rudd/Gillard will reregulate labor markets and reintroduce the executive authority of trade unions.

History may come to judge this government as one of Australia's worst. Sad for us all.

Gillard's use of our tax dollars to promote the ALP

I've praised Julia Gillard's abilities in the past but, at core, she is just a politician. In fact a politician who seeks to use our taxpaper dollars ($14.7 billion!) to promote her own political party. This is what recipients of Education Revolution packages must do for Ms. Napoleon in order to get their tax-payer funded dough:

"To receive funding under BER, there is a requirement to recognise and acknowledge the Commonwealth’s contribution. As a minimum, schools must adhere to the procedures and requirements set out in these Guidelines.

Recognition ceremonies: Schools receiving funding under the Primary Schools for the 21st Century and the Science and Language Centres for 21st Century Secondary Schools elements of BER must hold recognition ceremonies as part of their conditions of funding:

The Deputy Prime Minister (Ms. Napoleon) must be invited to

1. All opening ceremonies;

2. A convenient date for the ceremony for all parties should be chosen. Schools are required to choose three dates to allow greater flexibility for the Deputy Prime Minister (Ms. Naploeon) or representative to attend;

3. Ceremonies should not be scheduled on Parliamentary sitting days;

4. For assistance with organising an official opening, schools must contact DEEWR to arrange an Official Recognition ceremony through the BER website.

5. Provide the Deputy Prime Minister (Ms. Napoleon) with at least two months notice of any openings and public events relating to the projects;

6. Hold an official opening or ceremony within three months of the completion of the project, unless otherwise agreed by the Deputy Prime Minister (Ms. Napoleon); and

7. Make provision in the official proceedings for the Deputy Prime Minister (Ms. Napoleon) or representative to speak.

Once it is established that the Deputy Prime Minister (Ms. Napoleon) or representative is to open a facility, this arrangement cannot be changed without the Commonwealth’s agreement.

Publicity: Schools should acknowledge the Commonwealth’s assistance in publicity issued by the school regarding its BER funded project such as newsletters, web sites, articles in the local media, school outdoor signs and any other form of advertising available to the school.

Plaques: Schools will be required to affix a plaque, to be supplied by the Commonwealth, to all completed projects. This includes, but is not limited to, new buildings and substantially refurbished buildings. Where a plaque cannot be attached to a project because of the nature of the project, then a plaque must be placed in an appropriate location in the school, such as the front foyer or administration area.

Roadside signs: Schools will be required to affix a roadside sign, to be supplied by the Commonwealth, in front of the school for projects being funded under the Primary Schools for the 21st Century..."

Publicly bow and scrape scumbags! Honour the great Ms. Napoleon!

HT Andrew Bolt who questions the cost of these implementing these porcine transfers.

The Treasury critique of Turnbull

The Treasury isn't adding much by saying that it supports Kevin Rudd's package and rejects that of Malcolm Turnbull. It would have designed the Rudd package and so, in essence, is saying that it stands by its design. In essence this means supporting a large package rather than a smaller one. The claim by Ken Henry that a dollar spent directly by government has bigger stimulatory power than a dollar in tax cuts given to households is correct - it reflects the balanced budget multiplier idea - because households will save some of the dollar. But this only again relates to a defence of a larger package - tax cuts will just have a smaller expansionary effect.

Ken Henry's claim that the smaller package runs the risk that the economy might fall into recession is also correct. But it is also the case that, since the Australian economy is operating in unchartered waters with an especially uncertain international economic environment, that the larger stimulus will have its own risks. It will certainly add more to debt and it will reduce the ability of policy makers to make further expansionary moves in the future if this crisis is prolonged. Fiscal actions are available options now basically because public debt was reduced under the Howard Government. Deficits and debt are difficult to control particularly when a populist social democratic party holds the reins of power and when a gaping public deficit adds to the constraints imposed on an economy by an already weak current account. The AFR this morning has it right:

"Right now the government's financing task looks manageable. But if the worst comes to the worst, it wikll be years before the deficit is brought under control, adding to the burden. If foreign demand for Australian goverrnment debt remains scarce, the government will have to pay higher yields or face a currency depreciation. It - and we - need everything to go right from here".

