Impediments To Business Investment Inquiry Opening Statement

Thank you for the opportunity to appear before this inquiry.

I’ll make a few brief remarks about declining rates of business investment in Australia, and the role that public policy has played in that decline.

Public policy should be aimed at giving all Australians the opportunity to succeed based on their own hard work and merit. Earned success – the process of applying one’s skills and talents to achieve a goal of one’s own design – is the key to allowing people to reach their potential and to flourish. Business investment is key to this process.

By expanding the economy’s capital stock, business investment makes Australian workers more valuable. This puts upward demand on workers, which expands economic opportunity.

To this end, policy-makers should aim to make Australia the most attractive destination in the world for businesses to invest in.

However, bad public policy across a range of areas has made a substantial contribution to Australia’s low levels of business investment.

New private business investment in Australia is currently just 11.7 per cent of GDP, which is lower than the rate which prevailed during the Whitlam years.

There are five key areas of public policy that have contributed to this decline.

  • Firstly, Australia’s high business tax rate.

Australia has one of the highest business tax rates in the OECD and according to the World Economic Forum, out of 134 nations, Australia ranks 94th worst for the negative effect that taxes have on the incentive to invest.

  • Secondly, Red tape.

Each year red tape reduces economic output by $176 billion, which is around 10 per cent of GDP. This adds to the cost of setting up new businesses, expanding existing businesses, and taking on new staff.

  • Thirdly, Subsidisation of weather dependent, high cost renewable energy generation.

Wholesale prices have tripled in the last three years, while retail prices are up 130 per cent since the RET was expanded in 2007. High energy prices are having a deleterious effect on business investment. This is driven by subsidisation of wind and solar at the expense of coal.

To give just one example of many. In June last year, a family-run recycling business in Kilburn, in Adelaide’s inner north, announced it would be closing after 38 years, putting 35 people out of work. The trigger was a spike in its monthly electricity bill from $80,000 to $180,000.

  • Fourthly, High and rising public debt

Gross government debt has grown by some 380 per cent over the past decade to reach a record an expected $561 billion next financial year. Every dollar of public debt will be paid back via higher future taxes. This reduces the expected return on investment and so deters that investment.

  • Finally, Rigid and inflexible workplace relations

Australia has one of the worst workplace relations systems in the developed world. According to the world economic forum Australia is the 109th worst nation for flexibility of wage determination and 110th worst for hiring and firing practices, meaning Australia is one of the hardest places for businesses to recruit and keep talented workers.

To rejuvenate business investment, the government should implement a series of reforms, including:

  • Reduce Australia’s high corporate tax to at least 25 per cent, and ideally to 10 per cent.
  • Introduce a one-in-two-out approach to red tape reduction.
  • Exit the Paris Climate Agreement and end all subsidies to weather dependent energy generation.
  • Implement a series of modest changes to the Fair Work Act, including allowing for increased use of individual flexibility agreements and removing the conveniently belongs provision which allows unions to monopolise workers and give them bad deals.

Thank you again for the opportunity to appear before this inquiry.

We would be happy to take any questions.

Red tape Is Strangling Small Business

Australian small businesses are being strangled by red tape according to a new report, The decline of small business: How red tape is undermining opportunity, prosperity, and community, released this week by IPA.

The report, authored by IPA Research Fellow, Matthew Lesh, featured in a front page story in The Australian yesterday in a news story titled ‘Push to throw out baseless unfair dismissal claims’

The report comes as the Institute of Public Affairs, a free-market think tank, releases a separate analysis today showing the number of Australians employed by small businesses fell by 330,000, or 7 per cent, over a decade. In that time, small businesses stopped being the majority employer of Australians, while the average number of employees per Australian business increased by 14 per cent, reflecting the shift towards bigger businesses. Small businesses were almost twice as likely to shut down as large businesses between 2013 and 2017.

IPA research fellow Matthew Lesh said the falling number of small business employees was “a warning sign about the future of Australia’s prosperity” and attributed the fall to the profusion of red tape faced by small businesses. He noted the commonwealth had passed 61,615 pages of legislation over the decade.

The report was featured in The Australian editorial ‘Cut red tape for small business’.

Small business, one of the main generators of national prosperity, is struggling under a profusion of red tape and other time-consuming and costly bureaucratic compliance costs. In the past 10 years, the commonwealth alone has passed more than 60,000 pages of legislation covering health and safety, environmental and industry-specific rules and other regulations, adding to the burden of paperwork faced by every business. That burden, as the Institute of Public Affairs points out in a new report, The Decline of Small Business, is one of the main reasons the number of workers employed by small businesses has fallen by 330,000, or 7 per cent, across a decade. In an alarming trend, small businesses were almost twice as likely to close as large businesses between 2013 and last year. The onus is squarely on the Turnbull government, which is supposedly pro small business, and government agencies to help reverse the trend.

 

Doing Development Different Essay Competition – Winners Announced

The IPA and the Mannkal Economic Education Foundation are pleased to announce the winners of the Doing Development Differently Essay Competition.

The winner of the $1,500 first prize was Cian Hussey from the University of Notre Dame who wrote Spontaneous Order in Indigenous Australia. Cian examined the failure of government welfare in addressing indigenous disadvantage and outlined an approach for the future that included cutting red tape and encouraging grassroots activities.

