Child Care Survey - Results
The headline results? Most people are happy with their child’s care, many still collect the Child Care Rebate either quarterly or annually despite fortnightly now being an option and it’s about a 50/50 split as to whether parents are prepared to pay higher fees for reduced staff turnover and higher salaries.
Child Care Rebate
To me, the most surprising result was the number of people collecting the Child Care Rebate either quarterly or annually. On the face of it, it seems to make sense that receiving the benefit either fortnightly or paid directly to the centre might make it easier to balance household budgets.
While different financial arrangements obviously work for different families, it may just be that some families aren’t aware that you can receive the Child Care Rebate fortnightly or have it paid directly to the child care centre.
Even more concerning is that Kate Ellis, the Minister for Early Childhood and Child Care, said earlier this year that an estimated 1400 families in the ACT are eligible for the Child Care Rebate but not receiving it. I’d encourage all families to check whether they’re eligible for this support.
Happiness with care
The results showed a generally positive experience, with 79% of respondents saying they were ‘happy’ or ‘very happy’ with their child’s care. The experience across the electorate was relatively homogenous, at 81% for the Inner North, 79% for Belconnen and West Belconnen, and 74% in Gungahlin.
I’ve met many hard-working Early Childhood Educators, particularly through the Big Steps in Early Childhood Education and Care campaign run by United Voice and it’s great to see that parents recognise their hard work and dedication.
If you use formal care, would you be willing to pay higher fees in order to increase the salaries of staff and reduce staff turnover in centres?
While the overall split on this question was 55% in favour and 45% against, this was the one part of my survey that showed the strongest geographic difference within the electorate of Fraser. Belconnen/West Belconnen and Gungahlin showed remarkably different results on this question.
I’m aware of the strain that child care can place on a family’s budget, but one of the iron rules in politics is that there is never enough money for all the good things government wants to do. So I wanted to canvass parents’ views about the right trade-off between price and salaries.
In the free text area, many parents noted they already pay higher fees for their care and several also asked for the Government to contribute to better wages.
Working arrangements
I also asked respondents to tell me their working arrangements, and (if applicable) their partner’s working arrangements[1]. As most of the responses to my survey came through local child care centres distributing this to parents, it’s unsurprising to see responses generally skewed towards people working full-time and part-time using formal care.
There were again some slight differences within the electorate. 42% of families in Gungahlin had two parents working full-time, while in the Inner North this was 26% and only 20% in Belconnen/West Belconnen.
Conclusion
Early childhood education and care is a big policy challenge for government. The Prime Minister and Minister Kate Ellis have been working with the sector and I’ll pass on my findings to them to let them know about local experiences with child care. I’m very grateful for the feedback in this survey. You may also be interested to read Stephanie Peatling's writeup in the Sun-Herald.
I’d love to see more eligible families collecting the Child Care Rebate. Each year I host a ‘Welcoming the Babies’ event and I’ll make sure I provide more information on who is eligible for the Child Care Rebate and how parents can receive it.
If you didn’t take the survey, you’re still welcome to tell me your views. Send an email to Andrew.Leigh.MP{at}aph.gov.au to let me know what you think.
[1] Fewer than five respondents did not state working arrangements for a partner
Talking Economics with Jan Libich
Last Wednesday, I spoke with La Trobe University economist Jan Libich about some of my academic findings - from teacher pay & aptitude to child gender & divorce - and possible policy implications. If you want to read more, the research is available at my academic website: www.andrewleigh.org.
And if you'd like to watch Jan's other interviews (including with Eric Leeper and Don Brash), they're available on his YouTube channel.
Transcript
Dr Jan Libich: Welcome to La Trobe University in Melbourne. My name is Jan Libich and I’m privileged to have Dr Andrew Leigh here. Welcome Andrew. Thanks for joining us.
Dr Andrew Leigh: It’s a pleasure.
Dr Jan Libich: People see you now as a politician, due to your seat in the Australian House of Representatives for the Labor Party. But it should be mentioned that you were actually previously an Economics Professor at the Australian National University. I think one of the most prolific economics researchers. So, what we’re doing today: we’re going to try and merge your expertise in both economics and politics, and we’re going to focus on economic policy.
Specifically, we’re interested in how academic research can actually contribute to policy design and improve policy outcomes. Let’s start with education. In one of your papers, I think in 2006 with Chris Ryan, you’re looking at the quality of school teachers in Australia. You find a downward trend, you find a decline in the quality of the teachers. Then you look at possible explanations and you come up with teachers’ pay as one of the variables. Can you tell us what happened to teachers’ pay over time, and how it may link to teachers’ quality?
Dr Andrew Leigh: Absolutely. So the story of the academic aptitude of new teachers is that in 1983 the typical teacher was at the 70th percentile of the aptitude distribution – in the top 30 per cent of her class. By 2003, she was at the 62nd percentile – the top 38 per cent of her class. Chris (Ryan) and I talk about a number of possible explanations. One is this trade-off that policymakers made from the late 1980s to the early 2000s between cutting class sizes, but not increasing the overall salary budget commensurately. So roughly you saw a 10 per cent cut in teacher pay, relative to other occupations, and a 10 per cent cut in class size. So it’s almost like the new teachers were being paid out of the wallets of the existing teachers.
Then, you had some other factors going on. You had the fact that gender pay discrimination in the professions was rampant in the 1950s and 1960s. So it was almost like we were corralling Australia’s most talented women into teaching and nursing and as those gender pay gaps fell, we then saw a drop off in the share of suitably talented women entering teaching.
Thirdly, I think there’s also an increase in earnings inequality in the rest of the labour market, which posed a particular challenge for teaching. Teachers traditionally operated off uniform salary schedules.
Dr Jan Libich: Let’s think of the consequences. You have a 2009 paper where you’re actually looking at student outcomes. You look at the numeracy and literacy scores for Australian school children and you find a worrying trend. You find that there has been a decline in the scores. Given the increases in the expenditure per student, at face value it would imply a fall in the school productivity. Can you tell us a little bit about that and how it actually links to your previous study about lowering of teachers’ pay?
Dr Andrew Leigh: Yes. School productivity is one of these ugly phrases that economists love and educational policy makers hate. But essentially, what you described is the trend we found. We went back through the dusty archives to try and find instances in which precisely the same maths or English question had been asked of successive cohorts. So, same wording, certain share of kids get it right in one test, another share of kids get it right in another test. We find flat or perhaps even declining test scores across a couple of different tests. One possibility is that the trade-off between dropping teacher pay relative to other professionals, and cutting class sizes, was actually the wrong trade-off to be making in that period.
Then there’s other possibilities, such as potentially changes in curriculum affecting outcomes.
There’s also a set of social changes, but to the extent that Chris (Ryan) and I can hold them constant, it doesn’t look as though things like more TV watching or a rise in single-parent households, or rise in kids from non-English speaking backgrounds explains much of it.
You’ve actually got trends that go in the opposite direction. Not just the spending, but also the fact that more kids than ever before have a parent with a tertiary education. So, it’s a bit of a black box. We can tell that Australia’s school kids in Year 8 or 9 aren’t scoring better than they did a generation ago, and I think that poses a pretty big challenge for policymakers like me.
Dr Jan Libich: If you combine the two findings, it kind of seems like a no-brainer. You have lower teachers’ pay, you’ve got lower quality teachers and then you have worse student outcomes. You’re suggesting that might be too simplistic. It may not explain the whole story.
