If you’d like to come along to a future mobile office or community forum, a full list of dates is here.

Senator Don Farrell
Parliamentary Secretary for Sustainability and Urban Water

Katy Gallagher MLA
ACT Chief Minister
Minister for Territory and Municipal Services

Gai Brodtmann MP
Member for Canberra

Andrew Leigh MP
Member for Fraser

15 May 2012

FREE TV AND COMPUTER RECYCLING SCHEME OPENS FOR BUSINESS IN THE ACT

Australia today celebrates a major milestone in waste management with the first services under the National Television and Computer Recycling Scheme opening for business in the ACT.

Householders delivering unwanted TVs and computers to the Mugga Lane waste transfer station in Canberra this morning were greeted by Parliamentary Secretary for Sustainability and Urban Water, Senator Don Farrell, and ACT Chief Minister and Minister for Territory and Municipal Services, Katy Gallagher.

“This is an exciting first step for this important initiative, made possible by the Gillard Government’s landmark Product Stewardship legislation,” Senator Farrell said.

“People dropping off their unwanted televisions and computers for free here today, and in the future, can do so with the knowledge that these products will be recycled in an environmentally friendly way.

“Hazardous materials contained in these products, including lead, mercury and zinc, will be prevented from entering the environment through landfill. Valuable non-renewable resources, including gold and other precious metals will also be reclaimed for reuse.”

Services under the Scheme will be progressively rolled out across Australia, boosting television and computer recycling rates to 30 percent in 2012-13 and 80 per cent by 2021-22, providing a long-term solution to television and computer waste.

In the ACT, DHL Supply Chain (Australia) Pty Ltd is providing the free, ongoing recycling service, enabling households and small businesses to dispose of unwanted televisions, computers, and computer products such as printers, keyboards, mice and hard drives.

The scheme does not cover other electronic waste, such as mobile phones, which are already covered by the voluntary recycling scheme MobileMuster.

ACT Chief Minister Katy Gallagher said Canberra is at the forefront of innovation in recycling and waste management.

“I am delighted that the ACT is the first jurisdiction in the country to implement the National Television and Computer Recycling Scheme,” the Chief Minister said.

“The new scheme gives Canberrans the opportunity to dispose of their televisions, computers and computer products, free of charge, in a way that greatly reduces the risk to the local environment by stopping these products going into landfill,” she said.

“It is also hoped the scheme will help alleviate some of the ongoing issues in the ACT around illegal dumping, especially around charity bins.

“It is likely the Mugga Lane and Mitchell Transfer Stations will be very busy in the first few weeks of the new scheme. The ACT Government encourages residents to consider holding their items for a while longer to avoid long queues, especially on weekends. The free e-waste recycling service is a permanent arrangement so there is no need to rush.”

Member for Canberra Gai Brodtmann said she expected the service to be well used.

“Canberrans are great recyclers and this new scheme will be a popular, quick and easy way for families and small businesses to dispose of their unwanted TVs and computers,” she said.

Member for Fraser, Dr Andrew Leigh, said technology is developing at such a rapid rate that what was state-of-the-art only a few years ago soon becomes obsolete.

“The faster our computers and televisions keep improving, the more important it is that we have a good recycling program for e-waste,” Dr Leigh said.

From today, the DHL Supply Chain services will operate from the Mugga Lane and Mitchell Transfer Stations, which are open from 7.30am to 5pm, seven days a week.

The National Television and Computer Recycling Scheme is funded and implemented by the television and computer industry and regulated by the Australia Government under the Product Stewardship Act 2011 and the Product Stewardship (Televisions and Computers) Regulation 2011.

Further information on the scheme can be found at www.environment.gov.au/settlements/waste/ewaste/index.html

Further information about the scheme in the ACT can be found at http://www.tams.act.gov.au

Anyone who thinks they might be a descendant is encouraged to go to the Ancestor Search function on the Boer War Memorial website, or to contact the National Boer War Memorial Association.

Paid Parental Leave and Other Legislation Amendment (Dad and Partner Pay and Other Measures) Bill 2012
10 May 2012

The work we do in this place impacts on people’s lives—often far more than we imagine at the time. This bill, the Paid Parental Leave (Dad and Partner and Other Measures) Bill 2012, is one such example. I want to start off by sharing with the House the story of a friend of mine, Damien Hickman, and how he felt about the two weeks leave that he took when his first child arrived. Liesel Grace Hickman arrived on 23 June last year. Damien said: ‘I just did not want to be anywhere else. My whole world shrank to this tiny four-kilogram bundle and the three-hourly cycles.’ He said: ‘It was like nothing I had experienced or could have prepared for. I was placed under this spell. She was the ultimate timewaster. I would just stare at her and half an hour would go by like 30 seconds. To be there for my partner, look after the house and be there as an extra pair of hands and support was pretty special.’

Damien said: ‘I wanted to be part of it all. I was Liesel’s dad and I wanted to be with, and care for, my little girl. I can still remember how scared I was the first time I gave her a bath. I remember how she would fall asleep on my chest, so small her feet barely made it to my bellybutton.’ Damien said that for him the joy of being a dad was being there for all of those firsts; being there with Liesel and Kate was a great privilege. Liesel probably will not remember any of this but it is a memory that Damien will take to his grave.

That is why this legislation is so important: it allows dads and partners to take time off work and be at home to support new mothers in those crucial early days. It builds bonds that will extend to a lifetime of love, encouragement and support for children. It is the kind of encouragement and support that all kids need as they venture into life and face the challenges and opportunities that it presents—opportunities that are the foundation of the ideas and innovations that will inevitably drive a nation’s prosperity.

Before outlining the measures in this bill let me share with you why dads being there in the early days is so important to their newborns and partners. Research from children’s experts has found that, the more dads are involved right from the start, the better it is for the dad, for the mum and, most importantly, for the baby. Hands-on dads are important in developing social skills, independence, a strong moral sense and intellectual skills. Parenting expert Pam Linke of the children’s, youth and women’s health service in South Australia says:

When a man holds a baby they get a sense of security that’s quite different from a mother’s. While Dad’s role may be only a supporting one for things like breastfeeding, it’s absolutely critical in a baby’s development.

Dr Kyle Pruett, clinical professor of psychology at Yale University, says, ‘What dads actually do with their kids matters more than how often they do it,’ so it is important that every dad gets time in the lead role. Pam Linke’s advice is ‘let him change nappies’, and I can attest to having changed plenty of nappies in my few years as a dad. In fact, studies show that sons who are nurtured by their fathers are more likely to be more hands-on with their own children. Fathers who interact with their daughters reduce the rate of emotional problems in those girls when they reach their teenage years. Dads help daughters, even when they are young, feel competent—an essential prerequisite for self-esteem.

For us politicians, bringing up young children can come with additional risks. It might be apocryphal, but the story goes that the member for North Sydney received a phone call at home from John Howard after one of the elections. The former Prime Minister said, ‘What are you doing?’ ‘Changing nappies,’ replied the member for North Sydney. Prime Minister Howard apparently then said, ‘I have something similar for you—industrial relations.’ As the Work Choices episode shows, the similarity is more than passing.

I have found my own role as a politician and a father to be a constant and at the same time delightful juggling act. There are many challenges and changes with a newborn baby, and it is vital that dads can be there to support the partner and the child; to share the joys of the new baby; to give some respite—some time-out—for the partner to do little things such as take a bath, have a cup of tea and relax in front of the TV; and to share the responsibility for what is, especially to first-time parents, a vulnerable and mysterious creature. Liesel’s mum, Kate, told me, ‘It was so good to be home together as a family—to see her and Damien just be together. To see her respond to his voice or be fast asleep on his chest was just magical.’

After the 2010 election, Labor made a commitment to give dads the chance to have two weeks off to support new mums at home. The government’s historic Paid Parental Leave scheme has now benefited more than 150,000 new mums. Labor’s Paid Parental Leave scheme is funded by the government and paid through employers, so employers can stay in touch with their long-term employees while they are taking time off to care for a new baby. That was the approach recommended by the Productivity Commission after their extensive inquiry. It reflects the fact that Paid Parental Leave scheme is a workplace entitlement, not a welfare payment. It is critical that we maintain that link to employment, and it is maintained in Labor’s Paid Parental Leave scheme as the Productivity Commission recommended.

Under this bill, eligible fathers and partners will receive two weeks dad-and-partner pay at the same rate per week as paid parental leave is paid, which is currently $590 a week before tax. Dad-and-partner pay will begin on 1 January 2013. The eligibility criteria for dad-and-partner pay—including the income test, the work test and residency requirements—will be consistent with those for parental leave pay. Dad-and-partner pay cannot be transferred to the primary carer; it has a use-it-or-lose-it provision to encourage fathers to take more time off work. It also signals to employers that a father’s role in caring for a new baby is important. The government expects that employers will retain their existing parental and paternity leave provisions and continue to set themselves apart as employers of choice for parents. We are working with employers to provide fathers the maximum opportunity to take time off work so that they can be involved in their child’s care from an early age. The dad-and-partner payment gives families more options to balance work and family commitments. It is good for dads, it is good for mums and it gives newborns the best possible start in life.

For the last two years, I have held a welcoming-the-babies event, which was originated by the Treasurer in the electorate of Lilley. Welcoming the babies is a chance to recognise Canberra’s new parents and for them to meet other parents, connect with community services and find out what is available. For last year’s welcoming-the-babies event we had a terrific weather, and around 150 parents and children turned up. They grabbed a coffee or a sausage sandwich, enjoyed the sunshine and chatted to stallholders about playgroups, breastfeeding, maternal health, immunisation, toddler sports and other supports. First-time dad Tito Hasan told me: ‘It’s been great to see kids having fun. My wife and I see the range of things out there for first-time parents. I’m looking forward to coming back next year.’

This year we had horrendous rain and Commonwealth Park was closed on the weekend of welcoming the babies, so, in lieu of us having the event outside, around 30 parents and children enjoyed morning tea in my electorate office, shared stories and met with service providers. They all took home a baby pack and a formal certificate. As the saying goes, it takes a village to raise a child, and now dads can stay in the village for another two weeks and enjoy this special time without having to worry about the family finances.

I have a story to share about my own experience of being a new dad. I remember that first hour of my eldest son’s life. It was an extraordinary period, because my eldest son was born by caesarean section. For those who have not seen a caesarean section performed, what is most amazing is how quick it is. From the first incision to when the baby comes out is only about seven minutes but then the remainder of the operation takes about an hour. So, as a dad, you then have an hour on your own with the newborn.

I remember being struck by how relaxed and peaceful my son was. I just talked away to Sebastian. I babbled away and started to think about the advice that a father should give a son. I had never given father-son advice before, so after about 10 minutes of babbling, I finally settled on the one thing I wanted most of all: I wanted him to be curious. Five years later the conversation sometimes floats back to me—when he asks questions like: dad, why is the sky blue?—and I wonder whether I should have encouraged him to be quite so curious when he is in his cupboard-opening mode.

Those first weeks are an extraordinarily precious time, and encouraging fathers to spend more time bonding with their sons is a critical thing to do. It is a great privilege to be a dad. It is really important that we as policymakers encourage that bonding. It is good for early childhood and it ensure that dads enjoy that precious time with newborns, because a newborn child is too important, too precious and too loved to miss out on those early weeks with their father.

I commend the bill to the House.

Debate adjourned.

(For ease of reading, I’ve omitted the three times that the chair had to ask the opposition to quieten down.)