Moreover, I am completely unclear on how Henry derives the case for his $42 billion package. Econometric modelling will be useless in the current environment because the economy has deviated significantly from its past sample path. That the Labor Party were hedging a month ago on the issue of whether Australia would run a budget deficit and still hedges on the issue of whether a recession is imminent - views that would be motivated by background briefings from Treasury - suggests policy-maker uncertainty is huge.

Under these circumstances the case for moderation and for avoiding a strident policy defense is clear. Certainly the Turnbull proposals should be put on the table and debated intelligently. The hysterics of Kevin Rudd and his inept Treasurer Swan over the past couple of days have been a disgrace. Rudd's earlier talk about the case for greater civility in public life is revealled to be hypocrisy given his insistence on uncritical support for this massive package and for the unreasonable dishonest abuse about ripping up school programs and denying handouts to millions with which he has effectively threatened the Coalition without meeting its points.

Rudd banalities & handout disease

Rudd’s critique of neo-liberalism of course goes too far. His plan is probably to convert the global crisis into a historic failure of Liberal Party philosophy and its allegedly pro-market ideas. That’s a useful output for Rudd from a few hastily drawn-together conclusions that are vague enough to be reversed tomorrow and, even if this seems a bit dishonest, Rudd is a banal politician at heart, who confuses verbiage for honesty. But more importantly his half-baked theories on the failures of capitalism do not in themselves imply what should be done in terms of current policy in relation to the financial crisis. My fear is that that the theory he believes underlies his views will be used as a jargon-driven excuse for a big, mindless ‘Labor Party spend’.

LOL: The Labor Party will fix the economy! Car dealers, the car industry, child care, commercial property, banks have all received bailouts and now the dairy industry wants one. The Labor Party is heavily infected with the bailout disease as well as its inevitably confused social romanticism.

Rudd’s view of ‘government to the rescue’ is already producing dreadful outcomes. Rudd’s $30 billion package - $2 billion from government, $26 billion in government loans and $2 billion from the banks - supporting the property sector seems to have been rushed through following tearful representations from National Australia Bank*. Two days before Rudd made his January 24 statement Lindsay Tanner told the 7-30 Report that the government was only considering options. Two days later Rudd had decided on his course of action without apparently involving the RBA. Recall that Rudd disregarded the RBA in providing the unlimited guarantee for bank deposits - a case study in unintended consequences.

Rudd reminds me of one of my former bosses who arrived in his new job reading a book on how to make decisions in two minutes. I thought he was joking at the time in endorsing this treatise but this excuse for an educated human being made everyone's life a nightmare because he believed his own two minute judgements and invariably got it wrong.

Rudd claims the property move will save the jobs of 50,000 tradespeople. But with this ‘plucked-out-of-the-air’ figure that’s a hefty $600,000 per job as Brian Toohey points out in the Weekend AFR (firewall protected). Moreover, it is not clear that it will save any jobs – as Malcolm Turnbull has pointed out these jobs hardly depend on who has borrowed to buy the real estate that the loans finance. It is the use of that real estate not who owns it that will determine the complementary employment. The move by Rudd is about protecting the assets of banks and transferring valuation risk onto Joe Citizen. Government – particularly Labor - constantly needs to be reminded that it produces no wealth and only transfers privately created wealth to its coffers through taxes and charges.

Falling property prices are to be expected in the current situation and the last thing anyone should want is a government-induced expansion of this sector. The property sector should contract and the shareholders of the big banks deserve a kick in the guts not non-shareholders for backing boards who got it wrong.

Recall too that Rudd crumpled completely in the face of whining from Woodside concerning the exclusion of natural gas from compensation under the emissions trading scheme. Woodside won 100% and nothing was left to fund low emission technologies.

Toohey crisply sums up the Rudd problem:

“There’s a legitimate role for argy-bargy in public policy formation. But when a prime minister is a complete pushover, cabinet should supply constant adult supervision’.

I’d go further than this but I have decided to conceal my bitterness that we have elected poultry for a PM. His existence is like the capital bailout – we all pay the costs.

*It of course helps that property developers are major Labor Party funders.

Trade union policies for increasing unemployment

The Whitlam-inspired wage breakout in the 1980s drove unemployment to 10.4%. Another Labor-driven wage breakout in the 1990s exacerbated the recession we 'had to have'. This was Labor's economic legacy. I remember my left-wing mates at the time telling me that 30% wage increases given to metal workers would boost purchasing power and stimulate the economy! They didn't - these sorts of decisions created high unemployment and high inflation - stagflation.