Cian Hussey essay.

The winner of the $500 second prize was Alex Prindiville from Murdoch University who wrote Good Intentions Do Not Always Mean Good Outcomes. Alex identified financial regulations and poorly designed public policy as contributing to the gap between non-indigenous and indigenous home ownership rates.

Alex Prindiville essay.

The competition asked students and young people from Western Australia to write essays responding to the statement ‘Explain how Atlas’ Doing Development Differently approach could be applied to one or more public policy issue in Australia in a way that benefits the most poor and marginalised members of our society’.

The competition and its winners were featured in the Atlas Foundation’s global newsletter.

To find out more about the Atlas Foundation’s Doing Development Differently program, read my piece from the December IPA Review.

Rafe Champion’s chapterwise review of Climate Change The Facts 2017

Over at Catallaxy Files, the estimable Rafe Champion has embarked on a chapter by chapter appreciation of the Climate Change The Facts 2017, which is published by the IPA and Connor Court Publishing and available here. Rafe’s posts invite further consideration of the issues raised, and much of value can also be found in the accompanying comments threads.

Rafe himself has many good things to say on the uses and abuses of the scientific method, and has defended and explored the approach of Sir Karl Popper through a range of accessible publications which can be purchased from Amazon in paperback and ebook, here.

An overview of Rafe’s approach to the book is in this  this post, A carbon-constrained future? Climate Science: The Facts

The chapter headings of the book appear below, followed by, where available, an extract of Rafe’s commentary and a link to the relevant post.

1 The Extraordinary Resilience of Great Barrier Reef Corals, and Problems with Policy Science

Professor Peter Ridd

That means that the extra half a billion allocated to save the reef is just a piece of virtue -signalling by the Turnbull government at our expense. Of course it is an ill wind that blows nobody any good and a deal of good will fall to the marine scientists at James Cook.

Peter Ridd and the Death of Science

Peter Ridd and the death of science continued

2 Ocean Acidification: Not Yet a Catastrophe for the Great Barrier Reef

Dr John Abbot & Dr Jennifer Marohasy

Looking at the “acidification” that causes so much alarm and comment, it turns out to be a shift that is very small compared with the natural variation recorded daily, seasonally and geographically. It would be more appropriately called neutralization. Daily variations can range from 9.4 to 7.5 and there are seasonal variations which exceed the margins in the order of 0.1 or 0.2 that prompt “alarm”.

The Great Barrier Reef and neutralization

3 Understanding Climate Change in Terms of Natural Variability

Dr Nicola Scafetta

“The cycles of temperature that Dr Scafetta is talking about are oscillations of 9.1, 10.5, 20, 60 115, 900-1000 and 2100-2500 years. These are cycles in solar activity, tidal effects of the Sun and Moon and (as) I expected the various Milankovitch cycles…The bottom line is that he claims his analysis of cycles gives a very good match with the temperature record since 1860, very much better than the IPPC figures, and a projection through the 21st century that is less than 2C.”

Understanding Climate Change in Terms of Natural Variability

4 The Role of the Moon in Weather Forecasting

Ken Ring

Ken Ring wrote a chapter on “The Role of the Moon in Weather Forecasting”. He learned the hard way, coached by Maori fishermen on the wild east coast of New Zealand where he set fishing nets every day for ten years. He was lucky that he got interested just as the moon was entering a period when the three main cycles were aligned and the effects were more defined than usual. The three cycles are the phase, the perigee and the declination.

The moon and the weather

5 Creating a False Warming Signal in the US Temperature Record

Anthony Watts

“He provided some graphic examples of the way the data are misleading. The Chicago O’Hare International Airport became the busiest port in the world in 2014, a big change from the time it was the Orchard Place/Douglas Field. The initials ORD persist as the International Civil Aviation Organization identifier. It was surrounded by farmlands for miles until over the decades it morphed into suburban megacomplex of concrete and tarmac. The average annual temperature increased by 2.35C per century from 1961 to 2013 but the method of measurement did not change while the immediate surrounds of the weather station changed out of recognition.” 

Watts on the US temperature record

6 It was Hot in the USA – in the 1930s

Tony Heller & Dr Jennifer Marohasy

“The bottom line of Chapter 6 of Climate Science: The Facts 2017 is that the frequency, extent and duration of US heat waves have declined since the 1930s and the adjusted NASA record is false.”

It was really hot in the 1930s

7 Taking Melbourne’s Temperature

Dr Tom Quirk

“The point of the paper is to explain why there was a jump of 0.6C recorded after 1998. This is attributed to a combination of the urban heat island effect (indicated by the difference of 0.6 compared with the country town of Laverton) and specific factors affecting the microclimate in La Trobe Street.”

Inflated temperature record in Melbourne

8 Mysterious Revisions to Australia’s Long Hot History

Joanne Nova

“Joanne Nova described mysterious revisions to Australia’s long hot history that were located by a team of well qualified and experienced volunteer citizen scientists. The story really has to be read to get the full flavour. For example they found that thermometers accurate to a tenth of a degree were being adjusted by as much as two degrees. The records now indicate that the hottest day recorded in modern history was at Albany on the coast of WA rather than in the baked arid zones of Oodnadatta or Marble Bar. The temperature reported in Albany on 8 February 1933 was 44C and 8 decades this was adjusted by 7C to 51. This pipped the 50.7 that was recorded for Oodnadatta on 2 January 1960.”

