A Nudge in the Right Direction

I'm not in the habit of linking to corporate press releases, but given how many people find themselves falling foul of unduly complex mobile phone plans, this is a welcome announcement:
Telstra consumer mobile customers soon will be able to use their phone’s data service without the risk of an unexpectedly high bill, commonly known as “bill shock”.

They will be among the first in the world to have their data speeds slowed when they exceed their mobile data allowance and not be charged for excess domestic data usage.  The changes are in development and will be launched by year’s end.l
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Centenary of Canberra

Centenary of Canberra, 23 May 2011

When Canberra turns on its charm and offers that perfect day—the sun shines, the water glistens and the temperature is neither too cold nor too hot—it is easy to see how this city charmed the federal parliamentarians who visited in 1906 and 1907 on their tour of potential sites for the new nation's capital. Originally Canberra was not the preferred location of either the media or the politicians. But for the perfect Canberra day on 13 August 1906 and then again on 23 August 1907, the parochial interests of a Premier and the change of heart invoked by a Victorian senator, our nation's capital could have been somewhere entirely different.

On 23 May 1912, entry No. 29 by Walter Burley Griffin, a landscape architect from Chicago, Illinois, was declared the winner of the competition to design Australia's new federal capital. Walter Burley Griffin heard about the Australian government's competition to design the national capital while on honeymoon with his wife, Marion, in 1911. Although it was Walter's name that headed the entry, theirs was very much a collaborative effort. Without Marion's elegant drawings, it is unlikely that Walter's design would have grabbed the judges and lifted it above the 136 other entries in the competition. The winning design incorporated leading international ideas of the day in the science of town planning, such as the 'city beautiful' and 'garden city' movements. Yet, for the city to flourish, Griffin believed it also needed a community with 'great democratic civic ideals'. He wanted Australia's capital to be a place where citizens enjoyed a high quality of life based on 'egalitarian legislation, genuine public spirit and organic, scientific cities'. The 13th March 2013 marks the Centenary of Canberra. The Australian government recognises the national importance of the Centenary of Canberra as the national capital. We have been working closely with the ACT government to develop a program of events in the lead-up to and in the centenary year. The Australian and ACT governments have established an intergovernmental working group under an agreement signed in December 2008.

Along with the support of the Centenary of Canberra creative director, Robyn Archer, the working group have identified centenary national program activities, activities that have national reach and engage communities right around Australia, not just residents of the ACT. For example, the draft program includes the construction of the Canberra Centenary Walking and Cycling Trail. The trail will guide walkers and cyclists through urban and nearby rural areas, incorporating a variety of iconic and lesser known locations that tell the story of Canberra. The ideal for the trail was raised from community submissions received as part of the Canberra 100 call for centenary projects. Taking in existing fire and walking trails, it will merge with new ones. It will start here at Parliament House and loop around the ACT through locations including Anzac Parade, the Australian War Memorial, Lake Burley Griffin, Mount Ainslie, Mount Taylor, Red Hill, the National Arboretum, Stromlo Forest Park and Mulligans Flat Sanctuary. A result of the partnership between the Australian government and the ACT community, the Centenary Trail will be a gift to Canberra and visitors to our city for years to come.

The Australian government's commitment to the Centenary of Canberra is evidenced by the recent announcement in its 2011-12 budget of $6 million over three years as a contribution to the centenary national program. The Australian and ACT governments are keen to collaborate with all stakeholders to ensure the success of this activity and the entire national program. The final size and shape of the program is currently being negotiated with the ACT.