But from December 1995-December 2005 the Howard Government created 1.7 million jobs. In the 18 months to September 2007 another 500,000 jobs were created in an astonishing burst. Inflation was almost eliminated. Howard's reward was to be voted out of office.

Now the Labor Party is at the helm again and, in the face of a looming recession, the real contribution John Howard made to reducing human misery in Australia by driving unemployment to a 33 year low faces the prospect of being destroyed not, in the main, by economic circumstances as much as by idiot trade unions.

According to The Age:

"The union movement is pushing ahead with wage claims despite the Rudd government calling for restraint in difficult times.
The slowing economy will suffer further if the real incomes of workers are not protected, the ACTU says.
Unions are under pressure to moderate their positions during bargaining negotiations with employers after it was reported the CFMEU will ask aluminium giant Alcoa to strike a new deal giving power plant workers at its West Australian operations an immediate pay rise of up to 33%.
ACTU president Sharan Burrow defended the union saying the claim amounted to annual pay rises of between 5-10% over several years.
It was important real incomes were maintained because the economy would suffer if workers could not pay their bills.
"If you don't protect incomes, then that's a negative for the economy as well," she said.
"If working people can't pay their bills, if in fact their mortgage is threatened ... then that's not going to help the economy survive, nor indeed recover."

Apparently Burrows sees the role of wages as a source of aggregate demand but does not want to understand that they constitute a cost for firms and will influence employment because they are a cost. The Burrows policy position is that in times of emerging unemployment wages should be prevented from falling. Her claim is that wage reductions to reflect reduced demands for such things as our mineral exports will damage Australia! This is precisely analogous to the remarks of my friends in the 1980s on the metal worker wage claims.

If anything real wages need to fall in industries experiencing hard times and reduced demand just as they rose during the good times. This flexibility is the best guarantee we have against another emerging unemployment catastrophe. 5-10% wage claims in a time of depressed demands when productivity growth is less than 2% is a recipe for disaster.

The contrary suggestion that higher wages act only to boost aggregate demand is really too stupid to warrant serious analysis but it does show the forces that our intellectually-challenged Treasurer Swan is up against in trying to manage the economy. It is not just a few CFMEU ratbags but the ACTU - those dinosaurs whose contributions funded the current mob of nitwits into Federal power and whio are now baying for payback - who endorse this sad idiocy.

Watch the left of politics duck this issue! Silence will prevail! They cannot challenge this stupidity even though they recognise its craziness because of their blinkered ideological priors and hypocrisy. Their integrity is close to zero in these areas.

Richard Posner recently made the following remarks about US trade unions – they are appropriate to Australian unions as well:

"The goal of unions is to redistribute wealth from the owners and managers of firms, and from workers willing to work for very low wages, to the unionized workers and the union's officers. Unions do this by organizing (or threatening) strikes that impose costs on employers. ... Because the added cost to the employer of a unionized work force is a marginal cost (a cost that varies with the output of the firm), unionization results in reduced output by the unionized firm and, in consequence, benefits nonunionized competitors. Unless those competitors are too few or too small to be able to expand output at a cost no higher than the cost to the unionized firms, unionization will gradually drive the unionized firms out of business.
Unions, in other words, are worker cartels. Workers threaten to withhold their labor unless paid more than a competitive wage (including benefits and work rules), but unless their union is able to organize all the major competitors in a market, the cartel will be eroded by the entry of nonunionized firms, which by virtue of not being unionized will have lower labor costs. The parallel to producer cartels is exact--workers are producers.....
I don't think there's much to be said on behalf of unions, at least under current economic conditions. The redistribution of wealth that they bring about is not only fragile, for the reason just suggested, but also capricious, as it is an accident whether conditions in a particular industry are favorable or unfavorable to unionization. By driving up employers' costs, unions cause prices to increase, which harms consumers, who are not on average any better off than unionized workers are. Unions push hard for minimum wage laws and for tariffs, both being devices for reducing competition from workers, here or abroad, willing to work for lower wages.....And by raising labor costs, unions accelerate the substitution of capital for labor, further depressing the demand for labor and hence average wages. Union workers, in effect, exploit nonunion workers, as well as reducing the overall efficiency of the economy".