Dr Andrew Leigh: I certainly think that teacher quality is important. One of the things that always surprises me is that parents worry a huge amount about which school their child attends. Yet, they worry very little about which teacher their child is taught by within a school. Yet, we know that the within-school variance is higher than the between-school variance. So I think that does suggest that we ought to be focusing on teacher quality. I think programs such as ‘Teach For Australia’ and ‘Teach Next’ are important in attracting alternative career entry. I think it’s also really important to think about retention of great teachers in the profession. That’s a key issue for policymakers. It’s not the only one. Test score accountability and the right level of principal autonomy matters as well, but teacher quality is pretty much my number one educational issue.
Dr Jan Libich: Okay, so what would be some of the policies to try to reverse this. You mentioned class size. Does that matter so much, as much as it was believed?
Dr Andrew Leigh: Certainly, we know that cutting class sizes down from 40 to 30 has a big impact on student outcomes. Cutting class sizes once they fall below 30 probably has smaller impacts. The research is varied. You have ‘Tennessee Project STAR’ suggesting still positive effects going from 22 down to 18. But I think now you’re probably down to a point where you want to think about teacher quality and teacher pay as being the top priority.
Dr Jan Libich: One of the critiques of the approach, and it’s not just the Labor Party’s approach, it’s the approach across the globe, is that it’s more of a top-down approach. The politicians kind of have an idea what the education system should look like. They try to impose it and a lot of critique is around school autonomy and there is some evidence that it is important for schools to have the autonomy to set various things like exams and other things. What do you think about this trade-off?
Dr Andrew Leigh: I think determining the right level of school autonomy is the most important thing. That partly turns on what principals feel they’re able to do. If you’ve got a principal who is comfortable managing the lawn mowing contracts and wants the flexibility to save money on lawn mowing so they can spend it on textbooks, then that’s fine. But if you’ve got a principal who mainly wants to be an educational leader and actually doesn’t want to spend a lot of their time working out how the budget’s going to look, then you don’t want to thrust upon that principal more autonomy than they’re ready to handle. So I think this is one of these areas where the people who become principals are important to thinking about the autonomy we should give them.
Dr Jan Libich: Let’s move to tertiary education because there are similar themes that apply. You have a study from 2007 where you look at the various returns to education. Specifically regarding tertiary education, you find that there’s a high personal benefit. Something in the order of 15 per cent increase in salary for every year of tertiary education. Now in regards to that, there’s a recent Grattan Institute report that is making the very same findings. And they argue based on that, that we can actually start reducing the education subsidies because students are basically getting all the private benefits, so we don’t need subsidies. What’s your view on this?
Dr Andrew Leigh: So clearly the private benefits are very large, as you said, 15 per cent a year. So a three year Bachelor’s degree is earning a student something in the order of (up to) 50 per cent increase in earnings. Most of that is through productivity.
Then the question is: how much are the private returns also matched by social returns? And sadly the social returns are easier to list than they are to measure. So you can list returns such as better productivity, so if you have more education and we’re sitting next to each other in adjoining cubicles, I might learn a lot from you and become more productive. A higher education might also mean that you have less of an impact on the health care system. It’s probably unlikely to have much of an impact on crime. Increased secondary schooling I think could well have social payoffs in crime. I’m less sure about universities.
And there might be political participation payoffs of which I think we’re fairly uncertain. So all of that adds up to, I think, big confidence intervals around what the social payoff to education is.
The Grattan Institute report seems to take a strongly rational view on debt. It seems to say we can ramp up student contributions without affecting equity outcomes. But what I worry about is there might be some degree of debt-aversion which even if it isn’t backed up by a rational model, could still lead kids from disadvantaged backgrounds to balk at a high sticker price. And to refuse to take on a university education. It would be good for them and would have big social payoffs.
Dr Jan Libich: Well I think the report does a pretty good job to try to present evidence that people from lower socio economic backgrounds would not be disadvantaged and it wouldn’t impact too much on them actually entering university. Also, there’s international evidence to that effect. So you still worry that that could occur?
Dr Andrew Leigh: But they’re testing out of sample, Jan. So the two best experiments we have are the ones that Bruce Chapman and Chris Ryan look at. The introduction of HECS and then the introduction of differential HECS in the late 1990s, which sees higher HECS bills again. But those increases are of a much smaller magnitude than is proposed in the Grattan Institute report. So students now may be asked at the end of their university education to pay back a debt equivalent to a small car. I don’t think that then tells us that we could increase their debt to be enough to pay off a small plane, and they wouldn’t balk at it.
Dr Jan Libich: Okay. Let’s move to other microeconomic policies. You were quite instrumental in your research in highlighting the fact that some government policies badly implemented can have severe distortionary effect on people’s behaviour. The study that pops into my mind is your 2006 study with Joshua Gans where you look at the introduction of the baby bonus and the timing of births. Can you tell us what it was about?
Dr Andrew Leigh: Sure. The baby bonus study centres around a policy change put in place by the Howard Government. They said any baby born on or after the 1st of July will receive $3,000. They were asked: what about a baby born on the evening of the 30th of June? And the Minister was very clear that such a family would not receive the baby bonus. There were rumours around this time that this had caused shifting of births and overcrowding in maternity wards. Joshua (Gans) was very close to the issue because his wife had one of their children in the July just after the baby bonus came into effect.
Dr Jan Libich: Was his child one of those that was moved?
Dr Andrew Leigh: Well, they had some difficulty getting an obstetrician at the time and that’s indeed what we find from the data. This is one of those studies where you actually don’t need much fancy econometrics. There is one day in Australia in which more babies were born than any other day in Australian history. And that’s the first day the baby bonus was introduced. You just see the graph spike up and then what’s troubling is that you see the birth rate higher even in the second week of July than it should have been. Suggesting, that of the thousand births that were shifted from June into July, a non-trivial share - may be a few hundred - were shifted by a couple of weeks. Generally, when we’re thinking about the health of babies, we’re worried about premature births but there’s also some evidence that babies that are in the womb well past term might suffer health consequences as well. So, while we didn’t find anything that was conclusive, we were concerned that the sharp introduction of the baby bonus had actually had adverse health consequences.
Dr Jan Libich: You basically warned against this, but then there was another step increase in the level of the baby bonus, I think twice, and the same thing happened. Although the spike was a little bit less.
Dr Andrew Leigh: That’s right, yes. So the Howard government then went and increased the baby bonus. Having introduced it in July 2004, increased it in July 2006, and just in case you’d thought the first result was a fluke, we saw the same effect in July 2006 again. We had released our study just prior to that in order to try and persuade the government to just step in the change. They didn’t and you again saw births shifting.
Dr Jan Libich: So, you’re basically now moving onto the question of how we can improve the design of policies to avoid these kind of distortionary outcomes.
Dr Andrew Leigh: Yeah, I think we want to think about introduction effects - it’s what Joshua (Gans) and I call it. So normally when we think about policy distortions, we think about the steady state effect of a policy. I think we ought to also make sure that when a policy is put into place, it doesn’t generate perverse incentives. Those introduction effects are not as critical as the enduring effects, but they matter and there’s simple ways to get around it. So for example, the Health Minister wrote to obstetricians prior to Labor’s increase of the baby bonus to make them aware of the fact that there had been births shifting previously and to encourage them to make sure that birth timing was only done with the health of the baby and the mother in mind. I hope that had some effect in reducing the degree of births shifting.