Our national capital is a source of pride for all Australians. The Centenary of Canberra is a unique opportunity to celebrate this historic moment and for the Australian government to continue its conversation with the Australian people about the kind of nation we want over the next 100 years. As the federal member for Fraser and father of two young boys who proudly call Canberra home, I welcome the positive attention being paid to this city by the member for Menzies. I would also encourage the opposition to support the initiatives being put in place by the Australian government to celebrate the Centenary of Canberra, such as the Centenary Trail and new investments in the National Arboretum. I know they will join other national institutions in enriching the lives of the city and the nation.
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Indigenous Affairs

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AM Agenda 23 May 2011

Transcript (courtesy of JB)

GILBERT: Welcome back to AM Agenda, with me now is Jamie Briggs and Labor MP Andrew Leigh. Guys, thanks for being here. Jamie, first to you. The Climate Change Commission report has said that the science is done, the debate has been had. Yet you still have some Liberals this morning, Dennis Jensen on the doors this morning said that temperatures are actually levelling out. You do have a number of climate sceptics, is that damaging for the Coalition?

BRIGGS: Our policy is that we accept the science and we have got a bipartisan target with the Labor party. Both parties agree that their needs to be action on climate change. Both parties have agreed to a five per cent reduction by 2020. And all we disagree on is the method on which we get there. We have a policy which is about direct action carbon, green carbon so speak, and the soil, about cleaning up the dirtiest of power stations to reduce our emissions by 5 percent.

GILBERT: So you obviously believe that the science, although a number of your colleagues don’t?

BRIGGS: Oh look well it’s a free country still Kieran, last time I checked, people are entitled to a view. But ultimately it is the policy that matters. Now we have had the same policy for about 18 months now. When we first announced the policy we took it to an election and we stuck with it after the election. I know that is an unusual concept and I know that the Labor Party aren’t that finding that something that they do, because of course at the election the Labor Party announced one hundred and fifty people from a phone book to tell them what your climate change policy is. They said they would not have a carbon tax. Just after the election they announced a carbon tax and today we hear that that is going to put up electricity prices by double, from the electricity industries. So the story here is that we both have a target, it is five percent reductions by 2020. We just have a different method of getting there.

GILBERT: Andrew, I spoke to Professor Steffen earlier who worked for the ANU, he is the lead author of the Climate Commission. He was not at all scathing of the direct action approach, he said it needs to be part of the solution, but he was not critical at all of this idea of taking direct action.

LEIGH: Well Kieran you have got to recognise where this report is coming from. It is very clearly stating that there is overwhelming scientific consensus that the world is warming and humans are causing it and yet we have this frightening situation where every other seat in the Coalition Party Room is taken by a climate change denier, somebody who doesn’t believe that global warming is happening. That is incredibly dangerous because it means that Tony Abbott has now put in place a policy that is designed to be easily repealed as Malcolm Turnbull pointed out last week. The thing is, if you look across economists the consensus is as strong as it is across scientists. Economists almost universally back the idea that you should use a market based mechanism pricing carbon. I will be curious if the Jamie can name one, even two economists who would back a direct action plan. I have not been able to find any and frankly Tony Abbott has had the same problem.

GILBERT: Well if it is such a compelling case, why has the Government struggled to prosecute it, so badly to this point?

LEIGH: Well look Tony Abbott is very good at doing one thing and that is saying no, he is running a small target strategy at the moment. He is running a strategy as saying no, no, no to absolute everything and he has been prosecuting that very strongly. You see him at weetbix factories talking about climate change; I mean this is frankly ludicrous. Where by contrast, we have Tony Abbott’s colleagues in the UK, the British conservatives, to Margaret Thatcher, who are entirely comfortable with the idea that you would have an emissions trading scheme.

GILBERT: There are a lot of people who seem like they have stopped listening though;

LEIGH: Use the market to price carbon.

GILBERT: A lot of people have seemed to stop listening to you and your government. What, how do you turn them around? I mean that’s a compelling and a very easily argument to prosecute and one which Mr Abbott has been very successful at thus far.

LEIGH: Well Kieran, somebody said to me last week ‘good policy is good politics’. And I think frankly that is exactly the right way to go. We have to be absolutely clear that this is going to be a tax on the thousand biggest polluters. At the moment they can put as much pollution into the atmosphere as they want to. We are saying that if they are putting carbon pollution into the atmosphere, they should pay for it. We should provide assistance.