The Chronicle this week has a story about one of the first Canberrans to be connected to the National Broadband Network. You can read it here.

Mobile Offices – Saturday 12 May

• Charnwood Shops (outside Woolworths), 10-11am
• Kippax Fair (Hardwick Crescent), 11.15am-12.15pm

Community forum -Tuesday 15 May

• Dickson Quality Hotel (Trevor Scott Room), 6pm

Times don’t suit? More events here.

The media release is below. 

MINISTER FOR INFRASTRUCTURE AND TRANSPORT

THE HON ANTHONY ALBANESE MP

MEMBER FOR FRASER

ANDREW LEIGH MP 

JOINT MEDIA RELEASE 

Gillard Government Support Plan for More Livebale Capital 

I’m pleased to announce that Canberra will soon be home to an innovative project showcasing the best in urban design, planning and renewal, funded as part of our efforts to make the nation’s major cities more productive, sustainable and liveable. 

 The Gillard Labor Government is providing $500,000 to the ACT Government for a major planning project to unlock the potential of the city’s CBD and better integrate it with public transport, residential buildings, surrounding parklands  and ANU and CIT campuses. 

 The Canberra community will be invited to provide input into the masterplan – Realising the Capital in the City – which will become a blueprint to encourage people to visit, live and invest in the CBD. 

 It will support Walter Burley Griffin’s original vision for Canberra as a highly liveable city where people can participate with ease in its cultural, business and political activities. 

 The plan will also look at the feasibility of introducing a rapid transit system down Northbourne Avenue and the redevelopment of public housing immediately to the east and north of the CBD. 

 The ACT Government will work closely with the National Capital Authority to set out clear strategies for investment in the urban quality and amenity of Canberra’s city centre. 

 From a national perspective, this project is a great example of the kind of cooperation between governments needed to address the big challenges facing our cities such as climate change, a lack of affordable housing, traffic congestion and a growing, ageing population. 

 That’s why Federal Labor has ended the Commonwealth’s self-imposed, decade long exile from our major cities and is again engaging with the states and territories and local councils to bring about a much needed urban renaissance. 

 As one of the most urbanised societies on the planet, Australia’s future economic prosperity and social cohesion will depend largely on how successful we are at making our cities more productive, sustainable and liveable. 

 Realising the Capital in the City ($500,000 in program funding) is being funded as part of the Gillard Government’s Liveable Cities Program. 

Federal Member for Fraser, Andrew Leigh, welcomed the announcement. 

 ‘I believe that Canberra is the best city in Australia’, said Dr Leigh. ‘But we should always be thinking about ways of making a great city even better. With Canberra’s centenary coming up in 2013, this major planning project couldn’t be more timely.’

Trade Training Centres, 10 May 2012

The Australian government is establishing Trade Training Centres to help increase the proportion of students achieving year 12 or an equivalent qualification. Since parliament last sat it has been my pleasure to open two sites of an ACT trades training centre. The lead site of the Trade Training Centre is St Mary MacKillop College, and that was opened by the Prime Minister and Minister Garrett on 17 February 2012. It was my pleasure on 26 March to open the site at St Francis Xavier College and on 2 May to open the site at Merici College.

The site at St Francis Xavier College includes a large workshop, a machine room, a covered outdoor workshop and flexible learning areas, and works in with the Canberra Institute of Technology. I acknowledge College Captains Chloe Kelly and Nick Mahony; the Director of Catholic Education, Moira Najdecki; Archbishop Mark Coleridge; CIT’s Adrian Marron; and Principal Angus Tulley.

The Merici College site includes a restaurant and a commercial kitchen. I acknowledge Principal Catherine Rey; College Captain Anne Cusack; and Spirituality Captain Danielle Farrell; the school board chair, Graeme Plenderleith; guest speaker, Callum Hann, from the Jamie Oliver cooking skills program; and Monsignor John Woods.

Saints Francis Xavier and Angela Merici were both alive 500 years ago—St Angela Merici, a teacher in Brescia, Italy; and St Francis Xavier, a missionary from Spain who travelled to India, Japan, Borneo and the Moluccas. They never met one another but I think in the stories of both of them we can learn something about the Trade Training Centres today. Like St Francis Xavier, Australian school graduates will travel the world. They will go through different careers and work in different industries, and they need to be ready for the unexpected that accompanies them. But as St Angela Merici so passionately did during her life, they need to be provided with the best quality of education. They need that sustenance that education provides to the soul and to the mind to allow them the flexibility to adapt to a changing environment.

I commend both schools on the work that they have done, in conjunction with the fourth site, St Clare’s College in the electorate of Canberra. The work that these schools and the school communities are doing as part of these Trade Training Centres is essential in equipping young Canberrans for a future of change and a future in which they require all the skills that we can equip them with.

• Matter of Public Importance, 8 May 2012
• Tax Reform, 9 May 2012

The Pro-Growth Progressive: How Economic Reform Can Make Us Happier, Labor Voice, Issue 3, 2012
Andrew Leigh

As Australians, we’re used to economic growth [1]. It’s the benchmark by which governments are often judged. Yet it is easy to forget how unusual growth is in human history.

Go back a few centuries to the Victorian era and the average person was no better off than the average caveman [2]. There were a lucky few who enjoyed tea in china cups, but the true living standards of 1800 were better captured by Charles Dickens than Jane Austen.

Indeed, economic historian Greg Clark makes the point that on some measures, the vast mass of the world’s population were worse off in 1800 than their ancestors of 100,000BC. For example, Britons in the Victorian era were shorter – reflecting their poor diet and exposure to disease in childhood.

In 1800, life expectancy was around 30-35 years, pretty much what it was on the savannah. Citizens of 1800 probably worked longer hours than cavemen. From the Stone Age to the Renaissance, most people ate around 2000 calories a day, compared to the 3000 calories a day that we consume.

In fact, most of us would find it difficult to get by on 2000 calories a day, because our bodies are significantly bigger than those of our ancestors.

There’s something slightly shocking about the thought that our ancestors – just seven generations ago – experienced stone-age living conditions. For them, it was normal to go to bed hungry. Everyone knew someone who had lost a baby in childbirth – sometimes with the loss of the mother too. Illness was normal and uncontrollable.

There was simplicity in a world without economic growth. An artisan would engrave his prices on the stone wall of his workshop, knowing that his son would be charging the same. Life for most was, as Thomas Hobbes famously put it, ‘nasty, brutish and short’.

Then – beginning in a little island off the coast of Europe – something changed. With the industrial revolution, people began to experience rising living standards. Average income tripled from 70 cents
per person per day in 1800 to $2.30 by 1900. In the 20th century, average incomes worldwide rose tenfold to $22 per person per day [3].

That transformation had immediate effects on people’s health. A person born in 1900 could expect to live to 40. By 2000, babies born in a developed nation could expect to live until their 70s.

People aren’t just living longer – we’re living healthier. A survey of elderly veterans in the US found that in 1910, nearly all were suffering from digestive disorders. By the end of the 20th century, just one-fifth suffered from digestive disorders.

Underpining economic growth has been a massive rise in productivity. Workers today create more value in an hour than their predecessors. A century ago, it took 1700 hours of work to buy a year’s food supply for a family. Working a typical week, that’s 10 months’ labour. Today, a family’s food supply takes a month and a half of work.

That’s true of other products too. Since the late 19th century, the number of working hours to buy various products has dropped dramatically. It used to take 260 hours of work to buy a bicycle – now it takes seven hours. It used to take two hours of work to buy a dozen oranges – now it takes six minutes. Not surprisingly, that’s meant an increase in the number of leisure hours: from two hours a day in the late 19th century to six hours a day now.

The Easterlin Paradox

If you had to name one central fact to characterise the past two centuries, it would be income growth. It has made us healthier and allowed us to enjoy more leisure. It has lengthened our lives and allowed us to
be more generous.

Yet some now argue that economic growth has gone too far. In Growth Fetish, Clive Hamilton argued that once a society has developed to the point at which the majority of people live reasonably comfortably, the pursuit of growth is pointless and should be curtailed. Internationally, books like Tim Jackson’s Prosperity Without Growth became bestsellers.

“If anything, money seems to buy more satisfaction as you get richer.”

At the core of many of the anti-growth arguments was the contention that once incomes reach a certain threshold, more money doesn’t buy more happiness. The person most closely associated with this idea is Richard Easterlin, who wrote a famous article in 1974 that looked at the relationship between Gross Domestic Product (GDP) and happiness across nine countries. Easterlin found that there was no statistically significant relationship, and concluded that across countries, money didn’t buy happiness. The relationship became known as the ‘Easterlin Paradox’. His article has since been cited over 2000 times, and has become one of the most famous ideas in the social sciences.

A few years ago, a pair of economists at the University of Pennsylvania – Betsey Stevenson and Justin Wolfers – decided to revisit the Easterlin Paradox [4]. But rather than using data for just nine countries, they exploited the fact that we now have more happiness surveys. A lot more.

The centrepiece of Stevenson and Wolfers’ analysis is a massive 2006 survey, in which Gallup asked nearly 140,000 people in 131 countries about their life satisfaction. Across those countries, the relationship between satisfaction and GDP is almost perfectly linear. There is no evidence of satiation. If anything, money seems to buy more satisfaction as you get richer. When we move from nine countries to 131 countries, the Easterlin Paradox simply doesn’t hold up.

Interestingly, money doesn’t just buy more happiness. In countries with higher levels of GDP per capita, people are more likely to say they experienced enjoyment, and more likely to say they were pleased at having accomplished something. People in affluent nations are less likely to have experienced physical pain, loneliness depression and boredom. Indeed, people in richer countries are more likely to tell an interviewer that they experienced love in the previous day. That’s right, Paul McCartney, money can buy you love.

Environmental Concerns

A popular belief is that economic growth and environmental damage go hand in hand. This concern comes in two forms – some people argue that we will use too many inputs (like natural resources), while others argue that we will produce too many outputs (like pollution).

The view that our economy will eventually use up all the stuff in the world is based on a static view about where our GDP comes from. If it were the case that all workers produced goods requiring non-renewables and if we never became any more efficient at producing those goods, then rising incomes and population would eventually use up all the world’s resources.

But it turns out that neither of these things are true. Most workers don’t produce goods from nonrenewables. In fact, three-quarters of Australians work in the service sector. For detectives and doctors, barristers and baristas, the product of their jobs doesn’t weigh much, leading some to dub the phenomenon ‘the weightless world’ of work. In fact, the entire output of the United States weighs only marginally more today than it did a century ago [5]. There are more Americans, and they’re much better off than their great-grandparents – but the product of the country isn’t getting much weightier.

Productivity too, is always increasing. Today’s cars use less fuel. Our computers use less electricity. And, thanks to recycling, our paper uses fewer trees. Our economy is also shifting from one resource base to another, a phenomenon that economist Paul Collier characterises (not very reassuringly) as ‘running across ice floes’ [6]. In the nineteenth century, the British government worried that it was going to run out of tall trees for the masts of ships. We will probably look back at arguments about ‘peak oil’ in the same way [7].

The other environmental concern about growth is that people say it leads to more pollution. Here, the best example is urban air pollution. In the 1950s and 1960s, people became concerned that growth would inexorably choke cities like London and New York. Yet through cleaner cars, cleaner factories, and by shifting industrial pollution away from the largest urban areas, we have managed to reduce urban air pollution while still enjoying economic growth [8].

