Personal Reflections

Wednesday, October 29, 2014

Deloitte Access Economics. Yes, we are drowning in red tape. This is the reason

 kvd pointed me to this story with this comment: Hope it doesn't spoil your day to have such a complete affirmation of what you've been banging on about for years :)

I have not been able to find on-line the original Deloitte Access report on which this story is based on-line. However, this quote from the linked story will explain why the report has attracted so much coverage:
 Australian companies are drowning in their own red tape, wasting valuable hours of employee time and costing the economy billions of dollars.
In what it believes is the first assessment of red tape in both Australia's public and private sectors Deloitte Access says government regulations cost about $27 billion a year to administer and cost businesses $67 billion a year to comply with.
But it says red tape imposed by businesses themselves costs $155 billion a year - $21 billion to develop and administer and $134 billion a year to comply with.

T
he suggestion that businesses own red tape costs more than Government red tape has been the attention attracter, with a stated one staff member in eleven is now employed in compliance of all types. The data actually needs to be treated with some care, that's the reason I wanted to check the original, but it's still interesting. This Deloitte graph actually captures part of the picture I have been trying to paint to explain why, in my opinion, current business practices have so reduced management efficiency with consequent direct and indirect costs.

The reduction in back office workers has saved direct costs because of the sheer grunt of the computer systems that have replaced them. But there have been indirect costs created as well through cost shifting, This comes about because the costs saved tend to be measurable, that's why the changes were introduced in the first place, but the costs incurred are not.

As a simple example, consider the changes that have taken place in HR systems.

The processing functions once carried out by support staff have been computerised, leading to savings in processing staff. At the same time,  responsibility for certain activities have been passed to line staff. They have to enter the details for themselves and do the processing, reducing the work time that they had available, Their managers are in a similar position for they have to do checking and approval functions that once did not exist, were informal or were carried out by some-one else, Then there are the compliance staff who have to do the checking and pick up the mistakes that need to be corrected.

So the cost equation that I am talking about are the costs savings of the new system in terms of reduced HR staff costs that are directly measurable minus the extra staff costs created that are not. In this mix, the remaining HR staff move from a support and compliance role to a compliance role, ensuring as best they can that the new systems work. Since the focus is on directly measurable costs, an imbalance occurs.

The rise of compliance workers in organisations to the point that they now exceed the proportion of the workforce that was once occupied by back office workers is indeed part connected with the rise of Government regulation. However, and this is where the Deloitte Access study is helpful, it is more connected with management and organisational changes within organisations including changes in decision rules.. Here there is a chicken and egg problem in that the cultural, technological and organisational changes that facilitated Government regulation making do exactly the same outside Government. You can't blame Government in total.

I spoke of decision rules, something I have written about a fair bit. Every step in a decision chain adds time and costs. We have more decision points now, more things on which decisions have to be made. It should not surprise that costs have gone up, effectiveness down. That is how we do things now.    
 

Tuesday, October 28, 2014

Living in a post-modern government world

I was going to add this material as a footnote to Monday Forum - reforming the Australian Federation but decided instead to bring it up as a new post.

I have been working my through the first Reform of the Federation issues paper, A Federation for Our Future. Perhaps it's because I'm tired, but it is a most eye-glazing document, a sort of post modern government period piece.

Is that fair? I said I was tired. But consider this. It takes the existing constitution as a given. It's dominated by questions of economics and economic efficiency, focusing on questions of service delivery. It confuses issues, throwing in constraints on spend and what Governments can do. As a consequence of all these things, the immediate debate generated is on the GST.

Can the existing Federal system be made to work more better? Of course it can. To ask how to do that is a fair question. However, the discussion paper points to the central problem here. All the discussion on this topic and the various initiatives that have been proposed such as cooperative federalism fail because the Commonwealth controls and the states respond.

The Abbott Government is no different here. If you look at it's track record, it is much into control, some would say more so, than its predecessors. To the degree that the problem lies with the Commonwealth, then the solution rests with the Commonwealth. It can change its behaviour.

On the state side, the states can control their responses. All a state has to do is to say we are not going to accept this level of control. We will go without. We will plot our own course.

The paper is quite good at charting the political dynamics that make either path difficult. It doesn't offer real solutions.