BRIGGS: That’s interesting.

GILBERT: Jamie, you can respond to that as well, but Will Steffen said that on its own, direct action is not enough to deal with this. Now what do you say to your kids and the next generations, that’s two generations apparently this report says, unless there is action now in the next ten years…

BRIGGS: Well let’s get to basis here, five percent target, bipartisan. Five percent reduction by 2020 that is the bipartisan target. We can get there with direct action by cleaning up the dirtiest of power stations, by investing in soil carbon, the Labor Party want to have it with a tax. Now I would say to Andrew, who is compelling in his argument, he seems convinced by his own arguments that if they are so convinced, take it to an election, do the right thing. I mean the problem here is good policy is good politics. And I think it is being told in the story at the moment about how people are receiving this. About how good of policy this is. If they are so convinced about this policy and about how people are receiving this about how good of policy this is, if they are so convinced, if they are so convinced that this is the way to go, do the right thing and take it to the election.

LEIGH: Well Jamie it is very clear why you would make that argument because when the carbon price comes in next year, then this scare campaign that Tony Abbott has been running around the country will be exposed as hollow.

BRIGGS: That’s complete rubbish.

LEIGH: It will be very clear that the sky has not fallen.

BRIGGS: Do the right thing.

LEIGH: Carbon pricing has modest price impacts. We can see that, I mean the Labor Party has been consistent…

BRIGGS: Why was the Prime Minister not honest at the last election? Why did she not tell the Australian people that this is what she wanted to do?

LEIGH: We have been consistently pointing out that Tony Abbott scare campaign is entirely overblown. The impact of the CPRS on a weetbix, is a tiny fraction of one cent. This negativity that we see relentlessly from the Opposition is now starting to have blow back. I mean we can see first Malcolm Turnbull, now Joe Hockey, deeply concerned that the Coalition is nothing but negativity. Just driving a small target.

BRIGGS: I think this sums up the desperation of the Labor Party. The really personal vicious attacks on Tony Abbott, I think it sums up exactly where the Labor Party is at.

GILBERT: Asylum seekers. Scott Morrison is calling for another enquiry. Why not have another inquiry into the broad system because it is obviously enormous pressure if not dysfunctional right now?

LEIGH: Well Kieran, we have had particular enquiries into the Christmas Island affair and into the Villawood affair, but if we are going to look at the broad inquiry, I suppose you would want it to encompass the entire range of issues that have been faced in the detention centre. The Cornelia Rau affair, the children over board affair, the break outs from Baxter and Woomera, all of which occurred under the Coalition. The fact is that at the moment you have isolated incidents, the rate of those incidents is not tangibly higher than it has been in previous years, the Government is pursuing a very clear policy which is to send a tough message to people smugglers to make sure that they don’t put little kids on boats to come to Australia and also an humane way to slightly expand our refugee intake by about a thousand a year.

GILBERT: Jamie, as Andrew said a number of inquires already under way, is this not a stunt? As Chris Bowen says it is.

BRIGGS: No, not at all.

GILBERT: As Chris Bowen says it is.

BRIGGS: No, this is a very serious issue and I respect Andrew doesn’t have a detention facility in his electorate like I do, and the stories coming out in the media last week in Adelaide about allegations that SERCO officers have been rough with young people, allegations that SERCO officers have been having violence against them. It is a detention facility remember in which the Labor Party claims is their family friendly facility. Now if this is true and reports are true that are coming out, we really do need an inquiry into this. I think it reflects on the consequences of the mismanagement of Australia’s borders what is happening within these centres and from what we hear I think it is very disturbing, I think it is very concerning and I think Scott Morrison yet again is on the money with this call.

GILBERT: Okay, well one last, one last issue before we wrap up, you have got a big day ahead with Parliament back. Joe Hockey and Tony Abbot apparently had a clash over the phone. Jamie, Joe Hockey was angry at being hung out to dry over the tax treatment of trust. Is this just healthy robust discussion among the leadership or is there something more here?