Dodgy data from the Bureau of Meteorology

9 The Homogenisation of Rutherglen

Dr Jennifer Marohasy

“Jennifer Marohasy described the homogenisation of Rutherglen, a town in the Victorian wine country a little west of Albury. The temperatures were recorded at the agricultural research station since 1912 in a Stevenson screen, a wooden structure designed to standardise the immediate environment of the equipment. Very strange things happened in the course of homogenising the data for the new ACORN-SAT system. A cooling trend of 0.3C at the station is converted into a statistically significant warming of 1.6C per century, ignoring trends at nearby stations. The story is complex involving tables of data and helpful charts so I will not try to tell more of it here – just beg, borrow or steal the book if you are too poor or mean to buy it.”

Dodgy data from the Bureau of Meteorology

10 Moving in Unison: Maximum Temperatures from Victoria, Australia

Dr Jennifer Marohasy & Dr Jaco Vlok

“The work in this chapter does not call for sophisticated mechanical or electronic analysis, merely the technique known as “eyeballing” in the technical language of the trade, using the neural network connected to your eyes. This involves more charts and I strongly suggest that you eyeball them. They simply show all the raw data for maximum temperature series in Victoria that are available, starting with some in 1860. To summarize, all the series move together suggesting that they are all reflecting the same reality, the same variations and changes over the many decades. “But there is no long-term trend. There are, however, cycles of warming and cooling with the warmest periods corresponding with times of drought.

Dodgy data from the Bureau of Meteorology

11 A Brief Review of the Sun–Climate Connection, with a New Insight

Dr Willie Soon & Dr Sallie Baliunas

“They regard the total atmospheric water as a much neglected key variable. Given that water vapour is the dominant greenhouse gas (if you are concerned with them) this neglect would appear to be unsatisfactory. It may be explained by the difficulty of handling the complex relationship with clouds and so it is hard to make rapid progress and the pressure to obtain short-term research grants for quick results rules out some of the important work that needs to be done.”

Soon and Baliunas on the sun and water vapour

12 The Advantages of Satellite-Based Regional and Global Temperature

Dr Roy W Spencer

“(Spencer) is a Principal Research Scientist at the University of Alabama and he previously worked with John Christy at NASA developing satellite-based recording….With the phasing out of old-fashioned mercury thermometers the three basic measuring systems are now: First, surface-based thermistors giving continuous readings with (apparently) great precision. Second since the 1950s there are radiosondes carried in weather balloons. Their coverage is sparse but they have the benefit of giving readings at different altitudes. Third, satellites systems including two independent groups that are routinely cited in warming studies. “

Roy Spencer on satellite-based monitoring systems

13 Carbon Dioxide and Plant Growth

Dr Craig D. Idso

“This is an amazing paper and it falls right into my original ballpark – Agronomy…You all know that the level of CO2 is seriously sub-optimal for plant growth and a revelation in this paper is that the temperature is arguably sub-optimal as well…The trend in CO2, from a preindustrial baseline a bit under 300 ppm we are now about 400 and we could reach 800 by the end of the century …(results) extra growth of plants with 300ppm extra CO2 … Average for herbaceous plants is 33% extra biomass. Especially strong performers are fruit of all kinds including grapes and also carrots and turnips near 70% extra.  Trees do even better, woody plants average 50% more biomass with the extra CO2.”

The joy of extra CO2

“The outcome is that even the most extreme warming projected by the IPCC will not adversely impact the majority of the plants on earth.”

The joy of CO2 part 2

14 The Poor Are Carrying the Cost of Today’s Climate Policy

Dr Matt Ridley

Essentially, the poor pay for the virtue-signalling of the rich.

Matt Ridley on climate policy and the poor

Ridley went on to criticise biodiesel programs and the promotion of diesel cars. Then he mentioned one of the most outlandish schemes – the clearing of forests on the west coast of the US to convert into wood pellets to burn in British furnaces instead of coal to generate electricity.

More on the human disasters of the war on CO2

15 The Impact and Cost of the 2015 Paris Climate Summit, with a Focus on US Policies

Dr Bjørn Lomborg

The most powerful case against the war on CO2 is to accept some of the premises of the alarmists and show that even by their own standards the emission control policies make no sense in the light of cost/benefit analysis. Bjorn Lomborg can be described as a “lukewarm alarmist” because he considers that warming will cause non-catastrophic problems in the somewhat distant future. Still his cost/benefit analysis points the need to adjust to the change rather than persisting with the current (failing) efforts to achieve a “carbon constrained” future.

Lomborg on the cost and benefits of the Paris Summit

16 Re-examining Papal Energy and Climate Ethics

By Paul Driessen

“Dreissen’s critical comments address four main topics, first the Papal perspective on climate change, the gulf between the Pop’s call for dialogue and the reality of his dogmatic diatribes, his failure to appreciate the reasons for the advancement of human welfare that we have seen in recent times and the way that the Vatican “solutions” would inflict more harm than climate change under the IPCC projections.”