Today, our major environmental challenge is climate change. Here again, I am optimistic that we can decouple growth from carbon pollution, in the same way as we successfully did with urban air pollution and with the CFCs that were damaging the ozone layer. I do not believe that the best way to deal with climate change is by abandoning economic growth. Indeed, I think that growth will help us address dangerous climate change, since higher incomes will provide more resources to assist with the transition.

An Imperfect Measure

One of the curious things about economic growth is that while it closely tracks many of the things that we care about – such as health, longevity and love – it is far from being a perfect measure of wellbeing. Indeed, growth in Australia’s GDP (or our Gross National Income or Gross National Product, if you prefer) captures some things that we would think of as bad, and fails to capture other things that most of us would regard as good.

Robert Kennedy put this best in a speech at the University of Kansas, less than three months before he was tragically shot [9]:

‘Our Gross National Product … counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.’

More recently, Australian economist John Quiggin has argued that there are three things wrong with GDP as a measure of a nation’s economic wellbeing: ‘it’s Gross (doesn’t net out depreciation of physical or natural capital), Domestic (doesn’t net out income paid overseas) and a Product (takes no account of labour input)’ [10].

GDP per person also has the problem that it’s just an average. To see this, let’s suppose that you’re having a drink at your favourite pub, with another eight of your friends. Now, let’s imagine that Australia’s richest person, Gina Rinehart, pops by in her fluoro vest for a drink. According to the most recent BRW Rich List, Rinehart is worth over $10 billion. So if we just look at averages, the average wealth per person in the pub is $1 billion. But, alas, that doesn’t make you a billionaire.

The same problem occurs if economic growth goes only to the richest. In Australia, recent decades have seen an increase in inequality, but that doesn’t change the fact that incomes have risen across the distribution. According the OECD, the past quarter-century has seen incomes for the richest tenth grow by an average of 4.5 percent per year [11]. For the poorest tenth of Australian households, incomes grew at 3 percent per year. Australia’s experience contrasts with the United States, where incomes for the bottom tenth have barely budged in a generation. But it does highlight the importance of talking about both growth and inequality.

Boosting Growth

By now, you’ve probably guessed my secret: I think growth is good. As Winston Churchill said of democracy, it’s not perfect – merely better than all the alternatives. The challenge now is to find the set of policies that are best for promoting economic growth.

In the long-run, the key to boosting growth is raising productivity – producing more with the same set of inputs. During the 1980s and 1990s, tariff cuts, competition policy and enterprise bargaining were among the underpinnings of productivity growth, but what is the answer to the modern productivity puzzle?

In my view, the best productivity policy we can pursue today is to improve our education system. Raising the skill level of the workforce is essential if we are to adapt to changes in the labour market.

We need to raise the quantity of education – boosting the average number of years of schooling that each person receives. That means encouraging young people to complete high school, undertake vocational training and go to university.

We also need raise the quality of Australian education. Reforming schools is contentious, but the evidence points clearly towards the benefits of school accountability. The MySchool 2.0 website – which includes value-added data and school financial information – will play a significant role in driving change. Another reform that will improve educational outcomes and boost productivity is improving the salary structure of teachers. We need a salary structure that encourages the most talented young people to become teachers, and creates incentives for high-performing teachers to be recognised for their achievements.

Getting education right isn’t just good for our economy, it’s also great social policy. A first-rate education is the best anti-poverty vaccine we’ve yet devised.

Education is also good for civic activism. A bit more school, some vocational education or a few years at university are all factors that help make you more likely to join organisations, volunteer at the local sports club, or donate money to a worthy cause. This is music to the ears of someone like me, who cares passionately about strengthening community life.

Another crucial element to the productivity puzzle is technology. As recently as the early-1900s, American jurist Oliver Wendell Holmes quipped that if all the medicines in the world were dumped into the ocean, it would be better for humanity and worse for the fish [12]. A century on, medical advances have vanquished diseases like smallpox, polio and tuberculosis from the developed world. Our emergency departments are considerably better at saving critically injured patients. And in mental health, we are steadily doing better at diagnosing and treating mental illness as soon as it appears.

Maintaining the rate of technological growth in Australia is vital to improving our living standards. That means we need to continue to innovate here, but it also means we need to take up the best ideas from overseas. As a small open economy, it will always be the case that most of the new technologies that boost our productivity are invented overseas. In that sense, open markets are the best innovation policy we can devise.

No place for complacency

There’s an old joke that goes:
Q: How many conservative economists does it take to change a light bulb?
A: None. The darkness will cause the light bulb to change by itself.

While economic growth tends to benefit all Australians, you should not mistake my belief in the benefits of growth with complacency about the need for government to help build a better Australia. Unlike the conservative economist in the joke, I do not believe that markets can solve all problems. Government has an important role to play in providing public investments and managing risks. But it should also promote pro-growth policies, since growth tends to raise wellbeing.

Economic growth makes us happier, and it need not leave us with a dirtier environment. Indeed, the example of the past shows that we can use the resources from growth to improve our natural surroundings. Sometimes the changes come in unexpected ways. In the early 20th century, some Londoners worried that there would soon be so many horses plying the streets that the manure would become unmanageable. With the advent of the motor car, worries about exhaust fumes quickly replaced concerns about horse manure.

Australia today is in a far better position than most developed nations. Many have double-digit unemployment. Some have debt loads that exceed their annual incomes, and are heavily constrained in their policy choices by the absolute priority of paying off debt. By contrast, Australia has the ability to easily satisfy our creditors and make long-term investments.

Globally, Australia’s geographic position could hardly be better. At the start of the Asian Century, our proximity to fast-growing nations such as China, Malaysia, Vietnam and Korea will prove vital not only for goods trade, but also because it will allow us to plug in to global growth in other ways as well. Thousands of foreign-born students now study in our universities, while many Australianborn students take the chance to complete all or part of their education in an Asian university.

Great fundamentals place the onus on us to do something special. With the right policies and effective leadership, we can lay the foundations for continued productivity growth, ensuring that future generations enjoy steady improvements in living standards. We can make schools and hospitals work even better, providing the building blocks of a happy and healthy life. We can improve trust in politics, engaging with voters about the tradeoffs that are at the heart of decision-making. We can continue to close the gaps between Indigenous and non-Indigenous Australians, applying hard-headed analysis to find out what works, and what does not. Through trade, aid and diplomacy, we can help improve the lives of many in our region.

Ours is an optimistic future, and I am confident that economic growth will be part of Australia’s continued success.

Notes

[1] This article draws on a speech delivered at one of my community forums, held at Ginninderra Labor Club, Charnwood on 18 May 2011. The first half of my title is shamelessly stolen from Gene Sperling, The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity, Simon & Schuster, New York, 2006. I am grateful to Nick Terrell for valuable comments on an earlier draft.

[2] Gregory Clark, A Farewell to Alms: A Brief Economic History of the World, Princeton University Press, Princeton, 2007

[3] Arnold Kling and Nick Schultz, From Poverty to Prosperity: Intangible Assets, Hidden Liabilities, and the Lasting Triumph Over Scarcity, Encounter Books, New York, 2009, p.26

[4] Betsey Stevenson and Justin Wolfers (2008) “Economic Growth and Happiness: Reassessing the Easterlin Paradox”, Brookings Papers on Economic Activity. See also work by Angus Deaton and Alan Krueger, which reaches the same conclusion.

[5] Arnold Kling and Nick Schultz, From Poverty to Prosperity: Intangible Assets, Hidden Liabilities, and the Lasting Triumph Over Scarcity, Encounter Books, New York, 2009

[6] Paul Collier, The Plundered Planet: Why We Must – and How We Can – Manage Nature for Global Prosperity, Oxford University Press, Oxford, 2010, p.98. Our ethical obligation with natural resources, Collier argues, is to bequeath future generations assets of equal value to the natural resources we use. We are not obliged to preserve the world as a museum, but we are ‘custodians of their value’. In the mid-nineteenth century, a generation of prospectors who mined Victoria’s gold and left us with Melbourne’s wide streets and magnificent buildings. We look upon them more fondly than if they had sold the gold and left our generation nothing in return.

[7] On peak oil, see Michael Lynch, ‘Peak Oil Is a Waste of Energy’, New York Times, 24 August 2009.

[8] Economists refer to this tendency of environmental outcomes to worsen and then improve as the ‘environmental Kuznets curve’.

[9] Remarks of Robert F. Kennedy at the University of Kansas, March 18, 1968

[10] John Quiggin, ‘Is Happiness Gross?’, 7 August 2006, http://johnquiggin.com/2006/08/07/is-happiness-gross/

[11] OECD, Growing Income Inequality in OECD Countries: What Drives it and How Can Policy Tackle it? Forum, Paris, 2 May 2011

[12] Quoted in Robert Guest, The Shackled Continent: Power, Corruption, and African Lives, Smithsonian Books, Washington, 2004, p.200

Healthy workers make healthy businesses
7 May 2012

ACT Chief Minister and Minister for Health Katy Gallagher MLA, together with Federal Member for Fraser Andrew Leigh MP, today launched a new one-stop shop for workplaces wanting advice on developing and implementing health and wellbeing programs.

Commenting on the launch of the new WorkSafe ACT Healthier Work service, the Chief Minister said healthier workplaces made good business and health sense.

“Given the amount of time most adults spend working, it makes sense to focus on promoting health and wellbeing in the workplace,” the Chief Minister said.

“The ACT is not alone in witnessing a significant increase in the burden of chronic disease. Tobacco smoking, the misuse of alcohol, poor nutrition, physical inactivity and obesity are the main risk factors.

“It also makes good business sense for workplaces to invest in the health and wellbeing of their employees, with research indicating that unhealthy workers have up to nine times the annual sickness absence of healthy workers.

“Healthier employees are likely to be more productive, more engaged in their work, take less sick leave, and have higher energy and concentration levels.

“Healthier Work will assist all ACT workplaces to implement health and wellbeing programs through a range of supportive resources including a website, case studies, tools, a ‘how to guide’, training and employer support mechanisms, as well as advice for workers,” the Chief Minister concluded.

Healthier Work forms part of a joint Australian and Territory government initiative under the National Partnership Agreement on Preventive Health, Healthy Workers Initiative, which is committed to reducing the risk of chronic disease.

“The Australian Government supports this partnership because we know that making our workplaces healthier is an important part of the fight against chronic disease,” Mr Leigh said.

Information about Healthier Work can be found at www.healthierwork.act.gov.au

Volunteers Appreciated, The Chronicle, 1 May 2012

Last year, a friend of mine was in Canberra Hospital for cancer treatment. When I asked him how it was going, his first response was to talk about the Hand and Foot massage volunteers that came to see him. ‘It’s not just that they massage my smelly feet’, he quipped. ‘But they stand there telling jokes too. It makes my treatment more bearable.’

Peter passed away in January, aged just 27. His description of volunteering stays with me. As the federal MP for the northside of Canberra, barely a day goes by when I don’t meet another inspiring group of volunteers.

In my own suburb of Hackett, the Holy Cross church just celebrated the anniversary of their ‘Tuckerbox’, where volunteers now provide discounted groceries to over 300 families every week. Reverend Erica Mathieson described to me how the church community established the Tuckerbox because they saw it as an unmet need in the community; a way of helping others.

In Page, the Vietnam Veterans & Veterans Federation ACT are helping returned veterans with their claims, operating a food van at community events, and even running classes on how to cook healthy food. When I visited for their graduation, 66 year-old Danny Burton told the story of how the classes had given him the self-confidence in the kitchen to take over cooking for his partner, who has fallen ill.