In his responses to the discussion, Mr Abbott has said that he is now a pragmatist on the Federation. By this, he means simply that he no longer has a philosophical position at other than the most generalist level. Perhaps I am misquoting him. I stand to be corrected.

It is worthwhile having a conversation on the Australian Federation. Our system has actually proved reasonably flexible, but it can be improved. A conversation dominated by posturing around the GST is not, actually, a conversation. Everybody is trading set pieces, set positions. That is boring and not especially useful. So let us actually talk.        






Monday, October 27, 2014

Monday Forum - reforming the Australian Federation

On 12 September 2014, Australian Prime Minister Abbott released the first issues paper addressing the future of the Australian Federation. On 25 October, the PM delivered a speech in Tenterfield on his vision of the Federation. I wonder whether it will have the same impact as Sir Henry Parkes' famous speech?

I have written a fair bit on constitutional issues. Rather than repeating those views, I thought that I would ask you. How would you restructure the Australian Federation? How would you make our system work better? Is it in fact possible?

Postscript

The first comments received focused on the GST. Anons one and two focused on the political aspects of the GST. Winton Bates wrote
I think the starting point should be to establish an allocation of GST as close as possible to what it would be if it was a state tax. That would make fiscal equalisation a separate issue and help state premiers to consider whether the base of GST should be broadened, rate raised, more reliance placed on property taxes, spending reduced etc.
I am inclined to agree with Winton.

Postscript 2

The debate really does seem to be bogged down at present on GST.

Postscript 3 

Ross Gittin's take: GST out of the box, but states won't budge



Wednesday, October 22, 2014

Personal musings on the death of Gough Whitlam

We all see people in different ways shaped by our experiences, views and indeed deep reactions to personality and indeed appearance. I was twenty when I met Gough Whitlam for the first time. He had come to Armidale for my grandfather’s funeral. Later I was a junior Treasury official during the days of the Whitlam Government. During that time I was also active in the Country Party as a policy person as well as  machine official.

Speaking in 1975, Margaret Whitlam is reported to have said:  "Bugger the Whitlams... I'm a bit tired of all the adulation. He's almost reached the beatification stage. I suppose canonisation will come, with the obituaries." Perhaps it has, reading some of the responses to his death. My views are a little different. This brief  memoir provides a simple personal perspective, recognising Mr Whitlam’s strengths and weaknesses as I saw them, placing them in the context within which I moved. I will leave it to others to do the detailed evaluations. I think that only with time will an objective assessment become truly possible.

In 1955, the Menzies’ Government announced the planned formation of a joint parliamentary committee to inquire into the Australian constitution. It was a high powered affair with a wide ambit. Gough Whitlam was the most junior member of the committee. In her biography of Mr Whitlam, Jenny Hocking talks about the influence the committee had on Mr Whitlam’s constitutional views, as well as giving him exposure to the workings of the Parliament. She quotes John Menadue who became Mr Whitlam’s private secretary in 1960: the Constitutional Review Committee was, Mr Menadue suggested, ‘the central breakthrough intellectually’ in  Whitam’s intellectual evolution and consequently in the Labor Party’s policy evolution, over this time.

The Country Party’s David Drummond was one of the other members of the Committee. Drummond had been pushing for action on the constitution for some time, partly driven by his desire to see New England gain self-government. This was not his only issue, but it was a a key one.

On the surface, the two men would seem to have little in common. Drummond was Country Party, Whitlam Labor. Drummond was 65, Whitlam 38. Drummond had been a member of the NSW Parliament from 1920, the Federal since 1949, Whitlam a member of the Federal Parliament for three years. Whitlam was well educated, Drummond an autodidact who had left school at twelve. Despite these differences, the two men established a friendship and working relationship that was due in part to personality, in part to Drummond’s now deep understanding of constitutional issues and willingness to focus on principles. He and Mr Whitlam might not agree, but they understood differences and the reasons for them.

I knew about the friendship and respect because my grandfather told me, as  he did with other Labor figures whom he liked and respected  such as Kim Beazley Snr. Towards the end of his life, I would sit there playing with the dog and drinking dry ginger while he talked. After his death, Mr Whitlam came to the funeral. Later on his irregular trips to Armidale, he would always ring my parents to find out how they were. It’s not hard to like a man who does that.