The Pope on Energy and Climate Ethics

17 Free Speech and Climate Change

Simon Breheny

“Democrat Senators in the US have hounded firms and think tanks for information about their role in funding research and publicity related to climate policy. 22 think tanks were asked to provide information on their donors. Lawfare was waged against Mark Steyn in Canada by Michael Mann following some vigorous debate on their differences of opinion.”

Help wanted re attacks on climate sceptics

18 The Lukewarm Paradigm and Funding of Science

By Patrick J Michaels

At the technical level he explains how the computer models and cherry-picking of data have been used to exaggerate the amount of warming that we can expect. He notes that the pathology of science that Thomas Kuhn described as “normal science” has become distressingly common.

Michaels on lukewarming and the funding of science

Peer review is not working; see the East Anglia emails and copious reports around the water coolers, not to mention the alarms sounded by the editor of Lancet and others cited by Michaels and also by Ridd in this paper, notably John Ioannidis at Stanford.

Peter Ridd and the death of science continued

19 The Contribution of Carbon Dioxide to Global Warming

Dr John Abbot & Dr John Nicol

The authors describe recent theoretical investigations suggesting that the warming effect of CO2 may be an order of magnitude (a factor of ten) smaller than the numbers used by the IPCC. 

In his testimony to the US congressional committee in 1988 (James Hansen) used the number of 4.2C from doubling CO2. The authors note that the IPCC has been adjusting the number downward in small steps from 3.8 in 1995 to 3.5 in 2001 and 3.26 in 2007…Remarkably they report a statement by Hansen that it might need to be reduced further to 2.5.

CO2 and warming, a fun chapter for nerds

20 Carbon Dioxide and the Evolution of the Earth’s Atmosphere

Ian Plimer

There was no runaway warming when CO2 exceeded 5% of the atmosphere so it is hard to account for serious warming while CO2 is a trace gas. There were higher temperatures in the past and Plimer provides a deal of argument and evidence to indicate that the cycles of temperature and the coming and going of ice ages did not correlate with the level of CO2. 

Ian Plimer and Bob Carter on CO2 and the geology of climate change

21 The Geological Context of Natural Climate Change

Dr Bob Carter

Ian Plimer and Bob Carter on CO2 and the geology of climate change

22 Mass Death Dies Hard

Clive James

Opening Statement To The Senate Select Committee On Red Tape


Opening Statement to the Senate Select Committee on Red Tape: Effect of Red Tape on occupational licensing. 

Thank you for the opportunity to appear before this senate inquiry.

Let me start by saying that the goal of public policy should be to allow all Australians to succeed based on their own hard work and merit.

Earned success – the process of applying one’s skills and talents to achieve a goal of one’s own design – is the key to allowing people to reach their potential and to flourish as individuals.

Unfortunately, too much government policy is actively undermining the ability of many Australians to reach their potential. Perhaps the most egregious area of policy is regulation and red tape.

Research we did at the IPA found that red tape reduces economic output by $176 billion each year, which is around 10 per cent of GDP. This estimate is not an abstract number. It captures all of the jobs never created, the businesses never started, and, ultimately, the dreams and aspirations which are never fulfilled.

And a key area of red tape is occupational licensing.

Occupational licensing entails government regulated conditions and requirements that must be met before an individual can legally practice or participate in a profession.

People should be free to earn a living in the way they best see fit. But occupational licensing stops this happening.

Indeed, occupational licensing all too often acts as government enable cartel that inflates the wages and market share of licensed workers at the expense of non-licensed workers.

Firstly, occupational licensing creates barrier to market entry. This reduces the number of people in licensed professions and increases the number of people in non-licensed professions. This dries up labour supply in licensed professions, which pushes wages up, while it floods labour supply in unlicensed professions, which pushes wages down.

Moreover, many Australians who do not have the means to obtain a license are diverted in occupational that they are less suited to. This severely curtails their ability to reach their potential and practice a vocation which they enjoy and which they find they find meaningful and fulfilling.

Secondly, occupational licenses increase the cost of licensed goods and services. This has a disproportionality negative effect on low income households. In other words, occupational licensing acts as a regressive tax.

Parliament House

Thirdly, occupational licensing makes it more difficult for people to move between jurisdictions within Australia. This can make it harder for people to move away from areas where there are few jobs to areas where there are more job opportunities, with the effect of entrenching unemployment.

Despite these costs, occupational licensing confers comparatively few benefits from a community wide perspective.

Some claim that occupational licensing improves health and safety outcomes, or product and service quality. However, even a report on occupational licensing provided by the Obama White House concluded that ‘most research does not find that licensing improves quality or public health and safety’.

In fact, occupational licensing can actually reduce health and safety and quality outcomes by reducing competition. Less competitive markets contain businesses which are less responsive to the needs and preferences of consumers, and so are less likely to deliver high quality, low cost products and services.

Moreover, by raising prices, occupational licensing reduces real income. This means that people economise on the use of licensed products and services, which can cause negative health outcomes.

Competitive markets operating in a free market system, by contrast, put pressure on businesses to improve the quality of their products and services. Bad businesses suffer through negative reputational consequences. Good businesses expand and gain a larger market share.

This process has been bolstered through online communication platforms and ratings websites which improve the quality of information available and further enhance reputational mechanisms.