Another organisation that only survives thanks to volunteer efforts is the Girl Guides. At EPIC in Mitchell, the Guides last month held their national jamboree, with more than 550 Guides learning leadership and outdoor skills.  At a morning tea, youth leader Sam Chenney told a group of us that signing her up for the Guides was the best decision her mum ever made. Sam told the story of going on a trip with her boyfriend where they had to rope down 100 metres into a canyon. She said she couldn’t believe it when he said he’d never abseiled before; Sam had been abseiling for years in the Guides.

Volunteers also help with community arts. With Belconnen Arts Centre, I recently produced a map of Canberrans’ favourite northside places. ‘Mapping the Northside’ would not have been possible without the hard work of volunteer Alyssa Hardy, who worked alongside the Centre’s staff to uncover the many hidden gems of north Canberra.

Volunteering isn’t just good for the recipients. As Ralph Waldo Emerson once said, ‘The only reward of virtue is virtue; the only way to have a friend is to be a friend.’ In his book The Meaning of Friendship, philosopher Mark Vernon writes about civic friendship, the notion that democracy works best when we look out for others. By volunteering to help others, we’re building a stronger society.

This year, 14-20 May marks National Volunteer Week, to celebrate our existing volunteers and encourage new recruits. If you’d like to offer a helping hand, go to www.volunteeringact.org.au, where you can find the volunteering opportunity that’s right for you.

Andrew Leigh is the federal member for Fraser, and his website is www.andrewleigh.com.

On Sky’s Lunchtime Agenda program, I joined host David Lipson and Liberal Senator Arthur Sinodinos to discuss how a budget surplus puts downward pressure on interest rates, and why a National Disability Insurance Scheme is a higher priority than tax cuts for millionaires and billionaires.

Choosing Life Over Money in Our Old Age, The Drum, 2 May 2012

Quiz time. Over the past 40 years, average real incomes in Australia have doubled and life expectancy has increased by a decade. If you could have only one of those developments, which would you pick? Would you prefer twice the income, or to live a decade longer?

I’ve asked the ‘your money or your life?’ question of dozens of people, and I’m yet to find anyone who would take the money. As an economist, that suggests to me that the longevity gains that have taken place in my lifetime are worth even more to Australians than the income gains.

But because Australians will live longer, policymakers need to spend more time thinking about issues that affect senior Australians. We need to boost minimum superannuation contribution rates. We must make sure our hospital system operates as efficiently as possible. And we need to fix our aged-care system.

When the Gillard Government asked the Productivity Commission to look into the care of older Australians, they reported back to us that the system was often inflexible and limited in supply, and had too many unmet needs.

Most Australians want to stay in their own homes as long as possible. But for those entering a nursing home, quality is variable and choices can be limited. The Productivity Commission pointed out that a viable solution to improving the quality of nursing homes would inevitably have to involve users paying more.

Improving the residential aged-care system involves removing some of the perverse incentives that currently exist. By significantly relaxing supply constraints on nursing home places, we are recognising the reality that more Australians will require an aged-care place in decades to come.

By requiring accommodation providers to publish their fees on a My Aged Care website (both as a daily rate and a bond), we’re providing more information to consumers. And by introducing assets tests plus setting a lifetime limit on what people can be required to pay, we’re making the system more equitable.

The assets tests won’t apply until 2014, and if one partner is living in the family home, it will remain exempt.

Older Australians are also funding their retirement in different ways from previous generations. One of these is ‘reverse mortgages’. Just as a regular mortgage allows families to live in a house while slowly paying money to the bank, a reverse mortgage lets people continue to live in a house while the bank pays them regular instalments.

A regular mortgage stops once you’ve paid off the house. A reverse mortgage typically ends when both members of a couple die.

At present, the market is small (a 2007 report counted just 31,000 reverse mortgages, compared with the 3 million regular mortgages). But as it grows, it’s important to make sure that customers are protected. So we’re improving disclosure provisions, to make sure that people who take out reverse mortgages know exactly what they’re getting into. And we’re placing limits on what lenders can recover, so banks cannot ask seniors to pay more than the value of their home.

It’s hard to trace the origins of all the problems in our aged-care sector. Partly, they’re a product of overlapping state and federal government responsibilities. There has also been plenty of political laziness, with Howard government aged-care ministers often preferring to tip a few more dollars into the system rather than consider whether the structures themselves were actually fit for purpose.

One of the big problems has been a lack of rigorous economic analysis. Sometimes, the proper role of government is to correct market failures. At other times, we need to think carefully about whether government is stifling the ability of markets to help us.

What’s striking about the aged-care system is that the Productivity Commission identified both market failures and over-regulation. It’s time to build a system that’s more equitable, more efficient, and provides users with more choice and more control. Because as they say, living longer certainly beats the alternative.

Andrew Leigh is the federal member for Fraser.

(See also reports in the SMH and Canberra Times, and an op-ed version in the National Times.)

Why Inequality Matters, and What We Should Do About It*

Andrew Leigh MP
Federal Member for Fraser
www.andrewleigh.com

Sydney Institute
May Day 2012

Introduction

Imagine a ladder, in which each rung represents a million dollars of wealth.[1] Imagine the Australian population spread out along this ladder, with their distance from the ground reflecting their household wealth.

On this ladder, half of all households are closer to the ground than they are to the first rung.

The typical Australian household is halfway to the first rung.

Someone in the top 10 percent is at least 1½ rungs up.

A household in the top 1 percent is at least 5 rungs up.

Gina Reinhardt is 5½ kilometres off the ground.

‘The rich are different from you and me’, wrote an awestruck F. Scott Fitzgerald.[2]

‘Yes’, wrote the laconic Hemingway. ‘they have more money.’

But why should we care about the gap between rich and poor? Shouldn’t we focus on raising the bottom, rather than how much wealthier the top are than the rest? Aren’t discussions of inequality merely – shudder – ‘the politics of envy’?

Certainly, there are eminent economists who have taken this position. The University of Chicago’s Robert Lucas has argued that ‘of all the tendencies that are harmful to sound economics, the most seductive, and in my opinion, the most poisonous, is to focus on questions of distribution’. Harvard’s Martin Feldstein says ‘there is nothing wrong with an increase in well-being of the wealthy or with an increase in inequality that results [solely] from a rise in high incomes’.[3]

Contrary to Lucas and Feldstein, I want to persuade you that inequality matters, that the gap between rich and poor really is an important public policy issue, even apart from the question of poverty. Inequality has costs and benefits, and policymakers need to think hard about the right level of inequality. This is an issue that Wayne Swan has put squarely on the national agenda, and I commend his article in The Monthly to you.[4]

To begin, let me take a moment to review what we know about inequality in Australia. There are many measures of inequality, but I’m going to focus on top income inequality, because it allows me to look at a much longer period, and because it’s very clear that when we’re talking about top incomes, the topic is inequality rather than poverty.[5]

In Which Some Boats are Lifted More than Others

About a decade ago, I teamed up with a British economist, Sir Tony Atkinson, on a project to use taxation statistics to learn more about inequality. The idea was to follow work by Simon Kuznets in the 1950s and Thomas Piketty in the 1990s, using breakdowns of taxation figures to look at the top of the distribution. By combining taxation statistics for the top end with national accounts and population statistics for the entire population, we’re able to answer questions like ‘what was the income share of the richest 1 percent of Australian adults?’.

While regular surveys are only conducted every few years, taxation data are available annually. So we were able to estimate a measure of ‘top income inequality’ going back to the 1910s for Victoria, and the 1920s for Australia.

The thing that strikes you first is that for all the legends of egalitarian bushmen, early-twentieth century Australia was a strikingly unequal place. I’ll come to the data in a minute, but let me remind you first of the character of the place. The Australian Club in Sydney and the Melbourne Club were elite institutions. True, an Australian gentleman need not have been a man of leisure – both clubs included merchants and squatters from the outset – but great deference was paid to the elite.[6]

Large fortunes were made in the early-twentieth century, and many of the super-rich lived extravagantly.[7] Retail merchant Samuel Hordern raced yachts and bred racehorses. Goldmining magnate Walter Hall was also a racehorse owner, and collected Old Master paintings. Other super-rich of the era include newspaper proprietor David Syme, pastoralist Samuel McCaughey, union-busting manufacturer Hugh McKay, and retailer Sidney Myer.

Then things began to change.

In the 1910s and 1920s, the richest 1 percent of Australians had 12 percent of national income – 12 times their proportionate share. By the mid-1950s, this was down to 8 percent. By 1980, it was down to 5 percent.

You can see the same pattern if you look further up the distribution, at the richest 0.1 percent – the 1/1000^th of Australians with the highest incomes. Back in the 1910s and 1920s, the top 0.1 percent had about 4 percent of household income – 40 times their proportionate share. By the 1950s, this had fallen to 2 percent, and by 1980, it was down to 1 percent. Under the Prime Ministership of Malcolm Fraser, the share of income held by the richest 1/1000^th of Australians was only a quarter of what it had been under Billy Hughes.

The collapse of the super-rich is vividly portrayed in William Rubinstein’s book The All-Time Australian 200 Rich List. Published in 2004, the list covers the all-time richest 200 Australians, from Samuel Terry to Kerry Packer. The cut-off for inclusion in the book is that you had to have wealth of 0.17 percent of GDP, equivalent to $2.7 billion today.

Because Rubinstein’s book covers 200 people and about two centuries, you’d expect an entrant every year or so. But the striking thing is that for four decades, from 1940 to 1980, there wasn’t a single Australian wealthy enough to make the all-time rich list. For example, Rubinstein points out that in the 1940s and 1950s, there were probably only a handful of people worth more than £1 million, and no-one worth more than £8 million (the cutoff necessary to make the all-time rich list in 1955).

The closed economy of the 1950s and 1960s imposed costs on society as a whole, but nonetheless this was an era marked by full employment (for men), rapid increases in ownership of cars and houses, and significant reductions in poverty. Yet Rubinstein writes that ‘so markedly different were trends among the very rich compared with those for society as a whole that the post-war period seemed to constitute, as it were, an age of affluence for everyone except the very affluent’.[8] Corporate Australia was shifting from a period of asset-owning proprietors to professional managers, but managerial salaries remained modest.

The social norms of this era were different. Rubinstein says: ‘most of the wealthy now eschewed conspicuous consumption and ostentatious display of riches and privilege as politically unwise and economically costly’.[9] Craig McGregor, writing in the 1960s, said that the wealthy ‘feel under some pressure to be accepted by ordinary working Australians rather than the other way round’.[10]

The fall in inequality in the post-war years isn’t unique to Australia. Atkinson and I have also used taxation data to look at New Zealand, where we see almost precisely the same pattern.[11] Others have looked at the English-speaking nations of Britain and the United States, and the (mostly) English-speaking nation of Canada.[12] Across the Anglosphere, the pattern is very similar: inequality fell steadily from the 1920s until the 1970s. Among the factors that made all these countries more equal were rising education, high top tax rates, fairly closed economies, and strong unions.

Then, starting around 1980, Australian inequality began to rise. Let’s start with the top 1 percent: individuals with a pre-tax income these days of over $200,000. Over the past three decades, Atkinson and I find that the income share of the richest 1 percent has doubled. For the top 0.1 percent – which now means individuals with a pre-tax income of $700,000 or more – their income share has tripled since 1980. The ratio of CEO pay to the pay of an average worker has quadrupled. Relative to average workers, other elite salaries rose too, including the pay of High Court judges, senior public servants, and federal politicians.