In 1972 down in Canberra and with pre-selection in mind, I again became actively involved in the Country Party. recreating the organisation in the ACT and Eden-Monaro. I lost pre-selection, but our candidate (Bega mayor Roy Howard) achieved a swing against Labor of 2.7% and was a bit over 500 votes short of actually winning at a time when the national trend was running (if narrowly) to “it’s time.”  I knew Bob Whan, the new Labor  member, quite well; we had worked closely together if with different hats on wool marketing proposals. I had a high personal opinion of him, but thought he was beatable.

Mr Whitlam’s “It’s time” campaign did present a new view, one that had appeal even to many died in the wool Liberal or Country Party supporters.  That was still there when Mr Whitlam went back to the electorate in the double dissolution election of May 1974. Again I was involved in campaigning. Our candidate was Ron Brewer, the popular state member for Goulburn. This time we came 146 votes short. Labor retained its majority in the House of Representatives with the loss of one seat. 

The dismissal election held on 13 December 1975 was very different. The National Country Party candidate was the well known Canberra TV newsreader John Moore. The mood in the electorate was clearly such that Bob Whan was beatable, but there was a problem, for the electorate had polarised. The sharpest indication of the depth of feeling was at a Bega Branch meeting where Peter Nixon spoke. In talking about Canberra, Peter mentioned in passing the friendships formed across parties. The room exploded.

The difficulty with polarised elections is that the stark black and white drives people back to traditional allegiances. The National Country Party had clearly beaten the Liberals at the last two elections. Further, if Labor lost there would be a coalition. The electorate was having none of this. I was scrutineering at one of the Queanbeyan booths. There our vote halved. Walking back to the previously expected victory party, I found an air of gloom. In the end, our vote dropped from 30.1% to 19.6%. Murray Sainsbury won the seat for the Liberals.        

I have told this story to set a context.

The first Whitlam Government was a little frenetic and confused. It was a very new Government in the sense that Labor had had not been in office since 1949. There was no experience to draw from. The Government also had many older-style Labor members who had strong views and entrenched plans. The initial short Whitlam-Barnard ministry while caucus selected the members of the ministry may have been good theatre, it was certainly very active, but it was also a sign of things to come. Mr Whitlam was not especially attuned to the grind of Government, to the need to provide a measure of control, to manage egos.

I was working in the newly created Foreign Investment Division of Treasury at the time. There everything was chaos. Controls had been introduced. However, it is remarkably difficult to write advice when you don’t know what to say and are trying to articulate principles on the spot that, at best, represent guesses as to ministerial wishes.

Despite this type of difficulty, things settled down. Now here I want to mention two things that would become important,

The first was the nature of the attacks on the Government’s economic policies. I am not talking about macro economic policy, but the allegation that the Government was in some way socialist because it wished to do things like create the National Pipeline Authority.  At the time, I didn’t quite understand the arguments used against the Government. I could understand the arguments against Government intervention, but I couldn’t understand the theoretical constructs being used because I hadn’t been exposed to them. It seemed to me to be a strange melange of issues.

Later, I would come to see that this was the Australian start of a mind set that today is very familiar. It was also the start of of a  political obstructionalism in opposition that has, again, become very familiar. All this was still relatively ineffective by the time of the double dissolution election. However, as economic conditions deteriorated, as the budget blew out, it would become important. More, it was at this time that the Australian obsession with the Government budget emerged, creating a meme that would later come to occupy central stage.

The second important issue was Mr Whitlam’s sometimes strident Australianism. It is clear from some of the commentary  on Mr Whitlam’s death that many welcomed this. They saw it as a release, even a liberation, from their perceptions of the limitations of the past. I did not share that view. I saw it as old-fashioned, harking back to previous long-running threads in Labor thought. Worse, I saw it as little Australia, a narrowing of the breadth of Australian thought.

I recognise that many will disagree. I am simply reporting my perceptions at the time,

Of all the decisions of the Whitlam Government, there was one that I profoundly disagreed with, and that was the refusal to assist the escape of the South Vietnamese now threatened by the North's advance. I had opposed the war, I had been a conscientious objector, but I could not stomach the refusal to help those to whom, as I saw it, Australia had an obligation. I did not feel the same way about East Timor, but then I did not know what we know now.

