Andrew Leigh

In the latest Quarterly Essay, I've penned a response to Laura Tingle's discussion of the role of government, social spending, and whether Australians are congenitally cross.

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).

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[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/

I wrote to all of my local schools in the Fraser electorate in May this year encouraging them to apply for grants under the National Solar Schools Program for solar energy systems, rainwater tanks and other energy efficiency measures. It must have paid off because 17 schools were successful under the final round. The media release from last week is below.

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

Gai Brodtmann and I today welcomed yesterday's announcement by the Prime Minister about the National Plan for School Improvement. Our media release is below.

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.

Last week, I did the 'Big Interview' with James Lush from ABC Perth. We spoke about strengthening community, and the findings in my book Disconnected. You can podcast the full interview here.

I’ve appreciated hearing from hundreds of Canberrans about your views on childcare and migration. Since education is a passion of mine, I’m now running a survey on schooling. It should take about 3 minutes if you don’t have schoolchildren, or 5 minutes if you do. I look forward to hearing your views. For those on a mobile device, you can find the survey here

Ashleigh Gillon hosted Liberal MP Kelly O'Dwyer and me on the AM Agenda program this morning. We discussed the dreadful news of recent asylum seeker deaths at sea and how to prevent further drownings, as well as Labor's important new policy in providing Government-subsidised dental assistance for low-income, rural and remote Australians.

http://www.youtube.com/embed/wnCVUTB20HI

Prime Minister Julia Gillard gave a wonderful speech last night to the Community and Public Sector Union National Leaders' Conference. I thought it was a lovely statement of the important role of unions and also the work done by public servants to assist the Australian community. As an Australian Labor Party politician from the ACT, these are two areas that are important to me and I thought I'd share the Prime Minister's words here.

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.

In the Global Mail today, I have an article that expands on the argument kicked off in my first speech: that Labor is the natural party of both egalitarianism and liberalism. I'm an economist, not an historian, so thanks to a raft of people, including Dennis Glover, Emily Murray, Tim Soutphommasane, Macgregor Duncan, Louise Crossman, Troy Bramston, Dennis Altman, Damien Hickman, Nick Terrell, John Hirst, Nick Dyrenfurth, Judith Brett, David Lowe, Michael Jones, Barbara Leigh and Michael Leigh for valuable comments on earlier drafts. Note that several of these people strongly disagreed with my conclusions, so responsibility for errors of fact and argument are mine alone.

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.

In the Global Mail, I argue that Labor should combine both egalitarianism and social liberalism.

Labor’s Best Strategy: Become A Party For True Liberals
The Global Mail, August 27, 2012

The Liberal Party under John Howard and Tony Abbott has abandoned the mantle of social liberalism — and Labor should grasp it with both hands.

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.

Liberalism, Deakin said, meant a government that acted in the interests of the majority, with particular regard to the poorest in the community.

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.

Labor will always be the party of egalitarianism. Too much inequality can tear the social fabric, threatening to cleave us one from another.

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 require their 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.

The modern Liberal Party is not the party of liberalism. Instead, it is the creature of John Howard, and his intellectual heir Tony Abbott.

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.

I spoke in parliament about privacy reforms, and their tie-in with Labor's tradition of consumer protection.

Privacy Amendment (Enhancing Privacy Protection) Bill, 23 August 2012

Personal information is becoming more sensitive and valuable in the expanding online world. Protecting the privacy of personal information is a real concern for consumers and business. On one estimate, identity theft and fraud affects half a million Australians every year. In 2007, my friend Joshua Gans wrote in his blog about his own experience of identity theft. He wrote that somebody had obtained his details using his birthdate, which was available on his CV. They then obtained a Medicare card and began to open bank accounts in his name. He discovered later that he was among the victims of a large scamming operation which has since been shut down by the authorities. He was pretty shocked by the experience. Joshua's experience shows the importance of privacy protection and why we need strong legislative protection of personal information.

The Labor Party has a tradition of consumer protection, and it is in this tradition that we are strong believers in protecting privacy. We understand that to protect individual freedoms, you need appropriate privacy laws. Consumers deserve protection from the disclosure of credit-reporting information and its use in direct marketing. Businesses will benefit from a credit-reporting system that is accurate and up to date. In this bill we are striking a balance between the needs of consumers and businesses to operate and adequate protections of the disclosure of personal information and credit reporting.