BRIGGS: Well look I don’t have the benefit of being patched into conversations between our senior colleagues. As a very junior, you know insignificant back bencher, I don’t get to play part of the broader debates. Look at you know I think there is a big difference between the Labor Party and the Liberal Party at the moment, we are getting along and getting on with the job very well. We have of course from time to time, debates about policy issues, that is normal for anyone. We don’t have the Foreign Minister running around the world, making prime ministerial visits day after day, meeting with world leaders week after week, not turning up to community cabinets, acting like he is some sort of lone wolf leader of the Labor Party while building his rankings. I noticed the Galaxy Poll on the weekend had him about five lengths clear, sort of a black caviar of the political industry of the Labor Party at the moment. That far clear, so I think there is only one party at the moment that has got some leadership.

GILBERT: In terms of the PM’s position at the moment, obviously there has got to be a few nerves on the back bench with the polls as Jamie said looking so bad as they are.

LEIGH: Look Kieran, I think the Prime Minister is getting on with the job that focusing on long term reforms that is long term reform in the area of education, long term reform in the area of climate change. It is an extraordinary comment that the successor to Alexander Downer has just made, that the Australian Foreign Minister shouldn’t be meeting with foreign leaders.

BRIGGS: Foreign leaders?

LEIGH: I mean this is deeply concerning. That our foreign minister should some how just be confined to staying in Australia, I don’t understand that one.

BRIGGS: Alexander loved the Adelaide Hills.

LEIGH: We certainly talk about that. But certainly the Opposition is really having a debate at the moment as to whether it is going to small target negativity or whether it will actually come up with ideas.

BRIGGS: I think the obsession that the Labor Party has with us is quite profound.

GILBERT: I am sure it is. I am sure it will continue throughout the day and throughout the week.

LEIGH: There's a difference between Opposition and opportunism.

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Refugees and Asylum Seekers -- Expanding Protection

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Podcast of Lowy Speech

A podcast of my presentation at the Lowy Institute on Wednesday can be found at http://www.lowyinstitute.org/Publication.asp?pid=1589
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Capital Hill 20 May 2011

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Transcript of ABC News Breakfast Interview

18 May 2011  - Topic: foreign aid

Michael Rowland: The debate for foreign aid has increased significantly over the past year due to a big rise in national disasters and global political unrest.

Beverley O’Connor: By 2015 Australia’s foreign aid budget is expected to double to $8 billion. Some experts believe Australia needs to take a very targeted when it comes to aid spending. Dr Andrew Leigh will be talking about this topic a little later on. He’s the Federal Member for Fraser in the ACT, and he joins us now from Canberra. Many thanks for your time this morning. First of all, let’s start with the size of the budget doubling by 2015 – do you think that is too much for a country like Australia?

Andrew Leigh: Well Beverley, it is important to remember where we start off. Australia, compared to other developed countries is in the bottom third of donors and by the time we get to 2015-2016 we’ll be giving 50c out of every $100 that Australia earns and that will put us at the rich country average. So no, I think that is an appropriate scaling up that recognises the good Australia can do in the region and the benefits that being generous brings back to us, in terms of a more secure region and in terms of more trade in the future, which is good for our businesses.

Beverley O’Connor: So when you’re talking about that, you’re talking about aid with the idea of getting something back in return. If that is the approach, where critically do you think the aid should be targeted?

Andrew Leigh: Beverley, I’m giving a speech at the Lowy Institute today, and I’ll be arguing that Australia’s foreign aid has been extraordinarily effective and that one of the things we should do in the future as we scale up is to think about what Australia’s comparative advantage is, what we do better than other countries. I’ll be arguing that there are three of those areas where we should focus on. One is on natural resources – we’re a developed country with a lot of natural resources, so that’s a natural area to think about how we can help developing countries. The second is dry land farming and the third is dealing with fragile states. We’ve had a bit of experience with East Timor and the Solomon Islands and fragile states, so I think that’s something Australia does pretty well as well.