Based on this, we recommend substantial changes be made to the licensing regime in Australia.

Occupational licensing should be completely removed for all low-risk professions, such as hairdressers, beauticians, bee keepers, refrigeration and air conditioning occupations, many trades and property occupations, and so on.

There is also a strong case that licensing should be relaxed in other, higher stakes occupations like medicine. It is important to remember that the medical profession is concerned with the interests of health care providers, not patients. And the current regulatory regime has not sufficiently accounted for the plethora of technological changes which are empowering consumers with more and better information.

At a minimum, governments should undertake a detailed assessment of the costs and benefits of occupational licensing in such sectors.

Thank you for your time.

We look forward to taking any questions you may have.

To read the full submission click here.

Daniel Wild on Why and How to Cut Taxes – Address to Friedman Conference

Before the Whitlam government got its hands on the nation’s coffers, in 1972, tax as a percentage of GDP was just 16.9 per cent. Real taxes per capita were under $6000 a year. The Budget was in surplus. Net debt was negative.

Just four years later taxes had climbed close to 21 per cent of GDP. Spending grew by an astonishing 20 per cent in 1974 and 16 per cent the following year, in real terms. The Budget went into deficit, and debt blew out.

Ever since then, the size of government, the extent of taxation, and the level of spending has continued to grow almost without exception.

By 2021 taxes are expected to reach 24 per cent of GDP: Yes, this is slightly lower than during the Howard years where the commodity boom led to record revenue. But it is a long way from the pre-Whitlam excesses.

And when we look at the state and local government taxes and charges, plus superannuation – which is a tax on wages – over 40 per cent of income is going to taxes.

All of this under a Coalition government. Imagine what will have happened when Labor gets back in power.

When we talk about tax reform, we usually talk about it in technical terms.

We know that all taxes destroy wealth. But that some taxes are more destructive than others.

Australia has a very high reliance on the corporate tax – the most destructive of all taxes. Even the Gillard governments review of tax found that the so-called marginal excess burden of corporate tax is 40 per cent. Meaning every dollar that is raised by the corporate tax – 40 cents of economic value is destroyed.

Yet in 2015, the Australian government take of the business tax was 4.3 per cent of GDP. This is substantially higher than the OECD average of 2.7 per cent.

And corporate tax as a percentage of total tax is the highest in the OECD – at 15.3 per cent in Australia compared with just 8 per cent for the OECD average.

The left talk about corporates not paying their fair share. But businesses are just a composition of the workers, consumers, and shareholders of which they are comprised. Businesses don’t pay tax. People pay tax!

We also have a reliance on the so-called progressive income tax – the second most destructive federal tax.

But we have a low reliance on the GST – one of the least bad taxes. Although the butchered implementation means it is far worse than it should be.

Making compositional changes to the tax system – increasing reliance on GST, and reducing reliance on corporate and personal income taxes – are an important part of the conversation.

So too is restructuring the broken GST system. Under current arrangements, the GST is a mechanism for low performing states with bad economic policy to be bailed out by high perfuming states with good economic policy.

Western Australia is paying south Australia to blow up its coal plants and expose itself to whims of the sun and the wind.

Instead, states should be able to implement their own GST and keep whatever they raise. Rather than this being decided by some opaque bureaucratic modelling. If the GST really is a “state tax” then let the states deal with it.

But it is also important to have a goal.

That goal should be to reduce taxes as percentage of GDP at least back to pre-Whitlam rate of 16.9 per cent. A fairly modest proposal, I think. And much better than the Treasurer’s much vaunted 24.9 per cent tax speed limit, which will never be implemented and no one believes.

How do we get there?

The only way is to reduce spending.

Spending is tax. Every dollar of spending is a dollar of tax. That tax can be paid today or deferred into the future via the accumulation of debt.

Really, cutting taxes without cutting spending is not really cutting taxes at all. It is deferring taxes into the future – that is for today’s young Australians to foot the bill.

Tax is the equivalent to debt (plus interest). Debt today is $560 billion. The interest bill on debt alone is $18 billion a year, $1.5 billion a month, $375 million a week, $50 million every single day.

All up it means there will be $560 billion in extra taxes sometime in the future.

And the government claims it is cutting taxes.

Well, at least they are trying to reduce the corporate rate.

They also want to abolish the 37 income per cent tax threshold.

These are good ideas. But deferred way into the future. The corporate tax cuts weren’t slated to come in until 2026-27. And the income tax cuts not until 2024-25.

Either you believe in lower taxes or you don’t.

And the reason taxes are growing is because spending is growing. Every year over the forward estimate spending grows.

So how do we reduce spending?

I am a fan of simple rules.

Every government department should reduce spending by 1 per cent per year for the next four years.

If we did this, the Budget would be in Surplus within in one year. By 2021-22, debt would $326 billion instead of $580 billion. Too high, but getting better.

This would then start to provide room for the government to implement permanent, and sustainable cuts to taxes and move us toward the pre-Whitlam 16.9 per cent tax to GDP ratio.

I see no reason why each department cannot tighten its belt by just one per cent. Start with the pay and the generous superannuation entitlements and the number to bureaucrats, sell off the ABC, devolved education to the states.

This raises an even more important question which is why should we cut taxes?