Dr Jan Libich: It’s peculiar because the government could easily change the policy. But instead they’re going to write an email to all those obstetricians asking them to do something, rather than actually changing the policy.
So far we’ve assumed that the baby bonus was actually a good policy, but is it really the case? Do you think that it’s something that’s desirable?
Dr Andrew Leigh: Well the best argument you can make for the baby bonus is that if families are credit constrained at the time of the birth, then this provides extra liquidity for families at the time the baby is born. And that any drop in expenditure at the time of the birth could have substantial adverse consequences. So, think about a family that has difficulty keeping the heat on, providing enough food, making sure that the parents are in good harmony. If you can stop there being shouting in the household in the first few months of a baby’s life, you might well improve the child’s life overall.
Dr Jan Libich: But this effect’s kind of reduced now that there’s not a once-off bonus, but it’s actually phased out over time – it’s paid fortnightly I think. So that’s probably not going to be very helpful to a credit constrained family.
Dr Andrew Leigh: Well, why so? It just means that family then has payments that they receive through the ensuing six months or so. Either through a baby bonus or paid parental leave. I would’ve thought potentially that’s even better for liquidity constraints, if you’re worried that a lump of cash might not be spent entirely on baby-related things.
Dr Jan Libich: Okay.
Now, in terms of the baby bonus, the original assumption, at least on my part, was that it’s trying to do something with the undesirable demographic trends. The fact the populations are aging in Australia as well as in other advanced countries. So that’s not the intention you think, trying to provide extra incentives for people to have kids?
Dr Andrew Leigh: I think it was always principally income support, trying to top up payments at around the time of the birth. To the extent that it was a birth incentive, I think that was given life by then-Treasurer Peter Costello’s statement to radio on budget night: that mums and dads should have one for him, one for her and one for the country. That, I think, is probably a pretty weak argument for the baby bonus. Joshua (Gans) and I didn’t look at it, but there’s a Melbourne Institute study by Mark Wooden and co-authors that estimates that for every extra baby born thanks to the baby bonus the cost to the budget is over $100,000.
Dr Jan Libich: So, talking about the demographic trends, are there any other policies you can think of that can be implemented or reformed to try to cater for the fact that when baby boomers retire it’s going to have a pretty big negative impact on the budget. Can you think of any policies that should be implemented?
Dr Andrew Leigh: So the aged-care reforms that are going on at the moment are aimed at a lot of that. One of the things that we just announced yesterday, which I think is quite clever, is thinking about training of aged care workers. At the moment we train aged care workers and doctors very differently. Doctors are trained in teaching hospitals, which have regimented curriculum programs and experienced doctors to mentor them. Aged care workers tend to just find themselves in whatever aged care home they work in. So we’re actually setting up teaching aged care centres to try to improve the quality of care. And try and also think about the way in which aged care is financed. I think it’s also important.
Dr Jan Libich: Yeah, because this is only going to impose more expenditure on the budget. It’s not actually going to help solve the situation.
Dr Andrew Leigh: Well it imposes more expenditure on Australians as a whole. And I think one of the ways in which you’ve seen the debate shift in the last 15 years is away from the notion that government ought to pay for everything, to the notion that if an elderly couple finds themselves in a situation where they have substantial assets and they want a better quality of aged care, it might be appropriate to ask them to pay for it. Because, really who’s ending up paying for it is the children who are receiving slightly smaller inheritances while their parent receives a better quality of aged care.
I think that conversation’s gotten better in Australia than it was in the 1990s. And structuring sort of appropriate bonds, protections around reverse mortgages – to make sure reverse mortgages can work. These are natural policies to economists to make sure the tax system doesn’t generate perverse incentives not to make a contribution, for those that can afford it, to getting better quality aged care.
Dr Jan Libich: I think the extent of the demographic problem is much bigger than even most people realise. I mean if you look at the projections over the next 25 years, the proportion of people over 65 in Australia is going to increase by about 50 per cent. From about 0.2, to maybe 0.35. So, it’s a major impact, and it’s not only on the pension scheme – Australia’s done a pension reform, which has been copied by many other countries – but it’s mainly health care. I mean, most of the health expenditure occurs in the last year or two of life. So if we had 50 per cent more aged people, that’s going to have a severe impact on the health care budget.
Dr Andrew Leigh: But I think one of the good things that economists have brought to this debate, Jan, is the notion that we ought to not just think of a 64 year old as a 64 year old. In some sense, you know, as Paul McCartney actually said when he turned 64, it’s quite different from what he thought it would be. And you see this. David Cutler has some nice work where he looks at the functional physical mobility of someone who is 64 now and someone who was 64 a generation ago. And you’re finding increases in the order of about 10 years. So today’s 64 year old is as mobile as a 54 year old a generation ago. And so that means people enjoy longer life spans. And another thing I think the demographers miss is that demographers often ignore price effects. As prices change, you also see demands change as well. So I worry that a little bit too much of this modelling is driven by simple age structure and not enough by the way in which we would think about it as economists with the prices included.
Dr Jan Libich: Okay, let’s move onto a different microeconomic policy which regards the minimum wage legislation. You have a 2007 study where you’re trying to assess to whom the minimum wage actually goes. Who’s the recipient? And surprisingly to some people, you find that it’s actually not the low income families but it’s the medium income families. And when you run the simulations the scenario that I found most realistic is actually going to lead to an increase in income inequality rather than a decrease. So, we think of minimum wages as a way to reduce poverty and reduce inequality, but it seems your research would imply that that’s actually a bad idea. So as a politician now, where do you see the minimum wage legislation?
Dr Andrew Leigh: So I find the minimum wage debate enormously frustrating. There’s one side of the debate that doesn’t acknowledge that there’s benefits in terms of earnings - to raising the minimum wage. And there’s another side of the debate.
Dr Jan Libich: Income effects?
Dr Andrew Leigh: Yeah. You raise the minimum wage, a bunch of people get wage rises and while they’re not all poor, they are disproportionately poor. And then there’s another group of people that don’t accept that there could be any dis-employment effects. I think both of those extreme cases don’t make much sense. I think there’s dis-employment effects and I think they’re probably fairly small. I think there’s also positive wage effects, although it actually turns out we have no studies in Australia looking at what the wage effect is, and understanding better how much a minimum wage increase flows through into wage packets is really important. You can write theoretical models in which the answer is ‘none’, or in which the answer is ‘all’, therefore theory tells us nothing and we’d like to have some more empirics. So, I think it is part of an anti-poverty toolkit but I think it will never be the only effective part of alleviating poverty. Things like earned-income tax credits, focusing on the impact of payroll taxes and income taxes, and of course education, are all going to be at least as important in fighting poverty as the minimum wage.
Dr Jan Libich: You have a very interesting study, I think with … just remind me … about predicting …
Dr Andrew Leigh: Ah, with Justin Wolfers.
Dr Jan Libich: Justin Wolfers, yeah, about forecasting election outcomes. And one of the things you do, you compare economic models. You compare the polls and you compare prediction markets. The interesting finding to some people is that you actually find that the prediction markets do very often give you a better answer than the polls. So now as a politician, is your party paying more attention to prediction markets?