Beverley O’Connor: Can we take up that last point first though, we’ve seen Kevin Rudd just last week – the Foreign Minister – cutting back funding programs to some parts of the Pacific, because even though you may argue that they are fragile states, there is often abuse of the aid.

Andrew Leigh: Look we’ve got to absolutely make sure that our aid dollars are always being well spent. Fraud in the AusAID program is extraordinarily low, a small fraction of 1%, so I don’t think we need to be concerned that Australian aid dollars are being misspent, but we should always be vigilant about it. But in general, we have had some pretty good successes there. Our East Timor intervention and Solomon Islands stabilisation mission haven’t produced perfect states but we’ve done a lot of good in that area and that’s a real challenge, particularly in Africa now. If you look at places like Sudan and Congo, the world really needs expertise on how to stabilise countries. It’s that social policy being delivered with a rifle in one hand, which requires a mix of military, policing and aid assistance. We’re doing some of that work in Uruzgan Province in Afghanistan and the more we do, the better we get at that balancing act of maintaining security while providing basic services to the local population.

Beverley O’Connor: In terms of the other points you make, in terms of the expertise we have, are you thinking that more of our actual expertise and funding people to go over and assist, for example in countries that are developing resources, or in terms of as you were talking about that dry farming. Are you looking more at expertise being funded by Australia so that we can keep track of that money or just simply providing the funds for them to then do it themselves?

Andrew Leigh: That’s a good question, Beverley, and it’s a balancing act in foreign aid, the extent to which you want to send your people over training people in developing countries. Australia actually does a lot of training through our scholarships program, bringing people from developing countries to Australia to learn skills, and some of that is indeed in natural resource management and dry land farming. So I think it’s important to build that capacity and important to recognise that management, particularly of natural resources, is a really difficult balancing act. It turns out there’s this thing called the ‘resource curse’ in developing countries, that a country’s more likely to experience slow growth and violence if it finds natural resources. We need to turn that around – turn a ‘resource curse’ into a ‘resource blessing’, because the developing world has huge amounts of natural assets. There’s $3.5 trillion of sub-soil assets in Africa, most likely. We need to encourage developing countries to make the most of their natural resources as Australia has done.

Beverley O’Connor: How open are these other countries to us coming in, sort of the ‘Big Brother’, to show the way?

Andrew Leigh: I think there’s a lot of openness to think about how to work effectively with natural resources. One of the things I think is being increasingly discussed is how to best sell off the mining licenses. It’s really important to sell of the mining licenses in a transparent way so taxpayers can follow the funds that flow from mining companies through the governments. It’s also important to sell them through auctions, to make sure taxpayers get the best deal from mining leases. It’s really important for voters and governments to know what’s under the soil, to do some basic geological surveys first. These may sound a bit technical but they’re absolutely critical to making sure that people in developing countries get that flow of resources that benefits everyone. Mining employees relatively few people, so people in developing countries will really only benefit from sub-soil assets if governments manage them well.

Beverley O’Connor: Andrew Leigh, thank you very much for joining us this morning.

Andrew Leigh: Pleasure, Beverley.

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The Pro-Growth Progressive

I spoke last night at a community forum in Charnwood on economic growth.

The Pro-Growth Progressive: How Economic Reform Can Make Us Happier

Andrew Leigh
Federal Member for Fraser

Ginninderra Labor Club, Charnwood
18 May 2011

I acknowledge the traditional owners of this lands on which we meet.

The Origins of Growth

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

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

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

In 1800, as life expectancy was around 30-35 years, pretty much what it was on the savannah. And citizens of 1800 probably worked longer hours than cavemen. From the Stone Age to the Renaissance, most people ate around 2000 calories a day, compared to the 3000 calories a day that we consume. In fact, most of us would find it difficult to get by on 2000 calories a day, because our bodies are significantly bigger than those of our ancestors.