Indeed this describes what happens in normal economic times not in the current severe economic situation. Alcoa, the firm subject to the above-mentioned 33% pay claim, is already planning to cut 15,000 jobs. The union stance is madness. Unemployment will be much higher than it would otherwise be because of union and complicit Labor Party stupidity. Without wage restraint now we will have an appalling recession with hundreds of thousands of additional people on the dole.

And chardonnay socialists will declare Kevin Rudd a Great Leader because he has apologised to aboriginees on behalf of us all for claimed sins we had no part of and ratified the impotent Kyoto Protocol but done little to address climate change. November 2007 was an eventful moment in Australian history.

Rudd greets world at Xmas.

 In a Xmas message released yesterday:


Rudd urged Australians to spare a thought for troops serving overseas as they enjoy their Xmas break. People should remember Australia's troops serving in Iraq, Afghanistan, the Solomon Islands, East Timor and elsewhere. Many of them have little kids of their own but they won't be with them this Christmas. "We acknowledge the sacrifices they make and thank them for serving our nation with such courage and distinction abroad".

Rudd paid tribute to police, firefighters and other emergency service workers who are on duty and away from their family to help the community on this most special of days.

Rudd said Christmas was a wonderful time of celebration and recuperation with family – a time of reunion for families that have been separated for reasons of work, study and travel.

Rudd said it was a special time for kids, whose experiences of Christmas are among the happiest memories they carry throughout their lives. It was for him.

Rudd urged compassion for people dealing with the death of loved ones.

Rudd said people should support those around them and take care if they were travelling. "Please, please, drive carefully and please be considerate in sharing the road with others”.

Rudd said whether you are in a city or the suburbs, the beach or in the bush, at home or abroad, that he wishes all Australians a very safe Christmas, a very happy Christmas and a very happy and peaceful new year.

The world listens to your every banality Kevin. The world will vote for you Kevin. Your winning smile and hyoperactivity provide a model for us all Kevin.

Rudd the grub

It is obvious that our grubby little ear-wax-munching Prime Minister Rudd has damaged Australia by betraying the embellished form of a conversation he had with President George Bush. The story was embellished in an attempt to make the US President appear stupid (What is the G20?) and our own PM appear smart. The effect of Rudd's loquaciousness in repeating to reporters a personal conversation with Bush was to damage Australia and to destroy the trust that any foreign leader would ever place in our grubby little PM. And Rudd looks like a pretentious, myopic smart-arse rather than anything approximating an intelligent PM. Even Melbourne's Pravda recognises the damage.

BBC News describes the gaffe by Rudd as an attempt to make Bush look like a fool. It is a great way of treating our most important ally! Imagine how the Chinese and other nations see the stupidity and immaturity of the Rudd blunder. No one would trust him again.

Malcolm Turnbull is quite correct in remarking that:

"Mr Rudd's desperate desire to big-note himself has done real harm to our relations with the US.

It is clear enough that the US President has been deeply offended. President Obama and other American leaders in the future will be very wary about saying anything to Mr Rudd and other Prime Ministers, in case what they say winds up on the front page of a newspaper.

"Mr Rudd has sacrificed our nation's reputation for trustworthiness and discretion on the altar of his own vanity.'' (my bold)

Kevin Rudd's glib meaningless 'I will do whatever it takes' assurances, his declarations of war everywhere on every issue and his thin skin when the opposition takes him to task on any of his stupid policy measures - the unlimited deposit guarantee to the banks and the decision to encourage 450,000 Australians to abandon private health insurance - mark him as the worst PM Australia has had since Paul Keating. No qualifications - Rudd is a disaster.

Rudd is unreliable in a crisis and pretentious to the point where he believes the meaningless pollie drivel he offers the media as opinion. Rudd has seriously damaged Australia and I am confident will do more damage.

Update: Catallaxy has a discussion K Dudd a national embarrassment. The Age discusses the meeting between Rudd and Bush - "Rudd looks sheepish. Bush looks prickly".  Scraping the bottom of the barrell of Labor's cheersquad we have Mark Banish from Larvatus who doesn't deny Rudd gossipped about Bush's stupidity to the media - he just argues Rudd has done us all a favour in pointing out Bush's ignorance!