Dr Andrew Leigh: Yeah, so you always learn good things from co-authors. With the baby bonus study I was sure when we began it that we wouldn’t find any effects and with the election forecasting paper, I said: Justin why do you want to include this prediction market stuff, isn’t it more interesting just to look at the economic models and the polls? And then he persuaded me that prediction markets were truly fascinating to look at. I certainly look at them, but there’s a large degree of path dependence in politics. That’s true in the commentariat. That’s also true within political parties themselves and so I think the temptation to continuing surveying and the kind of mid-20th century wave is going to be with us for quite a time to come. Despite the fact that it is so extraordinarily volatile. You and I know if you’re measuring something that has a margin of error of a couple of percentage points either way and you want to look at the change in that thing, then if two things measured with a two percentage point margin of error differ by two percentage points then chances are, you’re just looking at noise. But that’s not the impression you’d get if you looked at the front of a major broadsheet on the day they brought out their in-house poll.
Dr Jan Libich: Let me ask you about the influence of academic research, your personal research, on your personal life. So far we’ve looked at policy.
Dr Andrew Leigh: Yes.
Dr Jan Libich: You have an interesting study where you look at how divorce rates, and generally happiness, how it’s affected by the composition of children. You find that if people have a boy and a girl, they are less likely to get divorced. So given that your first child was a boy, I think I can disclose that, were you wishing for a girl as the second child?
Dr Andrew Leigh: So this is what economists would call having convex preferences over child gender. You can tell models in which people ought to enjoy having two children of the same kind for example because they can pass down the blue clothes or the pink clothes to the next child. But in general, you see convex preferences. So, you know, this is partly exhibited in the fact that parents with two kids of the same gender are more likely to go for a third than parents of two kids of different genders. My research also showed they were more likely to split up, not by a great a deal, but 1.7 percentage points which accounts for maybe a thirtieth of the total variation in marriage rates among those families.
But I don’t know whether this is because we’ve talked ourselves into it or whether it was always our preferences. So we’re delighted by the fact that we’re expecting a third boy. I feel like I know how to raise boys. I feel as though I know what sort of holidays we’ll have. They’re going to be active holidays in which we try and all exhaust one another. And I feel as though I know what kinds of empirical lessons I’ll be sitting down to teach my sons. And making sure by the time they turn 10, they understand the fallacy of the sunk cost and they can think at the margin.
Dr Jan Libich: Well, congratulations very much. And I have to say that your wife is due in about a week or so, and it’s exactly the reason why we have to pack up now because you’re catching a plane in about an hour.
We would like to thank you very much for joining us and for your ongoing efforts to contribute to public policy, not only in Australia, but worldwide. So, good luck for the birth – to you and your wife – and we’re looking forward to more of your ideas. And if things don’t work out for you in politics, we’d be very happy to have you back in economics.
Dr Andrew Leigh: Thank you very much. I think there’s maybe an absorbing state but I very much enjoy dabbling in economics and I think the popularisation of economics is enormously valuable and important to the future of our discipline.
Dr Jan Libich: Thank you.
Dr Andrew Leigh: Thanks, Jan.
Government as Risk Manager
Response to Laura Tingle’s Quarterly Essay ‘Great Expectations’
Published in Quarterly Essay #47 (2012)
In 2002, David Moss described the role of government as being the ultimate “risk manager.”[1] Governments, Moss believed, ought to act as a backstop for things that might go wrong in our lives. Just as we buy private insurance to pool our risk with other customers, so governments allow us to pool social risk across other citizens. You can think of your taxes partly as an insurance premium.
The notion of government as risk manager doesn’t cover the full gamut of what governments do, but it does encapsulate many of their important roles. For example, governments help guard against overseas threats and keep our streets safe. Managing risk explains why we have a social safety net to guard against the risk of poverty, a public health care system to deal with the risk of illness, and a public education system to remove the risk that a poor family might not be able to afford to educate their child.
In the personal tax system, progressive taxation reflects the fact that those of us who earn above-average incomes tend to have been fortunate in our family background, educational opportunities and career breaks. The company tax system considers risk in the way it allows a firm to carry forward losses from bad years to offset profits in good years. The rubric of risk also reminds us that governmental responses to floods and bushfires need to be compassionate, yet not perversely encourage people to build homes in even riskier places.
Risk isn’t the only framework through which to view policy. For example, my colleague Bill Shorten prefers to describe government as consisting of four pillars: the minimum wage, the age pension, compulsory superannuation and Medicare, to which we have now added a National Disability Insurance Scheme. But as an economist, I’d prefer to view the NDIS as a form of risk management. Each of us is just a car crash away from a profound disability, a dice roll in the genetic lottery from giving birth to a child with a congenital abnormality.
If government is the ultimate risk manager, then society needs to decide which risks should be borne by citizens, and which should be taken on by governments. There’s no right answer to this, but it’s easy to see differences across countries. Many of the risks that are borne by individuals in the United States are carried by the government in Sweden. In some contexts, governments should be encouraging risk-taking (we want our scientists and entrepreneurs to take a chance). In other situations, we need to ensure that we don’t privatise the gains and socialise the losses, as Wall Street seems to have done over recent decades.
How a government manages risk says a lot about its values. Reading Laura Tingle’s analysis of Howard-era social policy, I was struck by how daily politics utterly dominated good policy. In place of risk management, we got – in Tingle’s memorable phrase – “endless avuncular tax cuts and new cash entitlements.” I am yet to meet anyone who can persuade me that the proper role for government includes providing the Baby Bonus to a millionaire.
All this came at a cost. As John Howard expanded non-means-tested benefits, he once said: “People like getting a cheque from the government.”[2] What he failed to mention was something known as the deadweight cost of taxation. For every $100 raised in revenue, around $20 is lost in decreased work effort and entrepreneurial activity.[3] Churning money for its own sake means that there’s less to go around. As George Megalogenis noted recently, “The competition for handouts affected the [Howard] government itself.”[4] On social policy, Howard seemed incapable of lowering expectations when the times called for it.
Tingle is right to focus on the difficult politics of who gets what in Australia. Her story of the Adelaide family that earns over $258,000 and rails against the government for means-testing the private health insurance rebate reminds me of several constituents who wrote to make the same point. And yet our government is not the first to have made hard decisions on means-testing. When the Hawke government put an assets test on the pension in the mid-1980s, Opposition leader Andrew Peacock called it “the latest of this Government’s assaults on the elderly,” and promised to repeal it if the Coalition won office. Today, the pension assets test is an accepted part of our social policy.
What I find a bit harder to cop is Joe Hockey lecturing from London about the need for the “Age of Entitlement” to cease. When Labor froze indexation on a Family Tax Benefit supplement and scaled back the out-dated Dependent Spouse Tax Offset, Hockey fulminated in parliament: “Your budget is indifferent to the plight of your people.” On Sky TV, he said, “I think this is madness.” To the Australian newspaper, he said, “I despise this envy; this envy and this jealousy.” His former leader Malcolm Turnbull used similar language when we means-tested the Baby Bonus to families earning under $150,000 (excluding the richest 6 per cent of parents).[5] Hockey’s London speech raises some interesting questions, but when you put it together with his views about means-testing, it’s hard to avoid the conclusion that Hockey wants the Age of Entitlement to end for the poor, but continue for the rich.