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

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

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

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

People didn’t just live longer – we lived healthier. A survey of elderly veterans in the US found that in 1910, nearly all were suffering from digestive disorders. By the end of the twentieth century, just one-fifth suffered from digestive disorders.

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

That’s true of other products too. Since the late-nineteenth century, the number of working hours to buy various products has dropped dramatically. It used to take 260 hours of work to buy a bicycle – now it takes 7 hours. It used to take 2 hours of work to buy a dozen oranges – now it takes 6 minutes. Not surprisingly, that’s meant an increase in the number of leisure hours: from 2 hours a day in the late-nineteenth century to 6 hours a day now.

The Easterlin Paradox

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

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

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

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

In 2006, Gallup surveyed people in 132 countries about their life satisfaction. The relationship between satisfaction and GDP is almost perfectly linear. There is no evidence of satiation. If anything, money seems to buy more satisfaction as you get richer. When we move from nine countries to 132 countries, the Easterlin Paradox simply doesn’t hold up.

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

Environmental Concerns

A popular belief is that economic growth and environmental damage go hand in hand. This concern comes in two forms – some people argue that we will use too many inputs, while others argue that we will produce too many outputs. Let me address each in turn.

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

But it turns out that neither of these things are true. Most workers don’t produce goods from non-renewables. In fact, three-quarters of Australians work in the service sector. For detectives and doctors, barristers and baristas, the product of their jobs doesn’t weigh much (leading some to dub the phenomenon ‘the weightless world’ of work). In fact, the entire output of the United States weighs only marginally more today than it did a century ago.[5]

Productivity too, is always increasing.  Today’s cars use less fuel. Our computers use less electricity. And, thanks to recycling, our paper uses fewer trees.

Our economy is also shifting from one resource base to another, a phenomenon that economist Paul Collier characterises (not very reassuringly) as ‘running across ice floes’.[6] In the nineteenth century, the British government worried that it was going to run out of tall trees for the masts of ships. We will probably look back at arguments about ‘peak oil’ in the same way.[7]

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

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

An Imperfect Measure

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

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

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

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

GDP per capita also has the problem that it’s just an average. To see this, let’s suppose that there are currently about 300 people here in the Ginninderra Labor Club. Now, let’s imagine that Australia’s richest man, Andrew ‘Twiggy’ Forrest, pops by in his fluoro vest for a drink. If we just look at averages, the average wealth per person in the Club is now $20 million – even although 300 people have the same assets they had before.

The same problem occurs if economic growth goes only to the richest. In Australia, recent decades have seen an increase in inequality, but everyone’s incomes have gone up. According the OECD, the past quarter-century has seen incomes for the richest tenth grow by an average of 4.5 percent per year. For the poorest tenth of Australian households, incomes grew at 3.0 percent per year.

Australia’s experience contrasts with the United States, where incomes for the bottom tenth have barely budged in a generation. But it does highlight the importance of talking about both growth and inequality. Or perhaps we should focus more on median incomes, just as we do with median house prices. Just as median house prices are unaffected by the doubling of millionaires’ house values, so a measure of median incomes would be unaffected by the doubling of millionaires’ incomes.

Boosting Growth

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

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

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

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

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

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

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

Another crucial element to the productivity puzzle is technology. As recently as the early-1900s, American jurist Oliver Wendell Holmes quipped that if all the medicines in the world were dumped into the ocean, it would be better for humanity and worse for the fish.[10] A century on, medical advances have vanquished diseases like smallpox, polio and tuberculosis from the developed world. Our emergency departments are considerably better at saving critically injured patients. And in mental health, we are steadily doing better at diagnosing and treating mental illness as soon as it appears.


There’s an old joke that goes:

Q: How many conservative economists does it take to change a light bulb?
A: None. The darkness will cause the light bulb to change by itself.