Whatever Mr Whitlam’s weaknesses may have been, it was an exciting time to be in Canberra. It was a small city, we all mixed together, we exchanged gossip and information. When the Fraser Government came in, I found it pedestrian and, dare I say it, boring. Mr Fraser’s actions on Vietnamese refugees was principled and indeed bold. Still, by the time of the March 1983 election, I and many like me were looking forward to a change of Government.  It was time to move on.

I think that’s part of the measure of Mr Whitlam. His place in Australian history will not be determined by the dismissal, although the sheer colour of events means that it will have  place in the history books. His place will not be determined by the success or failure of individual policies, for many drew from past actions and (in any case) time erodes what is seen as distinctive. Rather, his place will be determined by his personal characteristics, by the way he strode the stage and tried to bring about change, and by the reactions of his later followers who have, indeed, beatified him.                                  

Tuesday, October 21, 2014

Interlude

At the entrance to Sydney’s Central Station, an older bloke from the Citizens Electoral Council was handing out pamphlets. I stopped and took one. Fingering my lapel, he remarked: “You are the first suit who has taken one. Why is this so?” “I can’t answer that question”, I replied. We both laughed.

I browsed the pamphlet as I walked to my train. The world according to the CEC had not changed. “British SIS/ASIO planning a terrorist attack on Australia?” blared the main headline.

The Wikipedia article on the CEC suggests that it began as a spin-off of the League of Rights in Queensland in the 1980s that was then taken over by the LaRouche Movement.  It’s older than that, for if my memory serves me correctly, the CEC was around in Northern New South Wales in the 1970s. The modern CEC is a strange melange of views, old and new, unified by a central conspiracy theory.

I put the pamphlet away, my momentary curiosity satisfied. Time to move on.     

Monday, October 20, 2014

Monday Forum – cooperatives and the disruptive power of crowd funding and its like

Today’s Monday Forum wanders.

Cooperatives and Management Style

I didn’t get any response to my post Friday management note - Coles, Fonterra and the behavioural impact of cooperative structures, There were several elements in that post. Here I want to focus on one, cooperatives. I like cooperatives, but in Australia at least they are a much diminished breed. The lure of bigger immediate dollars from privatisation were just too great.

Is there  role for cooperatives? If so, how do we make them work? What problems have to be overcome?

How people in Muslim countries prefer women to dress in public

This one came from a Thomas retweet (@thomasee). It’s a Pew Research Report  on attitudes towards women’s headgear in certain predominantly Muslim countries. Meantime, the new rules re women visitors wearing burkas in the Australian Parliament have been relaxed. It’s actuallyLunch Astrolabe Road 24 June 2012 a rather strange story.

Crowd funding and other disruptive devices.

Back on Sunday 24 June  2012 I reported on a lunch at Astrolabe Road.   From left to right Noric Dilanchian, Clare Belshaw, Neil Whitfield and Dennis Sligar.

One of the things that we talked about at that lunch was the emergence of crowd funding. In simplest terms, these are platforms that put people who have projects in touch with people who might want to fund them. Kickstart is an example.

Since then, this type of platform has proliferated entering a range of arenas. Peer to peer lending is another example, bypassing the banks as middlemen. Trybooking is a third, a platfom that allows community organisations and others to sell and deliver tickets on-line without having their own system.

I have been watching all this for a while. I wondered if any readers had their own experiences and comments that they might like to share. This stuff is quite powerful.

Postscript

Commenting that there had been some legal changes since July but the broad thrust was still right, Noric pointed me to this from July written by with Anton Joseph - Tax and valuation of crowdfunding initiatives.

Sunday, October 19, 2014

On being awesome

Amazing today

This poster came via Facebook. Going from the reaction at the office where a number of people asked for copies that are now pinned up, it has considerable appeal. 

I am not sure that I was so freaking awesome on Saturday, although I did go to the movies to see Still Life with a friend.

The movie slowly drew me in through its use of silence, its detective and human elements. The ending left me cold. Of course it had an audience impact, but it was totally unsatisfying. It took a movie that was shaping as a must see multiple times, and turned it into a must see once. Ah well

Whether I was freaking awesome on Saturday, I certainly wasn’t on Sunday. For that reason, I leave you with this poster.  