Former New York governor Mario Cuomo once said that politicians campaign in poetry, but govern in prose. A corollary is that while politicians campaign in “and,” we govern in “or.” Each decision to spend in one area makes it harder to devote resources in another area. And every government decision to spend requires that money be raised from taxes on land, labour or capital. As Milton Friedman famously put it, “to tax is to spend.” These trade-offs – these “or” questions – mean that a government with a thousand priorities might as well have no priorities at all. Tingle might have usefully pointed out that on this score, the Gillard government has been more willing to make trade-offs than our predecessors. For example, Stephen Koukoulas recently observed that during their combined total of more than twenty years in office, the Fraser and Howard governments never once cut their real spending. By contrast, Labor governments have cut real spending on five occasions since the mid-1980s.[6]
Tingle writes fondly about the Hawke–Keating reform era, in which, ‘The political debate was not taking place at the level of what the reforms might mean for the individual, or what citizens could expect of governments in the future; it was being fought at the level of institutions, such as the centralised wage-fixing system, and the national economy.” This is a good principle for reform, particularly as a counterpoint to the “everyone’s a winner” reform mantra of the Howard government.[7] Reforms without losers are rare, but that doesn’t mean governments should eschew all reform.
This dynamic is particularly complicated when one realises that politicians are often forced to carry out reforms during an economic crisis. At this point, leaders can more credibly say, “The system is broken; we cannot go on like this.” And yet from an economic standpoint, it is far preferable to carry out reforms in boom times, since there are more resources available to compensate those who are made worse off. In the mid-1980s, the strong economy allowed tariff cuts to be accompanied by a Steel Plan, a Car Plan, a Textile, Clothing and Footwear Plan, a Shipbuilding Plan, and a Heavy Engineering Adjustment and Development Program. And yet there were many who looked at the strength of the macro-economy and wondered why we needed to reduce industry protection at all.[8]
Perhaps I’ve spent too long walking on the sunny side of the street, but I think the ‘angry Australian’ Tingle describes is a passing mood rather than a national trait. Yet that doesn’t take much away from her astute analysis of the challenge of reform. Governments will always be able to think of more good ways to spend government dollars than the Treasury coffers permit. So rationing our spending – and clearly explaining the reasons for our choices – is a challenge that will always be with us. It will probably also place more challenges on parliamentarians like me to define the boundaries of a good government. For that, the notion of government as risk manager may not be a bad spot to start.
Andrew Leigh is the federal member for Fraser, and a former professor of economics. His most recent book is Disconnected (2010).
[1] David Moss, When All Else Fails: Government as the Ultimate Risk Manager, Harvard University Press, Cambridge, MA, 2002. See also Nicholas Barr, The Welfare State as Piggy Bank: Information, Risk, Uncertainty and the Role of the State, Oxford University Press, Oxford, 2001; Bruce Chapman (ed.) Government Managing Risk: Income Contingent Loans for Social and Economic Progress, Oxford University Press, Oxford, 2006.
[2] Interview with Alan Jones on radio 2GB, 19 April 2006.
[3] Harry Campbell and K.A. Bond, “The cost of public funds in Australia,” Economic Record, Vol. 73, No. 220, 1997, pp. 22–34.
[4] George Megalogenis, The Australian Moment: How We Were Made for These Times, Penguin Books, Melbourne, 2012, p. 302.
[5] Baby Bonus statistics from Wayne Swan, “Means Testing Report Misleading,” media release, 18 May 2008.
[6] Stephen Koukoulas, “That’s the last big myth blown,” Australian Financial Review, 9 May 2012, p. B32.
[7] At this point, it’s also worth acknowledging the contribution of the Labor Opposition, which spent much of 1999–2000 talking about which individuals would lose out from the introduction of the GST, rather than whether the tax reform package as a whole was in the national interest.
[8] On the fragile public support for some of the 1980s reforms, see Possum Comitatus, “What Australians Believe,” 11 June 2012 http://blogs.crikey.com.au/pollytics/2012/06/11/what-australians-believe/
Local schools go solar
Andrew Leigh MP
Member for Fraser
MEDIA RELEASE
30 August 2012
CLEAN ENERGY SCHOOLS GO SOLAR WITH FEDERAL GOVERNMENT GRANTS
Member for Fraser, Andrew Leigh, is pleased to announce that 17 schools from the Fraser electorate will receive grants as part of the final round of the Australian Government’s National Solar Schools Program.
Deputy Prime Minister Wayne Swan, together with Parliamentary Secretary for Climate Change and Energy Efficiency, Mark Dreyfus, recently announced 804 schools from around Australia had been awarded grants of up to $50,000.
These grants are being used to install renewable solar energy systems, rainwater tanks and other energy efficiency measures to cut pollution and save money on electricity bills.
This program’s popularity shows that schools are keen to reduce their energy consumption and conserve water, giving students and local school communities the opportunity to experience renewable energy generation first-hand.
Since the program began, more than 5,400 schools (close to 60%) across the nation have received a grant. In this round, 17 schools in the Fraser electorate received grants, well above the national average of 5 grants per electorate.
Funding under the Solar Schools Program is used to install a either solar power system, rainwater tanks and/or other energy efficient items.
Applications were assessed using merit-based criteria. Schools demonstrated value for money, as well as environmental and educational benefits.
Further information about the National Solar Schools Program including a list of successful grant recipients is available on the Department of Climate Change and Energy Efficiency website: www.climatechange.gov.au/nationalsolarschools/
School Funding amount
Ainslie North Primary $25,000
Mount Rogers Primary School $25,000
Latham Primary School $25,000
Charnwood-Dunlop School $25,000
Maribyrnong Primary School $25,000
Fraser Primary School $25,000
Miles Franklin Primary School $25,000
University of Canberra High School Kaleen $25,000
St Vincent's Primary School $49,818
Gold Creek School $15,000
Campbell High School $25,000
Palmerston District Primary School $25,000
Ngunnawal Primary $25,000
Macgregor Primary $25,000
Jervis Bay Primary $23,636
Hawker College $25,000
Florey Primary $25,000
The National Plan for School Improvement
Remember to complete my education survey to let me know what issues in education matter to you most.
Gai Brodtmann MP
Member for Canberra
Andrew Leigh MP
Member for Fraser
MEDIA RELEASE
Tuesday 4 September 2012
Government releases plan for Better Schools
The National Plan for School Improvement
All Canberra local schools will benefit under the Gillard Government’s National Plan for School Improvement. Member for Canberra, Gai Brodtmann, and Member for Fraser, Andrew Leigh, said today.
Prime Minister Julia Gillard released the plan yesterday in response to the first comprehensive review of schools education undertaken in 40 years.
“We want to make sure every young Canberran has access to a great education. And we want to provide school principals and teachers with the support they need to deliver this, through better funding and resources, and ongoing training opportunities,” Ms Brodtmann said.
For the first time, funding for every school in Canberra would be calculated based on the needs of every student, in every classroom and will continue to rise under the plan.
“Our National Plan for School Improvement will give Canberra kids the best start so they can get the high-skilled, high paid jobs of the future,” Ms Brodtmann said.
“The National Plan for School Improvement isn’t just about more money – that’s why any additional funding will be tied to changes that improve the education students receive.
“That means putting the best teachers in Canberra classrooms, giving Canberra principals more power and getting better results for Canberra students.”
Gai Brodtmann said that Canberra schools and teachers were already doing a great job and the National School Improvement Plan would help them achieve even more.
Andrew Leigh recognised the importance of education to Australia’s economy.
“If we want to raise living standards, we need to increase the productivity of Australians. The best bet for raising productivity is to improve education and skills. This means that our education reforms are also economic reforms.
“I’ve done plenty of research into inequality and know that by targeting our reforms to help the neediest students, we’re also helping to reduce the gap between the rich and the poor,” Dr Leigh said.
Andrew Leigh’s education survey can be found at https://www.research.net/s/NorthCanberraEducation
The Prime Minister’s speech announcing the National School Improvement Plan can be found at www.pm.gov.au.