Rudd's politics

PM Rudd loves the dramatic gesture that has symbolic effect - 'apologising' to aboriginals for the claimed sins of our ancestors, ratifying the soon to be irrelevant Kyoto and, last weekend, posing for that inspiring snap of himself - shirt sleeves rolled up - 'getting down to work' with Ken Henry.  A man of action!

Unfortunately since his strength is pretence his policy making powers are unlikely to be strong. That Rudd is a pretender is widely recognised so that Rudd himself is now taking steps to be seen as a 'man of action' not words.  It is however far better for Rudd to be symbolic and inactive* however since we have to live with the consequences of his daft actions.

Rudd's worst policy since taking office is to weaken the incentives for individuals to take out private health insurance - it is estimated 492,000 will cease to privately insure. This policy reduces the availability of health resources in the community including access by the poor to such services.

But pretenders face real difficulties in times of crisis when cool heads not dramatic flourishes are called for.  The single major policy action Rudd has taken in relation to the current financial crisis has proved to be a hasty ill-considered disaster.  The Wall Street Journal gets it right:

World leaders scrambling to rethink financial regulation might pause to consider Australia, where a poorly conceived policy has gone from beggar-thy-neighbor to beggar-thyself in two weeks flat.

On October 12, Prime Minister Kevin Rudd announced that government - read: taxpayers - would fully insure 1.2 trillion Australian dollars ($741 billion) in deposits held at eligible financial institutions such as local banks. The move was meant to cut the risk of capital flight to other countries that had adopted or expanded such guarantees in preceding days.

Mr. Rudd's move had an effect, but not the one he intended. Depositors big and small immediately moved funds from uninsured to insured savings vehicles. Branches of foreign banks and mortgage unit trusts - a breed of mutual fund that invests in prime mortgages - were particularly hard hit. Some managers of uninsured investment funds have frozen withdrawals temporarily to stanch the outflow, a blow to retail investors who suddenly find they can't access their principal.

The Rudd government backtracked on Friday, capping the deposit guarantee at A$1 million and including foreign banks with branches in Australia in the program. It's an embarrassing reversal for Mr. Rudd and might have been prevented with a little forethought. While the opposition Liberals had proposed an A$100,000 cap when the idea for deposit insurance first surfaced this month, Mr. Rudd unveiled his proposal with no advance warning and no formal debate.

Perhaps Mr. Rudd felt global events warranted swift action. But now, having insured in haste, Canberra is forced to repent at leisure. At least Mr. Rudd is providing his peers around the world a valuable lesson: A financial panic doesn't suspend the law of unintended consequences.

Moreover, the prior evidence from the move by Ireland to unconditionally guaranteed bank deposits was widely recognised to have the types of adverse incentive effects that the Rudd scheme has had. European governments were furious with Ireland since funds drained from their banks to those deposits with protected status in Ireland.

Australians elected Rudd on the basis of a bland mee-tooism to replace the most effective Federal government Australia has had in decades. As a nation we will pay a price for this foolish adventurism. My confident preduiction is for more dramatic flourishes and more ill-conceived policies.

* I take the same view with respect to many (not all) university bureaucrats with their elaborate destructive schemes to improve scholarship and teaching in universities - matters they typically have limited expertise with.  If universities are unwilling to scrap these positions put those concerned on permanent holiday status. They will do less damage.

Krudd takes on the world

Krudd’s Australia is leading the world on climate change policy. Well, starting last November we did.

Krudd’s Australia will ‘work with’ the G20 countries to improve the world’s financial management. They will be grateful. Krudd delivers a stern economic message to the world’s economic leaders. They will appreciate Aussie honesty and directness. After all, Australia’s banking regulatory arrangements are ‘the best in the world’ says Krudd and he would know.

Krudd tells the US Congress it must pass the $700 billion dollar rescue passage now. 'No time to delay', Krudd says.  The Americans will appreciate his robust political advice and knowing where Australia stands.

Krudd urges Australia to regain its seat at the UN Security Council. Krudd has not yet set out which countries we will have to kowtow to or how being forced to take sides on Chinese versus US interests will advance our own national interest. But next week he probably will sort this out provided he isn't booked at resolving the world's financial or nuclear disarmament problems.  Maybe next Tuesday between 2-3pm.

In his few spare moments Krudd has founded a new Nuclear Non-Proliferation and Disarmament Commission.  India, Pakistan, Israel and North Korea have been urged to disarm.  You have been warned. I speak Chinese, says Krudd with that famous smile.