Friday, October 17, 2014

Friday management note - Coles, Fonterra and the behavioural impact of cooperative structures

There was extensive coverage in this morning's Australian media of the action by the Australian Competition and Consumer Commission against Coles alleging that the retail giant engaged in unconscionable conduct against five suppliers, including cleaning products company Oates, Benny’s Confectionery and Bayview Seafoods.

The alleged events surrounding a "perfect profit day" took place several years ago, but fit within a pattern of complaints asserting that Coles and Woolworths have used their overwhelming buyer power to squeeze suppliers in a situation of two primary buyers, multiple suppliers. 

Fonterra  (and here) is New Zealand's largest company.responsible for around 30% of the global trade in dairy products, It is also a cooperative owned by over 10,000 New Zealand dairy farmers. There are other shareholders now, but they have no voting rights, only an economic interest.

 The relationship between Fonterra and its dairy farmer shareholders is a complex one. Like Coles and Woolworths, Fonterra is effectively a single purchaser for a large number of smaller suppliers. It has to make a profit and has an incentive to lower farm gate prices to maximise returns on sales. It also operates in a global marketplace where milk prices fluctuate. Milk prices have dropped quite sharply and Fonterra needs to adjust. However, it also needs to maintain stable supply, recognising too that it is the main income source for its growers who are also its primary owners. 

  This complex relationship leads to quite different behavioural characteristics as compared to Coles and Woolworths. Here my attention was caught, among other things, by the new Farm Source program.The company describes it in this way:
Fonterra has signalled a significant step-up in its relationship with farmers, rolling out Farm Source which will support farmers and their farming businesses and bolster the Co-operative’s connection with rural communities in New Zealand. 
Farm Source combines service, support, rewards, digital technology and financial options for farmers together with local Farm Source hubs to support the major dairying regions throughout the country.
 Speaking at today’s launch in Methven, Fonterra Chairman John Wilson said Farm Source’s seed was discussions with farmers and the “together as one” principle behind co-operatives.
If this were a Government policy announcement, my reaction would be ho-hum, here we go again. I have lost count of the number of Government hub announcements I have seen. However, Fonterra is a highly commercial operation.

In the discussion that surrounded Farm Source, I caught an interesting side reference to the financial options discussion. Family farmers in New Zealand and in Australia have long experienced some difficulty in attracting capital, as well as servicing that capital during down turns. If I interpret the discussion correctly, Fonterra appears to be considering the creation of some form of vehicle that will attract longer term funds for farm investment for its members. 

This is just a note at this point  Fonterra has attracted my curiosity given its size, commercial success and different ownership structure.     


  

Thursday, October 16, 2014

Australia: are there positive economic threads in the current global gloom?

I was going to write something on the Australian Government’s new industry and innovation statement, setting in an historical context. However, to do that I need to access some of my previous writing, so that will have to go onto hold at least until the weekend.

This time last year I was preparing my annual economic outlook. I am not a super forecaster. I got some things more or less right, right some things more or less wrong. The best think that can be said is that I was broadly right. Australia’s economic performance was better than many forecast at the time, not quite as good as I had expected.

This year, I’m finding the same process far harder. The global strategic situation is far more complex. Ukraine, the Islamic State and Ebola really complicate things. The potential economic costs of Ebola should not be underestimated. It’s not just the West African countries most directly affected. The ripples are spreading far and wide.

The late Tom Clancy’s Executive Orders featured a terrorist attack on the United States using an aerosol version of Ebola, thus combining two current fears. I am not being alarmist. Unlike plague ridden Europe when  perhaps half the population was wiped out, we have the infrastructure and skills to ultimately control the spread of the disease. But you can see from the ripple effects as the disease reaches the US and Europe just how it may affect and slow the patterns of life.

Then, too, we have issues associated with the wind back of quantitative easing. In an earlier post, I wondered because I couldn’t see a clear path here. As QE comes to an end in the US, the value of the US dollar relative to other currencies has risen, placing pressure on the US economy. That was always going to happen. That was part of the reason why I saw the Ozzie falling. But I’m not sure that people realised that QE in Europe and Japan would, inevitably, depress the value of the euro and yen. At the same time, inflation in those areas has remained stubbornly low, economic activity has not picked up.

Here in Australia, Reserve Bank Deputy Governor Guy Debelle is warning that markets may be heading for a "violent sell-off".  The Australian financial press has flicked, as it so often does, to fundamentally negative reporting. We all risk ruin. So lets look at some basics.