These patterns are common across the English-speaking world, though Australia started from a lower base. From 1980 to the late-2000s, the top 1 percent share rose from about 5 to 10 percent in Australia, but from 10 to 20 percent in the US. So on this measure, Australia is twice as unequal as it was in 1980 – but the US is twice as unequal again.[13]

So after being largely absent from Australian life for four decades, we saw the return of the magnate. The 1980s saw the rise of people like Rupert Murdoch, Kerry Packer and Alan Bond. In the 1990s: Frank Lowy, Richard Pratt, Harry Triguboff. And in the 2000s, individuals such as Andrew Forrest, Clive Palmer, Ivan Glasenberg, Gina Reinhardt and others. In the most recent year, the cut-off to enter the Australian rich list jumped from $180 million to $215 million.[14] Ten people on the latest BRW Rich List would qualify for the all-time Australian rich list.[15]

Since 1980, Australia has seen 13 percent of household income gains go to the top 1 percent.[16] The rise in top income inequality is reflected in sales of luxury goods. Prices for waterfront properties and great Australian artworks have soared over recent decades, reflecting their scarcity.[17] Over the past two decades, a bottle of 1971 Grange – one of the great vintages – has increased in price at three times the rate of average earnings. The noughties saw a 70 percent increase in annual Porche sales, and a five-fold increase in Maserati sales.[18]

Even cocaine – what Robin Williams once described as ‘God’s way of telling you, you are making too much money’– is being consumed in greater quantities.[19] The number of registered helicopters has doubled.[20] Worldwide, builders of private jets are struggling to keep up with demand.[21] High net worth individuals have also donated more to political parties than ever before, with Graeme Wood giving $1.6 million to the Greens in 2010, and Clive Palmer donating $1 million to the Coalition in 2009-10.[22]

Three big factors drove this rise in top incomes inequality over the past generation. First, the returns increased markedly for those at the top of their field: what economists call ‘superstars’. The IT revolution made it possible for superstar professionals to reach more clients. The biggest companies grew, so top CEOs were servicing a larger organisation. English-speaking labour markets merged, so a large Australian firm looking for a CEO will now conduct a worldwide search, where in the 1970s they would have looked for the best Australian for the job.

Second, union membership has collapsed, from half the workforce in the early-1980s to one-fifth of the workforce today. Empirically, there’s a strong relationship between the unionisation rate in an industry and the amount of wage equality. Unions tend to work harder to get pay rises for their lowest paid members, or to campaign for a common dollar increase (eg. $10 a week), which reduces inequality.

And third, top tax rates were cut.[23] In 1970, Australia’s top personal income tax rate was 69 percent. By 1980, it was 60 percent. By 1990, it was 47 percent. Lower taxes increase top wage earnings by providing an incentive to take on additional work, and they increase capital earnings by allowing investors to reinvest a greater share. There were good reasons for cutting top tax rates, and I’m not arguing for them to rise again today. Yet a surge in inequality was a clear by-product of this decision.

Who Cares?

But should we care about inequality? Or do we take the view that then Workplace Relations Minister Tony Abbott put in 2003: ‘in the end we have to be a productive and competitive society and greater inequality might be inevitable.’?[24]

One set of arguments suggests that we should care about inequality for what are called ‘instrumental reasons’. Inequality, some contend, is associated with worse outcomes in areas that society cares about, such as health, crime, savings and growth. This argument is put most strongly in The Spirit Level, by Richard Wilkinson and Kate Pickett. It is an argument that I used to believe. Indeed, I deeply want to be true, but my own research persuades me otherwise.[25] The closer you get to these asserted effects, the more fragile are the findings. If there are negative effects of inequality on those social outcomes, they must be extremely small. (There are also small positive effects. For example, my own work shows that inequality boosts growth, though the trickle-down process is slow.)

I now believe that a better reason to care about the distribution of income is because humans have a palpable discomfort with high levels of inequality. As a father of two boys, I can attest that my sons are constantly benchmarking one against another. In preparing for this talk, I asked my older son whether he’d prefer that he and his brother both got one biscuit, or he got two and his brother got three. He chose one apiece.

This isn’t confined to children. In a famous economics experiment called the ‘ultimatum game’, the first player decides how she would like $100 divided between her and the other person. The second player chooses whether to accept that division, or give all the money back. If all we cared about was being better off, then the second player should accept the division when he gets anything at all. So if the first player proposes to keep $99 and hand over $1, a second player who doesn’t care about inequality should accept. Yet in thousands of settings, it has been shown that people have a cut-off around $25, below which they’d rather get nothing than receive a share that they regard as miserly. It offends our dignity – our sense of justice.

This sense of egalitarianism reflects what Lester Thurow termed ‘the income distribution as a public good’.[26] Anyone who thinks that economics is about maximising money rather than maximising wellbeing hasn’t gotten past first year. In maximising wellbeing, inequality matters – because a dollar brings more happiness to a poor person than to a rich person.

There are also practical ways in which an increase in top incomes can reduce wellbeing for others. If people are competing for ‘positional goods’, such as a home in a desirable suburb, a place in a top university, or a sought-after job, then inequality may lead to an ‘expenditure cascade’, as those in the middle have to spend more to stay in the race.[27] When top incomes are modest, a young man can happily wear a $200 suit to a job interview. But if top incomes rise, he may feel a need to buy a $1000 suit to compete.[28]

Another reason to care about inequality is that unequal societies tend to be immobile societies. Australia has always prided ourselves as being a place where – as Craig McGregor once put it – ‘The lack of widespread extremes in social differentiation makes it easy for class-jumpers to “pass”’.[29] And yet when I studied the relationship between the earnings of fathers and sons, I found that the degree of intergenerational mobility in Australia wasn’t much different from Britain.[30] True, it is easier to move from rags to riches (or the reverse) in Australia than it is in the United States. But Australia is less socially mobile than many Scandinavian nations, where being born on the ‘wrong side of the tracks’ is barely a barrier at all.

A belief in social mobility sits deep in the heart of the Australian national identity. When we talk about what a good society should achieve, it’s one of the things that first comes to the lips of politicians of all stripes. And yet we know that the more unequal a society, the less mobile it is.[31] If high inequality entrenches poverty and plutocracy across generations, it will damage something that many of us hold sacred.[32] The BRW Rich List is likely to increasingly become populated by those with inherited wealth rather than the self-made.[33]

My final concern about high inequality is that it has the potential to corrode the polity. Campaign contributions in themselves are not a cause for concern, but we must worry when donations buy policy outcomes that personally benefit the donor. At its worst, big donors pay for advertisements that aim to persuade voters that an extreme policy is a moderate one. We’ve seen some of this in the United States over recent years. As the Republicans have moved noticeably to the right, deep-pocket donors such as the Koch Brothers, Harold Simmons, and Sheldon Adelson now spend millions of dollars apiece on advertisements showing Republican candidates wearing jeans and talking to ordinary voters, while arguing that it is the Democrats who are out of touch with working America.

What to do about it?

So, what should we do about rising inequality in Australia?

In preparing for my talk, I went back and read the talks given in 1999, when The Sydney Institute hosted a debate on inequality between Craig Emerson and Julie Bishop. Both argued that education was key to reducing inequality. Emerson focused particularly on fairer private school funding and targeted early education for early childhood programs.

Education is still the most promising way of reducing inequality. Harvard economists Claudia Goldin and Larry Katz argue that we can think about inequality as a ‘race’ between education and technology.[34] When education outpaces technology, we get the ‘great compression’ of the postwar decades. When technology outpaces education, we get the ‘new Gilded Age’ of the recent era. Improving the quality of Australia’s education system, and (yes Craig), early childhood intervention programs for the most disadvantaged is a vital way to reduce inequality.

Targeted welfare is also important. It often goes unnoticed today, but one of the great achievements of the Hawke and Keating Governments was to target income support where it is most needed. Applying means tests and assets tests to the pension in the 1980s was politically tough, but absolutely essential to the sustainability of the system. Our Labor government has taken politically difficult decisions to impose means-tests on the Baby Bonus, Family Tax Benefit Part B, and the Private Health Insurance rebate. None of these decisions had bipartisan support, but they were important in ensuring that the tax and transfer system doesn’t perpetuate inequality.

We also need to recognise that – as Ken Henry pointed out in the 2011 Tax Forum – progressive income taxes are the best tool for redistributing income. The debate about progressivity frequently arises when talking about corporate income taxes, tobacco taxes, the GST, or carbon pricing. The points are valid ones, but the right way to deal with equity issues is through the system that’s best set up to address the problem: the tax and transfer system.

Conclusion

Egalitarianism sits deep in the Australian character.[35] We tend to think that Jack is as good as his master, if not better. Most of us don’t like tipping. If the plumber drops around, we’ll offer him a cuppa. It’s normal to sit in the front seat of a taxi. I’ll say ‘g’day mate’ to a bus driver as I would to a cabinet minister. We don’t typically say ‘sir’ in Australia. In fact, I enjoy the irony that the only knight I know is my inequality co-author Sir Tony Atkinson.

In his study of Japanese prisoners of war, Gavan Daws writes:[36]

‘I began imagining that if human beings were worked and starved and beaten to the point of death, they would be reduced to barely functioning skeletons, scraps of biology, with… all national culture and character tramped out of them. Not so. … all the way down to starvation rations, 1000 calories a day and less, to 100 pound of bodyweight and less .. the prisoners of the Japanese remained inextinguishably American, Australian, British, Dutch.

‘The Americans were the great individualists of the camps, the capitalists, the cowboys, the gangsters. The British hung on to their class structure like bulldogs, for grim death. The Australians kept trying to construct little male-bonded welfare states. [Unlike Americans] Australians could not imagine doing men to death by charging interest on something as basic to life as rice. That was blood-sucking; it was murder. Within little tribes of Australian enlisted men, rice went back and forth all the time, but this was not trading in commodities futures, it was sharing, it was Australian tribalism.’

My grandfather turns 90 years old this year. For most of his life, Australia became a more egalitarian place. It has only been in the last few decades that we have seen again a rise in inequality, now creeping up back towards what it was in the Great Gatsby era into which he was born. The risk is that too much inequality will destroy Australia’s egalitarian spirit.

There are many things about the 1950s and 1960s that we would not want to keep – but one value worth trying to reclaim about that era was the sense of egalitarianism. Too much inequality strains the social fabric, threatening to cleave us one from another. Australia is a stronger nation when we act together than when we pull apart.

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* I am grateful to Gerard Henderson for inviting me to give this talk, to Jack Brady for valuable research assistance, and to Fred Argy, Macgregor Duncan, John Edwards, Saul Eslake, John Hirst, Rick Kalowski and John Quiggin for insightful comments on an earlier draft. Although global inequality is higher than national inequality, my focus in this talk is on within-country inequality, since the nation is the strongest point of reference for most Australians.

[1] Median ($427,168)  and 90^th percentile ($1,474,854) estimates from ABS, 2011, Household Wealth and Wealth Distribution 2009-10, ABS, Canberra; 99^th percentile estimate (about $5 million) from Roger Wilkins, quoted in Mike Seccombe, ‘Australia’s One Per Cent Rising with a Bullet’, Global Mail, 6 February 2012; Reinhart’s wealth ($18 billion) from Forbes Magazine’s March 2012 estimate (http://www.forbes.com/profile/georgina-rinehart/). For the ladder analogy, I am indebted to my thesis adviser David Ellwood, who used it in a recent discussion about inequality at the Harvard Kennedy School.