Yes, lower taxes will encourage more business investment, which will create more job opportunities.

Yes, lower taxes will increase economic growth.

And, yes, lower taxes will increase take home pay.

But lower taxes are good for a much more important reason: they encourage earned success.

This is something I think we could get a little better at communicating.

We know that people flourish when they earn their own success. It’s not the money per se, which is merely a measure–not a source–of this earned success.

Getting more money – after a certain point – isn’t what makes people happier – it is earning more money that makes them happier.

That’s why a pay check and welfare check are not equivalent. A pay check is earned success. While a welfare check is the opposite – learned helplessness. It teaches people that good things or bad things aren’t a product of their own action or their own agency, but things randomly bestowed upon them.

This is why the goal of our political system should to give all Australians the greatest opportunities possible to succeed based on their hard work and merit.

Allowing people to keep as much of the fruits of their labour as possible isn’t just an economic necessity. It’s a moral imperative.

High taxes actively discourage earned success.

This is particularly pernicious for those on a low income who lose more of their money as well as their government benefits as they move up the income scale. Known as high effective marginal tax rates.

The effective marginal tax rate is as high as 80 per cent for those on around $10-15 thousand.

It’s almost as if there is a government plot to deny low income people the dignity of work and to keep poor people poor.

Of course, the same people who call for these high tax rates then blame capitalism for exploitation and keeping these poor people poor.

Low and flat income taxes encourage upward economic mobility.

Low business taxes encourage business investment, which allows more people to experience the dignity of work and to opportunity to earn their own success.

It is time to aim high and look to get the tax burden back to the pre-Whitlam levels of 16.9 per cent of GDP.

Speech by Daniel Wild to the annual Friedman Conference in Sydney. 

Australia’s Red Tape Crisis Book Coverage

A new book edited by Dr Chris Berg and Dr Darcy Allen, ‘Australia’s Red Tape Crisis’ was launched today at an Institute of Public Affairs event in Parliament House.

Coverage of the book was covered in The Australian today in a report by Economics Editor Adam Creighton.

Thou shalt not mandate. A new book by two free-market thinkers at RMIT University has declared Australia’s deregulation agenda an abject failure, urging governments to adopt a novel Canadian approach to unclogging the ­nation’s economic arteries.

Launched by the Institute of Public Affairs today in Canberra, Australia’s Red Tape Crisis, edited by Christopher Berg and his colleague Darcy Allen, has found mounting regulation is costing the economy $176 billion a year.

“Every elected Australian government over the past two decades has declared they would cut back on unnecessary regulation and red tape,” Dr Allen said.

He continues his report:

The book recommends governments instead focus on cutting “restrictiveness clauses” in legislation and regulations. “If a law or regulation says ‘must’ or ‘shall’ or ‘cannot’, you get rid of it,” Dr Berg said. In British Columbia, the number of restrictiveness clauses has fallen from 330,000 in 2001 to 170,000 last year.

“What’s really significant about this is it coincided with a big jump in growth in British Columbia compared to the rest of Canada. It was before then one of the worst-performing provinces,” he said.

As The Australian editorial  ‘Red And Green Tape Hurts Us All’ notes:

Australia’s Red Tape Crisis, edited by Darcy Allen and Chris Berg, quotes a Deloitte estimate on the cost of federal, state and local government regulatory burdens at $94 billion annually. The book also cites a study claiming this burden cuts output by $176bn, or more than 10 per cent of GDP. “In an ideal world,” Berg argues in the book, “governments would intervene in the market when there was clear evidence that consumers and producers would be significantly worse off in the absence of that intervention.” But in the real world governments will intervene much more often for a variety of reasons. There will always be good reasons to regulate — we have only to look to the banking royal commission to see the consequences that flow from inadequate or poorly policed regulation — but there is also a constant risk of unintended consequences. From renewable energy targets to vehicle emissions restrictions and native vegetation clearance controls, we see how environmental regulation, or green tape, adds layers and complexity.

Red tape costs the Australian economy as much as $176 billion a year. Governments create and enforce thousands of regulations on our workplaces and our communities. These rules slow and prevent businesses forming, people from flourishing, new technologies from being adopted, and hold back Australia’s global competitiveness.

Australia’s Red Tape Crisis is an exploration into the economics, politics and culture of over-regulation. How should we structure our federation to achieve reform? Does Australia have a deep desire for a federal bureaucracy? What is the future of red tape reduction policies?

Together, the contributions of economists, philosophers, politicians and lawyers help define a path for overcoming Australia’s red tape crisis. The Book ‘Australia’s Red Tape Crisis’ can be purchased here.

Marohasy’s Open Letter to Chief Scientist on BoM Failures

The next really big breakthrough in environmental management could come from better forecasting of droughts and floods.  In particular, using machine learning to mine historical climate data, build models based on clever algorithms, and use these to forecast rainfall.*

As a consequence of my involvement in this work, and searching for the best long historical temperature series, I stumbled across deficiencies in how the Australian Bureau of Meteorology archives its temperature data – and how it remodels temperature series to make them more consistent with human-caused global warming theory.

Over the last year, I’ve come to realize that the problem extends far beyond remodelling raw data.  There are also issues with the calibration of the electronic probes that have been used to measure temperatures since November 1996, this casts doubt over the integrity of the raw data.

