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Insights 25: 8 July 2016
Signal Loss: What we know about school performance
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Australia has lost the election
Dr Oliver Hartwich | Executive Director |
What is the difference between Austria and Australia? Well, when the Austrians recently went to the polls to elect a new president, procedures were so flawed that their Constitutional Court told them to hold the election again.

Australia’s election procedures, meanwhile, seem relatively flawless. It is just the vote count that is agonisingly slow.

You would think that on day 6 after an election, we might have an idea who has won. 

Not so in Australia. So far, we only know who has lost.

There are two losers in the Australian election: Prime Minister Malcolm Turnbull. And Australia.

Let’s start with Turnbull. He removed Prime Minister Abbott by a coup in the party room only eight months ago. His justification at the time: Only he could secure his coalition government a second term, and only he could provide sound economic management.

On both counts, Turnbull has failed. If he is very lucky, he might have gained a wafer-thin majority. More realistically, he could lead a minority government. In any case, he would have lost more than a dozen seats. Not the greatest result.

As for Turnbull’s claim of being a better manager, his short time in office does not support it. Nor does his election manifesto. 

In fact, apart from a vague promise to cut company taxes over the next decade, there was nothing much in Turnbull’s plan. Apart from a plethora of buzzwords, that is.

There would have been plenty a true reformer could have talked about. Most importantly, fixing Australia’s budget situation should have been the first priority. But on that, there was precious little the coalition had to offer.

Not that the opposition would have been any better on fiscal management. Far from it. The two main parties are just as hapless as each other when it comes to confronting Australia’s fiscal predicament.

Which makes Australia the real loser of this election.

To make matters worse, the uncertain majorities in the House of Representatives will be accompanied by an even more fractured Senate. The return of Pauline Hanson’s One Nation is only the icing on the cake.

There is one more difference between Austria and Australia: With all due respect, it hardly matters who will be the next Austrian president. 

But it matters a lot how Australia will be governed for the next three years. And sadly, the prospects for good government across the Ditch are not good.

Income inequality: Vive la différence!
Dr Bryce Wilkinson | Senior Fellow |
Do you feel like hissing at the people at the front of the plane when you walk past them to the cheaper seats at the back? If you are in the first class seats, do you cringe as people walk past you?

Professor Barry Nalebuff, a professor of management at Yale, has those feelings. This is according to an article earlier this year by New York Times journalist Nelson D Schwartz.

He would not be alone. Glaring gaps between privilege and the rest offend our egalitarian instincts. Why else did Chairman Mao and his associates dress in the plainest of military uniforms?

Mr Schwartz’s article lamented the exclusive luxury facilities that a new Norwegian cruise ship will provide for 275 elite guests, but not the other 3,935 passengers. Its title, “In an Age of Privilege, Not Everyone is in the Same Boat”, summarises its theme. Superior facilities for those willing and able to pay more are a bad thing, full stop.

The refrain resonates with fears raised by French economist Thomas Piketty. He fears a return to a world dominated by inherited wealth, that is privilege, rather than by merit or achievement.

Yet egalitarian instincts need not be at odds with exceptional rewards for exceptional achievement. The slogan “equal pay for equal work” permits unequal pay for unequal work. Few begrudge the millions of dollars a year earned by the most successful global sport or pop stars. Many buy Lotto tickets hoping against the odds for similar rewards for no effort.

It is a fact of life that incomes will always be unequal if effort and merit are to be rewarded and chance has a role. Ask any professional athlete about the chance of injury and its effects on performance.

Moreover, preferences differ. Some see cars as a status symbol, for others they are just a means of transport. So car manufacturers provide expensive cars and cheap cars.

Eminent US law and economics scholar Richard Epstein has criticised Mr Schwartz’s article. He points out that cruise liners that charge rich people more can charge steerage passengers less.

In short, we should all decry unjust differences in income or wealth. But it is wrong to condemn commerce for providing customers with price and quality options.

Save the hissing for those that deserve it.

The value of big oafs
Jason Krupp | Research Fellow |
With just about everyone proffering advice to post-Brexit Britain, it is unlikely the country will pay attention to this piece. And nor should it, given that Britain will soon be truly free to thumb its nose at advice givers.

But in the unlikely event that they do, I would advise them to use experience as their guide. That experience does not have to be positive, nor firsthand.

More explicitly, look at what your big oafish neighbour is doing wrong, and then do the exact opposite. At least that is what New Zealand has done with Australia in many respects, and it is advice Kiwi officials would do well to review again.

Some of the recent absurdities that have cropped up across the ditch include a bid to torpedo a plan to allow the parallel importation of cars from 2018. New Zealand has long allowed this, which explains the profusion of cheap and reliable Japanese vehicles on our roads.

In Australia, these imports are banned to protect domestic car manufacturers. But now that there is no car manufacturing industry left in Australia, you would think that there is no way the parallel import ban could be justified, right? Not so. It turns out car dealers are now putting political pressure on politicians to maintain the ban to preserve their livelihoods.

If we extend this logic we could expect to find that Australia has banned New Zealand fruit or placed costly import conditions on these goods because some farmer has an apple tree. Oh, wait…

It would be nice to think that these are limited cases. But the minor parties and independents that hold the balance of power in Australia have already listed the price of their support. It includes government support for ailing domestic steelmakers, torpedoing the TPPA, and renationalising a number of industries that have long been privatised.

Given the risky path ahead for Britain, it should be recognised that there is no sure fire formula for success. But a good place to start is to avoid repeating other peoples’ absurdities.
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