[2] The Fitzgerald quote appeared in his 1925 short story ‘Rich Boy’. Hemingway’s mocking rejoinder was in his 1936 short story ‘The Snows of Kilimanjaro’. Accounts of the exchange taking place in person are apocryphal.

[3] Both Lucas and Feldstein are quoted in Branko Milanovic, 2007, ‘Why We All Care About Inequality (But Some of Us Are Loathe to Admit It)’, Challenge, 50(6): 109-120.

[4] Wayne Swan, ‘The 0.01 Per Cent: The Rising Influence of Vested Interests in Australia’, The Monthly, March 2012

[5] For an analysis of trends in inequality across the full distribution of incomes, see OECD, 2011, Divided We Stand: Why Inequality Keeps Rising, OECD, Paris; OECD, 2008, Growing Unequal? Income Distribution and Poverty in OECD Countries, OECD: Paris; Frank Stilwell and Kirrily Jordan, 2007, Who Gets What? Analysing Economic Inequality in Australia, Cambridge University Press, Melbourne; Fred Argy, 2006, ‘Equality of Opportunity in Australia: Myth and Reality’, Discussion Paper 85, The Australia Institute, Canberra; Peter Saunders, 2005, The Poverty Wars, UNSW Press, Sydney; Andrew Leigh, 2005, ‘Deriving Long-Run Inequality Series from Tax Data’, Economic Record, 81: S58–S70; Michael Schneider, 2004, The Distribution of Wealth, Edward Elgar, Ann Arbor, MI; Fred Argy, 2003, Where To From Here?: Australian Egalitarianism Under Threat, Allen and Unwin, Sydney.

[6] John Hirst points out that in the nineteenth century, gentlemen dressed in frock-coats and top-hats, policemen were instructed to salute them, and letters to them were always addressed ‘Esquire’. See John Hirst, 2009, Sense and Nonsense in Australian History, pp.145-173.

[7] This paragraph draws on William Rubinstein, 2004, The All-Time Australian Rich List, Allen and Unwin, Sydney.

[8] William Rubinstein, 2004, The All-Time Australian Rich List, Allen and Unwin, Sydney, p.139.

[9] William Rubinstein, 2004, The All-Time Australian Rich List, Allen and Unwin, Sydney, p.143.

[10] Quoted in John Hirst, 2009, Sense and Nonsense in Australian History, p.172.

[11] Anthony B. Atkinson and Andrew Leigh, 2007, ‘Top Incomes in New Zealand 1921-2005: Understanding the Effects of Marginal Tax Rates, Migration Threat and the Macroeconomy’. Review of Income and Wealth, 54(2): 149-165.

[12] Anthony B. Atkinson, 2007, ‘The Distribution of Top Incomes in the United Kingdom 1908-2000’ in Anthony B. Atkinson and Thomas Piketty (editors) Top Incomes over the Twentieth Century. A Contrast Between Continental European and English-Speaking Countries, Oxford University Press, chapter 4; Thomas Piketty and Emmanuel Saez, 2007, ‘Income and Wage Inequality in the United States 1913-2002’ in Anthony B. Atkinson and Thomas Piketty (editors) Top Incomes over the Twentieth Century. A Contrast Between Continental European and English-Speaking Countries, Oxford University Press, chapter 5; Emmanuel Saez and Michael Veall, 2007, ‘The Evolution of High Incomes in Canada 1920-2000’ in Anthony B. Atkinson and Thomas Piketty (editors) Top Incomes over the Twentieth Century. A Contrast Between Continental European and English-Speaking Countries, Oxford University Press, chapter 6.

[13] For example, the threshold to enter the US top 1 percent is US$350,000 (nearly twice what it is in Australia), while the threshold to enter the top 0.1 percent is US$1.5 million (more than twice what it is in Australia). These figures are for 2010, from ‘Table0’ of a spreadsheet provided on Emmanuel Saez’s website, http://elsa.berkeley.edu/~saez/ (spreadsheets last updated 2 March 2012).

[14] The cut off for the BRW rich list went up from $180 million in 2010 to $215 million in 2011.

[15] In the 2011 BRW Rich List, the following people’s wealth exceeded Rubinstein’s cutoff of 0.17 percent of GDP ($2.7 billion): Gina Rinehart, Ivan Glasenberg, Andrew Forrest, Anthony Pratt, Clive Palmer, Frank Lowy, Harry Triguboff, James Packer, John Gandel and Chris Wallin. (I am ignoring the fact that because Rubinstein’s list covered the richest 200, new entrants would slightly raise the cutoff.)

[16] These trends are slightly less extreme than in the US. For example, since 1993, Australia has seen 12 percent of the real household income gains go to the top 1 percent, while the US has seen 52 of household income gains go to the top 1 percent. Australian calculations are my own, covering 1992-93 to 2008-09. US calculations are for 1993-2010, from Table1 of a spreadsheet provided on Emmanuel Saez’s website, http://elsa.berkeley.edu/~saez/ (spreadsheets last updated 2 March 2012).

[17] For example, the price of a 1971 Penfolds Grange has increased sixfold over the past two decades (from around $150 in 1991-93 to around $900 today). By comparison, nominal average full-time earnings are slightly more than twice as large (from around $590 in 1991-93 to $1300 in 2011). See Byron, R.P. and O. Ashenfelter (1995), ‘Predicting the Quality of an Unborn Grange’, Economic Record 71: 400-14; Wickman’s Penfold Grange prices (as at April 2012), http://www.wickman.net/wineauction/Grange_prices.aspx; Reserve Bank of Australia Historical Statistics, Table G6  Labour Costs.

[18] Angus Grigg, 2010, ‘How Did We Get So Rich?’, Australian Financial Review, 23-28 December 2010, pp.32-33.

[19] Angus Grigg, 2010, ‘How Did We Get So Rich?’, Australian Financial Review, 23-28 December 2010, pp.32-33.

[20] There were 943 helicopters registered in 2000, and 1800 in 2010. See Department of Infrastructure and Transport, Bureau of Infrastructure, Transport and Regional Economics, 2012, General Aviation Activity 2010, BITRE, Canberra (and its predecessor publications).

[21] ‘Corporate Jets: Winging It’, The Economist, 14 April 2012.

[22] In recent years, Mr Palmer has donated around $4 million to the Coalition parties, making him the largest single donor to a political party since records began 28 years ago. For thoughtful discussions of this issue by my parliamentary colleagues, see also Wayne Swan, ‘The 0.01 Per Cent: The Rising Influence of Vested Interests in Australia’, The Monthly, March 2012; Malcolm Turnbull, ‘Not classy, Wayne’, Australian Financial Review, 16 March 2012.

[23] Related to the marginal rate changes were shifts in taxation of different types of income, though these were not uniform. For example, a capital gains tax was introduced in 1985, but in 1999 the rate was halved for assets held for a year or more.

[24] Tony Abbott, cited in Mike Steketee (2003) “Still Work in Progress”, The Australian, 7 June, p. 22.

[25] See for example Dan Andrews, Christopher Jencks and Andrew Leigh, 2011, ‘Do Rising Top Incomes Lift All Boats?’ B.E. Journal of Economic Analysis & Policy (Contributions), 11(1): Article 6; Andrew Leigh, Christopher Jencks and Tim Smeeding, 2009, ‘Health and Inequality’ in W. Salverda, B. Nolan, and T. Smeeding (eds) The Oxford Handbook of Economic Inequality, Oxford, Oxford University Press, 384-405; Andrew Leigh and Alberto Posso, 2009, ‘Top Incomes and National Savings’ Review of Income and Wealth, 55(1): 57-74; Christopher Jencks and Andrew Leigh, 2007, ‘Inequality and Mortality: Long-Run Evidence from a Panel of Countries’, Journal of Health Economics, 26(1): 1-24.

[26] Lester C. Thurow, 1971, ‘The Income Distribution as a Pure Public Good’, Quarterly Journal of Economics, 85(2): 327-336.  Calling it ‘envy’ doesn’t make the negative externality any less real: see Branko Milanovic, 2007, ‘Why We All Care About Inequality (But Some of Us Are Loathe to Admit It)’, Challenge, 50(6): 109-120.

[27] See Robert Frank (2007). Falling Behind: How Rising Inequality Harms the Middle Class. Berkeley: University of California Press.

[28] As Tawney noted: ‘what thoughtful rich people call the problem of poverty, thoughtful poor people call with equal justice a problem of riches’: Tawney, R. (1913). ‘Poverty as an Industrial Problem’, inaugural lecture, reproduced in Memoranda on the Problems of Poverty, London: William Morris Press.

[29] Cited in Andrew Leigh (2007) “Intergenerational Mobility in Australia,” The B.E. Journal of Economic Analysis & Policy: Vol. 7: Iss. 2 (Contributions), Article 6. Available at: http://www.bepress.com/bejeap/vol7/iss2/art6

[30] Andrew Leigh (2007) “Intergenerational Mobility in Australia,” The B.E. Journal of Economic Analysis & Policy: Vol. 7: Iss. 2 (Contributions), Article 6. Available at: http://www.bepress.com/bejeap/vol7/iss2/art6. Other intergenerational patterns emerge too. For example, a man who reports that his father was unemployed for 6 months or more when the son was growing up is 3-4 times as likely to himself be unemployed.

[31] See for example Dan Andrews and Andrew Leigh, 2009, ‘More inequality, less social mobility’, Applied Economics Letters, 16, 1489–1492.

[32] My own study compared social mobility across multiple cohorts, and found that father-son mobility was no different for sons born in 1911-1940 than for sons born in 1949-1979. Because the latter cohort mostly grew up after the recent rise in inequality, it is unlikely that I would have been able to detect the impact of the post-1980 rise in inequality on Australian social mobility. See Andrew Leigh (2007) “Intergenerational Mobility in Australia,” The B.E. Journal of Economic Analysis & Policy: Vol. 7: Iss. 2 (Contributions), Article 6. Available at: http://www.bepress.com/bejeap/vol7/iss2/art6

[33] For a thoughtful analysis of this issue, see John Quiggin, ‘The coming boom in inherited wealth’, Crooked Timber blog, 16 April 2012. Available at http://crookedtimber.org/2012/04/16/the-coming-boom-in-inherited-wealth/

[34] Claudia Goldin and Lawrence Katz, 2009, The Race Between Education and Technology, Harvard University Press, Cambridge MA.

[35] Some of these examples draw upon Craig McGregor, cited in John Hirst, 2010, The Australians, 2^nd edition, Black Inc, Melbourne, pp.165-166.

[36] Gavan Daws, cited in John Hirst, 2010, The Australians, 2^nd edition, Black Inc, Melbourne, pp.144-145.

So far as I can work out, it’s not online, so thanks to Leonie Doyle for scanning it, and I hope the copyright holders won’t object.

And here’s a short version of the speech that was published on the ABC’s Drum website.

Our comments are available on FARE’s website (intro, Leigh, Di Natale, Laming). Mine are also below.

Gauging Grog’s Guidelines, Drink Tank Blog, 20 April 2012

According to a 2010 Roy Morgan report, people who consume more than three drinks a day account for more than half of all alcohol sales. That fact sometimes makes me pause when I’m at a liquor store. Looking across the shelves of Boags, Bundy and Bordeaux, it’s striking to think that half the contents of the store will be drunk by people who exceed the Australian Guidelines for safe alcohol consumption.