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

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

Australia today is in a far better position than most developed nations. Most have high unemployment rates – some over 10 percent. Some have debt loads that exceed their annual incomes, and are heavily constrained in their policy choices by the absolute priority of paying off debt. By contrast, Australia has the ability to easily satisfy our creditors and make long-term investments.

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

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

[1] The first half of my title is shamelessly stolen from Gene Sperling, The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity, Simon & Schuster, New York, 2006.

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

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

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

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

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

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

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

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

[10] Quoted in Robert Guest, The Shackled Continent: Power, Corruption, and African Lives, Smithsonian Books, Washington, 2004, p.200
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Fragile States and Agile Aid

I spoke at the Lowy Institute today, suggesting a few ideas for improving Australia's aid program.

Fragile States and Agile Aid: Some Ideas for the Future of Australia’s Development Assistance Program

Andrew Leigh
Federal Member for Fraser

Lowy Institute

18 May 2011

I acknowledge the traditional Indigenous owners of the lands on which we meet today.

Aid Works

Dai Manju lived in a small village in central China. Because her parents were ill and couldn’t afford the cost of sending her to school, she dropped out. When journalist Nicholas Kristof visited in 1990, she was hanging around the school hoping to pick up bits of knowledge.[1]

After publishing a front page article about Dai in the New York Times, Kristof was chuffed to receive a donation of $10,000 from a reader. He promptly sent it on the school, which spent it on improving facilities, and provided Dai with a scholarship to stay in education so long as she passed exams. After a good amount of the money had been sent, Kristof phoned the donor to thank him for the generous gift. It was only then he realised that the man had in fact only sent $100, and the slip of a bank teller’s fingers had multiplied it one-hundredfold. Informed of their error, the bank agreed to provide the difference as a donation.

After graduating as an accountant, Dai now runs her own business employing many others, and is able to send money back to improve the lives of her parents. Because many of the other girls in her class also received ‘bank error in your favour’ scholarships, the village now has a road.

Spent wisely, foreign aid can transform lives for the better. This year, Australia’s foreign aid program will build 2000 schools in Indonesia, fund a Women’s Crisis Centre in Fiji, prevent 8000 cases of blindness in East Asia, and provide clean water to 1.2 million people in Southern Africa. World Vision CEO Tim Costello claims that this year’s aid budget will save 200,000 lives.

Yet too often, aid debates become removed from the people that they are intended to help. When aid advocates ask the public for donations, they typically ask for help to solve an immediate and practical problem – feeding a child, building a well, providing schoolbooks. To the best of my knowledge, no aid campaigner ever knocked on a door and said to the resident: ‘we’d like you to consider increasing your aid contribution to 0.5 percent of your income in 2015-16, with the ambition of going to 0.7 percent in the future’.

Don’t get me wrong: the quantum of aid is important. I recognise that Australia’s aid contribution as a share of national income still places us in the bottom third of donor countries. Scaling up our aid to half a cent in the dollar will put us at the developed-country average.[2] This is eminently sensible given that 18 of our 20 nearest neighbours are developing nations, and we sell over $90 billion worth of goods to developing countries each year. Few developed nations have as much self-interest in running a good aid program as Australia. But we should never forget that the purpose of foreign aid is to alleviate disadvantage. More aid creates the potential for reducing poverty – but it will not happen automatically.

Although the input-wallahs would occasionally have us believe otherwise, the most interesting debates in foreign aid are not about the quantum of assistance.[3] So today, I want to suggest a few ideas about how to increase the effectiveness of the Australian aid program. This is particularly important in the context of the scaling up of Australia’s aid program. Over the next four years, the Australian aid budget will almost double in nominal terms. This represents a unique opportunity to ensure that our aid is spent in a way that does as much good as possible.

For an economist like me, that means identifying Australia’s comparative advantages in foreign aid, and rigorously evaluating our aid programs. Let me deal with each in turn.

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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.