What will Krudd come up with tomorrow?  He is now back in Australia today and going to the footie. Apologies to the 'stolen generations', ratifying Kyoto,  an 'education revolution', dismantling the private health system - all the really tough decisions have been taken. I am certain he will come up with some new program - a new initiative or three.

Malcolm Turnbull

I watched Malcolm Turnbull's extended interview last night with Tony Jones on the ABC - the video here - and believe he has the skills and charisma to defeat Labor at the next election. I also think that, even should Peter Costello eventually challenge for the leadership, Turnbull remains the better choice - Costello has already begun sniping from the sidelines. The key issue is for the Liberals to get behind the leadership and act cohesively to regain office.

The Labor Party - and its weakest major link - Wayne Swan - have good reason to be fearful of a rejuvenated Liberal Party with a young, successful and highly articulate leader. The Australian economy will be hit by the US sub-prime crisis. Many Australians who supported Labor at the last election after a decade of amazing prosperity and good government, felt comfortable and relaxed with a change. They will now begin to look hard at the emerging economic difficulties and the lack of sense in a party putting a hack politician like Swan in charge of the economy. The robotic Swan is not difficult to replace given his apparent discomfit at his current role - in Parliament he is too frequently red in the face and nervously looking at pre-prepared notes as he wades in on issues beyond his capacity. He is that chink in Labor's armour the Liberals should continue to attack.

All Australians should welcome the emergence of an effective opposition in Federal politics. Liberal Party supporters will want a lot more than that.

Malcolm Turnbull

The election of Malcolm Turnbull as leader of the Liberal Party is a good outcome for the party and an excellent outcome for Australia. Turnbull deserves the support of the Party and all those determined the kick the Rudd Labor Government out of office.

Turnbull has much more business and life experience than Kevin Rudd and is a much more intelligent politician. Turnbull is a serious candidate to be Australia's next Prime Minister.

Costello not a leader

I have always had affection for Peter Costello. He is one of the Liberal Party's strongest parliamentary performers and an even-tempered, amiable sort of bloke. I think he would have made a competent Prime Minister though not outstanding. He faced the problem that most Liberal Party members felt gratitude and respect towards John Howard so that a challenge to Howard for the top job was always going to be difficult. But that challenge was what Costello needed to make to confirm that he had the needed ticker to be leader. He didn't and, indeed, waited until the eve of the launch of his book to confirm that he would not seek leadership of the party. It is disappointing. Nick Minchin's anger over the suggestion that the Party has been destabilised in the interests of a book promotion suggests a core discomfit. He 'doth protest too much'.

Malcolm Turnbull will shortly replace Brendan Nelson as Party leader and Turnbull is a good prospect to be a future Prime Minister. No problems here in the timing - Nelson took the flack that inevitably followed an election loss by a figurehead leader. Nelson deserves the Party's praise for doing that but Costello puts a somewhat tarnished seal on his leadership aspirations. Future talk of possible comebacks by Costello should be ignored.

Leadership of Liberals

It is obvious to me that Brendan Nelson will not lead the Liberal Party to the next federal election. His attempt to turn the emissions trading scheme debate into a mean spirited rejection of trading unless developing countries with a fraction of our energy consumption also commit to do so means that he will lose Liberal Party supporters such as myself.

I cannot support this clown because (i) his stance is immoral; (ii) the urgency of climate change issues makes it imperative that we put pressure on other countries to act by not being hypocrites ourselves and (iii) it is unwise to be out of step with the majority of Australians who do support an ETS.

I am unsure whether Peter Costello or Malcolm Turnbull would make a better alternative leader - a leader who would regain power from Labor. Costello has the greater electoral appeal but has the liability of being a strong supporter of labour market reform that went even beyond WorkChoices. These reforms I continue to support. John Howard did too but he always figured they would be electorally unacceptible. The Liberals lost ground here after the election by whimping out like a bunch of beaten dogs when the Labor Party moved towards dismantling policy moves that fostered employment and created a more efficient workforce in Australia.

Its a simple principle. Don't abandon successful policies when opposition to them is backed in the main by a disappearing trade union movement who have zero economic intelligence - witness their stupid insistence on preserving the real wage in the face of food and oil price increases. Believe me - stripping aside party-political allegiances - there is not an economist in Australia who supports this foolish policy in private.