Of course, fundamental to machine learning is the integrity of the data.  So, in corrupting the measurements the Bureau may not only be artificially exaggerating the extent of recent warming, it is compromising our ability to forecast rainfall using the latest big data techniques forever.

I didn’t explain this in my recent letter to Australia’s Chief Scientist Alan Finkel.  I mostly detailed how the Bureau’s measuring system may not be fit for purpose – and suggested he look into it.

It is difficult to know how much to include in a letter to the Chief Scientist.

Anyway, the text follows, and you can download it as a PDF here.

Thanks for caring,
Jennifer Marohasy

* My technical papers about rainfall forecasting using machine learning are listed here: https://jennifermarohasy.com/rainfall-forecasting/

PS. The photograph is from my visit to the Goulburn airport weather station last July.
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Dr Alan Finkel AO
Office of the Chief Scientist
Dear Dr Finkel

Re: Bureau not measuring temperatures consistent with international standards

For some years I have been asking for an open, honest and independent inquiry into the operations of the Australian Bureau of Meteorology. In 2015, I wrote to the Auditor-General of Australia suggesting a performance audit with terms of reference to include: consistency with its own policies, and reliability of methodology. At the time my primary concern was the remodelling of raw data through a process known as homogenisation.

In response, it was suggested I direct my concerns to Dr Ron Sandland AM, who at that time was chairing a Technical Advisory Forum to review these same issues, that I had previously raised with the former Minister for the Environment, Hon. Greg Hunt MP. It was already clear to me that Dr Sandland and his team were undertaking a most cursory review and not working through a single example of homogenisation. I nevertheless made a submission to Dr Sandland’s Forum that has never been acknowledged.

To be clear, my issues continue to be less with the actual policies, protocols and best practice manuals already in place, but with increasing evidence, these are being systematically ignored.

The one issue that I would like to bring to your immediate attention concerns the way temperatures are currently measured in automatic weather stations by electronic probes. This goes to the heart of the integrity and reliability of temperature measurements recorded by the Bureau, which are subsequently homogenised, and incorporated into international databases – including those relied upon by the United Nation’s Intergovernmental Panel on Climate Change (IPCC).

Historically maximum air temperature was measured by mercury thermometers – worldwide. But over recent decades there has been a transition to electronic probes in automatic weather stations.

There is a lot of natural variability in air temperature (particularly on hot sunny days at inland locations), which was smoothed to some extent by the inertia of mercury thermometers. In order to ensure some equivalence between measurements from mercury thermometers and electronic probes, it is standard practice for the one-second readings from electronic probes to be averaged over a one-minute period – or in the case of the US National Weather Service the averaging of the one-second readings is over 5 minutes.

The Australian Bureau began the change-over to electronic probes as the primary instrument for the measurement of air temperatures in November 1996.

The original IT system for averaging the one-second readings from the electronic probes was put in place by Almos Pty Ltd, who had done similar work for the Indian, Kuwaiti, Swiss and other meteorological offices. The software in the Almos setup (running on the computer within the on-site shelter) computed the one-minute average (together with other statistics). This data was then sent to what was known as a MetConsole (the computer server software), which then displayed the data, and further processed the data into ‘Synop’, ‘Metar’, ‘Climat’ formats. This system was compliant with World Meteorological Organisation (WMO) and the International Civil Aviation Organisation (ICAO) standards. The maximum daily temperature for each location was recorded as the highest one-minute average for that day.

This was the situation until at least 2011 – I have this on good advice from a previous Bureau employee. It is likely to have been the situation through until perhaps February 2013 when Sue Barrell from the Bureau wrote to a colleague of mine, Peter Cornish, explaining that the one-second readings from the automatic weather station at Sydney Botanical Gardens were numerically-averaged. At some point over the last five years, however, this system has been disbanded. All, or most, of the automatic weather stations, now stream data from the electronic probes directly to the Bureau’s own software. This could be an acceptable situation, except that the Bureau no-longer averages the one-second readings over a one-minute period.

Indeed, it could be concluded that the current system is likely to generate new record hot days for the same weather – because of the increased sensitivity of the measuring equipment and the absence of any averaging/smoothing. To be clear, the highest one-second spot reading is now recorded as the maximum temperature for that day at the 563 automatic weather stations across Australia that are measuring surface air temperatures.

This is not generally understood. Most meteorologists and university professors in Australia appear to be working from the wrong assumption that the old system is still in place. Given this data is also used by thousands of other scientists and technologists, not just in Australia but across the world, I urge you to investigate.

My investigations have included scrutiny of actual measurements from the current probe at Mildura, in north-western Victoria. This data was made available to me following a directive from the Minister for the Environment, Hon Josh Frydenberg MP, to Andrew Johnson, CEO and Director of Meteorology at the Bureau. This has enabled me to confirm that the automatic weather station at Mildura is logging:
1. The last one-second reading in each one-minute period;
2. The highest one-second reading for the previous 60 seconds, and
3. The lowest one-second reading for the previous 60 seconds.