For more information on the Plan visit www.betterschools.gov.au.
Talking Social Capital
Education survey
Sky AM Agenda 30 August
http://www.youtube.com/embed/wnCVUTB20HI
A Life in Public Service
PRIME MINISTER
SPEECH
“A LIFE IN PUBLIC SERVICE”
CPSU NATIONAL CONFERENCE
28 AUGUST 2011
Yours is the model of a modern labour union.
Committed to the oldest union principles.
Sharing, sticking together, the strong in the workplace protecting the weak.
Organising always, working with the employer when you can, fighting when you must.
And committed to the future of unionism too.
To responsible leadership which sees the future, understands where change is necessary, ensures change is delivered for the many, not the few.
When people ask how should modern unions drive change in their members’ interests I say: look at the way the CPSU engages its members and delivers for them.
And you do it in two distinct and vital ways.
Your contribution to the cause of labour through the movement and the Party is enormous.
Your contribution to the cause of Australia, in the Australian Public Service and your other workplaces, is indispensable.
In the same way, here addressing you all, I do wear two hats.
When I get along to dinner with the “tee dubs” or the “miscos” I can safely tell them to stand up for themselves and not to go easy on their boss.
Here, I’m not quite so gung ho!
But for all that, I know that here, I’m among friends: because of the values we share.
The values I have always seen in the CPSU and your predecessors, in my life’s work in the labour movement – the values I recognise in all of you here tonight – the same values I see in the public servants I work with and rely on every day.
A bright passion and a deep enthusiasm for the life of public service.
That enthusiasm and passion in you is the same fire that drives me on, that drives everyone in my Government on, every day in office, to build a strong economy, to make a fair society.
What you do matters to Australia and to every Australian.
Ours is a remarkable nation. That didn’t happen by accident.
Australians worked for it, you worked for it, our public sector worked for it.
Of course some of our advantages are natural – natural wealth and location.
But I see our greatest advantages as human ones.
In world terms, we’re a top ten country on many measures.
Openness to international ideas, public institutions that operate free from corruption, the list goes on.
And we’re a top two country on measures that are most important to us.
Like political stability, social mobility, human development.
We’ve worked for those things and we’ve done it our way.
We don’t work exactly as others do.
We’ve always seen the public good, the public interest, the public sector, in our own distinctively progressive and Australian way.
Just one example: the way we regulate banks, very different than the US for instance.
It works, we’ve got four of the ten ‘AA minus’ rated banks in the world here.
And it works because of you.
Those banks are regulated by public servants.
The same is true of so many areas where our nation has achieved good things.
No developed country emerged from the global financial crisis stronger.
The political decision to take strong and immediate action was the vital beginning.
But make no mistake, the best thing we did then was to get the best advice.
The Nobel Prize-winning economist Joseph Stiglitz called our stimulus packages:
One of the most impressive economic policies I've seen.
But he went on:
Not only was it the right amount, it was extraordinarily well structured, with careful attention to what would stimulate the economy in the shorter run, the medium term and the long term …
When I look around the world, it was, I think, probably the best-designed stimulus program in the world and you should be happy that in fact it worked in exactly the way it was designed to work.
That was a Nobel Prize winner talking – and he was talking about you.
That stimulus was designed and implemented by public servants.
And the same is true across so much of Australian life.
Who got the relief payments to the flood victims? A public servant.
Who makes sure older Australians are cared for and safe in aged care homes? A public servant.
Who keeps our planes flying and our airports safe? A public servant.
Who helped Australians caught up in the earthquakes in New Zealand or Japan – who works to alleviate the suffering of the world’s poorest in the Pacific or Afghanistan? A public servant.
For that matter, who shows a group of school children a Sidney Nolan painting of Ned Kelly?
That person is a public servant too.
And to put it mildly – none of those people is in it for the money.
I know you make sacrifices, you move your families between cities, your forego higher private sector salaries.
And perhaps the most demanding sacrifice of all – all the time you spend at work and away from those you love.
You do it all for a reason.
For that passion, for that enthusiasm, that we share.
So I really do want to salute you for your life in public service.
And like anything that’s important, the stakes are high, and sometimes the decisions are hard.
That’s true of the decisions we make together, as public servants and ministers, true of the advice you give us, true of the work you do to implement our plans.
That work is sometimes hard but we get through it together.
That’s also true of the areas where we negotiate as employer and employees.
Big decisions we work through, changing our workplace, improving how government works, and of course, balancing budgets.
You’ll have discussed a lot of those issues while you’re here and I’m sure you’ve been frank.
And it’s important that I say clearly, I believe the latest round of APS bargaining showed us that we need a clearer bargaining framework and that before the next round more pre-bargaining work should be done.
And that I say, we will work with you to develop a more flexible and fact-based approach to lifting public sector productivity, through the Public Service Commission and the Strategic Centre for Leadership, Learning and Development.
And to achieve increased commonality of terms and conditions for APS employees.
I know you’ll keep pressing us in areas where we don’t agree and where you’re making a case for change.
Whether that’s how the efficiency dividend works or how agencies fund pay rises or the balance between agency and central bargaining.
We’ll keep talking about all of it and I know you’ll keep working for your members’ interests.
With all that understood, I’m proud that the Australian Government is a good and fair employer of around 170 000 Australians.
As a Labor Prime Minister, fairness at work is central to my task.
What I see as I look around Australia today, is that this is at risk. Profoundly at risk.
The decisions made by new State Liberal Governments in the past eighteen months have shown that dramatically.
First, remember what State Liberals say before their elections.
Barry O’Farrell: “we will need more public servants, not less”.
Ted Baillieu: “absolutely no reduction in public servants”.
Campbell Newman: “no forced redundancies”.
Then, look at what they do after elections.
In NSW the Liberal Premier has cut.
Almost 250 police. Funding to 272 special needs schools.
More than 400 hospital beds. 100 child protection workers.
In Victoria the Liberal Premier has cut.
$481 million from the education budget. $300 million from TAFE. $25 million from community health services.
In Queensland the Liberal National Premier has cut.
$400 million from roads. 30 beds from the Prince Charles Hospital in Chermside.
$80 million from Metro North Health District. $22.8 million from the education budget. $2.5 million from services to protect vulnerable children.
He’s even dismantled BreastScreen Queensland, a cut so brutal I honestly didn’t believe it when I first read the reports.
The bottom line?
10,000 public sector jobs in NSW gone.
25,000 public sector jobs in Queensland – gone.
That’s how the Liberals roll.
Now, I would come here to warn you that Tony Abbott will do to the APS what the State Liberals are doing to their public services.
Because first term conservative governments are like that.
But amazingly, it’s actually worse than that.
Last week the Coalition announced plans to gift core Federal responsibilities to the Liberal States.
They won’t just copy the Premiers – they’ll actually hand you over to the Premiers.
In their own words, “to cut thousands of federal public servants from the payroll”.
Again, take their word for it, from Shadow Minister Robb: these plans are not “incremental” – they are “huge” – they are “more radical” than what happened when the Howard Government was elected in 1996.
Now – think about those brutal cuts delivered by State Liberal Governments which promised “more public servants, not less”.
And think about what they’re doing to the industrial conditions of the public servants who remain.
What is going to happen if a Federal Liberal Government is elected which in Opposition already boasts of huge, radical cuts and from Opposition already promises thousands of public servants will go?
The difference could not be more plain.