In addition Costello will always be viewed as being a sook because of his unwillingness to take on John Howard for the leadership (in my view, to be fair, he had no choice) and because of his early suggestion he would quit politics after the 2007 loss.

Malcolm Turnbull has lower electoral appeal according to the polls but won the day on retaining a sensible attitude to climate change. He is a mile smarter and much quicker to sense the political winds than Nelson and would make a much better PM than Rudd. He has had lower visibility and less experience than does Costello but that is changing.

Whoever the Liberals do select to replace Nelson they should back this leader through to the next election and ignore the invitation to commit political suicide with continuing leadership debates. The economic downturn and the preospect of a severe contraction of house prices will swing back those 'working families' who believed they could reliably trust the economy to Labor with its trade union debts and fundamental lack of talent.

Whoever wins the current leadership tussle I believe Julie Bishop remains a capable potential Deputy PM with Tony Abbott standing in the wings should Bishop eventually be shifted into a leadership role. Unlike Labor the Liberal Party has plenty of talent to draw on. Brendan Nelson was a 'sacrificial lamb' who probably understands his temporary role - he might be part of a Liberal front bench but not a future PM.

Nelson nibbles away at a 2010 start on carbon trading

Brendan Nelson seeks to gain appeal by abandoning all principle. He has now reverted to the Howard position of not endorsing controls on carbon emissions before other large polluting countries (China, India, Russia) do so. Nelson warns of economic peril in ‘going ahead of the pack’. Nelson's warning is simply opportunism.

As the Garnaut Review suggested the climate change issue is ‘diabolical’. We don’t need to act on warming problems today - we can apparently delay until tomorrow so there are endless procrastination probabilities. In addition we need international co-operation, there is much uncertainty etc etc. It is just all too hard!

But the bottom line is that the probable costs of not taking action are huge and the costs of taking action are relatively low. The costs of constantly postponing are accumulating and this is making decisive actions more difficult and expensive.

The issue of carbon leakages has probably been exaggerated and leakage effects can be dealt with anyway by applying destination accounting in taxing carbon. This means exempting exported energy intensive outputs and placing tariffs on imports from countries that do not price carbon emissions correctly.

Update 1: It seems Penny Wong, the Australian Worker's Union and Labor's Michael Costa are all backpedalling on Garnaut's proposed 2010 startup date for carbon trading. It is a pathetic display and an indictment of that miserable branch of humanity comprising Australian politicians.

Update 2: Nelson continues to dig himself a deeper hole. He rejects the position of the Shadow Treasurer Malcolm Turnbull that Liberal Policy is for emissions trading to begin unconditionally in 2012.

Turnaround for the Coalition?

With its total domination of the Australian political scene are the public becoming cautious about State Labor? Are Australians tiring of Kevin Rudd's hot air politics? The cartoon above (from The Age) is an absolute delight.

In NSW Morris Iemma would be thrashed on the basis of current opinion polls and yesterday’s State Government by-elections in Victoria also look good for the Coalition – the Nationals got a 7% swing to them in Gippsland and there was a 13% swing against Labor in Kororoit – admittedly, in the main, to independent Les Twentyman.

The performance of the Liberals in NSW has been disgraceful for years in the face of a hopeless, corruption-ridden Labor Party but the trend is finally a bit more positive for the Coalition.

Conservative governments who run large deficits

When do conservative administrations run big budget deficits? One answer might be that they face almost inevitable electoral defeat and wish to leave the pantry bare to restrict the options of future less conservative administrations. That's Paul Krugman's view of the rationale for the Bush tax cuts and the resulting huge US government deficits. A Machiavellian might apply the same reasoning to John Howard's huge tax cut offers in the face of electoral defeat at the last Federal election.

Of course Howard left Rudd with a huge budget surplus - not a deficit - but forced Rudd to match his tax cut policies in an environment where inflation and interest rates were accelerating and where Howard knew Laborite stupidity towards restricting markets for labour would complement inflationary pressures in driving higher unemployment.

The prospects for a Labor-induced recession might have looked good to Howard with, at best, a short vacation from office for the Coalition. The issue is whether politicians exhibit this foresight?

Update: Gregory Mankiw discusses the same issue in an entertaining 'Starve the Beast' post. there is a long discussion over at Catallaxy.