I have corresponded with the Bureau’s CEO, Andrew Johnson, about the current situation. He has assured me that because the electronic probe is housed in a metal sheath which provides thermal mass, each measurement is actually the integration of the previous 40 to 80 seconds. If this is indeed the case, that the electronic probes have been weighted, then the Bureau should perhaps just sample the lowest one-¬second and the highest one¬-second for the agreed interval? Indeed, why log a single last one-second value from each minute – particularly given the equipment is capable of averaging all seconds, or averaging a subsample of all the one-second readings?

I have requested the manufacturer’s specifications, specifically for the probe at Mildura (Rosemount ST2401 S/N – 654). Dr Johnson has not provided this information, insisting that this is not available because the probes are purpose-designed: “The Bureau purpose-designed the temperature sensors to closely mirror the behaviour of mercury in glass thermometers, including the time constant. The manufacturer then manufactured the sensors to the Bureau’s design.”

There is no publicly available documentation for any of the custom-built electronic probes currently used by the Bureau to measure air temperature across Australia.

Furthermore, there are no published studies that provide any indication of the equivalence of measurements from the electronic probes with mercury thermometers, which were used to measure maximum temperatures at all weather stations until at least November 1996.

In order to assess the extent to which the Bureau’s probes actually mirror the behaviour of mercury thermometers, I have requested the relevant internal reports that presumably detail the results from field and laboratory trials. These have not been provided. My husband, Dr John Abbot, has requested the same and this information is the subject of an ongoing freedom-of-information (FOI) request by him, which may yet end-up in the Administrative Appeal Tribunal.

Following two interviews I did with radio broadcaster Alan Jones last year, and at the directive of Minister Frydenberg, I was provided with some information enabling me to obtain parallel data from Mildura late last year. This was provided as thousands of photographed A8 forms with each form including hand-written daily values as recorded from the electronic probe and mercury thermometer in the same equipment shelter at Mildura.

The first years of parallel recordings onto the A8 forms (from November 1996) indicate that the electronic probe first installed at Mildura was recording temperatures that were statistically significantly cooler than the mercury thermometer. This should be of concern, as it would indicate that the extent of global warming was being underestimated and that there was no equivalence between the electronic probes and mercury thermometers with this data incorporated into international databases.

A new probe, the current probe, was installed on 27 June 2012. This is the same probe that measured a much-acclaimed record hot day for the state of Victoria on 23 September 2017- sparking my initial interest in Mildura.

I had initially hoped that there would be parallel data to enable some verification of this record – I had been told by a whistle-blower that Mildura was a site with parallel data. I was subsequently told by Anthony Rea from the Bureau – after the directive given to the Bureau by Minister Frydenberg – that there was parallel data only available through until January 2015.

After scrutiny of the A8 forms actually provided, however, it appeared that the extent of parallel readings for the probe installed on 27 June 2012 would be limited to just the eight months July 2012 to February 2013… except that Dr Rea omitted to provide me with the data for September 2012 – the one month that could provide a direct measure of the equivalence of the relevant probe for that time of year at that location. The residual available parallel data from Mildura as measured by the current electronic probe is missing recordings from the mercury thermometer for the very hottest days as measured by the electronic probe (30 November 2012, 18 January 2013, 5 January 2013, 8 January 2013, 6 January 2013, 1 December 2013, highest to lowest).

In short, it appears that on the hottest days in Mildura – during the period that manual readings were being taken after installation of the most recent probe – no one was turning-up to take the manual reading from the mercury thermometer. As a consequence, the data for this period from the mercury thermometer is not normally distributed. This makes statistical analysis using standard techniques impossible as assumptions implicit, for example in a standard paired T-test, are violated.

The limited parallel data that I have from this probe (currently recording temperatures at Mildura) indicates that, on average, it records temperatures warmer than the mercury thermometer – often up to 0.4 degrees Celsius warmer than the mercury thermometer.

I have communicated this information to Dr Johnson, and he has replied that my sample is inadequate to conclude very much.
Exactly, and this is because the Bureau is not providing me with all the data! So, I would appreciate it if you could ask that he please make the relevant internal reports available and/or provide data from other weather stations for which there is parallel data to enable some proper comparisons and assessment of the Australian-wide system.

I have been reliably informed that there is parallel data (measurements from a mercury thermometer and electronic probe recording in the same shelter) for a further 37 sites, additional to Mildura. I have further been told that this data provides parallel reading to the present for some of these sites. But the Bureau is withholding this information.

In summary, given the intense political interest in climate change with far reaching economic implications, and the relatively recent transition to a very different methods of measuring temperatures (mercury thermometer to electronic probe), it would be assumed that there are dozens of reports published by the Bureau that document how comparable the measurements have proven at different locations, and under different conditions.

Yet there are none! Without independent verification, these temperature recordings of the Bureau are open to dispute and the integrity of the Bureau and the Government is degraded.

I have heard you lament that there is an overwhelming consensus of scientific support for global warming and so we should just get on with solutions. But, without an independent verification of the Bureau’s temperature measurements then those who doubt global warming can easily dismiss the Bureau’s reports as unreliable and incorrect. To help resolve this issue I request that you provide me with the opportunity to present my findings – my evidence – to a relevant committee for proper scrutiny.

Yours sincerely
Jennifer Marohasy BSc PhD
Senior Fellow at the Institute of Public Affairs, and
Owner-operator at the ClimateLab.com.au