House and share prices arguably got out of control in the soft money era. They are likely to come back and affect individual Australian wealth. With global slowdown, there will be (are) softer prices for Australia’s main commodities. Economic activity is likely to slow.  The Feds and states will experience revenue short falls, rising payments. So what?

As I said, I haven't worked through the issues. but I don’t share the gloom. Australia is remarkably well positioned to ride through another economic downturn so long as we can get rid of the presently negative present. I will pursue the reasons for that view in another post.  

Wednesday, October 15, 2014

Defining shirtfronting

I must admit that I did not know what shirtfronting meant when Mr Abbott used it in the context of Mr Putin. I am obliged to the ABC for this definition:

For the Shirtfront (Australian Rules) noun, "A fierce tackle, usually delivered by the shoulder to the chest of an opponent." verb, "The act of delivering such a tackle." - Oxford Australian Dictionary.

The ABC story linked above has some video clips of the now banned shirtfronting in practice. The Russian local diplomatic response can be found here. Mr Abbott has not repeated the term, referring instead to possible robust discussions. PUP Senator Jacqui Lambie takes a dim view of the whole thing, praising Mr Putin’s “great values”.

There is an air of unreality about the Australian discussion. This includes Opposition leader Shorten who wishes that the Government could have done more to prevent Mr Putin attending the Brisbane G20 summit. Yes, Australia’s political leaders need to reflect local concerns, but that also needs to be tempered with a degree of reality.

Tuesday, October 14, 2014

The Pyne curriculum review - results

Back in January in The Pyne curriculum review - Dr Donnelly's challenge I wrote of the establishment of the Australian national curriculum review. It attracted quite a strong comment stream.

The results of the review have now been released. These are two reactions: National curriculum review: experts respond; Education review reveals what we already knew

I suppose that my reaction is a little along the lines of the second story. I admit my biases. I thought the the curriculum had become too crowded; I disliked the way the unifying themes were used; I did feel that there was a tendency to cut us off from our past.

All that said, the review actually struck me as a moderately useful discussion to future directions in Australian education. I wondered what people think of it now?  

Monday, October 13, 2014

Monday Forum – the creeping cancer of social regulation

In an exchange on Carmen, cant and the State Opera of Western Australia, John Stitch wrote:

“So now its art according to what Ms Chard sees as appropriate? Let's hope she doesn't get to wield the censor's scissors on a national scale. The "I know what's best for you" mentality seems to be thriving in the arts as we lurch further to the right in this country. Just ask Paul Yore or Bill Henson.

In response, DG observed:

"...lurch further to the right". Hardly. The public health hierarchy is a creature of the left. The government knows what's best for you.

On the same day DG was writing, Kirsty Needham had this piece in the Sydney Morning Herald, Child protection checks evict grandfathers, foster fathers pointing to the difficulties being created in NSW by the tough new child protection laws introduced by the Liberal-National Coalition Government. The article begins:

Foster fathers and grandfathers are being barred from living with children for whom they are the primary carers after undergoing tough new child protection checks.

The Administrative Tribunal has been flooded with appeals against bans issued by the Office of the Children's Guardian under strict laws introduced last year.

Six out of 10 cases decided by the tribunal in the past six weeks were found in favour of men who had been forced out of the family home or prevented from working after failing a check.

On the surface, this would seem to be another example of the mess created in NSW under Governments of both political persuasions through over-zealous child protection laws. Consider the earlier example where the introduction of mandatory reporting brought an over-stretched NSW child protection system to its knees.

It seems to me that in every aspect of life we have created a social cancer that in the name of protection, standards, risk minimisation or harm reduction controls and limits what people can do to the point that no-one can actually properly understand all the applicable rules and regulations. Just as bad, there seems to be little evidence that the approach delivers real benefits relative to the direct and indirect costs involved.

There is a broad consensus that economic regulation should be reduced, although here too we introduce new controls as fast as we reduce existing controls. However, there is no consensus so far as social regulation is concerned. 

So, for this Monday Forum, a few questions. Am I right in my interpretation of all this as a social cancer? If so, how did it arise and what do we do about it? 

Postscript

This ACT example, Canberra cat containment could be extended city-wide, is another example of the process that I have been taking about. We have a problem, the damage done by feral cats, and a response, more costs and controls on cat owners.