Australia has always had a complex relationship with alcohol. In the early colony, rum was so pervasive that in some circles it came to be used as currency. For Indigenous Australians, part of the damage done by white settlers was plentiful grog. As Paul Keating said in his 1992 ‘Redfern Park’ speech, ‘We took the traditional lands and smashed the traditional way of life. We brought the disasters. The alcohol.’

Yet for many Australians, alcohol is not a harmful part of everyday life. Unlike moderate smokers, the available health research does not suggest that moderate drinkers are damaging themselves. On Sunday night, I sat on my couch with an embargoed copy of FARE’s report in one hand, and a beer in the other. I did not feel like a hypocrite.

There are many fascinating facts in this provocative and engaging report. Australians are more likely to consume wine than beer. Sixteen percent of drinkers consume six or more standard drinks on a typical occasion (up from 12 percent in 2010). The same share (and hopefully many of the same people) say that someone they know has expressed concern over their drinking. The rich drink more than the poor (the opposite pattern that we see with smoking).

A worrying part of the survey is the part that tests our knowledge of the alcohol guidelines. Eighty-one percent of drinkers either did not know or underestimated the number of standard drinks in a bottle of wine.  In fact, the typical bottle of wine contains 7.7 standard drinks, but the average drinker estimated that it contained just 5.9 drinks. Translated to blood alcohol limits, this implies that a person who thought she was at 0.04 percent would actually be over the legal limit – which is 0.05 percent for regular drivers.

In terms of the harms done by alcohol, it is positive to see that a large majority of people are aware of the risks that drinking poses to people under 18, to pregnant women, and to women who are breastfeeding. Yet 14 percent of respondents said that they had been the victim of alcohol-related violence. It would be valuable to see more analysis of this group, given that violence is one of the greatest social harms caused by alcohol.

Finally, I would like to see future FARE reports also ask about the benefits of alcohol consumption. As policymakers, our challenge is to do as much as we can to discourage harmful drinking while doing as little as we can to impede adults who enjoy a moderate tipple. I hope that in future years, FARE can do even more to help us get the balance right.

Andrew Leigh is the federal member for Fraser, and his website is www.andrewleigh.com

National Year of Reading, The Chronicle, April 2012

When Dick Adams left high school, he wasn’t able to read or write. It didn’t worry him much. As he told his local paper, ‘I was too busy playing cricket, helping my family on the farm, hunting and fishing’. But eventually, he realised that it would be hard to get far in life without reading and writing, so he found an adult literacy teacher and spent four years learning to read and write.

Today, Dick is a federal MP for the seat of Lyons in Tasmania. At Parliament House, he occupies the office two doors down from mine. He’s someone I can always trust for advice, and I know I’m not the only parliamentarian who feels that way.

Dick is also one of the national ambassadors for the Year of Reading 2012. The year encourages all Australians to enjoy reading as a life skill, to promote a reading culture at home, and to read to our children. Reading at home is great preparation for formal education – it’s also one of the pleasures that come from school. In the late-1980s, sitting in Judith Anderson’s high school English class, I learned to treasure the insights into the human condition that come from the great storytellers – the works of William Shakespeare and Jane Austen, George Orwell and Les Murray, Leo Tolstoy and Tim Winton.

These days, I’m enjoying other classics. My two year-old son Theodore loves Maisy’s Bus by Lucy Cousins and But Not the Hippopotamus by Sandra Boynton. Five year-old Sebastian delights in The Magic Faraway Tree‎ by Enid Blyton and James and the Giant Peach by Roald Dahl. For rhythm and rhyme, it’s tough to beat Dr Seuss’s tongue-twisters and A.A. Milne’s poems, which I love reading to my children partly because my parents read them to me.

When we talk about the aims of education in Australia, politicians like me tend to talk about the importance of making sure people have the skills for work. But a great education system will also produce a nation of book lovers. When we talk about the benefits of school building, computers in schools, more resources for the neediest students, and Trades Training Centres, it can all end up sounding a tad amorphous. But what it adds up to is a better learning environment at schools.

Finally, let’s make sure we’re talking about what we’re reading. Whether it’s at a formal book club, over a coffee with a friend, or at work during the lunch break, discussions about books offer a chance to step out of the everyday and into another world. A good book is like a travelling capsule, allowing us to experience other countries and eras. Books helps make us more imaginative, and more interesting.

So, what are you reading?

Andrew Leigh is the federal member for Fraser, and his website is www.andrewleigh.com. His summer reading included Ian McEwen’s Solar, Alison Booth’s The Indigo Sky, Christopher Hitchens’s Arguably, Michael Lewis’s Moneyball and Cordelia Fine’s Delusions of Gender.

‘Five Science Breakthroughs That Could Change Politics’*

Andrew Leigh MP
Federal Member for Fraser
www.andrewleigh.com

Talented Students Program Breakfast
Sydney University
18 April 2012

Introduction

In 1910, Alexander Graham Bell, inventor of the telephone, was visiting Australia. In Melbourne, he gave evidence to a parliamentary committee on communications.[1] He told them his ‘dream’ was that ‘a man will be able to talk with any other in any part of the United States’. Bell criticised our use of single-wire telephones, and encouraged Australia to install two-wire circuits to avoid ‘cross talk’. And he praised the quality of Australian electrical engineers. But even the great Bell didn’t get everything right. Asked about mobile telephones, he said that wireless telephony was unlikely to compete, due to the difficulty of securing privacy.

Reading Bell’s evidence a century on, I am struck by the sense of optimism and possibility, and my predecessors’ deep interest in one of the scientific breakthroughs that would shape the modern age.

There are three reasons I wanted to speak with you about science breakthroughs. First, I don’t think it’s a topic that politicians spend enough time on. For example, a survey published in 2010 of federal politicians’ reading habits found only one respondent reading a book about science.[2] And as the climate change debate showed, even findings that are broadly accepted by scientists can be described by certain politicians as ‘absolute crap’.

Second, talking about science is good for us because it engenders a sense of awe. As Monty Python once pointed out, our galaxy, one of millions in the universe, is a hundred thousand light years side to side.[3] As the late Christopher Hitchens observed, when our sun finally gives out, the people watching it will be a higher evolutionary form of humans than us.[4] Bryan Gaensler describes ‘Oh-my-God’ particles, which have been recorded moving through the universe at 99.9999999999999999999996% of the speed of light.[5] Like the great arts, science can be beautiful and thrilling.

Third, I’m immensely proud of what science has achieved. The stump-jump plough transformed nineteenth century agriculture. The winged keel allowed us to end the US’s 132-year hold over the America’s Cup. Spray-on skin helped burns victims. My own electorate contains CSIRO, who invented wi-fi and ultrasound; and ANU, the workplace of Brian Schmidt, who shared the 2011 Physics Nobel Prize for his work showing that the universe is expanding at an accelerating rate.

Five Breakthroughs

In choosing five science breakthroughs, I’ve focused on ideas that are just over the horizon for most of us. So green roofs, LED lights, genetically modified crops, 3D printers and geo-engineering are important, but improvements are likely to be steady rather than seismic. Instead, I’ve chosen ‘disruptive ideas’ that could radically affect the way our society operates.

1. Driverless electric cars. The two big developments in automotive technology right now are electric cars and driverless cars. Together, they are likely to transform transport. In the case of electric cars, we’re still waiting to see whether the model that prevails is the one in which we charge our cars at home, or whether we use battery swap stations like those operated by Better Place. Either way, electric cars will reduce emissions, are cheaper to maintain, and help manage the peak load problem of power generation.

The next step is driverless cars. In California and Nevada, Google’s fleet of seven self-drive Toyota Priuses have now driven more than 300,000 kilometres. The cars use multiple video cameras that match what they’re ‘seeing’ with images from Google’s Street View project. They have driven in busy city traffic, through a Taco Bell drive-thru, and across the Golden Gate Bridge. Last month, Steve Mahan, who is legally blind, took the driver’s seat. He joked afterwards ‘this is some of the best driving I’ve ever done’.[6]

Self-drive cars can do a few things that your regular car can’t do. They can reduce traffic congestion and move more efficiently by driving in ‘platoons’. Like Knight Rider’s KITT, they can travel empty. But while David Hasselhoff used this to escape bad guys, we’re more likely to use it to share our car with other people.

For policymakers, self-drive cars create painfully difficult questions. Even if the car is safer on average than a human, who is legally at fault when something goes wrong? Environmentally, electric cars may produce less emissions, but they’re also cheaper per kilometre. Because it’ll cost less to drive to work in your new electric car than it did in your old petrol car, electric cars may make traffic congestion worse.[7] Given that both pollution and congestion are negative externalities, policymakers must ask: what is the appropriate balance of taxes and subsidies?

2. Space elevators. When I was in primary school in the early-1980s, I vividly remember participating in a science extension program one school holidays, and asking the teacher why it wasn’t possible to transmit electricity wirelessly. It took a generation of research, but in 2009, a team of researchers won a NASA competition to power a robot to climb a one kilometre cable.[8] They did it by firing a laser beam at a photovoltaic panel. At present, the energy loss from power beaming is around 40 percent, but it is steadily becoming more efficient.

The most exciting application of laser beaming is the notion of a space elevator; the idea that robots could be powered to climb cables that reach from the ground up to orbiting satellites. The great irony of space exploration at present is that a vast amount of the energy required is in going the first few kilometres. Getting in and out of the earth’s atmosphere is expensive, dangerous and polluting. A space elevator would end the need for rockets; thereby changing the economics of both satellites and space travel.

For policymakers, lowering the cost of getting into space would enable more scientific research, as well as more extensive use of satellites for purposes such as entertainment and communications. Yet there is also a danger that space junk will proliferate. More than 6000 satellites have been launched since Sputnik in 1957, and thousands of pieces of space debris currently orbit the earth.[9] For aviation, space elevators also generate unique regulatory challenges. Currently, we assume that the space a few kilometres above the earth is essentially free for aircraft. How would we divide it between planes and elevators?

3. Nanotechnology. Our ability to change matter at a molecular level has given birth to a rich subfield of research. At the interface between biology and electronics, nanotechnology offers the potential of better bionic technology, from limbs to aural implants.[10] Programmable matter would radically change manufacturing, since the same block of matter could shift into endlessly different shapes.[11] Among the possible applications are shape-shifting furniture (perfect for small apartments!), or videoconferencing in which a realistic copy of the other speaker is in the room with you.

In solar cells, nanotechnology will soon enable wearable solar cells, likely to change clothing in practical ways (for soldiers and hikers) and aesthetic ones (for fashion designers). Similarly, nanogenerators in your shoes would provide a source of power that could charge a mobile phone or power a Pacemaker.[12] In countries where people do not have access to clean water, nanotechnology could provide a better way to purify water.[13]

For policymakers, nanotechnology poses multiple challenges. We need more research on the health risks, since the small size of nanoparticles means they can potentially penetrate cell walls. Yet we should also be aware of the benefits that nanoparticles bring. In 2009, the Therapeutic Goods Administration conducted a scientific review of nanoparticles in sunscreens, and concluded that the weight of the evidence is that nanoparticles do not cause health risks.[14] With nearly 2000 Australians dying annually from skin cancer, there’s a big social payoff from improving sunscreens.

4. Ubiquitous Data. Commentators often talk about things increasing ‘exponentially’, when they mean ‘fast’. But in the case of computing power and storage capacity, you really can plot advances as a straight line on a logarithmic scale. That means that many new scientific breakthroughs are likely to be made by coming up with better ways to collect, organise and analyse data.