Labor stands for jobs, the Liberals stand for cuts.
And in the words of your own campaign – cuts hurt.
I am just astonished by the total disrespect of conservatives for the public service, for expert advice.
Andrew Robb, who wants to be Finance Minister, tells the Australian Financial Review that much of the bureaucracy does no more than "leave a paper trail, to cover backsides".
That the problem in the public service is “bad apples”.
Campbell Newman, the Queensland Premier, is asked in Parliament why he’s cutting public service jobs and says that his job is to “get the poopa scoopa out every day of the week”.
And that’s all of a piece with a populist politics that rejects expertise and independent advice, whether it’s from scientists, economists, lawyers, engineers, architects, pretty much anyone they don’t agree with.
The public service doesn’t deserve that.
Just like you don’t deserve another 1996.
You don’t deserve it – the country can’t afford it.
My vision in Government, my Labor vision, is very different.
And the reality of how we’ve governed and worked with you is very different.
The Australian Government and the Australian Public Service has worked together.
And we’ve worked with the whole public sector.
Many of you here tonight, Telstra, Australia Post, Medibank, the ABC, and of course the two Territory government services.
You’ve all served the Australian public.
To deliver better services, to engage better with citizens, to make government simpler and more efficient, to build your skills.
And the Government has relied enormously on your advice and expertise to meet the big challenges to our nation’s wellbeing.
To restore balance to Australian workplaces.
To grow jobs and to build a strong economy.
To set the nation on the path to a clean energy future.
To get equal pay for caring workers.
To build hard infrastructure for the future, like the NBN.
To achieve hard policy reform for the future, like the MRRT.
And we’ll only need you more for the work ahead.
In our plans for school improvement.
In our plans to care for our ageing generations.
In our plans for a National Disability Insurance Scheme.
There’s much more to do.
I look forward to doing them together.
Egalitarianism & Liberalism
And yes, I haven't missed the irony of praising the Global Mail for not raising the opinion/news ratio, and then writing a essay for them. In my defence, editor Lauren Martin does an excellent line in arm-twisting.
(Comments on the Global Mail website, please.)
Labor’s Best Strategy: Become A Party For True Liberals
By Andrew Leigh
The Global Mail, August 27, 2012
In December 2007, there were 445 Labor representatives in lower houses across federal, state and territory parliaments. Before the August 23 NT election, there were 305. In less than five years, 140 Labor parliamentarians — one in three — have lost office.
At the same time, Labor is shedding members. In the 1950s, more than one in 100 adults were ALP members — now it is less than one in 300. The trend is common to other Australian political parties, and to political parties around the globe. Across the developed world, mass parties are under threat.
For the Australian Labor Party, one of the world's oldest progressive parties, a sense of realism about the challenge shouldn't diminish a sense of pride in our achievements. Significant migrant inflows and strong economic growth allow Australia to undertake reforms such as a price on carbon pollution and building a National Disability Insurance Scheme.
But we must also recognise that parties need to renew. For the Labor Party, I believe that our renewal may be drawn from an unlikely source: by becoming the party of egalitarianism and social liberalism. Liberalism means standing up for minority rights, and recognising that open markets are fundamental to boosting prosperity. To borrow a phrase from journalist George Megalogenis, Labor needs a commitment to markets and multiculturalism.
To recognise why Labor's future should include liberalism, it's first important to say something about Labor's past.
Exiled in the Polish town of Poronin in 1913, Vladimir Ilyich Lenin had plenty of time on his hands. Having already spent three years in a Siberian jail, he was biding his time until he was able to return to Russia. So the man who would soon serve as Russia's first Communist leader turned his attention to the antipodes.
Like many progressives around the world, Lenin was struck by the way the Australian Labor Party had swept into parliament. Just a few months after the party's formation in 1891, Labor won 36 out of 141 seats in the NSW Legislative Assembly. In 1899, Labor won government in Queensland (it lasted a week). In Australia's first national elections, Labor won 14 out of 75 seats in the House of Representatives. In 1903, Labor's share of the vote doubled. In 1904, Chris Watson became Labor's first Prime Minister. Other parties were struck by the strength of support for Labor, and by the energy and youth of its leaders.
And yet Lenin was puzzled. In 1913, he wrote:
"What sort of peculiar capitalist country is this, in which the workers' representatives predominate in the Upper House and, till recently, did so in the Lower House as well, and yet the capitalist system is in no danger? … The Australian Labor Party does not even call itself a socialist party. Actually it is a liberal-bourgeois party, while the so-called Liberals in Australia are really conservatives."
A century on, and Lenin's characterisation of Australia's two major parties stands up better than most of his ideas. Unlike many other commentators, Lenin discerned that Labor was not solely driven by a belief in egalitarianism. Even in its early decades, the ALP was also a party of social liberalism.
In my first speech to parliament, I argued that the Labor Party stands at the confluence of two powerful rivers in Australian politics. We believe in egalitarianism: that a child from Aurukun can become a High Court justice, and that a mine worker should get the same medical treatment as the mine owner. And we believe in liberalism: that governments have a role in protecting the rights of minorities, that freedom of speech applies as much to unpopular ideas as to popular ones, and that all of us stand equal beneath the Southern Cross. The modern Labor Party is the heir to the small-L liberal tradition in Australia. As my friend Macgregor Duncan likes to put it, "Labor is Australia's true liberal party".
Alfred Deakin was one of the earliest Australian leaders to make the distinction between liberals and conservatives. Deakin argued that liberalism meant the destruction of class privileges, equality of political rights without reference to creed, and equality of legal rights without reference to wealth. Liberalism, Deakin said, meant a government that acted in the interests of the majority, with particular regard to the poorest in the community.
Deakin's Australian version of liberalism drank deeply at the well of the British Liberal Party. In the late 19th century, Deakin's speeches frequently noted that the British Liberal Party was a positive force that sought to resist and overturn economic and class privileges throughout society. To Deakin, two of the British Liberals' greatest achievements were the legalisation of unions in 1871 and removal of 'religious disabilities' tests levelled against non-conformists and Roman Catholics.
As a member of Victoria's pre-Federation parliament, Deakin began sketching out the parameters of antipodean liberalism. Deakin was a great supporter of the Anti-Sweating League meetings, highlighting the exploitation of women's labour (or 'sweating') in that state's factories. He introduced into parliament the first factory act in Victoria, regulating hours and providing compensation for injury. And in his campaign for Federation, Deakin's vision and idealism helped the movement overcome setbacks and bypass the blockers.
On race and trade, Deakin's views were shaped by the time. He supported discriminatory migration policies and high tariff walls. Looking to the Asian region, he saw only danger. When I read back through Deakin's writings, I find myself thinking (perhaps naively) that if he had better understood the role that migration and trade could play in alleviating poverty, he might have been a Keatingesque internationalist. Given Deakin's extraordinary career, sparkling writing, and strong political philosophy, it's surprisingly easy to amputate his more illiberal views.
In the early years after Federation, it was conceivable that Deakin and his supporters might make common cause with the Labor Party. As Troy Bramston has pointed out, Deakin argued in 1903 that "more than half of [Labor's] members would be Liberal Protectionists". In 1906, he said that Labor and the Liberals were united on "seeking social justice", with the only difference being that Labor wanted reform to proceed "faster and further".
By contrast, Deakin regarded the Anti-Socialists and hard Conservatives as little more than wreckers brought together by their "attitude of denial and negation" to progressive reform.