It was the Labor Party which, in 1990, introduced credit reporting. The Privacy Amendment Act  was directed at the activities of credit-reporting agencies. A number of other bodies, such as consumer groups, have expressed concern about the potential for breaches of privacy by the users of the agencies and about the inaccuracy of some of the information held by agencies. This inaccuracy has usually resulted from incorrect information being passed to the agency or from a failure to update information under such circumstances—for example, when a person has subsequently paid a debt on which they had previously defaulted.

Labor is committed to containing the growing level of unmanageable personal debt, and we want to make sure that credit providers have access to a wider range of information about an individual's financial situation. Credit providers themselves are an important check on individuals taking on unmanageable debt. So, in reforming credit reporting, we introduced requirements that records be kept of inquiries made by credit providers for payments that are overdue by at least 90 days. We limited the maximum period for which information can be kept to no more than seven years. We empowered credit consumers by enabling a person to request that their information be altered if they disagree with the information held by a credit-reporting agency.

This government also introduced the National Consumer Credit Protection Act 2009, which implemented a new consumer credit regulation framework to replace the state based regulatory framework known as the Uniform Consumer Credit Code. That reform addressed the problems that emerged with the operation of the Uniform Consumer Credit Code to guarantee consistency among jurisdictions. We knew that there were risks associated with the continued lack of comprehensive government supervision of finance-broking practices, and that is why we took action to protect consumers from onerous mortgages.

The Law Reform Commission's 2008 report For Your Information: Australian Privacy Law and Practice informs the measures proposed in this bill. The report argued:

‘As a recognised human right, privacy protection generally should take precedence over a range of other countervailing interests, such as cost and convenience.’

It noted that rapid advances in information, communication and surveillance technologies have created a range of previously unforeseen privacy issues. It also noted that regional political and economic blocs, such as the EU and APEC, have created pressure for Australia's privacy protection regime to align with those of Australia's key trading partners.

The Australian retail industry has noted the rapid rise of online shopping. According to Australian Bureau of Statistics data, in 2008-09 just under two-thirds of Australian adults had used the internet to purchase goods and services in the previous 12 months. The wife of one of my staff has said that, when she wants to buy new clothes for her baby daughter, she does it through Etsy. Etsy is a perfect example of the interconnectedness brought about by online retailing. Dresses from the United States, toys from Italy and hairclips from Turkey can all be purchased online—and, of course, online retailers are holding email addresses, credit card details and other personal information.

While it is terrific to be able to have access to a wider range of goods—and a wider range of goods is as important a benefit of trade as lower prices—it is also important to make sure that we manage the risks regarding the protection of private information. The Australian Crime Commission have described identity theft as one of the fastest growing crimes in Australia. They highlight how identity crime causes financial damage to consumers, lending institutions, retail establishments and the economy as a whole because of the confidence-sapping effect of identity crime and the tendency for victims to then cease engaging in online transactions.

Identity crime fuels other criminal activities. Criminals will sometimes use identity crime, for example, in order to rent a car to carry out another offence. It erodes the trust consumers have in service providers. It causes emotional distress for victims. Someone ultimately has to foot the bill, whether that is a business or an individual. It can even threaten the safety of people who have had their data exposed. We have seen some of these instances in the world of online socialising.

The sophistication and speed with which hackers can breach online security systems is, frankly, breathtaking. Here is a story from Wired magazine demonstrating how easily and quickly this was done to Mat Honan through breaching Amazon and Apple security systems. He related how in the space of just an hour his 'digital life' was destroyed. Here is his chronology:

‘At 5:02 p.m., they reset my Twitter password. At 5:00 they used iCloud’s “Find My” tool to remotely wipe my iPhone. At 5:01 they remotely wiped my iPad. At 5:05 they remotely wiped my MacBook. Around this same time, they deleted my Google account. At 5:10, I placed the call to AppleCare. At 5:12 the attackers posted a message to my account on Twitter taking credit for the hack. ’All of that happened in the space of 12 minutes. When we are up against hackers like that, it is critical that the law adapts as well, that we enhance the protections around the collection, storage, security and use of personal information in today's digital world.