One application will be in ‘lifelogging’ – recording and analysing our lives. In an extraordinary blog post last month, Stephen Wolfram analysed two decades worth of his own data, including keystrokes, emails, files, meetings, phonecalls and footsteps (he wears a pedometer).[15] Through hundreds of millions of pieces of data, you can see clear patterns in his daily habits, as well as sudden bursts of creativity. For others, lifelogging may involve wearing a video camera at all times. While it sounds creepy, neurologists have shown that it helps sufferers of memory loss to regain control of their lives.[16]

Data analytics can help identify trends, such the use of internet search data to give real-time information on the spread of influenza or the rate of unemployment.[17] It can also help catch criminals, by identifying irregular transactions or behaviours. And yet it creates vast concerns for privacy, data storage, and intellectual property. As a former academic researcher, I often found myself frustrated at the difficulty of gaining access to government data. Increasingly, I think the government is losing its monopoly over data, and that private agencies are holding data that is at least as interesting to researchers.

5. Machine Intelligence. Despite massive advances in computing, we’re still yet to build a machine that can replicate the human brain. But at some point, it seems conceivable that we will succeed, either through artificial intelligence, or through building a machine that can emulate the brain.[18] Economist Robin Hanson argues that when we do, it will be an economic breakthrough akin to the start of farming, or the industrial revolution.[19]

Hanson observes that once we can replicate the brain, things start to change very quickly. To begin, we can start dialling up the clock speed. Then, we can start making copies. Next, we can start making them smaller. You might be squeamish about uploading your memories to a machine, but so long as some people are willing, it won’t be long before there are millions of these new entities in existence.

In the past, the kinds of jobs that have been displaced by computerisation are routine data entry positions. In the early-1990s, when I began working in university holidays at the Parramatta law firm of Coleman and Greig, the firm employed a pool of typists. Technology has now replaced almost every typist in Australia. But a machine that can emulate the human brain would challenge all occupations, from hairdressers to architects.

In the case of this science breakthrough, it’s hard to even begin to think how policymakers would respond. Do we limit how many times you can replicate yourself? If we have a machine that contains your memories and can think like you, shall we treat it like a slave or pay it a wage? Do you have the right to turn off copies of yourself? Will this breakthrough cause wages to fall? If so, how do we make sure that everyone has some capital to get by? After thinking about Hanson’s work for a few weeks, I’ve decided that this is one breakthrough for which I don’t want to be around.

Conclusion

As physicist Nils Bohr once said, ‘Prediction is very difficult, especially if it’s about the future’. In this talk, I’ve aimed to pique your interest in five areas of scientific research that could have major impacts on policy. I’ve deliberately chosen ‘disruptive technologies’ that could significantly change society, and would challenge politics.

But mine are only one set of possibilities, and it’s quite possible I’m thinking about it the wrong way. For example, US researchers Braden Allenby and Daniel Sarewitz argue that the main changes will come not from individual technologies, but from the convergence of ‘five horsemen’: nanotechnology, biotechnology, information and communications technology, robotics and cognitive science.[20] I’m sure you’ll also have your own ideas about the most interesting work occurring at the frontiers of science, and I’m keen to hear about them.

As well as the general issues that these science ideas present, there are ongoing challenges in making sure government policies support good scientific research. Our intellectual property system, grounded in the idea that providing a temporary monopoly to an inventor will spur innovation, needs to keep evolving as technologies change. Our research funding system should think not only about funding researchers who attempt to reach a goal, but also providing prizes for success (akin to the Netflix prize). For publicly funded research, we should aim to ensure datasets are made publicly available, and articles aren’t locked forever behind expensive paywalls.

We must remember that for developing countries, what often matters isn’t breakthroughs in achievement, but in cost, so OLPC’s $100 laptop and Tata’s $2500 car are vital innovations too.[21] Finally, we need to improve the quality and quantity of interaction between scientists and politicians, to make sure that when the next breakthrough comes, our system of governance is ready to deal with it.

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* Science ideas in this talk are drawn from research by Matthew James of the Parliamentary Library, plus suggestions from a variety of boffins, including Paul Harris and Andrew Wade. I am grateful to Bryan Gaensler for inviting me to give this talk, and to Nick Terrell for valuable comments on an earlier draft.

[1] I am indebted to David Forman for drawing my attention to the Alcatel-Lucent publication ‘Dr Bell’s Testimony to the Royal Commission on the Postmaster General’s Department’.

[2] Macgregor Duncan and Andrew Leigh, 2010, ‘Power Readers’ Australian Literary Review, 5(2): 14-16 (3 March 2010). We received responses from 89 of the 226 members and senators (39 percent). The only parliamentarian who told us that he or she was reading a science book was Tony Burke.

[3] Monty Python, 1983, ‘The Galaxy Song’ from The Meaning of Life.

[4] Christopher Hitchens, 2009, Opening Address to the Festival of Dangerous Ideas, Sydney Opera House, 3 October 2009

[5] Bryan Gaensler, 2011, Extreme Cosmos, New South Books, Sydney.

[6] Angela Moscaritolo, 2012, ‘Google’s Self-Driving Car Takes Blind Man for a Ride’, PC Mag, 29 March 2012

[7] This also affects estimates of how more fuel-efficient cars will reduce emissions. For a thoughtful discussion of what economists call the ‘Jevons paradox’, see David Owen, 2010, ‘The Efficiency Dilemma’ New Yorker, December 20, 2010.

[8] ‘Beam it up’, 2011, The Economist, 10 March 2011

[9] See http://en.wikipedia.org/wiki/Satellite

[10] Simon Moulton, Geoffrey Spinks and Gordon Wallace, 2009, ‘Nanobionics’, NanoQ, ARC Nanotechnology Network, Canberra, March 2009, pp.2-4

[11] ‘50 ideas to change science’, 2010, New Scientist, 16 October 2010

[12] ‘50 ideas to change science’, 2010, New Scientist, 9 October 2010

[13] Peter Majewski, 2009, ‘Surface Engineered Silica for Water Treatment’, NanoQ, ARC Nanotechnology Network, Canberra, March 2009, pp.5-6

[14] Therapeutic Goods Administration, 2009, ‘A review of the scientific literature on the safety of nanoparticulate titanium dioxide or zinc oxide in sunscreens’, TGA, Canberra.

[15] Stephen Wolfram, 2012, ‘The Personal Analytics of My Life’, 8 March 2012. http://blog.stephenwolfram.com/2012/03/the-personal-analytics-of-my-life/

[16] Gordon Bell, 2010, ‘Lifelogging’, New Scientist, 19 October 2010

[17] See for example Andrew Leigh, 2011, ‘Google’s on top of today’, Australian Financial Review, 20 September 2011. In that article, I noted ‘A cute feature of using search data to look at joblessness is that it also points to distinct patterns of search terms among the unemployed – many of whom are young men. [Google Chief Economist] Hal Varian finds that the first set of terms to spike are labour market related (eg. ‘jobs classifieds’, ‘unemployment benefits’). The second phase sees an increase in searches for new technologies (eg. ‘ipod apps’, ‘free ringtone’). The third stage of unemployment searches are for low-cost entertainment (eg. ‘guitar scales beginner’, ‘home workout routines’). The fourth stage of unemployment searches are for adult content (eg. ‘adult video’, ‘porn tube’).’

[18] Anders Sandberg and Nick Bostrom, 2008, ‘Whole Brain Emulation: A Roadmap’, Technical Report #2008‐3, Future of Humanity Institute, Oxford University.

[19] See for example Robin Hanson, 1994, ‘If uploads come first: The crack of a future dawn’. Extropy, 6; Robin Hanson, 2008, ‘Economics of the singularity’. IEEE Spectrum, 37‐42; Robin Hanson, 2012, ‘Em Econ 101’, Presentation at Halcyon, Redwood City, CA, 6 April 2012.

[20] Braden Allenby and Daniel Sarawitz, 2011, ‘We’ve made a world we cannot control’, New Scientist, 14 May 2011.

[21] OLPC is the acronym for One Laptop per Child (see www.laptop.org for more details). The Tata Neo was aimed at a price point of one lakh, or 100,000 rupees.

Spoilt by choice: how data ruins decisions, Sydney Morning Herald, 13 April 2012

In a share-trading experiment, two groups of university students were pitted against one another. One team saw only share prices, while the other team could also consult experts and media reports. The result? The better-informed team ended up reacting to rumours and gossip, made too many trades, and earned half as much as their less-informed classmates.

In his book How We Decide, Jonah Lehrer discusses a host of situations in which too much information leads us to make worse decisions. Guidance counsellors who can only see test scores do a better job of predicting whether students will perform well at university than when they can also draw upon essays and a personal interview. In the case of back pain, doctors who obtain an MRI scan are more likely to misdiagnose the patient as having disc abnormalities, and more likely to erroneously prescribe intensive medical interventions. Doctors are now advised not to get scans done on patients with non-specific lower back pain.

In the standard economic model, more information is never a bad thing. Yet studies like these are forcing economists to now incorporate ‘cognitive costs’ in our models. Similarly, another set of experiments suggest that having more choices can make us worse off.

Psychologist Sheena Iyengar made her reputation with an experiment which found that a tasting booth showing 24 jam flavours drew more customer attention, but one with 6 varieties sold more jam.

In her book The Art of Choosing, Iyengar gives examples of shampoo and cat litter companies who increased sales by reducing their product range. With fewer choices, employees are more likely to sign up for matched savings plans. Iyengar even finds that 3 year-olds who are allowed to choose from among a hundred different toys are less happy than children who are told to play with a single toy.

One of the surprising findings in the literature on choice is that we tend to get more enjoyment out of expensive products. After buying an expensive caffeine drink, students did better on a test than if they had purchased the same drink at a lower price. When subjects were asked to drink samples of cabernet sauvignon in a brain scanner (which must rank as one of the most agreeable neuroscience experiments of all time), researchers found more activity in the prefrontal cortex when the bottle was labelled $45 than when it was labelled $5.

We also have a strong tendency to discount the future. In an auction of sports tickets, the sale price was twice as high when bidders could use a credit card than when they had to pay cash. Conversely, when employees are given the option of putting their next pay raise into savings (a program called ‘Save More Tomorrow’), many jump at the chance to bind their future selves.

So how can we use this research to make better choices? Lehrer maintains that for simple choices (e.g. which vegetable peeler to buy), we should be guided by our rational brain. Go for functionality and price, and damn the colour scheme. Conversely, he makes the case that for complex items (e.g. which car to buy), there are too many dimensions to the problem for our rational brain to cope with. In such instances, we shouldn’t be afraid to let our emotions choose.

As a person who has been completely blind since childhood, Iyengar has to rely on others for many of her aesthetic choices. She argues that we should do the same, recognising the limits to our uniqueness. Asked ‘How similar are you to others’, most of us say ‘not very’. Yet when the question is posed as ‘How similar are others to you?’, most of us say ‘very’.

Iyengar contends that we will make better decisions if we draw on the experiences of others. We might ask: do people who make this choice look to be happier and more satisfied? Whether it’s studying restaurant customer ratings, reading book reviews on Amazon.com, or asking the advice of workmates, the collective savvy of other consumers can help us make better choices.

So there you have it. Beware of excess information. Narrow down the number of choices. Don’t look at the price tag before judging quality. Pay cash if you’re worried about overspending. Use your rational brain for small choices and your emotional side for big decisions. And remember to get by with a little help from your friends.

Andrew Leigh is the federal member for Fraser.