When George Reid began to take his party down the anti-Socialist route in the 1906 election, Deakin said that his platform amounted to nothing more than a "necklace of negatives" (a line that echoes down the decades, even if it was a mite exaggerated).
In another speech, Deakin said the forces of conservatism were: "a party less easy to describe or define, because, as a rule it has no positive programme of its own, adopting instead an attitude of denial and negation. This mixed body, which may fairly be termed the party of anti-liberalism, justifies its existence, not by proposing its own solution of problems, but by politically blocking all proposals of a progressive character, and putting the brakes on those it cannot block."
But with the conservative-liberal 'Fusion' in 1909, Deakin's liberals finally made common cause with the conservatives. Much as he might have wanted to ally with the ALP, there was little appetite for such an alliance in Labor ranks. Moreover, Deakin felt uncomfortable with the tightly binding 'pledge' that Labor candidates were required to sign. The difference seems trivial in an era when all political parties requiretheir parliamentary representatives to implement their party platforms.
If anyone needed proof that the scales of history could have tipped the other way, they need only have looked to UK politics after World War I, where the collapse of that country's Liberal Party led to a surge in electoral support for British Labour. Bramston calls Fusion in Australia "a marriage of convenience … in order to counter and challenge the rise of Labor".
Since its founding in 1944, the Liberal Party of Australia has regarded itself as the rightful heir to Australian liberalism. Addressing its inaugural meeting, Robert Menzies said "We took the name 'Liberal' because we were determined to be a progressive party, willing to make experiments, in no sense reactionary, but believing in the individual, his rights and enterprise, and rejecting the Socialist panacea."
According to Senator George Brandis, Menzies never once used the word 'conservative' to describe his party. In 1960, Friedrich Hayek wrote his famous essay Why I Am Not a Conservative. At the time, most in the Liberal Party would have agreed with him.
Yet under the leadership of John Howard, liberalism ceased to be the raison d'etre of the Liberal Party. Instead, Howard argued that the Liberal Party was the custodian of two traditions: "It is the custodian of the Conservative tradition in Australian politics. It is also the custodian of the progressive Liberal tradition in the Australian polity". Howard, who had once said, "I am the most conservative leader the Liberal Party has ever had", was breaking with his party's liberal past. As George Brandis has noted: "Alfred Deakin, Robert Menzies, Harold Holt, John Gorton, Malcolm Fraser were all happy to describe themselves simply as liberals. Howard was the first who did not see himself, and was uncomfortable to be seen, purely in the liberal tradition."
Current Liberal leader Tony Abbott has taken the Liberal Party further down the conservative road, writing in Battlelines: "'Liberal National' might actually be a better description of the party's overall orientation than simply 'Liberal'."
By 2010, Abbott had further watered down liberalism, nominating three instincts that animated the Liberal Party: "liberal, conservative and patriotic". It was a special irony that Abbott chose the Deakin Lecture as the venue to declare that liberalism's stake in the Liberal Party had been diluted from 100 per cent to 33 per cent.
What is occurring today is the undoing of the Fusion movement — the divorce of liberals and conservatives. Small-L liberals like George Brandis and Malcolm Turnbull are distinctly in the minority. Ironically, the Liberal Party's "Modest Members" are anything but self-effacing, with its representatives expressing views that often bear little resemblance to the open-market ideas of Bert Kelly in the 1970s. It is little surprise that genuine liberals like Malcolm Fraser and John Hewson spend more time criticising than praising the party they once led.
A century on from the conservative-liberal fusion, Deakinite liberalism is back on the auction block. Increasingly, the Liberal Party is defined by what it stands against, rather than what it stands for. The spirit of progressive liberalism —described by Deakin as "liberal always, radical often, and reactionary never" — is in need of a new custodian.
Labor has always contained a liberal strain — partly indebted to Chartist and Fabian traditions, but also influenced by the type of social liberalism that Deakin and his followers advocated in the later nineteenth and early twentieth centuries. This fact was not lost on astute foreign observers, such as Lenin. Australian philosopher Tim Soutphommasane argues that the social democracy of Anthony Crosland and H.C. Coombs owed more to liberalism than Marxism, summing up a review with the words, "we are all liberals now, comrade".
Throughout the 20th century, social liberalism joined together many of Labor's achievements. Broad-based income taxation under Curtin. A Race Discrimination Act under Whitlam. Trade liberalisation and a floating dollar under Hawke. Enterprise bargaining and native title under Keating. Removal of much of the explicit discrimination against same-sex couples under Rudd. Carbon pricing and disability reform under Gillard. Whether through support for individual liberties or the belief in open markets, social liberalism has a prominent place in the story of the Australian Labor Party.
And yet Labor's future is still up for grabs. The debate over the future of the British Labour Party has seen many reject the economically-liberal reforms of the Blair years. Labour leader Ed Miliband has engaged parliamentarian Jon Cruddas to conduct the party's policy review. Cruddas writes beautifully about his party's proud traditions. He also points out the vacuity of polling gurus like Philip Gould — whose caricatures of "Mondeo Man" and "Worcester Woman" drew more from advertising agencies than political philosophy.
But Cruddas also throws away too much that is valuable. In his yearning for Labour to reconnect with Britain's romantic and patriotic traditions, he is too ready to discard market economics and social liberalism. I fear that British Labour is making the same mistakes Kim Beazley's opposition made in the late 1990s, when the ALP distanced itself from many of the economic reforms of Hawke and Keating, and advocated illiberal policies such as abolishing the Productivity Commission.
Labor will always be the party of egalitarianism. Too much inequality can tear the social fabric, threatening to cleave us one from another. A belief in equality is deeply rooted in Australian values, and underpins policies such as progressive income taxation, means-tested social spending, and a focus on the truly disadvantaged. This marks Labor apart from many in the Coalition, who maintain that inequality does not matter, that economic outcomes have more to do with effort than luck, and that government can do little to reduce poverty.
But in also taking on the mantle of social liberalism, Labor would be stating our commitment to open markets as the most effective way of generating wealth. Labor would be pledging ourselves to the belief — grounded in the reforms of Hawke and Keating — that tax cuts are preferable to middle-class welfare. In social policy, we would engage in more of what Franklin D. Roosevelt called "bold, persistent experimentation". We would be at least as concerned about the nation's low entrepreneurship rates as the decline of manufacturing. We would permanently reject impediments to international trade. And we would acknowledge the power of market-based mechanisms to address environmental challenges, from water buybacks in the Murray-Darling basin to a price on carbon pollution.
A commitment to social liberalism would also pledge Labor to an open and multicultural Australia. Listening to the first speeches of Labor members, I sometimes wonder what my party's founders would have made of the paeans to multiculturalism and migration that are common to almost all Labor maiden speeches in recent years. Many of Labor's founders regarded Asia's peoples as the biggest threat to their living standards. By contrast, social liberalism recognises that Australia benefits from immigration (including circular migration).
It also acknowledges that national growth isn't like the Olympic medal tally: prosperity in China, India and Indonesia will boost Australian living standards too.
The modern Liberal Party is not the party of liberalism. Instead, it is the creature of John Howard, and his intellectual heir Tony Abbott. It is, in the words Tim Fischer once used to describe his favourite High Court judges, a party of "capital-C conservatism". And that leaves social liberalism free for just one party: the ALP. It is time for Labor to grasp this mantle with both hands: becoming the party not just of egalitarianism, but also of liberalism.
Andrew Leigh is the federal member for Fraser, and a former professor of economics at the Australian National University.