With so many Australians conducting business online, dealing with identity theft through the internet and cybercrime are substantial concerns for this government and law enforcement agencies. On an online forum I found one story about somebody who had been a victim of internet identity theft. Told anonymously, it read as follows:

‘Not too long ago, I made a disturbing discovery. I received a statement in the mail for a department store credit card that I hadn’t authorized, and noticed a shipping address that was not my own. My name was listed on the bill, and my home address was recorded as the billing address – but the shipping address was for a location in an entirely different state.

‘I immediately called the credit card company to find out what was happening, thinking there must be some kind of mistake. I was connected with a helpful customer service representative who was able to quickly determine that I was a victim of fraud. Thankfully, she believed me when I insisted I had not authorized this card to be opened.

‘Once the customer service representative had notified her company’s fraud department, I asked if she might be able to give me any further information. She was very helpful and gave me the name of the person who had opened the account.

‘After hanging up with the credit card company, I immediately did a quick Internet search. Having the name of the women who opened the account, and knowing the state where the products were sent made my search rather easy. Soon I was able to locate a telephone number for the person who had opened this credit card in my name, without my permission.

‘I dialed the number and was a little surprised to hear an older woman’s voice on the phone. She was clearly unnerved when I told her my name and asked why she had opened an account using my identity. Out spilled her story of meeting a man with my name in an Internet chat room.

‘Nervously she shared how he had convinced her to open a few credit card accounts on his behalf. He gave her the necessary information and directed her to make store credit purchases at a major department store, a clothing store, and a toy store. I was a bit alarmed – the major department store was not the only place where an unauthorized credit card had been issued.

‘The woman continued to tell me that the impostor had convinced her he wasn’t able to purchase products from the United States on his own and needed her help. He told her she would be doing him a big favor if she would order items on his behalf, and have them sent to her address. Then, she was directed to ship the items to him at an address outside the country.

…   …   …

‘It did take a few weeks and some follow-up phone calls for the matter to be completely resolved with all the stores. However, it took longer to shake the feeling of being violated. It was unnerving to know that someone else had used my name and information to open a line of credit without my knowledge. It could happen again, and it could happen to anyone.’

And it does.

The extent and severity of identity theft and fraud in Australia are difficult to pinpoint, but one estimate from the Australian Transaction Reports and Analysis Centre found identity fraud costs $1 billion every year. That estimate is from 2003, so the cost is almost certainly higher now. The ABS conducted a personal fraud survey, as I noted earlier, and estimated about half a million victims of identity fraud over the prior 12 months.

We are tightening the rules on sending personal information outside Australia. Before an agency or organisation discloses personal information to an overseas recipient, it will have to take reasonable steps to make sure the recipient does not breach the Australian Privacy Principles. Under the reforms in the bill, the agency or organisation will remain responsible for the personal information even when it is in the hands of the overseas recipient. The security of personal information will be the responsibility of the overseas recipient only in limited circumstances.

This bill is part of the government's response to the For your information report. It introduces three key reforms to the Privacy Act 1988: new unified Australian Privacy Principles that will apply equally to the private and public sectors; more comprehensive credit reporting that will include positive information in consumers' credit reports; and new powers for the Australian Privacy Commissioner to handle complaints and give remedies to consumers. These three reforms will deal with the handling of personal information and include provisions for the collection, storage, security, use, disclosure and accuracy of information.

A new principle will give more power to consumers to opt out of receiving direct marketing materials—an issue that I know, Deputy Speaker Georganas, is close to your heart with your strong advocacy for a 'do not knock' register. This reform more tightly regulates the use of personal information for direct marketing. Companies will have to provide a clear and simple way of opting out. The reforms to consumer credit reporting, as I said earlier, sit very much in a Labor tradition.

These are reforms that will benefit consumers and benefit businesses. By minimising identity fraud and maximising confidence in online trading, we will ensure that Australians are able to continue socialising online and communicating with businesses with confidence that the laws that underpin their dealings are advancing as the technology of hackers moves on. We are providing new powers to enable the Australian Privacy Commissioner to accept enforceable undertakings and, if warranted, to pursue civil penalties for a serious breach of privacy. We understand that individual freedoms require the protection of well-made laws, and that is in the great Labor tradition of protecting private information and standing up on the side of consumers. I commend the bill to the House.